<PAGE> 1
[THE EAGLE INTERNATIONAL EQUITY PORTFOLIO LOGO]
ANNUAL REPORT
October 31, 1997
EAGLE
ASSET MANAGEMENT INC.
880 Carillon Parkway P.O. Box 10520
St. Petersburg, FL 33733-0520
(813) 573-2453 (800) 237-3101
<PAGE> 2
December 12, 1997
Dear Fellow Shareholders:
We are pleased to provide you with the annual report for the Eagle International
Equity Portfolio (the "Fund") of Heritage Series Trust for the fiscal year ended
October 31, 1997. For this period, the Eagle class of shares of your Fund
appreciated by 9.98% as compared to a return of +4.63% for the Morgan Stanley
Capital International Europe, Australia, Far East ("EAFE Index"). For this
period, the average performance of the International Funds category of mutual
funds as reported by Lipper Analytical Services, Inc. was +9.60%. As you will
see from the chart on page 4, your Fund has outperformed the EAFE Index for the
period from the Fund's inception on May 1, 1995 through October 31, 1997. Your
Fund also offers class A and class C shares. The financial and investment
performance information for all classes of shares of your Fund is presented in
this annual report.
The investment subadviser for your Fund is Martin Currie, Inc. of Edinburgh,
Scotland. In the market commentary that follows, Martin Currie discusses the
performance of the Fund's investments among the various markets of the world.
Because the Fund's assets are allocated not only to developed markets, but also
to emerging markets around the world, we believe your Fund should be considered
a core international holding in your overall investment portfolio. We hope you
find the comments of Martin Currie, Inc. helpful in understanding how your
investment portfolio has been managed during a period of exceptional turbulence
in many of the world's stock markets.
On behalf of all of us at Eagle and Heritage, thank you for your continuing
investment in the Eagle International Equity Portfolio. We look forward to
serving your investment needs for years to come.
Sincerely, Sincerely,
/s/ Stephen G. Hill /s/ Richard K. Riess
<TABLE>
<S> <C>
Stephen G. Hill Richard K. Riess
President President
Heritage Series Trust Eagle Asset Management, Inc.
Eagle International Equity Portfolio
</TABLE>
ANNUAL REPORT
<PAGE> 3
MARKET COMMENTARY from MARTIN CURRIE, INC. December 5, 1997
Subadviser Eagle International Equity Portfolio
The Eagle International Equity Portfolio (the "Fund") invests a substantial
portion of its investment portfolio in securities traded in developed foreign
securities markets, such as those included in the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE Index"). The countries in
which it 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 intensive research process,
designed to screen out companies with either weak financial structures, market
positions or poor management. The ability to produce premium growth in earnings
is paramount.
In the twelve months to October 31, 1997, the Fund continued to outperform the
EAFE Index. While the UK and Continental European markets moved strongly ahead,
the collapse of many southeast Asian markets and weakness of the Japanese market
and currency have impacted on confidence in international markets in general. A
substantial exposure to the UK market, good stock selection against a weak
Japanese index and investments in Latin America have enabled the Fund to place
in the top half of the Lipper rankings for our category.
The UK market (22% of net assets) has benefited from the support of bonds, good
liquidity and corporate activity. We remain overweight against the industry
average and EAFE Index. The best performing stocks have included financials,
such as Lloyds TSB Group and Royal Bank of Scotland Group, while consumer stocks
such as Marks & Spencer have recovered. The Sterling's strength has held back
export stocks. The new Labour administration's public support for the Europe's
Economic and Monetary Union (EMU) has raised the prospect of yet lower bond
yields in the UK.
CONTINENTAL EUROPE (37% of net assets) has been pushed ahead by corporate
restructuring and significant efforts to improve returns for shareholders. We
added to the region over the period. Novartis, Rhone-Poulenc, and Philips
Electronics rose strongly as their restructuring plans bore fruit. Domestic
growth has begun to pick up while Maastricht targets look closer to being met. A
rights issue from Volkswagen upset markets in the third quarter but EMU
disciplines will ensure the restructuring theme will persist. Asian turmoil has
impacted on individual stocks, such as ABB with its Malaysian contracts or
Gucci, reliant on the Japanese consumer, rather than the region as a whole.
The JAPANESE market (17% of net assets) has continued to weaken and the yen has
fallen further against the dollar. We reduced our exposure over the period and
removed the final part of the currency hedge. Despite a relaxed monetary policy,
economic forecasts continue to be reduced. Great sector polarisation has
continued with export related "blue chips", where we are overweight, performing
relatively well. Financials, utilities, construction, and domestic plays have
suffered. The collapse of the southeast Asian financial markets and demand
(particularly Korean) have put back further the hope of economic recovery for
Japan. However, current bankruptcies among major financial conglomerates should
be regarded as an encouraging sign; the Japanese authorities are at last
tackling the underlying structural problems of uncompetitive practices and cross
share ownership which have beset both the stock market and economy for years.
