HERITAGE INCOME TRUST, 485APOS, 1995-12-01

HERITAGE INCOME TRUST
485APOS, 1995-12-01

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<PAGE>

As filed with the Securities and Exchange Commission on December 1, 1995

File No. 33-30361

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 11

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12

HERITAGE INCOME TRUST
(Exact name of registrant as specified in charter)
880 Carillon Parkway
St. Petersburg, FL 33716
(Address of principal executive offices)

Registrant's telephone number, including area code: (813) 573-3800

STEPHEN G. HILL, PRESIDENT
880 Carillon Parkway
St. Petersburg, FL 33716
(Name and address of agent for service)

Copies to:
CLIFFORD J. ALEXANDER, ESQ.
Kirkpatrick & Lockhart LLP
1800 M Street, N.W.
Washington, D.C. 20036
Telephone: (202) 778-9000

It is proposed that this filing will become effective February 1, 1996
pursuant to paragraph (a) of Rule 485.

Registrant filed a notice pursuant to Rule 24f-2 under the Investment
Company Act of 1940 on or about November 29, 1995.

Page 1 of ____ pages

Exhibit Index begins on page ___
<PAGE>

HERITAGE INCOME TRUST

CONTENTS OF REGISTRATION STATEMENT

This registration document is comprised of the following:

Cover Sheet

Contents of Registration Statement

Cross Reference Sheet - High Yield Bond Fund and Intermediate
Government Fund

Prospectus - High Yield Bond Fund

Prospectus - Intermediate Government Fund

Statement of Additional Information - High Yield Bond Fund
and Intermediate Government Fund

Part C of Form N-1A

Signature Page

Exhibits

C - 2
<PAGE>

HERITAGE INCOME TRUST -

HIGH YIELD BOND FUND
INTERMEDIATE GOVERNMENT FUND

N-1A CROSS-REFERENCE SHEET

PART A ITEM NO. PROSPECTUS CAPTION

1 Cover Page

2 General Information - Total Fund Expenses

3 General Information - Financial
Highlights

4 Cover Page; General Information;
Shareholder and Account Policies -
Shareholder Information

5 Cover Page; Management of the Fund

5A General Information - Performance
Information

6 General Information - Shareholder
Information; Investing in the Fund;
Shareholder Accounts and Policies -
Dividends and Other Distributions, Taxes

7 Investing in the Fund; General
Information - Net Asset Value;
Shareholder Accounts and Policies -
Distribution Plan

8 Investing in the Fund - How to Redeem
Shares

9 Inapplicable

STATEMENT OF ADDITIONAL
PART B ITEM NO. INFORMATION CAPTION

10 Cover Page

11 Table of Contents

C - 3
<PAGE>

12 General Information; Investment
Information

13 Investment Information; Investment
Limitations

14 Trust Information - Management of the
Trust

15 5% holders

16 Trust Information - Investment Adviser
and Administrator; Subadviser;
Distribution of Shares; Administration of
the Trust

17 Trust Information - Brokerage Practices

18 Trust Information

19 Investing in the Trust; Redeeming Shares;
Net Asset Value

20 Taxes

21 Trust Information - Distribution of
Shares

22 Performance Information

23 Financial Statements

PART C

Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C of this Registration
Statement.

C - 4
<PAGE>

(HERITAGE LOGO)

HIGH YIELD BOND FUND

Heritage Income Trust is a mutual fund offering shares in separate
investment portfolios. This Prospectus relates to the High Yield Bond Fund
(the "Fund"), which formerly was known as the Diversified Portfolio. The
Fund has an investment objective of high current income. The Fund seeks to
achieve this objective primarily by investing IN A PORTFOLIO OF LOWER- AND
MEDIUM-RATED HIGH YIELD FIXED INCOME SECURITIES. THESE LOWER-RATED
SECURITIES COMMONLY ARE REFERRED TO AS "JUNK BONDS" OR "HIGH YIELD
SECURITIES." INVESTMENTS IN LOWER-RATED SECURITIES ENTAIL A HIGH DEGREE
OF RISK AND ARE PREDOMINANTLY SPECULATIVE. ACCORDINGLY, THESE SECURITIES
ARE DESIGNED FOR INVESTORS WILLING TO ASSUME ADDITIONAL RISK IN RETURN FOR
THE POTENTIAL FOR ABOVE-AVERAGE INCOME. SEE "LOWER-RATED SECURITIES-RISK
FACTORS." The Fund offers two classes of shares, Class A shares (sold
subject to a front-end sales load) and Class C shares (sold subject to a
contingent deferred sales load).

This Prospectus contains information that should be read before
investing in the Fund and should be kept for future reference. A Statement
of Additional Information relating to the Fund, dated February 1, 1996,
has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. A copy of the Statement of
Additional Information is available free of charge and shareholder
inquiries can be made by writing to Heritage Asset Management, Inc. or by
calling (800) 421-4184.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

(HERITAGE LOGO)
Registered Investment Advisor--SEC

880 Carillon Parkway
St. Petersburg, Florida 33716
(800) 421-4184
Prospectus Dated February 1, 1996
<PAGE>

Table of Contents
=========================================================================
<TABLE>
<CAPTION>
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . .
<S> <C>
About the Trust and the Fund . . . . . . . . . . . . . 1
Total Fund Expenses . . . . . . . . . . . . . . . . . 1

Financial Highlights . . . . . . . . . . . . . . . . . 3
Differences Between A Shares and C Shares . . . . . . 4

Investment Objective, Policies and Risk Factors . . . 4

Net Asset Value . . . . . . . . . . . . . . . . . . . 8
Performance Information . . . . . . . . . . . . . . . 8

INVESTING IN THE FUND . . . . . . . . . . . . . . . . . . . . 9
How to Buy Shares . . . . . . . . . . . . . . . . . . 9

Minimum Investment Required/Accounts with Low Balances 10

Investment Programs . . . . . . . . . . . . . . . . . 10
Alternative Purchase Plans . . . . . . . . . . . . . . 11

What Class A Shares Will Cost . . . . . . . . . . . . 12
What Class C Shares Will Cost . . . . . . . . . . . . 14

How to Redeem Shares . . . . . . . . . . . . . . . . . 15

Receiving Payment . . . . . . . . . . . . . . . . . . 16
Exchange Privilege . . . . . . . . . . . . . . . . . . 17

MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . 18
SHAREHOLDER AND ACCOUNT POLICIES . . . . . . . . . . . . . . 19

Dividends and Other Distributions . . . . . . . . . . 19

Distribution Plans . . . . . . . . . . . . . . . . . . 19
Taxes . . . . . . . . . . . . . . . . . . . . . . . . 20

Shareholder Information . . . . . . . . . . . . . . . 21
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

</TABLE>
<PAGE>

GENERAL INFORMATION

ABOUT THE TRUST AND THE FUND

Heritage Income Trust (the "Trust") was established as a
Massachusetts business trust under a Declaration of Trust dated August 4,
1989. The Trust is an open-end diversified management investment company
that currently offers shares in two separate investment portfolios, the
Fund and the Intermediate Government Fund. The Fund is designed for
individuals and fiduciaries whose investment objective is high current
income. The Fund offers two classes of shares, Class A shares ("A shares")
and Class C shares ("C shares"). The Fund requires a minimum initial
investment of $1,000, except for certain retirement accounts and
investment plans for which lower limits may apply. See "Investing in the
Fund." This prospectus relates exclusively to the Fund. To obtain a
prospectus for the Intermediate Government Fund, call (800) 421-4184.

TOTAL FUND EXPENSES

Shown below are all Class A expenses incurred by the Fund during
its 1995 fiscal year. Class A annual operating expenses are shown as an
annualized percentage of fiscal 1995 average daily net assets. Because C
shares were not offered for sale prior to April 3, 1995, Class C annual
operating expenses are based on estimated expenses. Shareholder
transaction expenses for both classes are expressed as a percentage of
maximum public offering price, cost per transaction, or as otherwise
noted.

Class A Class C
------- -------
<S> <C> <C>
Shareholder Transaction Expenses
Sales load "charge" on purchases . . . . . . . . . . . . 3.75% None
Contingent deferred sales load (as a percentage original (declining to 0%
purchase price or redemption proceeds, as applicable) . . None 1.00% after the first year)
Wire redemption fee . . . . . . . . . . . . . . . . . . . $5.00 $5.00
Annual Fund Operating Expenses
Management Fee (after fee waiver) . . . . . . . . . . . . 0.34% 0.34%
12b-1 Distribution Fee . . . . . . . . . . . . . . . . . 0.35% 0.80%
Other Expenses . . . . . . . . . . . . . . . . . . . . . 0.56% 0.56%
----- -----
1.25% 1.70%
Total Fund Operating Expenses (after fee waiver) . . . . ===== =====

</TABLE>

year ending September 30, 1996. Absent fee waivers, the management fee for
each class would have been 0.60%, and total Fund operating expenses would
have been 1.51% for A shares and 1.96% for C shares. To the extent that
the Manager waives or reimburses its fees with respect to one class, it
will do so with respect to the other class on a proportionate basis. Due
to the imposition of Rule 12b-1 distribution fees, it is possible that
long-term shareholders of the Fund may pay more in total sales charges
than the economic equivalent of the maximum front-end sales charge
permitted by the rules of the National Association of Securities Dealers,
Inc.

The impact of Fund operating expenses on earnings is illustrated in
the example below assuming a hypothetical $1,000 investment, a 5% annual
rate of return, and a redemption at the end of each period shown.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C>
Total Operating Expenses -- A shares $50 $76 $104 $183

Total Operating Expenses -- C shares $27 $54 $92 $201

</TABLE>

The impact of Fund operating expenses on earnings is illustrated in
the example below assuming a hypothetical $1,000 investment, a 5% annual
rate of return, and no redemption at the end of each period shown.

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<PAGE>

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C>
Total Operating Expenses -- A shares $50 $76 $104 $183

Total Operating Expenses -- C shares $17 $54 $92 $201

</TABLE>

This is an illustration only and should not be considered a
representation of future expenses. Actual expenses and performance may be
greater or less than that shown above. The purpose of the above tables are
to assist investors in understanding the various costs and expenses that
will be borne directly or indirectly by shareholders. For a further
discussion of these costs and expenses, see "Management of the Fund" and
"Distribution Plans."

- 3 -
<PAGE>

FINANCIAL HIGHLIGHTS

The following table shows important financial information for an A
share and a C share of the Fund outstanding for the periods indicated,
including net investment income, net realized and unrealized gain on
investments, and certain other information. It has been derived from
financial statements that have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon is included in the Statement
of Additional Information ("SAI"), which may be obtained by calling the
Fund at the telephone number on the front page of this prospectus.

Class A* Class C*
For the Years Ended September 30,
_______________________________________________________________
1995 1994 1993 1992 1991 1990+ 1995++

Net asset value, beginning of $9.65 $10.65 $10.82 $10.29 $ 9.29 $ 9.60 $ 9.62
the period ------ ------ ------ ------ ------ ------ ------

Income from Investment
Operations:

Net investment income(a) 0.72 0.69 0.81 0.83 0.87 0.43 0.31

Net realized and 0.31 (0.84) 0.07 0.59 1.00 (0.34) 0.28
unrealized gain (loss) ---- ------ ---- ---- ---- ------ ----
on investments . . . . . .

Total from Investment 1.03 (0.15) 0.88 1.42 1.87 0.09 0.59
Operations . . . . . . . . . ---- ------ ---- ---- ---- ---- ----

Less Distributions:

Dividends from net investment (0.74) (0.71) (0.83) (0.85) (0.87) (0.36) (0.30)
income . . . . . . . . . . . .

Distributions from net realized -- (0.07) (0.22) (0.04) -- (0.04) -
gains . . . . . . . . . . . . .

Distributions in excess of net -- (0.07) -- -- -- -- --
realized gains . . . . . . . . ------ ------ ------ ------ ------ ------ ------

Total Distributions . . . . . . (0.74) (0.85) (1.05) (0.89) (0.87) (0.40) (0.30)
------ ------ ------ ------ ------ ------ ------

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<PAGE>

Net asset value, end of the $ 9.94 $ 9.65 $10.65 $10.82 $10.29 $ 9.29 $ 9.91
period . . . . . . . . . . . . ====== ====== ====== ====== ====== ====== ======

Total Return (%)(d) . . . . . . 11.23 (1.59) 8.57 14.35 21.19 0.91 (c) 6.18 (c)

Ratios (%) Supplemental Data:

Operating expenses, net, to 1.25 1.25 1.19 0.95 1.31 1.35 (b) 1.70 (b)
average daily net assets (a) .

Net investment income to 7.35 6.76 7.57 8.11 9.10 8.97 (b) 6.67 (b)
average daily net assets . . .

Portfolio turnover rate . . . . 109 135.05 150.36 70.73 118.83 38.76(b) 109

Net assets, end of the period $30 $36 $42 $32 $15 $10 $0.6
(millions) . . . . . . . . . .

</TABLE>

* Amounts and percentages contained in Financial Highlights are per
share information applicable to periods when the Fund was managed
under the name Heritage Income Trust - Diversified Portfolio. The
name and the investment objective were changed pursuant to a
shareholder vote on January 24, 1996.

+ For the period March 1, 1990 (commencement of operations) to
September 30, 1990.

++ For the period April 3, 1995 (commencement of operations of C
shares) to September 30, 1995.

(a) Excludes management fees waived and expenses reimbursed by the
Manager in the amount of $.03, $.02, $.02, $.05, $.07 and $.08 per
A share, respectively. The operating expense ratios including such
items would be 1.51%, 1.42%, 1.43%, 1.60%, 2.17% and 3.0%
(annualized) for A shares, respectively. Excludes management fees
waived by the Manager in the amount of $.03 per C share. The
operating expense ratio including such items would be 1.96%
(annualized) for C shares.

(b) Annualized.

(d) Does not reflect the imposition of a sales load.

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<PAGE>

DIFFERENCES BETWEEN A SHARES AND C SHARES

The primary difference between the A shares and the C shares lies
in their initial sales load and contingent deferred sales load ("CDSL")
structures and in their ongoing expenses, including asset-based sales
charges in the form of distribution fees. These differences are
summarized below. In addition, each class may bear differing amounts of
certain class-specific expenses, such as transfer agent fees, Securities
and Exchange Commission ("SEC") registration fees, state registration
fees, and expenses of administrative personnel and services. Each class
has distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives. See "How to Buy Shares," "Alternative Purchase Plans," "What
Class A Shares Will Cost" and "What Class C Shares Will Cost."

Annual 12b-1 Fees
as a % of Average
Sales Load Daily Net Assets Other Information
---------- ----------------- -----------------

A Shares Maximum initial sales Service fee of 0.25%; Initial sales load waived
load of 3.75% distribution fee of up to or reduced for certain
0.10% purchases

C Shares Maximum CDSL of 1% of Service fee of 0.25%; CDSL waived for certain
redemption proceeds; distribution fee of 0.55% types of redemptions
declining to zero after 1
year

</TABLE>

INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS

The investment objective of the Fund is high current income. The
Fund seeks to achieve this objective primarily by investing in a portfolio
of lower- and medium-rated high yield fixed income securities. These
lower-rated securities commonly are referred to as "junk bonds" or "high
yield securities." Investments in lower-rated securities entail a high
degree of risk and are predominantly speculative. Accordingly, an
investment in the Fund is not appropriate for all investors. Fund shares
will fluctuate in value as a result of value changes in portfolio
investments. There can be no assurance that the Fund's investment
objective will be achieved.

- 6 -
<PAGE>

In seeking its objective the Fund will invest primarily in
securities rated Baa or lower by Moody's Investors Service, Inc.
("Moody's") or BBB or lower by Standard & Poor's ("S&P"), or in securities
determined by Salomon Brothers Asset Management Inc, the Fund's investment
Subadviser (the "Subadviser") to be of comparable quality. These lower-
and medium-rated, and comparable unrated securities offer yields that
generally are superior to the yields offered by higher-rated securities.
However, such securities also involve significantly greater risks,
including price volatility and risk of default in the payment of principal
and interest. The Subadviser seeks to minimize the risks of investing in
these securities through its careful analysis of the credit status of
these issuers.

Certain of the debt securities purchased by the Fund may be rated
as low as C by Moody's or D by S&P or may be considered comparable to
securities having these ratings. These lower-rated securities are
considered to have extremely poor prospects of ever attaining any real
investment standing, to have a current and identifiable vulnerability to
default, to be unlikely to have the capacity to pay interest and repay
principal when due in the event of adverse business, financial or economic
conditions, and/or to be in default or not current in the payment of
interest or principal. Therefore, the Fund will not invest in these
lower-rated securities unless the Subadviser believes that the difference
in yield on these securities is sufficient to justify the higher risk.

The Fund may invest up to 10% of its total assets in foreign fixed
income securities. The Fund also may invest in zero coupon and pay-in-
kind securities, fixed and floating rate loans, high yield commercial
paper, repurchase agreements and reverse repurchase agreements. The Fund
may invest up to 20% of its assets in common stock, convertible
securities, warrants, preferred stock or other equity securities when
consistent with the Fund's objectives. The Fund generally will hold such
equity investments as a result of purchases of unit offerings of fixed-
income securities which include such securities or in connection with an
actual or proposed conversion or exchange of fixed-income securities, but
may also purchase equity securities not associated with fixed-income
securities when, in the opinion of the Subadviser, such purchase is
appropriate. The Fund may loan portfolio securities, borrow money (as
discussed in the SAI), and purchase securities on a firm commitment or
when issued basis. Up to 10% of the Fund's total assets may be invested
in illiquid securities. In times when, in its judgment, conditions in the
securities markets would make pursuing the Fund's basic investment
strategy inconsistent with the best interests of the Fund's shareholders,
the Subadviser may invest up to 100% of its assets in money market
instruments, U.S. Government securities, and long- and short-term debt
instruments that are rated A or higher by S&P or Moody's. See the
Appendix for a description of corporate bond ratings, and the Appendix to
the SAI for commercial paper, ratings by S&P and Moody's.

- 7 -
<PAGE>

as amended (the "1940 Act"). All policies of the Fund described in this
prospectus may be changed by the Trust's Board of Trustees (the "Board of
Trustees" or the "Board") without shareholder approval. The following is
a discussion of the types of investments in which the Fund may invest,
including the risks of investing in these securities. For a further
discussion of the Fund's investment policies and risks, see "Investment
Objective and Policies of the Fund" in the SAI.

Convertible Securities. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price
or formula. A convertible security entitles the holder to receive interest
paid or accrued on debt or dividends paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged.
Convertible securities have unique investment characteristics in that they
generally have higher yields than common stocks, but lower yields than
comparable non-convertible securities, are less subject to fluctuation in
value than the underlying stock because they have fixed income
characteristics, and provide the potential for capital appreciation if the
market price of the underlying common stock increases.

Debt Obligations and Fund Maturity. The Subadviser has discretion
to select the range of maturities of the debt obligations in which the
Fund will invest. The Subadviser anticipates that, under normal market
conditions, the Fund will have an average portfolio maturity of 10 to 15
years. However, this average portfolio's maturity may vary substantially
from time to time depending on economic and market conditions. The market
value of these securities will be affected by changes in interest rates.
There normally is an inverse relationship between the market value of such
securities and actual changes in interest rates, Thus, a decline in
interest rates generally produces an increase in market value, while an
increase in rates generally produces a decrease in market value. Moreover,
the longer the remaining maturity of a security, the greater will be the
effect of interest rate changes on the market value of such a security. In
addition, changes in the ability of an issuer to make payments of interest
and principal and in the market's perception of an issuer's
creditworthiness also will affect the market value of the debt securities
of that issuer. Differing yields on fixed income securities of the same
maturity are a function of several factors, including the relative
financial strength of the issuers. Higher yields generally are available
from lower-rated securities.

Firm Commitment and When-Issued Securities. The Fund may purchase
securities on a firm commitment basis, including when-issued securities.
Securities purchased on a firm commitment basis are purchased for delivery
beyond the normal settlement date at a stated price and yield. No income
accrues to the purchaser of a security on a firm commitment basis prior to
delivery. Such securities are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest
rates. Purchasing a security on a firm commitment basis can involve a
risk that the market price at the time of delivery may be lower than the

- 8 -
<PAGE>

agreed upon purchase price, in which case there could be an unrealized
loss at the time of delivery. The Fund only will make commitments to
purchase securities on a firm commitment basis with the intention of
actually acquiring the securities, but may sell them before the settlement
date if it is deemed advisable. The Fund will establish a segregated
account in which it will maintain liquid assets in an amount at least
equal in value to the Fund's commitments to purchase securities on a firm
commitment basis. If the value of these assets declines, the Fund will
place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such
commitments.

Fixed and Floating Rate Loans. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations
between a corporate borrower or a foreign sovereign entity and one or more
financial institutions ("Lenders"). The Fund may invest in such loans in
the form of participations in Loans ("Participations") and assignments of
all or a portion of Loans from third parties ("Assignments"). The Fund
considers these investments to be investments in debt securities for
purposes of this prospectus. The Fund, in pursuing its investment
policies, may acquire Participations and Assignments that are high yield,
nonconvertible corporate debt securities or short duration debt
securities. Participations typically will result in the Fund having a
contractual relationship only with the Lender, not with the borrower. The
Fund will have the right to receive payments of principal, interest and
any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund
generally will have no right to enforce compliance by the borrower with
the terms of the loan agreement relating to the Loan, nor any rights of
set-off against the borrower, and the Fund may not benefit directly from
any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Fund will assume the credit risk of both
the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit
from any set-off between the Lender and the borrower. The Fund will
acquire Participations only if the Lender interpositioned between the Fund
and the borrower is determined by the investment manager to be
creditworthy. When the Fund purchases Assignments from Lenders, the Fund
will acquire direct rights against the borrower on the Loan, except that
under certain circumstances such rights may be more limited than those
held by the assigning Lender.

The Fund may have difficulty disposing of Assignments and
Participations. Because the market for such instruments is not highly
liquid, the Fund anticipates that such instruments could be sold only to a
limited number of institutional investors. The lack of a highly liquid
secondary market may have an adverse impact on the value of such
instruments and will have an adverse impact on the Fund's ability to
dispose of particular Assignments or Participations in response to a
specific economic event, such as deterioration in the creditworthiness of

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<PAGE>

the borrower. Thus, the Fund will treat investments in Participations and
Assignments as illiquid for purposes of its limitation on investments in
illiquid securities. The Fund may revise this policy in the future.

Foreign Fixed Income Securities. The Fund may invest up to 10% of
its total assets in foreign fixed-income securities (including emerging
market securities) all or a portion of which may be non-U.S. dollar
denominated and which include: (a) debt obligations issued or guaranteed
by foreign national, provincial, state, municipal or other governments
with taxing authority or by their agencies or instrumentalities, including
Brady Bonds; (b) debt obligations of supranational entities; (c) debt
obligations of the U.S. government issued in non-dollar securities; (d)
debt obligations and other fixed-income securities of foreign corporate
issuers (both dollar and non-dollar denominated); and (e) U.S. corporate
issuers (both Eurodollar and non-dollar denominated). There is no minimum
rating criteria for the Fund's investments in such securities. Investing
in the securities of foreign issuers involves special considerations which
are not typically associated with investing in the securities of U.S.
issuers. Investments in securities of foreign issuers may involve risks
arising from restrictions on foreign investment and repatriation of
capital, from differences between U.S. and foreign securities markets,
including less volume, much greater price volatility in and relative
illiquidity of foreign securities markets, different trading and
settlement practices and less governmental supervision and regulation,
from changes in currency exchange rates, from high and volatile rates of
inflation, from economic, social and political conditions and, as with
domestic multinational corporations, from fluctuating interest rates.
Other investment risks include the possible imposition of foreign
withholding taxes on certain amounts of the Fund's income, the possible
seizure or nationalization of foreign assets and the possible
establishment of exchange controls, expropriation, confiscatory taxation,
other foreign governmental laws or restrictions which might affect
adversely payments due on securities held by the Fund, the lack of
extensive operating experience of eligible foreign subcustodians and legal
limitations on the ability of the Fund to recover assets held in custody
by a foreign subcustodian in the event of the subcustodian's bankruptcy.
In addition, there may be less publicly-available information about a
foreign issuer than about a U.S. issuer, and foreign issuers may not be
subject to the same accounting, auditing and financial record-keeping
standards and requirements of U.S. issuers. Finally, in the event of a
default in any such foreign obligations, it may be more difficult for the
Fund to obtain or enforce a judgment against the issuers of such
obligations.

Futures and Options. Although the Subadviser has no current
intention to do so, the Fund may engage in transactions in options and
futures contracts in an effort to adjust the risk/return characteristics
of its investment portfolio. The Fund also may, in certain circumstances,
purchase or sell futures contracts or options as a substitute for the
purchase or sale of securities. The Fund may purchase and sell put and
call options on debt securities and indices of debt securities, purchase
and sell futures contracts on debt securities and indices of debt

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<PAGE>

securities, and purchase and sell options on such futures contracts. For
example, if the Subadviser anticipates that interest rates will rise, the
Fund also may sell a debt futures contract or a call option thereon or
purchase a put option on a futures contract as a hedge against a decrease
in the value of the Fund's securities. If the Subadviser anticipates that
interest rates will decline, the Fund may purchase a debt futures contract
or a call option thereon or sell a put option on a futures contract to
protect against an increase in the price of securities the Fund intends to
purchase.

Lower-Rated Securities -Risk Factors. Lower-rated securities are
subject to certain risks that may not be present with investments in
higher-grade securities. Investors should consider carefully their ability
to assume the risks associated with lower-rated securities before
investing in the Fund.

Effect of Interest Rate and Economic Changes. The lower rating of
certain high yielding corporate income securities reflects a greater
possibility that the financial condition of the issuer or adverse changes
in general economic conditions may impair the ability of the issuer to pay
income and principal. Changes by rating agencies in their ratings of a
fixed income security also may affect the value of these investments.
However, allocating investments in the Fund among securities of different
issuers should reduce the risks of owning any such securities separately.

The prices of these high yielding securities tend to be less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic changes or individual corporate
developments. During economic downturns or periods of rising interest
rates, highly leveraged issuers may experience financial stress that
adversely affects their ability to service principal and interest payment
obligations, to meet projected business goals or to obtain additional
financing, and the markets for their securities may be more volatile. If
an issuer defaults, the Fund may incur additional expenses to seek
recovery. Furthermore, the market value of zero coupon and pay-in-kind
securities is more greatly affected by interest rate changes and is more
volatile than that of similar securities that pay interest periodically in
cash. Accrued discount and "interest" on zero coupon and pay-in-kind
securities are reported as income by the Fund even though no cash actually
is received by the Fund until the securities' maturity or payment date.

Frequently, the higher yields of high-yielding securities may not
reflect the value of the income stream that holders of such securities may
expect, but rather the risk that such securities may lose a substantial
portion of their value as a result of their issuer's financial
restructuring or default. Additionally, an economic downturn or an
increase in interest rates could have a negative effect on the high yield
securities market and on the market value of the high yield securities
held by the Fund, as well as on the ability of the issuers of such
securities to repay principal and interest on their borrowings.

Securities Ratings. Securities ratings are based largely on the

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<PAGE>

issuer's historical financial information and the rating agencies'
investment analysis at the time of rating. Credit ratings evaluate the
safety of principal and interest payments, not market value risk of high
yield bonds. Also, credit rating agencies may fail to timely change the
credit ratings to reflect subsequent events. Consequently, the rating
assigned to any particular security is not necessarily a reflection of the
issuer's current financial condition, which may be better or worse than
the rating would indicate. Although the Subadviser considers security
ratings when making investment decisions, it primarily relies upon its own
investment analysis. This analysis may include consideration of the
issuer's experience and managerial strength, changing financial condition,
borrowing requirements or debt maturity schedules, and its responsiveness
to changes in business conditions and interest rates. It also considers
relative values based on anticipated cash flow, interest or dividend
coverage, asset coverage and earnings prospects. Because of the greater
number of investment considerations involved in investing in lower-rated
securities, the achievement of the Fund's objective depends more on the
Subadviser's analytical abilities than would be the case if it were
investing only in securities in the higher rating categories. The Fund, at
the discretion of the Subadviser, may retain a security that has been
downgraded below the initial investment criteria.

Liquidity and Valuation. High yielding securities may contain
redemption or call provisions. If an issuer exercises these provisions in
a declining interest rate market, the Fund would have to replace the
security with a lower yielding security. To the extent that there is no
established retail secondary market, there may be thin trading of high
yielding securities. This may lessen the Fund's ability to accurately
value these securities and its ability to dispose of these securities.
Additionally, adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of
high yielding securities, especially in a thinly traded market. Certain
high yielding securities may involve special registration
responsibilities, liabilities and costs and liquidity and valuation
difficulties; thus, the responsibilities of the Board of Trustees to value
high yield securities in the portfolio becomes more difficult with
judgment playing a greater role.

The table below shows the percentages of the Fund's assets invested
during fiscal 1995 in securities assigned to the various rating categories
by Moody's and S&P and in unrated securities determined by the Subadviser
to be of comparable quality. These figures are dollar-weighted averages of
month-end portfolio holdings for the fiscal year ended September 30, 1995,
presented as a percentage of total net assets. As of February 1, 1996,
the Fund's investment strategy was amended to allow for up to 100% of its
assets to be invested in high yield lower-rated securities. Therefore,
these historical percentages are not indicative of the quality of current
or future portfolio holdings, which will vary.

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<PAGE>

Comparable
Quality of
unrated
Rated securities securities as a
as a percentage percentage of
of the Fund's the Fund's
assets assets
------ ------

[S] [C] [C]

S&P/Moody's Ratings

U.S. Government Securities . . 48.36% --

Repurchase Agreements involving --

U.S. Government Securities . 6.09 --

"BB"/"Ba" . . . . . . . . . . . 3.87 --

"B"/"B" . . . . . . . . . . . . 36.37 3.13

"CCC"/"Caa" . . . . . . . . . . 2.01 --
----- -----

97.7% 3.13
====== ======

Portfolio Turnover. The Fund may purchase and sell securities
without regard to the length of time the securities have been held. A high
rate of portfolio turnover generally leads to higher transaction costs and
may result in a greater number of taxable transactions. The Fund's
portfolio turnover rate for the fiscal year ended September 30, 1995 was
109%. See "Brokerage Practices" in the SAI.

Repurchase Agreements. Repurchase agreements are transactions in
which the Fund purchases securities and simultaneously commits to resell
the securities to the original seller (a member bank of the Federal
Reserve System or securities dealers who are members of a national
securities exchange or are market makers in U.S. Government securities) at
an agreed upon date and price reflecting a market rate of interest
unrelated to the coupon rate or the maturity of the purchased securities.
Although repurchase agreements carry certain risks not associated with
direct investment in securities, including possible decline in the market
value of the underlying securities and delays and costs to the Fund if the
other party to the repurchase agreement becomes bankrupt, the Fund intends
to enter into repurchase agreements only with banks and dealers in
transactions believed by the Subadviser to present minimal credit risks in
accordance with guidelines established by the Board of Trustees. The Fund
may invest up to 25% of its total assets in repurchase agreements.

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<PAGE>

Warrants. The Fund may invest in warrants, which are securities
permitting, but not obligating, their holder to subscribe for other
securities. Warrants do not carry the right to dividends or voting rights
with respect to their underlying securities, and they do not represent any
rights in assets of the issuer. An investment in warrants may be
considered speculative. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to its
expiration date.

Zero Coupon and Pay-in-Kind Bonds. The Fund may invest in zero
coupon securities and pay-in-kind bonds, which involve special risk
considerations. Zero coupon securities are debt securities that pay no
cash income but are sold at substantial discounts from their value at
maturity. When a zero coupon security is held to maturity, its entire
return, which consists of the amortization of discount, comes from the
difference between its purchase price and its maturity value. This
difference is known at the time of purchase, so that investors holding
zero coupon securities until maturity know at the time of their investment
what the expected return on their investment will be. Certain zero coupon
securities also are sold at substantial discounts from their maturity
value and provide for the commencement of regular interest payments at a
deferred date. Zero coupon securities may have conversion features. The
Fund also may purchase pay-in-kind bonds. Pay-in-kind bonds pay all or a
portion of their interest in the form of debt or equity securities.

Zero coupon securities and pay-in-kind bonds tend to be subject to
greater price fluctuations in response to changes in interest rates than
are ordinary interest-paying debt securities with similar maturities. The
value of zero coupon securities appreciates more during periods of
declining interest rates and depreciates more during periods of rising
interest rates than ordinary interest-paying debt securities with similar
maturities. Zero coupon securities and pay-in-kind bonds may be issued by
a wide variety of corporate and governmental issuers. Although zero
coupon securities and pay-in-kind bonds are generally not traded on a
national securities exchange, such securities are widely traded by brokers
and dealers and, to such extent, will not be considered illiquid for the
purposes of the Fund's 13% limitation on investments in illiquid
securities.

Current federal income tax law requires the holder of a zero coupon
security, certain pay-in-kind bonds and certain other securities acquired
at a discount (such as Brady Bonds) to accrue income with respect to these
securities prior to the receipt of cash payments. Accordingly, to avoid
liability for federal income and excise taxes, the Fund may be required to
distribute income accrued with respect to these securities and may have to
dispose of portfolio securities under disadvantageous circumstances in
order to generate cash to satisfy these distribution requirements.

- 14 -
<PAGE>

NET ASSET VALUE

The net asset values of A shares and C shares are calculated by
dividing the value of the total assets of the Fund attributable to that
class, less liabilities attributable to that class, by the number of
shares of that class outstanding. Shares are valued as of the close of
regular trading on the New York Stock Exchange ("Exchange") each day it is
open. Fund securities are stated 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. In the absence of a readily available market
quote, or if the Manager or Subadviser has reason to question the validity
of market quotations they receive, securities and other assets are valued
using such methods as the Board of Trustees believes would reflect fair
value. Short-term investments that will mature in 60 days or less are
valued at amortized cost, which approximates market value. The per share
net asset value of A shares and C shares may differ as a result of the
different daily expense accruals applicable to each class. For more
information on the calculation of net asset value, see "Net Asset Value"
in the SAI.

PERFORMANCE INFORMATION

Total return data of the A shares and C shares from time to time
may be included in advertisements about the Fund. Performance information
is computed separately for A shares and C shares in accordance with the
methods described below. Because C shares bear the expense of a higher
distribution fee attributable to the deferred sales load alternative, the
performance of C shares likely will be lower than that of A shares.

Total return with respect to a class for the one-, five- and ten-
year periods or, if such periods have not yet elapsed, the period since
the establishment of that class, through the most recent calendar quarter
represents that average annual compounded rate of return on an investment
of $1,000 in that class at the public offering price (in the case of A
shares, giving effect to the maximum initial sales load of 3.75% and, in
the case of C shares, giving effect to the deduction of any CDSL that
would be payable). In addition, the Fund also may advertise its total
return in the same manner, but without taking into account, the initial
sales load or CDSL. The Fund also may advertise total return calculated
without annualizing the return and total return, may be presented for
other periods. By not annualizing the returns, the total return
calculated in this manner simply will reflect the increase in net asset
value per A share and C share over a period of time, adjusted for
dividends and other distributions. A share and C share performance may be
compared with various indices.

- 15 -
<PAGE>

the last day of the period. Yield accounting methods differ from the
methods used for other accounting purposes; accordingly, the yield for a
class may not equal the dividend income actually paid to shareholders or
the net investment income per share reported in the Fund's financial
statements.

All data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of
the Fund's investment portfolio and the Fund's operating expenses.
Investment performance also often reflects the risks associated with the
Fund's investment objective and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. For more information on
investment performance, see the SAI.

INVESTING IN THE FUND

HOW TO BUY SHARES

Shares of the Fund are continuously offered through the Fund's
principal underwriter, Raymond James & Associates, Inc. (the
"Distributor"), and through other participating dealers or banks that have
dealer agreements with the Distributor. The Distributor receives
commissions consisting of that portion of the sales load remaining after
the dealer concession is paid to participating dealers or banks. Such
dealers may be deemed to be underwriters pursuant to the Securities Act of
1933, as amended.

Shares of the Fund may be purchased through a registered
representative of the Distributor, a participating dealer or a
participating bank ("Representative") by placing an order for Fund shares
with your Representative, completing and signing the Account Application
found in this prospectus, and mailing it, along with your payment, within
three business days.

The Fund offers and sells two classes of shares, A shares and C
shares. A shares may be purchased at a price equal to their net asset
value per share next determined after receipt of an order, plus a sales
load imposed at the time of purchase. C shares may be purchased at a price
equal to their net asset value per share next determined after receipt of
an order. A CDSL of 1% is imposed on C shares if you redeem those shares
within one year of purchase. When you place an order for Fund shares, you
must specify which class of shares you wish to purchase. See "Alternative
Purchase Plans."

- 16 -
<PAGE>

day also will receive that day's offering price. Otherwise, all purchase
orders accepted after the offering price is determined will be executed at
the offering price determined as of the close of regular trading on the
Exchange on the next trading day. See "What Class A Shares Will Cost" and
"What Class C Shares Will Cost."

You also may purchase shares of the Fund directly by completing and
signing the Account Application found in this prospectus and mailing it,
along with your payment, to Heritage Income Trust - High Yield Bond Fund,
c/o Shareholder Services, Heritage Asset Management, Inc., P.O. Box 33022,
St. Petersburg, FL 33733.

Shares may be purchased with Federal Funds (a commercial bank's
deposit with the Federal Reserve Bank that can be transferred to another
member bank on the same day) sent by Federal Reserve or bank wire to State
Street Bank and Trust Company, Boston, Massachusetts, ABA #011-000-028,
Account #3196-769-8. Wire instructions should include (1) the name of the
Fund, (2) the class of shares to be purchased, (3) your account number
assigned by the Fund, and (4) your name. To open a new account with
Federal Funds or by wire, you must contact the Manager or your
Representative to obtain a Heritage mutual fund account number. Commercial
banks may elect to charge a fee for wiring funds to State Street Bank and
Trust Company. For more information on "How to Buy Shares," see "Investing
in the Funds" in the SAI.

MINIMUM INVESTMENT REQUIRED/ACCOUNTS WITH LOW BALANCES

Except as provided under "Investment Programs", the minimum initial
investment in the Fund is $1,000 and a minimum account balance of $500
must be maintained. These minimum requirements may be waived at the
discretion of the Manager. In addition, initial investments in Individual
Retirement Accounts ("IRAs") may be reduced or waived under certain
circumstances. Contact the Manager or your Representative for further
information.

Due to the high cost of maintaining accounts with low balances, it
is currently the Fund's policy to redeem Fund shares in any account if the
account balance falls below the required minimum value of $500, except for
retirement accounts. The shareholder will be given 30 days' notice to
bring the account balance to the minimum required or the Fund may redeem
shares in the account and pay the proceeds to the shareholder. The Fund
does not apply this minimum account balance requirement to accounts that
fall below this minimum due to market fluctuation.

INVESTMENT PROGRAMS

- 17 -
<PAGE>

up to the minimum in order to remain open. Shareholders desiring this
service should complete the appropriate application available from the
Manager. You will receive a periodic confirmation of all activity for your
account.

Automatic Investment Options:

1. Bank Draft Investing -- You may authorize the Manager to process a
monthly draft from your personal checking account for investment
into the Fund. The draft is returned by your bank the same way a
canceled check is returned.

2. Payroll Direct Deposit -- If your employer participates in a direct
deposit program (also known as ACH Deposits) you may have all or a
portion of your payroll directed to the Fund. This will generate a
purchase transaction each time you are paid by your employer. Your
employer will report to you the amount sent from each paycheck.

3. Government Direct Deposit -- If you receive a qualifying periodic
payment from the U.S. Government or other agency that participates
in Direct Deposit, you may have all or a part of each check
directed to purchase shares of the Fund. The U.S. Government or
agency will report to you all payments made.

4. Automatic Exchange -- If you own shares of another open-end mutual
fund advised by the Manager ("Heritage Mutual Fund"), you may elect
to have a preset amount redeemed from that fund and exchanged into
the corresponding class of shares of the Fund. You will receive a
statement from the other Heritage Mutual Fund confirming the
redemption.

You may change or terminate any of the above options at any time.

RETIREMENT PLANS:

Shares of the Fund may be purchased as an investment for Heritage
IRA plans. In addition, shares may be purchased as an investment for self-
directed IRAs, defined contribution plans, Simplified Employee Pension
Plans ("SEPs") and other qualified retirement plans.

Heritage IRA. Individuals who earn compensation and who have not
reached age 70 1/2 before the close of the year generally may establish a
Heritage IRA. An individual may make limited contributions to a Heritage
IRA through the purchase of shares of the Fund and/or other Heritage
Mutual Funds. The Internal Revenue Code of 1986, as amended (the "Code")
limits the deductibility of IRA contributions to taxpayers who are not
active participants (and whose spouses are not active participants) in
employer-provided retirement plans or who have adjusted gross income below
certain levels. Nevertheless, the Code permits other individuals to make
nondeductible IRA contributions up to $2,000 per year (or $2,250, if such
contributions also are made for a nonworking spouse and a joint return is
filed). A Heritage IRA also may be used for certain "rollovers" from

- 18 -
<PAGE>

qualified benefit plans and from Section 403(b) annuity plans. For more
detailed information on the Heritage IRA, please contact the Manager.

Fund shares may be used as the investment medium for qualified
plans (defined benefit or defined contribution plans established by
corporations, partnerships or sole proprietorships). Contributions to
qualified plans may be made (within certain limits) on behalf of the
employees, including owner-employees, of the sponsoring entity.

Other Retirement Plans. Multiple participant payroll deduction
retirement plans also may purchase A shares of any Heritage Mutual Fund at
a reduced sales load on a monthly basis during the 13-month period
following such a plan's initial purchase. The sales load applicable to an
initial purchase of A shares will be that normally applicable under the
schedule of sales loads set forth in this prospectus to an investment 13
times larger than such initial purchase. The sales load applicable to each
succeeding monthly purchase of A shares will be that normally applicable,
under such schedule, to an investment equal to the sum of (1) the total
purchase previously made during the 13-month period and (2) the current
month's purchase multiplied by the number of months (including the current
month) remaining in the 13-month period. Sales loads previously paid
during such period will not be adjusted retroactively on the basis of
later purchases. Multiple participant payroll deduction retirement plans
may purchase C shares at any time.

Alternative Purchase Plans

The alternative purchase plans offered by the Fund enable you to
choose the class of shares that you believe will be most beneficial given
the amount of your intended purchase, the length of time you expect to
hold the shares and other circumstances. You should consider whether,
during the anticipated length of your intended investment in the Fund, the
accumulated continuing distribution and service fees plus the CDSL on C
shares would exceed the initial sales load plus accumulated service fees
on A shares purchased at the same time. Another factor to consider is
whether the potentially higher yield of A shares due to lower ongoing
charges will offset the initial sales load paid on such shares.
Representatives may receive different compensation for sales of A shares
than sales of C shares.

If you purchase sufficient shares to qualify for a reduced sales
load, you may prefer to purchase A shares because similar reductions are
not available on the C shares. For example, if you intend to invest more
than $1,000,000 in shares of the Fund, you should purchase A shares.
Moreover, all A shares are subject to a lower 12b-1 fee and, accordingly,
are expected to pay correspondingly higher dividends on a per share basis.
If your purchase will not qualify for a reduced sales load, you may still
wish to purchase A shares if you expect to hold your shares for an
extended period of time because, depending on the number of years you hold
the investment, the continuing distribution and service fees on C shares
would eventually exceed the initial sales load plus the continuing service
fee on A shares during the life of your investment. However, because

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<PAGE>

initial sales loads are deducted at the time of purchase, not all of the
purchase payment for A shares is invested initially.

You might determine that it would be more advantageous to
purchase C shares in order to have all of your purchase payment invested
initially. However, your investment would remain subject to continuing
distribution and service fees and, for a one year period, be subject to a
CDSL. For example, based on current fees and expenses for the Fund and the
maximum A shares sales load, you would have to hold A shares approximately
seven years before the accumulated distribution and service fees on the C
shares would exceed the initial sales load plus the accumulated service
fees on the A shares.

What Class A Shares Will Cost

A shares are sold on each day on which the Exchange is open. A
shares are sold at their next determined net asset value plus a sales load
as described below.

<TABLE>
<CAPTION>
Sales Load as a Percentage of
-----------------------------
Dealer Concession
Net Amount Invested as a Percentage of
Amount of Purchase Offering Price (Net Asset Value) Offering Price(1)
------------------ -------------- ------------------- ------------------
<S> <C> <C> <C>
Less than $25,000 3.75% 3.90% 3.25%
$25,000 to $49,999 3.25% 3.36% 2.75%
$50,000 to $99,999 2.75% 2.83% 2.25%
$100,000 to $249,999 2.25% 2.30% 1.75%
$250,000 to $499,999 1.50% 1.52% 1.00%
$500,000 to $999,999 0.75% 0.76% 0.25%
$1,000,000 and over(2) 0.00% 0.00% 0.00%
</TABLE>

(1) During certain periods, the Distributor may pay 100% of the sales
load to participating dealers. Otherwise, it will pay the Dealer
Concession shown above.

(2) The Manager may pay up to 0.50% of the purchase amount to the
Distributor for purchases exceeding $1,000,000. The Manager
reserves the right to reclaim this payment subject to certain
holding period requirements.

A shares may be sold at net asset value without any sales load to
the Manager and Subadviser; current and retired officers and Trustees of
the Trust; directors, officers, and full-time employees of the Manager,
Subadviser of any Heritage Mutual Fund, Distributor, and their affiliates
[Bond affiliates]; registered representatives of broker-dealers that are
parties to dealer agreements with the Distributor (or financial

- 20 -
<PAGE>

institutions that have arrangements with such broker-dealers); directors,
officers and full time employees of banks that are party to agency
agreements with the Distributor; and all such persons' immediate
relatives, and their beneficial accounts. In addition, the American
Psychiatric Association (the "APA Group") has entered into an agreement
with the Distributor that allows its members to purchase A shares at a
sales load equal to two-thirds of the percentages in the above table. The
Dealer Concession also will be adjusted in a like manner. Members of the
APA Group also are eligible to purchase A shares at net asset value in
amounts equal to the value of shares redeemed from other mutual funds that
were purchased under reduced sales load programs available to their
organization. A shares also may be purchased without sales loads by
investors who participate in certain broker-dealer wrap fee investment
programs.

A shares also may be purchased without a sales load if (1) within
90 days of the purchase of A shares the purchaser redeemed A shares of one
or more mutual funds for which a retail broker-dealer (other than the
Distributor) or its affiliate was principal underwriter (proprietary
funds), provided that the purchaser either paid a front-end sales load (or
a CDSL) or held shares of those funds for the period required not to pay
the otherwise applicable CDSL, and (2) the total value of A shares of all
Heritage Mutual Funds purchased under this sales load waiver does not
exceed the amount of the purchaser's redemption proceeds from the
proprietary funds. To take advantage of this waiver, an investor must
provide satisfactory evidence that all the above-noted conditions are met.
Qualifying investors should contact their investment executives for more
information.

A shares also may be purchased at net asset value by trust
companies and bank trust departments for funds over which they exercise
exclusive discretionary authority and are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are subject to
minimum requirements with respect to amount of purchase. Currently, the
minimum purchase required is $1,000,000, which may be invested over a
period of 13 months. The minimum may be changed from time to time by the
Distributor. The minimum may be aggregated between A shares of the Fund
and A shares of any other Heritage Mutual Funds that would be subject to a
sales load. Cities, counties, states or instrumentalities, and their
departments, authorities or agencies are able to purchase A shares of the
Fund at net asset value as long as certain conditions are met.

HERITAGE NET ASSET VALUE ("NAV") TRANSFER PROGRAM

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<PAGE>

have been liquidated no more than 90 days prior to the beginning of the
promotion period and not after the period ends. The Manager may pay
Representatives a one-time fee of up to 0.25% for all trades meeting the
requirements. The Manager reserves the right to recover these fees if A
shares are redeemed within 90 days of purchase.

COMBINED PURCHASE PRIVILEGE (RIGHT OF ACCUMULATION)

You may qualify for the sales load reductions indicated in the
above sales load schedule by combining purchases of A shares into a single
"purchase" if the resulting "purchase" totals at least $25,000. The term
"purchase" refers to a single purchase by an individual, or to concurrent
purchases that, in the aggregate, are at least equal to the prescribed
amounts, by an individual, his spouse, and their children under the age of
21 years, purchasing A shares for his or their own account; a single
purchase by a trustee or other fiduciary purchasing A shares for a single
trust, estate, or single fiduciary account although more than one
beneficiary is involved; or a single purchase for the employee benefit
plans of a single employer. A "purchase" also may include A shares
purchased at the same time through a single selected dealer of any other
Heritage Mutual Fund that distributes its shares subject to a sales load.
To qualify for the Combined Purchase Privilege on a purchase through a
selected dealer, the investor or selected dealer must provide the
Distributor with sufficient information to verify that each purchase
qualifies for the privilege or discount.

STATEMENT OF INTENTION

You also may obtain the reduced sales loads shown under "What
Class A Shares Will Cost" by means of a written Statement of Intention,
which expresses your intention to invest not less than $25,000 within a
period of 13 months in A shares of the Fund or A shares of any other
Heritage Mutual Fund subject to a sales load.

Investors qualifying for the Combined Purchase Privilege
described above may purchase A shares of the Heritage Mutual Funds under a
single Statement of Intention. For example, if, at the time an investor
signs a Statement of Intention to invest at least $25,000 in A shares of
the Fund, the investor and the investor's spouse each purchase A shares
worth $5,000 (for a total of $10,000), then it will be necessary only to
invest a total of $15,000 during the following 13 months in A shares or
any other Heritage Mutual Fund subject to a sales load to qualify for the
reduced sales loads on the total amount being invested.

The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial
investment under a Statement of Intention is 5% of such amount. Investors
wishing to enter into a Statement of Intention in conjunction with their
initial investment in A shares of the Fund should complete the appropriate
portion of the Account Application, while current Fund shareholders
desiring to do so can obtain a Statement of Intention form by contacting
the Manager or the Distributor at the address or telephone number listed

- 22 -
<PAGE>

on the cover of this prospectus, or from their Representative.

REINSTATEMENT PRIVILEGE

A shareholder who has redeemed any or all of his A shares of the
Fund may reinvest all or any portion of the redemption proceeds in A
shares at net asset value without any sales load, provided that such
reinvestment is made within 90 calendar days after the redemption date. A
shareholder who has redeemed any or all of his C shares of the Fund and
has paid a CDSL on those shares or has held those shares long enough so
that the CDSL no longer applies, may reinvest all or any portion of the
redemption proceeds in C shares at net asset value without paying a CDSL
on future redemptions of those shares, provided that such reinvestment is
made within 90 calendar days after the redemption date. A reinstatement
pursuant to this privilege will not cancel the redemption transaction;
therefore, (1) any gain realized on the transaction will be recognized for
Federal income tax purposes, while (2) any loss so realized will not be
recognized to the extent the proceeds are reinvested in shares of the
Fund. See "Taxes." The reinstatement privilege may be utilized by a
shareholder only once, irrespective of the number of shares redeemed,
except that the privilege may be utilized without limitation in connection
with transactions whose sole purpose is to transfer a shareholder's
interest in the Fund to his defined contribution plan, IRA or SEP.
Investors must notify the Fund if they intend to exercise the
reinstatement privilege.

For more information on "What Class A Shares Will Cost" and a
further explanation of instances in which the sales load will be waived or
reduced, see "Investing in the Funds" in the SAI.

WHAT CLASS C SHARES WILL COST

A CDSL of 1% is imposed on C shares if, within one year of
purchase, you redeem an amount that causes the current value of your
account to fall below the total dollar amount of C shares purchased
subject to the CDSL. The CDSL will not be imposed on the redemption of C
shares acquired as dividends or other distributions, or on any increase in
the net asset value of the redeemed C shares above the original purchase
price. Thus, the CDSL will be imposed on the lower of net asset value or
purchase price.

