-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SpBTnlNomb+dWosZY6nndi8RJMPTKmWq4GijaZJO5yFjvtUTyyY8GPY4PoDr1SiG xxAPi1qKuzPseJnLX46cGw== 0001016843-99-000711.txt : 19990629 0001016843-99-000711.hdr.sgml : 19990629 ACCESSION NUMBER: 0001016843-99-000711 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERITAGE SERIES TRUST CENTRAL INDEX KEY: 0000897111 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07470 FILM NUMBER: 99653417 BUSINESS ADDRESS: STREET 1: 880 CARILLON PARKWAY CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135733800 N-30D 1 HERITAGE SERIES TRUST [GRAPHIC OMITTED] FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH. Aggressive Growth Fund Eagle International Equity Portfolio Growth Equity Fund Mid Cap Growth Fund Small Cap Stock Fund Value Equity Fund Semiannual Report (Unaudited) and Investment Performance Review for the Six Month Period Ended April 30, 1999 [LOGO] HERITAGE SERIES TRUST SEMIANNUAL REPORT TABLE OF CONTENTS PRESIDENT'S LETTER ........................... 1 PORTFOLIO COMMENTARY AND INVESTMENT PORTFOLIO: AGGRESSIVE GROWTH FUND Investment Commentary .................. 3 Investment Portfolio ................... 4 EAGLE INTERNATIONAL EQUITY PORTFOLIO Investment Commentary .................. 6 Investment Portfolio ................... 8 GROWTH EQUITY FUND Portfolio Management Letter ............ 13 Investment Portfolio ................... 16 MID CAP GROWTH FUND Portfolio Management Letter ............ 17 Investment Portfolio ................... 19 SMALL CAP STOCK FUND Portfolio Management Letters ........... 21 Investment Portfolio ................... 23 VALUE EQUITY FUND Portfolio Management Letter ............ 26 Investment Portfolio ................... 27 STATEMENT OF ASSETS AND LIABILITIES .......... 29 STATEMENT OF OPERATIONS ...................... 30 STATEMENT OF CHANGES IN NET ASSETS ........... 31 FINANCIAL HIGHLIGHTS ......................... 33 NOTES TO FINANCIAL STATEMENTS ................ 39 June 17, 1999 Dear Fellow Shareholders: I am pleased to provide you with the semiannual report for Heritage Series Trust for the six month period ended April 30, 1999. The investment and financial information for each of the six funds available within Heritage Series Trust is provided in this report. Because many of you have investments in more than one of these funds, this approach allows us to provide you with the relevant information for each of your funds while reducing the volume of mail you receive from us. While returns for most sectors of the equity markets were positive during this semiannual reporting period, large cap stocks generally outperformed small and mid cap stocks and "growth" stocks slightly outperformed "value" stocks over this period. As the table below shows, all portfolios of Heritage Series Trust also generated positive investment performance for this period. Although we are pleased with the excellent absolute returns shown below, we should caution that these returns - especially those over 10% - should not be relied upon as typical of six-month returns from investments in common stocks. Markets can - and will - move both up and down, sometimes in dramatic fashion. We should all have appropriate long-term investment horizons in order to be able to weather the short-term volatility in the market. FUND "A" SHARES* "B" SHARES* "C" SHARES* ---- ----------- ----------- ----------- Aggressive Growth Fund +21.24% +20.74% +20.74% Eagle International Equity Portfolio +14.57% +14.07% +14.11% Growth Equity Fund +24.91% +24.49% +24.45% Mid Cap Growth Fund + 5.60% + 5.22% + 5.22% Small Cap Stock Fund + 7.78% + 7.41% + 7.41% Value Equity Fund +14.24% +13.81% +13.82% In the pages that follow are commentaries from the portfolio managers for each of the portfolios in Heritage Series Trust. Each commentary is followed by investment portfolio information for the respective fund. Following this information, you will find other important financial information for all of these funds. Since our last annual report, two of the funds in Heritage Series Trust have changed portfolio managers. First, on April 1, 1999, Ashi Parikh joined Eagle Asset Management, Inc. as managing director - growth equity and began managing the Growth Equity Fund. Ashi joined Eagle from Banc One Investment Advisors where he and his team had delivered outstanding results in both large cap and mid cap growth funds. Second, on May 14, 1999 the shareholders of the Value Equity Fund approved retaining Osprey Partners Investment Management as a new subadviser for this fund. This action had previously been approved by the Trustees of the Value Equity Fund at their February 26, 1999 meeting. The Osprey management team led by Russell Tompkins and Jerry Fischer has a long and successful history of managing portfolios utilizing a value approach to investing. We are excited about these changes and commend to you the portfolio management letters from these new managers to learn how they have positioned the portfolios of the Growth Equity and Value Equity Funds. 1 On behalf of all of us at Heritage, thank you for your continuing investments in the portfolios of Heritage Series Trust. We hope that you will discuss with your financial advisors how any of these funds you do not currently own may fit into your investment plans. Please remember that you may call us at 800/709-FUND (3863) with any questions or comments you would like to share with us. We look forward to reporting to you at the end of the funds' fiscal year. Sincerely, /s/ STEPHEN G. HILL ------------------- Stephen G. Hill President - ---------- * These returns are calculated without the imposition of either front-end or contingent deferred sales charges. 2 May 28, 1999 Dear Fellow Shareholders: The six months ended April 30, 1999 produced a strong return of +21.24%* for the Class A Shares for the Heritage Aggressive Growth Fund (the "Fund"). Performance for the period benefited from the acquisition or merger of several of our holdings, including Computer Management Systems (acquired by Computer Associates), FORE Systems (to be acquired by General Electric of the U.K.), Pharmerica (merged into Bergen Brunswig) and Sodak Gaming (to be acquired by International Game Technology). Other strong contributors included Ampex, which announced investments in several on-line television production ventures, CDW Computer Centers (subsequently sold), which surged on strong earnings, a rebound in the shares of Artesyn Technology, aided by a rebound in Asian markets and strong gains from Catalina Marketing, largely reflecting their investment in Supermarkets OnLine, a leader in Internet coupons. On the downside, disruptions in supplies of wireless handsets in China led to an earnings disappointment at Brightpoint. Despite strong earnings, Nova Corporation performed poorly, reflecting concerns over its integration of the recently acquired PMT Services, Inc. The Fund's portfolio remains a selective group of growth stocks ranging from minicaps such as Ampex to giants such as Nokia. At April 30, 1999, the portfolio traded at a relatively modest twenty times 1999 earnings. We believe our attention to valuation may help to explain the numerous companies in our portfolio that have been bought out. Given the reasonable valuation and strategic positioning of many of our holdings, we are optimistic that this trend could continue. Although we have little exposure in Internet "pure plays", due to their high valuations, we have benefited from several companies which have strong core businesses in addition to emerging Internet interests such as Catalina Marketing. Our investment approach is generally to buy companies that benefit from the Internet, rather than direct Internet investments. Although recent fears of higher interest rates have put a damper on many growth stocks, through our attention to valuation and flexibility between market capitalizations, thus far, we have avoided the sharp downturn. Our strategy remains the same. We will seek to apply sound research and valuation strategies to identifying rapidly growing companies. As always, we will seek to do the best for our shareholders. Sincerely, /s/ BERT BOKSEN --------------------- Bert Boksen Senior Vice President Eagle Asset Management, Inc. Portfolio Manager, Aggressive Growth Fund - ---------- * These returns are calculated without the imposition of either front-end or contingent deferred sales charges. 3 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS--91.6%(a) ----------------------- ADVERTISING/COMMUNICATIONS--4.3% -------------------------------- 19,000 Catalina Marketing Corporation*....... $1,623,312 ---------- AIR TRANSPORT--2.1% ------------------- 25,000 Southwest Airlines, Corporation ...... 814,062 ---------- DATA PROCESSING--17.5% ---------------------- 27,300 Check Point Software Technologies Ltd.* .................. 962,325 63,700 FORE Systems, Inc.* .................. 2,149,875 22,000 Gartner Group, Inc., Class "A"* ...... 419,375 50,000 IMRglobal Corporation* ............... 862,500 20,000 MMC Networks, Inc.* .................. 491,250 85,000 Omega Research Inc.* ................. 807,500 40,000 Tech Data Corporation ................ 935,000 ---------- 6,627,825 ---------- EDUCATION--1.1% --------------- 12,000 Strayer Education, Inc. .............. 415,500 ---------- ELECTRONICS/ELECTRIC--9.1% -------------------------- 140,000 Ampex Corporation, Class "A"* ........ 638,750 80,000 Artesyn Technologies, Inc.* .......... 1,440,000 14,000 Nokia Corporation, Sponsored ADR, Class "A"* ..................... 1,038,625 40,800 PSC Inc.* ............................ 364,650 ---------- 3,482,025 ---------- FINANCE--4.5% ------------- 20,000 Hambrecht & Quist Group, Inc.*........ 705,000 10,000 Morgan Stanley Dean Witter & Company ........................... 991,875 ---------- 1,696,875 ---------- FOOD--4.5% ---------- 45,000 Dave & Buster's, Inc.* ............... 922,500 20,000 Papa John's International Inc.* ...... 803,750 ---------- 1,726,250 ---------- GRAPHIC ARTS--1.7% ------------------ 25,000 World Color Press, Inc.* ............. 639,062 ---------- HEALTH CARE CENTERS--3.4% ------------------------- 67,375 Bergen Brunswig Corporation, Class "A" ........................... 1,280,125 ---------- INTERNET--1.0% -------------- 2,000 America Online, Inc.* ................ 285,500 59,900 Firstwave Technologies, Inc.* ........ 97,338 ---------- 382,838 ---------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- LEISURE/AMUSEMENT--10.6% ------------------------ 23,500 Action Performance Companies, Inc.* ............................... 796,063 25,000 Carnival Corporation, Class "A" ...... 1,031,250 10,000 Royal Caribbean Cruises, Ltd. ........ 369,375 90,000 Sodak Gaming, Inc.* .................. 776,250 34,000 Steiner Leisure, Ltd.* ............... 1,079,500 ---------- 4,052,438 ---------- MANUFACTURING/DISTRIBUTIONS--0.6% --------------------------------- 40,000 Brightpoint, Inc.* ................... 246,250 ---------- MEDICAL EQUIPMENT/SUPPLY--4.1% ------------------------------ 42,500 IGEN International, Inc.* ............ 1,067,813 5,000 Immunex Corporation* ................. 477,500 ---------- 1,545,313 ---------- PHARMACEUTICAL--1.1% -------------------- 25,500 Collateral Therapeutics, Inc.* ....... 290,063 1,500 Sepracor Inc* ........................ 126,750 ---------- 416,813 ---------- REAL ESTATE/LAND DEVELOPMENT--1.0% ---------------------------------- 20,000 LNR Property Corporation ............. 392,500 ---------- RETAIL STORES--6.1% ------------------- 60,000 Hibbett Sporting Goods, Inc.* ........ 1,638,750 60,000 Jan Bell Marketing, Inc.* ............ 183,750 30,000 Micro Warehouse, Inc.* ............... 508,125 ---------- 2,330,625 ---------- RETAIL-SPECIALTY--1.4% ---------------------- 50,000 Musicland Stores Corporation* ........ 543,750 ---------- SERVICES--12.0% --------------- 65,500 ABR Information Services, Inc.* ...... 1,146,250 42,000 MPW Industrial Services Group, Inc.* ........................ 383,250 55,000 Nova Corporation* .................... 1,430,000 25,000 Stewart Enterprises, Inc., Class "A" ............................ 496,875 55,000 Sykes Enterprises, Inc.* ............. 1,127,500 ---------- 4,583,875 ---------- TELECOMMUNICATIONS--5.5% ------------------------ 70,000 EMS Technologies, Inc* ............... 883,750 15,000 Plantronics, Inc.* ................... 1,012,500 10,000 Powertel, Inc.* ...................... 217,500 ---------- 2,113,750 ---------- Total Common Stocks (cost $32,429,261)................................. 34,913,188 The accompanying notes are an integral part of the financial statements. 4 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - ------------------------------------------------------------------------------- MARKET VALUE ----------- REPURCHASE AGREEMENT--12.6%(a) - ------------------------------ Repurchase Agreement with State Street Bank and Trust Company, dated April 30, 1999 @ 4.78% to be repurchased at $4,772,900 on May 3, 1999, collateralized by $3,190,000 United States Treasury Bonds, 10.625% due August 15, 2015, (market value $4,833,850 including interest) (cost $4,771,000)...... $ 4,771,000 ----------- TOTAL INVESTMENT PORTFOLIO, (cost $37,200,261)(b), 104.2%(a)........ 39,684,188 OTHER ASSETS AND LIABILITIES, net, (4.2%)(a) (1,584,715) ----------- NET ASSETS, 100.0% ........................ $38,099,473 =========== - ---------------------- * Not an income-producing security. (a) Percentages indicated are based on net assets. (b) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $2,483,927, which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $4,440,355 and aggregate gross unrealized depreciation for all securities in which there is an excess tax cost over market value of $1,956,428. The accompanying notes are an integral part of the financial statements. 5 June 18, 1999 Eagle International Equity Portfolio Commentary for the Semi-Annual Report for the period ended April 30, 1999 The Eagle International Equity Portfolio (the "Fund") invests a majority portion of its investment portfolio in securities traded in developed foreign securities markets, such as those included in the Morgan Stanley Capital International Europe, Australia, Far East Index ("EAFE Index"). The Fund may also invest a portion of the investment Portfolio in developing and emerging markets around the world. The countries in which the Fund invests are selected for their ability to generate high real rates of economic growth, consistent with reasonable political and currency stability. Securities are selected following an intensive research process, designed to screen out companies with either weak financial structures, market positions or management. The ability to produce premium growth in earnings is paramount. Over the six months to April 30, 1999, the EAFE Index rose by 15.27%, dominated by a strong recovery from Japan, Asia and smaller markets. In contrast, Europe lost ground, exacerbated by a weak start to the launch of the Euro. During this period the Class A Shares of the Fund rose by 14.57%*. Over the 52 week period ended April 30, 1999 the Class A Shares are 188/544 in the Lipper rankings, the 35th percentile.** CONTINENTAL EUROPEAN stockmarkets (46.6% of net assets at April 30, 1999) fell back in the face of political wrangling and evidence of slow growth. The Euro's weakness reflected these factors. We reduced exposure to the region over the period. Cyclical stocks recovered over March and April. While we have made the portfolio less defensive, our main emphasis remains on stocks benefiting from corporate restructuring. We bought shares of Total (France), increasing our energy exposure. We added stocks issued by Accor (France), Metro, Hoechst and BASF (Germany) to capture some cyclical recovery. Shares of Bank of Ireland and Argentaria (Spain) were bought to benefit from value in financials. Sales reflected our concern over earnings for groups such as Danone, Promodes and Nestle. We took good profits in the strongly performing shares of 1998 such as Deutsche Bank, Credit Suisse and Ericsson. In the UK (23.5% of net assets at April 30, 1999), the equity market moved ahead, supported by good liquidity and corporate activity. Cyclical stocks rallied towards the end of the period. We bought new holdings in BP Amoco, SmithKline Beecham and British Telecommunications. We also added shares of Scottish & Newcastle to participate in consumer recovery. We sold our holdings in Safeway and NFC, where profits looked under pressure. The UK equity market continues to benefit from its relationship with the bond market as yields move towards the European average. Recovery in smaller companies has been a feature, while corporate activity has affected every sector, highlighting the perceived value in the UK market. The JAPANESE stock market (20.8% of net assets at April 30, 1999) strengthened over the period. We have begun to see the first evidence of significant change in the Government's and company management attitudes to Japan's problems. We added significantly to the region, encouraged by rationalisation of the banking system, and the promotion of a more aggressive corporate culture. While we have maintained a quality blue chip portfolio, concentrating on beneficiaries of Yen weakness and corporate profit recovery, we have also added domestic stocks to the list. Smaller companies have rallied as well, and we have exposure to the sector. New holdings included Dai Nippon Printing, Fujitsu, Kao, Kubota and Mitsui Marine and Fire, reflecting restructuring and domestic recovery themes. Twenty-five percent of the Japanese assets remain hedged against the US dollar, although we expect the yen/dollar relationship to be less volatile over the remainder of the year. ASIAN markets (6.9% of net assets at April 30, 1999) have rallied significantly over the period. Markets such as South Korea, Thailand and Indonesia were supported by stronger currencies and falling interest rates. We 6 increased our exposure to the region in late 1998, initially through the more liquid markets of Singapore and Hong Kong. Our country allocation in this region is Australia, Korea, Singapore, India, Taiwan and Hong Kong. New holdings included Telstra, Woolworths, Fosters Brewing and News Corporation in Australia. In Hong Kong, we increased our weighting through purchases of shares of Cheung Kong, Henderson Land, and Dao Heng Bank. We also bought shares issued by City Developments in Singapore. Sales included Mayne Nickless in Australia and Overseas Chinese Banking Corp in Singapore, which we do not regard as a natural beneficiary of stronger economic growth. The impact of recovery in Asia has been felt particularly by the SMALLER MARKETS category. We added again to Latin America. Brazil and Mexico make up the bulk of our exposure. We established new positions in Israel, through purchases of Orbotech, while we went back into South Africa with Anglo American and Nedcor. We also made successful purchases in Emerging Europe, such as Hellenic Telecom (Greece). OUTLOOK By historical standards, valuations for many equity markets look high. But economic conditions look more robust than they were at the turn of the year. The concerted interest rate cuts in the fourth quarter are likely to give the economies of the US, UK and Europe a "soft landing". Substantial corporate restructuring and foreign buying has seen Japan off its lows. In an environment of more stable currencies and interest rates, smaller markets will prosper, but the rally in bond yields is probably past its best. While there is clear value in smaller companies and the more cyclical end of the market, the economic environment is sufficiently subdued to favor marketable companies with quality earnings. On behalf of all of us at Martin Currie, Inc., thank you for your continuing confidence in us. We look forward to reporting to you again after the end of the Fund's fiscal year. - ---------- * These returns are calculated without the imposition of either front-end or contingent deferred sales charges. ** Lipper Analytical Services, Inc. performance rankings for the Heritage Series Trust - Eagle International Equity Portfolio, Class A Shares were 195 out of 544 International Funds, for the 52 week period ended April 29, 1999. The performance numbers used for the Fund did not take into account any front-end or contingent deferred sales charges. Past performance is no guarantee of future results. 7 - -------------------------------------------------------------------------------- EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS--99.9%(a) ----------------------- AUSTRALIA--2.5% --------------- 9,600 Brambles Industries Ltd ................. $ 282,096 50,000 Fosters Brewing Group Ltd ............... 145,850 6,700 News Corporation Ltd .................... 56,149 54,000 Telstra Corporation ..................... 293,023 40,000 Westpac Banking Corporation* ............ 305,358 48,000 Woolworths Ltd .......................... 152,467 --------- 1,234,943 --------- BRAZIL--0.8% ------------ 18,000 Petrobras, Sponsored ADR ................ 261,000 6,500 Tele Norte Leste Participacoes, Sponsored ADR .......................... 110,094 --------- 371,094 --------- EGYPT--0.1% ----------- 3,000 Suez Cement Company, Sponsored GDR ........................... 50,250 --------- FINLAND--2.2% ------------- 14,202 Nokia (AB) OY ........................... 1,094,468 --------- FRANCE--11.6% ------------- 2,902 Accor ................................... 764,885 6,801 AXA ..................................... 877,955 2,090 Cap Gemini SA ........................... 319,480 3,270 Elf Aquitaine SA ........................ 507,801 3,261 PSA Peugeot Citroen ..................... 540,853 3,086 Societe Generale ........................ 552,253 6,006 Total SA, Class "B" ..................... 822,278 5,721 Vivendi ................................. 1,336,254 --------- 5,721,759 --------- GERMANY--12.0% -------------- 1,492 Allianz AG .............................. 475,209 15,279 BASF AG ................................. 669,034 8,000 Bayerische Hypo-Vereinsbank AG* .................................... 521,439 108 Bayerische Motoren Werke AG (Non Voting) ........................... 76,042 540 Bayerische Motoren Werke AG ............. 386,769 16,898 Hoechst AG .............................. 800,620 9,664 Mannesmann AG ........................... 1,272,048 8,402 Metro AG ................................ 607,110 6,640 Preussag AG ............................. 349,322 6,640 Preussag AG (b)* ........................ 6,173 10,000 Siemens AG .............................. 739,480 --------- 5,903,246 --------- GREECE--0.2% ------------ 1,110 Alpha Credit Bank ....................... 79,234 1,700 Hellenic Telecom ........................ 39,439 --------- 118,673 --------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- HONG KONG--1.3% --------------- 19,000 Cheung Kong Holdings Ltd ................ 172,816 50,200 China Telecom (Hong Kong), Ltd.* .................................. 114,635 30,500 Dao Heng Bank Group Ltd. ................ 123,952 12,000 Henderson Land Development Company ................................ 72,610 17,700 Hutchison Whampoa, Ltd. ................. 158,708 --------- 642,721 --------- INDIA--0.7% ----------- 8,032 Indian Opportunities Fund, Ltd. (c)* .............................. 81,606 8,900 ITC Ltd, Sponsored GDR* ................. 250,535 --------- 332,141 --------- IRELAND--0.8% ------------- 19,000 Bank of Ireland ......................... 380,357 --------- ISRAEL--0.1% ------------ 1,300 Orbotech* ............................... 62,400 --------- ITALY--5.1% ----------- 14,874 Assicurazioni Generali SPA .............. 579,020 38,369 San Paolo IMI SPA ....................... 575,569 83,229 Telecom Italia SPA ...................... 885,386 96,000 Unicredito Italiano ..................... 