As filed with the Securities and Exchange Commission on September 3, 1999
1933 Act File No. 33-57986
1940 Act File No. 811-7470
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 22 [ X ]
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 23
--
(Check appropriate box or boxes.)
HERITAGE SERIES TRUST
(Exact name of Registrant as Specified in Charter)
880 Carillon Parkway
St. Petersburg, FL 33716
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (727) 573-3800
STEPHEN G. HILL, PRESIDENT
880 Carillon Parkway
St. Petersburg, FL 33716
(Name and Address of Agent for Service)
Copy to:
CLIFFORD J. ALEXANDER, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, D.C. 20036
Approximate Date of Proposed Public Offering November 17, 1999
-----------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
HERITAGE SERIES TRUST
INFORMATION TECHNOLOGY FUND
CONTENTS OF REGISTRATION STATEMENT
This registration document is comprised of the following:
Cover Sheet
Contents of Registration Statement
Prospectus for the Information Technology Fund
Statement of Additional Information for the Information
Technology Fund
Part C of Form N-1A
Signature Page
Exhibits
The sole purpose of this filing is to add a new series of the Trust, the
Information Technology Fund. This filing does not affect the prospectus and
statement of additional information for the Class A, Class B and Class C shares
of Eagle International Equity Portfolio ("Eagle International"), Aggressive
Growth Fund, Growth Equity Fund, Mid Cap Growth Fund, Small Cap Stock Fund and
Value Equity Fund of Heritage Series Trust, or the Eagle Class shares of Eagle
International.
<PAGE>
SUBJECT TO COMPLETION
---------------------
HERITAGE
SERIES
TRUST
[picture]
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH.
INFORMATION TECHNOLOGY FUND
PROSPECTUS
---------------, 1999
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
[tree logo]
HERITAGE
--------
SERIES TRUST
880 Carillon Parkway
St. Petersburg, Florida 33716
(800) 421-4184
===============================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to buy these securities in any state where the offer or sale is not permitted.
===============================================================================
<PAGE>
TABLE OF CONTENTS
================================================================================
DETAILS OF THE FUND
Investment Objective.........................................................1
How the Information Technology Fund Pursues its Objective....................1
What are the Main Risks of Investing in the Information Technology Fund......1
Who is the Portfolio Manager.................................................2
What are the Costs of Investing in the Information Technology Fund...........3
Expense Example..............................................................3
MANAGEMENT OF THE FUND
Who Manages Your Fund........................................................4
Distribution of Fund Shares..................................................4
Year 2000....................................................................5
YOUR INVESTMENT
Before You Invest............................................................5
Choosing a Class of Shares...................................................5
Sales Charge Reductions and Waivers..........................................7
How to Invest................................................................8
How to Sell Your Investment.................................................10
How to Exchange Your Shares.................................................12
Account and Transaction Policies............................................12
Dividends, Capital Gains and Taxes..........................................13
<PAGE>
DETAILS OF THE FUND
INFORMATION TECHNOLOGY FUND
================================================================================
INVESTMENT OBJECTIVE. The Information Technology Fund seeks long-term
capital appreciation.
HOW THE INFORMATION TECHNOLOGY FUND PURSUES ITS OBJECTIVE. The Information
Technology Fund seeks to achieve its objective by investing primarily in equity
securities of companies that have developed, or are expected to develop,
products, processes or services that will provide significant technological
advances and improvements, as well as companies that will benefit significantly
from such advances and improvements. The fund invests in various technology
subsectors, including personal computer hardware and software, enterprise
hardware and software, data networking, telecommunications, Internet and
electronic commerce, semiconductors, semiconductor equipment, computer/business
services, contract manufacturing and component distribution.
The fund's portfolio manager will use a "bottom-up" method of analysis based
on fundamental research to select companies for the fund's portfolio. In
selecting investments, the fund's portfolio manager will search for companies,
regardless of size, whose stocks appear to be trading below their true value.
The Fund also will invest in companies that are positioned for accelerated
growth or higher earnings. The portfolio manager may sell any security in the
fund's portfolio if the company's fundamentals deteriorate, the competitive
landscape of the company or its industry changes, the company's position size in
the fund's portfolio becomes too large, or new investments are more attractive.
The fund will invest, under normal market conditions, at least 65% of its
total assets in equity securities of companies that develop, manufacture or
deliver technology-related products or services. Equity securities include
common and preferred stocks, warrants or rights exercisable into common or
preferred stock, securities convertible into common or preferred stock, and
American Depository Receipts. Up to 35% of the fund's total assets may be
invested in U.S. government securities, other investment-grade fixed income
securities and cash equivalents. A portion of the fund's assets may be invested
in foreign securities and options.
As a temporary defensive measure because of market, economic or other
conditions, the fund may invest up to 100% of its assets in high-quality,
short-term debt instruments. To the extent that the fund invokes this strategy,
its ability to achieve its investment objective may be affected adversely.
WHAT ARE THE MAIN COMPONENTS OF THE RISKS OF INVESTING IN THE
INFORMATION TECHNOLOGY FUND. Perhaps the biggest risk of investing in this fund
is that its returns will fluctuate and you could lose money. This fund invests
primarily in the equity securities of companies whose value might decrease in
response to the activities of the company that issued the securities, general
market conditions, and/or economic conditions. If this occurs, the fund's net
asset value also may decrease.
INVESTING IN A SINGLE SECTOR. The fund concentrates its investments in
the information technology sector. As a result, the fund's investments likely
will be sensitive to sector-wide conditions. Adverse conditions or developments
affecting one technology subsector may spread to other companies within related
technology subsectors. The market prices of companies within these subsectors
may move in tandem, which may cause greater volatility on the fund's net asset
value and performance than on a fund that invests among different and unrelated
sectors.
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INVESTING IN TECHNOLOGY COMPANIES. Investments in information technology
companies present special and significant risks. For example, if technology
continues to advance at an accelerated rate, and the number of companies and
product offerings continues to expand, increasingly aggressive pricing may
affect the profitability of companies in which the fund invests. In addition,
because of the rapid pace of technological development, products and services
produced by companies in which the fund invests may become obsolete or have
relatively short product cycles. As a result the fund's returns may be
considerably more volatile than the returns of other mutual funds that do not
invest in similarly related companies.
INVESTING IN SMALL-CAP COMPANIES. The fund may invest a portion of its
assets in small-capitalization information technology companies. Small cap
companies often have narrower markets and more limited managerial and financial
resources than larger, more established companies. As a result, their
performance can be more volatile and they face greater risk of business failure,
which could increase the volatility of the fund's portfolio. Generally, the
smaller the company size, the greater these risks.
INTEREST RATE RISK. A rising interest rate environment tends to
negatively affect companies in the technology sector. Those technology companies
having high market valuations may appear less attractive to investors which may
cause sharp decreases in the companies' market prices. Further, those technology
companies seeking to finance their expansion would have increased borrowing
costs which may negatively impact their earnings. In addition, a rise in
interest rates typically will cause the market value of any fixed-income
securities held by the fund to fall. Consequently, in a rising interest rate
environment, the fund's performance may be reduced.
INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve greater risks than investing in domestic securities. The fund's
investments in foreign securities may be adversely affected through economic,
political or regulatory developments in a foreign security's home country. In
addition, the fluctuations in currency exchange rates may impact the fund's
performance. As a result, the fund's returns and net asset value may be reduced.
INVESTING IN ILLIQUID SECURITIES. The fund may invest a portion of its
assets in illiquid securities. Illiquid securities may trade at a discount when
compared to more liquid investments. The fund may be unable to sell illiquid
securities in a timely manner or at a fair price due to the lack of liquidity.
In addition, the sale of such securities may require more time and increased
selling expenses. Consequently, the fund's investments in illiquid securities
may have an adverse impact on its net asset value.
NON-DIVERSIFICATION RISK. The fund is non-diversified which means it
invests in a limited number of companies. Consequently, the performance of any
one company may have a substantial impact on the fund's performance. In
addition, the fund's net asset value may fluctuate more than a fund investing in
a larger number of companies.
PORTFOLIO TURNOVER. The fund may engage in short-term transactions under
various market conditions to a greater extent than certain other mutual funds
with similar investment objectives. The portfolio manager expects that the
fund's portfolio turnover will exceed 100%. The fund's turnover rate may vary
greatly from year to year or during periods within a year. A high rate of
portfolio turnover generally leads to greater transaction costs and may result
in additional tax consequences to investors.
WHO IS THE PORTFOLIO MANAGER. Duane Eatherly, CFA, a __________ of the
fund's subadviser Eagle Asset Management, Inc., is responsible for the
day-to-day management of the fund.
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<PAGE>
WHAT ARE THE COSTS OF INVESTING IN THE INFORMATION TECHNOLOGY FUND. The
tables below describe the fees and expenses that you may pay if you buy and hold
shares of the fund. The fund's expenses are based on estimated expenses to be
incurred for the fiscal year ending October 31, 2000.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment):
- -----------------------------------------------------------------------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a % of 4.75% None None
offering price)
Maximum Deferred Sales Charge (as a % of original None 5%* 1%**
purchase price or redemption proceeds, whichever is lower)
Wire Redemption Fee (per transaction) $5.00 $5.00 $5.00
- ----------------------------------------------------------- ------------- ---------- ----------
* Declining over a six-year period as follows: 5% during the first year, 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year and 0% thereafter. Class B shares will
convert to Class A shares eight years after purchase.
** Declining to 0% at the first year.
- -----------------------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES (expenses deducted from fund assets):
- -----------------------------------------------------------------------------------------------
Class A Class B Class C
------- ------- -------
Management Fees* 1.00% 1.00% 1.00%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 2.39% 2.39% 2.39%
----- ----- -----
Total Annual Fund Operating Expenses 3.64% 4.39% 4.39%
Fee Waiver and/or Expense Reimbursement* 1.99% 1.99% 1.99%
Net Expenses 1.65% 2.40% 2.40%
===== ===== =====
- ----------------------------------------------------------- ------------- ---------- ----------
* Heritage Asset Management, Inc. has agreed to waive its investment advisory
fees and, if necessary, reimburse the fund to the extent that Class A annual
operating expenses exceed 1.65% of the class' average daily net assets and
Class B and Class C annual operating expenses exceed 2.40% of that class'
average daily net assets for the fund's 2000 fiscal year. Any reduction in
Heritage's management fees is subject to reimbursement by the fund within
the following two years if overall expenses fall below these percentage
limitations.
EXPENSE EXAMPLE. This Example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
fund's operating expenses for Year 1 are net of fee waivers and/or expense
reimbursement. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
- -----------------------------------------------------------------------------------------------
Share Class Year 1 Year
- -----------------------------------------------------------------------------------------------
A shares $635 $1,537
B shares
Assuming redemption at end of period $743 $1,629
Assuming no redemption $243 $1,329
C shares $243 $1,329
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
MANAGEMENT OF THE FUND
WHO MANAGES YOUR FUND
================================================================================
INVESTMENT ADVISER. Heritage Asset Management, Inc. serves as the investment
adviser and administrator for the fund. Heritage manages, supervises and
conducts the business and administrative affairs of the fund and the other
Heritage mutual funds with net assets totaling approximately $___ billion as of
August 31, 1999. Heritage's contractual aggregate annual investment advisory and
administration fee for the fund is 1.00% of the fund's average daily net assets
on the first $100 million and 0.75% on average daily net assets over $100
million.
Heritage is located at 880 Carillon Parkway, St. Petersburg, Florida 33716,
and is a wholly owned subsidiary of Raymond James Financial, Inc. (RJF),
together with its subsidiaries, provides a wide range of financial services to
retail and institutional clients.
SUBADVISER. Heritage may allocate and reallocate the assets of the fund
among one or more investment subadvisers, subject to review by the Board of
Trustees. In the future, Heritage may apply to the Securities and Exchange
Commission (SEC) to receive approval to enter into new or modified subadvisory
agreements with existing or new subadvisers without approval of fund
shareholders, but with the approval of the fund's Board. Upon issuance of such
relief from the SEC, no shareholder approval would be required, subject to
certain conditions. One of the conditions would be that the fund must send
notice to shareholders containing information about the new subadvisor or a
material change to an existing subadvisory contract.
Heritage has selected Eagle Asset Management, Inc., 880 Carillon Parkway,
St. Petersburg, Florida 33716, to provide investment advice and portfolio
management services to the fund's portfolio. Eagle has been managing private
accounts since 1976 for a diverse group of clients, including individuals,
corporations, municipalities and trusts. Eagle managed approximately $___
billion for these clients as of August 31, 1999.
PORTFOLIO MANAGER. Duane Eatherly, a _________of Eagle, is responsible for
the day-to-day management of the fund's portfolio. From January 1996 to May
1999, Mr. Eatherly served as a Sector Manager (Technology Equities) at Banc One
Investment Advisors. Prior to that, he was a Vice President (Acquisitions) with
Banc One Private Label Credit Services from November 1995 to January 1996, and
Senior Associate (Merchant Banking Group) with Banc One Capital Corporation from
June 1993 to January 1996. Mr. Eatherly is a Chartered Financial Analyst and
Certified Financial Planner.
DISTRIBUTION OF FUND SHARES
================================================================================
Raymond James & Associates, Inc. (RJA) currently serves as the distributor
of the fund. Subject to regulatory approvals, the fund's Board of Trustees has
approved a proposed distribution agreement with Heritage Fund Distributors, Inc.
Page 4
<PAGE>
YEAR 2000
================================================================================
The fund could be affected adversely if the computer systems used by
Heritage, Eagle, the fund's other service providers, or companies in which the
fund invests do not properly process and calculate information that relates to
dates beginning on January 1, 2000 and beyond. Heritage and Eagle have taken
steps that they believe are reasonably designed to address the potential failure
of computer systems used by them and the fund's service providers to address the
Year 2000 issue. However, due to the fund's reliance on various service
providers to perform essential functions, the fund could have difficulty
calculating its net asset value, processing orders for share sales and
delivering account statements and other information to shareholders. There can
be no assurance that these steps will be sufficient to avoid any adverse impact.
YOUR INVESTMENT
BEFORE YOU INVEST
================================================================================
Before you invest in the fund, please
o Read this prospectus carefully.
o Next, decide which class of shares is best for you.
o Finally, decide how much you wish to invest and how you want to open an
account.
CHOOSING A CLASS OF SHARES
================================================================================
You can choose from three classes of shares: Class A shares, Class B shares
and Class C shares. Each class has a different combination of sales charges and
ongoing fees allowing you to choose the class that best meets your needs. You
should make this decision carefully based on:
o the amount you wish to invest,
o the different sales charges that apply to each share class,
o whether you qualify for any reduction or waiver of sales charges,
o the length of time you plan to keep the investment, and
o the class expenses.
CLASS A SHARES. You may purchase Class A shares at the "offering price" - a
price equal to their net asset value, plus a maximum sales charge of 4.75%
imposed at the time of purchase. Class A shares are subject to ongoing
distribution and service (Rule 12b-1) fees of up to 0.25% of their average daily
net assets. These fees are lower than the ongoing Rule 12b-1 fees for Class B
shares and Class C shares.
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<PAGE>
If you choose to invest in Class A shares, you will pay a sales charge at
the time of each purchase. The table below shows the charges both as a
percentage of offering price and as a percentage of the amount you invest. If
you invest more, the sales charge will be lower. You may qualify for a reduced
sales charge or the sales charge may be waived as described below.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Class A Sales Charges
----------------------------------------------------------------------------------------
AS A % OF AS A % OF YOUR DEALER CONCESSION
YOUR INVESTMENT OFFERING PRICE INVESTMENT AS % OF OFFERING PRICE(1)
--------------- -------------- ---------- -------------------------
<S> <C> <C> <C>
Less than $25,000............4.75% 4.99% 4.25%
$25,000-$49,999..............4.25% 4.44% 3.75%
$50,000-$99,999..............3.75% 3.90% 3.25%
$l00,000-$249,999............3.25% 3.36% 2.75%
$250,000-$499,999............2.50% 2.56% 2.00%
$500,000-$999,999............1.50% 1.52% 1.25%
$1,000,000 and over..........0.00% 0.00% 0.00% (2)
----------------------------------------------------------------------------------------
</TABLE>
(1) During certain periods, the fund's distributor may pay 100% of the
sales charge to participating dealers. Otherwise, it will pay the
dealer concession shown above.
(2) For purchases of $1 million or more, Heritage may pay from its own
resources to the Distributor, up to 1.00% of the purchase amount
on the first $3 million and 0.80% on assets thereafter. There
shares purchased will then be subject to an 18-month CDSC of 1.00%
and Heritage will retain the initial year's Rule 12b-1 fees.
CLASS B SHARES. You may purchase Class B shares at net asset value with no
initial sales charge. As a result, the entire amount of your purchase is
invested immediately. However, if you sell the shares within 6 years of
purchase, you will pay a "contingent deferred" sales charge (CDSC) at the time
of sale of up to 5.00%. Class B shares are subject to ongoing Rule 12b-1 fees of
up to 1.00% of their average daily net assets. This Rule 12b-1 fee is higher
than the ongoing Rule 12b-1 fees for Class A shares but the same as for the
Class C shares. Class B shares are offered for sale only for purchases of less
than $250,000.
If you choose to invest in Class B shares, you will pay a sales charge if
you sell those shares within 6 years of purchase. The CDSC imposed on sales of
Class B shares will be calculated by multiplying the original purchase cost or
the current market value of the shares being sold, whichever is less, by the
percentage shown on the following chart. The longer you hold the shares, the
lower the rate of the CDSC. The CDSC may be waived as described below. Any
period of time you held Class B shares of the Heritage Cash Trust-Money Market
Fund will not be counted when determining your CDSC.
-------------------------------------------------------------
Class B Deferred Charges
-------------------------------------------------------------
Redemption During CDSC on shares being sold
----------------- -------------------------
1st year 5%
2nd year 4%
3rd year 3%
4th year 3%
5th year 2%
6th year 1%
After 6 years 0%
-------------------------------------------------------------
CONVERSION OF CLASS B SHARES. If you buy Class B shares and hold them for 8
years, we automatically will convert them to Class A shares without charge. Any
period of time you held Class B shares of the Heritage Cash Trust-Money Market
Fund will be excluded from the 8-year period. At this time, we also will convert
Page 6
<PAGE>
any Class B shares that you purchased with reinvested dividends and other
distributions. We do this to lower your investment costs.
When we do the conversion, you will receive Class A shares in an amount
equal to the value of your Class B shares. However, because Class A and Class B
shares have different prices, you may receive more or less Class A shares after
the conversion. The dollar value will be the same, so you have not lost any
money as a result of the conversion.
