STATEMENT OF ADDITIONAL INFORMATION

                              HERITAGE EQUITY FUNDS



  o   AGGRESSIVE GROWTH FUND                 o   INCOME-GROWTH TRUST
  o   CAPITAL APPRECIATION TRUST             o   MID CAP STOCK FUND
  o   EAGLE INTERNATIONAL EQUITY             o   SMALL CAP STOCK FUND
      PORTFOLIO                              o   TECHNOLOGY FUND
  o   GROWTH EQUITY FUND                     o   VALUE EQUITY FUND


         This Statement of Additional Information ("SAI") dated January 2, 2001,
should  be read in  conjunction  with the  Prospectus  dated  January  2,  2001,
describing  the Class A,  Class B and Class C shares  the  Capital  Appreciation
Trust,  the  Income-Growth  Trust and the Heritage  Series Trust,  including its
seven  series,  the  Aggressive  Growth  Fund,  the Eagle  International  Equity
Portfolio,  the Growth Equity Fund,  the Mid Cap Stock Fund, the Small Cap Stock
Fund,  the  Technology  Fund and the  Value  Equity  Fund  (each a  "fund"  and,
collectively, the "funds").

         This SAI is not a  prospectus  itself.  To receive a copy of the funds'
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


I. GENERAL INFORMATION.........................................................1
         A. History............................................................1
         B. Classification and Structure.......................................1

II. INVESTMENT INFORMATION.....................................................1
         A. Investment Policies and Strategies.................................1
         B. Industry Classifications..........................................19

III. INVESTMENT LIMITATIONS...................................................20
         A. Fundamental Investment Policies...................................20
         B. Fundamental Policies Unique to Eagle International................22
         C. Fundamental Policies Unique to Income-Growth......................22
         D. Non-Fundamental Investment Policies...............................22
         E. Non-Fundamental Policies Unique to Capital Appreciation...........23
         F. Non-Fundamental Policies Unique to Small Cap......................23

IV. NET ASSET VALUE...........................................................24

V. PERFORMANCE INFORMATION....................................................25

VI. INVESTING IN THE FUNDS....................................................29
         A. Systematic Investment Options.....................................29
         B. Retirement Plans..................................................30
         C. Class A Combined Purchase Privilege (Right of Accumulation).......31
         D. Class A Statement of Intention....................................31

VII. REDEEMING SHARES.........................................................32
         A. Waiver of the Contingent Deferred Sales Charge....................32
         B. Systematic Withdrawal Plan........................................32
         C. Telephone Transactions............................................33
         D. Redemptions in Kind...............................................33
         E. Receiving Payment.................................................33

VIII. EXCHANGE PRIVILEGE......................................................34

IX. CONVERSION OF CLASS B SHARES..............................................35

X. TAXES......................................................................35

XI. SHAREHOLDER INFORMATION...................................................39

XII. FUND INFORMATION.........................................................39
         A. Management of the Funds...........................................39
         B. Five Percent Shareholders.........................................42
         C. Investment Advisers and Administrator; Subadvisers................42
         D. Brokerage Practices...............................................47
         E. Distribution of Shares............................................49
         F. Administration of the Funds.......................................51
         G. Potential Liability...............................................52


APPENDIX A - FUND INVESTMENT TABLE...........................................A-1

APPENDIX B - COMMERCIAL PAPER / CORPORATE DEBT RATINGS.......................B-1



REPORTS OF THE INDEPENDENT CERTIFED PUBLIC ACCOUNTANTS & FINANCIAL
         STATEMENTS..........................................................C-1



I.       GENERAL INFORMATION
         -------------------

A.       HISTORY
         -------

         The Heritage Capital Appreciation Trust ("Capital  Appreciation"),  the
Heritage  Income-Growth  Trust  ("Income-Growth")  and the Heritage Series Trust
("Series  Trust")  (collectively,  the  "Trusts")  each  was  established  as  a
Massachusetts  business  trust under a Declaration of Trust dated June 21, 1985,
July 25, 1986, and October 28, 1992, respectively.

B.       CLASSIFICATION AND STRUCTURE
         ----------------------------

         Each  Trust  is  registered  as  an  open-end  diversified   management
investment  company  under the  Investment  Company Act of 1940, as amended (the
"1940 Act"). Capital Appreciation and Income-Growth each offers shares through a
single  investment  portfolio.  Series Trust currently offers its shares through
seven separate  investment  portfolios:  the Aggressive Growth Fund ("Aggressive
Growth"), the Eagle International Equity Portfolio ("Eagle International"),  the
Growth Equity Fund ("Growth Equity"),  the Mid Cap Stock Fund ("Mid Cap") (prior
to  January 3, 2000,  named the Mid Cap Growth  Fund),  the Small Cap Stock Fund
("Small Cap"), the Technology Fund ("Technology Fund") and the Value Equity Fund
("Value  Equity").  Each fund currently 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"). Eagle International also
offers  Eagle  Class  shares,  which are not covered in this SAI. To obtain more
information about Eagle Class shares, call (800) 237-3101.

         Each fund  described in this SAI  operates  for many  purposes as if it
were an  independent  company.  Each  fund has its own  objective(s),  policies,
strategies and portfolio managers, among other characteristics.

         The Technology 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 Technology Fund's investments are limited,  however,  to allow it 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,  its 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.

II.      INVESTMENT INFORMATION
         ----------------------

A.       INVESTMENT POLICIES AND STRATEGIES
         ----------------------------------

         This section provides a detailed description of the securities in which
a fund may invest to achieve its  investment  objective,  the  strategies it may
employ  and the  corresponding  risks  of such  securities  and  strategies.  In
general,  each  fund  invests  at  least  65%  of its  total  assets  in  equity
securities,  common stocks,  income-producing  securities or foreign securities.
The  remainder of a fund's  assets may be invested in the  securities  specified
below.  At  APPENDIX  A you will  find a FUND  INVESTMENT  TABLE  that  provides
information  regarding  the  extent to which  each fund may invest in a specific
security or instrument.  For more information on a fund's  principal  strategies
and risks, please see the funds' prospectus.



         EQUITY SECURITIES:

         COMMON  STOCKS.  Each 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. Each fund may invest in convertible securities.
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.  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"
for additional information.

         PREFERRED  STOCK.  Each 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 if
the issuer is 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"). Each fund may invest in REITs.
REITs include  equity,  mortgage and hybrid REITs.  Equity REITs own real estate
properties,  and their revenue comes principally from rent.  Mortgage REITs loan
money to real estate owners,  and their revenue comes  principally from interest
earned on their mortgage  loans.  Hybrid REITs combine  characteristics  of both
equity  and  mortgage  REITs.  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. Each fund may purchase warrants and rights,  which
are  instruments  that permit a fund to acquire,  by  subscription,  the capital
stock of a corporation  at a set price,  regardless of the market price for such
stock.  Warrants may be either perpetual or of limited duration but they usually
do not have  voting  rights or pay  dividends.  The market  price of warrants is
usually significantly less than the current price of the underlying stock. Thus,
there is a greater risk that warrants  might drop in value at a faster rate than
the underlying stock. Aggressive Growth, Eagle International, Growth Equity, Mid
Cap,  Small Cap and Value Equity  currently do not intend to invest more than 5%
of their respective net assets in warrants.  Eagle International also may invest
in warrants or rights it acquired as part of a unit or attached to securities at
the time of purchase without limitation.



         DEBT SECURITIES:

         DEBT SECURITIES.  Each fund may invest 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.

         CORPORATE DEBT OBLIGATIONS. Eagle International,  Income-Growth and Mid
Cap  may  invest  in  corporate  debt  securities,  including  corporate  bonds,
debentures, notes and other similar corporate debt instruments. The funds invest
primarily in investment grade non-convertible  corporate debt. Income-Growth and
Mid Cap may invest no more than 10% and 5%,  respectively,  of their  respective
assets in below investment  grade  non-convertible  corporate debt  obligations.
Please see the  discussion of  "Investment  Grade/Lower  Rated  Securities"  for
additional information.

         INVESTMENT GRADE/LOWER RATED SECURITIES:

         INVESTMENT GRADE  SECURITIES.  Each fund may invest in securities rated
investment grade.  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 a 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. Each 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.   Aggressive  Growth,   Eagle
International,  Income-Growth,  Mid Cap and Small Cap may  invest 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 "high  yield
securities" 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.

         RISK FACTORS OF LOWER RATED / HIGH-YIELD SECURITIES:
         ----------------------------------------------------

                  INTEREST RATE AND ECONOMIC RISK. As with all debt  securities,
the market prices of high yield  securities tend to decrease when interest rates
rise and increase when interest rates fall. The prices of high yield  securities
also will fluctuate  greatly during periods of economic  uncertainty and changes
and,  thus,  in a fund's net asset  value.  During  these  periods,  some highly
leveraged high yield  securities  issuers may  experience a higher  incidence of
default  due to  their  inability  to  meet  principal  and  interest  payments,
projected business goals or to obtain additional financing.  In addition, a fund
may need to  replace or sell a junk bond that it owns at  unfavorable  prices or
returns. Accordingly,  those high yield securities held by a fund may affect its
net asset value and performance adversely during such times.

                  In a  declining  interest  rate  market,  if  an  issuer  of a
high-yield  security  containing a redemption or call provision exercises either
provision,  a fund would have to replace the  security,  which could result in a
decreased return for shareholders.  Conversely, if a fund experiences unexpected
net  redemptions  in a rising  interest rate market,  it might be forced to sell
certain  securities,  regardless of investment merit.  While it is impossible to
protect  entirely  against  this risk,  diversification  of a fund's  investment
portfolio  and its  subadviser's  careful  analysis  of  prospective  investment



portfolio  securities  should  minimize  the impact of a decrease  in value of a
particular security or group of securities in the fund's investment portfolio.

                  CREDIT RISK.  Credit  ratings  usually  evaluate the safety of
principal and interest payment of debt securities, such as high yield securities
but may not  reflect  the true  risks of an  investment  in such  securities.  A
reduction  in an  issuer's  credit  rating  may cause that  issuer's  high yield
securities to decrease in market value. A fund's subadviser continually monitors
the investments in its respective  investment  portfolio and carefully evaluates
whether to dispose of or retain high yield  securities whose credit ratings have
changed.  A  fund'  subadviser  primarily  relies  on its own  credit  analysis,
including a study of existing debt, capital  structure,  ability to service debt
and pay dividends,  sensitivity to economic  conditions and other factors in its
determination. See Appendix A for a description of corporate debt ratings.

                  LIQUIDITY RISK. The market for high yield  securities tends to
be less active and primarily  dominated by institutional  investors  compared to
the  market  for  high-quality  debt  securities.  During  periods  of  economic
uncertainty or adverse economic changes,  the market may be further  restricted.
In these conditions,  a fund may have to dispose of its high yield securities at
unfavorable  prices or below fair market value. In addition,  during such times,
reliable  objective  information  may be limited  or  unavailable  and  negative
publicity may affect adversely the public's  perception of the junk bond market.
A  Trust's  Board of  Trustees  ("Board")  or  subadviser  may  have  difficulty
assessing the value of high yield securities  during these times.  Consequently,
any of these factors may reduce the market value of high yield  securities  held
by a fund.

         SHORT-TERM MONEY MARKET INSTRUMENTS:

         BANKERS'  ACCEPTANCES.  Each fund may invest in  bankers'  acceptances.
Bankers' acceptances generally are negotiable instruments (time drafts) drawn to
finance  the export,  import,  domestic  shipment or storage of goods.  They are
termed  "accepted"  when a bank writes on the draft its  agreement  to pay it at
maturity,  using the word  "accepted."  The bank is, in effect,  unconditionally
guaranteeing  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.
Maturities  on bankers'  acceptances  that are  eligible  for  purchase at times
extend to nine months, but more commonly range from 30 to 180 days.

         Income-Growth may invest in bankers'  acceptances of domestic banks and
savings and loans that have assets of at least $1 billion and  capital,  surplus
and undivided  profits of over $100 million as of the close of their most recent
fiscal year, or  instruments  that are insured by the Bank Insurance Fund or the
Savings Institution  Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC").

         CERTIFICATES OF DEPOSIT ("CDs").  Each fund may invest in CDs issued by
domestic institutions with assets in excess of $1 billion. The FDIC 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.

         COMMERCIAL PAPER. Each fund, except Eagle International,  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. Eagle  International may invest only in commercial
paper that is rated Prime-1 by Moody's or A-1 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  Appendix B for a  description  of  commercial  paper
ratings.

         REPURCHASE AND REVERSE REPURCHASE AGREEMENTS:

         REPURCHASE  AGREEMENTS.  Each fund may invest in repurchase agreements.
In accordance  with the guidelines  and  procedures  established by the Board, a
fund may enter into  repurchase  agreements  with  member  banks of the  Federal
Reserve  System,  securities  dealers who are  members of a national  securities
exchange or market makers in U.S. Government securities.  A repurchase agreement
is a transaction in which a fund purchases  securities and commits to resell the
securities  to the  original  seller at an agreed  upon date.  The resale  price
reflects a market  rate of  interest  that is  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 a fund if the other party becomes bankrupt, a fund intends to enter
into repurchase  agreements only with banks and dealers in transactions believed
by its subadviser to present minimal credit risks.

         The period of these repurchase  agreements  usually will be short, from
overnight  to one  week,  and at no time will the  funds  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.  A 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 its custodian, State Street
Bank and Trust Company ("Custodian").

         REVERSE  REPURCHASE  AGREEMENTS.  Each fund may borrow by entering into
reverse repurchase  agreements with the same parties with whom it may enter into
repurchase  agreements.  Under a  reverse  repurchase  agreement,  a fund  sells
securities and agrees to repurchase  them at a mutually  agreed to price. At the
time a 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
a 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 a
fund's  obligation to repurchase the securities.  During that time, a fund's use
of  the  proceeds  of  the  reverse  repurchase  agreement  effectively  may  be
restricted. Reverse repurchase agreements create leverage, a speculative factor,
and are  considered  borrowings  for  the  purpose  of a  fund's  limitation  on
borrowing.

         U.S. Government and Zero Coupon Securities:

         U.S.  GOVERNMENT  SECURITIES.  Each fund may invest in U.S.  Government
securities.  U.S. Government  securities include Treasury bills,  Treasury notes
and Treasury bonds,  Federal Home Loan Bank  obligations,  Federal  Intermediate
Credit Bank  obligations,  U.S.  Government  agency  obligations  and repurchase
agreements secured thereby.  U.S. Government securities are issued or guaranteed
by the U.S.  Government,  its  agencies or  instrumentalities,  supported by the
issuer's  right to borrow from the U.S.  Treasury or  supported  by the issuer's
credit.

         ZERO  COUPON  SECURITIES.  Income-Growth  may  invest  in  zero  coupon
securities.  Zero coupon securities are debt obligations that do not entitle the
holder to any periodic payment of interest prior to maturity or a specified date



when the securities begin paying current  interest.  Zero coupon  securities are
issued  and traded at a discount  from  their  face  amount or par value,  which
discount rate varies  depending on the time remaining until cash payments begin,
prevailing interest rates,  liquidity of the security,  and the perceived credit
quality of the issuer. The market prices of zero coupon securities generally are
more volatile than the prices of securities that pay interest  periodically  and
are likely to respond to changes in interest  rates to a greater  degree than do
other types of debt securities having similar maturities and credit value.

