-----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, Uo9cJhOBLRZZvAsiElJ7HnwZID5V/PuBtlH7czu728DkdadmzIS4Rj71/hmxid9o 2o3Pc9DGk4UkcoS87pMR0w== 0001016843-99-001271.txt : 19991228 0001016843-99-001271.hdr.sgml : 19991228 ACCESSION NUMBER: 0001016843-99-001271 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991227 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: 99780662 BUSINESS ADDRESS: STREET 1: 880 CARILLON PARKWAY CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135733800 N-30D 1 HERITAGE SERIES TRUST [MONTAGE OF PHOTOS] 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 ANNUAL REPORT and Investment Performance Review for the Year Ended October 31, 1999 [HERITAGE LOGO] SERIES TRUST(TM) HERITAGE SERIES TRUST ANNUAL REPORT TABLE OF CONTENTS PRESIDENT'S LETTER ....................................................... 1 PORTFOLIO COMMENTARY AGGRESSIVE GROWTH FUND Portfolio Management Letter ........................................ 2 Performance Graphs ................................................. 3 EAGLE INTERNATIONAL EQUITY PORTFOLIO Investment Commentary .............................................. 4 Performance Graphs ................................................. 6 GROWTH EQUITY FUND Portfolio Management Letter ........................................ 8 Performance Graphs ................................................. 11 MID CAP GROWTH FUND Portfolio Management Letter ........................................ 12 Performance Graphs ................................................. 14 SMALL CAP STOCK FUND Portfolio Management Letters ....................................... 15 Performance Graphs ................................................. 18 VALUE EQUITY FUND Portfolio Management Letter ........................................ 20 Performance Graphs ................................................. 22 INVESTMENT PORTFOLIOS .................................................... 24 STATEMENT OF ASSETS AND LIABILITIES ...................................... 39 STATEMENT OF OPERATIONS .................................................. 40 STATEMENTS OF CHANGES IN NET ASSETS ...................................... 41 FINANCIAL HIGHLIGHTS ..................................................... 43 NOTES TO FINANCIAL STATEMENTS ............................................ 49 December 20, 1999 Dear Fellow Shareholders: It is my pleasure to provide you with the annual report for the Heritage Series Trust for the fiscal year ended October 31, 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 combined report allows us to provide you with the relevant information for each of your funds while reducing the volume of mail you receive from us. As we have discussed in our last several reports, large cap stocks have performed better than small and mid cap stocks and "growth" stocks have delivered better results than "value" stocks. Among the portfolios in Heritage Series Trust, our large cap growth fund continued to be our top performer while our small cap and value funds delivered the lowest absolute returns for the period. With respect to the Growth Equity Fund, we have outperformed the Standard & Poor's 500 Composite Stock Price Index thus far in 1999 just as we did in each of the 1996, 1997 and 1998 calendar years. Fewer than one percent of diversified U.S. equity funds can claim this record.
FOR THE YEAR ENDED OCTOBER 31, 1999 =================================================== FUND "A" SHARES* "B" SHARES* "C" SHARES* ==================================== =============== =============== =============== Aggressive Growth Fund +35.50% +34.44% +34.44% Eagle International Equity Portfolio +24.68% +23.70% +23.70% Growth Equity Portfolio +50.73% +49.65% +49.57% Mid Cap Growth Fund +15.97% +15.17% +15.09% Small Cap Stock Fund +2.61% +1.86% +1.86% Value Equity Fund +0.24% -0.56% -0.50%
In the pages that follow are commentaries from the portfolio managers for each of the portfolios in Heritage Series Trust. Following the commentaries, you will find investment portfolios and other important financial information for all of these funds. The Board of Trustees of Heritage Series Trust has authorized changes to the market cap limits for our Small Cap and Mid Cap funds. Effective with the January 2000 prospectus update, the market capitalization limits for Small Cap and Mid Cap will be raised to $2 billion and $10 billion from $1 billion and $5 billion, respectively. In managing these funds, the portfolio managers generally will be required to invest at least 65% of the fund's assets in stocks with market capitalization below $2 billion for the Small Cap Stock Fund and between $500 million and $10 billion for the Mid Cap Stock Fund. We believe these changes will provide added flexibility to allow our portfolio managers the opportunity to be more competitive against their peers and benchmark indexes. Thank you for your continuing investments with us. We hope that you will call us at (800) 709-FUND (3863) with any comments or suggestions you wish to share with us. On behalf of all of us at Heritage, we hope you had a wonderful holiday season and wish you a happy and healthy 2000. Sincerely, /s/ STEPHEN G. HILL ---------------------------------------- Stephen G. Hill President - ---------- * Calculated without the imposition of either front-end or contingent deferred sales charges. 1 November 15, 1999 Dear Fellow Shareholders: I am pleased to report that for the year ended October 31, 1999, the Heritage Series Trust - Aggressive Growth Fund (the "Fund") Class A Shares advanced 35.5%*, topping the relative benchmarks. Check Point Software Technology was our top contributor, as the provider of Internet firewalls benefited from strong earnings and investor interest in Internet investments. Tanning Technology, an information technology services company specializing in e-commerce, advanced as well, which also reflected their position in the build-out of the Internet infrastructure. Sykes Enterprises, a call center operator, benefited from a strong earnings report. Tech Data, a distributor of computer equipment, was volatile and we were fortunate in buying and selling it well. Finally, ABR Information Services and Genesys Telecommunications Laboratories both benefited from merger agreements. On the downside, Hibbett Sporting Goods, a sporting goods retailer, sold off apparently due to investor apathy towards a small cap retailer; there was no corporate news to account for the weakness. Steiner Leisure, a provider of spa services on cruise ships, renegotiated contracts with major cruise lines at lower rates and sold off as a result. Office Depot, a retailer of office products, sold off following an earnings disappointment. At the end of the period, the Fund had a price/earnings ratio of 19x 2000 earnings, an estimated 3-5 year earnings growth of 27%, and return on equity of 12%. Technology represented about 45% of the portfolio. Although we are concerned with valuations of certain technology stocks, we intend to keep an above-market technology weighting, reflecting our belief that technology will drive the growth of the economy into the new millennium. Y2K fears should soon be a distant memory and it appears interest rates may have peaked. Such a scenario should prove very beneficial for our Fund. Wishing you a happy and prosperous new millennium. Sincerely, /s/ BERT BOKSON ----------------------------------- Bert Boksen Senior Vice President Eagle Asset Management, Inc. Portfolio Manager, Aggressive Growth Fund - ---------- * Calculated without the imposition of front-end sales charges. 2 [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Aggressive Growth Fund Class A, B and C Shares are calculated in conformance with item 21 of Form N-1A, which assumes maximum sales load of 4.75% for Class A Shares, a 4% contingent deferred sales load for the complete redemption of Class B Shares, and reinvestment of dividends for Class A, B and C Shares. If Class B Shares were still held at the end of the period, the value would be $14,421. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 3 December 2, 1999 MARKET COMMENTARY from MARTIN CURRIE, INC. Eagle International Equity Portfolio The final months of 1998 saw a rapid recovery from the turmoil of the third quarter, created by crisis in Russia and collapse of confidence in Asia. Interest rate cuts, initiated by the US, and a recovery in bond markets, allowed major world equity markets to recover and move towards previous highs in early 1999. This current year has been dominated by a strong recovery in Japan, Asia and emerging market equities, as corporate restructuring, improving economies and firmer currencies have encouraged a return of overseas buying. European markets have been subdued in the wake of a weak start for the Euro and evidence of sluggish growth. The UK equity market has been more volatile, impacted by the change in the US interest rate cycle and weaker bond yields. The Morgan Stanley Capital International Europe, Australia, Far East Index rose by 23.04% while the Fund's Class A Shares rose by 24.68%* after expenses, during the year ended October 31, 1999. JAPAN (33.0% of the portfolio as of fiscal year end) rallied significantly over the period, supported by a much stronger yen. Government support for domestic investors and small businesses and an unprecedented change in the attitude of Japanese corporate management, encouraged us to add to the region, taking our position above the Index and peer group weighting. Having run a portfolio dominated by blue chip export stocks, we switched emphasis towards domestic recovery and restructuring plays. New holdings included Fujitsu, Sumitomo Bakelite, Asahi Chemical, Benesse, and Kao, all reflective of domestic restructuring. NTT Mobile, Secom (domestic security) and Rohm have been some of your best performing investments. With a more positive view on the economy, we unwound the yen/dollar hedge towards the end of the period. Legislation is now in place to allow the corporate cross shareholdings to be placed in pension schemes rather than be sold into market rallies; this allows scope for the Index to rise further. We substantially reduced our weighting to CONTINENTAL EUROPE (51.2% of the portfolio as of fiscal year end). Concerns over the extent of economic recovery and mixed political news has left markets volatile and the new currency weak. We introduced a number of cyclical stocks into the portfolio such as Valeo, Peugeot, Elf Aquitaine (France), Preussag (Germany) and added to the telecommunications sector with holdings in Vivendi, France Telecom (France), Telecom Italia (Italy) and Ericsson (Sweden). In the medium term, weaker bond yields, a change in interest rate cycle and mixed signs of German and Italian economic growth leave upside for the region constrained. A reduction in the UK weighting (now 14.9% of the portfolio as of fiscal year end) took place after a period of good returns. However, weakening bond yields and the impact of a strong sterling on corporate profits, has left UK equities looking fully valued. We built up our energy and resource weighting (BP Amoco, RTZ) and continued to favour the financial sector through holdings in Legal & General and the Halifax Group. Sales reflected concerns over pricing power, such as Safeway (food retailing) and Marks & Spencer, all suffering in a tough retail environment. As with Continental Europe, the telecommunications sector continues to move ahead, and we added British Telecommunications to the list. ASIA (9.3% of the portfolio as of fiscal year end) was also built up over the period. The region benefited from the recovery in economic prospects for Japan and a stronger yen. Firmer Asian currencies, falling interest rates and evidence of considerable financial and corporate restructuring encouraged us to broaden our market exposure. Having played the relatively liquid markets of Australia, Hong Kong and Singapore, we extended the list to include Korea and Thailand. New holdings included North and Tabcorp (Australia), Swire Pacific, New World Development and China Everbright (Hong Kong), Singapore Telecom, Overseas Chinese Banking Corp, Neptune Orient Lines (Singapore), Korea Telecom and Thai Petrochemical Industry. - ---------- * Calculated without the imposition of front-end sales charges. 4 We increased our exposure to SMALLER MARKETS over the period, in line with a more optimistic view on world growth, Asian recovery and rising commodity prices. Alpha Credit Bank and Hellenic Telecom (Greece), Magyar Olaj es Gaz (Hungary), Bank Handlowy, Telekomunikacja Polska (Poland), Hindalco (India), Compania Vale Do Rio Doce (Brazil) Cifra (Mexico), Commercial International Bank (Egypt) and Nedcor (South Africa) represented a significant increase to non index markets. OUTLOOK Improving world economic growth and evidence of domestic recovery in a number of key markets has prompted a shift towards a greater cyclical emphasis within the portfolio. Japan, Asia and selective smaller markets have the greatest profit recovery potential in this improving environment and we have weighted the Fund's portfolio accordingly. A change in the interest rate cycle in the US and weak domestic bonds in both the UK and Europe, will constrain returns from these maturer market regions. Y2K issues have distorted capital flows this year, but we have liquidity available to capitalise on opportunities resulting from volatility surrounding this momentous event. 5 [GRAPH OMITTED] [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Eagle International Equity Portfolio Eagle Class, Class A and Class C Shares are calculated in conformance with item 21 of Form N-1A, which assumes the maximum sales load of 4.75% for Class A Shares, and reinvestment of dividends for Eagle Class, Class A and Class C Shares. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 6 [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Eagle International Class B Shares are calculated in conformance with item 21 of Form N-1A, which assumes a 4% contingent deferred sales load for the complete redemption of Class B Shares, and reinvestment of dividends. If Class B Shares were still held at the end of the period, the value would be $12,929. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 7 December 10, 1999 Dear Fellow Shareholders: The Heritage Series Trust--Growth Equity Fund has performed exceptionally well year-to-date and for the trailing 12 months ended October 31, 1999. The Fund's year-to-date total return thru October is up 28.56%* versus a year-to-date total return of 11.96% for the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). For the 52-week period ending October 31, 1999, the Class A Shares of the Fund handily outperformed the S&P 500 Index as well. Over that time period, the Fund's total return was 50.73%* versus a total return of 25.67% for the S&P 500 Index. The Fund was rated five stars(a) by Morningstar, based on 3,372 domestic equity funds for the three year period ending October 31, 1999. On a three-year basis, the Fund ranks in the top sixth(b) percentile of Morningstar's large growth category peer group for the period ending October 31, 1999. This performance comes on the heels of a change in the Fund's portfolio manager on April 1, 1999. The Fund currently has 47 equity investments that we consider premier growth stocks. Our investment strategy is to look for companies that have an earnings growth rate greater than the average for companies included in the S&P 500 Index. The types of companies that we seek are dominant firms in high growth industries. We favor those firms whose industries have significant barriers to entry and high switching costs for their customers. Finally, we consider those areas with the strongest potential for growth. MARKET ENVIRONMENT It is quite amazing to think about how far we have come in just a year's time. Think about it. In the fall of 1998, the global economic environment was seemingly in crisis. The Asian economies continued to struggle, Russia defaulted on its debt, and there was pressure on Latin American governments to devalue their currencies. Investors braced for the possibility of deflation and negative economic growth worldwide. Those who were the most pessimistic at that time argued that equities and asset prices could not possibly appreciate in this deflationary environment and that we should prepare for the worst. We disagreed with that assessment. Fortunately, these negative scenarios did not take place in 1999 as a global economic rebound kicked into high gear. Investors' sentiment has shifted once again and the worry has focused on inflation, and not deflation. Since then, the U.S. Federal Reserve has raised interest rates several times in 1999 when it appeared that the U.S. economy might overheat from its torrid growth pace. We do not believe there will be major inflation in the U.S. economy. There is still excess manufacturing capacity worldwide and with the Internet invading every part of our economy, it is our belief that inflation will be held in check. Although short-term issues may create a choppy market for investors, we remain bullish on the intermediate and longer-term fundamentals. Thus, we believe this type of environment will continue to be a "stock picker's" market. We remain very bullish on the prospects of the U.S. equity markets and the growth style in particular. In our view, the large, multinational companies held in the Fund should continue to compound their revenue and earnings growth and these factors should override any near-term macroeconomic changes. We continue to believe that the long-term market fundamentals remain outstanding. STRUCTURAL AND STRATEGIC CHANGES When we took over managing this Fund on April 1, 1999, we remained committed to the Fund's large cap growth emphasis. We focus our efforts on those areas that have the strongest growth potential. These primary areas include technology and health care (both pharmaceuticals and medical devices). Thus, we have beefed up the Fund's weightings in these two sectors. Despite any near-term hiccups that the market might experience, we continue to stay the course and buy more of our franchise names when they sell off and vice-versa. - ---------------- * Calculated without the imposition of front-end sales charges. (a) Morningstar, Inc. brings both performance and risk together into one evaluation. These ratings are subject to change every month. The top 10% of domestic equity funds receive five stars and the next 22.5% receive four stars. The performance numbers used for the Fund did take into account front-end sales charges. Past performance is not guarantee of future results. (b) Morningstar, Inc. performance rankings for the Heritage Capital Appreciation Trust Class A Shares were based on a quantitative measure of risk-adjusted returns. This measure calculated by Morningstar shows how well a fund has balanced risk and return relative to other funds in the same category. For the 1-year period ended October 31, 1999, the Fund was ranked in the 16th percentile out of 601 large growth funds. For the 3-year period ended October 31, 1999, the Fund was ranked in the 6th percentile out of 384 large growth funds. The performance numbers used for the fund did not take into account front-end sales charges. Past performance is no guarantee of future results. 