Redemptions will be processed in a manner intended to minimize
the amount of redemption that will be subject to the CDSL. When
calculating the CDSL, it will be assumed that the redemption is made first
of C shares acquired as dividends, second of C shares that have been held
for over one year, and finally of C shares held for less than one year on
a first-in first-out basis.

- 23 -
<PAGE>

the first year of purchase, 10 shares would not be subject to the CDSL
because redemptions are made first of shares acquired as dividends. With
respect to the remaining shares, the CDSL is applied only to the original
cost of $10 per share and not to the higher net asset value of $12 per
share. Therefore, only 40 of the 50 shares (or $400) being redeemed would
be subject to a CDSL at a rate of 1%.

Waiver of the Contingent Deferred Sales Load. The CDSL currently
is waived for (1) any partial or complete redemption in connection with a
distribution without penalty under Section 72(t) of the Code from a
qualified retirement plan, including a Keogh or IRA upon attaining age
70 1/2; (2) any redemption resulting from a tax-free return of an excess
contribution to a qualified employer retirement plan or an IRA; (3) any
partial or complete redemption following death or disability (as defined
in Section 72(m)(7) of the Code) of a shareholder (including one who owns
the shares as joint tenant with his spouse) from an account in which the
deceased or disabled is named, provided the redemption is requested within
one year of the death or initial determination of disability; (4) certain
periodic redemptions under the Systematic Withdrawal Plan from an account
meeting certain minimum balance requirements, in amounts representing
certain maximums established from time to time by the Distributor
(currently a maximum of 12% annually of the account balance at the
beginning of the Systematic Withdrawal Plan); or (5) involuntary
redemptions by the Fund of C shares in shareholder accounts that do not
comply with the minimum balance requirements. The Distributor may require
proof of documentation prior to waiver of the CDSL described in sections
(1) through (4) above, including distribution letters, certification by
plan administrators, applicable tax forms or death or physicians
certificates.

For more information about C shares, see "Reinstatement
Privilege" and "Exchange Privilege."

HOW TO REDEEM SHARES

Redemption of Fund shares can be made by:

Contacting Your Representative. Your Representative will
transmit an order to the Fund for redemption and may charge you a fee for
this service.

- 24 -
<PAGE>

them may be liable for losses due to unauthorized or fraudulent
transactions. For more information on these procedures, see "Redeeming
Shares -- Telephone Transactions" in the SAI. You may elect to have the
funds wired to the bank account specified on the Account Application.
Funds normally will be sent the next business day, and the shareholder
will be charged a wire fee by the Manager (currently $5.00). For
redemptions of less than $25,000, you may request that the check be mailed
to your address of record, providing that such address has not been
changed in the past 60 days. For your protection, all other redemption
checks will be transferred to the bank account specified on the Account
Application.

Written Request. Fund shares may be redeemed by sending a
written request for redemption to "Heritage Income Trust-High Yield Bond
Fund, c/o Shareholder Services, Heritage Asset Management, Inc., P.O. Box
33022, St. Petersburg, Florida 33733." Signature guarantees will be
required on the following types of requests: redemptions from any account
that has had an address change in the past 60 days, redemptions greater
than $25,000, redemptions that are sent to an address other than the
address of record and exchanges or transfers into other Heritage accounts
that have different titles. The Manager will transmit an order to the Fund
for redemption.

Systematic Withdrawal Plan. Withdrawal plans are available that
provide for regular periodic withdrawals of $50 or more on a monthly,
quarterly, semiannual or annual basis. Under these plans, sufficient
shares of the Fund are redeemed to provide the amount of the periodic
withdrawal payment. The purchase of A shares while participating in the
Systematic Withdrawal Plan ordinarily will be disadvantageous to you
because you will be paying a sales load on the purchase of those shares at
the same time that you are redeeming A shares upon which you may already
have paid a sales load. Therefore, the Fund will not knowingly permit the
purchase of A shares through an Automatic Investment Plan if you are at
the same time making systematic withdrawals of A shares. The Manager
reserves the right to cancel systematic withdrawals if insufficient shares
are available for two or more consecutive months.

Please contact the Manager or your Representative for further
information or see "Redeeming Shares" in the SAI.

RECEIVING PAYMENT

If a request for redemption is received by the Fund in good order
(as described below) before the close of regular trading on the Exchange,
the shares will be redeemed at the net asset value per share determined at
the close of regular trading on the Exchange on that day, less any
applicable CDSL for C shares. Requests for redemption received by the Fund
after the close of regular trading on the Exchange will be executed at the
net asset value determined at the close of regular trading on the Exchange
on the next trading day, less any applicable CDSL for C shares.

Payment for shares redeemed by the Fund normally will be made on

- 25 -
<PAGE>

the business day after the redemption was made. If the shares to be
redeemed recently have been purchased by personal check, the Fund may
delay mailing a redemption check until the purchase check has cleared,
which may take up to seven days. This delay can be avoided by wiring funds
for purchases. The proceeds of a redemption may be more or less than the
original cost of Fund shares.

A redemption request will be considered to be received in "good
order" if:

. the number or amount of shares and the class of shares to be
redeemed and shareholder account number have been indicated;

. any written request is signed by the shareholder and by all co-
owners of the account with exactly the same name or names used in
establishing the account;

. any written request is accompanied by certificates representing
the shares that have been issued, if any, and the certificates
have been endorsed for transfer exactly as the name or names
appear on the certificates or an accompanying stock power has
been attached; and

. the signatures on any written redemption request of $25,000 or
more and on any certificates for shares (or an accompanying stock
power) have been guaranteed by a national bank, a state bank that
is insured by the Federal Deposit Insurance Corporation, a trust
company, or by any member firm of the New York, American, Boston,
Chicago, Pacific or Philadelphia Stock Exchanges. Signature
guarantees also will be accepted from savings banks and certain
other financial institutions that are deemed acceptable by the
Manager, as transfer agent, under its current signature guarantee
program.

The Fund has the right to suspend redemption or postpone payment
at times when the Exchange is closed (other than customary weekend or
holiday closings) or during periods of emergency or other periods as
permitted by the SEC. In the case of any such suspension a shareholder may
either withdraw his request for redemption or receive payment based upon
the net asset value next determined after the suspension is lifted. If a
redemption check remains outstanding after six months, the Manager
reserves the right to redeposit those funds into the shareholder's
account. For more information on "Receiving Payment", see "Redeeming
Shares -- Receiving Payment" in the SAI.

EXCHANGE PRIVILEGE

- 26 -
<PAGE>

applicable terms set forth in the prospectus for the Heritage Mutual Fund
whose shares are being acquired. Exchanges involving the redemption of
shares recently purchased by check will be permitted only after the
Heritage Mutual Fund whose shares have been tendered for exchange is
reasonably assured that the check has cleared, normally seven calendar
days following the purchase date. Exchanges of shares of Heritage Mutual
Funds generally will result in the realization of a taxable gain or loss
for Federal income tax purposes.

For purposes of calculating the commencement of the one-year CDSL
holding period for shares exchanged from the Fund to the C shares of any
other Heritage Mutual Fund, except Heritage Cash Trust Money Market Fund
("Money Market Fund"), the original purchase date of those shares
exchanged will be used. Any time period that the exchanged shares were
held in the Money Market Fund will not be included in this calculation.

If you exchange A shares or C shares for corresponding shares of
the Money Market Fund, you may, at any time thereafter, exchange such
shares for the corresponding class of shares of any other Heritage Mutual
Fund. Because the Money Market Fund is a no-load mutual fund, if you
exchange shares of that fund acquired by purchase (rather than exchange)
for shares of another Heritage Mutual Fund, you will be subject to the
sales load, if any, that would be applicable to a purchase of that
Heritage Mutual Fund. In addition, if you exchange C shares of the Fund
for corresponding shares of the Money Market Fund, the period during which
an investment is held in shares of the Money Market Fund will not count
for purposes of calculating the one-year CDSL holding period for such
shares. As a result, if you redeem C shares of the Money Market Fund
before the expiration of the one-year CDSL holding period, you will be
subject to the applicable CDSL. A shares of the Fund may be exchanged for
A shares of the Heritage Cash Trust - Municipal Money Market Fund, which
is the only class of shares offered by that fund. Because the Heritage
Cash Trust - Municipal Money Market Fund is a no-load fund, if you
exchange shares of that fund acquired by purchase (rather than exchange)
for shares of another Heritage Mutual Fund, you also will be subject to
the sales load, if any, that would be applicable to a purchase of that
Heritage Mutual Fund. C shares are not eligible for exchange into the
Heritage Cash Trust - Municipal Money Market Fund.

Shares acquired pursuant to a telephone request for exchange will
be held under the same account registration as the shares redeemed through
such exchange. For a discussion of limitation of liability of certain
entities, see "How to Redeem Shares--Telephone Request."

Telephone exchanges can be effected by calling the Manager at
(800) 421-4184 or by calling your Representative. In the event that you or
your Representative are unable to reach the Manager by telephone, an
exchange can be effected by sending a telegram to Heritage Asset
Management, Inc., attention: Shareholder Services. Due to the volume of
calls or other unusual circumstances, telephone exchanges may be difficult
to implement during certain time periods.

- 27 -
<PAGE>

The exchange privilege is available only in states where shares
of the Heritage Mutual Fund being acquired may be legally sold. Each
Heritage Mutual Fund reserves the right to reject any order to acquire its
shares through exchange or otherwise to restrict or terminate the exchange
privilege at any time. In addition, each Heritage Mutual Fund may
terminate this exchange privilege upon 60 days' notice. For further
information on this exchange privilege, contact the Manager or your
Representative and see "Exchange Privilege" in the SAI.

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

The business and affairs of the Fund are managed by or under the
direction of the Trust's Board of Trustees. The Trustees are responsible
for managing the Fund's business affairs and for exercising all the Fund's
powers except those reserved to the shareholders. A Trustee may be removed
by a two-thirds vote of the outstanding Fund shares.

INVESTMENT ADVISER, FUND ACCOUNTANT, ADMINISTRATOR AND TRANSFER AGENT

Heritage Asset Management, Inc. is the Fund's investment adviser,
fund accountant, administrator and transfer agent. The Manager is
responsible for reviewing and establishing investment policies for the
Fund as well as administering the Fund's noninvestment affairs. The
Manager is a wholly owned subsidiary of Raymond James Financial, Inc.,
which, together with its subsidiaries, provides a wide range of financial
services to retail and institutional clients. The Manager manages,
supervises and conducts the business and administrative affairs of the
Fund and the other Heritage Mutual Funds. The annual investment advisory
and administration fee paid monthly by the Fund to the Manager is based on
the Fund's average daily net assets as shown on the chart below. The Fund
pays the Manager separately for fund accounting and transfer agent
services.

Advisory Fee as a % of
Average Daily Net
Average Daily Net Assets Assets
------------------------ ------
First $100 million 0.60%
Over $100 million 0.50%

The advisory fee may be reduced pursuant to regulations in
various states where Fund shares are qualified for sale which impose
limitations on the annual expense ratio of the Fund. The Manager reserves
the right to discontinue any voluntary waiver of its fees or reimbursement
to the Fund in the future. The Manager also may recover advisory fees
waived in the two previous years if the recovery does not cause the Fund
to exceed applicable expense limitations. It currently is not anticipated

- 28 -
<PAGE>

that the Manager will recover fees waived in fiscal 1994 and 1995.

SUBADVISER

The Manager has entered into an agreement with Salomon Brothers
Asset Management Inc to provide investment advice and portfolio management
services,including placement of securities orders, for an annual fee
payable by the Manager of .30% of the Fund's average daily net assets.
The Subadviser is a wholly owned subsidiary of Salomon Inc. The
Subadviser was incorporated in 1987 and, together with its affiliates,
provides a broad range of fixed income and equity investment advisory
services to various individual and institutional clients located
throughout the world and serves an investment adviser to various
investment companies. As of October 31, 1995, the Subadviser and its
affiliates had approximately $13.1 billion of assets under management.

PORTFOLIO MANAGEMENT

Peter J. Wilby, assisted by a team of other investment
professionals, serves as portfolio manager of the Fund. Mr. Wilby is
primarily responsible for the day-to-day management of the Fund's
investment portfolio subject to the general oversight of the Trust's Board
of Trustees. Mr. Wilby is a Director of the Subadviser and has been
affiliated with Subadviser in various capacities since 1989. Mr. Wilby is
a Chartered Financial Analyst, a Certified Public Accountant, and a member
of the New York Society of Securities Analysts.

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS AND OTHER DISTRIBUTIONS

Dividends from net investment income are declared and paid
monthly. The Fund distributes to shareholders substantially all net
realized capital gains on portfolio securities after the end of the year
in which the gains are realized. Dividends and other distributions on
shares held in retirement plans and by shareholders maintaining a
Systematic Withdrawal Plan generally are declared and paid in additional
Fund shares. Other shareholders may elect to:

. receive both dividends and capital gain distributions in
additional Fund shares;

. receive dividends in cash and capital gain distributions in
additional Fund shares;

. receive both dividends and capital gain distributions in cash; or

. receive both dividends and capital gain distributions for
investment into another Heritage Mutual Fund.

If you select none of the options, the first option will apply.
In any case when you receive a dividend or a capital gain distribution in

- 29 -
<PAGE>

shares, your account will be credited with additional Fund shares valued
at the net asset value of the shares determined at the close of regular
trading on the Exchange on the day following the record date for the
dividend or capital gain distribution. Distribution options can be changed
at any time by notifying the Manager in writing.

Dividends paid by the Fund with respect to its A shares and C
shares are calculated in the same manner and at the same time and will be
in the same amount relative to the aggregate net asset value of the shares
in each class, except that dividends on C shares may be lower than
dividends on A shares primarily as a result of the higher distribution fee
and class-specific expenses applicable to C shares.

DISTRIBUTION PLANS

As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of A shares and in
connection with personal services rendered to Class A shareholders and the
maintenance of Class A accounts, the Fund may pay the Distributor a
service fee of up to 0.25% on A shares. The Fund may pay the Distributor
a service fee of up to 0.25% and a distribution fee of up to 0.10% of the
Fund's average daily net assets attributable to A shares purchased prior
to April 3, 1995. This fee represents compensation for maintenance of
Class A accounts. This fee is computed daily and paid monthly.

As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of C shares and in
connection with personal services rendered to Class C shareholders and the
maintenance of Class C accounts, the Fund pays the Distributor a service
fee of up to 0.25% and a distribution fee of 0.55% of the Fund's average
daily net assets attributable to C shares. This fee is computed daily and
paid monthly.

The above-referenced fees paid to the Distributor are made under
Distribution Plans adopted pursuant to Rule 12b-1 under the 1940 Act.
These Plans authorize the Distributor to spend such fees on any activities
or expenses intended to result in the sale of A shares and C shares,
including compensation (in addition to the sales load) paid to
Representatives; advertising, salaries and other expenses of the
Distributor relating to selling or servicing efforts; expenses of
organizing and conducting sales seminars; printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; and preparation and distribution of advertising material and
sales literature and other sales promotion activities. The Distributor has
entered into dealer agreements with participating dealers who also will
distribute shares of the Fund.

If the Plan is terminated, the obligation of the Fund to make
payments to the Distributor pursuant to the Plan will cease and the Fund
will not be required to make any payments past the date the Plan
terminates.

- 30 -
<PAGE>

TAXES

The Fund is treated as a separate corporation for Federal income
tax purposes and intends to continue to qualify for treatment as a
regulated investment company under Subchapter M of the Code. In each
taxable year that the Fund does so, it (but not its shareholders) will be
relieved of Federal income tax on that part of its investment company
taxable income (generally consisting of net investment income and net
short-term capital gains) and net capital gain (the excess of net long-
term capital gain over net short-term capital loss) that is distributed to
its shareholders. Dividends from the Fund's investment company taxable
income are taxable to its shareholders as ordinary income, to the extent
of the Fund's earnings and profits, whether received in cash or in
additional Fund shares. Distributions of the Fund's realized net capital
gain, when designated as such, are taxable to its shareholders as long-
term capital gains, whether received in cash or in additional Fund shares
and regardless of the length of time the shares have been held. No
substantial portion of the dividends paid by the Fund will to be eligible
for the dividends-received deduction allowed to corporations.

Dividends and other distributions declared by the Fund in
December of any year and payable to shareholders of record on a date in
that month will be deemed to have been paid by the Fund and received by
the shareholders on December 31 if they are paid by the Fund during the
following January. Shareholders receive Federal income tax information
regarding dividends and other distributions after the end of each year.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain
other non-corporate shareholders who do not provide the Fund with a
correct taxpayer identification number. Withholding at that rate also is
required from dividends and capital gain distributions payable to such
shareholders who otherwise are subject to backup withholding.

The foregoing is only a summary of some of the important Federal
income tax considerations generally affecting the Fund and its
shareholders. See the SAI for a further discussion. There may be other
Federal, state or local tax considerations applicable to a particular
investor. You are therefore urged to consult your tax adviser.

SHAREHOLDER INFORMATION

Each share of the Fund gives the shareholder one vote in matters
submitted to shareholders for a vote. A shares and C shares of the Fund
have equal voting rights, except that, in matters affecting only a
particular class, only shares of that class are entitled to vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Trustees under
certain circumstances. Trustees may be removed by the Trustees or
shareholders at a special meeting. A special meeting of shareholders shall
be called by the Trustees upon the written request of shareholders owning
at least 10% of the Fund's outstanding shares.

- 31 -
<PAGE>

APPENDIX

DESCRIPTION OF CORPORATE BOND RATINGS

STANDARD & POOR'S

The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. S&P
does not perform any audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditor's rights.

AAA - Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher rated categories.

BB, B, CCC -- Debt rated "BB," "B" and "CCC" is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the

A - 1
<PAGE>

obligation. "BB" indicates the lowest degree of speculation. While such
debt will likely have some quality and protective characteristics, these
are outweighed by larger uncertainties or major risk exposures to adverse
conditions.

BB -- Debt rated "BB" has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. The "BB" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BBB-"
rating.

B -- Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The
"B" rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BB" or "BB-" rating.

CCC -- Debt rated "CCC" has a currently identifiable
vulnerability to default and is dependent upon favorable business,
financial and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business, financial or
economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The "CCC" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "B" or
"B-" rating.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major categories.

NR -- Indicates that no public rating has been requested, that
there is insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of policy.

MOODY'S INVESTORS SERVICE, INC.

Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa

A - 2
<PAGE>

securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long term
risks appear somewhat larger than the Aaa securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact has speculative
characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments amy be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of time
may be small.

Caa -- Bonds which are rated Caa are of poor standing. Such
issues maybe in default or there may be present elements of danger with
respect to principal or interest.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bonding rating
system. The modifier 1 indicates that the company ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking and the modifier 3 indicates that the company ranks in the lower
end of its generic rating category.

A - 3
<PAGE>

No dealer, salesman or other person has been authorized to give
any information or to make any representation other than that contained in
this Prospectus in connection with the offer contained in this Prospectus,
and, if given or made, such other information or representations must not
be relied upon as having been authorized by the Trust or the Distributor.
This Prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
<PAGE>

Heritage Income Trust
High Yield Bond Fund -----------------
P.O. Box 33022
St. Petersburg, FL 33733

--------------------------------------- Bulk Rate
U.S. Postage
Address Change Requested PAID
Modern Mailing
Prospectus -----------------

Investment Advisor/
Shareholder Servicing Agent
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 Accountants
Coopers & Lybrand L.L.P.
<PAGE>
(HERITAGE LOGO)

HIGH YIELD BOND FUND

Prospectus

February 1, 1996<PAGE>

(HERITAGE LOGO)

Intermediate Government Fund

Heritage Income Trust is a mutual fund offering shares in
separate investment portfolios. This Prospectus relates to the
Intermediate Government Fund (the "Fund"), which formerly was known as the
Limited Maturity Government Portfolio. The Fund has an investment
objective of high current income consistent with the preservation of
capital. The Fund seeks to achieve this objective primarily by investing
in securities issued by the U.S. Government, its agencies and
instrumentalities and related repurchase agreements and forward
commitments. Under normal market conditions the Fund will maintain a
dollar-weighted effective average maturity of between three and ten years.
The Fund offers two classes of shares, Class A shares (sold subject to a
front-end sales load) and Class C shares (sold subject to a contingent
deferred sales load).

This Prospectus contains information that should be read before
investing in the Fund and should be kept for future reference. A Statement
of Additional Information relating to the Fund dated February 1, 1996 has
been filed with the Securities and Exchange Commission and is incorporated
by reference in this Prospectus. A copy of the Statement of Additional
Information is available free of charge and shareholder inquiries can be
made by writing to Heritage Asset Management, Inc. or by calling (800)
421-4184.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.

(HERITAGE LOGO)
Registered Investment Advisor--SEC

880 Carillon Parkway
St. Petersburg, Florida 33716
(800) 421-4184

Prospectus Dated February 1, 1996

- 1 -
<PAGE>

Table of Contents
==========================================================================
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 1
About the Trust and the Fund . . . . . . . . . . . . . . . . . . . 1
Total Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . 1
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . 3

Differences Between A Shares and C Shares . . . . . . . . . . . . . 4
Investment Objective, Policies and Risk Factors . . . . . . . . . . 4
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Performance Information . . . . . . . . . . . . . . . . . . . . . . 9
INVESTING IN THE FUND . . . . . . . . . . . . . . . . . . . . . . . 9

How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . . . 9
Minimum Investment Required/Accounts with Low Balances . . . . . . 10
Investment Programs . . . . . . . . . . . . . . . . . . . . . . . . 11
Alternative Purchase Plans . . . . . . . . . . . . . . . . . . . . 12
What Class A Shares Will Cost . . . . . . . . . . . . . . . . . . . 12

What Class C Shares Will Cost . . . . . . . . . . . . . . . . . . . 15
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . 16
Receiving Payment . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . 17
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . 18

SHAREHOLDER AND ACCOUNT POLICIES . . . . . . . . . . . . . . . . . 19
Dividends and Other Distributions . . . . . . . . . . . . . . . . . 19
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Shareholder Information . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>

GENERAL INFORMATION

ABOUT THE TRUST AND THE FUND
==========================================================================

Heritage Income Trust (the "Trust") was established as a
Massachusetts business trust under a Declaration of Trust dated August 4,
1989. The Trust is an open-end diversified management investment company
that currently offers shares in two separate investment portfolios, the
Fund and the High Yield Bond Fund. The Fund is designed for individuals,
institutions and fiduciaries whose investment objective is high current
income consistent with the preservation of capital. The Fund offers two
classes of shares, Class A shares ("A shares") and Class C shares ("C
shares"). The Fund requires a minimum initial investment of $1,000, except
for certain retirement accounts and investment plans for which lower
limits may apply. See "Investing in the Fund." This prospectus relates
exclusively to the Fund. To obtain a prospectus for the High Yield Bond
Fund, call (800) 421-4184.

TOTAL FUND EXPENSES
==========================================================================

<TABLE>
<CAPTION>
CLASS A CLASS C
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales load "charge" on purchases . . . 3.75% None
Contingent deferred sales load (as a (declining to 0%
percentage of original purchase price after the first
or redemption proceeds, as applicable) None 1.00% year)
Wire redemption fee . . . . . . . . . . $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
Management Fee (after fee waiver) . . . 0.00% 0.00%
12b-1 Distribution Fee . . . . . . . . 0.35% 0.60%
Other Expenses (after reimbursement) . 0.60% 0.60%
----- -----
Total Fund Operating Expenses (after
fee waiver and reimbursement) . . . . . 0.95% 1.20%
===== =====
</TABLE>

- 1 -
<PAGE>

The Fund's manager, Heritage Asset Management, Inc. (the
"Manager"), voluntarily will waive its fees and, if necessary, reimburse
the Fund to the extent that Class A annual operating expenses exceed .95%
and to the extent that Class C annual operating expenses exceed 1.20% of
the average daily net assets attributable to that class for the fiscal
year ending September 30, 1996. Absent fee waivers, the management fee for
each class would have been 0.50%, and other expenses and total Fund
operating expenses would have been 0.62% and 1.47%, respectively, for A
shares and 0.62 and 1.72%, respectively, for C shares. To the extent that
the Manager waives or reimburses its fees with respect to one class, it
will do so with respect to the other class on a proportionate basis. Due
to the imposition of Rule 12b-1 distribution fees, it is possible that
long-term shareholders of the Fund may pay more in total sales charges
than the economic equivalent of the maximum front-end sales charge
permitted by the rules of the National Association of Securities Dealers,
Inc.

The impact of Fund operating expenses on earnings is illustrated
in the example below assuming a hypothetical $1,000 investment, a 5%
annual rate of return, and a redemption at the end of each period shown.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Total Operating Expenses--
A shares . . . . . . . . $___ $___ $___ $___
Total Operating Expenses--
C shares . . . . . . . . $___ $___ $___ $___

The impact of Fund expenses on earnings is illustrated in the
example below assuming a hypothetical $1,000 investment, a 5% annual rate
of return, and no redemption at the end of each period shown.

This is an illustration only and should not be considered a
representation of future expenses. Actual expenses and performance may be
greater or less than that shown above. The purpose of the above tables is
to assist investors in understanding the various costs and expenses that
will be borne directly or indirectly by shareholders. For a further
discussion of these costs and expenses, see "Management of the Fund" and
"Distribution Plans."

Financial Highlights
==========================================================================

The following table shows important financial information for an

- 2 -
<PAGE>

A share and a C share of the Fund outstanding for the periods indicated,
including net investment income, net realized and unrealized gain on
investments, and certain other information. It has been derived from
financial statements that have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon is included in the Statement
of Additional Information ("SAI"), which may be obtained by calling the
Fund at the telephone number on the front page of this prospectus.

<TABLE>
<CAPTION>
Class A* Class C*
For the Years Ended September 30,

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 gain . . . . . . . . . -- -- (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 0.95 0.95 0.91 0.78 1.07 1.10(b) 1.20(b)
assets(a) . . . . . . . . . . . . . . . . . . . . . . .
Net investment income to average daily net assets . . . 5.50 4.60 5.99 5.66 6.87 7.04(b) 5.19(b)
Fund turnover rate . . . . . . . . . . . . . . . . . . 162 213.53 150.17 122.75 201.58 75.93(b) 162
Net assets, end of the period (millions) . . . . . . . $24 $41 $102 $111 $5 $4 $0.07
</TABLE>
__________

* Amounts and percentages contained in Financial Highlights are per
share information applicable to periods when the Fund operated under
the name Heritage Income Trust - Limited Maturity Government
Portfolio.

** 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 method does not correspond with results

- 3 -
<PAGE>

of operations.

# For the period March 1, 1990 (commencement of operations) to September
30, 1990.

## For the period April 3, 1995 (commencement of operations of 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 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 A
shares, respectively. Excludes management fees waived and expenses
reimbursed by the Manager in the amount of $.06 per C share. The
operating expense ratio including such items would be 1.72%
(annualized) for C shares.

(b) Annualized.

(d) Does not reflect the imposition of a sales load.

Differences Between A Shares and C Shares
==========================================================================

The primary difference between the A shares and the C shares lies
in their initial sales load and contingent deferred sales load ("CDSL")
structures and in their ongoing expenses, including asset-based sales
charges in the form of distribution fees. These differences are
summarized below. In addition, each class may bear differing amounts of
certain class-specific expenses, such as transfer agent fees, Securities
and Exchange Commission ("SEC") registration fees, state registration fees
and expenses of administrative personnel and services. Each class has
distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives. See "How to Buy Shares," "Alternative Purchase Plans," "What
Class A Shares Will Cost" and "What Class C Shares Will Cost."

<TABLE>
<CAPTION>
Annual 12b-1 Fees
as a % of Average
Sales Load Daily Net Assets Other Information

<S> <C> <C> <C>
A Shares Maximum initial sales Service fee of 0.25%; Initial sales load
load of 3.75% distribution fee of up waived or reduced
to 0.10% for certain
purchases

- 4 -
<PAGE>

C Shares Maximum CDSL of 1% of Service fee of 0.25%; CDSL waived for
redemption proceeds; distribution fee of certain types of
declining to zero 0.35% redemptions
after 1 year

</TABLE>

Investment Objective, Policies and Risk Factors
==========================================================================

The investment objective of the Fund is high current income
consistent with the preservation of capital. Fund shares will fluctuate in
value as a result of value changes in portfolio investments. There can be
no assurance that the Fund's investment objective will be achieved.

In seeking its objective, the Fund invests at least 80% of its
assets in debt securities (including mortgage-backed securities) issued or
guaranteed by the U.S. Government and its agencies and instrumentalities,
and repurchase agreements and when-issued and forward commitment
securities involving such debt obligations. The Fund also may lend its
securities, borrow money (as discussed in the SAI), invest in money market
instruments to maintain sufficient liquidity, seek to hedge against
interest rate changes by a variety of strategies involving the use of
options, futures contracts and options on futures contracts as described
below, invest in stripped securities, inverse floaters and invest up to
10% of its net assets in illiquid securities. Under normal conditions the
Fund will maintain a dollar-weighted effective average maturity of between
three and ten years. In times where, in its judgment, conditions in the
securities markets would make pursuing the Fund's basic investment
strategy inconsistent with the best interests of the Fund's shareholders,
the Manager may shorten the Fund's dollar-weighted effective average
maturity below three years.

The Fund's investment objective is fundamental and may not be
changed without the vote of a majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). All policies of the Fund described in this
prospectus may be changed by the Trust's Board of Trustees (the "Board of
Trustees" or the "Board") without shareholder approval. The following is
a discussion of the types of investments in which the Fund may invest,
including the risks of investing in these securities. For a further
discussion of the Fund's investment policies and risks, see "Investment
Objective and Policies of the Fund" in the SAI.

Debt Obligations. The market value of the debt securities held
by the Fund will be affected by changes in interest rates. There normally
is an inverse relationship between the market value of such securities and
actual changes in interest rates. Thus, a decline in interest rates
generally produces an increase in market value, while an increase in rates
generally produces a decrease in market value. Moreover, the longer the
remaining maturity of a security, the greater will be the effect of
interest rate changes on the market value of such security.

- 5 -
<PAGE>

Futures and Options. The Fund may engage in transactions in
options and futures contracts in an effort to adjust the risk/return
characteristics of its investment portfolio. The Fund also may in certain
circumstances purchase or sell futures contracts or options as a
substitute for the purchase or sale of securities. The Fund may purchase
and sell put and call options on debt securities and indices of debt
securities, purchase and sell futures contracts on debt securities and
indices of debt securities, and purchase and sell options on a futures
contracts. For example, if the Manager anticipates that interest rates
will rise, the Fund also may sell a debt futures contract or a call option
thereon or purchase a put option on such futures contract as a hedge
against a decrease in the value of the Fund's securities. If the Manager
anticipates that interest rates will decline, the Fund may purchase a debt
futures contract or a call option thereon or sell a put option on futures
contract to protect against an increase in the price of securities the
Fund intends to purchase.

To the extent that the Fund enters into futures contracts and
options on futures contracts other than for bona fide hedging purposes (as
defined by the Commodity Futures Trading Commission), the aggregate
initial margin and premiums required to establish those positions
(excluding the amount by which options are "in-the-money") will not exceed
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into. The Fund may hedge up to 100% of its net assets by such
transactions. The Fund will not purchase any option, if immediately
thereafter, the aggregate cost of all outstanding options (including
options on futures described above) purchased by the Fund would exceed 5%
of the value of its total assets. The Fund may write call options and put
options on up to 15% of its total assets.

Risks of Futures and Options. The Fund might not use any of the
strategies described above, and there can be no assurance that any
strategy used will succeed. If the Manager incorrectly forecasts interest
rates in utilizing a strategy for the Fund, the Fund would be in a better
position if it had not hedged at all. Investments in futures and options
involve certain risks that are different in some respects from investment
risks associated with investment in securities. The principal risks
associated with the use of futures and options are: (1) imperfect
correlation in the price movements of securities underlying the options
and futures and the price movements of the portfolio securities subject to
the hedge; (2) possible lack of a liquid market for closing out futures or
options positions; (3) the need for additional portfolio management skills
and techniques; (4) the fact that, while hedging strategies can reduce the
risk of loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in hedged
investments; and (5) the possible inability of the Fund to purchase or
sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the possible need for the Fund to sell a security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or
to segregate securities in connection with hedging transactions and the
possible inability of the Fund to close out or liquidate a hedged

- 6 -
<PAGE>

position. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the security being
hedged. Such equal price changes are not always possible because the
security underlying the hedging instrument may not be the same security
that is being hedged. The Manager will attempt to create a closely
correlated hedge, but hedging activities may not be completely successful
in eliminating market fluctuation. The ordinary spreads between prices in
the futures markets, due to the nature of the futures market, are subject
to distortion. Due to the possibility of distortion, a correct forecast
of market trends by the Manager may still not result in a successful
transaction. The Manager may be incorrect in its expectation as to the
extent of market movements, or the time span within which the movements
take place.

Money Market Instruments. The types of money market instruments
in which the Fund can invest include high quality commercial paper, other
high quality short-term corporate debt obligations and various instruments
issued by domestic banks and savings and loan associations having assets
of at least $1 billion and capital, surplus and undivided profit of over
$100 million as of the close of the most recent fiscal year.

Mortgage-Backed Securities. Mortgage-backed securities represent
an interest in a pool of mortgages made by lenders such as commercial
banks, savings and loan institutions, mortgage bankers and others. These
securities generally provide monthly interest and, in most cases,
principal payments that are a "pass-through" of the monthly payments made
by the individual borrowers on their residential mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Mortgage-
backed securities may be issued by the U.S. Government or U.S. Government-
related entities or by non-governmental entities such as banks, savings
and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers. Although mortgage-backed
securities are issued with stated maturities of up to forty years,
unscheduled or early payments of principal and interest on the underlying
mortgages may shorten considerably their effective maturities. This
contrasts with U.S. Treasury securities, for instance, which generally pay
all principal at maturity and typically have an effective maturity equal
to the final stated maturity. Thus, for purposes of calculating the Fund's
weighted average maturity, the Fund will apply the standard market
consensus with respect to the effective maturity of mortgage-backed
securities rather than their stated final maturities.

U.S. Government and U.S. Government-Related Mortgage-
Backed Securities. The Government National Mortgage Association ("GNMA")
is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development and is a primary issuer of U.S. Government-
related mortgage-backed securities. GNMA pass-through securities are
considered to be riskless with respect to default because the underlying
mortgage loan portfolio is comprised entirely of U.S. Government-backed
loans and timely principal and interest payments are guaranteed by the
full faith and credit of the U.S. Government. Residential mortgage loans
also are pooled by the Federal Home Loan Mortgage Corporation ("FHLMC"), a

- 7 -
<PAGE>

corporate instrumentality of the U.S. Government, and the Federal National
Mortgage Association ("FNMA"), a U.S. Government-sponsored corporation
owned entirely by private stockholders, which guarantee the timely payment
of interest and the ultimate collection of principal on their respective
securities.

Private Issuer Mortgage-Backed Securities. Mortgage-
backed securities offered by private issuers include pass-through
securities comprised of pools of conventional residential mortgage loans;
mortgage-backed bonds which are considered to be debt obligations of the
institution issuing the bonds and are collateralized by mortgage loans;
and bonds and collateralized mortgage obligations ("CMOs") that are
collateralized by mortgage-backed securities issued by FHLMC, FNMA, GNMA
or pools of conventional mortgages. These securities generally offer a
higher interest rate than securities with direct or indirect U.S.
Government guarantees of payments. However, many issuers or servicers of
these securities guarantee timely payment of interest and principal, which
also may be supported by various forms of insurance, including individual
loan, title, pool and hazard policies. There can be no assurance that the
private issuers or insurers will be able to meet their obligations under
the relevant guarantee or insurance policies. Mortgage-backed securities
of private issuers, including CMOs, also have achieved broad market
acceptance and, consequently, an active secondary market has emerged.
However, the market for these securities is smaller and less liquid than
the market for U.S. Government and U.S. Government-related mortgage pools.
The maximum permitted investment in mortgage-backed securities of private
issuers is 20% of the net assets of the Fund.

REMICs. The Fund may invest in U.S. Government and
privately issued real estate mortgage investment conduits ("REMICs"), a
common form of CMO. REMICs are entities that issue multiple-class real
estate mortgage-backed securities that qualify and elect treatment as such
under the Internal Revenue Code of 1986, as amended (the "Code"). REMICs
may take several forms, such as trusts, partnerships, corporations,
associations, or segregated pools of mortgages. Once REMIC status is
elected and obtained, the entity is not subject to Federal income
taxation. Instead, income is passed through the entity and is taxed to the
persons who hold interests in the REMIC. A REMIC interest must consist of
one or more classes of "regular interests" and "residual interests." To
qualify as a REMIC, substantially all the assets of the entity must be
directly or indirectly secured principally by real property. The risks
inherent in investing in REMICs are similar to those of CMOs in general,
as well as those of other mortgage-backed securities as described below.

Risks of Mortgage-Backed Securities. Investments in
mortgage-backed securities entail both market and prepayment risk. Fixed-
rate mortgage-backed securities are priced to reflect, among other things,
current and perceived interest rate conditions. As conditions change,
market values will fluctuate. In addition, the mortgages underlying
mortgage-backed securities generally may be prepaid in whole or in part at
the option of the individual buyer. Prepayments of the underlying
mortgages can affect the yield to maturity on mortgage-backed securities

- 8 -
<PAGE>

and, if interest rates declined, the prepayment only may be invested by
the Fund at the then prevailing lower rate. Changes in market conditions,
particularly during periods of rapid or unanticipated changes in market
interest rates, may result in volatility of the market value of certain
mortgage-backed securities. The Manager will attempt to manage the Fund so
that this volatility, together with the volatility of other investments in
the Fund, is consistent with its investment objective.

Repurchase Agreements. Repurchase agreements are transactions in
which the Fund purchases securities and simultaneously commits to resell
the securities to the original seller (a member bank of the Federal
Reserve System or securities dealers who are members of a national
securities exchange or are market makers in U.S. Government securities) at
an agreed upon date and price reflecting a market rate of interest
unrelated to the coupon rate or the maturity of the purchased securities.
Although repurchase agreements carry certain risks not associated with
direct investment in securities, including possible decline in the market
value of the underlying securities and delays and costs to the Fund if the
other party to the repurchase agreement becomes bankrupt, the Fund intends
to enter into repurchase agreements only with banks and dealers in
transactions believed by the Manager to present minimal credit risks in
accordance with guidelines established by the Board of Trustees. The Fund
may invest up to 25% of its total assets in repurchase agreements.

Stripped Securities. The Fund may invest in separately traded
interest and principal components of securities ("Stripped Securities"),
including U.S. Government securities. Stripped Securities are obligations
representing an interest in all or a portion of the income or principal
components of an underlying or related security, a pool of securities or
other assets. In the most extreme case, one class will receive all of the
interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The
market values of stripped income securities tend to be more volatile in
response to changes in interest rates than are conventional debt
securities.

U.S. Government Securities. U.S. Government securities in which
the Fund may invest include (1) direct U. S. Treasury obligations, (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by the full faith and credit of the
U.S. Government or the right of the issuer to borrow specified amounts
from the U.S. Government, and (3) obligations of U.S. Government agencies
and instrumentalities that are not backed by the full faith and credit of
the United States.

- 9 -
<PAGE>

When-Issued and Forward Commitment Securities. The Fund may
purchase U.S. Government securities on a "when-issued" basis and may
purchase or sell such securities on a "forward commitment" basis in order
to hedge against anticipated changes in interest rates and prices. When
such transactions are negotiated, the price, which is generally expressed
in terms of yield, is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. At the
time the Fund makes the commitment to purchase securities on a when-issued
or forward commitment basis, it will record the transaction and thereafter
reflect the value of such securities in determining its net asset value.
In addition, a segregated account consisting of cash or liquid securities
such as U.S. Government securities or other appropriate high grade debt
obligations equal to the value of the when-issued or forward commitment
securities will be established and maintained with the Fund's custodian
and will be marked to market daily. On the delivery date, the Fund will
meet its obligations from securities that are then maturing or sales of
securities held in the segregated asset account and/or from available cash
flow. When-issued and forward commitment securities may be sold prior to
the settlement date. The Fund will engage in when-issued and forward
commitment transactions only with the intention of actually receiving or
delivering the securities, as the case may be. However, if the Fund
chooses to dispose of the right to acquire a when-issued security prior to
its acquisition or dispose of its right to deliver or receive against a
forward commitment, it can incur a gain or loss. In addition, there is
always the risk that the securities may not be delivered and that the Fund
may incur a loss or will have lost the opportunity to invest the amount
set aside for such transaction in the segregated account.

If the Fund disposes of the right to acquire a when-issued or
forward commitment security prior to its acquisition or disposes of its
right to deliver against a forward commitment, it can incur a gain or loss
due to market fluctuation. In some instances, the third-party seller of
when-issued or forward commitment securities may determine prior to the
settlement date that it will be unable to meet its existing transaction
commitments without borrowing securities. If advantageous from a yield
perspective, the Fund may, in that event, agree to resell its purchase
commitment to the third-party seller at the current market price on the
date of sale and concurrently enter into another purchase commitment for
such securities at a later date. As an inducement for the Fund to "roll
over" its purchase commitment, the Fund may receive a negotiated fee.

Net Asset Value
==========================================================================

- 10 -
<PAGE>

quoted bid price. In the absence of a readily available market quote, or
if the Manager has reason to question the validity of market quotations it
receives, securities and other assets are valued using such methods as the
Board of Trustees believes would reflect fair value. Short-term
investments that will mature in 60 days or less are valued at amortized
cost, which approximates market value. The per share net asset value of A
shares and C shares may differ as a result of the different daily expense
accruals applicable to each class. For more information on the calculation
of net asset value, see "Net Asset Value" in the SAI.

Performance Information
==========================================================================

Total return with respect to a class for one-, five- and ten-year
periods or, if such periods have not yet elapsed, the period since the
establishment of that class, through the most recent calendar quarter
represents that average annual compounded rate of return on an investment
of $1,000 in that class at the public offering price (in the case of A
shares, giving effect to the maximum initial sales load of 3.75% and, in
the case of C shares, giving effect to the deduction of any CDSL that
would be payable). In addition, the Fund also may advertise its total
return in the same manner, but without taking into account the initial
sales load or CDSL. The Fund also may advertise total return calculated
without annualizing the return, and total return may be presented for
other periods. By not annualizing the returns, the total return calculated
in this manner simply will reflect the increase in net asset value per A
share and C share over a period of time, adjusted for dividends and other
distributions. A share and C share performance may be compared with
various indices.

The Fund also may from time to time advertise the yield of A
shares and C shares and compare these yields to those of other mutual
funds with similar investment objectives. The yield of each class of the
Fund will be computed by dividing the net investment income per share
earned during a 30-day (or one month) period by the maximum offering price
per share on the last day of the period. Yield accounting methods differ
from the methods used for other accounting purposes; accordingly, the
yield for a class may not equal the dividend income actually paid to
shareholders or the net investment income per share reported in the Fund's
financial statements.

- 11 -
<PAGE>

Investment performance also often reflects the risks associated with the
Fund's investment objective and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. For more information on
investment performance, see the SAI.

INVESTING IN THE FUND

How to Buy Shares
==========================================================================

All purchase orders received by the Distributor prior to the
close of regular trading on the Exchange -- generally 4:00 p.m., eastern
time -- will be executed at that day's offering price. Purchase orders
received by your Representative prior to the close of regular trading on
the Exchange and transmitted to the Distributor before 5:00 p.m. eastern
time on that day also will receive that day's offering price. Otherwise,
all purchase orders accepted after the offering price is determined will
be executed at the offering price determined as of the close of regular
trading on the Exchange on the next trading day. See "What Class A Shares
Will Cost" and "What Class C Shares Will Cost."

- 12 -
<PAGE>

Government Fund, c/o Shareholder Services, Heritage Asset Management,
Inc., P.O. Box 33022, St. Petersburg, FL 33733.

Minimum Investment Required/Accounts With Low Balances
==========================================================================

Except as provided under "Investment Programs", the minimum
initial investment in the Fund is $1,000, and a minimum account balance of
$500 must be maintained. These minimum requirements may be waived at the
discretion of the Manager. In addition, initial investments in Individual
Retirement Accounts ("IRAs") may be reduced or waived under certain
circumstances. Contact the Manager or your Representative for further
information.

Due to the high cost of maintaining accounts with low balances,
it is currently the Fund's policy to redeem Fund shares in any account if
the account balance falls below the required minimum value of $500, except
for retirement accounts. The shareholder will be given 30 days' notice to
bring the account balance to the minimum required or the Fund may redeem
shares in the account and pay the proceeds to the shareholder. The Fund
does not apply this minimum account balance requirement to accounts that
fall below this minimum due to market fluctuation.

Investment Programs
==========================================================================

A variety of automated investment options are available for the
purchase of Fund shares. These plans provide for automatic monthly
investments of $50 or more through various methods described below. You
may change the amount to be automatically invested or may discontinue this
service at any time without penalty. If you discontinue this service
before reaching the required account minimum, the account must be brought
up to the minimum in order to remain open. Shareholders desiring this
service should complete the appropriate application available from the
Manager. You will receive a periodic confirmation of all activity for your
account.

Automatic Investment Options:

- 13 -
<PAGE>

1. Bank Draft Investing -- You may authorize the Manager to process a
monthly draft from your personal checking account for investment into
the Fund. The draft is returned by your bank the same way a canceled
check is returned.

3. Government Direct Deposit -- If you receive a qualifying periodic
payment from the U.S. Government or other agency that participates in
Direct Deposit, you may have all or a part of each check directed to
purchase shares of the Fund. The U.S. Government or agency will
report to you all payments made.

You may change or terminate any of the above options at any time.

Retirement Plans:

Heritage IRA. Individuals who earn compensation and who have not
reached age 70 1/2 before the close of the year generally may establish a
Heritage IRA. An individual may make limited contributions to a Heritage
IRA through the purchase of shares of the Fund and/or other Heritage
Mutual Funds. The Code limits the deductibility of IRA contributions to
taxpayers who are not active participants (and whose spouses are not
active participants) in employer-provided retirement plans or who have
adjusted gross income below certain levels. Nevertheless, the Code permits
other individuals to make nondeductible IRA contributions up to $2,000 per
year (or $2,250, if such contributions also are made for a nonworking
spouse and a joint return is filed). A Heritage IRA also may be used for
certain "rollovers" from qualified benefit plans and from Section 403(b)
annuity plans. For more detailed information on the Heritage IRA, please
contact the Manager.

- 14 -
<PAGE>

employees, including owner-employees, of the sponsoring entity.

Alternative Purchase Plans
==========================================================================

- 15 -
<PAGE>

distribution and service fees and, for a one year period, be subject to a
CDSL. For example, based on current fees and expenses for the Fund and the
maximum A shares sales load, you would have to hold A shares approximately
ten to twelve years before the accumulated distribution and service fees
on the C shares would exceed the initial sales load plus the accumulated
service fees on the A shares.

What Class A Shares Will Cost
==========================================================================

A shares are sold on each day on which the Exchange is open. A
shares are sold at their next determined net asset value plus a sales load
as described below.

- 16 -
<PAGE>

<TABLE>
<CAPTION>
Sales Load as a Percentage of
Net Amount Dealer Concession
Invested as a Percentage of
Amount of Purchase Offering Price (Net Asset Value) Offering Price(1)
<S> <C> <C> <C>
Less than $25,000 . . . . . . . . 3.75% 3.90% 3.25%
$25,000 to $49,999 . . . . . . . 3.25% 3.36% 2.75%
$50,000 to $99,999 . . . . . . . 2.75% 2.83% 2.25%
$100,000 to $249,999 . . . . . . 2.25% 2.30% 1.75%
$250,000 to $499,999 . . . . . . 1.50% 1.52% 1.00%
$500,000 to $999,999 . . . . . . 0.75% 0.76% 0.25%
$1,000,000 and over(2) . . . . . 0.00% 0.00% 0.00%
</TABLE>

(1) During certain periods, the Distributor may pay 100% of the sales
load to participating dealers. Otherwise, it will pay the Dealer
Concession shown above.
(2) The Manager may pay up to 0.50% of the purchase amount to the
Distributor for purchases exceeding $1,000,000. The Manager
reserves the right to reclaim this payment subject to certain
holding period requirements.

A shares may be sold at net asset value without any sales load to
the Manager, current and retired officers and Trustees of the Trust;
directors, officers, and full-time employees of the Manager, Subadviser of
any Heritage Mutual Fund, Distributor, and their affiliates; registered
representatives of broker-dealers that are parties to dealer agreements
with the Distributor (or financial institutions that have arrangements
with such broker-dealers); directors, officers and full-time employees of
banks that are party to agency agreements with the Distributor; and all
such persons' immediate relatives, and their beneficial accounts. In
addition, the American Psychiatric Association (the "APA Group") has
entered into an agreement with the Distributor that allows its members to
purchase A shares at a sales load equal to two-thirds of the percentages
in the above table. The Dealer Concession also will be adjusted in a like
manner. Members of the APA Group also are eligible to purchase A shares at
net asset value in amounts equal to the value of shares redeemed from
other mutual funds that were purchased under reduced sales load programs
available to their organization. A shares also may be purchased without
sales loads by investors who participate in certain broker-dealer wrap fee
investment programs.

- 17 -
<PAGE>

exceed the amount of the purchaser's redemption proceeds from the
proprietary funds. To take advantage of this waiver, an investor must
provide satisfactory evidence that all the above-noted conditions are met.
Qualifying investors should contact their investment executives for more
information.

A shares also may be purchased at net asset value by trust
companies and bank trust departments for funds over which they exercise
exclusive discretionary authority and are held in a fiduciary agency,
advisory, custodial or similar capacity. Such purchases are subject to
minimum requirements with respect to amount of purchase. Currently, the
minimum purchase required is $1,000,000, which may be invested over a
period of 13 months. The minimum may be changed from time to time by the
Distributor. The minimum may be aggregated between A shares of the Fund
and A shares of any other Heritage Mutual Funds that would be subject to a
sales load. Cities, counties, states or instrumentalities and their
departments, authorities or agencies are able to purchase A shares of the
Fund at net asset value as long as certain conditions are met.

Heritage Net Asset Value ("NAV") Transfer Program

During specific periods, A shares of the Fund may be sold at net
asset value without any sales load under the Manager's NAV Transfer
Program. To qualify for the NAV Transfer Program, you must provide
adequate proof that you recently redeemed shares from an open-end, load or
no-load fund other than the Heritage Mutual Funds. To provide adequate
proof you must complete a qualification form and provide a statement
showing the value liquidated from the other mutual fund within time
parameters set by the Manager. In addition, shares of the other fund must
have been liquidated no more than 90 days prior to the beginning of the
promotion period and not after the period ends. The Manager may pay
Representatives a one-time fee of up to 0.25% for all trades meeting the
requirements. The Manager reserves the right to recover these fees if A
shares are redeemed within 90 days of purchase.

Combined Purchase Privilege (Right of Accumulation)

- 18 -
<PAGE>

selected dealer, the investor or selected dealer must provide the
Distributor with sufficient information to verify that each purchase
qualifies for the privilege or discount.

Statement of Intention

Reinstatement Privilege

- 19 -
<PAGE>

with transactions whose sole purpose is to transfer a shareholder's
interest in the Fund to his defined contribution plan, IRA or SEP.
Investors must notify the Fund if they intend to exercise the
reinstatement privilege.

For more information on "What Class A Shares Will Cost" and a
further explanation of instances in which the sales load will be waived or
reduced, see "Investing in the Funds" in the SAI.

What Class C Shares Will Cost
==========================================================================

For example, assume you purchase 100 C shares at $10 per share
(for a total cost of $1,000) and, during the year you purchase such
shares, the net asset value increases to $12 per share and you acquire 10
additional shares as dividends. If you redeem 50 shares (or $600) within
the first year of purchase, 10 shares would not be subject to the CDSL
because redemptions are made first of shares acquired as dividends. With
respect to the remaining shares, the CDSL is applied only to the original
cost of $10 per share and not to the higher net asset value of $12 per
share. Therefore, only 40 of the 50 shares (or $400) being redeemed would
be subject to a CDSL at a rate of 1%.

