HERITAGE
SERIES
TRUST
[GRAPHIC OMITTED]
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH.
Aggressive Growth Fund
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, 1999
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<PAGE>
HERITAGE SERIES TRUST
SEMIANNUAL REPORT
TABLE OF CONTENTS
PRESIDENT'S LETTER ........................... 1
PORTFOLIO COMMENTARY AND INVESTMENT PORTFOLIO:
AGGRESSIVE GROWTH FUND
Investment Commentary .................. 3
Investment Portfolio ................... 4
EAGLE INTERNATIONAL EQUITY PORTFOLIO
Investment Commentary .................. 6
Investment Portfolio ................... 8
GROWTH EQUITY FUND
Portfolio Management Letter ............ 13
Investment Portfolio ................... 16
MID CAP GROWTH FUND
Portfolio Management Letter ............ 17
Investment Portfolio ................... 19
SMALL CAP STOCK FUND
Portfolio Management Letters ........... 21
Investment Portfolio ................... 23
VALUE EQUITY FUND
Portfolio Management Letter ............ 26
Investment Portfolio ................... 27
STATEMENT OF ASSETS AND LIABILITIES .......... 29
STATEMENT OF OPERATIONS ...................... 30
STATEMENT OF CHANGES IN NET ASSETS ........... 31
FINANCIAL HIGHLIGHTS ......................... 33
NOTES TO FINANCIAL STATEMENTS ................ 39
<PAGE>
June 17, 1999
Dear Fellow Shareholders:
I am pleased to provide you with the semiannual report for Heritage Series
Trust for the six month period ended April 30, 1999. The investment and
financial information for each of the six funds available within Heritage
Series Trust is provided in this report. Because many of you have investments
in more than one of these funds, this approach allows us to provide you with
the relevant information for each of your funds while reducing the volume of
mail you receive from us.
While returns for most sectors of the equity markets were positive during this
semiannual reporting period, large cap stocks generally outperformed small and
mid cap stocks and "growth" stocks slightly outperformed "value" stocks over
this period. As the table below shows, all portfolios of Heritage Series Trust
also generated positive investment performance for this period. Although we are
pleased with the excellent absolute returns shown below, we should caution that
these returns - especially those over 10% - should not be relied upon as
typical of six-month returns from investments in common stocks. Markets can -
and will - move both up and down, sometimes in dramatic fashion. We should all
have appropriate long-term investment horizons in order to be able to weather
the short-term volatility in the market.
FUND "A" SHARES* "B" SHARES* "C" SHARES*
---- ----------- ----------- -----------
Aggressive Growth Fund +21.24% +20.74% +20.74%
Eagle International Equity Portfolio +14.57% +14.07% +14.11%
Growth Equity Fund +24.91% +24.49% +24.45%
Mid Cap Growth Fund + 5.60% + 5.22% + 5.22%
Small Cap Stock Fund + 7.78% + 7.41% + 7.41%
Value Equity Fund +14.24% +13.81% +13.82%
In the pages that follow are commentaries from the portfolio managers for each
of the portfolios in Heritage Series Trust. Each commentary is followed by
investment portfolio information for the respective fund. Following this
information, you will find other important financial information for all of
these funds.
Since our last annual report, two of the funds in Heritage Series Trust have
changed portfolio managers. First, on April 1, 1999, Ashi Parikh joined Eagle
Asset Management, Inc. as managing director - growth equity and began managing
the Growth Equity Fund. Ashi joined Eagle from Banc One Investment Advisors
where he and his team had delivered outstanding results in both large cap and
mid cap growth funds. Second, on May 14, 1999 the shareholders of the Value
Equity Fund approved retaining Osprey Partners Investment Management as a new
subadviser for this fund. This action had previously been approved by the
Trustees of the Value Equity Fund at their February 26, 1999 meeting. The
Osprey management team led by Russell Tompkins and Jerry Fischer has a long and
successful history of managing portfolios utilizing a value approach to
investing. We are excited about these changes and commend to you the portfolio
management letters from these new managers to learn how they have positioned
the portfolios of the Growth Equity and Value Equity Funds.
1
<PAGE>
On behalf of all of us at Heritage, thank you for your continuing investments
in the portfolios of Heritage Series Trust. We hope that you will discuss with
your financial advisors how any of these funds you do not currently own may fit
into your investment plans. Please remember that you may call us at
800/709-FUND (3863) with any questions or comments you would like to share with
us.
We look forward to reporting to you at the end of the funds' fiscal year.
Sincerely,
/s/ STEPHEN G. HILL
-------------------
Stephen G. Hill
President
- ----------
* These returns are calculated without the imposition of either front-end or
contingent deferred sales charges.
2
<PAGE>
May 28, 1999
Dear Fellow Shareholders:
The six months ended April 30, 1999 produced a strong return of +21.24%* for
the Class A Shares for the Heritage Aggressive Growth Fund (the "Fund").
Performance for the period benefited from the acquisition or merger of several
of our holdings, including Computer Management Systems (acquired by Computer
Associates), FORE Systems (to be acquired by General Electric of the U.K.),
Pharmerica (merged into Bergen Brunswig) and Sodak Gaming (to be acquired by
International Game Technology).
Other strong contributors included Ampex, which announced investments in
several on-line television production ventures, CDW Computer Centers
(subsequently sold), which surged on strong earnings, a rebound in the shares
of Artesyn Technology, aided by a rebound in Asian markets and strong gains
from Catalina Marketing, largely reflecting their investment in Supermarkets
OnLine, a leader in Internet coupons.
On the downside, disruptions in supplies of wireless handsets in China led to
an earnings disappointment at Brightpoint. Despite strong earnings, Nova
Corporation performed poorly, reflecting concerns over its integration of the
recently acquired PMT Services, Inc.
The Fund's portfolio remains a selective group of growth stocks ranging from
minicaps such as Ampex to giants such as Nokia. At April 30, 1999, the
portfolio traded at a relatively modest twenty times 1999 earnings. We believe
our attention to valuation may help to explain the numerous companies in our
portfolio that have been bought out. Given the reasonable valuation and
strategic positioning of many of our holdings, we are optimistic that this
trend could continue.
Although we have little exposure in Internet "pure plays", due to their high
valuations, we have benefited from several companies which have strong core
businesses in addition to emerging Internet interests such as Catalina
Marketing. Our investment approach is generally to buy companies that benefit
from the Internet, rather than direct Internet investments.
Although recent fears of higher interest rates have put a damper on many growth
stocks, through our attention to valuation and flexibility between market
capitalizations, thus far, we have avoided the sharp downturn.
Our strategy remains the same. We will seek to apply sound research and
valuation strategies to identifying rapidly growing companies.
As always, we will seek to do the best for our shareholders.
Sincerely,
/s/ BERT BOKSEN
---------------------
Bert Boksen
Senior Vice President
Eagle Asset Management, Inc.
Portfolio Manager, Aggressive
Growth Fund
- ----------
* These returns are calculated without the imposition of either front-end or
contingent deferred sales charges.
3
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS--91.6%(a)
-----------------------
ADVERTISING/COMMUNICATIONS--4.3%
--------------------------------
19,000 Catalina Marketing Corporation*....... $1,623,312
----------
AIR TRANSPORT--2.1%
-------------------
25,000 Southwest Airlines, Corporation ...... 814,062
----------
DATA PROCESSING--17.5%
----------------------
27,300 Check Point Software
Technologies Ltd.* .................. 962,325
63,700 FORE Systems, Inc.* .................. 2,149,875
22,000 Gartner Group, Inc., Class "A"* ...... 419,375
50,000 IMRglobal Corporation* ............... 862,500
20,000 MMC Networks, Inc.* .................. 491,250
85,000 Omega Research Inc.* ................. 807,500
40,000 Tech Data Corporation ................ 935,000
----------
6,627,825
----------
EDUCATION--1.1%
---------------
12,000 Strayer Education, Inc. .............. 415,500
----------
ELECTRONICS/ELECTRIC--9.1%
--------------------------
140,000 Ampex Corporation, Class "A"* ........ 638,750
80,000 Artesyn Technologies, Inc.* .......... 1,440,000
14,000 Nokia Corporation, Sponsored
ADR, Class "A"* ..................... 1,038,625
40,800 PSC Inc.* ............................ 364,650
----------
3,482,025
----------
FINANCE--4.5%
-------------
20,000 Hambrecht & Quist Group, Inc.*........ 705,000
10,000 Morgan Stanley Dean Witter
& Company ........................... 991,875
----------
1,696,875
----------
FOOD--4.5%
----------
45,000 Dave & Buster's, Inc.* ............... 922,500
20,000 Papa John's International Inc.* ...... 803,750
----------
1,726,250
----------
GRAPHIC ARTS--1.7%
------------------
25,000 World Color Press, Inc.* ............. 639,062
----------
HEALTH CARE CENTERS--3.4%
-------------------------
67,375 Bergen Brunswig Corporation,
Class "A" ........................... 1,280,125
----------
INTERNET--1.0%
--------------
2,000 America Online, Inc.* ................ 285,500
59,900 Firstwave Technologies, Inc.* ........ 97,338
----------
382,838
----------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
LEISURE/AMUSEMENT--10.6%
------------------------
23,500 Action Performance Companies,
Inc.* ............................... 796,063
25,000 Carnival Corporation, Class "A" ...... 1,031,250
10,000 Royal Caribbean Cruises, Ltd. ........ 369,375
90,000 Sodak Gaming, Inc.* .................. 776,250
34,000 Steiner Leisure, Ltd.* ............... 1,079,500
----------
4,052,438
----------
MANUFACTURING/DISTRIBUTIONS--0.6%
---------------------------------
40,000 Brightpoint, Inc.* ................... 246,250
----------
MEDICAL EQUIPMENT/SUPPLY--4.1%
------------------------------
42,500 IGEN International, Inc.* ............ 1,067,813
5,000 Immunex Corporation* ................. 477,500
----------
1,545,313
----------
PHARMACEUTICAL--1.1%
--------------------
25,500 Collateral Therapeutics, Inc.* ....... 290,063
1,500 Sepracor Inc* ........................ 126,750
----------
416,813
----------
REAL ESTATE/LAND DEVELOPMENT--1.0%
----------------------------------
20,000 LNR Property Corporation ............. 392,500
----------
RETAIL STORES--6.1%
-------------------
60,000 Hibbett Sporting Goods, Inc.* ........ 1,638,750
60,000 Jan Bell Marketing, Inc.* ............ 183,750
30,000 Micro Warehouse, Inc.* ............... 508,125
----------
2,330,625
----------
RETAIL-SPECIALTY--1.4%
----------------------
50,000 Musicland Stores Corporation* ........ 543,750
----------
SERVICES--12.0%
---------------
65,500 ABR Information Services, Inc.* ...... 1,146,250
42,000 MPW Industrial Services
Group, Inc.* ........................ 383,250
55,000 Nova Corporation* .................... 1,430,000
25,000 Stewart Enterprises, Inc.,
Class "A" ............................ 496,875
55,000 Sykes Enterprises, Inc.* ............. 1,127,500
----------
4,583,875
----------
TELECOMMUNICATIONS--5.5%
------------------------
70,000 EMS Technologies, Inc* ............... 883,750
15,000 Plantronics, Inc.* ................... 1,012,500
10,000 Powertel, Inc.* ...................... 217,500
----------
2,113,750
----------
Total Common Stocks
(cost $32,429,261).................................
34,913,188
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- -------------------------------------------------------------------------------
MARKET
VALUE
-----------
REPURCHASE AGREEMENT--12.6%(a)
- ------------------------------
Repurchase Agreement with State Street Bank
and Trust Company, dated April 30, 1999 @
4.78% to be repurchased at $4,772,900 on
May 3, 1999, collateralized by $3,190,000
United States Treasury Bonds, 10.625% due
August 15, 2015, (market value $4,833,850
including interest) (cost $4,771,000)...... $ 4,771,000
-----------
TOTAL INVESTMENT PORTFOLIO,
(cost $37,200,261)(b), 104.2%(a)........ 39,684,188
OTHER ASSETS AND LIABILITIES, net, (4.2%)(a) (1,584,715)
-----------
NET ASSETS, 100.0% ........................ $38,099,473
===========
- ----------------------
* 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
$2,483,927, which consists of aggregate gross unrealized appreciation for
all securities in which there is an excess of market value over tax cost of
$4,440,355 and aggregate gross unrealized depreciation for all securities in
which there is an excess tax cost over market value of $1,956,428.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
June 18, 1999
Eagle International Equity Portfolio
Commentary for the Semi-Annual Report for the period ended April 30, 1999
The Eagle International Equity Portfolio (the "Fund") invests a majority
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 Fund may
also invest a portion of the investment Portfolio in developing and emerging
markets around the world. The countries in which the Fund invests are selected
for their ability to generate high real rates of economic growth, consistent
with reasonable political and currency stability. Securities are selected
following an intensive research process, designed to screen out companies with
either weak financial structures, market positions or management. The ability
to produce premium growth in earnings is paramount.
Over the six months to April 30, 1999, the EAFE Index rose by 15.27%, dominated
by a strong recovery from Japan, Asia and smaller markets. In contrast, Europe
lost ground, exacerbated by a weak start to the launch of the Euro. During this
period the Class A Shares of the Fund rose by 14.57%*. Over the 52 week period
ended April 30, 1999 the Class A Shares are 188/544 in the Lipper rankings, the
35th percentile.**
CONTINENTAL EUROPEAN stockmarkets (46.6% of net assets at April 30, 1999) fell
back in the face of political wrangling and evidence of slow growth. The Euro's
weakness reflected these factors. We reduced exposure to the region over the
period. Cyclical stocks recovered over March and April. While we have made the
portfolio less defensive, our main emphasis remains on stocks benefiting from
corporate restructuring. We bought shares of Total (France), increasing our
energy exposure. We added stocks issued by Accor (France), Metro, Hoechst and
BASF (Germany) to capture some cyclical recovery. Shares of Bank of Ireland and
Argentaria (Spain) were bought to benefit from value in financials. Sales
reflected our concern over earnings for groups such as Danone, Promodes and
Nestle. We took good profits in the strongly performing shares of 1998 such as
Deutsche Bank, Credit Suisse and Ericsson.
In the UK (23.5% of net assets at April 30, 1999), the equity market moved
ahead, supported by good liquidity and corporate activity. Cyclical stocks
rallied towards the end of the period. We bought new holdings in BP Amoco,
SmithKline Beecham and British Telecommunications. We also added shares of
Scottish & Newcastle to participate in consumer recovery. We sold our holdings
in Safeway and NFC, where profits looked under pressure. The UK equity market
continues to benefit from its relationship with the bond market as yields move
towards the European average. Recovery in smaller companies has been a feature,
while corporate activity has affected every sector, highlighting the perceived
value in the UK market.
The JAPANESE stock market (20.8% of net assets at April 30, 1999) strengthened
over the period. We have begun to see the first evidence of significant change
in the Government's and company management attitudes to Japan's problems. We
added significantly to the region, encouraged by rationalisation of the banking
system, and the promotion of a more aggressive corporate culture. While we have
maintained a quality blue chip portfolio, concentrating on beneficiaries of Yen
weakness and corporate profit recovery, we have also added domestic stocks to
the list. Smaller companies have rallied as well, and we have exposure to the
sector. New holdings included Dai Nippon Printing, Fujitsu, Kao, Kubota and
Mitsui Marine and Fire, reflecting restructuring and domestic recovery themes.
Twenty-five percent of the Japanese assets remain hedged against the US dollar,
although we expect the yen/dollar relationship to be less volatile over the
remainder of the year.
ASIAN markets (6.9% of net assets at April 30, 1999) have rallied significantly
over the period. Markets such as South Korea, Thailand and Indonesia were
supported by stronger currencies and falling interest rates. We
6
<PAGE>
increased our exposure to the region in late 1998, initially through the more
liquid markets of Singapore and Hong Kong. Our country allocation in this
region is Australia, Korea, Singapore, India, Taiwan and Hong Kong. New
holdings included Telstra, Woolworths, Fosters Brewing and News Corporation in
Australia. In Hong Kong, we increased our weighting through purchases of shares
of Cheung Kong, Henderson Land, and Dao Heng Bank. We also bought shares issued
by City Developments in Singapore. Sales included Mayne Nickless in Australia
and Overseas Chinese Banking Corp in Singapore, which we do not regard as a
natural beneficiary of stronger economic growth.
The impact of recovery in Asia has been felt particularly by the SMALLER
MARKETS category. We added again to Latin America. Brazil and Mexico make up
the bulk of our exposure. We established new positions in Israel, through
purchases of Orbotech, while we went back into South Africa with Anglo American
and Nedcor. We also made successful purchases in Emerging Europe, such as
Hellenic Telecom (Greece).
OUTLOOK
By historical standards, valuations for many equity markets look high. But
economic conditions look more robust than they were at the turn of the year.
The concerted interest rate cuts in the fourth quarter are likely to give the
economies of the US, UK and Europe a "soft landing". Substantial corporate
restructuring and foreign buying has seen Japan off its lows. In an environment
of more stable currencies and interest rates, smaller markets will prosper, but
the rally in bond yields is probably past its best. While there is clear value
in smaller companies and the more cyclical end of the market, the economic
environment is sufficiently subdued to favor marketable companies with quality
earnings.
On behalf of all of us at Martin Currie, Inc., thank you for your continuing
confidence in us. We look forward to reporting to you again after the end of
the Fund's fiscal year.
- ----------
* These returns are calculated without the imposition of either front-end or
contingent deferred sales charges.
** Lipper Analytical Services, Inc. performance rankings for the Heritage
Series Trust - Eagle International Equity Portfolio, Class A Shares were 195
out of 544 International Funds, for the 52 week period ended April 29, 1999.
The performance numbers used for the Fund did not take into account any
front-end or contingent deferred sales charges. Past performance is no
guarantee of future results.
