HERITAGE
SERIES
TRUST
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH.
EAGLE INTERNATIONAL EQUITY PORTFOLIO
GROWTH EQUITY FUND
MID CAP GROWTH FUND
SMALL CAP STOCK FUND
VALUE EQUITY FUND
SEMIANNUAL REPORT
(Unaudited) and Investment Performance
Review for the Six Month Period Ended
April 30, 1998
[LOGO]
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SERIES TRUST/TM/
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<PAGE>
HERITAGE SERIES TRUST
SEMIANNUAL REPORT
TABLE OF CONTENTS
PRESIDENT'S LETTER ........................... 1
PORTFOLIO COMMENTARY AND INVESTMENT PORTFOLIO:
EAGLE INTERNATIONAL EQUITY PORTFOLIO
Investment Commentary .................. 2
Investment Portfolio ................... 4
GROWTH EQUITY FUND
Portfolio Management Letter ............ 7
Investment Portfolio ................... 8
MID CAP GROWTH FUND
Portfolio Management Letter ............ 9
Investment Portfolio ................... 10
SMALL CAP STOCK FUND
Portfolio Management Letters ........... 12
Investment Portfolio ................... 14
VALUE EQUITY FUND
Portfolio Management Letter ............ 18
Investment Portfolio ................... 19
STATEMENT OF ASSETS AND LIABILITIES .......... 21
STATEMENT OF OPERATIONS ...................... 22
STATEMENT OF CHANGES IN NET ASSETS ........... 23
FINANCIAL HIGHLIGHTS ......................... 25
NOTES TO FINANCIAL STATEMENTS ................ 30
<PAGE>
June 10, 1998
Dear Fellow Shareholders:
I am pleased to provide you with the semiannual report for Heritage Series
Trust for the six months ended April 30, 1998. With the addition of the Mid Cap
Stock Fund, which commenced operations on November 6, 1997, there are now five
equity funds available within the Heritage Series Trust. The other funds are
the Eagle International Equity Portfolio, the Growth Equity Fund, the Small Cap
Stock Fund and the Value Equity Fund. The investment and financial information
for each of these funds is provided in this report. Because many of you own
shares in more than one of these funds, this approach allows us to reduce the
volume of mail you receive while still providing important investment
information on each of your investments.
During the period covered by this report, the U.S. stock market tended to
favor large capitalization stocks over small cap stocks and "growth" stocks
over "value" stocks. Some international stocks performed well, especially in
developed Europe, while most Asian markets suffered the fallout from political
and economic unrest in the region. As shown in the table below, each of the
funds in the Heritage Series Trust delivered positive returns during this
period.
FUND "A" SHARES (1) "C" SHARES (1)
- ---- ---------------- ---------------
Eagle International Equity Portfolio +17.58% +17.15%
Growth Equity Fund +21.22 +20.76
Mid Cap Growth Fund (2) +16.24 +15.89
Small Cap Stock Fund +9.09 +8.68
Value Equity Fund +9.84 +9.40
In the pages that follow, you will find commentaries from the portfolio
managers for these funds, each followed by investment portfolio information for
the respective fund. Following this information is other important financial
information for all of the funds.
In January of this year we introduced "B" shares, which allow investors to
purchase shares of the respective fund at net asset value. Upon redeeming
shares, investors in "B" shares are subject to a contingent deferred sales load
that declines from 5% in the first year after investment to zero after six
years.
On behalf of all of us at Heritage, we appreciate your continuing
confidence in the funds we manage for you. We hope that you will discuss with
your financial advisors how other Heritage funds may fit in your investment
plan. Please remember that you may call us at 800-709-FUND (3863) with any
comments or suggestions you would like to share with us.
We look forward to reporting to you again this fall after the end of the
funds' fiscal year.
Sincerely,
/s/ STEPHEN G. HILL
-------------------
Stephen G. Hill
President
- ----------
(1) Calculated without the imposition of front or back-end sales charges.
(2) Performance numbers are from inception (November 6, 1997) through April 30,
1998.
1
<PAGE>
May 19, 1998
MARKET COMMENTARY from MARTIN CURRIE, INC.
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.
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 dependable growth in earnings is
paramount.
Over the six months to April 30, 1998, the EAFE Index rose by 15.44%,
dominated by strong returns from the UK and Continental Europe. In contrast, the
Japanese market fell further, exacerbated by a weakening currency and a collapse
in Asian markets. The Class A Shares and Class C Shares of the Fund rose by
17.58% and 17.15%, respectively, during the same period(1). The Class A Shares
and Class C Shares of the Fund ranked in the second quartile of the
international fund category for the one year period ended April 30, 1998, as
measured by Lipper Analytical Services, Inc(2).
CONTINENTAL EUROPEAN stock markets (51% of net assets) have rallied
further, helped by converging bond markets and increased domestic buying.
Corporate restructuring, particularly in the financial sector, fueled the rise,
while markets such as Spain and Italy benefited most from falling bond yields.
We added securities to the region over the period. New holdings included
Unidanmark (Denmark), Nokia (Finland), Societe Generale (France), Bayerische
Vereinsbank (Germany), INA (Italy) and Nordbanken (Sweden). These stocks reflect
the dominant theme among companies of restructuring in the financial sector.
Sales reflected our concern over economically sensitive groups, such as
Schneider, Hoechst and Philips.
In the UK (22% of net assets), the equity market moved strongly ahead,
supported by good liquidity, corporate activity and improving bond yields.
Financial stocks were again significant outperformers. We bought a new holding
in the UK's largest property investment group, Land Securities, and built up a
holding in Zeneca which had lagged the pharmaceutical sector. Profits were taken
in Wolseley and Granada, where we believe the shares were fully valued. The UK
equity market has benefited as bond market yields moved lower towards the
European average. The new Labour administration has maintained a tough approach
to inflation; both bonds and equities have progressed. Good institutional
liquidity has meant there has been little selling pressure, even if the fall out
in Asia has caused stock market volatility.
The JAPANESE stock market (15% of net assets) has weakened further. Apart
from a rally in domestic stocks in the first two months of this year, the
pressure to restructure on the financial sector and economically sensitive
sectors such as construction, has remained intense. Bankruptcies have increased.
We have maintained a quality blue chip portfolio, concentrating on beneficiaries
of yen weakness and corporate profit recovery. This policy offset the worst of
the index fall. We have increased the convertible content of the portfolio,
protecting downside in anticipation of a further slowdown in economic growth.
With an Asian export market in disarray, we are concerned that the yen may
weaken further and as a result, we have hedged approximately 50% of the Japanese
assets against the US dollar. We see no reason to purchase additional Japanese
securities until there is clearer commitment to tax reform in Japan.
- ----------
(1) Calculated without the imposition of front- or back-end sales charges.
(2) Lipper Analytical Services, Inc. performance rankings for Heritage Series
Trust - Eagle International Equity Portfolio Class A and C Shares were 178
and 203 out of 455 International Funds, for the 1 year period ended April
30, 1998. The performance numbers used for the Fund did not take into
account any front- or back-end sales charges. Past performance is no
guarantee of future results.
2
<PAGE>
ASIAN markets (7% of net assets) were devastated over the period. ASEAN
(the Association of Southeast Asian Nations) markets, such as South Korea,
Thailand and Indonesia were very weak. India, Taiwan and Australia stood out in
contrast. We substantially reduced our exposure to the region in mid-1997 and
reduced the portfolio's holdings in Hong Kong in October, ahead of the market
decline. Exposure to the ASEAN markets has been limited as the portfolio has
concentrated on Australia, New Zealand, India, Taiwan and Hong Kong. New
holdings included Woodside Petroleum (Australia) and Telecom Corp of New
Zealand. We took short-term profits in Telstra Corp (Australia), Mahanagar
Telephone Nigam (India) and Singapore Press. Apart from a rally over January and
February, we remain very defensive in our approach to the region. We have no
holdings in Indonesia.
The impact of Asia on the world markets has been felt particularly by the
SMALLER MARKETS category. We reduced our exposure to Latin American securities
substantially. This region now represents 3% of net assets, having been close to
10% at its peak. Brazil and Mexico make up the bulk of our exposure. We
established new positions in Israel, through purchases of ECI Telecom and Teva
Pharmaceutical. We also made successful purchases in Emerging Europe, through
Alpha Credit Bank (Greece) and Matav (Hungary).
OUTLOOK
Looking ahead, the impact of the Asian crises is likely to leave markets
volatile. However, slowing growth in the Pacific region may well help restrain
the US economy and reduce pressure for higher interest rates in the maturer
markets of the UK and Europe. Broader Europe, or `Euroland' as it has been
named, will continue to benefit from corporate restructuring and lower bond
yields. The increasing move to equity ownership by domestic investors is being
fueled by the search for higher returns and changing pensions legislation. The
UK market continues to benefit from good liquidity and robust earnings growth.
Continental Europe and the UK make up the majority of the Fund where valuations
remain attractive and earnings momentum is positive. We remain cautious on the
Pacific region. Defensive stock selection in Japan -- and asset allocation in
Asia -- is appropriate in an environment of falling growth forecasts, currency
volatility and financial and social instability. Smaller markets will remain out
of favor, as capital flows seek safety in maturer markets and stronger
currencies.
3
<PAGE>
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HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS--96.9%(a)
- -----------------------
ARGENTINA--0.3%
---------------
4,300 YPF Sociedad Anonima,
Sponsored ADR .................... $ 149,963
----------
AUSTRALIA--1.4%
---------------
9,900 Lend Lease Corporation ............. 227,296
41,000 Mayne Nickless, Ltd ................ 221,480
32,500 Woodside Petroleum ................. 212,617
----------
661,393
----------
AUSTRIA--0.7%
-------------
2,200 V.A. Technologie AG ................ 316,240
----------
BELGIUM--1.6%
-------------
1,300 Generale de Banque ................. 751,054
----------
BRAZIL--1.2%
------------
6,900 Centrais Electricas
Brasileiras, ADR ................. 142,313
10,000 Petroleo Brasileiro ................ 251,094
1,500 Telecomunicaceus
Brasileiras, ADR ................. 182,718
----------
576,125
----------
CHILE--0.2%
-----------
3,500 Compania de Telefonos
de Chile SA, ADR ................. 87,719
----------
DENMARK--0.6%
-------------
3,500 Unidanmark A/S ..................... 294,090
----------
FINLAND--1.6%
-------------
11,400 Nokia Corporation .................. 766,056
----------
FRANCE--12.4%
-------------
9,100 AXA-UAP Groupe ..................... 1,068,807
6,659 Compagnie Generale
des Eaux ......................... 1,238,523
6,400 Elf Aquitaine SA ................... 840,060
2,950 L'Air Liquide SA ................... 544,751
1,300 Promodes ........................... 626,535
17,000 Rhone-Poulenc SA ................... 831,758
3,600 Societe Generale ................... 749,825
----------
5,900,259
----------
GERMANY--12.8%
--------------
3,676 Allianz AG ......................... 1,130,519
540 Bayerische Motoren
Werke AG ......................... 595,804
9,900 Bayerische Vereinsbank AG .......... 753,030
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
GERMANY (CONTINUED)
-------------------
11,700 Deutsche Bank AG ................... $ 900,376
1,400 Mannesmann AG ...................... 1,110,919
1,700 Preussag AG ........................ 604,385
15,001 VEBA AG ............................ 991,401
----------
6,086,434
----------
GREECE--0.7%
------------
3,300 Alpha Credit Bank .................. 348,023
----------
HONG KONG--1.0%
---------------
31,100 Citic Pacific, Ltd ................. 95,556
31,000 CLP Holdings ....................... 148,877
25,500 Hutchison Whampoa, Ltd ............. 157,688
32,400 New World Development, Ltd ......... 92,231
----------
494,352
----------
INDIA--1.0%
-----------
8,032 Indian Opportunities Fund,
Ltd.(c) .......................... 85,461
13,500 Mahanagar Telephone Nigam
Ltd .............................. 217,688
12,000 Videsh Sanchar Nigam, Ltd .......... 148,560
----------
451,709
----------
ISRAEL--1.3%
------------
11,000 ECI Telecom, Ltd ................... 335,500
6,500 Teva Pharmaceutical ................ 277,875
----------
613,375
----------
ITALY--7.0%
-----------
80,472 ENI ................................ 540,387
8,000 Gucci NV ........................... 372,500
54,000 IMI SPA ............................ 884,071
290,000 INA (1st Naz Association) .......... 866,881
120,000 Telecom Italia Mobil ............... 684,224
----------
3,348,063
----------
JAPAN--14.1%
------------
38,000 Asahi Chemical Industries
Company, Ltd ..................... 133,233
18,000 Cannon, Incorporated ............... 425,722
8,000 Fuji Photo Film Company,
Ltd .............................. 284,721
39,000 Hitachi, Ltd ....................... 279,666
14,000 Honda Motor Corporation ............ 507,783
9,000 Ito-Yokado Company, Ltd. ........... 465,846
19,000 Kao Corporation .................... 279,243
3,000 Mabuchi Motor Company, Ltd ......... 173,644
The accompanying notes are an integral part of the financial statements.
4
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HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
JAPAN (CONTINUED)
-----------------
15,000 Marui Company, Ltd ................. $ 236,890
15,000 Mitsui Fudosan Company, Ltd ........ 136,920
3,000 Promise Company Ltd ................ 152,335
2,000 Riso Kagaku Corporation ............ 104,428
5,000 Rohm Company, Ltd .................. 564,455
33,000,000 Sanwa International
Finance .......................... 240,942
5,000 Secom Company, Ltd ................. 294,695
7,000 Shimachu Company, Ltd .............. 126,152
17,000 Shin-Etsu Chemical
Company, Ltd ..................... 331,419
7,800 Sony Corporation ................... 648,919
5,000 Sumitomo Electric
Industries, Ltd .................. 59,583
15,000 Taisho Pharmaceutical
Company .......................... 317,364
34,000 Toppan Printing Company,
Ltd. ............................. 404,126
8,000 Toyota Motor Corporation ........... 208,554
15,000 Yamanouchi Pharmaceuticals ......... 354,768
----------
6,731,408
----------
MEXICO--1.4%
------------
75,000 Cifra SA DE CV ..................... 127,535
22,000 Grupo Carso SA, Series A1 .......... 138,538
65,000 Grupo Financiero Banamex ........... 203,125
3,400 Telefonos De Mexico ................ 192,525
----------
661,723
----------
NETHERLANDS--1.3%
-----------------
42,000 Elsevier N.V. ...................... 634,127
----------
NEW ZEALAND--0.4%
-----------------
53,000 Telecom Corporation of
New Zealand, Ltd ................. 204,196
----------
PHILIPPINES--0.1%
-----------------
504,600 Belle Corporation .................. 9,008
----------
SINGAPORE--0.3%
---------------
24,700 Development Bank of
Singapore ........................ 163,886
----------
SPAIN--3.5%
-----------
19,035 Banco de Santander SA .............. 1,006,118
19,000 Banco Central Hispanoamer SA........ 632,502
----------
1,638,620
----------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
SWEDEN--3.7%
------------
34,500 Astra AB ........................... $ 708,538
6,300 Incentive AB ....................... 610,307
61,800 Nordbanken Holding AB .............. 454,999
----------
1,773,844
-----------
SWITZERLAND--5.3%
-----------------
6,120 Credit Suisse Group ................ 1,345,951
717 Novartis AG ........................ 1,185,045
----------
2,530,996
----------
TAIWAN--0.8%
------------
22,000 Taiwan American Fund ............... 377,300
----------
THAILAND--0.2%
--------------
41,000 Thai Farmers Bank .................. 93,881
----------
UK--22.0%
---------
56,000 Cable & Wireless, PLC .............. 641,647
57,000 General Electric
Company, PLC ..................... 471,952
20,000 GKN, PLC ........................... 578,085
24,500 Glaxo Wellcome, PLC ................ 692,581
102,000 Ladbroke Group, PLC ................ 560,898
18,000 Land Securities, PLC ............... 321,560
84,000 LASMO, PLC ......................... 369,182
45,000 Lloyds TSB Group, PLC .............. 674,056
56,000 Marks & Spencer, PLC ............... 532,521
24,000 McKechnie, PLC ..................... 199,921
30,000 National Westminster Bank,
PLC .............................. 600,666
111,000 NFC, PLC ........................... 333,277
32,950 Reckitt & Colman, PLC .............. 664,141
43,100 Royal Bank of Scotland
Group, PLC ....................... 665,422
58,558 Safeway, PLC. ...................... 349,191
69,000 Scottish Power, PLC ................ 634,501
87,000 Shell Transport & Trading
Company, PLC ..................... 647,586
31,731 Smiths Industries, PLC ............. 456,723
64,000 Unilever, PLC ...................... 681,926
39,357 Wassall, PLC ....................... 205,397
5,000 Zeneca Group ....................... 215,443
----------
10,496,676
----------
Total Common Stocks
(cost $37,768,213)................................... 46,160,520
----------
The accompanying notes are an integral part of the financial statements.
