N-CSRS 1 dncsrs.htm HERITAGE SERIES TRUST Heritage Series Trust
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file Number: 811-07470

 

HERITAGE SERIES TRUST

(Exact name of Registrant as Specified in Charter)

 

880 Carillon Parkway

St. Petersburg, FL 33716

(Address of Principal Executive Office) (Zip Code)

 

Registrant’s Telephone Number, including Area Code: (727) 573-3800

 

RICHARD K. RIESS, PRESIDENT

880 Carillon Parkway

St. Petersburg, FL 33716

(Name and Address of Agent for Service)

 

Copy to:

CLIFFORD J. ALEXANDER, ESQ.

Kirkpatrick & Lockhart Nicholson Graham LLP

1800 Massachusetts Avenue, NW

Washington, D.C. 20036

 

Date of fiscal year end: October 31

 

Date of reporting period: April 30

Table of Contents

Item 1. Reports to Shareholders

Table of Contents

LOGO

LOGO

Table of Contents

Heritage Series Trust

Semiannual Report

Table of Contents

 

Portfolio Commentary

     

Diversified Growth Fund

     

Shareholder Letter

    1

Investment Portfolio

    3

Growth Equity Fund

     

Shareholder Letter

    5

Investment Portfolio

    7

International Equity Fund

     

Shareholder Letter

    9

Investment Portfolio

    11

Mid Cap Stock Fund

     

Shareholder Letter

    19

Investment Portfolio

    22

Small Cap Stock Fund

     

Shareholder Letter

    25

Investment Portfolio

    27

Value Equity Fund

     

Shareholder Letter

    30

Investment Portfolio

    33

Sector Allocation

   35

Understanding Your Fund’s Expenses

   38

Statements of Assets and Liabilities

   40

Statements of Operations

   42

Statements of Changes in Net Assets

   43

Financial Highlights

   45

Notes to Financial Statements

   51

Descriptions of Indices

   Inside Back Cover

 

Table of Contents

May 18, 2005

 

Dear Valued Shareholders:

 

With the first half of the fiscal year ended, it is a pleasure to report to you on the Heritage Series Trust–Diversified Growth Fund (the “Fund”)(a). For the six-month period ended April 30, 2005, the Fund’s Class A shares’ return(b) of +2.33% trailed the Fund’s benchmark index, the Russell Midcap Growth Index(c), which returned +4.07%. Please note that performance numbers quoted above for Class A shares are shown without the imposition of a front-end or contingent deferred sales charge. If reflected, the imposition of a front-end or contingent deferred sales charge would reduce the performance. In addition, the performance data quoted represents past performance and 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 the original cost. Also, please bear in mind that past performance does not guarantee future results and current performance may be higher or lower than the performance data quoted. To obtain more current performance, please visit our website at www.HeritageFunds.com.

 

During the first half of the fiscal year, the Fund’s worst performing stocks included Martek Biosciences, Doral Financial, Columbia Sportswear, Ambac Financial Group and Vishay Intertechnology. Martek Biosciences develops and sells products derived from microalgae and other microbes. Martek surprised investors when it lowered guidance revenue estimates for the year. As it turned out, several of Martek’s major customers have been hoarding inventories of Martek’s products, so they do not need to order as much in the second half of the year. We viewed this as a significant blunder by the company’s management and sold the stock. Doral Financial is a mortgage banker whose business is primarily in Puerto Rico. Investors have become concerned that Doral is being too aggressive with the assumptions it uses in valuing its interest-only portfolios, which could lead to earnings revisions. It is impossible to know how this will play out, so we sold the stock. Columbia Sportswear Co. manufactures and distributes active outdoor apparel and footwear. The company experienced weakness in revenues from its outerwear products last fall as winter weather arrived late in the season. Retailers have responded by lowering orders for next fall. Our long-term outlook for the company remains positive. Ambac Financial Group provides financial guarantee products and other financial services to clients in both the public and private sectors. Company management significantly lowered its revenue growth forecast, due to declining international transactions and increasing competition. We sold the stock. Vishay Intertechnology manufactures and supplies electronic components. Vishay has been struggling with decreased demand and lower pricing. However, the company’s restructuring efforts should improve its long-term profitability.