7
<PAGE>
- --------------------------------------------------------------------------------
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS--99.9%(a)
-----------------------
AUSTRALIA--2.5%
---------------
9,600 Brambles Industries Ltd ................. $ 282,096
50,000 Fosters Brewing Group Ltd ............... 145,850
6,700 News Corporation Ltd .................... 56,149
54,000 Telstra Corporation ..................... 293,023
40,000 Westpac Banking Corporation* ............ 305,358
48,000 Woolworths Ltd .......................... 152,467
---------
1,234,943
---------
BRAZIL--0.8%
------------
18,000 Petrobras, Sponsored ADR ................ 261,000
6,500 Tele Norte Leste Participacoes,
Sponsored ADR .......................... 110,094
---------
371,094
---------
EGYPT--0.1%
-----------
3,000 Suez Cement Company,
Sponsored GDR ........................... 50,250
---------
FINLAND--2.2%
-------------
14,202 Nokia (AB) OY ........................... 1,094,468
---------
FRANCE--11.6%
-------------
2,902 Accor ................................... 764,885
6,801 AXA ..................................... 877,955
2,090 Cap Gemini SA ........................... 319,480
3,270 Elf Aquitaine SA ........................ 507,801
3,261 PSA Peugeot Citroen ..................... 540,853
3,086 Societe Generale ........................ 552,253
6,006 Total SA, Class "B" ..................... 822,278
5,721 Vivendi ................................. 1,336,254
---------
5,721,759
---------
GERMANY--12.0%
--------------
1,492 Allianz AG .............................. 475,209
15,279 BASF AG ................................. 669,034
8,000 Bayerische Hypo-Vereinsbank
AG* .................................... 521,439
108 Bayerische Motoren Werke AG
(Non Voting) ........................... 76,042
540 Bayerische Motoren Werke AG ............. 386,769
16,898 Hoechst AG .............................. 800,620
9,664 Mannesmann AG ........................... 1,272,048
8,402 Metro AG ................................ 607,110
6,640 Preussag AG ............................. 349,322
6,640 Preussag AG (b)* ........................ 6,173
10,000 Siemens AG .............................. 739,480
---------
5,903,246
---------
GREECE--0.2%
------------
1,110 Alpha Credit Bank ....................... 79,234
1,700 Hellenic Telecom ........................ 39,439
---------
118,673
---------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
HONG KONG--1.3%
---------------
19,000 Cheung Kong Holdings Ltd ................ 172,816
50,200 China Telecom (Hong Kong),
Ltd.* .................................. 114,635
30,500 Dao Heng Bank Group Ltd. ................ 123,952
12,000 Henderson Land Development
Company ................................ 72,610
17,700 Hutchison Whampoa, Ltd. ................. 158,708
---------
642,721
---------
INDIA--0.7%
-----------
8,032 Indian Opportunities Fund,
Ltd. (c)* .............................. 81,606
8,900 ITC Ltd, Sponsored GDR* ................. 250,535
---------
332,141
---------
IRELAND--0.8%
-------------
19,000 Bank of Ireland ......................... 380,357
---------
ISRAEL--0.1%
------------
1,300 Orbotech* ............................... 62,400
---------
ITALY--5.1%
-----------
14,874 Assicurazioni Generali SPA .............. 579,020
38,369 San Paolo IMI SPA ....................... 575,569
83,229 Telecom Italia SPA ...................... 885,386
96,000 Unicredito Italiano ..................... 486,789
---------
2,526,764
---------
JAPAN--20.0%
------------
12,000 Brigestone Corporation .................. 321,554
19,000 Canon, Inc. ............................. 464,579
3,000 FamilyMart Company, Ltd ................. 141,936
9,000 Fuji Photo Film Company, Ltd ............ 339,893
27,000 Fujitsu Ltd ............................. 462,360
55,000 Hitachi, Ltd ............................ 401,608
12,000 Honda Motor Company, Ltd ................ 528,555
5,000 Ito-Yokado Company, Ltd ................. 306,900
19 Japan Tobacco Inc ....................... 190,923
19,000 Kao Corporation ......................... 482,080
97,000 Kubota Corporation ...................... 275,356
3,000 Mabuchi Motor Company, Ltd .............. 232,876
19,000 Marui Company, Ltd ...................... 315,182
50,000 Mitsui Marine & Fire Insurance .......... 277,173
15 NTT Mobile Communication ................ 879,250
3,000 Promise Company, Ltd .................... 170,826
2,000 Riso Kagaku Corporation ................. 95,461
6,000 Rohm Company, Ltd ....................... 723,497
6,000 Secom Company, Ltd ...................... 585,831
17,000 Shin-Etsu Chemical Company,
Ltd .................................... 540,948
7,800 Sony Corporation ........................ 728,270
The accompanying notes are an integral part of the financial statements.
8
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- --------------------------------------------------------------------------------
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
JAPAN (CONTINUED)
-----------------
10,000 Taisho Pharmaceutical Company ....... $ 307,319
37,000 Toppan Printing Company, Ltd ........ 444,917
19,000 Yamanouchi Pharmaceutical ........... 601,407
----------
9,818,701
----------
MEXICO--1.4%
------------
5,000 Desc ADS ............................ 123,750
600,000 Grupo Financiero Bancomer,
Series "O" SA ...................... 209,740
5,500 Grupo Televisa, SA, Sponsored
GDR ................................ 225,500
1,700 Telefonos de Mexico, Sponsored
ADR ................................ 128,562
----------
687,552
----------
NETHERLANDS--4.5%
-----------------
5,998 Aegon NV ............................ 575,018
17,561 Ahold (Kon) NV ...................... 652,083
1,661 ING Groep NV ........................ 102,298
14,000 VNU, NV ............................. 566,442
7,680 Wolters Kluwer ...................... 334,262
----------
2,230,103
----------
PHILIPPINES--0.1%
-----------------
320,000 Belle Corporation (d)* .............. 694
----------
SINGAPORE--1.8%
---------------
28,000 City Developments ................... 186,524
25,000 Overseas Chinese Banking
Corporation ........................ 234,333
45,000 Overseas Union Bank ................. 230,796
23,000 Singapore Airlines Ltd .............. 211,519
----------
863,172
----------
SOUTH AFRICA--0.2%
------------------
1,024 Anglo-American Corporation* ......... 52,841
2,300 Nedcor Ltd .......................... 50,271
----------
103,112
----------
SOUTH KOREA--0.2%
-----------------
4,290 Shinhan Bank GDS* ................... 102,424
----------
SPAIN--4.1%
-----------
19,477 Argentaria SA ....................... 458,011
33,606 Banco Santander Central ............. 729,921
17,410 Telefonica SA* ...................... 815,682
15,396 Telefonica SA (e)* .................. 14,475
----------
2,018,089
----------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
SWEDEN--1.7%
------------
10,599 AstraZeneca, PLC .................... 413,307
20,000 Foreningsparbanken,
AB, Class "A" ...................... 438,545
----------
851,852
----------
SWITZERLAND--4.7%
-----------------
697 Novartis AG ......................... 1,020,123
60 Roche Genus Scheine
Holdings AG ........................ 705,512
1,600 Swisscom AG ......................... 587,271
----------
2,312,906
----------
TAIWAN--0.3%
------------
11,700 Taiwan American Fund (c)* ........... 164,853
----------
UK--23.5%
---------
32,500 Allied Zurich, PLC .................. 430,810
11,000 AstraZeneca PLC ..................... 431,067
36,000 BP Amoco PLC ........................ 683,376
40,000 British Sky Broadcasting, PLC ....... 350,697
21,000 British Telecomunications, PLC ...... 350,664
55,000 Cable & Wireless, PLC ............... 787,901
36,000 General Electric Company, PLC ....... 381,069
38,000 GKN, PLC ............................ 648,596
25,500 Glaxo Welcome, PLC .................. 755,622
120,000 Ladbroke Group, PLC ................. 576,720
22,000 Land Securities, PLC ................ 288,617
74,000 LASMO, PLC .......................... 190,470
37,000 Lloyds TSB Group, PLC ............... 596,409
32,000 Marks & Spencer, PLC ................ 219,427
16,000 McKechnie, PLC ...................... 115,054
22,000 National Westminster Bank, PLC....... 529,101
19,950 Reckitt & Colman, PLC ............... 236,850
17,100 Royal Bank of Scotland Group,
PLC ................................ 403,829
27,000 Scottish & Newcastle, PLC ........... 336,620
58,000 Scottish Power, PLC ................. 477,719
87,000 Shell Transport & Trading
Company, PLC ....................... 652,199
40,000 SmithKline Beecham, PLC ............. 528,940
31,731 Smiths Industries, PLC .............. 490,038
50,000 Unilever, PLC ....................... 444,403
29,000 Vodafone Group ...................... 534,169
25,999 Wassall, PLC ........................ 104,980
----------
11,545,347
----------
Total Common Stocks
(cost $40,682,994)................................
49,137,621
----------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- -----------
CONVERTIBLE PREFERRED BONDS--0.8%(a)
------------------------------------
JAPAN--0.8%
-----------
33,000,000 Sanwa International Finance
(Bermuda) 1.25% 01/08/05 (f) .......... $ 306,732
12,000,000 TB Finance (Cayman) 2.75%
10/01/04 (f) .......................... 80,142
-----------
Total Convertible Preferred Bonds
(cost $344,102).................................... 386,874
-----------
TOTAL INVESTMENT PORTFOLIO
(cost $41,027,096) (g) 100.7% (a).................. 49,524,495
OTHER ASSETS AND LIABILITIES,
net, (0.7%) ....................................... (342,368)
-----------
NET ASSETS, 100.0% .................................. $49,182,127
===========
- ----------------------
* Not an income producing security
(a) Percentages indicated are based on net assets.
(b) Rights - These rights, if exercised by May 3, 1999, may be converted into
622 shares of Preussag AG at a strike price of $39.00 per share.
(c) Martin Currie Investment Management Limited is the manager of the Indian
Opportunities Fund, Ltd. and the Taiwan American Fund.
(d) Warrants - These warrants, if exercised by December 6, 1999, may be
converted into 320,000 shares of Belle Corporation at a strike price of 8.5
Philippine Pesos.
(e) Rights - These rights, when exercised by May 20, 1999, will convert into 308
shares of Telefonica SA.
(f) Principal amount is stated in Japanese Yen.
(g) The aggregate identified cost for federal income tax purposes is
substantially the same. Market value includes net unrealized appreciation of
$8,497,399 which consists of aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost of
$9,625,776 and aggregate gross unrealized depreciation for all securities in
which there is an excess tax cost over market value of $1,128,377.
ADR -- American Depository Receipt.
GDR -- Global Depository Receipt.
GDS -- Global Depository Shares.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
EAGLE INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET % OF NET
INDUSTRY DIVERSIFICATION VALUE ASSETS
- ------------------------ ------------- ----------
COMMON STOCKS
Aerospace ...................................... 490,038 1.0%
Airlines ....................................... 211,519 0.4%
Auto Manufacturers ............................. 1,590,847 3.2%
Auto Parts and Equipment ....................... 648,596 1.3%
Banking ........................................ 5,725,849 11.6%
Brewers ........................................ 145,850 0.3%
Broadcasting ................................... 576,197 1.2%
Building Materials ............................. 122,860 0.2%
Capital Goods .................................. 560,978 1.1%
Chemicals ...................................... 540,948 1.1%
Conglomerates .................................. 1,124,308 2.3%
Consumer Goods and Services .................... 2,889,127 5.9%
Cosmetics and Toiletries ....................... 482,080 1.0%
Electronics and Electrical Equipment ........... 3,206,800 6.5%
Finance ........................................ 1,059,127 2.2%
Food ........................................... 1,238,422 2.5%
Household Goods ................................ 236,850 0.5%
Industrials, Diversified ....................... 1,767,438 3.6%
Insurance ...................................... 3,215,185 6.5%
Leisure and Hotels ............................. 1,341,605 2.7%
Mining ......................................... 52,841 0.1%
Office Equipment ............................... 926,939 1.9%
Oil and Gas .................................... 3,117,124 6.3%
Pharmaceuticals ................................ 3,743,174 7.6%
Publishing ..................................... 390,411 0.8%
Real Estate .................................... 475,141 1.0%
Recreational Products .......................... 339,893 0.7%
Restaurants and Pubs ........................... 336,620 0.7%
Retail Stores .................................. 993,976 2.0%
Securities ..................................... 246,459 0.5%
Services ....................................... 867,927 1.8%
Software ....................................... 319,480 0.6%
Steel and Iron ................................. 1,156,115 2.3%
Telecommunications ............................. 6,217,427 12.6%
Tires and Rubber ............................... 321,554 0.7%
Tobacco ........................................ 190,923 0.4%
Transportation and Storage ..................... 438,545 0.9%
Utilities, Diversified ......................... 1,350,729 2.7%
Utilities, Electric ............................ 477,719 1.0%
CONVERTIBLE PREFERRED BONDS
Finance ........................................ 386,874 0.8%
--------- -----
Total Investments ..................... $49,524,495 100.7%
=========== =====
- --------------------------------------------------------------------------------
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
APRIL 30, 1999
- --------------------------------------------------------------------------------
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- ------------------- ------------------ ---------- ----------------
CHF 3,322 USD 2,193 05/03/99 $ 0.00
USD 10,840 CHF 16,531 05/03/99 0.00
USD 2,750 EUR 2,607 05/03/99 0.00
USD 2,337,000 JPY 276,093,180 07/06/99 4,199.18
----------
Net Unrealized Appreciation $ 4,199.18
==========
- ----------
CHF - Switzerland Francs EUR - Euro JPY - Japanese Yen USD - United States
Dollar
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
June 18, 1999
Dear Shareholders:
It is a pleasure for our team to assume portfolio management duties for the
Heritage Growth Equity Fund (the "Fund"). Our investment philosophy for
managing the portfolio of the Fund is to employ an extensive qualitative and
quantitative research process in order to identify companies that have an
articulated vision for the future and the ability to execute such vision.
Qualitatively, these companies have strong management teams that have the
ability to create and sustain competitive advantages, potential to increase
market share and drive further earnings per share growth, and to attract and
retain sufficient intellectual capital to realize that vision. Quantitatively,
these companies should have expected revenue and earnings growth rates and
returns on equity greater than the market average and have margins at the high
end of the relative peer group.
A stronger than expected economy has cooled the demand for growth stocks in
recent weeks as investors have shifted into value/cyclicals on the margin. In
addition, OPEC has kept its deal together and pulled oil supply off the market.
Energy prices have jumped off the lows of last year and many fear that
inflationary pressures are mounting. With increasing interest rates, growth
stocks could have further downside as price/earnings ratios would naturally
contract. However, we do not see inflation or much higher interest rates
surfacing as a major threat to this bull market.
Longer term, we feel very comfortable that large growth stocks should be an
integral part of a client's portfolio. With a stable economy, demand for
equities will remain strong while real interest rates should head lower and
inflation remaining in check. The United States will continue to be the world's
leader in many cutting edge industries, particularly in technology and health
care. We therefore will remain positioned with overweights in select names that
dominate their subsectors in these two areas.
Technology and health care will drive real growth in the world economy and we
believe U.S. companies will lead the way. From a macro viewpoint, we have
shifted from a manufacturing based economy to a services/technology based
economy. The key value in the value chain therefore has shifted from the
manufacturing function to the research and development function. Successful
commercialization of research and development lead to product/solution
breakthroughs, and in turn, increased productivity and a better standard of
living. We obtain this state through the harvesting of our intellectual capital
or brain power. These assets do not readily sit on a company's balance sheet
but are the most valuable of inputs. Since the value has shifted to the
"brain", we feel it will be very difficult for the rest of the world to quickly
replicate capability. Therefore, we expect the United States will continue to
lead the rest of the world, only this time reaping benefits through the
successful commercialization of research and development.
In repositioning the Fund, we bought companies that we believe will benefit
from these trends and sold companies that did not fit our investment profile.
From a sector view, the Fund was significantly overweighted in retail stocks
and telecommunications stocks. Although there are trends in place for continued
strength, we believe from a risk perspective that this large sector overweight
was unwarranted. The Fund did not have any semiconductor or cable/media
exposure so we added to those sectors.
Recent buys include:
TEXAS INSTRUMENTS (TXN) -- A diversified semiconductor company that is the
largest supplier of analog, ASIC and logic chips. The industry is coming out of
a three year downturn and TXN's products are poised to take market share. The
DSP (digital signal processor) market is booming and TI chips are being
designed into all the new wireless releases. The company has been restructured
to focus on their core competencies, which should result in increased operating
margins, lower expenses, and increased profitability.
FIRST DATA CORPORATION (FDC) -- A leader in electronic payment solutions for
merchants and third party commercial card payment programs. The company has
restructured itself to focus on its core businesses and is now benefitting from
this effort. FDC's internal growth rate is exceeding forecasts and poised to
further accelerate. Revenues and margins are increasing in most of its business
units.
CHARLES SCHWAB (SCH) -- Technology and the internet are revolutionizing the
financial services industry. Schwab's financial services delivery model will
include multi-channel distribution, asset accumulation capabilities, ability to
leverage technology, and one of the lowest cost/expense structures around. The
firm
12
<PAGE>
is on the cutting edge of shaping the evolving financial services industry,
bringing in more account assets per day than does Merrill Lynch. We feel
technology will provide a sustainable competitive advantage and SCH will
continue to gain market share and further lever earnings per share growth.
TIME WARNER (TWX) -- A dominant global media brand with properties that include
HBO, TNT, CNN, TBS, Warner Brothers, People magazine, Cinemax, Timelife Books,
Sports Illustrated, and many others. In addition to strong brand franchises in
cable networks, systems, and publishing that generate 15% earnings growth and
high return on invested capital, TWX is benefitting from the major worldwide
digital revolution. In the future, this will include broadband delivery of
content and electronic commerce. TWX is using its strong free cash flow to
repay debt, shrink the asset base, and repurchase shares.
MEDTRONIC (MDT) -- A premier medical device company with strong franchises in
cardiovascular, neurology, and the spinal area. MDT has a strong management
team, broad and deep pipeline, and is on the cutting edge a flurry of new
product introductions. We believe that this should drive earnings growth and
ROE to greater than 20%. MDT spends 11% of revenues on research and
development. It is this kind of world class research that allows the company to
have so many franchise product introductions and maintain high barriers to
entry.
Recent sells include:
WALGREENS (WAG) -- Drug store pharmacies have lost power relative to the large
pharmaceutical companies. WAG's organic growth rate is lower than we feel is
sustainable. In addition, risks from Washington (Medicare reimbursement) and
the threat of Internet delivery may continue to hamper price/earnings
multiples. Given the large number of unknown factors, the upside potential does
not seem as great as it once did.
FANNIE MAE (FNM) -- Another very solidly run long term winner. However, the
Fund had a weighting in mortgage stocks that was approximately five to six
times the S&P 500 Index weight and we felt the need to reduce it. Freddie Mac
has a higher growth rate and is slightly more conservatively positioned than
FNM.
CARDINAL HEALTH (CAH) -- Cardinal has produced consistent results but the
underlying growth rate is low double digits. It has supplemented its growth
rate though 4 major acquisitions in the last 5 years. In addition, the
competitive landscape risk has greatly increased due to threats from mass
merchants and the internet. CAH could lose pricing power as the value in the
chain moves from the distributor back to the manufacturer. As competition
increases and the market moves toward more direct delivery, CAH has less power
to control its own destiny.
NOKIA -- The company should exhibit strong growth over the near term, but there
are some risks over the intermediate term. Competition will increase as
Motorola and Ericsson will release their new products later this year which
could lead to pricing and margin pressures. In addition, Nokia is aiming to get
into the higher value added software and data communications networking
businesses. As the business model goes into transition, execution risk becomes
a much greater issue.