486,789 --------- 2,526,764 --------- JAPAN--20.0% ------------ 12,000 Brigestone Corporation .................. 321,554 19,000 Canon, Inc. ............................. 464,579 3,000 FamilyMart Company, Ltd ................. 141,936 9,000 Fuji Photo Film Company, Ltd ............ 339,893 27,000 Fujitsu Ltd ............................. 462,360 55,000 Hitachi, Ltd ............................ 401,608 12,000 Honda Motor Company, Ltd ................ 528,555 5,000 Ito-Yokado Company, Ltd ................. 306,900 19 Japan Tobacco Inc ....................... 190,923 19,000 Kao Corporation ......................... 482,080 97,000 Kubota Corporation ...................... 275,356 3,000 Mabuchi Motor Company, Ltd .............. 232,876 19,000 Marui Company, Ltd ...................... 315,182 50,000 Mitsui Marine & Fire Insurance .......... 277,173 15 NTT Mobile Communication ................ 879,250 3,000 Promise Company, Ltd .................... 170,826 2,000 Riso Kagaku Corporation ................. 95,461 6,000 Rohm Company, Ltd ....................... 723,497 6,000 Secom Company, Ltd ...................... 585,831 17,000 Shin-Etsu Chemical Company, Ltd .................................... 540,948 7,800 Sony Corporation ........................ 728,270 The accompanying notes are an integral part of the financial statements. 8 - -------------------------------------------------------------------------------- EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- JAPAN (CONTINUED) ----------------- 10,000 Taisho Pharmaceutical Company ....... $ 307,319 37,000 Toppan Printing Company, Ltd ........ 444,917 19,000 Yamanouchi Pharmaceutical ........... 601,407 ---------- 9,818,701 ---------- MEXICO--1.4% ------------ 5,000 Desc ADS ............................ 123,750 600,000 Grupo Financiero Bancomer, Series "O" SA ...................... 209,740 5,500 Grupo Televisa, SA, Sponsored GDR ................................ 225,500 1,700 Telefonos de Mexico, Sponsored ADR ................................ 128,562 ---------- 687,552 ---------- NETHERLANDS--4.5% ----------------- 5,998 Aegon NV ............................ 575,018 17,561 Ahold (Kon) NV ...................... 652,083 1,661 ING Groep NV ........................ 102,298 14,000 VNU, NV ............................. 566,442 7,680 Wolters Kluwer ...................... 334,262 ---------- 2,230,103 ---------- PHILIPPINES--0.1% ----------------- 320,000 Belle Corporation (d)* .............. 694 ---------- SINGAPORE--1.8% --------------- 28,000 City Developments ................... 186,524 25,000 Overseas Chinese Banking Corporation ........................ 234,333 45,000 Overseas Union Bank ................. 230,796 23,000 Singapore Airlines Ltd .............. 211,519 ---------- 863,172 ---------- SOUTH AFRICA--0.2% ------------------ 1,024 Anglo-American Corporation* ......... 52,841 2,300 Nedcor Ltd .......................... 50,271 ---------- 103,112 ---------- SOUTH KOREA--0.2% ----------------- 4,290 Shinhan Bank GDS* ................... 102,424 ---------- SPAIN--4.1% ----------- 19,477 Argentaria SA ....................... 458,011 33,606 Banco Santander Central ............. 729,921 17,410 Telefonica SA* ...................... 815,682 15,396 Telefonica SA (e)* .................. 14,475 ---------- 2,018,089 ---------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- SWEDEN--1.7% ------------ 10,599 AstraZeneca, PLC .................... 413,307 20,000 Foreningsparbanken, AB, Class "A" ...................... 438,545 ---------- 851,852 ---------- SWITZERLAND--4.7% ----------------- 697 Novartis AG ......................... 1,020,123 60 Roche Genus Scheine Holdings AG ........................ 705,512 1,600 Swisscom AG ......................... 587,271 ---------- 2,312,906 ---------- TAIWAN--0.3% ------------ 11,700 Taiwan American Fund (c)* ........... 164,853 ---------- UK--23.5% --------- 32,500 Allied Zurich, PLC .................. 430,810 11,000 AstraZeneca PLC ..................... 431,067 36,000 BP Amoco PLC ........................ 683,376 40,000 British Sky Broadcasting, PLC ....... 350,697 21,000 British Telecomunications, PLC ...... 350,664 55,000 Cable & Wireless, PLC ............... 787,901 36,000 General Electric Company, PLC ....... 381,069 38,000 GKN, PLC ............................ 648,596 25,500 Glaxo Welcome, PLC .................. 755,622 120,000 Ladbroke Group, PLC ................. 576,720 22,000 Land Securities, PLC ................ 288,617 74,000 LASMO, PLC .......................... 190,470 37,000 Lloyds TSB Group, PLC ............... 596,409 32,000 Marks & Spencer, PLC ................ 219,427 16,000 McKechnie, PLC ...................... 115,054 22,000 National Westminster Bank, PLC....... 529,101 19,950 Reckitt & Colman, PLC ............... 236,850 17,100 Royal Bank of Scotland Group, PLC ................................ 403,829 27,000 Scottish & Newcastle, PLC ........... 336,620 58,000 Scottish Power, PLC ................. 477,719 87,000 Shell Transport & Trading Company, PLC ....................... 652,199 40,000 SmithKline Beecham, PLC ............. 528,940 31,731 Smiths Industries, PLC .............. 490,038 50,000 Unilever, PLC ....................... 444,403 29,000 Vodafone Group ...................... 534,169 25,999 Wassall, PLC ........................ 104,980 ---------- 11,545,347 ---------- Total Common Stocks (cost $40,682,994)................................ 49,137,621 ---------- The accompanying notes are an integral part of the financial statements. 9 - -------------------------------------------------------------------------------- EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE --------- ----------- CONVERTIBLE PREFERRED BONDS--0.8%(a) ------------------------------------ JAPAN--0.8% ----------- 33,000,000 Sanwa International Finance (Bermuda) 1.25% 01/08/05 (f) .......... $ 306,732 12,000,000 TB Finance (Cayman) 2.75% 10/01/04 (f) .......................... 80,142 ----------- Total Convertible Preferred Bonds (cost $344,102).................................... 386,874 ----------- TOTAL INVESTMENT PORTFOLIO (cost $41,027,096) (g) 100.7% (a).................. 49,524,495 OTHER ASSETS AND LIABILITIES, net, (0.7%) ....................................... (342,368) ----------- NET ASSETS, 100.0% .................................. $49,182,127 =========== - ---------------------- * Not an income producing security (a) Percentages indicated are based on net assets. (b) Rights - These rights, if exercised by May 3, 1999, may be converted into 622 shares of Preussag AG at a strike price of $39.00 per share. (c) Martin Currie Investment Management Limited is the manager of the Indian Opportunities Fund, Ltd. and the Taiwan American Fund. (d) Warrants - These warrants, if exercised by December 6, 1999, may be converted into 320,000 shares of Belle Corporation at a strike price of 8.5 Philippine Pesos. (e) Rights - These rights, when exercised by May 20, 1999, will convert into 308 shares of Telefonica SA. (f) Principal amount is stated in Japanese Yen. (g) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $8,497,399 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $9,625,776 and aggregate gross unrealized depreciation for all securities in which there is an excess tax cost over market value of $1,128,377. ADR -- American Depository Receipt. GDR -- Global Depository Receipt. GDS -- Global Depository Shares. The accompanying notes are an integral part of the financial statements. 10 - -------------------------------------------------------------------------------- EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET % OF NET INDUSTRY DIVERSIFICATION VALUE ASSETS - ------------------------ ------------- ---------- COMMON STOCKS Aerospace ...................................... 490,038 1.0% Airlines ....................................... 211,519 0.4% Auto Manufacturers ............................. 1,590,847 3.2% Auto Parts and Equipment ....................... 648,596 1.3% Banking ........................................ 5,725,849 11.6% Brewers ........................................ 145,850 0.3% Broadcasting ................................... 576,197 1.2% Building Materials ............................. 122,860 0.2% Capital Goods .................................. 560,978 1.1% Chemicals ...................................... 540,948 1.1% Conglomerates .................................. 1,124,308 2.3% Consumer Goods and Services .................... 2,889,127 5.9% Cosmetics and Toiletries ....................... 482,080 1.0% Electronics and Electrical Equipment ........... 3,206,800 6.5% Finance ........................................ 1,059,127 2.2% Food ........................................... 1,238,422 2.5% Household Goods ................................ 236,850 0.5% Industrials, Diversified ....................... 1,767,438 3.6% Insurance ...................................... 3,215,185 6.5% Leisure and Hotels ............................. 1,341,605 2.7% Mining ......................................... 52,841 0.1% Office Equipment ............................... 926,939 1.9% Oil and Gas .................................... 3,117,124 6.3% Pharmaceuticals ................................ 3,743,174 7.6% Publishing ..................................... 390,411 0.8% Real Estate .................................... 475,141 1.0% Recreational Products .......................... 339,893 0.7% Restaurants and Pubs ........................... 336,620 0.7% Retail Stores .................................. 993,976 2.0% Securities ..................................... 246,459 0.5% Services ....................................... 867,927 1.8% Software ....................................... 319,480 0.6% Steel and Iron ................................. 1,156,115 2.3% Telecommunications ............................. 6,217,427 12.6% Tires and Rubber ............................... 321,554 0.7% Tobacco ........................................ 190,923 0.4% Transportation and Storage ..................... 438,545 0.9% Utilities, Diversified ......................... 1,350,729 2.7% Utilities, Electric ............................ 477,719 1.0% CONVERTIBLE PREFERRED BONDS Finance ........................................ 386,874 0.8% --------- ----- Total Investments ..................... $49,524,495 100.7% =========== ===== - -------------------------------------------------------------------------------- OPEN FORWARD FOREIGN CURRENCY CONTRACTS APRIL 30, 1999 - -------------------------------------------------------------------------------- CONTRACT IN DELIVERY GROSS UNREALIZED TO DELIVER EXCHANGE FOR DATE APPRECIATION - ------------------- ------------------ ---------- ---------------- CHF 3,322 USD 2,193 05/03/99 $ 0.00 USD 10,840 CHF 16,531 05/03/99 0.00 USD 2,750 EUR 2,607 05/03/99 0.00 USD 2,337,000 JPY 276,093,180 07/06/99 4,199.18 ---------- Net Unrealized Appreciation $ 4,199.18 ========== - ---------- CHF - Switzerland Francs EUR - Euro JPY - Japanese Yen USD - United States Dollar The accompanying notes are an integral part of the financial statements. 11 June 18, 1999 Dear Shareholders: It is a pleasure for our team to assume portfolio management duties for the Heritage Growth Equity Fund (the "Fund"). Our investment philosophy for managing the portfolio of the Fund is to employ an extensive qualitative and quantitative research process in order to identify companies that have an articulated vision for the future and the ability to execute such vision. Qualitatively, these companies have strong management teams that have the ability to create and sustain competitive advantages, potential to increase market share and drive further earnings per share growth, and to attract and retain sufficient intellectual capital to realize that vision. Quantitatively, these companies should have expected revenue and earnings growth rates and returns on equity greater than the market average and have margins at the high end of the relative peer group. A stronger than expected economy has cooled the demand for growth stocks in recent weeks as investors have shifted into value/cyclicals on the margin. In addition, OPEC has kept its deal together and pulled oil supply off the market. Energy prices have jumped off the lows of last year and many fear that inflationary pressures are mounting. With increasing interest rates, growth stocks could have further downside as price/earnings ratios would naturally contract. However, we do not see inflation or much higher interest rates surfacing as a major threat to this bull market. Longer term, we feel very comfortable that large growth stocks should be an integral part of a client's portfolio. With a stable economy, demand for equities will remain strong while real interest rates should head lower and inflation remaining in check. The United States will continue to be the world's leader in many cutting edge industries, particularly in technology and health care. We therefore will remain positioned with overweights in select names that dominate their subsectors in these two areas. Technology and health care will drive real growth in the world economy and we believe U.S. companies will lead the way. From a macro viewpoint, we have shifted from a manufacturing based economy to a services/technology based economy. The key value in the value chain therefore has shifted from the manufacturing function to the research and development function. Successful commercialization of research and development lead to product/solution breakthroughs, and in turn, increased productivity and a better standard of living. We obtain this state through the harvesting of our intellectual capital or brain power. These assets do not readily sit on a company's balance sheet but are the most valuable of inputs. Since the value has shifted to the "brain", we feel it will be very difficult for the rest of the world to quickly replicate capability. Therefore, we expect the United States will continue to lead the rest of the world, only this time reaping benefits through the successful commercialization of research and development. In repositioning the Fund, we bought companies that we believe will benefit from these trends and sold companies that did not fit our investment profile. From a sector view, the Fund was significantly overweighted in retail stocks and telecommunications stocks. Although there are trends in place for continued strength, we believe from a risk perspective that this large sector overweight was unwarranted. The Fund did not have any semiconductor or cable/media exposure so we added to those sectors. Recent buys include: TEXAS INSTRUMENTS (TXN) -- A diversified semiconductor company that is the largest supplier of analog, ASIC and logic chips. The industry is coming out of a three year downturn and TXN's products are poised to take market share. The DSP (digital signal processor) market is booming and TI chips are being designed into all the new wireless releases. The company has been restructured to focus on their core competencies, which should result in increased operating margins, lower expenses, and increased profitability. FIRST DATA CORPORATION (FDC) -- A leader in electronic payment solutions for merchants and third party commercial card payment programs. The company has restructured itself to focus on its core businesses and is now benefitting from this effort. FDC's internal growth rate is exceeding forecasts and poised to further accelerate. Revenues and margins are increasing in most of its business units. CHARLES SCHWAB (SCH) -- Technology and the internet are revolutionizing the financial services industry. Schwab's financial services delivery model will include multi-channel distribution, asset accumulation capabilities, ability to leverage technology, and one of the lowest cost/expense structures around. The firm 12 is on the cutting edge of shaping the evolving financial services industry, bringing in more account assets per day than does Merrill Lynch. We feel technology will provide a sustainable competitive advantage and SCH will continue to gain market share and further lever earnings per share growth. TIME WARNER (TWX) -- A dominant global media brand with properties that include HBO, TNT, CNN, TBS, Warner Brothers, People magazine, Cinemax, Timelife Books, Sports Illustrated, and many others. In addition to strong brand franchises in cable networks, systems, and publishing that generate 15% earnings growth and high return on invested capital, TWX is benefitting from the major worldwide digital revolution. In the future, this will include broadband delivery of content and electronic commerce. TWX is using its strong free cash flow to repay debt, shrink the asset base, and repurchase shares. MEDTRONIC (MDT) -- A premier medical device company with strong franchises in cardiovascular, neurology, and the spinal area. MDT has a strong management team, broad and deep pipeline, and is on the cutting edge a flurry of new product introductions. We believe that this should drive earnings growth and ROE to greater than 20%. MDT spends 11% of revenues on research and development. It is this kind of world class research that allows the company to have so many franchise product introductions and maintain high barriers to entry. Recent sells include: WALGREENS (WAG) -- Drug store pharmacies have lost power relative to the large pharmaceutical companies. WAG's organic growth rate is lower than we feel is sustainable. In addition, risks from Washington (Medicare reimbursement) and the threat of Internet delivery may continue to hamper price/earnings multiples. Given the large number of unknown factors, the upside potential does not seem as great as it once did. FANNIE MAE (FNM) -- Another very solidly run long term winner. However, the Fund had a weighting in mortgage stocks that was approximately five to six times the S&P 500 Index weight and we felt the need to reduce it. Freddie Mac has a higher growth rate and is slightly more conservatively positioned than FNM. CARDINAL HEALTH (CAH) -- Cardinal has produced consistent results but the underlying growth rate is low double digits. It has supplemented its growth rate though 4 major acquisitions in the last 5 years. In addition, the competitive landscape risk has greatly increased due to threats from mass merchants and the internet. CAH could lose pricing power as the value in the chain moves from the distributor back to the manufacturer. As competition increases and the market moves toward more direct delivery, CAH has less power to control its own destiny. NOKIA -- The company should exhibit strong growth over the near term, but there are some risks over the intermediate term. Competition will increase as Motorola and Ericsson will release their new products later this year which could lead to pricing and margin pressures. In addition, Nokia is aiming to get into the higher value added software and data communications networking businesses. As the business model goes into transition, execution risk becomes a much greater issue. Thank you for your confidence in us. We are comfortable with the Fund's characteristics/profile and feel that the companies we own can create great shareholder wealth over the long term. Sincerely, /s/ ASHI PARIKH ----------------------- Ashi Parikh Managing Director Eagle Asset Management, Inc. Portfolio Manager, Growth Equity Fund 13 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - GROWTH EQUITY FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------ COMMON STOCKS--95.5%(a) - ----------------------- ADVERTISING/COMMUNICATIONS--4.7% -------------------------------- 80,000 Omnicom Group, Inc. ................... $ 5,800,000 ------------ CONGLOMERATES--3.9% ------------------- 46,000 General Electric Company .............. 4,853,000 ------------ DATA PROCESSING--16.5% ---------------------- 60,000 Cisco Systems, Inc.* .................. 6,843,750 80,000 Dell Computer Corporation* ............ 3,295,000 20,000 EMC Corporation* ...................... 2,178,750 100,000 Microsoft Corporation* ................ 8,131,250 ------------ 20,448,750 ------------ ELECTRONICS/ELECTRIC--7.1% -------------------------- 70,000 Applied Materials Inc.* ............... 3,753,750 40,000 Solectron Corporation* ................ 1,940,000 30,000 Texas Instruments Inc. ................ 3,063,750 ------------ 8,757,500 ------------ FILMED ENTERTAINMENT--1.9% -------------------------- 34,000 Time Warner, Inc. ..................... 2,380,000 ------------ FINANCE--16.5% -------------- 30,000 American Express Company .............. 3,920,625 40,000 Charles Schwab Corporation ............ 4,390,000 67,500 Citigroup Inc. ........................ 5,079,375 60,000 Freddie Mac ........................... 3,765,000 33,500 Morgan Stanley Dean Witter & Company ............................... 3,322,781 ------------ 20,477,781 ------------ HOUSEHOLD PRODUCTS--1.9% ------------------------ 20,000 The Clorox Company .................... 2,307,500 ------------ INSURANCE--3.8% --------------- 40,000 American International Group, Inc. ........................... 4,697,500 ------------ INTERNET--3.4% -------------- 30,000 America Online, Inc.* ................. 4,282,500 ------------ MEDICAL EQUIPMENT/SUPPLY--6.2% ------------------------------ 80,000 Guidant Corporation ................... 4,295,000 47,000 Medtronic Inc. ........................ 3,381,063 ------------ 7,676,063 ------------ PHARMACEUTICAL--10.3% --------------------- 15,000 Amgen Inc.* ........................... 921,563 60,000 Bristol-Myers Squibb Company .......... 3,813,750 39,000 Pfizer, Inc. .......................... 4,487,437 77,000 Schering-Plough Corporation ........... 3,720,062 ------------ 12,942,812 MARKET SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) - ------------------------- RETAIL STORES--10.0% -------------------- 70,000 Home Depot, Inc. ...................... 4,195,625 55,000 Kohl's Corporation* ................... 3,654,063 100,000 Wal-Mart Stores, Inc. ................. 4,600,000 ------------ 12,449,688 ------------ SERVICES--3.1% -------------- 90,000 First Data Corporation ................ 3,819,375 ------------ TELECOMMUNICATIONS--6.2% ------------------------ 40,000 Lucent Technologies, Inc. ............. 2,405,000 65,000 MCI WorldCom, Inc.* ................... 5,342,187 ------------ 7,747,187 ------------ Total Common Stocks (cost $82,902,802)................................. 118,639,656 REPURCHASE AGREEMENT--5.6%(a) - ----------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated April 30, 1999 @ 4.78% to be repurchased at $6,906,750 on May 3, 1999, collateralized by $4,615,000 United States Treasury Bonds, 10.625% due August 15, 2015, (market value $6,993,171 including interest) (cost $6,904,000) .......................... 6,904,000 ------------ TOTAL INVESTMENT PORTFOLIO (cost $89,806,802) (b), 101.0% (a)................. 125,543,656 OTHER ASSETS AND LIABILITIES, net, (1.0%) (a) ........ (1,268,436) ------------ NET ASSETS,100.0% ................................... $124,275,220 ============ - ---------------------- * Not an income-producing security. (a) Percentages indicated are based on net assets. (b) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $35,736,854, which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $37,509,970 and aggregate gross unrealized depreciation for all securities in which there is an excess tax cost over market value of $1,773,116. The accompanying notes are an integral part of the financial statements. 