         FOREIGN SECURITIES EXPOSURE:

         DEPOSITORY RECEIPTS.  Aggressive Growth,  Eagle  International,  Growth
Equity,  Income-Growth,  Small Cap,  Technology  and Value  Equity may invest in
sponsored  or  unsponsored   European  Depository   Receipts  ("EDRs"),   Global
Depository  Receipts  ("GDRs"),  International  Depository  Receipts ("IDRs") or
other  similar  securities   representing   interests  in  or  convertible  into
securities of foreign issuers (collectively,  "Depository Receipts"). Depository
Receipts are not necessarily  denominated in the same currency as the underlying
securities  into  which  they  may be  converted  and  are  subject  to  foreign
securities risks, as discussed below.

         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.  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 these unsponsored  Depository Receipts.  For purposes of certain
investment  limitations,  EDRs,  GDRs  and  IDRs are  considered  to be  foreign
securities by Income-Growth.

         EURO/YANKEE BONDS. Eagle International may invest in dollar-denominated
bonds  issued  by  foreign   branches  of  domestic  banks   ("Eurobonds")   and
dollar-denominated  bonds issued by a U.S.  branch of a foreign bank and sold in
the United  States  ("Yankee  bonds").  Investment in Eurobonds and Yankee bonds
entails  certain risks  similar to investment in foreign  securities in general.
These risks are discussed below.

         EURODOLLAR  CERTIFICATES.  Income-Growth  may  purchase  CDs  issued by
foreign branches of domestic and foreign banks.  Domestic and foreign Eurodollar
certificates,  such as CDs and time deposits,  may be general obligations of the
parent bank in addition to the issuing  branch or may be limited by the terms of
a specific  obligation  or  governmental  regulation.  Such  obligations  may be
subject to different risks than are those of domestic banks or domestic branches
of  foreign  banks.   These  risks  include   foreign   economic  and  political
developments,  foreign  governmental  restrictions  that  may  affect  adversely
payment of principal and interest on the obligations,  foreign exchange controls
and foreign withholding and other taxes on interest income.  Foreign branches of
foreign  banks are not  necessarily  subject to the same or  similar  regulatory
requirements,  loan  limitations,  and  accounting,  auditing and  recordkeeping
requirements  as are domestic banks or domestic  branches of foreign  banks.  In
addition, less information may be publicly available about a foreign branch of a
domestic bank or a foreign bank than a domestic bank.

         FOREIGN SECURITIES. Each fund may invest in foreign securities. 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.  Their  markets and
economies  may react  differently  to  specific  or global  events than the U.S.
market and economy.  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 a
fund,  political or financial  instability or diplomatic and other  developments
that could affect such investments.

         Eagle   International   may  invest  in   emerging   markets.   Special
considerations (in addition to the considerations  regarding foreign investments
generally) may include greater political uncertainties,  an economy's dependence
on revenues from particular  commodities or on international  aid or development
assistance, currency transfer restrictions, a limited number of potential buyers
for  such  securities  and  delays  and  disruptions  in  securities  settlement
procedures.

         No fund will invest in foreign  securities  when there are  currency or
trading  restrictions in force or when, in the judgment of its subadviser,  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  Aggressive   Growth,   Capital
Appreciation,  Growth  Equity,  Income-Growth,  Technology  and Value Equity 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.
Each 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  against  uncertainty  in the level of future
exchange rates. Capital Appreciation,  Growth Equity, Income-Growth,  Technology
and Value Equity may enter into contracts to purchase or sell foreign currencies
at a future date (a "forward currency contract" or "forward contract").

         AMERICAN DEPOSITORY RECEIPTS ("ADRs"):

         Each fund except Capital  Appreciation may invest in both sponsored and
unsponsored ADRs.  Capital  Appreciation may invest only in sponsored 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  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 United States.  For purposes of certain  investment
limitations,   ADRs  are   considered  to  be  foreign   securities  by  Capital
Appreciation,  Growth  Equity and  Income-Growth  and are subject to many of the
risks inherent in investing in foreign securities, as discussed previously.



         HEDGING   INSTRUMENTS   -  FUTURES,   FORWARDS,   OPTIONS  AND  HEDGING
TRANSACTIONS:

         GENERAL  DESCRIPTION.  Each fund,  except  Small Cap,  may use  certain
financial  instruments  ("Hedging  Instruments"),  including  futures  contracts
(sometimes  referred to as "futures"),  options,  options on futures and forward
currency  contracts,  to  attempt to hedge the fund's  investment  portfolio  as
discussed below.

         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 a fund's investment portfolio.  Thus, in a short hedge,
a 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,  a 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 a 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 SEC,  the  exchanges  upon which they are traded and the  Commodity  Futures
Trading  Commission  ("CFTC").  In  addition,  a 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 funds
expect to discover additional  opportunities in connection with options, futures
contracts,  forward currency contracts and other hedging  techniques.  These new
opportunities  may become  available  as each  fund's  subadviser  develops  new
techniques,   as   regulatory   authorities   broaden  the  range  of  permitted
transactions and as new options,  futures contracts,  forward currency contracts
or other  techniques  are  developed.  A fund's  subadviser  may  utilize  these
opportunities  to the  extent  that it is  consistent  with a fund's  investment
objective(s) and permitted by the fund's  investment  limitations and applicable
regulatory  authorities.  Although a fund may be  permitted  to use a variety of
Hedging  Instruments,  each fund presently  intends to purchase and sell and use
for hedging or investment  purposes  those Hedging  Instruments as specified and
discussed in the sections that follow.

         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 a
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 each fund's
subadviser is  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 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,  a 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,
a 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 a 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,  each  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 a 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 a 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. A
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
a fund to an  obligation to another  party.  A fund will not enter into any such
transactions  unless it owns either (1) an  offsetting  ("covered")  position in
securities,  currencies,  forward currency contracts, options, futures contracts
or  forward  contracts  or (2)  cash  and  other  liquid  assets  with a  value,
marked-to-market   daily,  sufficient  at  all  times  to  cover  its  potential
obligations  to the extent not covered as provided in (1) above.  Each 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 an account with
the fund's Custodian, in the prescribed amount.

                  Assets used as cover or otherwise held in an account 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 a fund's assets to cover in segregated  accounts could impede
its ability to meet redemption requests or other current obligations.

         OPTIONS

         Each fund, except  Aggressive  Growth,  Capital  Appreciation and Small
Cap, may use for hedging or  investment  purposes,  certain  options,  including
options  on  securities,  equity  and  debt  indices  and  currencies.  However,
Income-Growth  may only purchase and sell call options on securities,  and write
covered call options on securities as discussed  below.  Technology may purchase
and sell only options on securities  and indices for hedging  purposes.  Certain
special characteristics of and risks with these strategies are discussed below.



                  Characteristics  and Risks of Options  Trading.  A call option
gives the  purchaser  the right to buy, and  obligates  the writer to sell,  the
underlying  investment at the agreed-upon  price during the option period. A put
option gives the purchaser  the right to sell,  and obligates the writer to buy,
the  underlying  investment at the  agreed-upon  price during the option period.
Purchasers of options pay an amount, known as a premium, to the option writer in
exchange for the right under the option contract.

                  The  purchase of call  options can serve as a long hedge,  and
the  purchase  of put options  can serve as a short  hedge.  Writing put or call
options can enable the fund to enhance income or yield by reason of the premiums
paid by the  purchasers  of such  options.  However,  if the market price of the
security underlying a put option declines to less than the exercise price of the
option, minus the premium received, the fund would expect to suffer a loss.

                  Writing  call  options  can  serve as a limited  short  hedge,
because  declines in the value of the hedged  investment  would be offset to the
extent of the premium received for writing the option.  However, if the security
or currency  appreciates  to a price higher than the exercise  price of the call
option,  it can be expected  that the option will be exercised and the Fund will
be obligated to sell the security or currency at less than its market value.  If
the call option is an  over-the-counter  ("OTC") option, the securities or other
assets used as cover would be considered  illiquid to the extent described under
"Illiquid and Restricted Securities."

                  Writing put options can serve as a limited long hedge  because
increases in the value of the hedged investment would be offset to the extent of
the  premium  received  for  writing the  option.  However,  if the  security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected  that the put option will be  exercised  and the fund will be
obligated to purchase the security or currency at more than its market value. If
the put option is an OTC option,  the  securities  or other assets used as cover
would be  considered  illiquid  to the  extent  described  under  "Illiquid  and
Restricted Securities."

                  The value of an option  position  will  reflect,  among  other
things,  the  current  market  value  of the  underlying  investment,  the  time
remaining until expiration, the relationship of the exercise price to the market
price of the  underlying  investment,  the  historical  price  volatility of the
underlying  investment  and  general  market  conditions.  Options  that  expire
unexercised have no value.

                  A 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 or currencies  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,  a 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 loss is realized from
a closing transaction depends on the price movement of the underlying  security,
index, currency or futures contract and the market value of the option.

                  In considering  the use of options,  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, currency or
futures contract,  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 depends upon a 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 a 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. Most
exchange-listed options relate to futures contracts,  stocks and currencies. The
ability to establish  and close out positions on the exchanges is subject to the
maintenance of a liquid secondary market. Although a 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.

                  Unlike  exchange-traded  options,  which are standardized with
respect to the underlying instrument, expiration date, contract size, and strike
price, the terms of OTC options (options not traded on exchanges)  generally are
established  through  negotiation  with the other party to the option  contract.
While this type of arrangement  allows a fund greater  flexibility to tailor the
option  to  its  needs,  OTC  options   generally   involve  greater  risk  than
exchange-traded  options,  which are guaranteed by the clearing  organization of
the exchanges where they are traded.  Since closing transactions may be effected
with respect to options traded in the 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,  there can be no assurance that a fund will in fact be able to close out
an OTC option position at a favorable price prior to expiration. In the event of
insolvency  of the  counterparty,  the Fund  might be unable to close out an OTC
option position at any time prior to its expiration.

                  With respect to options  written by a fund,  the  inability to
enter  into a closing  transaction  may  result in  material  losses to it.  For
example, because a 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, a 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  or  currencies.  Because  index options are
settled  in cash,  when a fund  writes a call on an index it cannot  provide  in
advance for its potential  settlement  obligations  by acquiring and holding the
underlying  securities.  A 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 a 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,  a fund as the call writer will not
learn that it has been assigned until the next business day at the earliest. The
time between exercise and notice of assignment poses no risk for the writer 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 a 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.

                  As noted  above,  Income-Growth  and  Value  Equity  may write
covered 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, a fund will write covered
call options on  securities  generally  when its  subadviser  believes  that the
premium received by the fund plus  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.  For
Income-Growth,  the aggregate  value of the securities  underlying  call options
(based on the lower of the option price or market) may not exceed 50% of its net
assets.  For Value Equity, its investment in covered call options may not exceed
10% of the fund's total assets.

                  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 a 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.  A fund would lose
the ability to  participate in the value of such  securities  above the exercise
price of the call option. A fund also gives up the ability to sell the portfolio
securities used to cover the call option while the call option is outstanding.

        FUTURES AND OPTIONS ON FUTURES

        Growth  Equity  and  Value  Equity  may  purchase  and sell  futures  on
securities,  indices  or  currencies  and  options  on  futures  for  hedging or
investment purposes. Eagle International may purchase and sell only currency and
stock index futures for hedging or investment  purposes.  Mid Cap and Technology
do not anticipate using futures or options on futures at this time.

         GUIDELINES, CHARACTERISTICS AND RISKS OF FUTURES AND OPTIONS ON FUTURES
TRADING.  The purchase of futures or call options on futures can serve as a long
hedge,  and the sale of futures or the  purchase  of put  options on futures can
serve as a short hedge. Writing call options on futures contracts can serve as a
limited  short  hedge,  using a strategy  similar to that used for writing  call
options on  securities  or  indices.  Similarly,  writing put options on futures
contracts  can serve as a limited long hedge.  Futures  contracts and options on
futures contracts can also be purchased and sold to attempt to enhance income or
yield.



                  Although  futures  contracts  by their  terms  call for actual
delivery or acceptance of currencies or financial instruments, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery.  Closing out a futures  contract  sale is effected by  purchasing a
futures contract for the same aggregate amount of the specific type of financial
instrument or currency and the same  delivery  date. If the price of the initial
sale of the futures contract exceeds the price of the offsetting  purchase,  the
seller is paid the difference and realizes a gain.  Conversely,  if the price of
the  offsetting  purchase  exceeds  the price of the  initial  sale,  the seller
realizes a loss.  Similarly,  the closing out of a futures contract  purchase is
effected  by  the  purchaser  entering  into a  futures  contract  sale.  If the
offsetting sale price exceeds the purchase price, the purchaser realizes a gain,
and if the purchase price exceeds the offsetting sale price, he realizes a loss.

                  A fund is required to maintain margin  deposits  through which
it buys and sells  futures  contracts  or writes  options  on future  contracts.
Initial  margin  deposits  vary from  contract  to  contract  and are subject to
change.  Margin  balances are  adjusted  daily to reflect  unrealized  gains and
losses on open  contracts.  If the price of an open  futures or  written  option
position  declines  so that a fund has market  exposure  on such  contract,  the
broker will  require the fund to deposit  variation  margin.  If the value of an
open futures or written option  position  increases so that a fund no longer has
market  exposure  on such  contract,  the broker  will pay any excess  variation
margin to the fund.

                  Most of the exchanges on which  futures  contracts and options
on futures are traded limit the amount of  fluctuation  permitted in futures and
options  prices during a single  trading day. The daily price limit  establishes
the  maximum  amount  that the price of a futures  contract  or option  may vary
either  up or down  from the  previous  day's  settlement  price at the end of a
trading  session.  Once the daily price limit has been  reached in a  particular
type of  contract,  no  trades  may be made on that day at a price  beyond  that
limit.  The daily price limit  governs only price  movement  during a particular
trading day and therefore does not limit potential  losses because the limit may
prevent the liquidation of unfavorable  positions.  Futures contract and options
prices  occasionally  have  moved to the  daily  limit for  several  consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures or options positions and subjecting some traders to substantial losses.

                  Another risk in employing  futures  contracts and options as a
hedge is the prospect that prices will correlate  imperfectly  with the behavior
of cash prices for the following reasons.  First, rather than meeting additional
margin deposit  requirements,  investors may close contracts through  offsetting
transactions.  Second,  the liquidity of the futures and options markets depends
on  participants  entering into  offsetting  transactions  rather than making or
taking  delivery.  To the  extent  that  participants  decide  to  make  or take
delivery,  liquidity in the futures and options  markets could be reduced,  thus
producing distortion.  Third, from the point of view of speculators, the deposit
requirements  in the futures and options  markets are less  onerous  than margin
requirements in the securities  market.  Therefore,  increased  participation by
speculators  in the  futures  and  options  markets  may cause  temporary  price
distortions. Due to the possibility of distortion, a correct forecast of general
interest rate,  currency  exchange rate or security price trends by a subadviser
may still not result in a successful transaction.