5
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HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
BONDS--1.2%(a)
--------------
JAPAN--1.2%
-----------
$ 380,000 MBL International Finance
(Bermuda)
3.0%, due 11/30/02(d) .............. $ 382,850
23,000,000 Nitto Denko Corporation
2.2%, due 03/31/99(d)(e) ........... 187,872
----------
Total Bonds (cost $645,503)............................ 570,722
----------
TOTAL INVESTMENT PORTFOLIO
(cost $38,413,716)(b) 98.1%(a)....................... 46,731,242
OTHER ASSETS AND LIABILITIES, net, 1.9%(a) ............ 896,664
----------
NET ASSETS, 100.0% .................................... $47,627,906
==========
- ----------
(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 $8,317,526 which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $9,661,419 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value of
$1,343,893.
(c) Martin Currie Investment Management Limited is the manager of the Indian
Opportunities Fund, Ltd.
(d) Convertible bond.
(e) Principal amount is stated in Japanese Yen.
ADR--American Depository Receipt.
MARKET % OF NET
VALUE ASSETS
---------- --------
INDUSTRY DIVERSIFICATION
- ------------------------
Common Stocks
Banking .......................... $ 6,589,014 13.8%
Basic Industries ................. 3,128,915 6.6%
Capital Goods .................... 5,133,856 10.8%
Consumer Goods and Services ...... 6,374,725 13.4%
Diversified Industrials .......... 458,641 1.0%
Electronic and Electrical
Equipment ...................... 471,952 1.0%
Energy ........................... 2,164,910 4.5%
Engineering ...................... 1,234,729 2.6%
Finance .......................... 7,691,913 16.2%
Foods ............................ 681,926 1.4%
Household Goods .................. 664,141 1.4%
Insurance ........................ 1,068,807 2.2%
Leisure and Hotels ............... 560,898 1.2%
Oil, Exploration and Production... 369,182 0.8%
Oil, Integrated .................. 1,111,297 2.3%
Pharmaceuticals .................. 1,858,032 3.9%
Real Estate ...................... 778,007 1.6%
Retail Trade ..................... 881,712 1.8%
Telecommunications ............... 1,440,110 3.0%
Transportation and Storage ....... 554,756 1.2%
Utilities ........................ 2,942,997 6.2%
Bonds
Capital Goods .................... 187,872 0.4%
Finance .......................... 382,850 0.8%
----------- ----
Total Investments ................ $46,731,242 98.1%
=========== ====
- --------------------------------------------------------------------------------
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
GROSS UNREALIZED
CONTRACT IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (DEPRECIATION)
- -------------------- ------------------ -------- ----------------
ARS 1,397 USD 1,396 05/04/98 $ (1)
BEL 533,000 USD 14,328 05/04/98 (78)
ESP 66,623 USD 438 05/04/98 1
FIM 38,542 USD 7,041 05/04/98 (35)
GRD 3,750,000 USD 11,833 05/04/98 (95)
JPY 531,654,600 USD 3,995,000 07/08/98 (61,700)
----------
Net Unrealized Depreciation $ (61,908)
==========
- ----------
ARS - Argentine Peso
BEL - Belgian Franc
ESP - Spanish Peseta
FIM - Finnish Markka
GRD - Greek Drachma
JPY - Japanese Yen
USD - United States Dollar
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
May 14, 1998
Dear Fellow Shareholders:
As economic turmoil spread throughout the Far East, U.S. investors have
begun to expect a reduction in our GNP growth, continued interest rate declines,
and a global flight to quality. All of these factors have led investors back to
U.S. quality growth stocks. Particularly good performers for the last six months
include our pharmaceutical positions in Pfizer, Inc. and Warner Lambert Company,
consumer stocks such as Gillette Company and The Coca-Cola Company, interest
rate sensitive companies like Travelers Group, Inc. and Fannie Mae, and
technology stocks like PeopleSoft, Inc., Microsoft Corporation, Lucent
Technologies, Inc., Dell Computer Corporation, and HBO & Company. Overall, for
the last six months the Heritage Series Trust - Growth Equity Fund (the "Fund")
Class A Shares returned 21.2%(1). The Class A Shares also ranked in the top
quartile of all growth funds for the one year period ended April 30, 1998 as
measured by Lipper Analytical Services, Inc(2).
The market's outstanding return for the last six months appears to be
driven by declining equity risk premiums and continued money flow into the
market coupled with declining supply of stock. We have continued to invest new
cash flows to keep the Fund fully invested. Total investment positions were
maintained at 35 stocks with approximately 5% cash. Our top five holdings
include Warner-Lambert Company, Omnicom Group, Inc., Travelers Group, Inc.,
Pfizer, Inc. and Schering-Plough Corporation. Current key sectors in the Fund
include technology, financial services, and healthcare.
Consistent with our focused, low turnover investment discipline, we have
made ten transactions during the last six months. Each transaction was a paired
trade where we sold one position and added a new position. We believe that each
of these investments will enhance the future return of the portfolio and
exemplify our theme for 1998 which is to own companies we believe have reliable
earnings that will continue to consistently grow regardless of the economic
environment.
Sales during the period include Nokia, Ericsson, Schlumberger, Security
Capital, Marriott International, Eli Lilly, Charles Schwab, Thermo Electron, and
Intel. New purchases with the proceeds from the sales include Lucent, Bristol
Myers, AES, Paychex, Clorox, Associates First Capital, Schering Plough,
Wal-Mart, Chase Manhattan, and Disney. Also, Diamond Offshore, Robert Half, and
Cendant were bought and sold during this period.
The second quarter of the calendar year will be very important for our high
quality growth stocks as well as for the market. First quarter earnings were
strong, but we believe the true impact of the Asian turmoil will be revealed in
the second quarter. This economic backdrop leads to our current investment theme
for 1998 -- own companies with predictable earnings. The current market
environment rewards companies that deliver consistent earnings growth and
severely punishes companies that disappoint the market. We want to own companies
like Warner-Lambert Company and PeopleSoft, Inc. that we believe will deliver
strong earnings growth of 30% and 60%, respectively, regardless of the economic
environment. We estimate that our portfolio in aggregate will deliver 20%
year-over-year earnings growth in comparison to the market that is expected to
grow only 6% for the current year. We believe this strategy coupled with stable
to declining interest rates will continue to produce excellent relative
performance for our shareholders.
Sincerely,
/s/ KENENTH W. CORBA
--------------------
Kenneth W. Corba
Executive Vice President
Chief Investment Officer
Portfolio Manager, Growth Equity Fund
Eagle Asset Management, Inc.
- ----------
(1) Calculated without the imposition of front- or back-end sales charges.
(2) Lipper Analytical Services, Inc. performance rankings for Heritage Series
Trust - Growth Equity Fund Class A Shares were 155 out of 860 Growth
Funds, for the 1 year period ended April 30, 1998. The performance numbers
used for the Fund did not take into account any front- or back-end sales
charges. Past performance is no guarantee of future results.
7
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HERITAGE SERIES TRUST - GROWTH EQUITY FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS--95.5%(a)
- -----------------------
ADVERTISING/COMMUNICATIONS--4.1%
- -----------------------------------
55,000 Omnicom Group, Inc. ................ $ 2,605,625
-----------
BANKING--6.9%
-------------
17,500 BankAmerica
Corporation. ..................... 1,487,500
10,000 Chase Manhattan
Corporation ...................... 1,385,625
20,000 NationsBank Corporation ............ 1,515,000
-----------
4,388,125
-----------
BEVERAGES--1.4%
---------------
12,000 The Coca-Cola Company .............. 910,500
-----------
BUILDING--2.2%
--------------
20,000 Illinois Tool Works, Inc. .......... 1,410,000
-----------
COSMETICS/TOILETRIES--2.3%
--------------------------
12,500 Gillette Company ................... 1,442,968
-----------
DATA PROCESSING--14.6%
----------------------
25,000 Cisco System, Inc.* ................ 1,831,250
25,000 Dell Computer
Corporation* ..................... 2,018,750
35,000 HBO & Company ...................... 2,093,437
16,000 Microsoft Corporation*. ............ 1,442,000
40,000 PeopleSoft, Inc.* .................. 1,860,000
-----------
9,245,437
-----------
ELECTRONICS/ELECTRIC--2.7%
--------------------------
20,000 General Electric
Company. ......................... 1,702,500
-----------
FINANCE--12.7%
--------------
15,000 American Express
Company .......................... 1,530,000
20,000 Associates First Capital
Corporation ...................... 1,495,000
30,000 Fannie Mae ......................... 1,796,250
40,000 Freddie Mac ........................ 1,852,500
25,000 Paychex, Inc. ...................... 1,357,813
-----------
8,031,563
-----------
HOUSEHOLD PRODUCTS--2.0%
------------------------
15,000 The Clorox Company ................. 1,258,125
-----------
INSURANCE--9.3%
---------------
15,000 Allstate Corporation ............... 1,443,750
15,000 American International
Group, Inc. ...................... 1,973,437
40,000 Travelers Group, Inc. .............. 2,447,500
-----------
5,864,687
-----------
LEISURE/AMUSEMENT--2.0%
-----------------------
10,000 The Walt Disney
Company .......................... 1,243,125
-----------
<PAGE>
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
MEDICAL EQUIPMENT/SUPPLY--2.7%
------------------------------
25,000 Guidant Corporation ................ $ 1,671,875
-----------
PHARMACEUTICAL--15.3%
---------------------
15,000 Bristol-Myers Squibb Company........ 1,588,125
25,000 Pfizer, Inc. ....................... 2,845,312
30,000 Schering-Plough Corporation ........ 2,403,750
15,000 Warner-Lambert Company ............. 2,837,813
-----------
9,675,000
-----------
RETAIL STORES-10.1%
-------------------
30,000 Home Depot, Inc. ................... 2,088,750
40,000 Kohl's Corporation* ................ 1,652,500
25,000 Wal-Mart Stores, Inc. .............. 1,264,063
40,000 Walgreen Company ................... 1,380,000
-----------
6,385,313
-----------
TELECOMMUNICATIONS-5.0%
-----------------------
25,000 Lucent Technologies, Inc. .......... 1,903,125
18,000 Tellabs, Inc.* ..................... 1,275,750
-----------
3,178,875
-----------
UTILITIES-DIVERSIFIED - 2.2%
----------------------------
25,000 AES Corporation* ................... 1,379,688
-----------
Total Common Stocks (cost $40,329,591) 60,393,406
REPURCHASE AGREEMENT -- 3.9%(a)
- -------------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated April 30,
1998 @ 5.47% to be repurchased at $2,494,379
on May 1, 1998, collateralized by $2,225,000
United States Treasury Notes, 7.125% due
February 15, 2023, (market value $2,564,478
including interest) (cost $2,494,000) ................. 2,494,000
-----------
TOTAL INVESTMENT PORTFOLIO
(cost $42,823,591) (b), 99.4%(a)..................... 62,887,406
OTHER ASSETS AND LIABILITIES, net, 0.6%(a) ............ 360,781
-----------
NET ASSETS, 100.0% .................................... $63,248,187
===========
- ----------
* Not an income-producing security.
(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 $20,063,815, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $20,182,430 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value of
$118,615.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
May 19, 1998
Dear Fellow Shareholders:
It is both a privilege and a pleasure to be presenting the first
semi-annual report for the most recent addition to the Heritage product family,
the Heritage Series Trust - Mid Cap Growth Fund ("the Fund"). We are pleased to
report that since the Fund's inception (November 6, 1997), the Fund has returned
16.24%(1) for the Class A Shares. Through the first three months of 1998, the
Class A Shares have returned 15.11%(1) compared to a 13.04% return for the S&P
400 Mid Cap Index. This performance ranks the Fund in the top quartile for all
mid cap growth mutual funds according to Lipper Analytical Services(2). While
this period is too short for any meaningful long term comparisons, we are
pleased the Fund has had such a strong start.
We are excited about the opportunities for the Fund as we are generally
bullish on the outlook for both mid cap stocks as an asset class and bullish on
the mid cap stocks that are owned by the Fund. As an asset class, we believe mid
sized companies (which we define as between $500 million and $5 billion in
market capitalization), are in the enviable position of exhibiting the high
growth characteristics of small cap companies but with a lower amount of
volatility that usually accompanies smaller stocks. In general, we are finding
stocks with twice the earnings growth rate of the larger companies found in the
S&P 500 but at a price to projected earnings at a slight discount to the overall
market.
We are flexible in our approach of finding attractive investments, but in
general we pay close attention to a company's ability to generate a high level
of cash and earn a high return on equity. This is usually a result of some or
all of the following characteristics: companies with a relative cost advantage,
companies operating in an industry with high barriers-to-entry, and companies
that have a technological advantage or make better use of technology. We are
flexible in our timing, choosing to only buy stocks when we feel the growth
characteristics more than offset the risk inherent in every investment
opportunity.
Strong performers in the most recent period include the following: Lincare
Holdings, Inc., a healthcare services company with a significant cost advantage
over its competition; Enhance Financial Services Group, Inc., which operates in
the financial guaranty business with few competitors; and Ingram Micro, Inc., a
company that utilizies technology that enables it to be a more efficient
distributor of computer products.
We are not infallible. Some of the weaker performers during the period
include DII Group, Inc., a technology stock suffering from weak Asian markets
and Robert Mondavi Corporation, managing through a grape shortage. In both cases
we have rechecked our investment thesis and believe that short term news has not
affected the underlying fundamentals of these companies. We continue to be
holders in keeping with our philosophy of keeping turnover low while managing
the Fund as long term investors.
We thank you for your support and look forward to providing you with
regular updates on your Fund.
Sincerely,
/s/ TODD L. MCALLISTER
----------------------
Todd L. McAllister
Senior Vice President
Eagle Asset Management
Portfolio Manager, Mid Cap Growth Fund
- ----------
(1) Calculated without the imposition of front- or back-end sales charges.
(2) Lipper Analytical Services, Inc. performance rankings for Heritage Series
Trust - Mid Cap Growth Fund Class A Shares were 73 out of 307 Mid-Cap
Funds, for the quarter ended March 31, 1998. The performance numbers used
for the Fund did not take into account any front- or back-end sales
charges. Past performance is no guarantee of future results.