- 20 -
<PAGE>

certain maximums established from time to time by the Distributor
(currently a maximum of 12% annually of the account balance at the
beginning of the Systematic Withdrawal Plan); or (5) involuntary
redemptions by the Fund of C shares in shareholder accounts that do not
comply with the minimum balance requirements. The Distributor may require
proof of documentation prior to waiver of the CDSL described in sections
(1) through (4) above, including distribution letters, certification by
plan administrators, applicable tax forms or death or physicians
certificates.

For more information about C shares, see "Reinstatement
Privilege" and "Exchange Privilege."

How to Redeem Shares
==========================================================================

Redemption of Fund shares can be made by:

Contacting Your Representative. Your Representative will
transmit an order to the Fund for redemption and may charge you a fee for
this service.

Telephone Request. You may redeem shares by placing a telephone
request to the Fund (800-421-4184) prior to the close of regular trading
on the Exchange. Shareholders who do not wish to have telephone
exchange/redemption privileges should so elect by completing the
appropriate section of the Account Application. The Trust, Manager,
Distributor and their Trustees, directors, officers and employees are not
liable for any loss arising out of telephone instructions that they
reasonably believe are authentic. These parties will employ reasonable
procedures to confirm that telephone instructions are authentic. To the
extent that the Trust, Manager, Distributor and their Trustees, directors,
officers and employees do not follow reasonable procedures, some or all of
them may be liable for losses due to unauthorized or fraudulent
transactions. For more information on these procedures, see "Redeeming
Shares - Telephone Transactions" in the SAI. You may elect to have the
funds wired to the bank account specified on the Account Application.
Funds normally will be sent the next business day, and the shareholder
will be charged a wire fee by the Manager (currently $5.00). For
redemptions of less than $25,000, you may request that the check be mailed
to your address of record, providing that such address has not been
changed in the past 60 days. For your protection, all other redemption
checks will be transferred to the bank account specified on the Account
Application.

Written Request. Fund shares may be redeemed by sending a
written request for redemption to "Heritage Income Trust-Intermediate
Government Fund, c/o Shareholder Services, Heritage Asset Management,
Inc., P.O. Box 33022, St. Petersburg, Florida 33733." Signature guarantees
will be required on the following types of requests: redemptions from any
account that has had an address change in the past 60 days, redemptions
greater than $25,000, redemptions that are sent to an address other than

- 21 -
<PAGE>

the address of record and exchanges or transfers into other Heritage
accounts that have different titles. The Manager will transmit an order to
the Fund for redemption.

Please contact the Manager or your Representative for further
information or see "Redeeming Shares" in the SAI.

Receiving Payment
==========================================================================

Payment for shares redeemed by the Fund normally will be made on
the business day after the redemption was made. If the shares to be
redeemed recently have been purchased by personal check, the Fund may
delay mailing a redemption check until the purchase check has cleared,
which may take up to seven days. This delay can be avoided by wiring funds
for purchases. The proceeds of a redemption may be more or less than the
original cost of Fund shares.

A redemption request will be considered to be received in "good
order" if:

. the number or amount of shares and the class of shares to be redeemed
and shareholder account number have been indicated;

. any written request is signed by the shareholder and by all co-owners
of the account with exactly the same name or names used in
establishing the account;

. any written request is accompanied by certificates representing the

- 22 -
<PAGE>

shares that have been issued, if any, and the certificates have been
endorsed for transfer exactly as the name or names appear on the
certificates or an accompanying stock power has been attached; and

. the signatures on any written redemption request of $25,000 or more
and on any certificates for shares (or an accompanying stock power)
have been guaranteed by a national bank, a state bank that is insured
by the Federal Deposit Insurance Corporation, a trust company, or by
any member firm of the New York, American, Boston, Chicago, Pacific
or Philadelphia Stock Exchanges. Signature guarantees also will be
accepted from savings banks and certain other financial institutions
that are deemed acceptable by the Manager, as transfer agent, under
its current signature guarantee program.

Exchange Privilege
==========================================================================

If you have held A shares or C shares for at least 30 days, you
may exchange some or all of your shares for shares of the same class of
any other open-end Heritage Mutual Fund. All exchanges will be based on
the respective net asset values of the Heritage Mutual Funds involved. All
exchanges are subject to the minimum investment requirements and any other
applicable terms set forth in the prospectus for the Heritage Mutual Fund
whose shares are being acquired. Exchanges involving the redemption of
shares recently purchased by check will be permitted only after the
Heritage Mutual Fund whose shares have been tendered for exchange is
reasonably assured that the check has cleared, normally seven calendar
days following the purchase date. Exchanges of shares of Heritage Mutual
Funds generally will result in the realization of a taxable gain or loss
for Federal income tax purposes.

If you exchange A shares or C shares for corresponding shares of
Money Market Fund, you may, at any time thereafter, exchange such shares
for the corresponding class of shares of any other Heritage Mutual Fund.

- 23 -
<PAGE>

Because the Money Market Fund is a no-load mutual fund, if you exchange
shares of that fund acquired by purchase (rather than exchange) for shares
of another Heritage Mutual Fund, you will be subject to the sales load, if
any, that would be applicable to a purchase of that Heritage Mutual Fund.
In addition, if you exchange C shares of the Fund for corresponding shares
of the Money Market Fund, the period during which an investment is held in
shares of the Money Market Fund will not count for purposes of calculating
the one-year CDSL holding period for such shares. As a result, if you
redeem C shares of the Money Market Fund before the expiration of the one-
year CDSL holding period, you will be subject to the applicable CDSL. A
shares of the Fund may be exchanged for A shares of the Heritage Cash
Trust - Municipal Money Market Fund, which is the only class of shares
offered by that fund. Because the Heritage Cash Trust - Municipal Money
Market Fund is a no-load fund, if you exchange shares of that fund
acquired by purchase (rather than exchange) for shares of another Heritage
Mutual Fund, you also will be subject to the sales load, if any, that
would be applicable to a purchase of that Heritage Mutual Fund. C shares
are not eligible for exchange into the Heritage Cash Trust - Municipal
Money Market Fund.

MANAGEMENT OF THE FUND

Board of Trustees

- 24 -
<PAGE>

Investment Adviser, Fund Accountant, Administrator and Transfer Agent

Heritage Asset Management, Inc. is the Fund's investment adviser,
fund accountant, administrator and transfer agent. The Manager is
responsible for reviewing and establishing investment policies for the
Fund as well as administering the Fund's noninvestment affairs. The
Manager is a wholly-owned subsidiary of Raymond James Financial, Inc.,
which, together with its subsidiaries, provides a wide range of financial
services to retail and institutional clients. The Manager manages,
supervises and conducts the business and administrative affairs of the
Fund and the other Heritage Mutual Funds with net assets totally
approximately $2.0 billion as of October 31, 1995. Investment decisions
for the Fund are made by the Manager. The Manager's annual investment
advisory and administration fee is 0.50% of the Fund's average daily net
assets. This fee is computed daily and paid monthly. The Fund pays the
Manager directly for fund accounting and transfer agent services.

Fund Management

H. Peter Wallace serves as portfolio manager of the Fund. Mr.
Wallace is responsible for the day-to-day management of the Fund's
investment portfolio subject to the general oversight of the Manager and
the Trust's Board of Trustees. Mr. Wallace has been a Senior Vice
President and Director of Fixed Income Investments for the Manager since
January 1993. In August 1993, he became a portfolio manager of the Fund.
Prior to 1993, Mr. Wallace was a Vice President of Mortgage Products at
Donaldson, Lufkin and Jenrette from 1990 through 1992 and from 1986
through 1990 he was a Senior Vice President and Director of Mortgage
Research at Shearson Lehman Brothers. Mr. Wallace is a Chartered Financial
Analyst.

SHAREHOLDER AND ACCOUNT POLICIES

Dividends and Other Distributions
==========================================================================

- 25 -
<PAGE>

. receive both dividends and capital gain distributions in additional
Fund shares;

. receive dividends in cash and capital gain distributions in
additional Fund shares;

. receive both dividends and capital gain distributions in cash; or

. receive both dividends and capital gain distributions for investment
into another Heritage Mutual Fund.

If you select none of the options, the first option will apply.
In any case when you receive a dividend or a capital gain distribution in
shares, your account will be credited with additional Fund shares valued
at the net asset value of the shares determined at the close of regular
trading on the Exchange the day following the record date for the dividend
or capital gain distribution. Distribution options can be changed at any
time by notifying the Manager in writing.

Distribution Plans
==========================================================================

As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of A shares and in
connection with personal services rendered to Class A shareholders and the
maintenance of Class A accounts, the Fund may pay the Distributor a
service fee of up to 0.25% on A shares. The Fund may pay the Distributor
a service fee of up to 0.25% and a distribution fee of up to 0.10% of the
Fund's average daily net assets attributable to A shares
purchased prior to April 3, 1995. This fee represents compensation for
maintenance of Class A accounts. This fee is computed daily and paid
monthly.

As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of C shares and in
connection with personal services rendered to Class C shareholders and the
maintenance of Class C accounts, the Fund pays the Distributor a service
fee of up to 0.25% and a distribution fee of 0.35% of the Fund's average
daily net assets attributable to C shares. This fee is computed daily and
paid monthly.

- 26 -
<PAGE>

including compensation (in addition to the sales load) paid to
Representatives; advertising, salaries and other expenses of the
Distributor relating to selling or servicing efforts; expenses of
organizing and conducting sales seminars; printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; and preparation and distribution of advertising material and
sales literature and other sales promotion activities. The Distributor has
entered into dealer agreements with participating dealers who also will
distribute shares of the Fund.

Taxes
==========================================================================

The Fund is treated as a separate corporation for Federal income
tax purposes and intends to continue to qualify for treatment as a
regulated investment company under Subchapter M of the Code. In each
taxable year that the Fund does so, it (but not its shareholders) will be
relieved of Federal income tax on that part of its investment company
taxable income (generally consisting of net investment income and net
short-term capital gains) and net capital gain (the excess of net long-
term capital gain over net short-term capital loss) that is distributed to
its shareholders. Dividends from the Fund's investment company taxable
income are taxable to its shareholders as ordinary income, to the extent
of the Fund's earnings and profits, whether received in cash or in
additional Fund shares. Distributions of the Fund's realized net capital
gain, when designated as such, are taxable to its shareholders as long-
term capital gains, whether received in cash or in additional Fund shares
and regardless of the length of time the shares have been held. No
substantial portion of the dividends paid by the Fund will be eligible for
the dividends-received deduction allowed to corporations.

Dividends and other distributions declared by the Fund December
of any year and payable to shareholders of record on a date in that month
will be deemed to have been paid by the Fund and received by the
shareholders on December 31 if they are paid by the Fund during the
following January. Shareholders receive Federal income tax information
regarding dividends and other distributions after the end of each year.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain
other non-corporate shareholders who do not provide the Fund with a
correct taxpayer identification number. Withholding at that rate also is
required from dividends and capital gain distributions payable such
shareholders who otherwise are subject to backup withholding.

The foregoing is only a summary of some of the important Federal
income tax considerations generally affecting the Fund and its
shareholders. See the SAI for a further discussion. There may be other

- 27 -
<PAGE>

Federal, state or local tax considerations applicable to a particular
investor; for example, a portion of the dividends paid by the Fund
represents income received on direct obligations of the U.S. Government
and, accordingly, is not subject to income taxation in most states and
localities. You are therefore urged to consult your tax adviser.

Shareholder Information
==========================================================================

- 28 -
<PAGE>

Heritage Income Trust
Intermediate Government Fund -----------------
P.O. Box 33022
St. Petersburg, FL 33733
--------------------------------------- Bulk Rate
U.S. Postage
Address Change Requested PAID
Modern Mailing
Prospectus -----------------
Investment Advisor/
Shareholder Servicing Agent
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 Accountants
Coopers & Lybrand L.L.P.

- 29 -
<PAGE>

(HERITAGE LOGO)

Intermediate
Government Fund

Prospectus

February 1, 1996

- 30 -
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
HERITAGE INCOME TRUST

HIGH YIELD BOND FUND
INTERMEDIATE GOVERNMENT FUND

This Statement of Additional Information dated February 1, 1996,
should be read with the prospectuses of the High Yield Bond and
Intermediate Government Funds of Heritage Income Trust (the "Trust"), each
dated February 1, 1996. This statement is not a prospectus itself. To
receive a prospectus for either of the Funds, write to Heritage Asset
Management, Inc., at 880 Carillon Parkway, Florida 33716, or call (800)
421-4184.

HERITAGE ASSET MANAGEMENT, INC.
880 Carillon Parkway
St. Petersburg, Florida 33716
<PAGE>

TABLE OF CONTENTS

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Objectives . . . . . . . . . . . . . . . . . . . 1
Investment Policies . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . 18

NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 21

INVESTING IN THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . 24
Class A Combined Purchase Privilege (Right of
Accumulation) . . . . . . . . . . . . . . . . . . . . . . . 24
Class A Statement of Intention . . . . . . . . . . . . . . 25

REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Systematic Withdrawal Plan . . . . . . . . . . . . . . . . . 26
Telephone Transactions . . . . . . . . . . . . . . . . . . . 28
Redemption in Kind . . . . . . . . . . . . . . . . . . . . . 28
Receiving Payment . . . . . . . . . . . . . . . . . . . . . 28

EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . 29

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

TRUST INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Management of the Trust . . . . . . . . . . . . . . . . . . 32
Investment Adviser and Administrator; Subadviser . . . . . . 36
Brokerage Practices . . . . . . . . . . . . . . . . . . . . 39
Distribution of Shares . . . . . . . . . . . . . . . . . . . 40
Administration of the Trust . . . . . . . . . . . . . . . . 43
Potential Liability . . . . . . . . . . . . . . . . . . . . 43

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
<PAGE>

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under
a Declaration of Trust dated August 4, 1989. It is registered as an
open-end diversified management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is composed of the
High Yield Bond Fund (known as the Diversified Portfolio prior to February
1, 1996) ("High Yield") and the Intermediate Government Fund (known as the
Government Portfolio prior to February 2, 1992 and Limited Maturity
Government Portfolio from February 2, 1992 through January 31,
1996)("Government")(each a "Fund" and, collectively, the "Funds"). Each
Fund constitutes a separate investment portfolio with distinct investment
objectives, purposes and strategies. Each Fund offers two classes of
shares, Class A shares sold subject to a front-end sales load ("A shares")
and Class C shares sold subject to a contingent deferred sales load
("CDSL")("C shares").

INVESTMENT INFORMATION

Investment Objectives

The investment objective of each Fund is stated in its respective
prospectus.

Investment Policies

The following information is in addition to and supplements each
Fund's investment policies set forth in its prospectus.

Brady Bonds. Brady Bonds are debt securities, generally
denominated in U.S. dollars, issued under the framework of the Brady Plan.
The Brady Plan is an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank indebtedness. In
restructuring its external debt under the Brady Plan framework, a debtor
nation negotiates with its existing bank lenders, as well as multilateral
institutions, such as the International Bank for Reconstruction and
Development (the "World Bank") and the International Monetary Fund (the
"IMF"). The Brady Plan framework, as it has developed, contemplates the
exchange of external commercial bank debt for newly issued bonds (Brady
Bonds). Brady Bonds may also be issued in respect of new money being
advanced by existing lenders in connection with the debt restructuring.
The World Bank and/or the IMF support the restructuring by providing funds
pursuant to loan agreements or other arrangements, which enable the debtor
nation to collateralize the new Brady Bonds or to repurchase outstanding
bank debt at a discount. These arrangements with the World Bank and/or
the IMF require debtor nations to agree to the implementation of certain
domestic monetary and fiscal reforms. Such reforms have included the
liberalization of trade and foreign investment, the privatization of
state-owned enterprises and the setting of targets for public spending and
borrowing. These policies and programs seek to promote the debtor
country's economic growth and development. Investors should recognize
that the Brady Plan only sets forth general guiding principles for
economic reform and debt reduction, emphasizing that solutions must be
<PAGE>

negotiated on a case-by-case basis between debtor nations and their
creditors. Salomon Brothers Asset Management Inc. (the "Subadviser")
believes economic reforms, undertaken by countries in connection with the
issuance of Brady Bonds, make the debt of those countries that have issued
or announced plans to issue Brady Bonds an attractive opportunity for
investment. However, there can be no assurance that SBAM's expectations
with respect to Brady Bonds will be realized.

Investors should also recognize that Brady Bonds have been issued
only recently, and, accordingly, do not have a long payment history.
Brady Bonds that have been issued to date are rated in the categories "BB"
or "B" by S&P or "Ba" or "B" by Moody's or, in cases in which a rating by
S&P or Moody's has not been assigned, are generally considered by the
Subadviser to be of comparable quality.

Agreements implemented under the Brady Plan to date are designed
to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the
financial packages offered by each country differ. The types of options
have included the exchange of outstanding commercial bank debt for bonds
issued at 100% of face value of such debt that carry a below-market stated
rate of interest (generally known as par bonds), bonds issued at a
discount from the face value of such debt (generally known as discount
bonds), bonds bearing an interest rate which increases over time, and
bonds issued in exchange for the advancement of new money by existing
lenders. Discount bonds issued to date under the framework of the Brady
Plan have generally borne interest computed semiannually at a rate equal
to 13/16 of one percent above the then current six month LIBOR rate.

Regardless of the stated face amount and stated interest rate of
the various types of Brady Bonds, the applicable Funds will purchase Brady
Bonds in secondary markets, as described below. In the secondary markets,
the price and yield to the investor reflect market conditions at the time
of purchase. Brady Bonds issued to date have traded at a deep discount
from their face value. Certain sovereign bonds are entitled to "value
recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally are not collateralized.
Certain Brady Bonds have been collateralized as to principal due at
maturity (typically 30 years from the date of issuance) by U.S. Treasury
zero coupon bonds with a maturity equal to the final maturity of such
Brady Bonds, although the collateral is not available to investors until
the final maturity of the Brady Bonds. Collateral purchases are financed
by the IMF, the World Bank and the debtor nations' reserves. In addition,
interest payments on certain types of Brady Bonds may be collateralized by
cash or high-grade securities in amounts that typically represent between
12 and 18 months of interest accruals on these instruments with the
balance of the interest accruals being uncollateralized. The applicable
Funds may purchase Brady Bonds with limited or no collateralization, and
will rely for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the willingness and
ability of the foreign government to make payment in accordance with the
terms of the Brady Bonds. Brady Bonds issued to date are purchased and

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<PAGE>

sold in secondary markets through U.S. securities dealers and other
financial institutions and are generally maintained through European
transnational securities depositories. A substantial portion of the Brady
Bonds and other sovereign debt securities in which the Fund invests are
likely to be acquired at a discount, which involves certain considerations
discussed below under "Additional Information Concerning Taxes."

Convertible Securities. High Yield may invest in convertible
securities. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than the
issuer's common stock. The extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells
above its value as a fixed income security. The Subadviser will decide to
invest in convertible securities based upon a fundamental analysis of the
long-term attractiveness of the issuer and the underlying common stock,
the evaluation of the relative attractiveness of the current price of the
underlying common stock, and the judgment of the value of the convertible
security relative to the common stock at current prices. Convertible
securities in which High Yield may invest include corporate bonds, notes
and preferred stock that can be converted into common stock. Convertible
securities combine the fixed-income characteristics of bonds and preferred
stock with the potential for capital appreciation. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates
decline. While convertible securities generally offer lower interest or
dividend yields than nonconvertible debt securities of similar quality,
they do enable the investor to benefit from increases in the market price
of the underlying common stock.

High Yield Foreign Sovereign Debt Securities. High Yield may
invest in high yield foreign sovereign debt securities. Investing in
fixed and floating rate high yield foreign sovereign debt securities will
expose Funds investing in such securities to the direct or indirect
consequences of political, social or economic changes in the countries
that issue the securities. The ability and willingness of sovereign
obligors in developing and emerging countries or the governmental
authorities that control repayment of their external debt to pay principal
and interest on such debt when due may depend on general economic and
political conditions within the relevant country. Countries such as those
in which a Fund may invest have historically experienced, and may continue
to experience, high rates of inflation, high interest rates, exchange rate
trade difficulties and extreme poverty and unemployment. Many of these
countries are also characterized by political uncertainty or instability.
Additional factors which may influence the ability or willingness to
service debt include, but are not limited to: a country's cash flow
situation, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of its debt service burden to the
economy as a whole, and its government's policy towards the International
Monetary Fund, the World Bank and other international agencies. The
ability of a foreign sovereign obligor to make timely payments on its
external debt obligations will also be strongly influenced by the
obligor's balance of payments, including export performance, its access to

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<PAGE>

international credits and investments, fluctuations in interest rates and
the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain
strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. To the extent that a country
receives payment for its exports in currencies other than dollars, its
ability to make debt payments denominated in dollars could be adversely
affected. If a foreign sovereign obligor cannot generate sufficient
earnings from foreign trade to service its external debt, it may need to
depend on continuing loans and aid from foreign governments, commercial
banks and multilateral organizations, and inflows of foreign investment.
The commitment on the part of these foreign governments, multilateral
organizations and others to make such disbursements may be conditioned on
the government's implementation of economic reforms and/or economic
performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or
repay principal or interest when due may result in the cancellation of
such third parties' commitments to lend funds, which may further impair
the obligor's ability or willingness to timely service its debts. The
cost of servicing external debt will also generally be adversely affected
by rising international interest rates, because many external debt
obligations bear interest at rates which are adjusted based upon
international interest rates. The ability to service external debt will
also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a sovereign obligor to obtain
sufficient foreign exchange to service its external debt.

As a result of the foregoing, a governmental obligor may default
on its obligations. If such an event occurs, a Fund may have limited
legal recourse against the issuer and/or guarantor. Remedies must, in
some cases, be pursued in the courts of the defaulting party itself, and
the ability of the holder of foreign sovereign debt securities to obtain
recourse may be subject to the political climate in the relevant country.
In addition, no assurance can be given that the holders of commercial bank
debt will not contest payments to the holders of other foreign sovereign
debt obligations in the event of default under their commercial bank loan
agreements.

Certain debt obligations, customarily referred to as "Brady
Bonds," are created through the exchange of existing commercial bank loans
to foreign entities for new obligations in connection with debt
restructuring under the Brady Plan. Brady Bonds have been issued only
recently, and, accordingly, do not have a long payment history. They may
be collateralized or uncollateralized and issued in various currencies
(although most are dollar-denominated) and they are actively traded in the
over-the-counter secondary market. Dollar-denominated, collateralized
Brady Bonds, which may be fixed rate par bonds or floating rate discount
bonds, are generally collateralized in full as to principal due at
maturity by U.S. Treasury zero coupon obligations which have the same
maturity as the Brady Bonds. Certain interest payments on these Brady
Bonds may be collateralized by cash or securities in an amount that, in

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<PAGE>

the case of fixed rate bonds, is typically equal to between 12 and 18
months of rolling interest payments or, in the case of floating rate
bonds, initially is typically equal to between 12 and 18 months rolling
interest payments based on the applicable interest rate at that time and
is adjusted at regular intervals thereafter with the balance of interest
accruals in each case being uncollateralized. The applicable Funds may
purchase Brady Bonds with no or limited collateralization, and will be
relying for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the willingness and
ability of the foreign government to make payment in accordance with the
terms of the Brady Bonds.

In the event of a default with respect to collateralized Brady
Bonds as a result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as collateral
for the payment of principal will not be distributed to investors, nor
will such obligations be sold and the proceeds distributed. The
collateral will be held by the collateral agent to the scheduled maturity
of the defaulted Brady Bonds, which will continue to be outstanding, at
which time the face amount of the collateral will equal the principal
payments which would have then been due on the Brady Bonds in the normal
course. Based upon current market conditions, a Fund would not intend to
purchase Brady Bonds which, at the time of investment, are in default as
to payments. However, in light of the residual risk of the Brady Bonds
and, among other factors, the history of default with respect to
commercial bank loans by public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds are to be viewed as speculative.

Sovereign obligors in developing and emerging countries are among
the world's largest debtors to commercial banks, other governments,
international financial organizations and other financial institutions.
These obligors have in the past experienced substantial difficulties in
servicing their external debt obligations, which led to defaults on
certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest
to Brady Bonds, and obtaining new credit to finance interest payments.
Holders of certain foreign sovereign debt securities may be requested to
participate in the restructuring of such obligations and to extend further
loans to their issuers. There can be no assurance that the Brady Bonds
and other foreign sovereign debt securities in which certain of the Funds
may invest will not be subject to similar restructuring arrangements or to
requests for new credit which may adversely affect a Fund's holdings.
Furthermore, certain participants in the secondary market for such debt
may be directly involved in negotiating the terms of these arrangements
and may therefore have access to information not available to other market
participants.

Borrowing. Each of the Funds may borrow in certain limited
circumstances. See "Investment Limitations." Borrowing creates an
opportunity for increased return, but, at the same time, creates special

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<PAGE>

risks. For example, borrowing may exaggerate changes in the net asset
value of a Fund's shares and in the return on the Fund's portfolio.
Although the principal of any borrowing will be fixed, a Fund's assets may
change in value during the time the borrowing is outstanding. A Fund may
be required to liquidate portfolio securities at a time when it would be
disadvantageous to do so in order to make payments with respect to any
borrowing, which could affect the investment manager's strategy and the
ability of the Fund to comply with certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code") in order to provide "pass-
through" tax treatment to shareholders. Furthermore, if a Fund were to
engage in borrowing, an increase in interest rates could reduce the value
of the Fund's shares by increasing the Fund's interest expense.

Inverse Floaters. Government may invest in U.S. Government
securities, including mortgage-backed securities, on which the rate of
interest varies inversely with interest rates on similar securities or the
value of an index. These derivative securities are commonly known as
inverse floaters. As market interest rates rise, the interest rate on the
inverse floater goes down, and vice versa. Inverse floaters include
components of securities on which interest is paid in two separate parts -
- an auction component, which pays interest at a rate that is set
periodically through an auction process or other method, and a residual
component, the interest on which varies inversely with that on a similar
security or the value of an index. The residual component may be
established by multiplying the rate of interest paid on such security or
the applicable index by a factor (a "multiplier feature") or by adding or
subtracting the factor to or from such interest rate or index. The
secondary market for inverse floaters may be limited. The market value of
inverse floaters is often significantly more volatile than that of a
fixed-rate obligation and, like most debt obligations, will vary inversely
with changes in interest rates. The interest rates on inverse floaters
may be significantly reduced, even to zero, if interest rates rise.

Money Market Instruments. In addition to the investments
described in the each Fund's prospectus, the Funds also may invest in
money market instruments including the following:

(1) Instruments such as certificates of deposit, demand and time
deposits, savings shares and bankers' acceptances of domestic banks and
savings and loans that have assets of at least $1 billion and capital,
surplus, and undivided profits of over $100 million as of the close of
their most recent fiscal year, or instruments that are insured by the Bank
Insurance Fund or the Savings Institution Insurance Fund of the Federal
Deposit Insurance Corporation.

(2) Commercial paper rated A-l or A-2 by Standard & Poor's
("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc.
("Moody's"). For a description of these ratings, see "Commercial Paper
Ratings" in the Appendix.

(3) High quality, short-term, corporate debt obligations,
including variable rate demand notes, having a maturity of one year or

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<PAGE>

less. Because there is no secondary trading market in demand notes, the
inability of the issuer to make required payments could adversely impact a
Fund's ability to resell when it deems advisable to do so.

Options, Futures and Options on Futures Trading. As discussed in
each Fund's prospectus, the Funds may use options, futures and options on
futures ("Derivative Investments") in order to hedge their investments,
and in certain circumstances, may purchase or sell Derivative Investments
as a substitute for the purchase and sale of securities. Certain special
characteristics of and risks with these strategies are discussed below.

Hedging strategies can be broadly categorized as "short hedges"
and "long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in a Fund's portfolio. Thus, in a
short hedge a Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the
investment being hedged.

Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in
the acquisition cost of one or more investments that a Fund intends to
acquire. Thus, in a long hedge a Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is
sometimes referred to as an anticipatory hedge. In an anticipatory hedge
transaction, a Fund does not own a corresponding security and, therefore,
the transaction does not relate to a security the Fund owns. Rather, it
relates to a security that the Fund intends to acquire. If a Fund does
not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the
transaction were entered into for speculative purposes.

Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions
that a Fund owns or intends to acquire. Derivative Instruments on
indices, in contrast, generally are used to attempt to hedge against price
movements in market sectors in which a Fund has invested or expects to
invest. Derivative Instruments on debt securities may be used to hedge
either individual securities or broad debt market sectors.

Use of these instruments is subject to applicable regulations of
the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which options and futures are traded, the Commodity
Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Funds' ability to use these instruments
will be limited by tax considerations. See "Taxes."

Special Risks. The use of Derivative Instruments involves
special considerations and risks, certain of which are described below.
Risks pertaining to particular Derivative Instruments are described in the
sections that follow.

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<PAGE>

(1) Successful use of most Derivative Instruments depends
upon the ability of the Funds' Manager, Heritage Asset Management, Inc.
(the "Manager"), or the Subadviser, as the case may be, to predict
movements of the overall securities and interest rate markets, which
requires different skills than predicting changes in the prices of
individual securities. There can be no assurance that any particular
strategy will succeed.

(2) There might be imperfect correlation, or even no
correlation, between price movements of a Derivative Instrument and price
movements of the investments being hedged. For example, if the value of a
Derivative Instrument used in a short hedge increased by less than the
decline in value of the hedged investment, the hedge would not be fully
successful. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which Derivative
Instruments are traded. The effectiveness of hedges using Derivative
Instruments on indices will depend on the degree of correlation between
price movements in the index and price movements in the securities being
hedged.

Because there are a limited number of types of exchange-traded
options and futures contracts, it is likely that the standardized
contracts available will not match a Fund's current or anticipated
investments exactly. A Fund may invest in options and futures contracts
based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.

Options and futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match a
Fund's investments well. Options and futures prices are affected by such
factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until
expiration of the contract, which may not affect security prices the same
way. Imperfect correlation may also result from differing levels of
demand in the options and futures markets and the securities markets, from
structural differences in how options and futures and securities are
traded, or from imposition of daily price fluctuation limits or trading
halts. A Fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not
be successful in all cases. If price changes in a Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that
are not offset by gains in other investments.

(3) If successful, the above-discussed strategies can reduce
risk of loss by wholly or partially offsetting the negative effect of
unfavorable price movements. However, such strategies can also reduce

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<PAGE>

opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if a Fund entered into a short hedge because the
Manager or the Subadviser, as the case may be, projected a decline in the
price of a security in the Fund's portfolio, and the price of that
security increased instead, the gain from that increase might be wholly or
partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss.
In either such case, the Fund would have been in a better position had it
not attempted to hedge at all.

(4) As described below, a Fund might be required to maintain
assets as "cover," maintain segregated accounts or make margin payments
when it takes positions in Derivative Instruments involving obligations to
third parties (i.e., Derivative Instruments other than purchased options).
If a Fund were unable to close out its positions in such Derivative
Instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured.
These requirements might impair a Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that a Fund sell a portfolio security at a
disadvantageous time. A Fund's ability to close out a position in a
Derivative Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a
market, the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to a Fund.

Cover. The Funds will not use leverage in their hedging
strategies. A Fund will not enter into a hedging strategy that exposes it
to an obligation to another party unless its owns either (1) an offsetting
("covered") position in securities or other options or futures contracts
or (2) cash, receivables and short-term debt securities with a value
sufficient to cover its potential obligations. The Funds will comply with
SEC guidelines regarding cover for such transactions and will, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with their
custodian in the amount prescribed.

Assets used as cover or held in a segregated account cannot be
sold while the corresponding futures contract or options position is open,
unless they are replaced with similar assets. As a result, the commitment
of a large percentage of a Fund's assets could impede portfolio management
or the Fund's ability to meet redemption requests or other current
obligations.

Guidelines, Characteristics and Risks of Options Trading. The
Funds may effectively terminate their right or obligation under an option
by entering into a closing transaction. If a Fund wishes to terminate its
obligation under a put or call option it has written, the Fund may
purchase a put or call option of the same series (i.e., an option

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<PAGE>

identical in its terms to the option previously written); this is known as
a closing purchase transaction. Conversely, in order to terminate its
right to purchase or sell under a call or put option it has purchased, the
Fund may write an option of the same series as the option held. This is
known as a closing sale transaction. Closing transactions essentially
permit the Fund to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option. Whether a
profit or loss is realized from a closing transaction depends on the price
movement of the underlying security, index or futures contract, and the
market value of the option.

In considering the use of options to hedge, particular note
should be taken of the following:

(1) The value of an option position will reflect, among other
things, the current market price of the underlying security, index, or
futures contract, the time remaining until expiration, the relationship of
the exercise price to the market price, the historical price volatility of
the underlying investment and general market conditions. For this reason,
the successful use of options as a hedging strategy depends upon the
ability of the Manager or Subadviser, as the case may be, to forecast the
direction of price fluctuations in the underlying investment.

(2) Prior to its expiration, the exercise price of an option may
be below, equal to, or above the current market value of the underlying
investment. Purchased options that expire unexercised have no value.
Unless an option purchased by a Fund is exercised or unless a closing
transaction is effected with respect to that position, a loss will be
realized in the amount of the premium paid.

(3) A position in an exchange-listed option may be closed out
only on an exchange that provides a secondary market for identical
options. Most exchange-listed options relate to futures contracts and
stocks. Exchange markets for options on debt securities exist, and the
ability to establish and close out positions on the exchanges is subject
to the maintenance of a liquid secondary market. Closing transactions may
be effected with respect to options traded in the over-the-counter ("OTC")
markets (currently the primary markets of options on debt securities) only
by negotiating directly with the other party to the option contract or in
a secondary market for the option if such market exists. In the event of
the insolvency of a Fund's contra party, the Fund might be unable to close
out an OTC option position at any time prior to its expiration. Although
the Funds intend to purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a
liquid secondary market will exist for any particular option at any
specific time. In such event, it may not be possible to effect closing
transactions with respect to certain options, with the result that a Fund
would have to exercise those options that it has purchased in order to
realize any profit. With respect to options written by a Fund, the
inability to enter into a closing transaction may result in material
losses to the Fund. For example, because a Fund may maintain a covered
position with respect to any call option it writes on a security, the Fund

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<PAGE>

may not sell the underlying security during the period it is obligated
under such option. This requirement may impair the Fund's ability to sell
a portfolio security or make an investment at a time when such a sale or
investment might be advantageous.

(4) Activities in the options market may result in a higher
portfolio turnover rate and additional brokerage costs. However, the
Funds also may save on commissions by using options as a hedge rather than
buying or selling individual securities in anticipation of market
movements.

(5) The risks of investment in options on indices may be greater
than options on securities. Because index options are settled in cash,
when a Fund writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund can offset some of the risk of writing a call index
option by holding a diversified portfolio of securities similar to those
on which the underlying index is based. However, a Fund cannot, as a
practical matter, acquire and hold a portfolio containing exactly the same
securities as underlie the index and, as a result, bear the risk that the
value of the securities held will vary from the value of the index.

Even if a Fund could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be
fully covered from a risk standpoint because of the "timing risk" inherent
in writing index options. When an index option is exercised, the amount
of cash that the holder is entitled to receive is determined by the
difference between the exercise price and the closing index level on the
date when the option is exercised. As with other kinds of options, a Fund
as the call writer will not learn that it has been assigned until the next
business day at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as
of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the
exercise date is borne by the exercising holder. In contrast, even if the
writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of
the exercise price. Instead, it will be required to pay cash in an amount
based on the closing index value on the exercise date. By the time it
learns that it has been assigned, the index may have declined, with a
corresponding decline in the value of its securities portfolio. This
"timing risk" is an inherent limitation on the ability of index call
writers to cover their risk exposure by holding securities positions.

If a Fund has purchased an index option and exercises it before
the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a
change causes the exercised option to fall out-of-the-money, the Fund will

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<PAGE>

be required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the
assigned writer.

Guidelines, Characteristics and Risks of Futures and Options on
Futures Trading. When a Fund purchases or sells a futures contract, the
Fund will be required to deposit an amount of cash or U.S. Treasury bills
equal to a varying specified percentage of the contract amount. This
amount is known as initial margin. Cash held in the margin account is not
income producing. Subsequent payments, called variation margin, to and
from the broker through which such Fund entered into the futures contract,
will be made on a daily basis as the price of the underlying security or
index fluctuates making the futures contract more or less valuable, a
process known as marking-to-market.

If a Fund writes an option on a futures contract, it will be
required to deposit initial and variation margin pursuant to requirements
similar to those applicable to futures contracts. Premiums received from
the writing of an option on a future are included in the initial margin
deposit.

Most of the exchanges on which futures contracts and options on
futures contracts are traded limit the amount of fluctuation permitted in
futures contract and option prices during a single trading day. The daily
price limit establishes the maximum amount that the price of a futures
contract or option may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily price
limit has been reached in a particular type of contract, no trades may be
made on that day at a price beyond that limit. The daily price limit
governs only price movement during a particular trading day and therefore
does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract and option prices
have occasionally moved to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
positions and subjecting some traders to substantial losses.

Another risk in employing futures contracts and options on
futures contracts as a hedge is the prospect that futures and options
prices will correlate imperfectly with the behavior of cash prices for the
following reasons. First, rather than meeting additional margin deposit
requirements, investors may close contracts through offsetting
transactions. Second, the liquidity of the futures and options markets
depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent that participants decide to make
or take delivery, liquidity in these markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures and options markets are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures and options market may cause
temporary price distortions. In addition, activities of large traders in
both the futures and securities markets involving arbitrage, "program
trading," and other investment strategies might result in temporary price

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<PAGE>

distortions. Due to the possibility of distortion, a correct forecast of
general interest trends by the manager or Subadviser, as applicable, may
still not result in a successful transaction.

In addition to the risks that apply to all options transactions,
there are several special risks relating to options on futures contracts.
The ability to establish and close out positions of such options will be
subject to the maintenance of a liquid secondary market.

Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves less
potential risk to the Funds because the maximum amount at risk is the
premium paid for the options (plus transaction costs). However, there may
be circumstances when the purchase of a call or put option on a futures
contract would result in a loss to a Fund when the purchase or sale of a
futures contract would not, such as when there is no movement in the price
of the underlying investment.

If a Fund enters into futures contracts or options on futures
contracts for other than bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish
these positions (excluding the amount by which options are "in-the-money")
may not exceed 5% of the liquidation value of the Fund's portfolio, after
taking into account any unrealized profits and unrealized losses on any
such contracts it has entered into. (In general, a call option on a
futures contract is "in-the-money" if the value of the underlying futures
contract exceeds the strike, i.e., exercise, price of the call; a put
option on a futures contract is "in-the-money" if the value of the
underlying futures contract is exceeded by the strike price of the put.)
This limitation does not limit the percentage of a Fund's assets at risk
to 5%.

Preferred Stock. High Yield may invest in preferred stock. A
preferred stock is a blend of the characteristics of a bond and a common
stock. It can offer the higher yield of a bond and has priority over
common stock in equity ownership, but does not have the seniority of a
bond and its participation in the issuer's growth may be limited.
Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate,
in some circumstances it can be changed or omitted by the issuer.

Repurchase Agreements. The Funds may enter into repurchase
agreements. Although repurchase agreements carry certain risks not
associated with direct investments in securities, including decline in the
market value of the underlying securities and delays and costs to a Fund
if the other party to the repurchase agreement becomes bankrupt, the Funds
intend to enter into repurchase agreements only with banks and dealers in
transactions believed by the Manager or Subadviser, as applicable, to
present minimal credit risks in accordance with guidelines established by
the Trust's Board of Trustees ("Board of Trustees" or "Board"). The
period of these repurchase agreements will usually be short, from

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<PAGE>

overnight to one week, and at no time will a Fund invest in repurchase
agreements of more than one year. The securities that are subject to
repurchase agreements, however, may have maturity dates in excess of one
year from the effective date of the repurchase agreement. A Fund will
always receive as collateral securities whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for
such securities only upon physical delivery or evidence of book entry
transfer to the account of its custodian bank.

Restricted and Illiquid Securities. As stated in each Fund's
prospectus, the Funds will not purchase or otherwise acquire any security
if, as a result, more than 10% of their net assets (taken at current
value) would be invested in securities that are illiquid by virtue of the
absence of a readily available market or due to legal or contractual
restrictions on resale.

Purchased OTC options, which may be purchased by the Funds, are
considered illiquid securities. Each Fund also may sell OTC options and,
in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by that Fund. The assets used as cover for
OTC options written by a Fund will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be calculated by
a formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option.

Reverse Repurchase Agreements. High Yield may borrow by entering
into reverse repurchase agreements. Under a reverse repurchase agreement,
the Fund sells securities and agrees to repurchase them at a mutually
agreed to price. At the time the Fund enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an
approved custodian containing liquid high grade securities, marked-to-
market daily, having a value not less than the repurchase price (including
accrued interest). One reason to enter into a reverse repurchase
agreement is to raise cash without liquidating any portfolio positions.
In this case, reverse repurchase agreements involve the risk that the
market value of securities retained in lieu of sale by the Fund may
decline below the price of the securities the Fund has sold but is obliged
to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer
or its trustee or receiver may receive an extension of time to determine
whether to enforce the Fund's obligation to repurchase the securities and
the Fund's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decisions. Reverse repurchase
agreements create leverage, a speculative practice, and will be considered
borrowings for the purpose of the Fund's limitation on borrowing.

Securities Loans. The Funds may loan portfolio securities to
qualified broker-dealers. Such loans may be terminated by a Fund at any

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<PAGE>

time and the market risk applicable to any security loaned remains a risk
to the Fund. Although voting rights, or rights to consent, with respect
to the loaned securities pass to the borrower, a Fund retains the right to
call the loans at any time on reasonable notice, and it will do so in
order that the securities may be voted by the Fund if the holders of such
securities are asked to vote upon or consent to matters materially
affecting the investment. A Fund also may call such loans in order to
sell the securities involved. The borrower must add to the collateral
whenever the market value of the securities rises above the level of such
collateral. The Funds could incur a loss if the borrower should fail
financially at a time when the value of the loaned securities is greater
than the collateral. The primary objective of securities lending is to
supplement a Fund's income through investment of the cash collateral in
short-term interest bearing obligations. Securities loans may not exceed
25% of a Fund's total assets and will be fully collateralized at all
times. However, securities loans do involve some risk. If the other
party to the securities loan defaults or becomes involved in bankruptcy
proceedings, a Fund may incur delays and costs in selling or recovering
the underlying security or may suffer a loss of principal and interest.

Stripped Securities. Government may invest in separately traded
interest and principal components of securities ("Stripped Securities"),
including U.S. Government securities, as discussed below. Stripped
Securities are obligations representing an interest in all or a portion of
the income or principal components of an underlying or related security, a
pool of securities or other assets. In the most extreme case, one class
will receive all of the interest (the interest-only or "IO" class), while
the other class will receive all of the principal (the principal-only or
"PO"). The market values of stripped income securities tend to be more
volatile in response to changes in interest rates than are conventional
debt securities.

Government also may invest in stripped mortgage-backed
securities, which are derivative multi-class mortgage securities.
Stripped mortgage-backed securities in which it may invest will be issued
by agencies or instrumentalities of the U.S. Government. Stripped
mortgage-backed securities are structured with two classes that receive
different proportions of the interest and principal distributions on a
pool of assets represented by mortgages ("Mortgage Assets"). A common
type of stripped mortgage-backed security will have one class receiving a
small portion of the interest and a larger portion of the principal from
the Mortgage Assets, while the other classes will receive primarily
interest and only a small portion of the principal. The yields to
maturity on IOs and POs are sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets, and
principal payments may have a material effect on yield to maturity. In
addition, the market value of stripped mortgage-backed securities is
subject to greater risk of fluctuation in response to changes in market
interest rates than other mortgage-backed securities. In the case of
mortgage-backed IOs, if the underlying assets experience greater than
anticipated prepayments of principal, there is a greater possibility that
Government may not fully recoup its initial investment. Conversely, if

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<PAGE>

the underlying assets experience slower than anticipated principal
payments, the yield on the PO class will be affected more severely than
would be the case with traditional mortgage-backed securities.

The SEC staff takes the position that IOs and POs generally are
illiquid securities. The staff also takes the position, however, that the
Board of Trustees (or the Manager pursuant to delegation by the Board) may
determine that U.S. Government-issued IOs or POs backed by fixed-rate
mortgages are liquid, where the Board determines that such securities can
be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of net asset value per
share. Accordingly, certain of the IO and PO securities in which
Government invests may be deemed liquid.

U.S. Government Securities. High Yield may invest in U.S.
Government Securities, including a variety of securities that are issued
or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements secured thereby. These securities include:
securities issued and guaranteed by the U.S. Government, such as Treasury
bills, Treasury notes, and Treasury bonds; obligations backed by the "full
faith and credit" of the United States, such as Government National
Mortgage Association securities; obligations supported by the right of the
issuer to borrow from the U.S. Treasury, such as those of the Federal Home
Loan Banks; and obligations supported only by the credit of the issuer,
such as those of the Federal Intermediate Credit Banks.

Zero Coupon and Pay-In-Kind Securities. High Yield may invest in
zero coupon and pay-in-kind securities. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of
interest prior to maturity or a specified date when the securities begin
paying current interest. Zero coupon securities are issued and traded at
a discount from their face amounts or par value, which discount rate
varies depending on the time remaining until cash payments begin,
prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind securities are those that pay
interest through the issuance of additional units of the same securities.
The market prices of zero coupon and pay-in-kind securities generally are
more volatile than the prices of securities that pay interest periodically
and in cash and are likely to respond to changes in interest rates to a
greater degree than do other types of debt securities having similar
maturities and credit value.

Industry Classifications

For purposes of determining industry classifications, the Funds
rely upon classifications established by the Manager that are based upon
classifications contained in the Directory of Companies Filing Annual
Reports with the SEC and in the Standard & Poor's Corporation Industry
Classifications.

INVESTMENT LIMITATIONS

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<PAGE>

In addition to the limits disclosed in "Investment Policies," the
Funds are subject to the following investment limitations, which are
fundamental policies and may not be changed without the vote of a majority
of the outstanding voting securities of the applicable Fund. Under the
1940 Act, a "vote of a majority of the outstanding voting securities" of a
Fund means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the shares present at
a shareholders meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.

Borrowing Money. The Funds may not borrow money, except from
banks as a temporary measure for extraordinary or emergency purposes
including the meeting of redemption requests that might require the
untimely disposition of securities. The payment of interest on such
borrowings will reduce the Funds' net investment income during the period
of such borrowing. Borrowing in the aggregate may not exceed 15% and
borrowing for purposes other than meeting redemptions may not exceed 5% of
a Fund's total assets at the time the borrowing is made. A Fund will not
make additional investments when borrowings exceed 5% of its total assets.

Diversification. Neither Fund will invest more than 5% of
its total assets in securities of any one issuer other than the U.S.
Government or its agencies or instrumentalities or buy more than 10% of
the voting securities or any other class of securities of any issuer.

Industry Concentration. Neither Fund will purchase securities
if, as a result more than 25% of its total assets would be invested in any
one industry with the exception of U.S. Government Securities.

Investing in Commodities, Minerals or Real Estate. A Fund may
not invest in commodities, commodity contracts, oil, gas or other mineral
programs, real estate limited partnerships, or real estate, except that it
may (1) purchase securities secured by real estate, or issued by companies
that invest in or sponsor such interests, (2) futures contracts and
options and (3) engage in transactions in forward commitments.

Underwriting. A Fund may not underwrite the securities of other
issuers, except that a Fund may invest in securities that are not readily
marketable without registration under the Securities Act of 1933, as
amended (the "1933 Act") (restricted securities), as provided in the
Fund's prospectus and this Statement of Additional Information.

Loans. A Fund may not make loans, except to the extent that the
purchase of a portion of an issue of publicly distributed or privately
placed notes, bonds or other evidences of indebtedness or deposits with
banks and other financial institutions may be considered loans, and
further provided that a Fund may enter into repurchase agreements and
securities loans as permitted under the Fund's investment policies.
Privately placed securities are typically either restricted as to resale
or may not have readily available market quotations, and therefore may not
be as liquid as other securities.

- 17 -
<PAGE>

Issuing Senior Securities. A Fund may not issue senior
securities, except as permitted by the investment objectives and policies
and investment limitations of that Fund.

Selling Short and Buying on Margin. A Fund may not sell any
securities short, purchase any securities on margin or maintain a short
position in any security, but may obtain such short-term credits as may be
necessary for clearance of purchase and sales of securities; provided,
however, the Funds may make margin deposits and may maintain short
positions in connection with the use of options, futures contracts and
options on futures contracts as described previously.

Investing in Issuers Whose Securities Are Owned by Officers and
Trustees of the Trust. A Fund may not purchase or retain the securities
of any issuer if the officers and Trustees of the Trust or the Manager or
its Subadviser, as applicable, own individually more than 1/2 of 1% of the
issuer's securities or together own more than 5% of the issuer's
securities.

Repurchase Agreements and Loans of Portfolio Securities. A Fund
may not enter into repurchase agreements with respect to more than 25% of
its total assets or lend portfolio securities amounting to more than 25%
of its total assets.

Each Fund has adopted the following additional restrictions,
which, together with certain limits described in its prospectus, may be
changed by the Board of Trustees without shareholder approval in compli-
ance with applicable law, regulation or regulatory policy.

Investing in Investment Companies. A Fund may not invest in
securities issued by other investment companies, except as permitted by
the 1940 Act.

Control Purpose. A Fund may not make investments for the purpose
of gaining control of an issuer's management.

Pledging Securities. A Fund may not pledge any securities,
except in an amount of not more than 15% of its total assets, to secure
borrowings for temporary and emergency purposes. (The deposit in escrow of
underlying securities in connection with the writing of covered call
options is not deemed to be a pledge or other encumbrance. The Funds also
may pledge their assets in connection with its use of options and futures
contracts without limit.)

Unseasoned Issuers. A Fund may not invest more than 5% of its
net assets in securities of companies (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities),
including their predecessors, which have been in continuous operation for
less than three years and in equity securities that do not have readily
available market quotations (other than restricted securities).

Illiquid Securities. A Fund may not invest more than 10% of its

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<PAGE>

net assets in the aggregate in repurchase agreements of more than seven
days' duration, in securities without readily available market quotations,
and in restricted securities including privately placed securities.

Except with respect to borrowing money, if a percentage
limitation is adhered to at the time of the investment, a later increase
or decrease in the percentage resulting from any change in value or net
assets will not result in a violation of such restriction. If at any
time, a Fund's borrowing exceeds its limitations due to a decline in net
assets, such borrowing will be promptly reduced to the extent necessary to
comply with the limitation.

NET ASSET VALUE

The net asset values of the A shares and C shares are determined
daily, Monday through Friday, except for New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day, as of the close of regular trading on the New York
Stock Exchange (the "Exchange"). Net asset value for each class is
calculated by dividing the value of the total assets of the Fund
attributable to that class, less all liabilities (including accrued
expenses) attributable to that class, by the number of class shares
outstanding, the result being adjusted to the nearest whole cent. A
security listed or traded on the Exchange, or other stock exchanges, is
valued at its last sales price on the principal exchange on which it is
traded prior to the time when assets are valued. If no sale is reported
at that time, the most recent bid price is used. When market quotations
for options and futures positions held by a Fund are readily available,
those positions will be valued based upon such quotations. Market
quotations generally will not be available for options traded in the OTC
market. Securities and other assets for which market quotations are not
readily available, or for which the Manager or the Subadviser, as
applicable, has reason to question the validity of quotations they
receive, are valued at fair value as determined in good faith by the Board
of Trustees. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, which approximates market value.

