<PAGE>
As filed with the Securities and Exchange Commission on August 17, 1995
Registration No. 33-57986
________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [ X ]
---
(Check appropriate box or boxes.)
HERITAGE SERIES TRUST
(Exact name of Registrant as specified in charter)
880 Carillon Parkway
St. Petersburg, FL 33716
(Address of Principal Executive Office) (Zip Code)
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)
Copy to:
CLIFFORD J. ALEXANDER, ESQ.
Kirkpatrick & Lockhart LLP
1800 M Street, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective 75 days from the
date of this filing pursuant to paragraph (a)(2) of Rule 485.
Registrant has filed a notice pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended, on or about December 21, 1994.
Page 1 of _____ Pages
Exhibit Index Appears on Page_____
<PAGE>
HERITAGE SERIES TRUST
CONTENTS OF REGISTRATION STATEMENT
This registration document is comprised of the following:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Prospectus - Growth Equity Fund
Statement of Additional Information - Growth Equity Fund
Part C of Form N-1A
Signature Page
Exhibits
<PAGE>
HERITAGE SERIES TRUST
GROWTH EQUITY FUND
FORM N-1A CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
PART A ITEM NO. PROSPECTUS CAPTION
---------------- -------------------
1. Cover Page Cover Page
2. Synopsis About the Trust and the Fund; Total
Fund Expenses; and Performance
Information
3. Condensed Financial Total Fund Expenses; and Performance
Information Information
4. General Description of Cover Page; Investment Objective,
Registrant Policies and Risk Factors; and
Investment Limitations
5. Management of the Fund Cover Page; About the Trust and the
Fund; and Management of the Fund
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Cover Page; General Information;
Information Investing in the Fund; Dividends and
Other Distributions; Shareholder
Information; and Taxes
7. Purchase of Securities Being Net Asset Value; How to Buy Shares;
Offered Minimum Investment Required/Accounts
with Low Balances; Investment
Programs; Alternative Purchase
Plans; What Class A Shares Will
Cost; What Class C Shares Will Cost;
Exchange Privilege; and Distribution
Plan
8. Redemption or Repurchase Total Fund Expenses; How to Redeem
Shares; Minimum Investment
Required/Accounts with Low Balances
9. Pending Legal Proceedings Not Applicable
<PAGE>
STATEMENT OF ADDITIONAL
PART B ITEM NO. INFORMATION CAPTION
---------------- ------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information
History
13. Investment Objectives and Investment Objective and Policies of
Policies the Fund; and Investment Limitations
14. Management of the Fund Management of the Fund
15. Control Persons and Principal Not applicable
Holders of Securities
16. Investment Advisory and Other Investment Other Services Adviser
Services and Administrator; Subadviser;
Distribution of Shares; and
Administration of the Fund
17. Brokerage Allocation Brokerage Practices
18. Capital Stock and Other General Information; and Fund
Securities Information
19. Purchase, Redemption and Net Asset Value; Investing in the
Pricing of Securities Being Fund; and Redeeming Shares
Offered
20. Tax Status Taxes
21. Underwriters Distribution of Shares
22. Calculation of Performance Performance Information
Data
23. Financial Statements Not Applicable
</TABLE>
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.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER __, 1995
HERITAGE
________________
Series Trust
GROWTH EQUITY FUND
____________________
Heritage Series Trust is a mutual fund offering its shares in
separate investment portfolios. This Prospectus relates to the Growth
Equity Fund (the "Fund"). The Fund primarily seeks growth through long-
term capital appreciation. The Fund seeks to accomplish this objective
primarily by investing in common stocks that the Fund's investment
subadviser, Eagle Asset Management, Inc., believes have sufficient growth
potential to offer above average long-term capital appreciation. 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 which 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 November 2,
1995 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
_________________________________________________
ASSET MANAGEMENT, INC.
________________________
Registered Investment Advisor-SEC
880 Carillon Parkway
St. Petersburg, Florida 33716
(800) 421-4184
Prospectus Dated November 2, 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
<PAGE>
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Table of Contents
__________________________________________________________________________
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 1
About the Trust and the Fund . . . . . . . . . . . . . . . . . 1
Total Fund Expenses . . . . . . . . . . . . . . . . . . . . . . 1
Investment Objective, Policies and Risk Factors . . . . . . . . 2
Investment Limitations . . . . . . . . . . . . . . . . . . . . 4
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . 5
Performance Information . . . . . . . . . . . . . . . . . . . . 5
INVESTING IN THE FUND . . . . . . . . . . . . . . . . . . . . . . . . 6
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . 6
Minimum Investment Required/Accounts with Low Balances . . . . 7
Investment Programs . . . . . . . . . . . . . . . . . . . . . . 7
Alternative Purchase Plans . . . . . . . . . . . . . . . . . . 8
What Class A Shares Will Cost . . . . . . . . . . . . . . . . . 9
What Class C Shares Will Cost . . . . . . . . . . . . . . . . . 12
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . 12
Receiving Payment . . . . . . . . . . . . . . . . . . . . . . . 13
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . 14
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . 15
SHAREHOLDER AND ACCOUNT POLICIES . . . . . . . . . . . . . . . . . . 17
Dividends and Other Distributions . . . . . . . . . . . . . . . 17
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . 17
Expenses of the Fund . . . . . . . . . . . . . . . . . . . . . 18
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Shareholder Information . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
GENERAL INFORMATION
About the Trust and the Fund
______________________________________________________________________
Heritage Series Trust (the "Trust") is a Massachusetts business trust
established under a Declaration of Trust dated October 28, 1992. The
Trust is an open-end diversified management investment company that
currently offers its shares in four separate investment portfolios. The
Fund is designed for individuals, institutions and fiduciaries whose
investment objective is growth through long-term capital appreciation.
The Fund offers two classes of shares, Class A shares and Class 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. This Prospectus relates exclusively to the Fund. To obtain a
Prospectus for any of the Trust's other portfolios, please call (800) 421-
4184.
Total Fund Expenses
_______________________________________________________________________
Shown below are all Class A and Class C expenses expected to be
incurred by the Fund during its initial fiscal year. Because the Fund's
shares were not offered for sale prior to November 1, 1995, annual
operating expenses are based on estimated expenses. Shareholder
transaction expenses are expressed as a percentage of maximum public
offering price, cost per transaction or as otherwise noted.
<TABLE>
<CAPTION>
<S> <C> <C>
Class A Class C
Shareholder Transaction
Expenses
Sales load "charge" on
purchases . . . . . . . . . . . 4.75% None
Contingent deferred sales load
(as a percentage of original
purchase price or redemption (declining to 0% after
proceeds, as applicable) None 1.00% the first year)
Wire redemption fee . . . . . . $5.00 $5.00
Annual Fund Operating Expenses
Management Fee 0.75% 0.75%
12b-1 Distribution Fees . . . . 0.25% 1.00%
Other Expenses . . . . . . . . 0.65% 0.65%
------ ------
Total Fund Operating
Expenses . . . . . . . . . . . 1.65% 2.40%
------ ------
------ ------
</TABLE>
<PAGE>
The Fund's manager, Heritage Asset Management, Inc. (the "Manager"),
will voluntarily waive its fees and, if necessary, reimburse the Fund to
the extent that Class A annual operating expenses exceed 1.65% and to the
extent that Class C annual operating expenses exceed 2.40% of the average
daily net assets attributable to that class for a fiscal year. 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. Although the Fund is authorized to pay annual Rule 12b-1
Distribution Fees of up to .35% of Class A average daily net assets, the
Trust's Board of Trustees (the "Board of Trustees" or the "Board") has
authorized annual payments of only .25% of Class A average daily net
assets. 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
________ _________
Total Class A Operating Expenses . $63 $97
Total Class C Operating Expenses . . $34 $72
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.
1 Year 3 Years
_________ _________
Total Class A Operating Expenses . $63 $97
Total Class C Operating Expenses . . $24 $72
This is an illustration only. Actual expenses and performance may be
greater or less than that shown above. The purpose of the above table is
to assist investors in understanding the various costs and expenses that
will be borne directly or indirectly by Fund shareholders. For a further
discussion of these costs and expenses, see "Management of the Fund,"
"Distribution Plans" and "Expenses of the Fund."
Investment Objective, Policies and Risk Factors
________________________________________________________________________
The Fund's primary investment objective is growth through long-term
capital appreciation. In seeking this objective, the Fund may invest
without limitation in common stocks that, when purchased, meet certain
qualitative standards as determined by Eagle Asset Management, Inc., the
<PAGE>
Fund's investment subadviser (the "Subadviser"). There is no assurance
that this objective will be met. The Fund is designed for long-term
investors who desire to participate in the stock market with more
investment risk and volatility than the stock market in general, but with
less investment risk and volatility than many aggressive capital
appreciation funds.
The Subadviser will invest in common stocks that it believes have
sufficient growth potential to offer above average long-term capital
appreciation. Companies in which the Subadviser will invest will have at
least one of the following characteristics at the time of purchase:
. expected earnings-per-share growth greater than the average
of the Standard and Poor's 500 Composite Stock Price Index
("S&P 500"), or
. return on equity greater than the average for the S&P 500.
Under normal market conditions, at least 65% of the Fund's total
assets will be invested in U.S. common stocks. A majority of the Fund's
total assets will be invested in common stock with market capitalization
of greater than $1 billion at the time of purchase. With respect to the
other 35% of its total assets, the Fund may invest in common stocks of
foreign issuers, American Depository Receipts ("ADRs"), foreign currency
transactions with respect to underlying common stocks, preferred stock,
investment grade securities convertible into common stocks, futures
contracts, options on equity securities or equity security indices, rights
or warrants to subscribe for or purchase common stocks, obligations of the
U.S. Government, its agencies and instrumentalities (including repurchase
agreements thereon) and in securities that track the performance of a
broad-based securities index, such as Standard & Poor's Depository
Receipts. The Fund may loan its portfolio securities. Investment grade
securities include securities rated Baa or above by Moody's Investors
Service, Inc. ("Moody's") or BBB or above by Standard & Poor's Rating
Group ("S&P") or unrated securities deemed to be of comparable quality by
the Subadviser. The Fund will invest no more than 5% of its total assets
in the lowest category of investment grade securities. The Fund may
retain a security that has been downgraded below investment grade if, in
the Subadviser's opinion, it is in the Fund's best interest. For
temporary defensive purposes during anticipated periods of general
market decline, the Fund may invest up to 100% of its assets in money
market instruments and long- and short-term debt instruments that are
rated A or higher by S&P or Moody's. See the Appendix to the Statement
of Additional Information ("SAI") for a description of corporate bond
and commercial paper ratings by S&P and Moody's.
No more than 10% of the Fund's net assets may be invested in
securities that, at the time of investment, are illiquid. The Fund may
invest in restricted securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended ("1933 Act"), that are
determined to be liquid under Board-approved guidelines. These securities
are not considered to be illiquid and therefore are not included in the
10% limit noted above. See "Investment Information -- Investment
Policies" in the SAI for a more detailed discussion of these securities,
including related risks.
- 6 -
<PAGE>
Stock Selection Process. In selecting securities, the Subadviser
will focus on companies with return on equity and expected earnings growth
rates greater than the average for the S&P 500. Selections will be made
in part based on the Subadviser's opinion regarding the sustainability of
the company's competitive advantage in the marketplace as well as the
Subadviser's opinion of the company's management team. The Subadviser will
invest in companies that, in its opinion, will have long-term returns
greater than the average for the S&P 500. The Subadviser normally will
reevaluate a security if it underperforms the S&P 500 by 15% or more
during a three-month period. At that time a decision will be made to sell
or hold the security. If a particular stock appreciates to over 5% of the
total assets of the portfolio, the Subadviser generally will reduce the
position to less than 5%. If the stock price appreciates to a level that,
in the opinion of the Subadviser, is not sustainable, the position
generally will be sold to realize the existing profits and avoid a
potential price correction. If the Subadviser identifies a holding that
it considers to be a better investment than a current holding, the
Subadviser generally will consider selling the current holding to add the
new security.
Special Risks of Foreign Securities Transactions. The Fund may
invest up to 25% of its total assets in common stocks of foreign issuers
and ADRs. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities of foreign
issuers. There are special risks involved in investing in foreign
securities and ADRs. There may be less public information available about
foreign issuers than U.S. issuers, and foreign issuers generally are not
subject to uniform audit and financial reporting standards, practices and
requirements comparable to those in the United States. The securities of
some foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in payment or
delivery of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic
investments. There may be a possibility of nationalization or
expropriation of assets, impositions of currency exchange controls,
confiscatory taxation, political or financial instability and diplomatic
developments which could affect the value of the Fund's investment in
certain foreign countries. In addition, income received by the Fund from
sources within foreign countries may be reduced by withholding and other
taxes imposed by such countries. Before investing in foreign securities,
- 7 -
<PAGE>
the Fund will consider possible political and financial instability
abroad, as well as the liquidity and volatility of foreign investments.
Fluctuations in monetary exchange rates will affect the dollar value of
foreign investments. Solely to protect against such uncertainty, the Fund
can enter into forward contracts to purchase or sell foreign currencies at
a future date.
Portfolio Turnover. There are no fixed limitations regarding the
Fund's portfolio turnover. Securities satisfying the basic policies and
objectives of the Fund may be sold when they are no longer deemed
suitable. The Fund currently does not expect its annual portfolio
turnover rate to exceed 100%. A high portfolio turnover rate generally
leads to higher transaction costs and may result in a greater number of
taxable transactions.