9
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - MID CAP GROWTH FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS--97.5%(a)
- -----------------------
ADVERTISING/COMMUNICATIONS--4.7%
--------------------------------
18,000 Catalina Marketing Corporation*. $ 936,000
20,000 NFO Worldwide, Inc.* ............... 418,750
-----------
1,354,750
-----------
AUTO RENTAL/SERVICE--1.7%
-------------------------
25,000 Aftermarket Technology
Corporation* ..................... 497,250
-----------
BANKING--2.7%
-------------
7,500 Golden West Financial
Corporation ...................... 789,844
-----------
BEVERAGES--2.7%
---------------
20,000 Robert Mondavi Corporation* ........ 790,000
-----------
BUILDING--1.4%
--------------
17,600 Comfort Systems USA, Inc.* ......... 411,400
-----------
CHEMICALS--2.1%
---------------
11,000 Minerals Technologies, Inc. ........ 598,812
-----------
CONTAINERS--2.1%
----------------
9,900 Sealed Air Corporation* ............ 620,606
-----------
DATA PROCESSING--13.5%
----------------------
30,000 Acxion Corporation* ................ 727,500
25,000 CCC Information Services
Group, Inc.* ..................... 600,000
3,000 DocuCorp International, Inc.* ...... 29,250
19,000 Ingram Micro Inc., Class "A"* ...... 866,875
15,000 Safeguard Scientifics, Inc.* ....... 633,750
13,500 Symbol Technologies, Inc. .......... 519,750
11,000 Tech Data Corporation* ............. 548,625
-----------
3,925,750
-----------
ELECTRONICS/ELECTRIC--6.1%
--------------------------
40,000 Berg Electronics Corporation* ...... 952,500
37,000 Computer Products, Inc.* ........... 814,000
-----------
1,766,500
-----------
FINANCE--8.9%
-------------
13,000 CMAC Investment Corporation......... 839,312
14,000 Enhance Financial Services
Group, Inc. ...................... 960,750
17,000 Ocwen Financial Corporation* ....... 439,875
6,000 The FINOVA Group, Inc. ............. 351,375
-----------
2,591,312
-----------
FOOD--3.1%
----------
45,000 Ralcorp Holdings, Inc.* ............ 894,375
-----------
HEALTH CARE CENTERS--6.7%
-------------------------
30,000 Beverly Enterprises, Inc.* ......... 472,500
10,000 Lincare Holdings, Inc.* ............ 811,250
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
HEALTH CARE CENTERS (CONTINUED)
-------------------------------
20,400 Quorum Health Group, Inc.* ......... $ 655,350
-----------
1,939,100
-----------
INSURANCE--9.6%
---------------
12,000 Executive Risk, Inc. ............... 800,250
7,000 Progressive Corporation ............ 948,063
12,200 Protective Life Corporation ........ 452,925
15,000 Provident Companies, Inc. .......... 585,937
-----------
2,787,175
-----------
LEISURE/AMUSEMENT--3.4%
-----------------------
36,000 International Game Technology....... 1,001,250
-----------
MANUFACTURING/DISTRIBUTIONS--4.0%
---------------------------------
13,000 Kaydon Corporation ................. 569,563
25,000 The DII Group, Inc.* ............... 581,250
-----------
1,150,813
-----------
MEDICAL EQUIPMENT/SUPPLY--3.5%
------------------------------
15,000 Henry Schein, Inc.* ................ 585,000
12,000 St. Jude Medical, Inc.* ............ 425,250
-----------
1,010,250
-----------
OIL & GAS--3.5%
---------------
32,000 Horizon Offshore, Inc.* ............ 466,000
15,500 Tosco Corporation .................. 552,188
-----------
1,018,188
-----------
PHARMACEUTICAL--1.3%
--------------------
26,500 PharMerica, Inc.* .................. 367,688
-----------
PUBLISHING--3.2%
----------------
24,000 Hollinger International, Inc. ...... 372,000
17,700 World Color Press, Inc.* ........... 566,400
-----------
938,400
-----------
RETAIL STORES--2.7%
-------------------
19,500 Proffitt's, Inc.* .................. 775,125
-----------
SERVICES--7.0%
--------------
33,500 Boise Cascade Office Products
Corporation* ..................... 642,781
17,500 Iron Mountain, Inc.* ............... 735,000
24,000 Unifirst Corporation ............... 648,000
-----------
2,025,781
-----------
TELECOMMUNICATIONS--3.6%
------------------------
16,000 Black Box Corporation* ............. 532,000
26,100 Western Wireless Corporation,
Class "A"* ....................... 508,950
-----------
1,040,950
-----------
Total Common Stocks
(cost $25,486,164).................................. 28,295,319
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - MID CAP GROWTH FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
VALUE
------
REPURCHASE AGREEMENT--0.9%(a)
- -----------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated April 30,
1998 @ 5.47% to be repurchased at $254,039
on May 1, 1998, collaterized by $230,000
United States Treasury Notes, 7.125% due
February 15, 2023, (market value $265,092
including interest) (cost $254,000).................... $ 254,000
-----------
TOTAL INVESTMENT PORTFOLIO
(cost $25,740,164)(b), 98.4%(a)...................... 28,549,319
OTHER ASSETS AND LIABILITIES, net, 1.6%(a) ............ 464,304
-----------
NET ASSETS, 100.0% .................................... $29,013,623
===========
- ----------
* Not an income-producing security.
(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 $2,809,155, which
consists of aggregate gross unrealized appreciation for
all securities in which there is an excess of market value
over tax cost of $3,213,283 and aggregate gross
unrealized depreciation for all securities in which there
is an excess of tax cost over market value of $404,128.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
May 19, 1998
Dear Fellow Shareholders:
We are pleased to report that the Heritage Series Trust - Small Cap Stock
Fund (the "Fund") has continued to produce positive results for our investors.
The Fund provided a total return of 9.09% for Class A Shares for the six month
period ended April 30, 1998(1). Turning our attention to the specifics:
On the positive side, strong performance was turned in by Comdisco, Inc.,
National Data Corporation, Doral Financial Corporation, ATS Medical, Inc. and
Sano Corporation. Sano Corporation was acquired by Elan Corporation of Ireland
early this year.
During the semiannual period we had several companies suffer price
declines. TransAct Technologies, Inc. and Miller Industries, Inc. were down due
to weaker earnings projections for 1998. Houghton Mifflin Company and Eltron
International, Inc. were down below expected earnings for the fourth quarter of
1997. Sun Healthcare Group, Inc. was off after being downgraded by Merrill
Lynch. Waverly, Inc. was off slightly due to its announcement of its acquisition
by Wolters Kluwer at a lower than expected price per share. Philip Services
Corporation has also turned in poor performance as the result of management and
accounting issues.
In recent weeks we have had good news from John Fluke Manufacturing, which
was acquired by Danaher, Inc. at a 40%+ premium to the then current market
price; Aviron, which announced positive results for its flu vaccine and
EntreMed, Inc. which was up substantially on news reports of its cancer drug. We
took the opportunity to sell EntreMed, Inc. at a significant premium to our
cost.
The events unfolding in Asia during the fourth quarter favored large cap
stocks as investors sought out perceived quality in the face of uncertainty.
During the first quarter, Asia affected large cap earnings more significantly
than small caps, but large caps continued to be buoyed by strength in Europe and
in the U.S. We continue to find fundamentally sound, well-run companies trading
at a discount to their intrinsic value in the small cap arena. As events in Asia
settle down and investors begin to return to fundamental analysis, they will see
the best fundamentals are in small cap stocks. Through your investment with
Heritage and Awad & Associates you stand to benefit when the focus returns to
small caps.
We believe that the companies in which the Fund invests will continue to
benefit from the strong domestic economy. We are in a period of low inflation
with moderate growth and a budget surplus while consumer confidence remains high
though not over-stimulated. Further, U.S. companies, particularly small caps,
are efficient and well-positioned to take advantage of these strengths through
1998. We will continue to invest in well-run companies populated with
outstanding management whose stock we believe is trading at a discount to its
intrinsic value. These companies will likely be market or niche leaders, have
healthy balance sheets, positive and growing cash flows, and significant
management ownership. They will be companies like Comdisco, Inc., National Data
Corporation and J.M. Smucker & Company whose stocks we look forward to owning
for several years.
We are off to a reasonable start in 1998 and we are optimistic about the
future. We will continue to work hard for you and appreciate your confidence in
us.
Sincerely,
/s/ JAMES D. AWAD
-----------------
James D. Awad
Chairman
Awad & Associates
Portfolio Manager, Small Cap
Stock Fund
- ----------
(1) Calculated without the imposition of front- or back-end sales charges.
12
<PAGE>
May 19, 1998
Dear Fellow Shareholders:
The six months ended April 30, 1998, was a period of solid returns for
small cap stocks as the Russell 2000 Index advanced 11.9%. However, gains made
by small stocks paled in comparison to the 22.6% gain of the S&P 500 Index over
the comparable period.
Largest gainers during the period included Cash America International,
Inc., INSpire Insurance Solutions, Inc., RCM Technologies, OYO Geospace Corp.,
and Genesco, Inc. A favorable rate environment also helped Lennar Corp., Ethan
Allen Interiors, Inc. (subsequently sold), and Furniture Brands International,
Inc., to big gains.
On the downside, underperforming stocks included Symmetricom, Inc., Allen
Telecom, Inc., Coherent, Inc. and Artesyn Technologies, Inc. (formerly Computer
Products), as all were impacted to some degree by weakness in the Asian markets.
Precision Drilling Corporation also declined due to lower energy prices.
At April 30, 1998, top industry concentrations in Eagle's portion of the
Fund were: Services, Securities, Manufacturing/Distributions, Data Processing,
Retail, Electronic/Electrical and Oil and Gas. The remainder was invested in
miscellaneous positions and cash.
During the period, the Fund acquired larger new positions including
Mail-Well, Inc., a consolidation play in the printing industry; Cerner
Corporation, a medical software/information management company; Avid Technology,
Inc., a video and film editing company; OYO Geospace Corporation, a provider of
data acquisition equipment to the oil services industry, Allen Telecom, Inc.,
telecommunications equipment; and Core Laboratories, energy services.
Stocks sold during the period included Gulf Island Fabrications, and Ethan
Allen Interiors, Inc., reflecting what we believe to be excessive valuations.
NABI, Inc., Sodak Gaming Inc., and Triquent Semiconductor, Inc. were sold due to
disappointing results as well as what we viewed as uncertain outlooks.
As of this writing recent concerns over the direction of interest rates
have had a dampening effect on the market. Looking forward we will be focusing
on reducing the cyclical exposure in the portfolio, while opportunistically
increasing our technology holdings.
I continue to believe that small cap stocks are attractively priced
relative to large cap equity investments and ultimately small caps will enjoy a
period of market leadership.
As always I thank you for your support and confidence.
Sincerely,
/s/ BERT BOKSEN
---------------
Bert Boksen
Senior Vice President
Eagle Asset Management, Inc.
Portfolio Manager, Small Cap
Stock Fund
13
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCK--94.0%(a)
- ----------------------
ADVERTISING/COMMUNICATIONS--0.7%
--------------------------------
50,000 Catalina Marketing
Corporation* ..................... $ 2,600,000
-----------
AEROSPACE--0.5%
---------------
70,000 Kellstrom Industries, Inc.* ........ 1,811,250
-----------
AUTO PARTS/EQUIPMENT--0.5%
--------------------------
21,000 Hayes Lemmerz International,
Inc.* ............................ 807,189
145,000 Miller Industries, Inc.* ........... 1,141,875
-----------
1,949,064
-----------
AUTO RENTAL/SERVICE--0.1%
-------------------------
58,000 Earl Scheib, Inc.* ................. 536,500
-----------
BANKING--3.6%
-------------
100,000 BankUnited Financial
Corporation, Class "A"* .......... 1,625,000
125,000 Commercial Federal
Corporation ...................... 4,531,250
88,000 Doral Financial Corporation ........ 3,091,000
5,200 Independent Bankshares, Inc. ....... 94,900
100,000 ITLA Capital Corporation* .......... 2,287,500
50,000 Pacific Crest Capital, Inc.* ....... 1,012,500
35,000 Staten Island Bancorp, Inc. ........ 796,250
25,000 Wayne Bancorp, Inc. ................ 775,000
-----------
14,213,400
-----------
BROADCASTING--1.0%
------------------
90,000 Avid Technology, Inc.* ............. 3,903,750
-----------
BUILDING--1.6%
--------------
120,000 Hospitality Worldwide Services,
Inc.* ............................ 1,162,500
180,000 Lennar Corporation ................. 4,938,750
-----------
6,101,250
-----------
CHEMICALS--0.6%
---------------
73,600 Lawter International, Inc. ......... 772,800
80,000 Mississippi Chemical
Corporation ....................... 1,450,000
-----------
2,222,800
-----------
CONGLOMERATES/DIVERSIFIED--0.2%
-------------------------------
15,900 Harsco Corporation ................. 731,400
-----------
CONTAINERS--0.8%
----------------
100,000 ZERO Corporation ................... 3,081,250
-----------
COSMETICS/TOILETRIES--0.2%
--------------------------
100,000 Enamelon, Inc.* .................... 987,500
-----------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
DATA PROCESSING--8.7%
---------------------
70,000 3D Systems Corporation* ............ $ 761,250
50,000 CACI International, Inc.,
Class "A"* ....................... 1,096,875
120,000 Cerner Corporation* ................ 3,577,500
100,750 Comdisco, Inc. ..................... 4,458,188
82,000 Computer Management
Sciences, Inc.* .................. 2,111,500
205,000 Dynamic Healthcare
Technologies, Inc.* .............. 486,875
100,000 Health Management
Systems, Inc.* ................... 1,062,500
245,300 LanVision Systems, Inc.* ........... 1,103,850
90,000 National Data Corporation .......... 3,673,125
93,000 New Horizons Worldwide, Inc.*....... 1,674,000
154,875 Printronix, Inc.* .................. 2,478,000
60,000 ScanSource, Inc.* .................. 1,215,000
20,000 Shared Medical Systems
Corporation ...................... 1,458,750
180,000 Sykes Enterprises, Inc.* ........... 3,768,750
105,000 The Pathways Group, Inc.* .......... 2,415,000
97,500 TransAct Technologies, Inc.* ....... 914,062
75,000 Transition Systems, Inc.* .......... 1,687,500
-----------
33,942,725
-----------
EDUCATION--1.9%
---------------
100,000 Computer Learning
Centers, Inc.* ................... 1,200,000
165,000 Strayer Education, Inc. ............ 6,063,750
-----------
7,263,750
-----------
ELECTRONICS/ELECTRIC--6.1%
--------------------------
54,450 AMETEK, Inc. ....................... 1,657,322
223,000 Computer Products, Inc.* ........... 4,906,000
210,000 EA Industries, Inc.* ............... 853,125
135,000 Eltron International, Inc.* ........ 3,493,125
60,000 FARO Technologies, Inc.* ........... 660,000
100,000 Fluke Corporation .................. 3,175,000
25,000 OPTEK Technology, Inc.* ............ 568,750
100,000 OYO Geospace Corporation* .......... 2,587,500
75,000 Pioneer-Standard
Electronics, Inc. ................ 942,187
45,000 Polaroid Corporation ............... 1,980,000
100,000 ThermoQuest Corporation* ........... 1,787,500
65,000 Trident International, Inc.* ....... 1,121,250
-----------
23,731,759
-----------
FILMED ENTERTAINMENT--0.5%
--------------------------
110,000 Ascent Entertainment
Group, Inc.* ..................... 1,292,500
18,000 Cinar Films, Inc.* ................. 346,500
15,000 Todd-AO Corporation ................ 172,500
-----------
1,811,500
-----------
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
FINANCE--1.1%
-------------
250,000 Cash America International, Inc..... $ 4,250,000
-----------
FOOD--1.8%
----------
75,000 Corn Products, International,
Inc.* ............................ 2,671,875
104,000 J.M. Smucker Company,
Class "B"* ....................... 2,509,000
60,000 Smithfield Foods, Inc.* ............ 1,822,500
-----------
7,003,375
-----------
HEALTH CARE CENTERS--2.2%
-------------------------
75,000 Alternative Living Services,
Inc.* ............................ 2,625,000
50,000 American Retirement
Corporation* ..................... 1,081,250
52,000 ARV Assisted Living, Inc.* ......... 741,000
55,000 Assisted Living Concepts, Inc.*..... 1,010,625
113,400 Horizon Health Corporation* ........ 2,693,250
35,000 Sun Healthcare Group, Inc.* ........ 586,250
-----------
8,737,375
-----------
HOME FURNISHINGS--1.7%
----------------------
66,600 Falcon Products, Inc. .............. 882,450
195,000 Furniture Brands International,
Inc.* ............................ 5,728,125
-----------
6,610,575
-----------
HOTELS/MOTELS/INNS--2.5%
------------------------
110,000 CapStar Hotel Corporation* ......... 3,533,750
320,000 Servico, Inc.* ..................... 6,240,000
-----------
9,773,750
-----------
INSURANCE--2.1%
---------------
50,000 Annuity And Life Re
(Holdings), Ltd.* ................ 1,193,750
50,000 Danielson Holding Corporation*...... 387,500
142,600 Gryphon Holdings, Inc.* ............ 2,540,063
125,000 INSpire Insurance
Solutions, Inc.* ................. 4,203,125
-----------
8,324,438
-----------
LEATHER/SHOES--2.6%
-------------------
100,000 Footstar, Inc.* .................... 3,981,250
300,000 Genesco, Inc.* ..................... 5,081,250
115,000 Shoe Carnival, Inc.* ............... 1,308,125
-----------
10,370,625
-----------
LEISURE/AMUSEMENT--2.6%
-----------------------
70,000 Gaylord Entertainment
Company .......................... 2,380,000
80,000 International Speedway
Corporation, Class "A" ........... 2,870,000
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
LEISURE/AMUSEMENT (CONTINUED)
-----------------------------
58,000 K2, Inc. ........................... $ 1,315,875
110,000 Rio Hotel & Casino, Inc.* .......... 2,488,750
30,000 Steiner Leisure, Ltd.* ............. 946,875
-----------
10,001,500
-----------
MACHINERY--2.1%
---------------
66,000 Blount International, Inc.,
Class "A"* ....................... 2,050,125
50,000 Gradall Industries, Inc.* .......... 862,500
206,500 ITEQ, Inc.* ........................ 2,632,875
160,000 Middleby Corporation ............... 1,280,000
86,900 Tokheim Corporation* ............... 1,379,538
-----------
8,205,038
-----------
MANUFACTURING/DISTRIBUTIONS--6.5%
---------------------------------
184,800 Armor Holdings, Inc.* .............. 2,032,800
125,000 Gentex Corporation* ................ 4,218,750
63,000 Gibson Greetings, Inc.* ............ 1,647,844
65,000 Harman International
Industries, Inc. ................. 2,795,000
130,000 Hughes Supply, Inc. ................ 5,037,500
136,000 JLG Industries, Inc. ............... 2,218,500
100,000 Lumen Technologies, Inc.* .......... 943,750
50,000 Mail-Well, Inc.* ................... 2,418,750
98,900 Metrika Systems Corporation* ....... 1,724,569
110,000 Thermo Optek Corporation* .......... 1,980,000
35,880 Thermo Vision Corporation* ......... 260,130
-----------
25,277,593
-----------
MEDICAL EQUIPMENT/SUPPLY--4.6%
------------------------------
585,000 Angeion Corporation* ............... 1,608,750
123,456 Angiosonics, Inc.* ................. 370,368
247,500 ATS Medical, Inc.* ................. 1,794,375
100,000 Aviron* ............................ 2,481,250
200,000 CardioDynamics International
Corporation* ..................... 625,000
210,000 Coherent, Inc.* .................... 4,987,500
100,333 Cooper Companies, Inc.* ............ 3,856,550
50,000 Cypress Bioscience, Inc.* .......... 171,875
196,000 Somanetics Corporation* ............ 1,004,500
44,444 SurVivaLink Corporation(c)* ........ 200,000
43,200 Thermo Cardiosystems, Inc.* ........ 1,179,900
-----------
18,280,068
-----------
METAL--0.3%
-----------
134,500 Material Sciences Corporation*...... 1,378,625
-----------
OIL & GAS--3.8%
---------------
154,000 CE Franklin Limited* ............... 1,058,750
400,000 Chaparral Resources, Inc.* ......... 762,500
70,000 Chieftain International, Inc.* ..... 1,566,250
175,000 Comstock Resources, Inc.* .......... 2,253,125
130,000 Core Laboratories N.V.* ............ 3,688,750
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
OIL & GAS (CONTINUED)
---------------------
49,830 Midcoast Energy
Resources, Inc. .................. $ 1,118,061
160,000 Precision Drilling Corporation*..... 3,820,000
30,000 Transmontaigne Oil Company* ........ 438,750
------------
14,706,186
------------
PHARMACEUTICAL--2.6%
--------------------
50,000 Bindley Western Industries, Inc..... 1,943,750
20,000 Elan Corporation, PLC,
Sponsored ADR* ................... 1,242,500
35,000 EntreMed, Inc.* .................... 420,000
350,000 PharMerica, Inc.* .................. 4,856,250
50,000 Protein Design Labs, Inc.* ......... 1,600,000
------------
10,062,500
------------
POLLUTION CONTROL--2.5%
-----------------------
220,000 Envirosource, Inc.* ................ 440,000
170,000 IMCO Recycling, Inc. ............... 3,145,000
300,000 Phillip Services Corporation* ...... 2,268,750
118,200 Superior Services, Inc.* ........... 3,841,500
------------
9,695,250
------------
PUBLISHING--3.6%
----------------
40,000 Houghton Mifflin Company ........... 1,302,500
54,800 John Wiley & Sons, Inc.