CLASS C SHARES. You may purchase Class C shares at net asset value with no
initial sales charge. As a result, the entire amount of your purchase is
invested immediately. However, if you sell the shares less than 1 year after
purchase, you will pay a CDSC at the time of sale of 1.00%. Class C shares are
subject to ongoing Rule 12b-1 fees of up to 1.00% of their average daily net
assets. This Rule 12b-1 fee is higher than the ongoing Rule 12b-1 fees for Class
A shares and is the same as for the Class B shares. Class C shares do not
convert to any other class of shares. Any period of time you held Class C shares
of the Heritage Cash-Trust Money Market Fund will not be counted toward the
1-year period.
If you choose to invest in Class C shares, you will pay a sales charge if
you sell your shares less than 1 year after purchase. The CDSC imposed on sales
of Class C shares will be calculated based on the original purchase cost or the
current market value of the shares being sold, whichever is less. The CDSC may
be waived as described below.
UNDERSTANDING RULE 12B-1 FEES. The fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and sales fees for the sale of its shares and
for services provided to shareholders. Because these fees are paid out of the
fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.
SALES CHARGE REDUCTIONS AND WAIVERS
================================================================================
We offer a number of ways to reduce or eliminate the initial sales charge on
Class A shares or the CDSC on Class B and Class C shares. If you think you are
eligible, contact Heritage or your financial advisor for further information.
REDUCING YOUR CLASS A SALES CHARGE. We offer three programs designed to
reduce your Class A sales charge. You may choose one of these programs to
combine multiple purchases of Class A shares of Heritage mutual funds to take
advantage of the reduced sales charges listed in the schedule above. Please
complete the appropriate section of your account application, contact your
financial advisor or Heritage if you would like to take advantage of these
programs.
o RIGHTS OF ACCUMULATION - Lets you combine purchases in related
accounts for purposes of calculating sales charges. Under this
program, a related account includes any other direct or beneficial
accounts you own, your spouse's accounts, or accounts held by your
minor children.
o COMBINED PURCHASE PRIVILEGE - Lets you add the value of your previous
Class A investments for purposes of calculating the sales charge if
the total amount you have invested is at least $25,000.
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<PAGE>
o STATEMENT OF INTENTION - Lets you purchase Class A shares of any
Heritage mutual fund over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. You must
invest at least $25,000 to obtain the benefit of this privilege.
WAIVER OF CLASS A SHARES SALES CHARGE. Class A shares may be sold at net
asset value without any sales charge to: (1) Heritage and Eagle; (2) current and
retired officers and Trustees of the fund; (3) directors, officers and full-time
employees of Heritage, Eagle, any subadviser of a Heritage mutual fund, the
fund's distributor and its affiliates; (4) registered financial advisors and
employees of broker-dealers that are parties to dealer agreements with the
fund's distributor (or financial institutions that have arrangements with such
broker-dealers); and (5) directors, officers and full-time employees of banks
that are party to agency agreements with the distributor, and all such persons'
immediate relatives and their beneficial accounts. In addition, members of the
American Psychiatric Association may purchase Class A shares at a sales charge
equal to two-thirds of the percentages in the above table. The dealer concession
also will be adjusted in a like manner. Class A shares also may be purchased
without sales charges by investors who participate in certain broker-dealer wrap
fee investment programs.
In addition, Class A shares may be sold at net asset value without any
sales charges to participants of retirement plans which have at least 100
participants or $50 million dollars. Heritage may pay from its own resources to
the Distributor up to 1.00% of the purchase amount on the first $3 million and
0.80% on assets thereafter, by these plans. Any participant in these plans who
redeems Class A shares within 18 months of his or her purchase may be subject to
a CDSC of 1.00% and Heritage will retain the initial year's Rule 12b-1 fees.
Class A shares also may be sold at net asset value without any sales charges
to individual retirement accounts, qualified retirement plans and taxable
accounts that execute transactions through a single omnibus account per fund
that is maintained by a financial institution or service organization that has
entered into an acceptable administrative or similar agreement with the
applicable Heritage mutual fund, Heritage or the fund's distributor.
CDSC WAIVERS. The CDSC for Class A shares, Class B shares and Class C
shares currently is waived if the shares are sold:
o to make certain distributions from retirement plans,
o because of shareholder death or disability (including shareholders
who own shares in joint tenancy with a spouse),
o to make payments through certain sales from a Systematic Withdrawal
Plan of up to 12% annually of the account balance at the beginning of
the plan, or
o to close out shareholder accounts thatdo not comply with the minimum
balance requirements.
REINSTATEMENT PRIVILEGE. If you sell shares of a Heritage mutual fund, you
may reinvest some or all of the sales proceeds up to 90 days later in the same
share class of any Heritage mutual fund without incurring additional sales
charges. If you paid a CDSC, the reinvested shares will have no holding period
requirement. You must notify the fund if you decide to exercise this privilege.
HOW TO INVEST
================================================================================
INITIAL OFFERING OF SHARES. The fund initially will offer its shares for
sale during a period scheduled to end at the close of business on __________,
1999. During this period, shares of the fund will be offered through RJA to
participating dealers or banks at a price of $_____ per Class A share (including
the applicable sales charge) with a maximum offering price of $______ per share.
Class B and Class C shares will be offered at $_____. During this period, a
financial advisor of RJA, participating dealers, or participating banks may
receive payments for any orders. These persons may benefit from the temporary
use of funds received prior to close of the initial offering period. After the
close, the fund will commence investment operations. The fund may withdraw,
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<PAGE>
cancel or modify the offering of shares during the initial offering period
without notice or refuse any order in whole or in part, if the fund determines
that it is in its best interests to do so.
MINIMUM INITIAL INVESTMENT. Once you have chosen a share class, the next
step is to determine the amount you wish to invest. The minimum initial
investment for the fund is:
---------------------------------------------------------------------
Minimum Initial Subsequent
Type of Account Investment Investment
---------------------------------------------------------------------
Regular Account $1,000 No minimum
Systematic Investment $50 $50 on a monthly
Program basis
Retirement Account $1,000 No minimum
---------------------------------------------------------------------
Heritage may waive these minimum requirements at its discretion. Investments
in IRAs may be reduced or waived under certain circumstances. Contact Heritage
or your financial advisor for further information.
OPENING AN ACCOUNT. You may open an account in the following ways:
THROUGH YOUR FINANCIAL ADVISOR. You may invest in the fund by contacting
your financial advisor. Your financial advisor can help you open a new account
and help you review your financial needs and formulate long-term investment
goals and objectives.
BY MAIL. You may invest in the fund directly by completing and signing the
account application found in this prospectus. Indicate the class of shares and
the amount you wish to invest. If you do not specify a share class, we will
automatically choose Class A shares, which include a front-end sales charge.
Make your check payable to the fund and specific class of shares you are
purchasing. Mail the application and your payment to:
Heritage Asset Management, Inc.
P.O. Box 33022
St. Petersburg, FL 33733
BY DOLLAR COST AVERAGING PLANS. We offer the following plans to allow you to
make regular, automatic investments into the fund. You determine the amount and
frequency of your investments. You can terminate your plan at any time.
Availability of these plans may be limited by your financial advisor.
o AUTOMATIC INVESTING - You may instruct us to transfer funds from a
specific bank checking account to your Heritage account. This
transfer will be effected either by electronic transfer or paper
draft. Complete the appropriate sections of the account application
or the Heritage Bank Draft Investing form to activate this service.
o DIRECT DEPOSIT - You may instruct your employer to direct all or part
of your paycheck to your Heritage account. You also may direct to
your account other types of payments you receive such as from an
insurance company or another mutual fund family. Contact your
financial advisor or Heritage for the direct deposit enrollment form.
Please note the routing instructions are different than the Federal
Reserve wire instructions discussed below.
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o GOVERNMENT DIRECT DEPOSIT - Beginning in 1999, any newly established
investment programs by employees of the Federal government must be
paid through direct deposit. You can have your Social Security,
military pension, paycheck or other Federal government payment sent
to your Heritage account. Your completed Government Direct Deposit
form requires Heritage's review and approval for processing. Contact
your financial advisor or Heritage for an enrollment form.
o AUTOMATIC EXCHANGE - You may make automatic regular exchanges between
two or more Heritage mutual funds. These exchanges are subject to the
exchange requirements discussed below.
If you discontinue any of these plans before your account reaches the required
minimum investment, you must buy more shares to keep your account open.
THROUGH A RETIREMENT PLAN. Heritage mutual funds offer a range of retirement
plans, including self-directed, traditional and Roth IRAs, Keogh Plans, SEPs and
SIMPLEs. A special application and custodial agreement is required. Contact your
financial advisor or Heritage for more information.
BY WIRE. You may invest in the fund by Federal Reserve wire sent from your
bank. Mail your completed and signed account application to Heritage. Contact
Heritage at (800) 421-4184 or your financial advisor to obtain your account
number before sending the wire. Your bank may charge a wire fee. Send your
investment and the following information by Federal Reserve or bank wire to:
State Street Bank and Trust Company
ABA #011-000-028
Account # 3196-769-8
Name of the Fund
The class of shares to be purchased
(Your account number assigned by Heritage)
(Your name)
HOW TO SELL YOUR INVESTMENT
================================================================================
You can sell - or redeem - shares of the fund for cash at any time, subject
to certain restrictions.
APPLICATION OF CDSC. To keep your CDSC as low as possible, each time you
place a request to sell shares we will first sell any shares in your account
that carry no CDSC. If there are not enough of these to meet your request, we
will sell those shares that have the lowest CDSC. There is no CDSC on shares
acquired through reinvestment of dividends or other distributions. However, any
period of time you held Class B or Class C shares of Heritage Cash Trust-Money
Market Fund will not be counted for purposes of calculating the CDSC.
HOW TO SELL YOUR SHARES. You may contact your financial advisor or Heritage
with instructions to sell your investment in the following ways:
THROUGH YOUR FINANCIAL ADVISOR. You may sell your shares through your
financial advisor who can prepare the necessary documentation. Your financial
advisor will transmit your request to sell shares of the fund and may charge you
a fee for this service.
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<PAGE>
BY TELEPHONE. You may sell shares from your account by telephone by calling
the fund at (800) 421-4184 prior to the close of regular trading on the New York
Stock Exchange - typically 4:00 p.m. Eastern time. If you do not wish to have
telephone redemption privileges, you must complete the appropriate section of
the account application.
BY MAIL. You may sell shares of the fund by sending a letter of instruction.
Specify the fund's name, your share class, your account number, the names in
which the account is registered and the dollar value or number of shares you
wish to sell. Include all signatures and any additional documents that may be
required. Mail the request to Heritage Asset Management, Inc., P.O. Box 33022,
St. Petersburg, FL 33733.
Some circumstances require a written letter requesting sale of shares, along
with a signature guarantee. These include:
o Sales from any account that has had an address change in the past
30 days
o Sales of greater than $50,000
o Sales in which payment is to be sent to an address other than the
address of record
o Sales in which payment is to be made to payees other than the
exact registration of the account or
o Exchanges or transfers into other Heritage accounts that have
different titles
We will only accept official signature guarantees from participants in our
signature guarantee program, which includes most banks and security dealers. A
notary public can not guarantee your signature.
BY SYSTEMATIC WITHDRAWAL PLAN. This plan may be used for periodic
withdrawals from your account. To establish, complete the appropriate section of
the account application or the Heritage systematic withdrawal form (available
from your financial advisor or Heritage) and send that form to Heritage.
Availability of this plan may be limited by your financial advisor. You should
consider the following factors when establishing a plan:
o Make sure you have a sufficient amount of shares in your account.
o Determine how much you wish to withdraw. You must withdraw a minimum
of $50 for each transaction.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you also are selling shares of
the same fund is not advantageous to you, because of sales charges).
o Determine the schedule: monthly, quarterly, semiannual or annual
basis.
o Determine which day of the month you would like the withdrawal to
occur. Available dates are the 1st, 5th, 10th or 20th day of the
month. If such a date falls on the weekend, the withdrawal will take
place on the next business day.
o Heritage reserves the right to cancel systematic withdrawals if
insufficient shares are available for two or more consecutive months.
RECEIVING PAYMENT. When you sell shares, payment of the proceeds generally
will be made the next business day after your order is received. If you sell
shares that were recently purchased by check or pre-authorized automatic
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purchase, payment will be delayed until we verify that those funds have cleared,
which may take up to two weeks. You may receive payment of your sales proceeds
the following ways:
o BY CHECK - We will mail a check to the address of record or bank
account specified on your account application. Checks made payable to
other than the registered owners or sent to an address other than the
address of record require written instruction accompanied by a
signature guarantee, as described above.
o BY WIRE - You may request that we send your proceeds by Federal
Reserve wire to a bank account you specify. You must provide wiring
instructions to Heritage in writing. We normally will send these
proceeds the next day. A $5.00 wire fee will be charged to your
account.
o TO YOUR BROKERAGE ACCOUNT - If you place your redemption request with
your financial advisor, payment can be directed to your brokerage
account. Payment for these trades occurs three business days after
you place your sale request.
HOW TO EXCHANGE YOUR SHARES
================================================================================
If you own shares of the fund for at least 30 days, you can exchange those
shares for shares of the same class of any other Heritage mutual fund provided
you satisfy the minimum investment requirements. You may exchange your shares by
calling your financial advisor or Heritage if you exchange to like titled
Heritage accounts. Written instructions with a signature guarantee, as described
above, are required if the accounts are not identically registered.
You may make exchanges without paying any additional sales charges. However,
if you exchange shares of the Heritage Cash Trust-Money Market Fund acquired by
purchase (rather than exchange) for shares of another Heritage mutual fund, you
must pay the applicable sales charge.
Class B and Class C shares will continue to age from the original date and
will retain the same CDSC rate as they had before the exchange. However, if you
hold Class B shares or Class C shares in the Heritage Cash Trust-Money Market
Fund, the time you hold those shares in that fund will not be counted for
purposes of calculating the CDSC.
ACCOUNT AND TRANSACTION POLICIES
================================================================================
PRICE OF SHARES. The fund's regular business days are the same as those of
the New York Stock Exchange, normally Monday through Friday. The net asset value
per share (NAV) for each class of the fund is determined each business day at
the close of regular trading on the New York Stock Exchange (typically 4:00
p.m., Eastern time). The share price is calculated by dividing a class's net
assets by the number of its outstanding shares. Because the value of the fund's
investment portfolio changes every business day, the NAV usually changes as
well.
In calculating NAV, the fund typically prices its securities by using
pricing services or market quotations. However, in cases where these are
unavailable or when the portfolio manager believes that subsequent events have
rendered them unreliable, the fund may use fair-value estimates instead. In
addition, the fund may invest in securities that are primarily listed on foreign
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<PAGE>
exchanges that trade on weekends and other days when the fund does not price its
shares. As a result, the NAV of the fund's shares may change on days when
shareholders will not be able to purchase or redeem the fund's shares.
TELEPHONE TRANSACTIONS. For your protection, telephone requests may be
recorded in order to verify their accuracy. In addition, we will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, we are not responsible for any losses that may
occur to any account due to an unauthorized telephone call. Also for your
protection, telephone redemptions are not permitted on accounts whose name or
addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.
TIMING OF ORDERS. All orders to purchase or sell shares are executed at the
next NAV calculated after the order has been received in good order. Orders are
accepted until the close of regular trading on the New York Stock Exchange every
business day - normally 4:00 p.m., Eastern time - and are executed the same day
at that day's NAV. Otherwise, all orders will be executed at the NAV determined
as of the close of regular trading on the next trading day.
RESTRICTIONS ON ORDERS. The fund and its distributor reserve the right to
reject any purchase order and to suspend the offering of fund shares for a
period of time. There are certain times when you may not be able to sell shares
of the fund or when we may delay paying you the proceeds. This may happen during
unusual market conditions or emergencies or when the fund cannot determine the
value of its assets or sell its holdings.
REDEMPTION IN KIND. We reserve the right to give you securities instead of
cash when you sell shares of the fund. If the amount of the sale is at least
either $250,000 or 1% of the fund's assets, we may give you securities from the
fund's portfolio instead of cash.
ACCOUNTS WITH BELOW-MINIMUM BALANCES. If your account balance falls below
$500 as a result of selling shares (and not because of performance or sales
charges), the fund reserves the right to request that you buy more shares or
close your account. If your account balance is still below the minimum 60 days
after notification, the fund reserves the right to close your account and send
the proceeds to your address of record.
DIVIDENDS, CAPITAL GAINS AND TAXES
================================================================================
DISTRIBUTIONS AND TAXES. The fund distributes to its shareholders dividends
from its net investment income annually. Net investment income generally
consists of interest income and dividends received on investments, less
expenses. The dividends you receive from the fund will be taxed as ordinary
income.
The fund also distributes net capital gains to its shareholders normally
once a year. Capital gains are generated by the fund when it sells assets in its
portfolio for profit. Capital gains are taxed differently depending on how long
the fund held the asset. Distributions of net gains recognized on the sale of
assets held for one year or less are taxed as ordinary income; distributions of
net gains recognized on the sale of assets held longer than that (long-term
capital gains) are taxed at lower capital gains rates.
Fund distributions of dividends and net capital gains are automatically
reinvested in fund shares at NAV (without sales charge) unless you opt to take
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<PAGE>
your distributions in cash, in the form of a check or direct them for purchase
of shares in another Heritage mutual fund. However, if you have a retirement
plan or a Systematic Withdrawal Plan, your distributions will be automatically
reinvested in fund shares.
In general, selling or exchanging shares and receiving distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities for taxable accounts:
----------------------------------------------------------------------------
Type of Transaction Tax Status
----------------------------------------------------------------------------
Income dividends Ordinary income rate
Short-term capital gain distributions Ordinary income rate
Long-term capital gain distributions Capital gains rate
Sale or exchange of fund share owned Long-term capital gains
for more than one year or losses(capital gains rate)
Sale or exchange of fund share owned Gains are taxed at the same
for one year or less rate as ordinary income; losses
are subject to special rules
--------------------------------------- ------------------------------------
Dividend distributions will vary by class and are anticipated to be
generally higher for Class A shares.
TAX REPORTING. If you are a non-retirement account holder, then each year,
we will send you a Form 1099 that tells you the amount of fund distributions you
received for the prior calendar year, the tax status of those distributions, and
a list of reportable sale transactions. Generally, fund distributions are
taxable to you in the year you receive them. However, any distributions that are
declared in October, November or December but paid in January generally are
taxable as if received on December 31 of the year they are declared.
WITHHOLDING TAXES. If you are a non-corporate shareholder and the fund does
not have your correct social security or other taxpayer identification number,
federal law requires us to withhold 31% of the distributions and sale proceeds
payable to you. If you are otherwise subject to backup withholding, we also are
required to withhold and pay to the IRS 31% of your distributions. Any tax
withheld may be applied against the tax liability on your tax return.
Because everyone's tax situation is unique, always consult your tax
professional about federal, state and local tax consequences.
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<PAGE>
FOR MORE INFORMATION
More information on these funds is available free upon request,
including the following:
Statement of Additional Information (SAI). Provides more details about
each fund and its policies. A current SAI is on file with the Securities
and Exchange Commission and is incorporated herein by reference
(is legally considered part of this prospectus).