Thank you for your confidence in us. We are comfortable with the Fund's
characteristics/profile and feel that the companies we own can create great
shareholder wealth over the long term.
Sincerely,
/s/ ASHI PARIKH
-----------------------
Ashi Parikh
Managing Director
Eagle Asset Management, Inc.
Portfolio Manager, Growth Equity Fund
13
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - GROWTH EQUITY FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------------
COMMON STOCKS--95.5%(a)
- -----------------------
ADVERTISING/COMMUNICATIONS--4.7%
--------------------------------
80,000 Omnicom Group, Inc. ................... $ 5,800,000
------------
CONGLOMERATES--3.9%
-------------------
46,000 General Electric Company .............. 4,853,000
------------
DATA PROCESSING--16.5%
----------------------
60,000 Cisco Systems, Inc.* .................. 6,843,750
80,000 Dell Computer Corporation* ............ 3,295,000
20,000 EMC Corporation* ...................... 2,178,750
100,000 Microsoft Corporation* ................ 8,131,250
------------
20,448,750
------------
ELECTRONICS/ELECTRIC--7.1%
--------------------------
70,000 Applied Materials Inc.* ............... 3,753,750
40,000 Solectron Corporation* ................ 1,940,000
30,000 Texas Instruments Inc. ................ 3,063,750
------------
8,757,500
------------
FILMED ENTERTAINMENT--1.9%
--------------------------
34,000 Time Warner, Inc. ..................... 2,380,000
------------
FINANCE--16.5%
--------------
30,000 American Express Company .............. 3,920,625
40,000 Charles Schwab Corporation ............ 4,390,000
67,500 Citigroup Inc. ........................ 5,079,375
60,000 Freddie Mac ........................... 3,765,000
33,500 Morgan Stanley Dean Witter &
Company ............................... 3,322,781
------------
20,477,781
------------
HOUSEHOLD PRODUCTS--1.9%
------------------------
20,000 The Clorox Company .................... 2,307,500
------------
INSURANCE--3.8%
---------------
40,000 American International
Group, Inc. ........................... 4,697,500
------------
INTERNET--3.4%
--------------
30,000 America Online, Inc.* ................. 4,282,500
------------
MEDICAL EQUIPMENT/SUPPLY--6.2%
------------------------------
80,000 Guidant Corporation ................... 4,295,000
47,000 Medtronic Inc. ........................ 3,381,063
------------
7,676,063
------------
PHARMACEUTICAL--10.3%
---------------------
15,000 Amgen Inc.* ........................... 921,563
60,000 Bristol-Myers Squibb Company .......... 3,813,750
39,000 Pfizer, Inc. .......................... 4,487,437
77,000 Schering-Plough Corporation ........... 3,720,062
------------
12,942,812
MARKET
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
- -------------------------
RETAIL STORES--10.0%
--------------------
70,000 Home Depot, Inc. ...................... 4,195,625
55,000 Kohl's Corporation* ................... 3,654,063
100,000 Wal-Mart Stores, Inc. ................. 4,600,000
------------
12,449,688
------------
SERVICES--3.1%
--------------
90,000 First Data Corporation ................ 3,819,375
------------
TELECOMMUNICATIONS--6.2%
------------------------
40,000 Lucent Technologies, Inc. ............. 2,405,000
65,000 MCI WorldCom, Inc.* ................... 5,342,187
------------
7,747,187
------------
Total Common Stocks
(cost $82,902,802)................................. 118,639,656
REPURCHASE AGREEMENT--5.6%(a)
- -----------------------------
Repurchase Agreement with State
Street Bank and Trust Company,
dated April 30, 1999 @ 4.78%
to be repurchased at $6,906,750 on
May 3, 1999, collateralized by
$4,615,000 United States Treasury
Bonds, 10.625% due August 15, 2015,
(market value $6,993,171 including
interest) (cost $6,904,000) .......................... 6,904,000
------------
TOTAL INVESTMENT PORTFOLIO
(cost $89,806,802) (b), 101.0% (a)................. 125,543,656
OTHER ASSETS AND LIABILITIES, net, (1.0%) (a) ........ (1,268,436)
------------
NET ASSETS,100.0% ................................... $124,275,220
============
- ----------------------
* 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 $35,736,854, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $37,509,970 and aggregate gross unrealized depreciation for all
securities in which there is an excess tax cost over market value of
$1,773,116.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
June 1, 1999
Dear Fellow Shareholders:
We are pleased to be presenting the semi-annual report for the Heritage Series
Trust - Mid Cap Growth Fund (the "Fund"). For the six month period ending April
30, 1999, your Fund returned +5.6% for the Class A Shares*. This compares to a
return of +27.39% for the Russell Mid Cap Growth Index and +18.85% for the
Standard and Poor's Mid Cap 400 Index.
Over the past six months, the equity markets can be characterized as having
been extremely volatile. In the final two months of 1998, we saw the
continuance of a broad market rally that began in early October, after the
Federal Reserve set in motion a series of three interest rate cuts. Both large
and small capitalization stocks gained roughly +10% during the closing two
months of 1998. During the first three months of 1999 however, the equity
markets began to diverge as larger stocks (as represented by the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500")), gained +5.5% in the first
quarter, while smaller stocks (as represented by the Russell 2000 Index),
declined by -5.4%. In the month of April, we experienced a reversal once again,
but surprisingly, small cap stocks outpaced large cap stocks as the Russell
2000 Index gained nearly +9% versus a +3.9% rise in the S&P 500.
The majority of the underperformance of your Fund over the last six months came
in the month of April when your Fund was roughly flat, while the small and mid
cap indices gained +8% on average. Since we are always fairly defensive in
nature, your Fund held up well in the first quarter, declining slightly less
than the average -6% decline for the average small and mid cap fund. However,
since your Fund is positioned defensively, it lagged in the environment when
the markets gapped up sharply higher. In addition, we currently are facing two
head winds that do not favor our style of picking smaller stocks at a
"growth-at-a-reasonable-price" approach. First, in the continuation of the
theme that prevailed throughout 1998, large cap stocks continue to lead in this
market with the "breadth" of the market favoring only a narrow spectrum of
larger cap growth stocks. As an illustration of this large cap effect, the
largest 5% of stocks that made up the Russell Mid Cap Index contributed NEARLY
ONE-HALF of the +6.5% gain in that index on a year-to-date basis through April
30, 1999. That means that out of a pool of 800 stocks, just 40 large stocks had
a disproportionate influence on the market averages. Since we focus on smaller
stocks that have been overlooked by the market, the current market environment
is clearly a hurdle for our style to overcome. As a side note, the median
market cap for the average mid cap stock fund now exceeds $5.0 billion as
compared to $1.6 billion for your Fund. We feel other mid cap funds are clearly
chasing performance by concentrating in the same handful of larger stocks that
do not fall within our defined mid cap universe. The second headwind is the
Internet phenomenon, where many companies that do not generate earnings, are
producing outsized gains despite the lack of any traditional justification for
their current stock market valuations.
We continue to favor companies that we feel can grow earning at a minimum of
15% per year over the next three years, and that are selling at reasonable
valuations both relative to the market and relative to the underlying earnings
and cash generating ability of the company. Our approach has led us to several
stocks that have become take-out candidates, at a nice premium, by larger
companies. American Bankers Insurance, Executive Risk Insurance, and Provident
Insurance have all been successes in this area. Healthcare services is an area
that has hurt the Fund's performance and we have reduced our exposure by
selling shares of HCR Manor Care and Lincare Holdings. We have increased our
exposure to technology and increased the growth potential by selling smaller
tech stocks such as Anixter, Black Box, Molex, Zebra Tech, Artesyn, and HNC
Software. In their place, we have added LSI Logic (semiconductors), Sanmina
(manufacturer of telecomm equipment), and American Management Systems (computer
services). In the consumer area, we have shed our holdings in food stocks which
did not perform well. These include Ralcorp and Whitman Corp. In their place,
we have shifted our consumer exposure by adding media stocks such as
15
<PAGE>
Lamar Advertising, Emmis Communications, and Metro Networks - all which have
performed well on a year-to-date basis. When compared to the Russell 2000 Mid
Cap Index your Fund is over-weighted in financial services, technology, and
consumer stocks. The Fund has a market weighting in healthcare and is
under-weighted in energy, basic materials, and under-weighted in utilities as
usual.
Despite the recent under performance, we feel we have successfully navigated
your Fund through some turbulent markets with a lower level of risk than is
evident strictly by looking at the performance numbers. Our aim is to generate
an above average rate of return over a long period of time while maintaining a
below average level of risk. In this way, the accumulation of wealth compounds
during rising markets without fear of losing an excessive amount of capital
during down markets.
I thank you for your support and continued confidence in my abilities as
helmsman of your Fund. I will continue to perform to the best of my abilities,
for the benefit of all of us as shareholders.
Sincerely,
/s/ TODD L. MCCALLISTER
-----------------------
Todd L. McCallister
Senior Vice President
Eagle Asset Management, Inc.
Portfolio Manager, Mid Cap Growth Fund
- ----------
* These returns are calculated without the imposition of either front-end or
contingent deferred sales charges.
16
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - MID CAP GROWTH FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS--96.2%(a)
- -----------------------
ADVERTISING/COMMUNICATIONS--8.0%
--------------------------------
8,000 Catalina Marketing Corporation*....... $ 683,500
31,000 Harte-Hanks Communications,
Inc. ................................ 782,750
21,000 Lamar Advertising Company* ........... 706,125
----------
2,172,375
----------
AEROSPACE--3.6%
---------------
12,000 Alliant Techsystems, Inc.* ........... 982,500
----------
AIRCRAFT MANUFACTURING/COMPONENTS--2.5%
---------------------------------------
14,000 Gulfstream Aerospace
Corporation* ........................ 682,500
----------
BANKING--2.7%
-------------
30,000 Golden State Bancorp ................. 736,875
----------
BROADCASTING--4.2%
------------------
13,000 Emmis Communications,
Class "A"* .......................... 585,000
12,400 Metro Networks, Inc.* ................ 558,000
----------
1,143,000
----------
DATA PROCESSING--14.3%
----------------------
22,000 American Management Systems *......... 756,250
34,000 National Computer Systems Inc. ....... 952,000
22,500 SunGard Data Systems Inc.* ........... 718,594
22,000 Synopsys, Inc.* ...................... 1,036,750
20,000 Tech Data Corporation ................ 467,500
----------
3,931,094
----------
EDUCATION--3.1%
---------------
24,800 Strayer Education, Inc. .............. 858,700
----------
ELECTRONICS/ELECTRIC--4.7%
--------------------------
20,000 LSI Logic Corporation* ............... 680,000
9,200 Sanmina Corporation* ................. 610,650
----------
1,290,650
----------
FINANCE--6.4%
-------------
22,000 CMAC Investment Corporation .......... 1,009,250
46,500 Federated Investors, Inc. ............ 746,906
----------
1,756,156
----------
HEALTH CARE CENTER--6.0%
------------------------
65,000 Health Management Associates,
Inc., Class "A"* .................... 1,015,625
12,100 Universal Health Services, Inc.,
Class "B" ........................... 626,931
----------
1,642,556
----------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
INSURANCE--7.9%
---------------
7,000 Allmerica Financial Corporation ...... 401,188
18,000 Mutual Risk Management, Ltd. ......... 699,750
17,700 Protective Life Corporation .......... 693,619
12,000 Reinsurance Group Of America,
Inc. Class "A" ...................... 363,000
----------
2,157,557
----------
LEISURE/AMUSEMENT--4.4%
-----------------------
35,000 Harrah's Entertainment, Inc.* ........ 770,000
14,000 Steiner Leisure, Ltd.* ............... 444,500
----------
1,214,500
----------
MACHINERY--3.8%
---------------
38,000 Sybron International
Corporation* ......................... 1,052,125
----------
MEDICAL EQUIPMENT/SUPPLY--4.1%
------------------------------
25,000 AmeriSource Health Corporation,
Class "A"* .......................... 692,187
12,000 Patterson Dental Company* ............ 432,750
----------
1,124,937
----------
PUBLISHING--8.6%
----------------
9,000 John Wiley & Sons, Inc.,
Class "A" ........................... 363,938
22,000 Media General, Inc., Class "A" ....... 1,144,000
15,000 Valassis Communications, Inc. ........ 840,000
----------
2,347,938
----------
RETAIL STORES--3.8%
-------------------
25,000 BJ's Wholesale Club, Inc.* ........... 664,062
14,000 Department 56, Inc.* ................. 378,875
----------
1,042,937
----------
SERVICES--5.7%
--------------
21,750 Iron Mountain, Inc.* ................. 604,922
35,000 Nielsen Media Research, Inc. ......... 958,125
----------
1,563,047
----------
TELECOMMUNICATIONS--2.4%
------------------------
16,100 Western Wireless Corporation,
Class "A"* .......................... 661,106
----------
Total Common Stocks
(cost$23,667,601)............................. 26,360,553
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - MID CAP GROWTH FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
VALUE
-----------
REPURCHASE AGREEMENT--2.5%(a)
- -----------------------------
Repurchase Agreement with State Street Bank
and Trust Company, dated April 30, 1999 @
4.78% to be repurchased at $695,277 on May 3,
1999, collateralized by $465,000 United States
Treasury Bonds, 10.625% due August 15, 2015,
(market value $704,621 including interest)
(cost $695,000)............................... $ 695,000
-----------
TOTAL INVESTMENT PORTFOLIO
(cost $24,362,601) (b), 98.7% (a).......... 27,055,553
OTHER ASSETS AND LIABILITIES, net, 1.3% (a) .. 359,575
-----------
NET ASSETS, 100.0% ........................... $27,415,128
===========
- ----------------------
* 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 $2,692,952, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $3,227,946 and aggregate gross unrealized depreciation for all
securities in which there is an excess tax cost over market value of
$534,994.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
May 28, 1999
Dear Fellow Shareholders:
We are happy to report that the very recent results for the Heritage Small
Cap Stock Fund (the "Fund") have improved dramatically, with the Fund's Class A
Shares gaining +7.78%* over the most recent semiannual period.
The environment from April 1998 to the end of March 1999 was historically
difficult for small capitalization stocks. During this period, small cap stocks
became cheaper than they have ever been relative to the stock market in
general.
What is more, the devastation in the small capitalization sector was more
serious than would appear by simply looking at the Russell 2000 Index ("Russell
2000") because this Index had several Internet stocks in it which went up
significantly and that allowed the Russell 2000 to materially outperform the
average small cap stock. What is interesting is that very few Internet stocks
qualify as small cap stocks.
During this period, the smaller a capitalization a company had, generally,
the worse its performance was. Some companies that earned money did poorer in
the market than companies that lost money. In short, it was a period dominated
by large capitalization growth stocks and Internet stocks. Small capitalization
value stocks, such as those we invest in for our portion of the Funds assets,
were ignored as many investors flocked to momentum stocks. Many other small cap
fund managers migrated into other than small cap issues and into Internet
stocks; we remained true to our style and discipline and therefore
underperformed our competition.
The Fund was hurt by its holdings Angeion, Genessee & Wyoming, Lanvision,
Thermo Cardio Systems and Thermolase. These issues suffered from market
neglect.
The Fund was helped by such stocks as Cooper Companies, Doral Financial,
Houghton Mifflin, John Wiley & Sons, National Data, New Horizons and Shoe
Carnival. In all cases, the stocks were driven by better than expected
earnings.
In April, the environment for small cap stocks improved dramatically.
Moreover, the types of stocks which had suffered the most began to rally the
most -- the small cap stocks which earned money and sell at remarkable values.
We expect this to continue: Small cap stocks are attractively priced and remain
historically cheap.
Investors have gone from selling the type of stocks we own to buying them.
As funds flow into these stocks, they should continue to appreciate. We are
quite optimistic about our Fund going forward. We believe we should do well
absolutely, relative to our benchmark and relative to our competition.
Sincerely,
/s/ JAMES D. AWAD
-----------------
James D. Awad
Chairman
Awad Asset Management, Inc.
Portfolio Manager, Small Cap
Stock Fund
- ----------
* These returns are calculated without the imposition of either front-end or
contingent deferred sales charges.
19
<PAGE>
May 28, 1999
Dear Fellow Shareholders:
A very strong April pushed ahead Eagle's portion of the Heritage Small Cap
Stock Fund (the "Fund"), helping the Fund to a strong finish for the semiannual
period. I'm happy to report the strong April was followed by a very strong May.
During the six months ended April 30, 1999, the Russell 2000 Index was
dominated by Internet names (about 9% of the Russell 2000 Index weighting is
now Internet stocks compared to some 2% for the S&P Small Cap 600). Most of
those stocks have no earnings, are over $1 billion market capitalization and
neither are small cap nor fit our growth at a reasonable price (GARP) style.
The difference between the Russell 2000 and the S&P Small Cap 600 during the
six months ended April 30 was striking, with the former up about 15% and the
latter only about 9%. Given this mix, we are very pleased with our six month
performance.
While we had no direct exposure to Internet stocks, our best performer,
Southwest Securities, advanced largely because of their holdings in Knight
Trimark Group, as well as interest in their investment broker
Mydiscountbroker.com. Action Performance and International Speedway benefited
from the continued strong popularity of NASCAR. Two retailers, Claires' Stores
and Genesco, performed well, reflecting strong comparable store sales leading
to positive earnings surprises.
We benefited from takeovers as Trident was acquired by Illinois Tool Works,
Computer Management Associates was acquired by Computer Associates and
Pharmerica was merged into Bergen Brunswig. Subsequent to the end of the
period, ABR Information Systems announced an agreement to be acquired by
Ceridian Corp., Gradall Industries agreed to be acquired by JLG Industries and
Medical Manager announced a merger with Synetic (whose principal asset is Care
Insite, an e-commerce health care unit).
On the downside we were hurt by Brightpoint, which had trouble procuring
adequate supplies of wireless handsets within China and missed earnings. Avid
Technologies, Cavanaugh Hospitality and Cole National also suffered earning
shortfalls.
We believe the recent spate of takeover actively reflects the value of small
capitalization stocks and are pleased it has positively impacted our portfolio.
With our portion of the Fund trading at about sixteen times 1999 earnings we
are hopeful we can continue to benefit from takeovers.
We will continue to invest in companies that will benefit from the growth of
the Internet without having to pay the exorbitant multiples currently accorded
to the "pure" internet companies. Examples of such holdings are Southwest
Securities, Action Performance, Medical Manager and Micro Warehouse.
The recent rise in interest rates has caused some crumbling in the large cap
growth stocks which had become market favorites. As of this writing,
speculative Internet stocks are going through a correction. Both of these
events could prove beneficial for small stocks as capital could move from those
previously hot performing sectors into small stocks.