8 We are big believers in the long-term growth prospects of technology, especially the Internet. Positions in companies such as Cisco Systems, Microsoft, and Sun Microsystems contributed to the Fund's performance. Positive performance was also attributed to semiconductor companies like Texas Instruments, Intel, LSI Logic, and National Semiconductor. At this time, we are diversifying our semiconductor investments by taking some profits and investing the proceeds into new, higher growth names. In the health care area, we have added to blue chip names such as Johnson & Johnson, Merck, Lilly, and Medtronic. The severe correction in 1999 in many health care stocks has given us a number of attractive entry points for purchasing these securities as longer-term positions. Another name that has been purchased for the Fund is Royal Caribbean Cruise Lines. We believe this firm has solid growth prospects and it is a nice addition to our consumer sector. Royal Caribbean is on its way to upgrading its fleet of ships and the demand for cruises remains strong. Retailing is an area where we have pared back the Fund somewhat because of the new threat of the Internet. In our view, web-based, Internet models pose a serious threat to traditional, bricks-and-mortar-based retailing models. The web-based, Internet models are producing significantly greater revenues per individual employee than the bricks-and-mortar-based firms are. In addition, the web-based, Internet models are generating these higher revenues per employee at a LOWER cost per employee than the traditional retailers are. Thus, we believe that increased competition in the retail sector will erode margins for all but the most efficient companies. We eliminated the Fund's positions in the Gap, Walgreen's, and Safeway. Two retail companies that we hold in the Fund, Wal-Mart and Home Depot, are using technology as a competitive weapon. The financial weighting has been pared back from 28% to 12% since we took over management of the Fund. Although the earnings for most financial companies remain strong, we believe that many companies in this sector will not have the proverbial "wind at their backs" going forward. Longer term, financial services companies face many challenges with the role of the "intermediary" in question in today's world. In our opinion, many financial services firms have infrastructure and cultural issues that are not conducive to these challenges. The blurring of the competitive battle lines, combined with the quickening pace of technology that is being deployed and used as a strategic weapon, is forcing companies to fight even harder to retain their existing base of customers. In a world that now moves and competes on "Internet" time, the winners will be those firms that can quickly adapt to the underlying market changes that are ahead. Profitability and customer growth will continue to be of paramount importance for all firms. Given our longer-term view on the financial sector, we believe that our decision to reduce the Fund's weighting in financial stocks was a prudent course of action. This decision proved to be especially beneficial to the Fund's shareholders given the weakness experienced by many financial stocks facing the wind of an uncertain, near-term interest rate environment. We will monitor the response of financial services companies very carefully before returning full force to this sector. In our opinion, the top financial services firms ten years from now will look very different from those that exist today. The Fund holds leading financial companies in dominant niches such as American Express, AIG, and Citigroup. TACTICAL CHANGES/VOLATILITY Market volatility is high by any historical measurement and we believe there are several reasons why this increased volatility is here to stay. First, there are many more investors (both retail and institutional) in today's marketplace. In our view, this can lead to exaggerated supply and demand situations for securities in both up and down markets. Second, there are many more hedge funds and money managers who trade securities that are using increasingly sophisticated derivative instruments. Naturally, increasing the amount of overall leverage in the financial system will increase the volatility in short-term price movements. Third, technology is allowing investors to have access to electronic networks, possible 24-hour trading, and the ability to move money around the world many times over instantaneously. We believe that this increased market volatility allows us to take advantage of trading opportunities both on the upside and on the downside. We are adapting by having an increased tolerance for volatility. Since we are very fundamental with our core investment process, this volatility should continue to provide us with trading opportunities in all types of markets. Therefore, we expect the Fund's turnover will be higher than in the past due to short-term, tactical trading opportunities. The Fund added incremental performance due to the additions of initial public offerings (IPOs) and favorable trading due to volatile market conditions. The market favorably received the IPOs of Ariba, E.Piphany, Juniper Networks, and Sycamore Networks. These are all companies with solid fundamentals that we would consider core holdings. 9 CONCLUSION Looking ahead to next year, we believe the market is favorable based not only on strong fundamentals and low inflation, but also because of potentially strong earnings growth in the companies in which we prefer to invest. We remain convinced that the real risk to investors is attempting to "time" the best period to invest in the market. We thank you for investing with us and look forward to working with you in the years to come. Sincerely, /s/ ASHI PARIKH ------------------------------------ Ashi Parikh Managing Director Eagle Asset Management, Inc. Portfolio Manager, Growth Equity Fund 10 [GRAPH OMITTED] [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Growth Equity Fund Class A, B and C Shares are calculated in conformance with item 21 of Form N-1A, which assumes the maximum sales load of 4.75% for Class A Shares, a 4% contingent deferred sales load for the complete redemption of Class B Shares, and reinvestment of dividends for Class A, B and C Shares. If Class B Shares were still held at the end of the period, the value would be $17,333. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 11 December 2, 1999 Dear Fellow Shareholders: We are pleased to present the second annual report for the Heritage Mid-Cap Growth Fund (the "Fund"). For the one year period ended October 31, 1999, your Fund's Class A Shares produced a 15.97%* return. For the same period the Russell Mid Cap Growth Index and the Standard & Poor's 400 Mid Cap Index (the "S&P Mid Cap Index") returned 37.66% and 21.06%, respectively. Year-to-date through September, the Fund's Class A Shares earned 4.16%*. This number trails the Russell Mid Cap Growth Index by 4.31%, but exceeds the S&P Mid Cap Index by 6.27%. For the period June 30, 1999 through September 30, 1999, the total return for the Class A shares was +1.85%. These results compare against 3Q 1999 returns of - -8.40% return for the S&P Mid Cap Index. We think that the Fund's third calendar quarter performance in a rough market represents an excellent data point. Since we are growth-at-a reasonable price investors with an emphasis on cash flow, we tend to hold up well in turbulent markets. Since there are a host of growth funds that own large amounts of technology stocks and stocks with high valuations, we feel that the fund's balanced conservatism is somewhat unique. Unlike most mid-cap funds, the Fund has a large exposure to small capitalization stocks. With a median market capitalization of approximately $1.8 billion, the Fund is one quarter the size of a typical mid-cap fund. For reference purposes, the median market capitalization of the S&P Mid Cap Index and the Russell Mid Cap indices are, respectively, $1.7 billion and $3 billion. While the Fund's numbers are beating the S&P Mid Cap Index, as of this writing, we feel that the market is not favoring our style and is at odds with long-term, growth-at-a reasonable price investors. Some facts: a) Despite their small index weights, 2 to 3% of incremental performance has come from Internet stocks. Given their valuation levels, we have difficulty holding these stocks. The Internet stocks we own are largely undiscovered. For instance, marketing services stocks such as Catalina Marketing, Nielsen Media Research, Harte-Hanks, and TMPW Worldwide are stealth Internet stocks. Our holdings in cable and telecommunications (Western Wireless, Insight Communications, Price Cellular) also represent indirect Internet plays, as these providers represent digital highways for the movement of data. b) The bottom 80% of stocks in the small cap market, as ranked by price-to-earning ratios, have averaged returns of -5.6% this year. The top quintile, as ranked by price-to-earning ratios, is up 11.39%. Stocks without earnings are up 34%. c) 3% of the Standard & Poor's 500 Composite Stock Price Index year-to-date return thru September is due to the top quintile of stocks. Price momentum has never worked better. The historical average since 1959 for this group is 31% (Source. S.C. Bernstein). We think that the Fund will be in good stead if a correction in technology and high multiple stocks occurs. Our technology stocks tend to have reasonable multiples. Our emphasis on cash flow becomes an important factor in rough markets. Growth firms require capital and firms that generate capital internally become more valuable in bad market conditions. Our emphasis on valuation also pays off in terms of take-overs. Take-overs of note this year include Executive Risk (insurance), Gulfstream (aircraft), Xomed (medical products), Nielsen Media Research (media), and Metro Networks (radio). - ---------------- * Calculated without the imposition of front-end charges. 12 The Fund is currently over weighted in consumer stocks, communications and health care and under weighted in basic materials, financial services, transportation, and utilities. Some comments about these sector weightings follow: Although we tend to favor well-run financial stocks, we are having difficulty finding favorably priced financial stocks with solid fundamentals. The property/casualty insurance industry has suffered numerous disappointments, the sub-prime consumer lending sector is suffering from over-capacity, and bank lending spreads seem to be narrowing. The valuations assigned to Internet and on-line finance firms are extremely high. Our core finance holdings for the past several years, Protective Life and Radian Group, have extremely solid fundamentals. Despite this fact, returns for both stocks have been poor this year, which has not helped the Fund's performance. Returns in our health care holdings have also hurt the Fund's performance. Most of the value names in the health care market this year were in health care services stocks. We had some exposure in this area, particularly in hospitals, from our Health Management Associates holding, which has subsequently been sold. Services stocks continue to suffer from the effects of the Balanced Budget Act cuts of 1997, and we are looking to selectively re-enter this area. The rest of our holdings in health care - Patterson Dental (dental supplies), Sybron (lab supplies), Xomed (medical devices), and Varian Medical (medical devices) have generally performed in-line with the market. The Fund's very large over-weighting in consumer cyclical stocks is in business services, advertising and marketing services, education, publishing, and telecommunication stocks. We have tended to de-emphasize retail stocks which traditionally are a large part of consumer cyclicals. This decision is based on fundamentals. In consumer staples, our exposure is primarily in broadcast and media stocks, with some exposure in entertainment stocks. We have de-emphasized food, beverage, household products, and restaurant stocks. As with consumer cyclicals, this weight is also based on fundamentals. As we enter 2000, we are confident that the Fund is well positioned. Many small and mid-cap stocks are much cheaper than large cap stocks. Our mix of stable growth stocks should serve well if equity markets continue their current course. As always, we thank you for your support and we will always strive to add value 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 13 [GRAPH OMITTED] [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Mid Cap Growth Fund Class A, B and C Shares are calculated in conformance with item 21 of Form N-1A, which assumes the maximum sales load of 4.75% for Class A Shares, a 4% contingent deferred sales load for the complete redemption of Class B Shares, and reinvestment of dividends for Class A, B and C Shares. If Class B Shares were still held at the end of the period, the value would be $11,319. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 14 November 16, 1999 Dear Fellow Shareholders: It is our pleasure to update you on the progress and prospects for our portion of the Heritage Series Trust-Small Cap Stock Fund (the "Fund"). For the twelve months ending October 31, 1999 the Fund's Class A Shares returned 2.61%* versus 14.87% for the Russell 2000 Index, 11.13% for the Standard & Poors Small Cap 600 Index and .72% for the Russell 2000 Value Index. The Russell 2000 Index was particularly supported by the presence of several Internet stocks which were included in the Russell 2000 until June 30. These were not small capitalization companies and had valuation characteristics not relevant to the Fund, so the other indices more accurately reflected what happened in the small cap universe during the period. The market was quite narrow during this period. Large caps did better than small caps; high growth did better than growth at a reasonable price; growth did better than value. Investors like Awad Asset Management that stuck to strict valuation disciplines and investment style were punished. Investors who migrated to Internet and high growth, high price to earnings technology stocks did better. This hurt the Fund's returns relative to the indices, as we stayed true to our value, growth at a reasonable price style. Positions in technology in the Fund that had a positive impact were StarTek, Zebra, Periphonics and Comdisco. The Publishing sector also added to the Fund's worth with positions in Houghton Mifflin and CMP Media. StarTek benefitted from being perceived as an Internet fulfillment firm; Zebra's earnings were better than expected, as were Periphonics. Comdisco was recognized as a technology company; CMP Media was taken over; and Houghton Mifflin was recognized as a potential takeover candidate. We were hurt by our holdings in the healthcare sector, as LTC Properties, Health Management Systems and Lanvision provided negative returns. LTC was hurt, as it leases facilities to the nursing home industry which is under pressure. Health Management and Lanvision went down from neglect as this sector of the market was ignored. Ultimately, the markets will refocus on small cap stocks and on value stocks. As this happens, the Heritage Small Cap Fund should do very well. As we move from a momentum market to a relative value market, funds should flow from the speculative sector to the small cap arena. As this happens, we believe that the Fund should experience better returns. We believe the Fund is filled with good growing companies selling at modest valuations. Sincerely, /s/ JAMES D. AWAD -------------------------------- James D. Awad Chairman Awad Asset Management, Inc. Portfolio Manager, Small Cap Stock Fund - ---------- * Calculated without the imposition of front-end sales charges. 15 November 15, 1999 Dear Fellow Shareholders: For the year ended October 31, 1999, the Heritage Small Cap Fund ("The Fund") Class A Shares advanced 2.61%,* underperforming the Russell 2000, which advanced 14.87%, in the comparable period. Primary factors that influenced Eagle Asset Management's ("Eagle") portion of the Fund's underperformance were underweighting of technology (only about 13% technology weighting for much of the period), not trading out of several big winners which encountered problems in the quarter and a style problem as growth at a reasonable price did not work. Eagle's portion of the Fund had about a 13% technology weighting. This proved to be far too low. Best performing small cap funds for the third quarter had about a 45% technology weighting for much of the period. (Worth noting, several of the currently better performing funds stumbled badly in 1997, while we had outstanding performance). Two of our poorest performing stocks for the period, Inspire Insurance Solutions and Strayer Education had been big winners. In hindsight, we should have been more aggressive in trading out of winning positions. Lastly, as shown in the table below, high price/earnings multiple stocks were favored for the first nine months of the calendar year. While this seems counter-intuitive, the following table indicates that a low price-earnings strategy was ill-fated. The Fund's price-earnings ratio was about 13x. 1/1/99 THROUGH 9/30/99 ------------------------------------- QUINTILES RETURN PRICE/EARNINGS ----------- --------------- ------------------- 1 -6.69% 8.4 - 10.1 2 -3.79% 11.6 - 13.2 3 -7.19% 14.7 - 17.0 4 -4.87% 20.0 - 25.7 5 +11.39% 46.0 - 4677.1 Source: Frank Russell Company; Prudential Securities. On a positive note, Genesys Telecommunications, World Color Press, ABR Information Systems, Computer Management Associates and Trident were up significantly in the period due to merger announcements. Sykes Enterprises performed well in the period due to a strong third quarter earnings report and progress with its e-commerce bundled solutions. Coherent stock rose reflecting a positive turn in their medical division as well as speculation regarding a future production order from a semiconductor company. We have taken certain steps to improve performance. Recently we increased our technology weighting from 13% to over 20%. We are trimming our holdings of financial services. While we still like the group, they had grown too large a portfolio weighting. We are also reducing holdings in several of our economically sensitive positions. In recent weeks performance has improved, largely reflecting these adjustments. We believe the portfolio is attractively positioned. As of period-end, the portfolio had a price-to-earnings ratio of roughly 12 times expected year 2000 earnings per share, an anticipated earnings growth rate of 16%, and a return on equity of 14%. Going forward I remain optimistic about small cap stocks. Valuations remain compelling both on an absolute and relative basis. Forecasted price/earnings ratios are about 75% of those of large cap stocks.** - ---------- * Calculated without the imposition of front-end sales charges. ** Source: Frank Russell Company, Prudential Securities 16 With the exception of technology, I have not seen small cap stocks as attractively priced since the mid-1970s. While timing a recovery can be frustrating, I believe future returns will be outstanding. 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 17 [GRAPH OMITTED] [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Small Cap Stock Fund Class A and B Shares are calculated in conformance with item 21 of Form N-1A, which assumes the maximum sales load of 4.75% for Class A Shares, a 4% contingent deferred sales load for the complete redemption of Class B Shares, and reinvestment of dividends for Class A and B Shares. If Class B Shares were still held at the end of the period, the value would be $8,010. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 18 [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Small Cap Stock Fund Class C Shares are calculated in conformance with item 21 of Form N-1A, which assumes reinvestment of dividends for Class C Shares. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. 19 November 16, 1998 Dear Fellow Shareholders: "Value" stocks have been down but not out. Over the last several weeks we have witnessed a resurgence in value-oriented stocks. Much of the change is due to new government legislation that appears to be ready for approval. Financial stocks received a big boost from HR 10 which eliminates the legislative barrier between banks, brokers, and insurance companies, thus allowing banks to enter insurance and brokerage activities to a greater extent than heretofore allowed. Most stocks in this group rallied based on the expectation of an acquisition explosion. The emergence of the group is very much appreciated at this time due to the doldrums it has gone through as interest rates ramped this year. Also, health care stocks improved based upon the likelihood that financial relief would be coming from a reinstatement on some Medicare cuts and the curtailing of further reductions in payments. Demographic trends favor stocks in this category due to the aging of America and the increased demands that are expected to take place in this segment over the foreseeable future. Furthermore, we expect U.S. corporate profits to significantly increase through the second half of this year and at least the first two quarters of 2000 (albeit off depressed levels in the comparative period). Plus, the global recovery appears to be picking up steam, which bodes well for cyclically depressed industries such as steel, chemicals, metals and mining, and forest products. The valuation gap between growth and value narrowed slightly in the second quarter, but has since widened due to the enormous runup in technology stocks. Nevertheless, we are very encouraged with the economy's vibrance as we move into the new millennium and the tremendous strides that domestic companies have made in improving their productivity which, in fact, has kept inflation in check despite higher labor costs and increases in basic material cost. Thus, we expect the growth/value gap to narrow accordingly as the year progresses and to finally witness a sustained improvement in value stocks as a whole and our portfolio in particular, which we think is well positioned for the year ahead. The level of relative performance of the Heritage Series Trust Value Equity Fund (the "Fund") has not been up to our standards and we look forward to turning the performance around now that the Fund totally reflects our positions on an ongoing basis. Performance of the Fund's Class A Shares for the fiscal year ended in October showed a gain of only 0.2%* versus the Russell 1000 Value Index that was up about 16.5%. Much of the shortfall in performance occurred earlier in the year and in October, and we have begun to see performance improvement in November, which is reversing the portfolio's negative trend of the past year. During the past year the Fund's performance benefited from the market's psychology of anything "technology" is good. Thus, our overall investment in the group did exceptionally well with large gains in Electronic Data Systems, IBM, and Intel. In addition, telecommunication stocks have had an extraordinary run due to the explosion of the Internet and data transmission. BellSouth, SBC Communications, and US West have been beneficiaries of this momentum. However, auto-related stocks such as Dana and Goodyear have hurt the performance and are trading at historically low valuations. Also, financial stocks have been hit hard due to rising interest rates and fierce competition in the marketplace. In particular, Chubb, Hartford Financial, and First Union were negatively affected. Retail stocks such as Albertson's and Kmart have had a tough time, which was generally reflected by most companies in the industry. - ---------------- * Calculated without the imposition of front-end sales charges. 20 We have completed the transition of the Heritage Value Equity Fund on a reasonably tax effective basis. The re-positioning more fully reflects our philosophy of achieving superior returns with a lower level of risk than the market averages. On an ongoing basis we will do all we can to offer our fellow shareholders the kind of returns that they should expect from us as we move into the next millennium. 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 Management, LLC Osprey Partners Investment Management, LLC Portfolio Manager, Value Equity Fund Portfolio Manager, Value Equity Fund