 

The Fund’s top contributing stocks included Patterson-UTI Energy, Nextel Partners, Station Casinos, ResMed and Caremark Rx. Patterson-UTI Energy provides pressure pumping services to oil and natural gas operators. Patterson continues to benefit from strength in oil prices. U.S. land drilling activity is at peak levels, and prices have firmed. Nextel Partners provides fully integrated, wireless digital communications services in mid-sized and rural markets. Profitability continues to expand, as the company builds scale and older markets mature. Station Casinos, a gaming and entertainment company, has continued to have strong long-term operating fundamentals in its Las Vegas properties. Station has been one of the top operators in the casino industry in same-store sales growth and unit growth opportunities. Las Vegas’ population growth continues to be a key driver in revenue growth for Station due to its high appeal to local gamblers. ResMed develops, manufactures and distributes

 

(a) The views expressed here are not meant as investment advice. Although some of the described portfolio holdings were viewed favorably as of the date of this letter, there is no guarantee the Fund will continue to hold these securities in the future. Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. Contact Heritage at (800) 421-4184 or your financial advisor for a prospectus, which contains this and other important information about the Fund. Read the prospectus carefully before you invest.

(b) All returns include the effect of reinvesting dividends and the deduction of Fund expenses.

(c) Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Please refer to the inside back cover for index descriptions.

 

 

Table of Contents

medical equipment for diagnosing and treating sleep-disordered breathing. The company has grown revenues and margins, benefiting from an under-penetrated obstructive sleep apnea market. Caremark provides pharmacy benefit management services. Caremark continues to benefit from favorable industry trends led by mail-order and generic pharmaceuticals.

 

The most notable sector in terms of positive relative performance was consumer discretionary, particularly casinos & gambling and commercial services stocks. The most significant lagging sector on a relative contribution basis was financial services, where the Fund significantly underperformed the Index. Within the sector, our worst-performing picks were in the financial information services and non-New York banking industries.

 

Over the six-month period, we slightly added to the Fund’s producer durables and health care weightings. We decreased our weighting in financial services. During the six-month period, our average cash position was 5.2%. We typically hold some cash, usually less than 10%, in order to have immediate purchasing power when adding new positions.

 

We continue to remind you that investments in small- and mid-cap companies generally involve greater risk than large-capitalization companies, due to their more limited managerial and financial resources. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of the Fund’s portfolio. Generally, the smaller the company size, the greater these risks. As of the end of this reporting period, our weighted average market capitalization was $5.9 billion, compared to $7.1 billion in the Russell Midcap Growth Index. In addition, the Fund invests in growth and technology companies that entail greater risks. The prices of growth company securities may rise and fall dramatically, based in part on investors’ perceptions of the company rather than on fundamental analysis of the stocks. Technology companies are at risk because the rapid pace of technological development, products, and services produced by them may become obsolete or have relatively short product cycles. As a result, the Fund’s returns may be considerably more volatile than the returns of other mutual funds that do not invest in similarly related companies. These and other risks are more fully described in the Fund’s prospectus. We thank you for your continued investment in the Fund and will continue to do our best for our valued shareholders.

 

Sincerely,

       
LOGO       

Bert Boksen

       

Managing Director

       

Eagle Asset Management, Inc.

       

Portfolio Manager

       

Heritage Diversified Growth Fund

       

 

2

 

Table of Contents

Heritage Series Trust—Diversified Growth Fund

Investment Portfolio

April 30, 2005

(unaudited)

 

Shares
         Value
           
Common Stocks—93.0% (a)
       
Aerospace/Defense—0.7%
       
      18,600   

Alliant Techsystems Inc.*

    $ 1,286,748
         
Apparel—1.7%
       
73,100   

Columbia Sportswear Company*

      3,143,300
         
Biotechnology—4.8%
       
69,800   

Celgene Corporation*

      2,646,118
64,400   

Charles River Laboratories International, Inc.*

      3,050,628
46,000   

Invitrogen Corporation*

      3,370,420
         
            9,067,166
         
Commercial Services—3.5%
       
96,675   

ChoicePoint Inc.*

      3,815,762
68,300   

Weight Watchers International Inc.*

      2,851,525
         
            6,667,287
         
Computers—3.6%
       
71,925   

Diebold, Inc.

      3,479,012
118,600   

FactSet Research Systems Inc.

      3,292,336
         
            6,771,348
         
Electronics—3.1%
       
259,800   

Vishay Intertechnology, Inc.*

      2,777,262
79,300   

Waters Corporation*

      3,142,659
         
            5,919,921
         
Entertainment—4.8%
       
370,800   

GTECH Holdings Corporation

      9,073,476
         
Financial Services—3.7%
       
375,775   

Ameritrade Holding Corporation*

      3,938,122
55,800   

T. Rowe Price Group, Inc.

      3,078,486
         
            7,016,608
         
Healthcare Products—13.1%
       
28,700   

C.R. Bard, Inc.