Hopefully, April and May are a harbinger of better times for small cap
investors.
As always, we will endeavor to do our best for our shareholders.
Sincerely,
/s/ BERT BOKSEN
---------------
Bert Boksen
Senior Vice President
Eagle Asset Management, Inc.
Portfolio Manager, Small Cap
Stock Fund
20
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS--96.2%(a)
- -----------------------
AEROSPACE--1.0%
---------------
122,000 Kellstrom Industries, Inc.* ............ $2,249,375
----------
BANKING--4.6%
-------------
125,000 Commercial Federal Corporation.......... 3,031,250
201,000 Doral Financial Corporation ............ 3,542,625
18,500 Hamilton Bancorp, Inc.* ................ 476,375
52,500 Independence Community Bank
Corporation .......................... 764,531
100,000 ITLA Capital Corporation* .............. 1,575,000
37,500 Pacific Crest Capital, Inc. ............ 520,312
55,000 Staten Island Bancorp, Inc. ............ 993,437
----------
10,903,530
----------
BUILDING--2.0%
--------------
190,000 Lennar Corporation ..................... 4,595,625
----------
CHEMICALS--0.7%
---------------
55,000 Cadiz Inc.* ............................ 546,563
110,000 Mississippi Chemical Corporation........ 1,003,750
----------
1,550,313
----------
COSMETICS/TOILETRIES/DRUGS--0.4%
--------------------------------
205,000 NBTY, Inc.* ............................ 1,037,813
90,000 Twinlab Corporation* ................... 765,000
----------
1,802,813
----------
DATA PROCESSING--12.8%
----------------------
70,000 Avid Technology, Inc.* ................. 1,137,500
60,000 Barra Inc* ............................. 1,173,750
25,000 Bell & Howell Company* ................. 835,938
50,000 CACI International Inc.,
Class "A"* ............................ 906,250
143,500 Comdisco, Inc. ......................... 3,775,844
198,962 Eclipsys Corporation* .................. 4,377,164
207,500 Health Management
Systems, Inc.* ........................ 959,688
279,300 LanVision Systems, Inc.* ............... 488,775
87,000 National Data Corporation .............. 4,012,875
154,875 Printronix, Inc.* ...................... 2,206,969
63,000 Shared Medical Systems
Corporation ........................... 3,421,687
25,000 Sterling Software, Inc.* ............... 517,187
95,000 The Pathways Group, Inc.* .............. 831,250
5,000 Zebra Technologies Corporation,
Class "A"* ............................ 166,250
107,500 Zebra Technologies Corporation,
Class "B"* ............................ 3,574,375
----------
30,251,314
----------
MARKET
SHARES VALUE
------ ---------
COMMON STOCKS (CONTINUED)
- -------------------------
EDUCATION--2.4%
---------------
93,000 New Horizons Worldwide, Inc.* .......... 1,865,812
165,000 Strayer Education, Inc. ................ 5,713,125
----------
7,578,937
----------
ELECTRONICS/ELECTRIC--2.3%
--------------------------
270,000 Artesyn Technologies, Inc.* ............ 4,860,000
50,000 OYO Geospace Corporation* .............. 450,000
----------
5,310,000
----------
FINANCE--3.1%
-------------
260,000 Cash America International, Inc. ....... 3,315,000
98,000 Investors Financial Services
Corporation ............................ 3,564,750
25,000 Resource America, Inc. ................. 309,375
----------
7,189,125
----------
FOOD--3.2%
----------
70,000 Corn Products International, Inc. ...... 2,021,250
125,000 Del Monte Foods Company * .............. 1,671,875
104,000 J. M. Smucker Company,
Class "B" ............................. 1,820,000
50,000 Smithfield Foods, Inc.* ................ 1,181,250
----------
6,694,375
----------
GRAPHICS ARTS--2.0%
-------------------
185,000 World Color Press, Inc.* ............... 4,729,062
----------
HEALTH CARE CENTERS--2.2%
-------------------------
70,000 American Retirement
Corporation* ........................... 1,163,750
174,750 Bergen Brunswig Corporation,
Class "A" ............................. 3,320,250
90,000 Horizon Health Corporation* ............ 680,625
----------
5,164,625
----------
HEALTH CARE SERVICES--0.1%
--------------------------
115,000 ThermoLase Corporation* ................ 294,687
----------
HOTELS/MOTELS/INNS --0.9%
-------------------------
120,000 Cavanaughs Hospitality
Corporation* .......................... 907,500
200,000 Lodgian, Inc.* ......................... 1,212,500
----------
2,120,000
----------
INSURANCE--3.7%
---------------
100,000 Annuity And Life Re
(Holdings), Ltd. ...................... 1,975,000
210,000 INSpire Insurance Solutions, Inc.*...... 4,567,500
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
INSURANCE (CONTINUED)
---------------------
105,000 Presidential Life Corporation ......... $1,883,437
30,000 Reliance Group Holdings ............... 225,000
----------
8,650,937
----------
LEATHER/SHOES--2.2%
-------------------
310,000 Genesco Inc.* ......................... 3,371,250
125,000 Shoe Carnival, Inc.* .................. 1,890,625
----------
5,261,875
----------
LEISURE/AMUSEMENT--3.0%
-----------------------
60,000 Action Performance Companies,
Inc.* ................................ 2,032,500
85,800 Florida Panthers Holdings, Inc.* ...... 761,475
52,300 Gaylord Entertainment Company.......... 1,621,300
35,000 International Speedway
Corporation, Class "A" ............... 1,802,500
26,000 Steiner Leisure, Ltd.* ................ 825,500
----------
7,043,275
----------
MACHINERY--1.4%
---------------
91,000 Blount International, Inc.,
Class "A" ............................ 2,536,625
45,000 Gradall Industries, Inc.* ............. 720,000
----------
3,256,625
----------
MANUFACTURING/DISTRIBUTIONS--6.2%
---------------------------------
170,100 Amor Holdings, Inc.* .................. 2,147,513
120,000 Brightpoint, Inc.* .................... 738,750
200,000 Gentex Corporation* ................... 6,012,500
130,000 Hughes Supply, Inc. ................... 3,022,500
27,500 Jakks Pacific Inc.* ................... 587,813
160,000 Mail-Well, Inc.* ...................... 2,090,000
----------
14,599,076
----------
MEDICAL EQUIPMENT/SUPPLY--4.6%
------------------------------
435,000 Angeion Corporation* .................. 135,938
123,456 Angiosonics, Inc. (c)* ................ 87,160
212,500 ATS Medical, Inc.* .................... 1,593,750
100,000 Aviron Corporation* ................... 1,887,500
200,000 Coherent, Inc.* ....................... 2,975,000
150,733 Cooper Companies, Inc.* ............... 2,374,045
316,000 Somanetics Corporation* ............... 869,000
44,444 SurVivaLink Corporation (c)* .......... 26,666
149,800 Thermo Cardiosystems, Inc.* ........... 1,095,412
----------
11,044,471
----------
OFFICE EQUIPMENT--1.1%
----------------------
180,000 Global Imaging Systems, Inc.* ......... 2,587,500
----------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
OIL & GAS--0.7%
---------------
86,400 Chieftain International, Inc.* ........ 1,560,600
----------
PHARMACEUTICAL--1.5%
--------------------
21,200 Bindley Western Industries, Inc. ...... 654,550
50,000 Collateral Therapeutics, Inc.* ........ 568,750
25,177 Priority Healthcare Corporation,
Class "B" ............................ 1,276,159
60,000 Protein Design Labs, Inc.* ............ 926,250
----------
3,425,709
----------
POLLUTION CONTROL--2.1%
-----------------------
180,000 IMCO Recycling, Inc. .................. 3,060,000
100,000 Superior Services, Inc.* .............. 1,837,500
----------
4,897,500
----------
PUBLISHING--2.6%
----------------
40,000 Houghton Mifflin Company .............. 1,785,000
107,600 John Wiley & Sons, Inc.,
Class "A" ............................ 4,351,075
----------
6,136,075
----------
RAILROADS--0.6%
---------------
135,000 Genesee & Wyoming, Inc.* .............. 1,333,125
----------
REAL ESTATE INVESTMENT TRUST--3.0%
----------------------------------
15,700 Correctional Properties Trust ......... 271,806
164,900 LTC Properties, Inc. .................. 2,215,844
110,000 Meristar Hospitality Corporation ...... 2,530,000
95,000 Nationwide Health Properties,
Inc. ................................. 1,929,688
----------
6,947,338
----------
REAL ESTATE/LAND DEVELOPMENT--2.0%
----------------------------------
240,000 LNR Property Corporation .............. 4,710,000
----------
RETAIL STORES--3.0%
-------------------
100,000 Bradlees Inc.* ........................ 825,000
50,000 Charming Shoppes ...................... 193,750
100,000 Claire's Stores Inc. .................. 3,312,500
43,800 Cole National Corporation,
Class "A"* ........................... 678,900
65,000 Micro Warehouse, Inc.* ................ 1,100,937
102,500 U.S. Vision, Inc.* .................... 563,750
25,000 Urban Outfitters Inc.* ................ 484,375
----------
7,159,212
----------
SECURITIES--8.6%
----------------
85,000 Advest Group, Inc. .................... 1,721,250
100,000 Dain Rauscher Corporation ............. 4,287,500
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - SMALL CAP STOCK FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS (CONTINUED)
- -------------------------
SECURITIES (CONTINUED)
----------------------
159,999 Legg Mason, Inc. ...................... $ 5,579,965
162,500 Southwest Securities Group, Inc. ...... 8,602,344
-----------
20,191,059
-----------
SERVICES--9.6%
--------------
200,000 ABR Information Services, Inc.* ....... 3,500,000
30,200 Borg-Warner Security
Corporation* ......................... 532,275
102,500 Cunningham Graphics
International, Inc.* ................. 1,697,656
170,000 Interim Services, Inc.* ............... 2,953,750
50,000 Medical Manager Corporation* .......... 1,425,000
230,000 MPW Industrial Services
Group, Inc.* ......................... 2,098,750
25,000 Nova Corporation* ..................... 650,000
198,500 RCM Technologies, Inc.* ............... 2,580,500
160,000 StarTek, Inc.* ........................ 3,210,000
80,000 Stewart Enterprises, Inc.,
Class "A" ............................ 1,590,000
130,000 Sykes Enterprises, Inc.* .............. 2,665,000
-----------
22,902,931
-----------
TELECOMMUNICATIONS--2.0%
------------------------
70,000 American Tower Corporation,
Class "A" ............................. 1,483,125
50,000 Comdial Corporation* .................. 293,750
183,750 Periphonics Corporation* .............. 1,590,586
35,000 Transaction Network Services* ......... 936,250
100,000 Trex Communications, Inc. (c)* ........ 400,000
-----------
4,703,711
-----------
TEXTILES--0.4%
--------------
40,000 Kellwood Company ...................... 1,030,000
-----------
TRANSPORTATION--0.2%
--------------------
22,500 Air Express International ............. 492,188
-----------
Total Common Stocks
(cost $211,379,535).................................. 226,501,176
-----------
PRINCIPAL MARKET
AMOUNT VALUE
--------- -----------
CONVERTIBLE BONDS--1.7%(a)
- --------------------------
DATA PROCESSING--0.1%
---------------------
$ 100,000 Proscape Technologies, Inc.,
Series "B", 6.5%, 11/18/01 (c) ........ 100,000
-----------
HEALTH CARE CENTERS--0.9%
-------------------------
2,000,000 American Retirement
Corporation, 5.75%, 10/01/02 ......... 1,792,500
CONVERTIBLE BONDS (CONTINUED)
- -----------------------------
HEALTH CARE CENTERS (CONTINUED)
- -------------------------------
$ 1,000,000 Assisted Living Concepts, Inc.,
6.0%, 11/01/02 ....................... 515,000
-----------
2,307,500
-----------
MEDICAL EQUIPMENT/SUPPLY--0.6%
------------------------------
1,000,000 Angeion Corporation, 7.5%,
04/15/03 ............................. 715,000
1,000,000 Aviron Corporation, 5.75%,
04/01/05 ............................. 835,000
-----------
1,550,000
-----------
REAL ESTATE INVESTMENT TRUST--0.1%
----------------------------------
155,000 LTC Properties, Inc., 8.25%,
07/01/01 ............................. 145,313
-----------
Total Convertible Bonds
(cost $5,232,500).................................. 4,102,813
-----------
Total Investment Portfolio excluding
repurchase agreement
(cost $216,612,035) (b), 98.0% (a)................. 230,603,989
REPURCHASE AGREEMENT--1.5%(a)
- -----------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated April 30,
1999 @ 4.78% to be repurchased at $3,538,409
on May 3, 1999, collateralized by $2,365,000
United States Treasury Bonds, 10.625% due
August 15, 2015, (market value $3,358,716
including interest) (cost $3,537,000)..... 3,537,000
---------
TOTAL INVESTMENT PORTFOLIO,
(cost $220,149,035) (b), 99.5% (a)..... 234,140,989
OTHER ASSETS AND LIABILITIES, net, 0.5%(a) . 1,232,728
-----------
NET ASSETS, 100.0% ....................... $235,373,717
============
- ----------------------
* 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 $13,991,954, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $48,612,881 and aggregate gross unrealized depreciation for all
securities in which there is an excess tax cost over market value of
$34,620,927.
(c) Private placement securities are fair valued by the Board of Trustees.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
June 18, 1999
Dear Shareholders:
Two important events took place at the Heritage Series Trust - Value Equity
Fund this past spring. First, Osprey Partners Investment Management, LLC
received your vote on May 14, to begin managing the Fund as the sub-advisor.
Second, and I think of most importance to our investors, is that "Value" stocks
rebounded from their dismal performance over the past year.
After some 12 months of being out of favor, investors finally began recognizing
the imbedded value of a broad spectrum of stocks that have languished in the
marketplace while a very concentrated few stocks dominated the performance of
the market averages. A handful of stocks (5 stocks accounted for 84% of the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") gain of 28.6%)
accounted for the out-performance of the S&P 500 in 1998. These same five
stocks (Microsoft, AOL, Citigroup, MCI Worldcom, and AIG) accounted for 53% of
the S&P 500 gain of 4.98% in the first quarter of 1999. Furthermore, just 18
stocks accounted for 100% of the S&P 500 gain during that same period. Thus,
the average return for the other 482 stocks in the S&P 500 was in the red for
the quarter.
The tide turned in early April when investors began to recognize the huge
disparity in valuations. For example, Schwab's market capitalization was
greater then Merrill Lynch's and AOL's market capitalization was larger than
GM's. The huge reversal in market psychology toward value stocks that occurred
in April and continued into June, we believe based on a number of studies, is
just the precursor of a trend that is likely to continue over at least the next
12 to 18 months.
Our philosophy of buying stocks that are selling below their intrinsic value
based on our proprietary research should serve us well in the future as it has
in the past. Our continual search for companies with low price/earnings ratios,
low price/book value, significant free cash flow and investment grade balance
sheets should reduce the market risk of the stocks in the portfolio. Visits
with top management at these companies allow us to delve into the inner
workings of the company to determine whether we think they will be able to
achieve the goals that they have set and thus we believe should lower the
business risk of our investments.
Some good news for our shareholders is that over the past month we have almost
completed the transition of the portfolio with minimal realized capital gains
which will help to mimize the year end distribution requirement. We have added
positions in several areas that have lagged the market year to date such as
financial services, consumer nondurables, and healthcare.
Our goal is to continue to do well compared to our benchmarks and other value
managers which will bring superior performance to the Heritage Value Equity
Fund and continued benefit to our shareholders.
Sincerely, Sincerely,
/s/ JEROME D. FISHER /s/ RUSSELL S. TOMPKINS
- -------------------- -----------------------
Jerome D. Fisher Russell S. Tompkins
Managing Partner Managing Partner
Director of Equity Research Chief Operating Officer
Osprey Partners Investment Osprey Partners Investment
Management, LLC Management, LLC
Portfolio Manager, Value Equity Fund Portfolio Manager, Value Equity Fund
24
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - VALUE EQUITY FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ----------
COMMON STOCKS--93.8%(a)
-----------------------
AEROSPACE--4.5%
---------------
19,500 Raytheon Company, Class "B" ........... $1,369,875
----------
BANKING--12.3%
--------------
16,600 Bank One Corporation .................. 979,400
12,000 Chase Manhattan Corporation ........... 993,000
16,500 First Union Corporation ............... 913,687
21,000 Washington Mutual, Inc. ............... 863,625
----------
3,749,712
----------
CHEMICALS--2.2%
---------------
7,500 Minnesota Mining &
Manufacturing Company ................. 667,500
----------
CONGLOMERATES/DIVERSIFIED--6.8%
-------------------------------
40,000 Allegheny Teledyne, Inc. .............. 895,000
29,500 Fortune Brands, Inc. .................. 1,165,250
----------
2,060,250
----------
DATA PROCESSING--7.2%
---------------------
22,000 Electronic Data Systems
Corporation .......................... 1,182,500
5,000 International Business Machines
Corporation ........................... 1,045,938
----------
2,228,438
----------
ELECTRONICS/ELECTRIC--5.6%
--------------------------
7,500 Honeywell, Inc. ....................... 710,625
11,700 Koninklijke Philips Electron,
Sponsored ADR ........................ 998,887
----------
1,709,512
----------
FINANCE--5.5%
-------------
13,000 Freddie Mac ........................... 815,750
20,000 SLM Holding Corporation ............... 853,750
----------
1,669,500
----------
GLASS/PRODUCTS--1.2%
--------------------
12,000 Libbey, Inc. ......................... 360,750
----------
HEALTH CARE CENTERS--1.8%
-------------------------
22,000 Columbia/HCA Healthcare
Corporation ......................... 543,125
----------
INSURANCE--4.8%
---------------
7,500 Aetna, Inc. ........................... 657,656
22,200 Allstate Corporation .................. 807,525
----------
1,465,181
----------
MACHINERY--0.8%
---------------
4,000 Caterpillar, Inc. ..................... 257,500
----------
COMMON STOCKS (CONTINUED)
- -------------------------
MEDICAL EQUIPMENT/SUPPLY--3.0%
------------------------------
12,100 Bausch & Lomb, Inc. ................... 907,500
----------
OIL & GAS--16.7%
----------------
11,500 British Petroleum Company, PLC,
Sponsored ADR ......................... 1,301,656
10,000 Exxon Corporation ..................... 830,625
32,000 MCN Energy Group, Inc. ................ 638,000
16,000 Royal Dutch Petroleum Company,
NY Shares, Sponsored ADR ............. 939,000
25,000 Sonat, Inc. ........................... 893,750
13,600 Sunoco, Inc. .......................... 486,200
----------
5,089,231
----------
PAPER/PRODUCTS--3.3%
--------------------
12,000 International Paper Company ........... 639,750
23,000 Schweitzer-Mauduit
International, Inc. .................. 380,937
----------
1,020,687
----------
PHARMACEUTICAL--1.7%
--------------------
9,500 Pharmacia & Upjohn, Inc. .............. 532,000
----------
POLLUTION CONTROL--3.7%
-----------------------
20,000 Waste Management
Holdings, Inc. ....................... 1,130,000
----------
RETAIL STORES--2.6%
-------------------
17,000 Federated Department
Stores, Inc.* ........................ 793,688
----------
SERVICES--0.9%
--------------
13,000 Service Corporation International...... 269,750
----------
STEEL/IRON--1.2%
----------------
15,500 British Steel PLC, Sponsored
ADR .................................. 358,438
----------
TELECOMMUNICATIONS--4.8%
------------------------
14,000 BellSouth Corporation ................. 626,500
15,000 SBC Communications, Inc. .............. 840,000
----------
1,466,500
----------
TOBACCO--1.9%
-------------
6,000 Philip Morris Companies, Inc. ......... 210,375
12,700 UST, Inc. ............................. 354,013
----------
564,388
----------
TOY MANUFA
-----------------------
15,000 Mattel, Inc. ......................... 388,125
----------
Total Common Stocks
(cost $23,383,354).................................. 28,601,650
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - VALUE EQUITY FUND
INVESTMENT PORTFOLIO
APRIL 30, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
VALUE
-----------
REPURCHASE AGREEMENT--6.3%(a)
-----------------------------
Repurchase Agreement with State Street Bank
and Trust, dated April 30, 1999
@ 4.78% to be repurchased at $1,921,765 on
May 3, 1999, collateralized by $1,285,000 United
States Treasury Notes, 10.625% due August 15,
2015 (market value $1,947,178
including interest) (cost $1,921,000)......... $ 1,921,000
-----------
TOTAL INVESTMENT PORTFOLIO
(cost $25,304,354)(b), 100.1% (a)........... 30,522,650
OTHER ASSETS AND LIABILITIES, net (0.1%) (a) . (31,494)
-----------
NET ASSETS, 100.0% ........................... $30,491,156
===========
- ----------------------
* 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 $5,218,296, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $5,814,746 and aggregate gross unrealized depreciation for all
securities in which there is an excess tax cost over market value of
$596,450.