To obtain information contact Heritage Mutual Funds:
By mail: 880 Carillon Parkway
St. Petersburg, Florida 33716
By telephone: (800) 421-4184
[Insert Picture]
Text-only versions of these documents and this prospectus are available,
upon payment of a duplicating fee, by writing from the Public
Reference Room of the Securities and Exchange Commission in
Washington, D.C. 20549-6009 or by calling the Commission at 800-SEC-0330.
Reports and other information about the funds may be viewed on-screen or
downloaded from the SEC's Internet web site at
http://www.sec.gov.
The fund's Investment Company and 1933 Act registration numbers are:
Heritage Series Trust: 811-7470 33-57986
Information Technology Fund 811-7470 33-57986
No dealer, salesman or other person has been authorized to give
any information or to make any representation other than that contained
in this Prospectus in connection with the offer contained in this Prospectus,
and, if given or made, such other information or representations must
not be relied upon as having been authorized by the funds or their distributor.
This Prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
[insert tree logo]
HERITAGE
--------
SERIES TRUST
FROM OUR FAMILY TO YOURS:
THE INTELLIGENT CREATION OF WEALTH
Raymond James & Associates, Inc.
Distributor
Member New York Stock Exchange/81PC
P.O. Box 33022, St. Petersburg, FL 33733
727-573-8143 800-421-4184
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HERITAGE SERIES TRUST
INFORMATION TECHNOLOGY FUND
This Statement of Additional Information ("SAI") dated ____________, 1999,
should be read in conjunction with the Prospectus of the Heritage Series Trust
Information Technology Fund (the "fund") dated ____________, 1999. This SAI is
not a prospectus. To receive a copy of the fund's Prospectus, write to Heritage
Asset Management, Inc. ("Heritage") at the address below or call (800) 421-4184.
HERITAGE ASSET MANAGEMENT, INC.
880 Carillon Parkway, St. Petersburg, Florida 33716
TABLE OF CONTENTS
Page
----
GENERAL INFORMATION..........................................................1
INVESTMENT INFORMATION.......................................................1
Non-Diversified Status.................................................1
Investment Policies and Strategies.....................................1
Industry Classifications..............................................12
INVESTMENT LIMITATIONS......................................................12
NET ASSET VALUE.............................................................14
PERFORMANCE INFORMATION.....................................................15
INVESTING IN THE FUND.......................................................16
Systematic Investment Options.........................................16
Retirement Plans......................................................16
Class A Combined Purchase Privilege (Right of Accumulation)...........17
Class A Statement of Intention........................................18
REDEEMING SHARES............................................................18
Systematic Withdrawal Plan............................................19
Telephone Transactions................................................19
Redemptions in Kind...................................................20
Receiving Payment.....................................................20
EXCHANGE PRIVILEGE..........................................................21
CONVERSION OF CLASS B SHARES................................................21
TAXES ......................................................................22
SHAREHOLDER INFORMATION.....................................................23
FUND INFORMATION............................................................25
Management of the Fund................................................25
Investment Adviser and Administrator; Subadviser......................27
Brokerage Practices...................................................29
Distribution of Shares................................................30
Administration of the Fund............................................31
Potential Liability...................................................31
APPENDIX...................................................................A-1
<PAGE>
GENERAL INFORMATION
- -------------------
The Heritage Series Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated October 28, 1992. The Trust is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Trust currently offers its
shares through seven separate investment portfolios, including the fund. The
fund offers three classes of shares, Class A shares sold subject to a 4.75%
maximum front-end sales charge ("Class A shares"), Class B shares sold subject
to a 5% maximum contingent deferred sales charge ("CDSC"), declining over a
six-year period ("Class B shares"), and Class C shares sold subject to a 1% CDSC
("Class C shares"). To obtain more information about the Trust's other
investment portfolios, call (800) 421-4281.
INVESTMENT INFORMATION
- ----------------------
NON-DIVERSIFIED STATUS
----------------------
The fund is classified as non-diversified within the meaning of the 1940
Act, which means that it is not restricted by the 1940 Act in the proportion of
its assets that it may invest in the securities of a single issuer. The fund's
investments are limited, however, in order to allow the fund to qualify as a
"regulated investment company" under current tax law. See "Taxes" for more
information. To the extent that the fund assumes large positions in the
securities of a small number of issuers, the fund's net asset value may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the issuers,
and the fund may be more susceptible to any single economic, political or
regulatory occurrence than a diversified company.
INVESTMENT POLICIES AND STRATEGIES
----------------------------------
The fund invests at least 65% of its total assets in the equity securities
of companies that develop, manufacture or deliver technology-related products or
services. Up to 35% of the fund's total assets may be invested in U.S.
government securities, other investment-grade fixed income securities and cash
equivalents. The information that follows in this section describes these and
other types of securities and instruments the fund may invest in to achieve its
investment objective.
DEBT SECURITIES:
Under normal circumstances, the fund may invest up to 35% of its total
assets in debt securities. The market value of debt securities is influenced
primarily by changes in the level of interest rates. Generally, as interest
rates rise, the market value of debt securities decreases. Conversely, as
interest rates fall, the market value of debt securities increases. Factors that
could result in a rise in interest rates, and a decrease in the market value of
debt securities, include an increase in inflation or inflation expectations, an
increase in the rate of U.S. economic growth, an increase in the Federal budget
deficit or an increase in the price of commodities such as oil.
EQUITY SECURITIES:
The fund invests at least 65% of its total assets in equity securities.
AMERICAN DEPOSITARY RECEIPTS ("ADRs"). The fund may invest in sponsored
and unsponsored ADRs. ADRs are receipts that represent interests in or are
convertible into, securities of foreign issuers. These receipts are not
necessarily denominated in the same currency as the underlying securities into
which they may be converted. ADRs may be purchased through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depository, whereas a depository may
<PAGE>
establish an unsponsored facility without participation by the issuer of the
depository security. Holders of unsponsored depository receipts generally bear
all the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts of the deposited securities. Generally,
ADRs in registered form are designed for use in the U.S. securities market and
ADRs in bearer form are designed for use outside the U.S.
COMMON STOCKS. The fund may invest in common stocks. Common stocks
represent the residual ownership interest in the issuer and are entitled to the
income and increase in the value of the assets and business of the entity after
all of its obligations and preferred stock are satisfied. Common stocks
generally have voting rights. Common stocks fluctuate in price in response to
many factors including historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
CONVERTIBLE SECURITIES. The fund may invest in convertible securities,
including up to 10% of its assets in convertible securities rated below
investment grade. Convertible securities include corporate bonds, notes and
preferred stock that can be converted into or exchanged for a prescribed amount
of common stock of the same or a different issue within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest paid or accrued on debt or dividends paid on preferred stock
until the convertible stock matures or is redeemed, converted or exchanged.
Convertible securities combine the fixed-income characteristics of bonds and
capital appreciation potential of preferred stock. While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than the issuer's common stock, although the extent to which
such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security. The
market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
nonconvertible debt securities of similar quality, they do enable the investor
to benefit from increases in the market price of the underlying common stock.
Please see the discussion of "Investment Grade/Lower Rated Securities" below for
additional information.
PREFERRED STOCK. The fund may invest in preferred stock. A preferred stock
blends the characteristics of a bond and common stock. It can offer the higher
yield of a bond and has priority over common stock in equity ownership, but does
not have the seniority of a bond and its participation in the issuer's growth
may be limited. Preferred stock has preference over common stock in the receipt
of dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.
REAL ESTATE INVESTMENT TRUSTS ("REITs"). The fund may invest in REITs.
REITs include equity REITs, which own real estate properties, and mortgage
REITs, which make construction, development and long-term mortgage loans. The
value of an equity REIT may be affected by changes in the value of the
underlying property, while a mortgage REIT may be affected by the quality of the
credit extended. The performance of both types of REITs depends upon conditions
in the real estate industry, management skills and the amount of cash flow. The
risks associated with REITs include defaults by borrowers, self-liquidation,
failure to qualify as a pass-through entity under the Federal tax law, failure
to qualify as an exempt entity under the 1940 Act and the fact that REITs are
not diversified.
WARRANTS AND RIGHTS. The fund may purchase warrants and rights, which are
instruments that permit the fund to acquire, by subscription, the capital stock
of a corporation at a set price, regardless of the market price for such stock.
The fund does not intend to invest more than 5% of its respective net assets in
-2-
<PAGE>
warrants. Warrants may be either perpetual or of limited duration. There is a
greater risk that warrants might drop in value at a faster rate than the
underlying stock.
FOREIGN SECURITIES EXPOSURE:
DEPOSITORY RECEIPTS. The fund may invest up to 15% of its total assets in
sponsored or unsponsored European Depository Receipts ("EDRs"), Global
Depository Receipts ("GDRs") and International Depository Receipts ("IDRs")
EDRs, GDRs, IDRs or other similar securities representing interests in or
convertible into securities of foreign issuers (collectively "Depository
Receipts"). Depository Receipts are receipts that represent interests in or are
convertible into, securities of foreign issuers. These receipts are not
necessarily denominated in the same currency as the underlying securities into
which they may be converted.
EDRs and IDRs are receipts typically issued by a European bank or trust
company evidencing ownership of the underlying foreign securities. GDRs are
issued globally for trading in non-U.S. securities markets and evidence a
similar ownership arrangement. Depository Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. As with ADRs, the issuers of the securities underlying
unsponsored Depository Receipts are not obligated to disclose material
information in the United States and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between such
information and the market value of the Depository Receipts. Depository Receipts
also involve the risks of other investments in foreign securities, as discussed
below.
FOREIGN SECURITIES. The fund may invest up to 15% of its total assets in
foreign securities (including Depository Receipts). In most cases, the best
available market for foreign securities will be on exchanges or in
over-the-counter markets located outside the United States. Foreign stock
markets, while growing in volume and sophistication, generally are not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions generally are higher than commissions on securities traded
in the United States. In general, there is less overall governmental supervision
and regulation of securities exchanges, brokers and listed companies than in the
United States. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on or delays in the removal
of funds or other assets of the fund, political or financial instability or
diplomatic and other developments that could affect such investments. Further,
the economies of some countries may differ favorably or unfavorably from the
economy of the United States.
The fund will not invest in foreign securities when there are currency or
trading restrictions in force or when, in the judgment of its subadviser, Eagle
Asset Management, Inc. ("Eagle"), such restrictions are likely to be imposed.
However, certain currencies may become blocked (i.e., not freely available for
transfer from a foreign country), resulting in the possible inability of the
fund to convert proceeds realized upon sale of portfolio securities of the
affected foreign companies into U.S. currency.
Because investments in foreign companies usually will involve currencies
of foreign countries and because the fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs, the
value of any of the assets of these funds as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and the fund may incur costs in connection
with conversions between various currencies. The fund will conduct its foreign
currency exchange transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market. Additionally, to protect
-3-
<PAGE>
against uncertainty in the level of future exchange rates, the fund may enter
into contracts to purchase or sell foreign currencies at a future date (i.e., a
"forward currency contract" or "forward contract").
HEDGING INSTRUMENTS - OPTIONS, FORWARDS AND HEDGING TRANSACTIONS:
GENERAL DESCRIPTION. The fund may purchase and sell options on securities,
indices of securities and currencies and forward currency contracts ("Hedging
Instruments") to attempt to hedge its investment portfolio. The fund also may
use forward currency contracts to shift exposure from one foreign currency to
another and write call options for income.
Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is the purchase or sale of a Hedging Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in the fund's investment portfolio. Thus, in a short hedge, the
fund takes a position in a Hedging Instrument whose price is expected to move in
the opposite direction of the price of the investment being hedged. A long hedge
is the purchase or sale of a Hedging Instrument intended partially or fully to
offset potential increases in the acquisition cost of one or more investments
that the fund intends to acquire. Thus, in a long hedge, the fund takes a
position in a Hedging Instrument whose price is expected to move in the same
direction as the price of the prospective investment being hedged.
Hedging Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the fund
owns or intends to acquire. Hedging Instruments on indices may be used to hedge
broad market sectors.
The use of Hedging Instruments is subject to applicable regulations of the
U.S. Securities and Exchange Commission ("SEC"), the exchanges upon which they
are traded. In addition, the fund's ability to use Hedging Instruments may be
limited by tax considerations. See "Taxes."
In addition to the products and strategies described below, the fund
expect to discover additional opportunities in connection with options and
forward currency contracts. These new opportunities may become available as the
fund's subadviser develops new techniques, as regulatory authorities broaden the
range of permitted transactions and as new options or forward currency contracts
or other techniques are developed. The fund's subadviser may utilize these
opportunities to the extent that it is consistent with the fund's investment
objectives and permitted by the fund's investment limitations and applicable
regulatory authorities.
SPECIAL RISKS OF HEDGING STRATEGIES. The use of Hedging Instruments
involves special considerations and risks, as described below. Risks pertaining
to particular Hedging Instruments are described in the sections that follow.
(1) Successful use of most Hedging Instruments depends upon the fund's
subadviser's ability to predict movements of the overall securities, currency
and interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. While the fund's subadviser are
experienced in the use of Hedging Instruments, there can be no assurance that
any particular hedging strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of a Hedging Instrument and price movements of the investments
being hedged. For example, if the value of a Hedging Instrument used in a short
hedge increased by less than the decline in value of the hedged investment, the
hedge would not be fully successful. Such a lack of correlation might occur due
to factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which Hedging Instruments are
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traded. The effectiveness of hedges using Hedging Instruments on indices will
depend on the degree of correlation between price movements in the index and
price movements in the securities being hedged.
To compensate for imperfect correlation, the fund may purchase or sell
Hedging Instruments in a greater dollar amount than the hedged securities or
currency if the volatility of the hedged securities or currency is historically
greater than the volatility of the Hedging Instruments. Conversely, the fund may
purchase or sell fewer contracts if the volatility of the price of the hedged
securities or currency is historically less than that of the Hedging
Instruments.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in
the investments being hedged. However, hedging strategies also can reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if the fund entered into a
short hedge because its subadviser projected a decline in the price of a
security in the fund's investment portfolio, and the price of that security
increased instead, the gain from that increase might be wholly or partially
offset by a decline in the price of the Hedging Instrument. Moreover, if the
price of the Hedging Instrument declined by more than the increase in the price
of the security, the fund could suffer a loss. In either such case, the fund
would have been in a better position had it not hedged at all.
(4) As described below, the fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Hedging Instruments involving obligations to third parties. If the
fund were unable to close out its positions in such Hedging Instruments, it
might be required to continue to maintain such assets or accounts or make such
payments until the position expired or matured. These requirements might impair
the fund's ability to sell a portfolio security or make an investment at a time
when it would otherwise be favorable to do so, or require that the fund sell a
portfolio security at a disadvantageous time. The fund's ability to close out a
position in a Hedging Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market, the
ability and willingness of the other party to the transaction ("counterparty")
to enter into a transaction closing out the position. Therefore, there is no
assurance that any hedging position can be closed out at a time and price that
is favorable to the fund.
COVER FOR HEDGING STRATEGIES. Some Hedging Instruments expose the fund to
an obligation to another party. The fund will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, forward currency contracts or options contracts or (2)
cash and other liquid assets with a value sufficient at all times to cover its
potential obligations to the extent not covered as provided in (1) above. The
fund will comply with SEC guidelines regarding cover for instruments and will,
if the guidelines so require, set aside cash or other liquid assets in a
segregated account with the fund's custodian, State Street Bank & Trust Company
("Custodian") in the prescribed amount.
Assets used as cover or otherwise set aside cannot be sold while the
position in the corresponding Hedging Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the fund's assets to cover in segregated accounts could impede its
ability to meet redemption requests or other current obligations.
FOREIGN CURRENCY HEDGING STRATEGIES -- RISK FACTORS. The fund may use
options on foreign currencies. Currency hedges can protect against price
movements in a security that the fund owns or intends to acquire that are
attributable to changes in the value of the currency in which it is denominated.
Such hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
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The fund might seek to hedge against changes in the value of a particular
currency when no Hedging Instruments on that currency are available or such
Hedging Instruments are more expensive than certain other Hedging Instruments.
In such cases, a fund may hedge against price movements in that currency by
entering into transactions using Hedging Instruments on another currency or
basket of currencies, the values of which the subadviser believes will have a
high degree of positive correlation to the value of the currency being hedged.
The risk that movements in the price of the Hedging Instrument will not
correlate perfectly with movements in the price of the currency being hedged is
magnified when this strategy is used.
The value of Hedging Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such Hedging
Instruments, the fund could be disadvantaged by having to deal in the odd-lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. futures markets are closed while
the markets for the underlying currencies remain open, significant price and
rate movements might take place in the underlying markets that cannot be
reflected in the markets for the Hedging Instruments until they reopen.
Settlement of transactions involving foreign currencies might be required
to take place within the country issuing the underlying currency. Thus, the fund
might be required to accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and might be required to pay any
fees, taxes and charges associated with such delivery assessed in the issuing
country.
FORWARD CURRENCY CONTRACTS. A forward currency contract involves an
obligation of the fund to purchase or sell specified currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers.
The fund may enter into forward currency contracts to purchase or sell
foreign currencies for a fixed amount of U.S. dollars or another foreign
currency. The fund also may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date either with
respect to specific transactions or with respect to portfolio positions in order
to minimize its risk from adverse changes in the relationship between the U.S.
dollar and foreign currencies.
Forward currency transactions may serve as long hedges - for example, the
fund may purchase a forward currency contract to lock in the U.S. dollar price
of a security denominated in a foreign currency that it intends to acquire.
Forward currency contract transactions also may serve as short hedges - for
example, the fund may sell a forward currency contract to lock in the U.S.
dollar equivalent of the proceeds from the anticipated sale of a security or
from a dividend or interest payment on a security denominated in a foreign
currency.
As noted above, the fund may seek to hedge against changes in the value of
a particular currency by using forward contracts on another foreign currency or
a basket of currencies, the value of which the fund's subadviser believes will
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have a positive correlation to the values of the currency being hedged. Use of a
different foreign currency magnifies the risk that movements in the price of the
forward contract will not correlate or will correlate unfavorably with the
foreign currency being hedged.
In addition, the fund may use forward currency contracts to shift exposure
to foreign currency fluctuations from one country to another. For example, if
the fund owned securities denominated in a foreign currency and its subadviser
believed that currency would decline relative to another currency, it might
enter into a forward contract to sell an appropriate amount of the first foreign
currency, with payment to be made in the second foreign currency. Transactions
that use two foreign currencies are sometimes referred to as "cross hedging."
Use of a different foreign currency magnifies the fund's exposure to foreign
currency exchange rate fluctuations.
The cost to the fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts usually
are entered into on a principal basis, no fees or commissions are involved. When
the fund enters into a forward currency contract, it relies on the counterparty
to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of any
expected benefit of the transaction.
