SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934.
Filed by the Registrant[x]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or
ss. 240.14a-12
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HERITAGE INCOME TRUST - HIGH YIELD BOND FUND
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 1
HERITAGE INCOME TRUST-HIGH YIELD BOND FUND
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 23, 1998
TO THE SHAREHOLDERS:
A special meeting of the holders of shares of beneficial interest of
Heritage Income Trust (the "Trust")-High Yield Bond Fund ("Fund") will be held
on February 23, 1998 at 9:30 a.m., Eastern standard time, at the offices of
Heritage Asset Management, Inc., at 100 CARILLON PARKWAY, SUITE 280, ST.
PETERSBURG, FLORIDA 33716, for the following purposes:
(1) To approve a Subadvisory Agreement between Heritage Asset
Management, Inc. ("Heritage") and Salomon Brothers Asset Management Inc
("SBAM"), with respect to the Fund;
(2) To approve a proposal to permit Heritage to hire subadvisers or
modify subadvisory agreements without shareholder approval;
(3) To ratify the selection of Price Waterhouse LLP as the Fund's
independent accountants for the fiscal year ending September 30, 1998; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
You will be entitled to vote at the meeting and any adjournments thereof if
you owned shares of the Trust at the close of business on January 12, 1998. If
you attend the meeting, you may vote your shares in person. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By Order of the Board of Trustees,
CLIFFORD J. ALEXANDER
Secretary
January 20, 1998
880 Carillon Parkway
St. Petersburg, Florida 33716
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy form, date
and sign the form, and return the form in the envelope provided. If you sign,
date and return the proxy form but give no voting instructions, your shares will
be voted "FOR" the proposals noticed above. In order to avoid the additional
expense of further solicitation, we ask your cooperation in mailing your proxy
card promptly. Unless proxy cards submitted by corporations and partnerships are
signed by the appropriate persons as indicated in the voting instructions on the
proxy card, they will not be voted.
<PAGE> 2
HERITAGE INCOME TRUST-HIGH YIELD BOND FUND
880 CARILLON PARKWAY, ST. PETERSBURG, FLORIDA 33716
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 23, 1998
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This is a proxy statement for Heritage Income Trust (the "Trust")-High
Yield Bond Fund ("Fund") in connection with the solicitation of proxies made by,
and on behalf of, the Fund's Board of Trustees ("Trustees" or "Board") to be
used at the special meeting of shareholders of the Fund and at any adjournments
thereof ("Meeting"). This proxy statement and a proxy card will be mailed to
shareholders on or about January 20, 1998.
A majority of the shares of beneficial interest of the Fund ("Shares")
outstanding on January 12, 1998 ("Record Date"), represented in person or by
proxy, must be present to constitute a quorum for the transaction of business at
the Meeting. Only holders of Shares as of this date are entitled to notice of
and to vote at the Meeting. In the absence of a quorum or in the event that a
quorum is present at the Meeting but votes sufficient to approve any of the
proposals are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those Shares
represented at the Meeting in person or by proxy. If a quorum is present, the
persons named as proxies will vote those proxies that they are entitled to vote
FOR any such proposal in favor of such an adjournment, and will vote those
proxies required to be voted AGAINST any such proposal against such adjournment.
A shareholder vote may be taken on one or more of the proposals in this proxy
statement prior to any such adjournment if sufficient votes have been received
and it is otherwise appropriate.
An abstention is a proxy that is properly executed, returned and
accompanied by instructions withholding authority to vote. Broker non-votes are
shares held in street name for which the broker indicates that instructions have
not been received from the beneficial owners or persons entitled to vote or with
respect to which the broker does not have discretionary voting authority.
Abstentions and broker non-votes are counted as votes present for purposes of
determining whether the requisite quorum exists. Approval of Proposals No. 1 and
No. 2 requires the affirmative vote of a specified percentage of the total
shares outstanding or of the total shares present at the Meeting. As a result,
abstentions and broker non-votes will have the same effect as votes cast
"against" these proposals because approval of these proposals depends only on
the number of affirmative votes cast and not on the ratio of votes cast "for" a
proposal to votes cast "against" a proposal. Approval of Proposal No. 3 requires
a majority of the votes cast on the matter. As a result, abstentions and broker
non-votes will have no effect on the outcome of the proposal because abstentions
and broker non-votes are votes not cast and, as such, they have no impact on
whether a proposal has received a majority of the votes cast.