Service sector confidence and a revival of the property market are prerequisites
to economic recovery. This is proceeding very slowly.
Returns for the rest of ASIA (7% of net assets) have been dramatically weak. A
combination of rising interest rates to protect local currencies, slowing growth
and destocking in traditional export markets has resulted in savage market
collapses. Worst affected have been Thailand, Korea and Malaysia. The
Philippines, Singapore and ultimately Hong Kong were caught in the wake. We
substantially reduced our exposure to the region over the period, held nothing
in Thailand and Korea, and remained underweight to Singapore and Malaysia. The
sale of a large proportion of our
2 ANNUAL REPORT
<PAGE> 4
Hong Kong assets in the summer, prior to the market's collapse in October,
helped relative returns. Australia, India and Hong Kong now make up the bulk of
our exposure to the region.
LATIN AMERICA (6% of net assets) represents the majority of exposure to
non-index markets. We took profits in the region over the second quarter, with
the current portfolio concentrated on Mexico, Brazil, Venezuela, Chile and
Argentina. After a dramatic recovery in the earlier part of year, the Asian
crisis has seen a withdrawal of capital. The most vulnerable markets have been
Argentina (with its dollar link) and Brazil (with its current account deficit
and deteriorating trade deficit). We reduced both positions. Looking into 1998,
the region looks oversold and risk premiums should decline. The earnings outlook
is still robust.
On behalf of all of us at Martin Currie, Inc., we appreciate the confidence you
have in us. We look forward to reporting to you again in the Spring of 1998.
3 ANNUAL REPORT
<PAGE> 5
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION OF THE HERITAGE SERIES TRUST-EAGLE INTERNATIONAL EQUITY
PORTFOLIO-EAGLE SHARES ON MAY 1, 1995
[PORTFOLIO EAGLE SHARES CHART]
The graph contained in the annual report compares the performance of the
Heritage Series Trust - Eagle International Equity Portfolio Eagle Shares with
the Morgan Stanley Capital International EAFE Index from inception of Eagle
Shares (May 1, 1995) through October 31, 1997.
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION OF THE HERITAGE SERIES TRUST-EAGLE INTERNATIONAL EQUITY
PORTFOLIO-CLASS A & C SHARES ON DECEMBER 27, 1995
[PORTFOLIO CLASS A & C CHART]
The graph contained in the annual report compares the performance of the
Heritage Series Trust - Eagle International Equity Portfolio Class A and C
Shares with the Morgan Stanley Capital International EAFE Index from inception
of Class A and C Shares (December 27, 1995) through October 31, 1997.
*Average annual total returns for Heritage Series Trust-Eagle International
Equity Portfolio are calculated in conformance with Item 22 of Form N-1A, which
assumes the reinvestment of dividends and a sales load of 4.75% for Class A
Shares. These returns are calculated based on the published net asset value.
4 ANNUAL REPORT
<PAGE> 6
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS--87.8%(A)
- -----------------------
ARGENTINA--0.5%
---------------
17,843 Compania Perez Companc SA................................... $ 111,765
3,000 Telefonica de Argentina, ADR................................ 84,375
-----------
196,140
-----------
AUSTRALIA--1.5%
---------------
70,000 John Fairfax Holdings, Ltd.................................. 154,574
6,000 Lend Lease Corporation...................................... 122,872
33,000 Mayne Nickless, Ltd......................................... 150,847
43,000 News Corporation, Ltd....................................... 190,813
-----------
619,106
-----------
AUSTRIA--0.9%
-------------
2,200 V.A. Technologie AG......................................... 390,374
-----------
BELGIUM--1.3%
-------------
1,300 Generale de Banque.......................................... 531,752
-----------
BRAZIL--1.8%
-------------
15,500 Centrais Electricas Brasileiras, ADR........................ 341,000
10,000 Petroleo Brasileiro......................................... 190,000
2,200 Telecomunicacues Brasileiras, ADR........................... 223,300
-----------
754,300
-----------
CHILE--0.6%
------------
8,500 Compania de Telefonos de Chile SA, ADR...................... 235,875
-----------
DENMARK--1.5%
-------------
5,717 Novo Nordisk................................................ 619,327
-----------
FRANCE--6.9%
-------------
9,400 AXA-UAP Groupe.............................................. 643,696
4,859 Compagnie Generale.......................................... 566,915
2,950 L'Air Liquide SA............................................ 457,721
17,000 Rhone-Poulenc SA............................................ 741,213
8,940 Schneider SA................................................ 477,358
-----------
2,886,903