ADR -- American Depository Receipt.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EAGLE
AGGRESSIVE INTERNATIONAL
GROWTH EQUITY
FUND PORTFOLIO
-------------- ---------------
<S> <C> <C>
ASSETS
- ------
Investments, at market value (identified cost
$32,429,261, $41,027,096, $82,902,802, $23,667,601,
$216,612,035 and $23,383,354, respectively) (Note 1) ..... $34,913,188 $49,524,495
Repurchase agreement, at market value (identified cost
$4,771,000, $0, $6,904,000, $695,000, $3,537,000 and
$1,921,000, respectively) (Note 1) ....................... 4,771,000 --
Cash ...................................................... 411 --
Foreign currency (cost $815,077)........................... -- 814,887
Receivables:
Investments sold ......................................... 26,499 4,399,805
Fund shares sold ......................................... 137,087 19,564
Dividends and interest ................................... 5,687 144,024
Foreign taxes recoverable ................................ -- 53,147
Unrealized appreciation on forward currency contracts ..... -- 4,199
Deferred organization expenses (Note 1) ................... -- 10,400
Deferred state qualification expenses (Note 1) ............ 11,839 22,068
Prepaid Insurance ......................................... -- 3,123
----------- -----------
Total assets .......................................... $39,865,711 $54,995,712
=========== ===========
LIABILITIES
- -----------
Payables (Note 4):
Investments purchased .................................... $ 1,591,374 $ 3,720,142
Fund shares redeemed ..................................... 41,740 188,469
Accrued management fee ................................... 71,034 624,076
Accrued distribution fee ................................. 18,008 35,808
Other accrued expenses ................................... 44,082 1,245,090
----------- -----------
Total Liabilities ..................................... $ 1,766,238 $ 5,813,585
----------- -----------
Net assets, at market value ............................... $38,099,473 $49,182,127
=========== ===========
NET ASSETS
- ----------
Net assets consist of:
Paid-in capital (Note 5) ................................. $32,217,880 $37,574,138
Undistributed net investment income (loss)
(Notes 1 and 5) ......................................... (165,182) (396,029)
Accumulated net realized gain (loss)
(Notes 1 and 5) ......................................... 3,562,848 3,512,258
Net unrealized appreciation on investments, covered
call options written and other assets and liabilities
denominated in foreign currencies ....................... 2,483,927 8,491,760
----------- -----------
Net assets, at market value ............................... $38,099,473 $49,182,127
=========== ===========
Net assets, at market value
Class A Shares ........................................... 20,818,876 7,478,283
Class B Shares ........................................... 7,379,626 413,357
Class C Shares ........................................... 9,900,971 6,863,087
Eagle Shares ............................................. -- 34,427,400
----------- -----------
Total ................................................. $38,099,473 $49,182,127
=========== ===========
Shares of beneficial interest outstanding
Class A Shares ........................................... 1,118,876 257,809
Class B Shares ........................................... 398,692 14,530
Class C Shares ........................................... 535,023 241,221
Eagle Shares ............................................. -- 1,202,735
----------- -----------
Total ................................................. 2,052,591 1,716,295
=========== ===========
Net Asset Value -- offering and redemption price
per share (Notes 1 and 2) ................................
Class A Shares ........................................... $ 18.61 $ 29.01
=========== ===========
Maximum offering price per share (100/95.25
of $18.61, $29.01, $36.00, $15.08, $24.38
and $20.89............................................... $ 19.54 $ 30.46
=========== ===========
Class B Shares ........................................... $ 18.51 $ 28.45
=========== ===========
Class C Shares ........................................... $ 18.51 $ 28.45
=========== ===========
Eagle Shares ............................................. $ 28.62
===========
<CAPTION>
GROWTH MID CAP SMALL CAP VALUE
EQUITY GROWTH STOCK EQUITY
FUND FUND FUND FUND
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments, at market value (identified cost
$32,429,261, $41,027,096, $82,902,802, $23,667,601,
$216,612,035 and $23,383,354, respectively) (Note 1) ..... $118,639,656 $ 26,360,553 $230,603,989 $ 28,601,650
Repurchase agreement, at market value (identified cost
$4,771,000, $0, $6,904,000, $695,000, $3,537,000 and
$1,921,000, respectively) (Note 1) ....................... 6,904,000 695,000 3,537,000 1,921,000
Cash ...................................................... 877 315 83 281
Foreign currency (cost $815,077)........................... -- -- -- --
Receivables:
Investments sold ......................................... 180,744 1,085,671 4,012,647 --
Fund shares sold ......................................... 861,530 41,045 284,076 152,008
Dividends and interest ................................... 38,117 2,045 103,250 17,316
Foreign taxes recoverable ................................ -- -- -- --
Unrealized appreciation on forward currency contracts ..... -- -- -- --
Deferred organization expenses (Note 1) ................... 8,499 18,094 -- 7,068
Deferred state qualification expenses (Note 1) ............ 15,136 19,815 23,332 13,571
Prepaid Insurance ......................................... 3,571 2,232 6,695 3,124
------------ ------------ ------------ ------------
Total assets .......................................... $126,652,130 $ 28,224,770 $238,571,072 $ 30,716,018
============ ============ ============ ============
LIABILITIES
- -----------
Payables (Note 4):
Investments purchased .................................... $ 1,980,506 $ 595,218 $ 1,616,188 $ --
Fund shares redeemed ..................................... 158,658 65,281 1,167,328 81,079
Accrued management fee ................................... 79,358 90,397 150,552 72,440
Accrued distribution fee ................................. 71,301 13,135 97,724 13,942
Other accrued expenses ................................... 87,087 45,611 165,563 57,401
------------ ------------ ------------ ------------
Total Liabilities ..................................... $ 2,376,910 $ 809,642 $ 3,197,355 $ 224,862
------------ ------------ ------------ ------------
Net assets, at market value ............................... $124,275,220 $ 27,415,128 $235,373,717 $ 30,491,156
============ ============ ============ ============
NET ASSETS
- ----------
Net assets consist of:
Paid-in capital (Note 5) ................................. $ 81,192,279 $ 26,554,443 $226,369,564 $ 26,466,013
Undistributed net investment income (loss)
(Notes 1 and 5) ......................................... (575,485) (204,043) (479,946) 12,811
Accumulated net realized gain (loss)
(Notes 1 and 5) ......................................... 7,921,572 (1,628,224) (4,507,855) (1,205,964)
Net unrealized appreciation on investments, covered
call options written and other assets and liabilities
denominated in foreign currencies ....................... 35,736,854 2,692,952 13,991,954 5,218,296
------------ ------------ ------------ ------------
Net assets, at market value ............................... $124,275,220 $ 27,415,128 $235,373,717 $ 30,491,156
============ ============ ============ ============
Net assets, at market value
Class A Shares ........................................... 54,132,138 15,411,546 149,504,415 16,880,690
Class B Shares ........................................... 10,715,571 2,034,734 10,368,138 1,128,187
Class C Shares ........................................... 59,427,511 9,968,848 75,501,164 12,482,279
Eagle Shares ............................................. -- -- -- --
------------ ------------ ------------ ------------
Total ................................................. $124,275,220 $ 27,415,128 $235,373,717 $ 30,491,156
============ ============ ============ ============
Shares of beneficial interest outstanding
Class A Shares ........................................... 1,503,701 1,021,794 6,131,831 807,952
Class B Shares ........................................... 305,497 136,443 438,789 54,595
Class C Shares ........................................... 1,694,685 668,280 3,194,131 604,093
Eagle Shares ............................................. -- -- -- --
------------ ------------ ------------ ------------
Total ................................................. 3,503,883 1,826,517 9,764,751 1,466,640
============ ============ ============ ============
Net Asset Value -- offering and redemption price
per share (Notes 1 and 2) ................................
Class A Shares ........................................... $ 36.00 $ 15.08 $ 24.38 $ 20.89
============ ============ ============ ============
Maximum offering price per share (100/95.25
of $18.61, $29.01, $36.00, $15.08, $24.38
and $20.89............................................... $ 37.80 $ 15.83 $ 25.60 $ 21.93
============ ============ ============ ============
Class B Shares ........................................... $ 35.08 $ 14.91 $ 23.63 $ 20.67
============ ============ ============ ============
Class C Shares ........................................... $ 35.07 $ 14.92 $ 23.64 $ 20.66
============ ============ ============ ============
Eagle Shares .............................................
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EAGLE
AGGRESSIVE INTERNATIONAL
GROWTH EQUITY
FUND PORTFOLIO
-------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
- -----------------
Income:
Dividends ....................................... $ 21,124 $ 301,202(a)
Interest ........................................ 112,700 23,849(b)
---------- ----------
Total income ................................. 133,824 325,051
Expenses (Notes 1 and 4):
Management fee .................................. 151,151 240,579
Distribution fee (Class A Shares) ............... 21,252 8,877
Distribution fee (Class B Shares) ............... 30,642 1,720
Distribution fee (Class C Shares) ............... 35,501 32,285
Distribution fee (Eagle Shares) ................. -- 171,066
Shareholder servicing fees ...................... 15,922 --
Shareholder servicing fees (Class A Shares) ..... -- 4,616
Shareholder servicing fees (Class B Shares) ..... -- 224
Shareholder servicing fees (Class C Shares) ..... -- 4,197
Shareholder servicing fees (Eagle Shares) ....... -- 1,711
Professional fees ............................... 26,701 34,871
Custodian/Fund accounting fees .................. 27,452 77,419
Amortization of state qualification expenses..... 31,342 22,383
Organization expenses ........................... -- 5,200
Reports to shareholders ......................... 8,563 12,575
Trustees' fees and expenses ..................... 5,067 5,394
Other ........................................... -- 2,050
---------- ----------
Total expenses before waiver ................. 353,593 625,167
Fees waived by Eagle/Manager
(Note 4) ................................... (54,587) (17,952)
---------- ----------
Total expenses after waiver .................. 299,006 607,215
---------- ----------
Net investment income (loss) ..................... (165,182) (282,164)
---------- ----------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) from investment
transactions .................................... 3,765,203 3,281,022
Net realized gain from foreign currency
transactions .................................... -- 246,677
Net increase in unrealized appreciation of
investments during the period ................... 951,017 2,346,615
Net decrease in unrealized appreciation of
covered call options written during
the period ...................................... -- --
Net increase in unrealized appreciation from
foreign currency during the period .............. -- 809,438
---------- ----------
Net gain on investments ...................... 4,716,220 6,683,752
---------- ----------
Net increase in net assets resulting
from operations ................................. $4,551,038 $6,401,588
========== ==========
<CAPTION>
GROWTH MID CAP SMALL CAP VALUE
EQUITY GROWTH STOCK EQUITY
FUND FUND FUND FUND
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
- -----------------
Income:
Dividends ....................................... $ 289,700 $ 46,236 $ 1,051,146 $ 280,772
Interest ........................................ 83,236 25,560 469,228 38,739
----------- ---------- ----------- ----------
Total income ................................. 372,936 71,796 1,520,374 319,511
Expenses (Notes 1 and 4):
Management fee .................................. 417,694 107,576 1,031,061 114,279
Distribution fee (Class A Shares) ............... 61,123 20,411 207,243 20,881
Distribution fee (Class B Shares) ............... 42,859 11,023 49,754 4,969
Distribution fee (Class C Shares) ............... 269,575 50,768 413,374 63,879
Distribution fee (Eagle Shares) ................. -- -- -- --
Shareholder servicing fees ...................... 58,571 18,835 176,695 18,834
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 ............................... 15,975 14,510 19,360 14,840
Custodian/Fund accounting fees .................. 32,753 27,645 45,189 27,537
Amortization of state qualification expenses..... 22,790 27,467 23,405 17,515
Organization expenses ........................... 2,833 2,585 -- 5,301
Reports to shareholders ......................... 16,789 5,751 23,215 5,753
Trustees' fees and expenses ..................... 5,094 5,067 5,094 5,094
Other ........................................... 2,365 1,379 5,930 2,003
----------- ---------- ----------- ----------
Total expenses before waiver ................. 948,421 293,017 2,000,320 300,885
Fees waived by Eagle/Manager
(Note 4) ................................... -- (17,178) -- (28,291)
----------- ---------- ----------- ----------
Total expenses after waiver .................. 948,421 275,839 2,000,320 272,594
----------- ---------- ----------- ----------
Net investment income (loss) ..................... (575,485) (204,043) (479,946) 46,917
----------- ---------- ----------- ----------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) from investment
transactions .................................... 11,055,593 (87,742) (792,062) (874,503)
Net realized gain from foreign currency
transactions .................................... -- -- -- --
Net increase in unrealized appreciation of
investments during the period ................... 12,117,581 1,754,872 19,893,958 5,218,296
Net decrease in unrealized appreciation of
covered call options written during
the period ...................................... -- -- -- (502,915)
Net increase in unrealized appreciation from
foreign currency during the period .............. -- -- -- --
----------- ---------- ----------- ----------
Net gain on investments ...................... 23,173,174 1,667,130 19,101,896 3,840,878
----------- ---------- ----------- ----------
Net increase in net assets resulting
from operations ................................. $22,597,689 $1,463,087 $18,621,950 $3,887,795
=========== ========== =========== ==========
</TABLE>
- ----------
(a) Net of $25,511 foreign withholding taxes.