Class "A" ........................ 3,034,550
96,000 Waverly, Inc. ...................... 3,714,000
185,000 World Color Press, Inc.* ........... 5,920,000
------------
13,971,050
------------
RAILROADS--1.0%
---------------
130,000 Genesee & Wyoming, Inc.* ........... 3,510,000
10,000 Kansas City Southern
Industries, Inc. ................. 451,875
------------
3,961,875
------------
REAL ESTATE INVESTMENT TRUST--3.9%
----------------------------------
123,000 Alexander Haagen
Properties, Inc. ................. 1,991,063
27,000 Arden Realty Group, Inc. ........... 757,687
10,000 Correctional Properties Trust* ..... 230,625
39,700 Excel Legacy Corporation* .......... 208,425
39,700 Excel Realty Trust, Inc. ........... 1,061,975
150,000 Innkeepers USA Trust ............... 2,268,750
164,900 LTC Properties, Inc. ............... 3,215,550
100,000 Meridian Industrial Trust, Inc. .... 2,312,500
152,700 Mid-Atlantic Realty Trust .......... 2,137,800
35,000 Prentiss Properties Trust .......... 888,125
------------
15,072,500
------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
REAL ESTATE/LAND DEVELOPMENT--1.9%
----------------------------------
120,000 Cadiz Land Company, Inc.* .......... $ 1,395,000
225,000 LNR Property Corporation ........... 6,018,750
------------
7,413,750
------------
RETAIL STORES--4.1%
-------------------
50,000 Burlington Coat Factory
Warehouse Corporation ............ 968,750
160,000 Claire's Stores, Inc. .............. 3,490,000
100,000 Cole National Corporation,
Class "A"* ....................... 3,718,750
20,000 Global DirectMail
Corporation* ..................... 355,000
90,000 Heilig-Meyers Company .............. 1,265,625
30,000 Maxwell Shoe Company, Inc.,
Class "A"* ....................... 532,500
200,000 Sunglass Hut
International, Inc.* ............. 1,912,500
125,000 Syms Corporation* .................. 1,851,562
80,000 The Sirena Apparel
Group, Inc.* ..................... 590,000
100,000 U.S. Vision, Inc.* ................. 1,312,500
------------
15,997,187
------------
SECURITIES--4.0%
----------------
85,000 Advest Group, Inc. ................. 2,661,562
50,000 Dain Rauscher Corporation .......... 3,009,375
106,666 Legg Mason, Inc. ................... 6,293,294
138,400 Southwest Securities
Group, Inc. ...................... 3,684,900
------------
15,649,131
------------
SERVICES--6.4%
--------------
111,500 CDI Corporation* ................... 4,313,656
15,000 Cunningham Graphics
International, Inc.* ............. 283,125
59,500 Forensic Technologies
International Corporation* ....... 1,063,563
200,000 Interim Services, Inc.* ............ 6,525,000
3,500 Kroll-O'Gara Company* .............. 74,593
47,200 Mac-Gray Corporation* .............. 778,800
200,000 MPW Industrial Services
Group, Inc.* ..................... 2,400,000
125,000 RCM Technologies, Inc.* ............ 3,000,000
72,500 Right Management
Consultants* ..................... 1,033,125
160,000 StarTek, Inc.* ..................... 2,070,000
80,000 Stewart Enterprises, Inc.,
Class "A" ........................ 2,060,000
35,700 Volt Information Sciences, Inc.*.... 1,187,025
------------
24,788,887
------------
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
TELECOMMUNICATIONS--2.0%
------------------------
90,000 Allen Telecom, Inc.* ............... $ 1,445,625
100,800 Network Long Distance, Inc.* ....... 1,461,600
50,000 Nextlink Communications,
Inc.* ............................ 1,500,000
155,000 Periphonics Corporation* ........... 1,801,875
136,435 SymmetriCom, Inc.* ................. 1,006,207
100,000 Trex Communications, Inc.(c)*....... 400,000
-------------
7,615,307
-------------
TEXTILES--0.8%
--------------
20,000 Interface, Inc., Class "A" ......... 848,750
73,000 Kellwood Company ................... 2,331,437
-------------
3,180,187
-------------
TRANSPORTATION--0.3%
--------------------
50,000 C.H. Robinson Worldwide, Inc........ 1,143,750
-------------
Total Common Stock (cost $285,480,029) ................ 366,358,420
-------------
CONVERTIBLE PREFERRED STOCKS--0.4%(a)
- -------------------------------------
HEALTH CARE CENTERS--0.4%
-------------------------
60,000 Sun Financing Inc., 7% ............. 1,575,000
-------------
Total Convertible Perferred Stocks
(cost $1,500,000).................................... 1,575,000
-------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
CONVERTIBLE BONDS--1.4%(a)
- --------------------------
DATA PROCESSING--0.0%
---------------------
$ 100,000 Proscape Technologies, Inc.
6.5%, Series "B" Subordinated
Convertible Debentures,
due, 11/18/01(c) ................. $ 100,000
-------------
HEALTH CARE CENTERS--0.3%
-------------------------
1,000,000 Assisted Living Concepts, Inc.
6.0%, due 11/01/02 ............... 1,044,440
-------------
MEDICAL EQUIPMENT/SUPPLY--0.5%
------------------------------
1,000,000 Angeion Corporation
7.5%, due 04/15/03(c) ............ 1,000,000
1,000,000 Aviron Corporation
5.75%, due 04/01/05 .............. 990,000
-------------
1,990,000
-------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
CONVERTIBLE BONDS (CONTINUED)
- -----------------------------
REAL ESTATE INVESTMENT TRUST--0.6%
----------------------------------
$2,000,000 American Retirement
Corporation
5.75%, due 10/01/02 .............. $ 2,112,500
155,000 LTC Properties, Inc.
8.25%, due 07/01/01 .............. 176,340
-------------
2,288,840
-------------
Total Convertible Bonds (cost $5,232,500) ............. 5,423,280
-------------
MARKET
SHARES VALUE
------ ------
WARRANTS--0.1%(a)
- -----------------
MEDICAL EQUIPMENT/SUPPLY--0.1%
------------------------------
25,000 Cypress Bioscience, Inc. * ......... $ 37,500
------------
Total Warrants (cost $781) ............................ 37,500
------------
Total investment portfolio excluding
repurchase agreement
(cost $292,213,310)(b), 95.9%(a) .................... 373,394,200
REPURCHASE AGREEMENT--5.2%(a)
- -----------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated April 30,
1998 @ 5.47% to be repurchased at
$20,139,060 on May 1, 1998, collateralized by
$17,955,000 United States Treasury Notes,
7.125% due February 15, 2023, (market value
$20,694,470 including interest)
(cost $20,136,000) .................................... $ 20,136,000
------------
TOTAL INVESTMENT PORTFOLIO
(cost $312,349,310)(b), 101.1%(a) ................... 393,530,200
OTHER ASSETS AND LIABILITIES, net, (1.1%)(a) .......... (4,118,178)
------------
NET ASSETS, 100.0% .................................... $389,412,022
============
- ----------
* Non-income producing security.
(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 $81,180,890, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $93,235,928 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value of
$12,055,038.
(c) Private placement securities are fair valued by the Board of Trustees.
ADR--American Depository Receipt.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
May 19, 1998
Dear Fellow Shareholders:
Once again, it is a pleasure to address you as portfolio manager of the
Heritage Series Trust - Value Equity Fund (the "Fund"). Although the past six
months have not generated the level of performance that I would have expected
from the Fund, I remain very enthusiastic toward our future prospects. It is
clear that value investing, in general, continues to be out of favor with most
investors. As an example, performance of value stocks has lagged that of growth
stocks by 52% over the last four years (122% versus 174% as measured by
Standard and Poor's). Continuing this trend, during the six month period since
I last addressed you, value stocks as a group have under-performed growth
stocks by 6.7% (12.9% versus 19.6%). In what continues to be a market driven by
liquidity with little apparent regard for valuation, I continue to focus on and
emphasize those investments that present a substantial margin of safety and
significant upside potential while offering relatively low correlation with the
overall market.
The vast majority of the under-performance over the last two quarters is
attributable to the following factors:
1. The Fund continued to maintain underweight positions in consumer stocks
(up 23% during the period) and financials (up 26%) relative to the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500"). These
underweight stances are driven purely by what we believe are extended
valuations (given the current state of the fundamentals) in each of these
sectors. The best of all possible worlds appears to be fully discounted in
these groups at this time.
2. Overweight positions relative to the S&P 500 are still maintained in
both energy (down 3% during the period) and tobacco (up 1%). Slumping oil
prices driven by declining Asian demand, excess inventories, and
uncertainty over OPEC production led to continued weakness in energy
stocks. Concern over the future of a proposed national tobacco settlement
and its impact on the industry led to a massive sell-off of tobacco stocks
to historic record low valuation levels. I continue to remain comfortable
with these overweight positions and feel these are the types of classic
contrarian investment opportunities that represent extraordinary value in
an otherwise fully valued environment.
3. The weighted-average capitalization of the Fund shifted toward mid-cap
value stocks (up 13% during the period) as the valuation gap between large
and mid cap issues continued to widen. As has been typical of this
extended bull market run, smaller and less expensive stocks have
under-performed substantially.
I continue to attempt to reduce the overall risk level of the Fund as, in
my opinion, the current risk/reward tradeoff in the equity market continues to
deteriorate. Presently, the Fund trades at significant valuation discounts to
the market from price-to-earnings and price-to-book perspectives. However, our
forecast earnings growth rate is twice that of the S&P 500. We believe that
these features, coupled with our low (70%) correlation with the overall market
and above average yield (2.1%), will serve us well in the uncertain market
environment ahead.
I would like to re-emphasize my belief that a classic contrarian value
approach offers the best opportunity to achieve above average, risk-adjusted,
long-term returns. Value investing, for the most part, is based upon the
concept of reversion to the mean. Individual stocks, industry sectors, and
entire markets can trend above or below mean valuation levels for extended
periods of time; the current market environment serves as a wonderful example.
Maintaining a long-term value perspective in today's market can be both
difficult and frustrating, but it is critical to our long-term success.
In closing, although our investment style continues to remain temporarily
out of favor, I feel we are extremely well positioned to outperform the broader
market when the current cycle is broken and I look forward to a rewarding
remainder of 1998.
Sincerely,
/s/ MICHAEL J. CHREN
--------------------
Michael J. Chren
Senior Vice President
Eagle Asset Management, Inc.