Repurchase Agreements. Repurchase agreements are transactions in
which the Fund purchases securities and 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 maturity of the purchased securities. Although repurchase
agreements carry certain risks not associated with direct investments 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.
See the SAI for further discussion of the above policies. The SAI
describes other investment techniques as well that the Fund may use but
that are not anticipated to be a part of the Fund's investment strategy
for the foreseeable future.
Investment Limitations
_______________________________________________________________________
The Fund will not:
. With respect to 75% of its total assets, invest more than 5% of its
total assets (valued at market value) in securities of any one issuer
other than the U.S. Government or its agencies and instrumentalities,
or purchase more than 10% of the voting securities of any one issuer.
. Purchase securities if, as a result of such purchase, more than 25%
of the value of its total assets would be invested in any one
industry.
. Borrow money, except from banks, and only if at the time of such
borrowings the total loans to the Fund do not exceed 5% of the Fund's
total assets, and such borrowing can only be made for temporary or
- 8 -
<PAGE>
emergency purposes (combined with other borrowings). However, the
Fund may invest up to 33 % of its total assets in reverse repurchase
agreements in order to meet redemption requests without immediately
selling securities.
The Fund's investment objective and these investment limitations are
fundamental policies 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 ("1940 Act"). See "Investment
Information - Investment Limitations" in the SAI for a listing of other
investment limitations, some of which are fundamental.
Net Asset Value
_______________________________________________________________________
The net asset values of the Class A and Class C shares will be
determined daily, Monday through Friday (excluding New York Stock Exchange
("Exchange") holidays), as of the close of regular trading on the Exchange
-- generally 4:00 p.m. Eastern time -- by dividing the value of the total
assets of the Fund, less liabilities, by the number of shares outstanding.
Securities and other instruments owned by the Fund for which market
quotations are readily available will be valued at current market value
based on the last quoted sale price or, if there is no such sale price
available, at the most recent quoted bid price. In the absence of market
quotations, or if the Manager or the Subadviser has reason to question the
validity of market quotations it receives, securities and other assets
will be valued using such methods as the Board of Trustees believe would
reflect fair market value. Short-term instruments that will mature in 60
days or less will be stated at amortized cost, which approximates market
value. Securities that are quoted in a foreign currency will be valued
daily in U.S. dollars at the foreign currency exchange rates prevailing at
the time the Fund calculates its daily net asset value per share. The per
share net asset value of Class A and Class 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
_______________________________________________________________________
From time to time the Fund may advertise its average annual total
return and compare its performance to that of other mutual funds with
similar investment objectives and to relevant indices. Performance
information is computed separately for Class A and Class C shares in
accordance with the methods described below. Because Class C shares bear
the expense of a higher distribution fee attributable to the deferred
sales charge alternative, the performance of Class C shares likely will be
lower than that of Class A shares.
The Fund may include the total return of its Class A and Class C
shares in advertisements or other written material. When the Fund
advertises its total return with respect to Class A and Class C shares, it
- 9 -
<PAGE>
will be calculated for the one-, five-, and ten-year periods or, if such
periods have not yet elapsed, the period since the establishment of that
class. Total return is measured by comparing the value of an investment
in the class at the beginning of the relevant period (in the case of Class
A shares, giving effect to the maximum initial sales load of 4.75%) to the
redemption value of the investment in the class at the end of the period
(assuming reinvestment of any dividends or capital gains distribution at
net asset value and, in the case of Class C shares, giving effect to the
deduction of any contingent deferred sales load ("CDSL") that would be
payable). In addition, the Fund also may advertise its total return in
the same manner, but without annualizing performance and/or taking into
account the sales load or CDSL. For more information on Fund performance,
see "Performance Information" in 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 1933 Act.
Shares of the Fund may be purchased through a registered
representative of the Distributor, a participating dealer or participating
bank ("Representative") by placing an order for Fund shares with your
Representative, completing and signing the Account Application in this
Prospectus, and mailing it, along with your payment, within three business
days.
The Fund offers and sells two classes of shares. Class A and Class C
shares. Class 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. Class 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 Class 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."
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
- 10 -
<PAGE>
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 in the Prospectus and mailing it, along
with your payment to Heritage Series Trust -- Growth Equity Fund, c/o
Shareholder Services, Heritage Asset Management, Inc., P. O. Box 33022,
St. Petersburg, FL 33733.
Shares also 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 account number. Commercial banks may
elect to charge a fee for wiring funds to the Custodian. For more
information on "How to Buy Shares," see "Investing in the Fund" 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 the minimum due to market fluctuation.
Investment Programs
_______________________________________________________________________
A variety of 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 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
- 11 -
<PAGE>
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 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 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 Heritage open-end
mutual fund for which the Manager serves as adviser ("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 retirement plan accounts.
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. You may make limited contributions to the Heritage IRA
through the purchase of shares of the Fund and/or other Heritage Mutual
Funds. The Internal Revenue Code of 1986, as amended ("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
- 12 -
<PAGE>
filed). The Heritage IRA may also 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.
Fund shares may be used as the investment medium for qualified plans
(defined benefit or defined contribution plans established by
corporations, partnerships and sole proprietorships). Contributions to
qualified plans (within certain limits) may be made on behalf of the
employees, including owner employees, of the sponsoring entity.
Other Retirement Plans. Multiple participant payroll deduction
retirement plans also may purchase Class 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 Class A shares of the Fund will be that normally
applicable under the schedule of sales load 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 Class 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 retroactively
adjusted on the basis of later purchases. Multiple participant payroll
deduction retirement plans may purchase Class 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
Class C shares would exceed the initial sales load plus accumulated
service fees on Class A shares purchased at the same time. Another factor
to consider is whether the potentially higher yield of Class 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
Class A shares than sales of Class C shares.
If you purchase sufficient shares to qualify for a reduced sales
load, you may prefer to purchase Class A shares because similar reductions
are not available on the Class C shares. For example, if you intend to
invest more than $1,000,000 in shares of the Fund, you should purchase
Class A shares. Moreover, all Class 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 Class 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
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<PAGE>
service fees on Class C shares would eventually exceed the initial sales
load plus the continuing service fee on Class A shares during the life of
your investment. However, because initial sales loads are deducted at the
time of purchase, not all of the purchase payment for Class A shares is
invested initially.
You might determine that it would be more advantageous to purchase
Class 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 Portfolio
and the maximum Class A sales load, you would have to hold Class A shares
approximately six years before the accumulated distribution and servicing
fees on the Class C shares would exceed the initial sales load plus the
accumulated servicing fees on the Class A shares.
What Class A Shares Will Cost
_______________________________________________________________________
Class A shares are sold on each day on which the Exchange is open.
The Class A shares of the Fund are sold at their next determined net asset
value plus a sales load as described below.
<TABLE>
<CAPTION>
<S> <C> <C>
Sales Load as a
Percentage of
-------------------------------
Net Amount Dealer Concession
Amount of Offering Invested as Percentage of
Purchase Price (Net Asset Value) Offering Price (1)
------------ --------- ----------------- ------------------
Less than $25,000 . . . . . . . . 4.75% 4.99% 4.25%
$25,000-$49,999 . . . . . . . . . 4.25% 4.44% 3.75%
$50,000-$99,999 . . . . . . . . . 3.75% 3.90% 3.25%
$100,000-$249,999 . . . . . . . . 3.25% 3.36% 2.75%
$250,000-$499,999 . . . . . . . . 2.50% 2.56% 2.00%
$500,000-$999,999 . . . . . . . . 1.75% 1.78% 1.25%
$1,000,000 and over . . . . . . . 1.00% 1.01% 0.75%
(1) During certain periods, the Distributors may pay 100% of the sales load to
participating dealers or participating banks. Otherwise, it will pay the Dealer
Concession shown above.
</TABLE>
Class A shares of the Fund may be sold at net asset value without any
sales load to the Manager and the Subadviser; current and retired officers
- 14 -
<PAGE>
and Trustees of the Trust; directors, officers, full-time employees and
retired employees of the Manager, the Subadviser of any Heritage Fund and
the Distributor, and their affiliates; registered representatives of
broker-dealers that are parties to dealer agreements with the Distributor;
directors, officers and full-time employees of banks that are parties to
agency agreements with the Distributor; and all such persons' immediate
relatives and 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 Fund shares at a sales
load equal to two-thirds of the percentages in the above table. The
Dealer concession will be adjusted in a like manner. Members of the APA
Group also are eligible to purchase Class 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. Class A shares also may be purchased without sales loads by
investors who participate in certain broker-dealer wrap fee investment
programs.
Class A shares also may be purchased without a sales load if
(1) within 90 days of the purchase of Class A shares the purchaser
redeemed 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 an otherwise applicable CDSL, and (2) the total
value of 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 competing firm's funds. To take advantage of this
waiver, an investor must provide satisfactory evidence that the above-
noted conditions are met. Qualifying investors should contact their
investment executives for more information.
Class 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 which 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 the
Fund and Class 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 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, Class 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
- 15 -
<PAGE>
no-load mutual fund outside the Heritage family of 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. Also, Class A shares 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 Class 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 Class A shares of the 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 Class A shares of the
Fund for his or their own account; a single purchase by a trustee or other
fiduciary purchasing Class 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" may also include Class A shares, purchased at the same time
through a single selected dealer, of any registered investment company
managed by the Manager that distributes its shares subject to a sales
load. To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer, you
or the 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 Class A shares of the Fund or any other Heritage Mutual
Fund subject to a sales load ("Statement of Intention").
Investors qualifying for the Combined Purchase Privilege described
above may purchase Class 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 Class A
shares of the Fund, the investor and the investor's spouse each purchase
shares of the Fund worth $5,000 (for a total of $10,000), then it will
only be necessary to invest a total of $15,000 during the following 13
months in Class A shares of the Fund or any other Heritage Mutual Fund to
qualify for the reduced sales loads on the total amount being invested.
- 16 -
<PAGE>
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. If you
would like to enter into a Statement of Intention in conjunction with your
initial investment in Class A shares of the Fund, please complete the
appropriate portion of the Account Application found in this Prospectus.
Current shareholders can obtain a Statement of Intention by contacting the
Manager or their Representative.
Reinstatement Privilege
_________________________
A shareholder who has redeemed any or all of his Class A shares of
the Fund may reinvest all or any portion of the redemption proceeds in
Class A shares of the Fund at net asset value without any sales load,
provided that such reinvestment is made within 30 calendar days after the
redemption date. A shareholder who has redeemed any or all of his Class 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 Class C shares of the Fund 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 so
realized will be recognized for federal tax purposes, and (2) any loss so
realized will not be recognized for those purposes to the extent that the
redemption 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, SEP, or IRA. Investors may exercise the
reinstatement privilege.
For more information on "What Class A Shares Will Cost" and further
explanation of instances in which the sales load will be waived or
reduced, see "Investing in the Fund" in the SAI.
What Class C Shares Will Cost
_______________________________________________________________________
A CDSL of 1% is imposed on Class 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 Class C shares purchased
subject to the CDSL. The CDSL will not be imposed on the redemption of
Class C shares acquired as dividends or other distributions, or on any
increase in the net asset value of the redeemed Class 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
- 17 -
<PAGE>
the CDSL, it will be assumed that the redemption is made first of Class C
shares acquired as dividends, second of Class C shares that have been held
for over one year, and finally of Class C shares held for less than one
year on a first-in first-out basis.
For example, assume you purchase 100 Class C shares at $10 per shares
(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 ($400) being redeemed would be
subject to a CDSL at a rate of 1%.
Waiver of the Contingent Deferred Sales Load. The CDSL is currently
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 Portfolio of Class 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.
How to Redeem Shares
_______________________________________________________________________
Redemptions 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 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. If you do not wish to have telephone exchange/redemption
privileges, you should so elect by completing the appropriate portion of
the Account Application. The Trust, Manager, Distributor and their
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<PAGE>
Trustees, directors, officers and employees are not liable for any loss
arising out of telephone instructions 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 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 will normally be sent the next business
day, and you 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 Requests. Fund shares may be redeemed by sending a written
request for redemption to "Heritage Series Trust--Growth Equity Fund, c/o
Shareholder Services, Heritage Asset Management, Inc., P.O. Box 33022,
St. Petersburg, FL 33733." Signature guarantees will be required on the
following types of requests: redemptions from any account which 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 when exchanging or transferring Funds into another Heritage account
that has a different name. The Manager will transmit an order to the Fund
for redemption.
Systematic Withdrawal Plan. Withdrawal plans are available which
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 Class 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 Class A shares
at the same time that you are redeeming shares upon which you may already
have paid a sales load. Therefore, the Fund will not knowingly permit
participation in an Automatic Investment Plan if you are at the same time
making systematic withdrawals of Class 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
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<PAGE>
CDSL for Class 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 as of the close of trading on the Exchange on
the next trading day, less any applicable CDSL for Class C shares.
Payment for shares redeemed by the Fund normally will be made on the
business day after redemption was made. If the shares to be redeemed have
been recently 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 the shareholder account number are indicated;
. any written request is signed by a 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 exceeding
$25,000 and on any certificates for shares (or an accompanying
stock power) have been guaranteed by a national bank, a state
bank which 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 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, you may either withdraw your 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 your account. For more information on "Receiving
Payment," see "Redeeming Shares - Receiving Payment" in the SAI.