21 [GRAPH OMITTED] [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Value Equity Fund Class A and B Shares are calculated in conformance with item 21 of Form N-1A, which assumes the maximum sales load of 4.75% for Class A Shares, a 4% contingent deferred sales load for the complete redemption of Class B Shares, and reinvestment of dividends for Class A and B Shares. If Class B Shares were still held at the end of the period, the value would be $9,279. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. Effective May 18, 1999, 100% of the assets of the Value Equity Fund were allocated to Osprey Partners Investment Management, LLC., (See Note 4). 22 [GRAPH OMITTED] * Average annual returns for Heritage Series Trust - Value Equity Fund Class C Shares are calculated in conformance with item 21 of Form N-1A, which assumes reinvestment of dividends for Class C Shares. Performance presented represents historical data. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's past performance is not indicative of future performance and should be considered in light of the Fund's investment policy and objectives, the characteristics and quality of its portfolio securities, and the periods selected. Effective May 18, 1999, 100% of the assets of the Value Equity Fund were allocated to Osprey Partners Investment Management, LLC., (See Note 4). 23 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS--96.9%(a) - ----------------------- ADVERTISING/COMMUNICATIONS--7.8% -------------------------------- 25,000 Catalina Marketing Corporation.* ..................................... $2,340,625 30,000 TMP Worldwide Inc.* ................................. 1,873,125 ---------- 4,213,750 ---------- BROADCASTING--6.4% ------------------ 20,000 Emmis Communications, Class "A"* ........................................ 1,442,500 22,500 Radio Unica* ........................................ 644,062 5,000 Tivo Inc.* .......................................... 214,375 48,750 World Wrestling Federation Entertainment Inc* ................................ 1,176,093 ---------- 3,477,030 ---------- DATA PROCESSING--14.1% ---------------------- 35,000 Bsquare Corporation* ................................ 1,384,688 55,000 Data Return Corporation* ............................ 828,438 100,000 Datastream Systems, Inc. ............................ 1,025,000 25,000 Electronic Data Systems Corporation ....................................... 1,462,500 5,000 Lexmark International Group, Inc.,Class "A"* ................................... 390,312 25,500 Omega Research Inc.* ................................ 146,625 20,000 Tech Data Corporation* .............................. 376,250 100,000 The 3DO Company* .................................... 750,000 40,000 Transaction Systems Architects Inc., Class "A" ................................... 1,230,000 ---------- 7,593,813 ---------- EDUCATION--0.9% --------------- 28,000 Strayer Education, Inc. ............................. 491,750 ---------- ELECTRONICS/ELECTRIC--14.1% --------------------------- 140,000 Amprex Corporation, Class "A"* ........................................ 341,250 90,000 Artesyn Technologies, Inc.* ......................... 1,777,500 10,000 Chartered Semiconductor, Sponsored ADR* .................................... 331,875 30,000 Fairchild Semiconductor International Inc., Class "A"*..................... 757,500 40,800 PSC Inc.* ........................................... 300,900 35,000 Sawtek, Inc.* ....................................... 1,435,000 7,500 Silicon Image Inc.* ................................. 331,406 5,000 Sycamore Networks Inc.* ............................. 1,075,000 35,000 The DII Group, Inc.* ................................ 1,260,000 ---------- 7,610,431 ---------- GRAPHIC ARTS--1.4% ------------------ 31,712 Quebecor Printing Inc. .............................. 731,358 ---------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) ------------------------- INTERNET--2.8% -------------- 5,000 Akamai Technologies Inc.* .......................... 725,938 10,000 CareInsite Inc.* ................................... 437,500 45,000 Firstwave Technologies, Inc.* ...................... 98,438 2,500 Interwoven Inc.* ................................... 195,938 ---------- 1,457,814 ---------- LEISURE/AMUSEMENT--6.3% ----------------------- 20,000 Royal Caribbean Cruises, Ltd. ...................... 1,061,250 121,500 Steiner Leisure, Ltd.* ............................. 2,300,906 ---------- 3,362,156 ---------- MANUFACTURING/DISTRIBUTIONS--1.4% --------------------------------- 30,000 Meade Instruments Corporation * .................... 765,000 ---------- MEDICAL EQUIPMENT/SUPPLY--6.1% ------------------------------ 75,000 Coherent, Inc.* .................................... 1,542,188 40,000 Lasersight Inc.* ................................... 552,500 24,062 Medical Manager Corporation* ....................... 1,206,107 ---------- 3,300,795 ---------- OFFICE EQUIPMENT--1.2% ---------------------- 50,000 Office Depot Inc.* ................................. 621,875 ---------- OIL & GAS--2.0% --------------- 70,000 Global Marine Inc.* ................................ 1,063,125 ---------- PHARMACEUTICAL--1.5% -------------------- 55,500 Collateral Therapeutics, Inc.* ..................... 783,938 ---------- RETAIL STORES--7.5% ------------------- 15,000 Abercrombie & Fitch Company, Class "A"* ....................................... 408,750 60,000 Hibbett Sporting Goods, Inc.* ...................... 956,250 50,000 Micro Warehouse, Inc.* ............................. 606,250 15,000 Tandy Corporation .................................. 944,062 50,000 Urban Outfitters Inc.* ............................. 1,100,000 ---------- 4,015,312 ---------- SECURITIES--1.6% ---------------- 16,000 Dain Ruscher Corporation ........................... 859,000 ---------- SERVICES--7.7% -------------- 15,000 Central Parking Corporation ........................ 402,188 60,000 Navigant Consulting Corporation* ..................................... 1,713,750 65,000 Sykes Enterprises, Inc.* ........................... 2,006,875 ---------- 4,122,813 ---------- TELECOMMUNICATIONS--14.1% ------------------------- 50,000 Cincinnati Bell Inc. ............................... 1,040,625 100,000 Ems Technologies Inc.* ............................. 956,250 37,000 Genesys Telecomm Labs Inc.* ........................ 1,817,625 40,000 Paradyne Networks Corporation* ..................................... 1,215,000 25,000 Splitrock Services* ................................ 546,875 22,000 Tellabs, Inc.* ..................................... 1,391,500 The accompanying notes are an integral part of the financial statements. 24 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - AGGRESSIVE GROWTH FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- TELECOMMUNICATIONS (CONTINUED) ------------------------------ 20,000 Williams Communications Group* ........................................ $ 637,500 ------------ 7,605,375 ------------ Total Common Stocks (cost $47,365,421) ............................................ 52,075,335 REPURCHASE AGREEMENT-- 10.1%(a) - ------------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated October 29, 1999 @ 5.13% to be repurchased at $5,416,314 on November 1, 1999, collateralized by $4,980,000 United States Treasury Notes, 7.88% due November 15, 2004, (market value $5,543,921 including interest) (cost $5,414,000) ..................................... 5,414,000 ------------ TOTAL INVESTMENT PORTFOLIO (cost $52,779,421) (b), 107.0%(a) 57,489,335 OTHER ASSETS AND LIABILITIES, net, (7.0%)(a) .................... (3,736,968) ------------ NET ASSETS, 100.0% $ 53,752,367 ============ - ---------- * Non 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 $4,709,914 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $7,370,189 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $2,660,275. The accompanying notes are an integral part of the financial statements. 25 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO OCTOBER 31, 1999 - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS--95.1% (a) - ------------------------- AUSTRALIA--2.5% --------------- 7,000 Brambles Industries Ltd. .......................... $ 196,858 38,700 News Corporation Ltd. ............................. 279,860 93,000 North Ltd. ........................................ 179,697 32,000 Tabcorp Holdings Ltd. ............................. 202,840 66,000 Telstra Corporation ............................... 335,737 ---------- 1,194,992 ---------- BRAZIL--0.5% ------------ 7,000 Compania Vale Do Rio Doce, Sponsored ADR .................................. 128,100 8,000 Petrobras, Sponsored ADR .......................... 127,000 ---------- 255,100 ---------- EGYPT--0.3% ----------- 10,700 Commercial International Bank, Sponsored GDR ................................... 132,145 ---------- FINLAND--1.8% ------------- 7,462 Nokia AB OY ....................................... 854,039 ---------- FRANCE--12.6% ------------- 1,526 Accor ............................................. 343,496 5,193 AXA-UAP Groupe .................................... 732,489 4,232 Cap Gemini SA ..................................... 641,006 2,788 Compagnie de Saint Gobain ......................... 483,872 3,716 France Telecom .................................... 359,012 2,394 Lafarge ........................................... 230,409 1,827 PSA Peugeot Citroen ............................... 350,716 2,682 Societe Generale .................................. 583,960 2,136 Suez Lyonnaise des Eaux ........................... 344,876 8,566 Total SA, Class "B" ............................... 1,157,856 10,531 Vivendi ........................................... 798,100 ---------- 6,025,792 ---------- GERMANY--6.5% ------------- 9,919 BASF AG ........................................... 446,024 6,643 Bayerische Hypo-Vereinsbank AG .............................................. 436,016 1,346 Celanese AG* ...................................... 21,235 12,974 Hoechst AG ........................................ 571,114 5,399 Mannesmann AG ..................................... 849,001 6,386 Metro AG .......................................... 343,244 4,920 Siemens AG ........................................ 441,695 ---------- 3,108,329 ---------- GREECE--0.2% ------------ 3,400 Hellenic Telecom OTE .............................. 72,043 ---------- HONG KONG--2.7% --------------- 230,000 China Everbright, Ltd. ............................ 164,317 30,500 Dao Heng Bank Group, Ltd. ......................... 138,592 25,000 Henderson Land Development Company ......................................... 113,600 155,934 Hong Kong Telecom Company, Ltd. ................................... 356,289 MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- HONG KONG (CONTINUED) --------------------- 9,500 Hutchison Whampoa, Ltd. ........................... 95,385 95,000 New World Development, Ltd. ....................... 179,764 53,000 Swire Pacific Ltd., Class "A" ..................... 262,663 --------- 1,310,610 --------- INDIA--0.6% ----------- 6,900 Hindalco Industries, Ltd., Sponsored GDR ..................................... 156,975 8,033 Indian Opportunities Fund, Ltd. (b) * ........................................ 123,467 --------- 280,442 --------- IRELAND--0.5% ------------- 31,932 Bank of Ireland ................................... 249,221 --------- ISRAEL--0.2% ------------ 1,200 Orbotech Ltd.* .................................... 93,750 --------- ITALY--3.2% ----------- 38,688 San Paolo IMI SPA ................................. 501,350 131,000 Seat Pagine Gialle SPA ............................ 186,709 40,986 Telecom Italia Mobiliere SPA ...................... 256,080 66,355 Telecom Italia SPA ................................ 573,021 --------- 1,517,160 --------- JAPAN--31.5% ------------ 50,000 Asahi Chemical Industry Company, Ltd. ..................................... 302,100 1,700 Benesse Corporation ............................... 363,575 17,000 Brigestone Corporation ............................ 467,920 21,000 Canon, Inc. ....................................... 594,131 4,000 FamilyMart Company, Ltd. .......................... 278,124 9,000 Fuji Photo Film Company, Ltd. ..................... 289,153 24,000 Fujitsu Ltd. ...................................... 722,739 56,000 Hitachi, Ltd. ..................................... 605,275 10,000 Honda Motor Company, Ltd. ......................... 421,981 6,000 Ito-Yokado Company, Ltd. .......................... 479,908 24,000 Kao Corporation ................................... 731,946 51,000 Kubota Corporation ................................ 202,983 3,000 Mabuchi Motor Company, Ltd. ....................... 443,080 25,000 Marui Company, Ltd. ............................... 472,331 40,000 Mitsui Marine & Fire Insurance.................... 265,081 65 NTT Mobile Communication .......................... 1,726,767 4,000 Promise Company, Ltd. ............................. 268,534 3,000 Riso Kagaku Corporation ........................... 129,472 5,200 Rohm Company, Ltd. ................................ 1,166,970 4,000 Secom Company, Ltd. ............................... 428,887 5,000 Secom Company, Ltd. (c)* .......................... 532,272 20,000 Shin-Etsu Chemical Company, Ltd. ..................................... 824,782 7,500 Sony Corporation .................................. 1,169,560 34,000 Sumitomo Bakelitel Company, Ltd. ..................................... 335,533 11,000 Taisho Pharmaceutical Company ..................... 457,850 45,000 Toppan Printing Company, Ltd. ..................... 551,980 The accompanying notes are an integral part of the financial statements. 26 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- JAPAN (CONTINUED) ----------------- 19,000 Yamanouchi Pharmaceutical ........................ $ 861,897 ----------- 15,094,831 ----------- MEXICO--1.7% ------------ 15,000 Alpha SA ......................................... 57,584 5,560 Cemex, SA, Class "B"* ............................ 125,100 81,000 Cifra, SA* ....................................... 127,416 5,000 Desc ADS ......................................... 79,375 3,300 Grupo Televisa, SA, Sponsored GDR* ........................................... 140,250 3,200 Telefonos de Mexico, Sponsored ADR ............................................ 273,600 ----------- 803,325 ----------- NETHERLANDS--3.4% ----------------- 16,068 Ahold (Kon) NV ................................... 493,513 10,710 ING Groep NV ..................................... 631,759 14,634 VNU, NV .......................................... 494,878 ----------- 1,620,150 ----------- POLAND--0.2% ------------ 18,500 Telekomunikacja Polska, Sponsored GDR .................................. 92,963 ----------- SINGAPORE--2.5% --------------- 9,100 Chartered Semiconductor Manufacturing, Sponsored ADR * .......................................... 302,006 221,000 Neptune Orient, Ltd.* ............................ 320,213 36,750 Overseas Union Bank .............................. 276,183 30,000 Singapore Airlines Ltd. .......................... 317,441 ----------- 1,215,843 ----------- SOUTH AFRICA--0.3% ------------------ 1,024 Anglo-American Corporation, PLC* ........................................... 54,503 3,400 Nedcor Investment Bank Holdings* ...................................... 1,909 3,400 Nedcor Ltd. ...................................... 66,852 ----------- 123,264 ----------- SOUTH KOREA--0.7% ----------------- 7,370 Korea Telecom Corporation ADS* ........................................... 259,793 4,290 Shinhan Bank GDS* ................................ 91,699 ----------- 351,492 ----------- SPAIN--3.4% ----------- 23,131 Argentaria SA .................................... 513,370 49,799 Banco Santander Central Hisp ..................... 517,001 37,694 Telefonica S.A. .................................. 620,101 ----------- 1,650,472 ----------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- SWEDEN--2.4% ------------ 17,900 Ericson, Class "B" ............................. 744,382 25,000 Foreningsparbanken, AB, Class "A" ...................................... 398,225 ----------- 1,142,607 ----------- SWITZERLAND--2.1% ----------------- 570 Clariant AG .................................... 249,419 270 Holderbank Financiere Glarus ................... 332,474 287 Novartis AG .................................... 429,286 --------- 1,011,179 --------- TAIWAN--0.1% ------------ 1,700 Taiwan American Fund (b)* ...................... 22,321 --------- THAILAND--0.3% -------------- 400,000 Thai Petrochemical Industry (d)* ............... 165,782 --------- UK--14.9% --------- 17,500 Allied Zurich, PLC ............................. 212,794 8,000 AstraZeneca PLC ................................ 361,767 40,000 BP Amoco, PLC .................................. 388,452 15,000 British Sky Broadcasting, PLC .................. 161,691 13,000 British Telecomunications, PLC ................. 235,832 29,000 Cable & Wireless, PLC .......................... 338,335 22,000 General Electric Company, PLC .................. 239,496 22,000 GKN, PLC ....................................... 353,912 11,500 Glaxo Welcome, PLC ............................. 339,386 11,000 Halifax Group, PLC ............................. 140,444 94,000 Hilton Group, PLC .............................. 287,297 22,000 Land Securities, PLC ........................... 274,020 61,000 LASMO, PLC ..................................... 135,317 73,000 Legal & General Group PLC ...................... 202,721 28,000 Lloyds TSB Group, PLC .......................... 387,401 16,000 McKechnie, PLC ................................. 101,221 14,000 National Westminster Bank, PLC ................. 316,086 8,000 Rio Tinto, PLC ................................. 136,583 11,100 Royal Bank of Scotland Group, PLC .......................................... 255,353 28,000 Scot & Newcastle, PLC .......................... 260,874 21,000 Scottish Power, PLC ............................ 194,275 38,000 Shell Transport & Trading Company, PLC ................................. 290,978 28,000 SmithKline Beecham, PLC ........................ 361,175 23,991 Smiths Industries, PLC ......................... 