<PAGE> 1
December 19, 1995
Dear Shareholder:
We are pleased to present you with the first annual report for the Eagle
International Equity Portfolio. When we launched the Fund in May of this year,
Eagle conducted an extensive search for the most capable and experienced
managers in the industry. Our selection process led us to the investment
management firm of Martin Currie, headquartered in Edinburgh, Scotland. Through
Martin Currie's six diversified geographical investment teams, we have gained
access to all major world markets, both established and emerging.
While the international markets have had somewhat lackluster performance during
1995, Martin Currie's research has indicated that opportunities for investment
remain very attractive. For example, many major hurdles to global economic
growth are currently being resolved, such as the banking and real estate-related
crises that faced the Japanese marketplace in 1995. Furthermore, changes are
occurring in many foreign companies that may allow them to increase efficiency
and capitalize on the potential opportunities presented by emerging markets
around the world. Combined with a variety of other satellite issues, we believe
the stage is set for more dramatic growth in the international markets.
In the Market Commentary that follows, your investment subadvisor, Martin
Currie, discusses the factors that materially affected your Fund's performance
for the fiscal year ended October 31, 1995. We hope you will find Martin
Currie's comments helpful in understanding how your Fund's investment portfolio
is managed.
We sincerely appreciate your decision to invest in the Eagle International
Equity Portfolio. At Eagle Asset Management, we are committed to providing our
clients with the finest quality investment needs and superior service. We hope
you will continue to look towards Eagle for your future investment needs.
Sincerely,
Stephen G. Hill Richard K. Riess
Stephen G. Hill Richard K. Riess
President President
Eagle International Equity Portfolio Eagle Asset Management, Inc.
A N N U A L R E P O R T
1
<PAGE> 2
MARKET COMMENTARY from MARTIN CURRIE, INC. December 19, 1995
Eagle International Equity Portfolio
The Eagle International Equity Portfolio, in seeking its goal of capital
appreciation, is constructed with the goal of outperforming the Morgan Stanley
Capital International Europe, Australia, Far East Index ("EAFE Index"). The
countries in which the Fund invests are selected for their ability to generate
high real rates of economic growth, consistent with reasonable political and
currency stability. Individual securities are selected following an extensive
research process that is designed to screen out companies with weak financial
structures and market positions, and with poor management; the ability to
produce premium growth in earnings is paramount.
The twelve months through October 31, 1995 were difficult for most international
stock markets and the returns did not match those of the United States equity
market. The EAFE Index rose by only 0.2% total return, compared to a gain of
27.8% for the S&P 500 Composite Stock Price Index. Between May 1 (the inception
date for the Eagle International Equity Portfolio) and October 31, the EAFE
Index was down 1.6%. However, the Fund has appreciated by 4.0% over that same
period.
The Japanese stock market, which accounts for 40% of the EAFE Index and for 32%
of the Fund's investment portfolio as of October 31, 1995, has been in almost
constant decline over the last five years, and reached its lowest point in July.
Since then, it has had a significant recovery, although for the U.S. dollar
investor some of that gain has been removed by the weakness of the yen. A recent
change in policy by the Japanese authorities to counter deflationary pressures
on the economy by loosening money supply and cutting interest rates, together
with concerted action by Central Banks to lower the yen, should lead to a good
recovery in economic activity in 1996 and a sharp rise in corporate earnings
after four years of decline. However, we believe this recovery requires the
return of the domestic institutional investor (who has been a steady net seller
throughout 1995) for share prices to make significant progress. It probably will
be necessary to remove some of the currency risk if returns in 1996 are to be
maximized, and currently 50% of the Japanese holdings in the Fund are hedged.
The objective of this hedging strategy is to attempt to neutralize the impact on
the Portfolio's performance caused by currency fluctuations.
Other Asian markets (21% of the Portfolio as of October 31, 1995) suffered this
year from an absence of international portfolio capital flows, despite
continuing high economic and corporate earnings growth. Recent improvements in
the local real estate market and in the Chinese economy have helped stock prices
in Hong Kong; and the Taiwanese and Indian stock markets, which have performed
particularly badly, are expected to recover in 1996, reflecting strong corporate
earnings. If, as expected, the U.S. stock market runs out of steam, it is
probable that funds will be diverted to Asia as the region of choice.