Portfolio Manager, Value Equity Fund
18
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - VALUE EQUITY FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCK--97.8%(a)
- ----------------------
AEROSPACE--3.8%
---------------
18,000 Raytheon Company, Class "B" .......... $ 1,020,375
5,000 United Technologies
Corporation ........................ 492,188
--------------
1,512,563
--------------
AUTO PARTS/EQUIPMENT--1.8%
--------------------------
17,400 Arvin Industries, Inc. .............. 712,312
--------------
BANKING--2.1%
-------------
6,000 Chase Manhattan Corporation ......... 831,375
-------------
BUILDING--5.0%
--------------
25,500 American Standard
Companies, Inc.* .................. 1,241,531
15,000 Black & Decker Corporation .......... 774,375
-------------
2,015,906
-------------
CHEMICALS--3.3%
---------------
6,000 E.I. du Pont de Nemours &
Company ........................... 436,875
12,500 Imperial Chemical Industries,
PLC, ADR .......................... 908,594
-------------
1,345,469
-------------
CONGLOMERATES/DIVERSIFIED--3.9%
-------------------------------
40,000 Allegheny Teledyne, Inc. ............. 1,015,000
15,000 Fortune Brands, Inc. ................. 553,125
-------------
1,568,125
-------------
CONTAINERS--1.3%
----------------
10,000 Crown Cork & Seal
Company, Inc. ...................... 520,625
-------------
DATA PROCESSING--1.3%
---------------------
9,000 Lexmark International
Group, Inc., Class "A"(c)* ......... 520,875
-------------
ELECTRONICS/ELECTRIC--6.9%
--------------------------
22,000 General Signal Corporation ........... 968,000
20,000 Philips Electronics N.V.,
NY Shares, ADR ..................... 1,800,000
-------------
2,768,000
-------------
FINANCE--6.2%
-------------
10,000 Fannie Mae ........................... 598,750
8,000 Freddie Mac .......................... 370,500
26,000 SLM Holding Corporation .............. 1,109,875
21,000 Walter Industries, Inc.* ............. 433,125
-------------
2,512,250
-------------
GLASS/PRODUCTS--0.9%
--------------------
10,000 Libbey, Inc. ......................... 377,500
-------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
HEALTH CARE CENTERS--4.3%
-------------------------
52,500 Columbia/HCA Healthcare
Corporation .........................$ 1,729,218
-------------
HOUSEHOLD PRODUCTS--3.8%
------------------------
15,500 Sunbeam Corporation .................... 389,438
42,000 Tupperware Corporation ................. 1,136,625
-------------
1,526,063
-------------
INSURANCE--5.3%
---------------
15,000 Aetna, Inc. ........................... 1,212,188
4,000 Allstate Corporation .................. 385,000
12,500 Travelers Property Casualty
Corporation, Class "A" .............. 525,000
-------------
2,122,188
-------------
MACHINERY--1.5%
---------------
22,000 Harnischfeger Industries, Inc. ......... 621,500
------------
MANUFACTURING/DISTRIBUTIONS--3.1
--------------------------------
34,500 Essex International, Inc.* ............. 1,237,687
----------
MEDICAL EQUIPMENT/SUPPLY--2.5%
------------------------------
20,000 Bausch & Lomb, Inc. ................... 988,750
------------
OFFICE EQUIPMENT--2.4%
----------------------
12,700 Hewlett-Packard Company ................ 956,469
------------
OIL & GAS--10.8%
----------------
21,000 Ashland, Inc. ......................... 1,110,375
10,000 British Petroleum Company,
PLC, Sponsored ADR ................... 945,000
12,000 Exxon Corporation ...................... 875,250
18,000 Royal Dutch Petroleum
Company, NY Shares, ADR ............. 1,018,125
9,200 Sonat, Inc. ........................... 408,250
------------
4,357,000
------------
PAPER/PRODUCTS--2.2%
--------------------
15,500 Schweitzer-Mauduit
International, Inc. ................ 515,375
28,000 Unisource Worldwide, Inc. ............ 355,250
------------
870,625
------------
PHARMACEUTICAL--0.5%
--------------------
5,000 Teva Pharmaceutical Industries,
Ltd., Sponsored ADR ................. 213,750
------------
POLLUTION CONTROL--2.7%
-----------------------
32,500 Waste Management, Inc. ................ 1,088,750
------------
REAL ESTATE/LAND DEVELOPMENT--2.3%
----------------------------------
30,000 Security Capital Group, Inc.,
Class "B"* .......................... 907,500
------------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - VALUE EQUITY FUND
INVESTMENT PORTFOLIO
APRIL 30, 1998
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
RETAIL STORES--4.2%
-------------------
9,000 Federated Department
Stores, Inc.* .......................$ 442,688
45,000 Toys "R" Us, Inc.* .................... 1,240,312
-----------
1,683,000
-----------
SECURITIES--2.4%
----------------
8,800 Standard and Poor's
Depository Receipts ................. 980,100
-----------
STEEL/IRON--0.9%
----------------
13,000 British Steel PLC,
Sponsored ADR ....................... 353,438
-----------
TELECOMMUNICATIONS--2.4%
------------------------
15,000 BellSouth Corporation ................. 962,813
-----------
TOBACCO--9.6%
-------------
54,000 DIMON, Inc. ........................... 789,750
32,000 Philip Morris Companies, Inc. ......... 1,194,000
35,300 RJR Nabisco Holdings
Corporation ......................... 981,781
32,500 UST, Inc. ............................. 895,781
-----------
3,861,312
-----------
UTILITIES-GAS--0.4%
-------------------
6,000 Central & South West
Corporation ......................... 156,375
-----------
Total Common Stock (cost $35,862,244)............. 39,301,538
-----------
MARKET
VALUE
------
REPURCHASE AGREEMENT--3.2(a)
- ----------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated April 30,
1998 @ 5.47% to be repurchased at
$1,287,196
on May 1, 1998, collateralized by
$1,150,000
United States Treasury Notes, 7.125% due
February 15, 2023, (market value $1,325,460
including interest) (cost $1,287,000).................. $ 1,287,000
--------------
TOTAL INVESTMENT PORTFOLIO EXCLUDING
COVERED CALL OPTIONS WRITTEN
(cost $37,149,244)(b), 101.0%(a)..................... 40,588,538
--------------
SHARES
------
COVERED CALL OPTIONS WRITTEN--(0.1%)(a)
- ---------------------------------------
9,000 Lexmark International
Group, Inc., Class "A",
June 1998 @ 55 .................... (48,375)
--------------
TOTAL COVERED CALL OPTIONS WRITTEN
(premiums received $36,179)(b) (0.1%)(a)............... (48,375)
OTHER ASSETS AND LIABILITIES, net (0.9%)(a) ............. (370,490)
--------------
NET ASSETS, 100.0% ...................................... $ 40,169,673
==============
- ----------
* Not an income-producing security.
(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 $3,427,098, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $4,457,862 and aggregate gross unrealized depreciation for all
securities in which there is an excess tax cost over market value of
$1,030,764.
(c) A portion of these shares were held by the custodian in connection with
covered call options written.
ADR--American Depository Receipt.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
EAGLE GROWTH
INTERNATIONAL EQUITY
EQUITY PORTFOLIO FUND
------------------ --------------
<S> <C> <C>
ASSETS
- ------
Investments, at market value (identified cost $38,413,716,
$40,329,591, $25,486,164, $292,213,310, and $35,862,244,
respectively) (Note 1) ............................................ $46,731,242 $60,393,406
Repurchase agreement (identified cost $0, $2,494,000, $254,000,
$20,136,000, and $1,287,000, respectively) (Note 1) ............... -- 2,494,000
Cash ............................................................... -- 918
Foreign currency (cost $542,499).................................... 542,586 --
Receivables:
Investments sold .................................................. 5,519,833 --
Fund shares sold .................................................. 216,156 432,922
Dividends and interest ............................................ 191,308 35,041
Foreign taxes recoverable ......................................... 58,017 --
Deferred organization expenses (Note 1) ............................ 20,800 14,165
Deferred state qualification expenses (Note 1) ..................... 32,052 25,846
----------- -----------
Total assets .................................................. $53,311,994 $63,396,298
----------- -----------
LIABILITIES
- -----------
Payables (Note 4):
Investments purchased ............................................. $ 4,948,700 $ --
Fund shares redeemed .............................................. -- 27,146
Accrued management fee ............................................ 236,878 38,382
Accrued distribution fee .......................................... 34,599 30,913
Unrealized depreciation of forward currency contracts ............. 61,908 --
Other accrued expenses ............................................ 402,003 51,670
Covered call options written, at market value (premiums received
$36,179)........................................................... -- --
----------- -----------
Total Liabilities ............................................. $ 5,684,088 $ 148,111
----------- -----------
Net assets, at market value ........................................ $47,627,906 $63,248,187
=========== ===========
NET ASSETS
- ----------
Net assets consist of:
Paid-in capital ................................................... $38,730,134 $43,380,598
Undistributed net investment income (loss) (Note 1) ............... (166,185) (195,969)
Accumulated net realized gain (loss) (Notes 1 and 5) .............. 809,809 (257)
Net unrealized appreciation on investments, covered call
options written and other assets and liabilities denominated in
foreign currencies ............................................... 8,254,148 20,063,815
----------- -----------
Net assets, at market value ........................................ $47,627,906 $63,248,187
=========== ===========
Net assets, at market value
Class A Shares .................................................... 7,395,471 33,171,440
Class B Shares .................................................... 117,076 1,465,494
Class C Shares .................................................... 5,250,377 28,611,253
Eagle Shares ...................................................... 34,864,982 --
----------- -----------
Total ......................................................... $47,627,906 $63,248,187
=========== ===========
Shares of beneficial interest outstanding
Class A Shares .................................................... 269,681 1,166,447
Class B Shares .................................................... 4,320 52,487
Class C Shares .................................................... 193,724 1,025,016
Eagle Shares ...................................................... 1,280,264 --
----------- -----------
Total ......................................................... 1,747,989 2,243,950
=========== ===========
Net Asset Value -- offering and redemption price per share
(Notes 1 and 2)
Class A Shares .................................................... $ 27.42 $ 28.44
=========== ===========
Maximum offering price per share (100/95.25 of $27.42,
$28.44, $16.61, $31.22 and $21.13, respectively) ................ $ 28.79 $ 29.86
=========== ===========
Class B Shares .................................................... $ 27.10 $ 27.92
=========== ===========
Class C Shares .................................................... $ 27.10 $ 27.91
=========== ===========
Eagle Shares ...................................................... $ 27.23
===========
<CAPTION>
MID CAP SMALL CAP VALUE
GROWTH STOCK EQUITY
FUND FUND FUND
-------------- --------------- ----------------
<S> <C> <C> <C>
ASSETS
- ------
Investments, at market value (identified cost $38,413,716,
$40,329,591, $25,486,164, $292,213,310, and $35,862,244,
respectively) (Note 1) ............................................ $28,295,319 $373,394,200 $ 39,301,538
Repurchase agreement (identified cost $0, $2,494,000, $254,000,
$20,136,000, and $1,287,000, respectively) (Note 1) ............... 254,000 20,136,000 1,287,000
Cash ............................................................... 975 233 741
Foreign currency (cost $542,499).................................... -- -- --
Receivables:
Investments sold .................................................. 309,035 5,823,068 --
Fund shares sold .................................................. 316,233 1,675,642 71,804
Dividends and interest ............................................ 1,119 106,101 21,780
Foreign taxes recoverable ......................................... -- -- --
Deferred organization expenses (Note 1) ............................ 31,494 -- 17,670
Deferred state qualification expenses (Note 1) ..................... 32,052 40,240 26,637
----------- ------------ ------------
Total assets .................................................. $29,240,227 $401,175,484 $ 40,727,170
----------- ------------ ------------
LIABILITIES
- -----------
Payables (Note 4):
Investments purchased ............................................. $ -- $ 10,830,635 $ 310,053
Fund shares redeemed .............................................. 30,407 366,520 119,523
Accrued management fee ............................................ 124,316 250,364 25,003
Accrued distribution fee .......................................... 11,815 156,271 19,300
Unrealized depreciation of forward currency contracts ............. -- -- --
Other accrued expenses ............................................ 60,066 159,672 35,243
Covered call options written, at market value (premiums received
$36,179)........................................................... -- -- 48,375
----------- ------------ ------------
Total Liabilities ............................................. $ 226,604 $ 11,763,462 $ 557,497
----------- ------------ ------------
Net assets, at market value ........................................ $29,013,623 $389,412,022 $ 40,169,673
=========== ============ ============
NET ASSETS
- ----------
Net assets consist of:
Paid-in capital ................................................... $25,411,720 $294,586,519 $ 34,721,865
Undistributed net investment income (loss) (Note 1) ............... (106,036) (877,015) 19,054
Accumulated net realized gain (loss) (Notes 1 and 5) .............. 898,784 14,521,628 2,001,656
Net unrealized appreciation on investments, covered call
options written and other assets and liabilities denominated in
foreign currencies ............................................... 2,809,155 81,180,890 3,427,098
----------- ------------ ------------
Net assets, at market value ........................................ $29,013,623 $389,412,022 $ 40,169,673
=========== ============ ============
Net assets, at market value
Class A Shares .................................................... 18,616,308 263,697,244 22,429,876
Class B Shares .................................................... 1,636,130 6,630,919 465,514
Class C Shares .................................................... 8,761,185 119,083,859 17,274,283
Eagle Shares ...................................................... -- -- --
----------- ------------ ------------
Total ......................................................... $29,013,623 $389,412,022 $ 40,169,673
=========== ============ ============
Shares of beneficial interest outstanding
Class A Shares .................................................... 1,120,611 8,447,522 1,061,469
Class B Shares .................................................... 98,864 217,492 22,281
Class C Shares .................................................... 529,165 3,905,554 826,855
Eagle Shares ...................................................... -- -- --
----------- ------------ ------------
Total ......................................................... 1,748,640 12,570,568 1,910,605
=========== ============ ============
Net Asset Value -- offering and redemption price per share
(Notes 1 and 2)
Class A Shares .................................................... $ 16.61 $ 31.22 $ 21.13
=========== ============ ============
Maximum offering price per share (100/95.25 of $27.42,
$28.44, $16.61, $31.22 and $21.13, respectively) ................ $ 17.44 $ 32.78 $ 22.18
=========== ============ ============
Class B Shares .................................................... $ 16.55 $ 30.49 $ 20.89
=========== ============ ============
Class C Shares .................................................... $ 16.56 $ 30.49 $ 20.89
=========== ============ ============
Eagle Shares ......................................................
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
EAGLE GROWTH
INTERNATIONAL EQUITY
EQUITY PORTFOLIO FUND
------------------ -------------
<S> <C> <C>
INVESTMENT INCOME
- -----------------
Income:
Dividends ................................................... $ 383,452(a) $ 185,995
Interest .................................................... 5,749(b) 61,770
---------- -----------
Total income ............................................ 389,201 247,765
Expenses (Notes 1 and 4):
Management fee .............................................. 215,982 190,614
Distribution fee (Class A Shares) ........................... 4,522 34,626
Distribution fee (Class B Shares) ........................... 20 2,015
Distribution fee (Class C Shares) ........................... 3,009 113,633
Distribution fee (Eagle Shares) ............................. 3,202 --
Shareholder servicing fees .................................. -- 22,713
Shareholder servicing fees (Class A Shares) ................. 8,103 --
Shareholder servicing fees (Class B Shares) ................. 156 --
Shareholder servicing fees (Class C Shares) ................. 21,615 --
Shareholder servicing fees (Eagle Shares) ................... 161,800 --
Professional fees ........................................... 33,679 20,911
Custodian/Fund accounting fees .............................. 72,873 23,177
Federal registration fees ................................... -- 3,159
Amortization of state qualification expenses ................ 20,967 18,056
Organization expenses ....................................... 5,200 2,833
Reports to shareholders ..................................... 14,192 6,320
Trustees' fees and expenses ................................. 4,435 4,235
Insurance expense ........................................... 2,072 1,270
Other ....................................................... 359 172
---------- -----------
Total expenses before waiver ............................ 572,186 443,734
Fees waived by Eagle/Manager (Note 4) ................... (30,140) --
---------- -----------
Total expenses after waiver ............................. 542,046 443,734
---------- -----------
Net investment income (loss) ................................. (152,845) (195,969)
---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------
Net realized gain from investment transactions ............... 906,977 176
Net realized loss from foreign currency transactions ......... (80,408) --
Net increase in unrealized depreciation of investments
during the period ........................................... 6,023,119 10,058,365
Net increase in unrealized depreciation of covered call
options written during the period ........................... -- --
Net increase in unrealized appreciation from foreign
currency during the period .................................. 284,757 --
---------- -----------
Net gain on investments ................................. 7,134,445 10,058,541
---------- -----------
Net increase in net assets resulting
from operations ............................................. $6,981,600 $ 9,862,572
========== ===========
<CAPTION>
MID CAP SMALL CAP VALUE
GROWTH STOCK EQUITY
FUND* FUND FUND
-------------- --------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME
- -----------------
Income:
Dividends ................................................... $ 36,229 $ 987,585 $ 323,013
Interest .................................................... 41,309 603,127 54,949
---------- ----------- ----------
Total income ............................................ 77,538 1,590,712 377,962
Expenses (Notes 1 and 4):
Management fee .............................................. 74,908 1,348,165 143,011
Distribution fee (Class A Shares) ........................... 17,046 299,745 26,912
Distribution fee (Class B Shares) ........................... 2,418 10,065 647
Distribution fee (Class C Shares) ........................... 29,276 505,861 82,387
Distribution fee (Eagle Shares) ............................. -- -- --
Shareholder servicing fees .................................. 10,285 148,391 16,056
Shareholder servicing fees (Class A Shares) ................. -- -- --
Shareholder servicing fees (Class B Shares) ................. -- -- --
Shareholder servicing fees (Class C Shares) ................. -- -- --
Shareholder servicing fees (Eagle Shares) ................... -- -- --
Professional fees ........................................... 25,143 26,006 14,309
Custodian/Fund accounting fees .............................. 21,115 47,041 28,407
Federal registration fees ................................... 7,496 17,888 702
Amortization of state qualification expenses ................ 18,476 26,749 9,471
Organization expenses ....................................... 3,499 5,000 5,301
Reports to shareholders ..................................... 5,500 23,333 5,329
Trustees' fees and expenses ................................. 4,072 4,235 4,271
Insurance expense ........................................... 328 4,138 1,890
Other ....................................................... 125 1,110 218
---------- ----------- ----------
Total expenses before waiver ............................ 219,687 2,467,727 338,911
Fees waived by Eagle/Manager (Note 4) ................... (36,113) -- --
---------- ----------- ----------
Total expenses after waiver ............................. 183,574 2,467,727 338,911
---------- ----------- ----------
Net investment income (loss) ................................. (106,036) (877,015) 39,051
---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------
Net realized gain from investment transactions ............... 898,784 15,313,916 2,083,384
Net realized loss from foreign currency transactions ......... -- -- --
Net increase in unrealized depreciation of investments
during the period ........................................... 2,809,155 16,819,011 1,416,922
Net increase in unrealized depreciation of covered call
options written during the period ........................... -- -- (12,196)
Net increase in unrealized appreciation from foreign
currency during the period .................................. -- -- --
---------- ----------- ----------
Net gain on investments ................................. 3,707,939 32,132,927 3,488,110
---------- ----------- ----------
Net increase in net assets resulting
from operations ............................................. $3,601,903 $31,255,912 $3,527,161
========== =========== ==========
<FN>
- ----------
* For the period November 6, 1997 (commencement of operations) to April 30,
1998.