Sellers or purchasers of forward currency contracts can enter into
offsetting closing transactions, by purchasing or selling, respectively, an
instrument identical to the instrument sold or bought. Secondary markets
generally do not exist for forward currency contracts, however, with the result
that closing transactions generally can be made for forward currency contracts
only by negotiating directly with the counterparty. Thus, there can be no
assurance that the fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the fund might be unable to close out a forward
currency contract at any time prior to maturity. In either event, the fund would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in the securities or currencies
that are the subject of the hedge or to maintain cash or securities.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the forward
currency contract has been established. Thus, the fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
OPTIONS TRADING. The fund may purchase, or may use for hedging purposes,
options on securities, equity indices and debt indices. Certain special
characteristics of and risks with these options are discussed below.
CHARACTERISTICS AND RISKS OF OPTIONS TRADING. The fund effectively
may terminate its right or obligation under an option by entering into a closing
transaction. If the fund wished to terminate its obligation to purchase or sell
securities under a put or call option it has written, it may purchase a put or
call option of the same series (i.e., an option identical in its terms to the
option previously written); this is known as a closing purchase transaction.
Conversely, in order to terminate its right to purchase or sell under a call or
put option it has purchased, the fund may write a call or put option of the same
series; this is known as a closing sale transaction. Closing transactions
essentially permit the fund to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option. Whether a profit or
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loss is realized from a closing transaction depends on the price movement of the
underlying security, index or currency and the market value of the option.
In considering the use of options to hedge, particular note should be
taken of the following:
(1) The value of an option position will reflect, among other
things, the current market price of the underlying security, index or currency,
the time remaining until expiration, the relationship of the exercise price to
the market price, the historical price volatility of the underlying instrument
and general market conditions. For this reason, the successful use of options as
a hedging strategy depends upon the fund's subadviser's ability to forecast the
direction of price fluctuations in the underlying instrument.
(2) At any given time, the exercise price of an option may be below,
equal to or above the current market value of the underlying instrument.
Purchased options that expire unexercised have no value. Unless an option
purchased by the fund is exercised or unless a closing transaction is effected
with respect to that position, a loss will be realized in the amount of the
premium paid.
(3) A position in an exchange-listed option may be closed out only
on an exchange that provides a secondary market for identical options. The
ability to establish and close out positions on the exchanges is subject to the
maintenance of a liquid secondary market. Closing transactions may be effected
with respect to options traded in the over-the-counter ("OTC") markets
(currently the primary markets of options on debt securities) only by
negotiating directly with the other party to the option contract, or in a
secondary market for the option if such market exists. Although the fund intends
to purchase or write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market will
exist for any particular option at any specific time. In such event, it may not
be possible to effect closing transactions with respect to certain options, with
the result that the fund would have to exercise those options that it has
purchased in order to realize any profit. With respect to options written by the
fund, the inability to enter into a closing transaction may result in material
losses to it. For example, because the fund may maintain a covered position with
respect to any call option it writes on a security, it may not sell the
underlying security during the period it is obligated under such option. This
requirement may impair the fund's ability to sell a portfolio security or make
an investment at a time when such a sale or investment might be advantageous.
(4) Activities in the options market may result in a higher
portfolio turnover rate and additional brokerage costs; however, the fund also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation of market movements.
(5) The risks of investment in options on indices may be greater
than options on securities. Because index options are settled in cash, when the
fund writes a call on an index it cannot provide in advance for its potential
settlement obligations by acquiring and holding the underlying securities. The
fund can offset some of the risk of writing a call index option by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the fund cannot, as a practical matter, acquire and
hold an investment portfolio containing exactly the same securities as underlie
the index and, as a result, bears a risk that the value of the securities held
will vary from the value of the index.
Even if the fund could assemble an investment portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the fund as the call writer will not
learn that it has been assigned until the next business day at the earliest. The
time lag between exercise and notice of assignment poses no risk for the writer
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of a covered call on a specific underlying security, such as common stock,
because there the writer's obligation is to deliver the underlying security, not
to pay its value as of a fixed time in the past. So long as the writer already
owns the underlying security, it can satisfy its settlement obligations by
simply delivering it, and the risk that its value may have declined since the
exercise date is borne by the exercising holder. In contrast, even if the writer
of an index call holds securities that exactly match the composition of the
underlying index, it will not be able to satisfy its assignment obligations by
delivering those securities against payment of the exercise price. Instead, it
will be required to pay cash in an amount based on the closing index value on
the exercise date. By the time it learns that it has been assigned, the index
may have declined, with a corresponding decline in the value of its investment
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding securities positions.
If the fund has purchased an index option and exercises it before
the closing index value for that day is available, it runs the risk that the
level of the underlying index subsequently may change. If such a change causes
the exercised option to fall out-of-the-money, the fund will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.
CALL OPTIONS. The fund may write call options on securities to
increase income in the form of premiums received from the purchasers of the
options. Because it can be expected that a call option will be exercised if the
market value of the underlying security increases to a level greater than the
exercise price, the fund will write covered call options on securities generally
when its subadviser believes that the premium received by the fund, anticipated
appreciation in the market price of the underlying security up to the exercise
price of the option, will be greater than the total appreciation in the price of
the security.
The strategy also may be used to provide limited protection against
a decrease in the market price of the security in an amount equal to the premium
received for writing the call option, less any transaction costs. Thus, if the
market price of the underlying security held by the fund declines, the amount of
such decline will be offset wholly or in part by the amount of the premium
received by the fund. If, however, there is an increase in the market price of
the underlying security and the option is exercised, the fund will be obligated
to sell the security at less than its market value. The fund would lose the
ability to participate in the value of such securities above the exercise price
of the call option. The fund also gives up the ability to sell the portfolio
securities used to cover the call option while the call option is outstanding.
ILLIQUID SECURITIES:
The fund will not purchase or otherwise acquire any illiquid security if,
as a result, more than 15% of its net assets (taken at current value) would be
invested in securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. The fund's
ability to dispose of illiquid securities in a timely manner and for a fair
price may be limited. Further, illiquid securities may trade at a discount from
comparable, more liquid investments.
OTC options and their underlying collateral are currently considered to be
illiquid investments. The fund may sell OTC options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the fund. The assets used as cover for OTC options will be considered
illiquid unless OTC options are sold to qualified dealers who agree that a fund
may repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
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INDEX SECURITIES AND OTHER INVESTMENT COMPANIES:
INDEX SECURITIES. The fund may invest up to 10% of its total assets in
Standard and Poor's Depositary Receipts ("SPDRs"), Standard and Poor's MidCap
400 Depositary Receipts ("Mid Cap SPDRs") and other similar index securities
("Index Securities"). Index Securities represent interests in a fixed portfolio
of common stocks designed to track the price and dividend yield performance of a
broad-based securities index, such as the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index"), but are traded on an exchange like shares of
common stock. The value of Index Securities fluctuates in relation to changes in
the value of the underlying portfolio of securities. However, the market price
of Index Securities may not be equivalent to the pro rata value of the index it
tracks. Index Securities are subject to the risks of an investment in a broadly
based portfolio of common stocks. Index Securities are considered investments in
other investment companies.
INVESTMENT COMPANIES. The fund may invest in the securities of other
investment companies to the extent that such an investment would be consistent
with the requirements of the 1940 Act. Investments in the securities of other
investment companies may involve duplication of advisory fees and certain other
expenses. By investing in another investment company, the fund becomes a
shareholder of that investment company. As a result, the fund's shareholders
indirectly bear the fund's proportionate share of the fees and expenses paid by
the shareholders of the other investment company, in addition to the fees and
expenses fund shareholders directly bear in connection with the fund's own
operations.
INVESTMENT GRADE/LOWER RATED SECURITIES:
INVESTMENT GRADE SECURITIES. The fund may invest in investment grade debt
and convertible securities. Investment grade securities include securities rated
BBB or above by Standard & Poor's ("S&P") or Baa by Moody's Investors Service,
Inc. ("Moody's") or, if unrated, are deemed to be of comparable quality by the
fund's subadviser. Securities rated in the lowest category of investment grade
are considered to have speculative characteristics and changes in economic
conditions are more likely to lead to a weakened capacity to pay interest and
repay principal than is the case with higher grade bonds. The fund may retain a
security that has been downgraded below investment grade if, in the opinion of
its subadviser, it is in the fund's best interest.
LOWER RATED / HIGH-YIELD SECURITIES. The fund may invest up to 10% of its
net assets in securities rated below investment grade, i.e., rated below BBB or
Baa by S&P and Moody's, respectively, or unrated securities determined to be
below investment grade by its subadviser. These securities are commonly referred
to as "junk bonds" and are deemed to be predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal and may involve
major risk exposure to adverse conditions. These securities are subject to
specific risks that may not be present with investments of higher grade
securities. These securities may have increased sensitivity to adverse economic
changes and individual corporate developments, increased volatility in market
prices and yields and decreased liquidity among dealers.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS:
REPURCHASE AGREEMENTS. The fund may invest up to 35% of its total assets
in repurchase agreements. A repurchase agreement is a transaction in which the
fund purchases securities and commits to resell the securities to the original
seller (a member bank of the Federal Reserve System or a securities dealer who
is a member of a national securities exchange or is a market makers in U.S.
Government securities) at an agreed upon date and price reflecting a market rate
of interest unrelated to the coupon rate or maturity of the purchased
securities. Although repurchase agreements carry certain risks not associated
with direct investment in securities, including possible declines in the market
value of the underlying securities and delays and costs to the fund if the other
party becomes bankrupt, the fund intends to enter into repurchase agreements
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only with banks and dealers in transactions believed by its subadviser to
present minimal credit risks in accordance with guidelines established by the
Board of Trustees ("Board").
The period of these repurchase agreements usually will be short, from
overnight to one week, and at no time will the fund invest in repurchase
agreements of more than one year. The securities that are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. The fund always will receive as
collateral securities whose market value, including accrued interest, will be at
least equal to 100% of the dollar amount invested by the fund in each agreement,
and the fund will make payment for such securities only upon physical delivery
or evidence of book entry transfer to the account of the fund's Custodian.
REVERSE REPURCHASE AGREEMENTS. The fund may borrow up to 33 1/3% of its
total assets by entering into reverse repurchase agreements with the same
parties with whom it may enter into repurchase agreements. Under a reverse
repurchase agreement, the fund sells securities and agrees to repurchase them at
a mutually agreed to price. At the time the fund enters into a reverse
repurchase agreement, it will establish and maintain a segregated account with
an approved custodian containing liquid high-grade securities, marked-to-market
daily, having a value not less than the repurchase price (including accrued
interest). Reverse repurchase agreements involve the risk that the market value
of securities retained in lieu of sale by the fund may decline below the price
of the securities the fund has sold but is obliged to repurchase. If the buyer
of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the fund's obligation to
repurchase the securities and the fund's use of the proceeds of the reverse
repurchase agreement effectively may be restricted pending such decisions.
Reverse repurchase agreements create leverage, a speculative factor, and are
considered borrowings for the purpose of the fund's limitation on borrowing.
However, the fund intends to enter into reverse repurchase agreements only as a
temporary measure for extraordinary or emergency purposes and in order to meet
redemption requests without immediately selling portfolio securities. See
"Fundamental Investment Policies" for additional information.
SHORT-TERM MONEY MARKET INSTRUMENTS:
Under normal circumstances, the fund may invest up to 35% of its total
assets in short-term money market instruments.
BANKERS' ACCEPTANCES. The fund may invest in bankers' acceptances.
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or an importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
asset, or it may be sold in the secondary market at the going rate of interest
for a specified maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.
CERTIFICATES OF DEPOSIT ("CDs"). The fund may invest in CDs issued by
domestic institutions with assets in excess of $1 billion. The Federal Deposit
Insurance Corporation is an agency of the U.S. Government that insures the
deposits of certain banks and savings and loan associations up to $100,000 per
deposit. The interest on such deposits may not be insured if this limit is
exceeded. Current federal regulations also permit such institutions to issue
insured negotiable CDs in amounts of $100,000 or more, without regard to the
interest rate ceilings on other deposits. To remain fully insured, these
investments must be limited to $100,000 per insured bank or savings and loan
association.
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COMMERCIAL PAPER. The fund may invest in commercial paper that is limited
to obligations rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P.
Commercial paper includes notes, drafts or similar instruments payable on demand
or having a maturity at the time of issuance not exceeding nine months,
exclusive of days of grace or any renewal thereof. See the Appendix for a
description of commercial paper ratings.
TEMPORARY DEFENSIVE PURPOSES:
For temporary defensive purposes during anticipated periods of general
market decline, the fund may invest up to 100% of its net assets in money market
instruments, including securities issued by the U.S. Government, its agencies or
instrumentalities and repurchase agreements secured thereby, as well as bank
certificates of deposit and banker's acceptances issued by banks having net
assets of at least $1 billion as of the end of their most recent fiscal year,
high-grade commercial paper, and other long- and short-term debt instruments
that are rated A or higher by S&P or Moody's. For a description of S&P or
Moody's commercial paper and corporate debt ratings, see the Appendix.
U.S. GOVERNMENT SECURITIES:
The fund may invest in U.S. Government securities. U.S. Government
securities include a variety of securities that are issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and repurchase agreements
secured thereby. These include securities issued and guaranteed by the full
faith and credit of the U.S. Government, such as Treasury bills, Treasury notes
and Treasury bonds; obligations supported by the right of the issuer to borrow
from the U.S. Treasury, such as those of the Federal Home Loan Banks; and
obligations supported only by the credit of the issuer, such as those of the
Federal Intermediate Credit Banks.
INDUSTRY CLASSIFICATIONS
For purposes of determining industry classifications, the fund relies upon
classifications established by Heritage that are based upon classifications
contained in the Directory of Companies Filing Annual Reports with the SEC and
in the S&P's Corporation Industry Classifications.
INVESTMENT LIMITATIONS
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FUNDAMENTAL INVESTMENT POLICIES
-------------------------------
In addition to the limits disclosed above and the investment limitations
described in the Prospectus, the fund is subject to the following investment
limitations that are fundamental policies and may not be changed without the
vote of a majority of the outstanding voting securities of the fund. Under the
1940 Act, a "vote of a majority of the outstanding voting securities" of the
fund means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the fund or (2) 67% or more of the shares present at a
shareholders meeting if more than 50% of the outstanding shares are represented
at the meeting in person or by proxy.
BORROWING MONEY. The fund may not borrow money except as a temporary
measure for extraordinary or emergency purposes, and except that the fund may
enter into reverse repurchase agreements in an amount up to 33 1/3% of the value
of its total assets in order to meet redemption requests without immediately
selling portfolio securities. This latter practice is not for investment
leverage but solely to facilitate management of the investment portfolio by
enabling the fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous. However, the fund may not
purchase additional portfolio investments once borrowed obligations exceed 5% of
total assets. When effecting reverse repurchase agreements, fund assets in an
amount sufficient to make payment for the obligations to be purchased will be
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segregated by the Custodian and on the fund's records upon execution of the
trade and maintained until the transaction has been settled. During the period
any reverse repurchase agreements are outstanding, to the extent necessary to
assure completion of the reverse repurchase agreements, the fund will restrict
the purchase of portfolio instruments to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements. Interest paid
on borrowed funds will not be available for investment. The fund will liquidate
any such borrowings as soon as possible and may not purchase any portfolio
instruments while any borrowings are outstanding (except as described above).
CONCENTRATION. The fund may invest more than 25% of the value of its total
assets taken at market value in the securities of issuers in any single industry
There shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
ISSUING SENIOR SECURITIES. The fund may not issue senior securities,
except as permitted by its investment objective, policies, and investment
limitations, except that the fund may engage in transactions involving options,
futures contracts, forward currency contracts or other financial instruments.
UNDERWRITING. Subject to the following exception, the fund may underwrite
the securities of other issuers: (1) the fund may underwrite securities to the
extent that, in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under federal securities laws and (2) may invest
not more than 15% of its net assets (taken at cost immediately after making such
investment) in securities that are not readily marketable without registration
under the 1933 Act.
INVESTING IN COMMODITIES, MINERALS OR REAL ESTATE. With the following
exceptions, the fund may not invest in commodities, commodity contracts or real
estate (including real estate limited partnerships): the fund may purchase (1)
securities issued by companies that invest in or sponsor such interests, and (2)
purchase and sell options, futures contracts, forward currency contracts and
other financial instruments.
LOANS. The fund may not make loans, except under the following
circumstances: (1) to the extent that the purchase of a portion of an issue of
publicly distributed notes, bonds or other evidences of indebtedness or deposits
with banks and other financial institutions may be considered loans and (2)
where the fund may enter into repurchase agreements as permitted under its
investment policies.
NON-FUNDAMENTAL INVESTMENT POLICIES
-----------------------------------
The fund has adopted the following additional restrictions that, together
with certain limits described in the Prospectus, may be changed by the Board
without shareholder approval in compliance with applicable law, regulation or
regulatory policy.
INVESTING IN ILLIQUID SECURITIES. The fund may not invest more than 15% of
its net assets in repurchase agreements maturing in more than seven days or in
other illiquid securities, including securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
as to resale.
SELLING SHORT AND BUYING ON MARGIN. The fund may not sell any securities
short or purchase any securities on margin but may obtain such short-term
credits as may be necessary for clearance of purchases and sales of securities;
in addition, the fund may make margin deposits in connection with its use of
forward currency contracts, futures contracts, options and other financial
instruments.
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INVESTING IN INVESTMENT COMPANIES. The fund may not invest in securities
issued by other investment companies except as permitted by the 1940 Act, except
in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer.
NET ASSET VALUE
- ---------------
The net asset value per share of Class A shares, Class B shares and Class
C shares is determined separately daily as of the close of regular trading on
the New York Stock Exchange (the "Exchange") each day the Exchange is open for
business. The Exchange normally is open for business Monday through Friday
except the following holidays: New Year's Day, Martin Luther King's Birthday,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
The fund values its securities and other assets based on their market
value determined as follows. A security listed or traded on the Exchange, or on
The Nasdaq Stock Market, is valued at its last sales price on the principal
exchange on which it is traded prior to the time when assets are valued. If no
sale is reported at that time or the security is traded in the OTC market,
market value is based on the most recent quoted bid price. When market
quotations for options positions held by the fund are readily available, those
positions will be valued based upon such quotations. Market quotations generally
will not be available for options traded in the OTC market. Securities and other
assets for which market quotations are not readily available, or for which
market quotes are not deemed to be reliable, are valued at fair value using such
methods as the Board believes would reflect fair value. Securities and other
assets in foreign currency and foreign currency contracts will be valued daily
in U.S. dollars at the foreign currency exchange rates prevailing at the time
the fund calculates the daily net asset value of each class. Short-term
investments having a maturity of 60 days or less are valued at cost with accrued
interest or discount earned included in interest receivable.