The Board may suspend the right of redemption or postpone payment
for more than seven days at times (1) during which the Exchange is closed
other than for customary weekend and holiday closings, (2) during which
trading on the Exchange is restricted as determined by the SEC, (3) during
which an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not
reasonably practical for the Fund fairly to determine the value of its net
assets, or (4) for such other periods as the SEC may by order permit for
the protection of the holders of the Fund's A shares and C shares.

PERFORMANCE INFORMATION

Performance data for each class of each Fund quoted in
advertising and other promotional materials represents past performance
and is not intended to indicate future performance. The investment return

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<PAGE>

and principal value will fluctuate so that an investor's redeemed shares
may be worth more or less than their original cost. Average annual total
return quotes for each class used in each Fund's advertising and
promotional materials are calculated according to the following formula:

n
P(1+T) = ERV

where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period at the end of that
period.

In calculating the ending redeemable value for Class A shares,
each Fund's maximum sales charge, is deducted from the initial $1,000
payment and all dividends and other distributions by the Fund are assumed
to have been reinvested at net asset value on the reinvestment dates
during the period. Total return, or "T" in the formula above, is computed
by finding the average annual compounded rates of return over the period
that would equate the initial amount invested to the ending redeemable
value. The average annualized total return for High Yield A shares for
the period March 1, 1990 (commencement of operations) to September 30,
1995, for the five year period ended September 30, 1995, and for the
fiscal year ended September 30, 1995 was %, % and %,
respectively. The average annualized total return for Government A shares
for the same periods was %, % and %, respectively. The average
annualized total return for High Yield C shares for the period April 3,
1995 (commencement of operations for C shares) to September 30, 1995 was
%. The average annualized total return for Government C shares for the
same period was %.

Each Fund also from time to time may include in such advertising
and promotional materials a total return figure that is not calculated
according to the method set forth above for each class of its shares. For
example, in comparing High Yield's A shares or C shares total return with
such market indices as the Lehman Brothers Government Corporate Composite
Index and the Merrill Lynch Domestic Master Index, and Government's A
shares or C shares total return with such market indices as the Lehman
Brothers Government Composite Index, the Lehman Intermediate Government
Corporate Index and the Lipper United States Government Fund Average, each
class of each Fund calculates its aggregate total return for each class
for the specified periods of time by assuming an investment of $10,000 in
that class of shares and assuming the reinvestment of each dividend or
other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of
the investment from the ending value and by dividing the remainder by the
beginning value. The Funds do not, for these purposes, deduct from the
initial value invested any amount representing sales loads charged on A
shares or CDSLs charged on C shares. The A shares cumulative returns
using this formula for High Yield for the year and five years ended

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<PAGE>

September 30, 1995, and for the period March 1, 1990 (commencement of
operations) to September 30, 1995 were %, % and %,
respectively. The cumulative returns for Government A shares for the same
periods were %, % and %, respectively. Cumulative returns
for High Yield C shares for the period April 3, 1995 (commencement of
operations for C shares) to September 30, 1995 was %. Cumulative
returns for Government C shares for the same period was %. By not
annualizing the performance and excluding the effect of the sales load on
A shares and the CDSL on C shares, total return calculated in this manner
will simply reflect the increase in net asset value per share over a
period of time, adjusted for dividends and other distributions.
Calculating total return without taking into account the sales load or
CDSL results in a higher rate of return than calculating total return net
of the sales load or CDSL.

Yields used in each Fund's performance advertisements for each
class are calculated by dividing each Fund's interest income for a
thirty-day period ("Period") attributable to that class, net of expenses
attributable to that class, by the average number of shares of that class
entitled to receive dividends during the Period, and expressing the result
as an annualized percentage (assuming semi-annual compounding) of the
maximum offering price per share at the end of the Period. Yield
quotations are calculated according to the following formula:

6
YIELD = 2X[(a-b+1) -1]
c x d

where: a = interest earned during the Period;
b = expenses accrued for the Period (net of
reimbursements);
c = the average daily number of shares outstanding
during the Period that were entitled to receive a
dividend; and
d = the maximum offering price per share on the last
day of the Period.

Except as noted below, in determining net investment income
earned during the Period (variable "a" in the above formula), each Fund
calculates interest earned on each debt obligation held by it during the
Period by (1) computing the obligation's yield to maturity, based on the
market value of the obligation (including actual accrued interest) to
determine the interest income on the obligation for each day of the period
that the obligation is in the Fund. Once interest earned is calculated in
this fashion for each debt obligation held by the Fund, interest earned
during the Period is then determined by totalling the interest earned on
all debt obligations. For purposes of these calculations, the maturity of
an obligation with one or more call provisions is assumed to be the next
date on which the obligation reasonably can be expected to be called or,
if none, the maturity date. At September 30, 1995, the 30-day yield for
High Yield and Government A shares was % and %, respectively. At
September 30, 1995, the 30-day yield for High Yield and Government C

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<PAGE>

shares was % and %, respectively.

INVESTING IN THE FUNDS

The procedures for purchasing shares of a Fund are explained in
each Fund's prospectus under "Investing in the Fund."

Alternative Purchase Plans

A shares are sold at their next determined net asset value plus a
sales load on days the Exchange is open for business. C shares are sold
at their next determined net asset value on days the Exchange is open for
business, subject to a 1% CDSL if the investor redeems such shares within
one year. The Manager, as the Trust's transfer agent, will establish an
account with the Trust and will transfer funds to State Street Bank and
Trust Company (the "Custodian"). See "Alternative Purchase Plans" in the
prospectuses. The Trust reserves the right to reject any order for a
Fund's shares. The Trust's distributor, Raymond James & Associates, Inc.
("RJA" or the "Distributor"), has agreed that it will hold each Fund
harmless in the event of loss as a result of cancellation of trades in
Fund shares by the Distributor, its affiliates or its customers.

Class A Purchases at Net Asset Value

Cities, counties, states or instrumentalities and their
departments, authorities or agencies are able to purchase A shares of a
Fund at net asset value as long as certain conditions are met: the
governmental entity is prohibited by applicable investment laws, codes or
regulations from paying a sales load in connection with the purchase of
shares of a registered investment company; it has determined that such A
shares are a legally permissible investment; and any relevant minimum
purchase amounts are met.

In the instance of discretionary fiduciary assets or trusts, or A
purchases by a governmental entity through a registered broker/dealer with
which the Distributor has a dealer agreement, the Manager may make a
payment out of its own resources to the Distributor, who may reallow the
payment to the selling broker/dealer. However, the Distributor and the
selling broker/dealer may be required to reimburse the Manager for these
payments if investors redeem A shares within specified periods.

Class A Combined Purchase Privilege (Right of Accumulation)

Certain investors may qualify for the Class A sales load
reductions indicated in the sales load schedule in each Fund's Prospectus
by combining purchases of A shares of a Fund into a single "purchase," if
the resulting purchase totals at least $25,000. The term "purchase"
refers to a single purchase by an individual, or to concurrent purchases
which, in the aggregate, are at least equal to the prescribed amounts, by
an individual, his spouse and their children under the age of 21 years
purchasing A shares of a Fund for his or their own account; a single
purchase by a trustee or other fiduciary purchasing A shares for a single

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<PAGE>

trust, estate or single fiduciary account although more than one
beneficiary is involved; or a single purchase for the employee benefit
plans of a single employer. The term "purchase" also includes purchases
by a "company," as the term is defined in the 1940 Act, but does not
include purchases by any such company that has not been in existence for
at least six months or that has no purpose other than the purchase of A
shares of a Fund or shares of other registered investment companies at a
discount; provided, however, that it shall not include purchases by any
group of individuals whose sole organizational nexus is that the
participants therein are credit card holders of a company, policy holders
of an insurance company, customers of either a bank or broker-dealer, or
clients of an investment adviser.

The applicable A shares sales load will be based on the total of:

(i) the investor's current purchase;

(ii) the net asset value (at the close of business on
the previous day) of (a) all A shares of a Fund held by the
investor and (b) all A shares of any other open-end mutual fund
advised by the Manager ("Heritage Mutual Fund") held by the
investor and purchased at a time when A shares of that other fund
were distributed subject to a sales load (including Heritage Cash
Trust A shares acquired by exchange); and

(iii) the net asset value of all A shares described in
paragraph (ii) owned by another shareholder eligible to combine
his purchase with that of the investor into a single "purchase."

A shares of Government purchased from February 1, 1992 through
July 31, 1992, without payment of a sales load will be deemed to fall
under the provisions of paragraph (ii) as if they had been distributed
without being subject to a sales load, unless those shares were acquired
through an exchange of other shares that were subject to a sales load.

Class A Statement of Intention

Investors also may obtain the reduced sales loads shown in each
Fund's prospectus by means of a written Statement of Intention, which
expresses the investor's intention to invest not less than $25,000 within
a period of 13 months in A shares of a Fund or any other Heritage Mutual
Fund. Each purchase of A shares under a Statement of Intention will be
made at the public offering price or prices applicable at the time of such
purchase to a single transaction of the dollar amount indicated in the
Statement. At the investor's option, a Statement of Intention may include
purchases of A shares of a Fund or any other Heritage Mutual Fund made not
more than 90 days prior to the date that the investor signs a Statement of
Intention. However, the 13-month period during which the Statement is in
effect will begin on the date of the earliest purchase to be included.

The Statement of Intention is not a binding obligation upon the

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<PAGE>

investor to purchase the full amount indicated. The minimum initial
investment under a Statement of Intention is 5% of such amount. A shares
purchased with the first 5% of such amount will be held in escrow (while
remaining registered in the name of the investor) to secure payment of the
higher sales load applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed A shares will be
involuntarily redeemed to pay the additional sales load, if necessary.
When the full amount indicated has been purchased, the escrow will be
released. To the extent an investor purchases more than the dollar amount
indicated on the Statement of Intention and qualifies for a further
reduced sales load, the sales load will be adjusted for the entire amount
purchased at the end of the 13-month period. The difference in sales load
will be used to purchase additional A shares of a Fund, subject to the
rate of sales load applicable to the actual amount of the aggregate
purchases. An investor may amend his Statement of Intention to increase
the indicated dollar amount and begin a new 13-month period. In that
case, all investments subsequent to the amendment will be made at the
sales load in effect for the higher amount. The escrow procedures
discussed above will apply.

REDEEMING SHARES

The methods of redemption are described in the section of each
Fund's prospectus entitled "How to Redeem Shares."

Systematic Withdrawal Plan

Shareholders also may elect to make systematic withdrawals from
their Fund account of a minimum of $50 on a periodic basis as set forth in
each Fund's prospectus under "How To Redeem Shares--Systematic Withdrawal
Plan." The amounts paid each period are obtained by redeeming sufficient
shares from an account to provide the withdrawal amount specified. The
Systematic Withdrawal Plan is not currently available for shares held in
an Individual Retirement Account, Section 403(b) annuity plan, defined
contribution plan, Simplified Employee Pension Plan or other retirement
plan, unless the shareholder establishes to the Manager's satisfaction
that withdrawals from such an account may be made without imposition of a
penalty. Shareholders may change the amount to be paid without charge not
more than once a year by written notice to the Distributor or the Manager.
Redemptions will be made at net asset value determined as of the close of
regular trading on the Exchange on the 10th day of each month or the 10th
day of the last month of each period, whichever is applicable. Systematic
withdrawals of C shares, if made within one year of the date of purchase,
will be charged a CDSL of 1%. If the Exchange is not open for business on
that day, the shares will be redeemed at net asset value determined as of
the close of regular trading on the Exchange on the preceding business
day, minus any applicable CDSL for C shares. The check for the withdrawal
payment will usually be mailed on the next business day following
redemption. If shareholders elect to participate in the Systematic
Withdrawal Plan, dividends and other distributions on all shares in the
account must be automatically reinvested in shares of the Fund in which
they invest. Shareholders may terminate the Systematic Withdrawal Plan at

- 24 -
<PAGE>

any time without charge or penalty by giving written notice to the Manager
or the Distributor. The Trust, its transfer agent, and its Distributor
also reserve the right to modify or terminate the Systematic Withdrawal
Plan at any time.

Withdrawal payments are treated as a sale of shares rather than
as a dividend or a capital gain distribution. These payments are taxable
to the extent that the total amount of the payments exceeds the tax basis
of the shares sold. If the periodic withdrawals exceed reinvested
dividends and other distributions, the amount of the original investment
may be correspondingly reduced.

Ordinarily, shareholders should not purchase additional A shares
of a Fund if maintaining a Systematic Withdrawal Plan of A shares, because
they may incur tax liabilities in connection with such purchases and
withdrawals. A Fund will not knowingly accept purchase orders from
shareholders for additional A shares if they maintain a Systematic
Withdrawal Plan unless the purchase is equal to at least one year's
scheduled withdrawals. In addition, if shareholders maintain a Systematic
Withdrawal Plan they may not make periodic investments under each Fund's
Automatic Investment Plan.

Telephone Transactions

Shareholders may redeem shares by placing a telephone request to
a Fund. The Trust, Manager, Distributor and their Trustees, directors,
officers and employees are not liable for any loss arising out of
telephone instructions they reasonably believe are authentic. In acting
upon telephone instructions, these parties use procedures that are
reasonably designed to ensure that such instructions are genuine, such as
(1) obtaining some or all of the following information: account number,
name(s) and social security number registered to the account, and personal
identification; (2) recording all telephone transactions; and (3) sending
written confirmation of each transaction to the registered owner. If the
Trust, Manager, Distributor and their Trustees, directors, officers and
employees do not follow reasonable procedures, some or all of them may be
liable for any such losses.

Redemption in Kind

The Trust is obligated to redeem shares of each Fund for any
shareholder for cash during any 90-day period up to $250,000 or 1% of the
Fund's net asset value, whichever is less. Any redemption beyond this
amount also will be in cash unless the Trustees determine that further
cash payments will have a material adverse effect on remaining
shareholders. In such a case, the Fund will pay all or a portion of the
remainder of the redemption in portfolio instruments, valued in the same
way as the Fund determines net asset value. The portfolio instruments
will be selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, shareholders receiving portfolio instruments and selling
them before their maturity could receive less than the redemption value of

- 25 -
<PAGE>

their securities and could incur certain transaction costs.

Receiving Payment

If a request for redemption is received by a Fund in good order
(as described in each prospectus) before the close of regular trading on
the Exchange, the shares will be redeemed at the net asset value per share
determined at such close, minus any applicable CDSL for C shares.
Requests for redemption received by a Fund after the close of regular
trading on the Exchange will be executed at the net asset value determined
as of the close of regular trading on the Exchange on the next trading
day, minus any applicable CDSL for C shares.

If shares of a Fund are redeemed by a shareholder through the
Distributor or a participating dealer, the redemption is settled with the
shareholder as an ordinary transaction. If a request for redemption is
received before the close of regular trading on the Exchange, shares will
be redeemed at the net asset value per share determined on that day, minus
any applicable CDSL for C shares. Requests for redemption received after
the close of regular trading will be executed on the next trading day.
Payment for shares redeemed will normally be made by a Fund to the
Distributor or a participating dealer by the third day after the day the
redemption request was made, provided that certificates for shares have
been delivered in proper form for transfer to the Trust or, if no
certificates have been issued, a written request signed by the shareholder
has been provided to the Distributor or a participating dealer prior to
settlement date.

Other supporting legal documents may be required from
corporations or other organizations, fiduciaries or persons other than the
shareholder of record making the request for redemption. Questions
concerning the redemption of Fund shares can be directed to registered
representatives of the Distributor or a participating dealer, or to the
Manager.

EXCHANGE PRIVILEGE

Shareholders who have held Fund shares for at least 30 days may
exchange some or all of their A shares or C shares for shares of
corresponding classes of any other Heritage Mutual Fund. All exchanges
will be based on the respective net asset values of the Heritage Mutual
Funds involved. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being acquired at
their respective net asset values as next determined following receipt by
the Heritage Mutual Fund whose shares are being exchanged of (1) proper
instructions and all necessary supporting documents as described in such
fund's prospectus, or (2) a telephone request for such exchange in
accordance with the procedures set forth in each Fund's prospectus and
below.

A shares of Government purchased from February 1, 1992 through
July 31, 1992, without payment of a sales load may be exchanged into A

- 26 -
<PAGE>

shares of another Heritage Mutual Fund without payment of any sales load.
A shares of Government purchased after July 31, 1992 without a sales load
will be subject to a sales load when exchanged into A shares of another
Heritage Mutual Fund, unless those shares were acquired through an
exchange of other shares that were subject to a sales load.

Telephone exchanges can be effected by calling the Manager at
800-421-4184, or by calling a registered representative of the
Distributor, a participating dealer or participating bank
("Representative"). In the event that a shareholder or his Representative
is unable to reach the Manager by telephone, a telephone exchange can be
effected by sending a telegram to Heritage Asset Management, Inc.,
attention: Shareholder Services. Telephone or telegram requests for an
exchange received by a Fund before the close of regular trading on the
Exchange will be effected at the close of regular trading on that day.
Requests for an exchange received after the close of regular trading will
be effected on the Exchange's next trading day. Due to the volume of
calls or other unusual circumstances, telephone exchanges may be difficult
to implement during certain time periods.

TAXES

Each Fund is treated as a separate corporation for Federal income
tax purposes. In order to continue to qualify for the favorable tax
treatment afforded to a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended (the "Code"), each Fund must
distribute annually to its shareholders at least 90% of its investment
company taxable income (generally consisting of net investment income plus
net short-term capital gain) ("Distribution Requirement") and must meet
several additional requirements. With respect to each Fund, these
requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other
disposition of securities, or other income (including gains from options
or futures contracts) derived with respect to its business of investing in
securities ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition
of securities, options or futures contracts held for less than three
months ("Short-Short Limitation"); (3) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government Securities, securities
of other RICs and other securities, with those other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the
value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (4) at the close of
each quarter of the Fund's taxable year, not more than 25% of the value of
its total assets may be invested in securities (other than U.S. Government

- 27 -
<PAGE>

Securities or the securities of other RICs) of any one issuer.

Each Fund will be subject to a nondeductible 4% excise tax
("Excise Tax") to the extent it fails to distribute by the end of any
calendar year substantially all of its ordinary income for that year and
capital gain net income for the one-year period ending on October 31 of
that year, plus certain other amounts.

A redemption of Fund shares will result in a taxable gain or loss
to the redeeming shareholder, depending on whether the redemption proceeds
are more or less than the shareholder's adjusted basis for the redeemed
shares (which normally includes any sales load paid on A shares). An
exchange of shares of either Fund for shares of the other Fund or any
other Heritage Mutual Fund generally will have similar tax consequences.
However, special rules apply when a shareholder disposes of shares of a
Fund through a redemption or exchange within 90 days after purchase
thereof and subsequently reacquires shares of that Fund or acquires shares
of another Heritage Mutual Fund without paying a sales load due to the 30-
day reinstatement or exchange privilege. In these cases, any gain on the
disposition of the original Fund shares will be increased, or loss
decreased, by the amount of the sales load paid when those shares were
acquired, and that amount will increase the adjusted basis of the shares
subsequently acquired. In addition, if Fund shares are purchased (whether
pursuant to the reinstatement privilege or otherwise) within 30 days
before or after redeeming other shares of that Fund (regardless of class)
at a loss, all or a portion of that loss will not be deductible and will
increase the basis of the newly purchased shares.

If shares of a Fund are sold at a loss after being held for six
months or less, the loss will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares. Investors also should be aware that if shares
are purchased shortly before the record date for a dividend or other
distribution, the shareholder will pay full price for the shares and
receive some portion of the price back as a taxable distribution.

[As of September 30, 1995, Government had net tax basis capital
loss carryforwards of $6,719,571, which may be applied against any
realized net capital 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,
High Yield incurred $1,291,490 of net realized capital losses, which will
be deferred and treated as arising on October 1, 1995, in accordance with
regulations under the Code.][TO BE UPDATED]

[PARAGRAPH FOR GOVERNMENT TO BE SUPPLIED]

The use of hedging instruments, such as writing (selling) and
purchasing options and futures contracts, involves complex rules that will
determine for income tax purposes the character and timing of the gains
and losses each Fund realizes in connection therewith. Gains from options
and futures contracts derived by a Fund with respect to its business of

- 28 -
<PAGE>

investing in securities will qualify as permissible income under the
Income Requirement. However, income from the disposition of options and
futures contracts will be subject to the Short-Short Limitation if they
are held for less than three months.

If a Fund satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. To the extent this treatment is not
available, a Fund may be forced to defer the closing out of certain
options and futures contracts beyond the time when it otherwise would be
advantageous to do so, in order for the Fund to continue to qualify as a
RIC.

High Yield may acquire zero coupon or other securities issued
with original issue discount ("OID"). As a holder of such securities,
High Yield must include in its income the OID that accrues thereon during
the taxable year, even if it receives no corresponding payment on them
during the year. Similarly, High Yield must include in its gross income
securities it receives as "interest" on pay-in-kind securities. Because
High Yield annually must distribute substantially all of their investment
company taxable income, including any OID and other non-cash income, to
satisfy the Distribution Requirement and to avoid imposition of the Excise
Tax, it may be required in a particular year to distribute as a dividend
an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from High Yield's cash assets
or from the proceeds of sales of portfolio securities, if necessary. High
Yield may realize capital gains or losses from those sales, which would
increase or decrease its investment company taxable income and/or net
capital gain (the excess of net long-term capital gain over net short-term
capital loss). In addition, any such gains may be realized on the
disposition of securities held for less than three months. Because of the
Short-Short Limitation, any such gains would reduce High Yield's ability
to sell other securities, options or futures held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.

TRUST INFORMATION

Management of the Trust

Trustees and Officers. Trustees and officers are listed with
their addresses, principal occupations and present positions, including
any affiliation with Raymond James Financial, Inc. ("RJF"), RJA and the
Manager.

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<PAGE>

Position with Principal Occupation
Name the Trust During Past Five Years
---- ------------- ----------------------

<S> <C> <C>
Thomas A. James* Trustee Chairman of the Board since 1986, Chief
880 Carillon Parkway Executive Officer since 1969 and President
St. Petersburg, FL from 1972-1986 of RJF; Chairman of the Board
33716 of RJA since 1969 and President of RJA from
1972-1990; Chairman of the Board of Eagle
Asset Management, Inc. ("Eagle") since 1984
and Chief Executive Officer of Eagle since
July 1994.

Richard K. Riess* Trustee President of Eagle, January 1995 to present,
880 Carillon Parkway Chief Operating Officer, July 1988 to present,
St. Petersburg, FL Executive Vice President, July 1988-December
33716 1993; President of Heritage Mutual Funds, June
1985-November 1991; President of the Manager,
June 1985-March 1989; Senior Vice President of
RJA, from August 1987-March 1989;

Donald W. Burton Trustee President of South Atlantic Capital
614 W. Bay Street Corporation (venture capital) since October
Suite 200 1981.
Tampa, FL 33606

C. Andrew Graham Trustee Vice President of Financial Designs Ltd. since
Financial Designs, Ltd. 1992; Executive Vice President of the Madison
1775 Sherman Street Group, Inc., October 1991-1992; Principal of
Suite 1900 First Denver Financial Corporation (investment
Denver, CO 80203 banking) since 1987; Chairman of the Board of
Quinoco Petroleum, Inc., 1985-1986; Chief
Executive Officer and Chairman of the Board of
Emcor Petroleum, Inc. (oil and gas exploration
and production), 1977-1985.

David M. Phillips Trustee Chairman and Chief Executive Officer CCC
World Trade Center Information Services, Inc. since 1994 and of
Chicago InfoVest Corporation (information services to
444 Merchandise Mart the insurance and auto industries and consumer
Chicago, IL 60654 households) since October 1982.

Eric Stattin Trustee Litigation Consultant Expert Witness and
2587 Fairway Village private investor since February 1988; Chairman
Drive of the Board, September 1986 to February 1988,
Park City, UT 84060 and President, June 1985 to February 1988 of
Florida Federal Savings and Loan Association;
Managing Director of Shearson Lehman Brothers
in Los Angeles, from 1979 to June 1985.

- 30 -
<PAGE>

Position with Principal Occupation
Name the Trust During Past Five Years
---- ------------- ----------------------

James L. Pappas Trustee Dean of College of Business Administration
University of South since August 1987 and Lykes Professor of
Florida Banking and Finance since August 1986 at
College of Business University of South Florida; Academic Dean of
Administration the Graduate School of Banking, Madison,
Tampa, FL 33620 Wisconsin, since 1983; Professor of School of
Business Administration at University of
Wisconsin, 1968-1986; Board Member, Marine
Bank, Dane County, 1983-1986.

Stephen G. Hill President Chief Executive Officer and President of the
880 Carillon Parkway Manager since April 1989 and Director since
St. Petersburg, FL December 31, 1994; Vice President, RJA, 1984-
33716 1989.

Donald H. Glassman Treasurer Treasurer of the Manager since May 1989;
880 Carillon Parkway Treasurer of Heritage Mutual Funds since May
St. Petersburg, FL 1989; Chief Accounting Officer of the Manager,
33716 1987-1989.

Clifford J. Alexander Secretary Partner, Kirkpatrick & Lockhart LLP (law
1800 M Street, N.W. firm).
Washington, DC 20036

Patricia Schneider Assistant Compliance Administrator of the Manager.
880 Carillon Parkway Secretary
St. Petersburg, FL
33716

Robert J. Zutz Assistant Partner, Kirkpatrick & Lockhart LLP (law
1800 M Street, N.W. Secretary firm).
Washington, DC 20036

</TABLE>

* These Trustees are "interested persons" as defined in section
2(a)(19) of the 1940 Act.

The Trustees and officers as a group own less than 1% of each
Fund's shares outstanding. The Trust's Declaration of Trust provides that
the Trustees will not be liable for errors of judgment or mistakes of fact
or law. However, they are not protected against any liability to which
they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of their office.

The Fund currently pays Trustees who are not "interested persons"

- 31 -
<PAGE>

of the Trust $727 annually and $182 per meeting of the Board of Trustees.
Trustees are also reimbursed for any expenses incurred in attending
meetings. Because the Manager performs substantially all of the services
necessary for the operation of the Fund, the Fund requires no employees.
No officer, director or employee of the Manager receives any compensation
from the Fund for acting as a director or officer. The following table
shows the compensation earned by each Trustee for the fiscal year ended
October 31, 1995.

<TABLE>
<CAPTION>
Compensation Table
Total
Compensation
Pension or From the Fund
Aggregate Retirement and the Heritage
Compensation Benefits Accrued Estimated Family of Funds
Name of Person, From the as Part of the Annual Benefits Paid
Position Fund Fund's Expenses Upon Retirement to Trustees
--------------- ------------ ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Donald W. Burton, Trustee $1,776 $0 $0 $16,000
C. Andrew Graham, Trustee $1,776 $0 $0 $16,000

David M. Phillips, Trustee $1,554 $0 $0 $14,000

Eric Stattin, Trustee $1,776 $0 $0 $16,000
James L. Pappas, Trustee $1,776 $0 $0 $16,000

Richard K. Riess, Trustee $0 $0 $0 $0
Thomas A. James, Trustee $0 $0 $0 $0
</TABLE>

Investment Adviser and Administrator; Subadviser

The Trust's investment adviser and administrator, Heritage Asset
Management, Inc., was organized as a Florida corporation in 1985. All the
capital stock of the Manager is owned by RJF. RJF is a holding company
that, through its subsidiaries, is engaged primarily in providing
customers with a wide variety of financial services in connection with
securities, limited partnerships, options, investment banking and related
fields.

Under an Investment Advisory and Administration Agreement
("Advisory Agreement") dated January 19, 1990, between the Trust, on
behalf of the Funds, and the Manager, and subject to the control and
direction of the Trustees, the Manager is responsible for reviewing and
establishing investment policies for the Trust as well as administering
the Trust's noninvestment affairs. Under a Subadvisory Agreement, dated

- 32 -
<PAGE>

February 1, 1996, the Subadviser, subject to direction by the Manager and
Trustees, will provide investment advice and portfolio management services
to High Yield for a fee payable by the Manager.

The Manager is also obligated to furnish the Trust with office
space, administrative, and certain other services as well as executive and
other personnel necessary for the operation of the Trust. The Manager and
its affiliates also pay all the compensation of Trustees of the Trust who
are employees of the Manager and its affiliates. Each Fund pays all its
other expenses that are not assumed by the Manager. Each Fund also is
liable for such nonrecurring expenses as may arise, including litigation
to which the Trust may be a party. Each Fund also may have an obligation
to indemnify Trustees and officers of the Trust with respect to any such
litigation.

The Advisory Agreement and the Subadvisory Agreement each were
approved by the Trustees of the Trust (including all of the Trustees who
are not "interested persons" of the Manager or Subadviser) and the
shareholders of the applicable Fund, in compliance with the 1940 Act.
Each Agreement will continue in force for two years unless its continuance
is approved at least annually thereafter by (i) a vote, cast in person at
a meeting called for that purpose, of a majority of those Trustees who are
not "interested persons" of the Manager, Subadviser or the Trust, and by
(ii) the majority vote of either the full Board of Trustees or the vote of
a majority of the outstanding shares of each applicable Fund. The
Advisory and Subadvisory Agreements each automatically terminate upon
assignment, and each is terminable on not more than 60 days' written
notice by the Trust to either party. In addition, the Advisory Agreement
may be terminated on not less than 60 days' written notice by the Manager
to the Trust and the Subadvisory Agreement may be terminated on not less
than 60 days' written notice by the Manager or 90 days' written notice by
the Subadviser. Under the terms of the Advisory Agreement, the Manager
automatically becomes responsible for the obligations of the Subadviser
upon termination of the Subadvisory Agreement. In the event the Manager
ceases to be the Manager of the Trust or the Distributor ceases to be
principal distributor of each Fund's shares, the right of the Trust to use
the identifying name of "Heritage" may be withdrawn.

The Manager and Subadviser shall not be liable to the Trust or
any shareholder for anything done or omitted by them, except acts or
omissions involving willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties imposed upon them by their agreements
with the Trust or for any losses that may be sustained in the purchase,
holding or sale of any security.

All of the officers of the Trust except for Messrs. Alexander and
Zutz are officers or directors of the Manager or its affiliates. These
relationships are described under "Management of the Trust."

Advisory and Administration Fee. The annual investment advisory
fee paid monthly by each Fund to the Manager is based on the applicable
Fund's average daily net assets as listed in the prospectus. The Manager

- 33 -
<PAGE>

has entered into an agreement with the Subadviser wherein the Subadviser
will provide investment advice and portfolio management services to High
Yield for an annual fee paid by the Manager equal to .30% of High Yield's
average daily net assets without regard to any reduction in fees actually
paid to the Manager as a result of expense limitations.

For High Yield, the Manager has voluntarily agreed to waive
management fees to the extent that Trust expenses attributable to A shares
exceed 1.30% of the average daily net assets or to the extent that Trust
expenses attributable to C shares exceed 1.75% of average daily net assets
attributable to that class for this fiscal year. To the extent that the
Manager waives its fees for one class, it will waive its fees for the
other class on a proportionate basis. For the fiscal years ended
September 30, 1993, 1994 and 1995 management fees amounted to $135,963,
$238,964, and $ , respectively. For the same periods, the Manager
waived its fees in the amount of $86,812, $66,556, and $
respectively. For the fiscal years ended September 30, 1993, 1994 and
1995 , the Manager paid subadvisory fees of $55,694, $59,753, and $
respectively for such Fund.

For Government, the Manager has voluntarily agreed to waive its
fees to the extent that Fund expenses attributable to A shares exceed .95%
of the average daily net assets or to the extent that Fund expenses
attributable to C shares exceed 1.20% of average daily net assets
attributable to that class for this fiscal year. For the fiscal years
ended September 30, 1993, 1994 and 1995, management fees amounted to
$444,183, $324,438 and $ , respectively. For the same periods,
the Manager waived its fees in the amount of $142,627, $146,407 and $
, respectively.

Class-Specific Expenses. Each Fund may determine to allocate
certain of its expenses (in addition to distribution fees) to the specific
classes of the Fund's shares to which those expenses are attributable.

State Expense Limitations. Certain states have established
expense limitations for investment companies whose shares are registered
for sale in that state. If a Fund's operating expenses (including the
investment advisory fee, but not including distribution fees, brokerage
commissions, interest, taxes and extraordinary expenses) exceed these
expense limitations, the investment advisory fee paid will be reduced on a
monthly basis by the amount of the excess, unless waivers of the expense
limitations are obtained by the Trust. If applicable state expense
limitations are exceeded, the amount to be reimbursed by the Manager will
be limited by the amount of the investment advisory fee and a Fund may
have to cease offering its shares for sale in certain states until the
expense ratio declines. Any fees waived by the Manager can be recovered
by it from the applicable Fund when such recovery would not cause the Fund
to exceed its expense limits. The most restrictive current state expense
limit is 2.5% of the Fund's first $30 million in assets, 2.0% of the next
$70 million in assets and 1.5% of all excess assets.

Brokerage Practices

- 34 -
<PAGE>

Each Fund's portfolio turnover rate is computed by dividing the
lesser of purchases or sales of securities for the period by the average
value of portfolio securities for that period. The annualized portfolio
turnover for the fiscal year ended September 30, 1994 and 1995 were
135.05% and %, respectively, for High Yield, and 213.53% and
%, respectively, for Government. 119.78%.

The Manager is responsible for the execution of each Fund's
portfolio transactions but has delegated that responsibility to the
Subadviser for a portion of the Diversified Fund's portfolio transactions.
In executing portfolio transactions, both the Manager and the Subadviser
must seek the most favorable price and execution for such transactions.
Best execution, however, does not mean that the Fund necessarily will be
paying the lowest commission or spread available. Rather, each Fund also
will take into account such factors as size of the order, difficulty of
execution, efficiency of the executing broker's or dealer's facilities,
and any risk assumed by the executing broker or dealer.

Consistent with the policy of most favorable price and execution,
both the Manager and the Subadviser may give consideration to research,
statistical and other services furnished by brokers or dealers. In
addition, they may place orders with brokers or dealers who provide
supplemental investment and market research and securities and economic
analysis and may pay to these brokers a higher brokerage commission or
spread than may be charged by other brokers or dealers, provided that the
Manager or Subadviser, as applicable, determines in good faith that such
commission is reasonable in relation to the value of brokerage and
research services provided. Such research and analysis may be useful to
the Manager and the Subadviser in connection with services to clients
other than a Fund.

Each Fund generally uses the Distributor as broker for agency
transactions in listed and OTC securities at commission rates and under
circumstances consistent with the policy of best execution. Commissions
paid to the Distributor will not exceed "usual and customary brokerage
commissions." Rule 17e-1 under the 1940 Act defines "usual and customary"
commissions to include amounts which are "reasonable and fair compared to
the commission, fee or other remuneration received or to be received by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a
comparable period of time."

The Manager and Subadviser may also select other brokers to
execute portfolio transactions. In the OTC market, each Fund generally
deals with primary market-makers unless a more favorable execution can
otherwise be obtained.

Each Fund effects its portfolio transactions in bonds with bond
dealers. Generally, bonds are traded on the OTC market on a "net" basis
without a stated commission through dealers acting for their own account
and not as brokers. Prices paid to dealers in principal transactions
generally include a "spread," which is the difference between the prices

- 35 -
<PAGE>

at which the dealer is willing to purchase and sell a specific security at
that time. The spread includes the dealer's normal profit.

The Funds may not buy securities from, or sell securities to, the
Distributor as principal. However, the Board of Trustees has adopted
procedures in conformity with Rule 10f-3 under the 1940 Act whereby the
each Fund may purchase securities that are offered in underwritings in
which the Distributor is a participant. The Board of Trustees will
consider the possibilities of seeking to recapture for the benefit of each
Fund expenses of certain portfolio transactions, such as underwriting
commissions and tender offer solicitation fees, by conducting such
portfolio transactions through affiliated entities, including the
Distributor, but only to the extent such recapture would be permissible
under applicable regulations, including the rules of the National
Association of Securities Dealers, Inc. and other self-regulatory
organizations.

Section 11(a) of the Securities Exchange Act of 1934, as amended,
prohibits the Distributor from executing transactions on an exchange for
the Trust except pursuant to the express written consent of the Trust.

Distribution of Shares

The Distributor and participating dealers with whom it has
entered into dealer agreements offer shares of each Fund as agents on a
best efforts basis and are not obligated to sell any specific amount of
shares. Pursuant to its Distribution Agreement with the Trust with
respect to A shares and C shares of each Fund, the Distributor bears the
cost of making information about the Trust available through advertising,
sales literature and other means, the cost of printing and mailing
prospectuses to persons other than shareholders, and salaries and other
expenses relating to selling efforts. The Distributor also pays service
fees to dealers for providing personal services to Class A and C
shareholders and for maintaining shareholder accounts. Each Fund pays the
cost of registering and qualifying their shares under state and federal
securities laws and pays its proportionate share for typesetting of its
prospectuses and printing and distributing such prospectuses to existing
shareholders.

As compensation for the services provided and expenses borne by
the Distributor pursuant to the Distribution Agreement with respect to A
shares, each Fund pays the Distributor the sales load described in its
prospectus and a 12b-1 fee in accordance with the Class A Plan described
below. The fee is accrued daily and paid monthly, and currently is equal
on an annual basis of an amount up to 0.35% of average daily net assets of
each Fund. For the fiscal year ended September 30, 1995 the Distributor
received 12b-1 fees in the amount of $ and $ for High Yield
and Government, respectively.

As compensation for the services provided and expenses borne by
the Distributor pursuant to the Distribution Agreement with respect to C
shares, the Trust pays the Distributor a 12b-1 fee in accordance with the

- 36 -
<PAGE>

Class C Plan described below. The fee is accrued daily and paid monthly,
and currently is equal on an annual basis to 0.80% of average daily net
assets for High Yield and 0.60% of average daily net assets for
Government. For the fiscal year ended September 30, 1995, the Distributor
received 12b-1 fees in the amount of $ and $ , respectively.

In reporting amounts expended under the Plans to the Trustees,
the Distributor will allocate expenses attributable to the sale of A
shares and C shares to the applicable class based on the ratio of sales of
shares of that class to the sales of all the classes of shares of the
applicable Fund. The fees paid by one class of shares will not be used to
subsidize the sale of any other class of shares.

The Trust has adopted a Class A Distribution Plan on behalf of
each Fund (the "Class A Plan") which, among other things, permits it to
pay the Trust's Distributor the above-described fee out of each Fund's net
assets to finance activity that is intended to result in the sale and
retention of A shares of each such Fund. As required by Rule 12b-1 under
the 1940 Act, the Class A Plan was approved by the shareholders of each
Fund and the Board of Trustees, including a majority of the Trustees who
are not interested persons of the Trust (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of the
Plan or the Distribution Agreement (the "Independent Trustees") after
determining that there is a reasonable likelihood that each Fund and its
Class A shareholders will benefit from the Class A Plan.

The Trust also has adopted a Class C Distribution Plan (the
"Class C Plan") which, among other things, permits it to pay the
Distributor the above-described fee out of its net assets to finance
activity which is intended to result in the sale and retention of C
shares. The Class C Plan was approved by the Board of Trustees, including
a majority of the Independent Trustees after determining that there is a
reasonable likelihood that the Trust and its Class C shareholders will
benefit from the Class C Plan.

The Class A Plan and the Class C Plan each may be terminated by
vote of a majority of the Independent Trustees, or by vote of a majority
of the outstanding voting securities of the each Fund. The Trustees
review quarterly a written report of Plan costs and the purposes for which
such costs have been incurred. A Plan may be amended by vote of the
Trustees, including a majority of the Independent Trustees cast in person
at a meeting called for such purpose. Any change in a Plan that would
materially increase the distribution cost to a class of shares of a Fund
requires the approval of that class of shareholders.

The Distribution Agreement may be terminated at any time on 60
days' written notice without payment of any penalty by either party. The
Trust may effect such termination by vote of a majority of the outstanding
voting securities of the Trust or by vote of a majority of the Independent
Trustees. For so long as either the Class A Plan or the Class C Plan is
in effect, selection and nomination of the Independent Trustees shall be
committed to the discretion of such disinterested persons.

- 37 -
<PAGE>

The Distribution Agreement and each of the above referenced Plans
will continue in effect for successive one-year periods, provided that
each such continuance is specifically approved (1) by the vote of a
majority of the Independent Trustees and (2) by the vote of a majority of
the entire Board of Trustees cast in person at a meeting called for that
purpose.

For the fiscal years ended September 30, 1993, 1994 and 1995 the
Distributor received $409,069, $359,240 and $ , respectively, of
which it retained $60,737, $43,306 and $ , respectively, for High
Yield, and $0, $0 and $ , respectively, of which it retained $0, $0
and $ , respectively for Government, as compensation for the sale of
these Funds' A shares. For the fiscal period ended September 30, 1995 the
Distributor received $ and retained $ for High Yield, and $
, and retained $ for Government, as compensation for the sale of
these Funds' C shares.

Administration of the Trust

Administrative, Fund Accounting and Transfer Agent Services. The
Manager, subject to the control of the Trustees, will manage, supervise
and conduct the administrative and business affairs of the Trust and of
each Fund; furnish office space and equipment; oversee the activities of
the Subadviser and Custodian; and pay all salaries, fees and expenses of
officers and Trustees of the Trust who are affiliated with the Manager.
The Manager will also provide certain shareholder servicing activities for
customers of the Trust. The Manager is also the fund accountant and
transfer and dividend disbursing agent for the Trust. The Trust pays the
Manager the Manager's cost plus ten percent for its services as fund
accountant and transfer and dividend disbursement agent. For the three
fiscal years ended September 30, 1993, 1994 and 1995, the Manager earned
$43,063, $38,623 and $ , respectively, from Government for its
services as transfer agent. For the same three fiscal years the Manager
earned $20,560, $26,724 and $ , respectively from High Yield for its
services as transfer agent.

For the period March 1, 1994 (commencement of Manager's
engagement as fund accountant) to September 30, 1994, and for the year
ended September 30, 1995, the Manager earned approximately $12,569 and $
, respectively, from the Government for its services as fund
accountant. For the same periods the Manager earned $11,969 and $
, respectively, from High Yield for its services as fund accountant.

Custodian. State Street Bank and Trust Company, P.O. Box 1912,
Boston, Massachusetts 02105, serves as custodian of the Trust's assets and
provides portfolio and certain other services.

Legal Counsel. Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Trust and
the Manager. Schifino & Fleischer, P.A., of Tampa, Florida serves as
counsel to the Distributor.

- 38 -
<PAGE>

Independent Accountants. Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109, is the independent accountant
for the Trust. The Financial Statements and Financial Highlights of the
Trust that appear in this Statement of Additional Information have been
audited by Coopers & Lybrand L.L.P., whose report thereon appears
elsewhere herein and has been included herein in reliance upon the report
of said firm of accountants, which is given upon their authority as
experts in accounting and auditing.

Potential Liability

Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for obligations of the Trust.
To protect its shareholders, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of its shareholders
for acts or obligations of the Trust. These documents require notice of
this disclaimer to be given in each agreement, obligation or instrument
the Trust or its Trustees enter into or sign. In the unlikely event a
shareholder is held personally liable for the Trust's obligations, the
Trust is required to use its property to protect or compensate the share-
holder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will
occur only if the Trust itself cannot meet its obligations to indemnify
shareholders and pay judgments against them.

- 39 -
<PAGE>

APPENDIX
COMMERCIAL PAPER RATINGS

The rating services' descriptions of commercial paper ratings in which the
Funds may invest are:

Description of Moody's Investors Services, Inc. Short-Term Debt Ratings

Prime-1. Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries;
high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal
cash generation; well established access to a range of financial markets
and assured sources of alternate liquidity.

Prime-2. Issuers (or supporting institutions) rated Prime-2 (P-2) have a
strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, may
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

Description of Standard & Poor's Commercial Paper Ratings

A-1. This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong characteristics are denoted with a plus sign (+) designation.

A-2. Capacity for timely payment of issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.

A-1
<PAGE>
<PAGE> 1

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Shareholders and Board of Trustees of
Heritage Income Trust - Diversified Portfolio:

We have audited the accompanying statement of assets and liabilities of
Heritage Income Trust-Diversified 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 and brokers. 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-Diversified 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

14
<PAGE> 2

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED PORTFOLIO
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARKET
VALUE
-----------
<S> <C>
GOVERNMENT SECTOR--58.6%(A)
REPURCHASE AGREEMENT--8.0%(A)
Repurchase Agreement with State Street Bank and Trust Company, dated September 29, 1995 @ 6.10%,
to be repurchased at $2,451,245 on October 2, 1995, (collateralized by $1,920,000 United States
Treasury Bonds, 10.375%, due November 15, 2009, with market value of $2,524,983, including
interest) (cost $2,450,000). ..................................................................... $ 2,450,000
-----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY
-------- DATE
--------
<C> <S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--50.6%(A)
- --------------------------------------------
U.S. TREASURIES--39.3%
--------------------
$1,000,000 U.S. Treasury Notes, 6.125%.............................................. 05/15/98 1,005,312
1,000,000 U.S. Treasury Notes, 7.75%............................................... 01/31/00 1,064,685
1,000,000 U.S. Treasury Notes, 6.125%.............................................. 09/30/00 1,002,500
3,750,000 U.S. Treasury Notes, 7.50%............................................... 02/15/05 4,082,813
3,250,000 U.S. Treasury Notes, 6.50%............................................... 05/15/05 3,322,108
1,500,000 U.S. Treasury Bonds, 6.875%.............................................. 08/25/25 1,576,406
-----------
Total U.S. Treasuries.................................................... 12,053,824
-----------
U.S. GOVERNMENT AGENCIES--11.2%
-----------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION:
-----------------------------------------
311,859 REMIC, 1259 J, 6.25%..................................................... 01/15/97 311,541
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
--------------------------------------
128,723 REMIC, 1989-16 C, Principal Only TAC, 5.6%*.............................. 03/25/19 126,763
1,000,000 REMIC, 1991-99 H, PAC, 7.5%.............................................. 12/25/20 1,006,250
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
------------------------------------------
1,000,000 REMIC, 1995-2 E, 8.5%.................................................... 07/20/18 1,025,313
934,309 Pool #385895, 8.5%....................................................... 09/15/24 972,755
-----------
Total U.S. Government Agencies........................................... 3,442,622
-----------
Total U.S. Government and Agency Securities (cost $15,121,443)........... 15,496,446
-----------
CORPORATE BONDS--43.1%(A)
- ------------------------
ADVERTISING/COMMUNICATIONS--1.4%
--------------------------------
400,000 Katz Corporation, 12.75%................................................. 11/15/02 438,000
-----------
AUTO PARTS/EQUIPMENT--0.6%
---------------------------
200,000 Venture Holdings Trust, 9.75%............................................ 04/01/04 172,000
-----------
BEVERAGES--1.6%
----------------
500,000 Royal Crown Corporation, 9.75%........................................... 08/01/00 485,000
-----------
BROADCASTING--1.6%
-------------------
500,000 Storer Communications, 10%............................................... 05/15/03 498,750
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE> 3

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED PORTFOLIO
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1995
(CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY MARKET
-------- DATE VALUE
-------- -----------
<C> <S> <C> <C>
BUILDING--1.4%
---------------
$500,000 Oriole Homes Corporation, 12.5%.......................................... 01/15/03 $ 430,000
-----------
CONTAINERS--3.6%
-----------------
550,000 Owens-Illinois, Inc., 10.5%.............................................. 06/15/02 573,375
500,000 Riverwood International Corporation, 11.25%.............................. 06/15/02 541,875
-----------
1,115,250
-----------
ELECTRONICS/ELECTRIC--4.4%
-------------------------
700,000 Harman International Industries, Inc., 12%............................... 08/01/02 770,000
550,000 MagneTek, Inc., 10.75%................................................... 11/15/98 580,938
-----------
1,350,938
-----------
FINANCE--1.8%
--------------
550,000 Scotsman Group, Inc., 9.5%............................................... 12/15/00 539,000
-----------
FOODS--1.5%
-------------
500,000 Specialty Foods Acquisition Corporation, 10.25%.......................... 08/15/01 472,500
-----------
HEALTH CARE CENTERS--5.2%
-------------------------
250,000 OrNda HealthCorp, 11.375%................................................ 08/15/04 279,375
250,000 OrNda HealthCorp, 12.25%................................................. 05/15/02 277,500
500,000 Paracelsus Healthcare, Inc., 9.875%...................................... 10/15/03 503,750
500,000 Tenet Healthcare Corporation, 10.125%.................................... 03/01/05 529,375
-----------
1,590,000
-----------
HOTELS/MOTELS/INNS--2.0%
-------------------------
500,000 La Quinta Inns, Inc., 9.25%.............................................. 05/15/03 517,500
100,000 Prime Hospitality Corporation, 7%(c)..................................... 04/15/02 107,000
-----------
624,500
-----------
JEWELRY, SILVERWARE, TIMEPIECES, CHINA--2.2%
-----------------------------------------
1,000,000 Finlay Enterprises, Inc., 0% to 5/1/98, 12% to maturity.................. 05/01/05 675,000
-----------
LAND DEVELOPMENT/REAL ESTATE--0.7%
-----------------------------------
250,000 Alexander Haagen Properties, Inc., 7.5%(c)............................... 01/15/01 208,125
-----------
LEISURE/AMUSEMENT--1.6%
-------------------------
500,000 Selmer Company, Inc., 11.0%.............................................. 05/15/05 487,500
-----------
MEDICAL EQUIPMENT/SUPPLY--2.4%
-------------------------------
250,000 Amsco International Corporation, 4.5% to 10/15/95, 6.5% to maturity(c)... 10/15/02 237,500
500,000 Wright Medical Technology, 10.75%, Series "B"............................ 07/01/00 502,500
-----------
740,000
-----------
OIL & GAS--3.7%
----------------
600,000 Global Marine, Inc., 12.75%.............................................. 12/15/99 663,000
475,000 Tuboscope Vetco International, Inc., 10.75%.............................. 04/15/03 475,000
-----------
1,138,000
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE> 4

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED PORTFOLIO
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1995
(CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY MARKET
-------- DATE VALUE
-------- -----------
<C> <S> <C> <C>
RETAIL--4.0%
-------------
$750,000 Big 5 Holdings Corporation, 13.625%...................................... 09/15/02 $ 735,000
500,000 Comp USA, Inc., 9.5%..................................................... 06/15/00 498,750
-----------
1,233,750
-----------
TELECOMMUNICATIONS--3.3%
-------------------------
250,000 Centennial Cellular Corporation, 10.125%................................. 05/15/05 252,188
1,000,000 Comcast Cellular Corporation, Series "A", Zero Coupon Bond, 11.7%*....... 03/05/00 761,250
-----------
1,013,438
-----------
Total corporate bonds (cost $12,997,741)................................. 13,211,751
-----------
WARRANTS--0.1%(A)
- --------------
UNITS
----
MEDICAL EQUIPMENT/SUPPLIES
---------------------------
206 Wright Medical Technology................................................ 33,970
-----------
Total Warrants (cost $40)................................................ 33,970
-----------
TOTAL INVESTMENT PORTFOLIO (cost $30,569,224)(b), 101.8%(a).................................. 31,192,167
OTHER ASSETS AND LIABILITIES, NET, (1.8%)(a)................................................. (545,500)
-----------
NET ASSETS, 100.0%........................................................................... $30,646,667
==========
</TABLE>

- ---------------
* Yield to Maturity (unaudited)
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is
$30,571,490. Market value includes net unrealized appreciation of $620,677,
which consists of aggregate gross unrealized appreciation for all securities
in which there is an excess of market value over tax cost of $830,205 and
aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over market value of $209,528.
(c) Convertible security.

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.