Exchange Privilege
_______________________________________________________________________
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<PAGE>
If you have held Class A or Class C shares for at least 30 days you
may exchange some or all of your shares for shares of any other Heritage
Mutual Fund without the payment of any additional sales load. 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 will generally 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 Class C shares of
any other Fund, except Heritage Cash Trust 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 Heritage Cash Trust Money
Market Fund will not be included in this calculation.
If you exchange Class A or Class C shares for corresponding shares of
Heritage Cash Trust -- Money Market Fund, you may, at any time thereafter,
exchange such shares for the corresponding class of shares of any 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 Class 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 Class 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. Class A shares of the Fund may be
exchanged for Class A shares of the Heritage Cash Trust-- Municipal Money
Market Fund, which is the only class of shares offered by that fund.
Because the 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 will also be subject to the sales
load, if any, that would be applicable to a purchase of that Heritage
Mutual Fund. Class C shares are not eligible for exchange into the
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 "Telephone Redemption Requests to the Trust."
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
- 21 -
<PAGE>
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.
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 the exchange privilege.
In addition, each Heritage Mutual Fund may terminate the exchange
privilege upon 60 days notice as described above. For further information
on this exchange privilege, see the SAI, or 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 Board of Trustees. The Trustees are responsible for
managing the Fund's business affairs and for exercising all of the Fund's
powers except those reserved for the shareholders. A Trustee may be
removed by the Trustees or 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 non-investment 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 totalling
approximately $1.8 billion as of August 1, 1995.
The Manager's annual investment advisory and administration fee is
0.75% of the Fund's average daily net assets. This fee is computed daily
and paid monthly and is higher than that charged for most other mutual
funds with a similar investment objective. The Manager is currently
waiving fees and reimbursing expenses to the extent that annual total Fund
operating expenses for A shares and C shares exceed 1.65% and 2.40%,
respectively. The Manager reserves the right to discontinue any voluntary
waivers of its fees or reimbursements to the Fund in the future. The
advisory fee also 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 may recover fees waived in
the previous two years if the recovery does not cause the Fund to exceed
- 22 -
<PAGE>
applicable expense limitations. The Fund pays the Manager directly for
Fund Accounting and Transfer Agent Services.
Subadviser
The Manager has entered into an agreement with Eagle Asset
Management, Inc. to provide investment advice and portfolio management
services, including placement of brokerage orders, to the Trust for a fee
payable by the Manager equal to 50% of the fees payable to the Manager by
the Trust without regard to any reduction in fees actually paid to the
Manager as a result of state expense limitations or other voluntary fee
waivers by the Manager. The Subadviser is a wholly owned subsidiary of
Raymond James Financial, Inc. The Subadviser acts as adviser and
administrator to Heritage Series Trust - Eagle International Equity
Portfolio. The Subadviser also acts as subadviser to Heritage Series
Trust - Small Cap Stock Fund, Heritage Series Trust - Value Equity Fund,
Heritage Capital Appreciation Trust (although no assets currently are
allocated to the Subadviser), Heritage Income-Growth Trust and Heritage
Income Trust - Diversified Portfolio, and advises private investment
accounts with net assets totalling approximately $1.8 billion as of August
1, 1995.
The Subadviser may use the Distributor as broker for agency
transactions in listed and over-the-counter securities at commission rates
and under circumstances consistent with the policy of best price and
execution. See "Brokerage Practices" in the SAI.
Portfolio Management
The portfolio manager for the Fund is Kenneth W. Corba. He is
responsible for the day-to-day management of the Fund's investment
portfolio, subject to the general oversight of the Manager and the Board
of Trustees. Mr. Corba is an Executive Vice President and Chief
Investment Officer of the Subadviser. Mr. Corba joined the Subadviser in
1995. From 1984 to 1995, Mr. Corba held various portfolio management
positions with Stein Roe & Farnham, Inc.
SHAREHOLDER AND ACCOUNT POLICIES
Dividends and Other Distributions
_______________________________________________________________________
Dividends from net investment income are declared and paid annually.
The Fund distributes to shareholders with its annual dividend
substantially all net realized capital gains on portfolio securities and
net realized gains from foreign currency transactions. Dividends and
other distributions on shares held in retirement plans and by shareholders
maintaining a Systematic Withdrawal Plan generally are paid in additional
Fund shares. Other shareholders may elect to:
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<PAGE>
. receive both dividends and other distributions in additional
Fund shares;
. receive dividends in cash and other distributions in additional
Fund shares;
. receive both dividends and other distributions in cash; or
. receive both dividends and other distributions in cash for
investment in another Heritage Mutual Fund.
If you select none of these four options, the first option with
apply. In any case where you receive a dividend or a capital gain
distribution in additional Fund shares, your account will be credited with
shares valued at the net asset value per share 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 Class A and Class 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 Class C shares may be lower than
dividends on Class A shares primarily as a result of the higher
distribution fee applicable to Class C shares.
Distribution Plans
_______________________________________________________________________
As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of Class 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% and a distribution fee of up to 0.10% of the
Fund's average daily net assets attributable to Class A shares. The Fund
currently pays the Distributor a service fee of up to 0.25% of Class A
average daily net assets. 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 Class C shares and in
connection with personal services rendered to Class C shareholders and the
maintenance of Class C account, the Fund pays the Distributor a service
fee of 0.25% and a distribution fee of 0.75% of the Fund's average daily
net assets attributable to Class 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 Class A and Class C shares,
shares, including, but not limited to: compensation (in addition to the
sales load) paid to Representatives which have entered into sales
- 24 -
<PAGE>
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, SAIs
and reports for other than existing shareholders; preparation and
distribution of advertising material and sales literature; and other sales
promotion expenses. The Distributor has entered into dealer agreements
with participating dealers and/or banks who will also 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.
Expenses of the Fund
_______________________________________________________________________
The Fund pays all of its own expenses. These expenses include, among
other things, organizational costs, expenses for legal and auditing
services, financial accounting services, preparing (including typesetting,
printing and mailing) reports, prospectuses and notices to its then-
current shareholders, the cost of printing stock certificates, advisory
and management fees, fees and expenses of the custodian and transfer and
dividend disbursing agents, the distribution fee, the expense of issuing
and redeeming shares (including electronic communications equipment
maintained by the Manager), the cost of registering shares under Federal
and state laws, shareholder meeting and related proxy solicitation
expenses, the fees and out-of-pocket expenses of Trustees who are not
affiliated with the Manager, insurance, interest, brokerage costs,
litigation, and other expenses properly payable by the Fund.
Taxes
_______________________________________________________________________
The Fund intends 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 the part of its investment company taxable income (generally
consisting of net investment income, net short-term capital gains and net
gains from certain foreign currency transactions) 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 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
is expected to be eligible for the dividends-received deduction allowed to
corporations.
- 25 -
<PAGE>
Dividends and other distributions declared by the Fund in November or
December of any year and payable to shareholders of record on a date in
one of those months will be deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if they are paid
by the Fund during the following January. Shareholders receive Federal
tax information regarding dividends and other distributions after the end
of the year. The Fund is required to withhold 31% of all dividends,
capital gain distributions and redemption proceeds payable to individuals
and certain other noncorporate shareholders who do not provide the Fund
with a correct taxpayer identification number. Withholding at that rate
from dividends and capital gain distributions also is required for such
shareholders who otherwise are subject to backup withholding.
The foregoing is only a summary of some of the important Federal 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. Class A and Class C shares of the
Fund have equal voting rights, except in matters affecting only a
particular class or series, only shares of that class or series are
entitled to vote. As a Massachusetts business trust, the Fund 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.
- 26 -
<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.
- 27 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
HERITAGE SERIES TRUST [LOGO]
GROWTH EQUITY FUND
P.O. Box 33022 HERITAGE
St. Petersburg, FL 33733 ______________________
INVESTMENT ADVISER/ Series Trust
SHAREHOLDER SERVICING AGENT _____________________
HERITAGE ASSET MANAGEMENT, INC.
P.O. Box 33022
St. Petersburg, FL 33733
(800) 421-4184
DISTRIBUTOR GROWTH EQUITY FUND
RAYMOND JAMES & ASSOCIATES, INC.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800 Prospectus
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
P.O. Box 1912
Boston, MA 02105
LEGAL COUNSEL
KIRKPATRICK & LOCKHART LLP
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
HERITAGE
_______________________ November 2, 1995
FAMILY OF FUNDS
______________________
</TABLE>
<PAGE>
SUBJECT TO COMPLETION: DATED OCTOBER __, 1995
STATEMENT OF ADDITIONAL INFORMATION
HERITAGE SERIES TRUST -
GROWTH EQUITY FUND
This Statement of Additional Information dated November 2, 1995,
should be read with the Prospectus of the Growth Equity Fund ("the Fund"),
a series of Heritage Series Trust, dated November 2, 1995. This Statement
is not a Prospectus itself. To receive a copy of the Prospectus, write to
Heritage Asset Management, Inc. at the address below or call (800)
421-4184.
Heritage Asset Management, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
TABLE OF CONTENTS
Page
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND . . . . . . . . . . . . 1
Investment Objective . . . . . . . . . . . . . . . . . . . . . 1
Investment Policies . . . . . . . . . . . . . . . . . . . . . . 1
Industry Classifications . . . . . . . . . . . . . . . . . . . 7
Hedging Strategies . . . . . . . . . . . . . . . . . . . . . . 7
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . 16
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 20
INVESTING IN THE FUND . . . . . . . . . . . . . . . . . . . . . . . . 21
Alternative Purchase Plans . . . . . . . . . . . . . . . . . . 21
Class A Purchases at Net Asset Value . . . . . . . . . . . . . 21
Class A Combined Purchase Privilege (Right of Accumulation) . . 22
Class A Statement of Intention . . . . . . . . . . . . . . . . 23
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Systematic Withdrawal Plan . . . . . . . . . . . . . . . . . . 24
Telephone Transactions . . . . . . . . . . . . . . . . . . . . 25
Redemption in Kind . . . . . . . . . . . . . . . . . . . . . . 25
Receiving Payment . . . . . . . . . . . . . . . . . . . . . . . 25
EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . 26
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FUND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Management of the Fund . . . . . . . . . . . . . . . . . . . . 31
Investment Adviser and Administrator; Subadviser . . . . . . . 34
Brokerage Practices . . . . . . . . . . . . . . . . . . . . . . 36
Distribution of Shares . . . . . . . . . . . . . . . . . . . . 38
Administration of the Fund . . . . . . . . . . . . . . . . . . 40
Potential Liability . . . . . . . . . . . . . . . . . . . . . . 40
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE
TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
GENERAL INFORMATION
Heritage Series Trust (the "Trust") consists of four portfolios: the
Growth Equity Fund (the "Fund"), the Value Equity Fund, the Small Cap
Stock Fund and the Eagle International Equity Portfolio. This Statement
of Additional Information relates solely to the Fund. 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
("CDSL")).
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
Investment Objective
The Fund's investment objective is growth through long-term capital
appreciation. This objective cannot be changed without shareholder
approval.
Investment Policies
American Depository Receipts. The Fund may invest in sponsored and
unsponsored ADRs. ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying securities of foreign
issuers. Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. Thus,
these securities are not denominated in the same currency as the
securities into which they may be converted. ADRs are considered to be
foreign securities by the Fund for purposes of certain investment
limitation calculations. ADRs are subject to many of the risks inherent
in investing in foreign securities, including confiscatory taxation or
nationalization, and less comprehensive disclosure requirements for the
underlying security. In addition, the issuers of the securities
underlying unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may be less
information available regarding such issuers and there may not be a
correlation between such information and the market value of the ADRs.
Convertible Securities. The Fund may invest in convertible
securities that are investment grade (rated "BBB" or above by Standard and
Poor's Ratings Group ("S&P") or "Baa" or above by Moody's Investors
Service ("Moody's")) or, if unrated, are deemed to be of comparable
quality by the Fund's investment subadviser, Eagle Asset Management, Inc.
("Subadviser"). Investment grade securities rated "BBB" or "Baa" are
considered to have speculative characteristics and changes in economic
conditions are more likely to lead to a weakened capacity to pay interest
and repay principal than is the case with higher grade securities. While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock,
although 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. Eagle will decide to invest in convertible
securities based upon a fundamental analysis of the long-term
- 2 -
<PAGE>
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 the Fund may invest include corporate bonds, notes and
preferred stock that can be converted into (exchanged for) 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.
Debt Securities. The market value of debt securities is influenced
primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases.
Conversely, as interest rates fall, the market value of debt securities
increases. Factors which could result in a rise in interest rates, and a
decrease in the market value of debt securities, include an increase in
inflation or inflation expectations, an increase in the rate of U.S.
economic growth, an increase in the Federal budget deficit or in the price
of commodities such as oil.
Foreign Securities. The Fund may invest up to 25% of its net assets
in foreign securities. It is anticipated that in most cases the best
available market for foreign securities will be on exchanges or in over-
the-counter markets located outside the United States. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign
issuers (particularly those located in developing countries) may be less
liquid and more volatile that securities of comparable U.S. companies. In
addition, foreign brokerage commissions are generally higher than
commissions on securities traded in the United States. In general, there
is less overall governmental supervision and regulation of securities
exchanges, brokers and listed companies than in the United States.