The individuals named as proxies in the enclosed proxy card will vote in
accordance with your directions as indicated thereon if your proxy card is
received properly executed. If you sign, date and return the proxy card, but
give no voting instructions, your Shares will be voted in favor of the proposals
described in this proxy statement. The duly appointed proxies may, in their
discretion, vote upon such other matters as may properly come before the
Meeting. Your proxy card may be revoked by giving another proxy, by letter or
telegram revoking your proxy if received by the Fund prior to the Meeting, or by
appearing and voting at the Meeting.
<PAGE> 3
As of the Record Date, the Fund had 5,413,491.326 Shares outstanding and no
persons owned beneficially 5% or more of any class of the Fund's outstanding
Shares. All costs associated with the Meeting, including the solicitation of
proxies, will be borne by Travelers Group Inc. ("Travelers"). Solicitations will
be made primarily by mail but also may include telephone communications by
regular employees of Heritage Asset Management, Inc. ("Heritage"), the Fund's
investment adviser and administrator, which will not receive any compensation
therefor from the Trust. Each full Share is entitled to one vote, and each
fractional Share is entitled to a proportionate share of one vote. You may
obtain a copy of the Fund's most recent annual report to shareholders, free of
charge, by writing to Heritage at 880 Carillon Parkway, St. Petersburg, Florida
33716 or by calling 1-800-421-4184.
PROPOSAL 1. APPROVAL OF THE SUBADVISORY AGREEMENT
INTRODUCTION
Salomon Brothers Asset Management Inc ("SBAM") has provided investment
advice and portfolio management services to the Fund in accordance with the
terms of an agreement with Heritage dated February 1, 1996 (the "Subadvisory
Agreement"). On November 28, 1997, SBAM became an indirect wholly-owned
subsidiary of Travelers as a result of a merger between a wholly-owned
subsidiary of Travelers and Salomon Inc. Under federal law, such a change in
control of the Fund's investment subadviser could be deemed to cause the
automatic termination of the Subadvisory Agreement.
Accordingly, in order to ensure that the Fund retains the services of SBAM
and its investment management personnel, which the Trustees have concluded is in
the best interest of the Fund, the Trustees and Heritage propose that SBAM be
re-appointed as investment subadviser to the Fund pursuant to a Subadvisory
Agreement that is essentially identical to the current Subadvisory Agreement. If
approved by the shareholders, SBAM would continue to manage the Fund using the
same trading strategies and substantially the same investment personnel it
currently uses.
If Proposal 1 is not approved by shareholders, Heritage and the Trustees
will consider any potential alternative arrangements for the provision of
investment subadvisory services that are appropriate and in the best interests
of the Fund's shareholders.
DESCRIPTION OF THE EXISTING SUBADVISORY AGREEMENT AND THE NEW SUBADVISORY
AGREEMENT
The current Subadvisory Agreement, dated February 1, 1996, was last
submitted to a vote of the Fund's shareholders on January 24, 1996 for the
purpose of its initial approval. The proposed Subadvisory Agreement between
Heritage and SBAM is identical to the current Subadvisory Agreement except for
its effective date. Except as otherwise noted, the following discussion
therefore applies to both the current Subadvisory Agreement and to the proposed
Subadvisory Agreement (collectively, the "Subadvisory Agreements").
Under the Subadvisory Agreements, SBAM provides investment advice and
portfolio management services with respect to all Fund assets. In return for
SBAM's services and for expenses borne by SBAM under the Subadvisory Agreements,
Heritage (not the Fund) pays SBAM an annual fee of 50% of the annual investment
advisory fees paid to Heritage, without regard to any reduction in the fees
actually paid to Heritage as a result of voluntary fee waivers by Heritage.