(b) Net of $2 foreign withholding taxes.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH FOR THE PERIOD
PERIOD ENDED AUGUST 20, 1998
APRIL 30, 1999 TO
(UNAUDITED) OCTOBER 31, 1998
=================== =================
<S> <C> <C>
AGGRESSIVE GROWTH FUND
- ----------------------
Increase in net assets:
Operations:
Net investment loss ...................................................... $ (165,182) $ (5,426)
Net realized gain (loss) on investment transactions ...................... 3,765,203 (202,355)
Net increase in unrealized appreciation of investments during the period . 951,017 1,532,910
----------- -----------
Net increase in net assets resulting from operations ..................... 4,551,038 1,325,129
Increase in net assets from Fund share transactions (Note 2) .............. 15,063,258 17,160,048
----------- -----------
Increase in net assets .................................................... 19,614,296 18,485,177
Net assets, beginning of period ........................................... 18,485,177 --
----------- -----------
Net assets, end of period (including accumulated net investment loss of
$165,182 as of April 30, 1999)............................................ $38,099,473 $18,485,177
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
================== =================
<S> <C> <C>
EAGLE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------
Increase in net assets:
Operations:
Net investment loss ............................................................. $ (282,164) $ (264,871)
Net realized gain on investment transactions .................................... 3,281,022 234,230
Net realized gain (loss) from foreign currency transactions ..................... 246,677 (68,794)
Net increase in unrealized appreciation of investments during the period ........ 2,346,615 1,977,238
Net increase in unrealized appreciation from foreign currency during the period . 809,438 1,412,197
------------ -----------
Net increase in net assets resulting from operations ............................ 6,401,588 3,290,000
Distributions to shareholders from:
Net investment income Class A Shares, ($0.05 per share).......................... -- (13,340)
Net realized gains Class A Shares, ($0.12 and $0.62 per share, respectively)..... (30,773) (155,218)
Net realized gains Class B Shares, ($0.12 per share) ............................ (1,581) --
Net realized gains Class C Shares, ($0.12 and $0.62 per share, respectively)..... (27,806) (102,719)
Net realized gains Eagle Shares, ($0.12 and $0.62 per share, respectively)....... (151,973) (808,740)
Increase (decrease) in net assets from Fund share transactions (Note 2) .......... (2,745,905) 1,913,671
------------ -----------
Increase in net assets ........................................................... 3,443,550 4,123,654
Net assets, beginning of period .................................................. 45,738,577 41,614,923
------------ -----------
Net assets, end of period (including undistributed net investment loss
of $396,029 and $113,865, respectively) ......................................... $ 49,182,127 $45,738,577
============ ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
================== =================
<S> <C> <C>
GROWTH EQUITY FUND
- ------------------
Increase in net assets:
Operations:
Net investment loss ...................................................... $ (575,485) $ (480,255)
Net realized gain (loss) on investment transactions ...................... 11,055,593 (3,134,021)
Net increase in unrealized appreciation of investments during the period . 12,117,581 13,613,823
------------ ------------
Net increase in net assets resulting from operations ..................... 22,597,689 9,999,547
Distribution to shareholders from:
Net realized gains Class A Shares ($0.32 per share)....................... -- (324,394)
Net realized gains Class C Shares ($0.32 per share) ...................... -- (263,908)
Increase in net assets from Fund share transactions (Note 2) .............. 17,157,752 32,315,932
------------ ------------
Increase in net assets .................................................... 39,755,441 41,727,177
Net assets, beginning of period ........................................... 84,519,779 42,792,602
------------ ------------
Net assets, end of period (including accumulated net investment loss
of $575,485 as of April 30, 1999)......................................... $124,275,220 $ 84,519,779
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH FOR THE PERIOD
PERIOD ENDED NOVEMBER 6, 1997
APRIL 30, 1999 TO
(UNAUDITED) OCTOBER 31, 1998
------------------- -----------------
<S> <C> <C>
MID CAP GROWTH FUND
- -------------------
Increase (decrease) in net assets:
Operations:
Net investment loss .......................................................... $ (204,043) $ (302,320)
Net realized loss on investment transactions ................................. (87,742) (1,540,482)
Net increase in unrealized appreciation of investments during the period ..... 1,754,872 938,080
------------ ------------
Net increase (decrease) in net assets resulting from operations .............. 1,463,087 (904,722)
Increase (decrease) in net assets from Fund share transactions (Note 2) ....... (1,876,965) 28,733,728
------------ ------------
Increase (decrease) in net assets ............................................. (413,878) 27,829,006
Net assets, beginning of period ............................................... 27,829,006 --
------------ ------------
Net assets, end of period (including accumulated net investment loss
of $204,043 as of April 30, 1999)............................................. $ 27,415,128 $ 27,829,006
============ ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
================== =================
<S> <C> <C>
SMALL CAP STOCK FUND
- --------------------
Decrease in net assets:
Operations:
Net investment loss ..................................................................... $ (479,946) $ (1,505,367)
Net realized loss on investment transactions ............................................ (792,062) (2,922,849)
Net increase (decrease) in unrealized appreciation of investments during the period ..... 19,893,958 (70,263,882)
------------- -------------
Net increase (decrease) in net assets resulting from operations ......................... 18,621,950 (74,692,098)
Distributions to shareholders from:
Net realized gains Class A Shares, ($1.73 per share)..................................... -- (13,224,158)
Net realized gains Class C Shares, ($1.73 per share)..................................... -- (5,438,602)
Increase (decrease) in net assets from Fund share transactions (Note 2) .................. (50,329,703) 48,086,681
------------- -------------
Decrease in net assets ................................................................... (31,707,753) (45,268,177)
Net assets, beginning of period .......................................................... 267,081,470 312,349,647
------------- -------------
Net assets, end of period (including accumulated net investment loss
of $479,946 as of April 30, 1999)........................................................ $ 235,373,717 $ 267,081,470
============= =============
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
------------------ -----------------
<S> <C> <C>
VALUE EQUITY FUND
- -----------------
Decrease in net assets:
Operations:
Net investment income ................................................................... $ 46,917 $ 149,444
Net realized loss on investment transactions ............................................ (874,503) (46,890)
Net increase (decrease) in unrealized appreciation of investments during the period ..... 4,715,381 (1,519,457)
------------ ------------
Net increase (decrease) in net assets resulting from operations ......................... 3,887,795 (1,416,903)
Distributions to shareholders from:
Net investment income Class A Shares, ($ 0.16 and $ 0.20 per share, respectively)........ (152,941) (171,438)
Net investment income Class B Shares, ($ 0.01 per share)................................. (752) --
Net investment income Class C Shares, ($ 0.01 and $ 0.05 per share, respectively)........ (9,859) (31,101)
Net realized gains Class A Shares, ($ 0.12 and $4.90 per share, respectively)............ (110,747) (4,141,640)
Net realized gains Class B Shares, ($ 0.12 per share).................................... (6,528) --
Net realized gains Class C Shares, ($ 0.12 and $4.90 per share, respectively)............ (85,568) (3,207,816)
Increase (decrease) in net assets from Fund share transactions (Note 2) .................. (5,295,660) 4,709,907
------------ ------------
Decrease in net assets ................................................................... (1,774,260) (4,258,991)
Net assets, beginning of period .......................................................... 32,265,416 36,524,407
------------ ------------
Net assets, end of period (including undistributed net investment income
of $12,811 and $129,446, respectively) .................................................. $ 30,491,156 $ 32,265,416
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - AGGRESSIVE GROWTH 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.
<TABLE>
<CAPTION>
CLASS A SHARES*
---------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1998/dagger/
------------------ ------------------------
<S> <C> <C>
Net asset value, beginning of period ................. $ 15.35 $ 14.29
-------- --------
Income from Investing Operations:
Net investment loss(a) .............................. ( 0.07) --
Net realized and unrealized gain on investments ..... 3.33 1.06
-------- --------
Total from Investment Operations ..................... 3.26 1.06
-------- --------
Net asset value, end of period ....................... $ 18.61 $ 15.35
======== ========
Total Return (%)(b)(c) ............................... 21.24 7.42
Ratios (%)/Supplemental Data:
Operating expenses, net, to average
daily net assets(a)(d) ............................. 1.65 1.65
Net investment gain (loss) to average
daily net assets(d) ................................ ( 0.77) 0.08
Portfolio turnover rate(b) .......................... 97 34
Net assets, end of period ($ millions)............... 21 11
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES*
----------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1998/dagger/
------------------ ------------------------
<S> <C> <C>
Net asset value, beginning of period ................. $ 15.33 $ 14.29
-------- --------
Income from Investing Operations:
Net investment loss(a) .............................. ( 0.14) ( 0.03)
Net realized and unrealized gain on investments ..... 3.32 1.07
-------- --------
Total from Investment Operations ..................... 3.18 1.04
-------- --------
Net asset value, end of period ....................... $ 18.51 $ 15.33
======== ========
Total Return (%)(B)(c) ............................... 20.74 7.28
Ratios (%)/Supplemental Data:
Operating expenses, net, to average
daily net assets(a)(d) ............................. 2.40 2.40
Net investment gain (loss) to average
daily net assets(d) ................................ ( 1.52) ( 0.77)
Portfolio turnover rate(b) .......................... 97 34
Net assets, end of period ($ millions)............... 7 4
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES*
-------------------------
FOR THE
PERIOD ENDED
OCTOBER 31, 1998/dagger/
-------------------------
<S> <C> <C>
Net asset value, beginning of period ................. $ 15.33 $ 14.29
-------- --------
Income from Investing Operations:
Net investment loss(a) .............................. ( 0.14) ( 0.03)
Net realized and unrealized gain on investments ..... 3.32 1.07
-------- --------
Total from Investment Operations ..................... 3.18 1.04
-------- --------
Net Asset Value, End of Period ....................... $ 18.51 $ 15.33
======== ========
Total Return (%)(b)(c) ............................... 20.74 7.28
Ratios (%)/Supplemental Data:
Operating expenses, net, to average
daily net assets(a)(d) ............................. 2.40 2.40
Net investment gain (loss) to average
daily net assets(d) ................................ ( 1.51) ( 0.71)
Portfolio turnover rate(b) .......................... 97 34
Net assets, end of period ($ millions)............... 10 3
</TABLE>
- --------------------
* 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 August 20, 1998 (commencement of operations) to
October 31, 1998.
(a) Excludes management fees waived and expenses reimbursed by the Manager in
the amount of $.03 and $.07 per Class A Share, respectively. The operating
expense ratios including such items would have been 2.01% (annualized) and
3.64% (annualized) per Class A Share, respectively. Excludes management
fees waived and expenses reimbursed by the Manager in the amount of $.03
and $.07 per Class B Share, respectively. The operating expense ratios
including such items would have been 2.76% (annualized) and 4.39%
(annualized) per Class B Share, respectively. Excludes management fees
waived and expenses reimbursed by the Manager in the amount of $.03 and
$.07 per Class C Share, respectively. The operating expense ratios
including such items would have been 2.76% (annualized) and 4.39%
(annualized) per Class C Share, respectively.
(b) Not annualized.
(c) Does not reflect the imposition of a sales charge.
(d) Annualized.
31
<PAGE>
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
CLASS A SHARES*
-------------------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 ---------------------------------------------------
(UNAUDITED) 1998 1997 1996/dagger//dagger/
------------- --------- --------- ----------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 25.43 $ 23.97 $ 22.25 $ 21.11
----------- --------- --------- -----------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... ( 0.08) ( 0.01) 0.05 0.10
Net realized and unrealized
gain on investments ............. 3.78 2.14 2.28 1.04
----------- --------- --------- -----------
Total from Investment
Operations ...................... 3.70 2.13 2.33 1.14
----------- --------- --------- -----------
Less Distributions:
Dividends from net
investment income ............... -- ( 0.05) ( 0.44) --
Distributions from net
realized gains .................. ( 0.12) ( 0.62) ( 0.17) --
----------- --------- --------- -----------
Total Distributions .............. ( 0.12) ( 0.67) ( 0.61) --
----------- --------- --------- -----------
Net asset value, end
of period ........................ $ 29.01 $ 25.43 $ 23.97 $ 22.25
=========== ========= ========= ===========
Total Return(%)(b) ................ 14.57 (c)(f) 9.04 (d) 10.71 (d) 5.40 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a)...... 1.97 (e) 1.97 1.97 1.97 (e)
Net investment income (loss)
to average daily net assets ..... ( 0.61)(e) ( 0.02) 0.22 0.44 (e)
Portfolio turnover rate .......... 41 (c) 71 50 59
Net assets, end of period
($ millions)..................... 7 7 6 3
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES*
-------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED
APRIL 30,
1999
(UNAUDITED) 1998/dagger//dagger//dagger/
------------- ---------------------------
<S> <C> <C>
Net asset value, beginning of
period ........................... $ 25.03 $ 23.95
----------- ---------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... ( 0.17) ( 0.16)
Net realized and unrealized
gain on investments ............. 3.71 1.24
----------- ---------
Total from Investment
Operations ...................... 3.54 1.08
----------- ---------
Less Distributions:
Dividends from net
investment income ............... -- --
Distributions from net
realized gains .................. ( 0.12) --
----------- ---------
Total Distributions .............. ( 0.12) --
----------- ---------
Net asset value, end
of period ........................ $ 28.45 $ 25.03
=========== =========
Total Return(%)(b) ................ 14.07 (c)(f) 4.51 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a)...... 2.72 (e) 2.72 (e)
Net investment income (loss)
to average daily net assets ..... ( 1.32)(e) ( 0.71)(e)
Portfolio turnover rate .......... 41 (c) 71
Net assets, end of period
($ millions)..................... 0.4 0.2
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES*
-----------------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 -------------------------------------------------
(UNAUDITED) 1998 1997 1996/dagger//dagger/
------------- --------- --------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 25.03 $ 23.73 $ 22.12 $ 21.11
----------- --------- --------- -----------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... ( 0.18) ( 0.20) ( 0.13) ( 0.07)
Net realized and unrealized
gain on investments ............. 3.72 2.12 2.25 1.08
----------- --------- --------- -----------
Total from Investment
Operations ...................... 3.54 1.92 2.12 1.01
----------- --------- --------- -----------
Less Distributions:
Dividends from net
investment income ............... -- -- ( 0.34) --
Distributions from net
realized gains .................. ( 0.12) ( 0.62) ( 0.17) --
----------- --------- --------- -----------
Total Distributions .............. ( 0.12) ( 0.62) ( 0.51) --
----------- --------- --------- -----------
Net asset value, end
of period ........................ $ 28.45 $ 25.03 $ 23.73 $ 22.12
=========== ========= ========= ===========
Total Return(%)(b) ................ 14.11 (c)(f) 8.24 (d) 9.79 (d) 4.78 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a)...... 2.72 (e) 2.72 2.72 2.72 (e)
Net investment income (loss)
to average daily net assets ..... ( 1.35)(e) ( 0.79) ( 0.52) ( 0.32)(e)
Portfolio turnover rate .......... 41 (c) 71 50 59
Net assets, end of period
($ millions)..................... 7 6 4 1
</TABLE>
<TABLE>
<CAPTION>
EAGLE SHARES*
--------------------------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 ----------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995/dagger/
------------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 25.17 $ 23.83 $ 22.14 $ 20.79 $ 20.00
----------- --------- --------- -------- -------------
Income from Investment
Operations:
Net investment income
(loss)(a) ....................... ( 0.17) ( 0.17) ( 0.11) ( 0.01) ( 0.03)
Net realized and unrealized
gain on investments ............. 3.74 2.13 2.28 1.84 0.82
----------- --------- --------- -------- -------------
Total from Investment
Operations ...................... 3.57 1.96 2.17 1.83 0.79
----------- --------- --------- -------- -------------
Less Distributions:
Dividends from net
investment income ............... -- -- ( 0.31) ( 0.01) --
Distributions from net
realized gains .................. ( 0.12) ( 0.62) ( 0.17) ( 0.47) --
----------- --------- --------- -------- -------------
Total Distributions .............. ( 0.12) ( 0.62) ( 0.48) ( 0.48) --
----------- --------- --------- -------- -------------
Net asset value, end
of period ........................ $ 28.62 $ 25.17 $ 23.83 $ 22.14 $ 20.79
=========== ========= ========= ======== =============
Total Return(%)(b) ................ 14.15 (c)(f) 8.38 (d) 9.98 (d) 8.93 3.95 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to
average daily net assets(a)...... 2.60 (e) 2.60 2.60 2.60 2.60 (e)
Net investment income (loss)
to average daily net assets ..... ( 1.26)(e) ( 0.67) ( 0.47) ( 0.02) ( 0.33)(e)
Portfolio turnover rate .......... 41 (c) 71 50 59 61
Net assets, end of period
($ millions)..................... 34 33 32 22 10
</TABLE>
- -------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents per share data for the year since
use of the undistributed income method does not correspond with results of
operations.
/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 October 31, 1998.
(a) Excludes management fees waived by Eagle in the amount of $.01, $.03, $.06
and $.16 per Class A Share, respectively. The operating expense ratio
including such items would have been 2.04% (annualized), 2.08%, 2.23% and
2.69% (annualized) for Class A Shares, respectively. Excludes management
fees waived by the Eagle in the amount of $.01, $.03 per Class B Share,
respectively. The operating expense ratio including such items would have
been 2.79% (annualized) and 2.83 (annualized) for Class B Shares,
respectively. Excludes management fees waived by the Eagle in the amount
of $.01, $.03, $.06, and $.16 per Class C Share, respectively. The
operating expense ratio including such items would have been 2.79%
(annualized), 2.83%, 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 $.01, $.03, $.06, $.16 and $.17 per Eagle
Share, respectively. The operating expense ratios including such items
would have been 2.67% (annualized), 2.71%, 2.86%, 3.31% and 5.09%
(annualized) for Eagle Shares, respectively.
(b) Calculated without the imposition of a sales charge.
(c) Not annualized.
(d) These returns are calculated based on the published net asset value at
October 31, 1997.
(e) Annualized.
(f) These returns are calculated based on
the published net asset value at April 30, 1999.
32
<PAGE>
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
CLASS A SHARES*
------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 --------------------------------------
(UNAUDITED) 1998 1997 1996/dagger/
------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 28.82 $ 23.77 $ 17.74 $ 14.29
-------- -------- -------- ---------
Income from Investment Operations:
Net investment loss(a) .............................. ( 0.10) ( 0.11) ( 0.07) ( 0.03)
Net realized and unrealized gain
on investments ..................................... 7.28 5.48 6.10 3.48
-------- -------- -------- ---------
Total from Investment Operations ..................... 7.18 5.37 6.03 3.45
-------- -------- -------- ---------
Less Distributions:
Distributions from net realized gains ............... -- ( 0.32) -- --
-------- -------- -------- ---------
Net asset value,
end of period ....................................... $ 36.00 $ 28.82 $ 23.77 $ 17.74
======== ======== ======== =========
Total Return (%)(b) .................................. $ 24.91(c) 22.84 33.99 24.14 (c)
Ratios (%)/Supplemental Data:
Operating expenses, net, to average daily
net assets(a) ...................................... 1.28 (d) 1.38 1.61 1.65 (d)
Net investment loss to average daily net assets ..... ( 0.61)(d) ( 0.40) ( 0.35) ( 0.19)(d)
Portfolio turnover rate ............................. 40 (c) 54 50 23
Net assets, end of period ($ millions)............... 54 40 24 12
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES*
--------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED
APRIL 30,
1999
(UNAUDITED) 1998/dagger//dagger/
---------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ................. $ 28.18 $ 24.33
--------- ---------
Income from Investment Operations:
Net investment loss(a) .............................. ( 0.23) ( 0.23)
Net realized and unrealized gain
on investments ..................................... 7.13 4.08
--------- ---------
Total from Investment Operations ..................... 6.90 3.85
--------- ---------
Less Distributions:
Distributions from net realized gains ............... -- --
--------- ---------
Net asset value,
end of period ....................................... $ 35.08 $ 28.18
========= =========
Total Return (%)(b) .................................. 24.49 (c) 15.82 (c)
Ratios (%)/Supplemental Data:
Operating expenses, net, to average daily
net assets(a) ...................................... 2.03 (d) 2.11 (d)
Net investment loss to average daily net assets ..... ( 1.37)(d) ( 1.10)(d)
Portfolio turnover rate ............................. 40 (c) 54
Net assets, end of period ($ millions)............... 11 5
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES*
------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 --------------------------------------
(UNAUDITED) 1998 1997 1996/dagger/
------------ --------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 28.18 $ 23.42 $ 17.61 $ 14.29
--------- -------- -------- ---------
Income from Investment Operations:
Net investment loss(a) .............................. ( 0.23) ( 0.31) ( 0.24) ( 0.15)
Net realized and unrealized gain
on investments ..................................... 7.12 5.39 6.05 3.47
--------- -------- -------- ---------
Total from Investment Operations ..................... 6.89 5.08 5.81 3.32
--------- -------- -------- ---------
Less Distributions:
Distributions from net realized gains ............... -- ( 0.32) -- --
--------- -------- -------- ---------
Net asset value,
end of period ....................................... $ 35.07 $ 28.18 $ 23.42 $ 17.61
========= ======== ======== =========
Total Return (%)(b) .................................. 24.45 (c) 21.93 32.99 23.23 (c)
Ratios (%)/Supplemental Data:
Operating expenses, net, to average daily
net assets(a) ...................................... 2.03 (d) 2.13 2.36 2.40 (d)
Net investment loss to average daily net assets ..... ( 1.36)(d) ( 1.15) ( 1.14) ( 0.96)(d)
Portfolio turnover rate ............................. 40 (c) 54 50 23
Net assets, end of period ($ millions)............... 59 39 18 5
</TABLE>
- -------
* 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 October 31, 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) Does not reflect the imposition of a sales charge.
(c) Not annualized.
(d) Annualized.