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5 ANNUAL REPORT
<PAGE> 7
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
GERMANY--11.2%
--------------
700 Bayerische Motoren Werke AG................................. $ 506,381
11,700 Deutsche Bank AG............................................ 765,611
16,300 Hoechst AG.................................................. 620,304
1,600 Mannesmann AG............................................... 675,716
1,700 Preussag AG................................................. 440,828
2,900 SGL Carbon AG............................................... 407,124
15,001 VEBA AG..................................................... 836,290
700 Volkswagen AG............................................... 413,795
-----------
4,666,049
-----------
HONG KONG--2.2%
---------------
6,500 Amoy Properties, Ltd........................................ 5,591
14,800 Cheung Kong Holdings, Ltd................................... 102,891
26,000 China Light and Power Company, Ltd.......................... 136,869
26,100 Citic Pacific, Ltd.......................................... 124,905
112,000 First Pacific Bank.......................................... 70,620
3,496 HSBC Holdings............................................... 79,131
19,500 Hutchison Whampoa, Ltd...................................... 134,935
48,400 New World Development, Ltd.................................. 170,275
18,000 Swire Pacific, Ltd, Class "A"............................... 96,152
-----------
921,369
-----------
INDIA--1.4%
------------
8,032 Indian Opportunities Fund, Ltd.(c) ......................... 81,446
30,500 Schroder India Fund......................................... 320,189
12,000 Videsh Sanchar Nigam, Ltd................................... 165,600
-----------
567,235
-----------
INDONESIA--1.1%
---------------
750,000 Bank International Indonesia................................ 161,234
316,000 PT Telekumunikasi........................................... 293,648
-----------
454,882
-----------
ITALY--1.8%
------------
80,472 ENI......................................................... 452,506
8,000 Gucci NV.................................................... 291,000
-----------
743,506
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6 ANNUAL REPORT
<PAGE> 8
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
JAPAN--15.8%
-------------
20,000 Canon, Incorporated......................................... $ 485,251
41 DDI Corporation............................................. 136,951
48,000 Hitachi, Ltd. .............................................. 368,924
11,000 Honda Motor Corporation..................................... 370,170
8,000 Ito-Yokado Company, Ltd. ................................... 397,507
34,000 Kamigumi Company, Ltd. ..................................... 153,968
3,000 Mabuchi Motor Company, Ltd. ................................ 167,013
12,000 Marui Company, Ltd. ........................................ 202,410
54,000 Mitsubishi Heavy Industries................................. 265,177
17,000 Mitsui Fudosan Company, Ltd. ............................... 192,106
24,000 Nippon Express Company, Ltd. ............................... 129,223
2,000 Riso Kagaku Corporation..................................... 117,823
7,000 Rohm Company, Ltd. ......................................... 692,148
24,000,000 Sakura Finance.............................................. 187,952
4,000 Secom Company, Ltd.......................................... 258,579
7,000 Shimachu Company, Ltd....................................... 148,899
10,000 Shin-Etsu Chemical Company, Ltd............................. 244,287
7,000 Sony Corporation............................................ 581,055
17,000 Sumitomo Electric Industries, Ltd........................... 224,595
15,000 Taisho Pharmaceutical Company............................... 383,880
24,000 Toppan Printing Company, Ltd................................ 301,122
9,000 Toyota Motor Corporation.................................... 250,519
13,000 Yamanouchi Pharmaceuticals.................................. 319,734
-----------
6,579,293
-----------
MEXICO--2.0%
-------------
16,118 Cifra SA DE CV.............................................. 32,063
30,000 Corporation Industrial ALFA................................. 218,963
4,000 Empresas ICA Sociedad Contro................................ 53,250
130,000 Grupo Financiero Banamex.................................... 257,364
5,800 Telefonos De Mexico......................................... 250,850
-----------
812,490
-----------
NETHERLANDS--3.0%
-----------------
13,100 ING Groep NV................................................ 549,910
9,000 Philips Electronics NV...................................... 704,610
-----------
1,254,520
-----------
PHILIPPINES--0.3%
-----------------