It is the Fund's policy not to invest in foreign securities where
there are currency or trading restrictions in force or where, in the
judgment of the Subadviser, such restrictions are likely to be imposed.
However, certain currencies may become blocked (i.e., not freely available
for transfer from a foreign country), resulting in the possible inability
of the Fund to convert proceeds realized upon sale of portfolio securities
of the affected foreign companies into U.S. currency.
Because investments in foreign companies will usually involve
currencies of foreign countries, and because the Fund may temporarily hold
funds in bank deposits in foreign currencies during the completion of
investment programs, the value of Fund assets as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may incur
- 3 -
<PAGE>
costs in connection with conversions between various currencies. The Fund
will conduct its foreign currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market. In addition, in order to protect against uncertainty in the level
of future exchange rates, the Fund may enter into contracts to purchase or
sell foreign currencies at a future date (i.e., a "forward currency
contract" or "forward contract"). See the "Foreign Currency Hedging
Strategies -- Special Considerations" section below under "Hedging
Strategies."
Illiquid Securities. As stated in the Prospectus, the Fund will not
purchase or otherwise acquire any security if, as a result, more than 10%
of its 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 legal or contractual restrictions on resale. This policy includes
repurchase agreements maturing in more than seven days. This policy does
not include restricted securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, as amended ("1933 Act"), which the
Trust's Board of Trustees ("Board of Trustees" or "Board"), or Heritage
Asset Management, Inc. ("Manager") or the Subadviser, as applicable, has
determined under Board-approved guidelines are liquid.
Restricted securities that are illiquid may be sold only in privately
negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the 1933 Act. Where
registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to
sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to sell.
In recent years, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
private placements, repurchase agreements, commercial paper, foreign
securities, and corporate bonds and notes. These instruments are often
restricted securities because the securities are either themselves exempt
from registration or sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments
to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can
be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions is
not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers. Institutional markets for
restricted securities that might develop as a result of Rule 144A could
provide both readily ascertainable values for restricted securities and
the ability to liquidate an investment to satisfy share redemption orders.
- 4 -
<PAGE>
An insufficient number of qualified institutional buyers interested in
purchasing Rule 144A-eligible securities held by the Fund, however, could
affect adversely the marketability of such portfolio securities and the
Fund might be unable to dispose of such securities promptly or at
reasonable prices.
The Fund may sell over-the-counter ("OTC") options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC
options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless 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.
Loans of Portfolio Securities. The Fund may loan portfolio
securities to qualified broker-dealers. Such loans may be terminated by
the Fund at any time and the market risk applicable to any security loaned
remains a risk of the Fund. Although voting rights, or rights to consent,
with respect to the loaned securities pass to the borrower, the 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. The Fund may also 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 Fund 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 the Fund's income through investment of the cash
collateral in short-term interest bearing obligations.
Money Market Instruments. Money market instruments include
securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities and repurchase agreements secured thereby, as well
as bank certificates of deposit and banker's acceptances issued by banks
having net assets of at least $1 billion as of the end of their most
recent fiscal year and high grade commercial paper. Investments in
commercial paper are limited to obligations rated Prime-1 or Prime-2
by Moody's or A-1 or A-2 by S&P. Commercial paper includes notes,
drafts, or similar instruments payable on demand or having a maturity
at the time of issuance not exceeding nine months, exclusive of days
of grace or any renewal thereof. Investments in certificates of
deposit are made only with domestic institutions with assets in
excess of $500 million. See the Appendix for a description of commercial
paper ratings.
Preferred Stock. 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. A preferred stock is a blend of
the characteristics of a bond and 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 is limited. Although the dividend is set at a fixed
annual rate, it can be changed or omitted by the issuer at any time.
- 5 -
<PAGE>
Reverse Repurchase Agreements. The Fund may borrow by entering into
reverse repurchase agreements with the same parties with whom it may enter
into 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). 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 factor, and are considered
borrowings for the purpose of the Fund's limitation on borrowing.
Standard and Poor's Depository Receipts ("SPDRs"). SPDRs represent
an interest in a fixed portfolio of common stocks designed to track the
price and dividend yield performance of the S&P 500 Composite Stock Price
Index. The interests are sponsored by PDR Services Corporation, a wholly-
owned subsidiary of the American Stock Exchange, and are issued as shares
of a unit investment trust registered under the Investment Company Act of
1940, as amended ("1940 Act"). Accordingly, the Fund's investment in
SPDRs is limited by its fundamental investment restriction regarding
investing in other investment companies and by Section 12(d)(1) of the
1940 Act. Under these limitations, the Fund may not invest in SPDRs if
such investment would cause the Fund: (1) to own more than 3% of the
outstanding voting stock of other investment companies SPDRs; (2) to have
more than 5% of the value of its total assets invested in other investment
companies SPDRs; or (3) to have more than 10% of its total assets invested
in other investment companies, including SPDRs.
U.S. Government Securities. The Fund may invest in U.S. Government
securities, including a variety of securities which 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 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.
Warrants. The Fund may purchase warrants, which are instruments that
permit the Fund to acquire, by subscription, the capital stock of a
corporation at a set price, regardless of the market price for such stock.
Warrants may be either perpetual or of limited duration. There is a
greater risk that warrants might drop in value at a faster rate than the
underlying stock. The Fund's investment in warrants will be limited to 5%
- 6 -
<PAGE>
of its net assets. Included within that amount, no more than 2% of the
Fund's net assets may be invested in warrants not traded on the New York
or American Stock Exchange.
Industry Classifications
For purposes of determining industry classifications, the Fund relies
upon classifications established by the Manager that are based upon
classifications contained in the Directory of Companies Filing Annual
Reports with the Securities and Exchange Commission ("SEC") and in the
Standard & Poor's Corporation Industry Classifications.
Hedging Strategies
General Description. The Subadviser may use a variety of financial
instruments ("Hedging Instruments"), including futures contracts
(sometimes referred to as "futures"), options, options on futures and
forward currency contracts, to attempt to hedge the Fund's portfolio.
Forward currency contracts may also be used to shift the Fund's exposure
from one foreign currency to another.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is the purchase or sale of a Hedging
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Hedging Instrument whose price
is expected to move in the opposite direction of the price of the
investment being hedged. A long hedge is the purchase or sale of a
Hedging Instrument intended partially or fully to offset potential
increases in the acquisition cost of one or more investments that the Fund
intends to acquire. Thus, in a long hedge the Fund takes a position in a
Hedging Instrument whose price is expected to move in the same direction
as the price of the prospective investment being hedged.
Hedging Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the
Fund owns or intends to acquire. Hedging Instruments on indices may be
used to hedge broad market sectors.
The use of Hedging Instruments is subject to applicable regulations
of the SEC, the exchanges upon which they are traded, the Commodity
Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Fund's ability to use Hedging Instruments
will be limited by tax considerations. See "Taxes."
In addition to the products, strategies and risks described below,
the Subadviser expects to discover additional opportunities in connection
with options, futures contracts, forward currency contracts and other
hedging techniques. These new opportunities may become available as the
Subadviser develops new techniques, as regulatory authorities broaden the
range of permitted transactions and as new options, futures contracts,
forward currency contracts or other techniques are developed. The
- 7 -
<PAGE>
Subadviser may utilize these opportunities to the extent that they are
consistent with the Fund's investment objectives and permitted by the
Fund's investment limitations and applicable regulatory authorities.
Special Risks of Hedging Strategies. The use of Hedging Instruments
involves special considerations and risks, as described below. Risks
pertaining to particular Hedging Instruments are described in the sections
that follow.
(1) Successful use of most Hedging Instruments depends upon the
Subadviser's ability to predict movements of the overall securities,
currency and interest rate markets, which requires different skills
than predicting changes in the prices of individual securities.
While the Subadviser is experienced in the use of Hedging
Instruments, there can be no assurance that any particular hedging
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no
correlation, between price movements of a Hedging Instrument and
price movements of the investments being hedged. For example, if the
value of a Hedging 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
Hedging Instruments are traded. The effectiveness of hedges using
Hedging Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements
in the securities being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable
price movements in the investments being hedged. However, hedging
strategies can also reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the hedged
investments. For example, if the Fund entered into a short hedge
because the Subadviser 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 Hedging Instrument.
Moreover, if the price of the Hedging 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 hedged at all.
(4) As described below, the Fund might be required to maintain
assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in Hedging Instruments involving
obligations to third parties. If the Fund were unable to close out
its positions in such Hedging 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
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impair the 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 the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to close out a position in
a Hedging 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 ("contra party") to enter into a transaction closing out
the position. Therefore, there is no assurance that any hedging
position can be closed out at a time and price that is favorable to
the Fund.
Cover for Hedging Strategies. Some Hedging Instruments expose the
Fund to an obligation to another party. The Fund will not enter into any
such transactions unless it owns either (1) an offsetting ("covered")
position in securities, currencies, forward currency contracts, options or
futures contracts or (2) cash and short-term debt securities, with a value
sufficient at all times to cover its potential obligations to the extent
not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for instruments 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 State Street Bank and
Trust Company, the Fund's custodian ("Custodian"), in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Hedging Instrument is open, unless
they are replaced with similar assets. As a result, the commitment of a
large portion of the Fund's assets to cover or segregated accounts could
impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
Options, Futures, and Options on Futures Trading. The Fund may
engage in certain options, futures and options on futures strategies in
order to hedge the Fund's investments. Certain special characteristics of
and risks with these strategies are discussed below.
Characteristics and Risks of Options Trading
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. If the Fund wished to
terminate its obligation to purchase or sell securities 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 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 a Portfolio 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
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underlying security, index, currency or futures contract and the market
value of the option.
In considering the use of options to hedge the Fund, 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, currency 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 instrument and general market conditions. For this reason,
the successful use of options as a hedging strategy depends upon the
ability of the investment adviser to forecast the direction of price
fluctuations in the underlying instrument.
(2) At any given time, the exercise price of an option may be below,
equal to or above the current market value of the underlying instrument.
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, stocks and
currencies. 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. Although the
Fund intends 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 the
Fund would have to exercise those options that it has purchased in order
to realize any profit. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in material
losses to the Fund. For example, because the Fund will maintain a covered
position with respect to any call option it writes on a security, the Fund
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 Fund also may
save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation of market movements.
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<PAGE>
(5) The risks of investment in options on indices may be greater
than options on securities or currencies. Because index options are
settled in cash, when the Fund writes a call on an index it cannot provide
in advance for its potential settlement obligations by acquiring and
holding the underlying securities. The 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, the Fund cannot, as a practical matter, acquire and hold a
portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will
vary from the value of the index.
Even if the 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, the
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 the 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 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
The Fund is required to maintain margin deposits with brokerage firms
through which they buy and sell futures contracts or write options on
future contracts. Initial margin deposits vary from contract to contract
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and are subject to change. Margin balances will be adjusted daily to
reflect unrealized gains and losses on open contracts. If the price of an
open futures or options positions decline so that the Fund has market
exposure on such contract, the broker will require the Fund to deposit
variation margin. If the value of an open futures or option position
increases so that the Fund no longer has market exposure on such contract,
the broker will pay the excess to the Fund.
Most of the exchanges on which futures contracts are traded limit the
amount of fluctuation permitted in futures and options 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 prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures or options positions and subjecting some
futures traders to substantial losses.
Another risk in employing futures contracts and options as a hedge is
the prospect that 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 the futures and
options 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 markets may cause temporary price distortions.
Due to the possibility of distortion, a correct forecast of general
interest rate, currency exchange rate or security price trends by the
Manager or Subadviser 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 in such options will be
subject to the existence of a liquid secondary market.
Compared to the purchase or sale of futures contracts, the purchase
of call options on futures contracts involves less potential risk to the
Fund 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 the Fund when the purchase or sale of a futures
contract would not, such as when there is no movement in the price of the
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underlying investment.
To the extent that the Fund enters into futures contracts and
commodity options (including options on futures contracts and options on
foreign currencies traded on a CFTC-regulated exchange) other than for
bona fide hedging purposes (as defined by the CFTC), 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.
Foreign Currency Hedging Strategies -- Risk Factors. The Fund may
use futures on foreign currencies, as described above, and foreign
currency forward contracts, as described below, in an amount not to exceed
5% of the Fund's assets, to hedge against movements in the values of the
foreign currencies in which the Fund's securities are denominated. Such
currency hedges can protect against price movements in a security that the
Fund owns or intends to acquire that are attributable to changes in the
value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are
attributable to other causes.
The Fund might seek to hedge against changes in the value of a
particular currency when no Hedging Instruments on that currency are
available or such Hedging Instruments are more expensive than certain
other Hedging Instruments. In such cases, the Fund may hedge against
price movements in that currency by entering into transactions using
Hedging Instruments on another currency or basket of currencies, the
values of which the Subadviser believes will have a high degree of
positive correlation to the value of the currency being hedged. The risk
that movements in the price of the Hedging Instrument will not correlate
perfectly with movements in the price of the currency being hedged is
magnified when this strategy is used.
The value of Hedging Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
such Hedging Instruments, the Fund could be disadvantaged by having to
deal in the odd lot market (generally consisting of transactions of less
than $1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large
transactions in the interbank market and thus might not reflect odd-lot
transactions where rates might be less favorable. The interbank market in
foreign currencies is a global, round-the-clock market. To the extent the
U.S. futures markets are closed while the markets for the underlying
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<PAGE>
currencies remain open, significant price and rate movements might take
place in the underlying markets that cannot be reflected in the markets
for the Hedging Instruments until they reopen.