(a) Net of $39,645 foreign withholding taxes.
(b) Net of $369 foreign withholding taxes.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED
APRIL 30, 1998 FOR THE YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------- ------------------
<S> <C> <C>
EAGLE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment loss ............................................................... $ (152,845) $ (131,673)
Net realized gain on investment transactions ...................................... 906,977 1,149,279
Net realized gain (loss) from foreign currency transactions ....................... (80,408) 200,478
Net increase in unrealized appreciation of investments during the period .......... 6,023,119 1,394,725
Net increase (decrease) in unrealized appreciation from foreign currency
during the period ................................................................ 284,757 (142,713)
----------- -----------
Net increase in net assets resulting from operations .............................. 6,981,600 2,470,096
----------- -----------
Distributions to shareholders from:
Net investment income Class A Shares, ($0.05 and $0.44 per share, respectively).... (13,340) (62,318)
Net investment income Class C Shares, ($0.34 per share)............................ -- (18,908)
Net investment income Eagle Shares, ($0.31 per share).............................. -- (318,525)
Net realized gains Class A Shares, ($0.62 and $0.17 per share, respectively)....... (155,218) (23,850)
Net realized gains Class C Shares, ($0.62 and $0.17 per share, respectively)....... (102,719) (9,263)
Net realized gains Eagle Shares, ($0.62 and $0.17 per share, respectively)......... (808,740) (172,431)
Increase in net assets from Fund share transactions (Note 2) ....................... 111,400 13,835,836
----------- -----------
Increase in net assets ............................................................. 6,012,983 15,700,637
Net assets, beginning of period .................................................... 41,614,923 25,914,286
----------- -----------
Net assets, end of period (including accumulated net investment loss of $166,185 and
distribution in excess of net investment income of $40,256, respectively).......... $47,627,906 $41,614,923
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED
APRIL 30, 1998 FOR THE YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------- ------------------
<S> <C> <C>
GROWTH EQUITY FUND
- ------------------
Increase (decrease) in net assets:
Operations:
Net investment loss ...................................................... $ (195,969) $ (185,188)
Net realized gain on investment transactions ............................. 176 818,812
Net increase in unrealized appreciation of investments during the period . 10,058,365 7,556,848
----------- -----------
Net increase in net assets resulting from operations ..................... 9,862,572 8,190,472
----------- -----------
Distribution to shareholders from:
Net realized gains Class A Shares ($0.32 per share)....................... (324,393) --
Net realized gains Class C Shares ($0.32 per share)....................... (263,908) --
Increase in net assets from Fund share transactions (Note 2) .............. 11,181,314 17,355,665
----------- -----------
Increase in net assets .................................................... 20,455,585 25,546,137
Net assets, beginning of period ........................................... 42,792,602 17,246,465
----------- -----------
Net assets, end of period (including accumulated net investment loss of
$195,969 as of April 30, 1998)............................................ $63,248,187 $42,792,602
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE
PERIOD NOVEMBER 6, 1997
(COMMENCEMENT OF OPERATIONS) TO
APRIL 30, 1998
(UNAUDITED)
--------------------------------
<S> <C>
MID CAP GROWTH FUND
- -------------------
Increase (decrease) in net assets:
Operations:
Net investment loss ...................................................... $ (106,036)
Net realized gain on investment transactions ............................. 898,784
Net increase in unrealized appreciation of investments during the period . 2,809,155
-----------
Net increase in net assets resulting from operations ..................... 3,601,903
Increase in net assets from Fund share transactions (Note 2) .............. 25,411,720
-----------
Increase in net assets .................................................... 29,013,623
Net assets, beginning of period ........................................... --
-----------
Net assets, end of period (including accumulated net investment loss of
$106,036 as of April 30, 1998)............................................ $29,013,623
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED
APRIL 30, 1998 FOR THE YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------- ------------------
<S> <C> <C>
SMALL CAP STOCK FUND
- --------------------
Increase (decrease) in net assets:
Operations:
Net investment loss ......................................................... $ (877,015) $ (560,143)
Net realized gain on investment transactions ................................ 15,313,916 18,888,445
Net increase in unrealized appreciation of investments during the period .... 16,819,011 42,301,556
------------- ------------
Net increase in net assets resulting from operations ........................ 31,255,912 60,629,858
Distributions to shareholders from:
Net realized gains Class A Shares, ($1.73 and $1.88 per share, respectively). (13,224,157) (7,806,517)
Net realized gains Class C Shares, ($1.73 and $1.88 per share, respectively). (5,439,644) (2,105,065)
Increase in net assets from Fund share transactions (Note 2) ................. 64,470,264 140,852,503
------------- ------------
Increase in net assets ....................................................... 77,062,375 191,570,779
Net assets, beginning of period .............................................. 312,349,647 120,778,868
------------- ------------
Net assets, end of period (including accumulated net investment loss of
$877,015 as of April 30, 1998)............................................... $ 389,412,022 $312,349,647
============= ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED
APRIL 30, 1998 FOR THE YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------- ------------------
<S> <C> <C>
VALUE EQUITY FUND
- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................ $ 39,051 $ 205,245
Net realized gain on investment transactions ..................................... 2,083,384 7,282,605
Net increase (decrease) in unrealized appreciation of investments
during the period ............................................................... 1,404,726 (39,985)
------------ -----------
Net increase in net assets resulting from operations ............................. 3,527,161 7,447,865
------------ -----------
Distributions to shareholders from:
Net investment income Class A Shares, ($0.20 and $0.15 per share, respectively)... (171,437) (117,148)
Net investment income Class C Shares, ($0.05 and $0.03 per share, respectively)... (31,101) (17,648)
Net realized gains Class A Shares, ($4.90 and $1.30 per share, respectively)...... (4,141,639) (990,566)
Net realized gains Class C Shares, ($4.90 and $1.30 per share, respectively)...... (3,207,817) (665,431)
Increase in net assets from Fund share transactions (Note 2) ...................... 7,670,099 5,193,588
------------ -----------
Increase in net assets ............................................................ 3,645,266 10,850,660
Net assets, beginning of period ................................................... 36,524,407 25,673,747
------------ -----------
Net assets, end of period (including undistributed net investment income of $19,054
and $182,541, respectively)....................................................... $ 40,169,673 $36,524,407
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - 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.
CLASS A SHARES*
-------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1998 --------------------------------------
(UNAUDITED) 1997 1996/dagger//dagger/
--------------- -------------- ---------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................... $ 23.97 $ 22.25 $ 21.11
--------- --------- ---------
Income from Investment
Operations:
Net investment income
(loss)(a) .................. ( 0.02) 0.05 0.10
Net realized and
unrealized gain on
investments ................ 4.14 2.28 1.04
--------- --------- ---------
Total from Investment
Operations ................. 4.12 2.33 1.14
--------- --------- ---------
Less Distributions:
Dividends from net
investment income .......... ( 0.05) ( 0.44) --
Distributions from net
realized gains ............. ( 0.62) ( 0.17) --
--------- --------- ---------
Total Distributions ......... ( 0.67) ( 0.61) --
--------- --------- ---------
Net asset value, end
of period ................... $ 27.42 $ 23.97 $ 22.25
========= ========= =========
Total Return(%)(d) ........... 17.58 (c) 10.71 (e) 5.40 (c)
Ratios (%)/ Supplemental
Data:
Operating expenses, net,
to average daily net
assets(a) .................. 1.96 (b) 1.97 1.97 (b)
Net investment income
(loss) to average daily
net assets ................. ( 0.14)(b) 0.22 0.44 (b)
Portfolio turnover rate...... 32 (c) 50 59
Net assets, end of
period ($ millions)......... 7 6 3
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES* CLASS C SHARES*
----------------------------- -------------------------------------------------------
FOR THE
FOR THE SIX MONTH
PERIOD PERIOD
ENDED ENDED FOR THE YEARS ENDED
APRIL 30, APRIL 30, OCTOBER 31,
1998/dagger//dagger//dagger/ 1998 --------------------------------------
(UNAUDITED) (UNAUDITED) 1997 1996/dagger//dagger/
----------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ................... $ 23.95 $ 23.73 $ 22.12 $ 21.11
--------- --------- --------- ---------
Income from Investment
Operations:
Net investment income
(loss)(a) .................. 0.01 ( 0.11) ( 0.13) ( 0.07)
Net realized and
unrealized gain on
investments ................ 3.14 4.10 2.25 1.08
--------- --------- --------- ---------
Total from Investment
Operations ................. 3.15 3.99 2.12 1.01
--------- --------- --------- ---------
Less Distributions:
Dividends from net
investment income .......... -- -- ( 0.34) --
Distributions from net
realized gains ............. -- ( 0.62) ( 0.17) --
--------- --------- --------- ---------
Total Distributions ......... -- ( 0.62) ( 0.51) --
--------- --------- --------- ---------
Net asset value, end
of period ................... $ 27.10 $ 27.10 $ 23.73 $ 22.12
========= ========= ========= =========
Total Return(%)(d) ........... 13.11 (c) 17.15 (c) 9.79 (e) 4.78 (c)
Ratios (%)/ Supplemental
Data:
Operating expenses, net,
to average daily net
assets(a) .................. 2.71 (b) 2.71 (b) 2.72 2.72 (b)
Net investment income
(loss) to average daily
net assets ................. 0.22 (b) ( 0.87)(b) ( 0.52) ( 0.32)(b)
Portfolio turnover rate...... 32(c) 32 (c) 50 59
Net assets, end of
period ($ millions)......... 0.1 5 4 1
<CAPTION>
EAGLE SHARES*
--------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1998 ---------------------------------------------
(UNAUDITED) 1997 1996 1995/dagger/
-------------- --------------- ---------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ................... $ 23.83 $ 22.14 $ 20.79 $ 20.00
--------- --------- -------- ---------
Income from Investment
Operations:
Net investment income
(loss)(a) .................. ( 0.10) ( 0.11) ( 0.01) ( 0.03)
Net realized and
unrealized gain on
investments ................ 4.12 2.28 1.84 0.82
--------- --------- -------- ---------
Total from Investment
Operations ................. 4.02 2.17 1.83 0.79
--------- --------- -------- ---------
Less Distributions:
Dividends from net
investment income .......... -- ( 0.31) ( 0.01) --
Distributions from net
realized gains ............. ( 0.62) ( 0.17) ( 0.47) --
--------- --------- -------- ---------
Total Distributions ......... ( 0.62) ( 0.48) ( 0.48) --
--------- --------- -------- ---------
Net asset value, end
of period ................... $ 27.23 $ 23.83 $ 22.14 $ 20.79
========= ========= ======== =========
Total Return(%)(d) ........... 17.21 (c) 9.98 (e) 8.93 3.95 (c)
Ratios (%)/ Supplemental
Data:
Operating expenses, net,
to average daily net
assets(a) .................. 2.59 (b) 2.60 2.60 2.60 (b)
Net investment income
(loss) to average daily
net assets ................. ( 0.80)(b) ( 0.47) ( 0.02) ( 0.33)(b)
Portfolio turnover rate...... 32 (c) 50 59 61
Net assets, end of
period ($ millions)......... 35 32 22 10
<FN>
- ----------
* 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.
/dagger/ For the period May 1, 1995 (commencement of operations) to October
31, 1995.
/dagger//dagger/ For the period December 27, 1995 (commencement of Class A and
Class C Shares) to October 31, 1996.
/dagger//dagger//dagger/ For the period January 2, 1998 (commencement of Class
B Shares) to April 30, 1998.
(a) Excludes management fees waived by the Eagle in the amount of $.02, $.06
and $.16 per Class A Share, respectively. The operating expense ratio
including such items would have been 2.10% (annualized), 2.23% and 2.69%
(annualized) for Class A Shares, respectively. Excludes management fees
waived by the Eagle in the amount of $.02 per Class B Share. The operating
expense ratio including such items would have been 2.85% (annualized) for
Class B Shares. Excludes management fees waived by the Eagle in the amount
of $.02, $.06, and $.16 per Class C Share, respectively. The operating
expense ratio including such items would have been 2.85% (annualized),
2.98% and 3.44% (annualized) for Class C Shares, respectively. Excludes
management fees waived and expenses reimbursed by the Eagle in the amount
of $.02, $.06, $.16 and $.17 per Eagle Share, respectively. The operating
expense ratios including such items would have been 2.73% (annualized),
2.86%, 3.31% and 5.09% (annualized) for Eagle Shares, respectively.
(b) Annualized.
(c) Not annualized.
(d) Calculated without the imposition of a sales charge.
(e) These returns are calculated based on the published net asset value.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements.
CLASS A SHARES*
-------------------------------------------
FOR THE SIX
MONTH PERIOD FOR THE YEARS ENDED
ENDED OCTOBER 31,
APRIL 30, 1998 --------------------------
(UNAUDITED) 1997 1996/dagger/
--------------- --------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ........... $ 23.77 $ 17.74 $ 14.29
--------- -------- ---------
Income from Investment Operations:
Net investment loss(a) ........................ ( 0.05) ( 0.07) ( 0.03)
Net realized and unrealized gain
on investments ............................... 5.04 6.10 3.48
--------- -------- ---------
Total from Investment Operations ............... 4.99 6.03 3.45
--------- -------- ---------
Less Distributions:
Distributions from net realized gains ......... ( 0.32) -- --
--------- -------- ---------
Net asset value, end of period ................. $ 28.44 $ 23.77 $ 17.74
========= ======== =========
Total Return (%)(d) ............................ 21.22 (c) 33.99 24.14 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets(a) .......................... 1.40 (b) 1.61 1.65 (b)
Net investment income to average
daily net assets ............................. ( 0.43)(b) ( 0.35) ( 0.19)(b)
Portfolio turnover rate ....................... 23 (c) 50 23 (c)
Net assets, end of period ($ millions)......... 33 24 12
<CAPTION>
CLASS B SHARES* CLASS C SHARES*
----------------------------- ----------------------------------------
FOR THE SIX
FOR THE PERIOD MONTH PERIOD FOR THE YEARS ENDED
ENDED ENDED OCTOBER 31,
APRIL 30, 1998 APRIL 30, 1998 -------------------------
(UNAUDITED)/dagger//dagger/ (UNAUDITED) 1997 1996/dagger/
--------------------------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 24.33 $ 23.42 $ 17.61 $ 14.29
--------- --------- -------- ---------
Income from Investment Operations:
Net investment loss(a) ........................ ( 0.08) ( 0.15) ( 0.24) ( 0.15)
Net realized and unrealized gain
on investments ............................... 3.67 4.96 6.05 3.47
--------- --------- -------- ---------
Total from Investment Operations ............... 3.59 4.81 5.81 3.32
--------- --------- -------- ---------
Less Distributions:
Distributions from net realized gains ......... -- ( 0.32) -- --
--------- --------- -------- ---------
Net asset value, end of period ................. $ 27.92 $ 27.91 $ 23.42 $ 17.61
========= ========= ======== =========
Total Return (%)(d) ............................ 14.76 (c) 20.76 (c) 32.99 23.23 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets(a) .......................... 2.15 (b) 2.15 (b) 2.36 2.40 (b)
Net investment income to average
daily net assets ............................. ( 1.17)(b) ( 1.18)(b) ( 1.14) ( 0.96)(b)
Portfolio turnover rate ....................... 23 (c) 23 (c) 50 23 (c)
Net assets, end of period ($ millions)......... 1 29 18 5
<FN>
- ----------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents per share data for the period
since use of the undistributed income method does not correspond with
results of operations.
/dagger/ For the period November 16, 1995 (commencement of operations) to
October 31, 1996.
/dagger//dagger/ For the period January 2, 1998 (commencement of Class B
Shares) to April 30, 1998.
(a) Excludes management fees waived and expensed reimbursed by the Manager in
the amount of $.11 per share, for the period ended October 31, 1996. The
operating expense ratios including such items would have been 2.39%
(annualized) for Class A Shares and 3.14% (annualized) for Class C Shares,
respectively. The year ended October 31, 1997 includes recovery of
previously waived management fees paid to the manager of $.01 per share.
The operating expense ratios excluding such items would have been 1.54%
for Class A Shares and 2.29% for Class C Shares.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - MID CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from the
financial statements.