                  In   addition   to  the  risks  that  apply  to  all   options
transactions,  there are several  special  risks  relating to options on futures
contracts.  The ability to establish  and close out positions in such options is
subject to the existence of a liquid secondary market.  Compared to the purchase
or sale of futures  contracts,  the  purchase  of call or put options on futures
contracts  involves less  potential risk to a fund because the maximum amount at
risk is the premium  paid for the options  (plus  transaction  costs).  However,
there  may be  circumstances  when the  purchase  of a call or put  option  on a
futures contract would result in a loss to a fund when the purchase or sale of a
futures  contract  would not,  such as when there is no movement in the price of
the underlying investment.



         STOCK INDEX  FUTURES.  A stock  index  assigns  relative  values to the
common  stocks  comprising  the  index.  A stock  index  futures  contract  is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified  dollar  amount  times the  difference
between  the  stock  index  value at the  close of the last  trading  day of the
contract and the price at which the futures  contract is originally  struck.  No
physical delivery of the underlying stocks in the index is made.

         The risk of imperfect  correlation  between movements in the price of a
stock index futures  contract and movements in the price of the securities  that
are the subject of the hedge increases as the composition of a fund's  portfolio
diverges from the securities  included in the applicable index. The price of the
stock index futures may move more than or less than the price of the  securities
being hedged.  If the price of the futures contract moves less than the price of
the  securities  that are the subject of the hedge,  the hedge will not be fully
effective  but,  if the price of the  securities  being  hedged  has moved in an
unfavorable direction, the fund would be in a better position than if it had not
hedged  at all.  If the  price of the  securities  being  hedged  has moved in a
favorable  direction,  this  advantage  will be partially  offset by the futures
contract.  If the price of the futures contract moves more than the price of the
securities,  a fund  will  experience  either  a loss or a gain  on the  futures
contract  that will not be  completely  offset by  movements in the price of the
securities  that are the subject of the hedge.  To compensate  for the imperfect
correlation  of  movements  in the  price of the  securities  being  hedged  and
movements in the price of the stock index futures  contracts,  a fund may buy or
sell stock index  futures  contracts in a greater  dollar amount than the dollar
amount of securities being hedged if the historical  volatility of the prices of
such securities is more than the historical volatility of the stock index. It is
also  possible  that,  where a fund  has sold  futures  contracts  to hedge  its
securities  against decline in the market,  the market may advance and the value
of securities  held by the fund may decline.  If this  occurred,  the fund would
lose money on the futures contract and also experience a decline in value in its
portfolio securities. However, while this could occur for a very brief period or
to a very  small  degree,  over time the  value of a  diversified  portfolio  of
securities  will tend to move in the same  direction as the market  indices upon
which the futures contracts are based.

         Where stock index  futures  contracts  are purchased to hedge against a
possible  increase in the price of securities before a fund is able to invest in
securities  in an orderly  fashion,  it is possible  that the market may decline
instead.  If a fund then  concludes  not to invest  in  securities  at that time
because of concern as to possible  further market decline for other reasons,  it
will realize a loss on the futures contract that is not offset by a reduction in
the price of the securities it had anticipated purchasing.

         LIMITATION ON THE USE OF OPTIONS AND FUTURES. To the extent that a fund
enters into  futures  contracts  and  commodity  options  (including  options on
futures  contracts and options on foreign  currencies traded on a CFTC-regulated
exchange)  other than for bona fide  hedging  purposes (as defined by the CFTC),
the aggregate  initial margin and premiums required to establish those positions
(excluding  the  amount  by  which  options  are  "in-the-money"  at the time of
purchase) will not exceed 5% of the liquidation  value of the fund's  investment
portfolio, after taking into account unrealized profits and unrealized losses on
any  contracts  the fund has entered into.  This  limitation  does not limit the
percentage of the fund's assets at risk to 5%.

         FOREIGN CURRENCY HEDGING STRATEGIES. Growth Equity and Value Equity may
use options and futures on foreign  currencies and Eagle  International may only
use  futures  on  foreign  currencies.  Technology  may use  options  on foreign
currencies.

         Currency  hedges can protect against price movements in a security that
a 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.

         A 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 its  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,  a 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,
a 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.  Each fund, except Small Cap, may engage in
forward  currency  contracts as discussed below.  Growth Equity,  Technology and
Value  Equity may enter into  forward  currency  contracts  to  purchase or sell
foreign  currencies  for a fixed  amount  of U.S.  dollars  or  another  foreign
currency,  in an amount not  exceeding 5% of their  respective  assets.  Capital
Appreciation may enter into contracts to purchase or sell foreign  currencies at
a future date that is not more than 30 days from the date of the contract. Eagle
International  generally  will not enter into a forward  contract with a term of
greater than one year.

         A  forward  currency  contract  involves  an  obligation  of a 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.

         Forward currency transactions may serve as long hedges - for example, a
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,  a 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.

         Income-Growth and Eagle International may enter into a forward contract
to sell the foreign  currency for a fixed U.S. dollar amount  approximating  the
value of some or all of their  respective  portfolio  securities  denominated in
such  foreign  currency.  Eagle  International  may  enter  into  such a forward


contract when its subadviser  believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar.

         In addition, Capital Appreciation, Eagle International,  Growth Equity,
Income-Growth  and Value  Equity may use  forward  currency  contracts  when its
subadviser  wishes to "lock in" the U.S.  dollar price of a security  when Eagle
International  is  purchasing  or  selling a security  denominated  in a foreign
currency or anticipates  receiving a dividend or interest payment denominated in
a foreign currency.

         Income-Growth and Technology 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  the risk to either fund from adverse  changes in
the relationship between the U.S. dollar and foreign currencies.

         Capital    Appreciation,    Eagle    International,    Growth   Equity,
Income-Growth,  Technology and Value Equity 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 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,  Eagle  International,   Growth  Equity,   Income-Growth,
Technology and Value Equity may use forward currency contracts to shift exposure
to foreign currency  fluctuations from one country to another. For example, if a
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  a fund's  exposure to foreign
currency exchange rate fluctuations.

         The cost to a 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 a 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.

         As is the case with futures contracts, sellers or purchasers of forward
currency  contracts can enter into offsetting closing  transactions,  similar to
closing  transactions  on futures,  by purchasing or selling,  respectively,  an
instrument identical to the instrument sold or bought,  respectively.  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 a 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,  a 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, a 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.

         COMBINED  TRANSACTIONS.  A fund  may  purchase  and  write  options  in
combination  with  each  other,  or  in  combination  with  futures  or  forward
contracts,  to  adjust  the  risk  and  return  characteristics  of its  overall
position.  For example, a fund may purchase a put option and write a call option
on the same  underlying  instrument,  in order to construct a combined  position
whose risk and return characteristics are similar to selling a futures contract.
Another  possible  combined  position would involve writing a call option at one
strike price and buying a call option at a lower  price,  in order to reduce the
risk of the written call option in the event of a  substantial  price  increase.
Because combined  options  positions  involve  multiple  trades,  they result in
higher transaction costs and may be more difficult to open and close out.

         A fund's  options and futures  activities  may affect its turnover rate
and brokerage  commission  payments.  The exercise of calls or puts written by a
fund,  and the sale or  purchase of futures  contracts,  may cause it to sell or
purchase related investments, thus increasing its turnover rate. Once a fund has
received  an exercise  notice on an option it has  written,  it cannot  effect a
closing  transaction in order to terminate its  obligation  under the option and
must deliver or receive the  underlying  securities at the exercise  price.  The
exercise  of puts  purchased  by a fund  may  also  cause  the  sale of  related
investments,  also  increasing  turnover;  although  such exercise is within the
fund's  control,  holding a  protective  put might  cause it to sell the related
investments  for reasons  that would not exist in the absence of the put. A fund
will  pay a  brokerage  commission  each  time it buys or sells a put or call or
purchases or sells a futures contract. Such commissions may be higher than those
that would apply to direct purchases or sales.

         FORWARD COMMITMENTS:

         Eagle  International  and  Income-Growth may make contracts to purchase
securities for a fixed price at a future date beyond  customary  settlement time
("forward  commitments").  However,  Income-Growth currently has no intention of
engaging  in such  transactions  at this  time.  A fund may  engage  in  forward
commitments if it either (1) holds and maintains  until the settlement date in a
segregated account,  cash or high-grade debt obligations in an amount sufficient
to meet the  purchase  price or (2) enters into an  offsetting  contract for the
forward sale of securities of equal value that it owns. Forward  commitments may
be considered securities in themselves. They involve a risk of loss if the value
of the security to be purchased  declines  prior to the settlement  date,  which
risk is in  addition to the risk of decline in value of a fund's  other  assets.
When such  purchases  are made through  dealers,  a fund relies on the dealer to
consummate the sale. The dealer's failure to do so may result in the loss to the
fund of an  advantageous  yield or price.  Although a fund  generally will enter
into forward  commitments  with the  intention of acquiring  securities  for its
investment portfolios, each fund may dispose of a commitment prior to settlement
and may realize short-term profits or losses upon such disposition.

         ILLIQUID AND RESTRICTED SECURITIES:

         Capital Appreciation, Eagle International, Growth Equity, Income-Growth
and Value Equity will not purchase or otherwise  acquire any illiquid  security,
including  repurchase  agreements  maturing  in more than seven  days,  if, as a
result,  more than 10% 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.  Similarly,
Aggressive  Growth,  Mid Cap,  Technology  and  Small Cap 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.  Small Cap  presently  has no intention of
investing more than 5% of its assets in illiquid securities.

         OTC options and their underlying collateral are currently considered to
be illiquid investments.  Growth Equity, Income-Growth,  Mid Cap, Technology and
Value Equity may sell OTC options and, in connection therewith, segregate assets
or cover its obligations with respect to OTC options written by these funds. The
assets  used as cover  for OTC  options  written  by a fund  will be  considered
illiquid  unless OTC  options are sold to  qualified  dealers who agree that the
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.

         Rule 144A under the  Securities  Act of 1933, as amended  ("1933 Act"),
establishes a "safe harbor" from the  registration  requirements of the 1933 Act
for  resales  of  certain   securities   to  qualified   institutional   buyers.
Institutional  markets for restricted securities that have developed as a result
of Rule 144A provide both readily  ascertainable  values for certain  restricted
securities  and  the  ability  to  liquidate  an  investment  to  satisfy  share
redemption  orders.  An insufficient  number of qualified  institutional  buyers
interested in purchasing Rule 144A-eligible  securities held by a fund, however,
could affect adversely the marketability of such portfolio securities and a fund
may be unable to dispose of such securities promptly or at reasonable prices.

         OTHER INVESTMENT COMPANIES AND INDEX SECURITIES:

         INVESTMENT  COMPANIES.  Each 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,  a  fund  becomes  a
shareholder  of that  investment  company.  As a result,  a 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. Eagle International may invest up to 10% of its assets in securities
of closed-end  investment companies that invest in foreign markets. See "Foreign
Securities  Exposure"  for a  discussion  of the risks of  investing  in foreign
securities.

         INDEX SECURITIES.  Index Securities are considered investments in other
investment  companies.  Each fund,  except  Eagle  International,  may invest in
Standard  and  Poor's  Depositary  Receipts,  Standard  and  Poor's  MidCap  400
Depositary  Receipts,  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.

         OTHER INVESTMENT PRACTICES:

         WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS.  Eagle International may
enter into agreements with banks or  broker-dealers  for the purchase or sale of
securities at an agreed-upon  price on a specified  future date. Such agreements
might be entered  into,  for example,  when Eagle  International  anticipates  a
decline in  interest  rates and is able to obtain a more  advantageous  yield by
committing  currently  to purchase  securities  to be issued  later.  When Eagle
International  purchases  securities on a when-issued or delayed delivery basis,



it  is  required   either  (1)  to  create  a  segregated   account  with  Eagle
International's  Custodian and to maintain in that account cash, U.S. Government
securities  or other high grade debt  obligations  in an amount equal on a daily
basis to the amount of Eagle  International's  when-issued  or delayed  delivery
commitments  or (2) to enter into an  offsetting  forward sale of  securities it
owns  equal in value to those  purchased.  Eagle  International  will  only make
commitments to purchase  securities on a when-issued or  delayed-delivery  basis
with  the  intention  of  actually  acquiring  the  securities.  However,  Eagle
International  may sell these  securities  before the  settlement  date if it is
deemed advisable as a matter of investment strategy.  When the time comes to pay
for when-issued or  delayed-delivery  securities,  Eagle International will meet
its  obligations  from then available  cash flow or the sale of securities,  or,
although it would not normally expect to do so, from the sale of the when-issued
or delayed  delivery  securities  themselves  (which may have a value greater or
less than Eagle International's payment obligation).

         LOANS OF PORTFOLIO SECURITIES. Mid Cap, Value Equity, Growth Equity and
Income-Growth may loan portfolio securities to qualified  broker-dealers.  Eagle
International may loan portfolio securities to broker-dealers or other financial
institutions. The collateral for a fund's loans will be "marked to market" daily
so that the  collateral  at all times  exceeds  100% of the value of the loan. A
fund may terminate such loans at any time and the market risk  applicable to any
security loaned remains its risk.  Although voting rights, or rights to consent,
with respect to the loaned  securities pass to the borrower,  a fund retains the
right to call the loans at any time on reasonable  notice,  and it will do so in
order that the securities  may be voted by it if the holders of such  securities
are  asked  to  vote  upon  or  consent  to  matters  materially  affecting  the
investment.  A fund  also may call  such  loans in order to sell the  securities
involved.  The borrower must add to the collateral  whenever the market value of
the securities  rises above the level of such  collateral.  A fund could incur a
loss if the  borrower  should fail  financially  at a time when the value of the
loaned  securities  is greater  than the  collateral.  The primary  objective of
securities  lending is to supplement a fund's income  through  investment of the
cash collateral in short-term interest bearing obligations.

         TEMPORARY DEFENSIVE  PURPOSES.  For temporary defensive purposes during
anticipated  periods  of general  market  decline,  each fund,  other than Eagle
International,  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 CDs
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.

         In addition, for temporary defensive purposes,  Eagle International may
invest all or a major portion of its assets in (1) foreign debt securities,  (2)
debt and  equity  securities  or U.S.  issuers  and (3)  obligations  issued  or
guaranteed  by the United  States or a foreign  government  or their  respective
agencies, authorities or instrumentalities.

B.       INDUSTRY CLASSIFICATIONS

         For purposes of determining industry classifications,  each fund except
Eagle International  relies upon  classifications  contained in the DIRECTORY OF
COMPANIES  FILING ANNUAL REPORTS WITH THE  SECURITIES  AND EXCHANGE  COMMISSION,
except with  respect to  investments  in companies  that produce or  manufacture
semiconductors.  Investments in those companies will be classified as one of the
following  four  industry  groups:  logic  semiconductors  (semiconductors  that
perform  a  processing   or   controlling   function);   analog   semiconductors
(semiconductors that manipulate unprocessed data, such as movement,  temperature
and sound); memory semiconductors  (semiconductors that hold programs and data);
and  communications   semiconductors   (semiconductors  used  primarily  in  the
transmission,  amplification  and switching of voice,  data and video  signals).



Eagle International relies on classifications  determined by the Financial Times
Stock Exchange International.