European stock markets (37% of the Portfolio as of October 31, 1995) have been
supported for most of 1995 by strong local bond markets, although economic
activity has not been particularly robust. We believe that inflation looks set
to remain low, which should provide a solid backdrop for bonds and, in theory,
for equities. However, there is a strong risk of earnings disappointments,
particularly in Germany where companies have been affected by the strength of
the Deutschemark. In addition, an excess of government privatization issues of
shares, particularly in the telephone utilities sector, looms on the horizon and
is likely to divert foreign portfolio capital away from secondary markets.
Finally, in Latin America (4% of the Portfolio as of October 31, 1995), the
outlook is starting to improve after a very torrid twelve months. In 1996, we
believe interest rates likely will be falling at the same time as economic
growth rates are picking up. Governments throughout the region are committed to
their programs of economic reform (particularly in Brazil), which should
encourage international investors back after a prolonged absence following the
Mexican currency crisis.
Although international markets did not provide the exciting returns this past
year that investors have come to expect from foreign markets, economic growth
overseas continues to rise and opportunities for investment are increasingly
attractive. While investing in foreign securities does carry additional risks,
we believe the investment strategies of the Eagle International Equity Portfolio
are designed to provide maximum returns over the long term.
A N N U A L R E P O R T
2
<PAGE> 3
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION OF THE EAGLE INTERNATIONAL EQUITY PORTFOLIO
ON MAY 1, 1995
<TABLE>
<CAPTION>
MORGAN STANLEY
HST EAGLE CAPITAL
INTERNATIONAL INTERNATIONAL
MEASUREMENT PERIOD EQUITY PORTFOLIO EAFE
(FISCAL YEAR COVERED) $10,395 INDEX $9,840
<S> <C> <C>
5/1/95** 10,000 10,000
5/31/95 9,975 9,881
6/30/95 10,040 9,707
7/31/95 10,575 10,312
8/31/95 10,330 9,919
9/30/95 10,495 10,112
10/31/95 10,395 9,840
</TABLE>
- --------------------------------------------------------------------------------
* Average annual total returns for the Eagle International Equity Portfolio are
calculated in conformance with Item 22 of Form N-1A.
** From Fund inception on 5/1/95.
A N N U A L R E P O R T
3
<PAGE> 4
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MARKET
VALUE
----------
<S> <C>
REPURCHASE AGREEMENT--6.2%(A)
Repurchase Agreement with State Street Bank and Trust Company, dated October 31, 1995, @ 5.82%, to
be repurchased at $620,100 on November 1, 1995, collateralized by $580,000 United States Treasury
Notes, 7.25%, due August 15, 2004, (market value $639,119 including interest) (cost $620,000) ..... $ 620,000
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<C> <S> <C>
COMMON STOCK--91.1%(A)
- --------------------
ARGENTINA--1.0%
--------------
8,700 Capex, SA............................................................................. 104,400
----------
AUSTRALIA--2.1%
--------------
13,600 Broken Hill Proprietary Company, Ltd.................................................. 184,193
17,000 Qantas Airways, Ltd................................................................... 30,043
----------
214,236
----------
BRAZIL--1.8%
-----------
3,800 Usiminas, SA.......................................................................... 36,328
3,500 Telecomunicacoes Brasileiras, SA...................................................... 140,438
----------
176,766
----------
FRANCE--5.8%
------------
2,100 Peugeot, SA........................................................................... 273,553
7,840 Schneider, SA......................................................................... 302,371
----------
575,924
----------
GERMANY--3.0%
--------------
7,200 VEBA, AG.............................................................................. 295,601
----------
HONG KONG--7.2%
----------------
31,000 China Light & Power Company, Ltd...................................................... 165,190
18,800 HSBC Holdings......................................................................... 273,549
50,000 Hutchison Whampoa, Ltd................................................................ 275,489
----------
714,228
----------
INDIA--0.8%
----------
8,032 Indian Opportunities Fund, Ltd........................................................ 84,418
----------
ITALY--1.9%
----------
31,950 La Rinascente......................................................................... 189,415
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A N N U A L R E P O R T
4
<PAGE> 5
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1995
(CONTINUED)
<TABLE>
<CAPTION>
SHARES MARKET
------ VALUE
----------
<C> <S> <C>
JAPAN--29.4%
------------
15,000 Canon, Incorporated................................................................... $ 256,611
22,000 Hitachi Metals, Ltd................................................................... 270,981
33,000 Asahi Chemicals Industry Company, Ltd................................................. 231,624
31 DDI Corporation....................................................................... 251,224
39,000 Itochu Corporation.................................................................... 231,038