CLASS A SHARES*
------------------
FOR THE PERIOD
ENDED
APRIL 30, 1998
(UNAUDITED)/dagger/
-------------------
Net asset value, beginning of period ........................ $ 14.29
--------
Income from Investment Operations:
Net investment loss(a) ..................................... ( 0.06)
Net realized and unrealized gain on investments ............ 2.38
--------
Total from Investment Operations ............................ 2.32
--------
Net asset value, end of period .............................. $ 16.61
========
Total Return (%)(c)(d) ...................................... 16.24
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets(a)(b) .................................... 1.60
Net investment loss to average daily net assets(b) ......... ( 0.81)
Portfolio turnover rate(c) ................................. 48
Net assets, end of period ($ millions)...................... 19
<TABLE>
<CAPTION>
CLASS B SHARES* CLASS C SHARES*
---------------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
ENDED ENDED
APRIL 30, 1998 APRIL 30, 1998
(UNAUDITED)/dagger//dagger/ (UNAUDITED)/dagger/
---------------------------- --------------------
<S> <C> <C>
Net asset value, beginning of period ........................ $ 14.42 $ 14.29
-------- --------
Income from Investment Operations:
Net investment loss(a) ..................................... ( 0.08) ( 0.11)
Net realized and unrealized gain on investments ............ 2.21 2.38
-------- --------
Total from Investment Operations ............................ 2.13 2.27
-------- --------
Net asset value, end of period .............................. $ 16.55 $ 16.56
======== ========
Total Return (%)(c)(d) ...................................... 14.77 15.89
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets(a)(b) .................................... 2.35 2.35
Net investment loss to average daily net assets(b) ......... ( 1.78) ( 1.58)
Portfolio turnover rate(c) ................................. 48 48
Net assets, end of period ($ millions)...................... 2 9
<FN>
- ----------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents per share data for the period
since use of the undistributed income method does not correspond with
results of operations.
/dagger/ For the period November 6, 1997 (commencement of operations) to April
30, 1998.
/dagger//dagger/ For the period January 2, 1998 (commencement of Class B
Shares) to April 30, 1998.
(a) Excludes management fees waived by the Manager in the amount of $.03 per
share for Class A, B and C Shares. The operating expense ratios including
such items would have been 1.96% (annualized), 2.71% (annualized), and
2.71% (annualized) for Class A, B and C Shares, respectively.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements.
CLASS A SHARES
--------------------------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1998* ---------------------------------------------------------------
(UNAUDITED) 1997* 1996* 1995 1994 1993/dagger/
-------------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ...... $ 30.39 $ 24.08 $ 18.86 $ 16.20 $ 15.57 $ 14.29
--------- -------- -------- -------- -------- ---------
Income from Investment
Operations:
Net investment
income (loss)(a) ........ ( 0.04) ( 0.02) ( 0.05) 0.02 ( 0.01) ( 0.01)
Net realized and
unrealized gain on
investments ............. 2.60 8.21 6.12 3.62 0.64 1.29
--------- -------- -------- -------- -------- ---------
Total from Investment
Operations .............. 2.56 8.19 6.07 3.64 0.63 1.28
--------- -------- -------- -------- -------- ---------
Less Distributions:
Dividends from net
investment income ....... -- -- ( 0.01) ( 0.01) -- --
Distributions from net
realized gains .......... ( 1.73) ( 1.88) ( 0.84) ( 0.97) -- --
--------- -------- -------- -------- -------- ---------
Total Distributions ...... ( 1.73) ( 1.88) ( 0.85) ( 0.98) -- --
--------- -------- -------- -------- -------- ---------
Net asset value, end
of period ................ $ 31.22 $ 30.39 $ 24.08 $ 18.86 $ 16.20 $ 15.57
========= ======== ======== ======== ======== =========
Total Return(%)(d) ........ 9.09 (c) 36.68 33.18 23.97 4.05 8.96 (c)
Ratios (%)/
Supplemental Data:
Operating expenses,
net, to average daily
net assets(a) ........... 1.21 (b) 1.25 1.41 1.88 1.91 2.00 (b)
Net investment
income (loss) to
average daily net
assets .................. ( 0.29)(b) ( 0.09) ( 0.21) 0.15 ( 0.07) ( 0.15)(b)
Portfolio turnover
rate .................... 19 (c) 54 80 89 95 97
Net assets, end of
period ($ millions)...... 264 222 96 57 42 40
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------ -------------------------------------------------------------
FOR THE
FOR THE SIX MONTH
PERIOD PERIOD
ENDED ENDED FOR THE YEARS ENDED
APRIL 30, APRIL 30, OCTOBER 31,
1998* 1998* ---------------------------------------------
(UNAUDITED)/dagger//dagger//dagger/ (UNAUDITED) 1997* 1996* 1995/dagger//dagger/
----------------------------------- -------------- --------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ...... $ 27.98 $ 29.83 $ 23.84 $ 18.79 $ 15.67
--------- --------- -------- -------- ---------
Income from Investment
Operations:
Net investment
income (loss)(a) ........ ( 0.08) ( 0.15) ( 0.23) ( 0.22) ( 0.02)
Net realized and
unrealized gain on
investments ............. 2.59 2.54 8.10 6.11 3.14
--------- --------- -------- -------- ---------
Total from Investment
Operations .............. 2.51 2.39 7.87 5.89 3.12
--------- --------- -------- -------- ---------
Less Distributions:
Dividends from net
investment income ....... -- -- -- -- --
Distributions from net
realized gains .......... -- ( 1.73) ( 1.88) ( 0.84) --
--------- --------- -------- -------- ---------
Total Distributions ...... -- ( 1.73) ( 1.88) ( 0.84) --
--------- --------- -------- -------- ---------
Net asset value, end
of period ................ $ 30.49 $ 30.49 $ 29.83 $ 23.84 $ 18.79
========= ========= ======== ======== =========
Total Return(%)(d) ........ 8.97 (c) 8.68 (c) 35.63 32.22 19.91 (c)
Ratios (%)/
Supplemental Data:
Operating expenses,
net, to average daily
net assets(a) ........... 1.98 (b) 1.96 (b) 2.00 2.13 2.36 (b)
Net investment
income (loss) to
average daily net
assets .................. ( 1.06)(b) ( 1.04)(b) ( 0.85) ( 0.94) ( 0.46)(b)
Portfolio turnover
rate .................... 19 (c) 19 (c) 54 80 89
Net assets, end of
period ($ millions)...... 7 119 90 25 4
<FN>
- ----------
* 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.
/dagger/ For the period May 7, 1993 (commencement of operations) to October
31, 1993.
/dagger//dagger/ For the period April 3, 1995 (commencement of Class C Shares)
to October 31, 1995.
/dagger//dagger//dagger/ For the period January 2, 1998 (commencement of Class
B Shares) to April 30, 1998.
(a) Excludes management fees waived by the Manager of less than $.01 per share
for the period ended October 31, 1993. The operating expense ratio
including such items would have been 2.09% (annualized). The year ended
October 31, 1994 includes recovery of previously waived management fees
paid to the manager of less than $.01 per share.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of sales charge.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - VALUE EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements.
CLASS A SHARES*
-----------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1998 -----------------------------------------
(UNAUDITED) 1997 1996 1995/dagger/
-------------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 24.27 $ 20.27 $ 18.00 $ 14.29
--------- -------- -------- ---------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... 0.06 0.22 0.17 0.08
Net realized and unrealized
gain on investments ............. 1.90 5.23 2.76 3.63
--------- -------- -------- ---------
Total from Investment
Operations ...................... 1.96 5.45 2.93 3.71
--------- -------- -------- ---------
Less Distributions:
Dividends from net
investment income ............... ( 0.20) ( 0.15) ( 0.11) --
Distributions from net
realized gains .................. ( 4.90) ( 1.30) ( 0.55) --
--------- -------- -------- ---------
Total Distributions .............. ( 5.10) ( 1.45) ( 0.66) --
--------- -------- -------- ---------
Net asset value, end
of period ........................ $ 21.13 $ 24.27 $ 20.27 $ 18.00
========= ======== ======== =========
Total Return(%)(d) ................ 9.84 (c) 28.69 16.59 25.96 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a) ..... 1.45 (b) 1.61 1.65 1.65 (b)
Net investment income to
average daily net assets ........ 0.53 (b) 0.96 0.89 1.05 (b)
Portfolio turnover rate .......... 67 (c) 155 129 82
Net assets, end of period
($ millions)..................... 22 19 15 12
</TABLE>
CLASS B SHARES*
------------------------------------
FOR THE
PERIOD
ENDED
APRIL 30,
1998
(UNAUDITED)/dagger//dagger//dagger/
------------------------------------
Net asset value, beginning of
period ........................... $ 19.60
---------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... ( 0.02)
Net realized and unrealized
gain on investments ............. 1.31
---------
Total from Investment
Operations ...................... 1.29
---------
Less Distributions:
Dividends from net
investment income ............... --
Distributions from net
realized gains .................. --
---------
Total Distributions .............. --
---------
Net asset value, end
of period ........................ $ 20.89
=========
Total Return(%)(d) ................ 6.58 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a) ..... 2.25 (b)
Net investment income to
average daily net assets ........ (0.37)(b)
Portfolio turnover rate .......... 67 (c)
Net assets, end of period
($ millions)..................... 0.47
<TABLE>
<CAPTION>
CLASS C SHARES*
-------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD FOR THE YEARS ENDED
ENDED OCTOBER 31,
APRIL 30, --------------------------------------------
1998
(UNAUDITED) 1997 1996 1995/dagger//dagger/
----------- ------- ------ --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 23.98 $ 20.06 $ 17.92 $ 15.27
--------- --------- --------- ---------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... (0.02) 0.05 0.02 0.01
Net realized and unrealized
gain on investments ............. 1.88 5.20 2.74 2.64
--------- --------- --------- ---------
Total from Investment
Operations ...................... 1.29 1.86 5.25 2.65
--------- --------- --------- ---------
Less Distributions:
Dividends from net
investment income ............... (0.05) (0.03) (0.07) --
Distributions from net
realized gains .................. (4.90) (1.30) (.055) --
--------- --------- --------- ---------
Total Distributions .............. (4.95) (1.33) (0.62) --
--------- --------- --------- ---------
Net asset value, end
of period ........................ $ 20.89 $ 23.98 $ 20.06 $ 17.92
========= ========= ========= =========
Total Return(%)(d) ................ 9.40 (c) 27.79 15.65 17.35 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a) ..... 2.20 (b) 2.36 2.40 2.40 (b)
Net investment income to
average daily net assets ........ (0.22) (b) 0.21 0.13 0.28 (b)
Portfolio turnover rate .......... 67 (c) 155 129 82
Net assets, end of period
($ millions)..................... 17 13 10 4
</TABLE>
- ----------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents per share data for the period
since the use of the undistributed income method does not correspond with
results of operations.
/dagger/ For the period December 30, 1994 (commencement of operations) to
October 31, 1995.
/dagger//dagger/ For the period April 3, 1995 (commencement of Class C Shares)
to October 31, 1995.
/dagger//dagger//dagger/ For the period January 2, 1998 (commencement of Class
B Shares) to April 30, 1998.
(a) Excludes management fees waived and expenses reimbursed by the Manager in
the amount of $.07 and $.13 per Class A Shares, for the two years ended
October 31, 1996. The operating expense ratios including such items would
have been 1.99% and 3.49% (annualized) for Class A Shares for the two years
ended October 31, 1996. Excludes management fees waived and expenses
reimbursed by the Manager in the amount of $.07 and $.13 per Class C
Shares, for the two years ended October 31, 1996. The operating expense
ratio including such items would have been 2.74% and 4.24% (annualized) for
Class C Shares for the two years ended October 31, 1996. The year ended
October 31, 1997 includes recovery of previously waived management fees
paid to the manager of $.02 per Class A and C Shares. The operating expense
ratio excluding such items would have been 1.53% and 2.28% for Class A and
C Shares, respectively.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
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 and presently offers shares in five series,
the Eagle International Equity Portfolio, the Growth Equity Fund, the Mid
Cap Growth Fund, the Small Cap Stock Fund, and the Value Equity Fund
(each, a "Fund" and collectively, the "Funds"). The Eagle International
Equity Portfolio primarily seeks capital appreciation principally through
investment in an international portfolio of equity securities. The Growth
Equity Fund primarily seeks growth through long-term capital appreciation.
The Mid Cap Growth Fund primarily seeks long-term appreciation by
investing in equity securities of companies with mid-size market
capitalization that are believed to have above average growth potential.
The Small Cap Stock Fund seeks long-term capital appreciation by investing
principally in the equity securities of companies with small market
capitalization. The Value Equity Fund primarily seeks long-term capital
appreciation and, secondarily, seeks current income. The Funds currently
offer Class A, Class B and Class C Shares. 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 B Shares, which were offered to shareholders
beginning January 2, 1998, are sold subject to a 5% maximum contingent
deferred sales load (based on the lower of purchase price or redemption
price), declining over a six-year period. Class C Shares, which were
offered to shareholders beginning April 3, 1995, are sold subject to a
contingent deferred sales charge of 1% of the lower of net asset value or
purchase price payable upon any redemptions made in less than one year of
purchase. The Eagle International Equity Portfolio also issues Eagle Class
Shares, which are subject to certain minimum investment requirements and
are sold without any sales charge. 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: Each 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 Eagle International Equity
Portfolio calculates its daily net asset value per share. Although the
Eagle International Equity Portfolio 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 amortized cost, which
approximates market.
FOREIGN CURRENCY TRANSACTIONS: The books and records of the Eagle
International Equity Portfolio 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 Eagle International Equity Portfolio 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 Eagle International Equity
Portfolio 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 Eagle International Equity
Portfolio 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: Each Fund enters into repurchase agreements whereby
a 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 to at least 100% of the resale price.
FEDERAL INCOME TAXES: Each Fund is treated as a single corporate taxpayer
as provided for in the Tax Reform Act of 1986, as amended. A 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 each
Fund, will be distributed to shareholders in the following fiscal year.
Each Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes.
30
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
STATE QUALIFICATION EXPENSES: State qualification fees are amortized based
either on the time period covered by the qualification or as related
shares are sold, whichever is appropriate for each state.
OPTION ACCOUNTING PRINCIPLES: When a Fund writes a covered call option, an
amount equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset and as an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. The current market
value of a written option is based on the last offering price on the
principal exchange on which such option is traded. The Fund receives a
premium on the sale of an option, but gives up the opportunity to profit
from any increase in stock value above the exercise price of the option.
If an option that a Fund has written either expires on its stipulated
expiration date, or the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a call option that a
Fund has written is exercised, the Fund realizes a capital gain or loss
from the sale of the underlying security, and the proceeds from such sale
are increased by the premium originally received.
EXPENSES: Each 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 all allocated proportionately among the
Trust. Expenses of each 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 and shareholders service fees with respect to Eagle
International Equity Portfolio, are charged directly to that class.
ORGANIZATION EXPENSES: Expenses incurred in connection with the formation
of each Fund were deferred and are being amortized on a straight-line
basis over 60 months from the date of commencement of operations.
CAPITAL ACCOUNTS: Each Fund reports the undistributed net investment
income and accumulated net realized gain (loss) accounts on a basis
approximating amounts available for future tax distributions (or to offset
future taxable realized gains when a capital loss carryforward is
available). Accordingly, each 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. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
Note 2: FUND SHARES. At April 30, 1998, there was an unlimited number of shares
of beneficial interest of no par value authorized.