325,626 40,000 Stagecoach Holdings, PLC ....................... 113,709 27,642 Unilever, PLC .................................. 256,630 90,000 Vodafone Group ................................. 419,262 8,892 Wassall, PLC ................................... 40,985 --------- 7,131,622 --------- Total Common Stocks (cost $36,733,783) ........................... 45,519,474 ---------- The accompanying notes are an integral part of the financial statements. 27 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE ------ ------------- CONVERTIBLE PREFERRED SHARES--1.5% (a) - -------------------------------------- JAPAN--1.5% ----------- 34,000,000 TB Finance (Cayman) 2.75% 10/01/04 (e) ................................... $ 295,914 36,000,000 Sanwa International Finance (Bermuda) 1.25% 1/8/05 (e)...................... 447,108 ----------- 743,022 ----------- Total Convertible Preferred Shares (cost $506,793) ................................................. 743,022 ----------- Total Investment Portfolio excluding repurchase agreement (cost $37,240,576) .............................................. 46,262,496 REPURCHASE AGREEMENT--2.7%(a) - ----------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated October 29, 1999 @ 5.13% to be repurchased at $1,291,552 on November 1, 1999, collateralized by $1,275,000 United States Treasury Notes, 6.25% due October 31, 2001,(market value $1,324,984 including interest) (cost $1,291,000) ................................................. 1,291,000 ----------- TOTAL INVESTMENT PORTFOLIO (cost $38,531,576)(f), 99.3%(a) ................................. 47,553,496 OTHER ASSETS AND LIABILITIES, net, 0.7%(a) ........................ 320,770 ----------- NET ASSETS, 100.0% ................................................ $47,874,266 =========== - ---------- * Non-income producing security. (a) Percentages indicated are based on net assets. (b) Martin Currie Investment Management Limited is the manager of the Indian Opportunities Fund, Ltd. and the Taiwan American Fund. (c) Bonus Issue - This bonus issue was converted into 5,000 shares of Secom Company, Ltd. on November 29, 1999. (d) Security is deemed illiquid and is fair valued by the Board of Trustees. (e) Principal amount is stated in Japanese Yen. (f) The aggregate indentified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $9,021,920 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $10,912,504 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $1,890,584. ADR - American Depository Receipt ADS - American Depository Shares GDR - Global Depository Receipt GDS - Global Depository Shares The accompanying notes are an integral part of the financial statements. 28 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - EAGLE INTERNATIONAL EQUITY PORTFOLIO INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET % OF NET INDUSTRY DIVERSIFICATION VALUE ASSETS ------------------------ ------ ------- Common Stocks Aerospace ..................................... $ 325,626 0.7% Airlines ...................................... 317,441 0.7% Auto Manufacturers ............................ 421,981 0.9% Auto Parts and Equipment ...................... 353,912 0.7% Banking ....................................... 4,106,232 8.6% Broadcasting .................................. 301,941 0.6% Building ...................................... 1,285,455 2.7% Capital Goods ................................. 558,959 1.2% Chemicals ..................................... 1,628,197 3.3% Conglomerates ................................. 495,007 1.0% Consumer Goods and Services ................... 3,142,913 6.5% Cosmetics and Toiletries ...................... 731,946 1.5% Electronic and Electrical Equipment ........... 4,368,082 9.0% Finance ....................................... 1,401,643 2.9% Food .......................................... 1,028,267 2.1% Forest Products ............................... 179,697 0.4% Industrials, Diversified ...................... 1,215,425 2.5% Insurance ..................................... 1,577,402 3.3% Leisure and Hotels ............................ 630,793 1.3% Mining ........................................ 191,086 0.4% Office Equipment .............................. 1,316,870 2.8% Oil and Gas ................................... 2,099,603 4.4% Pharmaceuticals ............................... 2,828,099 6.0% Publishing .................................... 279,860 0.6% Real Estate ................................... 453,784 1.0% Recreational Products ......................... 289,153 0.6% Restaurants ................................... 260,874 0.5% Retail Stores ................................. 1,079,655 2.3% Securities .................................... 145,788 0.3% Services ...................................... 1,344,726 2.8% Software ...................................... 641,006 1.3% Steel and Iron ................................ 571,114 1.2% Telecommunications ............................ 7,309,619 15.5% Tires and Rubber .............................. 467,920 1.0% Transportation and Storage .................... 832,147 1.7% Utilities, Diversified ........................ 798,100 1.7% Utilities, Electric ........................... 194,275 0.4% Utilities, Water .............................. 344,876 0.7% Convertible Preferred Shares Banking ....................................... 295,914 0.6% Finance ....................................... 447,108 0.9% Repurchase Agreement ............................. 1,291,000 2.7% ----------- ---- Total Investments ................................ $47,553,496 99.3% =========== ==== - -------------------------------------------------------------------------------- OPEN FORWARD FOREIGN CURRENCY CONTRACTS OCTOBER 31, 1999 - -------------------------------------------------------------------------------- GROSS UNREALIZED CONTRACT IN DELIVERY APPRECIATION TO DELIVER EXCHANGE FOR DATE (DEPRECIATION) - ----------------------- ---------------------- ---------- ----------------- USD 95,825 EUR 91,349 11/01/99 $ (280) USD 3,503,000 JPY 386,993,820 11/22/99 (221,192) JPY 386,993,820 USD 3,676,202 11/22/99 47,990 ---------- Net Unrealized Depreciation $ (173,482) ========== - ---------- EUR - Euro JPY - Japanese Yen USD - United States Dollar The accompanying notes are an integral part of the financial statements. 29 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - GROWTH EQUITY FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS--89.0%(a) - ----------------------- ADVERTISING/COMMUNICATIONS--3.6% -------------------------------- 65,000 Omnicom Group, Inc. ............................... $ 5,720,000 ----------- BROADCASTING--1.0% ------------------ 38,600 AT&T-Liberty Media Group, Class "A"* ...................................... 1,531,938 ----------- CONGLOMERATES/DIVERSIFIED--4.7% ------------------------------- 54,600 General Electric Company .......................... 7,401,713 ----------- DATA PROCESSING--18.1% ---------------------- 120,900 Cisco Systems, Inc.* .............................. 8,946,600 92,600 Dell Computer Corporation* ........................ 3,715,575 26,000 Epiphany Inc.* .................................... 2,236,000 35,900 First Data Corporation ............................ 1,640,181 30,000 Intertrust Technologies Corporation* .................................... 1,635,000 84,600 Microsoft Corporation*. ........................... 7,830,787 10,700 Oracle Corporation* ............................... 508,918 19,900 Sun Microsystems, Inc.* ........................... 2,105,668 ----------- 28,618,729 ----------- ELECTRONICS/ELECTRIC--11.7% --------------------------- 8,700 Applied Micro Circuits Corporation* .................................... 676,969 9,500 Broadcom Corporation, Class "A" ....................................... 1,214,219 3,400 Chartered Semiconductor, Sponsored ADR* .................................. 112,838 10,500 Conexant Systems, Inc. * .......................... 980,438 27,150 Intel Corporation ................................. 2,102,428 57,500 LSI Logic Corporation* ............................ 3,058,281 36,100 Microchip Technology Inc.* ........................ 2,405,162 85,700 National Semiconductor Corporation* .................................... 2,565,643 14,900 RF Micro Devices Inc.* ............................ 769,212 15,300 Solectron Corporation* ............................ 1,151,325 8,900 Sycamore Networks Inc.* ........................... 1,913,500 17,000 Texas Instruments Inc. ............................ 1,525,750 ----------- 18,475,765 ----------- FILMED ENTERTAINMENT--0.6% -------------------------- 14,000 Time Warner, Inc. ................................. 975,625 ----------- FINANCE--5.1% ------------- 21,400 American Express Company .......................... 3,295,600 42,300 Citigroup, Inc. ................................... 2,289,488 46,400 Freddie Mac ....................................... 2,508,500 ----------- 8,093,588 ----------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- INSURANCE--2.8% --------------- 43,575 American International Group, Inc. ..................................... 4,485,502 ----------- INTERNET--5.7% -------------- 3,200 Akamai Technologies, Inc.* ........................ 464,600 46,600 America Online, Inc.* ............................. 6,043,438 1,500 Juniper Networks Inc.* ............................ 413,437 11,300 YAHOO! Inc.* ...................................... 2,023,406 ----------- 8,944,881 ----------- LEISURE/AMUSEMENT--0.4% ----------------------- 10,500 Royal Caribbean Cruises, Ltd....................... 557,156 ----------- MACHINERY--1.5% --------------- 58,200 PRI Automation Inc.* .............................. 2,335,275 ----------- MEDICAL EQUIPMENT/SUPPLY--5.2% ------------------------------ 55,900 Guidant Corporation ............................... 2,760,063 32,500 Johnson & Johnson ................................. 3,404,375 61,600 Medtronic Inc. .................................... 2,132,900 ----------- 8,297,338 ----------- PHARMACEUTICAL--13.1% --------------------- 32,600 American Home Products Corporation ..................................... 1,703,350 76,000 Bristol-Myers Squibb Company ......................................... 5,837,750 38,800 Eli Lilly & Company ............................... 2,672,350 36,550 Merck & Company, Inc. ............................. 2,908,009 105,500 Pfizer, Inc. ...................................... 4,167,250 69,000 Schering-Plough Corporation ....................... 3,415,500 ----------- 20,704,209 ----------- RETAIL STORES-8.9% ------------------ 11,000 Costco Wholesale Corporation*...................... 883,438 63,100 Home Depot, Inc. .................................. 4,764,050 32,000 Kohl's Corporation* ............................... 2,394,000 107,500 Wal-Mart Stores, Inc. ............................. 6,093,906 ----------- 14,135,394 ----------- TELECOMMUNICATIONS-5.7% ----------------------- 94,300 Aspect Telecommunications Corporation*. ................................... 2,375,182 65,000 Cincinnati Bell Inc. .............................. 1,352,813 11,900 Lucent Technologies Inc. .......................... 764,575 37,200 MCI WorldCom, Inc.* ............................... 3,192,225 38,500 Qwest Communications International* .................................. 1,386,000 ----------- 9,070,795 ----------- The accompanying notes are an integral part of the financial statements. 30 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - GROWTH EQUITY FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- UTILITIES-GAS--1.1% ------------------- 42,400 Enron Corporation .............................. $ 1,693,350 ------------ Total Common Stocks (cost $91,980,085)............................................. 141,041,258 ------------ REPURCHASE AGREEMENT -- 11.1%(a) - -------------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated October 29, 1999 @ 5.13% to be repurchased at $17,655,545 on November 1, 1999, collateralized by $18,005,000 United States Treasury Notes, 5.63% due September 30, 2001, (market value $18,020,542 including interest) (cost $17,648,000) .............................................. 17,648,000 ------------ TOTAL INVESTMENT PORTFOLIO (cost $109,628,085)(b), 100.2%(a).............................. 158,689,258 OTHER ASSETS AND LIABILITIES, net, (0.2%)(a) .................... (270,851) ------------ NET ASSETS, 100.0% .............................................. $158,418,407 ============ - ---------- * Non-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 $49,061,173, which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $49,150,469 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $89,296. ADR - American Depository Receipt The accompanying notes are an integral part of the financial statements. 31 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - MID CAP GROWTH FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS -- 94.8% (a) - -------------------------- ADVERTISING/COMMUNICATIONS -- 9.6% ---------------------------------- 8,000 Catalina Marketing Corporation * ................. $ 749,000 31,000 Harte-Hanks Communications, Inc. ........................................... 614,188 12,000 Lamar Advertising Company * ...................... 648,000 7,200 TMP Worldwide Inc. * ............................. 449,550 ---------- 2,460,738 ---------- AEROSPACE -- 1.9% ----------------- 8,000 Alliant Techsystems, Inc. * ...................... 492,000 ---------- BANKING -- 1.2% --------------- 15,000 Golden State Bancorp ............................. 313,125 ---------- BROADCASTING -- 14.1% --------------------- 7,100 Adelphia Communications, Class "A" * .................................... 387,838 12,000 Emmis Communications, Class "A" * .................................... 865,500 20,700 Insight Communications Inc. * .................... 489,038 10,000 Pegasus Communications Corporation * .................................. 442,500 5,200 Radio Unica * .................................... 148,850 24,500 Saga Communications Inc., Class "A" * .................................... 591,062 5,000 Spanish Broadcasting System, Class "A" * .................................... 133,125 12,600 Westwood One, Inc. * ............................. 581,175 ---------- 3,639,088 ---------- CHEMICALS -- 1.5% ----------------- 9,000 Minerals Technologies, Inc. ...................... 388,125 ---------- DATA PROCESSING -- 11.0% ------------------------ 8,400 CSG Systems International, Inc. * ................ 288,225 8,500 Electronic Arts Inc. * ........................... 686,906 18,000 National Computer Systems Inc. ................... 680,625 13,400 Synopsys, Inc. * ................................. 834,987 6,400 Zebra Technologies Corporation, Class "A" * .................................... 348,000 ---------- 2,838,743 ---------- EDUCATION -- 1.1% ----------------- 13,500 Devry Inc. * ..................................... 284,344 ---------- ELECTRONICS/ELECTRIC -- 8.4% ---------------------------- 20,000 Fairchild Semiconductor International Inc., Class "A" * ................ 505,000 10,000 LSI Logic Corporation * .......................... 531,875 8,000 Sanmina Corporation * ............................ 720,500 11,300 The DII Group, Inc. * ............................ 406,800 ---------- 2,164,175 ---------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- FINANCE -- 6.2% --------------- 41,500 Federated Investors, Inc. ........................ 715,875 17,000 Radian Group Inc. ................................ 897,812 ---------- 1,613,687 ---------- HEALTH CARE CENTERS -- 1.9% --------------------------- 10,500 Lincare Holdings, Inc. * ......................... 295,313 12,400 Stericycle Inc. * ................................ 193,750 ---------- 489,063 ---------- INSURANCE -- 4.0% ----------------- 17,200 Protective Life Corporation ...................... 622,425 16,500 Stancorp Financial Group ......................... 418,687 ---------- 1,041,112 ---------- LEISURE/AMUSEMENT -- 2.8% ------------------------- 25,000 Harrah's Entertainment, Inc. *.................... 723,438 ---------- MACHINERY -- 5.6% ----------------- 12,200 Kulicke & Soffa Industries * ..................... 359,138 4,000 Novellus Systems Inc. * .......................... 310,000 33,000 Sybron International Corporation * .................................. 785,812 ---------- 1,454,950 ---------- MANUFACTURING/DISTRIBUTIONS -- 2.1% ----------------------------------- 20,000 Aptargroup Inc. .................................. 537,500 ---------- MEDICAL EQUIPMENT/SUPPLY -- 5.4% -------------------------------- 25,000 Novoste Corporation * ............................ 429,688 6,000 Patterson Dental Company * ....................... 270,375 33,000 Varian Medical Systems Inc. ...................... 695,062 ---------- 1,395,125 ---------- OIL & GAS -- 2.8% ----------------- 16,000 Newfield Exploration Company * ...................................... 471,000 17,800 Petroleum Geo-Services, Sponsored ADR * ................................ 260,325 ---------- 731,325 ---------- PUBLISHING -- 6.1% ------------------ 17,000 IDG Books Worldwide Inc. * ....................... 303,875 30,000 John Wiley & Sons, Inc., Class "A" ...................................... 506,250 18,000 Valassis Communications, Inc. .................... 774,000 ---------- 1,584,125 ---------- RETAIL STORES -- 2.1% --------------------- 18,000 BJ's Wholesale Club, Inc. * ...................... 554,625 ---------- SERVICES -- 2.7% ---------------- 18,750 Iron Mountain, Inc. * ............................ 567,188 4,000 Jupiter Communications Inc * ..................... 137,500 ---------- 704,688 ---------- The accompanying notes are an integral part of the financial statements. 32 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - MID CAP GROWTH FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- TELECOMMUNICATIONS -- 4.3% -------------------------- 24,150 Price Communications Corporation * ................................. $ 525,262 5,000 Telephone & Data Systems, Inc. .................. 576,250 ----------- 1,101,512 ----------- Total Common Stocks (cost $21,105,526) ........................... 24,511,488 ----------- REPURCHASE AGREEMENT -- 1.0%(a) - ------------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated October 29, 1999 @ 5.13% to be repurchased at $268,115 on November 1, 1999, collateralized by $265,000 United States Treasury Notes, 6.25% due October 31, 2001, (market value $275,262 including interest) (cost $268,000) .................................................. 268,000 ----------- TOTAL INVESTMENT PORTFOLIO (cost $21,373,526)(b), 95.8%(a) ................................ 24,779,488 OTHER ASSETS AND LIABILITIES, net, 4.2%(a) ....................... 1,089,272 ----------- NET ASSETS, 100.0% ............................................... $25,868,760 =========== - ---------- * Non-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 $3,405,962 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $4,062,787 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $656,825. ADR - American Depository Receipt The accompanying notes are an integral part of the financial statements. 33 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - SMALL CAP STOCK FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS -- 96.8% (a) - -------------------------- ADVERTISING/COMMUNICATIONS -- 0.7% ---------------------------------- 15,000 Catalina Marketing Corporation* ......................................... $ 1,404,375 ----------- ARM/AMMUNITION -- 0.6% ---------------------- 60,000 North Fork Bancorporation ....................... 1,241,250 ----------- BANKING -- 5.2% --------------- 95,900 Capital Crossing Bank* .......................... 1,420,519 125,000 Commercial Federal Corporation ................................... 2,453,125 196,000 Doral Financial Corporation ..................... 2,511,250 52,500 Independence Community Bank Corporation ................................... 626,719 100,000 ITLA Capital Corporation* ....................... 1,512,500 37,500 Pacific Crest Capital, Inc. ..................... 567,188 55,000 Staten Island Bancorp, Inc. ..................... 1,065,625 ----------- 10,156,926 ----------- BROADCASTING -- 0.9% -------------------- 68,750 World Wrestling Federation Entertainment Inc* ............................ 1,658,593 ----------- COSMETICS/TOILETRIES/DRUGS -- 0.7% ---------------------------------- 174,500 NBTY, Inc.* ..................................... 1,406,906 ----------- DATA PROCESSING -- 15.7% ------------------------ 40,000 Ancor Communications Inc.* ...................... 1,267,500 85,000 Barra Inc.* ..................................... 1,877,969 55,000 Bell & Howell Company* .......................... 