During the Fund's fiscal year ended September 30, 1997, Heritage paid SBAM
$143,535 in subadvisory fees, which amounted to .30% of average daily net
assets.
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The Subadvisory Agreements provide that, in the absence of its bad faith,
negligence or disregard of its obligations and duties, SBAM will not be subject
to any liability to Heritage, the Fund or its Trustees, officers or shareholders
for any act or omission in the course of, or connected with, the performance of
its duties under the Subadvisory Agreements.
If approved by shareholders, the proposed Subadvisory Agreement will become
effective immediately. Unless sooner terminated, it would remain in effect for
two years following its effective date and would continue automatically for
successive annual periods, provided that it is specifically approved at least
annually (1) by a vote of a majority of the Independent Trustees and (2) by a
majority of all Trustees or by a vote of a majority of the outstanding Shares of
the Fund. The Trust may terminate the proposed Subadvisory Agreement by a vote
of a majority of the Independent Trustees or a majority of its outstanding
voting securities on 60 days' written notice to Heritage and SBAM. Heritage may
at any time terminate the agreement upon 60 days' written notice to SBAM. SBAM
may at any time terminate the agreement upon 90 days' written notice to
Heritage. The Subadvisory Agreement automatically will terminate without penalty
in the event of assignment or termination of the Trust's Investment Advisory and
Administration Agreement.
INFORMATION CONCERNING SBAM
SBAM is a corporation organized under the laws of Delaware on December 24,
1987. It is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended. As of September 30, 1997, SBAM and its worldwide
investment affiliates managed approximately $25.9 billion of assets, of which
SBAM managed approximately $19.3 billion. SBAM serves as investment adviser to a
number of investment companies whose investment strategy is similar to that of
the Fund's. The name and size of these investment companies and SBAM's annual
rate of compensation with respect to each fund is as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY OR APPROXIMATE NET ASSETS
FUND NAME MANAGEMENT FEE* AS OF OCTOBER 31, 1997
--------- ------------------------- ----------------------
<S> <C> <C>
Salomon Brothers High Yield Bond Fund........... .75% $519,287,538
Salomon Brothers Institutional High Yield Bond
Fund(1)....................................... .50% $ 4,672,775
Salomon Brothers Institutional Emerging Markets
Debt Fund(1)(2)............................... .70% $ 9,516,914
The Emerging Markets Income Fund Inc.(3)........ .70% $ 67,249,398
The Emerging Markets Income Fund II
Inc.(3)(4).................................... .70% $343,314,002
The Emerging Markets Floating Rate Fund
Inc.(3)(4).................................... .65% $ 65,058,219
Salomon Brothers Worldwide Income Fund
Inc.(3)(5).................................... .90% $198,077,564
Global Partners Income Fund Inc.(3)(4).......... .65% $219,732,558
Salomon Brothers High Income Fund Inc.(3)....... .70% $ 72,289,118
Salomon Brothers/JNL Global Bond Series(6)(7)... first $50 million -- .375% $ 32,170,924
next $100 million -- .350%
next $350 million -- .300%
next $500 million -- .250%
SEI Emerging Markets Debt Portfolio(6).......... first $50 million -- .475% $ 59,294,032
over $50 million -- .15%
Latin America Investment Fund(6)................ .15% $ 3,790,920
Americas Income Trust, Inc.(3)(6)............... .375% $ 60,663,911
</TABLE>
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* Fees are calculated on average daily net assets unless otherwise noted.
(1) For the last fiscal year SBAM waived certain management fees.
(2) SBAM has agreed to reduce or otherwise limit the expenses of the Salomon
Brothers Institutional Emerging Markets Debt Fund (exclusive of taxes,
interest, and extraordinary expenses, such as litigation and indemnification
expenses), on an annualized basis to 0.75% of the Fund's average daily net
assets. This limitation includes SBAM's advisory fees.
(3) With respect to this Fund the Investment Advisory or Management Fee is a
percentage of average weekly net assets.
(4) Fee is paid by Value Advisors out of its management fee and includes
compensation for administration services.