III.     INVESTMENT LIMITATIONS


         A.       FUNDAMENTAL INVESTMENT POLICIES

         In  addition  to  the  limits   disclosed   above  and  the  investment
limitations described in the Prospectus,  the funds are 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
applicable  fund.  Under the 1940 Act, a "vote of a majority of the  outstanding
voting  securities"  of a 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.

         DIVERSIFICATION.  With  respect to 100% of the total  assets of Capital
Appreciation  and  Income-Growth  and with respect to 75% of the total assets of
the other funds (excluding Technology),  no fund may invest more than 5% of that
fund's  assets  (valued at market  value) in  securities of any one issuer other
than the U.S. Government or its agencies and instrumentalities, or purchase more
than 10% of the voting securities of any one issuer.

         INDUSTRY CONCENTRATION. No fund may purchase securities if, as a result
of such  purchase,  more than 25% of the value of such fund's total assets would
be invested in any one industry;  however,  this  restriction  does not apply to
U.S. Government securities.

         BORROWING MONEY. No fund may borrow money except as a temporary measure
for extraordinary or emergency purposes. Such borrowing is limited as follows:

         (1) Income-Growth may not borrow money except from banks.  Borrowing in
the aggregate may not exceed 15%, and borrowing for purposes  other than meeting
redemptions  may not  exceed 5% of the value of the fund's  total  assets at the
time the borrowing is made. The fund may not make  additional  investments  when
borrowings exceed 5% of the fund's total assets.

         (2) Capital  Appreciation  may not borrow  money  except from banks and
only if at the time of such borrowings the total loans to the fund do not exceed
5% of the fund's total assets.

         (3) Aggressive  Growth,  Eagle  International,  Growth Equity, Mid Cap,
Small  Cap,  Technology  and Value  Equity  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 funds to meet redemption
requests when the liquidation of portfolio  instruments would be inconvenient or
disadvantageous.   However,  a  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 segregated by the Custodian
and on the funds' 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,  a 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 obligations



will  not be  available  for  investment.  The  funds  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).

         (4) Eagle  International  will not borrow money in excess of 10% of the
value  (taken at the lower of cost or  current  value) of Eagle  International's
total assets (not  including  the amount  borrowed) at the time the borrowing is
made, and then only from banks as a temporary measure, such as to facilitate the
meeting of higher redemption  requests than anticipated (not for leverage) which
might otherwise require the untimely disposition of portfolio investments or for
extraordinary or emergency  purposes.  As a matter of nonfundamental  investment
policy,  Eagle  International  may  not  make  any  additional  investments  if,
immediately after such investments, outstanding borrowings of money would exceed
5% of the currency value of Eagle International's total assets.

         ISSUING SENIOR SECURITIES. No fund may issue senior securities,  except
as permitted by the investment objective,  policies,  and investment limitations
of the fund,  except  that (1)  Aggressive  Growth  may  engage in  transactions
involving  forward currency  contracts or other financial  instruments (2) Eagle
International, Growth Equity, Mid Cap, Technology and Value Equity may engage in
transactions involving options,  futures,  forward currency contracts,  or other
financial instruments, as applicable and (3) Income-Growth may purchase and sell
call  options  and forward  contracts.  Underwriting.  Subject to the  following
exceptions,  no fund  may  underwrite  the  securities  of  other  issuers:  (1)
Aggressive Growth, Eagle International,  Growth Equity, Small Cap and Technology
may underwrite securities to the extent that, in connection with the disposition
of  portfolio  securities,  that fund may be deemed to be an  underwriter  under
federal  securities  laws and (2) Capital  Appreciation  and  Income-Growth  may
invest not more than 5% and Aggressive Growth, Mid Cap, Small Cap and Technology
may  invest  not more than 15% of their  respective  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,  no fund may  invest in  commodities,  commodity  contracts  or real
estate (including real estate limited partnerships, in the case of all the funds
except  Income-Growth  and Eagle  International):  (1) the  funds  may  purchase
securities  issued by companies  that invest in or sponsor such  interests,  (2)
Aggressive  Growth may purchase and sell forward  currency  contracts  and other
financial  instruments,  (3)  Growth  Equity,  Technology  and Value  Equity may
purchase and sell options,  futures  contracts,  forward currency  contracts and
other  financial  instruments,  (4) Eagle  International  may  purchase and sell
forward contracts,  futures contracts,  options and foreign currency,  (5) Eagle
International  and  Income-Growth  may purchase  securities  that are secured by
interests in real estate, (6) Income-Growth may write and purchase call options,
purchase  and sell  forward  contracts  and  engage in  transactions  in forward
commitments and (7) Capital  Appreciation,  Eagle International,  Growth Equity,
Income-Growth,  Small Cap and Value Equity may not invest in oil,  gas, or other
mineral  programs except that they may purchase  securities  issued by companies
that invest in or sponsor such interests.

         LOANS.  No funds may make loans,  except  that each fund  except  Eagle
International  may make  loans  under the  following  circumstances:  (1) to the
extent that the purchase of a portion of an issue of publicly  distributed (and,
in the case of Income-Growth, privately placed) notes, bonds, or other evidences
of indebtedness or deposits with banks and other financial  institutions  may be
considered  loans;  (2) where the fund may enter into  repurchase  agreements as
permitted  under that fund's  investment  policies (3) Mid Cap, Value Equity and
Growth  Equity may make loans of portfolio  securities as described in this SAI.
Eagle  International  may  make  loans by  purchase  of debt  obligations  or by
entering into repurchase  agreements or through lending of Eagle International's
portfolio securities.



B.       FUNDAMENTAL POLICIES UNIQUE TO EAGLE INTERNATIONAL

         Eagle International has adopted the following fundamental policies that
can be changed only by shareholder vote:

         MARGIN PURCHASES.  Eagle  International will not purchase securities on
margin,  except such short-term credits as may be necessary for the clearance of
purchases and sales of securities.  (For this purpose, the deposit or payment by
Eagle  International  of initial or variation  margin in connection with futures
contracts,  forward  contracts  or options is not  considered  the purchase of a
security on margin.)

         SHORT  SALES.  Eagle   International  will  not  make  short  sales  of
securities or maintain a short  position,  except that Eagle  International  may
maintain  short  positions  in  connection  with  its  use of  options,  futures
contracts,  forward  contracts  and  options  on  futures  contracts,  and Eagle
International  may sell short  "against the box." As a matter of  nonfundamental
investment policy,  Eagle  International will not sell securities short "against
the box."

C.       FUNDAMENTAL POLICIES UNIQUE TO INCOME-GROWTH

         Income-Growth has adopted the following  fundamental  policies that can
be changed only by shareholder vote:

         INVESTING  IN  ISSUERS  WHOSE  SECURITIES  ARE  OWNED BY  OFFICERS  AND
TRUSTEES  OF  INCOME-GROWTH.  Income-Growth  may  not  purchase  or  retain  the
securities of any issuer if the officers and Trustees of the fund or Heritage or
its  subadviser  owning  individually  more  than  1/2  of  1% of  the  issuer's
securities together own more than 5% of the issuer's securities.

         REPURCHASE AGREEMENTS AND LOANS OF PORTFOLIO SECURITIES.  Income-Growth
may not enter into  repurchase  agreements  with respect to more than 25% of its
total assets and may not lend portfolio securities amounting to more than 25% of
its total assets.

         MARGIN PURCHASES.  Income-Growth may not purchase  securities on margin
except to obtain such  short-term  credits as may be necessary for the clearance
of transactions.

         RESTRICTED SECURITIES. Income-Growth may not invest more than 5% of the
its total assets (taken at cost) in securities  that are not readily  marketable
without registration under the 1933 Act (restricted securities).

D.       NON-FUNDAMENTAL INVESTMENT POLICIES

         Each fund has  adopted the  following  additional  restrictions  which,
together  with  certain  limits  described  above,  may be  changed by the Board
without  shareholder  approval in compliance with applicable law,  regulation or
regulatory policy.

         INVESTING  IN ILLIQUID  SECURITIES.  Aggressive  Growth,  Small Cap and
Technology may not invest more than 15% and Capital Appreciation,  Income-Growth
and Value Equity may not invest more than 10% of their 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  and
including, in the case of Income-Growth, privately placed securities.



         Growth Equity and Eagle International may not invest more than 10%, and
Mid Cap may not invest more than 15% of their net assets in securities  that are
subject  to  restrictions  on  resale  or are  not  readily  marketable  without
registration  under the 1933 Act and in repurchase  agreements  maturing in more
than seven days.

         SELLING  SHORT  AND  BUYING  ON  MARGIN.   Aggressive  Growth,  Capital
Appreciation, Growth Equity, Mid Cap, Small Cap, Technology and Value Equity 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, Aggressive Growth, Growth Equity, Mid Cap,
Technology and Value Equity may make margin  deposits in connection with its use
of options, futures contracts and forward currency contracts, as applicable.  In
addition, Growth Equity and Mid Cap may sell short "against the box."

         INVESTING IN INVESTMENT  COMPANIES.  Aggressive Growth,  Income-Growth,
Mid Cap,  Small Cap,  Technology  and Value Equity may not invest in  securities
issued by other investment companies except as permitted by the 1940 Act.

         Capital  Appreciation  may not  invest  in  securities  issued by other
investment  companies,  except  in  connection  with  a  merger,  consolidation,
acquisition  or  reorganization  by purchase in the open market of securities of
closed-end  investment  companies  where no underwriter or dealer  commission or
profit,  other than a customary  brokerage  commission  is involved  and only if
immediately  thereafter not more than 5% of Capital  Appreciation's total assets
(taken at market value) would be invested in such securities.

         Growth  Equity may not  invest in the  securities  of other  investment
companies,  except by purchase in the open market where no  commission or profit
to a sponsor  or dealer  results  from the  purchase  other  than the  customary
broker's  commission,  or except when the  purchase is part of a plan of merger,
consolidation, reorganization or acquisition.

         Eagle International may not invest more than 10% of its total assets in
securities  of other  investment  companies.  For purposes of this  restriction,
foreign  banks and foreign  insurance  companies or their  respective  agents or
subsidiaries  are  not  considered  investment  companies.  In  addition,  Eagle
International  may invest in the  securities  of other  investment  companies in
connection  with a  merger,  consolidation  or  acquisition  of  assets or other
reorganization   approved   by   Eagle   International's   shareholders.   Eagle
International may incur duplicate  advisory or management fees when investing in
another mutual fund.

E.       NON-FUNDAMENTAL POLICIES UNIQUE TO CAPITAL APPRECIATION

         Capital   Appreciation   has  adopted  the  following   non-fundamental
policies:

         OPTION WRITING. Capital Appreciation may not write put or call options.

         PLEDGING.  Capital  Appreciation  may not pledge any securities  except
that it may  pledge  assets  having a value of not  more  than 10% of its  total
assets to secure permitted borrowing from banks.

F.       NON-FUNDAMENTAL POLICIES UNIQUE TO SMALL CAP

         Small Cap has adopted the following non-fundamental policy:

         OPTION WRITING. Small Cap may not write put or call options.



         Except with respect to borrowing  money, if a percentage  limitation is
adhered to at the time of the  investment,  a later  increase or decrease in the
percentage resulting from any change in value of net assets will not result in a
violation of such restriction.

IV.      NET ASSET VALUE

         The net asset  value per  share of Class A shares,  Class B shares  and
Class C shares is separately determined daily as of the close of regular trading
on the New York Stock  Exchange (the  "Exchange")  each day the Exchange is open
for business (each a "Business Day"). 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 funds value  securities or
assets held in their portfolios as follows:

                  LISTED  SECURITIES.   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.

                  OPTIONS AND FUTURES.  Options and futures positions are valued
based on market quotations when readily available.  Market quotations  generally
will not be available for options traded in the OTC market.

                  FOREIGN  ASSETS.   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 a fund calculates the
daily net asset value of each class.  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 a fund conducted on a spot basis are valued at the spot
rate for  purchasing  or selling  currency  prevailing  on the foreign  exchange
market.

                  SHORT-TERM   SECURITIES.   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.

                  FAIR VALUE  ESTIMATES.  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 their fair  value as  determined  in good
faith under  procedures  established  by and under the general  supervision  and
responsibility of the Board.

         The funds are open each Business Day. Trading in securities on European
and Far Eastern securities  exchanges and OTC markets normally is completed well
before the funds' close of business on each Business  Day. In addition,  trading
in various  foreign  markets may not take place on all Business Days or may take
place on days  that are not  Business  Days and on which  the  funds'  net asset
values per share are 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 funds  calculate  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  funds'  net  asset  value is
calculated,  such  securities  and other  assets  may be valued at 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 funds of securities owned by them is
not reasonably  practicable or it is not  reasonably  practicable  for the funds
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.

V.       PERFORMANCE INFORMATION

         Total  return  data of each class from time to time may be  included in
advertisements about each fund.  Performance  information is 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 a fund likely will
be lower than that of Class A shares.

         The funds' 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 each 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:

            P(1+T)n =         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,  each
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 a 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  (simple  change of an  investment  over a stated  period) to
current or prospective shareholders,  each 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 often reflects the risks  associated with a fund's  investment
objective and  policies.  These factors  should be considered  when  comparing a
fund's  investment  results  to those  of  other  mutual  funds  and  investment
vehicles.



         From time to time each Fund's  performance  may be compared  with:  (1)
data (that may be  expressed as rankings or ratings)  published  by  independent
services or  publications  (including  newspapers,  newsletters,  and  financial
periodicals)  that  monitor  the  performance  of mutual  funds,  such as Lipper
Analytical Services,  Inc., C.D.A. Investment  Technologies,  Inc., Wiesenberger
Investment Companies Service,  Investment Company Data Inc., Morningstar,  Inc.,
Micropal  Incorporated,  and quarterly  mutual fund rankings by Money,  Fortune,
Forbes,  Business  Week,  Personal  Investor,  and  U.S.  News  &  World  Report
magazines,  The Wall Street Journal,  The New York Times,  Kiplinger's  Personal
Finance, and Barron's Newspaper, or (2) recognized stock and other indices, such
as the S&P 500  Composite  Stock Price Index ("S&P 500 Index"),  S&P Mid Cap 400
Index ("S&P 400 Index"),  Russell 2000 Stock Index, Russell Midcap Growth Index,
Dow Jones Industrial  Average  ("DJIA"),  Nasdaq  Composite Index,  Russell 2000
Index,  Value  Line  Index,  U.S.  Department  of  Labor  Consumer  Price  Index
("Consumer  Price Index"),  the Barra Growth Index,  the Barra Value Index,  and
various other domestic,  international, and global indices. The S&P 500 Index is
a broad  index of common  stock  prices,  while the DJIA  represents  a narrower
segment of industrial companies.  The S&P 400 Index measures mid-sized companies
that  have an  average  market  capitalization  of $2.1  billion.  Each  assumes
reinvestment  of  distributions   and  is  calculated   without  regard  to  tax
consequences or the costs of investing.

         In addition, each 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
shares.  For  example,  in comparing a 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,  each 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 funds do 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.