1,546,875 35,000 Bsquare Corporation* ............................ 1,384,688 50,000 CACI International Inc., Class "A"* .................................... 1,071,875 133,500 Comdisco, Inc. .................................. 2,695,031 55,000 Data Return Corporation* ........................ 828,438 100,000 Datastream Systems, Inc.* ....................... 1,025,000 173,962 Eclipsys Corporation* ........................... 2,761,647 207,500 Health Management Systems, Inc.* ......................................... 894,844 216,800 LanVision Systems, Inc.* ........................ 162,600 149,875 Printronix, Inc.* ............................... 3,072,438 65,000 Research In Motion Ltd.* ........................ 1,998,750 79,000 Silicon Storage Technology Inc.* ................ 1,347,937 85,000 Sterling Software, Inc.* ........................ 1,864,687 50,000 Transaction Systems Architects Inc., Class "A"* .............................. 1,537,500 97,500 Zebra Technologies Corporation, Class "B"* ....................... 5,301,562 ----------- 30,639,341 ----------- EDUCATION -- 2.3% ----------------- 116,250 New Horizons Worldwide, Inc.* .................. 1,598,438 165,000 Strayer Education, Inc. ......................... 2,897,812 ----------- 4,496,250 ----------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- ELECTRONICS/ELECTRIC -- 3.3% ---------------------------- 270,000 Artesyn Technologies, Inc.* ..................... 5,332,500 25,000 C-Cube Microsystems Inc.* ....................... 1,112,500 ----------- 6,445,000 ----------- FINANCE -- 3.4% --------------- 260,000 Cash America International, Inc. ........................... 2,453,750 98,000 Investors Financial Services Corporation ................................... 3,626,000 10,000 Kansas City Southern Industries, Inc. .............................. 474,375 27,500 Resource America, Inc. .......................... 199,375 ----------- 6,753,500 ----------- FOOD -- 3.7% ------------ 70,000 Corn Products International, Inc. .......................................... 2,279,375 125,000 Del Monte Foods Company* ........................ 1,742,188 104,000 J. M. Smucker Company, Class "B"* .................................... 1,748,500 60,000 Smithfield Foods, Inc.* ......................... 1,365,000 ----------- 7,135,063 ----------- GRAPHIC ARTS -- 2.4% -------------------- 202,960 Quebecor Printing Inc. .......................... 4,680,765 ----------- HEALTH CARE CENTERS -- 0.7% --------------------------- 119,750 Bergen Brunswig Corporation, Class "A" ..................................... 853,219 80,000 Horizon Health Corporation* ..................... 435,000 ----------- 1,288,219 ----------- HOTELS/MOTELS/INNS -- 0.8% -------------------------- 100,000 Cavanaughs Hospitality Corporation* .................................. 756,250 150,000 Lodgian, Inc.* .................................. 721,875 ----------- 1,478,125 ----------- HOUSEHOLD PRODUCTS -- 0.3% -------------------------- 50,000 Windmere-Durable Holdings ....................... 650,000 ----------- INSURANCE -- 3.1% ----------------- 94,375 Annuity And Life Re (Holdings), Ltd. .............................. 2,217,812 75,000 Fremont General Corp. ........................... 646,875 210,000 INSpire Insurance Solutions, Inc.* ......................................... 1,338,750 105,000 Presidential Life Corporation................... 1,929,375 ----------- 6,132,812 ----------- LEATHER/SHOES -- 2.9% --------------------- 310,000 Genesco Inc.* ................................... 4,107,500 150,000 Shoe Carnival, Inc.* ............................ 1,593,750 ----------- 5,701,250 ----------- The accompanying notes are an integral part of the financial statements. 34 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST- SMALL CAP STOCK FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- LEISURE/AMUSEMENT -- 2.0% ------------------------- 60,000 Action Performance Companies, Inc.* ......................................... $ 1,220,625 35,000 International Speedway Corporation, Class "A" ........................ 1,806,875 46,000 Steiner Leisure, Ltd.* .......................... 871,125 ----------- 3,898,625 ----------- MANUFACTURING/DISTRIBUTIONS -- 3.4% ----------------------------------- 100,000 Gentex Corporation* ............................. 1,718,750 130,000 Hughes Supply, Inc. ............................. 2,819,375 150,000 Mail-Well, Inc.* ................................ 2,006,250 ----------- 6,544,375 ----------- MEDICAL EQUIPMENT/SUPPLY -- 6.8% -------------------------------- 123,456 Angiosonics, Inc.(b)* ........................... 87,160 47,000 Beckman Coulter Inc. ............................ 2,162,000 200,000 Coherent, Inc.* ................................. 4,112,500 140,733 Cooper Companies, Inc. .......................... 3,518,325 50,000 Covance Inc.* ................................... 484,375 31,250 Medical Manager Corporation* .................... 1,566,406 233,000 Somanetics Corporation* ......................... 349,500 44,444 SurVivaLink Corporation(b)* ..................... 26,666 148,900 Thermo Cardiosystems, Inc.* ..................... 939,931 ----------- 13,246,863 ----------- OFFICE EQUIPMENT -- 1.1% ------------------------ 150,000 Global Imaging Systems, Inc.* ................... 2,071,875 ----------- OIL & GAS -- 1.0% ----------------- 86,400 Chieftain International, Inc.*................... 1,652,400 50,000 Horizon Offshore, Inc.* ......................... 312,500 ----------- 1,964,900 ----------- PHARMACEUTICAL -- 2.6% ---------------------- 110,000 Collateral Therapeutics, Inc.*................... 1,553,750 88,500 Emisphere Technologies Inc.* .................... 1,106,250 350,000 Vion Pharmaceuticals Inc.* ...................... 2,362,500 ----------- 5,022,500 ----------- POLLUTION CONTROL -- 1.4% ------------------------- 180,000 IMCO Recycling, Inc. ............................ 2,632,500 ----------- PUBLISHING -- 4.1% ------------------ 40,000 Houghton Mifflin Company ........................ 1,695,000 215,200 John Wiley & Sons, Inc., Class "A"* .................................... 3,631,500 147,000 Penton Media Inc. ............................... 2,719,500 ----------- 8,046,000 ----------- REAL ESTATE INVESTMENT TRUST -- 1.8% ------------------------------------ 159,400 LTC Properties, Inc. ............................ 1,693,625 MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- REAL ESTATE INVESTMENT TRUST (CONTINUED) ---------------------------------------- 110,000 Meristar Hospitality Corporation ................................... 1,766,875 ----------- 3,460,500 ----------- REAL ESTATE/LAND DEVELOPMENT -- 1.5% ------------------------------------ 152,300 LNR Property Corporation ........................ 2,950,813 ----------- RETAIL STORES -- 2.8% --------------------- 130,000 Bradlees Inc. ................................... 1,462,500 200,000 Charming Shoppes ................................ 993,750 100,000 Claire's Stores Inc. ............................ 1,762,500 65,000 Micro Warehouse, Inc.* .......................... 788,125 102,500 U.S. Vision, Inc.* .............................. 371,562 ----------- 5,378,437 ----------- SECURITIES -- 7.0% ------------------ 85,000 Advest Group, Inc. .............................. 1,641,563 100,000 Dain Rauscher Corporation ....................... 5,368,750 119,999 Legg Mason, Inc. ................................ 4,364,964 94,350 Southwest Securities Group, Inc. ................ 2,246,709 ----------- 13,621,986 ----------- SERVICES -- 10.3% ----------------- 95,200 Burns International Services Corporation* .................................. 957,950 102,500 Cunningham Graphics International, Inc.* .......................... 1,101,875 120,000 Interim Services, Inc.* ......................... 1,972,500 55,000 Iron Mountain, Inc.* ............................ 1,663,750 127,000 MPW Industrial Services Group, Inc.* .................................. 1,016,000 70,000 Navigant Consulting Corporation* .................................. 1,999,375 178,500 RCM Technologies, Inc.* ......................... 2,063,906 84,000 StarTek, Inc.* .................................. 3,811,500 130,000 Sykes Enterprises, Inc.* ........................ 4,013,750 195,000 Telespectrum Worldwide Inc.* .................... 804,375 54,500 Teletech Holdings Inc.* ......................... 773,218 ----------- 20,178,199 ----------- TELECOMMUNICATIONS -- 4.3% -------------------------- 90,000 American Tower Corporation, Class "A" ..................................... 1,715,625 50,000 Comdial Corporation* ............................ 371,875 40,000 Ems Technologies Inc* ........................... 382,500 40,500 Genesys Telecomm Labs Inc.* ..................... 1,989,563 50,000 InterVoice-Brite Inc.* .......................... 618,750 50,000 Paradyne Networks Corporation* .................. 1,518,750 70,000 Splitrock Services* ............................. 1,531,250 100,000 Trex Communications, Inc.(b)* ................... 400,000 ----------- 8,528,313 ----------- Total Common Stocks (cost $182,692,042) .......................... 188,814,269 ----------- The accompanying notes are an integral part of the financial statements. 35 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST- SMALL CAP STOCK FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE ------ ------------- CONVERTIBLE BONDS -- 0.4% (a) - ----------------------------- DATA PROCESSING -- 0.1% ----------------------- $100,000 Proscape Technologies, Inc., 6.5%, Series "B" Subordinated Convertible Debentures due 11/18/01 (b) ................................. $ 100,000 ------------ MEDICAL EQUIPMENT/SUPPLY -- 0.3% -------------------------------- 1,000,000 Angeion Corporation, 7.5%, due 04/15/03 ..................................... 550,000 ------------ Total Convertible Bonds (cost $1,100,000).............................................. 650,000 ------------ Total Investment Portfolio excluding repurchase agreement (cost $183,792,042) ...................... 189,464,261 ------------ REPURCHASE AGREEMENT -- 3.8%(a) - ------------------------------- Repurchase Agreement with State Street Bank and Trust Company, dated October 29, 1999 @ 5.13% to be repurchased at $7,369,149 on November 1, 1999, collateralized by $7,515,000 United States Treasury Bonds, 5.63% due September 30, 2001, (market value $7,521,487 including interest) (cost $7,366,000)................................................ 7,366,000 ------------ TOTAL INVESTMENT PORTFOLIO (cost $191,158,042)(c), 101.0%(a) ............................. 196,830,261 OTHER ASSETS AND LIABILITIES, net, (1.0%)(a) .................... (1,865,893) ------------ NET ASSETS, 100.0% .............................................. $194,964,368 ============ - ---------- * Non-income producing security. (a) Percentages indicated are based on net assets. (b) Private placement securities are fair valued by the Board of Trustees. (c) The aggregate identified cost for federal income tax purposes is substantially the same. Market value includes net unrealized appreciation of $5,672,219 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $33,396,883 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $27,724,664. The accompanying notes are an integral part of the financial statements. 36 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - VALUE EQUITY FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 - -------------------------------------------------------------------------------- MARKET SHARES VALUE ------ ------------- COMMON STOCK -- 97.7% (a) - ------------------------- AUTO PARTS/EQUIPMENT -- 5.6% ---------------------------- 12,000 Dana Corporation .................................. $ 354,750 10,000 Goodyear Tire & Rubber Company ......................................... 413,125 18,000 TRW Inc ........................................... 771,750 ---------- 1,539,625 ---------- BANKING -- 9.7% --------------- 11,000 Bank of New York Company, Inc. ................................... 460,625 10,500 First Union Corporation ........................... 448,219 22,000 National City Corporation ......................... 649,000 16,000 Regions Financial Corporation ..................... 481,000 14,000 Union Planters Corporation ........................ 623,000 ---------- 2,661,844 ---------- CHEMICALS -- 8.4% ----------------- 15,000 Air Products & Chemicals Inc. ..................... 412,500 8,400 E.I. du Pont de Nemours & Company ......................................... 541,275 46,300 Millennium Chemicals Inc. ......................... 856,550 13,000 Rohm & Haas Company ............................... 497,250 ---------- 2,307,575 ---------- COSMETICS/TOILETRIES -- 2.6% ---------------------------- 11,500 Kimberly-Clark Corporation ........................ 725,937 ---------- DATA PROCESSING -- 5.7% ----------------------- 15,000 3Com Corporation * ................................ 435,000 6,000 Electronic Data Systems Corporation ..................................... 351,000 8,000 International Business Machines Corporation ..................................... 787,000 ---------- 1,573,000 ---------- ELECTRONICS -- 2.6% ------------------- 33,000 Arrow Electronics Inc. ............................ 719,813 ---------- ELECTRONICS/ELECTRIC -- 2.0% ---------------------------- 7,000 Intel Corporation ................................. 542,063 ---------- FOOD -- 7.8% ------------ 13,300 Albertson's Inc. .................................. 482,956 23,000 ConAgra, Inc. ..................................... 599,438 27,600 Interstate Bakeries ............................... 558,900 27,000 Universal Foods Corporation ....................... 516,375 ---------- 2,157,669 ---------- HEALTH CARE CENTERS -- 3.3% --------------------------- 20,000 Manor Care Inc. * ................................. 315,000 30,000 Tenet Healthcare Corporation * .................... 583,125 ---------- 898,125 ---------- INSURANCE -- 6.6% ----------------- 9,000 Chubb Corporation ................................. 493,875 MARKET SHARES VALUE ------ ------------- COMMON STOCKS (CONTINUED) - ------------------------- INSURANCE (CONTINUED) --------------------- 30,000 Everest Reinsurance Holdings ...................... 772,500 10,500 Hartford Financial Services ....................... 544,031 ---------- 1,810,406 ---------- MACHINERY -- 1.8% ----------------- 14,000 Deere & Company ................................... 507,500 ---------- MANUFACTURING/DISTRIBUTIONS -- 4.8% ----------------------------------- 12,000 Parker Hannifin Corporation ....................... 549,750 35,000 Sherwin-Williams Company .......................... 783,125 ---------- 1,332,875 ---------- MINING/DIVERSIFIED -- 2.2% -------------------------- 10,000 Alcoa Inc. ........................................ 607,500 ---------- OIL & GAS -- 12.6% ------------------ 18,000 Baker Hughes Inc. ................................. 502,875 22,340 Conoco Inc., Class "B" ............................ 605,973 25,000 EL Paso Energy Corporation ........................ 1,025,000 10,000 Exxon Corporation ................................. 740,625 10,000 Royal Dutch Petroleum Company, NY Shares, Sponsored ADR * ................................. 599,375 ---------- 3,473,848 ---------- PHARMACEUTICAL -- 2.2% ---------------------- 13,800 Cardinal Health, Inc. ............................. 595,125 ---------- RAILROADS -- 2.2% ----------------- 19,000 Burlington Northern Santa Fe Corporation ..................................... 605,625 ---------- RETAIL STORES -- 1.5% --------------------- 40,200 K Mart Corporation ................................ 404,512 ---------- TELECOMMUNICATIONS -- 10.3% --------------------------- 14,000 BellSouth Corporation ............................. 630,000 15,000 Cable & Wireless Plc, Sponsored ADR * ........................................... 525,000 15,000 SBC Communications, Inc. .......................... 764,062 15,000 US West Inc. ...................................... 915,937 ---------- 2,834,999 ---------- TRANSPORTATION -- 2.0% ---------------------- 17,000 CNF Transportation Inc. ........................... 562,063 ---------- UTILITIES-ELECTRIC -- 3.8% -------------------------- 10,000 FPL Group, Inc. ................................... 503,125 14,400 Texas Utilities Company ........................... 558,000 ---------- 1,061,125 ---------- Total Common Stocks (cost $27,533,530) ............................................... 26,921,229 ---------- The accompanying notes are an integral part of the financial statements. 37 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST - VALUE EQUITY FUND INVESTMENT PORTFOLIO OCTOBER 31, 1999 (CONTINUED) - -------------------------------------------------------------------------------- MARKET VALUE ------------- REPURCHASE AGREEMENT--1.2% (a) Repurchase Agreement with State Street Bank and Trust Company, dated October 29, 1999 @ 5.13% to be repurchased at $342,146 on November 1, 1999, collateralized by $340,000 United States Treasury Notes, 6.50% due May 31, 2001 (market value $352,730 including interest) (cost $342,000) ............................................... $ 342,000 ----------- TOTAL INVESTMENT PORTFOLIO (cost $27,875,530)(b). 98.9%(a) ............................. 27,263,229 298,910 ----------- OTHER ASSETS AND LIABILITIES, net, 1.1% (a) ................... $27,562,139 =========== - ---------- * Non-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 depreciation of $612,301 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $2,182,102 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $2,794,403. ADR - American Depository Receipt The accompanying notes are an integral part of the financial statements. 38 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1999 - --------------------------------------------------------------------------------