14 June 1, 1999 Dear Fellow Shareholders: We are pleased to be presenting the semi-annual report for the Heritage Series Trust - Mid Cap Growth Fund (the "Fund"). For the six month period ending April 30, 1999, your Fund returned +5.6% for the Class A Shares*. This compares to a return of +27.39% for the Russell Mid Cap Growth Index and +18.85% for the Standard and Poor's Mid Cap 400 Index. Over the past six months, the equity markets can be characterized as having been extremely volatile. In the final two months of 1998, we saw the continuance of a broad market rally that began in early October, after the Federal Reserve set in motion a series of three interest rate cuts. Both large and small capitalization stocks gained roughly +10% during the closing two months of 1998. During the first three months of 1999 however, the equity markets began to diverge as larger stocks (as represented by the Standard & Poor's 500 Composite Stock Price Index ("S&P 500")), gained +5.5% in the first quarter, while smaller stocks (as represented by the Russell 2000 Index), declined by -5.4%. In the month of April, we experienced a reversal once again, but surprisingly, small cap stocks outpaced large cap stocks as the Russell 2000 Index gained nearly +9% versus a +3.9% rise in the S&P 500. The majority of the underperformance of your Fund over the last six months came in the month of April when your Fund was roughly flat, while the small and mid cap indices gained +8% on average. Since we are always fairly defensive in nature, your Fund held up well in the first quarter, declining slightly less than the average -6% decline for the average small and mid cap fund. However, since your Fund is positioned defensively, it lagged in the environment when the markets gapped up sharply higher. In addition, we currently are facing two head winds that do not favor our style of picking smaller stocks at a "growth-at-a-reasonable-price" approach. First, in the continuation of the theme that prevailed throughout 1998, large cap stocks continue to lead in this market with the "breadth" of the market favoring only a narrow spectrum of larger cap growth stocks. As an illustration of this large cap effect, the largest 5% of stocks that made up the Russell Mid Cap Index contributed NEARLY ONE-HALF of the +6.5% gain in that index on a year-to-date basis through April 30, 1999. That means that out of a pool of 800 stocks, just 40 large stocks had a disproportionate influence on the market averages. Since we focus on smaller stocks that have been overlooked by the market, the current market environment is clearly a hurdle for our style to overcome. As a side note, the median market cap for the average mid cap stock fund now exceeds $5.0 billion as compared to $1.6 billion for your Fund. We feel other mid cap funds are clearly chasing performance by concentrating in the same handful of larger stocks that do not fall within our defined mid cap universe. The second headwind is the Internet phenomenon, where many companies that do not generate earnings, are producing outsized gains despite the lack of any traditional justification for their current stock market valuations. We continue to favor companies that we feel can grow earning at a minimum of 15% per year over the next three years, and that are selling at reasonable valuations both relative to the market and relative to the underlying earnings and cash generating ability of the company. Our approach has led us to several stocks that have become take-out candidates, at a nice premium, by larger companies. American Bankers Insurance, Executive Risk Insurance, and Provident Insurance have all been successes in this area. Healthcare services is an area that has hurt the Fund's performance and we have reduced our exposure by selling shares of HCR Manor Care and Lincare Holdings. We have increased our exposure to technology and increased the growth potential by selling smaller tech stocks such as Anixter, Black Box, Molex, Zebra Tech, Artesyn, and HNC Software. In their place, we have added LSI Logic (semiconductors), Sanmina (manufacturer of telecomm equipment), and American Management Systems (computer services). In the consumer area, we have shed our holdings in food stocks which did not perform well. These include Ralcorp and Whitman Corp. In their place, we have shifted our consumer exposure by adding media stocks such as 15 Lamar Advertising, Emmis Communications, and Metro Networks - all which have performed well on a year-to-date basis. When compared to the Russell 2000 Mid Cap Index your Fund is over-weighted in financial services, technology, and consumer stocks. The Fund has a market weighting in healthcare and is under-weighted in energy, basic materials, and under-weighted in utilities as usual. Despite the recent under performance, we feel we have successfully navigated your Fund through some turbulent markets with a lower level of risk than is evident strictly by looking at the performance numbers. Our aim is to generate an above average rate of return over a long period of time while maintaining a below average level of risk. In this way, the accumulation of wealth compounds during rising markets without fear of losing an excessive amount of capital during down markets. I thank you for your support and continued confidence in my abilities as helmsman of your Fund. I will continue to perform to the best of my abilities, for the benefit of all of us as shareholders. Sincerely, /s/ TODD L. MCCALLISTER ----------------------- Todd L. McCallister Senior Vice President Eagle Asset Management, Inc. Portfolio Manager, Mid Cap Growth Fund - ---------- * These returns are calculated without the imposition of either front-end or contingent deferred sales charges. 16 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - MID CAP GROWTH FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS--96.2%(a) - ----------------------- ADVERTISING/COMMUNICATIONS--8.0% -------------------------------- 8,000 Catalina Marketing Corporation*....... $ 683,500 31,000 Harte-Hanks Communications, Inc. ................................ 782,750 21,000 Lamar Advertising Company* ........... 706,125 ---------- 2,172,375 ---------- AEROSPACE--3.6% --------------- 12,000 Alliant Techsystems, Inc.* ........... 982,500 ---------- AIRCRAFT MANUFACTURING/COMPONENTS--2.5% --------------------------------------- 14,000 Gulfstream Aerospace Corporation* ........................ 682,500 ---------- BANKING--2.7% ------------- 30,000 Golden State Bancorp ................. 736,875 ---------- BROADCASTING--4.2% ------------------ 13,000 Emmis Communications, Class "A"* .......................... 585,000 12,400 Metro Networks, Inc.* ................ 558,000 ---------- 1,143,000 ---------- DATA PROCESSING--14.3% ---------------------- 22,000 American Management Systems *......... 756,250 34,000 National Computer Systems Inc. ....... 952,000 22,500 SunGard Data Systems Inc.* ........... 718,594 22,000 Synopsys, Inc.* ...................... 1,036,750 20,000 Tech Data Corporation ................ 467,500 ---------- 3,931,094 ---------- EDUCATION--3.1% --------------- 24,800 Strayer Education, Inc. .............. 858,700 ---------- ELECTRONICS/ELECTRIC--4.7% -------------------------- 20,000 LSI Logic Corporation* ............... 680,000 9,200 Sanmina Corporation* ................. 610,650 ---------- 1,290,650 ---------- FINANCE--6.4% ------------- 22,000 CMAC Investment Corporation .......... 1,009,250 46,500 Federated Investors, Inc. ............ 746,906 ---------- 1,756,156 ---------- HEALTH CARE CENTER--6.0% ------------------------ 65,000 Health Management Associates, Inc., Class "A"* .................... 1,015,625 12,100 Universal Health Services, Inc., Class "B" ........................... 626,931 ---------- 1,642,556 ---------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- INSURANCE--7.9% --------------- 7,000 Allmerica Financial Corporation ...... 401,188 18,000 Mutual Risk Management, Ltd. ......... 699,750 17,700 Protective Life Corporation .......... 693,619 12,000 Reinsurance Group Of America, Inc. Class "A" ...................... 363,000 ---------- 2,157,557 ---------- LEISURE/AMUSEMENT--4.4% ----------------------- 35,000 Harrah's Entertainment, Inc.* ........ 770,000 14,000 Steiner Leisure, Ltd.* ............... 444,500 ---------- 1,214,500 ---------- MACHINERY--3.8% --------------- 38,000 Sybron International Corporation* ......................... 1,052,125 ---------- MEDICAL EQUIPMENT/SUPPLY--4.1% ------------------------------ 25,000 AmeriSource Health Corporation, Class "A"* .......................... 692,187 12,000 Patterson Dental Company* ............ 432,750 ---------- 1,124,937 ---------- PUBLISHING--8.6% ---------------- 9,000 John Wiley & Sons, Inc., Class "A" ........................... 363,938 22,000 Media General, Inc., Class "A" ....... 1,144,000 15,000 Valassis Communications, Inc. ........ 840,000 ---------- 2,347,938 ---------- RETAIL STORES--3.8% ------------------- 25,000 BJ's Wholesale Club, Inc.* ........... 664,062 14,000 Department 56, Inc.* ................. 378,875 ---------- 1,042,937 ---------- SERVICES--5.7% -------------- 21,750 Iron Mountain, Inc.* ................. 604,922 35,000 Nielsen Media Research, Inc. ......... 958,125 ---------- 1,563,047 ---------- TELECOMMUNICATIONS--2.4% ------------------------ 16,100 Western Wireless Corporation, Class "A"* .......................... 661,106 ---------- Total Common Stocks (cost$23,667,601)............................. 26,360,553 The accompanying notes are an integral part of the financial statements. 17 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - MID CAP GROWTH FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- MARKET VALUE ----------- REPURCHASE AGREEMENT--2.5%(a) - ----------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated April 30, 1999 @ 4.78% to be repurchased at $695,277 on May 3, 1999, collateralized by $465,000 United States Treasury Bonds, 10.625% due August 15, 2015, (market value $704,621 including interest) (cost $695,000)............................... $ 695,000 ----------- TOTAL INVESTMENT PORTFOLIO (cost $24,362,601) (b), 98.7% (a).......... 27,055,553 OTHER ASSETS AND LIABILITIES, net, 1.3% (a) .. 359,575 ----------- NET ASSETS, 100.0% ........................... $27,415,128 =========== - ---------------------- * Not an income-producing security. (a) Percentages indicated are based on net assets. (b) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $2,692,952, which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $3,227,946 and aggregate gross unrealized depreciation for all securities in which there is an excess tax cost over market value of $534,994. The accompanying notes are an integral part of the financial statements. 18 May 28, 1999 Dear Fellow Shareholders: We are happy to report that the very recent results for the Heritage Small Cap Stock Fund (the "Fund") have improved dramatically, with the Fund's Class A Shares gaining +7.78%* over the most recent semiannual period. The environment from April 1998 to the end of March 1999 was historically difficult for small capitalization stocks. During this period, small cap stocks became cheaper than they have ever been relative to the stock market in general. What is more, the devastation in the small capitalization sector was more serious than would appear by simply looking at the Russell 2000 Index ("Russell 2000") because this Index had several Internet stocks in it which went up significantly and that allowed the Russell 2000 to materially outperform the average small cap stock. What is interesting is that very few Internet stocks qualify as small cap stocks. During this period, the smaller a capitalization a company had, generally, the worse its performance was. Some companies that earned money did poorer in the market than companies that lost money. In short, it was a period dominated by large capitalization growth stocks and Internet stocks. Small capitalization value stocks, such as those we invest in for our portion of the Funds assets, were ignored as many investors flocked to momentum stocks. Many other small cap fund managers migrated into other than small cap issues and into Internet stocks; we remained true to our style and discipline and therefore underperformed our competition. The Fund was hurt by its holdings Angeion, Genessee & Wyoming, Lanvision, Thermo Cardio Systems and Thermolase. These issues suffered from market neglect. The Fund was helped by such stocks as Cooper Companies, Doral Financial, Houghton Mifflin, John Wiley & Sons, National Data, New Horizons and Shoe Carnival. In all cases, the stocks were driven by better than expected earnings. In April, the environment for small cap stocks improved dramatically. Moreover, the types of stocks which had suffered the most began to rally the most -- the small cap stocks which earned money and sell at remarkable values. We expect this to continue: Small cap stocks are attractively priced and remain historically cheap. Investors have gone from selling the type of stocks we own to buying them. As funds flow into these stocks, they should continue to appreciate. We are quite optimistic about our Fund going forward. We believe we should do well absolutely, relative to our benchmark and relative to our competition. Sincerely, /s/ JAMES D. AWAD ----------------- James D. Awad Chairman Awad Asset Management, Inc. Portfolio Manager, Small Cap Stock Fund - ---------- * These returns are calculated without the imposition of either front-end or contingent deferred sales charges. 19 May 28, 1999 Dear Fellow Shareholders: A very strong April pushed ahead Eagle's portion of the Heritage Small Cap Stock Fund (the "Fund"), helping the Fund to a strong finish for the semiannual period. I'm happy to report the strong April was followed by a very strong May. During the six months ended April 30, 1999, the Russell 2000 Index was dominated by Internet names (about 9% of the Russell 2000 Index weighting is now Internet stocks compared to some 2% for the S&P Small Cap 600). Most of those stocks have no earnings, are over $1 billion market capitalization and neither are small cap nor fit our growth at a reasonable price (GARP) style. The difference between the Russell 2000 and the S&P Small Cap 600 during the six months ended April 30 was striking, with the former up about 15% and the latter only about 9%. Given this mix, we are very pleased with our six month performance. While we had no direct exposure to Internet stocks, our best performer, Southwest Securities, advanced largely because of their holdings in Knight Trimark Group, as well as interest in their investment broker Mydiscountbroker.com. Action Performance and International Speedway benefited from the continued strong popularity of NASCAR. Two retailers, Claires' Stores and Genesco, performed well, reflecting strong comparable store sales leading to positive earnings surprises. We benefited from takeovers as Trident was acquired by Illinois Tool Works, Computer Management Associates was acquired by Computer Associates and Pharmerica was merged into Bergen Brunswig. Subsequent to the end of the period, ABR Information Systems announced an agreement to be acquired by Ceridian Corp., Gradall Industries agreed to be acquired by JLG Industries and Medical Manager announced a merger with Synetic (whose principal asset is Care Insite, an e-commerce health care unit). On the downside we were hurt by Brightpoint, which had trouble procuring adequate supplies of wireless handsets within China and missed earnings. Avid Technologies, Cavanaugh Hospitality and Cole National also suffered earning shortfalls. We believe the recent spate of takeover actively reflects the value of small capitalization stocks and are pleased it has positively impacted our portfolio. With our portion of the Fund trading at about sixteen times 1999 earnings we are hopeful we can continue to benefit from takeovers. We will continue to invest in companies that will benefit from the growth of the Internet without having to pay the exorbitant multiples currently accorded to the "pure" internet companies. Examples of such holdings are Southwest Securities, Action Performance, Medical Manager and Micro Warehouse. The recent rise in interest rates has caused some crumbling in the large cap growth stocks which had become market favorites. As of this writing, speculative Internet stocks are going through a correction. Both of these events could prove beneficial for small stocks as capital could move from those previously hot performing sectors into small stocks. Hopefully, April and May are a harbinger of better times for small cap investors. As always, we will endeavor to do our best for our shareholders. Sincerely, /s/ BERT BOKSEN --------------- Bert Boksen Senior Vice President Eagle Asset Management, Inc. Portfolio Manager, Small Cap Stock Fund 20 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - SMALL CAP STOCK FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS--96.2%(a) - ----------------------- AEROSPACE--1.0% --------------- 122,000 Kellstrom Industries, Inc.* ............ $2,249,375 ---------- BANKING--4.6% ------------- 125,000 Commercial Federal Corporation.......... 3,031,250 201,000 Doral Financial Corporation ............ 3,542,625 18,500 Hamilton Bancorp, Inc.* ................ 476,375 52,500 Independence Community Bank Corporation .......................... 764,531 100,000 ITLA Capital Corporation* .............. 1,575,000 37,500 Pacific Crest Capital, Inc. ............ 520,312 55,000 Staten Island Bancorp, Inc. ............ 993,437 ---------- 10,903,530 ---------- BUILDING--2.0% -------------- 190,000 Lennar Corporation ..................... 4,595,625 ---------- CHEMICALS--0.7% --------------- 55,000 Cadiz Inc.* ............................ 546,563 110,000 Mississippi Chemical Corporation........ 1,003,750 ---------- 1,550,313 ---------- COSMETICS/TOILETRIES/DRUGS--0.4% -------------------------------- 205,000 NBTY, Inc.* ............................ 1,037,813 90,000 Twinlab Corporation* ................... 765,000 ---------- 1,802,813 ---------- DATA PROCESSING--12.8% ---------------------- 70,000 Avid Technology, Inc.* ................. 1,137,500 60,000 Barra Inc* ............................. 1,173,750 25,000 Bell & Howell Company* ................. 835,938 50,000 CACI International Inc., Class "A"* ............................ 906,250 143,500 Comdisco, Inc. ......................... 3,775,844 198,962 Eclipsys Corporation* .................. 4,377,164 207,500 Health Management Systems, Inc.* ........................ 959,688 279,300 LanVision Systems, Inc.* ............... 488,775 87,000 National Data Corporation .............. 4,012,875 154,875 Printronix, Inc.* ...................... 2,206,969 63,000 Shared Medical Systems Corporation ........................... 3,421,687 25,000 Sterling Software, Inc.* ............... 517,187 95,000 The Pathways Group, Inc.* .............. 831,250 5,000 Zebra Technologies Corporation, Class "A"* ............................ 166,250 107,500 Zebra Technologies Corporation, Class "B"* ............................ 3,574,375 ---------- 30,251,314 ---------- MARKET SHARES VALUE ------ --------- COMMON STOCKS (CONTINUED) - ------------------------- EDUCATION--2.4% --------------- 93,000 New Horizons Worldwide, Inc.* .......... 1,865,812 165,000 Strayer Education, Inc. ................ 5,713,125 ---------- 7,578,937 ---------- ELECTRONICS/ELECTRIC--2.3% -------------------------- 270,000 Artesyn Technologies, Inc.* ............ 4,860,000 50,000 OYO Geospace Corporation* .............. 450,000 ---------- 5,310,000 ---------- FINANCE--3.1% ------------- 260,000 Cash America International, Inc. ....... 3,315,000 98,000 Investors Financial Services Corporation ............................ 3,564,750 25,000 Resource America, Inc. ................. 309,375 ---------- 7,189,125 ---------- FOOD--3.2% ---------- 70,000 Corn Products International, Inc. ...... 2,021,250 125,000 Del Monte Foods Company * .............. 1,671,875 104,000 J. M. Smucker Company, Class "B" ............................. 1,820,000 50,000 Smithfield Foods, Inc.* ................ 1,181,250 ---------- 6,694,375 ---------- GRAPHICS ARTS--2.0% ------------------- 185,000 World Color Press, Inc.* ............... 4,729,062 ---------- HEALTH CARE CENTERS--2.2% ------------------------- 70,000 American Retirement Corporation* ........................... 1,163,750 174,750 Bergen Brunswig Corporation, Class "A" ............................. 3,320,250 90,000 Horizon Health Corporation* ............ 680,625 ---------- 5,164,625 ---------- HEALTH CARE SERVICES--0.1% -------------------------- 115,000 ThermoLase Corporation* ................ 294,687 ---------- HOTELS/MOTELS/INNS --0.9% ------------------------- 120,000 Cavanaughs Hospitality Corporation* .......................... 907,500 200,000 Lodgian, Inc.* ......................... 1,212,500 ---------- 2,120,000 ---------- INSURANCE--3.7% --------------- 100,000 Annuity And Life Re (Holdings), Ltd. ...................... 1,975,000 210,000 INSpire Insurance Solutions, Inc.*...... 4,567,500 The accompanying notes are an integral part of the financial statements. 21 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - SMALL CAP STOCK FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- INSURANCE (CONTINUED) --------------------- 105,000 Presidential Life Corporation ......... $1,883,437 30,000 Reliance Group Holdings ............... 225,000 ---------- 8,650,937 ---------- LEATHER/SHOES--2.2% ------------------- 310,000 Genesco Inc.* ......................... 3,371,250 125,000 Shoe Carnival, Inc.* .................. 1,890,625 ---------- 5,261,875 ---------- LEISURE/AMUSEMENT--3.0% ----------------------- 60,000 Action Performance Companies, Inc.* ................................ 2,032,500 85,800 Florida Panthers Holdings, Inc.* ...... 761,475 52,300 Gaylord Entertainment Company.......... 1,621,300 35,000 International Speedway Corporation, Class "A" ............... 1,802,500 26,000 Steiner Leisure, Ltd.* ................ 825,500 ---------- 7,043,275 ---------- MACHINERY--1.4% --------------- 91,000 Blount International, Inc., Class "A" ............................ 2,536,625 45,000 Gradall Industries, Inc.* ............. 720,000 ---------- 3,256,625 ---------- MANUFACTURING/DISTRIBUTIONS--6.2% --------------------------------- 170,100 Amor Holdings, Inc.* .................. 2,147,513 120,000 Brightpoint, Inc.* .................... 738,750 200,000 Gentex Corporation* ................... 6,012,500 130,000 Hughes Supply, Inc. ................... 3,022,500 27,500 Jakks Pacific Inc.* ................... 587,813 160,000 Mail-Well, Inc.* ...................... 2,090,000 ---------- 14,599,076 ---------- MEDICAL EQUIPMENT/SUPPLY--4.6% ------------------------------ 435,000 Angeion Corporation* .................. 135,938 123,456 Angiosonics, Inc. (c)* ................ 87,160 212,500 ATS Medical, Inc.* .................... 1,593,750 100,000 Aviron Corporation* ................... 1,887,500 200,000 Coherent, Inc.* ....................... 2,975,000 150,733 Cooper Companies, Inc.* ............... 2,374,045 316,000 Somanetics Corporation* ............... 869,000 44,444 SurVivaLink Corporation (c)* .......... 26,666 149,800 Thermo Cardiosystems, Inc.* ........... 1,095,412 ---------- 11,044,471 ---------- OFFICE EQUIPMENT--1.1% ---------------------- 180,000 Global Imaging Systems, Inc.* ......... 2,587,500 ---------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- OIL & GAS--0.7% --------------- 86,400 Chieftain International, Inc.* ........ 1,560,600 ---------- PHARMACEUTICAL--1.5% -------------------- 21,200 Bindley Western Industries, Inc. ...... 654,550 50,000 Collateral Therapeutics, Inc.* ........ 568,750 25,177 Priority Healthcare Corporation, Class "B" ............................ 1,276,159 60,000 Protein Design Labs, Inc.* ............ 926,250 ---------- 3,425,709 ---------- POLLUTION CONTROL--2.1% ----------------------- 180,000 IMCO Recycling, Inc. .................. 3,060,000 100,000 Superior Services, Inc.* .............. 1,837,500 ---------- 4,897,500 ---------- PUBLISHING--2.6% ---------------- 40,000 Houghton Mifflin Company .............. 1,785,000 107,600 John Wiley & Sons, Inc., Class "A" ............................ 