(5) SBAM also serves as Administrator for this Fund and is paid a monthly fee at
an annual rate of .15% of the value of the Fund's average weekly net assets
up to $250 million and .125% of the value of such net assets in excess of
$250 million for its services. SBAM in turn pays 80% of such fees collected
to Prudential Mutual Fund Management, Inc., which serves as
Sub-administrator for the Fund. During the last fiscal year of Salomon
Brothers Worldwide Income Fund Inc, SBAM was paid $315,258 by the Fund for
its services as Administrator.
(6) With respect to this Fund SBAM serves as subadvisor and, accordingly, the
sponsoring investment advisor pays SBAM a portion of the total advisory fee.
(7) SBAM Limited acts as subadviser to this Fund and is paid by SBAM out of its
management fee an amount equal to the fee payable under the management
contract between SBAM and the Fund multiplied by the current value of net
assets of the Fund that SBAM allocates to SBAM Limited.
SBAM's principal business address is 7 World Trade Center, New York, New
York 10048. The names, titles and principal occupations of the current directors
and executive officers of SBAM are set forth in the following table.
<TABLE>
<CAPTION>
NAME TITLE AND PRINCIPAL OCCUPATION
---- ------------------------------
<S> <C>
THOMAS W. BROCK................ Chairman, Chief Executive Officer and Managing Director of
SBAM and Managing Director and Member of the Management
Board of Salomon Brothers Inc
MICHAEL S. HYLAND.............. President, Managing Director and Member of the Board of SBAM
and Managing Director of Salomon Brothers Inc
RODNEY B. BERENS............... Managing Director and Member of the Board of SBAM and
Managing Director and Member of the Management Board of
Salomon Brothers Inc
VILAS V. GADKARI............... Managing Director and Member of the Board of SBAM and
Managing Director of Salomon Brothers Inc
ZACHARY SNOW................... Secretary of SBAM and Managing Director and Counsel of
Salomon Brothers Inc
</TABLE>
The business address of each person listed above other than Mr. Gadkari is
7 World Trade Center, New York, New York 10048 and the business address of Mr.
Gadkari is Victoria Plaza, 111 Buckingham Palace Road, London, England SW1W OSB.
As noted above, on November 28, 1997, SBAM became an indirect wholly-owned
subsidiary of Travelers as a result of a merger between a wholly-owned
subsidiary of Travelers and Salomon Inc. More particularly, as a result of the
merger, SBAM is a wholly-owned subsidiary of Salomon Brothers Holding Company
Inc
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("SBHC"). SBHC, in turn, is a wholly-owned subsidiary of Salomon Smith Barney
Holdings Inc, which in turn is a wholly-owned subsidiary of Travelers.
Travelers' principal business address is 388 Greenwich Street, New York, New
York 10013. The address of the principal place of business of SBHC and of
Salomon Smith Barney Holdings Inc. is 7 World Trade Center, New York, New York
10048.
EVALUATION OF THE BOARD OF TRUSTEES
As noted above, under federal law, the change in control of SBAM could be
deemed to cause the automatic termination of the Subadvisory Agreement. Against
this backdrop, at a meeting on November 10, 1997, the Trustees determined that
it would be in the Fund's best interest to continue to retain SBAM's services by
re-appointing SBAM as an investment subadviser to the Fund. This determination
included the unanimous approval of all Trustees who are not "interested persons"
of the Trust, Heritage or SBAM as that term is defined in the Investment Company
Act of 1940 ("Independent Trustees"). In approving the new SBAM Agreement, the
Board analyzed the factors discussed below and other factors that would affect
positively or negatively the provision of portfolio management services.
The Trustees primarily considered the value of continuity in the Fund's
investment strategy and style, SBAM's specialized experience and success as a
high-yield bond fund manager, its experience and track record to date as the
Fund's investment subadviser, and other portfolio management alternatives
available to the Fund. The Fund's Board of Trustees also considered the
likelihood of SBAM's and Travelers' continued financial stability following the
change in control of SBAM and whether the change in control would affect the
ability of SBAM to retain and attract qualified personnel.