EAGLE AGGRESSIVE INTERNATIONAL GROWTH GROWTH EQUITY EQUITY FUND PORTFOLIO FUND ------------- ------------- ------------- ASSETS - ------ Investments, at market value (identified cost $47,365,421, $37,240,576, $91,980,085, $21,105,526, $183,792,042 and $27,533,530, respectively) (Note 1) $ 52,075,335 $ 46,262,496 $ 141,041,258 Repurchase agreement, at market value (identified cost $5,414,000, $1,291,000, $17,648,000, $268,000, $7,366,000 and $342,000, respectively) (Note 1) .... 5,414,000 1,291,000 17,648,000 Cash ................................................. 49 10,760 967 Receivables: Investments sold ................................... 1,553,324 7,655,613 4,789,210 Fund shares sold ................................... 221,630 517,511 646,143 Dividends and interest ............................. 2,314 46,972 44,742 Foreign taxes recoverable .......................... -- 36,692 -- Deferred organization expenses (Note 1) .............. -- 5,200 5,666 Deferred state qualification expenses (Note 1) ....... 20,681 7,834 14,886 Prepaid insurance .................................... -- 1,328 1,518 ------------- ------------- ------------- Total assets .................................... $ 59,287,333 $ 55,835,406 $ 164,192,390 ------------- ------------- ------------- LIABILITIES - ----------- Payables (Note 4): Investments purchased .............................. $ 5,241,287 $ 7,464,352 $ 5,323,796 Fund shares redeemed ............................... 105,491 128,567 183,235 Accrued management fee ............................. 106,134 86,796 93,018 Accrued distribution fee ........................... 25,862 34,435 84,501 Other accrued expenses ............................. 56,192 73,508 89,433 Unrealized depreciation of forward currency contracts ........................................ -- 173,482 -- ------------- ------------- ------------- Total liabilities ............................... $ 5,534,966 $ 7,961,140 $ 5,773,983 ------------- ------------- ------------- Net assets, at market value .......................... $ 53,752,367 $ 47,874,266 $ 158,418,407 ============= ============= ============= NET ASSETS - ---------- Net assets consist of: Paid-in capital (Note 5) ........................... $ 43,188,096 $ 32,464,483 $ 89,185,890 Undistributed net investment income (loss) (Notes 1 and 5) .................................. -- 78,478 -- Accumulated net realized gain (loss) (Notes 1 and 5) 5,854,357 6,487,318 20,171,344 Net unrealized appreciation (depreciation) on investments and other assets and liabilities denominated in foreign currencies ................ 4,709,914 8,843,987 49,061,173 ------------- ------------- ------------- Net assets, at market value .......................... $ 53,752,367 $ 47,874,266 $ 158,418,407 ============= ============= ============= Net assets, at market value Class A Shares ..................................... $ 27,402,212 $ 7,910,457 $ 67,171,735 Class B Shares ..................................... 10,416,222 458,757 16,216,202 Class C Shares ..................................... 15,933,933 7,300,063 75,030,470 Eagle Shares ....................................... -- 32,204,989 -- ------------- ------------- ------------- Total ........................................... $ 53,752,367 $ 47,874,266 $ 158,418,407 ============= ============= ============= Shares of beneficial interest outstanding Class A Shares ..................................... 1,317,722 250,659 1,546,474 Class B Shares ..................................... 505,461 14,881 384,547 Class C Shares ..................................... 773,291 236,759 1,779,961 Eagle Shares ....................................... -- 1,037,481 -- ------------- ------------- ------------- Total .............................................. 2,596,474 1,539,780 3,710,982 ============= ============= ============= Net Asset Value -- offering and redemption price per share (Notes 1 and 2) Class A Shares ................................... $ 20.80 $ 31.56 $ 43.44 ============= ============= ============= Maximum offering price per share (100/95.25 of $20.80, $31.56, $43.44, $16.56, $23.21 and $18.33) $ 21.83 $ 33.13 $ 45.60 ============= ============= ============= Class B Shares ..................................... $ 20.61 $ 30.83 $ 42.17 ============= ============= ============= Class C Shares ..................................... $ 20.61 $ 30.83 $ 42.15 ============= ============= ============= Eagle Shares $ 31.04 ============= MID CAP SMALL CAP VALUE GROWTH STOCK EQUITY FUND FUND FUND ------------- ------------- ------------- ASSETS - ------ Investments, at market value (identified cost $47,365,421, $37,240,576, $91,980,085, $21,105,526, $183,792,042 and $27,533,530, respectively) (Note 1) $ 24,511,488 $ 189,464,261 $ 26,921,229 Repurchase agreement, at market value (identified cost $5,414,000, $1,291,000, $17,648,000, $268,000, $7,366,000 and $342,000, respectively) (Note 1) .... 268,000 7,366,000 342,000 Cash ................................................. 718 373 66 Receivables: Investments sold ................................... 1,760,447 3,251,587 766,322 Fund shares sold ................................... 20,707 80,988 111,166 Dividends and interest ............................. 2,858 45,935 47,154 Foreign taxes recoverable .......................... -- -- -- Deferred organization expenses (Note 1) .............. 15,509 -- 1,767 Deferred state qualification expenses (Note 1) ....... 16,940 9,326 10,674 Prepaid insurance .................................... 948 2,845 1,328 ------------- ------------- ------------- Total assets .................................... $ 26,597,615 $ 200,221,315 $ 28,201,706 ------------- ------------- ------------- LIABILITIES - ----------- Payables (Note 4): Investments purchased .............................. $ 500,263 $ 3,123,100 $ 531,958 Fund shares redeemed ............................... 122,683 1,764,524 23,185 Accrued management fee ............................. 40,961 135,498 17,495 Accrued distribution fee ........................... 12,635 86,819 13,731 Other accrued expenses ............................. 52,313 147,006 53,198 Unrealized depreciation of forward currency contracts ........................................ -- -- -- ------------- ------------- ------------- Total liabilities ............................... $ 728,855 $ 5,256,947 $ 639,567 ------------- ------------- ------------- Net assets, at market value .......................... $ 25,868,760 $ 194,964,368 $ 27,562,139 ============= ============= ============= NET ASSETS - ---------- Net assets consist of: Paid-in capital (Note 5) ........................... $ 22,075,245 $ 194,487,112 $ 27,502,628 Undistributed net investment income (loss) (Notes 1 and 5) .................................. -- 31,078 54,770 Accumulated net realized gain (loss) (Notes 1 and 5) 387,553 (5,226,041) 617,042 Net unrealized appreciation (depreciation) on investments and other assets and liabilities denominated in foreign currencies ................ 3,405,962 5,672,219 (612,301) ------------- ------------- ------------- Net assets, at market value .......................... $ 25,868,760 $ 194,964,368 $ 27,562,139 ============= ============= ============= Net assets, at market value Class A Shares ..................................... $ 14,549,544 $ 124,883,049 $ 14,717,906 Class B Shares ..................................... 2,074,027 9,490,522 1,016,106 Class C Shares ..................................... 9,245,189 60,590,797 11,828,127 Eagle Shares ....................................... -- -- -- ------------- ------------- ------------- Total ........................................... $ 25,868,760 $ 194,964,368 $ 27,562,139 ============= ============= ============= Shares of beneficial interest outstanding Class A Shares ..................................... 878,429 5,380,077 802,947 Class B Shares ..................................... 127,121 423,535 56,257 Class C Shares ..................................... 566,498 2,702,718 654,941 Eagle Shares ....................................... -- -- -- ------------- ------------- ------------- Total .............................................. 1,572,048 8,506,330 1,514,145 ============= ============= ============= Net Asset Value -- offering and redemption price per share (Notes 1 and 2) Class A Shares ................................... $ 16.56 $ 23.21 $ 18.33 ============= ============= ============= Maximum offering price per share (100/95.25 of $20.80, $31.56, $43.44, $16.56, $23.21 and $18.33) $ 17.39 $ 24.37 $ 19.24 ============= ============= ============= Class B Shares ..................................... $ 16.32 $ 22.41 $ 18.06 ============= ============= ============= Class C Shares ..................................... $ 16.32 $ 22.42 $ 18.06 ============= ============= ============= Eagle Shares .......................................
The accompanying notes are an integral part of the financial statements. 39 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1999 - --------------------------------------------------------------------------------
EAGLE AGGRESSIVE INTERNATIONAL GROWTH GROWTH EQUITY EQUITY FUND PORTFOLIO FUND ------------ ------------ ------------ INVESTMENT INCOME - ----------------- Income: Dividends ......................................... $ 71,718 $ 737,523(a) $ 571,726 Interest .......................................... 259,885 46,306(b) 278,404 ------------ ------------ ------------ Total income ................................... 331,603 783,829 850,130 Expenses (Notes 1 and 4): Management fee .................................... 382,703 477,822 932,644 Distribution fee (Class A Shares) ................. 52,009 18,407 134,727 Distribution fee (Class B Shares) ................. 76,078 3,928 108,805 Distribution fee (Class C Shares) ................. 98,589 67,266 595,810 Distribution fee (Eagle Shares) ................... -- 332,966 -- Shareholder servicing fees ........................ 38,673 -- 114,755 Shareholder servicing fees (Class A Shares) ....... -- 9,572 -- Shareholder servicing fees (Class B Shares) ....... -- 511 -- Shareholder servicing fees (Class C Shares) ....... -- 8,745 -- Shareholder servicing fees (Eagle Shares) ......... -- 3,330 -- Custodian/Fund accounting fees .................... 59,360 165,632 73,792 Professional fees ................................. 39,693 61,680 23,389 Amortization of state qualification expenses ...... 46,629 41,775 43,713 Organization expenses ............................. -- 10,400 5,666 Reports to shareholders ........................... 14,774 12,776 22,026 Trustees' fees and expenses ....................... 9,141 9,478 9,178 Other ............................................. -- 4,254 4,913 ------------ ------------ ------------ Total expenses before waiver ................... 817,649 1,228,542 2,069,418 Fees waived by Eagle/Manager (Note 4) .......... (55,188) (24,049) -- ------------ ------------ ------------ Total expenses after waiver .................... 762,461 1,204,493 2,069,418 ------------ ------------ ------------ Net investment income (loss) ........................ (430,858) (420,664) (1,219,288) ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - -------------------------------------------------- Net realized gain (loss) from investment transactions 6,487,570 6,904,858 24,524,653 Net realized gain from foreign currency transactions -- 216,150 -- Net unrealized appreciation (depreciation) of investments during the year ....................... 3,177,004 3,686,213 25,441,900 Net realized gain from covered call options written during the year ................................... -- -- -- Net unrealized depreciation from foreign currency liabilities during the year ....................... -- (177,933) -- ------------ ------------ ------------ Net gain (loss) on investments ...................... 9,664,574 10,629,288 49,966,553 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ........................................ $ 9,233,716 $ 10,208,624 $ 48,747,265 ============ ============ ============ MID CAP SMALL CAP VALUE GROWTH STOCK EQUITY FUND FUND FUND ------------ ------------ ------------ INVESTMENT INCOME - ----------------- Income: Dividends ......................................... $ 70,303 $ 1,825,980 $ 571,257 Interest .......................................... 44,087 809,955 60,329 ------------ ------------ ------------ Total income ................................... 114,390 2,635,935 631,586 Expenses (Notes 1 and 4): Management fee .................................... 210,881 1,960,400 227,557 Distribution fee (Class A Shares) ................. 39,528 390,705 41,462 Distribution fee (Class B Shares) ................. 21,386 102,748 10,806 Distribution fee (Class C Shares) ................. 101,676 781,631 126,758 Distribution fee (Eagle Shares) ................... -- -- -- Shareholder servicing fees ........................ 36,410 292,147 37,058 Shareholder servicing fees (Class A Shares) ....... -- -- -- Shareholder servicing fees (Class B Shares) ....... -- -- -- Shareholder servicing fees (Class C Shares) ....... -- -- -- Shareholder servicing fees (Eagle Shares) ......... -- -- -- Custodian/Fund accounting fees .................... 56,942 88,607 56,772 Professional fees ................................. 26,253 28,047 42,933 Amortization of state qualification expenses ...... 47,303 42,133 31,601 Organization expenses ............................. 5,170 -- 10,602 Reports to shareholders ........................... 12,343 43,891 20,539 Trustees' fees and expenses ....................... 9,151 9,178 9,178 Other ............................................. 2,776 11,924 4,036 ------------ ------------ ------------ Total expenses before waiver ................... 569,819 3,751,411 619,302 Fees waived by Eagle/Manager (Note 4) .......... (27,644) -- (76,169) ------------ ------------ ------------ Total expenses after waiver .................... 542,175 3,751,411 543,133 ------------ ------------ ------------ Net investment income (loss) ........................ (427,785) (1,115,476) 88,453 ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - -------------------------------------------------- Net realized gain (loss) from investment transactions 1,928,034 (2,081,165) 931,457 Net realized gain from foreign currency transactions -- -- -- Net unrealized appreciation (depreciation) of investments during the year ....................... 2,467,882 11,574,223 (1,115,216) Net realized gain from covered call options written during the year ................................... -- -- 17,466 Net unrealized depreciation from foreign currency liabilities during the year ....................... -- -- -- ------------ ------------ ------------ Net gain (loss) on investments ...................... 4,395,916 9,493,058 (166,293) ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ........................................ $ 3,968,131 $ 8,377,582 $ (77,840) ============ ============ ============
- ---------------- (a) Net of $84,150 foreign withholding taxes. (b) Net of $3 foreign withholding taxes. The accompanying notes are an integral part of the financial statements. 40 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE YEARS ENDED ----------------------------------- OCTOBER 31, 1999 OCTOBER 31, 1998 ---------------- ---------------- AGGRESSIVE GROWTH FUND - ---------------------- Increase in net assets: Operations: Net Investment loss ........................................... $ (430,858) $ (5,426) Net realized gain (loss) from investment transactions ......... 6,487,570 (202,355) Net unrealized appreciation of investments during the year .... 3,177,004 1,532,910 ------------ ------------ Net increase in net assets resulting from operations .......... 9,233,716 1,325,129 Increase in net assets from Fund share transactions (Note 2) .... 26,033,474 17,160,048 ------------ ------------ Increase in net assets .......................................... 35,267,190 18,485,177 Net assets, beginning of year ................................... 18,485,177 -- ------------ ------------ Net assets, end of year ......................................... $ 53,752,367 $ 18,485,177 ============ ============
FOR THE YEARS ENDED ----------------------------------- OCTOBER 31, 1999 OCTOBER 31, 1998 ---------------- ---------------- EAGLE INTERNATIONAL EQUITY PORTFOLIO - ------------------------------------ Increase in net assets: Operations: Net Investment loss .................................................................. $ (420,664) $ (264,871) Net realized gain from investment transactions ....................................... 6,904,858 234,230 Net realized gain (loss) from foreign currency transactions .......................... 216,150 (68,794) Net unrealized appreciation of investments during the year ........................... 3,686,213 3,293,526 Net unrealized appreciation (depreciation) from foreign currrency during the year .... (177,933) 95,909 ------------ ------------ Net increase in net assets resulting from operations ................................. 10,208,624 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) ................ (7,860,802) 1,913,671 ------------ ------------ Increase in net assets ................................................................. 2,135,689 4,123,654 Net assets, beginning of year .......................................................... 45,738,577 41,614,923 ------------ ------------ Net assets, end of year (including undistributed net investment income of $78,478 and accumulated net investment loss of $113,865, respectively.) ...................... $ 47,874,266 $ 45,738,577 ============ ============
FOR THE YEARS ENDED ------------------------------------ OCTOBER 31, 1999 OCTOBER 31, 1998 ---------------- ---------------- GROWTH EQUITY FUND - ------------------ Increase in net assets: Operations: Net Investment loss ........................................... $ (1,219,288) $ (480,255) Net realized gain (loss) from investment transactions ......... 24,524,653 (3,134,021) Net unrealized appreciation of investments during the year .... 25,441,900 13,613,823 ------------- ------------- Net increase in net assets resulting from operations .......... 48,747,265 9,999,547 Distributions 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) .... 25,151,363 32,315,932 ------------- ------------- Increase in net assets .......................................... 73,898,628 41,727,177 Net assets, beginning of year ................................... 84,519,779 42,792,602 ------------- ------------- Net assets, end of year ......................................... $ 158,418,407 $ 84,519,779 ============= =============
The accompanying notes are an integral part of the financial statements. 41 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
FOR THE YEARS ENDED ----------------------------------- OCTOBER 31, 1999 OCTOBER 31, 1998 --------------- ---------------- MID CAP GROWTH FUND - ------------------- Increase (decrease) in net assets: Operations: Net Investment loss ........................................................ $ (427,785) $ (302,320) Net realized gain (loss) from investment transactions ...................... 1,928,034 (1,540,482) Net unrealized appreciation of investments during the year ................. 2,467,882 938,080 ------------ ------------ Net increase (decrease) in net assets resulting from operations ............ 3,968,131 (904,722) Increase (decrease) in net assets from Fund share transactions (Note 2) ..... (5,928,377) 28,733,728 ------------ ------------ Increase (decrease) in net assets ........................................... (1,960,246) 27,829,006 Net assets, beginning of year ............................................... 27,829,006 -- ------------ ------------ Net assets, end of year ..................................................... $ 25,868,760 $ 27,829,006 ============ ============
FOR THE YEARS ENDED ----------------------------------- OCTOBER 31, 1999 OCTOBER 31, 1998 --------------- ---------------- SMALL CAP STOCK FUND - -------------------- Decrease in net assets: Operations: Net Investment loss .................................................................... $ (1,115,476) $ (1,505,367) Net realized loss from investment transactions ......................................... (2,081,165) (2,922,849) Net unrealized appreciation (depreciation) of investments during the year .............. 11,574,223 (70,263,882) ------------- ------------- Net increase (decrease) in net assets resulting from operations ........................ 8,377,582 (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) ................. (80,494,684) 48,086,681 ------------- ------------- Decrease in net assets .................................................................. (72,117,102) (45,268,177) Net assets, beginning of year ........................................................... 267,081,470 312,349,647 ------------- ------------- Net assets, end of year (including undistributed net investment income of $31,078 for the year ended October 31, 1999) ........................................................ $ 194,964,368 $ 267,081,470 ============= =============
FOR THE YEARS ENDED ----------------------------------- OCTOBER 31, 1999 OCTOBER 31, 1998 --------------- ---------------- VALUE EQUITY FUND - ----------------- Decrease in net assets: Operations: Net Investment income .............................................................. $ 88,453 $ 149,444 Net realized gain (loss) from investment transactions .............................. 931,457 (46,890) Net realized gain from covered call options written (Note 1) ....................... 17,466 -- Net unrealized depreciation of investments during the year ......................... (1,115,216) (1,519,457) ------------ ------------ Net decrease in net assets resulting from operations ............................... (77,840) (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). ..... (85,565) (3,207,816) Increase (decrease) in net assets from Fund share transactions (Note 2) ............. (4,259,045) 4,709,907 ------------ ------------ Decrease in net assets .............................................................. (4,703,277) (4,258,991) Net assets, beginning of year ....................................................... 32,265,416 36,524,407 ------------ ------------ Net assets, end of year (including undistributed net investment income of $54,770 and $129,446, respectively) ................................................ $ 27,562,139 $ 32,265,416 ============ ============