1,920,000 Belle Corporation........................................... 144,487
-----------
SINGAPORE--0.5%
---------------
24,000 Development Bank of Singapore............................... 224,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7 ANNUAL REPORT
<PAGE> 9
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
SPAIN--2.7%
-----------
19,035 Banco de Santander SA....................................... $ 533,221
22,500 Telefonica de Espana SA..................................... 614,044
-----------
1,147,265
-----------
SWEDEN--1.3%
-------------
6,100 Incentive AB................................................ 534,266
-----------
SWITZERLAND--6.3%
-----------------
6,120 Credit Suisse Group......................................... 862,110
617 Novartis AG................................................. 966,315
90 Roche Holdings AG Genusscheine.............................. 790,894
-----------
2,619,319
-----------
UK--22.3%
------------
67,000 Cable & Wireless, PLC....................................... 535,068
57,000 General Electric Company, PLC............................... 364,118
23,000 GKN, PLC.................................................... 515,925
26,500 Glaxo Wellcome, PLC......................................... 568,204
33,200 Granada Group, PLC.......................................... 457,865
102,000 Ladbroke Group, PLC......................................... 456,919
84,000 LASMO, PLC.................................................. 387,560
51,000 Lloyds TSB Group, PLC....................................... 637,461
56,000 Marks & Spencer, PLC........................................ 568,422
24,000 McKechnie, PLC.............................................. 202,538
33,000 National Westminister Bank, PLC............................. 474,485
111,000 NFC, PLC.................................................... 251,411
32,950 Reckitt & Colman, PLC....................................... 505,553
43,100 Royal Bank of Scotland Group, PLC........................... 457,006
58,558 Safeway, PLC................................................ 381,439
69,000 Scottish Power, PLC......................................... 516,311
81,000 Shell Transport & Trading Company PLC....................... 574,508
28,731 Smiths Industries, PLC...................................... 416,960
64,000 Unilever, PLC............................................... 476,750
44,357 Wassall, PLC................................................ 250,795
34,000 Wolseley, PLC............................................... 283,364
-----------
9,282,662
-----------
VENEZUELA--0.9%
---------------
8,200 Compania Anonima Nacional Telefonos......................... 358,750
-----------
Total Common Stocks (cost $34,543,491)...................... 36,543,870
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 ANNUAL REPORT
<PAGE> 10
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY MARKET
AMOUNT DATE VALUE
--------- -------- -----------
<C> <S> <C> <C>
BONDS--1.5%(A)
- -------------
JAPAN--1.5%
-------------
$ 311,000 MBL International Finance (Bermuda), 3.0%(d)................ 11/30/02 $ 317,026
10,000,000 Namco, 4.7%(d)(e)........................................... 09/30/98 108,018
23,000,000 Nitto Denko Corporation, 2.2%(d)(e)......................... 03/31/99 217,100
-----------
Total Bonds (cost $697,855)................................. 642,144
-----------
Total investment portfolio excluding repurchase agreement (cost
$35,241,346).................................................................. 37,186,014
REPURCHASE AGREEMENT--7.0%(A)
- -----------------------------
Repurchase Agreement with State Street Bank and Trust Company, dated October
31, 1997, @ 5.58% to be repurchased at $2,899,348 on November 3, 1997,
collateralized by $2,580,000 United States Treasury Notes, 7.875% due November
15, 2004, (market value of $2,968,034 including interest) (cost $2,898,000)... 2,898,000
-----------
TOTAL INVESTMENT PORTFOLIO (COST $38,139,346)(B) 96.3%(A)..................... 40,084,014
OTHER ASSETS AND LIABILITIES, NET, 3.7%(A).................................... 1,530,909
-----------
NET ASSETS, 100%.............................................................. $41,614,923
===========
</TABLE>
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is
substantially the same. Market value includes net unrealized appreciation of
$1,944,668 which consists of aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost of
$4,708,721 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value of $2,764,053.
(c) Martin Currie Investment Management Limited is the manager of the Indian
Opportunities Fund, Ltd.
(d) Convertible bonds.
(e) Principal amount is stated in Japanese yen.
ADR -- American Depository Receipt.
The accompanying notes are an integral part of the financial statements.