5,000 Ito-Yokado Company, Ltd............................................................... 273,229
29,000 Kamigumi Company, Ltd................................................................. 262,232
3,000 Kyocera Corporation................................................................... 245,760
14,000 Mitsubishi Heavy Industries, Ltd...................................................... 107,982
27,000 Nippon Express Company, Ltd........................................................... 219,072
1,000 Rohm Company, Ltd..................................................................... 60,707
11,000 Shin-Etsu Chemical Company, Ltd....................................................... 224,742
1,000 Sony Corporation...................................................................... 44,968
18,000 Sumitomo Forestry Company, Ltd........................................................ 253,385
----------
2,933,555
----------
MALAYSIA--4.7%
-------------
9,000 AMMB Holdings BHD..................................................................... 111,570
14,000 Edaran Otomobil Nasional BHD.......................................................... 110,193
14,000 Genting BHD........................................................................... 120,661
20,000 United Engineers BHD.................................................................. 124,360
----------
466,784
----------
MEXICO--0.7%
------------
15,000 Grupo Industrial San Luis, SA......................................................... 70,526
----------
NETHERLANDS--3.3%
-----------------
3,600 Wolters Kluwer CVA.................................................................... 327,646
----------
SINGAPORE--3.6%
--------------
12,000 Development Bank of Singapore, Ltd. (Alien Market).................................... 137,580
14,000 Jardine Matheson & Company, Ltd....................................................... 85,400
9,000 Singapore Press Holdings, Ltd. (Alien Market)......................................... 140,764
----------
363,744
----------
SOUTH AFRICA--0.5%
-----------------
1,600 South African Breweries, Ltd.......................................................... 52,532
----------
SPAIN--1.9%
-----------
4,345 Banco de Santander, SA................................................................ 189,385
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A N N U A L R E P O R T
5
<PAGE> 6
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1995
(CONTINUED)
<TABLE>
<CAPTION>
SHARES MARKET
------ VALUE
----------
<C> <S> <C>
SWEDEN--1.7%
-------------
4,000 Electrolux, AB........................................................................ $ 171,069
----------
SWITZERLAND--3.2%
----------------
300 Nestle, SA............................................................................ 314,454
----------
TAIWAN--1.6%
------------
1,000 Taipei Fund, IDR...................................................................... 74,060
10,800 Taiwan Opportunities Fund, Ltd........................................................ 85,752
----------
159,812
----------
THAILAND--1.6%
-------------
40,000 Thai Military Bank, PCL (Alien Market)................................................ 157,361
----------
UNITED KINGDOM--15.3%
---------------------
33,500 Argyll Group, PLC..................................................................... 170,281
46,000 BTR, PLC.............................................................................. 53,818
25,000 British Airways, PLC.................................................................. 179,842
11,000 East Midlands Electricity, PLC........................................................ 151,043
15,500 Glaxo Wellcome, PLC................................................................... 209,036
16,200 Granada Group, PLC.................................................................... 173,398
71,000 Ladbroke Group, Ltd, PLC.............................................................. 186,340
2,000 TSB Group, PLC........................................................................ 11,794
10,000 Unilever, PLC......................................................................... 194,308
31,000 Wolseley, PLC......................................................................... 192,126
----------
1,521,986
----------
Total Common Stocks (cost $9,077,759)................................................. 9,083,842
----------
<CAPTION>
PRINCIPAL
--------
<C> <S> <C>
BONDS--2.0%(A)
-------------
JAPAN--2.0%
-------------
$ 90,000 Bank of Tokyo, Ltd, 3.375%, due 3/31/2004, (c)........................................ 97,538
110,000 Mitsubishi Bank, Ltd, 3.5%, due 3/31/2004, (c)........................................ 102,850
----------
Total Bonds (cost $244,384)........................................................... 200,388
----------
TOTAL INVESTMENT PORTFOLIO (cost $9,942,143)(b), 99.3%(a)............................................... 9,904,230
OTHER ASSETS AND LIABILITIES, NET, 0.7%(a).............................................................. 66,329
----------
NET ASSETS, 100.0%...................................................................................... $9,970,559
==========
</TABLE>
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same.