All securities and other assets quoted in foreign currency and forward
currency contracts are valued daily in U.S. dollars on the basis of the foreign
currency exchange rate prevailing at the time such valuation is determined by
the fund's Custodian. Foreign currency exchange rates generally are determined
prior to the close of regular trading on the Exchange. Occasionally, events
affecting the value of foreign securities and such exchange rates occur between
the time at which they are determined and the close of regular trading on the
Exchange, which events will not be reflected in a computation of the fund's net
asset value. If events materially affecting the value of such securities or
assets or currency exchange rates occurred during such time period, the
securities or assets would be valued at their fair value as determined in good
faith under procedures established by and under the general supervision and
responsibility of the Board. The foreign currency exchange transactions of the
fund conducted on a spot basis are valued at the spot rate for purchasing or
selling currency prevailing on the foreign exchange market.
The fund is open for business on days on which the Exchange is open (each
a "Business Day"). Trading in securities on European and Far Eastern securities
exchanges and OTC markets normally is completed well before the fund's close of
business on each Business Day. In addition, European or Far Eastern securities
trading may not take place on all Business Days. Furthermore, trading takes
place in various foreign capital markets on days that are not Business Days and
on which the net asset value per share is not calculated. Calculation of net
asset value of Class A shares, Class B shares and Class C shares does not take
place contemporaneously with the determination of the prices of the majority of
the portfolio securities used in such calculation. The fund calculates net asset
value per share and, therefore, effect sales and redemptions, as of the close of
regular trading on the Exchange each Business Day. If events materially
affecting the value of such securities or other assets occur between the time
when their prices are determined (including their value in U.S. dollars by
reference to foreign currency exchange rates) and the time when the fund's net
asset value is calculated, such securities and other assets may be valued at
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fair value by methods as determined in good faith by or under procedures
established by the Board.
The Board may suspend the right of redemption or postpone payment for more
than seven days at times (1) during which the Exchange is closed other than for
the customary weekend and holiday closings, (2) during which trading on the
Exchange is restricted as determined by the SEC, (3) during which an emergency
exists as a result of which disposal by the fund of securities owned by them is
not reasonably practicable or it is not reasonably practicable for the fund
fairly to determine the value of their net assets or (4) for such other periods
as the SEC may by order permit for the protection of the holders of Class A
shares, Class B shares and Class C shares.
PERFORMANCE INFORMATION
- -----------------------
Total return data of each class from time to time may be included in
advertisements about each fund. Performance information may be computed
separately for each class. Because Class B shares and Class C shares bear higher
Rule 12b-1 fees, the performance of Class B shares and Class C shares of the
fund likely will be lower than that of Class A shares.
The fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to indicate future
performance. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Average annual total return quotes for each class used
in the fund's advertising and promotional materials are calculated for the
one-year, five-year and ten-year periods (or life of the fund), according to the
following formula:
n
P(1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of that period
In calculating the ending redeemable value for Class A shares, the fund's
current maximum sales charge of 4.75% is deducted from the initial $1,000
payment and, for Class B shares and Class C shares, the applicable CDSC imposed
on a redemption of Class B shares or Class C shares held for the period is
deducted. All dividends and other distributions by the fund are assumed to have
been reinvested at net asset value on the reinvestment dates during the period.
Based on this formula, the total return, or "T" in the formula above, is
computed by finding the average annual compounded rates of return over the
period that would equate the initial amount invested to the ending redeemable
value.
In connection with communicating its average annual total return or
cumulative return to current or prospective shareholders, the fund may compare
these figures to the performance of other mutual funds tracked by mutual fund
rating services or to other unmanaged indexes that may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs. Investment performance also may not reflects the risks
associated with the fund's investment objective and policies. These factors
should be considered when comparing the fund's investment results to those of
other mutual funds and investment vehicles.
In addition, the fund may from time to time include in advertising and
promotional materials total return or cumulative figures that are not calculated
according to the formula set forth above or for other periods for each class of
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<PAGE>
shares. For example, in comparing the fund's aggregate total return with data
published by Lipper Analytical Services, Inc., CDA Investment Technologies,
Inc., Morningstar Mutual Funds or with such market indices as the Dow Jones
Industrial Average and the S&P 500 Index, the fund calculates its cumulative
total return for each class for the specified periods of time by assuming an
investment of $10,000 in that class of shares and assuming the reinvestment of
each dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value. The fund does not, for these purposes, deduct from the initial value
invested any amount representing front-end sales charges charged on Class A
shares or CDSCs charged on Class B shares and Class C shares. By not annualizing
the performance and excluding the effect of the front-end sales charge on Class
A shares and the CDSC on Class B shares and Class C shares, the total return
calculated in this manner simply will reflect the increase in net asset value
per share over a period of time, adjusted for dividends and other distributions.
Calculating total return without taking into account the sales charge or CDSC
results in a higher rate of return than calculating total return net of the
front-end sales charge.
INVESTING IN THE FUND
- ---------------------
Class A shares, Class B shares and Class C shares are sold at their next
determined net asset value on Business Days. The procedures for purchasing
shares of the fund are explained in the Prospectus under "How to Invest."
SYSTEMATIC INVESTMENT OPTIONS
-----------------------------
The options below allow you to invest continually in the fund at regular
intervals.
1. Automatic Investing -- You may authorize Heritage to process a monthly
draft from your personal checking account for investment into the fund. The
draft is returned by your bank the same way a canceled check is returned.
2. Payroll Direct Deposit -- If your employer participates in a direct
deposit program (also known as ACH Deposits), you may have all or a portion of
your payroll directed to the fund. This will generate a purchase transaction
each time you are paid by your employer. Your employer will report to you the
amount sent from each paycheck.
3. Government Direct Deposit -- If you receive a qualifying periodic
payment from the U.S. Government or other agency that participates in Direct
Deposit, you may have all or a part of each check directed to purchase shares of
the fund. The U.S. Government or agency will report to you all payments made.
4. Automatic Exchange -- If you own shares of another Heritage mutual fund
advised or administered by Heritage ("Heritage Mutual Fund"), you may elect to
have a preset amount redeemed from that fund and exchanged into the
corresponding class of shares of the fund. You will receive a statement from the
other Heritage Mutual Fund confirming the redemption.
You may change or terminate any of the above options at any time.
RETIREMENT PLANS
----------------
HERITAGE IRA. Individuals who earn compensation and who have not reached
age 70 1/2 before the close of the year generally may establish a Heritage
Individual Retirement Account ("IRA"). An individual may make limited
contributions to a Heritage IRA through the purchase of shares of the fund
and/or other Heritage Mutual Funds. The Internal Revenue Code of 1986, as
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amended (the "Code"), limits the deductibility of IRA contributions to taxpayers
who are not active participants (and, under certain circumstances, whose spouses
are not active participants) in employer-provided retirement plans or who have
adjusted gross income below certain levels. Nevertheless, the Code permits other
individuals to make nondeductible IRA contributions up to $2,000 per year (or
$4,000, if such contributions also are made for a nonworking spouse and a joint
return is filed). In addition, individuals whose earnings (together with their
spouse's earnings) do not exceed a certain level may establish an "education
IRA" and/or a "Roth IRA"; although contributions to these new types of IRAs are
nondeductible, withdrawals from them will not be taxable under certain
circumstances. A Heritage IRA also may be used for certain "rollovers" from
qualified benefit plans and from Section 403(b) annuity plans. For more detailed
information on the Heritage IRA, please contact Heritage.
Fund shares also may be used as the investment medium for qualified plans
(defined benefit or defined contribution plans established by corporations,
partnerships or sole proprietorships). Contributions to qualified plans may be
made (within certain limits) on behalf of the employees, including
owner-employees, of the sponsoring entity.
OTHER RETIREMENT PLANS. Multiple participant payroll deduction retirement
plans also may purchase Class A shares of any Heritage Mutual Fund at a reduced
sales charge on a monthly basis during the 13-month period following such a
plan's initial purchase. The sales charge applicable to an initial purchase of
Class A shares will be that normally applicable under the schedule of sales
charges set forth in the prospectus to an investment 13 times larger than the
initial purchase. The sales charge applicable to each succeeding monthly
purchase of Class A shares will be that normally applicable, under the schedule,
to an investment equal to the sum of (1) the total purchase previously made
during the 13-month period and (2) the current month's purchase multiplied by
the number of months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will not be adjusted
retroactively on the basis of later purchases. Multiple participant payroll
deduction retirement plans may purchase Class C shares at any time.
CLASS A COMBINED PURCHASE PRIVILEGE (RIGHT OF ACCUMULATION)
-----------------------------------------------------------
Certain investors may qualify for the Class A sales charge reductions
indicated in the sales charge schedule in the prospectus by combining purchases
of Class A shares into a single "purchase," if the resulting purchase totals at
least $25,000. The term "purchase" refers to a single purchase by an individual,
or to concurrent purchases that, in the aggregate, are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account; a single
purchase by a trustee or other fiduciary purchasing Class A shares for a single
trust, estate or single fiduciary account although more than one beneficiary is
involved; or a single purchase for the employee benefit plans of a single
employer. The term "purchase" also includes purchases by a "company," as the
term is defined in the 1940 Act, but does not include purchases by any such
company that has not been in existence for at least six months or that has no
purpose other than the purchase of Class A shares or shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit card holders of a company, policy holders of
an insurance company, customers of either a bank or broker-dealer, or clients of
an investment adviser. A "purchase" also may include Class A shares purchased at
the same time through a single selected dealer of any other Heritage Mutual Fund
that distributes its shares subject to a sales charge.
The applicable Class A shares initial sales charge will be based on the
total of:
(i) the investor's current purchase;
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<PAGE>
(ii) the net asset value (at the close of business on the previous
day) of (a) all Class A shares of the fund held by the investor and (b) all
Class A shares of any other Heritage Mutual Fund held by the investor and
purchased at a time when Class A shares of such other fund were distributed
subject to a sales charge (including Heritage Cash Trust shares acquired by
exchange); and
(iii) the net asset value of all Class A shares described in
paragraph (ii) owned by another shareholder eligible to combine his purchase
with that of the investor into a single "purchase."
Class A shares of Heritage Income Trust-Intermediate Government Fund
("Intermediate Government") purchased from February 1, 1992 through July 31,
1992, without payment of a sales charge will be deemed to fall under the
provisions of paragraph (ii) as if they had been distributed without being
subject to a sales charge, unless those shares were acquired through an exchange
of other shares that were subject to a sales charge.
To qualify for the Combined Purchase Privilege on a purchase through a
selected dealer, the investor or selected dealer must provide the distributor,
Raymond James & Associates, Inc. ("Distributor"), with sufficient information to
verify that each purchase qualifies for the privilege or discount.
CLASS A STATEMENT OF INTENTION
------------------------------
Investors also may obtain the reduced sales charges shown in the
prospectus by means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $25,000 within a period of 13
months in Class A shares of the fund or any other Heritage Mutual Fund subject
to a sales charge. Each purchase of Class A shares under a Statement of
Intention will be made at the public offering price or prices applicable at the
time of such purchase to a single transaction of the dollar amount indicated in
the Statement. In addition, if you own Class A shares of any other Heritage
Mutual Fund subject to a sales charge, you may include those shares in computing
the amount necessary to qualify for a sales charge reduction.
The Statement of Intention is not a binding obligation upon the investor
to purchase the full amount indicated. The minimum initial investment under a
Statement of Intention is 5% of such amount. Class A shares purchased with the
first 5% of such amount will be held in escrow (while remaining registered in
the name of the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased, and such escrowed Class A shares will be redeemed involuntarily to
pay the additional sales charge, if necessary. When the full amount indicated
has been purchased, the escrow will be released. To the extent an investor
purchases more than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales charge will be
adjusted for the entire amount purchased at the end of the 13-month period. The
difference in sales charge will be used to purchase additional Class A shares of
the fund subject to the rate of sales charge applicable to the actual amount of
the aggregate purchases. An investor may amend his/her Statement of Intention to
increase the indicated dollar amount and begin a new 13-month period. In that
case, all investments subsequent to the amendment will be made at the sales
charge in effect for the higher amount. The escrow procedures discussed above
will apply.
REDEEMING SHARES
- ----------------
The methods of redemption are described in the section of the Prospectus
entitled "How to Sell Your Investment."
SYSTEMATIC WITHDRAWAL PLAN
--------------------------
Shareholders may elect to make systematic withdrawals from the fund
account of a minimum of $50 on a periodic basis. The amounts paid each period
are obtained by redeeming sufficient shares from an account to provide the
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withdrawal amount specified. The Systematic Withdrawal Plan currently is not
available for shares held in an IRA, Section 403(b) annuity plan, defined
contribution plan, simplified employee pension plan or other retirement plan,
unless the shareholder establishes to Heritage's satisfaction that withdrawals
from such an account may be made without imposition of a penalty. Shareholders
may change the amount to be paid without charge not more than once a year by
written notice to the Distributor or Heritage.
Redemptions will be made at net asset value determined as of the close of
regular trading on the Exchange on a day of each month chosen by the
shareholders or a day of the last month of each period chosen by the
shareholders, whichever is applicable. Systematic withdrawals of Class C shares,
if made in less than one year of the date of purchase, will be charged a CDSC of
1%. Systematic withdrawals of Class B shares, if made in less than six years of
the date of purchase, will be charged the applicable CDSC. If the Exchange is
not open for business on that day, the shares will be redeemed at net asset
value determined as of the close of regular trading on the Exchange on the
preceding Business Day, minus any applicable CDSC for Class B shares and Class C
shares. If a shareholder elects to participate in the Systematic Withdrawal
Plan, dividends and other distributions on all shares in the account must be
reinvested automatically in fund shares. A shareholder may terminate the
Systematic Withdrawal Plan at any time without charge or penalty by giving
written notice to Heritage or the Distributor. The fund, and the transfer agent
and Distributor also reserve the right to modify or terminate the Systematic
Withdrawal Plan at any time.
A withdrawal payment is treated as proceeds from a sale of shares rather
than as a dividend or a capital gain distribution. These payments are taxable to
the extent that the total amount of the payments exceeds the tax basis of the
shares sold. If the periodic withdrawals exceed reinvested dividends and other
distributions, the amount of the original investment may be correspondingly
reduced.
Ordinarily, a shareholder should not purchase additional Class A shares of
the fund if maintaining a Systematic Withdrawal Plan of Class A shares because
the shareholder may incur tax liabilities in connection with such purchases and
withdrawals. The fund will not knowingly accept purchase orders from
shareholders for additional Class A shares if they maintain a Systematic
Withdrawal Plan unless the purchase is equal to at least one year's scheduled
withdrawals. In addition, a shareholder who maintains such a Plan may not make
periodic investments under the fund's Automatic Investment Plan.
TELEPHONE TRANSACTIONS
----------------------
Shareholders may redeem shares by placing a telephone request to the fund.
The fund, Heritage, the Distributor and their Trustees, directors, officers and
employees are not liable for any loss arising out of telephone instructions they
reasonably believe are authentic. In acting upon telephone instructions, these
parties use procedures that are reasonably designed to ensure that such
instructions are genuine, such as (1) obtaining some or all of the following
information: account number, name(s) and social security number(s) registered to
the account, and personal identification; (2) recording all telephone
transactions; and (3) sending written confirmation of each transaction to the
registered owner. If the fund, Heritage, the Distributor and their Trustees,
directors, officers and employees do not follow reasonable procedures, some or
all of them may be liable for any such losses.
REDEMPTIONS IN KIND
-------------------
The fund is obligated to redeem shares for any shareholder for cash during
any 90-day period up to $250,000 or 1% of the fund's net asset value, whichever
is less. Any redemption beyond this amount also will be in cash unless the Board
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the fund will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
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as the fund determines net asset value. The portfolio instruments will be
selected in a manner that the Board deem fair and equitable. A redemption in
kind is not as liquid as a cash redemption. If a redemption is made in kind, a
shareholder receiving portfolio instruments could receive less than the
redemption value thereof and could incur certain transaction costs.
RECEIVING PAYMENT
-----------------
If shares of the fund are redeemed by a shareholder through the
Distributor or a participating dealer, the redemption is settled with the
shareholder as an ordinary transaction. If a request for redemption is received
in good order (as described below) before the close of regular trading on the
Exchange, shares will be redeemed at the net asset value per share determined on
that day, minus any applicable CDSC for Class B shares and Class C shares.
Requests for redemption received after the close of regular trading on the
Exchange will be executed on the next trading day. Payment for shares redeemed
normally will be made by the fund to the Distributor or a participating dealer
by the third business day after the day the redemption request was made,
provided that certificates for shares have been delivered in proper form for
transfer to the fund, or if no certificates have been issued, a written request
signed by the shareholder has been provided to the Distributor or a
participating dealer prior to settlement date.
Other supporting legal documents may be required from corporations or
other organizations, fiduciaries or persons other than the shareholder of record
making the request for redemption. Questions concerning the redemption of fund
shares can be directed to registered representatives of the Distributor, a
participating dealer or to Heritage.
A redemption request will be considered to be received in "good order" if:
o the number or amount of shares and the class of shares to be redeemed and
shareholder account number have been indicated;
o any written request is signed by a shareholder and by all co-owners of the
account with exactly the same name or names used in establishing the account;
o any written request is accompanied by certificates representing the shares
that have been issued, if any, and the certificates have been endorsed for
transfer exactly as the name or names appear on the certificates or an
accompanying stock power has been attached; and
o the signatures on any written redemption request of $50,000 or more and on
any certificates for shares (or an accompanying stock power) have been
guaranteed by a national bank, a state bank that is insured by the Federal
Deposit Insurance Corporation, a trust company or by any member firm of the
New York, American, Boston, Chicago, Pacific or Philadelphia Stock Exchanges.
Signature guarantees also will be accepted from savings banks and certain
other financial institutions that are deemed acceptable by Heritage, as
transfer agent, under its current signature guarantee program.
The fund has the right to suspend redemption or postpone payment at times
when the Exchange is closed (other than customary weekend or holiday closings)
or during periods of emergency or other periods as permitted by the SEC. In the
case of any such suspension, you may either withdraw your request for redemption
or receive payment based upon the net asset value next determined, less any
applicable CDSC, after the suspension is lifted. If a redemption check remains
outstanding after six months, Heritage reserves the right to redeposit those
funds into your account.
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EXCHANGE PRIVILEGE
- ------------------
An exchange is effected through the redemption of the shares tendered for
exchange and the purchase of shares being acquired at their respective net asset
values as next determined following receipt by the Heritage Mutual Fund whose
shares are being exchanged of (1) proper instructions and all necessary
supporting documents or (2) a telephone request for such exchange in accordance
with the procedures set forth in the Prospectus and below. Telephone or telegram
requests for an exchange received by the fund before the close of regular
trading on the Exchange will be effected at the close of regular trading on that
day. Requests for an exchange received after the close of regular trading will
be effected on the Exchange's next trading day.
If you or your Financial Advisor are unable to reach Heritage by
telephone, an exchange can be effected by sending a telegram to Heritage. Due to
the volume of calls or other unusual circumstances, telephone exchanges may be
difficult to implement during certain time periods.