9 ANNUAL REPORT
<PAGE> 11
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
OCTOBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
MARKET % OF NET
INDUSTRY DIVERSIFICATION VALUE ASSETS
- ------------------------ ------ --------
<S> <C> <C>
Common Stocks
Banking................................................... $ 3,934,520 9.4%
Basic Industries.......................................... 2,858,725 6.9%
Building Materials and Merchandise........................ 283,364 0.7%
Capital Goods............................................. 4,989,508 12.0%
Consumer Goods and Services............................... 5,593,249 13.4%
Diversified Industrials................................... 825,749 2.0%
Electronic and Electrical Equipment....................... 1,068,728 2.6%
Energy.................................................... 1,217,451 2.9%
Engineering............................................... 1,135,423 2.7%
Finance................................................... 3,103,324 7.5%
Foods..................................................... 476,750 1.2%
Household Goods........................................... 505,553 1.2%
Insurance................................................. 643,696 1.6%
Leisure and Hotels........................................ 914,784 2.2%
Oil, Exploration and Production........................... 387,560 0.9%
Oil, Integrated........................................... 764,508 1.8%
Pharmaceuticals........................................... 1,271,818 3.1%
Retail Trade.............................................. 1,543,596 3.7%
Telecommunications........................................ 2,595,910 6.2%
Transportation and Storage................................ 685,449 1.6%
Utilities................................................. 1,744,205 4.2%
Bonds....................................................... 642,144 1.5%
Repurchase Agreement........................................ 2,898,000 7.0%
----------- ------
Total Investments........................................... $40,084,014 96.3%
=========== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 ANNUAL REPORT
<PAGE> 12
EAGLE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
Assets
- ------
Investments, at market value (identified cost $35,241,346)
(Note 1).................................................. $37,186,014
Repurchase agreement (identified cost $2,898,000) (Note
1)........................................................ 2,898,000
Cash........................................................ 969
Foreign currency (cost $192,758)............................ 192,612
Receivables:
Investments sold.......................................... 2,155,873
Fund shares sold.......................................... 149,363
Dividends and interest.................................... 62,864
Foreign taxes recoverable................................. 52,320
Deferred organizational expenses (Note 1)................... 26,000
Deferred state/federal registration expenses (Note 1)....... 6,621
Prepaid insurance........................................... 2,488
-----------
Total assets........................................ 42,733,124
Liabilities
- -----------
Payables (Note 4):
Investments purchased..................................... $853,462
Accrued management fee.................................... 51,036
Other accrued expenses.................................... 68,977
Accrued distribution fee.................................. 33,284
Fund shares redeemed...................................... 111,442
--------
Total liabilities................................... 1,118,201
-----------
Net assets, at market value................................. $41,614,923
===========
Net Assets
- ----------
Net assets consist of:
Paid-in capital........................................... 38,658,990
Accumulated net realized gain (Notes 1 and 5)............. 1,049,917
Distribution in excess of net investment income........... (40,256)
Net unrealized appreciation on investments and other
assets and liabilities denominated in
foreign currencies...................................... 1,946,272
-----------
Net assets, at market value................................. $41,614,923
===========
Eagle Class Shares
- ------------------
Net asset value, redemption and offering price per share
($31,724,827 divided by 1,331,303 shares of beneficial
interest outstanding, no par value) (Notes 1 and 2)....... $23.83
======
Class A Shares
- --------------
Net asset value and redemption price per share ($6,131,182
divided by 255,762 shares of beneficial interest
outstanding, no par value) (Notes 1 and 2)................ $23.97
======
Maximum offering price per share (100/95.25 of $23.97)...... $25.17
======
Class C Shares
- --------------
Net asset value and offering price per share ($3,758,914
divided by 158,392 shares of beneficial interest
outstanding, no par value) (Notes 1 and 2)................ $23.73
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 ANNUAL REPORT
<PAGE> 13
EAGLE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
Investment Income
- -----------------
Income:
Dividends (net of $77,808 foreign withholding taxes)...... $ 621,961
Interest (net of $207 foreign withholding taxes).......... 132,268
----------
Total income........................................ 754,229
Expenses (Notes 1 and 4):
Management fee............................................ $351,913
Distribution fee (Eagle Shares)........................... 275,084
Distribution fee (Class A Shares)......................... 12,772
Distribution fee (Class C Shares)......................... 25,783
Shareholder servicing fees (Eagle Shares)................. 8,242
Shareholder servicing fees (Class A Shares)............... 7,663
Shareholder servicing fees (Class C Shares)............... 3,867
Custodian/Fund accounting fees............................ 146,869
State/Federal registration expenses....................... 37,140
Professional fees......................................... 59,490
Reports to shareholders................................... 27,053
Organization expenses..................................... 10,400
Trustees' fees and expenses............................... 7,641