The accompanying notes are an integral part of the financial statements. 42 - -------------------------------------------------------------------------------- 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 * CLASS B SHARES * ------------------------- ------------------------------- FOR THE YEARS ENDED FOR THE YEARS ENDED OCTOBER 31 OCTOBER 31 ------------------------- ------------------------------- 1999 1998/dagger/ 1999 1998/dagger//dagger/ -------- ------------ -------- -------------------- Net asset value, beginning of year ............................ $ 15.35 $ 14.29 $ 15.33 $ 14.29 -------- --------- -------- ---------- Income from Investment Operations: Net investment loss (a) ...................................... (0.15) -- (0.29) (0.03) Net realized and unrealized gain on investments .............. 5.60 1.06 5.57 1.07 -------- --------- -------- ---------- Total from Investment Operations ............................. 5.45 1.06 5.28 1.04 -------- --------- -------- ---------- Net asset value, end of year .................................. $ 20.80 $ 15.35 $ 20.61 $ 15.33 ======== ========= ======== ========== Total Return (%) (b) .......................................... 35.50 7.42 (c) 34.44 7.28 (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ........................................ 1.65 1.65 (d) 2.40 2.40 (d) Net investment income (loss) to average daily net assets ..... (.78) .08 (d) (1.53) (.77)(d) Portfolio turnover rate (c) .................................. 195 34 195 34 Net assets, end of year ($ millions) ......................... 27 11 10 4 CLASS C SHARES * -------------------------- FOR THE YEARS ENDED OCTOBER 31 -------------------------- 1999 1998/dagger/ -------- ------------ Net asset value, beginning of year ............................ $ 15.33 $ 14.29 -------- ---------- Income from Investment Operations: Net investment loss (a) ...................................... (0.29) (0.03) Net realized and unrealized gain on investments .............. 5.57 1.07 -------- ---------- Total from Investment Operations ............................. 5.28 1.04 -------- ---------- Net asset value, end of year .................................. $ 20.61 $ 15.33 ======== ========== Total Return (%) (b) .......................................... 34.44 7.28 (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ........................................ 2.40 2.40 (d) Net investment income (loss) to average daily net assets ..... (1.53) (.71)(d) Portfolio turnover rate (c) .................................. 195 34 Net assets, end of year ($ millions) ......................... 16 3
- ------- * Per share amounts have been calculated using the monthly average share method. /dagger/ For the period August 20, 1998 (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 $0.03 per Class A, B and C Shares, for the year ended October 31, 1999. The operating expense ratios including such items would have been 1.79% , 2.54% and 2.54% for Class A, B and C Shares for the year ended October 31, 1999, respectively. Excludes management fees waived and expenses reimbursed by the Manager in the amount of $.07 per Class A, B and C Shares for the year ended October 31, 1998. The operating expense ratios including such items would have been 3.64% (annualized), 4.39% (annualized) and 4.39 (annualized) for Class A, B and C Shares, respectively. (b) Does not reflect the imposition of a sales charge. (c) Not annualized. (d) Annualized. The accompanying notes are an integral part of the financial statements. 43 - -------------------------------------------------------------------------------- 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 YEARS ENDED OCTOBER 31, ------------------------------------------------------------ 1999 1998 1997 1996/dagger/ --------- --------- --------- ------------ Net asset value, beginning of year ............................ $ 25.43 $ 23.97 $ 22.25 $ 21.11 -------- --------- --------- --------- Income from Investment Operations: Net investment income (loss)(a) ...................... (0.09) (0.01) 0.05 0.10 Net realized and unrealized gain on investments ............ 6.34 2.14 2.28 1.04 -------- --------- --------- --------- Total from Investment Operations ..................... 6.25 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 year ......................... $ 31.56 $ 25.43 $ 23.97 $ 22.25 ======== ========= ========= ========= Total Return(%)(b) ............... 24.68 9.04 (c) 10.71 (c) 5.40 (d) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)..... 1.97 1.97 1.97 1.97 (e) Net investment income (loss) to average daily net assets..... (0.32) (0.02) 0.22 0.44 (e) Portfolio turnover rate (d) ..... 78 71 50 59 Net assets, end of year ($ millions).................... 8 7 6 3 CLASS B SHARES* -------------------------------- FOR THE YEARS ENDED OCTOBER 31, --------------------------------- 1999 1998/dagger//dagger/ -------- -------------------- Net asset value, beginning of year ............................ $ 25.03 $ 23.95 -------- --------- Income from Investment Operations: Net investment income (loss)(a) ...................... (0.30) (0.16) Net realized and unrealized gain on investments ............ 6.22 1.24 -------- --------- Total from Investment Operations ..................... 5.92 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 year ......................... $ 30.83 $ 25.03 ======== ========= Total Return(%)(b) ............... 23.70 4.51 (d) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)..... 2.72 2.72 (e) Net investment income (loss) to average daily net assets..... (1.04) (0.71)(e) Portfolio turnover rate (d) ..... 78 71 Net assets, end of year ($ millions).................... 0.5 0.2 CLASS C SHARES* ---------------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31, ----------------------------------------------------------- 1999 1998 1997 1996/dagger/ --------- --------- --------- ------------ Net asset value, beginning of year ............................ $ 25.03 $ 23.73 $ 22.12 $ 21.11 -------- --------- --------- --------- Income from Investment Operations: Net investment income (loss)(a) ...................... (0.30) (0.20) (0.13) (0.07) Net realized and unrealized gain on investments ............ 6.22 2.12 2.25 1.08 -------- --------- --------- --------- Total from Investment Operations ..................... 5.92 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 year ......................... $ 30.83 $ 25.03 $ 23.73 $ 22.12 ======== ========= ========= ========= Total Return(%)(b) ............... 23.70 8.24 (c) 9.79 (c) 4.78 (d) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)..... 2.72 2.72 2.72 2.72 (e) Net investment income (loss) to average daily net assets..... (1.06) (0.79) (0.52) (0.32)(e) Portfolio turnover rate (d) ..... 78 71 50 59 Net assets, end of year ($ millions).................... 7 6 4 1 EAGLE SHARES* -------------------------------------------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31, -------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995/dagger//dagger//dagger/ -------- --------- --------- --------- ---------------------------- Net asset value, beginning of year ............................ $ 25.17 $ 23.83 $ 22.14 $ 20.79 $ 20.00 -------- --------- --------- -------- --------- Income from Investment Operations: Net investment income (loss)(a) ...................... (0.27) (0.17) (0.11) (0.01) (0.03) Net realized and unrealized gain on investments ............ 6.26 2.13 2.28 1.84 0.82 -------- --------- --------- -------- --------- Total from Investment Operations ..................... 5.99 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 year ......................... $ 31.04 $ 25.17 $ 23.83 $ 22.14 $ 20.79 ======== ========= ========= ======== ========= Total Return(%)(b) ............... 23.85 8.38 (c) 9.98 (c) 8.93 3.95 (d) Ratios (%)/ Supplemental Data: Operating expenses, net, to average daily net assets(a)..... 2.60 2.60 2.60 2.60 2.60 (e) Net investment income (loss) to average daily net assets..... ( 0.95) ( 0.67) ( 0.47) ( 0.02) ( 0.33)(e) Portfolio turnover rate (d) ..... 78 71 50 59 61 Net assets, end of year ($ millions).................... 32 33 32 22 10
- ------- * Per share amounts have been calculated using the monthly average share method. /dagger/ For the period December 27, 1995 (commencement of Class A and Class C Shares) to October 31, 1996. /dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31, 1998. /dagger//dagger//dagger/ For the period May 1, 1995 (commencement of operations) to October 31, 1995. (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 2.02%, 2.08%, 2.23% and 2.69% (annualized) for Class A Shares, respectively. Excludes management fees waived by Eagle in the amount of $.01 and $.03 per Class B Share, respectively. The operating expense ratio including such items would have been 2.77% and 2.83% (annualized) for Class B Shares, respectively. Excludes management fees waived by 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 2.77%, 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 2.65%, 2.71%, 2.86%, 3.31% and 5.09% (annualized) for Eagle Shares, respectively. (b) Calculated without the imposition of a sales charge. (c) These returns are calculated based on the published net asset value at October 31, 1997. (d) Not annualized. (e) Annualized. The accompanying notes are an integral part of the financial statements. 44 - -------------------------------------------------------------------------------- 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 YEARS ENDED OCTOBER 31 ------------------------------------------------- 1999 1998 1997 1996/dagger/ -------- --------- -------- ------------- Net asset value, beginning of year ........ $ 28.82 $ 23.77 $ 17.74 $ 14.29 -------- -------- -------- --------- Income from Investment Operations: Net investment loss (a) .................. (0.20) (0.11) (0.07) (0.03) Net realized and unrealized gain on investments .......................... 14.82 5.48 6.10 3.48 -------- -------- -------- --------- Total from Investment Operations .......... 14.62 5.37 6.03 3.45 -------- -------- -------- --------- Less Distributions: Distributions from net realized gains ................................... -- (0.32) -- -- -------- -------- -------- --------- Net asset value, end of year .............. $ 43.44 $ 28.82 $ 23.77 $ 17.74 ======== ======== ======== ========= Total Return (%) (b) ...................... 50.73 22.84 33.99 24.14 (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) .................... 1.24 1.38 1.61 1.65 (d) Net investment loss to average daily net assets .............................. (.56) (.40) (.35) (.19)(d) Portfolio turnover rate (c) .............. 160 54 50 23 Net assets, end of year ($ millions) ..... 67 40 24 12 CLASS B SHARES * -------------------------------- FOR THE YEARS ENDED OCTOBER 31 -------------------------------- 1999 1998/dagger//dagger/ -------- -------------------- Net asset value, beginning of year ........ $ 28.18 $ 24.33 -------- ---------- Income from Investment Operations: Net investment loss (a) .................. (0.47) (0.23) Net realized and unrealized gain on investments .......................... 14.46 4.08 -------- ---------- Total from Investment Operations .......... 13.99 3.85 -------- ---------- Less Distributions: Distributions from net realized gains ................................... -- -- -------- ---------- Net asset value, end of year .............. $ 42.17 $ 28.18 ======== ========== Total Return (%) (b) ...................... 49.65 15.82 (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) .................... 1.98 2.11 (d) Net investment loss to average daily net assets .............................. (1.30) (1.10)(d) Portfolio turnover rate (c) .............. 160 54 Net assets, end of year ($ millions) ..... 16 5 CLASS C SHARES * -------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31 -------------------------------------------------- 1999 1998 1997 1996/dagger/ -------- -------- -------- ------------ Net asset value, beginning of year ........ $ 28.18 $ 23.42 $ 17.61 $ 14.29 -------- -------- -------- --------- Income from Investment Operations: Net investment loss (a) .................. ( 0.47) ( 0.31) ( 0.24) ( 0.15) Net realized and unrealized gain on investments .......................... 14.44 5.39 6.05 3.47 -------- -------- -------- --------- Total from Investment Operations .......... 13.97 5.08 5.81 3.32 -------- -------- -------- --------- Less Distributions: Distributions from net realized gains ................................... -- ( 0.32) -- -- -------- -------- -------- --------- Net asset value, end of year .............. $ 42.15 $ 28.18 $ 23.42 $ 17.61 ======== ======== ======== ========= Total Return (%) (b) ...................... 49.57 21.93 32.99 23.23 (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) .................... 1.99 2.13 2.36 2.40 (d) Net investment loss to average daily net assets .............................. ( 1.31) ( 1.15) ( 1.14) ( .96)(d) Portfolio turnover rate (c) .............. 160 54 50 23 Net assets, end of year ($ millions) ..... 75 39 18 5
- ------- * Per share amounts have been calculated using the monthly average share method. /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 expenses reimbursed by the Manager in the amount of $0.11 per Class A and C Shares 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 for the year ended October 31, 1996, respectively. The year ended October 31, 1997 includes recovery of previously waived management fees paid to the manager of $.01 per Class A and C Shares. 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. The accompanying notes are an integral part of the financial statements. 45 - -------------------------------------------------------------------------------- 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 * CLASS B SHARES * -------------------------- -------------------------------- FOR THE YEARS ENDED FOR THE YEARS ENDED OCTOBER 31 OCTOBER 31 -------------------------- -------------------------------- 1999 1998/dagger/ 1999 1998/dagger//dagger/ -------- ------------ -------- -------------------- Net asset value, beginning of year ............................ $ 14.28 $ 14.29 $ 14.17 $ 14.42 -------- ---------- -------- ---------- Income from Investment Operations: Net investment loss (a) ...................................... (0.18) (0.15) (0.30) (0.23) Net realized and unrealized gain (loss) on investments ....... 2.46 0.14 2.45 (0.02) -------- ---------- -------- ---------- Total from Investment Operations ............................. 2.28 (0.01) 2.15 (0.25) -------- ---------- -------- ---------- Net asset value, end of year .................................. $ 16.56 $ 14.28 $ 16.32 $ 14.17 ======== ========== ======== ========== Total Return (%) (b) .......................................... 15.97 (0.07) (c) 15.17 (1.73) (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ........................................ 1.60 1.60 (d) 2.35 2.35 (d) Net investment loss to average daily net assets ...... ....... (1.19) (.99)(d) (1.94) (1.85)(d) Portfolio turnover rate (c) .................................. 192 129 192 129 Net assets, end of year ($ millions) ......................... 15 16 2 2 CLASS C SHARES * -------------------------- FOR THE YEARS ENDED OCTOBER 31 -------------------------- 1999 1998/dagger/ -------- ------------ Net asset value, beginning of year ............................ $ 14.18 $ 14.29 -------- ---------- Income from Investment Operations: Net investment loss (a) ...................................... (0.30) (0.25) Net realized and unrealized gain (loss) on investments ....... 2.44 0.14 -------- ---------- Total from Investment Operations ............................. 2.14 (0.11) -------- ---------- Net asset value, end of year .................................. $ 16.32 $ 14.18 ======== ========== Total Return (%) (b) .......................................... 15.09 (0.77) (c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ........................................ 2.35 2.35 (d) Net investment loss to average daily net assets ...... ....... (1.95) (1.75)(d) Portfolio turnover rate (c) .................................. 192 129 Net assets, end of year ($ millions) ......................... 9 9
- ------- * Per share amounts have been calculated using the monthly average share method. /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 $0.02 and $.03 per Class A Shares for the two years ended October 31, 1999. The operating expense ratios including such items would have been 1.70% and 1.86% (annualized) per Class A Shares, respectively. Excludes management fees waived by the Manager in the amount of $0.02 and $.03 per Class B Shares for the two years ended October 31, 1999. The operating expense ratios including such items would have been 2.45% and 2.61% (annualized) per Class B Shares, respectively. Excludes management fees waived by the Manager in the amount of $0.02 and $.03 per Class C Shares for the two years ended October 31, 1999. The operating expense ratios including such items would have been 2.45% and 2.61% (annualized) per Class C Shares, respectively. (b) Does not reflect the imposition of a sales charge. (c) Not annualized. (d) Annualized. The accompanying notes are an integral part of the financial statements. 46 - -------------------------------------------------------------------------------- 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 YEARS ENDED OCTOBER 31 --------------------------------------------------------- 1999 * 1998 * 1997 * 1996 * 1995 -------- --------- -------- -------- --------- Net asset value, beginning of year ........ $ 22.62 $ 30.39 $ 24.08 $ 18.86 $ 16.20 -------- --------- -------- -------- -------- Income from Investment Operations: Net investment income (loss) ............. (0.04) (0.06) (0.02) (0.05) 0.02 Net realized and unrealized gain (loss) on investments ................... 0.63 (5.98) 8.21 6.12 3.62 -------- --------- -------- -------- -------- Total from Investment Operations ......... 0.59 (6.04) 8.19 6.07 3.64 -------- --------- -------- -------- -------- 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 year .................................. $ 23.21 $ 22.62 $ 30.39 $ 24.08 $ 18.86 ======== ========= ======== ======== ======== Total Return (%) (a) ...................... 2.61 (20.96) 36.68 33.18 23.97 Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets ........................ 1.26 1.22 1.25 1.41 1.88 Net investment income (loss) to average daily net assets ................ (.18) (.22) (.09) (.21) .15 Portfolio turnover rate (b) .............. 42 52 54 80 89 Net assets, end of year ($ millions) ..... 125 174 222 96 57 CLASS B SHARES * ----------------------------- FOR THE YEARS ENDED OCTOBER 31 ----------------------------- 1999 1998/dagger/ -------- -------------- Net asset value, beginning of year ........ $ 22.00 $ 27.98 -------- ----------- Income from Investment Operations: Net investment income (loss) ............. (0.22) (0.20) Net realized and unrealized gain (loss) on investments ................... 0.63 (5.78) -------- ----------- Total from Investment Operations ......... 0.41 (5.98) -------- ----------- Less Distributions: Dividends from net investment income .................................. -- -- Distributions from net realized gains ................................... -- -- -------- ----------- Total Distributions ...................... -- -- -------- ----------- Net asset value, end of year .................................. $ 22.41 $ 22.00 ======== =========== Total Return (%) (a) ...................... 1.86 (21.37) (b) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets ........................ 2.01 1.98 (c) Net investment income (loss) to average daily net assets ................ (.95) (.93) (c) Portfolio turnover rate (b) .............. 42 52 Net assets, end of year ($ millions) ..... 9 9 CLASS C SHARES --------------------------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31 --------------------------------------------------------------------- 1999* 1998 * 1997 * 1996 * 1995 /dagger//dagger/ -------- --------- -------- -------- --------------------- Net asset value, beginning of year ........ $ 22.01 $ 29.83 $ 23.84 $ 18.79 $ 15.67 -------- --------- -------- -------- ---------- Income from Investment Operations: Net investment income (loss) ............. (0.22) (0.26) (0.23) (0.22) (0.02) Net realized and unrealized gain (loss) on investments ................... 0.63 (5.83) 8.10 6.11 3.14 -------- --------- -------- -------- ---------- Total from Investment Operations ......... 0.41 (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 year .................................. $ 22.42 $ 22.01 $ 29.83 $ 23.84 $ 18.79 ======== ========= ======== ======== ========== Total Return (%) (a) ...................... 1.86 (21.55) 35.63 32.22 19.91 (b) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets ........................ 2.01 1.97 2.00 2.13 2.36 (c) Net investment income (loss) to average daily net assets ................ (.94) (.96) (.85) (.94) (.46)(c) Portfolio turnover rate (b) .............. 42 52 54 80 89 Net assets, end of year ($ millions) ..... 61 84 90 25 4.0