Each Heritage Mutual Fund reserves the right to reject any order to
acquire its shares through exchange or otherwise to restrict or terminate the
exchange privilege at any time. In addition, each Heritage Mutual Fund may
terminate this exchange privilege upon 60 days' notice.
CONVERSION OF CLASS B SHARES
- ----------------------------
Class B shares automatically will convert to Class A shares, based on the
relative net asset values per share of the two classes, eight years after the
end of the month in which the shareholder's order to purchase was accepted. For
the purpose of calculating the holding period required for conversion of Class B
shares, the date of initial issuance shall mean (i) the date on which the Class
B shares were issued or (ii) for Class B shares obtained through an exchange, or
a series of exchanges, the date on which the original Class B shares were
issued. For purposes of conversion to Class A shares, Class B shares purchased
through the reinvestment of dividends and other distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time any Class B
shares in the shareholder's regular account (other than those in the
sub-account) convert to Class A shares, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A shares. The portion will be
determined by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares not acquired
through dividends and other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A shares and Class B shares will not result in
"preferential dividends" under the Code and the conversion of shares does not
constitute a taxable event. If the conversion feature ceased to be available,
the Class B shares would not be converted and would continue to be subject to
the higher ongoing expenses of the Class B shares beyond eight years from the
date of purchase. Heritage has no reason to believe that this condition for the
availability of the conversion feature will not be met.
TAXES
- -----
GENERAL. The fund is treated as a separate corporation for Federal income
tax purposes and intends to qualify for favorable tax treatment as a regulated
investment company ("RIC") under the Code. To do so, the fund must distribute
annually to its shareholders at least 90% of its investment company taxable
income (generally consisting of net investment income, net short-term capital
gain and net gains from certain foreign currency transactions) ("Distribution
Requirement") and must meet several additional requirements. These requirements
-21-
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include the following: (1) the fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures or forward
currency contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) at the close of each
quarter of the fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with those other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (3) at the close of each
quarter of the fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S. Government securities or
the securities of other RICs) of any one issuer.
By qualifying for treatment as a RIC, the fund (but not its shareholders)
will be relieved of Federal income tax on the part of its investment company
taxable income and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that it distributes to its shareholders. If
the fund failed to qualify as a RIC for any taxable year, it would be taxed on
the full amount of its taxable income for that year without being able to deduct
the distributions it makes to its shareholders and the shareholders would treat
all those distributions, including distributions of net capital gain, as
dividends (that is, ordinary income) to the extent of the fund's earnings and
profits. In addition, the fund could be required to recognize unrealized gains,
pay substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
The fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and its capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
DISPOSITION OF FUND SHARES; DISTRIBUTIONS. A redemption of fund shares
will result in a taxable gain or loss to the redeeming shareholder, depending on
whether the redemption proceeds are more or less than the shareholder's adjusted
basis for the redeemed shares (which normally includes any sales charge paid on
Class A shares). An exchange of fund shares for shares of another Heritage
Mutual Fund generally will have similar tax consequences. However, special rules
apply when a shareholder disposes of Class A shares through a redemption or
exchange within 90 days after purchase thereof and subsequently acquires Class A
shares of the fund or of another Heritage Mutual Fund without paying a sales
charge due to the 90-day reinstatement or exchange privileges. In these cases,
any gain on the disposition of the original Class A shares will be increased, or
loss decreased, by the amount of the sales charge paid when those shares were
acquired, and that amount will increase the adjusted basis of the shares
subsequently acquired. In addition, if fund shares are purchased (whether
pursuant to the reinstatement privilege or otherwise) within 30 days before or
after redeeming other fund shares (regardless of class) at a loss, all or a
portion of that loss will not be deductible and will increase the basis of the
newly purchased shares.
If fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for a dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends from the fund's investment company taxable income are taxable to
its shareholders as ordinary income, to the extent of its earnings and profits,
whether received in cash or in additional fund shares. Distributions of the
fund's net capital gain, when designated as such, are taxable to its
-22-
<PAGE>
shareholders as long-term capital gains, whether received in cash or in
additional fund shares and regardless of the length of time the shares have been
held. The portion of the dividends (but not the capital gain distributions) the
fund pays that does not exceed the aggregate dividends it receives from U.S.
corporations will be eligible for the dividends-received deduction allowed to
corporations; however, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the Federal alternative minimum tax.
INCOME FROM FOREIGN SECURITIES. Dividends and interest received by the
fund, and gains realized thereby, may be subject to income, withholding or other
taxes imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or total return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
The fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in
general, meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, the
fund will be subject to Federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain on disposition of
the stock (collectively "PFIC income"), plus interest thereon, even if the fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.
If the fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the fund will be required to include in income each year its PRO
RATA share of the QEF's annual ordinary earnings and net capital gain -- which
the fund most likely would have to distribute to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if the fund did not
receive those earnings and gain from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
The fund may elect to "mark-to-market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock the fund included in income
for prior taxable years thereunder. The fund's adjusted basis in each PFIC's
stock with respect to which it makes this election will be adjusted to reflect
the amounts of income included and deductions taken under the election.
Gains or losses (1) from the disposition of foreign currencies including
foreign currency contracts, (2) on the disposition of each foreign-currency
denominated debt security that are attributable to fluctuations in the value of
the foreign currency between the dates of acquisition and disposition of the
security and (3) that are attributable exchange rate fluctuation between the
time the fund accrues dividends, interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time the fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, increase or decrease the amount of the
fund's investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than affecting the amount of its net
capital gain.
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<PAGE>
HEDGING STRATEGIES. The use of hedging strategies, such as selling
(writing) and purchasing options and futures contracts and entering into forward
currency contracts, involves complex rules that will determine for income tax
purposes the amount, character and timing of recognition of the gains and losses
the fund realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, futures and forward currency contracts derived by the
fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
Certain foreign currency contracts in which the fund may invest will be
"section 1256 contracts." Section 1256 contracts the fund holds at the end of
each taxable year, other than section 1256 contracts that are part of a "mixed
straddle" with respect to which it has made an election not to have the
following rules apply, must be "marked-to-market" (that is, treated as sold for
their fair market value) for Federal income tax purposes, with the result that
unrealized gains or losses will be treated as though they were realized. Sixty
percent of any net gain or loss recognized on these deemed sales, and 60% of any
net realized gain or loss from any actual sales of section 1256 contracts, will
be treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss. Section 1256 contracts also may be
marked-to-market for purposes of the Excise Tax.
Code section 1092 (dealing with straddles) also may affect the taxation of
certain Hedging Instruments in which the fund may invest. That section defines a
"straddle" as offsetting positions with respect to actively traded personal
property; for these purposes, options and forward currency contracts are
personal property. Under that section, any loss from the disposition of a
position in a straddle generally may be deducted only to the extent the loss
exceeds the unrealized gain on the offsetting position(s) of the straddle. In
addition, these rules may postpone the recognition of loss that otherwise would
be recognized under the mark-to-market rules discussed above. The regulations
under section 1092 also provide certain "wash sale" rules, which apply to
transactions where a position is sold at a loss and a new offsetting position is
acquired within a prescribed period, and "short sale" rules applicable to
straddles. If the fund makes certain elections, the amount, character and timing
of the recognition of gains and losses from the affected straddle positions
would be determined under rules that vary according to the elections made.
Because only a few of the regulations implementing the straddle rules have been
promulgated, the tax consequences to the fund of straddle transactions are not
entirely clear.
If the fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, forward contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the position, the fund will be
treated as having made an actual sale thereof, with the result that it will
recognize gain at that time. A constructive sale generally consists of a short
sale, an offsetting notional principal contract or forward contract entered into
by the fund or a related person with respect to the same or substantially
similar property. In addition, if the appreciated financial position is itself a
short sale or such a contract, acquisition of the underlying property or
substantially identical property will be deemed a constructive sale. The
foregoing will not apply, however, to any transaction during any taxable year
that otherwise would be treated as a constructive sale if the transaction is
closed within 30 days after the end of that year and the fund holds the
appreciated financial position unhedged for 60 days after that closing (I.E., at
no time during that 60-day period is the fund's risk of loss regarding that
position reduced by reason of certain specified transactions with respect to
substantially identical or related property, such as having an option to sell,
being contractually obligated to sell, making a short sale, or granting an
option to buy substantially identical stock or securities).
Investors are advised to consult their own tax advisers regarding the
status of an investment in the fund under state and local tax laws.
-24-
<PAGE>
SHAREHOLDER INFORMATION
- -----------------------
Each share of the fund gives the shareholder one vote in matters submitted
to shareholders for a vote. Class A shares, Class B shares and Class C shares of
the fund have equal voting rights, except that, in matters affecting only a
particular class or series, only shares of that class or series are entitled to
vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in a Trust's or the fund's operation and for the election of
Trustees under certain circumstances. Trustees may be removed by the Trustees or
by shareholders at a special meeting. A special meeting of shareholders shall be
called by the Trustees upon the written request of shareholders owning at least
10% of a Trust's outstanding shares.
FUND INFORMATION
- ----------------
MANAGEMENT OF THE FUND
----------------------
BOARD OF TRUSTEES. The business affairs of the fund is managed by or under
the direction of the Board. The Trustees are responsible for managing the fund's
business affairs and for exercising all the fund's powers except those reserved
to the shareholders. A Trustee may be removed by the other Trustees or by a
two-thirds vote of the outstanding Trust shares.
BACKGROUND OF THE TRUSTEES AND OFFICERS. The fund's Trustees and Officers
are listed below with their addresses, principal occupations and present
positions, including any affiliation with Raymond James Financial, Inc. ("RJF"),
Raymond James & Associates, Inc. ("RJA"), Heritage and Eagle.
<TABLE>
<CAPTION>
Position with Principal Occupation
Name each Trust During Past Five Years
---- ------------- ----------------------
<S> <C> <C>
Thomas A. James* (56) Trustee Chairman of the Board since 1986 and
880 Carillon Parkway Chief Executive Officer since 1969 of
St. Petersburg, FL 33716 RJF; Chairman of the Board of RJA since
1986; Chairman of the Board of Eagle
since 1984 and Chief Executive Officer of
Eagle, 1994 to 1996.
Richard K. Riess* (49) Trustee Executive Vice President and Managing
880 Carillon Parkway Director for Asset Management of RJF
St. Petersburg, FL 33716 since 1998, Chief Executive Officer of
Eagle since 1996, President of Eagle,
1995 to present, Chief Operating Officer
of Eagle, 1988 to 1995, Executive Vice
President of Eagle, 1988 to 1993.
Donald W. Burton (54) Trustee President of South Atlantic Capital
614 W. Bay Street, Suite 200 Corporation (venture capital) since 1981.
Tampa, FL 33606
C. Andrew Graham (58) Trustee Vice President of Financial Designs Ltd.
Financial Designs, Ltd. since 1992; Executive Vice President of
1775 Sherman Street, Suite 1900 the Madison Group, Inc., 1991 to 1992;
Denver, CO 80203 Principal of First Denver Financial
Corporation (investment banking) since
1987.
-25-
<PAGE>
Position with Principal Occupation
Name each Trust During Past Five Years
---- ------------- ----------------------
David M. Phillips (59) Trustee Chairman and Chief Executive Officer of
World Trade Center Chicago CCC Information Services, Inc. since
444 Merchandise Mart 1994 and of InfoVest Corporation
Chicago, IL 60654 (information services to the insurance
and auto industries and consumer
households) since 1982.
Eric Stattin (65) Trustee Litigation Consultant/Expert Witness and
1975 Evening Star Drive private investor since 1988.
Park City, UT 84060
James L. Pappas (55) Trustee Lykes Professor of Banking and Finance
University of South Florida since 1986 at University of South Florida;
College of Business Dean of College of Business Administration .
Administration 1987 to 1996
Tampa, FL 33620
Stephen G. Hill (39) President Chief Executive Officer and President of
880 Carillon Parkway Heritage since 1989 and Director since
St. Petersburg, FL 33716 1994; Director of Eagle since 1995.
Donald H. Glassman (41) Treasurer Treasurer of Heritage since 1989;
880 Carillon Parkway Treasurer of Heritage Mutual Funds since
St. Petersburg, FL 33716 1989.
Clifford J. Alexander (56) Secretary Partner, Kirkpatrick & Lockhart LLP (law
1800 Massachusetts Ave., NW firm).
Washington, DC 20036
Patricia Schneider (58) Assistant Compliance Administrator of Heritage.
880 Carillon Parkway Secretary
St. Petersburg, FL 33716
Robert J. Zutz (46) Assistant Partner, Kirkpatrick & Lockhart LLP (law
1800 Massachusetts Ave., NW Secretary firm).
Washington, DC 20036
</TABLE>
- -----------------------
* These Trustees are "interested persons" as defined in section 2(a)(19) of the
1940 Act.
The Trustees and officers of the Trust, as a group, own less than 1% of
each class of the fund's shares outstanding. Each Trust's Declaration of Trust
provides that the Trustees will not be liable for errors of judgment or mistakes
of fact or law. However, they are not protected against any liability to which
they would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
their office.
The Trust currently pays Trustees who are not employees of Heritage or its
affiliates [$3,999] annually and [$1,500] per meeting of the Board. Each Trustee
also is reimbursed for any expenses incurred in attending meetings. Because
Heritage performs substantially all of the services necessary for the operation
-26-
<PAGE>
of each fund, the fund requires no employees. No officer, director or employee
of Heritage receives any compensation from the fund for acting as a director or
officer. The following table shows the compensation earned by each Trustee for
the fiscal year ending October 31, 1998.
<TABLE>
COMPENSATION TABLE(1)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Total Compensation
Pension or From the Trust and
Aggregate Retirement Benefits Estimated Annual the Heritage Family
Name of Person, Compensation From Accrued as Part of Benefits Upon of Funds Paid to
Position the Series Trust the Trust's Expenses Retirement Trustees(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald W. Burton, Trustee $9,166.60 $0 $0 $20,833
C. Andrew Graham, Trustee $9,166.60 $0 $0 $20,833
Thomas A. James, $0 $0 $0 $0
Trustee
James L. Pappas, $9,166.60 $0 $0 $20,833
Trustee
David M. Phillips, Trustee $________ $0 $0 $_______
Richard K. Riess, $0 $0 $0 $0
Trustee
Eric Stattin, $9,166.60 $0 $0 $20,833
Trustee
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
(1) For the fiscal year ended October 31, 1999.
(2) The Heritage Mutual Funds consist of seven separate registered investment
companies, including the Series Trust.
INVESTMENT ADVISER AND ADMINISTRATOR; SUBADVISER
------------------------------------------------
The investment adviser and administrator for the fund is Heritage Asset
Management, Inc. Heritage was organized as a Florida corporation in 1985. All
the capital stock of Heritage is owned by RJF. RJF is a holding company that,
through its subsidiaries, is engaged primarily in providing customers with a
wide variety of financial services in connection with securities, limited
partnerships, options, investment banking and related fields.
With respect to the fund, Heritage is responsible for overseeing the
fund's investment and noninvestment affairs, subject to the control and
direction of the fund's Board. The Trust, on behalf of the fund entered into an
Investment Advisory and Administration Agreement with Heritage dated March 29,
1993 and last supplemented on September __, 1999. The Investment Advisory and
Administration Agreements require that Heritage review and establish investment
policies for the fund and administer the fund's noninvestment affairs.
-27-
<PAGE>
Under a Subadvisory Agreement, Eagle, subject to the direction and control
of Heritage and the Board, provide investment advice and portfolio management
services to the fund for a fee payable by Heritage.
Heritage also is obligated to furnish the fund with office space,
administrative, and certain other services as well as executive and other
personnel necessary for the operation of the fund. Heritage and its affiliates
also pay all the compensation of Trustees of the Trust who are employees of
Heritage or its affiliates. The fund pays all its other expenses that are not
assumed by Heritage. The fund also is liable for such nonrecurring expenses as
may arise, including litigation to which the fund may be a party. The fund also
may have an obligation to indemnify its Trustees and officers with respect to
any such litigation.
The Advisory Agreement and the Subadvisory Agreement each were approved by
the Board (including all of the Trustees who are not "interested persons" of the
Trust, Heritage or Eagle, as defined under the 1940 Act) and by the shareholders
of the fund in compliance with the 1940 Act. Each Agreement provides that it
will be in force for an initial two-year period and it must be approved each
year thereafter by (1) a vote, cast in person at a meeting called for that
purpose, of a majority of those Trustees who are not "interested persons" of
Heritage, Eagle, or the Trust, and by (2) the majority vote of either the full
Board or the vote of a majority of the outstanding shares of the fund. The
Advisory and Subadvisory Agreement each automatically terminates on assignment,
and each is terminable on not more than 60 days' written notice by the Trust to
either party. In addition, the Advisory Agreement may be terminated on not less
than 60 days' written notice by Heritage, to the fund and the Subadvisory
Agreement may be terminated on not less than 60 days' written notice by
Heritage, or 90 days' written notice by Eagle. Under the terms of the Advisory
Agreement, Heritage automatically becomes responsible for the obligations of
Eagle upon termination of the Subadvisory Agreement. In the event Heritage
ceases to be the investment adviser of the fund or the Distributor ceases to be
principal distributor of shares of the fund, the right of the fund to use the
identifying name of "Heritage" may be withdrawn.
Heritage and Eagle shall not be liable to either fund or any shareholder
for anything done or omitted by them, except acts or omissions involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
imposed upon them by their agreements with the fund or for any losses that may
be sustained in the purchase, holding or sale of any security.
All of the officers of the fund except for Messrs. Alexander and Zutz are
officers or directors of Heritage, Eagle or their affiliates. These
relationships are described under "Management of the Fund."
ADVISORY AND ADMINISTRATION FEE. The annual investment advisory fee paid
monthly by the fund to Heritage is based on the fund's average daily net assets
as listed in the Prospectus. Heritage has agreed to waive its management fees to
the extent that annual operating expenses attributable to Class A shares exceed
1.65% of the average daily net assets or to the extent that annual operating
expenses attributable to Class B shares and Class C shares exceed 2.40% of
average daily net assets attributable to that class during this fiscal year.
Heritage has entered into an agreement with Eagle to provide investment
advice and portfolio management services to the fund for a fee paid by Heritage
to Eagle with respect to the amount of fund assets under management equal to 50%
of the fees payable to Heritage by the fund, without regard to any reduction in
fees actually paid to Heritage as a result of expense limitations.
CLASS-SPECIFIC EXPENSES. The fund may determine to allocate certain of its
expenses (in addition to distribution fees) to the specific classes of the
fund's shares to which those expenses are attributable.
-28-
<PAGE>
BROKERAGE PRACTICES
-------------------
While the fund generally purchases securities for long-term capital gains,
the fund may engage in short-term transactions under various market conditions
to a greater extent than certain other mutual funds with similar investment
objectives. Thus, the turnover rate may vary greatly from year to year or during
periods within a year. The fund's portfolio turnover rate is computed by
dividing the lesser of purchases or sales of securities for the period by the
average value of portfolio securities for that period. A 100% turnover rate
would occur if all the securities in the fund's portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover (100% or more) generally leads to higher transaction costs
and may result in a greater number of taxable transactions. The fund's turnover
rate is expected to range between 200% and 400%.