7
<PAGE> 5

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Assets
Investments, at market value (identified cost $28,119,224) (Note 1)...................... $28,742,167
Repurchase agreement (identified cost $2,450,000) (Note 1)............................... 2,450,000
Cash..................................................................................... 774
Receivables:
Interest............................................................................... 527,494
Fund shares sold....................................................................... 30,710
Deferred state registration expenses (Note 1)............................................ 10,373
Prepaid insurance........................................................................ 2,434
-----------
Total assets..................................................................... 31,763,952
Liabilities
Payables (Note 4):
Investments purchased.................................................................. $1,002,500
Fund shares redeemed................................................................... 3,498
Accrued professional fees.............................................................. 25,533
Accrued management fee................................................................. 42,420
Accrued distribution fee............................................................... 8,949
Other accrued expenses................................................................. 34,385
----------
Total liabilities................................................................ 1,117,285
-----------
Net assets, at market value.............................................................. $30,646,667
==========
Net Assets
Net assets consist of:
Undistributed net investment income (Note 1)........................................... $ 93,090
Net unrealized appreciation on investments............................................. 622,943
Accumulated net realized loss (Note 1)................................................. (2,407,214)
Paid-in capital........................................................................ 32,337,848
-----------
Net assets, at market value.............................................................. $30,646,667
==========
Class A Shares
Net asset value and redemption price per share ($30,004,403 divided by 3,018,826 shares
of beneficial interest outstanding, no par value) (Note 2)............................. $ 9.94
=====
Maximum offering price per share (100/96.25 of $9.94).................................... $10.33
=====
Class C Shares
Net assets value, offering price and redemption price per share ($642,264 divided by
64,783 shares of beneficial interest outstanding, no par value) (Notes 1 and 2)........ $ 9.91
=====
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE> 6

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment Income
Interest................................................................................... $ 2,783,575
Expenses (Notes 1 and 4):
Management fee........................................................................... $194,363
Distribution fee......................................................................... 113,666
Custodian/Fund accounting fees........................................................... 41,821
Professional fees........................................................................ 38,699
Shareholder servicing fees............................................................... 28,181
Amortization of state registration expenses.............................................. 30,176
Reports to shareholders.................................................................. 21,065
Amortization of organization expenses.................................................... 4,167
Trustees' fees and expenses.............................................................. 9,800
Insurance................................................................................ 4,971
Other.................................................................................... 1,966
--------
Total expenses before waiver........................................................... 488,875
Fees waived by Manager (Note 4)........................................................ (83,663) 405,212
-------- -----------
Net investment income...................................................................... 2,378,363
-----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss from investment transactions............................................. (1,106,214)
Net increase in unrealized appreciation of investments during the year..................... 2,100,137
-----------
Net gain on investments............................................................ 993,923
-----------
Net increase in net assets resulting from operations....................................... $ 3,372,286
==========
</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.................................................. $ 2,378,363 $ 2,692,274
Net realized loss from investment transactions......................... (1,106,214) (1,014,329)
Net increase (decrease) in unrealized appreciation of investments
during the year...................................................... 2,100,137 (2,338,323)
------------------ ------------------
Net increase (decrease) in net assets resulting from operations........ 3,372,286 (660,378)
Distributions to shareholders from:
Net investment income, Class A Shares ($.74 and $.71 per share,
respectively)........................................................ (2,484,241) (2,770,014)
Net investment income, Class C Shares ($.30 per share)................. (10,482) --
Net realized gains, Class A Shares ($.07 per share).................... -- (270,959)
Distribution in excess of net realized gains, Class A Shares ($.07 per
share)............................................................... -- (277,151)
Decrease in net assets from Fund share transactions (Note 2)............. (6,054,028) (2,402,711)
------------------ ------------------
Decrease in net assets................................................... (5,176,465) (6,381,213)
Net assets, beginning of the year........................................ 35,823,132 42,204,345
------------------ ------------------
Net assets, end of the year (including undistributed net investment
income of $93,090 and $199,940, respectively).......................... $ 30,646,667 $ 35,823,132
================= =================
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE> 7

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED 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................ $ 9.65 $10.65 $10.82 $10.29 $ 9.29 $9.60 $ 9.62
------ ------ ------ ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a).............................. 0.72 0.69 0.81 0.83 0.87 0.43 0.31
Net realized and unrealized gain (loss) on
investments......................................... 0.31 (0.84) 0.07 0.59 1.00 (0.34 ) 0.28
------ ------ ------ ------ ------ ------ -------
Total from Investment Operations...................... 1.03 (0.15) 0.88 1.42 1.87 0.09 0.59
------ ------ ------ ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from net investment income.................. (0.74) (0.71) (0.83) (0.85) (0.87) (0.36 ) (0.30 )
Distributions from net realized gains................. -- (0.07) (0.22) (0.04) -- (0.04 ) --
Distribution in excess of net realized gains.......... -- (0.07) -- -- -- -- --
------ ------ ------ ------ ------ ------ -------
Total Distributions................................... (0.74) (0.85) (1.05) (0.89) (0.87) (0.40 ) (0.30 )
------ ------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE PERIOD...................... $ 9.94 $ 9.65 $10.65 $10.82 $10.29 $9.29 $ 9.91
====== ====== ====== ====== ====== ======= =========
TOTAL RETURN (%)(D)..................................... 11.23 (1.59) 8.57 14.35 21.19 0.91 (c) 6.18 (c)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net
assets(a)........................................... 1.25 1.25 1.19 0.96 1.31 1.35 (b) 1.70 (b)
Net investment income to average daily net assets..... 7.35 6.76 7.57 8.11 9.10 8.97 (b) 6.67 (b)
Portfolio turnover rate............................... 109 135 150 71 119 39 (b) 109
Net assets, end of the period ($ millions)............ 30 36 42 32 15 10 0.6
</TABLE>

- ---------------
+ 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 $.03, $.02, $.02, $.05, $.07 and $.08 per Class A Share,
respectively. The operating expense ratios including such items would be
1.51%, 1.42%, 1.43%, 1.60%, 2.17% and 3.00% (annualized) for Class A Shares,
respectively. Excludes management fees waived by the Manager in the amount
of $0.03 per Class C Share. The operating expense ratio including such items
would be 1.96% (annualized) for Class C Shares.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.

10
<PAGE> 8

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED 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 Diversified Portfolio (the "Fund"), the Limited Maturity
Government 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
Limited Maturity Government 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 the 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. 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. As of September 30, 1995, the Fund had a net
tax basis capital loss carryforward of $1,402,142, which may be applied
against any realized net taxable gains until its expiration date of
September 30, 2003. From November 1, 1994 to September 30, 1995, the
Fund incurred $1,002,808 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 that are directly
attributable to it, such as management fee, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as professional
fees, insurance expense, etc., are 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. Dividend income and 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.

11
<PAGE> 9

- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-DIVERSIFIED 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
------------------------- -------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold.............................................. 189,017 $ 1,831,973 601,368 $ 6,198,262
Shares issued on reinvestment of distributions........... 194,940 1,881,075 250,301 2,562,687
Shares redeemed.......................................... (1,079,005) (10,410,508) (1,099,200) (11,163,660)
---------- ------------ ---------- ------------
Net decrease............................................. (695,048) $ (6,697,460) (247,531) $ (2,402,711)
=========== ===========
Shares outstanding:
Beginning of the year.................................. 3,713,874 3,961,405
---------- ----------
End of the year........................................ 3,018,826 3,713,874
========= =========
</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>
CLASS C SHARES SHARES AMOUNT
---------------------------------------------------------------- ------ --------
<S> <C> <C> <C> <C>
Shares sold..................................................... 64,725 $642,880
Shares issued on reinvestment of distributions.................. 582 5,752
Shares redeemed................................................. (524) (5,200)
----- -------
Net increase.................................................... 64,783 $643,432
-------
-------
Shares outstanding:
Beginning of period........................................... --
-----
End of period................................................. 64,783
-----
-----
</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) were as follows:

<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
- --------------------------------------------------- -------------------------------
PURCHASES SALES PAYDOWNS PURCHASES SALES
- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$27,900,236 $30,074,393 $ 713,931 $ 4,763,905 $ 8,175,225
</TABLE>

Note 4: MANAGEMENT, SUBADVISORY, 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 annualized rate of 0.60%
of the first $100,000,000 of the Fund's average daily net assets, and
0.50% of any excess over $100,000,000 of such 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 .85% to 1.35% of average daily net assets. Effective April 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
1.25% for Class A Shares (1.70% 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
of $83,663 ($0.03 per share for each class) were waived in 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 ($66,556) 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.

12
<PAGE> 10

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 25% of the fees payable by the
Fund to the Manager without regard to any reduction due to the
imposition of expense limitations.

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 $7,050. 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.

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 .80% 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 $112,311 and $1,355 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 which 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.

13
<PAGE>
<PAGE> 1

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

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> 2

- --------------------------------------------------------------------------------
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> 3

- --------------------------------------------------------------------------------
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> 4

- --------------------------------------------------------------------------------
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> 5

- --------------------------------------------------------------------------------
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> 6

- --------------------------------------------------------------------------------
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.

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.

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> 7

- --------------------------------------------------------------------------------
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 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> 8

- --------------------------------------------------------------------------------
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>

HERITAGE INCOME TRUST

PART C. OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements:

See the Prospectus and Statement of Additional
Information

Included in Part A of the Registration Statement
for the Class A shares:

Financial Highlights - A shares of High Yield
Bond Fund and Intermediate Government Fund: For
the period March 1, 1990 (commencement of
operations) to September 30, 1990, and each of
the five years in the period ended September 30,
1995; Intermediate Government Fund Class C shares
of High Yield Bond Fund: for the period April 3,
1995 (commencement of operations of C shares) to
September 30, 1995.

Included in Part B of the Registration Statement
on behalf of the High Yield Bond Fund and
Intermediate Government Fund:

Investment Portfolio - September 30, 1995
Statement of Assets and Liabilities - September
30, 1995
Statement of Operations - September 30, 1995
Statements of Changes in Net Assets for the year
ended September 30, 1995 and 1994
Notes to Financial Statements
Reports of Coopers & Lybrand L.L.P., Independent
Accountants dated November 27, 1995

(b) Exhibits:

(1) Declaration of Trust (filed herewith)

(2) (a) Bylaws (filed herewith)

(b) Amended and Restated Bylaws
(filed herewith)

(3) Voting trust agreement -- none

(4) (a)(i) Specimen security High Yield
Bond Fund Class A**

C-1
<PAGE>

(a)(ii) Specimen security High Yield
Bond Fund Class C**

(b)(i) Specimen security Intermediate
Government Class A**

(b)(ii) Specimen security Intermediate
Government Class C**

(5) (a) Investment Advisory and
Administration Agreement (filed
herewith)

(b) Subadvisory Agreement between
Heritage Asset Management, Inc.
and Eagle Asset Management, Inc.
(filed herewith)

(c) Subadvisory Agreement between
Heritage Asset Management, Inc.
and Salomon Brothers Asset
Management Inc (filed herewith)

(6) Distribution Agreement (filed herewith)

(7) Bonus, profit sharing or pension plans
-- none

(8) Custodian Agreement (filed herewith)

(9) (a) Transfer Agency and Service
Agreement (filed herewith)

(b) Fund Accounting and Pricing
Service Agreement (filed
herewith)

(10) Opinion and consent of counsel*

(11) Accountants' consent (filed herewith)

(12) Financial statements omitted from
prospectus -- none

(13) Letter of investment intent (filed
herewith)

(14) Prototype retirement plan**

(15) (a) Class A Plan pursuant to Rule
12b-1 (filed herewith)

C-2
<PAGE>

(b) Class C Plan pursuant to Rule
12b-1 (filed herewith)

(16) (a) Performance Computation Schedule
Relating to High Yield Bond Fund
(formerly Diversified Portfolio)
(filed herewith)

(b) Performance Computation Schedule
Relating to Intermediate
Government Fund (formerly
Limited Maturity Government
Portfolio) (filed herewith)

(17) Electronic Filers -- Financial Data
Schedule:

(a) Financial Data Schedule Relating
to High Yield Bond Fund
(formerly Diversified Portfolio)
Class A

(b) Financial Data Schedule Relating
to High Yield Bond Fund
(formerly Diversified Portfolio)
Class C

(c) Financial Data Schedule Relating
to Intermediate Government Fund
(formerly Limited Maturity
Government Portfolio) Class A

(d) Financial Data Schedule Relating
to Intermediate Government Fund
(formerly Limited Maturity
Government Portfolio) Class C

(18) Plan pursuant to Rule 18f-3 -- none

* Incorporated by reference to the Trust's Rule 24f-2 Notice, filed
previously on November 29, 1995.

** To be filed by subsequent amendment.

Item 25. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT

None.

Item 26. NUMBER OF HOLDERS OF SECURITIES

C-3
<PAGE>

Number of Record Holders
Title of Class October 31, 1995
---------------- -----------------------

Shares of Beneficial Interest

High Yield Bond Fund
Class A Shares 1,752
Class C Shares 41

Intermediate Government Funds
Class A Shares 1,395
Class C Shares 8

C-4
<PAGE>

Item 27. INDEMNIFICATION

Article XI, Section 2 of the Trust's Declaration of Trust
provides that:

(a) Subject to the exceptions and limitations contained in
paragraph (b) below:

(i) every person who is, or has been, a Trustee or
officer of the Trust (hereinafter referred to as "Covered Person") shall
be indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a
Trustee or officer and against amounts paid or incurred by him in the
settlement thereof;

(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened while
in office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.

(b) No indemnification shall be provided hereunder to a
Covered Person:

(i) who shall have been adjudicated by a court or
body before which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office or (B) not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or

(ii) in the event of a settlement, unless there has
been a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither interested persons of the Trust nor are parties
to the matter based upon a review of readily available facts (as opposed
to a full trial-type inquiry); or (C) by written opinion of independent
legal counsel based upon a review of readily available facts (as opposed
to a full trial-type inquiry); provided, however, that any Shareholder
may, by appropriate legal proceedings, challenge any such determination by
the Trustees, or by independent counsel.

C-5
<PAGE>

the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which Trust
personnel, other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law.

(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit, or proceeding of the
character described in paragraph (a) of this Section 2 may be paid by the
applicable Portfolio from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person that
such amount will be paid over by him to the Trust if it is ultimately
determined that he is not entitled to indemnification under this Section
2; provided, however, that:

(i) such Covered Person shall have provided
appropriate security for such undertaking,

(ii) the Trust is insured against losses arising out
of any such advance payments or

(iii) either a majority of the Trustees who are neither
interested persons of the Trust nor parties to the matter, or independent
legal counsel in a written opinion, shall have determined, based upon a
review of readily available facts (as opposed to a trial-type inquiry or
full investigation), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Section 2.

According to Article XII, Section 1 of the Declaration of Trust,
the Trust is a trust, not a partnership. Trustees are not liable
personally to any person extending credit to, contracting with or having
any claim against the Trust, a particular Portfolio or the Trustees.

Article XII, Section 2 of the Declaration of Trust provides that,
subject to the provisions of Section 1 of Article XII and to Article XI,
the Trustees are not liable for errors of judgment or mistakes of fact or
law, or for any act or omission in accordance with advice of counsel or
other experts or for failing to follow such advice. A Trustee, however,
is not protected from liability due to willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office.

Paragraph 8 of the Investment Advisory and Administration
Agreement of Heritage Income Trust ("Advisory Agreement") between the
Trust and Heritage Asset Management, Inc. ("Manager") provides that the
Manager shall not be liable for any error of judgment or mistake of law
for any loss suffered by the Trust in connection with the matters to which
the Advisory Agreement relates except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations and
duties under the Advisory Agreement. Any person, even though also an
officer, partner, employee, or agent of the Manager, who may be or become
an officer, director, employee or agent of the Trust shall be deemed, when

C-6
<PAGE>

rendering services to the Trust or acting in any business of the Trust, to
be rendering such services to or acting solely for the Trust and not as an
officer, partner, employee, or agent or one under the control or direction
of the Manager even though paid by it.

Paragraph 9 of the Heritage Income Trust Subadvisory Agreement
("Subadvisory Agreement") between the Manager and Eagle Asset Management,
Inc. ("Subadviser" or "Eagle") provides that, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Subadviser,
or reckless disregard of its obligations and duties under the Subadvisory
Agreement, the Subadviser shall not be subject to any liability to the
Trust, or to any of its Shareholders, for any act or omission in the
course of, or connected with, rendering services under the Subadvisory
Agreement.

Paragraph 7 of the Distribution Agreement of Heritage Income
Trust ("Distribution Agreement") between the Trust and Raymond James &
Associates, Inc. ("Raymond James") provides that the Trust agrees to
indemnify, defend and hold harmless Raymond James, its several officers
and directors, and any person who controls Raymond James within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "1933
Act") from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which Raymond James, its officers or Trustees, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in the Registration Statement, Prospectus or
Statement of Additional Information or arising out of or based upon any
alleged omission to state a material fact required to be stated in either
thereof or necessary to make the statements in either thereof not
misleading, provided that in no event shall anything contained in the
Distribution Agreement be construed so as to protect Raymond James against
any liability to the Trust or its shareholders to which Raymond James
would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under the Distribution
Agreement.

Paragraph 13 of the Heritage Funds Accounting and Pricing
Services Agreement ("Accounting Agreement") between the Trust and Heritage
provides that the Trust shall indemnify and hold harmless Heritage and its
nominees from all losses, damages, costs, charges, payments, expenses
(including reasonable counsel fees), and liabilities arising directly or
indirectly from any action that Heritage takes or does or omits to take to
do (i) at the request or on the direction of or in reasonable reliance on
the written advice of the Trust or (ii) upon Proper Instructions (as
defined in the Accounting Agreement), provided, that neither Heritage nor
any of its nominees shall be indemnified against any liability to the
Trust or to its shareholders (or any expenses incident to such liability)
arising out of Heritage's own willful misfeasance, willful misconduct,
gross negligence or reckless disregard of its duties and obligations

C-7
<PAGE>

specifically described in the Accounting Agreement or its failure to meet
the standard of care set forth in the Accounting Agreement.

Item 28. I. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT
ADVISER

Heritage Asset Management, Inc. is a Florida corporation which
offers investment management services. Information as to the officers and
directors of Heritage is included in its current Form ADV filed with the
Securities and Exchange Commission ("SEC") and is included by reference
herein.

II. BUSINESS AND OTHER CONNECTIONS OF SUBADVISER

Salomon Brothers Asset Management Inc ("Salomon") is a registered
investment adviser. It is a wholly-owned subsidiary of Salomon Inc.
Salomon primarily is engaged in the investment advisory business.
Information as to the officers and directors of Salomon is included in its
current Form ADV filed with the SEC and is incorporated by reference
herein.

Item 29. PRINCIPAL UNDERWRITER

(a) Raymond James & Associates, Inc. is the principal
underwriter for each of the following investment companies: Heritage Cash
Trust, Heritage Capital Appreciation Trust, Heritage Income-Growth Trust,
Heritage Income Trust and Heritage Series Trust.

(b) The directors and officers of the Registrant's
principal underwriter are:

Name Positions & Offices Position
with Underwriter with Registrant

Thomas A. James Chief Executive Officer, Trustee
Director

Robert F. Shuck Executive V.P., Director None

Thomas S. Franke President, Chief Operating None
Officer, Director

Lynn Pippenger Secretary/Treasurer, Chief None
Financial Officer, Director

C-8
<PAGE>

Dennis Zank Executive V.P. of Operations None
and Administration, Director

</TABLE>

Item 30. LOCATION OF ACCOUNTS AND RECORDS

The books and other documents required by Rule 31a-1 under the
Investment Company Act of 1940 are maintained in the physical possession
of the Trust's custodian through February 28, 1994, except that: Heritage
will maintain some or all of the records required by Rule 31a-(b)(l), (2)
and (8); and the Subadviser will maintain some or all of the records
required by Rule 31a-1(b)(2), (5), (6), (9), (10) and (11). After
March 1, 1994, the required records will be maintained by Heritage and the
Subadviser.

Item 31. MANAGEMENT SERVICES

Not applicable.

Item 32. UNDERTAKINGS

The Trust hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

C-9
<PAGE>

INDEX TO EXHIBITS

Exhibit
Number Description Page
_______ _____________ _____

1 Declaration of Trust (filed herewith)

2 (a) Bylaws (filed herewith)

2 (b) Amended and Restated Bylaws (filed
herewith)

3 Voting trust agreement -- none

4 (a) (i) Specimen security High Yield Bond
Fund class A**

(a) (ii) Specimen security High Yield Bond
Fund Class**

(b) (i) Specimen security Intermediate
Government Class A**

(b) (ii) Specimen security Intermediate
Government Class C**

5 (a) Investment Advisory and
Administration Agreement (filed
herewith)

(b) Subadvisory Agreement between
Heritage Asset Management, Inc. and
Eagle Asset Management, Inc. (filed
herewith)

(c) Subadvisory Agreement between
Heritage Asset Management, Inc. and
Salomon Brothers Asset Management Inc
(filed herewith)

6 Distribution Agreement (filed
herewith)

7 Bonus, profit sharing or pension
plans -- none
<PAGE>

8 Custodian Agreement (filed herewith)

9 (a) Transfer Agency and Service Agreement
(filed herewith)

9 (b) Fund Accounting and Pricing Service
Agreement (filed herewith)

10 Opinion and consent of counsel*

11 Accountants' consent (filed herewith)

12 Financial statements omitted from
prospectus -- none

13 Letter of investment intent (filed
herewith)

14 Prototype retirement plan**

15 (a) Class A Plan pursuant to Rule 12b-1
(filed herewith)

(b) Class C Plan pursuant to Rule 12b-1
(filed herewith)

16 (a) Performance Computation Schedule
Relating to High Yield Bond fund
(formerly Diversified Portfolio)
(filed herewith)

(b) Performance Computation Schedule
Relating to Intermediate Government
Fund (formerly Limited Maturity
Government Portfolio) (filed
herewith)

17 Financial Data Schedule:

(a) Financial Data Schedule Relating to
High Yield Bond Fund (formerly
Diversified Portfolio) Class A.

(b) Financial Data Schedule relating to
High Yield Bond Fund (formerly
Diversified Portfolio) Class C

- 2 -
<PAGE>

(c) Financial Data Schedule Relating to
Intermediate Government Fund
(formerly Limited Maturity Government
Portfolio) Class A

(d) Financial Data Schedule Relating to
Intermediate Government Fund
(formerly Limited Maturity Government
Portfolio) Class C

18 Plan pursuant to Rule 18f-3 -- none

</TABLE>

* Incorporated by reference to the Trust's Rule 24f-2 Notice, filed
previously on November 29, 1995.

** To be filed by subsequent amendment.

- 3 -
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Post-Effective Amendment No. 11 to its
Registration Statement (No. 33-30361) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg and
the State of Florida, on the 1st day of December, 1995.

HERITAGE INCOME TRUST

By: /s/ Stephen G. Hill

_________________________
Stephen G. Hill
President
Attest:

/s/ Donald H. Glassman
________________________
Donald H. Glassman
Treasurer

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 11 to the Registration
Statement has been signed below by the following persons in the capacity
and on the dates indicated.

Signature Title Date

/s/ Stephen G. Hill President December 1, 1995
__________________________
Stephen G. Hill

Thomas A. James* Trustee December 1, 1995
__________________________
Thomas A. James

Richard K. Riess* Trustee December 1, 1995
_________________________
Richard K. Riess

C. Andrew Graham* Trustee December 1, 1995
_________________________
C. Andrew Graham
<PAGE>

David M. Phillips* Trustee December 1, 1995
_________________________
David M. Phillips

James L. Pappas* Trustee December 1, 1995
_________________________
James L. Pappas

Donald W. Burton* Trustee December 1, 1995
_________________________
Donald W. Burton

Eric Stattin* Trustee December 1, 1995
_________________________
Eric Stattin

/s/ Donald H. Glassman Treasurer December 1, 1995
_________________________
Donald H. Glassman

*By /s/ Donald H. Glassman
_________________________
Donald H. Glassman,
Attorney-in-Fact

</TABLE>
<PAGE>

<PAGE>

HERITAGE INCOME TRUST

DECLARATION OF TRUST

TABLE OF CONTENTS

Page

ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Name and Definitions . . . . . . . . . . . . . . . . . . . . . . 1
Section 1: Name . . . . . . . . . . . . . . . . . . . . 1
Section 2: Definitions . . . . . . . . . . . . . . . . . 1

ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purpose of the Trust . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . 2
Section 1: Shares of Beneficial Interest . . . . . . . . 2
Section 2: Ownership of Shares . . . . . . . . . . . . . 3
Section 3: Investment in the Trust . . . . . . . . . . . 3
Section 4: Assets and Liabilities of the Trust . . . . . 3
Section 5: No Preemptive Rights . . . . . . . . . . . . 4
Section 6: Limitation on Personal Liability . . . . . . 4

ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1: Management of the Trust . . . . . . . . . . . 4
Section 2: Election: Initial Trustees . . . . . . . . . 4
Section 3: Term of Office of Trustees . . . . . . . . . 5
Section 4: Resignation and Appointment of Trustees . . . 5
Section 5: Temporary Absence of Trustee . . . . . . . . 6
Section 6: Number of Trustees . . . . . . . . . . . . . 6
Section 7: Effect of Death, Resignation, Etc.
of a Trustee . . . . . . . . . . . . . . . . 6
Section 8: Ownership of Trust Assets . . . . . . . . . . 6

ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Powers of the Trustee . . . . . . . . . . . . . . . . . . . . . 6
Section 1: Powers . . . . . . . . . . . . . . . . . . . 6
Section 2: Trustees and Officers as Shareholders . . . . 9
Section 3: Action by the Trustees . . . . . . . . . . . 9
Section 4: Chairman of the Trustees . . . . . . . . . . 10

ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Expenses of the Trust . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Adviser, Principal Underwriter and Transfer Agent . . 11
Section 1: Investment Adviser . . . . . . . . . . . . . 11
Section 2: Principal Underwriter . . . . . . . . . . . . 11
Section 3: Transfer Agent . . . . . . . . . . . . . . . 12
Section 4: Parties to Contract . . . . . . . . . . . . . 12
<PAGE>

Section 5: Provisions and Amendments . . . . . . . . . . 12

ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Shareholders' Voting Powers and Meetings . . . . . . . . . . . . 13
Section 1: Voting Powers . . . . . . . . . . . . . . . . 13
Section 2: Meetings . . . . . . . . . . . . . . . . . . 13
Section 3: Quorum and Required Vote . . . . . . . . . . 14

ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1: Appointment and Duties . . . . . . . . . . . 14
Section 2: Employment of Sub-Custodian . . . . . . . . . 15
Section 3: Central Certificate System . . . . . . . . . 15

ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Distributions and Redemptions . . . . . . . . . . . . . . . . . 15
Section 1: Distributions . . . . . . . . . . . . . . . . 15
Section 2: Redemptions . . . . . . . . . . . . . . . . . 16
Section 3: Determination of Net Asset Value
and Valuation of Portfolio Assets . . . . . . 17
Section 4: Suspension of the Right of Redemption . . . . 17

ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Limitation of Liability and Indemnification . . . . . . . . . . 17
Section 1: Limitation of Liability . . . . . . . . . . . 17
Section 2: Indemnification . . . . . . . . . . . . . . . 18
Section 3: Shareholders . . . . . . . . . . . . . . . . 19

ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 1: Trust Not a Partnership . . . . . . . . . . . 20
Section 2: Trustee's Good Faith Action, Expert
Advice, No Bond or Surety . . . . . . . . . . 20
Section 3: Establishment of Record Dates . . . . . . . . 20
Section 4: Termination of Trust . . . . . . . . . . . . 21
Section 5: Filing of Copies, References, Headings . . . 22
Section 6: Applicable Law . . . . . . . . . . . . . . . 23
Section 7: Amendments . . . . . . . . . . . . . . . . . 23
Section 8: Fiscal Year . . . . . . . . . . . . . . . . . 23
Section 9: Use of the Word "Heritage" . . . . . . . . . 23
Section 10: Notice to Other Parties . . . . . . . . . . . 24

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HERITAGE INCOME TRUST

DECLARATION OF TRUST

DECLARATION OF TRUST, made this 4th day of August, 1989 by Thomas
A. James and Richard K. Riess, the Trustees hereunder, and by the holders
of Shares of beneficial interest to be issued hereunder as hereinafter
provided.

WHEREAS, this Trust has been formed to carry on the business of an
investment company; and

WHEREAS, the Trustees have agreed to manage all property coming
into their hands as trustees of a Massachusetts voluntary association with
transferable Shares in accordance with the provisions here set forth.

NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the pro rata
benefit of the holders from time to time of Shares in this Trust as
hereinafter set forth.

ARTICLE I
NAME AND DEFINITIONS

Name

Section 1. This Trust shall be known as "Heritage Income Trust"
and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.

Definitions

Section 2. Wherever used herein, unless otherwise required by the
context or specifically provided:

(a) The terms "Affiliated Person," "Assignment,"
"Commission," "Interested Person," "Majority Shareholder Vote" (the
67% or 50% requirement of the third sentence of Section 2(42) of
the 1940 Act, whichever may be applicable) and "Principal
Underwriter" shall have the meanings given them in the 1940 Act, as
amended from time to time;

(b) The "Trust" refers to Heritage Income Trust;

(d) "Shareholder" means a record owner of Shares of the
Trust;
<PAGE>

(e) The "Trustees" refers to the individual trustees in
their capacity as trustees hereunder of the Trust and their
successor or successors for the time being in office as such
trustee or trustees;

(f) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest of the Trust
shall be divided from time to time, and includes fractions of
shares as well as whole shares consistent with the requirements of
federal and/or other securities laws;

(g) The "1940 Act" refers to the Investment Company Act of
1940, as amended from time to time;

(h) "Declaration of Trust" shall mean this Declaration of
Trust as amended or restated from time to time;

(i) "Bylaws" shall mean the Bylaws of the Trust as amended
or restated from time to time; and

(j) "Portfolios" refers to Portfolios of the Trust
established in accordance with the provisions of Article III.

ARTICLE II
PURPOSE OF TRUST

The purpose of this Trust is to provide investors, through one or
more investment Portfolios as designated by the Trustees, with a
continuous source of managed investments in securities.

ARTICLE III
BENEFICIAL INTEREST

Shares of Beneficial Interest

Section 1. The Shares of the Trust shall be issued in one or more
separate and distinct Portfolios or classes as the Trustees may, without
shareholder approval, authorize. Each Portfolio shall be preferred over
all other Portfolios in respect of the assets allocated to that Portfolio.
The beneficial interest in each Portfolio shall at all times be divided
into Shares, with or without par value as the Trustees may specify, each
of which shall represent an equal proportionate interest in the Portfolio
with each other Share of the same Portfolio, none having priority or
preference over another. Each Portfolio shall be represented by one or
more classes of Shares, with each class possessing such rights (including,
notwithstanding any contrary provision herein, voting rights) as the
Trustees, without shareholder approval, authorize. The number of Shares
authorized shall be unlimited, and the Shares so authorized may be
represented in part by fractional Shares. The Trustees may from time to
time and without Shareholder approval divide or combine the Shares of any

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<PAGE>

Portfolio or class into a greater or lesser number without thereby
changing the proportionate beneficial interests in the Portfolio.

Ownership of Shares

Section 2. The ownership of Shares shall be recorded in the books
of the Trust. The Trustees may make such rules as they consider
appropriate for the transfer of Shares and similar matters. The record
books of the Trust shall be conclusive as to who are the holders of Shares
and as to the number of Shares held from time to time by each Shareholder.

Investment in the Trust

Section 3. The Trustees shall accept investments in the Trust from
such persons and on such terms as they may from time to time authorize. As
determined by guidelines established by the Trustees, such investments may
be in the form of cash or securities in which the Trust (or each
designated Portfolio) is authorized to invest, valued as provided in
Article X, Section 3. Investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value
per Share next determined after the investment is received; provided,
however, that the Trustees may, in their sole discretion: (a) impose a
sales charge upon investments in the Trust and (b) issue fractional
Shares. The Trustees shall have the right to refuse to accept investments
in the Trust at any time without any cause or reason whatsoever.

Assets and Liabilities of the Trust

Section 4. All consideration received by the Trust for the issue
or sale of Shares of a particular Portfolio, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be referred to as assets belonging to that Portfolio and
shall be held by the Trustees in Trust for the benefit of the Shareholders
of that Portfolio. The assets belonging to each particular Portfolio shall
be charged with the liabilities of that Portfolio and all expenses, costs,
charges and reserves attributable to that Portfolio. In addition, any
assets, income, earnings, profits, and proceeds thereof, funds, or
payments or any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to or
chargeable to any particular Portfolio shall be allocated by the Trustees
between and among one or more of the Portfolio in such manner as they, in
their sole discretion, deem fair and equitable. Each such allocation shall
be conclusive and binding upon the Shareholders of all Portfolios for all
purposes, and shall be referred to as assets belonging to that Portfolio.
Any creditor of any Portfolio may look only to the assets of that
Portfolio to satisfy such creditor's debt.

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<PAGE>

No Preemptive Rights

Section 5. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees.

Limitation on Personal Liability

Section 6. The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription
for any Shares or otherwise. Every note, bond, contract or other
undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust shall include a recitation limiting the obligation
represented thereby to the Trust and its assets (but the omission of such
a recitation shall not operate to bind any Shareholder).

ARTICLE IV
THE TRUSTEES

Management of the Trust

Section 1. The business and affairs of the Trust shall be managed
by the Trustees, and they shall have all powers necessary and desirable to
carry out that responsibility.

Election: Initial Trustees

Section 2. On a date fixed by the initial Trustees, the
Shareholders shall elect not less than three Trustees. A Trustee shall not
be required to be a Shareholder of the Trust. The initial Trustees shall
be Thomas A. James and Richard K. Riess and such other individuals as the
Board of Trustees shall appoint pursuant to Section 4 of this Article IV.

Term of Office of Trustees

Section 3. The Trustees shall hold office during the lifetime of
this Trust, and until its termination as hereinafter provided, except: (a)
that any Trustee may resign his trust by written instrument signed by him
and delivered to the Trust's President or the other Trustees, which
resignation shall take effect upon such delivery or upon such later date
as is specified therein; (b) that any Trustee may be removed at any time
by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal
shall become effective; and (c) a Trustee may be removed at any Special
Meeting of Shareholders of the Trust by a vote of two-thirds of the
outstanding Shares.

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<PAGE>

Resignation and Appointment of Trustees

Section 4. In case any vacancy of a Trustee position shall exist
for any reason, including, but not limited to, declination to assume
office, death, resignation, removal, or by reason of an increase in the
number of Trustees authorized, the remaining Trustees shall fill such
vacancy by appointing such other person as they in their discretion shall
see fit, consistent with the limitations under the 1940 Act. Such
appointment shall be evidenced by a written instrument signed by a
majority of the Trustees in office or by recording in the records of the
Trust, whereupon the appointment shall take effect. An appointment of a
Trustee may be made by the Trustees then in office in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in
number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of
said retirement, resignation or increase in number of Trustees. As soon as
any Trustee so appointed shall have accepted this trust, the trust estate
shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he or she shall be
deemed a Trustee hereunder. The power of appointment of Trustees is
subject to the provisions of Section 16(a) of the 1940 Act.

Temporary Absence of Trustee

Section 5. Any Trustee may, by power of attorney, delegate his or
her power for a period not exceeding six months at any one time to any
other Trustee or Trustees, provided that in no case shall less than two
Trustees personally exercise the other powers hereunder, except as herein
otherwise expressly provided.

Number of Trustees

Section 6. Following the appointment of additional Trustees by the
initial Trustees pursuant to Section 2 of Article IV, the number of
Trustees serving hereunder at any time shall be determined by the Trustees
themselves and shall not be less than three (3) nor more than twelve (12).
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from
his state of domicile, or is physically or mentally incapacitated by
reason of disease or otherwise, the other Trustees shall have all the
powers hereunder and the certificate of the other Trustees of such
vacancy, absence or incapacity, shall be conclusive.

Effect of Death, Resignation, Etc. of a Trustee

Section 7. The death, declination, resignation, retirement,
removal, incapacity, or inability of the Trustees, or any one of them,
shall not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.

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<PAGE>

Ownership of Trust Assets

Section 8. The assets of the Trust shall be held separate and
apart from any assets now or hereafter held in any capacity other than as
Trustee hereunder by the Trustees or any successor Trustees. All of the
assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in
any individual asset of the Trust or any right of partition or possession
thereof, but each Shareholder shall have a proportionate undivided
beneficial interest in the Trust.

ARTICLE V
POWERS OF THE TRUSTEES

Powers

Section 1. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to
make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall not in any way be bound or limited by present or
future laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Without limiting the foregoing, but subject to any applicable
limitation in the Declaration of Trust or the Bylaws of the Trust, the
Trustees shall have power and authority:

(a) To invest and reinvest cash and other property, and to
hold cash or other property uninvested, without in any event being
bound or limited by any present or future law or custom in regard
to investments by Trustees, and to sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the
assets of the Trust;

(b) To adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business of the Trust and
to amend and repeal them to the extent that the rights of amendment
and repeal are not reserved to Shareholders;

(d) To employ a bank or trust company as Custodian of any
assets of the Trust subject to any conditions set forth in this
Declaration of Trust or in the Bylaws, if any;

(e) To retain a transfer agent and Shareholder servicing
agent, or both;

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<PAGE>

(f) To provide for the distribution of interests of the
Trust either through a principal underwriter in the manner
hereinafter provided for or by the Trust itself, or both;

(g) To set record dates in the manner hereinafter provided;

(h) To delegate such authority as they consider desirable
to any officers of the Trust and to any agent, Custodian or
underwriter;

(i) To sell or exchange any or all of the assets of the
Trust, subject to the provisions of Article XII, Section 4(b)
hereof;

(j) To vote or give assent, or exercise any rights of
ownership with respect to stock or other securities or property;
and to execute and deliver powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person
or persons such power and discretion with relation to securities or
property as the Trustees shall deem proper;

(k) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;

(l) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form; or in its own name or in the name of a Custodian
or a nominee or nominees, subject in whichever case to proper
safeguards according to the usual practice of Massachusetts trust
companies or investment companies;

(m) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
concern, any security of which is held in the Trust; to consent to
any contract, lease, mortgage, purchase, or sale of property by
such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;

(n) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes;

(o) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided;

(p) To borrow money from a bank for temporary or emergency
purposes and not for investment purposes. The Trustees shall not
pledge, mortgage or hypothecate the assets of the Trust except
that, to secure borrowing, the Trustees may pledge securities;

(q) To establish, from time to time, a minimum total
investment for Shareholders, and to require redemption of the

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<PAGE>

Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;

(r) To retain an administrator, investment adviser and/or
investment subadviser;

(s) To establish separate and distinct Portfolios of shares
with separately defined investment objectives, policies and
purposes, and to allocate assets, liabilities and expenses of the
Trust to a particular Portfolio of Shares or to apportion the same
among two or more Portfolios, provided that any liability or
expense incurred by a particular Portfolio of Shares shall be
payable solely out of the assets of that Portfolio; and

(t) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the trust and payment of
distributions and principal on its portfolio investments, and
insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust individually
against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or
omitted by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal
underwriter, or independent contractor, including any action taken
or omitted that may be determined to constitute negligence, whether
or not the Trust would have the power to indemnify such person
against such liability.

No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to
the application of any payments made or property transferred to the
Trustees or upon their order.

Trustees and Officers as Shareholders

Section 2. Subject only to the general limitations herein
contained as to the sale and purchase of Trust Shares and any restrictions
that may be contained in the Bylaws:

(a) Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of Shares to the same extent as if he were
not a Trustee, officer or agent; and

(b) The Trustees may issue and sell or cause to be issued
and sold Shares to (and buy such Shares from) any such person or
firm or company in which such person is interested.

Action by the Trustees

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<PAGE>

Section 3. The Trustees shall act by majority vote at a meeting
duly called or by unanimous written consent without a meeting or by
telephone consent provided a quorum of Trustees participate in any such
telephonic meeting, unless the 1940 Act requires that a particular action
be taken only at a meeting of the Trustees. At any meeting of the
Trustees, a majority of the Trustees shall constitute a quorum. Meetings
of the Trustees may be called orally or in writing by the Chairman of the
Trustees or by any two other Trustees. Notice of the time, date and place
of all meetings of the Trustees shall be given to each Trustee as provided
in the Bylaws.

Notice need not be given to any Trustee who attends the meeting
without objecting to the lack of notice or who executes a written waiver
of notice with respect to the meeting. Subject to the requirements of the
1940 Act, the Trustees by majority vote may delegate to any one of their
number the authority to approve particular matters or take particular
actions on behalf of the Trust.

Chairman of the Trustees

Section 4. The Trustees may appoint one of their number to be
Chairman of the Board of Trustees and to perform such duties as the
Trustees may designate.

ARTICLE VI
EXPENSES OF THE TRUST

Subject to the provisions of Article III, Section 4, the Trustees
are authorized to have paid from the Trust estate or the assets belonging
to the appropriate Portfolio, as they deem fair and appropriate, expenses
and disbursements of the Trust, including, without limitation, fees and
expenses of Trustees who are not Interested Persons of the Trust, interest
expenses, taxes, fees and commissions of every kind, expenses of pricing
Trust portfolio securities, expenses of issue, repurchase and redemption
of Shares including expenses attributable to a program of periodic
repurchases or redemptions, expenses of registering and qualifying the
Trust and its Shares under federal and state laws and regulations, charges
of Custodians, transfer agents, and registrars, expenses of preparing and
setting up in type Prospectuses and Statements of Additional Information,
expenses of printing and distributing prospectuses sent to existing
Shareholders, auditing and legal expenses, reports to Shareholders,
expenses of meetings of Shareholders and proxy solicitations therefor,
insurance expenses, association membership dues and for such non-recurring
items as may arise, including litigation to which the Trust is a party,
and for all losses and liabilities by them incurred in administering the
Trust, and for the payment of such expenses, disbursements, losses and
liabilities the Trustees shall have a lien on the assets belonging to the
Trust prior to any rights or interests of the Shareholders thereto. This
section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.

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ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT

Investment Adviser

Section 1. Subject to a Majority Shareholder Vote when required by
the 1940 Act, the Trustees may in their discretion from time to time enter
into an investment advisory or management agreement(s) with respect to the
Trust or any Portfolio thereof whereby the other party(ies) to such
agreement(s) shall undertake to furnish the Trustees such management,
investment advisory, statistical and research facilities and services and
such other facilities and services, if any, and all upon such terms and
conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the Trustees
may authorize the investment adviser(s) (subject to such general or
specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities and other
investment instruments of the Trust on behalf of the Trustees or may
authorize any officer, agent, or Trustee to effect such purchases, sales
or exchanges pursuant to recommendations of the investment adviser (and
all without further action by the Trustees). Any such purchases, sales and
exchanges shall be deemed to have been authorized by all of the Trustees.

The Trustees may, subject to applicable requirements of the 1940
Act, including those relating to Shareholder approval, authorize the
investment adviser to employ one or more subadvisers from time to time to
perform such of the acts and services of the investment adviser, and upon
such terms and conditions, as may be agreed upon between the investment
adviser and subadviser.

Principal Underwriter

Section 2. The Trustees may in their discretion from time to time
enter into an agreement(s) providing for the sale of the Shares, whereby
the Trust may either agree to sell the Shares to the other party to the
agreement or appoint such other party its sales agent for such Shares. In
either case, the agreement shall be on such terms and conditions as may be
prescribed in the Bylaws, if any, and such further terms and conditions as
the Trustees may in their discretion determine to be not inconsistent with
the provisions of this Article VII, or of the Bylaws, if any; and such
agreement may also provide for the repurchase or sale of Shares by such
other party as principal or as agent of the Trust. The Trustees may in
their discretion adopt a plan or plans of distribution and enter into any
related agreements whereby the Trust finances directly or indirectly any
activity which is primarily intended to result in sales of Shares. Such
plan or plans of distribution and any related agreements may contain such
terms and conditions as the Trustees may in their discretion determine
subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder and any other applicable rules and regulations.

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<PAGE>

Transfer Agent

Section 3. The Trustees may in their discretion from time to time
enter into a transfer agency and Shareholder service agreement whereby the
other party shall undertake to furnish the Trustees with transfer agency
and Shareholder services. The agreement shall be on such terms and
conditions as the Trustees may in their discretion determine are not
inconsistent with the provisions of this Declaration of Trust or of the
Bylaws, if any. Such services may be provided by one or more entities,
including one or more agents of such other party.

Parties to Contract

Section 4. Any agreement of the character described in Sections 1,
2 and 3 of this Article VII or in Article IX hereof may be entered into
with any corporation, firm, partnership, trust or association, although
one or more of the Trustees or officers of the Trust may be an officer,
director, trustee, shareholder, or member of such other party to the
agreement, and no such agreement shall be invalidated or rendered voidable
by reason of the existence of any relationship, nor shall any person
holding such relationship be liable merely by reason of such relationship
for any loss or expense to the Trust under or by reason of said agreement
or accountable for any profit realized directly or indirectly therefrom,
provided that the agreement when entered into was reasonable and fair and
not inconsistent with the provisions of this Article VII or the Bylaws, if
any. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to agreements entered into pursuant
to Sections 1, 2 and 3 of this Article VII or Article IX, and any
individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the agreements mentioned in this
Section 4.

Provisions and Amendments

Section 5. To the extent applicable, any contract entered into
pursuant to Sections 1 and 2 of this Article VII shall be consistent with
and subject to the requirements of Sections 12 and 15 of the 1940 Act
(including any amendments thereof or other applicable Act of Congress
hereafter enacted) with respect to its continuance in effect, its
termination, and the method of authorization and approval of such
agreement or renewal or amendment thereof.

ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS

Voting Powers

Section 1. The Shareholders shall have power to vote: (i) for the
election of Trustees as provided in Article IV, Section 2, (ii) for the
removal of Trustees as provided in Article IV, Section 3(c), (iii) with
respect to any investment advisory or management contract as provided in

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<PAGE>

Article VII, Section 1, (iv) with respect to the amendment of this
Declaration of Trust as provided in Article XII, Section 7, (v) to the
same extent as the shareholders of a Massachusetts business corporation,
as to whether or not a court action, proceeding or claim should be brought
or maintained derivatively or as a class action on behalf of the Trust or
the Shareholders, provided, however, that a Shareholder of a particular
Portfolio shall not be entitled to bring any derivative or class action on
behalf of any other Portfolio of the Trust, and (vi) with respect to such
additional matters relating to the Trust as may be required or authorized
by law, by this Declaration of Trust, or the Bylaws of the Trust, if any,
or any registration of the Trust with the Commission or any state, as the
Trustees may consider desirable. On any matter submitted to a vote of the
Shareholders, all Shares shall be voted in the aggregate and not by
individual Portfolios; except that, (i) when required by the 1940 Act or
(ii) when the Trustees have determined that the matter affects only the
interests of one or more Portfolios, then only the Shareholders of such
Portfolio(s) shall be entitled to vote thereon. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and
each fractional Share shall be entitled to a proportionate fractional
vote. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Declaration of Trust or any Bylaws of
the Trust to be taken by Shareholders.

Meetings

Section 2. The first Shareholders' meeting shall be held at the
principal office of the Trust or such other place as the Trustees may
designate. Special meetings of the Shareholders may be called by the
Trustees. Special meetings also shall be called by the Trustees for the
purpose of removing one or more Trustees upon the written request for such
a meeting by Shareholders owning at least 10 percent of the outstanding
Shares entitled to vote. Whenever ten or more Shareholders meeting the
qualifications set forth in Section 16(c) of the 1940 Act, as the same may
be amended from time to time, seek the opportunity of furnishing materials
to the other Shareholders with a view to obtaining signatures on such a
request for a meeting, the Trustees shall comply with the provisions of
said Section 16(c) with respect to providing such Shareholders access to
the list of the Shareholders of record of the Trust or the mailing of such
materials to such Shareholders of record. Shareholders shall be entitled
to at least 15 days' notice of any meeting.

Quorum and Required Vote

Section 3. A majority of Shares entitled to vote in person or by
proxy shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Declaration of
Trust permits or requires that holders of any Portfolio shall vote, as a
Portfolio, then a majority of the aggregate number of Shares of that
Portfolio entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that Portfolio. Any lesser number shall be

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<PAGE>

sufficient for adjournments. Any adjourned session or sessions may be
held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except when a larger
vote is required by any provision of this Declaration of Trust, the
By-Laws or law, a majority of the Shares voted in person or by proxy shall
decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Declaration of Trust permits or
requires that the holders of any Portfolio shall vote as a Portfolio, then
a majority of the Shares of that Portfolio voted on the matter shall
decide that matter insofar as that Portfolio is concerned.

ARTICLE IX
CUSTODIAN

Appointment and Duties

Section 1. The Trustees shall at all times employ a bank or trust
company organized under the laws of the United States or one of the states
thereof and, having capital, surplus and undivided profits of at least two
million dollars ($2,000,000) as Custodian on such basis of compensation as
may be agreed upon between the Trustees and the Custodian. The Custodian
shall have authority as agent for the Trust, but subject to such
restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust:

(a) to hold the securities owned by the Trust and deliver
the same upon written order;

(b) to receive and receipt for any moneys due to the Trust
and deposit the same in its own banking department or elsewhere as
the Trustees may direct;

(d) to keep the books and accounts of the Trust and furnish
clerical and accounting services;

(e) to compute, if authorized to do so by the Trustees, the
Trust's Net Asset Value of any Portfolio in accordance with the
provisions hereof; and

(f) to take such other actions as approved by the Board of
Trustees.

Employment of Sub-Custodian

Section 2. The Trustees may also authorize the Custodian to employ
one or more sub-Custodians from time to time to perform such of the acts
and services of the Custodian, and upon such terms and conditions, as may
be agreed upon between the Custodian and such sub-Custodian and approved
by the Trustees, provided that in every case such sub-Custodian shall be a

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<PAGE>

bank or trust company organized under the laws of the United States or one
of the states thereof and having capital, surplus and undivided profits of
at least two million dollars ($2,000,000) or such other person as may be
permitted by the Commission, or otherwise in accordance with the 1940 Act
as from time to time amended

Central Certificate System

Section 3. Subject to such rules, regulations and orders as the
Commission may adopt, the Trustees may direct the Custodian to deposit all
or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities
exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such
other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act as from time to time amended, pursuant to
which system all securities of any particular class of any issuer
deposited within the system are treated as fungible and may be transferred
or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal
only upon the order of the Trust.

ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS

Distributions

Section 1.

(a) The Trustees may from time to time declare and pay
dividends. The amount of such dividends and the payment of them
shall be wholly in the discretion of the Trustees.

(b) The Trustees shall have power, to the fullest extent
permitted by the laws of Massachusetts, at any time to declare and
cause to be paid dividends on Shares of a particular Portfolio,
from the assets belonging to that Portfolio, which dividends, at
the election of the Trustees, may be paid daily or otherwise
pursuant to a standing resolution or resolutions adopted only once
or with such frequency as the Trustees may determine, and may be
payable in Shares of that Portfolio at the election of each
Shareholder of that Portfolio.

(c) Anything in this Declaration of Trust to the contrary
notwithstanding, the Trustees may at any time declare and
distribute pro rata among the Shareholders of a particular
Portfolio a "stock dividend."

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<PAGE>

Redemptions

Section 2. In case any Shareholder of record of Shares of a
particular Portfolio desires to dispose of his Shares, he may deposit at
the office of the transfer agent or other authorized agent of the Trust a
written request or such other form of request as the Trustees may from
time to time authorize, requesting that the Trust purchase the Shares in
accordance with this Section 2; and the Shareholder so requesting shall be
entitled to require the Trust to purchase, and the Trust or the principal
underwriter of the Trust shall purchase, said Shares, but only at the Net
Asset Value thereof (as described in Section 3 hereof). The Portfolio
shall make payment for any such Shares to be redeemed, as aforesaid, in
cash to the extent required by federal law, and securities from such
Portfolio's assets, and payment for such Shares shall be made by the
Portfolio or the principal underwriter to the Shareholder of record within
seven (7) days after the date upon which the request is effective;
provided, however, that if Shares being redeemed have been purchased by
check, the Portfolio may postpone payment until the Trust has assurance
that good payment has been collected for the purchase of the Shares. The
Trust may require Shareholders to pay a sales charge to the Trust, the
underwriter or any other person designated by the Trustees upon redemption
or repurchase of Shares of any Portfolio in such amount as shall be
determined from time to time by the Trustees. The amount of such sales
charge may but need not vary depending on various factors, including
without limitation the holding period of the redeemed or repurchase
Shares. The Trustees may also charge a redemption or repurchase fee in
such amount as may be determined from time to time by the Trustees.