33
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST - MID CAP GROWTH 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.
<TABLE>
<CAPTION>
CLASS A SHARES*
------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1998/dagger/
------------------- ------------------------
<S> <C> <C>
Net asset value, beginning of period ....................... $ 14.28 $ 14.29
-------- --------
Income from Investment Operations:
Net investment loss(a) .................................... ( 0.08) ( 0.15)
Net realized and unrealized gain (loss) on investments..... 0.88 0.14
-------- --------
Total from Investment Operations ........................... 0.80 ( 0.01)
-------- --------
Net asset value, end of period ............................. $ 15.08 $ 14.28
======== ========
Total Return (%)(b)(c) ..................................... 5.60 ( 0.07)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average daily
net assets(a)(d) ......................................... 1.60 1.60
Net investment loss to average daily net assets(d) ........ ( 1.10) ( 0.99)
Portfolio turnover rate(b) ................................ 103 129
Net assets, end of period ($ millions)..................... 15 16
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES*
------------------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1998/dagger//dagger/
------------------- --------------------------------
<S> <C> <C>
Net asset value, beginning of period ....................... $ 14.17 $ 14.42
-------- --------
Income from Investment Operations:
Net investment loss(a) .................................... ( 0.14) ( 0.23)
Net realized and unrealized gain (loss) on investments..... 0.88 ( 0.02)
-------- --------
Total from Investment Operations ........................... 0.74 ( 0.25)
-------- --------
Net asset value, end of period ............................. $ 14.91 $ 14.17
======== ========
Total Return (%)(b)(c) ..................................... 5.22 ( 1.73)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average daily
net assets(a)(d) ......................................... 2.35 2.35
Net investment loss to average daily net assets(d) ........ ( 1.85) ( 1.85)
Portfolio turnover rate(b) ................................ 103 129
Net assets, end of period ($ millions)..................... 2 2
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES*
-------------------------------------------
FOR THE SIX MONTH
PERIOD ENDED FOR THE
APRIL 30, 1999 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1998/dagger/
------------------ ------------------------
<S> <C> <C>
Net asset value, beginning of period ....................... $ 14.18 $ 14.29
-------- --------
Income from Investment Operations:
Net investment loss(a) .................................... ( 0.14) ( 0.25)
Net realized and unrealized gain (loss) on investments..... 0.88 0.14
-------- --------
Total from Investment Operations ........................... 0.74 ( 0.11)
-------- --------
Net asset value, end of period ............................. $ 14.92 $ 14.18
======== ========
Total Return (%)(b)(c) ..................................... 5.22 ( 0.77)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average daily
net assets(a)(d) ......................................... 2.35 2.35
Net investment loss to average daily net assets(d) ........ ( 1.85) ( 1.75)
Portfolio turnover rate(b) ................................ 103 129
Net assets, end of period ($ millions)..................... 10 9
</TABLE>
- ------------
* 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
October 31, 1998.
/dagger//dagger/ For the period January 2, 1998 (commencement of Class B
Shares) to October 31, 1998.
(a) Excludes management fees waived by the Manager in the amount of $.01 and
$.03 per Class A Share, respectively. The operating expense ratios
including such items would have been 1.72% (annualized) and 1.86%
(annualized) per Class A Share, respectively. Excludes management fees
waived and expenses reimbursed by the Manager in the amount of $.01 and
$.03 per Class B Share, respectively. The operating expense ratios
including such items would have been 2.47% (annualized) and 2.61%
(annualized) per Class B Share, respectively. Excludes management fees
waived and expenses reimbursed by the Manager in the amount of $.01 and
$.03 per Class C Share, respectively. The operating expense ratios
including such items would have been 2.47% (annualized) and 2.61%
(annualized) per Class C Share, respectively.
(b) Not annualized.
(c) Does not reflect the imposition of a sales charge.
(d) Annualized.
34
<PAGE>
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------
FOR THE
SIX MONTH FOR THE YEARS ENDED
PERIOD ENDED OCTOBER 31,
APRIL 30, 1999* -----------------------------------------------------------
(UNAUDITED) 1998* 1997* 1996* 1995 1994
----------------- ----------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................ $ 22.62 $ 30.39 $ 24.08 $ 18.86 $ 16.20 $ 15.57
---------- --------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment
income (loss)(a) ................ ( 0.01) ( 0.06) ( 0.02) ( 0.05) 0.02 ( 0.01)
Net realized and unrealized
gain (loss) on investments ...... 1.77 ( 5.98) 8.21 6.12 3.62 0.64
---------- --------- -------- -------- -------- --------
Total from Investment
Operations ...................... 1.76 ( 6.04) 8.19 6.07 3.64 0.63
---------- --------- -------- -------- -------- --------
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 ........................ $ 24.38 $ 22.62 $ 30.39 $ 24.08 $ 18.86 $ 16.20
========== ========= ======== ======== ======== ========
Total Return(%)(b) ................ 7.78 c) (20.96) 36.68 33.18 23.97 4.05
Ratios (%)/Supplemental Data:
Operating expenses, net, to
average daily net assets(a) ..... 1.28 (d) 1.22 1.25 1.41 1.88 1.91
Net investment income (loss)
to average daily net assets ..... ( 0.10)(d) ( 0.22) ( 0.09) ( 0.21) 0.15 ( 0.07)
Portfolio turnover rate .......... 20 (c) 52 54 80 89 95
Net assets, end of period
($ millions)..................... 150 174 222 96 57 42
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES*
--------------------------------------
FOR THE
SIX MONTH
PERIOD ENDED
APRIL 30, 1999
(UNAUDITED) 1998/dagger//dagger/
--------------- --------------------
<S> <C> <C>
Net asset value, beginning
of period ........................ $ 22.00 $ 27.98
---------- ----------
Income from Investment
Operations:
Net investment
income (loss)(a) ................ ( 0.10) ( 0.20)
Net realized and unrealized
gain (loss) on investments ...... 1.73 ( 5.78)
---------- ----------
Total from Investment
Operations ...................... 1.63 ( 5.98)
---------- ----------
Less Distributions:
Dividends from net
investment income ............... -- --
Distributions from net
realized gains .................. -- --
---------- ----------
Total Distributions .............. -- --
---------- ----------
Net asset value, end
of period ........................ $ 23.63 $ 22.00
========== ==========
Total Return(%)(b) ................ 7.41 (c) (21.37)(c)
Ratios (%)/Supplemental Data:
Operating expenses, net, to
average daily net assets(a) ..... 2.03 (d) 1.98 (d)
Net investment income (loss)
to average daily net assets ..... ( 0.87) (d) ( 0.93)(d)
Portfolio turnover rate .......... 20 (c) 52
Net assets, end of period
($ millions)..................... 10 9
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES
---------------------------------------------------------------------
FOR THE
SIX MONTH FOR THE YEARS ENDED
PERIOD ENDED OCTOBER 31,
APRIL 30, 1999* ----------------------------------------------------
(UNAUDITED) 1998* 1997* 1996* 1995/dagger/
---------------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................ $ 22.01 $ 29.83 $ 23.84 $ 18.79 $ 15.67
--------- --------- -------- -------- ---------
Income from Investment
Operations:
Net investment
income (loss)(a) ................ ( 0.10) ( 0.26) ( 0.23) ( 0.22) ( 0.02)
Net realized and unrealized
gain (loss) on investments ...... 1.73 ( 5.83) 8.10 6.11 3.14
--------- --------- -------- -------- ---------
Total from Investment
Operations ...................... 1.63 ( 6.09) 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 ........................ $ 23.64 $ 22.01 $ 29.83 $ 23.84 $ 18.79
========= ========= ======== ======== =========
Total Return(%)(b) ................ 7.41 (c) (21.55) 35.63 32.22 19.91 (c)
Ratios (%)/Supplemental Data:
Operating expenses, net, to
average daily net assets(a) ..... 2.03 (d) 1.97 2.00 2.13 2.36 (d)
Net investment income (loss)
to average daily net assets ..... ( 0.85)(d) ( 0.96) ( 0.85) ( 0.94) ( 0.46)(d)
Portfolio turnover rate .......... 20 (c) 52 54 80 89
Net assets, end of period
($ millions)..................... 76 84 90 25 4
</TABLE>
- -----------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents per share data for the year since
use of the undistributed income method does not correspond with results of
operations.
/dagger/ For the period April 3, 1995 (commencement of Class C Shares) to
October 31, 1995.
/dagger//dagger/ For the period January 2, 1998 (commencement of Class B
Shares) to October 31, 1998.
(a) The year ended October 31, 1994 includes recovery of previously waived
management fees paid to the manager of less than $.01 per share.
(b) Does not reflect the imposition of sales charge.
(c) Not annualized.
(d) Annualized.
35
<PAGE>
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
CLASS A SHARES*
---------------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 ----------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995/dagger/
---------------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 18.56 $ 24.27 $ 20.27 $ 18.00 $ 14.29
--------- -------- -------- -------- ---------
Inome from Investment Operations:
Net investment income(loss)(a) ............... 0.06 0.15 0.22 0.17 0.08
Net realized and unrealized gain (loss) on
investments ................................. 2.55 ( 0.76) 5.23 2.76 3.63
--------- -------- -------- -------- ---------
Total from Investment Operations ............. 2.61 ( 0.61) 5.45 2.93 3.71
--------- -------- -------- -------- ---------
Less Distributions:
Dividends from net investment income ......... ( 0.16) ( 0.20) ( 0.15) ( 0.11) --
Distributions from net realized gains ........ ( 0.12) ( 4.90) ( 1.30) ( 0.55) --
--------- -------- -------- -------- ---------
Total Distributions .......................... ( 0.28) ( 5.10) ( 1.45) ( 0.66) --
--------- -------- -------- -------- ---------
Net asset value, end
of period .................................... $ 20.89 $ 18.56 $ 24.27 $ 20.27 $ 18.00
========= ======== ======== ======== =========
Total Return(%)(b) ............................ 14.24 (c) ( 3.52) 28.69 16.59 25.96 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average daily
net assets(a) ............................... 1.45 (d) 1.45 1.61 1.65 1.65 (d)
Net investment income to average daily
net assets .................................. 0.65 (d) 0.74 0.96 0.89 1.05 (d)
Portfolio turnover rate ...................... 49 (c) 132 155 129 82
Net assets, end of period ($ millions)........ 17 18 19 15 12
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES*
------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED
APRIL 30,
1999
(UNAUDITED) 1998/dagger//dagger//dagger/
---------------- ----------------------------
<S> <C> <C>
Net asset value, beginning of period .......... $ 18.29 $ 19.60
---------- ---------
Inome from Investment Operations:
Net investment income(loss)(a) ............... ( 0.01) 0.02
Net realized and unrealized gain (loss) on
investments ................................. 2.52 ( 1.33)
---------- ---------
Total from Investment Operations ............. 2.51 ( 1.31)
---------- ---------
Less Distributions:
Dividends from net investment income ......... ( 0.01) --
Distributions from net realized gains ........ ( 0.12) --
---------- ---------
Total Distributions .......................... ( 0.13) --
---------- ---------
Net asset value, end
of period .................................... $ 20.67 $ 18.29
========== =========
Total Return(%)(b) ............................ 13.81 (c) ( 6.68)(c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average daily
net assets(a) ............................... 2.20 (d) 2.20 (d)
Net investment income to average daily
net assets .................................. ( 0.13) (d) ( 0.15)(d)
Portfolio turnover rate ...................... 49 (c) 132
Net assets, end of period ($ millions)........ 1 1
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES*
---------------------------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED
APRIL 30, OCTOBER 31,
1999 ----------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995/dagger//dagger/
---------------- --------------- ----------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 18.28 $ 23.98 $ 20.06 $ 17.92 $ 15.27
--------- ---------- -------- -------- ---------
Inome from Investment Operations:
Net investment income(loss)(a) ............... ( 0.01) 0.00 0.05 0.02 0.01
Net realized and unrealized gain (loss) on
investments ................................. 2.52 ( 0.75) 5.20 2.74 2.64
--------- ---------- -------- -------- ---------
Total from Investment Operations ............. 2.51 ( 0.75) 5.25 2.76 2.65
--------- ---------- -------- -------- ---------
Less Distributions:
Dividends from net investment income ......... ( 0.01) ( 0.05) ( 0.03) ( 0.07) --
Distributions from net realized gains ........ ( 0.12) ( 4.90) ( 1.30) ( 0.55) --
--------- ---------- -------- -------- ---------
Total Distributions .......................... ( 0.13) ( 4.95) ( 1.33) ( 0.62) --
--------- ---------- -------- -------- ---------
Net asset value, end
of period .................................... $ 20.66 $ 18.28 $ 23.98 $ 20.06 $ 17.92
========= ========== ======== ======== =========
Total Return(%)(b) ............................ 13.82 (c) ( 4.27) (c) 27.79 15.65 17.35 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average daily
net assets(a) ............................... 2.20 (d) 2.20 2.36 2.40 2.40 (d)
Net investment income to average daily
net assets .................................. ( 0.10)(d) ( 0.01) 0.21 0.13 0.28 (d)
Portfolio turnover rate ...................... 49 (c) 132 155 129 82
Net assets, end of period ($ millions)........ 12 14 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 October 31, 1998.
(a) Excludes management fees waived by the Manager in the amount of $.02 per
Class A Shares, $.02 per Class B Shares and $.02 per Class C Shares for the
six month period ended April 30, 1999. The operating expense ratios
including such items would have been 1.64% (annualized), 2.39% (annualized)
and 2.39% (annualized) for Class A, Class B and Class C, respectively.
Excludes management fees waived by the Manager in the amount of $.03 per
Class A Shares, $.02 per Class B Shares and $1.03 per Class C Shares for the
year ended October 31, 1998. The operating expense ratios including such
items would have been 1.58%, 2.33% (annualized) and 2.33% for Class A, Class
B and Class C, respectively. The year ended October 31, 1997 includes
recovery of previously waived management fees paid to the Manager of $.02
per Class A and Class C Shares. The operating expense ratio excluding such
items would have been 1.53% and 2.28% for Class A and Class C Shares,
respectively. 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.
(b) Does not reflect the imposition of a sales charge.
(c) Not annualized.
(d) Annualized.
36
<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
six series, the Aggressive Growth Fund, 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 Aggressive Growth Fund primarily seeks
long-term capital appreciation by investing in equity securities of
companies that may have significant growth potential. The Eagle
International Equity Portfolio primarily seeks capital appreciation
through investments in a portfolio of international 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 primarily in equity securities of companies
with medium 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.
37
<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, except the Aggressive Growth Fund, were deferred
and are being amortized on a straight-line basis over 60 months from the
date of commencement of operations for the respective Funds. The Small
Cap Stock Fund organization expenses have been amortized completely.
Subsequent to June 30, 1998, organization costs of approximately $49,000
in the Aggressive Growth Fund were absorbed by Heritage Asset
Management, Inc.
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, 1999, there was an unlimited number of shares
of beneficial interest of no par value authorized.