Insurance expense......................................... 3,312
Other..................................................... 106
--------
Total expenses before fee waiver.................... 977,335
Fees waived by Manager.............................. (91,433) 885,902
-------- ----------
Net investment loss......................................... (131,673)
----------
Realized and Unrealized Gain (Loss) on Investments
- --------------------------------------------------
Net realized gain from investment transactions.............. 1,149,279
Net realized gain from foreign currency transactions........ 200,478
Net increase in unrealized appreciation of investments
during the year........................................... 1,394,725
Net decrease in unrealized appreciation from foreign
currency during the year.................................. (142,713)
----------
Net gain on investments............................. 2,601,769
----------
Net increase in net assets resulting from operations........ $2,470,096
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 ANNUAL REPORT
<PAGE> 14
EAGLE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
Eagle International Equity Portfolio
----------------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss).............................. $ (131,673) $ 1,400
Net realized gain on investment transactions.............. 1,149,279 176,463
Net realized gain from foreign currency transactions...... 200,478 236,722
Net increase in unrealized appreciation of investments
during the year......................................... 1,394,725 589,606
Net increase (decrease) in unrealized appreciation from
foreign currency during the year........................ (142,713) 142,373
----------- -----------
Net increase in net assets resulting from operations...... 2,470,096 1,146,564
----------- -----------
Distribution to shareholders from:
Net investment income Eagle Shares, ($0.31 and $0.01 per
share, respectively).................................... (318,525) (7,915)
Net investment income Class A Shares, ($0.44 per share)... (62,318) --
Net investment income Class C Shares, ($0.34 per share)... (18,908) --
Net realized gains Eagle Shares, ($0.17 and $0.47 per
share, respectively).................................... (172,431) (254,085)
Net realized gains Class A Shares, ($0.17 per share)...... (23,850) --
Net realized gains Class C Shares, ($0.17 per share)...... (9,263) --
Increase in net assets from Fund share transactions (Note
2)........................................................ 13,835,836 15,059,163
----------- -----------
Increase in net assets...................................... 15,700,637 15,943,727
Net assets, beginning of year............................... 25,914,286 9,970,559
----------- -----------
Net assets, end of year (including distribution in excess of
net investment income of $40,256 and undistributed net
investment income of $230,207, respectively).............. $41,614,923 $25,914,286
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 ANNUAL REPORT
<PAGE> 15
EAGLE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A SHARES* CLASS C SHARES*
EAGLE SHARES* FOR THE YEARS FOR THE YEARS
FOR THE YEARS ENDED ENDED ENDED
------------------------ --------------- ---------------
1997 1996 1995+ 1997 1996++ 1997 1996++
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.................. $22.14 $20.79 $20.00 $22.25 $21.11 $22.12 $21.11
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)................... (0.11) (.01) (.03) 0.05 .10 (0.13) (.07)
Net realized and unrealized gain on investments... 2.28 1.84 .82 2.28 1.04 2.25 1.08
------ ------ ------ ------ ------ ------ ------
Total from investment operations.................... 2.17 1.83 .79 2.33 1.14 2.12 1.01
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income.............. (0.31) (.01) -- (0.44) -- (0.34) --
Distributions from net realized gains............. (0.17) (.47) -- (0.17) -- (0.17) --
------ ------ ------ ------ ------ ------ ------
Total Distributions................................. (0.48) (.48) -- (0.61) -- (0.51) --
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR........................ $23.83 $22.14 $20.79 $23.97 $22.25 $23.73 $22.12
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(D)................................. 9.98(e) 8.93 3.95(c) 10.71(e) 5.40(c) 9.79(e) 4.78(c)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net
assets(a)....................................... 2.60 2.60 2.60(b) 1.97 1.97(b) 2.72 2.72(b)
Net investment income (loss) to average daily net
assets.......................................... (0.47) (.02) (.33)(b) .22 .44(b) (.52) (.32)(b)
Portfolio turnover rate(c)........................ 50 59 61 50 59 50 59
Average commission rate on portfolio
transactions.................................... $.0164 $.0289 -- $.0164 $.0289 $.0164 $.0289
Net assets, end of year ($ millions).............. 32 22 10 6 3 4 1
</TABLE>
- ---------------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents per share data for the year since
use of the undistributed income method does not correspond with results of
operations.
+ For the period May 1, 1995 (commencement of operations) to October 31, 1995.
++ For the period December 27, 1995 (commencement of Class A and Class C Shares)
to October 31, 1996.
(a)Excludes management fees waived and expenses reimbursed by the Manager in the
amount of $.06, $.16 and $.17 per Eagle Share, respectively. The operating
expense ratios including such items would have been 2.86%, 3.31% and 5.09%
(annualized) for Eagle Shares, respectively. Excludes management fees waived
by the Manager in the amount of $.06 and $.16 per Class A Share,
respectively. The operating expense ratio including such items would have
been 2.23% and 2.69% (annualized) for Class A Shares, respectively. Excludes
management fees waived by the Manager in the amount of $.06 and $.16 per
Class C Share, respectively. The operating expense ratio including such items
would have been 2.98% and 3.44% (annualized) for Class C Shares,
respectively.
(b)Annualized.
(c)Not annualized.
(d)Calculated without the imposition of a sales load.
(e)These returns are calculated based on the published net asset value.