Determination of Net Asset Value and Valuation of Portfolio Assets

Section 3. The term "Net Asset Value" shall mean that amount by
which the assets of that Portfolio thereof exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined on such days and at such times as the Trustees may determine.
Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees, provided, however, that
the Trustees, without Shareholder approval, may alter the method of
appraising portfolio securities insofar as permitted under the 1940 Act
and the rules, regulations and interpretations thereof promulgated or
issued by the Commission or insofar as permitted by any Order of the
Commission. The Trustees may delegate any powers and duties under this
Section 3 with respect to appraisal of assets and liabilities. At any time
the Trustees may cause the value per Share last determined to be
determined again in similar manner and may fix the time when such
redetermined value shall become effective.

Suspension of the Right of Redemption

Section 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment to the extent as permitted

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<PAGE>

under the 1940 Act. Such suspension shall take effect at such time as the
Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment until the Trustees shall
declare the suspension at an end. In the case of a suspension of the right
of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the Net Asset Value per Share
existing after the termination of the suspension.

ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION

Limitation of Liability

Section 1. Provided they have exercised reasonable care and have
acted under the reasonable belief that their actions are in the best
interest of the Trust, the Trustees shall not be responsible for or liable
in any event for neglect or wrongdoing of them or any officer, agent,
employee or investment adviser of the Trust, but nothing contained herein
shall protect any Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office

Indemnification

Section 2.

(a) Subject to the exceptions and limitations contained in
paragraph (b) below:

(i) every person who is, or has been, a Trustee or
officer of the Trust (hereinafter referred to as "Covered
Person") shall be indemnified by the appropriate Portfolio to
the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue
of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;

(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid
in settlement, fines, penalties and other liabilities.

(b) No indemnification shall be provided hereunder to a
Covered Person:

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<PAGE>

(i) who shall have been adjudicated by a court or
body before which the proceeding was brought (A) to be liable
to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
or

(ii) in the event of a settlement, unless there has
been a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office, (A) by the court or other body approving the
settlement; (B) by at least a majority of those Trustees who
are neither interested persons of the Trust nor are parties
to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any Shareholder may, by
appropriate legal proceedings, challenge any such
determination by the Trustees, or by independent counsel.

(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not be exclusive of or affect any other rights to
which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall
affect any rights to indemnification to which Trust personnel,
other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law.

(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding
of the character described in paragraph (a) of this Section 2 may
be paid by the applicable Portfolio from time to time prior to
final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by
him to the Trust if it is ultimately determined that he is not
entitled to indemnification under this Section 2; provided,
however, that:

(i) such Covered Person shall have provided
appropriate security for such undertaking;

(ii) the Trust is insured against losses arising out
of any such advance payments; or

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<PAGE>

(iii) either a majority of the Trustees who are
neither interested persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion,
shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such
Covered Person will be found entitled to indemnification
under this Section 2.

Shareholders

Section 3. In case any Shareholder or former Shareholder of any
Portfolio of the Trust shall be held to be personally liable solely by
reason of his being or having been a Shareholder and not because of his
acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Portfolio to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Trust shall, upon request by the Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust
and satisfy any judgment thereon.

ARTICLE XII
MISCELLANEOUS

Trust Not A Partnership

Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power
to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against
the Trust, a particular Portfolio or the Trustees shall look only to the
assets of the applicable Portfolio for payment under such credit, contract
or claim; and neither the Shareholders nor the Trustees, nor any of their
agents, whether past, present or future, nor any other Portfolio shall be
personally liable therefor. Nothing in this Declaration of Trust shall
protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.

Trustee's Good Faith Action, Expert Advice, No Bond or Surety

Section 2. The exercise by the Trustees of their powers and
discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing, shall be binding upon everyone interested.
Subject to the provisions of Section 1 of this Article XII and to Article
XI, the Trustees shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with

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<PAGE>

respect to the meaning and operation of this Declaration of Trust, and
subject to the provisions of Section 1 of this Article XII and to Article
XI, shall be under no liability for any act or omission in accordance with
such advice or for failing to follow such advice. The Trustees shall not
be required to give any bond as such, nor any surety if a bond is
obtained.

Establishment of Record Dates

Section 3. The Trustees may close the stock transfer books of the
Trust for a period not exceeding 60 days preceding the date of any meeting
of Shareholders, or the date for the payment of any dividends, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of Shares shall go into effect; or in lieu of closing the stock
transfer books as aforesaid, the Trustees may fix in advance a date, not
exceeding 90 days preceding the date of any meeting of Shareholders, or
the date for payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares
shall go into effect, as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend, or to any such allotment
of rights, or to exercise the rights in respect of any such change,
conversion or exchange of Shares, and in such case such Shareholders and
only such Shareholders as shall be Shareholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting,
or to receive payment of such dividend, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding
any transfer of any Shares on the books of the Trust after any such record
date fixed as aforesaid.

Termination of Trust

Section 4.

(a) This Trust shall continue without limitation of time
but subject to the provisions of paragraph (b) of this Section 4.

(b) Subject to a Majority Shareholder Vote of each
Portfolio affected by the matter or, if applicable, to a majority
Shareholder Vote of the Trust, the Trustees may:

(i) sell and convey the assets of the Trust or any
affected Portfolio to another trust, partnership, association
or corporation organized under the laws of any state which is
a diversified open-end management investment company as
defined in the 1940 Act, for adequate consideration which may
include the assumption of all outstanding obligations, taxes
and other liabilities, accrued or contingent, of the Trust or
any affected Portfolio and which may include shares of
beneficial interest or stock of such trust, partnership,
association or corporation; or

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<PAGE>

(ii) at any time sell and convert into money all of
the assets of the Trust or any affected Portfolio.

Upon making provision for the payment of all such liabilities
in either (i) or (ii), by such assumption or otherwise, the
Trustees shall distribute the remaining proceeds or assets (as the
case may be) ratably among the Shareholders of the Trust or any
affected Portfolio then outstanding.

The Trustees may take any of the actions specified in clauses
(i) and (ii) above without obtaining a Majority Shareholder Vote of
any Portfolio or the Trust if a majority of the Trustees makes a
determination that the continuation of a Portfolio or the Trust is
not in the best interests of such Portfolio, the Trust or their
respective Shareholders as a result of factors or events adversely
affecting the ability of such Portfolio or the Trust to conduct its
business and operations in an economically viable manner. Such
factors and events may include the inability of a Portfolio or the
Trust to maintain its assets at an appropriate size, changes in
laws or regulations governing the Portfolio or Trust or affecting
assets of the type in which such Portfolio or the Trust invests or
economic developments or trends having a significant adverse impact
on the business or operations of such Portfolio or the Trust.

(c) Upon completion of the distribution of the remaining
assets as provided in paragraph (b), the Trust or any affected
Portfolio shall terminate and the Trustees shall be discharged of
any and all further liabilities and duties hereunder and the right,
title and interest of all parties shall be cancelled and
discharged.

Filing of Copies, References, Headings

Section 5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental declaration of trust shall be filed by
the Trustees with the Secretary of the Commonwealth of Massachusetts, as
well as any other governmental office where such filing may from time to
time be required. Anyone dealing with the Trust may rely on a certificate
by an officer or Trustee of the Trust as to whether or not any such
supplemental declarations of trust have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it
were the original, may rely on a copy certified by an officer or Trustee
of the Trust to be a copy of this instrument or of any such supplemental
declaration of trust. In this instrument or in any such supplemental
declaration of trust, references to this instrument, and the expressions
"herein," "hereof" and "hereunder," shall be deemed to refer to this
instrument as amended or affected by any such supplemental declaration of
trust. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the

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<PAGE>

headings, shall control. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.

Applicable Law

Section 6. The trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.

Amendments

Section 7. If authorized by votes of the Trustees and a Majority
Shareholder Vote, or by any larger vote which may be required by
applicable law or this Declaration of Trust in any particular case, the
Trustees shall amend or otherwise supplement this instrument, by making a
declaration of trust supplemental hereto, which thereafter shall form a
part hereof. Amendments having the purpose of changing the name of the
Trust or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision
contained herein shall not require authorization by Shareholder vote.
Copies of the supplemental declaration of trust shall be filed as
specified in Section 5 of this Article XII.

Fiscal Year

Section 8. The fiscal year of the Trust shall end on a specified
date as set forth in the Bylaws, provided, however, that the Trustees may,
without Shareholder approval, change the fiscal year of the Trust.

Use of the Word "Heritage"

Section 9. Raymond James & Associates, Inc. ("Raymond James") has
consented to the use by the Trust of the identifying word "Heritage."
Such consent is conditioned upon the employment of Heritage Asset
Management, Inc., its successors or its affiliated companies as investment
adviser or manager of the Trust. As between the Trust and itself, Raymond
James controls the use of the name of the Trust insofar as such name
contains the identifying word "Heritage." Raymond James may from time to
time use the identifying word "Heritage" in other connections and for
other purposes, including, without limitation, in the names of other
investment companies, corporations or businesses which it may manage,
advise, sponsor or own, or in which it may have a financial interest.
Raymond James may require the Trust to cease using the identifying word
"Heritage" in the name of the Trust if the Trust ceases to employ Heritage
Asset Management, Inc. or another subsidiary or affiliate of Raymond James
as investment adviser.

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<PAGE>

Notice to Other Parties

Section 10. Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or officer
shall give notice that this Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts and shall recite that the
same was executed or made by or on behalf of the Trust or the applicable
Portfolio or by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, and may contain such
further recital as he and she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.

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<PAGE>

IN WITNESS WHEREOF, the undersigned, being all of the initial
Trustees of the Trust, have executed this instrument.

<TABLE>
<CAPTION>
STATE OF FLORIDA
COUNTY OF PINELLAS

<S> <C>

I, the undersigned authority,
hereby certify that the foregoing
is a true and correct copy of the
instrument presented to me by
Thomas A. James as the original of
such instrument.

/s/ Thomas A. James
-------------------------
Thomas A. James
880 Carillon Parkway
St. Petersburg, FL 33716

WITNESS my hand and official seal,
this ____ day of _________, 1989.

__________________________________

STATE OF FLORIDA
COUNTY OF PINELLAS

I, the undersigned authority,
hereby certify that the foregoing
is a true and correct copy of the
instrument presented to me by
Thomas A. James as the original of
such instrument.

/s/ Richard K. Riess
-------------------------
Richard K. Riess
880 Carillon Parkway
St. Petersburg, FL 33716

WITNESS my hand and official seal,
this _____ day of _________, 1989.

__________________________________

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<PAGE>

Resident Agent:
James E. Howard, Esq.
Kirkpatrick & Lockhart
Exchange Place
53 State Street - 28th Floor
Boston, MA 02109
(617) 227-600025

</TABLE>

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<PAGE>

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<PAGE>

<PAGE>

BYLAWS
of
HERITAGE INCOME TRUST

TABLE OF CONTENTS

Page

ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Officers and Their Election . . . . . . . . . . . . . . . . . 1
Section 1: Officers . . . . . . . . . . . . . . . . . . 1
Section 2: Election of Officers . . . . . . . . . . . . 1
Section 3: Resignations And Removals . . . . . . . . . 1

ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Powers and Duties of Officers and Trustees . . . . . . . . . . 1
Section 1: Management of The Trust-General . . . . . . 1
Section 2: Executive And Other Committees . . . . . . . 2
Section 3: Chairman of The Trustees . . . . . . . . . . 2
Section 4: President . . . . . . . . . . . . . . . . . 2
Section 5: Treasurer . . . . . . . . . . . . . . . . . 2
Section 6: Secretary . . . . . . . . . . . . . . . . . 2
Section 7: Vice President . . . . . . . . . . . . . . . 3
Section 8: Assistant Treasurer . . . . . . . . . . . . 3
Section 9: Assistant Secretary . . . . . . . . . . . . 3
Section 10: Other Officers . . . . . . . . . . . . . . . 3

ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . 3
Section 1: Special Meetings . . . . . . . . . . . . . . 3
Section 2: Notice of Meeting . . . . . . . . . . . . . 4
Section 3: Place of Meeting . . . . . . . . . . . . . . 4
Section 4: Ballots . . . . . . . . . . . . . . . . . . 4
Section 5: Proxies . . . . . . . . . . . . . . . . . . 4

ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trustees' Meetings . . . . . . . . . . . . . . . . . . . . . . 5
Section 1: Regular Meetings . . . . . . . . . . . . . . 5
Section 2: Special Meetings . . . . . . . . . . . . . . 5
Section 3: Quorum . . . . . . . . . . . . . . . . . . . 5
Section 4: Notices of Meeting . . . . . . . . . . . . . 5
Section 5: Special Action . . . . . . . . . . . . . . . 5
Section 6: Action by Consent . . . . . . . . . . . . . 6

ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shares of Beneficial Interest . . . . . . . . . . . . . . . . 6
Section 1: Beneficial Interest . . . . . . . . . . . . 6
Section 2: Transfer of Shares . . . . . . . . . . . . . 6
Section 3: Equitable Interest Not Recognized . . . . . 6
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Inspection of Books . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>

Provisions Relating to the Conduct of the Trust's Business . . 7
Section 1: Dealings with Affiliates . . . . . . . . . . 7
Section 2: Right to Engage in Business . . . . . . . . 8
Section 3: Dealings in Securities of the Trust . . . . 8
Section 4: Limitation on Certain Loans . . . . . . . . 8
Section 5: Custodian . . . . . . . . . . . . . . . . . 8

ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution Arrangements . . . . . . . . . . . . . . . . . . 9

ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Reports to Shareholders . . . . . . . . . . . . . . . . . . . 9

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<PAGE>

BYLAWS
of
HERITAGE INCOME TRUST

These Bylaws of the Heritage High Income Trust (the "Trust"), a
Massachusetts business trust which offers shares of stock (the "Shares")
in distinct portfolios (the "Portfolios"), are subject to the Trust's
Declaration of Trust as from time to time amended (the "Declaration of
Trust").

ARTICLE I
OFFICERS AND THEIR ELECTION

OFFICERS

Section 1. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers as the Trustees may from
time to time may in their discretion appoint or elect. It shall not be
necessary for any Trustee or other officer to be a holder of shares in the
Trust.

Election Of Officers

Section 2. The Treasurer and Secretary shall be chosen annually by
the Trustees. The President shall be chosen annually by and from the
Trustees. Two or more offices may be held by a single person except the
offices of President and Secretary. The officers shall hold office until
their successors are chosen and qualified.

Resignations And Removals

Section 3. Any officer of the Trust may resign by filing a written
resignation with the President, the Trustees or the Secretary, which
resignation shall take effect on being so filed at such time as may be
therein specified. The Trustees may at any meeting remove any officer by a
majority vote of the voting Trustees.

ARTICLE II
POWERS AND DUTIES OF OFFICERS AND TRUSTEES

Management Of The Trust-General

Section 1. The business and affairs of the Trust shall be managed
by the Trustees, and they shall have all powers necessary and desirable to
carry out their responsibilities, so far as such powers are not
inconsistent with the laws of the Commonwealth of Massachusetts, the
Declaration of Trust, or with these Bylaws.

Executive And Other Committees

Section 2. The Trustees may elect from their own number an
executive committee to consist of not less than three nor more than five
members, which shall have the power and duty to conduct the current and
ordinary business of the Trust, including the purchase and sale of
<PAGE>

securities, while the Trustees are not in session, and such other powers
and duties as the Trustees may from time to time delegate to such
committee. The Trustees may also elect from their own number other
committees from time to time. The number composing such committees and the
powers conferred upon the same are to be determined by vote of the
Trustees.

Chairman Of The Trustees

Section 3. The Trustees may, but need not, appoint from among
their number a Chairman. He shall perform such duties as the Trustees may
from time to time designate.

President

Section 4. The President shall be the chief executive officer of
the Trust and, subject to the Trustees, shall have general supervision
over the business and policies of the Trust. When present, he shall
preside at all meetings of the Shareholders and the Trustees, and he may,
subject to the approval of the Trustees, appoint a Trustee to preside at
such meetings in his absence. The President shall perform such duties
additional to all of the foregoing as the Trustees may from time to time
designate.

Treasurer

Section 5. The Treasurer shall be the principal financial and
accounting officer of the Trust. He or she shall deliver all funds and
securities of the Trust which may come into his or her hands to such bank
or trust company as the Trustees shall employ as Custodian in accordance
with Article IX of the Declaration of Trust. He or she shall have the
custody of the seal of the Trust. He or she shall make annual reports
regarding the business and condition of the Trust, which reports shall be
preserved in Trust records, and he or she shall furnish such other reports
regarding the business and condition of the Trust as the Trustees may from
time to time require. The Treasurer shall perform such additional duties
as the Trustees may from time to time designate.

Secretary

Section 6. The Secretary shall record in books kept for the
purpose all votes and proceedings of the Trustees and the Shareholders at
their respective meetings. The Secretary shall perform such additional
duties as the Trustees may from time to time designate.

Vice President

Section 7. Any Vice President of the Trust shall perform such
duties as the Trustees may from time to time designate.

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<PAGE>

Assistant Treasurer

Section 8. Any Assistant Treasurer of the Trust shall perform such
duties as the Trustees may from time to time designate.

Assistant Secretary

Section 9. Any Assistant Secretary of the Trust shall perform such
duties as the Trustees may from time to time designate.

Other Officers

Section 10. The Trustees from time to time may appoint such other
officers or agents as they may deem advisable, each of whom shall have
such title, hold office for such period, have such authority and perform
such duties as the Trustees may determine. The Trustees from time to time
may delegate to one or more officers or agents the power to appoint any
such subordinate officers or agents and to prescribe their respective
rights, terms of office, authorities and duties.

ARTICLE III
SHAREHOLDERS' MEETINGS

Special Meetings

Section 1. A special meeting of the Shareholders of the Trust
shall be called by the Secretary whenever (i) ordered by the Trustees or
(ii) requested, for the purpose of removing a Trustee from office, in
writing by the holder or holders of at least 10% of the outstanding Shares
of the Trust entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than 30 days to call such special
meeting, the Trustees or the Shareholders so requesting may, in the name
of the Secretary, call the meeting by giving notice thereof in the manner
required when notice is given by the Secretary. If the meeting is a
meeting of the Shareholders of one or more Portfolios, but not a meeting
of all shareholders of the Trust, then only the shareholders of such one
or more Portfolios shall be entitled to notice of and to vote at such
meeting.

Notice of Meeting

Section 2. Except as above provided, notices of the place, date,
hour and purposes or purpose of any special meeting of the Shareholders
shall be given by the Secretary by delivering or mailing, postage prepaid,
to each Shareholder entitled to vote at said meeting, a written or printed
notification of such meeting, at least 15 days before the meeting, to such
address as appears on the record of the Trust at the time of such meeting.

Notice of any Shareholders' meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder

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<PAGE>

who shall attend such meeting in person or by proxy. Notice of adjournment
of a Shareholders' meeting to another time or place need not be given, if
such time and place are announced at the meeting.

Place Of Meeting

Section 3. All special meetings of the Shareholders shall be held
at the principal place of business of the Trust or at such other place in
the United States as the Trustees may designate.

Ballots

Section 4. The vote upon any question shall be by ballot whenever
requested by any person entitled to vote, but, unless such a request is
made, voting may be conducted in any way approved by the meeting.

Proxies

Section 5. Shareholders entitled to vote may vote either in person
or by proxy, provided that an instrument authorizing such proxy to act is
executed by the Shareholder in writing and dated not more than eleven
months before the meeting, unless the instrument specifically provides for
a longer period. Proxies shall be delivered to the secretary of the Trust
or other person responsible for recording the proceedings before being
voted. A proxy with respect to shares held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Trust receives a specific written notice to the
contrary from any one of them. Unless otherwise specifically limited by
their terms, proxies shall entitle the holder thereof to vote at any
adjournment of a meeting. A proxy purporting to be exercised by or on
behalf of a Shareholder shall be deemed valid unless challenged at or
prior to its exercise and the burden of providing invalidity shall rest on
the challenger. At all meetings of the Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualifications of
voters, the validity of proxies, and the acceptance of rejection of votes
shall be decided by the chairman of the meeting.

ARTICLE IV
TRUSTEES' MEETINGS

Regular Meetings

Section 1. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from
time to time determine, provided that any Trustee who is absent when such
determination is made shall be given notice of the determination in the
manner as provided in Section 4 of this Article.

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<PAGE>

Special Meetings

Section 2. Special meetings of the Trustees shall be called by the
Secretary at the written request of the President, the Treasurer, or any
two Trustees, and if the Secretary, when so requested, refuses or fails
for more than 24 hours to call such meeting, the President, the Treasurer,
or such two Trustees may, in the name of the Secretary, call such meeting
by giving due notice in the manner required when notice is to be given by
the Secretary. All special meetings of the Trustees shall be held at the
principal place of business of the Trustees or such other place in the
United States as the person or persons requesting said meeting to be
called may designate, but any meeting may adjourn to any other place.

Quorum

Section 3. A majority of the Trustees shall constitute a quorum
for the transaction of business at any meeting of the Trustees.

Notices of Meeting

Section 4. Except as otherwise provided, notice of any special
meeting of the Trustees shall be given by the Secretary to each Trustee
orally or by mail, hand delivery or telegram. Such notice may be mailed,
postage prepaid, addressed to him at his address as registered on the
books of the Trust or, if not so registered, at his last known address at
least three days before the meeting or delivered to him at least two days
before the meeting, provided orally by telephone at least 24 hours before
the meeting or sent to him at least 24 hours before the meeting, by
prepaid telegram addressed to him at said registered address, if any, or
if he has no such registered address, at his last known address.

Special Action

Section 5. When all the Trustees shall be present at any meeting,
however called or wherever held, or shall assent to the holding of the
meeting without notice, or after the meeting shall sign a written assent
thereto on the record of such meeting, the acts of such meeting shall be
valid as if such meeting had been regularly held.

Action By Consent

Section 6. Any action by the Trustees may be taken without a
meeting if a written consent thereto is signed by all the Trustees and
filed with the records of the Trustees' meeting, or by telephone consent
provided a quorum of Trustees participate in any such telephone meeting.
Such consent shall be treated as a vote of the Trustees for all purposes.

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<PAGE>

ARTICLE V
SHARES OF BENEFICIAL INTEREST

Beneficial Interest

Section 1. The beneficial interest in the Trust shall at all times
be divided into an unlimited number of transferable Shares without par
value. Such shares may be divided into Portfolios or into classes, as
provided for in the Declaration of Trust. Each Share shall represent an
equal proportionate interest in the Portfolio or class with each other
Share of the Portfolio or class outstanding, none having priority or
preference over another.

Transfer Of Shares

Section 2. The Shares of the Trust shall be transferable, so as to
affect the rights of the Trust, only by transfer recorded on the books of
the Trust, in person or by attorney.

Equitable Interest Not Recognized

Section 3. The Trust shall be entitled to treat the holder of
record of any Share or Shares of stock as the holder in fact thereof, and
shall not be bound to recognize any equitable or other claim or interest
in such Share or Shares on the part of any other person except as may be
otherwise expressly provided by law.

ARTICLE VI
INSPECTION OF BOOKS

The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be
open to the inspection of the Shareholders; and no Shareholder shall have
any right to inspect any account or book or document of the Trust except
as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.

ARTICLE VII
PROVISIONS RELATING TO THE
CONDUCT OF THE TRUST'S BUSINESS

Dealings with Affiliates

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<PAGE>

or Trustees of the Trust or such officers or directors of such investment
adviser or manager who own beneficially more than one-half of one percent
of the shares or securities together own beneficially more than five
percent of such outstanding shares or securities. Each Trustee and officer
of the Trust shall give notice to the President or Treasurer of the Trust
of the identity of all issuers whose securities are held by the Trust of
which such officer or Trustee owns as much as one-half of one percent of
the outstanding securities, and the Trust shall not be charged with the
knowledge of such holdings in the absence of receiving such notice if the
Trust has requested such information not less often than quarterly.

Subject to the provisions of the preceding paragraph, no officer,
Trustee or agent of the Trust and no officer, director or agent of any
investment adviser or manager shall deal for or on behalf of the Trust
with himself as principal or agent, or with any partnership, association
or corporation in which he has a material financial interest; provided,
that the foregoing provisions shall not prevent: (a) officers and Trustees
of the Trust from buying, holding or selling shares in the Trust, or from
being partners, officers or directors of or financially interested in any
investment adviser or manager to the Trust or in any corporation, firm or
association which may at any time have a distributor's or principal
underwriter's contract with the Trust; (b) purchases or sales of
securities or other property if such transaction is permitted by or is
exempt or exempted from the provisions of the Investment Company Act of
1940 or any rule or regulation thereunder and if such transaction does not
involve any commission or profit to any security dealer who is, or one of
more of whose partners, shareholders, officers or directors is, an officer
or Trustee of the Trust or an officer or director of the investment
adviser, manager or principal underwriter of the Trust; (c) employment of
legal counsel, registrar, transfer agent, shareholder services agent,
dividend disbursing agent or Custodian who is, or has a partner,
stockholder, officer or director who is, an officer or Trustee of the
Trust; or (d) sharing statistical, research and management expenses,
including personnel and services, with any other company in which an
officer or Trustee of the Trust is an officer or director or financially
interested.

Right to Engage in Business

Section 2. Any officer or Trustee of the Trust, the investment
adviser, the manager, and any officers or directors of the investment
adviser or manager may have personal business interests and may engage in
personal business activities.

Dealing in Securities of the Trust

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<PAGE>

directors of every investment adviser, manager and distributor, shall not
take long or short positions in the securities of the Trust, except that:

(a) the Distributor may place orders with the Trust for its
shares equivalent to orders received by the Distributor;

(b) shares of the Trust may be purchased at not less than net
asset value for investment by the investment adviser, manager, and
officers and directors of the distributor, investment adviser, or the
Trust, and by any trust, pension, profit-sharing or other benefit plan for
such persons, no such purchase to be in contravention of any applicable
state or federal requirements.

Limitation on Certain Loans

Section 4. The Trust shall not make loans to any officer, Trustee
or employee of the Trust or any investment adviser, manager or Distributor
or their respective officers, directors or partners or employees.

Custodian

Section 5. All securities and cash owned by the Trust shall be
maintained in the custody of a Custodian (the "Custodian") as provided in
the Declaration of Trust; provided, however, the Custodian may deliver
securities as collateral on borrowing effected by the Trust; provided,
that such delivery shall be conditioned upon receipt of the borrowed funds
by the Custodian except where additional collateral is being pledged on an
outstanding loan and the Custodian may deliver securities lent by the
Trust against receipt of initial collateral specified by the Trust.
Subject to such rules, regulations and orders, if any, as the Securities
and Exchange Commission (the "Commission") may adopt, the Trust may, or
may permit any Custodian to, deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
operated by the Federal Reserve Banks, or established by a national
securities exchange or national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person
as may be permitted by the Commission, pursuant to which system all
securities of any particular class or Series of any issue deposited with
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry, without physical delivery of such securities.

The Trust shall upon the resignation or inability to serve of its
Custodian or upon change of the Custodian: (a) use its best efforts to
obtain a successor Custodian; (b) require that the cash and securities
owned by this Trust be delivered directly to the successor Custodian; and
(c) in the event that no successor Custodian can be found, submit to the
shareholders, before permitting delivery of the cash and securities owned
by this Trust otherwise than to a successor Custodian, the question
whether or not this Trust shall be liquidated or shall function without a
Custodian.

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<PAGE>

ARTICLE VIII
SEAL

The seal of the Trust shall be circular in form bearing the name of
the Trust and the year of its organization. The absence of the seal on any
document or other paper executed by or on behalf of the Trust shall not
impair the validity of such document or paper.

ARTICLE IX
FISCAL YEAR

The fiscal year of the Trust shall end on such date as the Trustees
shall from time to time determine.

ARTICLE X
AMENDMENTS

These Bylaws may be amended at any meeting of the Trustees of the
Trust by a majority vote.

ARTICLE XI
DISTRIBUTION ARRANGEMENTS

Any agreement entered into for the sale of Shares of the Trust
pursuant to Article VII, Section 2 of the Declaration of Trust shall
require the other party thereto, whether acting as principal or as agent,
to use all reasonable efforts consistent with the other business of such
other party to secure purchasers for the Shares.

ARTICLE XII
REPORTS TO SHAREHOLDERS

The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the transactions of the Trust
including financial statements which shall be certified at least annually
by independent public accountants.

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<PAGE>

<PAGE>

AMENDED BY-LAWS
of
HERITAGE INCOME TRUST

TABLE OF CONTENTS

Page

ARTICLE I . . . . . . . . . . . . . . . . . . . . . . 1
Officers and Their Election . . . . . . . . . . . . . . 1
Section 1: Officers . . . . . . . . . . . . . . . . . 1
Section 2: Election of Officers . . . . . . . . . . . 1
Section 3: Resignations and Removals . . . . . . . . . 1

ARTICLE II . . . . . . . . . . . . . . . . . . . . . . 1
Powers and Duties of Officers and Trustees . . . . . . . 1
Section 1: Management of The Trust-General . . . . . . 1
Section 2: Executive and Other Committees. . . . . . . 2
Section 3: Chairman of The Trustees. . . . . . . . . . 2
Section 4: President . . . . . . . . . . . . . . . . . 2
Section 5: Treasurer . . . . . . . . . . . . . . . . . 2
Section 6: Secretary . . . . . . . . . . . . . . . . . 2
Section 7: Vice President. . . . . . . . . . . . . . . 3
Section 8: Assistant Treasurer . . . . . . . . . . . . 3
Section 9: Assistant Secretary . . . . . . . . . . . . 3
Section 10: Other Officers. . . . . . . . . . . . . . . 3

ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . 3
Shareholders' Meetings. . . . . . . . . . . . . . . . . . 3
Section 1: Special Meetings. . . . . . . . . . . . . . 3
Section 2: Notice of Meeting . . . . . . . . . . . . . 3
Section 3: Place of Meeting. . . . . . . . . . . . . . 4
Section 4: Ballots . . . . . . . . . . . . . . . . . . 4
Section 5: Proxies . . . . . . . . . . . . . . . . . . 4

ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . 5
Trustees' Meetings . . . . . . . . . . . . . . . . . . . 5
Section 1: Regular Meetings. . . . . . . . . . . . . . 5
Section 2: Special Meetings. . . . . . . . . . . . . . 5
Section 3: Quorum . . . . . . . . . . . . . . . . . . 5
Section 4: Notices of Meeting. . . . . . . . . . . . . 5
Section 5: Special Action . . . . . . . . . . . . . . 6
Section 6: Action by Consent . . . . . . . . . . . . . 6

ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shares of Beneficial Interest . . . . . . . . . . . . . . 6
Section 1: Beneficial Interest . . . . . . . . . . . . 6
Section 2: Transfer of Shares . . . . . . . . . . . . 6
Section 3: Equitable Interest Not Recognized . . . . 6

ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . 7
Inspection of Books . . . . . . . . . . . . . . . . . . . 7

ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>

Provisions Relating to the Conduct of the
Trust's Business . . . . . . . . . . . . . . . . . . 7
Section 1: Dealings with Affiliates . . . . . . . . . 7
Section 2: Right to Engage in Business . . . . . . . . 8
Section 3: Dealings in Securities of the Trust . . . . 8
Section 4: Limitation on Certain Loans . . . . . . . . 8
Section 5: Custodian . . . . . . . . . . . . . . . . . 8

ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . 9
Seal . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . 9
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . 10
Amendments . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . 10
Distribution Arrangements . . . . . . . . . . . . . . . 10

ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . 10
Reports to Shareholders . . . . . . . . . . . . . . . . . 10

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<PAGE>

AMENDED BY-LAWS
of
HERITAGE U.S. INCOME TRUST

These By-Laws of the Heritage Income Trust (the "Trust"), a
Massachusetts business trust which may offer its shares of beneficial
interest (the "Shares") in distinct portfolios (the "Portfolios"), are
subject to the Trust's Declaration of Trust as from time to time amended
(the "Declaration of Trust").

ARTICLE I
OFFICERS AND THEIR ELECTION

Officers

Section 1. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers as the Trustees may from
time to time in their discretion appoint or elect. It shall not be
necessary for any Trustee or other officer to be a holder of shares in the
Trust.

Election of Officers

Section 2. The President, Treasurer and Secretary shall be
chosen annually by the Trustees. Two or more offices may be held by a
single person except the offices of President and Secretary. The officers
shall hold office until their successors are chosen and qualified.

Resignations and Removals

Section 3. Any officer of the Trust may resign by filing a
written resignation with the President, the Trustees or the Secretary,
which resignation shall take effect on being so filed at such time as may
be therein specified. The Trustees may at any meeting remove any officer
by a majority vote of the voting Trustees.

ARTICLE II
POWERS AND DUTIES OF OFFICERS AND TRUSTEES

Management Of The Trust-General

Section 1. The business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary and
desirable to carry out their responsibilities, so far as such powers are
not inconsistent with the laws of the Commonwealth of Massachusetts, the
Declaration of Trust, or with these By-Laws.

Executive And Other Committees

Section 2. The Trustees may elect from their own number an
executive committee to consist of not less than three nor more than five
<PAGE>

members, which shall have the power and duty to conduct the current and
ordinary business of the Trust, including the purchase and sale of
securities, while the Trustees are not in session, and such other powers
and duties as the Trustees may from time to time delegate to such
committee. The Trustees may also elect from their own number other
committees from time to time. The number composing such committees and
the powers conferred upon the same are to be determined by vote of the
Trustees.

Chairman Of The Trustees

Section 3. The Trustees may, but need not, appoint from among
their number a Chairman. He shall perform such duties as the Trustees may
from time to time designate.

President

Treasurer

Secretary

Vice President

Section 7. Any Vice President of the Trust shall perform such
duties as the Trustees may from time to time designate.

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<PAGE>

Assistant Treasurer

Section 8. Any Assistant Treasurer of the Trust shall perform
such duties as the Trustees may from time to time designate.

Assistant Secretary

Section 9. Any Assistant Secretary of the Trust shall perform
such duties as the Trustees may from time to time designate.

Other Officers

Section 10. The Trustees from time to time may appoint such
other officers or agents as they may deem advisable, each of whom shall
have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time
to time may delegate to one or more officers or agents the power to
appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.

ARTICLE III
SHAREHOLDERS' MEETINGS

Special Meetings

Notice of Meeting

Section 2. Except as above provided, notices of the place, date,
hour, and, in the case of a special meeting, the purposes or purpose shall
be given by the Secretary by delivering or mailing, postage prepaid, to
each Shareholder entitled to vote at said meeting, a written or printed
notification of such meeting, at least 15 days before the meeting, to such
address as appears on the record of the Trust at the time of such meeting.

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<PAGE>

who shall attend such meeting in person or by proxy. Notice of
adjournment of a Shareholders' meeting to another time or place need not
be given, if such time and place are announced at the meeting.

Place of Meeting

Section 3. All meetings of the Shareholders shall be held at the
principal place of business of the Trust or at such other place in the
United States as the Trustees may designate.

Ballots

Section 4. The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such a
request is made, voting may be conducted in any way approved by the
meeting.

Proxies

Section 5. Shareholders entitled to vote may vote either in
person or by proxy, provided that an instrument authorizing such proxy to
act is executed by the Shareholder in writing and dated not more than
eleven months before the meeting, unless the instrument specifically
provides for a longer period. Proxies shall be delivered to the secretary
of the Trust or other person responsible for recording the proceedings
before being voted. A proxy with respect to shares held in the name of
two or more persons shall be valid if executed by one of them unless at or
prior to exercise of such proxy the Trust receives a specific written
notice to the contrary from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of providing
invalidity shall rest on the challenger. At all meetings of the
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualifications of voters, the validity of proxies, and the
acceptance of rejection of votes shall be decided by the chairman of the
meeting.

ARTICLE IV
TRUSTEES' MEETINGS

Regular Meetings

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<PAGE>

Special Meetings

Section 2. Special meetings of the Trustees shall be called by
the Secretary at the written request of the President, the Treasurer, or
any two Trustees, and if the Secretary, when so requested, refuses or
fails for more than 24 hours to call such meeting, the President, the
Treasurer, or such two Trustees may, in the name of the Secretary, call
such meeting by giving due notice in the manner required when notice is to
be given by the Secretary. All special meetings of the Trustees shall be
held at the principal place of business of the Trustees or such other
place in the United States as the person or persons requesting said
meeting to be called may designate, but any meeting may adjourn to any
other place.

Quorum

Section 3. A majority of the Trustees shall constitute a quorum
for the transaction of business at any meeting of the Trustees.

Notices of Meeting

Section 4. Except as otherwise provided, notice of any special
meeting of the Trustees shall be given by the Secretary to each Trustee
orally or by mail, hand delivery or telegram. Such notice may be mailed,
postage prepaid, addressed to him at his
address as registered on the books of the Trust or, if not so registered,
at his last known address at least three days before the meeting or
delivered to him at least two days before the meeting, provided orally by
telephone at least 24 hours before the meeting or sent to him at least 24
hours before the meeting, by prepaid telegram addressed to him at said
registered address, if any, or if he has no such registered address, at
his last known address.

Special Action

Section 5. When all the Trustees shall be present at any
meeting, however called or wherever held, or shall assent to the holding
of the meeting without notice, or after the meeting shall sign a written
assent thereto on the record of such meeting, the acts of such meeting
shall be valid as if such meeting had been regularly held.

Action By Consent

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<PAGE>

ARTICLE V
SHARES OF BENEFICIAL INTEREST

Beneficial Interest

Section 1. The beneficial interest in the Trust shall at all
times be divided into an unlimited number of transferable Shares without
par value. Such shares may be divided into Portfolios or into classes, as
provided for in the Declaration of Trust. Each Share shall represent an
equal proportionate interest in the Portfolio or class with each other
Share of the Portfolio or class outstanding, none having priority or
preference over another.

Transfer Of Shares

Section 2. The Shares of the Trust shall be transferable, so as
to affect the rights of the Trust, only by transfer recorded on the books
of the Trust, in person or by attorney.

Equitable Interest Not Recognized

ARTICLE VI
INSPECTION OF BOOKS

The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be
open to the inspection of the Shareholders; and no Shareholder shall have
any right to inspect any account or book or document of the Trust except
as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.

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<PAGE>

ARTICLE VII
PROVISIONS RELATING TO THE
CONDUCT OF THE TRUST'S BUSINESS

Dealings with Affiliates

Section 1. The Trust shall not purchase or retain securities
issued by any issuer if one or more of the holders of the securities of
such issuer or one or more of the officers or directors of such issuer is
an officer or Trustee of the Trust or officer or director of any
organization, association or corporation with which the Trust has an
investment advisory or management contract ("investment adviser" or
"manager"), if to the knowledge of the Trust one or more of such officers
or Trustees of the Trust or such officers or directors of such investment
adviser or manager who own beneficially more than one-half of one percent
of the shares or securities together own beneficially more than five
percent of such outstanding shares or securities. Each Trustee and
officer of the Trust shall give notice to the President or Treasurer of
the Trust of the identity of all issuers whose securities are held by the
Trust of which such officer or Trustee owns as much as one-half of one
percent of the outstanding securities, and the Trust shall not be charged
with the knowledge of such holdings in the absence of receiving such
notice if the Trust has requested such information not less often than
quarterly.

Subject to the provisions of the preceding paragraph, no officer,
Trustee or agent of the Trust and no officer, director or agent of any
investment adviser or manger shall deal for or on behalf of the Trust with
himself as principal or agent, or with any partnership, association or
corporation in which he has a material financial interest; provided, that
the foregoing provisions shall not prevent: (a) officers and Trustees of
the Trust from buying, holding or selling shares in the Trust, or from
being partners, officers or directors of or financially interested in any
investment adviser or manager to the Trust or in any corporation, firm or
association which may at any time have a distributor's or principal
underwriter's contract with the Trust; (b) purchases or sales of
securities or other property if such transaction is permitted by or is
exempt or exempted from the provisions of the Investment Company Act of
1940 or any rule or regulation thereunder and if such transaction does not
involve any commission or profit to any security dealer who is, or one of
more of whose partners, shareholders, officers or directors is, an officer
or Trustee of the Trust or an officer or director of the investment
adviser, manager or principal underwriter of the Trust; (c) employment of
legal counsel, registrar, transfer agent, shareholder services agent,
dividend disbursing agent or Custodian who is, or has a partner,
stockholder, officer or director who is, an officer or Trustee of the
Trust; or (d) sharing statistical, research and management expenses,
including personnel and services, with any other company in which an
officer or Trustee of the Trust is an officer or director or financially
interested.

Right to Engage in Business

- 7 -
<PAGE>

Dealing in Securities of the Trust

Section 3. The Trust, the investment adviser, the manager, any
corporation, firm or association which may at any time have an exclusive
distributor's or principal underwriter's contract with the Trust (the
"Distributor") and the officers and Trustees of the Trust and officers and
directors of every investment adviser, manager and Distributor, shall not
take long or short positions in the securities of the Trust, except that:

(a) the Distributor may place orders with the Trust for its
shares equivalent to orders received by the Distributor;

(b) shares of the Trust may be purchased at not less than net
asset value for investment by the investment adviser, manager, and
officers and directors of the Distributor, investment adviser, or the
Trust, and by any trust, pension, profit-sharing or other benefit plan for
such persons, no such purchase to be in contravention of any applicable
state or federal requirements.

Limitation on Certain Loans

Section 4. The Trust shall not make loans to any officer,
Trustee or employee of the Trust or any investment adviser, manager or
Distributor or their respective officers, directors or partners or
employees.

Custodian

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<PAGE>

ARTICLE VIII
SEAL

The seal of the Trust shall be circular in form bearing the name
of the Trust and the year of its organization. The absence of the seal on
any document or other paper executed by or on behalf of the Trust shall
not impair the validity of such document or paper.

ARTICLE IX
FISCAL YEAR

The fiscal year of the Trust shall end on such date as the
Trustees shall from time to time determine.

ARTICLE X
AMENDMENTS

These By-Laws may be amended at any meeting of the Trustees of
the Trust by a majority vote.

ARTICLE XI
DISTRIBUTION ARRANGEMENTS

ARTICLE XII
REPORTS TO SHAREHOLDERS

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<PAGE>

Dated: August 4, 1989, as amended and restated on
May 18, 1993

- 10 -
<PAGE>

<PAGE>

INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
OF HERITAGE INCOME TRUST

Agreement made as of this ____________ day of____________, 1989
between Heritage Income Trust, a Massachusetts business trust (the
"Trust"), and Heritage Asset Management, Inc. (the "Manager"), a Florida
corporation.

WHEREAS, the Trust is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company consisting of several series (portfolios) of shares, each having
its own investment policies; and

WHEREAS, the Trust desires to retain the Manager as investment
adviser and administrator to furnish administrative, investment advisory
and portfolio management services to the Trust with respect to its
existing portfolios and such other portfolios as the Trust and the Manager
shall agree upon (collectively, the "Portfolios"), and the Manager is
willing to furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:

1. Appointment. The Trust hereby appoints Heritage Asset
Management, Inc. as investment adviser and administrator of the Trust for
the period and on the terms set forth in this Agreement. Heritage Asset
Management, Inc. accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided. In all
matters relating to the performance of this Agreement, the Manager will
act in conformity with the Declaration of Trust, Bylaws and current
Prospectus and Statement of Additional Information of the Trust and with
the instructions and directions of the Trust's Board of Trustees and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal or state laws and regulations.

2. Duties as Investment Adviser. Subject to the supervision
of the Trust's Board of Trustees, the Manager will provide a continuous
investment program for each Portfolio, including investment research and
management with respect to all securities, investments and cash
equivalents in each Portfolio. The Manager will determine from time to
time what securities and other investments will be purchased, retained or
sold by each Portfolio. The Manager will provide the services under this
Agreement in accordance with the investment objective, policies and
restrictions as stated in the Trust's current Prospectus and Statement of
Additional Information.

The Manager will place orders pursuant to its investment
determinations for each Portfolio either directly with the issuer or
through any brokers or dealers. In the selection of brokers or dealers and
the placement of orders for the purchase and sale of portfolio investments
for the Portfolios, the Manager shall use its best efforts to obtain for
the Portfolios the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage commissions for

-2-<PAGE>

brokerage and research services as described below. In using its best
efforts to obtain the most favorable price and execution available, the
Manager, bearing in mind the Trust's best interests at all times, shall
consider all factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for the
security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience
and financial stability of the broker or dealer involved and the quality
of service rendered by the broker or dealer in other transactions. Subject
to such policies as the Trustees of the Trust may determine, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having
caused a Portfolio to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with
respect to the Trust and to other clients of the Manager as to which the
Manager exercises investment discretion. In no instance will portfolio
securities of any Portfolio be purchased from or sold to the Manager or
any affiliated person of the Manager. The Trust agrees that any entity or
person associated with the Manager which is a member of a national
securities exchange is authorized to effect any transaction on such
exchange for the account of the Trust which is permitted by Section 11(a)
of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and
the Trust has consented to the retention of compensation for such
transactions in accordance with Rule 11a2-2(T)(a)(2)(iv).

The Manager will provide the Board of Trustees of the Trust on a
regular basis with economic and investment analyses and reports and make
available to the Board upon request any economic, statistical and
investment services normally available to institutional or other customers
of the Manager.

Any of the foregoing functions with respect to any or all
Portfolios may be delegated by the Manager, at the Manager's expense, to
another appropriate party (including an affiliated party), subject to such
approval by the Board of Trustees and shareholders of each affected
Portfolio as may be required by the 1940 Act. The Manager shall oversee
the performance of delegated functions by any such party and shall furnish
to the Trust with quarterly evaluations and analyses concerning the
performance of delegated responsibilities by those parties.

3. Duties as Administrator. The Manager will assist in
administering the affairs of the Trust subject to the supervision of the
Trust's Board of Trustees and the following understandings:

(a) The Manager will supervise all aspects of the operations
of the Trust except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board

-3-<PAGE>

of Trustees of the Trust of its responsibility for and control of the
conduct of the Trust's affairs.

(b) The Manager will investigate and, with appropriate
approval of the Trust's Board of Trustees, select necessary service
companies to conduct certain operations of the Trust, including the
Trust's custodian, transfer agent, dividend disbursing agent, accountant
and attorney.

(c) The Manager will provide the Trust with such
administrative and clerical services as are deemed necessary or advisable
by the Trust's Board of Trustees, including the maintenance of certain
books and records of the Trust and each Portfolio which are not maintained
by the Trust's Custodian or any Subadviser.

(d) The Manager will arrange, but not pay, for the periodic
updating of Prospectuses and supplements thereto, proxy material, tax
returns and reports to the Shareholders and to the Securities and Exchange
Commission.

(e) The Manager will provide the Trust with, or obtain for
it, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and
similar items.

(f) The Manager will make itself available to receive
redemption requests as the Trust's transfer agent and will hold itself
available to respond to Shareholder inquiries.

4. Services Not Exclusive. The services furnished by the
Manager hereunder are not to be deemed exclusive and the Manager shall be
free to furnish similar services to others so long as its services under
this Agreement are not impaired thereby.

5. Books and Records. In compliance with the requirements
of Rule 31a-3 under the 1940 Act, the Manager hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Manager further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act.

6. Expenses. During the term of this Agreement, the Trust
will bear all expenses not specifically assumed by the Manager incurred in
its operations and the offering of its shares. Expenses borne by the Trust
will include but not be limited to the following (or each Portfolio's
proportionate share of the following): (a) brokerage commissions relating
to securities purchased or sold by the Trust or any losses incurred in
connection therewith; (b) fees payable to and expenses incurred on behalf
of the Trust by the Manager; (c) expenses of organizing the Trust and the
Trust; (d) filing fees and expenses relating to the registration and
qualification of the Trust's shares and the Trust under federal or state
securities laws and maintaining such registrations and qualifications; (e)
distribution fees; (f) fees and salaries payable to the Trust's Trustees

-4-<PAGE>

and officers who are not officers or employees of the Manager or
interested persons (as defined in the 1940 Act) of any investment adviser
or underwriter of the Trust; (g) taxes (including any income or franchise
taxes) and governmental fees; (h) costs of any liability, uncollectible
items of deposit and other insurance or fidelity bonds; (i) any costs,
expenses or losses arising out of any liability of or claim for damage or
other relief asserted against the Trust for violation of any law; (j)
legal, accounting and auditing expenses, including legal fees of special
counsel for the independent directors; (k) charges of custodians, transfer
agents and other agents; (1) costs of preparing share certificates; (m)
expenses of setting in type and printing Prospectuses and supplements
thereto for existing shareholders, reports and statements to shareholders
and proxy material; (n) any extraordinary expenses (including fees and
disbursements of counsel) incurred by the Trust; and (o) fees and other
expenses incurred in connection with membership in investment company
organizations.

The Trust may pay directly any expense incurred by it in its
normal operations and, if any such payment is consented to by the Manager
and acknowledged as otherwise payable by the Manager pursuant to this
Agreement, the Trust may reduce the fee payable to the Manager pursuant to
paragraph 7 hereof by such amount. To the extent that such deductions
exceed the fee payable to the Manager on any monthly payment date, such
excess shall be carried forward and deducted in the same manner from the
fee payable on succeeding monthly payment dates.

In addition, if the expenses borne by the Trust or any Portfolio
in any fiscal year exceed the applicable expense limitations imposed by
the securities regulations of any state in which shares are registered or
qualified for sale to the public, the Manager will reimburse the Trust or
Portfolio for any excess up to the amount of the fee payable to it during
that fiscal year pursuant to paragraph 7 hereof.

7. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, effective from the date of this
Agreement, the Manager shall receive a fee as specified in Schedule A
attached and made part of this Agreement. For the services provided and
the expenses assumed pursuant to this Agreement with respect to any
Portfolio hereafter established, the Manager shall receive a fee to be
agreed upon and described in additional schedules to this Agreement.

8. Limitation of Liability of the Manager. The Manager
shall not be liable for any error of judgment or mistake of law for any
loss suffered by the Trust in connection with the matters to which this
Agreement relates except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. Any person, even though also an officer, partner, employee, or
agent of the Manager, who may be or become an officer, director, employee
or agent of the Trust shall be deemed, when rendering services to the
Trust or acting in any business of the Trust, to be rendering such
services to or acting solely for the Trust and not as an officer, partner,
employee, or agent or one under the control or direction of the Manager
even though paid by it.

-5-<PAGE>

9. Duration and Termination. This Agreement shall become
effective upon its execution; provided, that with respect to any Portfolio
now existing or hereafter created, this agreement shall not take effect
unless it has first been approved (i) by a vote of the majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of such party, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by vote of a majority of that
Portfolio's outstanding voting securities. This Agreement shall remain in
full force and effect continuously thereafter until terminated as follows:

(a) The Trust may at any time terminate this Agreement with
respect to any or all Portfolios by providing not more than 60 days'
written notice delivered or mailed by registered mail, postage prepaid, to
the Manager; or

(b) With respect to any Portfolio, if (i) the Trustees of the
Trust or the Shareholders of that Portfolio by the affirmative vote of a
majority of the outstanding shares of such Portfolio, and (ii) a majority
of the Trustees of the Trust who are not interested persons of the Trust
or of the Manager or any Subadviser, by vote cast in person at a meeting
called for the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Agreement, then this
Agreement shall automatically terminate at the close of business on the
second anniversary of its execution, or upon the expiration of one year
from the effective date of the last such continuance, whichever is later;
provided, however, that if the continuance of this Agreement is submitted
to the shareholders of a Portfolio for their approval and such
shareholders fail to approve such continuance of this Agreement as
provided herein, the Manager may continue to serve hereunder in a manner
consistent with the 1940 Act and the rules and regulations thereunder with
respect to that Portfolio; or

Action by the Trust under paragraph (a) above with respect to any
Portfolio may be taken either (i) by vote of a majority of its Trustees,
or (ii) by the affirmative vote of a majority of the outstanding Shares of
such Portfolio.