- ------- * Per share amounts have been calculated using the monthly average share method. /dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31,1998. /dagger//dagger/ For the period April 3, 1995 (commencement of Class C Shares) to October 31, 1995. (a) Does not reflect the imposition of a sales charge. (b) Not annualized. (c) Annualized. The accompanying notes are an integral part of the financial statements. 47 - -------------------------------------------------------------------------------- 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 YEARS ENDED OCTOBER 31 ------------------------------------------------------------ 1999 1998 1997 1996 1995/dagger/ -------- -------- -------- -------- ------------ Net asset value, beginning of year ....... $ 18.56 $ 24.27 $ 20.27 $ 18.00 $ 14.29 -------- -------- -------- -------- ------------ Income from Investment Operations: Net investment income (loss) (a) ........ 0.12 0.15 0.22 0.17 0.08 Net realized and unrealized gain (loss) on investments .................. (0.07) (0.76) 5.23 2.76 3.63 -------- -------- -------- -------- ------------ Total from Investment Operations ........ 0.05 (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 year .................................. $ 18.33 $ 18.56 $ 24.27 $ 20.27 $ 18.00 ======== ======== ======== ======== ============ Total Return (%) (b) ..................... 0.24 (3.52) 28.69 16.59 25.96(c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ................... 1.45 1.45 1.61 1.65 1.65(d) Net investment income (loss) to average daily net assets ............... .63 .74 .96 .89 1.05(d) Portfolio turnover rate (c) ............. 137 132 155 129 82 Net assets, end of year ($ millions) ..... 15 18 19 15 12 CLASS B SHARES * -------------------------------- FOR THE YEARS ENDED OCTOBER 31 -------------------------------- 1999 1998/dagger//dagger/ -------- --------------------- Net asset value, beginning of year ....... $ 18.29 $ 19.60 -------- ------- Income from Investment Operations: Net investment income (loss) (a) ........ (0.02) 0.02 Net realized and unrealized gain (loss) on investments .................. (0.08) (1.33) -------- ------- Total from Investment Operations ........ (0.10) (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 year .................................. $ 18.06 $ 18.29 ======== ======= Total Return (%) (b) ..................... (0.56) (6.68)(c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ................... 2.20 2.20 (d) Net investment income (loss) to average daily net assets ............... (.13) .15 (d) Portfolio turnover rate (c) ............. 137 132 Net assets, end of year ($ millions) ..... 1 1 CLASS C SHARES * ----------------------------------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31 ----------------------------------------------------------------------------- 1999 1998 1997 1996 1995 /dagger//dagger//dagger/ -------- -------- -------- -------- ----------------------------- Net asset value, beginning of year ....... $ 18.28 $ 23.98 $ 20.06 $ 17.92 $ 15.27 -------- -------- -------- -------- ------------ Income from Investment Operations: Net investment income (loss) (a) ........ (0.02) -- 0.05 0.02 0.01 Net realized and unrealized gain (loss) on investments .................. (0.07) (0.75) 5.20 2.74 2.64 -------- -------- -------- -------- ------------ Total from Investment Operations ........ (0.09) (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 year .................................. $ 18.06 $ 18.28 $ 23.98 $ 20.06 $ 17.92 ======== ======== ======== ======== ============ Total Return (%) (b) ..................... (0.50) (4.27) 27.79 15.65 17.35(c) Ratios (%)/ Supplemental Data Operating expenses, net, to average daily net assets (a) ................... 2.20 2.20 2.36 2.40 2.40(d) Net investment income (loss) to average daily net assets ............... (.12) (.01) .21 .13 .28(d) Portfolio turnover rate (c) ............. 137 132 155 129 82 Net assets, end of year ($ millions) ..... 12 14 13 10 4.0
- ------- * Per share amounts have been calculated using the monthly average share method. /dagger/ For the period December 30, 1994 (commencement of operations) to October 31,1995. /dagger//dagger/ For the period January 2, 1998 (commencement of Class B Shares) to October 31,1998. /dagger//dagger//dagger/ For the period April 3, 1995 (commencement of Class C Shares) to October 31,1995. (a) Excludes management fees waived by the Manager in the amount of $.05 per Class A Shares, $.05 per Class B Shares and $.05 per Class C Shares for the year ended October 31, 1999. The operating expense ratios including such items would have been 1.70%, 2.45% and 2.45% 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 $.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. Effective May 18, 1999, 100% of the assets of the Value Equity Fund were allocated to Osprey Partners Investment Management, LLC., (See Note 4). (c) Not annualized. (d) Annualized. The accompanying notes are an integral part of the financial statements. 48 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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, the 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 of 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. 49 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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. 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 fees, custodian/fund accounting fees, distribution fees, etc., while other expenses such as insurance expense, 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 October 31, 1999, there was an unlimited number of shares of beneficial interest of no par value authorized. AGGRESSIVE GROWTH FUND ---------------------- Transactions in Class A, B and C Shares of the Fund during the year ended October 31, 1999, were as follows:
A SHARES B SHARES C SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 -------------------------- ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ----------- ------------ ---------- ------------ --------- ------------ Shares sold .................... 816,167 $ 15,241,364 302,485 $ 5,661,744 645,799 $ 12,067,581 Shares redeemed . .............. (228,646) (4,233,253) (49,661) (930,205) (94,328) (1,773,757) -------- ------------ ------- ----------- ------- ------------ Net increase ................... 587,521 $ 11,008,111 252,824 $ 4,731,539 551,471 $ 10,293,824 ============ =========== ============ Shares outstanding: Beginning of year ............. 730,201 252,637 221,820 -------- ------- ------- End of year ................... 1,317,722 505,461 773,291 ========= ======= =======
50 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (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 and C Shares and Eagle Shares of the Fund during the year ended October 31, 1999, were as follows:
A SHARES B SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 ----------------------- -------------------- SHARES AMOUNT SHARES AMOUNT ------- ------------ ------ ---------- Shares sold ..................... 27,491 $ 780,723 9,353 $ 254,995 Shares issued on reinvestment of distributions .............. 1,024 28,582 58 1,581 Shares redeemed ................. (45,994) (1,298,534) (3,878) (109,438) ------- ------------ ------ ---------- Net increase (decrease) ......... (17,479) $ (489,229) 5,533 $ 147,138 ============ ========== Shares outstanding: Beginning of year .............. 268,138 9,348 ------- ------ End of year .................... 250,659 14,881 ======= ====== C SHARES EAGLE SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 ----------------------- ------------------------ SHARES AMOUNT SHARES AMOUNT ------- ------------ ------ ------------- Shares sold ..................... 45,492 $ 1,262,451 137,206 $ 3,951,774 Shares issued on reinvestment of distributions .............. 1,009 27,703 5,474 151,150 Shares redeemed ................. (43,865) (1,222,395) (409,377) (11,689,394) ------- ------------ -------- ------------- Net increase (decrease) ......... 2,636 $ 67,759 (266,697) $ (7,586,470) ============ ============= Shares outstanding: Beginning of year .............. 234,123 1,304,178 ------- --------- End of year .................... 236,759 1,037,481 ======= =========
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:
A SHARES B SHARES FOR THE YEAR ENDED 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 ======= ===== C SHARES EAGLE SHARES FOR THE YEAR ENDED 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 ======= =========
51 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- GROWTH EQUITY FUND ------------------ Transactions in Class A, B and C Shares of the Fund during the year ended October 31, 1999, were as follows:
A SHARES B SHARES C SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 -------------------------- -------- ------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------- -------------- -------- ------------- ---------- ------------- Shares sold .................... 493,710 $ 17,871,948 241,317 $ 8,402,380 775,238 $ 25,998,482 Shares redeemed ................ (331,288) (12,049,577) (40,337) (1,454,604) (395,353) (13,617,224) -------- ------------- ------- ------------ -------- ------------- Net increase ................... 162,422 $ 5,822,371 200,980 $ 6,947,776 379,885 $ 12,381,258 ============= ============ ============= Shares outstanding: Beginning of year ............. 1,384,052 183,567 1,400,076 --------- ------- --------- End of year ................... 1,546,474 384,547 1,779,961 ========= ======= =========
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 year ended October 31, 1999, were as follows:
A SHARES B SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 ----------------------------- ------------------------ SHARES AMOUNT SHARES AMOUNT ----------- -------------- --------- ------------ Shares sold . .................. 167,255 $ 2,515,905 42,991 $ 656,381 Shares redeemed ................ (418,149) (6,408,277) (71,859) (1,083,381) -------- ------------- ------- ------------ Net decrease ................... (250,894) $ (3,892,372) (28,868) $ (427,000) ============= ============ Shares outstanding: Beginning of year ............. 1,129,323 155,989 --------- ------- End of year ................... 878,429 127,121 ========= ======= C SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 --------------------------- SHARES AMOUNT ---------- ------------- Shares sold . .................. 192,230 $ 2,895,086 Shares redeemed ................ (295,178) (4,504,091) -------- ------------- Net decrease ................... (102,948) $ (1,609,005) ============= Shares outstanding: Beginning of year ............. 669,446 -------- End of year ................... 566,498 ========
52 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (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 year ended October 31, 1999, were as follows:
A SHARES B SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 ----------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT ----------- --------------- ---------- ------------- Shares sold ....................... 842,703 $ 20,207,077 167,884 $ 3,950,709 Shares redeemed ................... (3,151,721) (75,402,363) (148,184) (3,460,431) ---------- -------------- -------- ------------ Net increase (decrease) ........... (2,309,018) $ (55,195,286) 19,700 $ 490,278 ============== ============ Shares outstanding: Beginning of year ................ 7,689,095 403,835 ---------- -------- End of year ...................... 5,380,077 423,535 ========== ======== C SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 ------------------------------ SHARES AMOUNT ----------- --------------- Shares sold ....................... 621,819 $ 14,595,795 Shares redeemed ................... (1,747,954) (40,385,471) ---------- -------------- Net increase (decrease) ........... (1,126,135) $ (25,789,676) ============== Shares outstanding: Beginning of year ................ 3,828,853 ---------- End of year ...................... 2,702,718 ==========
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 ==========
53 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- VALUE EQUITY FUND ----------------- Transactions in Class A, B and C Shares of the Fund during the year ended October 31, 1999, were as follows:
A SHARES B SHARES C SHARES FOR THE YEAR ENDED OCTOBER 31, 1999 ---------------------------- ---------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------- ------------- --------- ----------- --------- -------------- Shares sold ..................... 136,595 $ 2,740,843 28,808 $ 558,979 154,403 $ 3,058,861 Shares issued on reinvestment of distributions ................. 13,519 254,838 389 7,278 5,023 93,852 Shares redeemed ................. (302,249) (5,780,061) (22,484) (428,531) (249,936) (4,765,104) -------- ------------- ------- ---------- -------- ------------- Net increase (decrease) ......... (152,135) $ (2,784,380) 6,713 $ 137,726 (90,510) $ (1,612,391) ============= ========== ============= Shares outstanding: Beginning of year .............. 955,082 49,544 745,451 -------- ------- -------- End of year .................... 802,947 56,257 654,941 ======== ======= ========
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 year ended October 31, 1999, purchases and sales on investment securities (excluding repurchase agreements and short term obligations) were as follows:
INVESTMENT SECURITIES ----------------------------- PURCHASES SALES ------------ ------------ Aggressive Growth Fund ....................... $ 92,945,289 $ 66,116,984 Eagle International Equity Portfolio ......... 37,080,096 36,465,810 Growth Equity Fund ........................... 199,068,229 188,114,864 Mid Cap Growth Fund .......................... 52,206,092 58,850,111 Small Cap Stock Fund ......................... 98,562,362 160,694,892 Value Equity Fund ............................ 39,709,252 42,627,955
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) (139,313) Expired .............................. (110) (17,466) ---- ---------- Outstanding, October 31, 1999 ......... 0 $ 0 ==== ==========
54 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT, FUND ACCOUNTING AND TRUSTEES' FEES. Under the Trust'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 waived 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 $55,188 were waived for the Aggressive Growth Fund for the year ended October 31, 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 $24,049 were waived for the Eagle International Equity Portfolio for the year ended October 31, 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 $52,276 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 $27,644 were waived by the Mid Cap Growth Fund for the year ended October 31, 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 $76,169 were waived by the Value Equity fund for the year ended October 31, 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. 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 year ended October 31, 1999 the Subadviser earned $238,911 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 year ended 55 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- October 31, 1999, the total fees the Subadvisers earned were $191,381, $466,322, $105,440, $980,200 and $113,779 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 Value Equity 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 Value Equity 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 $245,292, $19,272, $303,861, $35,757, $320,799, and $39,460 in front end sales charges for Class A Shares, $13,734, $2,439, $29,289, $32,058, $60,368 and $9,483 in contingent deferred sales charges for Class B Shares and $5,200, $2,202, $16,048, $6,126, $31,566, and $1,545 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 year ended October 31, 1999. The Distributor paid sales commission to salespersons from these fees and incurred other distribution costs. Total agency brokerage commissions paid by the Funds and agency brokers commissions paid directly to Raymond James & Associates, Inc., for the year ended October 31, 1999.
TOTAL AGENCY PAID TO BROKERAGE RAYMOND JAMES COMMISSIONS & ASSOCIATES, INC. ------------ ------------------ Aggressive Growth Fund ....................... $118,326 $16,500 Eagle International Equity Portfolio ......... 191,194 -- Growth Equity Fund ........................... 303,840 -- Mid Cap Growth Fund .......................... 127,029 540 Small Cap Stock Fund ......................... 347,665 48,580 Value Equity Fund ............................ 130,194 300
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 October 31, 1999 was $15,200, $14,671, $39,200, $12,000, $90,000 and $12,400, 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 $40,829, $49,494, $38,911, $49,801 and $39,620 during the current period, of which $14,400, $17,200, $13,200, $17,000 and $14,000, was payable as of October 31, 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. 56 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Note 5: FEDERAL INCOME TAXES. AGGRESSIVE GROWTH FUND: For the year ended October 31, 1999, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund credited undistributed net investment income and debited accumulated net realized gain $430,858. The Fund utilized $50,287 of net tax basis capital losses during the current year against net realized gains from investment transactions. EAGLE INTERNATIONAL EQUITY PORTFOLIO: For the year ended October 31, 1999, 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 $613,007 and paid in capital $5,242 and debited accumulated net realized gain $618,249. GROWTH EQUITY FUND: For the year ended October 31, 1999, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund credited undistributed net investment income and debited accumulated net realized gain $1,219,288. The Fund utilized $2,741,694 of net tax basis capital losses during the current year against net realized gains from investment transactions. MID CAP GROWTH FUND: For the year ended October 31, 1999, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund credited undistributed net investment income and debited paid in capital $427,785. The Fund utilized $1,409,298 of net tax basis capital losses during the current year against net realized gains from investment transactions. SMALL CAP STOCK FUND: For the year ended October 31, 1999, 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 $1,146,554 and accumulated net realized loss $570,917 and debited paid in capital $1,717,471. The Fund has net tax basis capital loss carryforwards of $5,057,448, which may be applied against any realized net taxable gains until their expiration dates of October 31, 2006 ($1,863,838) and October 31, 2007 ($3,193,610). 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. 57 - -------------------------------------------------------------------------------- HERITAGE SERIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Note 7: SHAREHOLDERS MEETING. (UNAUDITED) 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
58 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Heritage Series Trust In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Heritage Series Trust - Aggressive Growth Fund, Heritage Series Trust - Eagle International Equity Portfolio, Heritage Series Trust - Growth Equity Fund, Heritage Series Trust - Mid Cap Growth Fund, Heritage Series Trust - Small Cap Stock Fund and Heritage Series Trust - Value Equity Fund (constituting the Heritage Series Trust, hereafter referred to as the "Trust") at October 31, 1999, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management, our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/ PRICEWATERHOUSECOOPERS LLP - ------------------------------ PricewaterhouseCoopers LLP Tampa, Florida December 15, 1999 - -------------------------------------------------------------------------------- 1999 FEDERAL INCOME TAX NOTICE (UNAUDITED) - -------------------------------------------------------------------------------- During the year ended October 31, 1999, the Eagle International Equity Portfolio and the Value Equity Fund paid to shareholders $211,848 and $203,264 or $0.12 and $0.12 per share, from long-term capital gains, respectively. For such period 100% of the income dividends for the Value Equity Fund qualified for the dividend received deduction available for corporations. 59 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 MidCap Small Cap Technology Value Equity HERITAGE bOND fUNDS High Yield Intermediate Government HERITAGE MONEY MARKET FUNDS Money Market Municipal Money market We are pleased that mahy 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, MidCap Growth Fund, Small Cap Stock Fund and Value Equity Fund. It may also be used as sales literature when ppreceded or accompanied by a prospectus. (C) 1999 Heritage Asset Management, Inc. 40M 10/99 AR53415-HST /LOGO/ HERITAGE SERIES tRUST P.O. BOX 33022 ST. PETERSBURG, FL 33733 - -------------------------------------------------------------------------------- ADDRESS SERVICE REQUESTED -----END PRIVACY-ENHANCED MESSAGE-----