The accompanying notes are an integral part of the financial statements.
14 ANNUAL REPORT
<PAGE> 16
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 Fund primarily seeks capital appreciation principally through
investment in an international portfolio of equity securities.
The Fund currently offers Eagle Class, Class A and Class C Shares. The
Eagle Class of shares are subject to certain minimum investment
requirements and are sold without any sales charge. Class A Shares are
sold subject to a maximum sales charge of 4.75% of the amount invested
payable at the time of purchase. Class C Shares are sold subject to a
contingent deferred sales charge of 1% of the lower of net asset value
or purchase price payable upon any redemptions less than one year after
purchase. The financial statements for the Small Cap Fund, Growth Equity
Fund and Value Equity Fund are presented separately. The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies:
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 changes 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 foreign 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.
Forward Foreign Currency Contracts: The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange gains and losses are
included in the Statement of Operations as unrealized foreign currencies
gain or loss. The Fund records realized gains or losses on delivery of
the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
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.
Expenses: The Fund is charged for those expenses that are directly
attributable to it, such as management fee, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as professional
fees, insurance expense, etc., are allocated proportionately among the
funds. Expenses of the Fund are allocated to each class of shares based
upon their relative percentage of current net assets. All expenses that
are directly attributable to a specific class of shares, such as
distribution fees, are allocated to that class.
State Registration Expenses: State registration fees are amortized based
either on the time period covered by the registration or as related
shares are sold, whichever is appropriate for each state.
15 ANNUAL REPORT
<PAGE> 17
EAGLE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
Other: For purposes of these financial statements, investment security
transactions are accounted for on a trade date basis (date the order to
buy or sell is executed). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is
recorded on the accrual basis. Expenses of the Fund are allocated to
each class of shares based upon their relative percentage of current net
assets of dividend eligible shares. All expenses that are directly
attributable to a specific class of shares, such as distribution and
shareholder servicing fees, are charged directly to that class.
Note 2: FUND SHARES. At October 31, 1997, there was an unlimited number of
shares of beneficial interest of no par value authorized.
Transactions in Eagle Shares, A Shares and C Shares of the Eagle
International Equity Portfolio during the year ended October 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------ ----------------------
EAGLE SHARES SHARES AMOUNT SHARES AMOUNT
------------ --------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................. 459,654 $11,104,451 534,815 $11,648,653
Shares issued on reinvestment of distributions.......... 21,188 475,249 11,917 251,561
Shares redeemed......................................... (125,683) (2,972,703) (50,151) (1,114,981)
--------- ----------- ------- -----------
Net increase............................................ 355,159 $ 8,606,997 496,581 $10,785,233
=========== ===========
Shares outstanding:
Beginning of year..................................... 976,144 479,563
--------- -------
End of year........................................... 1,331,303 976,144
========= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------ ----------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
-------------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................. 145,840 $ 3,468,293 159,739 $ 3,524,406
Shares issued on reinvestment of distributions.......... 3,346 75,081 -- --
Shares redeemed......................................... (33,267) (815,865) (19,896) (444,547)
--------- ----------- ------- -----------
Net increase............................................ 115,919 $ 2,727,509 139,843 $ 3,079,859
=========== ===========
Shares outstanding:
Beginning of year..................................... 139,843 --
--------- -------
End of year........................................... 255,762 139,843
========= =======
</TABLE>
16 ANNUAL REPORT
<PAGE> 18
EAGLE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------ ----------------------
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
-------------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................. 121,689 $ 2,915,342 56,036 $ 1,238,468
Shares issued on reinvestment of distributions.......... 1,158 25,899 -- --
Shares redeemed......................................... (18,479) (439,911) (2,012) (44,397)
--------- ----------- ------- -----------
Net increase............................................ 104,368 $ 2,501,330 54,024 $ 1,194,071
=========== ===========
Shares outstanding:
Beginning of year..................................... 54,024 --
--------- -------
End of year........................................... 158,392 54,024
========= =======
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the year ended October 31, 1997,
purchases and sales of investment securities (excluding repurchase
agreements and short term obligations) aggregated $27,640,397 and
$16,594,704, 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. Currently, the Manager has voluntarily agreed to waive its fee
to the extent that Fund operating expenses exceed 2.60%, 1.97% and 2.72%
on an annual basis of the Fund's average daily net assets for Eagle
Class Shares, Class A and Class C Shares, respectively. Management fees
of $91,433 were waived for the year ended October 31, 1997. If total
Fund expenses fall below the expense limitation agreed to by the Manager
before the end of the year ending October 31, 1999, the Fund may be
required to pay the Manager a portion or all of the waived management
fee. In addition, the Fund may be required to pay the Manager a portion
or all of the management fees waived of $134,735 for the year ended
October 31, 1996, if total Fund expenses fall below the annual expense
limitations before the end of October 31, 1998.