Settlement of hedging transactions involving foreign currencies might
be required to take place within the country issuing the underlying
currency. Thus, the Fund might be required to accept or make delivery of
the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Combined Transactions. The Fund may enter into multiple futures
transactions, instead of a single transaction, as part of a single or
combined strategy when, in the opinion of the Subadviser, it is in the
best interests of the Fund to do so. A combined transaction will usually
contain elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered into
based on the Subadviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase
such risks or hinder achievement of the portfolio management objective.
Forward Currency Contracts. The Fund may enter into forward currency
contracts to purchase or sell foreign currencies for a fixed amount of
U.S. dollars or another foreign currency, in an amount not to exceed 5% of
the Fund's assets. Such transactions may serve as long hedges -- for
example, the Fund may purchase a forward currency contract to lock in the
U.S. dollar price of a security denominated in a foreign currency that the
Fund intends to acquire. Forward currency contract transactions may also
serve as short hedges -- for example, the Fund may sell a forward currency
contract to lock in the U.S. dollar equivalent of the proceeds from the
anticipated sale of a security or from a dividend or interest payment on a
security denominated in a foreign currency. In addition, the Fund may
purchase forward currency contracts to enhance income when the Subadviser
anticipates that the foreign currency will appreciate in value, but
securities denominated in that currency do not present attractive
investment opportunities.
As noted above, the Fund may seek to hedge against changes in the
value of a particular currency by using forward contracts on another
foreign currency or a basket of currencies, the value of which the
Subadviser believes will have a positive correlation to the values of the
currency being hedged. Use of a different foreign currency magnifies the
risk that movements in the price of forward currency contracts will not
correlate or will correlate unfavorably with the foreign currency being
hedged.
In addition, the Fund may use forward currency contracts to shift
exposure to foreign currency fluctuations from one country to another.
For example, if the Fund owned securities denominated in a foreign
currency and the Subadviser believed that currency would decline relative
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<PAGE>
to another currency, it might enter into a forward contract to sell an
appropriate amount of the first foreign currency, with payment to be made
in the second foreign currency.
The cost to the Fund of engaging in forward currency contracts varies
with factors such as the currency involved, the length of the contract
period and the market conditions then prevailing. Because forward
currency contracts are usually entered into on a principal basis, no fees
or commissions are involved. When the Fund enters into a forward currency
contract, it relies on the contra party to make or take delivery of the
underlying currency at the maturity of the contract. Failure by the
contra party to do so would result in the loss of any expected benefit of
the transaction.
As is the case with futures contracts, sellers or purchasers of
forward currency contracts can enter into offsetting closing transactions,
similar to closing transactions on futures, by selling or purchasing,
respectively, an instrument identical to the instrument bought or sold.
Secondary markets generally do not exist for forward currency contracts,
with the result that closing transactions generally can be made for
forward currency contracts only by negotiating directly with the contra
party. Thus, there can be no assurance that the Fund will in fact be able
to close out a forward currency contract at a favorable price prior to
maturity. In addition, in the event of insolvency of the contra party,
the Fund might be unable to close out a forward currency contract at any
time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that
are the subject of the hedge or to maintain cash or securities in a
segregated account.
The precise matching of forward currency contract amounts and the
value of the securities involved generally will not be possible because
the value of such securities, measured in the foreign currency, will
change after the foreign currency contract has been established. Thus,
the Fund might need to purchase or sell foreign currencies in the spot
(cash) market to the extent such foreign currencies are not covered by
forward contracts. The projection of short-term currency market movements
is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain.
The Fund may use the following instruments:
Equity and Debt Security Index Futures Contracts. An index futures
contract is a bilateral agreement pursuant to which one party agrees to
accept, and the other party agrees to make, delivery of an amount of cash
equal to a specified dollar amount times the difference between the index
value at the close of trading of the contract and the price at which the
futures contract is originally struck. No physical delivery of the
securities comprising the index is made; generally contracts are closed
out prior to the expiration date of the contract.
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<PAGE>
Security and Currency Futures Contracts. A security or currency
futures contract is a bilateral agreement pursuant to which one party
agrees to accept, and the other party agrees to make, delivery of the
specific type of security or currency called for in the contract at a
specified future time and at a specified price. Although such futures
contracts by their terms call for actual delivery or acceptance of
securities or currency in most cases the contracts are closed out before
the settlement date without the making or taking of delivery.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future
date, which may be any fixed number of days from the contract date agreed
upon by the parties, at a price set at the time the contract is entered
into.
INVESTMENT LIMITATIONS
In addition to the limits disclosed in "Investment Policies" above
and the investment limitations described in the Prospectus, the Fund is
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 Fund. Under the 1940 Act, a "vote of
a majority of the outstanding voting securities" of the 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 Fund may not borrow money except as a temporary
measure for extraordinary or emergency purposes. The Fund may enter into
reverse repurchase agreements in an amount up to 33 1/3% of the value of
its total assets (combined with other borrowings) in order to meet
redemption requests without immediately selling portfolio securities.
This latter practice is not for investment leverage but solely to
facilitate management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio instruments would be
inconvenient or disadvantageous. However, the Fund may not purchase
additional portfolio investments once borrowed funds exceed 5% of total
assets. When effecting reverse repurchase agreements, Fund assets in an
amount sufficient to make payment for the obligations to be purchased will
be segregated by the Custodian and on the Fund's records upon execution of
the trade and maintained until the transaction has been settled. During
the period any reverse repurchase agreements are outstanding, to the
extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments
to money market instruments maturing on or before the expiration date of
the reverse repurchase agreements. Interest paid on borrowed funds will
not be available for investment. The Fund will liquidate any such
borrowings as soon as possible and may not purchase any portfolio
instruments while any borrowings are outstanding (except as described
above).
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<PAGE>
Issuing Senior Securities. The Fund may not issue senior securities,
except as permitted by the investment objective and policies and
investment limitations of the Fund or with respect to transactions
involving options, futures, forward currency contracts or other financial
instruments.
Underwriting. The Fund may not underwrite the securities of other
issuers except to the extent that in connection with the disposition of
portfolio securities, the Fund may be deemed to be an underwriter under
Federal securities laws.
Investing in Commodities, Minerals or Real Estate. The Fund may not
invest in commodities, commodity contracts, oil, gas or other mineral
leases, or real estate (including real estate limited partnerships),
except that it may purchase securities issued by companies that invest in
or sponsor such interests and except that the Fund may purchase and sell
options, futures contracts, forward currency contracts and other financial
instruments.
Loans. The Fund may not make loans, except: (1) through loans of
portfolio securities as described in this Statement of Additional
Information; (2) to the extent that the purchase of a portion of an issue
of publicly distributed notes, bonds or other evidences of indebtedness or
deposits with banks and other financial institutions may be considered
loans; and (3) that the Fund may enter into repurchase agreements as
permitted under the Fund's investment policies.
The Fund has adopted the following additional restrictions which,
together with certain limits described in the Fund's Prospectus, may be
changed by the Board of Trustees without shareholder approval in
compliance with applicable laws, regulations or regulatory policy.
Selling Short and Buying on Margin. The Fund may not sell any
securities short or purchase any securities on margin but may make short
sales "against the box," obtain such short-term credits as may be
necessary for clearance of purchases and sales of securities, and make
margin deposits in connection with its use of options, futures contracts,
forward currency contracts and other financial instruments.
Investing in Investment Companies. The Fund may not invest in
securities issued by other investment companies, except as permitted under
the 1940 Act and except in connection with the merger, consolidation or
acquisition of all the securities or assets of such an issuer.
Investing in Issuers Whose Securities Are Owned by Officers of the
Trust. The Fund may not purchase or retain the securities of any issuer
if the officers and Trustees of the Trust, the Manager or the Subadviser,
who own individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
Pledging. The Fund may not pledge any securities except that the
Fund may pledge assets having a value of not more than 10% of its total
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<PAGE>
assets to secure permitted borrowing from banks and except that the Fund
may pledge its assets in connection with options, futures, forward
currency contracts, forward commitments, when-issued or delayed delivery
securities or other financial instruments.
Unseasoned Issuers. The Fund may not invest more than 5% of the
value of its total assets in securities of issuers (other than securities
issued by the U.S. Government, its agencies or instrumentalities) that,
with their predecessors, have been in continuous operation for less than
three years.
Illiquid Securities. The Fund may not invest more than 10% of the
value of its net assets in securities that are subject to restrictions on
resale or are not readily marketable without registration under the 1933
Act and in repurchase agreements maturing in more than seven days.
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 the Fund's
borrowings exceed its limitations due to a decline in net assets, such
borrowings will be promptly reduced to the extent necessary to comply with
the limitation.
NET ASSET VALUE
The net asset values of the Class A and Class 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 domestic or foreign
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 the 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 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. For valuation purposes, quotations of foreign securities in
foreign currencies are translated to U.S. dollar equivalents using the net
foreign exchange rate in effect at the close of the stock exchange in the
country where the security is issued. Short-term investments having a
maturity of 60 days or less are valued at amortized cost, which
approximates market value.
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<PAGE>
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 shares.
All securities and other assets quoted in foreign currency and
forward currency contracts are valued daily in U.S. dollars on the basis
of the foreign currency exchange rate prevailing at the time such
valuation is determined by the Fund's custodian. Foreign currency
exchange rates are generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of foreign securities
and such exchange rates occur between the time at which they are
determined and the close of the Exchange, which events will not be
reflected in a computation of the Fund's net asset value. If events
materially affecting the value of such securities or assets or currency
exchange rates occurred during such time period, the securities or assets
would be valued at their fair value as determined in good faith under
procedures established by and under the general supervision and
responsibility of the Board of Trustees. The foreign currency exchange
transactions of the Fund conducted on a spot basis are valued at the spot
rate for purchasing or selling currency prevailing on the foreign exchange
market.
Because of differences in time zones and trading practices, trading
on European and Far Eastern securities exchanges and OTC markets is
normally completed before the close of business on the Exchange on each
day the Exchange is open. In addition, European or Far Eastern securities
trading may not take place on all business days in New York, or may take
place on certain days when the Exchange is not open and on which the
Fund's net asset value is not calculated. The Fund calculates net asset
value per share, and thus effects sales and redemptions, as of the close
of trading on the Exchange once on each day on which the Exchange is open.
If events materially affecting the value of such securities occur between
the time when their price is determined (as of the close of the foreign
markets) and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value as determined in good faith by or
under the direction of the Board of Trustees.
PERFORMANCE INFORMATION
The performance data for Class A and Class C shares of the Fund
quoted in advertising and other promotional materials represents past
performance and is not intended to indicate future performance. The
investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Average annual total return quotes for each class used in the Fund's
advertising and promotional materials are calculated according to the
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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, the
current maximum sales load of 4.75% 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 Fund may also from time to time include in such advertising and
promotional materials total return figures that are not calculated
according to the formula set forth above for each class of its shares.
For example, in comparing the Fund's Class A or Class C cumulative total
return with data published by Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc. or with such market indices as the Dow Jones
Industrial Average and the Standard & Poor's 500 Composite Stock Price
Index, the Fund calculates its cumulative 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 Fund does not, for this purpose, deduct from the
initial value invested any amount representing front-end sales loads or
CDSLs. By not annualizing the performance and excluding the effect of the
sales load or CDSL, the total return calculated in this manner will simply
reflect the increase in net asset value per class 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.
INVESTING IN THE FUND
The procedure for purchasing shares of the Fund is explained in the
Prospectus under "How to Buy Shares."
Alternative Purchase Plans
Class A shares are sold at their next determined net asset value plus
- 20 -
<PAGE>
a sales load on days the Exchange is open for business. Class 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 Fund's transfer agent, will
establish an account with the Fund and will transfer funds to the
Custodian. See "Alternative Purchase Plans" in the Prospectus. The Fund
reserves the right to reject any order for its shares. The Fund's
distributor, Raymond James & Associates, Inc. ("RJA" or the
"Distributor"), has agreed that it will hold the 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 Class A shares of the 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 Class 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
governmental purchases 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, which 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 shares within a specified period.
Class A Combined Purchase Privilege (Right of Accumulation)
Certain investors may qualify for the Class A sales load reductions
indicated in the above sales load schedule in the Prospectus by combining
purchases of Class 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 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 Class A
shares of the Fund for his or their own account; a single purchase by a
trustee or other fiduciary purchasing 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.
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 which has not been in existence for at least six months or which
has no purpose other than the purchase of Class A shares 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
- 21 -
<PAGE>
either a bank or broker-dealer, or clients of an investment adviser.
The applicable Class A 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 Class A shares of the Fund held by the investor and
(b) all Class A shares of any other Heritage open end mutual fund
advised by the Manager ("Heritage Mutual Fund") held by the investor
and purchased at a time when Class A shares of such Fund were
distributed subject to a sales load (including Heritage Cash Trust
shares acquired by exchange); and
(iii) the net asset value of all Class A shares described in
paragraph (ii) owned by another shareholder eligible to combine his
purchase with that of the investor into a single "purchase."