Market value includes net unrealized depreciation of $37,913, which consists
of aggregate gross unrealized appreciation for all securities in which there
is an excess of market value over tax cost of $315,240 and aggregate gross
unrealized depreciation for all securities in which there is an excess of
tax cost over market value of $353,153.
(c) Convertible security.
IDR -- International Depository Receipt (one IDR equals 1,000 shares).
The accompanying notes are an integral part of the financial statements.
A N N U A L R E P O R T
6
<PAGE> 7
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1995
(CONTINUED)
<TABLE>
<CAPTION>
MARKET % OF NET
INDUSTRY DIVERSIFICATION VALUE ASSETS
------------------------ ---------- --------
<S> <C> <C>
Common Stocks
Airlines............................................................................... $ 179,842 1.80%
Automotive............................................................................. 383,746 3.85
Banks.................................................................................. 881,240 8.84
Basic Industries....................................................................... 184,193 1.85
Broadcasting........................................................................... 173,398 1.74
Building Materials..................................................................... 192,126 1.93
Capital Goods.......................................................................... 800,887 8.03
Casinos................................................................................ 120,661 1.21
Chemicals.............................................................................. 456,366 4.58
Construction........................................................................... 377,745 3.79
Consumer Goods......................................................................... 223,601 2.24
Diversified Holding.................................................................... 275,489 2.76
Electronics............................................................................ 608,045 6.10
Fabricated Metal....................................................................... 270,981 2.72
Finance................................................................................ 244,230 2.45
Food................................................................................... 679,043 6.81
Industrial............................................................................. 161,800 1.62
Lodging................................................................................ 186,340 1.87
Overseas Trading....................................................................... 316,438 3.17
Pharmaceuticals........................................................................ 209,036 2.10
Publishing............................................................................. 468,410 4.70
Retailers.............................................................................. 462,644 4.64
Transportation......................................................................... 511,347 5.13
Utilities.............................................................................. 716,235 7.18
Bonds...................................................................................... 200,388 2.01
Repurchase Agreement....................................................................... 620,000 6.22
---------- -------
Total Investments.......................................................................... 9,904,230 99.33
Other Assets and Liabilities, net.......................................................... 66,329 0.67
---------- -------
Net Assets................................................................................. $9,970,559 100.00%
========== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
A N N U A L R E P O R T
7
<PAGE> 8
EAGLE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<S> <C> <C>
Assets
Investments, at market value (identified cost $9,322,143) (Note 1)........................ $ 9,284,230
Repurchase agreement (identified cost $620,000) (Note 1).................................. 620,000
Cash...................................................................................... 302
Receivables:
Foreign currency........................................................................ 50,651
Fund shares sold........................................................................ 248,613
Dividends and interest.................................................................. 15,625
From Manager............................................................................ 16,811
Foreign taxes recoverable............................................................... 1,846
Deferred organizational expenses (Note 1)................................................. 46,800
Deferred state registration expenses (Note 1)............................................. 9,175
Prepaid insurance......................................................................... 1,036
-----------
Total assets...................................................................... 10,295,089
Liabilities
Payables (Note 4):
Investments purchased................................................................... $137,734
Foreign currency purchased.............................................................. 50,651
Accrued distribution fee................................................................ 32,303
Other accrued expenses.................................................................. 48,098
Foreign taxes withheld.................................................................. 1,931
Foreign currency sold short, at value (proceeds $53,813)................................ 53,813
--------
Total liabilities................................................................. 324,530
-----------
Net assets, at market value............................................................... $ 9,970,559
===========
Net Assets
Net assets consist of:
Net unrealized gain on foreign currency related transactions............................ 194
Net unrealized depreciation on investments.............................................. (37,913)
Accumulated net realized gain (Note 1).................................................. 242,845
Accumulated net realized gain on foreign currency transactions.......................... 1,440
Paid-in capital......................................................................... 9,763,993
-----------
Net assets, at market value............................................................... $ 9,970,559
===========
Net asset value, redemption and offering price per share ($9,970,559 divided by 479,563
shares of beneficial interest outstanding, no par value) (Note 2)....................... $20.79
</TABLE>
The accompanying notes are an integral part of the financial statements.