4,351,075 ---------- 6,136,075 ---------- RAILROADS--0.6% --------------- 135,000 Genesee & Wyoming, Inc.* .............. 1,333,125 ---------- REAL ESTATE INVESTMENT TRUST--3.0% ---------------------------------- 15,700 Correctional Properties Trust ......... 271,806 164,900 LTC Properties, Inc. .................. 2,215,844 110,000 Meristar Hospitality Corporation ...... 2,530,000 95,000 Nationwide Health Properties, Inc. ................................. 1,929,688 ---------- 6,947,338 ---------- REAL ESTATE/LAND DEVELOPMENT--2.0% ---------------------------------- 240,000 LNR Property Corporation .............. 4,710,000 ---------- RETAIL STORES--3.0% ------------------- 100,000 Bradlees Inc.* ........................ 825,000 50,000 Charming Shoppes ...................... 193,750 100,000 Claire's Stores Inc. .................. 3,312,500 43,800 Cole National Corporation, Class "A"* ........................... 678,900 65,000 Micro Warehouse, Inc.* ................ 1,100,937 102,500 U.S. Vision, Inc.* .................... 563,750 25,000 Urban Outfitters Inc.* ................ 484,375 ---------- 7,159,212 ---------- SECURITIES--8.6% ---------------- 85,000 Advest Group, Inc. .................... 1,721,250 100,000 Dain Rauscher Corporation ............. 4,287,500 The accompanying notes are an integral part of the financial statements. 22 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - SMALL CAP STOCK FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS (CONTINUED) - ------------------------- SECURITIES (CONTINUED) ---------------------- 159,999 Legg Mason, Inc. ...................... $ 5,579,965 162,500 Southwest Securities Group, Inc. ...... 8,602,344 ----------- 20,191,059 ----------- SERVICES--9.6% -------------- 200,000 ABR Information Services, Inc.* ....... 3,500,000 30,200 Borg-Warner Security Corporation* ......................... 532,275 102,500 Cunningham Graphics International, Inc.* ................. 1,697,656 170,000 Interim Services, Inc.* ............... 2,953,750 50,000 Medical Manager Corporation* .......... 1,425,000 230,000 MPW Industrial Services Group, Inc.* ......................... 2,098,750 25,000 Nova Corporation* ..................... 650,000 198,500 RCM Technologies, Inc.* ............... 2,580,500 160,000 StarTek, Inc.* ........................ 3,210,000 80,000 Stewart Enterprises, Inc., Class "A" ............................ 1,590,000 130,000 Sykes Enterprises, Inc.* .............. 2,665,000 ----------- 22,902,931 ----------- TELECOMMUNICATIONS--2.0% ------------------------ 70,000 American Tower Corporation, Class "A" ............................. 1,483,125 50,000 Comdial Corporation* .................. 293,750 183,750 Periphonics Corporation* .............. 1,590,586 35,000 Transaction Network Services* ......... 936,250 100,000 Trex Communications, Inc. (c)* ........ 400,000 ----------- 4,703,711 ----------- TEXTILES--0.4% -------------- 40,000 Kellwood Company ...................... 1,030,000 ----------- TRANSPORTATION--0.2% -------------------- 22,500 Air Express International ............. 492,188 ----------- Total Common Stocks (cost $211,379,535).................................. 226,501,176 ----------- PRINCIPAL MARKET AMOUNT VALUE --------- ----------- CONVERTIBLE BONDS--1.7%(a) - -------------------------- DATA PROCESSING--0.1% --------------------- $ 100,000 Proscape Technologies, Inc., Series "B", 6.5%, 11/18/01 (c) ........ 100,000 ----------- HEALTH CARE CENTERS--0.9% ------------------------- 2,000,000 American Retirement Corporation, 5.75%, 10/01/02 ......... 1,792,500 CONVERTIBLE BONDS (CONTINUED) - ----------------------------- HEALTH CARE CENTERS (CONTINUED) - ------------------------------- $ 1,000,000 Assisted Living Concepts, Inc., 6.0%, 11/01/02 ....................... 515,000 ----------- 2,307,500 ----------- MEDICAL EQUIPMENT/SUPPLY--0.6% ------------------------------ 1,000,000 Angeion Corporation, 7.5%, 04/15/03 ............................. 715,000 1,000,000 Aviron Corporation, 5.75%, 04/01/05 ............................. 835,000 ----------- 1,550,000 ----------- REAL ESTATE INVESTMENT TRUST--0.1% ---------------------------------- 155,000 LTC Properties, Inc., 8.25%, 07/01/01 ............................. 145,313 ----------- Total Convertible Bonds (cost $5,232,500).................................. 4,102,813 ----------- Total Investment Portfolio excluding repurchase agreement (cost $216,612,035) (b), 98.0% (a)................. 230,603,989 REPURCHASE AGREEMENT--1.5%(a) - ----------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated April 30, 1999 @ 4.78% to be repurchased at $3,538,409 on May 3, 1999, collateralized by $2,365,000 United States Treasury Bonds, 10.625% due August 15, 2015, (market value $3,358,716 including interest) (cost $3,537,000)..... 3,537,000 --------- TOTAL INVESTMENT PORTFOLIO, (cost $220,149,035) (b), 99.5% (a)..... 234,140,989 OTHER ASSETS AND LIABILITIES, net, 0.5%(a) . 1,232,728 ----------- NET ASSETS, 100.0% ....................... $235,373,717 ============ - ---------------------- * Not an income-producing security. (a) Percentages indicated are based on net assets. (b) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $13,991,954, which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $48,612,881 and aggregate gross unrealized depreciation for all securities in which there is an excess tax cost over market value of $34,620,927. (c) Private placement securities are fair valued by the Board of Trustees. The accompanying notes are an integral part of the financial statements. 23 June 18, 1999 Dear Shareholders: Two important events took place at the Heritage Series Trust - Value Equity Fund this past spring. First, Osprey Partners Investment Management, LLC received your vote on May 14, to begin managing the Fund as the sub-advisor. Second, and I think of most importance to our investors, is that "Value" stocks rebounded from their dismal performance over the past year. After some 12 months of being out of favor, investors finally began recognizing the imbedded value of a broad spectrum of stocks that have languished in the marketplace while a very concentrated few stocks dominated the performance of the market averages. A handful of stocks (5 stocks accounted for 84% of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") gain of 28.6%) accounted for the out-performance of the S&P 500 in 1998. These same five stocks (Microsoft, AOL, Citigroup, MCI Worldcom, and AIG) accounted for 53% of the S&P 500 gain of 4.98% in the first quarter of 1999. Furthermore, just 18 stocks accounted for 100% of the S&P 500 gain during that same period. Thus, the average return for the other 482 stocks in the S&P 500 was in the red for the quarter. The tide turned in early April when investors began to recognize the huge disparity in valuations. For example, Schwab's market capitalization was greater then Merrill Lynch's and AOL's market capitalization was larger than GM's. The huge reversal in market psychology toward value stocks that occurred in April and continued into June, we believe based on a number of studies, is just the precursor of a trend that is likely to continue over at least the next 12 to 18 months. Our philosophy of buying stocks that are selling below their intrinsic value based on our proprietary research should serve us well in the future as it has in the past. Our continual search for companies with low price/earnings ratios, low price/book value, significant free cash flow and investment grade balance sheets should reduce the market risk of the stocks in the portfolio. Visits with top management at these companies allow us to delve into the inner workings of the company to determine whether we think they will be able to achieve the goals that they have set and thus we believe should lower the business risk of our investments. Some good news for our shareholders is that over the past month we have almost completed the transition of the portfolio with minimal realized capital gains which will help to mimize the year end distribution requirement. We have added positions in several areas that have lagged the market year to date such as financial services, consumer nondurables, and healthcare. Our goal is to continue to do well compared to our benchmarks and other value managers which will bring superior performance to the Heritage Value Equity Fund and continued benefit to our shareholders. Sincerely, Sincerely, /s/ JEROME D. FISHER /s/ RUSSELL S. TOMPKINS - -------------------- ----------------------- Jerome D. Fisher Russell S. Tompkins Managing Partner Managing Partner Director of Equity Research Chief Operating Officer Osprey Partners Investment Osprey Partners Investment Management, LLC Management, LLC Portfolio Manager, Value Equity Fund Portfolio Manager, Value Equity Fund 24 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - VALUE EQUITY FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ---------- COMMON STOCKS--93.8%(a) ----------------------- AEROSPACE--4.5% --------------- 19,500 Raytheon Company, Class "B" ........... $1,369,875 ---------- BANKING--12.3% -------------- 16,600 Bank One Corporation .................. 979,400 12,000 Chase Manhattan Corporation ........... 993,000 16,500 First Union Corporation ............... 913,687 21,000 Washington Mutual, Inc. ............... 863,625 ---------- 3,749,712 ---------- CHEMICALS--2.2% --------------- 7,500 Minnesota Mining & Manufacturing Company ................. 667,500 ---------- CONGLOMERATES/DIVERSIFIED--6.8% ------------------------------- 40,000 Allegheny Teledyne, Inc. .............. 895,000 29,500 Fortune Brands, Inc. .................. 1,165,250 ---------- 2,060,250 ---------- DATA PROCESSING--7.2% --------------------- 22,000 Electronic Data Systems Corporation .......................... 1,182,500 5,000 International Business Machines Corporation ........................... 1,045,938 ---------- 2,228,438 ---------- ELECTRONICS/ELECTRIC--5.6% -------------------------- 7,500 Honeywell, Inc. ....................... 710,625 11,700 Koninklijke Philips Electron, Sponsored ADR ........................ 998,887 ---------- 1,709,512 ---------- FINANCE--5.5% ------------- 13,000 Freddie Mac ........................... 815,750 20,000 SLM Holding Corporation ............... 853,750 ---------- 1,669,500 ---------- GLASS/PRODUCTS--1.2% -------------------- 12,000 Libbey, Inc. ......................... 360,750 ---------- HEALTH CARE CENTERS--1.8% ------------------------- 22,000 Columbia/HCA Healthcare Corporation ......................... 543,125 ---------- INSURANCE--4.8% --------------- 7,500 Aetna, Inc. ........................... 657,656 22,200 Allstate Corporation .................. 807,525 ---------- 1,465,181 ---------- MACHINERY--0.8% --------------- 4,000 Caterpillar, Inc. ..................... 257,500 ---------- COMMON STOCKS (CONTINUED) - ------------------------- MEDICAL EQUIPMENT/SUPPLY--3.0% ------------------------------ 12,100 Bausch & Lomb, Inc. ................... 907,500 ---------- OIL & GAS--16.7% ---------------- 11,500 British Petroleum Company, PLC, Sponsored ADR ......................... 1,301,656 10,000 Exxon Corporation ..................... 830,625 32,000 MCN Energy Group, Inc. ................ 638,000 16,000 Royal Dutch Petroleum Company, NY Shares, Sponsored ADR ............. 939,000 25,000 Sonat, Inc. ........................... 893,750 13,600 Sunoco, Inc. .......................... 486,200 ---------- 5,089,231 ---------- PAPER/PRODUCTS--3.3% -------------------- 12,000 International Paper Company ........... 639,750 23,000 Schweitzer-Mauduit International, Inc. .................. 380,937 ---------- 1,020,687 ---------- PHARMACEUTICAL--1.7% -------------------- 9,500 Pharmacia & Upjohn, Inc. .............. 532,000 ---------- POLLUTION CONTROL--3.7% ----------------------- 20,000 Waste Management Holdings, Inc. ....................... 1,130,000 ---------- RETAIL STORES--2.6% ------------------- 17,000 Federated Department Stores, Inc.* ........................ 793,688 ---------- SERVICES--0.9% -------------- 13,000 Service Corporation International...... 269,750 ---------- STEEL/IRON--1.2% ---------------- 15,500 British Steel PLC, Sponsored ADR .................................. 358,438 ---------- TELECOMMUNICATIONS--4.8% ------------------------ 14,000 BellSouth Corporation ................. 626,500 15,000 SBC Communications, Inc. .............. 840,000 ---------- 1,466,500 ---------- TOBACCO--1.9% ------------- 6,000 Philip Morris Companies, Inc. ......... 210,375 12,700 UST, Inc. ............................. 354,013 ---------- 564,388 ---------- TOY MANUFA ----------------------- 15,000 Mattel, Inc. ......................... 388,125 ---------- Total Common Stocks (cost $23,383,354).................................. 28,601,650 The accompanying notes are an integral part of the financial statements. 25 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - VALUE EQUITY FUND INVESTMENT PORTFOLIO APRIL 30, 1999 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- MARKET VALUE ----------- REPURCHASE AGREEMENT--6.3%(a) ----------------------------- Repurchase Agreement with State Street Bank and Trust, dated April 30, 1999 @ 4.78% to be repurchased at $1,921,765 on May 3, 1999, collateralized by $1,285,000 United States Treasury Notes, 10.625% due August 15, 2015 (market value $1,947,178 including interest) (cost $1,921,000)......... $ 1,921,000 ----------- TOTAL INVESTMENT PORTFOLIO (cost $25,304,354)(b), 100.1% (a)........... 30,522,650 OTHER ASSETS AND LIABILITIES, net (0.1%) (a) . (31,494) ----------- NET ASSETS, 100.0% ........................... $30,491,156 =========== - ---------------------- * Not an income-producing security. (a) Percentages indicated are based on net assets. (b) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $5,218,296, which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $5,814,746 and aggregate gross unrealized depreciation for all securities in which there is an excess tax cost over market value of $596,450. ADR -- American Depository Receipt. The accompanying notes are an integral part of the financial statements. 26 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1999 (UNAUDITED) - --------------------------------------------------------------------------------
EAGLE AGGRESSIVE INTERNATIONAL GROWTH EQUITY FUND PORTFOLIO -------------- --------------- ASSETS - ------ Investments, at market value (identified cost $32,429,261, $41,027,096, $82,902,802, $23,667,601, $216,612,035 and $23,383,354, respectively) (Note 1) ..... $34,913,188 $49,524,495 Repurchase agreement, at market value (identified cost $4,771,000, $0, $6,904,000, $695,000, $3,537,000 and $1,921,000, respectively) (Note 1) ....................... 4,771,000 -- Cash ...................................................... 411 -- Foreign currency (cost $815,077)........................... -- 814,887 Receivables: Investments sold ......................................... 26,499 4,399,805 Fund shares sold ......................................... 137,087 19,564 Dividends and interest ................................... 5,687 144,024 Foreign taxes recoverable ................................ -- 53,147 Unrealized appreciation on forward currency contracts ..... -- 4,199 Deferred organization expenses (Note 1) ................... -- 10,400 Deferred state qualification expenses (Note 1) ............ 11,839 22,068 Prepaid Insurance ......................................... -- 3,123 ----------- ----------- Total assets .......................................... $39,865,711 $54,995,712 =========== =========== LIABILITIES - ----------- Payables (Note 4): Investments purchased .................................... $ 1,591,374 $ 3,720,142 Fund shares redeemed ..................................... 41,740 188,469 Accrued management fee ................................... 71,034 624,076 Accrued distribution fee ................................. 18,008 35,808 Other accrued expenses ................................... 44,082 1,245,090 ----------- ----------- Total Liabilities ..................................... $ 1,766,238 $ 5,813,585 ----------- ----------- Net assets, at market value ............................... $38,099,473 $49,182,127 =========== =========== NET ASSETS - ---------- Net assets consist of: Paid-in capital (Note 5) ................................. $32,217,880 $37,574,138 Undistributed net investment income (loss) (Notes 1 and 5) ......................................... (165,182) (396,029) Accumulated net realized gain (loss) (Notes 1 and 5) ......................................... 3,562,848 3,512,258 Net unrealized appreciation on investments, covered call options written and other assets and liabilities denominated in foreign currencies ....................... 2,483,927 8,491,760 ----------- ----------- Net assets, at market value ............................... $38,099,473 $49,182,127 =========== =========== Net assets, at market value Class A Shares ........................................... 20,818,876 7,478,283 Class B Shares ........................................... 7,379,626 413,357 Class C Shares ........................................... 9,900,971 6,863,087 Eagle Shares ............................................. -- 34,427,400 ----------- ----------- Total ................................................. $38,099,473 $49,182,127 =========== =========== Shares of beneficial interest outstanding Class A Shares ........................................... 1,118,876 257,809 Class B Shares ........................................... 398,692 14,530 Class C Shares ........................................... 535,023 241,221 Eagle Shares ............................................. -- 1,202,735 ----------- ----------- Total ................................................. 2,052,591 1,716,295 =========== =========== Net Asset Value -- offering and redemption price per share (Notes 1 and 2) ................................ Class A Shares ........................................... $ 18.61 $ 29.01 =========== =========== Maximum offering price per share (100/95.25 of $18.61, $29.01, $36.00, $15.08, $24.38 and $20.89............................................... $ 19.54 $ 30.46 =========== =========== Class B Shares ........................................... $ 18.51 $ 28.45 =========== =========== Class C Shares ........................................... $ 18.51 $ 28.45 =========== =========== Eagle Shares ............................................. $ 28.62 =========== GROWTH MID CAP SMALL CAP VALUE EQUITY GROWTH STOCK EQUITY FUND FUND FUND FUND --------------- -------------- --------------- -------------- ASSETS - ------ Investments, at market value (identified cost $32,429,261, $41,027,096, $82,902,802, $23,667,601, $216,612,035 and $23,383,354, respectively) (Note 1) ..... $118,639,656 $ 26,360,553 $230,603,989 $ 28,601,650 Repurchase agreement, at market value (identified cost $4,771,000, $0, $6,904,000, $695,000, $3,537,000 and $1,921,000, respectively) (Note 1) ....................... 6,904,000 695,000 3,537,000 1,921,000 Cash ...................................................... 877 315 83 281 Foreign currency (cost $815,077)........................... -- -- -- -- Receivables: Investments sold ......................................... 180,744 1,085,671 4,012,647 -- Fund shares sold ......................................... 861,530 41,045 284,076 152,008 Dividends and interest ................................... 38,117 2,045 103,250 17,316 Foreign taxes recoverable ................................ -- -- -- -- Unrealized appreciation on forward currency contracts ..... -- -- -- -- Deferred organization expenses (Note 1) ................... 8,499 18,094 -- 7,068 Deferred state qualification expenses (Note 1) ............ 15,136 19,815 23,332 13,571 Prepaid Insurance ......................................... 3,571 2,232 6,695 3,124 ------------ ------------ ------------ ------------ Total assets .......................................... $126,652,130 $ 28,224,770 $238,571,072 $ 30,716,018 ============ ============ ============ ============ LIABILITIES - ----------- Payables (Note 4): Investments purchased .................................... $ 1,980,506 $ 595,218 $ 1,616,188 $ -- Fund shares redeemed ..................................... 158,658 65,281 1,167,328 81,079 Accrued management fee ................................... 79,358 90,397 150,552 72,440 Accrued distribution fee ................................. 71,301 13,135 97,724 13,942 Other accrued expenses ................................... 87,087 45,611 165,563 57,401 ------------ ------------ ------------ ------------ Total Liabilities ..................................... $ 2,376,910 $ 809,642 $ 3,197,355 $ 224,862 ------------ ------------ ------------ ------------ Net assets, at market value ............................... $124,275,220 $ 27,415,128 $235,373,717 $ 30,491,156 ============ ============ ============ ============ NET ASSETS - ---------- Net assets consist of: Paid-in capital (Note 5) ................................. $ 81,192,279 $ 26,554,443 $226,369,564 $ 26,466,013 Undistributed net investment income (loss) (Notes 1 and 5) ......................................... (575,485) (204,043) (479,946) 12,811 Accumulated net realized gain (loss) (Notes 1 and 5) ......................................... 7,921,572 (1,628,224) (4,507,855) (1,205,964) Net unrealized appreciation on investments, covered call options written and other assets and liabilities denominated in foreign currencies ....................... 35,736,854 2,692,952 13,991,954 5,218,296 ------------ ------------ ------------ ------------ Net assets, at market value ............................... $124,275,220 $ 27,415,128 $235,373,717 $ 30,491,156 ============ ============ ============ ============ Net assets, at market value Class A Shares ........................................... 54,132,138 15,411,546 149,504,415 16,880,690 Class B Shares ........................................... 10,715,571 2,034,734 10,368,138 1,128,187 Class C Shares ........................................... 59,427,511 9,968,848 75,501,164 12,482,279 Eagle Shares ............................................. -- -- -- -- ------------ ------------ ------------ ------------ Total ................................................. $124,275,220 $ 27,415,128 $235,373,717 $ 30,491,156 ============ ============ ============ ============ Shares of beneficial interest outstanding Class A Shares ........................................... 1,503,701 1,021,794 6,131,831 807,952 Class B Shares ........................................... 305,497 136,443 438,789 54,595 Class C Shares ........................................... 1,694,685 668,280 3,194,131 604,093 Eagle Shares ............................................. -- -- -- -- ------------ ------------ ------------ ------------ Total ................................................. 3,503,883 1,826,517 9,764,751 1,466,640 ============ ============ ============ ============ Net Asset Value -- offering and redemption price per share (Notes 1 and 2) ................................ Class A Shares ........................................... $ 36.00 $ 15.08 $ 24.38 $ 20.89 ============ ============ ============ ============ Maximum offering price per share (100/95.25 of $18.61, $29.01, $36.00, $15.08, $24.38 and $20.89............................................... $ 37.80 $ 15.83 $ 25.60 $ 21.93 ============ ============ ============ ============ Class B Shares ........................................... $ 35.08 $ 14.91 $ 23.63 $ 20.67 ============ ============ ============ ============ Class C Shares ........................................... $ 35.07 $ 14.92 $ 23.64 $ 20.66 ============ ============ ============ ============ Eagle Shares .............................................