This Agreement will automatically and immediately terminate in
the event of its assignment. Termination of this Agreement pursuant to
this Section 9 shall be without the payment of any penalty. (As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such
terms have in the 1940 Act.)

10. Amendment of This Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, and
no material amendment of this Agreement with respect to any Portfolio

-6-<PAGE>

shall be effective until approved by vote of the holders of a majority of
that Portfolio's outstanding voting securities.

11. Name of Trust. The Trust may use the name "Heritage" or
"Heritage Income Trust" only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
business of the Manager. At such time as such an agreement shall no longer
be in effect, the Trust will (to the extent that it lawfully can) cease to
use any name derived from Heritage Income Trust, Raymond James &
Associates, Inc., or Heritage Asset Management, Inc., or any successor
organization.

12. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors.

IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day
and year first above written.

Attest: HERITAGE INCOME TRUST

By:_____________________________ By:_____________________________

Attest: HERITAGE ASSET MANAGEMENT, INC.

By:_____________________________ By:_____________________________

-7-<PAGE>

SCHEDULE A
TO THE
INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT
BETWEEN
HERITAGE ASSET MANAGEMENT, INC.
AND
HERITAGE INCOME TRUST

As compensation pursuant to section 7 of the Investment Advisory
and Administrative Agreement between Heritage Asset Management, Inc. (the
"Manager") and Heritage Income Trust the "Trust"), the Trust shall pay to
the Manager a fee, computed daily and paid monthly, at the following
annual rates as percentages of each Portfolio's average daily net assets:

(1) For the Government
Portfolio:

Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
------------- -------------------------

All 0.50%

(2) For the Diversified
Portfolio:

Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
------------- -------------------------

First $100 million . . . . . . . . . . . 0.60%
Over $100 million . . . . . . . . . . . . 0.50%
<PAGE>

<PAGE>

Exhibit (5)(b)

HERITAGE INCOME TRUST
SUBADVISORY AGREEMENT

Agreement made as of _______________________, 1989 between
Heritage Asset Management, Inc., a Florida corporation (the "Manager"),
and Eagle Asset Management, Inc., a Florida corporation (the
"Subadviser").

WHEREAS, the Manager has by separate contract agreed to serve as
the investment adviser and administrator to the Heritage Income Trust
("Trust"), a Massachusetts business trust registered under the Investment
Company Act of 1940 ("1940 Act") as an opened diversified management
investment company consisting of several series (portfolios) of shares,
each having its own investment policies;

WHEREAS, the Manager's contract with the Trust allows it to
delegate certain investment advisory services for the Trust to other
parties; and

WHEREAS, the Manager desires to retain the Subadviser to perform
certain investment advisory services for the Trust with respect to certain
investment series (portfolios) and such other investment series
(portfolios) as the Trust and the Manager may agree upon and so specify in
Schedules attached hereto (collectively, the "Portfolios"), and the
Subadviser is willing to perform such services;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:

1. SERVICES TO BE RENDERED BY SUBADVISER TO THE TRUST

(a) Subject always to the control of the Trustees and Manager
of Heritage Income Trust (the "Trust"), the Subadviser, at its expense and
at the request of the Manager, will furnish continuously to the Manager
and for the Trust an investment program for such portion, if any, of the
Portfolios' assets as is designated by the Manager from time to time. The
Subadviser, with respect to the portion of the Portfolios' investments for
which the Subadviser has been delegated responsibility under this
Agreement, will make investment decisions on behalf of the Portfolios and
will place all orders for the purchase and sale of portfolio securities.
In the performance of its duties, the Subadviser will comply with the
provisions of this Agreement and the Trust's Declaration of Trust, Bylaws
and Registration Statement as from time to time amended, any relevant
undertakings provided to State securities regulators, and the stated
investment objective, policies and restrictions of the Trust, and will use
its best efforts to safeguard and promote the welfare of the Trust, and to
comply with other policies which the Trustees or the Manager, as the case
may be, may from time to time determine, and shall exercise the same care
and diligence as are expected of the Trustees.
<PAGE>

(b) The Subadviser, at its expense, will make available its
officers and advisory and other personnel, particularly portfolio managers
and research analysts, to the Trustees and Manager at reasonable times, to
review investment policies of the Trust and to consult with the Trustees
and Manager regarding the investment affairs of the Trust and economic,
statistical and investment matters relevant to the Subadviser's duties
hereunder and will provide periodic reports to the Manager relating to the
portfolio strategies it employs.

(c) The Subadviser, at its expense, will pay for all salaries
of personnel and facilities required for it to execute its duties under
this Agreement faithfully.

(d) The Subadviser, at its expense, also will provide the
Manager with compliance reports relating to the investment operations of
the Portfolios for which the Subadviser has responsibility, including
periodic reports which monitor investment restrictions and other
guidelines of the Trust's prospectus and statement of additional
information, and such other compliance reports as may be agreed upon from
time to time.

(e) The Subadviser, at its expense, also will provide the
Trust's custodian bank with market price information relating to the
portfolio instruments of those Portfolios for which the Subadviser has
responsibility, on a daily basis, unless such information is, as decided
by the Manager, provided by the Manager.

(f) In the selection of brokers or dealers and the placement
of orders for the purchase and sale of portfolio investments for the
Portfolios, the Subadviser shall use its best efforts to obtain for the
Portfolios the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best
efforts to obtain the most favorable price and execution available, the
Subadviser, bearing in mind the Trust's best interests at all times, shall
consider all factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for the
security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience
and financial stability of the broker or dealer involved and the quality
of service rendered by the broker or dealer in other transactions.
Subject to such policies as the Trustees of the Trust may determine, the
Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Portfolio to pay a broker or dealer that provides
brokerage and research services to the Subadviser an amount of commission
for effecting a portfolio investment transaction in excess of the amount
of commission another broker or dealer would have charged for effecting
that transaction if the Subadviser determines in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Subadviser's overall

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<PAGE>

responsibilities with respect to the Trust and to other clients of the
Subadviser as to which the Subadviser exercises investment discretion.
As provided in the Investment Advisory and Administration Agreement
between the Manager and the Trust referred to in Section 4 below, the
Trust agrees that any entity or person associated with the Manager which
is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Trust which is
permitted by Section 11(a) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and Rule 11a2-2(T) thereunder, and the Trust has
consented to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(a)(2)(iv).

(g) The Subadviser shall not be obligated to pay any expenses
of or for the Trust not expressly assumed by the Subadviser pursuant to
this Section 1 and Section 2 hereafter.

2. BOOKS AND RECORDS

In compliance with the requirements of Rule 31a-3 under the
Investment Company Act of 1940 (the "1940 Act"), the Subadviser agrees
that all records it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust or Manager any such
records upon the Trust's or Manager's request. The Subadviser further
agrees to maintain for the Trust the records the Trust is required to
maintain under Rule 31a-l(b) insofar as such records relate to the
investment affairs of the Trust for which the Subadviser has
responsibility under this Agreement. The Subadviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records it maintains for the Trust.

3. OTHER AGREEMENTS

Any of the shareholders, Trustees, officers and employees of the
Trust may be a shareholder, director, officer or employee of, or be
otherwise interested in the Subadviser and in any person controlled by or
under common control with the Subadviser, and the Subadviser and any
person controlled by or under common control with the Subadviser may have
an interest in the Trust. The Subadviser and persons controlled by or
under common control with the Subadviser have and may have advisory,
management service or other contracts with other organizations and
persons, and may have other interests and businesses.

- 3 -
<PAGE>

4. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUBADVISER

The Manager will pay to the Subadviser as compensation for the
Subadvisers' services rendered and for the expenses borne by the
Subadviser pursuant to Sections 1 and 2, a subadvisory fee, as specified
in Schedule A attached hereto and made part of this Agreement.

For services provided and the expenses assumed pursuant to this
Agreement with respect to any Portfolio hereafter established, the
Subadviser shall receive from the Manager a fee to be agreed upon and
described in additional Schedules to this Agreement.

Such fees shall be paid by the Manager and not by the Trust
without regard to any reduction in the fees paid to the Manager as a
result of any statutory or regulatory limitation on investment company
expenses. Such fees shall be payable for each month within 10 business
days after the end of such month. If the Subadviser shall serve for less
than the whole of a month, the compensation as specified shall be
prorated.

5. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENT OF THIS AGREEMENT

This Agreement shall automatically terminate, without the payment
of any penalty, in the event of its assignment or in the event that the
Investment Advisory and Administration Agreement between the Manager and
the Trust shall have terminated for any reason; and this Agreement shall
not be materially amended unless such amendment be approved at a meeting
by the affirmative vote of a majority of the outstanding shares of any and
all Portfolios which are affected by the amendment, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Trust who are not interested persons
of the Trust or of the Manager or of the Subadviser.

6. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT

This Agreement shall become effective upon its execution;
provided, that with respect to any Portfolio now existing or hereafter
created for which the subadviser performs investment advisory services
under this Agreement, this Agreement shall not take effect unless it has
first been approved (i) by a vote of the majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of such
party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by a vote of a majority of that Portfolio's
outstanding voting securities. This Agreement shall remain in full force
and effect continuously thereafter (unless terminated automatically as set
forth in Section 5) until terminated as follows:

(a) The Trust may at any time terminate this
Agreement with respect to any or all Portfolios by providing not
more than 60 days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the
Subadviser; or

- 4 -
<PAGE>

(b) With respect to any Portfolio, if (i) the
Trustees of the Trust or the shareholders of a Portfolio by the
affirmative vote of a majority of the outstanding shares of such
Portfolio, and (ii) a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Manager or of
the Subadviser, by vote cast in person at a meeting called for
the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Agreement, then
this Agreement shall automatically terminate at the close of
business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of
any Portfolio for their approval and such shareholders fail to
approve such continuance of this Agreement as provided herein,
the Subadviser may continue to serve hereunder in a manner
consistent with the 1940 Act and the rules and regulations
thereunder with respect to that Portfolio; or

(c) The Manager may at any time terminate this
Agreement with respect to any or all Portfolios by not less than
60 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Subadviser, and the Subadviser may at any
time terminate this Agreement with respect to any or all
Portfolios by not less than 90 days' written notice delivered or
mailed by registered mail, postage prepaid, to the Manager.

Termination of this Agreement pursuant to this Section 6 shall be
without the payment of any penalty. Upon termination of this Agreement,
the duties of the Manager delegated to the Subadviser under this Agreement
automatically revert to the Manager.

7. CERTAIN INFORMATION

The Subadviser shall promptly notify the Manager in writing of
the occurrence of any of the following events:

(a) the Subadviser shall fail to be registered as an
investment adviser under the 1940 Act, as amended from time to
time, and under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser
in order to perform its obligations under this Agreement;

(b) the Subadviser shall have been served or
otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court,

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<PAGE>

public board or body, involving the affairs of the Trust or any
Portfolio; or

(c) any other occurrence that might affect the
ability of the Subadviser to provide the services provided for
under this Agreement.

8. CERTAIN DEFINITIONS

For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding Shares" means the affirmative vote, at a duly
called and held meeting of shareholders of the Trust or of a Portfolio, as
applicable, of the lesser of: (a) the holders of 67% or more of the Shares
present (in person or by proxy) and entitled to vote at such meeting if
the holders of more than 50% of the Shares entitled to vote at such
meeting are present in person or by proxy, or (b) the holders of more than
50% of Shares entitled to vote at such meeting.

For the purposes of this Agreement, the terms "affiliated
person," "control," "interested person" and "assignment" shall have their
respective meanings defined in the 1940 Act and the rules and regulations
thereunder subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder; and the term
"brokerage and research services" shall have the meaning given in the 1934
Act and the rules and regulations thereunder.

9. NONLIABILITY OF SUBADVISER

In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Subadviser, or reckless disregard of its
obligations and duties hereunder, the Subadviser shall not be subject to
any liability to the Trust, or to any of its Shareholders, for any act or
omission in the course of, or connected with, rendering services
hereunder.

- 6 -
<PAGE>

IN WITNESS WHEREOF, Heritage Asset Management, Inc. and Eagle
Asset Management Company, Inc. have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative,
all as of the day and year first above written.

Attest: HERITAGE ASSET MANAGEMENT, INC.

By:______________________ By:____________________________

Attest: EAGLE ASSET MANAGEMENT, INC.

By:______________________ By:____________________________

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<PAGE>

SCHEDULE A
TO THE
SUBADVISORY AGREEMENT
BETWEEN
HERITAGE ASSET MANAGEMENT, INC.
AND
EAGLE ASSET MANAGEMENT, INC.

As compensation pursuant to section 4 of the Subadvisory
Agreement between Heritage Asset Management, Inc. (the "Manager") and
Eagle Asset Management, Inc. (the "Subadvisor"), the Manager shall pay the
Subadvisor a Subadvisory Fee, computed and paid monthly, at the following
rates as percentages of the Advisory Fee received by the Manager from
Heritage Income Trust (the "Trust") for each Portfolio under the
Investment Advisory and Administration Agreement between the Trust and the
Manager:

(1) For the Diversified Portfolio: 25%

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<PAGE>

<PAGE>

HERITAGE INCOME TRUST
HIGH YIELD BOND FUND
SUBADVISORY AGREEMENT

This Subadvisory Agreement is made as of ________ __, 1996,
between Heritage Asset Management, Inc., a Florida corporation (the
"Manager"), and Salomon Brothers Asset Management Inc, a Delaware
corporation (the "Subadviser").

WHEREAS, the Manager has by separate contract agreed to serve as
the investment adviser to the High Yield Bond Fund ("Fund"), an investment
portfolio of Heritage Income Trust ("Trust"), a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended
("1940 Act"), as an open-end diversified management investment company
consisting of one or more investment series of shares, each having its own
assets and investment policies;

WHEREAS, the Manager's contract with the Trust allows it to
delegate certain investment advisory services to other parties; and

WHEREAS, the Manager desires to retain the Subadviser to perform
certain sub-investment advisory services for the Trust with respect to the
Fund, and the Subadviser is willing to perform such services;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:

1. Services to be Rendered by the Subadviser to the Trust.

(a) Investment Program. Subject to the control and
supervision of the Board of Trustees of the Trust and the
Manager, the Subadviser shall, at its expense, continuously
furnish to the Fund an investment program for such portion, if
any, of Fund assets that is allocated to it by the Manager from
time to time. With respect to such assets, the Subadviser will
make investment decisions and will place all orders for the
purchase and sale of portfolio securities. In the performance of
its duties, the Subadviser will act in the best interests of the
Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies
and restrictions of the Fund, as stated in the then-current
Registration Statement of the Trust, and (iv) such other
guidelines as the Trustees or Manager may establish. The Manager
shall be responsible for providing the Subadviser with the
Trust's Declaration of Trust, as filed with the Secretary of
State of Massachusetts on August 4, 1989, and all amendments
thereto or restatements thereof, the Trust's By-Laws and
amendments thereto, resolutions of the Trust's Board of Trustees
authorizing the appointment of Subadviser and approving this
Agreement and current copies of the materials specified in
<PAGE>

Subsections (a)(iii) and (iv) of this Section 1. At such times
as may be reasonably requested by the Board or the Manager, the
Subadviser will provide them with economic and investment
analysis and reports, and make available to the Board any
economical, statistical, or investment services normally
available to similar investment company clients of the
Subadviser.

(b) Availability of Personnel. The Subadviser, at
its expense, will make available to the Trustees and the Manager at
reasonable times its portfolio managers and other appropriate
personnel in order to review investment policies of the Fund and
to consult with the Trustees and the Manager regarding the
investment affairs of the Fund, including economic, statistical
and investment matters relevant to the Subadviser's duties
hereunder, and will provide periodic reports to the Manager
relating to the portfolio strategies it employs.

(c) Salaries and Facilities. The Subadviser, at its
expense, will pay for all salaries of personnel and facilities
required for it to execute its duties under this Agreement.

(d) Compliance Reports. The Subadviser, at its
expense, will provide the Manager with such compliance reports
relating to its duties under this Agreement as may be agreed upon
by such parties from time to time.

(e) Valuation. The Subadviser, at its expense, will
provide the Trust's custodian with market price information
relating to the assets of the Fund at such times as the parties
hereto may agree upon from time to time.

(f) Executing Portfolio Transactions. The Subadviser
will place all orders pursuant to its investment determinations
for the Fund either directly with the issuer or through broker-
dealers selected by Subadviser. In the selection of broker-
dealers and the placement of orders for the purchase and sale of
portfolio investments for the Fund, the Subadviser shall use its
best efforts to obtain for the Fund the most favorable price and
execution available, except to the extent it may be permitted to
pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain
the most favorable price and execution available, the Subadviser,
bearing in mind the Fund's best interests at all times, shall
consider all factors it deems relevant, including by way of
illustration, price, the size of the transaction, the nature of
the market for the security, the amount of the commission and
dealer's spread or mark-up, the timing of the transaction taking
into account market prices and trends, the reputation, experience
and financial stability of the broker-dealer involved, the
general execution and operational facilities of the broker-dealer
and the quality of service rendered by the broker-dealer in other

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<PAGE>

transactions. Subject to such policies as the Board of Trustees
may determine, the Subadviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of its having caused the Fund to
pay a broker-dealer that provides brokerage and research services
to the Subadviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting
that transaction if the Subadviser determines in good faith that
such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such broker-
dealer, viewed in terms of either that particular transaction or
the Subadviser's overall responsibilities with respect to the
Trust and to other clients of the Subadviser as to which the
Subadviser exercises investment discretion. In no instance will
portfolio securities of the Fund be purchased from or sold to the
Subadviser or any affiliated person of the Subadviser. The Trust
agrees that any entity or person associated with the Manager or
the Subadviser that is a member of a national securities exchange
is authorized to effect any transaction on such exchange for the
account of the Trust that is permitted by Section 11(a) of the
Securities Exchange Act of 1934, as amended, and the Trust
consents to the retention of compensation for such transactions.

(g) Expenses. The Subadviser shall not be obligated
to pay any expenses of or for the Trust or the Fund not expressly
assumed by the Subadviser pursuant to this Agreement.

2. Books and Records. Pursuant to Rule 31a-3 under the 1940
Act, the Subadviser agrees that: (a) all records it maintains for the
Trust are the property of the Trust; (b) it will surrender promptly to the
Trust or the Manager any such records upon the Trust's or Manager's
request; (c) it will maintain for the Trust the records that the Trust is
required to maintain pursuant to Rule 31a-1 insofar as such records relate
to the investment affairs of the Fund; and (d) it will preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records it
maintains for the Trust.

3. Other Agreements. The Manager understands that
Subadviser now acts, or may in the future act, as an investment adviser to
fiduciary and other managed accounts, and as investment adviser or
subadviser to other investment companies. Manager has no objection to
Subadviser acting in such capacities, provided that whenever the Fund and
one or more other investment advisory clients of Subadviser have available
funds for investment, investments suitable and appropriate for each will
be allocated in a manner believed by Subadviser to be equitable to each,
but Subadviser cannot assure, and assumes no responsibility for equality
among all accounts and customers. Subadviser shall be permitted to bunch
or aggregate orders for the Fund with orders for other funds and accounts
in a manner deemed equitable to all. Manager recognizes that in some
cases this procedure may adversely affect the size of the position or
price that the participating Fund may obtain in a particular security. In

- 3 -
<PAGE>

addition, Manager understands that the persons employed by Subadviser to
assist in Subadviser's duties under this Agreement will not devote their
full time to such service and nothing contained in this Agreement will be
deemed to limit or restrict the right of Subadviser or any of its
affiliates to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.

By reason of the Subadviser's investment advisory activities and
the investment banking and other activities of its affiliates, the
Subadviser may acquire confidential information or be restricted from
initiating transactions in certain securities. The Manager acknowledges
and agrees that the Subadviser will not be free to divulge to the Manager,
or to act upon, any such confidential information with respect to the
Subadviser's performance of this Agreement and that, due to such a
restriction, the Subadviser may not initiate a transaction the Subadviser
otherwise might have initiated.

4. Compensation. The Manager will pay to the Subadviser as
compensation for the Subadviser's services rendered pursuant to this
Agreement a subadvisory fee equal to 50% of the advisory fee payable to
the Manager by the Fund without regard to any reduction in the fees paid
to the Manager as a result of any statutory or regulatory limitation on
investment company expenses Such fees shall be paid by the Manager (and
not by the Trust). Such fees shall be payable for each month within 15
business days after the end of such month. If the Subadviser shall serve
for less than the whole of a month, the compensation as specified shall be
prorated.

5. Amendment of Agreement. This Agreement shall not be
materially amended unless such amendment is approved by the affirmative
vote of a majority of the outstanding shares of the Fund, and by the vote,
cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the members of the Board of Trustees who are
not interested persons of the Trust, the Manager or the Subadviser (the
"Independent Trustees"). The Subadviser agrees to notify the Manager of
any anticipated change in control of the Subadviser as soon as such change
is anticipated and, in any event, prior to such change.

6. Duration and Termination of the Agreement. This
Agreement shall become effective upon its execution; provided, however,
that this Agreement shall not become effective unless it has first been
approved (a) by a vote of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by an
affirmative vote of a majority of the outstanding voting shares of the
Fund. This Agreement shall remain in full force and effect continuously
thereafter, except as follows:

(a) By vote of a majority of the (i) Independent
Trustees, or (ii) outstanding voting shares of the Fund, the
Trust may at any time terminate this Agreement, without the
payment of any penalty, by providing not more than 60 days'

- 4 -
<PAGE>

written notice delivered or mailed by registered mail, postage
prepaid, to the Manager and the Subadviser.

(b) This Agreement will terminate automatically,
without the payment of any penalty, unless within two years after
its initial effectiveness and at least annually thereafter, the
continuance of the Agreement is specifically approved by (i) the
Board of Trustees or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Independent Trustees, by vote
cast in person at a meeting called for the purpose of voting on
such approval. If the continuance of this Agreement is submitted
to the shareholders of the Fund for their approval and such
shareholders fail to approve such continuance as provided herein,
the Subadviser may continue to serve hereunder in a manner
consistent with the 1940 Act and the rules and regulations
thereunder.

(c) The Manager may at any time terminate this
Agreement, without the payment of any penalty, by not less than
60 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Subadviser, and the Subadviser may at any
time, without the payment of any penalty, terminate this
Agreement by not less than 90 days' written notice delivered or
mailed by registered mail, postage prepaid, to the Manager.

(d) This Agreement automatically and immediately
shall terminate, without the payment of any penalty, in the
event of its assignment or if the Investment Advisory
Agreement between the Manager and the Trust shall
terminate for any reason.

(e) Any notice of termination served on the
Subadviser by the Manager shall be without prejudice to the
obligation of the Subadviser to complete transactions already
initiated or acted upon with respect to the Fund. Upon
termination without reasonable notice by the Manager, the
Subadviser will be paid certain previously agreed upon expenses
the Subadviser necessarily incurs in terminating the Agreement.

Upon termination of this Agreement, the duties of the Manager
delegated to the Subadviser under this Agreement automatically shall
revert to the Manager.

7. Notification of the Manager. The Subadviser promptly
shall notify the Manager in writing of the occurrence of any of the
following events:

(a) the Subadviser shall fail to be registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended, and under the laws of any jurisdiction in which the

- 5 -
<PAGE>

Subadviser is required to be registered as an investment adviser
in order to perform its obligations under this Agreement;

(b) the Subadviser shall have been served or
otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court,
public board or body, involving the affairs of the Trust or the
Fund; or

(c) any other occurrence that might affect the
ability of the Subadviser to provide the services provided for
under this Agreement.

8. Definitions. For the purposes of this Agreement, the
terms "vote of a majority of the outstanding shares," "affiliated person,"
"control," "interested person" and "assignment" shall have their
respective meanings as defined in the 1940 Act and the rules and
regulations thereunder subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; and
references to annual approvals by the Board of Trustees shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.

9. Liability of the Subadviser. In the absence of its bad
faith, negligence or disregard of its obligations and duties hereunder,
the Subadviser shall not be subject to any liability to the Manager, the
Trust or their directors, Trustees, officers or shareholders, for any act
or omission in the course of, or connected with, rendering services
hereunder. However, the Subadviser shall indemnify and hold harmless such
parties from any and all claims, losses, expenses, obligations and
liabilities (including reasonable attorneys fees) which arise or result
from the Subadviser's bad faith, negligence or disregard of its duties
hereunder.

10. Liability of Trustees and Shareholders. Any obligations
of the Trust under this Agreement are not binding upon the Trustees or the
Shareholders individually but are binding only upon the assets and
property of the Fund.

11. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Florida, without giving effect to
the conflicts of laws principles thereof, and in accordance with the 1940
Act. To the extent that the applicable laws of the State of Florida
conflict with the applicable provisions of the 1940 Act, the latter shall
control.

12. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors.

- 6 -
<PAGE>

13. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is made less restrictive by a rule, regulation
or order of the Securities and Exchange Commission, whether of special or
general application, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.

IN WITNESS WHEREOF, Heritage Asset Management, Inc. and Salomon
Brothers Asset Management Inc have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative,
all as of the day and year first above written.

Attest: HERITAGE ASSET MANAGEMENT, INC.

By:________________________ By: _______________________________

Attest: SALOMON BROTHERS ASSET MANAGEMENT INC

By:________________________ By:________________________________

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<PAGE>

<PAGE>

Exhibit (6)

DISTRIBUTION AGREEMENT
OF
HERITAGE INCOME TRUST

This Distribution Agreement is made this ____ day of
_________________, 1989, by and between Heritage Income Trust, a
Massachusetts business trust (the "Trust"), and Raymond James &
Associates, Inc. ("Raymond James").

WHEREAS, the Trust is registered as an open-end, diversified
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), and has registered and intends to register the shares
(the "Shares") of beneficial interest of its distinct portfolios now
existing or hereafter created (the "Portfolios") for sale to the public
under the Securities Act of 1933, as amended (the "1933 Act"), and various
state securities laws; and

WHEREAS, the Trust wishes to retain Raymond James as the Trust's
Distributor in connection with the offering and sale of the Shares and to
furnish certain other services to the Trust as specified in this
Agreement; and

WHEREAS, this Agreement has been approved by a vote of the
Trust's Board of Trustees and certain disinterested Trustees in conformity
with Paragraph (b)(2) of Rule 12b-1 under the 1940 Act; and

WHEREAS, Raymond James is willing to act as Distributor and to
furnish such services on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:

1. The Trust hereby appoints Raymond James as Distributor in
connection with the offering and sale of the Shares. The Trust authorizes
Raymond James as exclusive agent for the Trust, subject to applicable
federal and state law and the Declaration of Trust, Bylaws and current
Prospectus and Statement of Additional Information of the Trust: (a) to
promote the Trust; (b) to solicit orders for the purchase of the Shares
subject to such terms and conditions as the Trust may specify; and (c) to
accept orders for the purchase of the Shares on behalf of the Trust.
Raymond James shall offer the Shares on an agency or "best efforts" basis
under which the Trust shall only issue such Shares as are actually sold.

2. The public offering price of the Shares of a Portfolio of
the Trust shall be the net asset value per share (as determined by the
Trust) of the outstanding Shares of that Portfolio plus a sales charge as
set forth in the Trust's current Prospectus. The Trust shall made
available to Raymond James a statement of each computation of net asset
value of each Portfolio and of the details entering into such computation.
<PAGE>

3. As compensation for the services performed and the
expenses assumed by Raymond James under this Agreement including, but not
limited to, any commissions paid for sales of Shares, the Trust shall pay
Raymond James, as promptly as possible after the last day of each month, a
fee, accrued daily, of 0.25% per annum of each Portfolio's average daily
net assets. The first payment of the fee shall be made as promptly as
possible at the end of the month in which the Trust commences operations
and shall constitute a full payment of the fee due Raymond James for all
services prior to that date. If this Agreement is terminated as of any
date not the last of a month, such fee shall be paid as promptly as
possible after such date of termination, shall be based on the average
daily net assets of each Portfolio in the period from the beginning of
such month to such date of termination, and shall be that portion of such
average daily net assets as the number of days in such period bears to the
number of days in such month. Each such payment shall be accompanied by a
report of the Trust prepared either by the Trust or its transfer agent
that shall show the amount properly payable to Raymond James under this
Agreement and the detailed computation thereof. Raymond James shall also
receive the sales load set forth in the Trust's current prospectus.

4. As used in this Agreement, the term "Registration
Statement" shall mean the Registration Statement most recently filed by
the Trust with the Securities and Exchange Commission and effective under
the 1933 Act, as such Registration Statement is amended by any amendments
thereto at the time in effect, and the terms "Prospectus" and "Statement
of Additional Information" shall mean the form of Prospectus and Statement
of Additional Information filed by the Trust as part of the Registration
Statement.

5. Raymond James shall finance activity which is intended to
result in the sale and retention of Shares of each Portfolio including,
but not limited to, advertising, salaries and other expenses of the
Distributor relating to selling or servicing efforts, expenses of
organizing and conducting sales seminars, printing of Prospectuses and
reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature and payments to dealers whose
customers purchase Shares. In connection with such sales and offers of
sale, the Trust and the Portfolios shall not be responsible in any way for
any other information, statements or representations given or made by
Raymond James or its representatives or agents, except such information
and make only such statements or representations as are contained in the
Prospectus or in information furnished in writing to Raymond James by the
Trust. Except as specifically provided in this Agreement, the Trust and
the Portfolios shall bear none of the expenses of Raymond James in
connection with its offer and sale of the Shares.

6. The Trust agrees, at its own expense, to register the
Shares with the Securities and Exchange Commission, state and other
regulatory bodies, and to prepare and file from time to time such
Prospectuses, amendments, reports and other documents as may be necessary
to maintain the Registration Statement. The Trust shall bear all expenses
related to preparing and typesetting such Prospectuses, Statements of

- 2 -
<PAGE>

Additional Information and other materials required by law and such other
expenses, including printing and mailing expenses, related to the Trust's
communications with persons who are shareholders of the Trust.

7. The Trust agrees to indemnify, defend and hold harmless
Raymond James, its several officers and directors, and any person who
controls Raymond James within the meaning of Section 15 of the 1933 Act
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
Raymond James, its officers or Trustees, or any such controlling person
may incur under the 1933 Act or under common law or otherwise arising out
of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement, Prospectus or Statement of Additional
Information or arising out of or based upon any alleged omission to state
a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, provided that in no
event shall anything contained in this Agreement be construed so as to
protect Raymond James against any liability to the Trust or its
shareholders to which Raymond James would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of its obligations
and duties under this Agreement.

8. Raymond James agrees to indemnify, defend and hold
harmless the Trust and its Portfolios, its several officers and directors,
and any person who controls the Trust within the meaning of Section 15 of
the 1933 Act from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Trust, its officers or Trustees, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by Raymond
James to the Trust for use in the Registration Statement, Prospectus or
Statement of Additional Information or arising out of or based upon any
alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading.

9. The Trust reserves the right at any time to withdraw all
offerings of the Shares of any or all Portfolios by written notice to the
Distributor at its principal office.

10. The Trust shall not issue certificates representing
Shares unless requested by a shareholder. If such request is transmitted
through Raymond James, the Trust will cause certificates evidencing the
Shares owned to be issued in such names and denominations as Raymond James
shall from time to time direct.

11. Raymond James at its sole discretion may repurchase
Shares offered for sale by the shareholders. Repurchase of Shares of any

- 3 -
<PAGE>

Portfolio by Raymond James shall be at the net asset value of the
applicable Portfolio next determined after a repurchase order has been
received. On each business day, Raymond James shall notify by telex or in
writing the Trust and the Trust's transfer agent of the orders for
repurchase of shares received by Raymond James since the last such report,
the amount to be paid for such Shares, and the identity of shareholders
offering Shares for repurchase. Upon such notice, the Trust shall pay
Raymond James such amounts as are required by Raymond James for the
repurchase of such shares in cash or in the form of a credit against
moneys due the Trust from Raymond James as proceeds from the sale of
Shares. Raymond James will receive no commission or other remuneration for
repurchasing Shares other than the compensation set forth in paragraph 3
hereof or service fees charged to its customers for processing a
redemption order. The Trust reserves the right to suspend such purchases
with respect to any or all Portfolios upon written notice to Raymond
James. Raymond James further agrees to act as agent for the Trust to
receive and transmit promptly to the Trust's transfer agent shareholder
requests for redemption of Shares.

12. Raymond James is an independent contractor and shall be
agent for the Trust only with respect to the sale and repurchase of the
Shares.

13. The services of Raymond James to the Trust under this
Agreement are not to be deemed exclusive, and the Distributor shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.

14. Raymond James shall prepare reports for the Board of
Trustees of the Trust upon request showing information concerning
expenditures related to this Agreement.

15. As used in this Agreement, the term "net asset value"
shall have the meaning ascribed to it in the Trust's Declaration of Trust;
and the terms "assignment," "interested person," and "majority of the
outstanding voting securities" shall have the meanings given to them by
Section 2(a) of the 1940 Act, subject to such exemptions as may be granted
by the Securities and Exchange Commission by any rule, regulation or
order.

16. With respect to any or all Portfolios, this Agreement
shall automatically terminate in the event of its assignment and may be
terminated at any time without the payment of any penalty by the Trust or
by Raymond James on 60 days' written notice to the other party. The Trust
may effect such termination with respect to any or all Portfolios by a
vote of (i) a majority of the Trust's Board of Trustees, (ii) a majority
of the Trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of the Trust's
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act in this
Agreement or in any agreement related to the Trust's Distribution Plan
(the "Rule 12b-1 Trustees"), or (iii) a majority of the outstanding voting
securities of the Trust or the applicable Portfolio.

- 4 -
<PAGE>

17. This Agreement will remain in effect for two years from
the date of its execution and from year to year thereafter, provided that
it is specifically approved annually (i) by a majority vote of the Trust's
Board of Trustees, and (ii) by the vote of a majority of the Rule 12b-1
Trustees of the Trust, cast in person at a meeting called for the purpose
of voting on such approval.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers thereunto duly authorized.

Dated:_____________________, 1989

Attest: HERITAGE INCOME TRUST

By:_________________________ By:_____________________________

Attest: RAYMOND JAMES & ASSOCIATES, INC.

By:_________________________ By:_____________________________

- 5 -
<PAGE>

<PAGE>

CUSTODIAN CONTRACT
Between
HERITAGE INCOME TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>

TABLE OF CONTENTS
-----------------

PAGE
----

1. Employment of Custodian and Property to be Held By It . . . . 1

2. Duties of the Custodian with Respect to Property of
Fund Held by the Custodian . . . . . . . . . . . . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . 3
2.3 Registration of Securities . . . . . . . . 8
2.4 Bank Accounts . . . . . . . . . . . . . . 9
2.5 Payments for Shares . . . . . . . . . . . 10
2.6 Availability of Federal Funds . . . . . . 10
2.7 Collection of Income . . . . . . . . . . . 10
2.8 Payment of Fund Monies . . . . . . . . . . ll
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . 14
2.10 Payments for Repurchases or Redemptions of
Shares of the Fund . . . . . . . . . . . . 15
2.11 Appointment of Agents . . . . . . . . . . 15
2.12 Deposit of Fund Assets in Securities System 16
2.12A Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . l9
2.13 Segregated Account . . . . . . . . . . . . 21
2.14 Ownership Certificates for Tax Purposes . 22
2.15 Proxies . . . . . . . . . . . . . . . . . 22
2.16 Communications Relating to Portfolio
Securities . . . . . . . . . . . . . . . . 23
2.17 Proper Instructions . . . . . . . . . . . 23
2.18 Actions Permitted Without Express
Authority . . . . . . . . . . . . . . . . 24
2.19 Evidence of Authority . . . . . . . . . . 25

3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . . . . . . 26

4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

5. Opinion of Fund's Independent Accountants . . . . . . . . . . 27

6. Reports to Fund by Independent Public Accountants . . . . . . 27

7. Compensation of Custodian . . . . . . . . . . . . . . . . . . 28

8. Responsibility of Custodian . . . . . . . . . . . . . . . . . 28

9. Effective Period, Termination and Amendment . . . . . . . . . 30

10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . 31

-2-<PAGE>

11. Interpretive and Additional Provisions . . . . . . . . . . . . 33

12. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . 33

13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 34

14. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . 34

-3-<PAGE>

CUSTODIAN CONTRACT
__________________

This Contract between Heritage Income Trust, a business trust
organized and existing under the laws of Massachusetts, having its
principal place of business at 880 Carillon Parkway, St. Petersburg,
Florida 33716 hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place
of business at 225 Franklin Street, Boston, Massachusetts, 02110,
hereinafter called the Custodian",

WITNESSETH:

WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets; and

WHEREAS, the Fund intends to initially offer shares in two
series, The Government Portfolio and The Diversified Portfolio (such
series together with all other series subsequently established by the Fund
and made subject to this Contract in accordance with paragraph 12, being
herein referred to as the "Portfolio(s)");

NOW THEREFOR, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:

1. Employment of Custodian and Property to be Held by It

The Fund hereby employs the Custodian as the custodian of the
assets of the Portfolios of the Fund pursuant to the provisions
of the Declaration of Trust. The Fund on behalf of the
Portfolio(s) agrees to deliver to the Custodian all securities
and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect
to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or
treasury shares of beneficial interest of the Fund representing
interests in the Portfolios, ( Shares ) as may be issued or sold
from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of
Section 2.17), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians,
but only in accordance with an applicable vote by the Board of
Trustees of the Fund on behalf of the applicable Portfolio (8 ),
and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian 80 employed than any such
sub-custodian has to the Custodian.

-4-<PAGE>

2. Duties of the Custodian with Respect to Property of the Fund Held
By the Custodian

2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash
property, including all securities owned by such Portfolio, other
than (a) securities which are maintained pursuant to Section 2.12
in a clearing agency which acts as a securities depository or in
a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.12A.

2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in
the following cases:

1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;

2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;

3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.12
hereof;

4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;

5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or
other consideration is to be delivered to the Custodian;

6) To the issuer thereof, or its agent, for transfer into
the name of the Portfolio or into the name of any nominee
or nominees of the Custodian or into the name or nominee
name of any agent appointed pursuant to Section 2.11 or
into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new
securities are to be delivered to the Custodian;

-5-<PAGE>

7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;

8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;

9) In the case of warrants, rights or similar the surrender
thereof in the securities, exercise of such warrants,
rights or similar securities or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;

10) For delivery in connection with any loans of securities
made by the Portfolio, but only against receipt of
adequate collateral as agreed upon from time to time by
the Custodian and the fund on behalf of the Portfolio,
which may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with any
loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery
of securities owned by the Portfolio prior to the receipt
of such collateral;

11) For delivery as security ln connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of the
Portfolio, but only against receipt of amounts borrowed;

12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and
a member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any

-6-<PAGE>

similar organization or organizations, regarding escrow
or other arrangement in connection with transactions by
the Portfolio of the Fund;

13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits
in connection with transactions by the Portfolio of the
Fund;

14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time
to time in the currently effective prospectus and
statement of additional information of the Fund, related
to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and

15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified
copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be
made.

2.3 Registration of Securities. Securities held by the g Custodian
(other than bearer securities) shall be registered in the name of
the Portfolio or in the name of any nominee of the Fund on behalf
of the Portfolio or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Portfolio, unless the Fund
has authorized in writing the appointment of a nominee to be used
in common with other registered investment companies having the
same investment adviser as the Portfolio, or in the name or
nominee name of any agent appointed pursuant to Section 2.11 or in
the name or nominee name of any sub-custodian appointed pursuant
to Article 1. All securities accepted by the Custodian on behalf
of the Portfolio under the terms of this Contract shall be' in
"street name" or other good delivery form.

If, however, the Fund directs the Custodian to maintain securities
in "street name", the Custodian shall utilize its best efforts
only to timely collect income due the Fund on such securities and

-7-<PAGE>

to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.

2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Portfolio of the
Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio, other
than cash maintained by the Portfolio in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved
by vote of a majority of the Board of Trustees of the Fund. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.

2.5 Payments for Shares. The Custodian shall receive from the
distributor for the Shares or from the Transfer Agent of the Fund
and deposit into the account of the appropriate Portfolio such
payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide
timely notification to the Fund on behalf of each such Portfolio
and the Transfer Agent of any receipt by it of payments for Shares
of such Portfolio.

2.6 Availability of Federal Funds. Upon mutual agreement between the
Fund on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the
Fund on behalf of a Portfolio, make federal funds available to
such Portfolio as of specified times agreed upon from time to time
by the Fund and the Custodian in the amount of checks received in
payment for Shares of such Portfolio which are deposited into the
Portfolio's account.

2.7 Collection of Income. Subject to the provisions of Section 2.3,
the Custodian shall collect on a timely basic all income and other
payments with respect to registered securities held hereunder to
which each Portfolio shall be entitled either by law or pursuant
to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and
shall credit such income, as collected, to such Portfolio's
custodian account. Without limiting the generality of the

-8-<PAGE>

foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities
held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist
the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.

2.8 Payment of Fund Monies. Upon receipt of Proper Instructions from
the Fund on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of a Portfolio in the following
cases only:

1) Upon the purchase of securities, options, futures
contracts or options on futures contracts for the account
of the Portfolio but only (a) against the delivery of
such securities or evidence of title to such options,
futures contracts or options on futures contracts to the
Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, a
amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered
in the name of the Portfolio or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof; (c) in
the case of a purchase involving the Direct Paper System,
in accordance with the conditions set forth in Section
2.12A; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian' account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities owned
by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities
from the Portfolio or (e) for transfer to a time deposit
account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt
of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as
defined in Section 2.17;

2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;

-9-<PAGE>

3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Section 2.10 hereof;

4) For the payment of any expense or liability incurred by
the Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest,
taxes, management, accounting, transfer agent and legal
fees, and operating expenses of the Fund whether or not
such expenses are to be in whole or part capitalized or
treated as deferred expenses;

5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents of
the Fund;

6) For payment of the amount of dividends received in
respect of securities sold short;

7) For any other proper purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on
behalf of the Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified
by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper purpose, and naming the person or persons
to whom such payment is to be made.

2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
securities for the account of a Portfolio is made by the Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions from the Fund on behalf of such
Portfolio to pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the sale extent as if
the securities had been received by the Custodian.

2.10 Payments for Repurchases or Redemptions of Shares of the Fund.
From such funds as may be available for the purpose but subject to
the limitations of the Declaration of Trust and any applicable
votes of the Board of Trustees of the Fund pursuant thereto, the
Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares who
have delivered to the Transfer Agent a request for redemption or
repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds
to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the
Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the

-10-<PAGE>

Custodian in accordance with such procedures and controls as are
mutually agreed upon from time to time between the Fund and the
Custodian.

2.11 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the Investment
Company Act of 1940, as amended, to act as a custodian, as its
agent to carry out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.

2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:

1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;

2) The records of the Custodian with respect to securities
of the Portfolio which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Portfolio;

3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from
the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for
the Portfolio by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation

-11-<PAGE>

of each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's
transactions in the Securities System for the account of
the Portfolio.

4) The Custodian shall provide the Fund for the Portfolio
with any report obtained by the Custodian on the
Securities System's accounting system, internal
accounting control and procedures for safeguarding
securities deposited in the Securities System;

5) The Custodian shall have received from the Fund on behalf
of the Portfolio the initial or annual certificate, ac
the case may be, required by Article 9 hereof;

6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any 1088 or
damage to the Portfolio resulting from use of the
Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such 1088 or damage if
and to the extent that the Portfolio has not been made
whole for any such or damage.

2.12A Fund Assets Held in the Custodian's Direct Paper System The
Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to
the following provisions:

1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;

2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are
represented in an account (~Account~) of the Custodian in
the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;

3) The records of the Custodian with respect to securities
of the Portfolio which are maintained in the Direct Paper
System shall identify by book-entry those securities
belonging to the Portfolio;

-12-<PAGE>

4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio.
The Custodian shall transfer securities sold for the
account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and
receipt of payment for the account of the Portfolio;

5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the
account of the Portfolio, in the form of a written advice
or notice, of Direct Paper on the nest business day
following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction
sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;

6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request
from time to time.

2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may
be transferred cash and for securities, including securities
maintained in an account by the Custodian pursuant to Section 2.12
hereof, (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the E~change Act and a member of
the NASD (or any futures commission merchant registered under the
Commodity E~change Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization
or organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio, (ii) for purposes
of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity
futures contracts or-options thereon purchased or sold by the
Portfolio, (iii) for the purposes of compliance by the Portfolio
with the procedures required by Investment Company Act Release ~o.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund
on behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or
an Assistant Secretary, setting forth the purpose or purposes of

-13-<PAGE>

such segregated account and declaring such purposes to be proper
corporate purposes.

2.14 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of each
Portfolio held by it and in connection with transfers of
securities.

2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise
than in the name of the Portfolio or a nominee of the Portfolio,
all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the
Portfolio such proxies, all prosy soliciting materials and all
notices relating to such securities.

2.16 Communications Relating to Portfolio Securities Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly
to the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund on behalf of
the Portfolio and the maturity of futures contracts purchased or
sold by the Portfolio) received by the Custodian from issuers of
the securities being held for the Portfolio. With respect to
tender or exchange offers, the Custodian shall transmit promptly
to the Portfolio all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange
offer. If the Portfolio desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days
prior to the date on which the Custodian is to take such action.

2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more
person or persons as the Board of Trustees shall have from time to
time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the
Board of Trustees of the Fund accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such

-14-<PAGE>

procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance
with Section 2.13.

2.18 Actions Permitted without Express Authority. The Custodian may in
its discretion, without express authority from the Fund on behalf
of each applicable Portfolio:

1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to
its duties under this Contract, provided that all such
payments shall be accounted for to the Fund on behalf of
the Portfolio;

2) surrender securities in temporary form for securities in
definitive form;

3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and

4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.

2.19 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The Custodian
may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such
vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.

3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income

The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees of the Fund to keep the books of account of each
Portfolio and/or compute the net asset value per share of the
outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep
such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Fund's
currently effective prospectus related to such Portfolio and shall
advise the Fund and the Transfer Agent daily of the total amounts

-15-<PAGE>

of such net income and, if instructed in writing by an officer of
the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of each Portfolio shall be made at the time or times described
from time to time in the Fund's currently effective prospectus
related to such Portfolio.

4. Records

The Custodian shall with respect to each Portfolio create and
maintain all records relating to its activities and obligations
under this Contract in such manner as will meet the obligations of
the Fund under the Investment Company Act of 1940, with particular
attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable federal and state tax laws and any other
law or administrative rules or procedures which may be applicable
to the Fund. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when
requested to do 80 by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations. 5.

5. Opinion of Fund's Independent Accountant

The Custodian shall take all reasonable action, as the Fund on
behalf of each applicable Portfolio may from time to time request,
to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder
in connection with the preparation of the Fund's Form N-lA, and
Form N-SAR or other annual reports to the Securities and E~change
Commission and with respect to any other requirements of such
Commission.

6. Reports to Fund by Independent Public Accountants

The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting
system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and,
if there are no such inadequacies, the reports shall so state.
-14-<PAGE>

7. Compensation of Custodian

The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to
time between the Fund on behalf of each applicable Portfolio and
the Custodian.

8. Responsibility of Custodian

So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to
the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to
redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the
Fund.

If the Fund on behalf of a Portfolio requires the Custodian to
take any action with respect to securities, which action involves
the payment of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned to the
Fund or the Portfolio being liable for the payment of money or
incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount
and form satisfactory to it.

If the Fund requires the Custodian to advance cash or securities
for any purpose for the benefit of a Portfolio or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such Portfolio's assets to the
extent necessary to obtain reimbursement.

-15-<PAGE>

9. Effective Period, Termination and Amendment

This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than
thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not with respect to a
Portfolio act under Section 2.12 hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio
and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the
use by such Portfolio of such Securities System, as required in
each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a
Portfolio act under Section 2.12A hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has approved the initial use
of the Direct Paper System by such Portfolio and the receipt of an
annual certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has reviewed the use by such Portfolio of
the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Declaration of Trust, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action
of its Board of Trustees (1) substitute another bank or trust
company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening
of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.

Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation
as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and
disbursements.

10. Successor Custodian

If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the
Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each
such Portfolio held in a Securities System.

-16-<PAGE>

If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote
of the Board of Trustees of the Fund, deliver at the office of the
Custodian and transfer such securities, funds and other
properties~ in accordance with such vote.

In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees
shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian
shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian
on behalf of each applicable Portfolio and all instruments held by
the Custodian relative thereto and all other property held by it
under this Contract on behalf of each applicable Portfolio and to
transfer to an account of such successor custodian all of the
securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of
the Custodian under this Contract.

In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination
hereof owing to failure of the Fund to procure the certified copy
ff the vote referred to or of the Board of Trustees to appoint a
successor custodian, the Custodian shall be entitled to fair
compensation for its services during such period as the Custodian
retains possession of such securities, funds and Other properties
and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and
effect.

11. Interpretive and Additional Provisions

In connection with the operation of this Contract, the Custodian
and the Fund on behalf of each of the Portfolios, may from time to
time agree on such provisions interpretive of or in addition to
the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed
by both parties and shall be addressed hereto, provided that no
such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.

12. Additional Funds

In the event that the Fund establishes one or more series of
Shares in addition to The Government Portfolio and The Diversified

-17-<PAGE>

Portfolio with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in
writing to provide such services, such series of Shares shall
become a Portfolio hereunder.

13. Massachusetts Law to Apply

This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.

14. Prior Contracts

This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund on behalf of each of the
Portfolios and the Custodian relating to the custody of the Fund's
assets.

IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized represen-
tative and its seal to be hereunder affixed as of the ____ day of
___________________ , 1989.

ATTEST HERITAGE INCOME TRUST

By:
------------------------ --------------------------------

ATTEST STATE STREET BANK AND TRUST COMPANY

By:
------------------------ --------------------------------

-18-<PAGE>

<PAGE>

EXHIBIT (9)

TRANSFER AGENCY AND SERVICE AGREEMENT
between
HERITAGE INCOME TRUST
and
HERITAGE ASSET MANAGEMENT, INC.
<PAGE>

TABLE OF CONTENTS

Page

Article 1 Terms of Appointment; Duties of the Agent . . 1

Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . 5

Article 3 Representations and Warranties of the Agent . . . . . 6

Article 4 Representations and Warranties of the Fund . . . . . . 6

Article 5 Indemnification . . . . . . . . . . . . . . . . . . . 7

Article 6 Covenants of the Fund and the Agent . . . . . . . . . 11

Article 7 Termination of Agreement . . . . . . . . . . . . . . . 12

Article 8 Assignment . . . . . . . . . . . . . . . . . . . . . . 13

Article 9 Amendment . . . . . . . . . . . . . . . . . . . . . . 14

Article 10 Merger of Agreement . . . . . . . . . . . . . . . . . 14

Article 11 Miscellaneous . . . . . . . . . . . . . . . . . . . . 14

Article 12 Massachusetts Law to Apply . . . . . . . . . . . . . . 15
<PAGE>

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the 31st day of October, 1989, by and

between HERITAGE INCOME TRUST, a Massachusetts business trust, having its

principal office and place of business at 880 Carillon Parkway, St.

Petersburg, Florida 33716 (the "Fund"), and HERITAGE ASSET MANAGEMENT,

INC., a Florida corporation and a duly registered transfer agent pursuant

to the securities & exchange act of 1934 having its principal office and

place of business at 880 Carillon Parkway, St.Petersburg, Florida 33716

(the "Agent").