A N N U A L R E P O R T
8
<PAGE> 9
EAGLE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 1, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995
<TABLE>
<S> <C> <C>
Investment Income
Income:
Dividends (net of $7,068 foreign withholding taxes)........................................ $ 46,873
Interest (net of $26 foreign withholding taxes)............................................ 26,429
--------
Total income......................................................................... 73,302
Expenses (Notes 1 and 4):
Management fee............................................................................. $ 32,303
Distribution fee........................................................................... 32,303
Amortization of state registration expenses................................................ 27,235
Custodian/Fund accounting fees............................................................. 20,908
Professional fees.......................................................................... 29,679
Shareholder servicing fees................................................................. 1,016
Reports to shareholders.................................................................... 7,500
Amortization of organization expenses...................................................... 5,200
Trustees' fees and expenses................................................................ 4,200
Federal registration fees.................................................................. 1,954
Insurance.................................................................................. 1,744
Other...................................................................................... 250
--------
Total expenses before waiver and reimbursement....................................... 164,292
Fees waived by Manager............................................................... (32,303)
Expenses reimbursed by Manager....................................................... (48,001) 83,988
-------- --------
Net investment loss.......................................................................... (10,686)
--------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain from investment transactions............................................... 253,531
Net realized gains from foreign currency transactions (net of $2,799 capital gains tax
withheld).................................................................................. 1,440
Net increase in unrealized depreciation of investments during the period..................... (37,913)
Net increase in unrealized appreciation from foreign currency................................ 194
--------
Net gain on investments.............................................................. 217,252
--------
Net increase in net assets resulting from operations......................................... $206,566
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 1, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995
<TABLE>
<S> <C> <C>
Increase in net assets:
Operations:
Net investment loss...................................................................... $ (10,686)
Net realized gains from foreign currency transactions
(net of $2,799 capital gains tax withheld)............................................. 1,440
Net realized gain from investment transactions........................................... 253,531
Net increase in unrealized appreciation from foreign currency............................ 194
Net increase in unrealized depreciation of investments during the period................. (37,913)
----------
Net increase in net assets resulting from operations..................................... 206,566
Increase in net assets from Fund share transactions (Note 2)............................... 9,762,993
----------
Increase in net assets..................................................................... 9,969,559
Net assets, beginning of period (initial seed capital)..................................... 1,000
----------
Net assets, end of period.................................................................. $9,970,559
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
A N N U A L R E P O R T
9
<PAGE> 10
EAGLE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1995+*
------
<S> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD............................................................ $20.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss(a)............................................................................ (.03)
Net realized and unrealized gain on investments................................................... 0.82
------
Total from investment operations.................................................................... 0.79
------
NET ASSET VALUE, END OF THE PERIOD.................................................................. $20.79
======
TOTAL RETURN (%)(C)................................................................................. 3.95
RATIOS (%)/SUPPLEMENTAL DATA:
Ratio of operating expenses, net, to average daily net assets(a).................................. 2.60(b)
Ratio of net investment loss to average daily net assets.......................................... (0.33)(b)
Portfolio turnover rate........................................................................... 61(b)
Net assets, end of period (millions).............................................................. $10
</TABLE>
- ---------------
* Per share amounts have been calculated using the monthly average share
method.