         The average  annualized total return and cumulative total return are as
follows for each period of each fund below.  The returns are through October 31,
2000,  except for  Capital  Appreciation  and  Income-Growth,  which are through
August 31, 2000 and September 30, 2000, respectively.  The average annual return
calculations  below reflect the imposition of the maximum sales charge for Class
A shares  and the  applicable  CDSC for Class B shares  and Class C shares.  The
cumulative  return  calculations  do not  include  the  imposition  of any sales
charges.  The returns  calculated  below for each class of shares of  Aggressive
Growth,  Eagle  International,  Growth Equity,  Mid Cap Stock,  Small Cap Stock,
Technology and Value Equity are based on the published NAVs for October 31, 2000
and not on the NAVs reflected in those Funds' Annual Report to Shareholders.




CLASS A SHARES

- --------------------------------- ----------- ------------- ------------ ------------- -------------------------
Fund                              1 Year      5 Years       10 Years     Inception      Initial Offering Date
- ----                              ------      -------       --------     ---------      ---------------------
- --------------------------------- ----------- ------------- ------------ ------------- -------------------------
                                                                       
o    Aggressive Growth                                                                    August 20, 1998
     average annual                 37.89%        N/A           N/A         37.26%
     return                         44.77%        N/A           N/A        110.72%
     cumulative return



o    Capital Appreciation                                                                 December 12, 1985
     average annual return          23.40%       26.10%       20.43%        16.10%
     cumulative return              29.55%      234.77%       573.66%      845.99%

o    Eagle International                                                                  December 27, 1995
     average annual return          -5.73%        N/A           N/A         8.60%
     cumulative return              -1.02%        N/A           N/A         56.61%

o    Growth Equity                                                                        November 16, 1995
     average annual return          24.72%        N/A           N/A         31.16%
     cumulative return              30.94%        N/A           N/A        303.27%

o    Income-Growth                                                                        December 15, 1986
     average annual return          -0.24%       10.80%       13.20%        9.60%
     cumulative return              4.74%        75.35%       262.84%      271.72%

o    Mid Cap Stock                                                                        November 6, 1997
     average annual return          35.84%        N/A           N/A         16.41%
     cumulative return              42.61%        N/A           N/A         65.26%

o    Small Cap Stock                                                                      May 7, 1993
     average annual return          19.67%       12.05%         N/A         12.91%
     cumulative return              25.64%       85.47%         N/A        160.65%

o    Technology                                                                           November 18, 1999
     average annual return           N/A          N/A           N/A          N/A%
     cumulative return               N/A          N/A           N/A         21.90%

o    Value Equity                                                                         December 30, 1994
     average annual return           9.72%        9.75%         N/A         12.65%
     cumulative return              15.19%       67.15%         N/A        110.55%
- --------------------------------- ----------- ------------- ------------ ------------- -------------------------



CLASS B SHARES

- --------------------------------- ----------- ----------- ------------- ------------- -------------------------
Fund                              1 Year      5 Years     10 Years      Inception      Initial Offering Date
- ----                              ------      -------     --------      ---------      ---------------------
- --------------------------------- ----------- ----------- ------------- ------------- -------------------------

o    Aggressive Growth                                                                    August 20, 1998
     average annual return          39.74%       N/A          N/A          38.37%
     cumulative return              43.74%       N/A          N/A         107.31%

o    Capital Appreciation                                                                 January 2, 1998
     average annual return          24.75%       N/A          N/A          25.60%
     cumulative return              28.75%       N/A          N/A          86.50%

o    Eagle International                                                                  January 2, 1998
     average annual return          -5.67%       N/A          N/A          7.64%
     cumulative return              -1.74%       N/A          N/A          26.17%

o    Growth Equity                                                                        January 2, 1998
     average annual return          25.97%       N/A          N/A          32.73%
     cumulative return              29.97%       N/A          N/A         125.84%

o    Income-Growth                                                                        January 2, 1998
     average annual return          -0.05%       N/A          N/A          0.68%
     cumulative return              3.95%        N/A          N/A          4.89%

o    Mid Cap Stock                                                                        January 2, 1998
     average annual return          37.51%       N/A          N/A          17.38%
     cumulative return              41.51%       N/A          N/A          60.37%

o    Small Cap Stock                                                                      January 2, 1998
     average annual return          20.72%       N/A          N/A          -0.95%
     cumulative return              24.72%       N/A          N/A          0.32%

o    Technology                                                                           November 18, 1999
     average annual return           N/A          N/A          N/A          N/A
     cumulative return               N/A          N/A          N/A         21.06%

o    Value Equity                                                                         January 2, 1998
     average annual return          10.34%       N/A          N/A          0.86%
     cumulative return              14.34%       N/A          N/A          5.46%
- --------------------------------- ----------- ----------- ------------- ------------- -------------------------






CLASS C SHARES

- --------------------------------- ----------- ----------- ------------- ------------- -------------------------
Fund                              1 Year      5 Years     10 Years      Inception     Initial Offering Date
- ----                              ------      -------     --------      ---------     ---------------------
- --------------------------------- ----------- ----------- ------------- ------------- -------------------------
                                                                    
o    Aggressive Growth                                                                 August 20, 1998
     average annual return          43.69%       N/A          N/A          39.27%
     cumulative return              43.69%       N/A          N/A         107.24%

o    Capital Appreciation                                                              April 3, 1995
     average annual return          28.76%      26.59%        N/A          26.38%
     cumulative return              28.76%     225.09%        N/A         255.35%

o    Eagle International                                                               December 27, 1995
     average annual return          -1.81%       N/A          N/A          8.85%
     cumulative return              -1.81%       N/A          N/A          50.90%

o    Growth Equity                                                                     November 16, 1995
     average annual return          29.99%       N/A          N/A          31.46%
     cumulative return              29.99%       N/A          N/A         288.53%

o    Income-Growth                                                                     April 3, 1995
     average annual return          3.95%       11.05%        N/A          12.50%
     cumulative return              3.95%       68.88%        N/A          91.14%

o    Mid Cap Stock                                                                    November 6, 1997
     average annual return          41.51%       N/A          N/A          17.44%
     cumulative return              41.51%       N/A          N/A          61.61%

o    Small Cap Stock                                                                   April 3, 1995
     average annual return          24.75%      12.32%        N/A          14.63%
     cumulative return              24.75%      78.78%        N/A         114.37%

o    Technology                                                                        November 18, 1999
     average annual return           N/A          N/A          N/A          N/A
     cumulative return               N/A          N/A          N/A         20.99%

o    Value Equity                                                                      April 3, 1995
     average annual return          14.34%      9.99%         N/A          12.07%
     cumulative return              14.34%      60.96%        N/A          88.90%
- --------------------------------- ----------- ----------- ------------- ------------- -------------------------


VI.      INVESTING IN THE FUNDS
         ----------------------

         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 a fund are explained in the Prospectus under "How to Invest."

A.       SYSTEMATIC INVESTMENT OPTIONS

         The options below allow you to invest  continually in one or more funds
at regular intervals.

         1.  Automatic  Investing  -- You may  authorize  Heritage  to process a
monthly draft from your personal  checking  account for investment  into a fund.
The draft is returned by your bank the same way a canceled check is returned.



         2. 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 a 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
a 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 a 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.

B.       RETIREMENT PLANS
         ----------------

         HERITAGE  IRA. An  individual  who earns  compensation  and who has 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 a fund and/or
other Heritage Mutual Funds.  The Internal Revenue Code of 1986, as 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 a certain level;  however,  a married  investor who is not an
active  participant  in such a plan and files a joint income tax return with his
or her  spouse  (and  their  combined  adjusted  gross  income  does not  exceed
$150,000)  is  not  affected  by  the  spouse's   active   participant   status.
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 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.



C.       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;

                  (ii) the net  asset  value (at the  close of  business  on the
previous  day) of (a) all Class A shares of a 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
with  sufficient  information  to verify that each  purchase  qualifies  for the
privilege or discount.

D.       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 a 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  of  Intention.  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. The difference
in sales  charge  will be used to purchase  additional  Class A shares of a 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.

VII.     REDEEMING SHARES
         ----------------

         The  methods  of  redemption  are  described  in  the  section  of  the
Prospectus entitled "How to Sell Your Investment."

A.       WAIVER OF THE CONTINGENT DEFERRED SALES CHARGE
         ----------------------------------------------

         The  CDSC  for  Class A  shares,  Class B  shares  and  Class C  shares
currently is waived for: (1) any partial or complete  redemption  in  connection
with a distribution  without penalty under Section 72(t) of the Internal Revenue
Code of 1986,  as  amended  (the  "Code"),  from a  qualified  retirement  plan,
including  a Keogh Plan or IRA upon  attaining  age 70 1/2;  (2) any  redemption
resulting  from a  tax-free  return of an  excess  contribution  to a  qualified
employer  retirement  plan or an IRA;  (3) any  partial or  complete  redemption
following death or disability (as defined in Section  72(m)(7) of the Code) of a
shareholder  (including one who owns the shares as joint tenant with his spouse)
from an  account  in which the  deceased  or  disabled  is named,  provided  the
redemption is requested within one year of the death or initial determination of
disability;  (4) certain periodic  redemptions  under the Systematic  Withdrawal
Plan from an account meeting certain  minimum balance  requirements,  in amounts
representing  certain maximums  established from time to time by the Distributor
(currently a maximum of 12% annually of the account  balance at the beginning of
the Systematic  Withdrawal  Plan); or (5)  involuntary  redemptions by a Fund of
Class A shares or Class B shares or Class C shares in shareholder  accounts that
do not comply with the minimum balance requirements. The Distributor may require
proof of  documentation  prior to waiver of the CDSC  described  in sections (1)
through  (4)  above,  including  distribution  letters,  certification  by  plan
administrators, applicable tax forms or death or physicians' certificates

B.       SYSTEMATIC WITHDRAWAL PLAN
         --------------------------

         Shareholders  may  elect  to make  systematic  withdrawals  from a 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
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 funds, 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 a 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.  A 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 each fund's Automatic Investment Plan.

C.       TELEPHONE TRANSACTIONS
         ----------------------

         Shareholders  may  redeem  shares by placing a  telephone  request to a
fund. A fund,  Heritage,  Eagle, 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 a fund,  Heritage,  Eagle, 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.

D.       REDEMPTIONS IN KIND
         -------------------

         A fund is  obligated  to redeem  shares  for any  shareholder  for cash
during any 90-day  period up to $250,000  or 1% of that 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,  a fund  will pay all or a
portion of the remainder of the redemption in portfolio  instruments,  valued in
the same way as each 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.

E.       RECEIVING PAYMENT
         -----------------

         If  shares  of a  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 a 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.

         Each 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
Securities and Exchange Commission. 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.

VIII.    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 a 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.

         Class A shares of  Intermediate  Government  purchased from February 1,
1992 through July 31, 1992,  without  payment of an initial  sales charge may be
exchanged  into Class A shares of a fund  without  payment of any sales  charge.
Class A shares of Intermediate  Government purchased after July 31, 1992 without
an initial  sales charge will be subject to a sales charge when  exchanged  into
Class A shares of a fund,  unless those shares were acquired through an exchange
of other Class A shares that were subject to an initial sales charge.

         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.

IX.      CONVERSION OF CLASS B SHARES
         ----------------------------

         Class B shares of a fund  automatically  will convert to Class A shares
of that  fund,  based on the  relative  net  asset  values  per share of the two
classes,  eight  years  after  the  end of  the  calendar  month  in  which  the
shareholder's order to purchase the Class B shares was accepted. For the purpose
of calculating the holding period required for conversion of Class B shares, the
date of purchase order  acceptance  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  and  Eagle  have no reason  to  believe  that this
condition for the availability of the conversion feature will not be met.

X.       TAXES
         -----

         GENERAL. Each fund is treated as a separate corporation for Federal tax
purposes  and intends to continue to qualify for  favorable  tax  treatment as a
regulated  investment  company  under  the Code  ("RIC").  To do so, a 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,
determined  without  regard  to  the  dividends-paid  deduction)  ("Distribution
Requirement")  and must meet several  additional  requirements.  With respect to
each fund, these requirements 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, a 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 a
fund failed to qualify for  treatment 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.

         Each 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  shares of any fund for  shares  of  another
Heritage  Mutual Fund  (including  another fund) generally will have similar tax
consequences.  However, special rules apply when a shareholder disposes of Class
A shares of a fund  through  a  redemption  or  exchange  within  90 days  after
purchase thereof and  subsequently  reacquires Class A shares of that 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 basis of the shares subsequently acquired. In addition,
if  shares  of a fund  are  purchased  (whether  pursuant  to the  reinstatement
privilege or otherwise) within 30 days before or after redeeming other shares of
that fund  (regardless  of class) at a loss,  all or a portion of that loss will
not be deductible and will increase the basis in the newly purchased shares.

         If shares of a fund 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 a 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
a fund's  net  capital  gain,  when  designated  as  such,  are  taxable  to its
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. A portion of the dividends (but not the capital gain  distributions)  each
fund pays (an  insubstantial  portion in the case of Eagle  International),  not
exceeding 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 each
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 foreign
taxes,  however, and many foreign countries do not impose taxes on capital gains
in respect of investments by foreign investors. If more than 50% of the value of
a fund's total assets at the close of any taxable year consists of securities of
foreign corporations, it will be eligible to, and may, file an election with the
Internal  Revenue  Service that would  enable its  shareholders,  in effect,  to
receive the benefit of the foreign tax credit with respect to any foreign  taxes
paid by it. It is anticipated that only Eagle International will be eligible for
such election.  Pursuant to such  election,  the fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by the shareholder, the shareholder's
proportionate  share of those taxes, (2) treat the shareholder's  share of those
taxes and of any dividend paid by the fund that  represents  income from foreign
or U.S.  possessions sources as the shareholder's own income from those sources,
and (3) either deduct the taxes deemed paid by the  shareholder in computing the
shareholder's taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against the shareholder's Federal income tax.
Each fund that makes this election will report to its shareholders shortly after
each  taxable  year their  respective  shares of the fund's  income from sources
within  foreign  countries  and  U.S.  possessions  and  foreign  taxes it paid.
Individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable  foreign taxes  included on Forms 1099 and have no foreign  source
non-passive  income will be able to claim a foreign tax credit without having to
file the detailed Form 1116 that otherwise is required.

         Each  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,  a 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 a 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.

         Each  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
a fund's  adjusted  basis  therein as of the end of that year.  Pursuant  to the
election,  a 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 under the election  (and under  regulations  proposed in
1992 that  provided  a similar  election  with  respect  to the stock of certain



PFICs).  A fund's  adjusted  basis in each PFIC's stock  subject to the election
would be adjusted to reflect the amounts of income included and deductions taken
thereunder.

         Gains or  losses  (1)  from  the  disposition  of  foreign  currencies,
including   forward   currency   contracts,   (2)  on  the   disposition   of  a
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  to exchange  rate
fluctuations  between  the  time a 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 a 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.

         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
a 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 a fund derives
with respect to its business of investing in securities  or foreign  currencies,
will be treated as qualifying income under the Income Requirement.

         Certain  futures,  foreign  currency  contracts  and  listed  nonequity
options (such as those on a securities index) in which a fund may invest will be
subject to section 1256 of the Code  ("Section  1256  Contracts").  Section 1256
Contracts a 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. These rules may operate to increase the amount that a fund must  distribute
to satisfy  the  Distribution  Requirement  (i.e.,  with  respect to the portion
treated as short-term  capital gain),  which will be taxable to its shareholders
as ordinary  income,  and to increase  the net capital  gain a fund  recognizes,
without in either case increasing the cash available to the fund.