Class A shares of Heritage Income Trust-Limited Maturity Government
Fund purchased after July 31, 1992, without payment of a sales load, will
be deemed to fall under the provisions of section (ii) above as if they
had been distributed without being subject to a sales load, unless those
shares were acquired through an exchange of other shares which were
subject to a sales load.
Class A Statement of Intention
Investors also may obtain the reduced sales loads shown in the
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 Class A shares of the Fund or any other Heritage Mutual
Fund. Each purchase of Class 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 Class A shares of the 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
investor to purchase the full amount indicated. The minimum initial
investment under a Statement of Intention is 5% of such amount. Class 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 Class 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
- 22 -
<PAGE>
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 Class A shares of the 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 thirteen-month
period. In this 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 the
Prospectus entitled "How to Redeem Shares."
Systematic Withdrawal Plan
Shareholders may also elect to make systematic withdrawals from a
Fund account of a minimum of $50 on a periodic basis. 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 ("IRA"), Simplified Employee Pension Plan or other retirement
plan, unless withdrawals from these types of accounts 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 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 Class C shares, if
made within one year of the date of purchase, will be charged with 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 Class C shares. The check for the withdrawal payment
will usually be mailed on the next business day following redemption. If
a shareholder elects to participate in the Systematic Withdrawal Plan,
dividends and other distributions on all shares in the account must be
automatically reinvested in Fund shares. A shareholder may terminate the
Systematic Withdrawal Plan at any time without charge or penalty by giving
written notice to the Manager or the Distributor. The Fund, its transfer
agent, and the 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 distributions, the amount of the original investment may be
correspondingly reduced.
Ordinarily, shareholders should not purchase additional Class A
- 23 -
<PAGE>
shares of the Fund if maintaining a Systematic Withdrawal Plan because
they may incur tax liabilities in connection with such purchases and
withdrawals. The Fund will not knowingly accept purchase orders for Class
A shares from shareholders for additional Class A shares if they maintain
a Systematic Withdrawal Plan unless the purchase is equal to at least one
year's scheduled withdrawals. In addition, shareholders who maintain such
a Plan may not make periodic investments in Class A shares under the
Fund's Automatic Investment Programs, as defined in the Prospectus.
Telephone Transactions
Shareholders may redeem shares by placing a telephone request to the
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 which are
reasonable 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
Fund, its Manager, the 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 Fund is obligated to redeem shares 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 will also 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 their securities and could
incur certain transaction costs.
Receiving Payment
If a request for redemption is received by the Fund in good order (as
described in the 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 Class 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
as of the close of trading on the Exchange on the next trading day, minus
any applicable CDSL for Class C shares.
- 24 -
<PAGE>
If shares of the Trust 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 Class 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 the Fund to the
Distributor or participating dealer on the seventh day after the day the
redemption request was made (or by the third business day after May 31,
1995), provided that certificates for shares have been delivered in proper
form for transfer to the Fund or, if no certificates have been issued, a
written request signed by the shareholder has been provided to the
Distributor or 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 a registered representative
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 Class A or Class C shares for corresponding
classes of shares 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 below.
Class A shares of Heritage Income Trust-Limited Maturity Government
Fund purchased from February 1, 1992 through July 31, 1992, without
payment of a sales load may be exchanged into Class A Shares of the Fund
without payment of any sales load. Class A shares of Heritage Income
Trust-Limited Maturity Government Fund purchased after July 31, 1992
without a sales load will be subject to a sales load when exchanged into
Class A shares of the Fund, unless those shares were acquired through an
exchange of other Class A shares which were subject to a sales load.
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 "Telephone Redemption Requests to the Fund."
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
- 25 -
<PAGE>
("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 the 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
General. In order to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"), the Fund -- which is treated as a separate corporation for these
purposes -- must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally
of net investment income, net short-term capital gain and net gains from
certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. 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
foreign currencies, or other income (including gains from options, futures
or forward contracts) derived with respect to its business of investing in
securities or those currencies ("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, or any of the following, that were
held for less than three months -- options or futures (other than those on
foreign currencies), or foreign currencies (or options, futures or forward
contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect
to securities) ("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 securities or the securities of other RICs) of
any one issuer.
The Fund will be subject to a nondeductible 4% 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.
If shares of the Fund are sold at a loss after being held for six
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<PAGE>
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 any distribution, the
shareholder will pay full price for the shares and receive some portion of
the purchase price back as a taxable dividend or capital gain
distribution.
Income from Foreign Securities. Dividends and interest received by
the Fund may be subject to income, withholding or other taxes imposed by
foreign countries and U.S. possessions that would reduce the yield on its
securities. Tax conventions between certain countries and the United
States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of in-
vestments by foreign investors. If more than 50% of the value of the
Fund's total assets at the close of any taxable year consists of
securities of foreign corporations, the Fund will be eligible to, and may,
file an election with the Internal Revenue Service that will enable its
shareholders, in effect, to receive the benefit of the foreign tax credit
with respect to any foreign and U.S. possessions income taxes paid by it.
Pursuant to any such election, the Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required
to (1) include in gross income, and treat as paid by the shareholder, the
shareholder's proportionate share of those taxes, (2) treat the
shareholder's share of those taxes and of any dividend paid by the Fund
that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources, and (3) either deduct the
taxes deemed paid by the shareholder in computing the shareholder's
taxable income or, alternatively, use the foregoing information in calcu-
lating the foreign tax credit against the shareholder's Federal income
tax. The Fund will report to its shareholders shortly after each taxable
year their respective shares of the Fund's income from sources within, and
taxes paid to, foreign countries and U.S. possessions if it makes this
election.
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general,
meets either of the following tests: (1) at least 75% of its gross income
is passive or (2) an average of at least 50% of its assets produce, or are
held for the production of, passive income. Under certain circumstances,
the Fund will be subject to Federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest
thereon, even if the Fund distributes the PFIC income as a taxable divi-
dend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment company taxable income and, accordingly, will not
be taxable to it to the extent that income is distributed to its
shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its
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<PAGE>
pro rata share of the qualified electing fund's annual ordinary earnings
and net capital gain (the excess of net long-term capital gain over net
short-term capital loss) -- which would have to be distributed to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax --
even if those earnings and gain were not received by the Fund. In most
instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.
Three bills passed by Congress in 1991 and 1992 and vetoed by
President Bush would have substantially modified the taxation of U.S.
shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICs and replacing them (and other
provisions) with a regulatory scheme involving entities called "passive
foreign corporations." The "Tax Simplification and Technical Corrections
Bill of 1993," passed in May 1994 by the House of Representatives,
contains the same modifications. It is unclear at this time whether, and
in what form, the proposed modifications may be enacted into law.
Proposed regulations have been published pursuant to which open-end
RICs, such as the Fund, would be entitled to elect to "mark-to-market"
their stock in certain PFICs. "Marking-to-market," in this context, means
recognizing as gain for each taxable year the excess, as of the end of
that year, of the fair market value of each such PFIC's stock over the
adjusted basis in that stock (including mark-to-market gain for each prior
year for which an election was in effect).
Gains or losses (1) from the disposition of foreign currencies,
(2) from the disposition of debt securities denominated in foreign
currency that are attributable to fluctuations in the value of the foreign
currency between the date of acquisition of each security and the date of
disposition, and (3) that are attributable to fluctuations in exchange
rates that occur between the time the Fund accrues dividends, interest or
other receivables or accrues expenses or other liabilities denominated in
a foreign currency and the time the Fund actually collects the receivables
or pays the liabilities, generally will be treated as ordinary income or
loss. These gains or losses, referred to under the Code as "section 988"
gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders.
Hedging Strategies. The use of hedging strategies, such as selling
(writing) and purchasing options and futures contracts and entering into
forward contracts, involves complex rules that will determine for income
tax purposes the character and timing of recognition of the gains and
losses the Fund realizes in connection therewith. Income from foreign
currencies (except certain gains therefrom that may be excluded by future
regulations), and income from transactions in options and futures and
forward contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition
of options and futures contracts (other than those on foreign currencies)
will be subject to the Short-Short Limitation if they are held for less
than three months. Income from the disposition of foreign currencies, and
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<PAGE>
futures and forward contracts thereon, that are not directly related to
the Fund's principal business of investing in securities (or options and
futures with respect to securities) also will be subject to the Short-
Short Limitation if they are held for less than three months.
If the 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. The Fund will consider whether it should
seek to qualify for this treatment for its hedging transactions. To the
extent the Fund does not so qualify, it may be forced to defer the closing
out of certain options, futures and forward contracts beyond the time when
it otherwise would be advantageous to do so, in order for the Fund to
qualify as a RIC.
Certain options and futures in which the Fund may invest will be
"section 1256 contracts." Section 1256 contracts held by the Fund at the
end of each taxable year, other than section 1256 contracts that are part
of a "mixed straddle" with respect to which the Fund has made an election
not to have the following rules apply, must be "marked-to-market" (that
is, treated as sold for their fair market value) for Federal income tax
purposes, with the result that unrealized gains or losses will be treated
as though they were realized. Sixty percent of any net gain or loss
recognized on these deemed sales, and 60% of any net realized gain or loss
from any actual sales of section 1256 contracts, will be treated as long-
term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. Section 1256 contracts also may be marked-to-market
for purposes of the Excise Tax.
Code section 1092 (dealing with straddles) also may affect the
taxation of options and futures contracts in which the Fund may invest.
Section 1092 defines a "straddle" as offsetting positions with respect to
personal property; for these purposes, options and futures contracts are
personal property. Section 1092 generally provides that any loss from the
disposition of a position in a straddle may be deducted only to the extent
the loss exceeds the unrealized gain on the offsetting position(s) of the
straddle. Section 1092 also provides certain "wash sale" rules, which
apply to transactions where a position is sold at a loss and a new offset-
ting position is acquired within a prescribed period, and "short sale"
rules applicable to straddles. If the Fund makes certain elections, the
amount, character and timing of the recognition of gains and losses from
the affected straddle positions would be determined under rules that vary
according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax
consequences to the Fund of straddle transactions are not entirely clear.
FUND INFORMATION
Management of the Fund
- 29 -
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Position with Principal Occupation
Name the Trust During Past Five Years
---- ------------- ----------------------
Thomas A. James* Trustee Chairman of the Board since
880 Carillon Parkway 1986, Chief Executive Officer
St. Petersburg, FL since 1969 and President from
33716 1972-1986 of RJF; Chairman of
the Board 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
880 Carillon Parkway 1995 to present, Chief
St. Petersburg, FL Operating Officer, July 1988
33716 to present, Executive Vice
President, July 1988-December
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
614 W. Bay Street Capital Corporation (venture
Suite 200 capital) since October 1981.
Tampa, FL 33606
- 30 -
<PAGE>
<S> <C> <C>
Position with Principal Occupation
Name the Trust During Past Five Years
---- ------------- ----------------------
C. Andrew Graham Trustee Vice President of Financial
1775 Sherman Street Designs Ltd. since 1992;
Suite 1900 Executive Vice President of
Denver, CO 80203 the Madison Group, Inc.,
October 1991-1992; Principal
of First Denver Financial
Corporation (investment
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
World Trade Center Officer CCC Information
Chicago Services, Inc. since 1994 and
444 Merchandise Mart of InfoVest Corporation
Chicago, IL 60654 (information services to the
insurance and auto industries
and consumer households) since
October 1982.
Eric Stattin Trustee Litigation Consultant Expert
2587 Fairway Village Witness and private investor
Drive since February 1988; Chairman
Park City, UT 84060 of the Board, September 1986
to February 1988, 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.
- 31 -
<PAGE>
<S> <C> <C>
Position with Principal Occupation
Name the Trust During Past Five Years
---- ------------- ----------------------
James L. Pappas Trustee Dean of College of Business
University of South Administration since August
Florida 1987 and Lykes Professor of
College of Business Banking and Finance since
Administration August 1986 at University of
Tampa, FL 33620 South Florida; Academic Dean
of the Graduate School of
Banking, Madison, 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
880 Carillon Parkway President of the Manager since
St. Petersburg, FL April 1989 and Director since
33716 December 31, 1994; Vice
President, RJA, 1984-1989.
Donald H. Glassman Treasurer Treasurer of the Manager since
880 Carillon Parkway May 1989; Treasurer of
St. Petersburg, FL Heritage Mutual Funds since
33716 May 1989; Chief Accounting
Officer of the Manager, 1987-
1989.
Clifford J. Alexander Secretary Partner, Kirkpatrick &
1800 M Street, N.W. Lockhart LLP (law firm).
Washington, DC 20036
Patricia Schneider Assistant Compliance Administrator of
880 Carillon Parkway Secretary the Manager.
St. Petersburg, FL
33716
Robert J. Zutz Assistant Partner, Kirkpatrick &
1800 M Street, N.W. Secretary Lockhart LLP (law firm).
Washington, DC 20036
</TABLE>
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<PAGE>
* These Trustees are "interested persons" as defined in section
2(a)(19) of the 1940 Act.
The Trustees and officers of the Fund as a group own less than 1% of
the 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" 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 who is not an "interested
person of the Trust" for the fiscal year ended October 31, 1994.
Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Benefits From the Fund
Accrued as Estimated and the
Aggregate Part of Annual Heritage
Compensation the Benefits Family of
Name of Person, From the Fund's Upon Funds Paid to
Position Fund Expenses Retirement Trustees
--------------- ------------ ---------- ---------- ------------
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, $1,776 $0 $0 $16,000
Trustee
James L. Pappas, $1,776 $0 $0 $16,000
Trustee
Richard K. Riess, $0 $0 $0 $0
Trustee
Thomas A. James, $0 $0 $0 $0
Trustee
</TABLE>
- 33 -
<PAGE>
Investment Adviser and Administrator; Subadviser
The Fund'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
which, through its subsidiaries, is engaged primarily in providing cus-
tomers 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 March 31, 1993, between the Trust and the Manager, as
supplemented and amended on behalf of the Fund on August 7, 1995, and
subject to the control and direction of the Trustees, the Manager is
responsible for reviewing and establishing investment policies for the
Fund as well as administering the Fund's noninvestment affairs. Under a
Subadvisory Agreement ("Subadvisory Agreement"), the Subadviser, subject
to direction by the Manager and the Board of Trustees, will provide
investment advice and portfolio management services to the Fund for a fee
payable by the Manager.
The Manager also is obligated to furnish the Fund with office space,
administrative, and certain other services as well as executive and other
personnel necessary for the operation of the Fund. The Manager and its
affiliates also pay all the compensation of Trustees of the Fund who are
employees of the Manager and its affiliates. The Fund pays all its other
expenses that are not assumed by the Manager as described in the
Prospectus. The Fund also is liable for such nonrecurring expenses as may
arise, including litigation to which the Fund may be a party. The Fund
also may have an obligation to indemnify its Trustees and officers with
respect to any such litigation.
The Advisory Agreement and the Subadvisory Agreement each were
approved by the Trustees (including all of the Trustees who are not
"interested persons" of the Manager or Subadviser) and the Manager, as
sole shareholder of the Fund, in compliance with the 1940 Act. Each
Agreement will continue in force for only so long as its continuance is
approved at least annually 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, the 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 the Fund. The Advisory and
Subadvisory Agreements each automatically terminates on 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 Fund 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 Fund or the Distributor ceases to be principal distributor of Fund
- 34 -
<PAGE>
shares, the right of the Fund to use the identifying name of "Heritage"
may be withdrawn.
The Manager and Subadviser shall not be liable to the Fund or any
shareholder for anything done or omitted by them, except acts or omissions
involving willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties imposed upon them by their agreements with the
Fund or for any losses that may be sustained in the purchase, holding or
sale of any security.
All of the officers of the Fund except for Clifford J. Alexander and
Robert J. Zutz are officers or directors of the Manager or its affiliates.
These relationships are described under "Management of the Fund."
Advisory and Administration Fee. The annual investment advisory fee
paid monthly by the Fund to the Manager is set forth in the Prospectus.
The Manager has voluntarily agreed to waive management fees to the extent
that Class A annual operating expenses exceed 1.65% or to the extent that
Class C annual operating expenses exceed 2.40% of average daily net assets
attributable to that class during 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. The Manager has entered into an
agreement with the Subadviser to provide investment advice and portfolio
management services to the Fund for a fee paid by the Manager to the
Subadviser equal to 50% of the fees paid to the Manager, without regard to
any reduction in fees actually paid to the Manager as a result of expense
limitations.
State Expense Limitations. Certain states have established expense
limitations for investment companies whose shares are registered for sale
in that state. If the 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. 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 the Fund may
have to cease offering Fund shares for sale in certain states until the
expense ratio declines. Any fees waived by the Manager can be recovered
by it from the 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
While the Fund generally purchases securities for long-term capital
gains, it may engage in short-term transactions under various market
conditions to a greater extent than certain other mutual funds with
similar investment objectives. Thus, the turnover rate may vary greatly
from year to year or during periods within a year. The portfolio turnover
rate is computed by dividing the lesser of purchases or sales of
- 35 -
<PAGE>
securities for the period by the average value of portfolio securities for
that period.
The Subadviser is responsible for the execution of the Fund's
portfolio transactions and 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, the Fund also will take into account such factors as
size of the order, difficulty of execution, efficiency of the executing
broker's facilities, and any risk assumed by the executing broker.
Consistent with the policy of most favorable price and execution, the
Subadviser may give consideration to research, statistical and other
services furnished by brokers to the Subadviser for its use. In addition,
the Subadviser may place orders with brokers 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, provided that the Subadviser 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 Subadviser in connection with services to clients other
than the Fund. The Fund also may purchase and sell portfolio securities
to and from dealers who provide it with research services. However,
portfolio transactions will not be directed by the Fund to dealers on the
basis of such research services.
The Fund generally uses the Distributor, its affiliates or certain
affiliates of the Subadviser as a broker for agency transactions in listed
and over-the-counter securities at commission rates and under
circumstances consistent with the policy of best execution. Commissions
paid to the Distributor, its affiliates or certain affiliates of the
Subadviser will not exceed "usual and customary brokerage commissions."
Rule l7e-1 under the 1940 Act defines "usual and customary" commissions to
include amounts that 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 Subadviser also may select other brokers to execute portfolio
transactions. In the over-the-counter market, the Fund generally deals
with primary market-makers unless a more favorable execution can otherwise
be obtained.
The Fund may not buy securities from, or sell securities to the
Distributor, its affiliates, or certain affiliates of the Subadviser as
principal. However, the Board of Trustees has adopted procedures in
conformity with Rule 10f-3 under the 1940 Act whereby the Fund may
purchase securities that are offered in underwritings in which the
Distributor, its affiliates or certain affiliates of the Subadviser are
participants. The Board of Trustees will consider the possibilities of
seeking to recapture for the benefit of the Fund expenses of certain
- 36 -
<PAGE>
portfolio transactions, such as underwriting commissions and tender offer
solicitation fees, by conducting such portfolio transactions through
affiliated entities, including the Distributor, its affiliates or certain
affiliates of the Subadviser, 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 Fund except pursuant to written consent by the Fund.
Distribution of Shares
The Distributor, participating dealers and participating banks with
whom it has entered into dealer agreements offer shares of the Fund as
agents on a best efforts basis and are not obligated to sell any specific
amount of shares. In this connection, the Distributor makes distribution
and service payments to participating dealers in connection with the sale
of Fund shares. Pursuant to its Distribution Agreement with the Trust on
behalf of the Fund with respect to Class A and Class C shares, the
Distributor bears the cost of making information about the Fund 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 Class C shareholders and for maintaining shareholder accounts. The
Fund pays the cost of registering and qualifying its shares under state
and federal securities laws and typesetting of its prospectuses and
printing and distributing prospectuses to existing shareholders.
As compensation for the services provided and expenses borne by the
Distributor pursuant to the Distribution Agreement with respect to Class A
shares, the Fund pays the Distributor the sales load described in the
Prospectus and may pay a 12b-1 fee in an amount up to .35% of the Fund's
average daily net assets in accordance with the Class A Plan described
below. The 12b-1 fee is accrued daily and paid monthly, and currently is
equal on an annual basis to .25% of average daily net assets. The
Distributor may use this fee as a service fee to compensate participating
dealers or participating banks, for services performed incidental to the
maintenance of shareholder accounts.
As compensation for the services provided and expenses borne by the
Distributor pursuant to the Distribution Agreement with respect to Class C
shares, the Fund pays the Distributor a distribution fee and a shareholder
service fee in accordance with the Class C Plan described below. The
distribution fee is accrued daily and paid monthly, and currently is equal
on an annual basis to .75% of average daily net assets. The service fee
is accrued daily and paid monthly, and currently is equal on an annual
basis to .25% of average daily net assets.
The Fund has adopted a Class A Distribution Plan (the "Class A Plan")
that, among other things, permits it to pay the Distributor the monthly
12b-1 fee out of its net assets to finance activity that is intended to
- 37 -
<PAGE>
result in the sale and retention of Class A shares. As required by Rule
12b-1 under the 1940 Act, the Class A Plan was approved by the Manager, as
the sole shareholder of the Fund, and the Board of Trustees, including a
majority of the Trustees who are not interested persons of the Fund (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 the Fund and its shareholders will benefit from the Plan.
The Fund also has adopted a Class C Distribution Plan (the "Class C
Plan") which, among other things, permits it to pay the Distributor the
monthly 12b-1 fee out of its net assets to finance activity which is
intended to result in the sale and retention of Class 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 shareholders will benefit from the 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 Fund. The Trustees review quarterly
a written report of Plan costs and the purposes for which such costs have
been incurred. The 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 requires shareholder
approval of that class.
The Distribution Agreement may be terminated at any time on 60 days'
written notice without payment of any penalty by either party. The Fund
may effect such termination by vote of a majority of the outstanding
voting securities of the Fund 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.
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 (i) by the vote of a
majority of the Independent Trustees and (ii) by the vote of a majority of
the entire Board of Trustees cast in person at a meeting called for that
purpose.
Administration of the Fund
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 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 Fund who are affiliated with the Manager. The Manager
will also provide certain shareholder servicing activities for customers
of the Fund. The Manager is also the fund accountant and transfer and
- 38 -
<PAGE>
dividend disbursing agent for the Fund. The Fund pays the Manager the
Manager's cost plus 10% for its services as fund accountant and transfer
and dividend disbursing agent.
Custodian. State Street Bank and Trust Company, P.0. Box 1912,
Boston, Massachusetts 02105, serves as custodian of the Fund's assets and
provides portfolio accounting and certain other services.
Legal Counsel. Kirkpatrick & Lockhart LLP of 1800 M Street, N.W.,
Washington, D.C., 20036 serves as counsel to the Fund. Schifino &
Fleischer, P.A. of 1 Tampa City Center, Suite 2700, Tampa, Florida, 33602
serves as counsel to the Distributor and the Manager.
Independent Accountants. Coopers & Lybrand L.L.P. of One Post Office
Square, Boston, Massachusetts, 02109 are the independent accountants for
the Trust.
Potential Liability
Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for obligations of the Fund.
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 Fund. These documents require notice of
this disclaimer to be given in each agreement, obligation or instrument
the Fund or its Trustees enter into or sign. In the unlikely event a
shareholder is held personally liable for the Fund's obligations, the Fund
is required to use its property to protect or compensate the shareholder.
On request, the Fund will defend any claim made and pay any judgment
against a shareholder for any act or obligation of the Fund. Therefore,
financial loss resulting from liability as a shareholder will occur only
if the Fund 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
Fund may invest are:
Description of Moody's Commercial Paper Ratings
Prime-l. 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 S&P's Commercial Paper Ratings
A-1. This designation indicates that the degree of safety regarding
timely payment is very 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.
CORPORATE DEBT RATINGS
The rating services' descriptions of corporate debt ratings in which the
Fund may invest are:
Description of Moody's Corporate Debt Ratings:
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
A - 1
<PAGE>
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 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.
Description of S&P's Corporate Debt Ratings:
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.
A - 2
<PAGE>
HERITAGE SERIES TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included as a part of this
Registration Statement:
Included in Part A of the Registration Statement: None
Included in Part B of the Registration Statement: None
(b) Exhibits:
(1) Declaration of Trust*
(2) Bylaws*
(3) Voting trust agreement -- none
(4) Specimen security
Class A Shares and Class C Shares (to be filed by
subsequent amendment)
(5)(a)(i) Investment Advisory and Administration
Agreement***
(a)(ii) Amended Schedule A (filed herewith)
(b) Investment Advisory and Administration
Agreement between Eagle Asset Management,
Inc. and Eagle International Equity
Portfolio (to be filed by subsequent
amendment)
(c)(i) Subadvisory Agreement between Heritage
Asset Management, Inc. and Raymond James &
Associates, Inc. relating to Small Cap
Stock Fund***
(c)(ii) Amended Schedule A (filed herewith)
(d)(i) Subadvisory Agreement between Heritage
Asset Management, Inc. and Awad &
Associates, a division of Raymond James and
Associates, Inc. relating to Small Cap
Stock Fund***
(d)(ii) Amended Schedule A (filed herewith)
C-1
<PAGE>
(e)(i) Subadvisory Agreement between Eagle Asset
Management, Inc. and Martin Currie Inc. relating
to Eagle International Equity Portfolio (to be
filed by subsequent amendment)
(e)(ii) Amended Schedule A (filed herewith)
(6) Distribution Agreement***
(7) Bonus, profit sharing or pension plans -- none
(8) Form of Custodian Agreement**
(9) (a) Form of Transfer Agency and Service
Agreement**
(b) Form of Fund Accounting and Pricing
Service Agreement+
(10) Opinion and consent of counsel++
(11) Accountants' consents (not applicable)
(12) Financial statements omitted from prospectus -- none
(13) Letter of investment intent**
(14) Prototype retirement plan (to be filed by subsequent
amendment)
(15) (a) Plan pursuant to Rule 12b-1
Class A Shares***
Class C Shares (to be filed by subsequent
amendment)
(b) Amended Schedule A relating to the addition of
the Value Equity Fund+
(c) Amended Schedule A relating to the addition of
the Eagle International Equity Portfolio (to be
filed by subsequent amendment)
(d) Amended Schedule A relating to the addition of
the Growth Equity Fund (to be filed by subsequent
amendment)
(16) Performance Computation Schedule****
(17) Electronic Filers (to be filed by subsequent
amendment)
(18) Plan Pursuant to Rule 18f-3 (not applicable)
C-2
<PAGE>
* Incorporated by reference from the Registration
Statement of the Trust, SEC File No. 33-57986, filed
previously on February 5, 1993.