VOTE REQUIRED
Approval of Proposal 1 requires the affirmative vote of the holders of the
lesser of (1) 67% or more of the Shares of the Fund present at the Meeting, if
the holders of more than 50% of the outstanding Fund Shares are present or
represented by proxy at the Meeting, or (2) more than 50% of the outstanding
Shares of the Fund entitled to vote at the Meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 1.
PROPOSAL 2. APPROVAL OF A PROPOSAL TO PERMIT HERITAGE TO HIRE SUBADVISERS OR
MODIFY SUBADVISER AGREEMENTS WITHOUT SHAREHOLDER APPROVAL
INTRODUCTION
Heritage serves as the investment adviser and administrator of the Fund. As
such, Heritage does not make the day-to-day investment decisions for the Fund.
Instead, Heritage administers the Fund, establishes an investment program for
the Fund and selects, compensates and evaluates the Fund's investment
subadviser, currently SBAM. The investment subadviser, in turn, makes the
day-to-day investment decisions for the Fund.
Federal securities law requires that the shareholders of the Fund approve
the Fund's subadvisory agreements and any amendments thereto. Thus, when a new
subadviser is retained on behalf of the Fund, shareholders are required to
approve the subadvisory agreement. Similarly, if an existing subadvisory
agreement is amended in any respect (e.g., an increase in the fee paid by
Heritage -- not by the Fund -- to
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<PAGE> 7
the subadviser), shareholder approval is required. Additionally, as Proposal 1
exemplifies, shareholder approval is required in order to re-appoint a
subadviser when there is a change in control of the Fund's subadviser. In all of
these cases, in order to obtain shareholder approval, the Fund must call and
conduct a shareholder meeting, prepare and distribute proxy materials, and
solicit votes from Fund shareholders. The process can be costly and
time-consuming.
The Trustees recently authorized the Fund's officers to apply to the
Securities and Exchange Commission ("SEC") for an order exempting the Fund from
the requirement described in the previous paragraph ("SEC Order"). If it is
issued, the SEC Order would permit the Fund, without the prior approval of
shareholders, to hire new subadvisers, to rehire existing subadvisers that have
experienced a change in control and to modify subadvisory agreements. By
eliminating shareholder approval in these matters, the Fund would have greater
flexibility in selecting and re-appointing investment subadvisers and would save
the considerable expenses involved in soliciting shareholder proxies and
conducting shareholder meetings. Changes in subadvisory arrangements would still
require Board approval and may be subject to certain other conditions, as
discussed below.
The Trustees and Heritage hereby seek shareholder approval of this proposed
arrangement for approval of subadvisory agreements. If Proposal 2 is not
approved by shareholders, shareholder approval of subadvisory agreements and
amendments thereto will continue to be required. If Proposal 2 is approved by
Fund shareholders, the proposal will be effective if and when the SEC Order is
issued. There is no assurance that the SEC Order will be issued.
COMPARISON OF PRESENT AND PROPOSED SELECTION PROCESS FOR SUBADVISERS
Under both the current process for approval of subadvisory agreements and
under the proposed process, any change in a subadvisory agreement requires
approval by the Board. In considering whether to appoint a subadviser, the Board
will analyze the factors it considers relevant, including the nature, quality
and scope of services provided by a subadviser to investment companies
comparable to the Fund. The Board will review the ability of the subadviser to
provide its services to the Fund, as well as its personnel, operations,
financial condition or any other factor that would affect the provision of those
services. The Board will examine the performance of the subadviser with respect
to compliance and regulatory matters over the past fiscal year. It will review
the subadviser's investment performance with respect to accounts that are
comparable. Finally, the Board will consider other factors that it considers
relevant to the subadviser's performance as an investment adviser. The Board
believes that this review process provides appropriate shareholder protection in
the selection of subadvisers.
Under the current process for approval of subadvisory agreements, in
addition to Trustee approval, shareholders must approve any change in
subadvisory agreements. More particularly, a subadvisory agreement must receive
the affirmative vote of the holders of the lesser of (1) 67% or more of the
Shares of the Fund present at the Meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy at the Meeting, or
(2) more than 50% of the outstanding Shares of the Fund entitled to vote at the
Meeting. Such shareholder approval would be eliminated under the proposed
process for approval of subadvisory agreements.