         Code section 1092 (dealing with straddles) also may affect the taxation
of certain Hedging  Instruments in which a fund may invest. That section defines
a "straddle" as offsetting  positions with respect to actively  traded  personal
property;  for these purposes,  options,  futures and forward currency contracts
are  positions  in  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  provides  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 a 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 a fund  of  straddle
transactions are not entirely clear.

         If a fund has an  "appreciated  financial  position"  -  generally,  an
interest  (including an interest through an option,  futures or forward currency
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 a futures or forward
currency contract entered into by a fund or a related person with respect to the
same or  substantially  identical  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 by
a fund 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).

         ORIGINAL  ISSUE  DISCOUNT  SECURITIES.  Income-Growth  may acquire zero
coupon or other  securities  issued with original issue discount  ("OID").  As a
holder of those  securities,  Income-Growth  must  include in its income the OID
that  accrues  on  them  during  the  taxable  year,  even  if  it  receives  no
corresponding  payment on them during the year. Because  Income-Growth  annually
must  distribute  substantially  all of its investment  company  taxable income,
including any OID, to satisfy the Distribution  Requirement and avoid imposition
of the  Excise  Tax,  Income-Growth  may be  required  in a  particular  year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from Income-Growth's cash
assets or from the  proceeds of sales of  portfolio  securities,  if  necessary.
Income-Growth may realize capital gains or losses from those sales,  which would
increase or decrease its  investment  company  taxable income and/or net capital
gain.

         Investors are advised to consult  their own tax advisers  regarding the
status of an investment in the funds under state and local tax laws.

XI.      SHAREHOLDER INFORMATION
         -----------------------

         Each  share  of a 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 each 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  Massachusetts  business  trusts,  Capital  Appreciation,
Income-Growth  and  Heritage  Series  Trust  are not  required  to  hold  annual
shareholder  meetings.  Shareholder  approval  will be sought  only for  certain
changes in a Trust's or a 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.



XII.     FUND INFORMATION
         ----------------

A.       MANAGEMENT OF THE FUNDS
         -----------------------

         BOARD OF TRUSTEES.  The business affairs of each fund are managed by or
under the direction of the Board.  The Trustees are responsible for managing the
funds'  business  affairs and for  exercising all the funds' 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.  Each 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.

                                   Position with        Principal Occupation
     Name                           each Trust         During Past Five Years
     ----                           ----------         ----------------------

Thomas A. James* (58)              Trustee           Chairman of the Board since
880 Carillon Parkway                                 1986  and  Chief  Executive
St. Petersburg, FL                                   Officer  since 1969 of RJF;
                                                     Chairman  of the  Board  of
                                                     RJA   33716   since   1986;
                                                     Chairman  of the  Board  of
                                                     Eagle  since 1984 and Chief
                                                     Executive Officer of Eagle,
                                                     1994 to 1996.

Richard K. Riess (51)              President and     Executive   Vice  President
880 Carillon Parkway                  Trustee        and  Managing  Director for
St. Petersburg, FL 33716                             Asset   Management  of  RJF
                                                     since 1998, Chief Executive
                                                     Officer   of  Eagle   since
                                                     1996,  President  of Eagle,
                                                     1995   to    2000,    Chief
                                                     Operating Officer of Eagle,
                                                     1988 to 1995.

Donald W. Burton* (56)                Trustee        President of South Atlantic
614 W. Bay Street, Suite 200                         Capital         Corporation
Tampa, FL  33606                                     (venture   capital)   since
                                                     1981.

C. Andrew Graham (60)                 Trustee        Vice President of Financial
Financial Designs, Ltd.                               Designs Ltd. since 1992.
1700 Lincoln Street
Denver, CO  80203

David M. Phillips (62)                Trustee        Chairman      and     Chief
World Trade Center Chicago                           Executive  Officer  of  CCC
444 Merchandise Mart                                 Information Services,  Inc.
Chicago, IL  60654                                   since 1994 and of  InfoVest
                                                     Corporation    (information
                                                     services  to the  insurance
                                                     and  auto   industries  and
                                                     consumer  households) since
                                                     1982.

Eric Stattin (67)                     Trustee        Litigation      Consultant/
                                                     Expert  Witness and private
                                                     investor  1975 Evening Star
                                                     Drive  since   1988.   Park
                                                     City, UT 84060

James L. Pappas (57)                  Trustee        Lykes  Professor of Banking
16303 Villarreal de Avila                            and  Finance  since 1986 at
Tampa, FL 33613                                      University     of     South
                                                     Florida; Dean of College of
                                                     Business     Administration
                                                     1987 to 1996.



                                   Position with        Principal Occupation
     Name                           each Trust         During Past Five Years
     ----                           ----------         ----------------------

K.C. Clark (42)                    Executive Vice    Executive   Vice  President
880 Carillon Parkway               President and     and Chief Operating Officer
St. Petersburg, FL 33716             Principal       of  Heritage  Mutual  Funds
                                   Executive         since  2000;   Senior  Vice
                                     Officer         President - Operations  and
                                                     Administration  of Heritage
                                                     Mutual Funds, 1998 to 2000;
                                                     Vice President - Operations
                                                     and    Administration    of
                                                     Heritage Mutual Funds, 1993
                                                     to 1998.

Donald H. Glassman (43)               Treasurer      Treasurer   of     Heritage
880 Carillon Parkway                                 since  1989;  Treasurer  of
St. Petersburg, FL 33716                             Heritage Mutual Funds since
                                                     1989.

Clifford J. Alexander (57)            Secretary      Partner,    Kirkpatrick   &
1800 Massachusetts Ave., N.W.                        Lockhart LLP (law firm).
Washington, D.C.  20036

Robert J. Zutz (47)                   Assistant      Partner,    Kirkpatrick   &
1800 Massachusetts Ave., N.W.         Secretary      Lockhart LLP (law firm).
Washington, D.C.  20036

- ---------------

* 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 each 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 Series  Trust  currently  pays  Trustees  who are not  employees of
Heritage or its affiliates  $9,692 annually and $1,615 per meeting of the Board.
Income-Growth  and Capital  Appreciation  each pay such Trustees $1,385 annually
and $231 per  meeting of the Board.  Each  Trustee  also is  reimbursed  for any
expenses  incurred  in  attending  meetings.   Because  Heritage  or  Eagle,  as
applicable,  performs  substantially  all  of the  services  necessary  for  the
operation of each fund, each fund requires no employees. No officer, director or
employee of Heritage or Eagle  receives  any  compensation  from either fund for
acting as a director  or officer.  The  following  table shows the  compensation
earned by each Trustee for the calendar year ended December 31, 2000.



                                               COMPENSATION TABLE

                                                                                               Total Compensation
                               Aggregate            Aggregate                                From the Trust and the
                           Compensation From     Compensation From        Aggregate            Heritage Family of
    Name of Person,       Capital Appreciation     Income-Growth     Compensation From the         Funds Paid
      Position                   Trust                 Trust             Series Trust            to Trustees(1)
      ---------                  -----                 -----            ------------              --------------

                                                                                         
Donald W. Burton,                $10,500               $1,500                $1,500                  $19,500
Trustee



C. Andrew Graham,                $11,667               $1,667                $1,667                  $21,666
Trustee

Thomas A. James,                    $0                    $0                   $0                      $0
Trustee

James L. Pappas,                 $11,667               $1,667                $1,667                  $21,666
Trustee

David M. Phillips,               $10,500               $1,500                $1,500                  $19,500
Trustee

Richard K. Riess,                   $0                    $0                   $0                      $0
Trustee

Eric Stattin,                    $11,667               $1,667                $1,667                  $21,666
Trustee

- ---------------


(1)  The Heritage  Mutual Funds consist of five separate  registered  investment
     companies,  including Capital Appreciation,  Income-Growth Trust and Series
     Trust, and 13 portfolios of those companies.

         No Trustee will receive any benefits upon retirement.  Thus, no pension
or retirement benefits have accrued as part of any of any Trust's expenses.

B.       FIVE PERCENT SHAREHOLDERS

         Listed below are  shareholders who owned of record or were known by the
funds to own beneficially five percent or more of the outstanding  shares of the
following funds as of December 22, 2000:


Eagle International - Class A Shares:
- -------------------------------------

Johnson Family Ltd. Partnership       7.4%
5406 Lakemont Boulevard, SE
Bellevue, WA  98006

Eagle International - Class B Shares:
- -------------------------------------

Lawrence T. Brannon TTEE  TRSTE   9.2%        Raymond James & Assoc., Inc.  6.2%
For U A DID 12-18-95                          Cust. A. Robert Dare
Lawrence T. Brannon MD  PSP  TR               IRA  R/O
3213 Embry Hills Drive                        855 Winn Lake Road
Atlanta, GA  30341                            Lapeer, MI  48446

Value Equity - Class B Shares

Raymond James & Assoc., Inc.          7.9%    Raymond James & Assoc., Inc.  7.6%
For Elite Acct. 51903562                      Cust. Charles I. Dunlap
Fad Ann M. Kennedy                            IRA
PASS                                          846 McCallie Avenue
142 Oley Furnace Road                         Chattanooga, TN  37403
Fleetwood, PA  19552



C.       INVESTMENT ADVISERS AND ADMINISTRATOR; SUBADVISERS

         The  investment  adviser and  administrator  for each fund except Eagle
International  is Heritage Asset  Management,  Inc.  Heritage was organized as a
Florida  corporation in 1985. The investment adviser for Eagle  International is
Eagle Asset  Management,  Inc.  Eagle was organized as a Florida  corporation in
1976. All the capital stock of both Heritage and Eagle 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 each fund  except  Eagle  International,  Heritage  is
responsible  for overseeing the fund's  investment  and  noninvestment  affairs,
subject to the control and direction of the fund's Board.  The Series Trust,  on
behalf of Aggressive Growth,  Growth Equity, Mid Cap, Small Cap,  Technology and
Value Equity entered into an Investment  Advisory and  Administration  Agreement
with Heritage  dated March 29, 1993 and last  supplemented  on October 12, 1999.
Capital  Appreciation  and  Income-Growth  entered into Investment  Advisory and
Administration  Agreements  dated  November  13,  1985  and  October  31,  1986,
respectively and, in the case of Capital  Appreciation,  amended on November 19,
1996.  The  Investment  Advisory  and  Administration  Agreements  require  that
Heritage review and establish  investment  policies for each fund and administer
the funds' noninvestment affairs.

         On behalf of Eagle International, the Series Trust also entered into an
Investment Advisory and Administration Agreement (collectively with the Advisory
Agreements discussed above,  "Advisory Agreements") dated February 14, 1995 with
Eagle to provide oversight of Eagle International's investment and noninvestment
affairs, subject to the control and direction of the Board.

         Under separate  Subadvisory  Agreements,  Eagle and Goldman Sachs Asset
Management  ("Goldman"),  subject  to  the  direction  and  control  of  Capital
Appreciation's   Board,  provide  investment  advice  and  portfolio  management
services to Capital Appreciation for a fee payable by Heritage.  None of Capital
Appreciation's   assets  currently  are  allocated  to  Eagle.   Under  separate
Subadvisory  Agreements,  Eagle and Awad Asset  Management,  Inc.  ("Awad") each
provide  investment  advice  and  portfolio  management  services,   subject  to
direction  by  Heritage  and the Series  Trust's  Board,  to Small Cap for a fee
payable by Heritage.  Under a Subadvisory  Agreement,  Eagle provides investment
advice and portfolio management  services,  subject to the direction of Heritage
and the Board, to Aggressive Growth, Growth Equity,  Income-Growth,  Mid Cap and
Value  Equity  for a fee  payable by  Heritage.  None of Value  Equity's  assets
currently are allocated to Eagle. Under a Subadvisory Agreement, Osprey Partners
Investment Management,  LLC ("Osprey") provides investment adviser and portfolio
management services, subject to the direction by Heritage and the Series Trust's
Board,  to Value  Equity for a fee  payable  by  Heritage.  Under a  Subadvisory
Agreement,  Martin Currie Inc. ("Martin Currie") provides  investment advice and
portfolio management services,  subject to the direction of Eagle and the Board,
to  Eagle  International  for  a  fee  payable  by  Eagle   (collectively,   the
"Subadvisory Agreements").

         Heritage and Eagle,  as applicable,  also are obligated to furnish each
fund with office space,  administrative,  and certain other  services as well as
executive and other  personnel  necessary for the operation of a fund.  Heritage
and Eagle, as applicable,  and their affiliates also pay all the compensation of
Trustees  of the  Trust  who are  employees  of  Heritage  or  Eagle  and  their
affiliates.  Each fund  pays all its  other  expenses  that are not  assumed  by
Heritage or Eagle, as applicable. Each fund also is liable for such nonrecurring
expenses as may arise, including litigation to which a fund may be a party. Each
fund also may have an  obligation  to indemnify  its Trustees and officers  with
respect to any such litigation.

         The  Advisory  Agreements  and the  Subadvisory  Agreements  each  were
approved by the Board  (including  all of the Trustees  who are not  "interested
persons" of Heritage  and Eagle or the  subadvisers,  as defined  under the 1940
Act) and by the shareholders of the applicable funds 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, the subadvisers 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 a fund. The Advisory and  Subadvisory  Agreements
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 Agreements may be terminated on not less than 60 days written notice by
Heritage or Eagle, as applicable,  to a fund and the Subadvisory  Agreements may
be terminated on not less than 60 days written  notice by Heritage or Eagle,  as
applicable,  or 90 days `written notice by the  subadvisers.  Under the terms of
the Advisory Agreement,  Heritage and Eagle automatically become responsible for
the  obligations  of  the  subadvisers   upon  termination  of  the  Subadvisory
Agreements.  In the event  Heritage or Eagle,  as  applicable,  ceases to be the
investment  adviser  of a  fund  or  the  Distributor  ceases  to  be  principal
distributor of shares of a fund, the right of a fund to use the identifying name
of "Heritage" may be withdrawn.

         Heritage,  Eagle and the subadvisers 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 a fund or for
any  losses  that  may be  sustained  in the  purchase,  holding  or sale of any
security.

         All of the officers of each 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 Funds."

         ADVISORY AND  ADMINISTRATION  FEE. The annual  investment  advisory fee
paid monthly by each fund to Heritage or Eagle,  as applicable,  is based on the
applicable fund's average daily net assets as listed in the Prospectus.

         AGGRESSIVE GROWTH. For Aggressive  Growth,  Heritage  contractually has
agreed to waive  through  the fund's 2000  fiscal  year  management  fees to the
extent that annual  operating  expenses  attributable  to Class A shares  exceed
1.60% of the average  daily net assets or to the extent  that  annual  operating
expenses  attributable  to Class B shares  and  Class C shares  exceed  2.35% of
average daily net assets attributable to that class during this fiscal year. For
the period  since the Fund's  inception  to October  31, 1998 and the two fiscal
years ended October 31, 2000,  Heritage earned  $25,861,  $382,703 and $872,006,
respectively. For those same periods, Heritage waived its fees in the amounts of
$25,861, $55,188 and recovered $81,049, respectively.