The accompanying notes are an integral part of the financial statements. 27 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENT OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) - --------------------------------------------------------------------------------
EAGLE AGGRESSIVE INTERNATIONAL GROWTH EQUITY FUND PORTFOLIO -------------- ----------------- INVESTMENT INCOME - ----------------- Income: Dividends ....................................... $ 21,124 $ 301,202(a) Interest ........................................ 112,700 23,849(b) ---------- ---------- Total income ................................. 133,824 325,051 Expenses (Notes 1 and 4): Management fee .................................. 151,151 240,579 Distribution fee (Class A Shares) ............... 21,252 8,877 Distribution fee (Class B Shares) ............... 30,642 1,720 Distribution fee (Class C Shares) ............... 35,501 32,285 Distribution fee (Eagle Shares) ................. -- 171,066 Shareholder servicing fees ...................... 15,922 -- Shareholder servicing fees (Class A Shares) ..... -- 4,616 Shareholder servicing fees (Class B Shares) ..... -- 224 Shareholder servicing fees (Class C Shares) ..... -- 4,197 Shareholder servicing fees (Eagle Shares) ....... -- 1,711 Professional fees ............................... 26,701 34,871 Custodian/Fund accounting fees .................. 27,452 77,419 Amortization of state qualification expenses..... 31,342 22,383 Organization expenses ........................... -- 5,200 Reports to shareholders ......................... 8,563 12,575 Trustees' fees and expenses ..................... 5,067 5,394 Other ........................................... -- 2,050 ---------- ---------- Total expenses before waiver ................. 353,593 625,167 Fees waived by Eagle/Manager (Note 4) ................................... (54,587) (17,952) ---------- ---------- Total expenses after waiver .................. 299,006 607,215 ---------- ---------- Net investment income (loss) ..................... (165,182) (282,164) ---------- ---------- Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) from investment transactions .................................... 3,765,203 3,281,022 Net realized gain from foreign currency transactions .................................... -- 246,677 Net increase in unrealized appreciation of investments during the period ................... 951,017 2,346,615 Net decrease in unrealized appreciation of covered call options written during the period ...................................... -- -- Net increase in unrealized appreciation from foreign currency during the period .............. -- 809,438 ---------- ---------- Net gain on investments ...................... 4,716,220 6,683,752 ---------- ---------- Net increase in net assets resulting from operations ................................. $4,551,038 $6,401,588 ========== ========== GROWTH MID CAP SMALL CAP VALUE EQUITY GROWTH STOCK EQUITY FUND FUND FUND FUND --------------- -------------- --------------- ------------- INVESTMENT INCOME - ----------------- Income: Dividends ....................................... $ 289,700 $ 46,236 $ 1,051,146 $ 280,772 Interest ........................................ 83,236 25,560 469,228 38,739 ----------- ---------- ----------- ---------- Total income ................................. 372,936 71,796 1,520,374 319,511 Expenses (Notes 1 and 4): Management fee .................................. 417,694 107,576 1,031,061 114,279 Distribution fee (Class A Shares) ............... 61,123 20,411 207,243 20,881 Distribution fee (Class B Shares) ............... 42,859 11,023 49,754 4,969 Distribution fee (Class C Shares) ............... 269,575 50,768 413,374 63,879 Distribution fee (Eagle Shares) ................. -- -- -- -- Shareholder servicing fees ...................... 58,571 18,835 176,695 18,834 Shareholder servicing fees (Class A Shares) ..... -- -- -- -- Shareholder servicing fees (Class B Shares) ..... -- -- -- -- Shareholder servicing fees (Class C Shares) ..... -- -- -- -- Shareholder servicing fees (Eagle Shares) ....... -- -- -- -- Professional fees ............................... 15,975 14,510 19,360 14,840 Custodian/Fund accounting fees .................. 32,753 27,645 45,189 27,537 Amortization of state qualification expenses..... 22,790 27,467 23,405 17,515 Organization expenses ........................... 2,833 2,585 -- 5,301 Reports to shareholders ......................... 16,789 5,751 23,215 5,753 Trustees' fees and expenses ..................... 5,094 5,067 5,094 5,094 Other ........................................... 2,365 1,379 5,930 2,003 ----------- ---------- ----------- ---------- Total expenses before waiver ................. 948,421 293,017 2,000,320 300,885 Fees waived by Eagle/Manager (Note 4) ................................... -- (17,178) -- (28,291) ----------- ---------- ----------- ---------- Total expenses after waiver .................. 948,421 275,839 2,000,320 272,594 ----------- ---------- ----------- ---------- Net investment income (loss) ..................... (575,485) (204,043) (479,946) 46,917 ----------- ---------- ----------- ---------- Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) from investment transactions .................................... 11,055,593 (87,742) (792,062) (874,503) Net realized gain from foreign currency transactions .................................... -- -- -- -- Net increase in unrealized appreciation of investments during the period ................... 12,117,581 1,754,872 19,893,958 5,218,296 Net decrease in unrealized appreciation of covered call options written during the period ...................................... -- -- -- (502,915) Net increase in unrealized appreciation from foreign currency during the period .............. -- -- -- -- ----------- ---------- ----------- ---------- Net gain on investments ...................... 23,173,174 1,667,130 19,101,896 3,840,878 ----------- ---------- ----------- ---------- Net increase in net assets resulting from operations ................................. $22,597,689 $1,463,087 $18,621,950 $3,887,795 =========== ========== =========== ==========
- ---------- (a) Net of $25,511 foreign withholding taxes. (b) Net of $2 foreign withholding taxes. The accompanying notes are an integral part of the financial statements. 28 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX MONTH FOR THE PERIOD PERIOD ENDED AUGUST 20, 1998 APRIL 30, 1999 TO (UNAUDITED) OCTOBER 31, 1998 =================== ================= AGGRESSIVE GROWTH FUND - ---------------------- Increase in net assets: Operations: Net investment loss ...................................................... $ (165,182) $ (5,426) Net realized gain (loss) on investment transactions ...................... 3,765,203 (202,355) Net increase in unrealized appreciation of investments during the period . 951,017 1,532,910 ----------- ----------- Net increase in net assets resulting from operations ..................... 4,551,038 1,325,129 Increase in net assets from Fund share transactions (Note 2) .............. 15,063,258 17,160,048 ----------- ----------- Increase in net assets .................................................... 19,614,296 18,485,177 Net assets, beginning of period ........................................... 18,485,177 -- ----------- ----------- Net assets, end of period (including accumulated net investment loss of $165,182 as of April 30, 1999)............................................ $38,099,473 $18,485,177 =========== ===========
FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 YEAR ENDED (UNAUDITED) OCTOBER 31, 1998 ================== ================= EAGLE INTERNATIONAL EQUITY PORTFOLIO - ------------------------------------ Increase in net assets: Operations: Net investment loss ............................................................. $ (282,164) $ (264,871) Net realized gain on investment transactions .................................... 3,281,022 234,230 Net realized gain (loss) from foreign currency transactions ..................... 246,677 (68,794) Net increase in unrealized appreciation of investments during the period ........ 2,346,615 1,977,238 Net increase in unrealized appreciation from foreign currency during the period . 809,438 1,412,197 ------------ ----------- Net increase in net assets resulting from operations ............................ 6,401,588 3,290,000 Distributions to shareholders from: Net investment income Class A Shares, ($0.05 per share).......................... -- (13,340) Net realized gains Class A Shares, ($0.12 and $0.62 per share, respectively)..... (30,773) (155,218) Net realized gains Class B Shares, ($0.12 per share) ............................ (1,581) -- Net realized gains Class C Shares, ($0.12 and $0.62 per share, respectively)..... (27,806) (102,719) Net realized gains Eagle Shares, ($0.12 and $0.62 per share, respectively)....... (151,973) (808,740) Increase (decrease) in net assets from Fund share transactions (Note 2) .......... (2,745,905) 1,913,671 ------------ ----------- Increase in net assets ........................................................... 3,443,550 4,123,654 Net assets, beginning of period .................................................. 45,738,577 41,614,923 ------------ ----------- Net assets, end of period (including undistributed net investment loss of $396,029 and $113,865, respectively) ......................................... $ 49,182,127 $45,738,577 ============ ===========
FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 YEAR ENDED (UNAUDITED) OCTOBER 31, 1998 ================== ================= GROWTH EQUITY FUND - ------------------ Increase in net assets: Operations: Net investment loss ...................................................... $ (575,485) $ (480,255) Net realized gain (loss) on investment transactions ...................... 11,055,593 (3,134,021) Net increase in unrealized appreciation of investments during the period . 12,117,581 13,613,823 ------------ ------------ Net increase in net assets resulting from operations ..................... 22,597,689 9,999,547 Distribution to shareholders from: Net realized gains Class A Shares ($0.32 per share)....................... -- (324,394) Net realized gains Class C Shares ($0.32 per share) ...................... -- (263,908) Increase in net assets from Fund share transactions (Note 2) .............. 17,157,752 32,315,932 ------------ ------------ Increase in net assets .................................................... 39,755,441 41,727,177 Net assets, beginning of period ........................................... 84,519,779 42,792,602 ------------ ------------ Net assets, end of period (including accumulated net investment loss of $575,485 as of April 30, 1999)......................................... $124,275,220 $ 84,519,779 ============ ============
The accompanying notes are an integral part of the financial statements. 29 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
FOR THE SIX MONTH FOR THE PERIOD PERIOD ENDED NOVEMBER 6, 1997 APRIL 30, 1999 TO (UNAUDITED) OCTOBER 31, 1998 ------------------- ----------------- MID CAP GROWTH FUND - ------------------- Increase (decrease) in net assets: Operations: Net investment loss .......................................................... $ (204,043) $ (302,320) Net realized loss on investment transactions ................................. (87,742) (1,540,482) Net increase in unrealized appreciation of investments during the period ..... 1,754,872 938,080 ------------ ------------ Net increase (decrease) in net assets resulting from operations .............. 1,463,087 (904,722) Increase (decrease) in net assets from Fund share transactions (Note 2) ....... (1,876,965) 28,733,728 ------------ ------------ Increase (decrease) in net assets ............................................. (413,878) 27,829,006 Net assets, beginning of period ............................................... 27,829,006 -- ------------ ------------ Net assets, end of period (including accumulated net investment loss of $204,043 as of April 30, 1999)............................................. $ 27,415,128 $ 27,829,006 ============ ============
FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 YEAR ENDED (UNAUDITED) OCTOBER 31, 1998 ================== ================= SMALL CAP STOCK FUND - -------------------- Decrease in net assets: Operations: Net investment loss ..................................................................... $ (479,946) $ (1,505,367) Net realized loss on investment transactions ............................................ (792,062) (2,922,849) Net increase (decrease) in unrealized appreciation of investments during the period ..... 19,893,958 (70,263,882) ------------- ------------- Net increase (decrease) in net assets resulting from operations ......................... 18,621,950 (74,692,098) Distributions to shareholders from: Net realized gains Class A Shares, ($1.73 per share)..................................... -- (13,224,158) Net realized gains Class C Shares, ($1.73 per share)..................................... -- (5,438,602) Increase (decrease) in net assets from Fund share transactions (Note 2) .................. (50,329,703) 48,086,681 ------------- ------------- Decrease in net assets ................................................................... (31,707,753) (45,268,177) Net assets, beginning of period .......................................................... 267,081,470 312,349,647 ------------- ------------- Net assets, end of period (including accumulated net investment loss of $479,946 as of April 30, 1999)........................................................ $ 235,373,717 $ 267,081,470 ============= =============
FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 YEAR ENDED (UNAUDITED) OCTOBER 31, 1998 ------------------ ----------------- VALUE EQUITY FUND - ----------------- Decrease in net assets: Operations: Net investment income ................................................................... $ 46,917 $ 149,444 Net realized loss on investment transactions ............................................ (874,503) (46,890) Net increase (decrease) in unrealized appreciation of investments during the period ..... 4,715,381 (1,519,457) ------------ ------------ Net increase (decrease) in net assets resulting from operations ......................... 3,887,795 (1,416,903) Distributions to shareholders from: Net investment income Class A Shares, ($ 0.16 and $ 0.20 per share, respectively)........ (152,941) (171,438) Net investment income Class B Shares, ($ 0.01 per share)................................. (752) -- Net investment income Class C Shares, ($ 0.01 and $ 0.05 per share, respectively)........ (9,859) (31,101) Net realized gains Class A Shares, ($ 0.12 and $4.90 per share, respectively)............ (110,747) (4,141,640) Net realized gains Class B Shares, ($ 0.12 per share).................................... (6,528) -- Net realized gains Class C Shares, ($ 0.12 and $4.90 per share, respectively)............ (85,568) (3,207,816) Increase (decrease) in net assets from Fund share transactions (Note 2) .................. (5,295,660) 4,709,907 ------------ ------------ Decrease in net assets ................................................................... (1,774,260) (4,258,991) Net assets, beginning of period .......................................................... 32,265,416 36,524,407 ------------ ------------ Net assets, end of period (including undistributed net investment income of $12,811 and $129,446, respectively) .................................................. $ 30,491,156 $ 32,265,416 ============ ============
The accompanying notes are an integral part of the financial statements. 30 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements.
CLASS A SHARES* --------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 PERIOD ENDED (UNAUDITED) OCTOBER 31, 1998/dagger/ ------------------ ------------------------ Net asset value, beginning of period ................. $ 15.35 $ 14.29 -------- -------- Income from Investing Operations: Net investment loss(a) .............................. ( 0.07) -- Net realized and unrealized gain on investments ..... 3.33 1.06 -------- -------- Total from Investment Operations ..................... 3.26 1.06 -------- -------- Net asset value, end of period ....................... $ 18.61 $ 15.35 ======== ======== Total Return (%)(b)(c) ............................... 21.24 7.42 Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a)(d) ............................. 1.65 1.65 Net investment gain (loss) to average daily net assets(d) ................................ ( 0.77) 0.08 Portfolio turnover rate(b) .......................... 97 34 Net assets, end of period ($ millions)............... 21 11
CLASS B SHARES* ---------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 PERIOD ENDED (UNAUDITED) OCTOBER 31, 1998/dagger/ ------------------ ------------------------ Net asset value, beginning of period ................. $ 15.33 $ 14.29 -------- -------- Income from Investing Operations: Net investment loss(a) .............................. ( 0.14) ( 0.03) Net realized and unrealized gain on investments ..... 3.32 1.07 -------- -------- Total from Investment Operations ..................... 3.18 1.04 -------- -------- Net asset value, end of period ....................... $ 18.51 $ 15.33 ======== ======== Total Return (%)(B)(c) ............................... 20.74 7.28 Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a)(d) ............................. 2.40 2.40 Net investment gain (loss) to average daily net assets(d) ................................ ( 1.52) ( 0.77) Portfolio turnover rate(b) .......................... 97 34 Net assets, end of period ($ millions)............... 7 4
CLASS C SHARES* ------------------------- FOR THE PERIOD ENDED OCTOBER 31, 1998/dagger/ ------------------------- Net asset value, beginning of period ................. $ 15.33 $ 14.29 -------- -------- Income from Investing Operations: Net investment loss(a) .............................. ( 0.14) ( 0.03) Net realized and unrealized gain on investments ..... 3.32 1.07 -------- -------- Total from Investment Operations ..................... 3.18 1.04 -------- -------- Net Asset Value, End of Period ....................... $ 18.51 $ 15.33 ======== ======== Total Return (%)(b)(c) ............................... 20.74 7.28 Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a)(d) ............................. 2.40 2.40 Net investment gain (loss) to average daily net assets(d) ................................ ( 1.51) ( 0.71) Portfolio turnover rate(b) .......................... 97 34 Net assets, end of period ($ millions)............... 10 3
- -------------------- * Per share amounts have been calculated using the monthly average share method, which more appropriately presents per share data for the period since use of the undistributed income method does not correspond with results of operations. /dagger/ For the period August 20, 1998 (commencement of operations) to October 31, 1998. (a) Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.03 and $.07 per Class A Share, respectively. The operating expense ratios including such items would have been 2.01% (annualized) and 3.64% (annualized) per Class A Share, respectively. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.03 and $.07 per Class B Share, respectively. The operating expense ratios including such items would have been 2.76% (annualized) and 4.39% (annualized) per Class B Share, respectively. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.03 and $.07 per Class C Share, respectively. The operating expense ratios including such items would have been 2.76% (annualized) and 4.39% (annualized) per Class C Share, respectively. (b) Not annualized. (c) Does not reflect the imposition of a sales charge. (d) Annualized. 31 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements.