An SEC Order authorizing the proposed process for approval of subadvisory
agreements may be granted subject to a number of conditions. Following is a list
of conditions that is representative of the relevant conditions that the SEC has
recently imposed in a number of orders that are similar to the SEC Order that
the Fund is seeking. The list may be a useful guide in predicting the conditions
that may be imposed in any SEC
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<PAGE> 8
Order that is issued with respect to the Fund. However, any SEC Order that is
issued with respect to the Fund might be granted subject to different conditions
than those set forth below:
1. Before the Fund may rely on the order requested in the application, the
operation of the Fund in the manner described in the application will receive
the affirmative vote of the holders of the lesser of (1) 67% or more of the
Shares of the Fund present at the Meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy at the Meeting, or
(2) more than 50% of the outstanding Shares of the Fund entitled to vote at the
Meeting.
2. The Fund will disclose in its prospectus the existence, substance and
effect of any order granted pursuant to the application. In addition, the Fund
will hold itself out to the public as employing the management structure
described in the application. The prospectus will prominently disclose that
Heritage has the ultimate responsibility to oversee investment subadvisers and
recommend their hiring, termination and replacement.
3. At all times, a majority of the Trust's Board of Trustees will be
persons each of whom is not an "interested person" of the Trust as that term is
defined in federal securities law ("Independent Trustees"), and the nomination
of new or additional Independent Trustees will be at the discretion of the then
existing Independent Trustees.
4. Heritage will not enter into a subadvisory agreement with any investment
subadviser that is an "affiliated person," as defined in federal securities law,
of Heritage or of any Heritage mutual funds, other than by reason of serving as
investment subadviser to one or more Heritage mutual funds ("Affiliated
investment subadviser"), without that agreement, including the compensation to
be paid thereunder, being approved by the shareholders of the Fund.
5. When an investment subadviser change is proposed for the Fund with an
Affiliated investment subadviser, the Fund's Trustees, including a majority of
the Independent Trustees, will make a separate finding, reflected in the Fund's
Board minutes, that the change is in the best interests of the Fund and its
shareholders and does not involve a conflict of interest from which Heritage or
the Affiliated investment subadviser derives an inappropriate advantage.
6. Within 90 days of the hiring of any new investment subadviser,
shareholders will be furnished relevant information about a new investment
subadviser that would be contained in an information statement, including any
change in such disclosure caused by the addition of a new investment subadviser.
Heritage will meet this condition by providing shareholders, within 90 days of
the hiring of an investment subadviser, an informal information statement. The
information statement provided will meet relevant requirements of federal
securities law.
7. Heritage will provide general management services to the Fund, including
overall supervisory responsibility for the general management and investment of
the Fund's portfolio, and subject to review and approval by the Trustees, will:
(i) set the Fund's overall investment strategies; (ii) select investment
subadvisers; (iii) when and if appropriate, recommend to the Fund's Board of
Trustees the allocation and reallocation of the Fund's assets among multiple
investment subadvisers; (iv) monitor and evaluate the performance of investment
subadvisers; and (v) ensure that the investment subadvisers comply with the
Fund's investment objectives, policies and restrictions.
8. No Trustee or officer of the Trust or director or officer of Heritage
will own directly or indirectly (other than through a pooled investment vehicle
that is not controlled by that Trustee, director or officer) any interest in an
investment subadviser except for (i) ownership of interests in Heritage or any
entity that
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<PAGE> 9
controls, is controlled by, or is under common control with Heritage; or (ii)
ownership of less than 1% of the outstanding securities of any class of debt or
equity of a publicly-traded company that is either an investment subadviser or
an entity that controls, is controlled by or is under common control with an
investment subadviser.
VOTE REQUIRED
As noted above, the SEC has previously granted requests for exemptive
relief that are similar to Proposal 2 where the proposal receives the
affirmative vote of the holders of the lesser of (1) 67% or more of the Shares
of the Fund present at the Meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy at the Meeting, or (2)
more than 50% of the outstanding Shares of the Fund entitled to vote at the
Meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 2.