+ For the period May 1, 1995 (commencement of operations) to October 31, 1995.
(a) Excludes management fees waived and expenses reimbursed by the Manager in
fiscal 1995 of $.17 per share. The operating expense ratio including such
items would be 5.09% (annualized).
(b) Annualized.
(c) Not annualized.
A N N U A L R E P O R T
10
<PAGE> 11
EAGLE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Series Trust (the "Trust") is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company consisting of four separate investment
Portfolios, the Eagle International Equity Portfolio (the "Fund"), the
Small Cap Stock Fund, the Value Equity Fund and the Growth Equity Fund.
The policies described below are followed by the Fund in the preparation
of its financial statements in conformity with generally accepted
accounting principles. Financial statements for the Small Cap Stock Fund
and the Value Equity Fund are presented separately.
Security Valuation: The Fund values investment securities at market value
based on the last quoted sales price as reported by the principal
securities exchange on which the security is traded. If no sale is
reported, the last bid price is used and in the absence of a market
quote, securities are valued using such methods as the Board of Trustees
believes would reflect fair market value. 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. Although the Fund values its assets in
U.S. dollars on a daily basis, it does not intend to convert holdings of
foreign currencies into U.S. dollars on a daily basis. Short term
investments having a maturity of 60 days or less are valued at cost
which, when combined with accrued interest included in interest
receivable or discount earned, approximates market.
Foreign Currency Transactions: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated
into U.S. dollars on the following basis: (i) market value of investment
securities, other assets and other liabilities at the daily rates of
exchange, and (ii) purchases and sales of investment securities,
dividend and interest income and certain expenses at the rates of
exchange prevailing on the respective dates of such transactions. The
Fund does not isolate that portion of gains and losses on investments
which is due to change in foreign exchange rates from that which is due
to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gains and losses from
investments. Net realized gain (loss) and unrealized appreciation
(depreciation) from currency transactions include gains and losses
between trade and settlement date on securities transactions, gains and
losses arising from the sales of foreign currency and gains and losses
between the ex and payment dates on dividends, interest, and foreign
withholding taxes.
Repurchase Agreements: The Fund enters into repurchase agreements whereby
the Fund, through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount equal to at least 100% of the resale price.
Federal Income Taxes: The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended, which are applicable
to regulated investment companies and to distribute substantially all of
its taxable income to its shareholders. Accordingly, no provision has
been made for federal income and excise taxes.
Distribution of Net Realized Gains. Net realized gains from investment
transactions during any particular year in excess of available capital
loss carryforwards, which, if not distributed, would be taxable to the
Fund, will be distributed to shareholders in the following fiscal year.
The Fund uses the identified cost method for determining realized gain
or loss on investments for both financial and federal income tax
reporting purposes.
State Registration Expenses: State registration fees are amortized based
either on the time period covered by the registration or as related
shares are sold, whichever is appropriate for each state.
Organization Expenses: Expenses incurred in connection with the formation
of the Fund were deferred and are being amortized on a straight-line
basis over 60 months from the date of commencement of operations.
Capital Accounts: The Fund reports the undistributed net investment income
(accumulated net investment loss) and accumulated net realized gain
(loss) accounts on a basis approximating amounts available for future
tax distributions (or to offset future taxable realized gains when a
capital loss carryforward is available). Accordingly, the Fund may
periodically make reclassifications among certain capital accounts
without impacting the net asset value of the Fund. As a result, the net
investment loss for the period ended October 31, 1995 has been charged
to accumulated net realized gain.
Other: Investment security transactions are accounted for on a trade date
plus one basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis.
A N N U A L R E P O R T
11
<PAGE> 12
EAGLE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Note 2: FUND SHARES. At October 31, 1995, there was an unlimited number of
shares of beneficial interest of no par value authorized. Transactions
in shares of the Fund for the period May 1, 1995 (commencement of
operations) to October 31, 1995 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------- -----------
<S> <C> <C>
Shares sold........................................................................... 493,157 $10,046,244
Shares redeemed....................................................................... (13,644) (283,251)
------- -----------
Net increase.......................................................................... 479,513 $ 9,762,993
===========
Shares outstanding:
Beginning of period (seed shares)................................................... 50
-------
End of period....................................................................... 479,563
=======
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the period May 1, 1995
(commencement of operations) to October 31, 1995, purchases and sales of
investment securities (excluding repurchase agreements and short term
obligations) aggregated $10,712,255 and $1,643,743, respectively.