CLASS A SHARES* ------------------------------------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 --------------------------------------------------- (UNAUDITED) 1998 1997 1996/dagger//dagger/ ------------- --------- --------- ---------------------- Net asset value, beginning of period ........................... $ 25.43 $ 23.97 $ 22.25 $ 21.11 ----------- --------- --------- ----------- Income from Investment Operations: Net investment income (loss)(a) ....................... ( 0.08) ( 0.01) 0.05 0.10 Net realized and unrealized gain on investments ............. 3.78 2.14 2.28 1.04 ----------- --------- --------- ----------- Total from Investment Operations ...................... 3.70 2.13 2.33 1.14 ----------- --------- --------- ----------- Less Distributions: Dividends from net investment income ............... -- ( 0.05) ( 0.44) -- Distributions from net realized gains .................. ( 0.12) ( 0.62) ( 0.17) -- ----------- --------- --------- ----------- Total Distributions .............. ( 0.12) ( 0.67) ( 0.61) -- ----------- --------- --------- ----------- Net asset value, end of period ........................ $ 29.01 $ 25.43 $ 23.97 $ 22.25 =========== ========= ========= =========== Total Return(%)(b) ................ 14.57 (c)(f) 9.04 (d) 10.71 (d) 5.40 (c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)...... 1.97 (e) 1.97 1.97 1.97 (e) Net investment income (loss) to average daily net assets ..... ( 0.61)(e) ( 0.02) 0.22 0.44 (e) Portfolio turnover rate .......... 41 (c) 71 50 59 Net assets, end of period ($ millions)..................... 7 7 6 3
CLASS B SHARES* ------------------------------------------- FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) 1998/dagger//dagger//dagger/ ------------- --------------------------- Net asset value, beginning of period ........................... $ 25.03 $ 23.95 ----------- --------- Income from Investment Operations: Net investment income (loss)(a) ....................... ( 0.17) ( 0.16) Net realized and unrealized gain on investments ............. 3.71 1.24 ----------- --------- Total from Investment Operations ...................... 3.54 1.08 ----------- --------- Less Distributions: Dividends from net investment income ............... -- -- Distributions from net realized gains .................. ( 0.12) -- ----------- --------- Total Distributions .............. ( 0.12) -- ----------- --------- Net asset value, end of period ........................ $ 28.45 $ 25.03 =========== ========= Total Return(%)(b) ................ 14.07 (c)(f) 4.51 (c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)...... 2.72 (e) 2.72 (e) Net investment income (loss) to average daily net assets ..... ( 1.32)(e) ( 0.71)(e) Portfolio turnover rate .......... 41 (c) 71 Net assets, end of period ($ millions)..................... 0.4 0.2
CLASS C SHARES* ----------------------------------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 ------------------------------------------------- (UNAUDITED) 1998 1997 1996/dagger//dagger/ ------------- --------- --------- ------------------- Net asset value, beginning of period ........................... $ 25.03 $ 23.73 $ 22.12 $ 21.11 ----------- --------- --------- ----------- Income from Investment Operations: Net investment income (loss)(a) ....................... ( 0.18) ( 0.20) ( 0.13) ( 0.07) Net realized and unrealized gain on investments ............. 3.72 2.12 2.25 1.08 ----------- --------- --------- ----------- Total from Investment Operations ...................... 3.54 1.92 2.12 1.01 ----------- --------- --------- ----------- Less Distributions: Dividends from net investment income ............... -- -- ( 0.34) -- Distributions from net realized gains .................. ( 0.12) ( 0.62) ( 0.17) -- ----------- --------- --------- ----------- Total Distributions .............. ( 0.12) ( 0.62) ( 0.51) -- ----------- --------- --------- ----------- Net asset value, end of period ........................ $ 28.45 $ 25.03 $ 23.73 $ 22.12 =========== ========= ========= =========== Total Return(%)(b) ................ 14.11 (c)(f) 8.24 (d) 9.79 (d) 4.78 (c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)...... 2.72 (e) 2.72 2.72 2.72 (e) Net investment income (loss) to average daily net assets ..... ( 1.35)(e) ( 0.79) ( 0.52) ( 0.32)(e) Portfolio turnover rate .......... 41 (c) 71 50 59 Net assets, end of period ($ millions)..................... 7 6 4 1
EAGLE SHARES* -------------------------------------------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 ---------------------------------------------------------- (UNAUDITED) 1998 1997 1996 1995/dagger/ ------------- --------- --------- -------- ------------ Net asset value, beginning of period ........................... $ 25.17 $ 23.83 $ 22.14 $ 20.79 $ 20.00 ----------- --------- --------- -------- ------------- Income from Investment Operations: Net investment income (loss)(a) ....................... ( 0.17) ( 0.17) ( 0.11) ( 0.01) ( 0.03) Net realized and unrealized gain on investments ............. 3.74 2.13 2.28 1.84 0.82 ----------- --------- --------- -------- ------------- Total from Investment Operations ...................... 3.57 1.96 2.17 1.83 0.79 ----------- --------- --------- -------- ------------- Less Distributions: Dividends from net investment income ............... -- -- ( 0.31) ( 0.01) -- Distributions from net realized gains .................. ( 0.12) ( 0.62) ( 0.17) ( 0.47) -- ----------- --------- --------- -------- ------------- Total Distributions .............. ( 0.12) ( 0.62) ( 0.48) ( 0.48) -- ----------- --------- --------- -------- ------------- Net asset value, end of period ........................ $ 28.62 $ 25.17 $ 23.83 $ 22.14 $ 20.79 =========== ========= ========= ======== ============= Total Return(%)(b) ................ 14.15 (c)(f) 8.38 (d) 9.98 (d) 8.93 3.95 (c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)...... 2.60 (e) 2.60 2.60 2.60 2.60 (e) Net investment income (loss) to average daily net assets ..... ( 1.26)(e) ( 0.67) ( 0.47) ( 0.02) ( 0.33)(e) Portfolio turnover rate .......... 41 (c) 71 50 59 61 Net assets, end of period ($ millions)..................... 34 33 32 22 10
- ------- * Per share amounts have been calculated using the monthly average share method, which more appropriately presents per share data for the year since use of the undistributed income method does not correspond with results of operations. /dagger/ For the period May 1, 1995 (commencement of operations) to October 31, 1995. /dagger//dagger/ For the period December 27, 1995 (commencement of Class A and Class C Shares) to October 31, 1996. /dagger//dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31, 1998. (a) Excludes management fees waived by Eagle in the amount of $.01, $.03, $.06 and $.16 per Class A Share, respectively. The operating expense ratio including such items would have been 2.04% (annualized), 2.08%, 2.23% and 2.69% (annualized) for Class A Shares, respectively. Excludes management fees waived by the Eagle in the amount of $.01, $.03 per Class B Share, respectively. The operating expense ratio including such items would have been 2.79% (annualized) and 2.83 (annualized) for Class B Shares, respectively. Excludes management fees waived by the Eagle in the amount of $.01, $.03, $.06, and $.16 per Class C Share, respectively. The operating expense ratio including such items would have been 2.79% (annualized), 2.83%, 2.98% and 3.44% (annualized) for Class C Shares, respectively. Excludes management fees waived and expenses reimbursed by the Eagle in the amount of $.01, $.03, $.06, $.16 and $.17 per Eagle Share, respectively. The operating expense ratios including such items would have been 2.67% (annualized), 2.71%, 2.86%, 3.31% and 5.09% (annualized) for Eagle Shares, respectively. (b) Calculated without the imposition of a sales charge. (c) Not annualized. (d) These returns are calculated based on the published net asset value at October 31, 1997. (e) Annualized. (f) These returns are calculated based on the published net asset value at April 30, 1999. 32 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - GROWTH EQUITY FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements.
CLASS A SHARES* ------------------------------------------------------ FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 -------------------------------------- (UNAUDITED) 1998 1997 1996/dagger/ ------------- ---------- ---------- ------------- Net asset value, beginning of period ................. $ 28.82 $ 23.77 $ 17.74 $ 14.29 -------- -------- -------- --------- Income from Investment Operations: Net investment loss(a) .............................. ( 0.10) ( 0.11) ( 0.07) ( 0.03) Net realized and unrealized gain on investments ..................................... 7.28 5.48 6.10 3.48 -------- -------- -------- --------- Total from Investment Operations ..................... 7.18 5.37 6.03 3.45 -------- -------- -------- --------- Less Distributions: Distributions from net realized gains ............... -- ( 0.32) -- -- -------- -------- -------- --------- Net asset value, end of period ....................................... $ 36.00 $ 28.82 $ 23.77 $ 17.74 ======== ======== ======== ========= Total Return (%)(b) .................................. $ 24.91(c) 22.84 33.99 24.14 (c) Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a) ...................................... 1.28 (d) 1.38 1.61 1.65 (d) Net investment loss to average daily net assets ..... ( 0.61)(d) ( 0.40) ( 0.35) ( 0.19)(d) Portfolio turnover rate ............................. 40 (c) 54 50 23 Net assets, end of period ($ millions)............... 54 40 24 12
CLASS B SHARES* -------------------------------------- FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) 1998/dagger//dagger/ ---------------- ------------------- Net asset value, beginning of period ................. $ 28.18 $ 24.33 --------- --------- Income from Investment Operations: Net investment loss(a) .............................. ( 0.23) ( 0.23) Net realized and unrealized gain on investments ..................................... 7.13 4.08 --------- --------- Total from Investment Operations ..................... 6.90 3.85 --------- --------- Less Distributions: Distributions from net realized gains ............... -- -- --------- --------- Net asset value, end of period ....................................... $ 35.08 $ 28.18 ========= ========= Total Return (%)(b) .................................. 24.49 (c) 15.82 (c) Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a) ...................................... 2.03 (d) 2.11 (d) Net investment loss to average daily net assets ..... ( 1.37)(d) ( 1.10)(d) Portfolio turnover rate ............................. 40 (c) 54 Net assets, end of period ($ millions)............... 11 5
CLASS C SHARES* ------------------------------------------------------ FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 -------------------------------------- (UNAUDITED) 1998 1997 1996/dagger/ ------------ --------- ---------- ------------- Net asset value, beginning of period ................. $ 28.18 $ 23.42 $ 17.61 $ 14.29 --------- -------- -------- --------- Income from Investment Operations: Net investment loss(a) .............................. ( 0.23) ( 0.31) ( 0.24) ( 0.15) Net realized and unrealized gain on investments ..................................... 7.12 5.39 6.05 3.47 --------- -------- -------- --------- Total from Investment Operations ..................... 6.89 5.08 5.81 3.32 --------- -------- -------- --------- Less Distributions: Distributions from net realized gains ............... -- ( 0.32) -- -- --------- -------- -------- --------- Net asset value, end of period ....................................... $ 35.07 $ 28.18 $ 23.42 $ 17.61 ========= ======== ======== ========= Total Return (%)(b) .................................. 24.45 (c) 21.93 32.99 23.23 (c) Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a) ...................................... 2.03 (d) 2.13 2.36 2.40 (d) Net investment loss to average daily net assets ..... ( 1.36)(d) ( 1.15) ( 1.14) ( 0.96)(d) Portfolio turnover rate ............................. 40 (c) 54 50 23 Net assets, end of period ($ millions)............... 59 39 18 5
- ------- * Per share amounts have been calculated using the monthly average share method, which more appropriately presents per share data for the period since use of the undistributed income method does not correspond with results of operations. /dagger/ For the period November 16, 1995 (commencement of operations) to October 31, 1996. /dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31, 1998. (a) Excludes management fees waived and expensed reimbursed by the Manager in the amount of $.11 per share for the period ended October 31, 1996. The operating expense ratios including such items would have been 2.39% (annualized) for Class A Shares and 3.14% (annualized) for Class C Shares, respectively. The year ended October 31, 1997 includes recovery of previously waived management fees paid to the manager of $.01 per share. The operating expense ratios excluding such items would have been 1.54% for Class A Shares and 2.29% for Class C Shares. (b) Does not reflect the imposition of a sales charge. (c) Not annualized. (d) Annualized. 33 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - MID CAP GROWTH FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements.
CLASS A SHARES* ------------------------------------------ FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 PERIOD ENDED (UNAUDITED) OCTOBER 31, 1998/dagger/ ------------------- ------------------------ Net asset value, beginning of period ....................... $ 14.28 $ 14.29 -------- -------- Income from Investment Operations: Net investment loss(a) .................................... ( 0.08) ( 0.15) Net realized and unrealized gain (loss) on investments..... 0.88 0.14 -------- -------- Total from Investment Operations ........................... 0.80 ( 0.01) -------- -------- Net asset value, end of period ............................. $ 15.08 $ 14.28 ======== ======== Total Return (%)(b)(c) ..................................... 5.60 ( 0.07) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)(d) ......................................... 1.60 1.60 Net investment loss to average daily net assets(d) ........ ( 1.10) ( 0.99) Portfolio turnover rate(b) ................................ 103 129 Net assets, end of period ($ millions)..................... 15 16
CLASS B SHARES* ------------------------------------------------------ FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 PERIOD ENDED (UNAUDITED) OCTOBER 31, 1998/dagger//dagger/ ------------------- -------------------------------- Net asset value, beginning of period ....................... $ 14.17 $ 14.42 -------- -------- Income from Investment Operations: Net investment loss(a) .................................... ( 0.14) ( 0.23) Net realized and unrealized gain (loss) on investments..... 0.88 ( 0.02) -------- -------- Total from Investment Operations ........................... 0.74 ( 0.25) -------- -------- Net asset value, end of period ............................. $ 14.91 $ 14.17 ======== ======== Total Return (%)(b)(c) ..................................... 5.22 ( 1.73) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)(d) ......................................... 2.35 2.35 Net investment loss to average daily net assets(d) ........ ( 1.85) ( 1.85) Portfolio turnover rate(b) ................................ 103 129 Net assets, end of period ($ millions)..................... 2 2
CLASS C SHARES* ------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE APRIL 30, 1999 PERIOD ENDED (UNAUDITED) OCTOBER 31, 1998/dagger/ ------------------ ------------------------ Net asset value, beginning of period ....................... $ 14.18 $ 14.29 -------- -------- Income from Investment Operations: Net investment loss(a) .................................... ( 0.14) ( 0.25) Net realized and unrealized gain (loss) on investments..... 0.88 0.14 -------- -------- Total from Investment Operations ........................... 0.74 ( 0.11) -------- -------- Net asset value, end of period ............................. $ 14.92 $ 14.18 ======== ======== Total Return (%)(b)(c) ..................................... 5.22 ( 0.77) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)(d) ......................................... 2.35 2.35 Net investment loss to average daily net assets(d) ........ ( 1.85) ( 1.75) Portfolio turnover rate(b) ................................ 103 129 Net assets, end of period ($ millions)..................... 10 9
- ------------ * Per share amounts have been calculated using the monthly average share method, which more appropriately presents per share data for the period since use of the undistributed income method does not correspond with results of operations. /dagger/ For the period November 6, 1997 (commencement of operations) to October 31, 1998. /dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31, 1998. (a) Excludes management fees waived by the Manager in the amount of $.01 and $.03 per Class A Share, respectively. The operating expense ratios including such items would have been 1.72% (annualized) and 1.86% (annualized) per Class A Share, respectively. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.01 and $.03 per Class B Share, respectively. The operating expense ratios including such items would have been 2.47% (annualized) and 2.61% (annualized) per Class B Share, respectively. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.01 and $.03 per Class C Share, respectively. The operating expense ratios including such items would have been 2.47% (annualized) and 2.61% (annualized) per Class C Share, respectively. (b) Not annualized. (c) Does not reflect the imposition of a sales charge. (d) Annualized. 34 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - SMALL CAP STOCK FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements.
CLASS A SHARES ----------------------------------------------------------------------------- FOR THE SIX MONTH FOR THE YEARS ENDED PERIOD ENDED OCTOBER 31, APRIL 30, 1999* ----------------------------------------------------------- (UNAUDITED) 1998* 1997* 1996* 1995 1994 ----------------- ----------- ----------- ---------- --------- ----------- Net asset value, beginning of period ........................ $ 22.62 $ 30.39 $ 24.08 $ 18.86 $ 16.20 $ 15.57 ---------- --------- -------- -------- -------- -------- Income from Investment Operations: Net investment income (loss)(a) ................ ( 0.01) ( 0.06) ( 0.02) ( 0.05) 0.02 ( 0.01) Net realized and unrealized gain (loss) on investments ...... 1.77 ( 5.98) 8.21 6.12 3.62 0.64 ---------- --------- -------- -------- -------- -------- Total from Investment Operations ...................... 1.76 ( 6.04) 8.19 6.07 3.64 0.63 ---------- --------- -------- -------- -------- -------- Less Distributions: Dividends from net investment income ............... -- -- -- ( 0.01) ( 0.01) -- Distributions from net realized gains .................. -- ( 1.73) ( 1.88) ( 0.84) ( 0.97) -- ---------- --------- -------- -------- -------- -------- Total Distributions .............. -- ( 1.73) ( 1.88) ( 0.85) ( 0.98) -- ---------- --------- -------- -------- -------- -------- Net asset value, end of period ........................ $ 24.38 $ 22.62 $ 30.39 $ 24.08 $ 18.86 $ 16.20 ========== ========= ======== ======== ======== ======== Total Return(%)(b) ................ 7.78 c) (20.96) 36.68 33.18 23.97 4.05 Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a) ..... 1.28 (d) 1.22 1.25 1.41 1.88 1.91 Net investment income (loss) to average daily net assets ..... ( 0.10)(d) ( 0.22) ( 0.09) ( 0.21) 0.15 ( 0.07) Portfolio turnover rate .......... 20 (c) 52 54 80 89 95 Net assets, end of period ($ millions)..................... 150 174 222 96 57 42
CLASS B SHARES* -------------------------------------- FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) 1998/dagger//dagger/ --------------- -------------------- Net asset value, beginning of period ........................ $ 22.00 $ 27.98 ---------- ---------- Income from Investment Operations: Net investment income (loss)(a) ................ ( 0.10) ( 0.20) Net realized and unrealized gain (loss) on investments ...... 1.73 ( 5.78) ---------- ---------- Total from Investment Operations ...................... 1.63 ( 5.98) ---------- ---------- Less Distributions: Dividends from net investment income ............... -- -- Distributions from net realized gains .................. -- -- ---------- ---------- Total Distributions .............. -- -- ---------- ---------- Net asset value, end of period ........................ $ 23.63 $ 22.00 ========== ========== Total Return(%)(b) ................ 7.41 (c) (21.37)(c) Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a) ..... 2.03 (d) 1.98 (d) Net investment income (loss) to average daily net assets ..... ( 0.87) (d) ( 0.93)(d) Portfolio turnover rate .......... 20 (c) 52 Net assets, end of period ($ millions)..................... 10 9
CLASS C SHARES --------------------------------------------------------------------- FOR THE SIX MONTH FOR THE YEARS ENDED PERIOD ENDED OCTOBER 31, APRIL 30, 1999* ---------------------------------------------------- (UNAUDITED) 1998* 1997* 1996* 1995/dagger/ ---------------- ---------- ---------- ---------- ---------------- Net asset value, beginning of period ........................ $ 22.01 $ 29.83 $ 23.84 $ 18.79 $ 15.67 --------- --------- -------- -------- --------- Income from Investment Operations: Net investment income (loss)(a) ................ ( 0.10) ( 0.26) ( 0.23) ( 0.22) ( 0.02) Net realized and unrealized gain (loss) on investments ...... 1.73 ( 5.83) 8.10 6.11 3.14 --------- --------- -------- -------- --------- Total from Investment Operations ...................... 1.63 ( 6.09) 7.87 5.89 3.12 --------- --------- -------- -------- --------- Less Distributions: Dividends from net investment income ............... -- -- -- -- -- Distributions from net realized gains .................. -- ( 1.73) ( 1.88) ( 0.84) -- --------- --------- -------- -------- --------- Total Distributions .............. -- ( 1.73) ( 1.88) ( 0.84) -- --------- --------- -------- -------- --------- Net asset value, end of period ........................ $ 23.64 $ 22.01 $ 29.83 $ 23.84 $ 18.79 ========= ========= ======== ======== ========= Total Return(%)(b) ................ 7.41 (c) (21.55) 35.63 32.22 19.91 (c) Ratios (%)/Supplemental Data: Operating expenses, net, to average daily net assets(a) ..... 2.03 (d) 1.97 2.00 2.13 2.36 (d) Net investment income (loss) to average daily net assets ..... ( 0.85)(d) ( 0.96) ( 0.85) ( 0.94) ( 0.46)(d) Portfolio turnover rate .......... 20 (c) 52 54 80 89 Net assets, end of period ($ millions)..................... 76 84 90 25 4
- ----------- * Per share amounts have been calculated using the monthly average share method, which more appropriately presents per share data for the year since use of the undistributed income method does not correspond with results of operations. /dagger/ For the period April 3, 1995 (commencement of Class C Shares) to October 31, 1995. /dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31, 1998. (a) The year ended October 31, 1994 includes recovery of previously waived management fees paid to the manager of less than $.01 per share. (b) Does not reflect the imposition of sales charge. (c) Not annualized. (d) Annualized. 35 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - VALUE EQUITY FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements.