PROPOSAL 3. RATIFICATION OF SELECTION OF ACCOUNTANTS
The Fund's financial statements for the fiscal years ended September 30,
1996, and September 30, 1997, were audited by Price Waterhouse LLP, independent
accountants. The Board of Trustees has selected Price Waterhouse LLP as
independent accountants for the Fund for the fiscal year ending September 30,
1998, subject to termination of that position without penalty by either the
shareholders of the Fund or by the Trustees.
Price Waterhouse LLP has been the Fund's independent accountants since
1996. During 1996, the Independent Trustees accepted the resignation of Coopers
& Lybrand L.L.P. and appointed Price Waterhouse LLP as the Fund's independent
public accountants. Coopers & Lybrand L.L.P.'s reports for each of the Fund's
last two periods ended September 30, 1994 and 1995 did not contain any adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. No disagreement occurred
between Coopers & Lybrand L.L.P. and the Fund during the aforementioned two
periods with respect to any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Price Waterhouse LLP has informed the Fund that it has no material direct
or indirect financial interest in the Fund. Representatives of Price Waterhouse
LLP are not expected to be present at the meeting but have been given the
opportunity to make a statement if they so desire, and will be available should
any matter arise requiring their presence.
VOTE REQUIRED
A majority of the votes cast at the meeting in person or by proxy is
required for ratification.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL 3.
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<PAGE> 10
INFORMATION ABOUT THE FUND
CURRENT ADVISORY ARRANGEMENTS
Heritage is a Florida corporation organized in 1985 and registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
Heritage serves as investment adviser and administrator to the Fund pursuant to
an Investment Advisory and Administration Agreement between Heritage and the
Trust on behalf of the Fund, dated January 19, 1990. All of the capital stock of
Heritage is owned by Raymond James Financial, Inc. ("RJF"). Thomas A. James, a
Trustee of the Trust, by virtue of his direct or indirect ownership of RJF, owns
beneficially more than 10% of Heritage. RJF, 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. Heritage also serves as investment
adviser and manager to ten other investment portfolios with aggregate assets of
approximately $3.2 billion as of September 30, 1997.
The principal address of Heritage, RJF, Thomas A. James and each of
Heritage's directors and principal executive officer is at 880 Carillon Parkway,
St. Petersburg, Florida 33716. The directors and principal executive officer of
Heritage are: Jeffrey P. Julien, Director; Richard K. Riess, Director; and
Stephen G. Hill, Director, President and Chief Executive Officer. The officers
of the Fund who also are employed by Heritage are: Stephen G. Hill; Donald H.
Glassman; and Patricia Schneider. The Trustees and the officers of the Fund do
not own in the aggregate more that 1% of the shares of beneficial interest in
the Fund.
Under the Advisory Agreement, and subject to the supervision of the
Trustees, Heritage has agreed, among other duties, to provide a continuous
investment program for the Fund's portfolio, supervise all aspects of the Fund's
operation and hold itself available to respond to shareholder inquiries. The
Advisory Agreement expressly permits advisory services to be delegated to and
performed by a subadviser. Under the Advisory Agreement, the Fund bears all of
its expenses not specifically assumed by Heritage incurred in its operation and
the offering of shares.
Heritage voluntarily has agreed to limit the expenses of the Fund.
Effective February 1, 1998, Heritage has agreed to waive its advisory fee or to
reimburse each class of the Fund to the extent that Class A expenses exceed an
annualized rate of 1.25% of average daily net assets or Class B or Class C
expenses exceed 1.70%. During the fiscal year ended September 30, 1997, the Fund
paid Heritage management fees in the amount of $287,069 and Heritage waived fees
in the amount of $45,839.
For services provided under the Advisory Agreement, the Fund pays Heritage
an annualized advisory fee, computed daily and paid monthly, of .60% of the
Fund's average daily net assets up to $100 million and .50% of daily net assets
over $100 million. Heritage also is the fund accountant and transfer and
dividend disbursing agent for the Fund. For the fiscal year ended September 30,
1997, the Fund paid Heritage approximately $24,352 for its services as transfer
and dividend disbursing agent. For the fiscal year ended September 30, 1997, the
Fund paid Heritage approximately $32,320 for its services as fund accountant.