WHEREAS, the Fund desires to appoint the Agent as its transfer

agent, dividend disbursing agent and agent in connection with certain

other activities, and the Agent desires to accept such appointment;

WHEREAS, the Fund is authorized to issue Shares of beneficial

interest, without par value ("Shares")

NOW, THEREFORE, in consideration of the mutual covenants herein

contained, the parties hereto agree as follows:

Article 1 Terms of Appointment: Duties of the Agent

1.01 Subject to the terms and conditions set forth in this

Agreement, the Fund hereby employs and appoints the Agent to act as, and

the Agent agrees to act as its transfer agent for the Fund's authorized

and issued Shares; its dividend disbursing agent and its agent in

connection with any accumulation, open-account or similar plans provided

to the Shareholders of the Fund ("Shareholders") and set out in the

current effective Prospectus and Statement of Additional Information of

the Fund, including without limitation any periodic investment plan or

periodic withdrawal program.
<PAGE>

1.02 The Agent agrees that it will perform the following

services:

(a) In accordance with the Fund's then current Prospectus and

Statement of Additional Information and procedures established from time

to time by agreement between the Fund and the Agent, the Agent shall:

(i) receive for acceptance, orders for the purchase of

Shares, and promptly deliver payment and appropriate

documentation therefor to the Custodian of the Fund (the

"Custodian");

(ii) pursuant to purchase orders, issue the appropriate number

of Shares and hold such Shares in the appropriate account

of the Shareholder;

(iii) receive for acceptance, redemption requests and

redemption directions and deliver the appropriate

documentation therefor to the Custodian:

(iv) at the appropriate time as and when the Agent receives

monies paid to it by the Custodian with respect to any

redemption, pay over or cause to be paid over in the

appropriate manner such monies as instructed by the

redeeming Shareholder;

(v) effect transfers of Shares by the Shareholders thereof

upon receipt of appropriate instructions;

(vi) prepare and transmit payments for dividends and

distributions declared by the Fund;

(vii) maintain records of account for and advise the Fund and

its Shareholders as to the foregoing; and
<PAGE>

(viii) record the issuance of shares of the Fund and maintain

pursuant to rule 17Ad-10(e) under the Securities Exchange

Act of 1934 a record of the total number of shares of the

Fund which are authorized, based upon data provided to it

by the Fund, and issued and outstanding. Agent shall also

provide the Fund on a regular basis with the total number

of shares which are authorized and issued and outstanding

and shall have no obligation, when recording the issuance

of shares, to monitor the issuance of such shares or to

take cognizance of any laws relating to the issue or sale

of such shares, which functions shall be the sole

responsibility of the Fund.

(b) In addition to and not in lieu of the services set forth

in the above paragraph (a), the Agent shall: (i) perform all of the

customary services of a transfer agent, dividend disbursing agent and, as

relevant, agent in connection with accumulation, open-account or similar

plans (including without limitation any periodic investment plan or

periodic withdrawal program), including but not limited to : maintaining

all Shareholder accounts, preparing Shareholder meeting lists, mailing

proxies, receiving and tabulation proxies, mailing Shareholder reports and

prospectuses to current Shareholders, withholding taxes on non-resident

alien accounts, preparing and filing U.S. Treasury Department Forms 1099

and other appropriate forms required with respect to dividends and

distributions by federal authorities for all shareholders, preparing and

mailing confirmation forms and statements of account to Shareholders for

all purchases and redemptions of shares and other confirmable transactions

in Shareholder accounts, (which shall also indicate redemptions by check
<PAGE>

if the Shareholder has elected the checkwriting privilege), preparing and

mailing activity statements for Shareholders, and providing Shareholder

account information and (ii) provide a system which will enable the Fund

to monitor the total number of shares sold in each State. The Fund shall

(i) identify the Agent in writing those transactions and assets to be

treated as exempt from blue sky reporting for each State and (ii) verify

the establishment of transactions for each State on the system prior to

activation and thereafter monitor the daily activity for each State. The

responsibility of the Agent for the Fund's blue sky State registration

status is solely limited to the initial establishment of transactions

subject to blue sky compliance by the Fund and the reporting of such

transactions to the Fund as provided above.

Procedures applicable to certain of these services described in

paragraphs (a) and (b) may be established from time to time by agreement

between the Fund and the Agent and shall be subject to the review and

approval of the Fund. The failure of the Fund to establish such procedures

with respect to any service shall not in any way diminish the duty and

obligation of the Agent to perform such service hereunder.

not provide certain shareholder services which may be provided by Raymond

James & Associates, Inc. The services to be provided shall be as mutually

agreed upon from time to time between the Fund, the Agent and Raymond

James & Associates, Inc. and as set forth in writing attached hereto as

Appendix B. Article 2 Fees and Expenses

2.01 For the duties and obligations to be performed by the

Agent pursuant to this Agreement, the Fund agrees to pay the agent an

annual maintenance fee for each Shareholder account as set out in the fee
<PAGE>

schedule attached hereto. Such fees and out-of-pocket expenses and

advances identified under Section 2.02 below may be changed from time to

time subject to mutual written agreement between the Fund and the Agent.

2.02 In addition to the fee paid under Section 2.01 above, the

Fund agrees to promptly reimburse the Agent for reasonable out-of-pocket

expenses or advances incurred by the Agent for the items set out in the

fee schedule attached hereto. In addition, any other expenses incurred by

the Agent at the request or with the consent of the Fund which are not

properly borne by the agent as part of its duties and obligations under

this Agreement will be promptly reimbursed by the Fund. Postage for

mailing of dividends, proxies, Fund reports and other mailings to all

Shareholder accounts shall be advanced to the Agent by the Fund at least

seven (7) days prior to the mailing date of such materials.

Article 3 Representations and Warranties of the Agent

The Agent represents and warrants to the Fund that:

3.01 It is a corporation duly organized and existing and in

good standing under the laws of the State of Florida.

3.02 It is duly qualified to carry on its business in the

State of Florida.

3.03 It is empowered under applicable laws and by its charter

and by-laws to enter into and perform this Agreement.

3.04 All requisite corporate proceedings have been taken to

authorize it to enter into and perform this Agreement.

3.05 It has and will continue to have access to the necessary

facilities, equipment and personnel to perform its duties and obligations

under this Agreement in accordance with procedures established from time

to time by mutual agreement between the Fund and the Agent.
<PAGE>

Article 4 Representations and Warranties of the Fund

The Fund represents and warrants to the Agent that;

4.01 It is a business trust duly organized and existing and in

good standing under the laws of Massachusetts.

4.02 It is empowered under applicable laws and by its

Declaration of Trust and By-Laws to enter into and perform this Agreement.

4.03 All corporate proceedings required by said Declaration of

Trust and By-Laws have been taken to authorize it to enter into and

perform this Agreement.

4.04 It is an open-end management investment company

registered under the Investment Company Act of 1940.

4.05 A Registration Statement containing a Prospectus and

Statement of Additional Information under the Securities Act of 1933 is

currently effective or will become effective before any public offering

commences, and appropriate state securities law filings have been made or

will be made before any public offering in such state commences, with

respect to all Shares of the Fund being offered for sale.

Article 5 Indemnification

5.01 The Agent shall not be responsible for, and the Fund

shall indemnify and hold the Agent harmless from and against, any and all

losses, damages, and any and all reasonable costs, charges, counsel fees,

payments expenses and liability arising out of or attributable to:

(a) All actions of the Agent or its agents or subcontractors

required to be taken by the Agent pursuant to this Agreement, provided the

Agent and its agents or sub-contractors have acted in good faith and

without negligence or willful misconduct.
<PAGE>

(b) The Fund's refusal or failure to comply with the terms of

this Agreement, or the Fund's lack of good faith, negligence or willful

misconduct or the breach of any representation or warranty of the Fund

hereunder.

subcontractors of information, records and documents which (i) are

received by the Agent or its agents or subcontractors and furnished to it

by or on behalf of the Fund, and (ii) have been prepared and/or maintained

by the Fund or any other person or firm on behalf of the Fund.

(d) The reliance on or the carrying out by the Agent or its

agents or subcontractors of any written instructions of the Fund. "Written

Instructions" means written instructions delivered by mail, tested

telegram cable, telex or facsimile sending device and received by the

Agent, or its agents or subcontractors, signed by authorized persons.

(e) The offer or sale of Shares in violation of any

requirement under the federal securities laws or regulations or the

securities laws or regulations of any state that such Shares be registered

in such state or in violation of any stop order or other determination or

ruling by any federal agency or any state with respect to the offer or

sale of such Shares in such state.

5.02 The Fund shall not be responsible for and the Agent shall

indemnify and hold the Fund harmless from and against any and all losses,

damages, and any and all reasonable costs, charges, counsel fees,

payments, expenses and liability arising out of or attributable to the

Agent's failure to comply with the terms of this Agreement or any action

or failure or omission to act by the Bank as a result of the lack of good

faith, negligence or willful misconduct of the Agent or any of its agents
<PAGE>

or subcontractors referred to in Section 8.03 (i) and (ii) or which arise

out of the breach of any representation or warranty of the Agent

hereunder.

5.03 At any time the Agent may apply to any authorized officer

of the Fund for instructions, and may consult with experienced securities

counsel with respect to any matter arising in connection with the services

to be performed by the Agent under this Agreement, and Agent and its

agents and subcontractors shall not be liable and shall be indemnified by

the Fund for any such instructions or upon the opinion of such counsel

that such actions or omissions comply with the terms of this Agreement and

with all applicable laws. The Agent, its agents and subcontractors shall

be protected and indemnified in acting upon any paper or document

furnished by or on behalf of the Fund, reasonably believed by the Agent to

be genuine and to have been signed by the proper person or persons, or

upon any instruction, information, data, records or documents provided the

Agent or its agents or subcontractors by machine readable input, telex,

CRT data entry or other similar means authorized by the Fund, and shall

not be held to have notice of any change of authority of any person, until

receipt of written notice thereof from the Fund. The Agent its agents and

subcontractors shall also be protected and indemnified in recognizing

stock certificates which are reasonably believed to bear the proper manual

or facsimile signatures of the officers of the Fund, and proper counter-

signature of any former transfer agent or registrar, or of a co-transfer

agent or co-registrar.

5.04 In the event either party is unable to perform its

obligations under the terms of this Agreement because of acts of God,

strikes, equipment or transmission failure or damage, or other causes
<PAGE>

reasonably beyond its control, such party shall not be liable for damages

to the other party resulting from such failure to perform or otherwise

from such causes. In addition, the Agent shall enter into and shall

maintain in effect with appropriate parties one or more agreements making

reasonable provision for emergency use of electronic data processing

equipment to the extent appropriate equipment is available and the Agent

shall further use reasonable care to minimize the likelihood of such

damage, loss of data, delays and/or errors and should such damage, loss of

data, delays and/or errors occur, the Agent shall use its best efforts to

mitigate the effects of such occurrence.

5.05 Neither party to this Agreement shall be liable to the

other party for consequential damages under any provision of this

Agreement or for any act or failure to act hereunder.

5.06 In order that the indemnification provisions contained in

this Article 5 shall apply, upon the assertion of a claim or the

institution of any agency action or investigation for which either party

may be required to indemnify the other, the party seeking indemnification

shall promptly notify the other party of such assertion, and shall keep

the other party advised with respect to all developments concerning same.

The party who may be required to indemnify shall have the option to

participate with the party seeking indemnification in the defense of same.

The party seeking indemnification shall in no case confess any claim or

make any compromise in any case in which the other party may be required

to indemnify it except with the other party's prior written consent.

Article 6 Covenants of the Fund and the Agent

6.01 The Fund shall promptly furnish to the Agent the

following:
<PAGE>

(a) A certified copy of the resolution of the Board of

Trustees of the Fund authorizing the appointment of the Agent and the

execution and delivery of this Agreement.

(b) A copy of the Declaration of Trust and By-Laws of the

Fund and all amendments thereto.

6.02 The Agent represents and warrants that to the best of its

knowledge, the various procedures and systems which the Agent has

implemented with regard to safeguarding from loss or damage the stock

certificates, check forms, facsimile signature imprinting devices, and

other property used in the performance of its obligations hereunder are

adequate and will enable the Agent to perform satisfactorily its

obligations hereunder and that the Agent will make such changes therein

from time to time as in its judgment are required for the secure

performance of its obligations hereunder.

6.03 The Agent shall keep all records relating to the services

to be performed hereunder, in the form and manner it may deem advisable.

To the extend required by Section 31 of the Investment Company Act of

1940, as amended, and the Rules thereunder, the Agent agrees that all such

records prepared or maintained by the Agent relating to the services to be

performed by the Agent hereunder are the property of the Fund and will be

preserved, maintained and made available in accordance with such Section

and Rules, and will be surrendered promptly to the Fund on and in

accordance with its request.

6.04 The Agent and the Fund agree that all books, records,

information and data pertaining to the business of the other party which

are exchanged or received pursuant to the negotiation or the carrying out
<PAGE>

of this Agreement shall remain confidential, and shall not be voluntarily

disclosed to any other person, except as may be required by law.

6.05 In case of any requests or demands for the inspection of

the Shareholder records of the Fund, the Agent will endeavor to notify the

Fund and to secure instructions from an authorized officer of the Fund as

to such inspection. The Agent reserves the right, however, to exhibit the

Shareholder records to any person whenever it is advised by its counsel

that it may be held liable for the failure to exhibit the Shareholder

records to such person.

Article 7 Termination of Agreement

7.01 This Agreement may be terminated by either party upon

sixty (60) days written notice to the other. Any such termination shall

not effect the rights and obligations of the parties under Article 5

hereof. Should the Fund exercise its right to terminate, all

out-of-pocket expenses associated with the movement of records and

material will be borne by the Fund. Additionally, the Agent reserves the

right to charge for any other reasonable expenses associated with such

termination. In the event that the Fund designates a successor to any of

the Agent's obligations hereunder, the Agent shall, at the expense and

direction of the Fund, transfer to such successor a certified list of the

Shareholders of the Fund, a complete record of the account of each

Shareholder, and all other relevant books, records and other data

established or maintained by the Agent hereunder.

Article 8 Assignment

8.01 Except as provided in Section 8.03 below, neither this

Agreement nor any rights or obligations hereunder may be assigned by the

Agent without the written consent of the Fund.
<PAGE>

8.02 This Agreement shall insure to the benefit of and be

binding upon the parties and their respective permitted successors and

assigns.

8.03 The Agent may, without further consent on the part of the

Fund, subcontract for the performance hereof with (i) Sungard Shareholders

Systems, Inc. or (iii) Raymond, James & Associates, Inc. for the

performance of certain duties in connection with the Agent performance of

this Agreement; provided, however, that the Agent shall be as fully

responsible to the Fund for the acts and omissions of any subcontractor

referred to in (i) and (ii) above as it is for its own acts and omissions

and further provided, the Fund shall hold the Agent harmless for the acts

and omissions of Raymond James & Associates, Inc. referred to in (iii).

Article 9 Amendment

9.01 This Agreement may bee amended or modified only by a

written agreement executed by both parties and authorized or approved by a

resolution of the Board of Trustees of the Fund.

9.02 In the event the Fund issues additional series of shares

in addition to the Shares with respect to which it desires to have the

Agent render services as transfer agent, dividend disbursing agent and

agent under the terms hereof, it shall so notify the Agent in writing, and

if the Agent agrees, in writing to provide such services, such additional

series of Shares shall become a Fund hereunder.

Article 10 Merger of Agreement

10.01 This Agreement constitutes the entire agreement between

the parties hereto and supersedes any prior agreement with respect to the

subject matter hereof whether oral or written.
<PAGE>

Article 11 Miscellaneous

11.01 The Fund authorizes the Agent to provide Raymond, James &

Associates, Inc. any information it provides or makes available to the

Fund in connection with this Agreement.

11.02 The Agent agrees to treat all records and other

information relative to the Fund and its prior, present or potential

Shareholders confidentially and the Agent on behalf of itself and its

employees agrees to keep confidential all such information, except after

prior notification to and approval in writing by the fund, which approval

shall not be unreasonably withheld and may not be withheld where the Agent

may be exposed to civil or criminal contempt proceedings for failure to

comply, when requested to divulge such informationby duly constitutes

authorities, or when so requested by the Fund.

Article 12 Florida Law to Apply

12.01 This Agreement shall be construed and the provisions

thereof interpreted under and in accordance with the laws of the State of

Florida.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement

to be executed in their names and on their behalf under their seals by and

through their duly authorized officers, as of the day and year first above

written.

HERITAGE INCOME TRUST

BY:__________________________

ATTEST:

____________________________
<PAGE>

HERITAGE ASSET MANAGEMENT, INC.

BY:____________________________
Vice President

ATTEST:

____________________________
Assistant Secretary
<PAGE>

<PAGE>

HERITAGE FUNDS ACCOUNTING AND PRICING SERVICES AGREEMENT

THIS AGREEMENT is made as of the 1st day of March, 1994, by and
between each of the investment companies and investment series thereof
listed on Schedule A attached hereto, as such Schedule is amended from
time to time (each a "Fund" and collectively, the "Funds"), and Heritage
Asset Management, Inc. ("Heritage"), a Florida corporation.

WHEREAS, each Fund is organized as a business trust under the laws
of the Commonwealth of Massachusetts, is registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"), and is authorized to issue its shares in separate
investment series; and

WHEREAS, each Fund wishes to retain Heritage to provide certain fund
accounting and pricing services to each Fund and each of its existing
investment series, together with all other investment series established
in the future, and Heritage is willing to furnish such services.

NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:

1. APPOINTMENT. The Funds hereby appoint Heritage to provide certain
accounting services for each Fund on the terms set forth in this
Agreement. Heritage accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in
Paragraph 11 of this Agreement.

2. DELIVERY OF DOCUMENTS. Each Fund has made available to Heritage (or
has furnished Heritage with) properly certified or authenticated copies,
with all amendments and supplements thereto, of the following documents:

(a) Declaration of Trust of the Fund;

(b) By-Laws of the Fund;

(d) Resolutions of the Fund's Board of Trustees designating
certain of its officers to give instructions on behalf of the Fund to
Heritage and authorizing Heritage to rely upon Proper Instructions (as
hereinafter defined).

3. AUTHORIZED PERSONS. Concurrently with the execution of this
Agreement, each Fund shall deliver to Heritage a certificate setting forth
the names, titles and signatures of such persons authorized to give Proper
Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund ("Authorized Persons").
Such certificate may be accepted and reasonably relied upon by Heritage as
conclusive evidence of the facts set forth therein and shall be considered
to be in full force and effect until delivery to Heritage of a similar
<PAGE>

certificate to the contrary. Upon delivery of a certificate that deletes
the name of a person previously authorized to give Proper Instructions,
such person shall no longer be considered an Authorized Person.

4. PROPER INSTRUCTIONS.

(a) Unless otherwise provided in this Agreement, Heritage shall
act only upon Proper Instructions. "Proper Instructions" shall mean: (i)
a tested telex from a Fund; (ii) other communications effected directly
between electro-mechanical or electronic devices or systems, provided that
the Heritage and the Fund agree to the use of such device or system; (iii)
a written request, direction, instruction or certificate signed or
initialled on behalf of a Fund by one or more Authorized Persons; or (iv)
telephonic or other oral instructions given by any Authorized Person that
Heritage reasonably believes to have been given by a person authorized to
give such instructions. Proper Instructions may be in the form of
standing instructions.

(b) Oral instruments will be confirmed by tested telex or in
writing in the manner set forth above at the close of business on the same
day that oral instructions are given to Heritage, but the lack of such
confirmation shall in no way affect any action taken by Heritage in
reasonable reliance upon such oral instructions.

(c) Heritage may assume that any Proper Instructions received
hereunder are not in any way inconsistent with any provisions of the
applicable Fund's Declaration of Trust or By-Laws or any vote, resolution
or proceeding of the Fund's Shareholders, or of the Board of Trustees or
of any committees thereof. Heritage shall be entitled reasonably to rely
upon any Proper Instructions actually received by it pursuant to this
Agreement. The sole obligation of Heritage with respect to any follow-up
or confirmatory instruction shall be to make reasonable efforts to detect
any discrepancy between said instruction and the original Proper
Instruction and to advise the applicable Fund accordingly.

5. FUND ACCOUNTING SERVICES.

(a) Daily Activities. Heritage will perform the following
accounting functions on a daily basis for each Fund:

(1) Journalize the Fund's capital share and income and
expense activities;

(2) Verify investment buy/sell trade tickets received from
the Fund's investment adviser(s) or subadvier(s) and transmit trades
to the Fund for transmittal for proper settlement;

(3) Maintain individual ledgers for investment securities;

(4) Maintain historical tax lots for each security;

- 2 -
<PAGE>

(5) Reconcile Share activity and outstanding Share balances
with the transfer agent;

(6) Update the cash availability throughout the day as
required by the Fund's investment adviser(s) or subadviser(s);

(7) Post to and prepare the Fund's Statement of Assets and
Liabilities and the Statement of Operations;

(8) Calculate various contractual expenses (e.g., advisory
and custody fees);

(9) Monitor the expense accruals and notify Fund management
of any proposed adjustments;

(10) Calculate capital gains and losses;

(11) Determine the Fund's net income;

(12) Obtain security market quotations from appropriately
approved independent pricing services or, if such quotes are
unavailable, then obtain such prices from the Fund's investment
adviser(s) or subadviser(s), and in either case calculate the market
value of the Fund's investments;

(13) Value the assets of the Fund and compute the net asset
value per share of the Fund at such times and dates and in the
manner specified in the Fund's current prospectus;

(14) Provide a copy of the daily portfolio valuation to the
Fund's investment adviser(s) or subadviser(s); and

(15) Compute the Fund's yield, total return, expense ratio,
portfolio turnover rate and daily dividend factor and disseminate as
agreed upon by the parties hereto.

(b) Monthly Activities. On the first business day following the
end of each month, each Fund shall cause its custodian to prepare and
forward to Heritage, within three business days following the end of each
such month, a monthly statement of cash and portfolio transactions, which
Heritage will reconcile with Heritage's accounts and records maintained
for the Fund. Within three business days following Heritage's receipt of
the monthly statement provided by the Fund's custodian , Heritage will
provide a written report of any discrepancies to the Fund's custodian, and
will provide a written report of any unreconciled items to the Fund.

(c) Other Activities. In addition to the foregoing accounting
services, Heritage, will on behalf of each Fund and its separate
investment series:

- 3 -
<PAGE>

(1) Prepare quarterly broker security transactions
summaries;

(2) Supply various Fund statistical data as reasonably
requested by the Fund on an ongoing basis;

(3) Assist in the preparation of support schedules
necessary for completion of the Fund's federal, state and, if
applicable, excise tax returns;

(4) Assist in preparation of the Fund's semi-annual reports
with the Securities and Exchange Commission on Form N-SAR;

(5) Assist in the preparation of the Fund's annual and
semi-annual Shareholder reports and any proxy statements;

(6) Assist in the preparation of registration statements on
Form N-1A and other filings relating to the registration of the
Fund's Shares;

(7) Act as liaison with the Fund's independent certified
public accountants and provide account analyses, fiscal year
summaries, and other audit related schedules, and take all
reasonable actions in the performance of its obligations under this
Agreement to assure that the necessary information is made available
to such accountants for the expression of their opinion, as such may
be required by the Fund from time to time; and

(8) Render such other similar services as may be reasonably
requested by the Fund.

6. RECORDS. Heritage shall create and maintain all necessary books
and records in accordance with all applicable laws, rules and regulations,
including, but not limited to, records required by Section 31(a) of the
1940 Act and the rules thereunder, as the same may be amended from time to
time, pertaining to the services performed by it and not otherwise created
and maintained by another party pursuant to contract with the Funds. Such
books and records which are in the possession of the Heritage shall be the
property of the applicable Fund. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at all times
during Heritage's normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall be provided by
Heritage to the Fund or the Fund's authorized representatives at the
Fund's expense.

7. INFORMATION TO BE PROVIDED TO HERITAGE. Each Fund shall provide,
and shall require each of its agents (including, without limitation, its
custodian and distributor) to provide, to Heritage in a timely fashion all
data and information necessary for Heritage to maintain the Fund's
accounts, books and records as required by this Agreement.

- 4 -
<PAGE>

8. CONFIDENTIALITY. Heritage agrees on behalf of itself and its
employees to treat confidentially and as proprietary information of the
Funds all books, records and other information relative to the Funds and
the Funds' prior, present or potential shareholders, and not to use such
books, records and other information for any purpose other than
performance of the Heritage's responsibilities and duties hereunder,
except, after prior notification to and approval by the applicable Fund,
which approval shall not be unreasonably withheld and may not be withheld
where Heritage may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.

9. RIGHT TO RECEIVE ADVICE.

(a) Advice of a Fund. If Heritage shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall promptly
receive, from a Fund directions or advice, including Proper Instructions
where appropriate.

(b) Advice of Counsel. If Heritage shall be in doubt as to any
question of law involved in any action to be taken or omitted by the
Heritage, it may request advice from qualified legal counsel of its own
choosing, who is acceptable to the Fund.

(c) Protection of Heritage. Heritage shall be protected in any
action that it takes or determines not to take in reasonable reliance on
any directions, advice or Proper Instructions received pursuant to
subsections (a) or (b) of this paragraph. However, nothing in this
paragraph shall be construed as imposing upon Heritage any obligation to
seek such directions, advice or Proper Instructions, or to act in
accordance with such directions, advice or Proper Instructions when
received, unless, under the terms of another provision of this Agreement,
the same is a condition to Heritage's properly taking or omitting to take
such action. Nothing in this subsection shall excuse Heritage when an
action or omission on its part constitutes willful misfeasance, willful
misconduct, gross negligence or reckless disregard by Heritage of its
duties under this Agreement.

10. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its
obligations under this Agreement, Heritage shall at all times conform with
all applicable provisions of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the 1940 Act, and the
Commodity Exchange Act; any other applicable provisions of state and
federal laws, rules and regulations; and the provisions of each Fund's
current prospectus, Declaration of Trust and By-Laws, all as amended from
time to time.

11. FEES AND EXPENSES.

(a) As compensation for the accounting services rendered by
Heritage during the terms of this Agreement, each Fund will pay Heritage a
fee equal to 110% of Heritage's cost in complying with the terms of this

- 5 -
<PAGE>

Agreement including, but not limited to, Heritage's cash disbursements,
expenses and charges in connection with the Agreement (excluding salaries
and usual overhead expenses).

(b) Heritage will, on a timely basis, bill the Funds for any and
all amounts due it under this Agreement. The Fund will promptly pay to
Heritage the amount of such billing.

(c) Heritage in its sole discretion may from time to time employ
or associate with itself such person or persons as Heritage may believe to
be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are
employed by both the Fund and Heritage. The compensation of such person
or persons shall be paid by Heritage and no obligation shall be incurred
on behalf of the Fund.

12. RESPONSIBILITY OF HERITAGE. Heritage shall be under no duty to take
any action on behalf of the Funds except as specifically set forth herein
or as may be specifically agreed to by Heritage in writing. Heritage
shall not be liable for any error in judgment or mistake at law for any
loss suffered by a Fund in connection with any matters to which this
Agreement relates, but nothing herein contained shall be construed to
protect Heritage against any liability by reason of willful misfeasance,
willful misconduct, or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement. Without limiting the generality of the foregoing or of
any other provision of this Agreement, Heritage in connection with its
duties under this Agreement shall not be under any duty or obligation to
inquire into and shall not be liable for or in respect of:

(a) the validity or invalidity or authority or lack thereof of
any Proper Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which Heritage reasonably
believes to be genuine.

(b) delays, errors or loss of data occurring by reason of
circumstances beyond Heritage's control, including, without limitation,
acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply; or

(c) the accuracy of security market quotations provided to
Heritage by independent pricing services or such other service or source
designated by the Fund's investment adviser, except when a Fund or the
investment adviser has given or caused Heritage to be given instructions
to utilize a different market value.

In addition, nothing herein shall require Heritage to perform any duties
under this Agreement on any day on which Heritage or the New York Stock
Exchange, Inc. is closed for business.

- 6 -
<PAGE>

13. STANDARD OF CARE; INDEMNIFICATION.

(a) Standard of Care. Heritage shall be held to a standard of
reasonable care in carrying out the provisions of this Agreement;
provided, however, that Heritage shall be held to any higher standard of
care that would be imposed upon Heritage by any applicable law, rule or
regulation even though such standard of care was not part of the
Agreement.

(b) Indemnification by the Fund. Each Fund agrees to indemnify
and hold harmless Heritage and its nominees from all losses, damages,
costs, charges, payments, expenses (including reasonable counsel fees),
and liabilities arising directly or indirectly from any action that
Heritage takes or does or omits to take to do (i) at the request or on the
direction of or in reasonable reliance on the written advice of the
applicable Fund or (ii) upon Proper Instructions, provided, that neither
Heritage nor any of its nominees shall be indemnified against any
liability to a Fund or to its Shareholders (or any expenses incident to
such liability) arising out of Heritage's own willful misfeasance, willful
misconduct, gross negligence or reckless disregard of its duties and
obligations specifically described in this Agreement or its failure to
meet the standard of care set forth in Paragraph 14(a).

(c) Indemnification by Heritage. Heritage agrees to indemnify
and hold harmless each Fund and its nominees from all losses, damages,
costs, charges, payments, expenses (including reasonable counsel fees),
and liabilities arising out of or attributed to any action or failure or
omission to act by Heritage as a result of Heritage's own willful
misfeasance, willful misconduct, gross negligence or reckless disregard of
its duties and obligations specifically described in this Agreement.

14. INSURANCE. Heritage will at all times maintain in effect insurance
coverage , including, without limitation, Fidelity Bond and Electronic
Data coverage, at levels of coverage consistent with those customarily
maintained by other high quality investor servicing agents for registered
investment companies and with such policies as the Board of Trustees of
the Funds may from time to time adopt.

15. DURATION AND TERMINATION. This Agreement shall continue until
termination by either Heritage or any Fund on sixty days' written notice.
In the event that in connection with any such termination a successor to
any of Heritage's duties or responsibilities hereunder is designated by a
Fund by written notice to Heritage, Heritage will cooperate fully in the
transfer of such duties and obligations, including provision for
assistance by Heritage's personnel in the establishment of books, records
and other data by such successor. The applicable Fund will reimburse
Heritage for all reasonable expenses incurred by Heritage in connection
with such transfer. The termination of this Agreement with respect to a
Fund will not cause the termination of this Agreement on behalf of the
other Funds that are a party hereto.

- 7 -
<PAGE>

16. NOTICES. All notices and other communications, including Proper
Instructions (collectively referred to as "Notices" in this paragraph),
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices to Heritage shall be addressed to
Heritage at P.O. Box 33022, St. Petersburg, Florida 33733. Notices to a
Fund shall also be addressed to the applicable Fund at P.O. Box 33022, St.
Petersburg, Florida 33733. All postage, cable, telex, or facsimile
sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.

17. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.

18. AMENDMENT; MODIFICATION; WAIVER. This Agreement or any part hereof
may be amended, modified or waived only by an instrument in writing signed
by both parties hereto.

19. ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written consent of
the other party.

20. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original. The Agreement shall become
effective when one or two counterparts have been signed and delivered by
each of the parties.

21. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties thereto, and supersedes all prior
agreements and understandings, relating to the subject matter hereof,
provided that the parties hereto may embody in one or more separate
documents their agreement, if any, with respect to Proper Instructions.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provissions hereof or
otherwise affect their construction or effect. This Agreement shall be
deemed to be a contract made in Florida and governed by Florida law. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule regulation or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefits of the parties hereto and their respective
successors.

22. MASSACHUSETTS BUSINESS TRUST. Notice is hereby given that Heritage
shall have no right to seek to proceed against or enforce this Agreement
against the individual shareholders of any Fund or against the Trustees or
officers of any Fund. Rather, Heritage can seek to enforce this Agreement
only against the applicable Fund itself.

- 8 -
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on this day and year first
above written.

HERITAGE MUTUAL FUNDS
(as listed in Schedule A hereto)

By: _____________________________
Stephen G. Hill
President

HERITAGE ASSET MANAGEMENT, INC.

By: _____________________________
Donald H. Glassman
Treasurer

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<PAGE>

SCHEDULE A

Heritage Cash Trust (effective as of March 1, 1994):
Money Market Fund
Municipal Money Market Fund

Heritage Capital Appreciation Trust (effective as of March 1, 1994)

Heritage Income-Growth Trust (effective as of April 1, 1994)

Heritage Income Trust (effective as of April 1, 1994):
Diversified Portfolio
Institutional Government Portfolio
Limited Maturity Government Portfolio

Heritage Series Trust (effective as of May 1, 1994):
Small Cap Stock Fund
Value Equity Fund
Eagle International Equity Portfolio

Heritage Series Trust (effective as of November 16, 1995):
Growth Equity Fund

March 1, 1994, as amended on November 16, 1995

- 10 -
<PAGE>

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Heritage
Income Trust:

We consent to the inclusion in Post-Effective Amendment
No. 11 to the Registration Statement of Heritage Income Trust (comprised
of Limited Maturity Government Portfolio, and Diversified Portfolio) on
Form N-1A of our reports dated November 27, 1995, on our audits of the
financial statements and financial highlights of the Portfolios which are
included in the Registration Statement. We also consent to the reference
to our Firm under the captions "Financial Highlights" in the Prospectuses
and "Independent Accountants" in the Registration Statement.

/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 28, 1995
<PAGE>

<PAGE>

EXHIBIT (13)

HERITAGE
Asset Management, Inc.
Registered Investment Advisor-SEC

October 6, 1989

Heritage Income Trust
880 Carillon Parkway
St. Petersburg, FL 33733

Re: Letter of Investment Intent

Dear Sirs:

Please be advised that the $100,000 investment in Heritage Income
Trust being made on or about this date by Heritage Asset Management, Inc.,
is being made as an investment with no present intention of redeeming or
reselling such shares.

Very truly yours,

HERITAGE ASSET MANAGEMENT, INC.

/s/ Stephen G. Hill
By Stephen G. Hill
President

880 Carillon Parkway, St. Petersburg, FL 33716
813-573-8143, 800-421-4184
<PAGE>

<PAGE>

HERITAGE INCOME TRUST
CLASS A
DISTRIBUTION PLAN

WHEREAS, Heritage Income Trust (the "Trust") is engaged in
business as an open-end management investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Trust, on behalf of its one or more designated
series presently existing or hereafter established (hereinafter referred
to as "Portfolios"), desires to adopt a Class A ("Class") Distribution
Plan pursuant to Rule l2b-1 under the 1940 Act and the Board of Trustees
of the Trust has determined that there is a reasonable likelihood that
adoption of this Distribution Plan will benefit the Trust and the Class A
shareholders; and

WHEREAS, the Trust intends to employ a registered broker-dealer
as Distributor of the securities of which it is the issuer;

NOW, THEREFORE, the Trust, with respect to its Class A shares,
hereby adopts this Distribution Plan (the "Plan") in accordance with Rule
l2b-1 under the 1940 Act on the following terms and conditions:

1. PAYMENT OF FEES. The Trust is authorized to pay
distribution fees for the Class A shares of each Portfolio listed on
Schedule A of this Plan, as such schedule may be amended from time to
time, on an annualized basis, at such rates as shall be determined from
time to time by the Board of Trustees in the manner provided for approval
of this Plan in Paragraph 5, up to the maximum rates set forth in Schedule
A, as such schedule may be amended from time to time. Such fees shall be
calculated and accrued daily and paid monthly or at such other intervals
as shall be determined by the Board in the manner provided for approval of
this Plan in Paragraph 5. The distribution and service fees shall be
payable by the Trust on behalf of the Class A shares of a Portfolio
regardless of whether those fees exceed or are less than the actual
expenses, described in Paragraph 2 below, incurred by the Distributor with
respect to such Class in a particular year.

2. DISTRIBUTION EXPENSES. The fee authorized by Paragraph 1
of this Plan shall be paid pursuant to an appropriate Distribution
Agreement in payment for any activities or expenses intended to result in
the sale and retention of Trust shares, including, but not limited to,
compensation paid to registered representatives of the Distributor and to
participating dealers which have entered into sales agreements with the
Distributor, advertising, salaries and other expenses of the Distributor
relating to selling or servicing efforts, expenses of organizing and
conducting sales seminars, printing of prospectuses, statements of
additional information and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature
and other sales promotion expenses, for providing ongoing services to
Class A shareholders.
<PAGE>

3. ADDITIONAL COMPENSATION. This Plan shall not be
construed to prohibit or limit additional compensation derived from sales
charges or other sources that may be paid to the Distributor pursuant to
the aforementioned Distribution Agreement.

4. SHAREHOLDER APPROVAL. This Plan shall not take effect
with respect to the Class A shares of a Portfolio until it has been
approved by a vote of at least a majority of such Class' outstanding
voting securities, as defined in the 1940 Act, voting separately from any
other Class or Portfolio of the Trust.

5. BOARD APPROVAL. This Plan shall not take effect with
respect to any Class until it has been approved, together with any related
agreements, by vote of a majority of both (a) the Board of Trustees and
(b) those members of the Board who are not "interested persons" of the
Trust, as defined in the 1940 Act, and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
to it (the "Independent Trustees"), cast in person at a meeting or
meetings called for the purpose of voting on this Plan and such related
agreements.

6. RENEWAL OF PLAN. This Plan shall continue in full force
and effect with respect to the Class A shares of a Portfolio for
successive periods of one year from its approval as set forth in
Paragraphs 4 and 5 for so long as such continuance is specifically
approved at least annually in the manner provided for approval of this
Plan in Paragraph 5.

7. REPORTS. Any Distribution Agreement entered into
pursuant to this Plan shall provide that the Distributor shall provide to
the Board of Trustees and the Board shall review, at least quarterly, or
at such other intervals as reasonably requested by the Board, a written
report of the amounts so expended and the purposes for which such
expenditures were made.

8. TERMINATION. This Plan may be terminated with respect to
the Class A shares of a Portfolio at any time by vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding voting
securities of such Class, voting separately from any other Class of the
Trust.

9. AMENDMENTS. Any change to the Plan that would materially
increase the distribution costs to the Class A shares of a Portfolio may
not be instituted unless such amendment is approved in the manner provided
for initial approval in Paragraphs 4 and 5 hereof. Any other material
change to the Plan may not be instituted unless such change is approved in
the manner provided for initial approval in Paragraph 5 hereof.

10. NOMINATION OF TRUSTEES. While this Plan is in effect,
the selection and nomination of Independent Trustees of the Trust shall be
committed to the discretion of the Independent Trustees then in office.

- 2 -
<PAGE>

11. RECORDS. The Trust shall preserve copies of this Plan
and any related agreements and all reports made pursuant to Paragraph 7
hereof for a period of not less than six years from the date of execution
of this Plan, or of the agreements or of such reports, as the case may be,
the first two years in an easily accessible place.

Date: March 29, 1993, as restated on April 3, 1995

- 3 -
<PAGE>

HERITAGE INCOME TRUST

DISTRIBUTION PLAN

SCHEDULE A

The annualized fee rate pursuant to Paragraph 1 of the Heritage
Income Trust Distribution Plan shall be as follows:

LIMITED MATURITY GOVERNMENT PORTFOLIO:

0.35% of the average daily net assets

DIVERSIFIED PORTFOLIO:

0.35% of the average daily net assets

INSTITUTIONAL GOVERNMENT PORTFOLIO:

0.25% of the average daily net assets

Dated: January 19, 1990, as supplemented on December 24, 1993
<PAGE>

<PAGE>

HERITAGE INCOME TRUST
CLASS C
DISTRIBUTION PLAN

WHEREAS, the Trust, on behalf of its one or more designated
series presently existing or hereafter established (hereinafter referred
to as "Portfolios"), desires to adopt a Class C ("Class") Distribution
Plan pursuant to Rule l2b-1 under the 1940 Act and the Board of Trustees
of the Trust has determined that there is a reasonable likelihood that
adoption of this Distribution Plan will benefit the Trust and the Class C
shareholders; and

WHEREAS, the Trust intends to employ a registered broker-dealer
as Distributor of the securities of which it is the issuer;

NOW, THEREFORE, the Trust, with respect to its Class C shares,
hereby adopts this Distribution Plan (the "Plan") in accordance with Rule
l2b-1 under the 1940 Act on the following terms and conditions:

1. PAYMENT OF FEES. The Trust is authorized to pay
distribution fees for the Class C shares of each Portfolio listed on
Schedule A of this Plan, as such schedule may be amended from time to
time, on an annualized basis, at such rates as shall be determined from
time to time by the Board of Trustees in the manner provided for approval
of this Plan in Paragraph 5, up to the maximum rates set forth in Schedule
A, as such schedule may be amended from time to time. Such fees shall be
calculated and accrued daily and paid monthly or at such other intervals
as shall be determined by the Board in the manner provided for approval of
this Plan in Paragraph 5. The distribution and service fees shall be
payable by the Trust on behalf of the Class C shares of a Portfolio
regardless of whether those fees exceed or are less than the actual
expenses, described in Paragraph 2 below, incurred by the Distributor with
respect to such Class in a particular year.

2. DISTRIBUTION EXPENSES. The fee authorized by Paragraph 1
of this Plan shall be paid pursuant to an appropriate Distribution
Agreement in payment for any activities or expenses intended to result in
the sale and retention of Trust shares, including, but not limited to,
compensation paid to registered representatives of the Distributor and to
participating dealers which have entered into sales agreements with the
Distributor, advertising, salaries and other expenses of the Distributor
relating to selling or servicing efforts, expenses of organizing and
conducting sales seminars, printing of prospectuses, statements of
additional information and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature
and other sales promotion expenses, or for providing ongoing services to
Class C shareholders.
<PAGE>

4. SHAREHOLDER APPROVAL. This Plan shall not take effect
with respect to the Class C shares of a Portfolio until it has been
approved by a vote of at least a majority of such Class' outstanding
voting securities, as defined in the 1940 Act, voting separately from any
other Class or Portfolio of the Trust.

6. RENEWAL OF PLAN. This Plan shall continue in full force
and effect with respect to the Class C shares of a Portfolio for
successive periods of one year from its approval as set forth in
Paragraphs 4 and 5 for so long as such continuance is specifically
approved at least annually in the manner provided for approval of this
Plan in Paragraph 5.

8. TERMINATION. This Plan may be terminated with respect to
the Class C shares of a Portfolio at any time by vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding voting
securities of such Class, voting separately from any other Class of the
Trust.

9. AMENDMENTS. Any change to the Plan that would materially
increase the distribution costs to the Class C shares of a Portfolio may
not be instituted unless such amendment is approved in the manner provided
for initial approval in Paragraphs 4 and 5 hereof. Any other material
change to the Plan may not be instituted unless such change is approved in
the manner provided for initial approval in Paragraph 5 hereof.

- 2 -
<PAGE>

Date: April 3, 1995

- 3 -
<PAGE>

HERITAGE INCOME TRUST

CLASS C
DISTRIBUTION PLAN

SCHEDULE A

The maximum annualized fee rate pursuant to Paragraph 1 of the
Heritage Income Trust Distribution Plan shall be as follows:

LIMITED MATURITY GOVERNMENT PORTFOLIO

0.60% of the average daily net assets

DIVERSIFIED PORTFOLIO

0.80% of the average daily net assets

INSTITUTIONAL MATURITY GOVERNMENT PORTFOLIO

0.80% of the average daily net assets

Dated: April 3, 1995
<PAGE>

<PAGE>

Heritage Income Trust-Diversified Portfolio
Calculation of Return
<TABLE>
<CAPTION>

Return Since One-Year
Inception Return
------------ --------

Ending Date 9/30/93 9/30/93

Inception Date 3/1/90 9/30/92
------- -------

Days Since Inception 1309 365
======= =======

Years Since Inception 3.59 1.00

Beginning Offering Price 10.00 11.27

Ending Net Asset Value 10.65 10.65

Dividend Factor 1.368533 1.102996
-------- --------

Ending Net Asset Value 14.5749 11.7469
------- -------

Adjusted for Dividend Reinvestments

Annualized return 11.08% 4.22%

Formula for since inception (((14.57)/(10.00))^(1/3.59))-1

Formula for One Year (((11.75)/(11.27))^(1))-1

Beginning NAV 9.60 10.82

Ending Net Asset Value 10.65 10.65

Dividend Factor 1.368533 1.102996
-------- --------
Ending Net Asset Value 14.5749 11.7469
------- -------

Adjusted for Dividend Reinvestment

Cumulative Total Return 51.82% 8.57%
<PAGE>

Formula for since inception (14.58-9.60)/9.60

Formula for One Year (11.75-10.82)/10.82

</TABLE>
<PAGE>

<PAGE>

<TABLE>
<CAPTION>
Heritage Income Trust-Limited Maturity Government Portfolio
Calculation of Return

Return Since One-Year
Inception Return
<S> <C> <C>
Ending Date 9/30/93 9/30/93
Inception Date 3/1/90 9/30/92
--------- ---------
Days Since Inception 1309 365
========= =========

Years Since Inception 3.59 1.00

Beginning Offering Price 9.60 9.84

Ending Net Asset Value 9.44 9.44
Dividend Factor 1.264913 1.058817
---------- ---------

Ending Net Asset Value 11.9408 9.9952
Adjusted for Dividend Reinvestments

Annualized return 6.27% 1.58%

Formula for since inception (((11.94)/(10.00))^(1/3.59))-1

Formula for One Year (((9.99)/(9.84))^(1))-1

Beginning NAV 9.60 9.84

Ending Net Asset Value 9.44 9.44
Dividend Factor 1.264913 1.058817
---------- ----------
Ending Net Asset Value 11.9408 9.9952
---------- ---------
Adjusted for Dividend Reinvestment

Cumulative Total Return 24.38% 1.58%

Formula for since inception (11.94-9.60)/9.60

Formula for One Year (9.99-9.84)/9.84

</TABLE>
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>
<ARTICLE> 6
<CIK> 0000853977
<NAME> HERITAGE INCOME TRUST
<SERIES>
<NUMBER> 2
<NAME> DIVERSIFIED PORTFOLIO (CLASS A)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 30,569,224
<INVESTMENTS-AT-VALUE> 31,192,167
<RECEIVABLES> 558,204
<ASSETS-OTHER> 31,205,748
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,763,952
<PAYABLE-FOR-SECURITIES> 1,002,500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 114,785
<TOTAL-LIABILITIES> 1,117,285
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,337,848
<SHARES-COMMON-STOCK> 3,083,609
<SHARES-COMMON-PRIOR> 3,713,874
<ACCUMULATED-NII-CURRENT> 93,090
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,407,214)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 622,943
<NET-ASSETS> 30,646,667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,783,575
<OTHER-INCOME> 0
<EXPENSES-NET> 405,212
<NET-INVESTMENT-INCOME> 2,378,363
<REALIZED-GAINS-CURRENT> (1,106,214)
<APPREC-INCREASE-CURRENT> 2,100,137
<NET-CHANGE-FROM-OPS> 3,372,286
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,494,723
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 253,742
<NUMBER-OF-SHARES-REDEEMED> 1,079,529
<SHARES-REINVESTED> 195,522
<NET-CHANGE-IN-ASSETS> (5,176,465)
<ACCUMULATED-NII-PRIOR> 2,692,274
<ACCUMULATED-GAINS-PRIOR> (1,014,329)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 277,151
<GROSS-ADVISORY-FEES> 110,700
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 488,875
<AVERAGE-NET-ASSETS> 32,393,777
<PER-SHARE-NAV-BEGIN> 9.65
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> 0.74
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<PAGE>
<ARTICLE> 6
<CIK> 0000853977
<NAME> HERITAGE INCOME TRUST
<SERIES>
<NUMBER> 2
<NAME> DIVERSIFIED PORTFOLIO (CLASS C)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 30,569,224
<INVESTMENTS-AT-VALUE> 31,192,167
<RECEIVABLES> 558,204
<ASSETS-OTHER> 31,205,748
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,763,952
<PAYABLE-FOR-SECURITIES> 1,002,500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 114,785
<TOTAL-LIABILITIES> 1,117,285
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,337,848
<SHARES-COMMON-STOCK> 3,083,609
<SHARES-COMMON-PRIOR> 3,713,874
<ACCUMULATED-NII-CURRENT> 93,090
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,407,214)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 622,943
<NET-ASSETS> 30,646,667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,783,575
<OTHER-INCOME> 0
<EXPENSES-NET> 405,212
<NET-INVESTMENT-INCOME> 2,378,363
<REALIZED-GAINS-CURRENT> (1,106,214)
<APPREC-INCREASE-CURRENT> 2,100,137
<NET-CHANGE-FROM-OPS> 3,372,286
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,494,723
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 253,742
<NUMBER-OF-SHARES-REDEEMED> 1,079,529
<SHARES-REINVESTED> 195,522
<NET-CHANGE-IN-ASSETS> (5,176,465)
<ACCUMULATED-NII-PRIOR> 2,692,274
<ACCUMULATED-GAINS-PRIOR> (1,014,329)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 277,151
<GROSS-ADVISORY-FEES> 110,700
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 488,875
<AVERAGE-NET-ASSETS> 32,393,777
<PER-SHARE-NAV-BEGIN> 9.62
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.91
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>
<ARTICLE> 6
<CIK> 0000853977
<NAME> HERITAGE INCOME TRUST
<SERIES>
<NUMBER> 1
<NAME> LIMITED MATURITY GOVERNMENT PORTFOLIO (CLASS A)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 23,978,567
<INVESTMENTS-AT-VALUE> 24,228,437
<RECEIVABLES> 388,485
<ASSETS-OTHER> 24,244,536
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,633,021
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67,019
<TOTAL-LIABILITIES> 67,019
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,922,051
<SHARES-COMMON-STOCK> 2,644,129
<SHARES-COMMON-PRIOR> 4,512,870
<ACCUMULATED-NII-CURRENT> 721,566
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,327,485)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 249,870
<NET-ASSETS> 24,566,002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,892,860
<OTHER-INCOME> 0
<EXPENSES-NET> 278,344
<NET-INVESTMENT-INCOME> 1,614,516
<REALIZED-GAINS-CURRENT> (712,069)
<APPREC-INCREASE-CURRENT> 1,324,202
<NET-CHANGE-FROM-OPS> 2,226,649
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,803,808
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 268,941
<NUMBER-OF-SHARES-REDEEMED> 2,312,399
<SHARES-REINVESTED> 174,717
<NET-CHANGE-IN-ASSETS> (16,508,439)
<ACCUMULATED-NII-PRIOR> 2,985,426
<ACCUMULATED-GAINS-PRIOR> (2,506,763)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 430,227
<AVERAGE-NET-ASSETS> 29,331,594
<PER-SHARE-NAV-BEGIN> 9.10
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.12
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.29
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<PAGE>
<ARTICLE> 6
<CIK> 0000853977
<NAME> HERITAGE INCOME TRUST
<SERIES>
<NUMBER> 1
<NAME> LIMITED MATURITY GOVERNMENT PORTFOLIO (CLASS C)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 23,978,567
<INVESTMENTS-AT-VALUE> 24,228,437
<RECEIVABLES> 388,485
<ASSETS-OTHER> 24,244,536
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,633,021
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67,019
<TOTAL-LIABILITIES> 67,019
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,922,051
<SHARES-COMMON-STOCK> 2,644,129
<SHARES-COMMON-PRIOR> 4,512,870
<ACCUMULATED-NII-CURRENT> 721,566
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,327,485)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 249,870
<NET-ASSETS> 24,566,002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,892,860
<OTHER-INCOME> 0
<EXPENSES-NET> 278,344
<NET-INVESTMENT-INCOME> 1,614,516
<REALIZED-GAINS-CURRENT> (712,069)
<APPREC-INCREASE-CURRENT> 1,324,202
<NET-CHANGE-FROM-OPS> 2,226,649
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,803,808
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 268,941
<NUMBER-OF-SHARES-REDEEMED> 2,312,399
<SHARES-REINVESTED> 174,717
<NET-CHANGE-IN-ASSETS> (16,508,439)
<ACCUMULATED-NII-PRIOR> 2,985,426
<ACCUMULATED-GAINS-PRIOR> (2,506,763)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 430,227
<AVERAGE-NET-ASSETS> 29,331,594
<PER-SHARE-NAV-BEGIN> 9.05
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 0.23
<PER-SHARE-DIVIDEND> 0.22
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.27
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0