EAGLE INTERNATIONAL EQUITY PORTFOLIO
------------------------------------
Transactions in Class A Shares, C Shares and Eagle Shares of the Fund
during the six month period ended April 30, 1998 and Class B Shares from
January 2, 1998 (commencement of Class B Shares) to April 30, 1998, were
as follows:
FOR THE PERIOD ENDED A SHARES B SHARES
APRIL 30, 1998 ----------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) --------- ----------- ------ ---------
Shares sold ..................... 30,881 $ 793,261 4,341 $112,900
Shares issued on reinvestment
of distributions .............. 6,686 158,113 -- --
Shares redeemed ................. (23,648) (584,354) (21) (583)
------- ----------- ----- --------
Net increase (decrease) ......... 13,919 $ 367,020 4,320 $112,317
=========== ========
Shares outstanding:
Beginning of period ............ 255,762 --
------- -----
End of period .................. 269,681 4,320
======= =====
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED C SHARES EAGLE SHARES
APRIL 30, 1998 ------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold ..................... 43,600 $1,113,463 64,212 $ 1,635,201
Shares issued on reinvestment
of distributions .............. 4,371 102,414 34,247 805,842
Shares redeemed ................. (12,639) (322,834) (149,498) (3,702,023)
------- ---------- -------- ------------
Net increase (decrease) ......... 35,332 $ 893,043 (51,039) $ (1,260,980)
========== ============
Shares outstanding:
Beginning of period ............ 158,392 1,331,303
------- ---------
End of period .................. 193,724 1,280,264
======= =========
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Transactions in Class A Shares, C Shares and Eagle shares of the Fund
during the year ended October 31, 1997, were as follows:
A SHARES C SHARES EAGLE SHARES
FOR THE YEAR ENDED OCTOBER 31, 1997 -------------------------- -------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ....................... 145,840 $3,468,293 121,689 $2,915,342 459,654 $ 11,104,451
Shares issued on reinvestment
of distributions ................ 3,346 75,081 1,158 25,899 21,188 475,249
Shares redeemed ................... (33,267) (815,865) (18,479) (439,911) (125,683) (2,972,703)
------- ---------- ------- ---------- -------- ------------
Net increase ...................... 115,919 $2,727,509 104,368 $2,501,330 355,159 $ 8,606,997
========== ========== ============
Shares outstanding:
Beginning of year ................ 139,843 54,024 976,144
------- ------- --------
End of year ...................... 255,762 158,392 1,331,303
======= ======= =========
</TABLE>
GROWTH EQUITY FUND
------------------
Transactions in Class A and C Shares of the Fund during the six month
period ended April 30, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to April 30, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE PERIOD ENDED APRIL 30, 1998 ---------------------------- ------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) ---------- ------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ....................... 220,907 $ 5,779,334 52,580 $1,387,855 285,929 $ 7,358,004
Shares issued on reinvestment
of distributions ................ 12,951 312,499 -- -- 10,879 258,383
Shares redeemed ................... (96,205) (2,477,549) (93) (2,578) (54,912) (1,434,634)
------- ------------ ------ ---------- ------- ------------
Net increase ...................... 137,653 $ 3,614,284 52,487 $1,385,277 241,896 $ 6,181,753
============ ========== ============
Shares outstanding:
Beginning of period .............. 1,028,794 -- 783,120
--------- ------ -------
End of period .................... 1,166,447 52,487 1,025,016
========= ====== =========
</TABLE>
Transactions in Class A and C Shares of the Fund during the year ended
October 31, 1997, were as follows:
<TABLE>
<CAPTION>
A SHARES C SHARES
FOR THE YEAR ENDED OCTOBER 31, 1997 ---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold ....................... 553,303 $ 11,132,958 534,451 $11,343,816
Shares redeemed ................... (208,950) (4,286,048) (41,133) (835,061)
-------- ------------ ------- -----------
Net increase ...................... 344,353 $ 6,846,910 493,318 $10,508,755
============ ===========
Shares outstanding:
Beginning of year ................ 684,441 289,802
-------- -------
End of year ...................... 1,028,794 783,120
========= =======
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
-------------------
Transactions in Class A and C Shares of the Fund during the period
November 6, 1997 (commencement of operations) to April 30, 1998 and Class
B Shares from January 2, 1998 (commencement of Class B Shares) to April
30, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE PERIOD ENDED APRIL 30, 1998 --------------------------- ----------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) ------------ -------------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ....................... 1,266,573 $ 18,445,185 99,188 $1,538,661 582,185 $8,491,096
Shares redeemed ................... (145,962) (2,257,563) (324) (5,224) (53,020) (800,435)
--------- ------------ ------ ---------- ------- ----------
Net increase ...................... 1,120,611 $ 16,187,622 98,864 $1,533,437 529,165 $7,690,661
============ ========== ==========
Shares outstanding:
Beginning of period .............. -- -- --
--------- ------ -------
End of period .................... 1,120,611 98,864 529,165
========= ====== =======
</TABLE>
SMALL CAP STOCK FUND
--------------------
Transactions in Class A and C Shares of the Fund during the six month
period ended April 30, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to April 30, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE PERIOD ENDED APRIL 30, 1998 ----------------------------- ----------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) ------------ --------------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................... 1,392,366 $ 41,623,508 218,328 $6,352,269 913,447 $ 26,402,368
Shares issued on reinvestment
of distributions .............. 450,844 12,565,036 -- -- 196,501 5,364,470
Shares redeemed ................. (711,607) (21,302,908) (836) (24,891) (222,904) (6,509,588)
--------- ------------- ------- ---------- -------- ------------
Net increase .................... 1,131,603 $ 32,885,636 217,492 $6,327,378 887,044 $ 25,257,250
============= ========== ============
Shares outstanding:
Beginning of period ............ 7,315,919 -- 3,018,510
--------- ------- ---------
End of period .................. 8,447,522 217,492 3,905,554
========= ======= =========
</TABLE>
Transactions in Class A and C Shares of the Fund during the year ended
October 31, 1997, were as follows:
<TABLE>
<CAPTION>
A SHARES C SHARES
FOR THE YEAR ENDED OCTOBER 31, 1997 ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold .................... 3,806,977 $ 102,346,776 2,145,616 $ 56,993,115
Shares issued on reinvestment
of distributions ............. 335,280 7,590,750 93,252 2,086,050
Shares redeemed ................ (805,333) (21,288,297) (267,904) (6,875,891)
--------- ------------- --------- ------------
Net increase ................... 3,336,924 $ 88,649,229 1,970,964 $ 52,203,274
============= ============
Shares outstanding:
Beginning of year ............. 3,978,995 1,047,546
--------- ---------
End of year ................... 7,315,919 3,018,510
========= =========
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
-----------------
Transactions in Class A and C Shares of the Fund during the six month
period ended April 30, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to April 30, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE PERIOD ENDED APRIL 30, 1998 ----------------------------- -------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) ------------ -------------- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 91,977 $ 1,938,193 22,281 $456,991 66,644 $ 1,405,154
Shares issued on reinvestment
of distributions ............. 216,712 4,225,878 -- -- 165,685 3,204,346
Shares redeemed ................ (103,754) (2,237,664) -- -- (61,529) (1,322,799)
-------- ------------ ------ -------- ------- ------------
Net increase ................... 204,935 $ 3,926,407 22,281 $456,991 170,800 $ 3,286,701
============ ======== ============
Shares outstanding:
Beginning of period ........... 856,534 -- 656,055
-------- ------ -------
End of period ................. 1,061,469 22,281 826,855
========= ====== =======
</TABLE>
Transactions in Class A and C Shares of the Fund during the year ended
October 31, 1997, were as follows:
<TABLE>
<CAPTION>
A SHARES C SHARES
FOR THE YEAR ENDED OCTOBER 31, 1997 ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- --------------
<S> <C> <C> <C> <C>
Shares sold .................... 189,849 $ 4,264,982 196,401 $ 4,418,250
Shares issued on reinvestment
of distributions ............. 54,761 1,062,355 34,665 668,696
Shares redeemed ................ (148,365) (3,309,390) (86,706) (1,911,305)
-------- ------------ ------- ------------
Net increase ................... 96,245 $ 2,017,947 144,360 $ 3,175,641
============ ============
Shares outstanding:
Beginning of year ............. 760,289 511,695
-------- -------
End of year ................... 856,534 656,055
======== =======
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the six month period ended
April 30, 1998, purchases and sales on investment securities (excluding
repurchase agreements and short term obligations) were as follows:
INVESTMENT SECURITIES
-----------------------------
PURCHASES SALES
------------- ------------
Eagle International Equity Portfolio ......... $ 16,423,077 $13,641,284
Growth Equity Fund ........................... 20,800,738 11,440,748
Mid Cap Growth Fund .......................... 34,336,057 9,748,678
Small Cap Stock Fund ......................... 109,310,915 63,222,209
Value Equity Fund ............................ 27,187,402 24,569,080
Agency brokerage commissions for the Eagle International Equity Portfolio,
the Growth Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund,
and the Value Equity Fund for the six month period ended April 30, 1998
aggregated $62,431, $30,920, $48,179, $206,972 and $71,149, of which $0,
$0, $0, $34,560 and $1,314, was paid to Raymond James & Associates, Inc.,
respectively.
34
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Transactions in covered call options written on equity securities were as
follows:
NUMBER OF PREMIUMS
VALUE EQUITY FUND CONTRACTS RECEIVED
- ----------------- --------- ---------
Outstanding, October 31, 1997 ......... 80 $ 20,429
Written .............................. 651 168,140
Closed................................ (143) (44,881)
Exercised ............................ (286) (46,659)
Expired .............................. (212) (60,850)
---- ---------
Outstanding, April 30, 1998 ........... 90 $ 36,179
==== =========
Note 4: MANAGEMENT, SUBADIVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND
TRUSTEES' FEES. Under the Fund's Investment Advisory and Administrative
Agreements with Heritage Asset Management, Inc. (the "Manager"), the
Growth Equity, Mid Cap Growth and Value Equity Funds agree to pay to the
Manager a fee equal to an annual rate of 0.75% of the Fund's average daily
net assets, computed daily and payable monthly. For the Small Cap Stock
Fund the Management fee is 1.0% on the first $50 million and 0.75% of any
excess over $50 million of net assets. Under the Fund's Investment
Advisory and Administrative Agreement with Eagle Asset Management, Inc.
("Eagle"), the Eagle International Equity Portfolio Management fee is 1.0%
on the first $100 million of net assets and 0.80% of any excess over $100
million of net assets. The Manager voluntarily will waive its investment
advisory fees and, if necessary, reimburse each Fund to the extent that
Class A, Class B and Class C annual operating expenses exceed that Funds
average daily net assets attributable to that class for the 1998 fiscal
year as follows:
CLASS A CLASS B AND CLASS C
--------- --------------------
Growth Equity Fund ........... 1.45% 2.20%
Mid Cap Growth Fund .......... 1.60% 2.35%
Small Cap Stock Fund ......... 1.30% 2.05%
Value Equity Fund ............ 1.45% 2.20%
Eagle has capped expenses at 1.97% for Class A Shares of the Eagle
International Equity Portfolio (2.72% for Class B and C Shares). Under
these agreements, management fees of $30,140 were waived for the Eagle
International Equity Portfolio for the six month period ended April 30,
1998. If total Fund expenses fall below the expense limitation agreed to
by Eagle before the end of the year ended October 31, 2000, Eagle
International Equity Portfolio may be required to pay Eagle a portion or
all of the waived management fees. In addition the Eagle International
Equity Portfolio may be required to pay Eagle, a portion or all of the
management fees waived in fiscal 1996 and 1997 if total Fund expenses fall
below the annual expense limitations before the end of the year ending
October 31, 1998 and 1999, respectively. Management fees of $36,113 were
waived by the Mid Cap Growth Fund for the six month period ended April 30,
1998. If total Fund expenses fall below the expense limitation agreed to
by the Manager before the end of the year ended October 31, 2000, the Mid
Cap Growth Fund may be required to pay the Manager a portion or all of the
waived management fees.
Eagle has entered into an agreement with Martin Currie, Inc., a New York
Corporation to provide to the Eagle International Equity Portfolio
investment advice, portfolio management services including the placement
of brokerage orders, and certain compliance and other services for a fee
payable by Eagle equal to .50% of the average daily net assets on the
first $100 million of net assets and .40% thereafter without regard to any
reduction due to the imposition of expense limitations. For the six month
period April 30, 1998 the Subadviser earned $108,752 for Subadviser fees,
which was paid by Eagle.
The Manager has entered into agreements with Eagle, (with respect to the
Value Equity Fund, Mid Cap Growth Fund, and the Growth Equity Fund) and
with Eagle and Awad & Associates, Inc., a division of Raymond James &
Associates, Inc. (with respect to the Small Cap Stock Fund) to provide
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 the fees payable by the Fund to the
Manager without regard to any reduction due to the imposition of expense
limitations. For the six month period ended April 30, 1998, the total fees
the Subadvisers earned were $95,307, $37,454 $674,083 and $71,506 for the
Growth Equity Fund, Mid Cap Growth Fund, Small Cap Stock Fund and Value
Equity Fund, respectively.
35
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Effective October 1, 1997, all of the assets of the Value Equity Fund were
allocated to Eagle. Prior to October 1, 1997, the assets of the Fund were
managed by Dreman Value Advisors, Inc. ("Dreman"), an additional
subadviser to the Fund. Dreman provided 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 .35% of the Fund's average daily net assets.
Raymond James & Associates, Inc. (the "Distributor") has advised the Trust
that it received $14,964, $125,138, $452,382, $732,618 and $42,130 in
front end sales charges for Class A Shares, $25, $69, $224, $1,058, and $0
in contingent deferred sales charges for Class B Shares and $523, $3,446,
$5,368, $16,254 and $1,183 in contingent deferred sales charges for Class
C Shares for the Eagle International Equity Portfolio, Growth Equity Fund,
Mid Cap Growth Fund, Small Cap Stock Fund and the Value Equity Fund,
respectively, for the six month period ended April 30, 1998. The
Distributor paid sales commission to salespersons and from these fees,
incurred other distribution costs.
Pursuant to a plan in accordance with Rule 12b-1 of the Investment Company
Act of 1940, as amended, the Trust is authorized to pay the Distributor a
fee pursuant to the Class A Distribution Plan of up to .35% of the average
daily net assets for the services it provides in connection with the
promotion and distribution of Fund shares. However, at the present time
the Board of Trustees has authorized payments of only .25% of average
daily net assets. Under the Class B and Class C Distribution Plans, the
Trust may pay the Distributor a fee equal to 1.00% of the average daily
net assets. Such fees are accrued daily and payable monthly. Class B
Shares will convert to Class A Shares eight years after the end of the
calendar month in which the shareholder's order to purchase was accepted.
The Manager, Eagle and the Distributor are all wholly owned subsidiaries
of Raymond James Financial, Inc.
The Manager also is the Dividend Paying and Shareholder Servicing Agent
for the Eagle International Equity Portfolio, the Growth Equity Fund, the
Mid Cap Growth Fund, the Small Cap Stock Fund, and the Value Equity Fund.
The amount payable to the Manager for such expenses as of April 30, 1998
was $18,559, $14,000, $7,200 $90,800 and $8,200, respectively. In
addition, the Manager performs Fund Accounting services for the Growth
Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund and the
Value Equity Fund and charged $16,147, $13,102, $21,064 and $14,784,
during the current period of which $10,120, $8,800, $12,000 and $9,200,
was payable as of April 30, 1998, respectively.
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 the Manager (collectively referred to
as the Heritage funds). Each Trustee of the Heritage funds that is not an
interested person of the Manager received and annual fee of $8,000, and
additional fee of $3,000 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.
EAGLE INTERNATIONAL EQUITY PORTFOLIO
------------------------------------
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.
GROWTH EQUITY FUND:
-------------------
For the year ended October 31, 1997, to reflect reclassifications arising
from permanent book/tax differences primarily attributable to a net
operating loss, the Fund debited accumulated net realized gain on
investments $176,623, paid-in capital $8,565 and credited accumulated net
investment loss $185,188. The Fund utilized $54,321 of net tax basis
capital losses during the current year against net realized gains from
investment transactions.
SMALL CAP STOCK FUND:
---------------------
For the year ended October 31, 1997, to reflect reclassifications arising
from permanent book/tax differences primarily attributable to a net
operating loss and REIT distributions, the Fund debited accumulated net
realized gain on investments $703,835 and credited paid-in capital
$143,692 and accumulated net investment loss $560,143.
VALUE EQUITY FUND:
------------------
For the year ended October 31, 1997, to reflect reclassification arising
from permanent book/tax differences attributable to a dividend reclass,
the Fund debited accumulated net realized gain on investments and credited
undistributed net investment income $9,919.
36
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Note 6: FINANCIAL INVESTMENT WITH OFF-BALANCE SHEET RISK.
EAGLE INTERNATIONAL EQUITY PORTFOLIO:
-------------------------------------
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 holding to be
hedged. Additionally, when the Subadviser anticipates purchasing
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.
The Fund may enter into forward contracts to hedge against changes to
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.
37
<PAGE>
HERITAGE FAMILY OF FUNDS/TM/
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH
HERITAGE MONEY MARKET FUNDS
Cash Trust Money Market
Cash Trust Municipal Money Market
HERITAGE BOND FUNDS
Intermediate Government
High Yield
HERITAGE STOCK FUNDS
Income-Growth
Value Equity
Growth Equity
Capital Appreciation
Mid Cap
Small Cap
International
We are pleased that many of you are also investors in these funds. For
information and a prospectus for any of these mutual funds, please contact your
financial advisor. Please read the prospectus carefully before you invest in any
of the funds.
This report is for the information of shareholders of Heritage Series Trust -
Eagle International Equity Portfolio, Growth Equity Fund, Mid Cap Growth Fund,
Small Cap Stock Fund and Value Equity fund. It may also be used as sales
literature when preceded or accompanied by a prospectus.
Copyright 1998 Heritage Asset Management, Inc.
34M 4/98
5341S EQ
Heritage Series Trust
P.O. Box 33022
[GRAPHIC OMITTED] St. Petersburg, FL 33733
- --------------------------------------------------------------
Address Change Requested