CLASS A SHARES* --------------------------------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 ---------------------------------------------------- (UNAUDITED) 1998 1997 1996 1995/dagger/ ---------------- ---------- ---------- ---------- ---------------- Net asset value, beginning of period .......... $ 18.56 $ 24.27 $ 20.27 $ 18.00 $ 14.29 --------- -------- -------- -------- --------- Inome from Investment Operations: Net investment income(loss)(a) ............... 0.06 0.15 0.22 0.17 0.08 Net realized and unrealized gain (loss) on investments ................................. 2.55 ( 0.76) 5.23 2.76 3.63 --------- -------- -------- -------- --------- Total from Investment Operations ............. 2.61 ( 0.61) 5.45 2.93 3.71 --------- -------- -------- -------- --------- Less Distributions: Dividends from net investment income ......... ( 0.16) ( 0.20) ( 0.15) ( 0.11) -- Distributions from net realized gains ........ ( 0.12) ( 4.90) ( 1.30) ( 0.55) -- --------- -------- -------- -------- --------- Total Distributions .......................... ( 0.28) ( 5.10) ( 1.45) ( 0.66) -- --------- -------- -------- -------- --------- Net asset value, end of period .................................... $ 20.89 $ 18.56 $ 24.27 $ 20.27 $ 18.00 ========= ======== ======== ======== ========= Total Return(%)(b) ............................ 14.24 (c) ( 3.52) 28.69 16.59 25.96 (c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a) ............................... 1.45 (d) 1.45 1.61 1.65 1.65 (d) Net investment income to average daily net assets .................................. 0.65 (d) 0.74 0.96 0.89 1.05 (d) Portfolio turnover rate ...................... 49 (c) 132 155 129 82 Net assets, end of period ($ millions)........ 17 18 19 15 12
CLASS B SHARES* ------------------------------------------------ FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) 1998/dagger//dagger//dagger/ ---------------- ---------------------------- Net asset value, beginning of period .......... $ 18.29 $ 19.60 ---------- --------- Inome from Investment Operations: Net investment income(loss)(a) ............... ( 0.01) 0.02 Net realized and unrealized gain (loss) on investments ................................. 2.52 ( 1.33) ---------- --------- Total from Investment Operations ............. 2.51 ( 1.31) ---------- --------- Less Distributions: Dividends from net investment income ......... ( 0.01) -- Distributions from net realized gains ........ ( 0.12) -- ---------- --------- Total Distributions .......................... ( 0.13) -- ---------- --------- Net asset value, end of period .................................... $ 20.67 $ 18.29 ========== ========= Total Return(%)(b) ............................ 13.81 (c) ( 6.68)(c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a) ............................... 2.20 (d) 2.20 (d) Net investment income to average daily net assets .................................. ( 0.13) (d) ( 0.15)(d) Portfolio turnover rate ...................... 49 (c) 132 Net assets, end of period ($ millions)........ 1 1
CLASS C SHARES* --------------------------------------------------------------------------------- FOR THE SIX MONTH PERIOD ENDED FOR THE YEARS ENDED APRIL 30, OCTOBER 31, 1999 ---------------------------------------------------------------- (UNAUDITED) 1998 1997 1996 1995/dagger//dagger/ ---------------- --------------- ----------- ---------- --------------------- Net asset value, beginning of period .......... $ 18.28 $ 23.98 $ 20.06 $ 17.92 $ 15.27 --------- ---------- -------- -------- --------- Inome from Investment Operations: Net investment income(loss)(a) ............... ( 0.01) 0.00 0.05 0.02 0.01 Net realized and unrealized gain (loss) on investments ................................. 2.52 ( 0.75) 5.20 2.74 2.64 --------- ---------- -------- -------- --------- Total from Investment Operations ............. 2.51 ( 0.75) 5.25 2.76 2.65 --------- ---------- -------- -------- --------- Less Distributions: Dividends from net investment income ......... ( 0.01) ( 0.05) ( 0.03) ( 0.07) -- Distributions from net realized gains ........ ( 0.12) ( 4.90) ( 1.30) ( 0.55) -- --------- ---------- -------- -------- --------- Total Distributions .......................... ( 0.13) ( 4.95) ( 1.33) ( 0.62) -- --------- ---------- -------- -------- --------- Net asset value, end of period .................................... $ 20.66 $ 18.28 $ 23.98 $ 20.06 $ 17.92 ========= ========== ======== ======== ========= Total Return(%)(b) ............................ 13.82 (c) ( 4.27) (c) 27.79 15.65 17.35 (c) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a) ............................... 2.20 (d) 2.20 2.36 2.40 2.40 (d) Net investment income to average daily net assets .................................. ( 0.10)(d) ( 0.01) 0.21 0.13 0.28 (d) Portfolio turnover rate ...................... 49 (c) 132 155 129 82 Net assets, end of period ($ millions)........ 12 14 13 10 4
- ------- * Per share amounts have been calculated using the monthly average share method, which more appropriately presents per share data for the period since the use of the undistributed income method does not correspond with results of operations. /dagger/ For the period December 30, 1994 (commencement of operations) to October 31, 1995. /dagger//dagger/ For the period April 3, 1995 (commencement of Class C Shares) to October 31, 1995. /dagger//dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31, 1998. (a) Excludes management fees waived by the Manager in the amount of $.02 per Class A Shares, $.02 per Class B Shares and $.02 per Class C Shares for the six month period ended April 30, 1999. The operating expense ratios including such items would have been 1.64% (annualized), 2.39% (annualized) and 2.39% (annualized) for Class A, Class B and Class C, respectively. Excludes management fees waived by the Manager in the amount of $.03 per Class A Shares, $.02 per Class B Shares and $1.03 per Class C Shares for the year ended October 31, 1998. The operating expense ratios including such items would have been 1.58%, 2.33% (annualized) and 2.33% for Class A, Class B and Class C, respectively. The year ended October 31, 1997 includes recovery of previously waived management fees paid to the Manager of $.02 per Class A and Class C Shares. The operating expense ratio excluding such items would have been 1.53% and 2.28% for Class A and Class C Shares, respectively. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.07 and $.13 per Class A Shares, for the two years ended October 31, 1996. The operating expense ratios including such items would have been 1.99% and 3.49% (annualized) for Class A Shares for the two years ended October 31, 1996. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.07 and $.13 per Class C Shares, for the two years ended October 31, 1996. The operating expense ratio including such items would have been 2.74% and 4.24% (annualized) for Class C Shares for the two years ended October 31, 1996. (b) Does not reflect the imposition of a sales charge. (c) Not annualized. (d) Annualized. 36 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Series Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company and presently offers shares in six series, the Aggressive Growth Fund, Eagle International Equity Portfolio, the Growth Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund, and the Value Equity Fund (each, a "Fund" and collectively, the "Funds"). The Aggressive Growth Fund primarily seeks long-term capital appreciation by investing in equity securities of companies that may have significant growth potential. The Eagle International Equity Portfolio primarily seeks capital appreciation through investments in a portfolio of international equity securities. The Growth Equity Fund primarily seeks growth through long-term capital appreciation. The Mid Cap Growth Fund primarily seeks long-term appreciation by investing primarily in equity securities of companies with medium capitalization that are believed to have above average growth potential. The Small Cap Stock Fund seeks long-term capital appreciation by investing principally in the equity securities of companies with small market capitalization. The Value Equity Fund primarily seeks long-term capital appreciation and, secondarily, seeks current income. The Funds currently offer Class A, Class B and Class C Shares. Class A Shares are sold subject to a maximum sales charge of 4.75% of the amount invested payable at the time of purchase. Class B Shares, which were offered to shareholders beginning January 2, 1998, are sold subject to a 5% maximum contingent deferred sales load (based on the lower of purchase price or redemption price), declining over a six-year period. Class C Shares, which were offered to shareholders beginning April 3, 1995, are sold subject to a contingent deferred sales charge of 1% of the lower of net asset value or purchase price payable upon any redemptions made in less than one year of purchase. The Eagle International Equity Portfolio also issues Eagle Class Shares, which are subject to certain minimum investment requirements and are sold without any sales charge. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: SECURITY VALUATION: Each Fund values investment securities at market value based on the last quoted sales price as reported by the principal securities exchange on which the security is traded. If no sale is reported, the last bid price is used and in the absence of a market quote, securities are valued using such methods as the Board of Trustees believes would reflect fair market value. Securities that are quoted in a foreign currency will be valued daily in U.S. dollars at the foreign currency exchange rates prevailing at the time the Eagle International Equity Portfolio calculates its daily net asset value per share. Although the Eagle International Equity Portfolio values its assets in U.S. dollars on a daily basis, it does not intend to convert holdings of foreign currencies into U.S. dollars on a daily basis. Short term investments having a maturity of 60 days or less are valued at amortized cost, which approximates market. FOREIGN CURRENCY TRANSACTIONS: The books and records of the Eagle International Equity Portfolio are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, other assets and other liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. The Eagle International Equity Portfolio does not isolate that portion of gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains and losses from investments. Net realized gain (loss) and unrealized appreciation (depreciation) from foreign currency transactions include gains and losses between trade and settlement date on securities transactions, gains and losses arising from the sales of foreign currency and gains and losses between the ex and payment dates on dividends, interest, and foreign withholding taxes. FORWARD FOREIGN CURRENCY CONTRACTS: The Eagle International Equity Portfolio may enter into forward foreign currency contracts which are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are included in the Statement of Operations as unrealized foreign currencies gain or loss. The Eagle International Equity Portfolio records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. REPURCHASE AGREEMENTS: Each Fund enters into repurchase agreements whereby a Fund, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount to at least 100% of the resale price. FEDERAL INCOME TAXES: Each Fund is treated as a single corporate taxpayer as provided for in the Tax Reform Act of 1986, as amended. A Fund's policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no provision has been made for federal income and excise taxes. DISTRIBUTION OF NET REALIZED GAINS: Net realized gains from investment transactions during any particular year in excess of available capital loss carryforwards, which, if not distributed, would be taxable to each Fund, will be distributed to shareholders in the following fiscal year. Each Fund uses the identified cost method for determining realized gain or loss on investments for both financial and federal income tax reporting purposes. 37 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- STATE QUALIFICATION EXPENSES: State qualification fees are amortized based either on the time period covered by the qualification or as related shares are sold, whichever is appropriate for each state. OPTION ACCOUNTING PRINCIPLES: When a Fund writes a covered call option, an amount equal to the premium received by the Fund is included in the Fund's Statement of Assets and Liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. The current market value of a written option is based on the last offering price on the principal exchange on which such option is traded. The Fund receives a premium on the sale of an option, but gives up the opportunity to profit from any increase in stock value above the exercise price of the option. If an option that a Fund has written either expires on its stipulated expiration date, or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a call option that a Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the underlying security, and the proceeds from such sale are increased by the premium originally received. EXPENSES: Each Fund is charged for those expenses that are directly attributable to it, such as management fee, custodian/fund accounting fees, distribution fee, etc., while other expenses such as professional fees, insurance expense, etc., are all allocated proportionately among the Trust. Expenses of each Fund are allocated to each class of shares based upon their relative percentage of current net assets. All expenses that are directly attributable to a specific class of shares, such as distribution fees and shareholders service fees with respect to Eagle International Equity Portfolio, are charged directly to that class. ORGANIZATION EXPENSES: Expenses incurred in connection with the formation of each Fund, except the Aggressive Growth Fund, were deferred and are being amortized on a straight-line basis over 60 months from the date of commencement of operations for the respective Funds. The Small Cap Stock Fund organization expenses have been amortized completely. Subsequent to June 30, 1998, organization costs of approximately $49,000 in the Aggressive Growth Fund were absorbed by Heritage Asset Management, Inc. CAPITAL ACCOUNTS: Each Fund reports the undistributed net investment income and accumulated net realized gain (loss) accounts on a basis approximating amounts available for future tax distributions (or to offset future taxable realized gains when a capital loss carryforward is available). Accordingly, each Fund may periodically make reclassifications among certain capital accounts without impacting the net asset value of the Fund. OTHER: For purposes of these financial statements, investment security transactions are accounted for on a trade date basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Note 2: FUND SHARES. At April 30, 1999, there was an unlimited number of shares of beneficial interest of no par value authorized. AGGRESSIVE GROWTH FUND ---------------------- Transactions in the Class A, B and C Shares of the Fund during six month period ended April 30, 1999 were as follows:
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES (UNAUDITED) ----------------------------- -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- ------------- ----------- ------------ ----------- ------------- Shares sold .................... 538,375 $ 9,635,489 176,241 $3,092,182 356,855 $6,306,014 Shares redeemed ................ (149,700) (2,654,971) (30,186) (541,511) (43,652) (773,945) -------- ------------ ------- ---------- ------- ---------- Net increase ................... 388,675 $ 6,980,518 146,055 $2,550,671 313,203 $5,532,069 ============ ========== ========== Shares outstanding: Beginning of period ........... 730,201 252,637 221,820 -------- ------- ------- End of period ................. 1,118,876 398,692 535,023 ========= ======= =======
38 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- AGGRESSIVE GROWTH FUND (CONTINUED) --------------------------------- Transactions in the Class A, B and C Shares of the Fund during the period August 20, 1998 (commencement of operations) to October 31, 1998, were as follows:
A SHARES B SHARES C SHARES FOR THE PERIOD ENDED OCTOBER 31, 1998 --------------------------- ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ----------- ------------ ---------- ----------- ---------- ------------- Shares sold ...................... 758,002 $10,793,788 254,153 $3,604,086 224,375 $3,201,056 Shares redeemed .................. (27,801) (380,444) (1,516) (22,060) (2,555) (36,378) ------- ----------- ------- ---------- ------- ---------- Net increase ..................... 730,201 $10,413,344 252,637 $3,582,026 221,820 $3,164,678 =========== ========== ========== Shares outstanding: Beginning of period ............. -- -- -- ------- ------- ------- End of period ................... 730,201 252,637 221,820 ======= ======= =======
EAGLE INTERNATIONAL EQUITY PORTFOLIO ------------------------------------ Transactions in Class A, B, C and Eagle Shares of the Fund during the six month period ended April 30, 1999, were as follows:
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES (UNAUDITED) -------------------------- ----------------------- SHARES AMOUNT SHARES AMOUNT ------------ ------------- ----------- ----------- Shares sold ...................... 13,972 $ 382,554 7,150 $ 190,623 Shares issued on reinvestment of distributions ............... 1,024 28,582 58 1,581 Shares redeemed .................. (25,325) (686,411) (2,026) (58,788) ------- ---------- ------ --------- Net increase (decrease) .......... (10,329) $ (275,275) 5,182 $ 138,416 ========== ========= Shares outstanding: Beginning of period ............. 268,138 9,348 ------- ------ End of period ................... 257,809 14,530 ======= ====== FOR THE PERIOD ENDED APRIL 30, 1999 C SHARES EAGLE SHARES (UNAUDITED) -------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT ----------- ------------ ------------ --------------- Shares sold ...................... 29,962 $ 810,481 44,313 $ 1,203,429 Shares issued on reinvestment of distributions ............... 1,009 27,707 5,474 151,150 Shares redeemed .................. (23,873) (643,700) (151,230) (4,158,113) ------- ----------- -------- ------------ Net increase (decrease) .......... 7,098 $ 194,488 (101,443) $ (2,803,534) =========== ============ Shares outstanding: Beginning of period ............. 234,123 1,304,178 ------- --------- End of period ................... 241,221 1,202,735 ======= =========
Transactions in Class A Shares, Class C Shares and Eagle Shares of the Fund during the year ended October 31, 1998 and Class B Shares from January 2, 1998 (commencement of Class B Shares) to October 31, 1998, were as follows:
FOR THE YEAR ENDED A SHARES B SHARES OCTOBER 31, 1998 ---------------------------- -------------------- SHARES AMOUNT SHARES AMOUNT ------------ -------------- -------- ----------- Shares sold ..................... 57,108 $ 1,498,668 9,521 $247,499 Shares issued on reinvestment of distributions .............. 6,686 158,113 -- -- Shares redeemed ................. (51,418) (1,323,329) (173) (4,682) ------- ------------- ----- -------- Net increase (decrease) ......... 12,376 $ 333,452 9,348 $242,817 ============= ======== Shares outstanding: Beginning of year .............. 255,762 -- ------- ----- End of year .................... 268,138 9,348 ======= ===== FOR THE YEAR ENDED C SHARES EAGLE SHARES OCTOBER 31, 1998 ---------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT ------------ --------------- ------------- --------------- Shares sold ..................... 138,692 $ 3,626,639 161,915 $ 4,255,168 Shares issued on reinvestment of distributions .............. 4,371 102,414 34,247 805,842 Shares redeemed ................. (67,332) (1,769,569) (223,287) (5,683,092) ------- ------------- -------- ------------- Net increase (decrease) ......... 75,731 $ 1,959,484 (27,125) $ (622,082) ============= ============= Shares outstanding: Beginning of year .............. 158,392 1,331,303 ------- --------- End of year .................... 234,123 1,304,178 ======= =========
39 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- GROWTH EQUITY FUND ------------------ Transactions in Class A, B and C Shares of the Fund during the six month period ended April 30, 1999, were as follows:
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES (UNAUDITED) ---------------------------- -------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- -------------- ----------- ------------ ------------- -------------- Shares sold ...................... 301,444 $ 10,441,826 142,133 $4,672,719 555,177 $ 17,702,396 Shares redeemed .................. (181,795) (6,335,205) (20,203) (703,725) (260,568) (8,620,259) -------- ------------ ------- ---------- -------- ------------ Net increase ..................... 119,649 $ 4,106,621 121,930 $3,968,994 294,609 $ 9,082,137 ============ ========== ============ Shares outstanding: Beginning of period ............. 1,384,052 183,567 1,400,076 --------- ------- --------- End of period ................... 1,503,701 305,497 1,694,685 ========= ======= =========
Transactions in Class A and Class C Shares of the Fund during the year ended October 31, 1998 and Class B Shares from January 2, 1998 (commencement of Class B Shares) to October 31, 1998, were as follows:
A SHARES B SHARES C SHARES FOR THE YEAR ENDED OCTOBER 31, 1998 ---------------------------- ------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- -------------- ----------- ----------- ------------- -------------- Shares sold ....................... 586,531 $ 16,436,873 185,913 $5,192,150 854,527 $ 23,502,787 Shares issued on reinvestment of distributions ................ 12,951 312,499 -- -- 10,879 258,383 Shares redeemed ................... (244,224) (6,562,209) (2,346) (65,655) (248,450) (6,758,896) -------- ------------ ------- ---------- -------- ------------ Net increase ...................... 355,258 $ 10,187,163 183,567 $5,126,495 616,956 $ 17,002,274 ============ ========== ============ Shares outstanding: Beginning of year ................ 1,028,794 -- 783,120 --------- ------- -------- End of year ...................... 1,384,052 183,567 1,400,076 ========= ======= =========
MID CAP GROWTH FUND -------------------- Transactions in Class A, B and C Shares of the Fund during the six month period ended April 30, 1999, were as follows:
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES (UNAUDITED) ----------------------------- -------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- --------------- ------------ ------------- ------------ --------------- Shares sold ..................... 138,710 $ 2,059,369 29,905 $ 447,079 141,875 $ 2,106,721 Shares redeemed ................. (246,239) (3,655,403) (49,451) (729,408) (143,041) (2,105,323) -------- ------------ ------- ---------- -------- ------------ Net increase (decrease) ......... (107,529) $ (1,596,034) (19,546) $ (282,329) (1,166) $ 1,398 ============ ========== ============ Shares outstanding: Beginning of period ............ 1,129,323 155,988 669,446 --------- ------- -------- End of period .................. 1,021,794 136,442 668,280 ========= ======= ========