The Manager has entered into an agreement with Martin Currie, Inc., a
New York Corporation, (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. For the year
ended October 31, 1997 the Subadviser earned $175,957 for Subadviser
fees, which were paid by the Manager.
Heritage Asset Management, Inc. ("Heritage"), an affiliate of the
Manager, 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 the Manager for performing these
administrative services.
Raymond James & Associates, Inc. (the "Distributor") has advised the
Fund that it received $90,013 in front-end sales charges and $1,902 in
contingent deferred sales charges for the year ended October 31, 1997.
The Distributor paid commissions to salespersons and from these fees
incurred other distribution costs.
Pursuant to the Class A Distribution Plan adopted in accordance with
Rule 12b-1 of the Investment Company Act of 1940, at amended, the Fund
is authorized to pay the Distributor a fee, equal to .25% of the average
daily net assets for Class A Shares. Under the Eagle Class and Class C
Distribution Plans, the Fund may pay the Distributor a fee equal to
1.00% of the average daily net assets for each Class. Such fees are
accrued daily and payable monthly. The Manager, Heritage and Distributor
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 are advised by Heritage (collectively referred
to as the Heritage funds). Each Trustee of the Heritage funds that is
not an interested person of Heritage received an annual fee of $8,000,
an additional fee of $2,000 for each combined quarterly meeting of the
Heritage funds attended and $1,000 for each special Trustees meeting
attended. Trustees' fees and expenses are paid equally by each of the
Heritage funds.
Note 5: FEDERAL INCOME TAXES. For the year ended October 31, 1997, to reflect
reclassifications arising from permanent book/tax differences primarily
attributable to foreign currency gains, the Fund credited undistributed
net investment income and debited accumulated net realized gain
$260,960.
Note 6: FINANCIAL INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Fund may enter
into forward foreign currency contracts ("forward contracts") to
facilitate settlement of foreign currency denominated portfolio
transactions or to manage its foreign currency exposure or to sell for a
fixed amount of U.S. dollars or other currency, the amount of foreign
currency approximating the value of some or all of its holdings
denominated in such foreign currency or an amount of foreign currency
other than the currency in which the securities to be hedged are
denominated approximating the value of some or all of its holdings to be
hedged. Additionally, when the Subadviser anticipates purchasing
17 ANNUAL REPORT
<PAGE> 19
EAGLE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
securities at some time in the future, the Fund may enter into a forward
contract to purchase an amount of currency equal to some or all of the
value of the anticipated purchase for a fixed amount of U.S. dollars or
other currency.
At October 31, 1997, the Fund had no outstanding forward foreign
currency exchange contracts ("forward contracts"). The Fund may enter
into forward contracts to hedge against changes in future foreign
exchange rates and enhance return. Forward contracts involve elements of
market risk in excess of the amount reflected in the Statement of Assets
and Liabilities. The Fund bears the risk of an unfavorable change in the
foreign exchange rate underlying the forward contract. Risks may also
arise upon entering into these contracts from the potential inability of
these parties to meet the terms of their contracts.
18 ANNUAL REPORT
<PAGE> 20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
Heritage Series Trust-Eagle International Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Heritage Series Trust-Eagle
International Equity Portfolio (the "Fund") at October 31, 1997, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above. The financial highlights for
the period May 1, 1995 (commencement of operations) to October 31, 1995 were
audited by other independent accountants whose report dated November 29, 1995
expressed an unqualified opinion on those financial highlights.
Price Waterhouse LLP
Tampa, Florida
December 17, 1997
19 ANNUAL REPORT
<PAGE> 21
(This page intentionally left blank)
<PAGE> 22
EAGLE INTERNATIONAL EQUITY PORTFOLIO
P.O. Box 10520
St. Petersburg, FL 33733
INVESTMENT ADVISER
Eagle Asset Management, Inc.
P.O. Box 10520
St. Petersburg, FL 33733
(800) 237-3101
INVESTMENT SUBADVISER
Martin Currie Inc.
Saltire Court
20 Castle Terrace
Edinburgh, Scotland EH1 2ES
DISTRIBUTOR
Raymond James & Associates, Inc.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800
TRANSFER AGENT/
DIVIDEND DISBURSING AGENT
Heritage Asset Management, Inc.
P.O. Box 33022
St. Petersburg, FL 33733
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
EAGLE INTERNATIONAL EQUITY
PORTFOLIO
ANNUAL REPORT
October 31, 1997
