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022 A000001 STATE STREET BANK AND TRUST COMPANY
022 B000001 04-1867445
022 C000001 726600
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<PAGE> PAGE 2
022 A000002 GREENWICH CAPITAL MARKETS, INC.
022 B000002 13-3172275
022 C000002 3416
022 D000002 80166
022 A000003 DEAN WITTER REYNOLDS, INC.
022 B000003 94-1671384
022 C000003 19979
022 D000003 124314
022 A000004 MERRILL LYNCH, PIERCE, FENNER & SMITH, I
022 B000004 13-5674085
022 C000004 4077
022 D000004 20424
022 A000005 R.W. PRESSPRICH & CO., INC.
022 B000005 13-3570685
022 C000005 1039
022 D000005 40346
022 A000006 BLAIR (WILLIAM) & COMPANY
022 B000006 36-2214610
022 C000006 1878
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022 A000007 DEUTSCHE BANK GOVERNMENT SECURITIES
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022 C000007 0
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SIGNATURE STEPHEN G. HILL
TITLE PRESIDENT
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-31-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> $53,359,482
<INVESTMENTS-AT-VALUE> $53,742,821
<RECEIVABLES> $572,962
<ASSETS-OTHER> $9,847
<OTHER-ITEMS-ASSETS> $0
<TOTAL-ASSETS> $54,325,630
<PAYABLE-FOR-SECURITIES> $10,086,719
<SENIOR-LONG-TERM-DEBT> $0
<OTHER-ITEMS-LIABILITIES> $6,490,819
<TOTAL-LIABILITIES> $16,577,538
<SENIOR-EQUITY> $0
<PAID-IN-CAPITAL-COMMON> $43,465,066
<SHARES-COMMON-STOCK> 3,115,471
<SHARES-COMMON-PRIOR> 3,115,471
<ACCUMULATED-NII-CURRENT> $0
<OVERDISTRIBUTION-NII> $48,409
<ACCUMULATED-NET-GAINS> ($6,100,314)
<OVERDISTRIBUTION-GAINS> $0
<ACCUM-APPREC-OR-DEPREC> $383,340
<NET-ASSETS> $37,748,092
<DIVIDEND-INCOME> $0
<INTEREST-INCOME> $3,925,361
<OTHER-INCOME> $0
<EXPENSES-NET> $816,731
<NET-INVESTMENT-INCOME> $3,108,630
<REALIZED-GAINS-CURRENT> ($379,007)
<APPREC-INCREASE-CURRENT> $264,998
<NET-CHANGE-FROM-OPS> $2,994,621
<EQUALIZATION> $0
<DISTRIBUTIONS-OF-INCOME> $3,110,485
<DISTRIBUTIONS-OF-GAINS> $0
<DISTRIBUTIONS-OTHER> $0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> ($164,273)
<ACCUMULATED-NII-PRIOR> $1,855
<ACCUMULATED-GAINS-PRIOR> ($5,725,322)
<OVERDISTRIB-NII-PRIOR> $0
<OVERDIST-NET-GAINS-PRIOR> $0
<GROSS-ADVISORY-FEES> $128,723
<INTEREST-EXPENSE> $445,516
<GROSS-EXPENSE> $371,215
<AVERAGE-NET-ASSETS> $37,121,254
<PER-SHARE-NAV-BEGIN> 12.17
<PER-SHARE-NII> 0.99
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.99
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.02
<PER-SHARE-NAV-END> 12.12
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
For period ending 10-31-97
File Number 811-7980
Sub-Item 77.B
Suite 2800 Telephone (813) 223-7577
400 North Ashley Street
Tampa, Florida 33601-2640
PRICE WATERHOUSE LLP
To the Shareholders and Board of Trustees of
Heritage U.S. Government Income Fund
In planning and performing our audit of the financial statements of Heritage
U.S. Government Income Fund (the "Fund") for the year ended October 31, 1997, we
considered its internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on internal control.
The management of the Fund is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
control activities. Generally, control activities that are relevant to an audit
pertain to the entity's objective of preparing financial statements for external
purposes that are fairly presented in conformity with generally accepted
accounting principles. Those control activities include the safeguarding of
assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of any
specific internal control components does not reduce to a relatively low level
the risk that errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and not be detected
within a timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving internal control,
including control activities for safeguarding securities, that we consider to be
material weaknesses as defined above as of October 31, 1997.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
/s/ Price Waterhouse LLP
- ------------------------------
Price Waterhouse LLP
Tampa, Florida
December 17, 1997