Eagle is responsible for the execution of the fund's portfolio
transactions and must seek the most favorable price and execution for such
transactions. Best execution, however, does not mean that the fund necessarily
will be paying the lowest commission or spread available. Rather, Eagle also
will take into account such factors as size of the order, difficulty of
execution, efficiency of the executing broker's facilities, and any risk assumed
by the executing broker.
It is a common practice in the investment advisory business for advisers
of investment companies and other institutional investors to receive research,
statistical and quotation services from broker-dealers who execute portfolio
transactions for the clients of such advisers. Consistent with the policy of
most favorable price and execution, Eagle may give consideration to research,
statistical and other services furnished by brokers or dealers. In addition,
Eagle may place orders with brokers who provide supplemental investment and
market research and securities and economic analysis and may pay these brokers a
higher brokerage commission or spread than may be charged by other brokers,
provided that Eagle determines in good faith that such commission is reasonable
in relation to the value of brokerage and research services provided. Such
research and analysis may be useful to Eagle in connection with services to
clients other than the fund.
Eagle may use the Distributor, its affiliates or certain affiliates of
Heritage as a broker for agency transactions in listed and OTC securities at
commission rates and under circumstances consistent with the policy of best
execution. Commissions paid to the Distributor, its affiliates or certain
affiliates of Heritage will not exceed "usual and customary brokerage
commissions." Rule l7e-1 under the 1940 Act defines "usual and customary"
commissions to include amounts that are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time."
Eagle also may select other brokers to execute portfolio transactions. In
the OTC market, the fund generally deals with primary market makers unless a
more favorable execution can otherwise be obtained.
The Board has adopted procedures in conformity with Rule 10f-3 under the
1940 Act whereby the fund may purchase securities that are offered in
underwritings in which the Distributor is a participant. The Board of Trustees
will consider the ability to recapture fund expenses on certain portfolio
transactions, such as underwriting commissions and tender offer solicitation
fees, by conducting such portfolio transactions through affiliated entities,
including the Distributor, but only to the extent such recapture would be
permissible under applicable regulations, including the rules of the National
Association of Securities Dealers, Inc. and other self-regulatory organizations.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as
amended, the fund has expressly consented to the Distributor executing
transactions on an exchange on its behalf.
-29-
<PAGE>
DISTRIBUTION OF SHARES
----------------------
Shares of the fund are offered continuously through the fund's principal
underwriter, RJA, and through other participating dealers or banks that have
dealer agreements with the Distributor. The Distributor receives commissions
consisting of that portion of the sales charge remaining after the dealer
concession is paid to participating dealers or banks. Such dealers may be deemed
to be underwriters pursuant to the 1933 Act.
The Distributor and Financial Advisors or banks with whom the Distributor
has entered into dealer agreements offer shares of the fund as agents on a best
efforts basis and are not obligated to sell any specific amount of shares. In
this connection, the Distributor makes distribution and servicing payments to
participating dealers in connection with the sale of shares of the fund.
Pursuant to the Distribution Agreements with respect to Class A shares, Class B
shares and Class C shares, the Distributor bears the cost of making information
about the fund available through advertising, sales literature and other means,
the cost of printing and mailing prospectuses to persons other than
shareholders, and salaries and other expenses relating to selling efforts. The
Distributor also pays service fees to dealers for providing personal services to
Class A, B and C shareholders and for maintaining shareholder accounts. The fund
pays the cost of registering and qualifying its shares under state and federal
securities laws and typesetting of its prospectuses and printing and
distributing prospectuses to existing shareholders.
The fund has adopted a Distribution Plan for each class of shares (each a
"Plan" and collectively the "Plans"). These Plans permit the fund to pay the
Distributor the monthly distribution and service fee out of the fund's net
assets to finance activity that is intended to result in the sale and retention
of Class A shares, Class B shares and Class C shares. The Distributor, on Class
C shares, may retain the first 12 months distribution fee for reimbursement of
amounts paid to the broker-dealer at the time of purchase. Each Plan was
approved by the Board, including a majority of the Trustees who are not
interested persons of the fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or the
Distribution Agreement (the "Independent Trustees"). In approving such Plans,
the Board determined that there is a reasonable likelihood that the fund and its
shareholders will benefit from each Plan.
As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of Class A shares and in
connection with personal services rendered to Class A shareholders and the
maintenance of Class A shareholder accounts, the fund may pay the Distributor
distribution and service fees of up to 0.35% of that fund's average daily net
assets attributable to Class A shares of that fund. Currently, the fund pays the
Distributor a fee of up to 0.25% of its average daily net assets attributable to
Class A shares. These fees are computed daily and paid monthly.
As compensation for services rendered and expenses borne by the
Distributor in connection with the distribution of Class B shares and Class C
shares and in connection with personal services rendered to Class B and Class C
shareholders and the maintenance of Class B and Class C shareholder accounts,
the fund pays the Distributor a service fee of 0.25% and a distribution fee of'
0.75% of that fund's average daily net assets attributable to Class B shares and
Class C shares. These fees are computed daily and paid monthly.
-30-
<PAGE>
Each Plan each may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of a
class of the fund. The Board reviews quarterly a written report of Plan costs
and the purposes for which such costs have been incurred. A Plan may be amended
by vote of the Board, including a majority of the Independent Trustees, cast in
person at a meeting called for such purpose. Any change in a Plan that would
increase materially the distribution cost to a class requires shareholder
approval of that class.
The Distribution Agreements may be terminated at any time on 60 days
written notice without payment of any penalty by either party. The fund may
effect such termination by vote of a majority of the outstanding voting
securities of the fund or by vote of a majority of the Independent Trustees. For
so long as the Plan is in effect, selection and nomination of the Independent
Trustees shall be committed to the discretion of such disinterested persons.
The Distribution Agreements and each Plan will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (1) by the vote of a majority of the Independent Trustees and (2) by
the vote of a majority of the entire Board cast in person at a meeting called
for that purpose. If a Plan is terminated, the obligation of the fund to make
payments to the Distributor pursuant to the Plan will cease and the fund will
not be required to make any payment past the date the Plan terminates.
ADMINISTRATION OF THE FUND
- --------------------------
ADMINISTRATIVE, FUND ACCOUNTING AND TRANSFER AGENT SERVICES. Heritage,
subject to the control of the Board of Trustees, will manage, supervise and
conduct the administrative and business affairs of the fund; furnish office
space and equipment; oversee the activities of the subadviser and the Custodian;
and pay all salaries, fees and expenses of officers and Trustees of the Trust
who are affiliated with Heritage. In addition, Heritage provides certain
shareholder servicing activities for fund customers.
Heritage also is the transfer and dividend reimbursing agent for the fund
and serves as fund accountant for the fund. The fund pays Heritage its cost plus
10% for its services as fund accountant and transfer and dividend disbursing
agent.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 1912, Boston,
Massachusetts 02105, serves as custodian of the fund's assets. The Custodian
also provides portfolio accounting and certain other services for the fund.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, NW,
2nd Floor, Washington, D.C. 20036, serves as counsel to the Trust.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 400 North Ashley
Street, Suite 2800, Tampa, Florida 33602, is the independent accountant for the
Trust.
POTENTIAL LIABILITY
- -------------------
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the fund. These documents require notice of this disclaimer to be given in each
agreement, obligation or instrument the fund or the Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the fund's
obligations, that fund is required to use its property to protect or compensate
-31-
<PAGE>
the shareholder. On request, the fund will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the fund. Therefore,
financial loss resulting from liability as a shareholder will occur only if the
fund itself cannot meet its obligations to indemnify shareholders and pay
judgments against them.
-32-
<PAGE>
APPENDIX
COMMERCIAL PAPER RATINGS
The rating services' descriptions of commercial paper ratings in which the fund
may invest are:
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER DEBT RATINGS
- ----------------------------------------------------------------------------
PRIME-L. Issuers (or supporting institutions) rated PRIME-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation;
well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2. Issuers (or supporting institutions) rated PRIME-2 (P-2) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS
- ---------------------------------------------------------
A-1. This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess extremely strong
characteristics are denoted with a plus sign (+) designation.
A-2. Capacity for timely payment of issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
CORPORATE DEBT RATINGS
The rating services' descriptions of corporate debt ratings in which the fund
may invest are:
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. CORPORATE DEBT RATINGS
- ---------------------------------------------------------------------
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
A-1
<PAGE>
Baa - Bonds that are rated Baa are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA - Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the company ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking and the modifier 3
indicates that the company ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATE DEBT RATINGS
- -------------------------------------------------------
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC, C - Debt rated "BB," "B," "CCC," "CC," and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
A-2
<PAGE>
BB - Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions that could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B - Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
CCC - Debt rated "CCC" has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
CC - The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C - The rating "C" is typically applied to debt subordinated to senior debt that
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI - The rating "CI" is reserved for income bonds on which no interest is being
paid.
D - Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
NR - Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
A-3
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
--------
(a) Declaration of Trust*
(b) Bylaws*
(c) Voting trust agreement - none
(d)(i)(A) Investment Advisory and Administration Agreement*
(i)(B) Amended Schedule A relating to the addition of the
Value Equity Fund*
(i)(C) Amended Schedule A relating to the addition of the
Growth Equity Fund*
(i)(D) Amended Schedule A relating to the addition of the
Mid Cap Growth Fund***
(i)(E) Amended Schedule A relating to the addition of the
Aggressive Growth Fund+
(i)(F) Amended Schedule A relating to the addition of the
Information Technology Fund (filed herewith)
(ii) Investment Advisory and Administration Agreement between
Eagle Asset Management, Inc. and Eagle International
Equity Portfolio*
(iii)(A) Subadvisory Agreement between Heritage Asset Management,
Inc. and Eagle Asset Management, Inc. relating to Small
Cap Stock Fund*
(iii)(B) Subadvisory Agreement between Heritage Asset Management,
Inc. and Awad & Associates, a division of Raymond James
and Associates, Inc. relating to Small Cap Stock Fund*
(iv)(A) Subadvisory Agreement between Heritage Asset Management,
Inc. and Eagle Asset Management, Inc.relating to Value
Equity Fund*
(iv)(B) Amended Schedule A relating to the addition of the
Small Cap Stock Fund*
(iv)(C) Amended Schedule A relating to the addition of the
Growth Equity Fund*
(iv)(D) Amended Schedule A relating to the addition of the
Mid Cap Growth Fund***
(iv)(E) Amended Schedule A relating to the addition of the
Aggressive Growth Fund+
<PAGE>
(iv)(F) Amended Schedule A relating to the addition of the
Information Technology Fund (filed herewith)
(v) Subadvisory Agreement between Eagle Asset Management,
Inc. and Martin Currie Inc. relating to Eagle
International Equity Portfolio*
(e) Distribution Agreement*
(f) Bonus, profit sharing or pension plans - none
(g) Form of Custodian Agreement*
(h)(i) Form of Transfer Agency and Service Agreement*
(ii)(A) Form of Fund Accounting and Pricing Service Agreement*
(ii)(B) Amended Schedule A relating to the addition of the
Mid Cap Growth Fund***
(ii)(C) Amended Schedule A relating to the addition of the
Aggressive Growth Fund+
(ii)(D) Amended Schedule A relating to the addition of the
Information Technology Fund (filed herewith)
(i) Opinion and consent of counsel (filed herewith)
(j) Consent of Independent Auditors (not applicable)
(k) Financial statements omitted from prospectus - none
(l) Letter of investment intent*
(m)(i)(A) Class A Plan pursuant to Rule 12b-1*
(i)(B) Amended Schedule A relating to the addition of
the Value Equity Fund*
(i)(C) Amended Schedule A relating to the addition of
the Growth Equity Fund*
(i)(D) Amended Schedule A relating to the addition of
the Eagle International Equity Portfolio*
(i)(E) Amended Schedule A relating to the addition of
the Mid Cap Growth Fund and Aggressive Growth
Fund
(i)(F) Amended Schedule A relating to the addition of
the Information Technology Fund (filed herewith)
(ii)(A) Class C Plan pursuant to Rule 12b-1*
(ii)(B) Amended Schedule A relating to the addition of
the Growth Equity Fund*
C-2
<PAGE>
(ii)(C) Amended Schedule A relating to the addition of
the Eagle International Equity Portfolio*
(ii)(D) Amended Schedule A relating to the addition of
the Mid Cap Growth Fund and Aggressive Growth
Fund+
(ii)(E) Amended Schedule A relating to the addition of
the Information Technology Fund (filed herewith)
(iii) Eagle Class Plan pursuant to Rule 12b-1*
(iv)(A) Class B Plan pursuant to Rule 12b-1***
(iv)(B) Amended Schedule A relating to the addition of the
Aggressive Growth Fund+
(iv)(C) Amended Schedule A relating to the addition of the
Information Technology Fund (filed herewith)
(n)(i) Plan pursuant to Rule 18f-3*
(ii) Amended Plan pursuant to Rule 18f-3**
(iii) Amended Plan pursuant to Rule 18f-3+
(iv) Amended Plan pursuant to Rule 18f-3 relating to the
addition of the Information Technology Fund (filed
herewith)
- ---------------------------
* Incorporated by reference from the Post-Effective Amendment No.
10 to the Registration Statement of the Trust, SEC File No.
33-57986, filed previously via EDGAR on December 1, 1995.
** Incorporated by reference from the Trust's Post-Effective
Amendment No. 13 to the Trust's Registration Statement on Form N-1A,
File No. 33-57986, filed previously via EDGAR on February 28, 1997.
*** Incorporated by reference from the Trust's Post-Effective
Amendment No. 15 to the Trust's Registration Statement on Form N-1A,
File No. 33-57986, filed previously via EDGAR on October 31, 1997.
+ Incorporated by reference from the Trust's Post-Effective
Amendment No. 16 to the Trust's Registration Statement on Form N-1A,
File No. 33-57986 filed previously via EDGAR on October 30, 1998.
Item 24. Persons Controlled by or under
Common Control with Registrant
------------------------------
None.
C-3
<PAGE>
Item 25. Indemnification
---------------
Article XI, Section 2 of Heritage Series Trust's Declaration of Trust
provides that:
(a) Subject to the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate portfolios to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office (A) by the court or other body approving
the settlement; (B) by at least a majority of those Trustees who are neither
interested persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry); provided,
however, that any Shareholder may, by appropriate legal proceedings, challenge
any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law.
C-4
<PAGE>
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit, or proceeding of the character described in
paragraph (a) of this Section 2 may be paid by the applicable Portfolio from
time to time prior to final disposition thereof upon receipt of an undertaking
by or on behalf of such Covered Person that such amount will be paid over by him
to the Trust if it is ultimately determined that he is not entitled to
indemnification under this Section 2; provided, however, that:
(i) such Covered Person shall have provided appropriate security for
such undertaking;
(ii) the Trust is insured against losses arising out of any such
advance payments; or
(iii) either a majority of the Trustees who are neither interested
persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled to
indemnification under this Section 2.
According to Article XII, Section 1 of the Declaration of Trust, the Trust
is a trust, not a partnership. Trustees are not liable personally to any person
extending credit to, contracting with or having any claim against the Trust, a
particular Portfolio or the Trustees. A Trustee, however, is not protected from
liability due to willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Article XII, Section 2 provides that, subject to the provisions of Section
1 of Article XII and to Article XI, the Trustees are not liable for errors of
judgment or mistakes of fact or law, or for any act or omission in accordance
with advice of counsel or other experts or for failing to follow such advice.
Paragraph 8 of the Investment Advisory and Administration Agreement
("Advisory Agreement") between the Trust and Eagle Asset Management, Inc.
("Eagle"), provides that Eagle shall not be liable for any error of judgment or
mistake of law for any loss suffered by the Trust or any Portfolio in connection
with the matters to which the Advisory Agreement relate except a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the Advisory Agreement. Any person, even though also an
officer, partner, employee, or agent of Eagle, who may be or become an officer,
trustee, employee or agent of the Trust shall be deemed, when rendering services
to the Trust or acting in any business of the Trust, to be rendering such
services to or acting solely for the Trust and not as an officer, partner,
employee, or agent or one under the control or direction of Eagle even though
paid by it.
Paragraph 9 of the Subadvisory Agreement ("Subadvisory Agreement") between
Eagle and Martin Currie Inc. ("Subadviser") provides that, in the absence of
willful misfeasance, bad faith or gross negligence on the part of the
Subadviser, or reckless disregard of its obligations and duties under the
Subadvisory Agreement, the Subadviser shall not be subject to any liability to
C-5
<PAGE>
Eagle, the Trust, or their directors, trustees, officers or shareholders, for
any act or omission in the course of, or connected with, rendering services
under the Subadvisory Agreement.
Paragraph 7 of the Distribution Agreement between the Trust and Raymond
James & Associates, Inc. ("Raymond James") provides that, the Trust agrees to
indemnify, defend and hold harmless Raymond James, its several officers and
directors, and any person who controls Raymond James within the meaning of
Section 15 of the Securities Act of 1933, as amended (the "1933 Act") from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Raymond James, its officers
or Trustees, or any such controlling person may incur under the 1933 Act or
under common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement, Prospectus
or Statement of Additional Information or arising out of or based upon any
alleged omission to state a material fact required to be stated in either
thereof or necessary to make the statements in either thereof not misleading,
provided that in no event shall anything contained in the Distribution Agreement
be construed so as to protect Raymond James against any liability to the Trust
or its shareholders to which Raymond James would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under the Distribution Agreement.
Paragraph 13 of the Heritage Funds Accounting and Pricing Services
Agreement ("Accounting Agreement") between the Trust and Heritage Asset
Management, Inc. ("Heritage") provides that the Trust agrees to indemnify and
hold harmless Heritage and its nominees from all losses, damages, costs,
charges, payments, expenses (including reasonable counsel fees), and liabilities
arising directly or indirectly from any action that Heritage takes or does or
omits to take to do (i) at the request or on the direction of or in reasonable
reliance on the written advice of the Trust or (ii) upon Proper Instructions (as
defined in the Accounting Agreement), provided, that neither Heritage nor any of
its nominees shall be indemnified against any liability to the Trust or to its
shareholders (or any expenses incident to such liability) arising out of
Heritage's own willful misfeasance, willful misconduct, gross negligence or
reckless disregard of its duties and obligations specifically described in the
Accounting Agreement or its failure to meet the standard of care set forth in
the Accounting Agreement.
Item 26. I. Business and Other Connections of Investment Adviser
----------------------------------------------------
Eagle Asset Management, Inc., a Florida corporation, is a registered
investment adviser. All of its stock is owned by Raymond James Financial, Inc.
Eagle is primarily engaged in the investment advisory business. Eagle provides
investment advisory services to the Eagle International Equity Portfolio.