         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.  For the two
fiscal years ended  October 31, 2000,  Heritage paid Eagle  subadvisory  fees of
$191,381and $395,479, respectively.

         CAPITAL APPRECIATION. For Capital Appreciation,  Heritage contractually
has agreed to waive through the fund's 2000 fiscal year  management  fees to the
extent  that total  annual  operating  expenses  attributable  to Class A shares
exceed 1.40% of the average  daily net assets or to the extent that total annual
operating expenses  attributable to Class C shares exceed 2.15% of average daily
net assets.  For the three fiscal years ended August 31, 2000,  Heritage  earned
$825,313, $1,378,107 and $2,316,092, respectively.

         Heritage has entered into  agreements with Eagle and Goldman to provide
investment advice and portfolio  management services to Capital Appreciation for
an  annual  fee  to  be  paid  by   Heritage  to  Goldman  of  .25%  of  Capital
Appreciation's  average  daily net assets and for an annual fee paid by Heritage



to Eagle of 50% of the fees payable to Heritage by Capital Appreciation, without
regard to any reduction in fees actually paid to Heritage as a result of expense
limitations.  Eagle currently does not have any of Capital Appreciation's assets
under management,  and, therefore, does not receive a fee from Heritage. For the
three fiscal years ended August 31, 2000,  Heritage paid to Goldman  subadvisory
fees of $275,104, $459,368 and $772,031, respectively.

         EAGLE INTERNATIONAL.  For Eagle International,  Eagle contractually has
agreed to waive  through  the fund's 2000  fiscal  year  management  fees to the
extent that Class A annual operating expenses,  exclusive of foreign taxes paid,
exceed 1.97% or to the extent that Class B and Class C annual operating expenses
exceed 2.72% of average daily net assets  attributable to that class during this
fiscal  year.  For three  fiscal  years ended  October 31,  2000,  Eagle  earned
$453,725 $477,822 and $506,058, respectively. For the same periods, Eagle waived
its fees in the amounts of $52,276, $24,049 and $0, respectively.

         Eagle has  entered  into an  agreement  with  Martin  Currie to provide
investment   advisory  advice  and  portfolio   management   services  to  Eagle
International for a fee based on Eagle International's  average daily net assets
paid by Eagle to Martin Currie equal to .50% on the first $100 million of assets
and .40%  thereafter,  without  regard to any reduction in fees actually paid to
Eagle as a result of  expense  limitations.  For the three  fiscal  years  ended
October 31, 2000, Eagle paid Martin Currie subadvisory fees of $226,862 $238,911
and $253,029, respectively.

         GROWTH EQUITY. For Growth Equity,  Heritage contractually has agreed to
waive  through the fund's 2000  fiscal year  management  fees to the extent that
Class A annual  operating  expenses  exceed  1.40% or to the extent that Class C
annual operating expenses exceed 2.15% of average daily net assets  attributable
to that class during this fiscal year.  For the three fiscal years ended October
31, 2000, Heritage earned $471,447, $932,644 and $1,993,560, respectively.

         Heritage has entered into an agreement with Eagle to provide investment
advisory  advice and  portfolio  management  services to Growth Equity for a fee
paid by  Heritage to Eagle  equal to 50% of the fees paid to  Heritage,  without
regard to any reduction in fees actually paid to Heritage as a result of expense
limitations.  For three fiscal years ended October 31, 2000, Heritage paid Eagle
subadvisory fees of $235,729, $466,322 and $966,780, respectively.

         INCOME-GROWTH. For Income-Growth,  Heritage contractually has agreed to
waive  through the fund's 2000  fiscal year  management  fees to the extent that
total annual operating  expenses  attributable to Class A shares exceed 1.35% of
the  average  daily net assets or to the  extent  that  total  annual  operating
expenses  attributable  to Class C shares  exceed  2.10% of  average  daily  net
assets.  For the three fiscal years ended  September 30, 2000,  Heritage  earned
$760,605, $783,838 and $588,810, respectively.

         Heritage has entered into an agreement with Eagle to provide investment
advice and  portfolio  management  services to  Income-Growth  for a fee paid by
Heritage equal to 50% of the fees payable to Heritage by Income-Growth,  without
regard to any reduction in fees actually paid to Heritage as a result of expense
limitations.  For the three fiscal years ended September 30, 2000, Heritage paid
Eagle subadvisory fees of $380,302, $391,919 and $294,405, respectively.

         MID CAP.  For Mid  Cap,  Heritage  contractually  has  agreed  to waive
through the fund's 2000  fiscal year  management  fees to the extent that annual
operating  expenses  attributable to Class A shares exceed 1.55 % of the average
daily net assets or to the extent that annual operating expenses attributable to
Class C shares  exceed 2.30% of average  daily net assets  attributable  to that
class during this fiscal year. For the period since the fund's inception through
October 31,  1998 and the two fiscal  years ended  October  31,  2000,  Heritage
earned $178,741,  $210,881 and $240,166,  respectively.  For those same periods,
Heritage  waived  its fees in the  amounts  of  $60,948,  $27,644  and  $24,899,
respectively.



         Heritage has entered into an agreement with Eagle to provide investment
advice and portfolio  management  services to Mid Cap for a fee paid by Heritage
to Eagle  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
voluntary fee waivers by Heritage.  For the period since the fund's inception to
October 31, 1998 and the two fiscal years ended October 31, 2000,  Heritage paid
Eagle $89,371, $105,440 and $120,083, respectively.

         SMALL CAP. For Small Cap,  Heritage  contractually  has agreed to waive
through the fund's 2000  fiscal year  management  fees to the extent that annual
operating  expenses  attributable  to Class A shares exceed 1.30% of the average
daily net assets or to the extent that annual operating expenses attributable to
Class B shares  and Class C shares  exceed  2.05% of  average  daily net  assets
attributable  to that class during this fiscal year.  For the three fiscal years
ended October 31, 2000,  Heritage earned $2,609,951,  $1,960,400 and $1,503,024,
respectively.

         Heritage has entered  into an agreement  with Eagle and Awad to provide
investment advice and portfolio  management services to Small Cap for a fee paid
by Heritage to each  subadviser  with  respect to the amount of Small Cap assets
under  management  equal to 50% of the fees  payable to  Heritage  by Small Cap,
without regard to any reduction in fees actually paid to Heritage as a result of
expense limitations. The Research Department of Raymond James & Associates, Inc.
("Research"), a former subadviser of Small Cap who resigned as its subadviser on
November 20, 1995,  received  from Heritage for the November 1, 1995 to November
20, 1995 (when Research  resigned as subadviser),  subadvisory  fees of $74,583.
Eagle  began  as  subadviser  to  Small  Cap on  August  7,  1995  and  received
subadvisory fees from Heritage for the three fiscal years ended October 31, 2000
in the amount of $691,150,  $541,662 and $392,941,  respectively.  For the three
fiscal years ended  October 31, 2000,  Heritage  paid Awad  subadvisory  fees of
$613,825, $438,538 and $358,571, respectively.

         TECHNOLOGY. For Technology,  Heritage contractually has agreed to waive
through the fund's 2000  fiscal year  management  fees to the extent that annual
operating expenses  attributable to Class A shares exceed 1.65% of 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.  For the period since the
fund's inception through October 31, 2000, Heritage earned $1,026,011 and waived
$0 of its fees.

         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.  For the
period since the fund's inception through October 31, 2000,  Heritage paid Eagle
subadvisory fees of $513,006.

         VALUE EQUITY.  For Value Equity,  Heritage  contractually has agreed to
waive  through the fund's 2000  fiscal year  management  fees to the extent that
annual operating expenses attributable to Class A shares exceed 1.45% of average
daily net assets or to the extent that annual operating expenses attributable to
Class B shares  and Class C shares  exceed  2.20% of  average  daily net  assets
attributable  to that class during this fiscal year.  For the three fiscal years
ended  October 31,  2000,  Heritage  earned  $272,954,  $227,557  and  $193,447,
respectively.  For the same periods,  Heritage waived its fees in the amounts of
$48,072, $76,169 and $69,913, respectively.

         Heritage has entered into separate  agreements with Eagle and Osprey to
provide investment advice and portfolio  management services to Value Equity for
a fee paid by  Heritage.  Heritage  paid fees to Eagle and Osprey,  for the 1999
fiscal  year,   equal  to  0.375%  and  0.32%  of  average   daily  net  assets,
respectively,  without regard to any reduction in fees actually paid to Heritage
as a result of expense limitations. For the three fiscal years ended October 31,



1998,  Heritage  paid  Eagle  subadvisory  fees of  $111,334,  $136,477  and $0,
respectively.  For the period  November 1, 1998 through May 17,  1999,  Heritage
paid Eagle  subadvisory fees of $66,946.  Commencing on May 18, 1999, all of the
fund's  assets were  allocated to Osprey.  No assets  currently are allocated to
Eagle. From May 18, 1999 to October 31, 1999,  Heritage paid Osprey  subadvisory
fees of $39,964.  For the fiscal  year ended  October 31,  2000,  Heritage  paid
Osprey subadvisory fees of $82,537.

         CLASS-SPECIFIC EXPENSES. Each fund may determine to allocate certain of
its  expenses (in addition to  distribution  fees) to the specific  classes of a
fund's shares to which those expenses are attributable.

D.       BROKERAGE PRACTICES
         -------------------

         Each 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.  A 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 a 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 transaction
costs and may  result in a greater  number of taxable  transactions.  Aggressive
Growth's  portfolio  turnover rates for two fiscal years ending October 31, 1999
and 2000 were  195% and 252%,  respectively.  Capital  Appreciation's  portfolio
turnover  rates for the two fiscal years ended August 31, 1999 and 2000 were 44%
and 48%,  respectively.  Eagle International's  portfolio turnover rates for the
two fiscal years ended October 31, 1999 and 2000 were 78% and 67%, respectively.
Growth Equity's  portfolio turnover rates for the two fiscal years ended October
31, 1999 and 2000 were 160% and 392%,  respectively.  Income-Growth's  portfolio
turnover  rates for the two fiscal years ended  September 30, 1999 and 2000 were
46% and 58%, respectively. Mid Cap's portfolio turnover rates for the two fiscal
years ended  October 31, 1999 and 2000 were 192% and 265%,  respectively.  Small
Cap's  portfolio  turnover rates for the two fiscal years ended October 31, 1999
and 2000 were 42% and 85%,  respectively.  Technology's  portfolio turnover rate
for the period  November 18, 1999 to October 31, 2000 was 441%.  Value  Equity's
portfolio  turnover  rates for two fiscal years ended  October 31, 1999 and 2000
were 137% and 95%, respectively.

         The  subadvisers  are  responsible  for the  execution  of each  fund's
portfolio  transactions and must seek the most favorable price and execution for
such  transactions.   Best  execution,  however,  does  not  mean  that  a  fund
necessarily will be paying the lowest  commission or spread  available.  Rather,
each  fund  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,  the  subadvisers  may  give
consideration to research,  statistical and other services  furnished by brokers
or dealers,  and to potential access to initial public  offerings  ("IPOs") that
may be made available by such broker-dealers.  In addition,  the subadvisers may
place  orders  with  brokers  who  provide  supplemental  investment  and market
research and  securities  and economic  analysis and may pay to these  brokers a
higher  brokerage  commission  or spread  than may be charged by other  brokers,
provided that the  subadvisers  determine 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 the  subadvisers in connection  with
services to clients other than the funds. Eagle  International also may purchase
and sell  portfolio  securities to and from dealers who provide it with research
services.  However,  portfolio  transactions  will  not  be  directed  by  Eagle
International to dealers on the basis of such research services.



         The  Trustees  may direct  Heritage  or the  subadvisers  to allocate a
certain   amount  of   commission   business   from  certain  funds  to  certain
broker-dealers  as  consideration  for the  annual  provision  of  certain  data
provided by Lipper Analytical Securities Corporation (which provides information
useful to the Trustees in reviewing the relationships among the funds,  Heritage
and the subadvisers).

         Aggressive Growth,  Capital Appreciation,  Eagle International,  Growth
Equity,  Income-Growth,  Mid  Cap,  Technology  and  Value  Equity  may  use the
Distributor,  its  affiliates  or certain  affiliates of Heritage and Eagle 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 and Eagle 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."

         Although it  currently  does not intend to do so, Small Cap may use the
Distributor  as broker for agency  transactions  in listed and OTC securities at
commission  rates and under  circumstances  consistent  with the  policy of best
execution.  Provided,  however,  that if Small Cap does use the Distributor as a
broker, commissions paid to the Distributor will not exceed "usual and customary
brokerage commissions" as defined above.

         The  subadvisers  also may select  other  brokers to execute  portfolio
transactions.  In the OTC market,  each fund generally deals with primary market
makers unless a more favorable execution can otherwise be obtained.

         Aggregate  brokerage  commissions  paid by  Aggressive  Growth  for the
period ended  October 31, 1998 and the two fiscal  years ended  October 31, 2000
amounted to $26,396, $118,326, and $329,767, respectively. For the same periods,
aggregate brokerage commissions paid by Aggressive Growth to the Distributor, an
affiliated broker-dealer,  were $6,696, $16,500 and $33,320,  respectively.  The
commission to the Distributor for the most recent fiscal year represented 10.10%
of the total aggregate commissions paid on brokerage  transactions  representing
3.87% of the total aggregate brokerage transactions.

         Aggregate  brokerage  commissions paid by Capital  Appreciation for the
three  fiscal  years ended  August 31, 2000  amounted to $68,582,  $206,766  and
$375,005,  respectively.  For the same periods,  aggregate brokerage commissions
paid by Capital  Appreciation to the Distributor,  an affiliated  broker-dealer,
were $216,  $2,580 and $0,  respectively.  The commission to the Distributor for
the most recent fiscal year  represented 0% of the total  aggregate  commissions
paid on brokerage transactions  representing 0% of the total aggregate brokerage
transactions.

         Aggregate  brokerage  commissions paid by Eagle  International  for the
three years ended October 31, 2000 amounted to $134,334,  $191,194 and $137,739,
respectively.

         Aggregate  brokerage  commissions  paid by Growth  Equity for the three
fiscal  years  ended  October  31,  2000  amounted  to  $81,410,   $303,840  and
$1,284,162,  respectively. For the same periods, aggregate brokerage commissions
paid by Growth Equity to the Distributor, an affiliated broker-dealer,  were $0,
$0 and $1,440, respectively.

         Aggregate  brokerage  commissions paid by  Income-Growth  for the three
fiscal  years ended  September  30,  2000  amounted to  $195,587,  $130,655  and
$130,561,  respectively.  For the same periods,  aggregate brokerage commissions
paid by  Income-Growth  to the Distributor,  an affiliated  broker-dealer,  were
$9,280, $8,058 and $6,807,  respectively.  The commission to the Distributor for



the most recent fiscal year represented 5.21% of the total aggregate commissions
paid  on  brokerage  transactions  representing  2.0%  of  the  total  aggregate
brokerage transactions.