AGGRESSIVE GROWTH FUND
----------------------
Transactions in the Class A, B and C Shares of the Fund during six month
period ended April 30, 1999 were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES
(UNAUDITED) ----------------------------- -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 538,375 $ 9,635,489 176,241 $3,092,182 356,855 $6,306,014
Shares redeemed ................ (149,700) (2,654,971) (30,186) (541,511) (43,652) (773,945)
-------- ------------ ------- ---------- ------- ----------
Net increase ................... 388,675 $ 6,980,518 146,055 $2,550,671 313,203 $5,532,069
============ ========== ==========
Shares outstanding:
Beginning of period ........... 730,201 252,637 221,820
-------- ------- -------
End of period ................. 1,118,876 398,692 535,023
========= ======= =======
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH FUND (CONTINUED)
---------------------------------
Transactions in the Class A, B and C Shares of the Fund during the period
August 20, 1998 (commencement of operations) to October 31, 1998, were as
follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE PERIOD ENDED OCTOBER 31, 1998 --------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ...................... 758,002 $10,793,788 254,153 $3,604,086 224,375 $3,201,056
Shares redeemed .................. (27,801) (380,444) (1,516) (22,060) (2,555) (36,378)
------- ----------- ------- ---------- ------- ----------
Net increase ..................... 730,201 $10,413,344 252,637 $3,582,026 221,820 $3,164,678
=========== ========== ==========
Shares outstanding:
Beginning of period ............. -- -- --
------- ------- -------
End of period ................... 730,201 252,637 221,820
======= ======= =======
</TABLE>
EAGLE INTERNATIONAL EQUITY PORTFOLIO
------------------------------------
Transactions in Class A, B, C and Eagle Shares of the Fund during the six
month period ended April 30, 1999, were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES
(UNAUDITED) -------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold ...................... 13,972 $ 382,554 7,150 $ 190,623
Shares issued on reinvestment
of distributions ............... 1,024 28,582 58 1,581
Shares redeemed .................. (25,325) (686,411) (2,026) (58,788)
------- ---------- ------ ---------
Net increase (decrease) .......... (10,329) $ (275,275) 5,182 $ 138,416
========== =========
Shares outstanding:
Beginning of period ............. 268,138 9,348
------- ------
End of period ................... 257,809 14,530
======= ======
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 C SHARES EAGLE SHARES
(UNAUDITED) -------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold ...................... 29,962 $ 810,481 44,313 $ 1,203,429
Shares issued on reinvestment
of distributions ............... 1,009 27,707 5,474 151,150
Shares redeemed .................. (23,873) (643,700) (151,230) (4,158,113)
------- ----------- -------- ------------
Net increase (decrease) .......... 7,098 $ 194,488 (101,443) $ (2,803,534)
=========== ============
Shares outstanding:
Beginning of period ............. 234,123 1,304,178
------- ---------
End of period ................... 241,221 1,202,735
======= =========
</TABLE>
Transactions in Class A Shares, Class C Shares and Eagle Shares of the
Fund during the year ended October 31, 1998 and Class B Shares from
January 2, 1998 (commencement of Class B Shares) to October 31, 1998, were
as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED A SHARES B SHARES
OCTOBER 31, 1998 ---------------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold ..................... 57,108 $ 1,498,668 9,521 $247,499
Shares issued on reinvestment
of distributions .............. 6,686 158,113 -- --
Shares redeemed ................. (51,418) (1,323,329) (173) (4,682)
------- ------------- ----- --------
Net increase (decrease) ......... 12,376 $ 333,452 9,348 $242,817
============= ========
Shares outstanding:
Beginning of year .............. 255,762 --
------- -----
End of year .................... 268,138 9,348
======= =====
<CAPTION>
FOR THE YEAR ENDED C SHARES EAGLE SHARES
OCTOBER 31, 1998 ---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Shares sold ..................... 138,692 $ 3,626,639 161,915 $ 4,255,168
Shares issued on reinvestment
of distributions .............. 4,371 102,414 34,247 805,842
Shares redeemed ................. (67,332) (1,769,569) (223,287) (5,683,092)
------- ------------- -------- -------------
Net increase (decrease) ......... 75,731 $ 1,959,484 (27,125) $ (622,082)
============= =============
Shares outstanding:
Beginning of year .............. 158,392 1,331,303
------- ---------
End of year .................... 234,123 1,304,178
======= =========
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
------------------
Transactions in Class A, B and C Shares of the Fund during the six month
period ended April 30, 1999, were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES
(UNAUDITED) ---------------------------- -------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ...................... 301,444 $ 10,441,826 142,133 $4,672,719 555,177 $ 17,702,396
Shares redeemed .................. (181,795) (6,335,205) (20,203) (703,725) (260,568) (8,620,259)
-------- ------------ ------- ---------- -------- ------------
Net increase ..................... 119,649 $ 4,106,621 121,930 $3,968,994 294,609 $ 9,082,137
============ ========== ============
Shares outstanding:
Beginning of period ............. 1,384,052 183,567 1,400,076
--------- ------- ---------
End of period ................... 1,503,701 305,497 1,694,685
========= ======= =========
</TABLE>
Transactions in Class A and Class C Shares of the Fund during the year
ended October 31, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to October 31, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE YEAR ENDED OCTOBER 31, 1998 ---------------------------- ------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ....................... 586,531 $ 16,436,873 185,913 $5,192,150 854,527 $ 23,502,787
Shares issued on reinvestment
of distributions ................ 12,951 312,499 -- -- 10,879 258,383
Shares redeemed ................... (244,224) (6,562,209) (2,346) (65,655) (248,450) (6,758,896)
-------- ------------ ------- ---------- -------- ------------
Net increase ...................... 355,258 $ 10,187,163 183,567 $5,126,495 616,956 $ 17,002,274
============ ========== ============
Shares outstanding:
Beginning of year ................ 1,028,794 -- 783,120
--------- ------- --------
End of year ...................... 1,384,052 183,567 1,400,076
========= ======= =========
</TABLE>
MID CAP GROWTH FUND
--------------------
Transactions in Class A, B and C Shares of the Fund during the six month
period ended April 30, 1999, were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES
(UNAUDITED) ----------------------------- -------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................... 138,710 $ 2,059,369 29,905 $ 447,079 141,875 $ 2,106,721
Shares redeemed ................. (246,239) (3,655,403) (49,451) (729,408) (143,041) (2,105,323)
-------- ------------ ------- ---------- -------- ------------
Net increase (decrease) ......... (107,529) $ (1,596,034) (19,546) $ (282,329) (1,166) $ 1,398
============ ========== ============
Shares outstanding:
Beginning of period ............ 1,129,323 155,988 669,446
--------- ------- --------
End of period .................. 1,021,794 136,442 668,280
========= ======= ========
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND (CONTINUED)
------------------------------
Transactions in Class A and Class C Shares of the Fund during the period
November 6, 1997 (commencement of operations) to October 31, 1998 and
Class B Shares from January 2, 1998 (commencement of Class B Shares) to
October 31, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE PERIOD ENDED OCTOBER 31, 1998 ---------------------------- ------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ......................... 1,498,547 $ 21,897,656 164,784 $2,531,799 804,758 $ 11,737,195
Shares redeemed ..................... (369,224) (5,364,630) (8,795) (114,655) (135,312) (1,953,637)
--------- ------------ ------- ---------- -------- ------------
Net increase ........................ 1,129,323 $ 16,533,026 155,989 $2,417,144 669,446 $ 9,783,558
============ ========== ============
Shares outstanding:
Beginning of period ................ -- -- --
--------- ------- --------
End of period ...................... 1,129,323 155,989 669,446
========= ======= ========
</TABLE>
SMALL CAP STOCK FUND
--------------------
Transactions in Class A, B and C Shares of the Fund during the six month
period ended April 30, 1999, were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES
(UNAUDITED) -------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold ...................... 474,093 $ 11,229,605 118,833 $ 2,743,652
Shares redeemed .................. (2,031,357) (48,040,728) (83,879) (1,904,536)
---------- ------------- ------- -------------
Net increase (decrease) .......... (1,557,264) $ (36,811,123) 34,954 $ 839,116
============= =============
Shares outstanding:
Beginning of period ............. 7,689,095 403,835
---------- -------
End of period ................... 6,131,831 438,789
========== =======
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 C SHARES
(UNAUDITED) =-------------------------------
SHARES AMOUNT
--------------- ----------------
<S> <C> <C>
Shares sold ...................... 432,534 $ 9,978,848
Shares redeemed .................. (1,067,256) (24,336,544)
---------- -------------
Net increase (decrease) .......... (634,722) $ (14,357,696)
=============
Shares outstanding:
Beginning of period ............. 3,828,853
----------
End of period ................... 3,194,131
==========
</TABLE>
Transactions in Class A and Class C Shares of the Fund during the year
ended October 31, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to October 31, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES
FOR THE YEAR ENDED OCTOBER 31, 1998 -------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold ....................... 2,324,448 $ 65,942,936 430,520 $12,003,417
Shares issued on reinvestment
of distributions ................ 450,837 12,564,851 -- --
Shares redeemed ................... (2,402,109) (65,619,657) (26,685) (623,843)
---------- -------------- ------- -----------
Net increase ...................... 373,176 $ 12,888,130 403,835 $11,379,574
============== ===========
Shares outstanding:
Beginning of year ................ 7,315,919 --
---------- -------
End of year ...................... 7,689,095 403,835
========== =======
<CAPTION>
C SHARES
FOR THE YEAR ENDED OCTOBER 31, 1998 --------------------------------
SHARES AMOUNT
--------------- ----------------
<S> <C> <C>
Shares sold ....................... 1,681,715 $ 46,062,174
Shares issued on reinvestment
of distributions ................ 196,455 5,363,217
Shares redeemed ................... (1,067,827) (27,606,414)
---------- --------------
Net increase ...................... 810,343 $ 23,818,977
==============
Shares outstanding:
Beginning of year ................ 3,018,510
----------
End of year ...................... 3,828,853
==========
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
-----------------
Transactions in Class A, B and C Shares of the Fund during the period
ended April 30, 1999, were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES
(UNAUDITED) ----------------------------- -------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................... 41,832 $ 819,439 15,057 $ 279,508 39,562 $ 759,372
Shares issued on reinvestment
of distributions .............. 13,519 254,838 389 7,278 5,023 93,852
Shares redeemed ................. (202,481) (3,817,660) (10,395) (194,200) (185,943) (3,498,087)
-------- ------------ ------- ---------- -------- ------------
Net increase (decrease) ......... (147,130) $ (2,743,383) 5,051 $ 92,586 (141,358) $ (2,644,863)
============ ========== ============
Shares outstanding:
Beginning of period ............ 955,082 49,544 745,451
-------- ------- --------
End of period .................. 807,952 54,595 604,093
======== ======= ========
</TABLE>
Transactions in Class A and Class C Shares of the Fund during the year
ended October 31, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to October 31, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
FOR THE YEAR ENDED OCTOBER 31, 1998 ----------------------------- -------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 173,321 $ 3,500,708 51,939 $ 998,767 194,603 $ 3,691,922
Shares issued on reinvestment
of distributions ............. 216,712 4,225,878 -- -- 165,685 3,204,346
Shares redeemed ................ (291,484) (5,797,438) (2,395) (43,713) (270,892) (5,070,563)
-------- ------------ ------ --------- -------- ------------
Net increase ................... 98,549 $ 1,929,148 49,544 $ 955,054 89,396 $ 1,825,705
============ ========= ============
Shares outstanding:
Beginning of year ............. 856,533 -- 656,055
-------- ------ --------
End of year ................... 955,082 49,544 745,451
======== ====== ========
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the six month period ended
April 30, 1999, purchases and sales on investment securities (excluding
repurchase agreements and short term obligations) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
-------------------------------
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Aggressive Growth Fund ....................... $39,557,651 $25,147,939
Eagle International Equity Portfolio ......... 20,500,901 19,381,116
Growth Equity Fund ........................... 58,104,386 42,758,530
Mid Cap Growth Fund .......................... 30,933,956 28,867,788
Small Cap Stock Fund ......................... 44,049,111 76,479,810
Value Equity Fund ............................ 14,257,455 19,503,571
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Agency brokerage commissions for the Aggressive Growth Fund, 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
period ended April 30, 1999 aggregated $55,119, $103,822, $70,740,
$73,842, $174,415 and $69,859, of which $9,300, $0, $0, $0, 24,852 and
$300, were paid to Raymond James & Associates, Inc., respectively.
Transactions in covered call options written on equity securities were
as follows:
NUMBER OF PREMIUMS
VALUE EQUITY FUND CONTRACTS RECEIVED
----------------- ----------- -------------
Outstanding, October 31, 1998 ......... 330 $ 144,269
Written .............................. 60 12,510
Closed ............................... -- --
Exercised ............................ (280) (139,312)
Expired .............................. (110) (17,467)
---- ----------
Outstanding, April 30, 1999 ........... 0 0
==== ==========
Note 4: MANAGEMENT, SUBADIVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT,
FUND ACCOUNTING 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 Funds' average daily net assets, computed daily and payable monthly.
For the Aggressive Growth Fund and Small Cap Stock Fund, the management
fee for each Fund is 1.0% on the first $50 million and 0.75% of any
excess over $50 million of average daily net assets. Under the Fund's
Investment Advisory and Administrative Agreement with Eagle Asset
Management, Inc. ("Eagle"), the Eagle International Equity Portfolio
annual management fee is 1.0% on the first $100 million of average daily
net assets and 0.80% of any excess over $100 million of average daily
net assets. The Manager contractually will waive its investment advisory
fees and, if necessary, reimbursed each Fund to the extent that Class A,
Class B and Class C annual operating expenses exceeded that Fund's
average daily net assets attributable to that class for the 1999 fiscal
year as follows:
CLASS A CLASS B AND CLASS C
--------- --------------------
Aggressive Growth Fund ................... 1.65% 2.40%
Eagle International Equity Portfolio ..... 1.97% 2.72%
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%
Management fees of $54,587 were waived for the Aggressive Growth Fund
for the six month period ended April 30, 1999. If total Fund expenses
fall below the expense limitation agreed to by the Manager before the
end of the year ended October 31, 2001, the Aggressive Growth Fund may
be required to pay the Manager a portion or all of the waived management
fees. In addition, the Aggressive Growth Fund may be required to pay the
Manager, a portion or all of the management fees waived of $25,861 and
reimbursed expenses of $25,530 in fiscal 1998 if total Fund expenses
fall below the annual expense limitations before the end of the year
ending October 31, 2000. Management fees of $17,952 were waived for the
Eagle International Equity Portfolio for the six month period ended
April 30, 1999. If total Fund expenses fall below the expense limitation
agreed to by Eagle before the end of the year ended October 31, 2001,
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 of $91,433 in fiscal 1997 and
$52,276 for fiscal 1998 if total Fund expenses fall below the annual
expense limitations before the end of the year ending October 31, 1999,
and 2000, respectively. Management fees of $17,178 were waived by the
Mid Cap Growth Fund for the six month period ended April 30, 1999. If
total Fund expenses fall below the expense limitation agreed to by the
Manager before the end of the year ended October 31, 2001, the Mid Cap
Growth Fund may be required to pay the Manager a portion or all of the
waived management fees. In addition, the Mid Cap Growth Fund may be
required to pay the Manager, a portion or all of the management fees
waived of $60,948 in fiscal 1998 if total Fund expenses fall below the
annual expense limitations before the end of the year ending October 31,
2000. Management fees of $28,291 were waived by the Value Equity Fund
for the six month period ended April 30, 1999. If total Fund expenses
fall below the expense limitation agreed to by the Manager before the
end of the year ended October 31, 2001, the Value Equity Fund may be
required to pay the Manager a portion or all of the waived management
fees. In addition, the Value Equity Fund may be required to pay the
Manager, a portion or all of the management fees waived of $48,072 in
fiscal 1998 if total Fund expenses fall below the annual expense
limitations before the end of the year ending October 31, 2000.
43
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Eagle has entered into an agreement with Martin Currie, Inc., a New York
Corporation, to provide the Eagle International Equity Portfolio
investment advice, portfolio management services including the placement
of brokerage orders, and certain compliance and other services for an
annualized 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 ended April 30, 1999 the
Subadviser earned $120,282 for Subadviser fees, which was paid by Eagle.
Heritage Asset Management, Inc. an affiliate of Eagle, provides certain
administrative services for the Eagle International Equity Portfolio.
Heritage receives a fee in the amount of 0.10% from Eagle for performing
these administrative services.
The Manager has entered into agreements with Eagle (with respect to the
Aggressive Growth Fund, Growth Equity Fund, Mid Cap Growth Fund and the
Value Equity Fund) and with Eagle and Awad Asset Management, 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, 1999, the total
fees the Subadvisers earned were $75,575, $208,847, $53,788, $515,531
and $57,140 for the Aggressive Growth Fund, Growth Equity Fund, Mid Cap
Growth Fund, Small Cap Stock Fund and Value Equity Fund, respectively.
The Manager has entered into an agreement with Osprey Partners
Investment Management, LLC ("Osprey") to provide to the Fund investment
advice, portfolio management services including the placement of
brokerage orders, and certain compliance and other services for a fee
payable by the Manager equal to .32% of the Fund's average daily net
assets. Effective May 18, 1999, the assets of the Value Equity Fund were
allocated to Osprey. Prior to May 18, 1999, the assets of the Fund were
managed by Eagle. Eagle will continue to serve as subadvisor to the
Fund, although there are no assets currently allocated to them.
Raymond James & Associates, Inc. (the "Distributor") has advised the
Trust that it received $138,517, $11,211, $145,929 $23,190, $197,202,
and $15,254 in front end sales charges for Class A Shares, $2,580,
$2,189, $12,265, $24,105, $27,496, and $6,371 in contingent deferred
sales charges for Class B Shares and $3,727, $1,740, $10,442, $4,552,
$20,043, and $541 in contingent deferred sales charges for Class C
Shares for the Aggressive Growth Fund, 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, 1999. The Distributor paid sales commission to salespersons
from these fees and 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 the Class B Shares was accepted. The Manager, Eagle,
Awad Asset Management, Inc. 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 Aggressive Growth Fund, 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, 1999 was $71,034, $16,060, $36,972,
$13,035, $118,965 and $12,547, respectively. In addition, the Manager
performs Fund Accounting services for the Aggressive Growth Fund, the
Growth Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund
and the Value Equity Fund and charged $19,068, $23,778, $18,847, $51,484
and $18,313 during the current period, of which $13,087, $16,521,
$12,669, $16,721 and $12,569, was payable as of April 30, 1999,
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 employee of the Manager or employee of an affiliate of
the Manager received an annual fee of $8,666, an additional fee of
$3,250 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.
AGGRESSIVE GROWTH FUND:
----------------------
For the year ended October 31, 1998, to reflect reclassifications
arising from permanent book/tax differences primarily
44
<PAGE>
attributable to a net operating loss, the Fund credited undistributed
net investment income and debited paid in capital $5,426. The Fund has a
net tax basis capital loss carryforward of $50,287, which may be applied
against any realized net taxable gains until its expiration date of
October 31, 2006.
EAGLE INTERNATIONAL EQUITY PORTFOLIO:
------------------------------------
For the year ended October 31, 1998, to reflect reclassifications
arising from permanent book/tax differences primarily attributable to
foreign currency gains, a net operating loss and basis difference in
passive foreign investment companies (PFICs), the Fund credited
undistributed net investment income $204,602 and accumulated net
realized gain $48,016 and debited paid in capital $252,618.
GROWTH EQUITY FUND:
-----------------
For the year ended October 31, 1998, to reflect reclassifications
arising from permanent book/tax differences primarily attributable to a
net operating loss, the Fund credited undistributed net investment
income $480,255, accumulated net realized loss $434 and debited paid in
capital $480,689. The Fund has a net tax basis capital loss carryforward
of $2,741,694, which may be applied against any realized net taxable
gains until its expiration date of October 31, 2006.
MID CAP GROWTH FUND:
-------------------
For the year ended October 31, 1998, to reflect reclassification arising
from permanent book/tax differences attributable to a net operating
loss, the Fund credited undistributed net investment income and debited
paid in capital $302,320. The Fund has a net tax basis capital loss
carryforward of $1,409,298, which may be applied against any realized
net taxable gains until its expiration date of October 31, 2006.
SMALL CAP STOCK FUND:
--------------------
For the year ended October 31, 1998, to reflect reclassifications
arising from permanent book/tax differences primarily attributable to a
net operating loss and REIT distributions, the Fund credited
undistributed net investment income $1,505,367 and debited accumulated
net realized loss $1,698 and paid in capital $1,503,669. The Fund has a
net tax basis capital loss carryforward of $2,351,305, which may be
applied against any realized net taxable gains until its expiration date
of October 31, 2006.
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, 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.
Note 7: SHAREHOLDERS MEETING:.
On May 14, 1999 a special shareholders' meeting was held for the
following purposes:
(1) To approve a Subadvisory Agreement between Heritage Asset
Management, Inc. and Osprey Partners Investment Management,
LLC. with respect to the Fund;
(2) To approve a proposal to permit Heritage to hire subadvisors or
modify subadvisory agreements without shareholder approval;
The voting results were as follows:
<TABLE>
<CAPTION>
SHARES
-----------------------------------
FOR AGAINST ABSTAINING
--------- --------- -----------
<S> <C> <C> <C>
To approve a Subadvisory Agreement between Heritage Asset
Management, Inc. and Osprey Partners Investment Management, LLC.
with respect to the Fund; ............................................ 686,084 22,224 76,483
To approve a proposal to permit Heritage to hire subadvisors or modify
subadvisory agreements without shareholder approval; ................. 640,290 61,124 83,377
</TABLE>
45
<PAGE>
HERITAGE FAMILY OF FUNDS(TM)
From Our Family to Yours: The Intelligent Creation of Wealth.
HERITAGE STOCK FUNDS
Aggressive Growth
Capital Appreciation
Eagle International
Growth Equity
Income-Growth
Mid Cap
Small Cap
Value Equity
HERITAGE BOND FUNDS
High Yield
Intermediate Government
HERITAGE MONEY MARKET FUNDS
Money Market
Municipal Money Market
We are pleased that many of you are also investors in these funds. For more
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-Aggressive Growth Fund, 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.
(c) 1999 Heritage Asset Management, Inc.
35M 04/99
AR53415-HST
Heritage Series Trust
[LOGO] P.O. Box 33022
St. Petersburg, FL 33733
Address Service Requested
- -------------------------------------------------
Address Services Requested