Eagle's offices are located at 880 Carillon Parkway, St. Petersburg, Florida
33733. Information as to the officers and directors of Eagle is included in its
current Form ADV filed with the Securities and Exchange Commission ("SEC") and
is incorporated by reference herein.
Heritage Asset Management, Inc. is a Florida corporation that offers
investment management services. Heritage provides investment advisory services
C-6
<PAGE>
to the Small Cap Stock, Value Equity, Growth Equity, Mid Cap Growth, Aggressive
Growth and Information Technology Funds of the Trust. Heritage's offices are
located at 880 Carillon Parkway, St. Petersburg, Florida 33733. Information as
to the directors and officers of Heritage is included in its current Form ADV
filed with the SEC (registration number 801-25067) and is incorporated by
reference herein.
II. Business and Other Connections of Subadviser
--------------------------------------------
Martin Currie Inc., a New York corporation, is a wholly owned subsidiary
of Martin Currie Limited. Martin Currie Inc. is primarily engaged in the
investment advisory business. Martin Currie Inc. provides subadvisory services
to the Eagle International Equity Portfolio of the Trust. Martin Currie's
offices are located at Edinburgh, Scotland. Information as to the officers and
directors of Martin Currie Inc. is included in its current Form ADV filed with
the SEC and is incorporated by reference herein.
Awad Asset Management, Inc. is a registered investment adviser. All of its
stock is owned by Raymond James Financial, Inc. Awad is primarily engaged in the
investment advisory business. Awad's offices are located at 477 Madison Ave.,
New York, NY. 10022. Information as to the officers and directors of Awad is
included in the current Form ADV filed with the SEC and is incorporated by
reference herein.
Eagle Asset Management, Inc., a Florida corporation, is a registered
investment adviser. All of its stock is owned by Raymond James Financial, Inc.
Eagle is primarily engaged in the investment advisory business. Information as
to the officers and directors of Eagle is included in the current Form ADV filed
with the SEC and is incorporated by reference herein.
Osprey Partners Investment Management, LLC, Shrewsbury Executive Center
II, 1040 Broad Street, Shrewsbury, New Jersey 077702, is a registered investment
adviser. Osprey is primarily engaged in the investment advisory business.
Information as to the officers and directors of Osprey is included in the
current Form ADV filed with the SEC and is incorporated by reference herein.
Item 27. Principal Underwriter
---------------------
(a) Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida 33716 is the principal underwriter for each of the
following investment companies: Heritage Cash Trust, Heritage Capital
Appreciation Trust, Heritage Income-Growth Trust, Heritage Income Trust and
Heritage Series Trust.
(b) The directors and officers of the Registrant's principal
underwriter are:
Positions & Offices Position
Name with Underwriter with Registrant
- ---- ------------------- ---------------
Thomas A. James Chief Executive Officer, Director Trustee
C-7
<PAGE>
Robert F. Shuck Executive VP, Director None
Thomas S. Franke President, Chief Operating None
Officer, Director
Lynn Pippenger Secretary/Treasurer, Chief None
Financial Officer, Director
Dennis Zank Executive VP of Operations None
and Administration, Director
The business address for each of the above directors and officers is 880
Carillon Parkway, St. Petersburg, Florida 33716.
Item 28. Location of Accounts and Records
--------------------------------
For the Small Cap Stock Fund, the Mid Cap Growth Fund, the Value Equity
Fund, the Growth Equity Fund, the Aggressive Growth Fund and the Information
Technology Fund, the books and other documents required by Rule 31a-1 under the
Investment Company Act of 1940, as amended ("1940 Act"), are maintained by
Heritage. For the Eagle International Equity Portfolio, the books and other
documents required by Rule 31a-1 under the 1940 Act are maintained by the
Portfolio's custodian, State Street Bank & Trust Company. Prior to March 1, 1994
the Trust's Custodian maintained the required records for the Small Cap Stock
Fund, except that Heritage maintained some or all of the records required by
Rule 31a-1(b)(l), (2) and (8); and the Subadviser will maintain some or all of
the records required by Rule 31a-1(b) (2), (5), (6), (9), (10) and (11).
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings
------------
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered a copy of its latest annual report to shareholders, upon request
and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it has duly caused this Post-Effective Amendment No. 22 to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Petersburg and the State of Florida, on
September 3, 1999.
HERITAGE SERIES TRUST
By: /s/ Stephen G. Hill
---------------------
Stephen G. Hill
President
Attest:
/s/ Donald H. Glassman
- -----------------------------
Donald H. Glassman, Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 22 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Stephen G. Hill
- --------------------- President September 3, 1999
Stephen G. Hill
Thomas A. James* Trustee September 3, 1999
- ---------------------
Thomas A. James
Richard K. Riess* Trustee September 3, 1999
- ---------------------
Richard K. Riess
C. Andrew Graham* Trustee September 3, 1999
- ---------------------
C. Andrew Graham
David M. Phillips* Trustee September 3, 1999
- ---------------------
David M. Phillips
James L. Pappas* Trustee September 3, 1999
- ---------------------
James L. Pappas
C-9
<PAGE>
Donald W. Burton* Trustee September 3, 1999
- ---------------------
Donald W. Burton
Eric Stattin* Trustee September 3, 1999
- ---------------------
Eric Stattin
/s/ Donald H. Glassman
- ---------------------- Treasurer September 3, 1999
Donald H. Glassman
*By: /s/ Donald H. Glassman
----------------------
Donald H. Glassman,
Attorney-In-Fact
2
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page
- ------- ----------- ----
(a) Declaration of Trust*
(b) Bylaws*
(c) Voting trust agreement - none
(d)(i)(A) Investment Advisory and Administration Agreement*
(i)(B) Amended Schedule A relating to the addition of the Value Equity
Fund*
(i)(C) Amended Schedule A relating to the addition of the Growth Equity
Fund*
(i)(D) Amended Schedule A relating to the addition of the Mid Cap Growth
Fund***
(i)(E) Amended Schedule A relating to the addition of the Aggressive
Growth Fund+
(i)(F) Amended Schedule A relating to the addition of the Information
Technology Fund (filed herewith)
(ii) Investment Advisory and Administration Agreement between Eagle
Asset Management, Inc. and Eagle International Equity Portfolio*
(iii)(A) Subadvisory Agreement between Heritage Asset Management, Inc. and
Eagle Asset Management, Inc. relating to Small Cap Stock Fund*
(iii)(B) Subadvisory Agreement between Heritage Asset Management, Inc. and
Awad & Associates, a division of Raymond James and Associates,
Inc. relating to Small Cap Stock Fund*
(iv)(A) Subadvisory Agreement between Heritage Asset Management, Inc. and
Eagle Asset Management, Inc. relating to Value Equity Fund*
(iv)(B) Amended Schedule A relating to the addition of the Small Cap Stock
Fund*
(iv)(C) Amended Schedule A relating to the addition of the Growth Equity
Fund*
(iv)(D) Amended Schedule A relating to the addition of the Mid Cap Growth
Fund***
(iv)(E) Amended Schedule A relating to the addition of the Aggressive
Growth Fund+
(iv)(F) Amended Schedule A relating to the addition of the Information
Technology Fund (filed herewith)
(v) Subadvisory Agreement between Eagle Asset Management, Inc.
and Martin Currie Inc. relating to Eagle International Equity
Portfolio*
(e) Distribution Agreement*
(f) Bonus, profit sharing or pension plans - none
(g) Form of Custodian Agreement*
<PAGE>
(h)(i) Form of Transfer Agency and Service Agreement*
(ii)(A) Form of Fund Accounting and Pricing Service Agreement*
(ii)(B) Amended Schedule A relating to the addition of the Mid Cap
Growth Fund***
(ii)(C) Amended Schedule A relating to the addition of the Aggressive
Growth Fund+
(ii)(D) Amended Schedule A relating to the addition of the Information
Technology Fund (filed herewith)
(i) Opinion and consent of counsel (filed herewith)
(j) Consent of Independent Auditors (not applicable)
(k) Financial statements omitted from prospectus - none
(l) Letter of investment intent*
(m)(i)(A) Class A Plan pursuant to Rule 12b-1*
(i)(B) Amended Schedule A relating to the addition of the Value
Equity Fund*
(i)(C) Amended Schedule A relating to the addition of the Growth
Equity Fund*
(i)(D) Amended Schedule A relating to the addition of the Eagle
International Equity Portfolio*
(i)(E) Amended Schedule A relating to the addition of the Mid Cap
Growth Fund and Aggressive Growth Fund+
(i)(F) Amended Schedule A relating to the addition of the
Information Technology Fund (filed herewith)
(ii)(A) Class C Plan pursuant to Rule 12b-1*
(ii)(B) Amended Schedule A relating to the addition of the Growth
Equity Fund*
(ii)(C) Amended Schedule A relating to the addition of the Eagle
International Equity Portfolio*
(ii)(D) Amended Schedule A relating to the addition of the Mid Cap
Growth Fund and Aggressive Growth Fund+
(ii)(E) Amended Schedule A relating to the addition of the
Information Technology Fund (filed herewith)
(iii) Eagle Class Plan pursuant to Rule 12b-1*
(iv)(A) Class B Plan pursuant to Rule 12b-1***
(iv)(B) Amended Schedule A relating to the addition of the Aggressive
Growth Fund+
(iv)(C) Amended Schedule A relating to the addition of the Information
Technology Fund (filed herewith)
(n)(i) Plan pursuant to Rule 18f-3*
2
<PAGE>
(ii) Amended Plan pursuant to Rule 18f-3**
(iii) Amended Plan pursuant to Rule 18f-3+
(iv) Amended Plan pursuant to Rule 18f-3 relating to the addition of the
Information Technology Fund (filed herewith)
- ---------------------------
* Incorporated by reference from the Post-Effective Amendment No.
10 to the Registration Statement of the Trust, SEC File No.
33-57986, filed previously via EDGAR on December 1, 1995.
** Incorporated by reference from the Trust's Post-Effective
Amendment No. 13 to the Trust's Registration Statement on Form N-1A,
File No. 33-57986, filed previously via EDGAR on February 28, 1997.
*** Incorporated by reference from the Trust's Post-Effective
Amendment No. 15 to the Trust's Registration Statement on Form N-1A,
File No. 33-57986, filed previously via EDGAR on October 31, 1997.
+ Incorporated by reference from the Trust's Post-Effective
Amendment No. 16 to the Trust's Registration Statement on Form N-1A,
File No. 33-57986 filed previously via EDGAR on October 30, 1998.
3
AMENDED SCHEDULE A
TO THE
INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT
BETWEEN
HERITAGE ASSET MANAGEMENT, INC.
AND
HERITAGE SERIES TRUST
As compensation pursuant to section 7 of the Investment Advisory and
Administrative Agreement between Heritage Asset Management, Inc. (the "Manager")
and Heritage Series Trust (the "Trust"), the Trust shall pay to the Manager a
fee, computed daily and paid monthly, at the following annual rates as
percentages of each Portfolio's average daily net assets:
For the Heritage Aggressive Growth Fund and Small Cap Stock Fund:
Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
------------- ------------------------
Up to and including $50 million 1.00%
In excess of $50 million .75%
For the Heritage Growth Equity Fund, Mid Cap Growth Fund and Value
Equity Fund:
Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
------------- ------------------------
All .75%
For the Heritage Information Technology Fund:
Average Daily Advisory Fee as % of
Net Assets Average Daily Net Assets
------------- ------------------------
Up to and including $100 million 1.00%
In excess of $100 million .75%
Dated: March 29, 1993, as last amended on ________, 1999
AMENDED SCHEDULE A
TO THE
HERITAGE SERIES TRUST
SUBADVISORY AGREEMENT
BETWEEN
HERITAGE ASSET MANAGEMENT, INC.
AND
EAGLE ASSET MANAGEMENT, INC.
As compensation pursuant to section 4 of the Subadvisory Agreement between
Heritage Asset Management, Inc. (the "Manager") and Eagle Asset Management, Inc.
(the "Subadviser"), the Manager shall pay the Subadviser the following
subadvisory fees. For Small Cap Stock Fund, the Manager shall pay the Subadviser
a subadvisory fee, computed and paid monthly, at the following percentage rates
of the Small Cap Stock Fund's average daily net assets under management by the
Subadviser:
Up to and including $50 million .500%
In excess of $50 million .375%
In addition, for the Growth Equity Fund, Value Equity Fund, Mid Cap Growth
Fund, Aggressive Growth Fund and the Information Technology Fund the Manager
shall pay the Subadviser at an annual rate equal to 50% of the fees payable to
the Manager by the Fund, without regard to any reduction in fees actually paid
to the Manager as a result of voluntary fee waivers by the Manager.
Dated: December 29, 1994, as last amended on ________, 1999
HERITAGE FUNDS
ACCOUNTING AND PRICING SERVICES AGREEMENT
AMENDED SCHEDULE A
------------------
Heritage Cash Trust (effective as of March 1, 1994):
Money Market Fund
Municipal Money Market Fund
Heritage Capital Appreciation Trust (effective as of March 1, 1994)
Heritage Income-Growth Trust (effective as of April 1, 1994)
Heritage Income Trust (effective as of April 1, 1994):
High Yield Bond Fund
Intermediate Government Fund
Heritage Series Trust (effective as of May 1, 1994):
Small Cap Stock Fund
Value Equity Fund
Eagle International Equity Portfolio
Heritage Series Trust (effective as of November 16, 1995):
Growth Equity Fund
Heritage Series Trust (effective as of September 29, 1997):
Mid Cap Growth Fund
Heritage Series Trust (effective as of July 27, 1998):
Aggressive Growth Fund
Heritage Series Trust (effective as of __________, 1999):
Information Technology Fund
March 1, 1994, as last amended on _________, 1999
----------------------------------------
KIRKPATRICK & LOCKHART LLP
----------------------------------------
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
September 3, 1999
Heritage Series Trust
880 Carillon Parkway
St. Petersburg, Florida 33716
Ladies and Gentlemen:
You have requested our opinion, as counsel to Heritage Series Trust (the
"Trust"), as to certain matters regarding the issuance of Shares of the Trust.
As used in this letter, the term "Shares" means the Class A, Class B and Class C
shares of beneficial interest of the Information Technology Fund, a series of
the Trust.
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Trust's Declaration of Trust and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) in the Commonwealth of
Massachusetts that in our experience are normally applicable to the issuance of
shares by unincorporated voluntary associations and to the Securities Act of
1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on present laws and facts, we are of the opinion that the issuance
of the Shares has been duly authorized by the Trust and that, when sold in
accordance with the terms contemplated by the Post-Effective Amendment No. 22 to
the Trust's Registration Statement on Form N-1A ("PEA"), including receipt by
the Trust of full payment for the Shares and compliance with the 1933 Act and
the 1940 Act, the Shares will have been validly issued, fully paid and
non-assessable.
We note, however, that the Trust is an entity of the type commonly known
as a "Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. The Declaration of Trust states that all persons
extending credit to, contracting with or having any claim against the Trust or
the Trustees shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of their agents, whether past, present or future, shall be personally liable
therefor. It also requires that every note, bond, contract or other undertaking
issued by or on behalf of the Trust or the Trustees relating to the Trust shall
include a recitation limiting the obligation represented thereby to the Trust
and its assets. The Declaration of Trust further provides: (1) for
indemnification from the assets of the Trust for all loss and expense of any
shareholder held personally liable for the obligations of the Trust by virtue of
ownership of shares of the Trust; and (2) for the Trust to assume the defense of
any claim against the shareholder for any act or obligation of the Trust. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust or series would be
unable to meet its obligations.
<PAGE>
Heritage Series Trust
September 3, 1999
Page 2
We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the PEA.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By /s/ Robert J. Zutz
------------------
Robert J. Zutz
HERITAGE SERIES TRUST
CLASS A
DISTRIBUTION PLAN
AMENDED
SCHEDULE A
The maximum annualized fee rate pursuant to Paragraph 1 of the Heritage
Series Trust Distribution Plan shall be as follows:
SMALL CAP STOCK FUND.........................................0.35%
VALUE EQUITY FUND............................................0.35%
GROWTH EQUITY FUND...........................................0.35%
EAGLE INTERNATIONAL EQUITY PORTFOLIO.........................0.35%
MID CAP GROWTH FUND..........................................0.35%
AGGRESSIVE GROWTH FUND.......................................0.35%
INFORMATION TECHNOLOGY FUND..................................0.35%
Dated: March 29, 1993, as last amended on __________, 1999
HERITAGE SERIES TRUST
CLASS C
DISTRIBUTION PLAN
AMENDED
SCHEDULE A
The maximum annualized fee rate pursuant to Paragraph 1 of the Heritage
Series Trust Distribution Plan shall be as follows:
SMALL CAP STOCK FUND.........................................1.00%
VALUE EQUITY FUND............................................1.00%
GROWTH EQUITY FUND...........................................1.00%
EAGLE INTERNATIONAL EQUITY PORTFOLIO.........................1.00%
MID CAP GROWTH FUND..........................................1.00%
AGGRESSIVE GROWTH FUND.......................................1.00%
INFORMATION TECHNOLOGY FUND..................................1.00%
Dated: April 3, 1995, as last amended on _________, 1999
HERITAGE SERIES TRUST
CLASS B
DISTRIBUTION PLAN
AMENDED
SCHEDULE A
The maximum annualized fee rate of the average daily rate asset pursuant
to Paragraph 1 of the Heritage Series Trust Distribution Plan shall be as
follows:
SMALL CAP STOCK FUND.........................................1.00%
VALUE EQUITY FUND............................................1.00%
GROWTH EQUITY FUND...........................................1.00%
EAGLE INTERNATIONAL EQUITY PORTFOLIO.........................1.00%
MID CAP GROWTH FUND..........................................1.00%
AGGRESSIVE GROWTH FUND.......................................1.00%
INFORMATION TECHNOLOGY FUND..................................1.00%
Dated: January 2, 1998, as last amended on _________, 1999
AMENDMENT TO THE
HERITAGE MUTUAL FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
Heritage Cash Trust:
Money Market Fund -- Class A, Class B and Class C shares
Municipal Money Market Fund - Class A shares
Heritage Capital Appreciation Trust -- Class A, Class B and Class C shares
Heritage Income-Growth Trust -- Class A, Class B and Class C shares
Heritage Income Trust:
High Yield Bond Fund -- Class A, Class B and Class C shares Intermediate
Government Fund -- Class A, Class B and Class C shares
Heritage Series Trust:
Small Cap Stock Fund -- Class A, Class B and Class C shares
Value Equity Fund -- Class A, Class B and Class C shares
Growth Equity Fund -- Class A Class B and Class C shares
Mid Cap Growth Fund - Class A, Class B and Class C shares
Aggressive Growth Fund - Class A, Class B and Class C shares
Information Technology Fund - Class A, Class B and Class C shares
Eagle International Equity Portfolio -- Class A, Class B, Class C and
Eagle Class shares
Dated: January 2, 1998, as amended on _________, 1999