Heritage will continue to provide these services to the Fund after the
subadvisory contract is approved.
In addition, an affiliate of Heritage, Raymond James & Associates, Inc.
("RJA"), serves as the Trust's principal underwriter. RJA's principal address is
880 Carillon Parkway, St. Petersburg, Florida 33716. As compensation for certain
distribution and shareholder servicing activities, RJA was paid $51,820 pursuant
to the Trust's Rule 12b-1 distribution plan. RJA will continue to serve as
principal underwriter to the Trust after the advisory contract is approved. The
Fund does not currently execute any securities transactions through RJA or any
other affiliated broker-dealer.
9
<PAGE> 11
The Advisory Agreement provides that Heritage will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matter to which the Agreement relates, except a loss
resulting from willful misfeasance, bad faith, or gross negligence on their part
in the performance of their duties or from reckless disregard by them of their
obligations and duties thereunder.
SHAREHOLDER PROPOSALS
As a general matter, the Trust does not hold regular annual or other
meetings of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of the Trust's shareholders should send such
proposals to the Trust at 880 Carillon Parkway, St. Petersburg, Florida 33716,
so as to be received a reasonable time before the proxy solicitation for that
meeting is made.
Shareholder proposals that are submitted in a timely manner will not
necessarily be included in the Trust's proxy materials. Inclusion of such
proposals is subject to limitations under the federal securities laws.
OTHER BUSINESS
Management knows of no business to be presented to the Meeting other than
the matters set forth in this statement, but should any other matter requiring a
vote of shareholders arise, the proxies will vote thereon according to their
best judgment in the interests of the Trust.
By the order of the Board of Trustees,
CLIFFORD J. ALEXANDER
Secretary
January 20, 1998
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN YOUR PROXY PROMPTLY.
10
<PAGE>
HERITAGE
- -------------------
Income Trust
High Yield Fund(TM)
- -------------------
HERITAGE ASSET MANAGEMENT, INC.
880 CARILLON PARKWAY
ST. PETERSBURG, FL 33716
HERITAGE INCOME TRUST - HIGH YIELD BOND FUND
Special Meeting of Shareholders - February 23, 1998
The undersigned hereby appoints as proxies Stephen G. Hill, K.C. Clark and
Donald H. Glassman, each with the power of substitution, to vote for the
undersigned all shares of beneficial interest of the undersigned at the
aforementioned meeting and any adjournment thereof with all the power the
undersigned would have if personally present. The shares represented by this
proxy will be voted as instructed. Unless indicated to the contrary, this proxy
shall be deemed to indicate authority to vote "FOR" all proposals. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy and return it in the enclosed postage paid
envelopes as soon as possible.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL
<PAGE>
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: HERHYB KEEP THIS PORTION FOR YOUR RECORDS
- -------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
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<S> <C> <C> <C>
HERITAGE INCOME TRUST - HIGH YIELD BOND FUND
This proxy will not be voted unless it is dated and signed exactly as instructed below.
If shares are held jointly, each shareholder named should sign; if only one signs, his or her signature will be
binding. If the shareholder is a corporation, the President or Vice President should sign in his or her own name,
indicating title. If the shareholder is a partnership, a partner should sign in his or her own name, indicating
that he or she is a "Partner."
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
1. Approval of the proposed subadvisory Agreement between Heritage Asset / / / / / /
Management, Inc. and Salomon Brothers Asset Management Inc. with respect to
the Heritage Income Trust - High Yield Bond Fund.
2. Approval of the proposal to permit Heritage Asset Management, Inc. to hire / / / / / /
subadvisers or modify subadvisory agreements without shareholder approval.
3. Ratification of Price Waterhouse LLP as independent accountants of the Fund / / / / / /
for the fiscal year ending September 30, 1998.
</TABLE>
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Signature [PLEASE Date Signature [PLEASE Date
SIGN WITHIN BOX] SIGN WITHIN BOX]