** Incorporated by reference from Pre-Effective Amendment
No. 1 to the Registration Statement of the Trust, SEC File
No. 33-57986, filed previously on March 16, 1993.
*** Incorporated by reference from Post-Effective
Amendment No. 1 to the Registration Statement of the Trust,
SEC File No. 33-57986, filed previously on October 1, 1993.
**** Incorporated by reference from Post-Effective
Amendment No. 2 to the Registration Statement of the Trust,
SEC File No. 33-57986, filed previously on March 1, 1994.
+ Incorporated by reference from Post-Effective Amendment
No. 4 to the Registration Statement of the Trust, SEC File
No. 33-57986, filed previously on November 4, 1994.
++ Incorporated by reference to the Fund's Rule 24f-2
Notice, filed previously on or about December 21, 1994.
+++ Incorporated by reference from Post-Effective
Amendment No. 6 to the Registration Statement of the Trust,
SEC File No. 33-57986, filed previously on December 30,
1994.
Item 25. Persons Controlled by or under
Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class July 31, 1995
-------------- ----------------
Shares of Beneficial Interest
Small Cap Stock Fund
Class A Shares 4,863
Class C Shares 163
Value Equity Fund
Class A Shares 843
Class C Shares 255
C-3
<PAGE>
Number of Record
Holders as of
Title of Class July 31, 1995
-------------- ----------------
Eagle International Equity
Portfolio 114
Growth Equity Fund
Class A Shares 0
Class C Shares 0
Item 27. Indemnification
Article XI, Section 2 of Heritage Series 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 appropriate portfolios 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
C-4
<PAGE>
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
(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. 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.
C-5
<PAGE>
Article XII, Section 2 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.
Paragraph 8 of the Investment Advisory and Administration Agreement
("Advisory Agreement") between the Trust, on behalf of Eagle International
Equity Portfolio, and Eagle Asset Management, Inc. ("Eagle"), and on
behalf of the Small Cap Stock Fund and Value Equity Fund and Heritage
Asset Management ("Heritage"), provides that Eagle and Heritage shall not
be liable for any error of judgment or mistake of law for any loss
suffered by the Trust or any Portfolio in connection with the matters to
which the Advisory Agreement relate 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 Eagle or Heritage, who may be or
become an officer, trustee, 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 Eagle or Heritage even though paid by it.
Paragraph 9 of the Subadvisory Agreement ("Subadvisory Agreement") between
Eagle and Martin Currie Inc. ("Martin Currie") for the Eagle International
Equity Portfolio, between Heritage and Raymond James Research Department
("Research") and Awad and Associates ("Awad"), for the Small Cap Stock
Fund, and between Heritage and Eagle for the Value Equity Fund, (Martin
Currie, Research, Awad and Eagle (in relation to the Value Equity fund)
are collectively the "Subadvisers" or singularly a "Subadviser") 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 Eagle, Heritage, the Trust, or their
directors, trustees, officers or 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 between the Trust, on behalf of
the Small Cap Stock Fund 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
C-6
<PAGE>
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 Asset
Management, Inc. ("Heritage") provides that the Trust 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 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 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 directors or
officers of Heritage is included in its current Form ADV filed with the
SEC (registration number 801-25067) and is incorporated by reference
herein.
II. Business and Other Connections of Subadviser
Raymond James is a registered investment adviser. All of its stock
is owned by Raymond James Financial, Inc. It is primarily in the
financial services business. Awad & Associates, is a division of RJA.
Information as to the officers and directors of RJA and Awad is included
in RJA's current Form ADV filed with the SEC (registration number 801-
10418) and is incorporated herein by reference.
Eagle Asset Management, Inc., a Florida corporation, is a registered
investment adviser. All of its stock is owned by Raymond James Financial,
Inc. Eagle is primarily engaged in the investment advisory business.
Information as to the officers and directors of Eagle is included in its
current Form ADV filed with the SEC and is incorporated by reference
herein.
C-7
<PAGE>
Item 29. Principal Underwriter
(a) Raymond James 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:
Positions & Offices Position
Name 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
Dennis Zank Executive VP of Operations and None
Administration, Director
Item 30. Location of Accounts and Records
For the Eagle International Portfolio, 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, except
that: Eagle will maintain some or all of the records required by Rule
31a-1(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).
For the Small Cap Stock Fund, the Value Equity Fund and the Growth
Equity Fund, the books and other documents required by Rule 31a-1 under
the Investment Company Act of 1940 are maintained by Heritage Asset
Management, Inc. Prior to March 1, 1994 the Trusts's Custodian maintained
the required records for the Small Cap Stock Fund, except that Heritage
maintained some or all of the records required by Rule 31a-1(b)(l), (2)
and (8); and the Subadviser maintained some or all of the records required
by Rule 31a-1(b) (2), (5), (6), (9), (10) and (11).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
C-8
<PAGE>
Registrant hereby undertakes to file a Post-effective Amendment to
the Registration Statement, containing financial statements for the Growth
Equity Fund that need not be certified, within four to six months from the
effective date of this Registration Statement, or from the date of its
commencement of operations.
Registrant hereby undertakes, if requested by the holders of at least
10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees and to assist in communications with other
shareholders in accordance with Section 16(c) of the 1940 Act, as though
Section 16(c) applied.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to
Shareholders, upon request and without charge.
C-9
<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 duly caused this Post-Effective Amendment No. 8 to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, there unto duly authorized, in the City of St. Petersburg and
the State of Florida, on August 17, 1995.
HERITAGE SERIES TRUST
By: /s/ Stephen G. Hill
------------------------------
Stephen G. Hill, President
Attest:
-----------------------------
Donald H. Glassman, Treasurer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 8 to the Registration Statement
has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
/s/ Stephen G. Hill President August 17, 1995
-----------------------
Stephen G. Hill
Thomas A. James* Trustee August 17, 1995
-----------------------
Thomas A. James
Richard K. Riess* Trustee August 17, 1995
-----------------------
Richard K. Riess
C. Andrew Graham* Trustee August 17, 1995
-----------------------
C. Andrew Graham
David M. Phillips* Trustee August 17, 1995
-----------------------
David M. Phillips
<PAGE>
James L. Pappas* Trustee August 17, 1995
-----------------------
James L. Pappas
Donald W. Burton* Trustee August 17, 1995
-----------------------
Donald W. Burton
Eric Stattin* Trustee August 17, 1995
-----------------------
Eric Stattin
/s/ Donald H. Glassman Treasurer August 17, 1995
------------------------
Donald H. Glassman
*By /s/ Donald H. Glassman
-------------------------------------
Donald H. Glassman, Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit
Number Description Page
-------- ------------- ----
1 Declaration of Trust*
2 Bylaws*
3 Voting trust agreement -- none
4 Specimen security
Class A Shares and Class C Shares (to
be filed by subsequent amendment)
5(a)(i) Investment Advisory and Administration
Agreement***
5(a)(ii) Amended Schedule A (filed herewith)
5(b) Investment Advisory and Administration
Agreement between Eagle Asset
Management, Inc. and Eagle
International Equity Portfolio (to be
filed by subsequent amendment)
5(c)(i) Subadvisory Agreement between Heritage
Asset Management, Inc. and Raymond
James & Associates, Inc. relating to
Small Cap Stock Fund***
5(c)(ii) Amended Schedule A (filed herewith)
5(d)(i) Subadvisory Agreement between Heritage
Asset Management, Inc. and Awad &
Associates, a division of Raymond
James and Associates, Inc. relating to
Small Cap Stock Fund***
5(d)(ii) Amended Schedule A (filed herewith)
- 1 -
<PAGE>
5(e)(i) Subadvisory Agreement between Eagle
Asset Management, Inc. and Martin
Currie Inc. relating to Eagle
International Equity Portfolio (to be
filed by subsequent amendment)
5(e)(ii) Amendment Schedule A (filed herewith)
6 Distribution Agreement***
7 Bonus, profit sharing or pension plans
-- none
8 Form of Custodian Agreement**
9(a) Form of Transfer Agency and Service
Agreement**
9(b) Form of Fund Accounting and Pricing
Service Agreement+
10 Opinion and consent of counsel++
11 Accountants' consents (not applicable)
12 Financial statements omitted from
prospectus -- none
13 Letter of investment intent**
14 Prototype retirement plan (to be filed
by subsequent amendment)
15(a) Plan pursuant to Rule 12b-1
Class A Shares***
Class C Shares (to be filed by
subsequent amendment)
15(b) Amendment Schedule A relating to the
addition of the Value Equity Fund+
15(c) Amended Schedule A relating to the
addition of the Eagle International
Equity Portfolio (to be filed by
subsequent amendment)
- 2 -
<PAGE>
15(d) Amended Schedule A relating to the
addition of the Growth Equity Fund (to
be filed by subsequent amendment)
16 Performance Computation Schedule***
17 Electronic Filers (to be filed by
subsequent amendment)
18 Plan Pursuant to 18f-3 (not
applicable)
</TABLE>
* Incorporated by reference from the Registration Statement of the
Trust, SEC File No. 33-57986, filed previously on February 5, 1993.
** Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of the Trust, SEC File No. 33-57986, filed
previously on March 16, 1993.
*** Incorporated by reference from Post-Effective Amendment No. 1 to the
Registration Statement of the Trust, SEC File No. 33-57986, filed
previously on October 1, 1993.
**** Incorporated by reference from Post-Effective Amendment No. 2 to the
Registration Statement of the Trust, SEC File No. 33-57986, filed
previously on March 1, 1994.
+ Incorporated by reference from Post-Effective Amendment No. 4 to the
Registration Statement of the Trust, SEC File No. 33-57986, filed
previously on November 4, 1994.
++ Incorporated by reference to the Fund's Rule 24f-2 Notice, filed
previously on or about December 21, 1994.
+++ Incorporated by reference from Post-Effective Amendment No. 6 to the
Registration Statement of the Trust, SEC File No. 33-57986, filed
previously on November 4, 1994.
- 3 -
<PAGE>
EXHIBIT (5)(a)(ii)
Schedule A
to the
Investment Advisory and
Administration Agreement
between
Heritage Asset Management, Inc.
and
Heritage Series Trust
As compensation pursuant to section 7 of the Investment Advisory
and Administrative Agreement between Heritage Asset Management, Inc. (the
"Manager") and Heritage Series 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 Heritage Small Cap Stock Fund:
Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
-------------- ------------------------
Up to and including $50 1.00%
million
In excess of $50 million .75%
(2) For the Heritage Value Equity Fund:
Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
-------------- -------------------------
All .75%
(3) For the Heritage Value Equity Fund:
Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
-------------- -------------------------
All .75%
Dated: March 29, 1993, as amended on December 29, 1994 and October ____,
1995
<PAGE>
EXHIBIT (5)(c)(ii)
Schedule A
to the
Heritage Series Trust
Subadvisory Agreement
between
Heritage Asset Management, Inc.
and
Raymond James & Associates, Inc.
As compensation pursuant to section 4 of the Subadvisory
Agreement between Heritage Asset Management, Inc. (the "Manager") and
Raymond James & Associates, Inc. (the "Subadviser"), the Manager shall pay
the Subadviser a subadvisory fee, computed and paid monthly, at the
following percentage rates of each Portfolio's average daily net assets
under management by the Subadviser:
(1) For the Heritage Small Cap Stock Fund:
<TABLE>
<C>
<S> Advisory Fee as % of
Average Daily Net Assets Average Daily Net
of the Entire Portfolio: Assets Under Management
------------------------- --------------------------
Up to and including $50 million .500%
In excess of $50 million .375%
</TABLE>
Dated: March 29, 1993, as amended on August 7, 1995
<PAGE>
EXHIBIT (5)(d)(ii)
Schedule A
to the
Heritage Series Trust
Subadvisory Agreement
between
Heritage Asset Management, Inc.
and
Awad & Associates, a Division of
Raymond James & Associates, Inc.
As compensation pursuant to section 4 of the Subadvisory
Agreement between Heritage Asset Management, Inc. (the "Manager") and Awad
& Associates, a division of Raymond James & Associates, Inc. (the
"Subadviser"), the Manager shall pay the Subadviser a subadvisory fee,
computed and paid monthly, at the following percentage rates of each
Portfolio's average daily net assets under management by the Subadviser:
(1) For the Heritage Small Cap Stock Fund:
Advisory Fee as % of
Average Daily Net Assets Average Daily Net
of the Entire Portfolio: Assets Under Management
------------------------ -----------------------
Up to and including $50 million .500%
In excess of $50 million .375%
Dated: March 29, 1993, as amended on August 7, 1995
<PAGE>
EXHIBIT (5)(e)(ii)
Schedule A
to the
Heritage Series Trust
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 "Subadviser"), the Manager shall pay the
Subadviser a subadvisory fee, computed and paid monthly, at the following
percentage rates of each Portfolio's average daily net assets under
management by the Subadviser:
(1) For the Heritage Value Equity Fund: .375%
(2) For the Heritage Small Cap Stock Fund:
<TABLE>
<CAPTION>
<S> <C>
Advisory Fee as % of
Average Daily Net Assets Average Daily Net
of the Entire Portfolio: Assets Under Management
------------------------ -------------------------
Up to and including $50 million .500%
In excess of $50 million .375%
</TABLE>
Dated: December 29, 1994, as amended on August ___, 1995 to reflect the
addition of the Heritage Small Cap Stock Fund
<PAGE>