40 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- MID CAP GROWTH FUND (CONTINUED) ------------------------------ Transactions in Class A and Class C Shares of the Fund during the period November 6, 1997 (commencement of operations) to October 31, 1998 and Class B Shares from January 2, 1998 (commencement of Class B Shares) to October 31, 1998, were as follows:
A SHARES B SHARES C SHARES FOR THE PERIOD ENDED OCTOBER 31, 1998 ---------------------------- ------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- -------------- ----------- ------------- ------------ -------------- Shares sold ......................... 1,498,547 $ 21,897,656 164,784 $2,531,799 804,758 $ 11,737,195 Shares redeemed ..................... (369,224) (5,364,630) (8,795) (114,655) (135,312) (1,953,637) --------- ------------ ------- ---------- -------- ------------ Net increase ........................ 1,129,323 $ 16,533,026 155,989 $2,417,144 669,446 $ 9,783,558 ============ ========== ============ Shares outstanding: Beginning of period ................ -- -- -- --------- ------- -------- End of period ...................... 1,129,323 155,989 669,446 ========= ======= ========
SMALL CAP STOCK FUND -------------------- Transactions in Class A, B and C Shares of the Fund during the six month period ended April 30, 1999, were as follows:
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES (UNAUDITED) -------------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT --------------- ---------------- ------------ --------------- Shares sold ...................... 474,093 $ 11,229,605 118,833 $ 2,743,652 Shares redeemed .................. (2,031,357) (48,040,728) (83,879) (1,904,536) ---------- ------------- ------- ------------- Net increase (decrease) .......... (1,557,264) $ (36,811,123) 34,954 $ 839,116 ============= ============= Shares outstanding: Beginning of period ............. 7,689,095 403,835 ---------- ------- End of period ................... 6,131,831 438,789 ========== ======= FOR THE PERIOD ENDED APRIL 30, 1999 C SHARES (UNAUDITED) =------------------------------- SHARES AMOUNT --------------- ---------------- Shares sold ...................... 432,534 $ 9,978,848 Shares redeemed .................. (1,067,256) (24,336,544) ---------- ------------- Net increase (decrease) .......... (634,722) $ (14,357,696) ============= Shares outstanding: Beginning of period ............. 3,828,853 ---------- End of period ................... 3,194,131 ==========
Transactions in Class A and Class C Shares of the Fund during the year ended October 31, 1998 and Class B Shares from January 2, 1998 (commencement of Class B Shares) to October 31, 1998, were as follows:
A SHARES B SHARES FOR THE YEAR ENDED OCTOBER 31, 1998 -------------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT --------------- ---------------- ------------ -------------- Shares sold ....................... 2,324,448 $ 65,942,936 430,520 $12,003,417 Shares issued on reinvestment of distributions ................ 450,837 12,564,851 -- -- Shares redeemed ................... (2,402,109) (65,619,657) (26,685) (623,843) ---------- -------------- ------- ----------- Net increase ...................... 373,176 $ 12,888,130 403,835 $11,379,574 ============== =========== Shares outstanding: Beginning of year ................ 7,315,919 -- ---------- ------- End of year ...................... 7,689,095 403,835 ========== ======= C SHARES FOR THE YEAR ENDED OCTOBER 31, 1998 -------------------------------- SHARES AMOUNT --------------- ---------------- Shares sold ....................... 1,681,715 $ 46,062,174 Shares issued on reinvestment of distributions ................ 196,455 5,363,217 Shares redeemed ................... (1,067,827) (27,606,414) ---------- -------------- Net increase ...................... 810,343 $ 23,818,977 ============== Shares outstanding: Beginning of year ................ 3,018,510 ---------- End of year ...................... 3,828,853 ==========
41 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- VALUE EQUITY FUND ----------------- Transactions in Class A, B and C Shares of the Fund during the period ended April 30, 1999, were as follows:
FOR THE PERIOD ENDED APRIL 30, 1999 A SHARES B SHARES C SHARES (UNAUDITED) ----------------------------- -------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- --------------- ------------ ------------- ------------- --------------- Shares sold ..................... 41,832 $ 819,439 15,057 $ 279,508 39,562 $ 759,372 Shares issued on reinvestment of distributions .............. 13,519 254,838 389 7,278 5,023 93,852 Shares redeemed ................. (202,481) (3,817,660) (10,395) (194,200) (185,943) (3,498,087) -------- ------------ ------- ---------- -------- ------------ Net increase (decrease) ......... (147,130) $ (2,743,383) 5,051 $ 92,586 (141,358) $ (2,644,863) ============ ========== ============ Shares outstanding: Beginning of period ............ 955,082 49,544 745,451 -------- ------- -------- End of period .................. 807,952 54,595 604,093 ======== ======= ========
Transactions in Class A and Class C Shares of the Fund during the year ended October 31, 1998 and Class B Shares from January 2, 1998 (commencement of Class B Shares) to October 31, 1998, were as follows:
A SHARES B SHARES C SHARES FOR THE YEAR ENDED OCTOBER 31, 1998 ----------------------------- -------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- --------------- ------------ ------------- ------------- --------------- Shares sold .................... 173,321 $ 3,500,708 51,939 $ 998,767 194,603 $ 3,691,922 Shares issued on reinvestment of distributions ............. 216,712 4,225,878 -- -- 165,685 3,204,346 Shares redeemed ................ (291,484) (5,797,438) (2,395) (43,713) (270,892) (5,070,563) -------- ------------ ------ --------- -------- ------------ Net increase ................... 98,549 $ 1,929,148 49,544 $ 955,054 89,396 $ 1,825,705 ============ ========= ============ Shares outstanding: Beginning of year ............. 856,533 -- 656,055 -------- ------ -------- End of year ................... 955,082 49,544 745,451 ======== ====== ========
Note 3: PURCHASES AND SALES OF SECURITIES. For the six month period ended April 30, 1999, purchases and sales on investment securities (excluding repurchase agreements and short term obligations) were as follows:
INVESTMENT SECURITIES ------------------------------- PURCHASES SALES -------------- -------------- Aggressive Growth Fund ....................... $39,557,651 $25,147,939 Eagle International Equity Portfolio ......... 20,500,901 19,381,116 Growth Equity Fund ........................... 58,104,386 42,758,530 Mid Cap Growth Fund .......................... 30,933,956 28,867,788 Small Cap Stock Fund ......................... 44,049,111 76,479,810 Value Equity Fund ............................ 14,257,455 19,503,571
42 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- Agency brokerage commissions for the Aggressive Growth Fund, the Eagle International Equity Portfolio, the Growth Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund and the Value Equity Fund for the period ended April 30, 1999 aggregated $55,119, $103,822, $70,740, $73,842, $174,415 and $69,859, of which $9,300, $0, $0, $0, 24,852 and $300, were paid to Raymond James & Associates, Inc., respectively. Transactions in covered call options written on equity securities were as follows: NUMBER OF PREMIUMS VALUE EQUITY FUND CONTRACTS RECEIVED ----------------- ----------- ------------- Outstanding, October 31, 1998 ......... 330 $ 144,269 Written .............................. 60 12,510 Closed ............................... -- -- Exercised ............................ (280) (139,312) Expired .............................. (110) (17,467) ---- ---------- Outstanding, April 30, 1999 ........... 0 0 ==== ========== Note 4: MANAGEMENT, SUBADIVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT, FUND ACCOUNTING AND TRUSTEES' FEES. Under the Fund's Investment Advisory and Administrative Agreements with Heritage Asset Management, Inc. (the "Manager"), the Growth Equity, Mid Cap Growth and Value Equity Funds agree to pay to the Manager a fee equal to an annual rate of 0.75% of the Funds' average daily net assets, computed daily and payable monthly. For the Aggressive Growth Fund and Small Cap Stock Fund, the management fee for each Fund is 1.0% on the first $50 million and 0.75% of any excess over $50 million of average daily net assets. Under the Fund's Investment Advisory and Administrative Agreement with Eagle Asset Management, Inc. ("Eagle"), the Eagle International Equity Portfolio annual management fee is 1.0% on the first $100 million of average daily net assets and 0.80% of any excess over $100 million of average daily net assets. The Manager contractually will waive its investment advisory fees and, if necessary, reimbursed each Fund to the extent that Class A, Class B and Class C annual operating expenses exceeded that Fund's average daily net assets attributable to that class for the 1999 fiscal year as follows: CLASS A CLASS B AND CLASS C --------- -------------------- Aggressive Growth Fund ................... 1.65% 2.40% Eagle International Equity Portfolio ..... 1.97% 2.72% Growth Equity Fund ....................... 1.45% 2.20% Mid Cap Growth Fund ...................... 1.60% 2.35% Small Cap Stock Fund ..................... 1.30% 2.05% Value Equity Fund ........................ 1.45% 2.20% Management fees of $54,587 were waived for the Aggressive Growth Fund for the six month period ended April 30, 1999. If total Fund expenses fall below the expense limitation agreed to by the Manager before the end of the year ended October 31, 2001, the Aggressive Growth Fund may be required to pay the Manager a portion or all of the waived management fees. In addition, the Aggressive Growth Fund may be required to pay the Manager, a portion or all of the management fees waived of $25,861 and reimbursed expenses of $25,530 in fiscal 1998 if total Fund expenses fall below the annual expense limitations before the end of the year ending October 31, 2000. Management fees of $17,952 were waived for the Eagle International Equity Portfolio for the six month period ended April 30, 1999. If total Fund expenses fall below the expense limitation agreed to by Eagle before the end of the year ended October 31, 2001, Eagle International Equity Portfolio may be required to pay Eagle a portion or all of the waived management fees. In addition, the Eagle International Equity Portfolio may be required to pay Eagle, a portion or all of the management fees waived of $91,433 in fiscal 1997 and $52,276 for fiscal 1998 if total Fund expenses fall below the annual expense limitations before the end of the year ending October 31, 1999, and 2000, respectively. Management fees of $17,178 were waived by the Mid Cap Growth Fund for the six month period ended April 30, 1999. If total Fund expenses fall below the expense limitation agreed to by the Manager before the end of the year ended October 31, 2001, the Mid Cap Growth Fund may be required to pay the Manager a portion or all of the waived management fees. In addition, the Mid Cap Growth Fund may be required to pay the Manager, a portion or all of the management fees waived of $60,948 in fiscal 1998 if total Fund expenses fall below the annual expense limitations before the end of the year ending October 31, 2000. Management fees of $28,291 were waived by the Value Equity Fund for the six month period ended April 30, 1999. If total Fund expenses fall below the expense limitation agreed to by the Manager before the end of the year ended October 31, 2001, the Value Equity Fund may be required to pay the Manager a portion or all of the waived management fees. In addition, the Value Equity Fund may be required to pay the Manager, a portion or all of the management fees waived of $48,072 in fiscal 1998 if total Fund expenses fall below the annual expense limitations before the end of the year ending October 31, 2000. 43 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- Eagle has entered into an agreement with Martin Currie, Inc., a New York Corporation, to provide the Eagle International Equity Portfolio investment advice, portfolio management services including the placement of brokerage orders, and certain compliance and other services for an annualized fee payable by Eagle equal to .50% of the average daily net assets on the first $100 million of net assets and .40% thereafter without regard to any reduction due to the imposition of expense limitations. For the six month period ended April 30, 1999 the Subadviser earned $120,282 for Subadviser fees, which was paid by Eagle. Heritage Asset Management, Inc. an affiliate of Eagle, provides certain administrative services for the Eagle International Equity Portfolio. Heritage receives a fee in the amount of 0.10% from Eagle for performing these administrative services. The Manager has entered into agreements with Eagle (with respect to the Aggressive Growth Fund, Growth Equity Fund, Mid Cap Growth Fund and the Value Equity Fund) and with Eagle and Awad Asset Management, Inc. (with respect to the Small Cap Stock Fund) to provide investment advice, portfolio management services including the placement of brokerage orders and certain compliance and other services for a fee payable by the Manager equal to 50% of the fees payable by the Fund to the Manager without regard to any reduction due to the imposition of expense limitations. For the six month period ended April 30, 1999, the total fees the Subadvisers earned were $75,575, $208,847, $53,788, $515,531 and $57,140 for the Aggressive Growth Fund, Growth Equity Fund, Mid Cap Growth Fund, Small Cap Stock Fund and Value Equity Fund, respectively. The Manager has entered into an agreement with Osprey Partners Investment Management, LLC ("Osprey") to provide to the Fund investment advice, portfolio management services including the placement of brokerage orders, and certain compliance and other services for a fee payable by the Manager equal to .32% of the Fund's average daily net assets. Effective May 18, 1999, the assets of the Value Equity Fund were allocated to Osprey. Prior to May 18, 1999, the assets of the Fund were managed by Eagle. Eagle will continue to serve as subadvisor to the Fund, although there are no assets currently allocated to them. Raymond James & Associates, Inc. (the "Distributor") has advised the Trust that it received $138,517, $11,211, $145,929 $23,190, $197,202, and $15,254 in front end sales charges for Class A Shares, $2,580, $2,189, $12,265, $24,105, $27,496, and $6,371 in contingent deferred sales charges for Class B Shares and $3,727, $1,740, $10,442, $4,552, $20,043, and $541 in contingent deferred sales charges for Class C Shares for the Aggressive Growth Fund, Eagle International Equity Portfolio, Growth Equity Fund, Mid Cap Growth Fund, Small Cap Stock Fund and the Value Equity Fund, respectively, for the six month period ended April 30, 1999. The Distributor paid sales commission to salespersons from these fees and incurred other distribution costs. Pursuant to a plan in accordance with Rule 12b-1 of the Investment Company Act of 1940, as amended, the Trust is authorized to pay the Distributor a fee pursuant to the Class A Distribution Plan of up to .35% of the average daily net assets for the services it provides in connection with the promotion and distribution of Fund shares. However, at the present time the Board of Trustees has authorized payments of only .25% of average daily net assets. Under the Class B and Class C Distribution Plans, the Trust may pay the Distributor a fee equal to 1.00% of the average daily net assets. Such fees are accrued daily and payable monthly. Class B Shares will convert to Class A Shares eight years after the end of the calendar month in which the shareholder's order to purchase the Class B Shares was accepted. The Manager, Eagle, Awad Asset Management, Inc. and the Distributor are all wholly owned subsidiaries of Raymond James Financial, Inc. The Manager also is the Dividend Paying and Shareholder Servicing Agent for the Aggressive Growth Fund, Eagle International Equity Portfolio, the Growth Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund and the Value Equity Fund. The amount payable to the Manager for such expenses as of April 30, 1999 was $71,034, $16,060, $36,972, $13,035, $118,965 and $12,547, respectively. In addition, the Manager performs Fund Accounting services for the Aggressive Growth Fund, the Growth Equity Fund, the Mid Cap Growth Fund, the Small Cap Stock Fund and the Value Equity Fund and charged $19,068, $23,778, $18,847, $51,484 and $18,313 during the current period, of which $13,087, $16,521, $12,669, $16,721 and $12,569, was payable as of April 30, 1999, respectively. Trustees of the Trust also serve as Trustees for Heritage Cash Trust, Heritage Capital Appreciation Trust, Heritage Income-Growth Trust, Heritage Income Trust and Heritage U.S. Government Income Fund, investment companies that also are advised by the Manager (collectively referred to as the Heritage funds). Each Trustee of the Heritage funds that is not an employee of the Manager or employee of an affiliate of the Manager received an annual fee of $8,666, an additional fee of $3,250 for each combined quarterly meeting of the Heritage funds attended and $1,000 for each special Trustees meeting attended. Trustees' fees and expenses are paid equally by each of the Heritage funds. Note 5: FEDERAL INCOME TAXES. AGGRESSIVE GROWTH FUND: ---------------------- For the year ended October 31, 1998, to reflect reclassifications arising from permanent book/tax differences primarily 44 attributable to a net operating loss, the Fund credited undistributed net investment income and debited paid in capital $5,426. The Fund has a net tax basis capital loss carryforward of $50,287, which may be applied against any realized net taxable gains until its expiration date of October 31, 2006. EAGLE INTERNATIONAL EQUITY PORTFOLIO: ------------------------------------ For the year ended October 31, 1998, to reflect reclassifications arising from permanent book/tax differences primarily attributable to foreign currency gains, a net operating loss and basis difference in passive foreign investment companies (PFICs), the Fund credited undistributed net investment income $204,602 and accumulated net realized gain $48,016 and debited paid in capital $252,618. GROWTH EQUITY FUND: ----------------- For the year ended October 31, 1998, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund credited undistributed net investment income $480,255, accumulated net realized loss $434 and debited paid in capital $480,689. The Fund has a net tax basis capital loss carryforward of $2,741,694, which may be applied against any realized net taxable gains until its expiration date of October 31, 2006. MID CAP GROWTH FUND: ------------------- For the year ended October 31, 1998, to reflect reclassification arising from permanent book/tax differences attributable to a net operating loss, the Fund credited undistributed net investment income and debited paid in capital $302,320. The Fund has a net tax basis capital loss carryforward of $1,409,298, which may be applied against any realized net taxable gains until its expiration date of October 31, 2006. SMALL CAP STOCK FUND: -------------------- For the year ended October 31, 1998, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss and REIT distributions, the Fund credited undistributed net investment income $1,505,367 and debited accumulated net realized loss $1,698 and paid in capital $1,503,669. The Fund has a net tax basis capital loss carryforward of $2,351,305, which may be applied against any realized net taxable gains until its expiration date of October 31, 2006. Note 6: FINANCIAL INVESTMENT WITH OFF-BALANCE SHEET RISK. EAGLE INTERNATIONAL EQUITY PORTFOLIO: ------------------------------------ The Fund may enter into forward foreign currency contracts ("forward contracts") to facilitate settlement of foreign currency denominated portfolio transactions, to manage its foreign currency exposure or to sell for a fixed amount of U.S. dollars or other currency, the amount of foreign currency approximating the value of some or all of its holdings denominated in such foreign currency or an amount of foreign currency other than the currency in which the securities to be hedged are denominated approximating the value of some or all of its holding to be hedged. Additionally, when the Subadviser anticipates purchasing securities at some time in the future, the Fund may enter into a forward contract to purchase an amount of currency equal to some or all of the value of the anticipated purchase for a fixed amount of U.S. dollars or other currency. The Fund may enter into forward contracts to hedge against changes to future foreign exchange rates and enhance return. Forward contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward contract. Risks may also arise upon entering into these contracts from the potential inability of these parties to meet the terms of their contracts. Note 7: SHAREHOLDERS MEETING:. On May 14, 1999 a special shareholders' meeting was held for the following purposes: (1) To approve a Subadvisory Agreement between Heritage Asset Management, Inc. and Osprey Partners Investment Management, LLC. with respect to the Fund; (2) To approve a proposal to permit Heritage to hire subadvisors or modify subadvisory agreements without shareholder approval; The voting results were as follows:
SHARES ----------------------------------- FOR AGAINST ABSTAINING --------- --------- ----------- To approve a Subadvisory Agreement between Heritage Asset Management, Inc. and Osprey Partners Investment Management, LLC. with respect to the Fund; ............................................ 686,084 22,224 76,483 To approve a proposal to permit Heritage to hire subadvisors or modify subadvisory agreements without shareholder approval; ................. 640,290 61,124 83,377
45 HERITAGE FAMILY OF FUNDS(TM) From Our Family to Yours: The Intelligent Creation of Wealth. HERITAGE STOCK FUNDS Aggressive Growth Capital Appreciation Eagle International Growth Equity Income-Growth Mid Cap Small Cap Value Equity HERITAGE BOND FUNDS High Yield Intermediate Government HERITAGE MONEY MARKET FUNDS Money Market Municipal Money Market We are pleased that many of you are also investors in these funds. For more information and a prospectus for any of these mutual funds, please contact your financial advisor. Please read the prospectus carefully before you invest in any of the funds. This report is for the information of shareholders of Heritage Series Trust-Aggressive Growth Fund, Eagle International Equity Portfolio, Growth Equity Fund, Mid Cap Growth Fund, Small Cap Stock Fund and Value Equity Fund. It may also be used as sales literature when preceded or accompanied by a prospectus. (c) 1999 Heritage Asset Management, Inc. 35M 04/99 AR53415-HST Heritage Series Trust [LOGO] P.O. Box 33022 St. Petersburg, FL 33733 Address Service Requested - ------------------------------------------------- Address Services Requested -----END PRIVACY-ENHANCED MESSAGE-----