         Aggregate  brokerage  commissions  paid by Mid Cap for the period since
inception  to October 31, 1998 and the two fiscal  years ended  October 31, 2000
amounted to $81,410, $127,029 and $119,898,  respectively. For the same periods,
aggregate  brokerage  commissions  paid  by  Mid  Cap  to  the  Distributor,  an
affiliated broker-dealer, were $0, $540 and $3,180, respectively. The commission
to the  Distributor  for the most recent  fiscal year  represented  2.65% of the
total aggregate commissions paid on brokerage  transactions  representing .9% of
the total aggregate brokerage transactions.

         Aggregate  brokerage  commissions paid by Small Cap for the three years
ended   October  31,  2000   amounted  to  $560,894,   $347,665  and   $406,607,
respectively.  For  the  same  periods,  Small  Cap  paid  the  Distributor,  an
affiliated   broker-dealer,   commissions  of  $102,192,   $48,580  and  $34,317
respectively.  The commission to the Distributor for the most recent fiscal year
represented  8.44%  of  the  total  aggregate   commissions  paid  on  brokerage
transactions representing 2.8% of the total aggregate brokerage transactions.

         Aggregate brokerage commissions paid by Technology for the period ended
October 31, 2000 amounted to $506,342. For the same period,  aggregate brokerage
commissions paid by Technology to the Distributor,  an affiliated broker-dealer,
were $1,290. The commission to the Distributor for the most recent fiscal period
represented   .26%  of  the  total  aggregate   commissions  paid  on  brokerage
transactions representing .1% of the total aggregate brokerage transactions.

         Aggregate  brokerage  commissions  paid by Value  Equity  for the three
fiscal years ended October 31, 2000  amounted to $153,869,  $130,194 and $73,625
respectively.  For the same periods,  aggregate  brokerage  commissions  paid by
Value Equity to the  Distributor  were $4,212,  $300 and $0,  respectively.  The
commission to the Distributor for the prior fiscal year represented 0.23% of the
total aggregate commissions paid on brokerage transactions representing 0.05% of
the total aggregate brokerage transactions.

         Each fund may not buy  securities  from,  or sell  securities  to,  the
Distributor  as  principal.   However,  the  Board  has  adopted  procedures  in
conformity  with Rule 10f-3  under the 1940 Act whereby  each fund may  purchase
securities  that are  offered in  underwritings  in which the  Distributor  is a
participant.  The Board 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,  each  fund  has  expressly  consented  to  the  Distributor  executing
transactions on an exchange on its behalf.

         Pursuant to Section  17(j) of the 1940 Act and Rule 17j-1 there  under,
Heritage,  Eagle, the Adviser,  each subadviser and the Distributor have adopted
Codes of Ethics  ("Codes").  These Codes  permit  portfolio  managers  and other
access persons of the applicable Funds to invest in securities that may be owned
by the Fund, subject to certain restrictions.

E.       DISTRIBUTION OF SHARES
         ----------------------

         DISTRIBUTION.  Shares of each fund are offered continuously through the
funds'   principal   underwriter,   Raymond  James  &   Associates,   Inc.  (the
"Distributor"),  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  load  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 each  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.

         DISTRIBUTION AGREEMENT.  Each fund had adopted a Distribution Agreement
pursuant to which the  Distributor  bears the cost of making  information  about
each 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,
Class B and Class C shareholders and for maintaining  shareholder accounts. Each
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  Distribution  Agreements  may be terminated at any time on 60 days
written  notice  without  payment of any penalty by either party.  Each fund may
effect  such  termination  by  vote  of a  majority  of the  outstanding  voting
securities of a fund or by vote of a majority of the Independent  Trustees.  For
so long as either Plan is in effect, selection and nomination of the Independent
Trustees shall be committed to the discretion of such disinterested persons.

         RULE 12b-1 DISTRIBUTION PLAN. Each fund has adopted a Distribution Plan
under Rule 12b-1 for each class of shares  (each a "Plan" and  collectively  the
"Plans").  These  Plans  permit  a  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 funds used all Class A and Class C 12b-1 fees to
pay the Distributor. 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.

         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,  each 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,  each fund pays
the  Distributor  a fee  of  up  to  0.25%  of  its  average  daily  net  assets
attributable  to  Class A  shares.  For  Capital  Appreciation  Class  A  shares
purchased  prior to April 3, 1995, the fund pays the  Distributor a fee of up to
0.50% of that  fund's  average  daily net assets  attributable  to those 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,
each 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.

         The following table illustrates the amount of class specific 12b-1 fees
paid by the funds to the Distributor for the fiscal year end August 31, 2000 for
Capital Appreciation,  September 30, 2000 for Income-Growth and October 31, 2000
for the other funds. All 12b-1 fees were paid to the Distributor.



   ------------------------ --------------- --------------- ----------------
             Fund               Class A         Class B         Class C
             ----               -------         -------         -------
   ------------------------ --------------- --------------- ----------------

   Aggressive Growth              $108,231        $159,752        $ 295,268
   Capital Appreciation           $738,068        $325,881        $ 580,044
   Eagle International             $22,342         $ 7,072         $ 88,632
   Growth Equity                  $282,213        $331,910       $1,197,319
   Income-Growth                  $131,347         $56,574        $ 203,119
   Mid Cap                         $47,505        $ 29,937         $100,263
   Small Cap                      $293,578        $105,971         $557,083
   Technology                     $137,043        $199,667         $327,021
   Value Equity                    $33,504          $9,420         $114,492
   ------------------------ --------------- --------------- ----------------

         Each Plan was  approved  by the  Board,  including  a  majority  of the
Trustees who are not  interested  persons of a 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 each
fund and its  shareholders  will benefit  from each Plan.  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 a 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 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 a 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.

F.       ADMINISTRATION OF THE FUNDS
         ---------------------------

         ADMINISTRATIVE,  FUND ACCOUNTING AND TRANSFER AGENT SERVICES.  Heritage
or Eagle,  as  applicable,  subject to the  control of the Board,  will  manage,
supervise  and conduct the  administrative  and  business  affairs of each fund;
furnish  office space and equipment;  oversee the activities of the  subadvisers
and the  Custodian;  and pay all  salaries,  fees and  expenses of officers  and
Trustees of each fund who are affiliated  with Heritage or Eagle, as applicable.
In addition,  Heritage  provides certain  shareholder  servicing  activities for
customers of the funds. State Street Bank & Trust is the fund accountant for the
Eagle  International  Equity  Portfolio.   Each  fund  pays  directly  for  fund
accounting and transfer agent services.

         Under a separate  Administration  Agreement between Eagle and Heritage,
Heritage provides certain  noninvestment  services to Eagle  International for a
fee  payable by Eagle equal to .10% on the first $100  million of average  daily
net assets, and .05% thereafter.



         Heritage also is the transfer and dividend  reimbursing  agent for each
fund and serves as fund  accountant  for each fund except  Eagle  International.
Each fund pays  Heritage its cost plus 10% for its  services as fund  accountant
and transfer and dividend disbursing agent.

         For the period  August 20,  1998 to October 31, 1998 and the two fiscal
years ended  October 31,  2000,  Heritage  earned  $8,200,  $40,829 and $52,270,
respectively,  from Aggressive  Growth for its services as fund accountant.  For
the three fiscal years ended August 31, 2000,  Heritage earned $42,486,  $49,326
and $54,001,  respectively,  from Capital  Appreciation for its services as fund
accountant.  For the three fiscal years ended October 31, 2000,  Heritage earned
approximately $39,661, $49,494 and $54,999, respectively, from Growth Equity for
its services as fund accountant.  For the three fiscal years ended September 30,
2000,  Heritage  earned  $49,324,  $51,947  and  $51,128,   respectively,   from
Income-Growth  for its services as fund  accountant.  For the period November 6,
1997 to October  31,  1998 and the two fiscal  years  ended  October  31,  2000,
Heritage earned approximately $32,403,  $38,911 and $45,091 from Mid Cap for its
services as fund accountant.  For the three fiscal years ended October 31, 2000,
Heritage earned approximately $47,885, $49,801 and $55,370,  respectively,  from
Small Cap for its services as fund accountant.  For the period November 18, 1999
to October 31, 2000, Heritage earned $48,712 from Technology for its services as
fund  accountant.  For the three fiscal years ended  October 31, 2000,  Heritage
earned  approximately  $35,631,  $39,620 and $43,894,  respectively,  from Value
Equity for its services as fund accountant.

         CUSTODIAN.  State Street Bank and Trust Company, P.0. Box 1912, Boston,
Massachusetts  02105,  serves as custodian of each fund's assets.  The Custodian
also provides portfolio accounting and certain other services for the funds.

         LEGAL COUNSEL.  Kirkpatrick & Lockhart LLP, 1800 Massachusetts  Avenue,
NW, 2nd Floor, Washington, D.C. 20036, serves as counsel to the funds.

         INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.  PricewaterhouseCoopers  LLP,
400 North Ashley Street,  Suite 2800,  Tampa,  Florida 33602,  are the certified
independent  public  accountants for the funds. The Financial  Statements of the
funds that appear in this SAI have been audited by  PricewaterhouseCoopers  LLP,
and are included herein in reliance upon the report of said firm of accountants,
which is given upon their authority as experts in accounting and auditing.

G.       POTENTIAL LIABILITY
         -------------------

         Under certain circumstances, shareholders may be held personally liable
as partners under  Massachusetts  law for  obligations of a fund. To protect its
shareholders,  each fund has  filed  legal  documents  with  Massachusetts  that
expressly  disclaim the liability of its shareholders for acts or obligations of
a fund.  These  documents  require notice of this disclaimer to be given in each
agreement,  obligation  or  instrument  each fund or its Trustees  enter into or
sign. In the unlikely event a shareholder is held personally liable for a fund's
obligations,  that fund is required to use its property to protect or compensate
the  shareholder.  On  request,  a fund will  defend  any claim made and pay any
judgment  against a shareholder for any act or obligation of a fund.  Therefore,
financial loss  resulting  from liability as a shareholder  will occur only if a
fund itself  cannot  meet its  obligations  to  indemnify  shareholders  and pay
judgments against them.



                                   APPENDIX A
                                   ----------

                              FUND INVESTMENT TABLE
                              ---------------------

         All percentage limitations are based on the fund's total assets, unless
otherwise specified.

N     Net Assets

10    minimum percent of assets (italic type)

10    no more than specified percent of assets (Roman type)

- --    not permitted

o     no policy limitation on usage

|_|   permitted, but typically has not been used

**    Excluding those short-term money market instruments not separately listed.



- -----------------------------------------------------------------------------------------------------------------------------------
                                                           Eagle                                    Small
                             Aggressive      Capital       Int'l.    Growth     Income-   Mid Cap    Cap                    Value
                               Growth      Appreciation    Equity    Equity     Growth    Stock     Stock    Technology    Equity
- -----------------------------------------------------------------------------------------------------------------------------------

                                                                                                   
 o   Equity Securities           65            65            65        65 1/        o         65       65         65          65

 o   Convertible Securities

     ->Investment Grade           o             o             o        35           o          o       35          o          35

     ->Below Investment           5            --             5        --          35 2/       5        5         --          --
       Grade

 o   Corporate Debt              --            --            35 3/     --           o 4/      35       --         --          --

 o   Short-Term Money            35            35            35        --           o         35       35         35          --
     Market Instruments**

 o   Illiquid SecuritiesN        15            10            10        10          10         15       15 5/      15          10


 o   Repurchase                  35            35            35        35          25         35       35         35          35
     Agreements

 o   Reverse Repurchase          33 1/3         5            33 1/3    33 1/3       5         33 1/3   33 1/3     33 1/3      33 1/3
     Agreements

 o   U.S. Government             35            35            35        35           o         35       35         35          35
     Securities

 o   Zero Coupon                 --            --            --        --          |_|        --       --         --          --
     Securities

- ----------------------------------
1/    Growth Equity may invest up to 35% of its assets in rights and warrants.

2/    Income-Growth  will  not  invest  35% or  more  of  its  assets  in  below
investment grade convertible and nonconvertible securities.

3/    Investment grade non-convertible foreign debt.

4/    Income-Growth   may   invest   not  more   than  10%  of  its   assets  in
non-convertible corporate debt obligations that are rated below investment grade
by Moody's or S&P.

5/    Small Cap  currently  has no intention of investing  more than 5% in these
securities at this time.





                                       A-1


- -----------------------------------------------------------------------------------------------------------------------------------
                                                           Eagle                                    Small
                             Aggressive      Capital       Int'l.    Growth     Income-   Mid Cap    Cap                    Value
                               Growth      Appreciation    Equity    Equity     Growth    Stock     Stock    Technology    Equity
- -----------------------------------------------------------------------------------------------------------------------------------


 o   Foreign Securities          10            10 6/         65        25 N,7/     20 8/      15 N/    15 N/      15          15 N/
     Exposure

 o   ADRs                         o            10 6/          o        25 N,7/     20          o       35          o          35

 o   Hedging Instruments
     ->Futures                   --            --             o        35          --         |_|      --          o          35
     Contracts

     ->Options                   --             o 9/          o        35           o 10/     |_|      --          o          35 11/
     Contracts

     ->Forward
      Contracts (including        o             o             o        35           o         |_|      --          o          35
      foreign currency
      transactions)

 o    Forward Commitments        --            --             o        --          25 12/     --       --         --          --


 o    Index Securities           10             5            10        10          10          5       10         10          10
      and Other Investment
      Companies

 o    When-issued and            --            --             o        --          --         --       --         --          --
      Delayed Delivery
      Transactions

 o    Loans of Portfolio         --            --            |_|       |_|         25 12/     |_|      --         --          |_|
      Securities

 o    Temporary                  100           100           100       100         100        100      100        100         100
      Defensive Measures








- -------------------------------------
6/    Capital Appreciation's  investments in foreign securities and ADRs may not
exceed 10%.

7/    Growth  Equity may not  invest  more than 25% of its net assets in foreign
securities and ADRs.

8/    Income-Growth may invest up to 20% in foreign  securities,  including ADRs
and other similar securities.

9/    Capital Appreciation may not write put or call options.

10/   Income-Growth  may  write  covered  calls.  The  aggregate  value  of  the
securities  underlying  call options  (based on the lower of the option price or
market) may not exceed 50% of the fund's net assets.

11/   Value Equity may write  covered call  options;  however,  the fund may not
invest more than 10% of its total assets in covered call options.

12/   Income-Growth  currently has no intention of engaging in this  transaction
at this time.





                                       A-2



                                   APPENDIX B
                                   ----------

                            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.



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.



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.



           REPORTS OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND
           -----------------------------------------------------------
                              FINANCIAL STATEMENTS
                              --------------------

         The  Report  of  the  Independent   Certified  Public  Accountants  and
Financial  Statements  are  incorporated  herein by  reference  from the Capital
Appreciation  Trust's  Annual Report to  Shareholders  for the fiscal year ended
August 31, 2000,  filed with the Securities  and Exchange  Commission on October
27, 2000,  Accession  No.  0001016843-00-000813;  Income-Growth  Trust's  Annual
Report to Shareholders  for the fiscal year ended September 30, 2000, filed with
the  Securities  and Exchange  Commission  on November 27, 2000,  Accession  No.
0000950168-00-002511;  Series  Trust's  Annual  Report to  Shareholders  for the
fiscal  year ended  October  31,  2000 filed with the  Securities  and  Exchange
Commission on December 29, 2000, Accession No. 0001016843-00-000906.