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND
TRUSTEES' FEES. Under the Fund's Investment Advisory and Administration
Agreement with Eagle Asset Management, Inc. ( the "Manager"), the Fund
agrees to pay to the Manager a fee equal to an annualized rate of 1.00%
of the Fund's average daily net assets, computed daily and payable
monthly. The agreement also provides for a reduction in such fees in any
year to the extent that operating expenses of the Fund exceed applicable
state expense limitations. Currently, the Manager has voluntarily agreed
to waive its fee to the extent that Fund operating expenses exceed 2.60%
on an annual basis of the Fund's average daily net assets. This
agreement is more restrictive than any state expense limitation at the
current level of net assets. Under the agreement, management fees waived
and expenses reimbursed totaled $80,304 ($.17 per share) for the period
ended October 31, 1995. If Fund expenses fall below the expense
limitation agreed to by the Manager before the end of the year ending
October 31, 1997, the Fund may be required to pay the Manager all or a
portion of the waived management fees.
The Manager has entered into an agreement with Martin Currie, Inc., a New
York Corporation, (the "Subadviser") for the Subadviser to provide to
the Fund investment advice, portfolio management services including the
placement of brokerage orders, and certain compliance and other services
for a fee payable by the Manager equal to .50% of average daily net
assets on the first $100 million of assets and .40% thereafter without
regard to any reduction due to the imposition of expense limitations.
Heritage Asset Management, Inc. ("Heritage"), an affiliate of Eagle, is
the Dividend Paying and Shareholder Servicing Agent for the Fund.
Heritage also may provide certain administrative services for the Fund
and may receive a fee from Eagle for performing these administrative
services.
Pursuant to a plan adopted in accordance with Rule 12b-1 of the Investment
Company Act of 1940, as amended, the Fund paid Raymond James &
Associates, Inc. (the "Distributor") a fee equal to 1.00% of average
daily net assets for the services it provides in connection with the
promotion and distribution of Fund shares. Such fee is accrued daily and
payable monthly. The Manager, the Distributor, the Shareholder Servicing
Agent are all wholly-owned subsidiaries of Raymond James Financial, Inc.
Trustees of the Trust also serve as Trustees for Heritage Cash Trust,
Heritage Capital Appreciation Trust, Heritage Income-Growth Trust,
Heritage Income Trust and Heritage U.S. Government Income Fund,
investment companies that also are advised by Heritage (collectively
referred to as the Heritage funds). Each Trustee of the Heritage funds
who is not an interested person of Heritage received an annual fee of
$8,000 and an additional fee of $2,000 for each combined quarterly
meeting of the Heritage funds attended. Trustees' fees and expenses are
paid equally by each of the Heritage funds.
A N N U A L R E P O R T
12
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Heritage Series Trust and the
Shareholders of Eagle International Equity Portfolio:
We have audited the accompanying statement of assets and liabilities of Eagle
International Equity Portfolio, including the investment portfolio, as of
October 31, 1995, and the related statements of operations and changes in net
assets, and the financial highlights for the period May 1, 1995 (commencement of
operations) to October 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Eagle
International Equity Portfolio, as of October 31, 1995, the results of its
operations, the changes in its net assets, and the financial highlights for the
period May 1, 1995 (commencement of operations) to October 31, 1995 in
conformity with generally accepted accounting principles.
Boston, Massachusetts
November 29, 1995
Coopers & Lybrand
A N N U A L R E P O R T
13
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INVESTMENT ADVISER EAGLE INTERNATIONAL EQUITY
PORTFOLIO
Eagle Asset Management, Inc.
P.O. Box 10520
St. Petersburg, FL 33733
(800) 237-3101
DISTRIBUTOR
Raymond James & Associates, Inc.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. ANNUAL REPORT
October 31, 1995