      2,042,579
81,000   

Henry Schein, Inc.*

      3,038,310
69,000   

Inamed Corporation*

      4,197,960
39,625   

Kinetic Concepts, Inc.*

      2,434,956
98,900   

ResMed Inc.*

      6,141,690
99,125   

Stryker Corporation

      4,812,519
28,450   

The Cooper Companies, Inc.

      1,921,798
         
            24,589,812
         
Healthcare Services—2.1%
       
48,200   

Lincare Holdings Inc.*

      2,057,176
31,800   

Pacificare Health Systems, Inc.*

      1,900,368
         
            3,957,544
         
Shares
         Value
           
Common Stocks (continued)
     
Internet—4.4%
     
    142,450   

Check Point Software Technologies Ltd.*

    2,984,328
244,100   

IAC/InterActiveCorp*

    5,306,734
         
          8,291,062
         
Leisure Time—2.9%
     
36,725   

Carnival Corporation

    1,795,118
88,000   

Royal Caribbean Cruises Ltd.

    3,697,760
         
          5,492,878
         
Lodging—6.7%
     
85,800   

Harrah’s Entertainment, Inc.

    5,630,196
107,075   

Station Casinos, Inc.

    6,909,550
         
          12,539,746
         
Logic Semiconductors—7.7%
     
274,200   

Altera Corporation*

    5,684,166
185,575   

ATI Technologies Inc.*

    2,746,510
73,300   

NVIDIA Corporation*

    1,608,202
134,000   

QLogic Corporation*

    4,454,160
         
          14,493,038
         
Oil & Gas—6.3%
     
84,400   

Nabors Industries Ltd.*

    4,546,628
195,175   

Patterson-UTI Energy, Inc.

    4,678,345
101,575   

Rowan Companies, Inc.

    2,694,785
         
          11,919,758
         
Oil & Gas Services—1.0%
     
39,200   

BJ Services Company

    1,911,000
         
Pharmaceuticals—2.6%
     
120,800   

Caremark Rx, Inc.*

    4,838,040
         
Retail—3.5%
     
79,875   

Michaels Stores, Inc.

    2,651,850
131,100   

The Cheesecake Factory Inc.*

    4,023,459
         
          6,675,309
         
Semiconductor Equipment—0.7%
     
84,400   

ASML Holding N.V.*

    1,222,956
         
Software—5.3%
     
80,700   

Avid Technology, Inc.*

    3,995,457
191,000   

Citrix Systems, Inc.*

    4,297,500
42,975   

Intuit Inc.*

    1,731,892
         
          10,024,849
         

 

The accompanying notes are an integral part of the financial statements.

 

3

 

Table of Contents

Heritage Series Trust—Diversified Growth Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
           
Common Stocks (continued)
       
Telecommunications—9.6%
       
      121,700   

Amdocs Ltd.*

    $ 3,250,607
232,000   

Comverse Technology, Inc.*

      5,287,280
13,654   

Enterasys Networks, Inc.*

      9,831
245,300   

Nextel Partners, Inc., Class “A”*

      5,769,456
125,550   

Scientific-Atlanta, Inc.

      3,839,319
         
            18,156,493
         
Television, Cable & Radio—1.2%
       
84,275   

XM Satellite Radio Holdings Inc., Class “A”*

      2,337,788
         
Total Common Stocks (cost $152,039,410)      175,396,127
         
Repurchase Agreement—4.4% (a)
       
Repurchase Agreement with State Street Bank and
Trust Company, dated April 29, 2005 @ 2.72% to
be repurchased at $8,287,878 on May 2, 2005,
collateralized by $8,455,000 United States
Treasury Notes, 2.0% due August 31, 2005,
(market value $8,455,488 including interest)
(cost $8,286,000)		      8,286,000
         
Total Investment Portfolio
(cost $160,325,410) (b), 97.4% (a)		      183,682,127
Other Assets and Liabilities, net, 2.6% (a)      4,839,183
         
Net Assets, 100.0%    $ 188,521,310
         
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same. Market value includes net unrealized appreciation of $23,356,717 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $27,408,658 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $4,051,941.

 

Beginning with the Diversified Growth Fund’s fiscal quarter ended July 31, 2004, the Trust began filing its complete schedule of portfolio holdings with the Securities Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q; the Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov; and the Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

The accompanying notes are an integral part of the financial statements.

 

4

 

Table of Contents

May 18, 2005

 

Dear Valued Shareholders:

 

The Heritage Series Trust–Growth Equity Fund (the “Fund”)(a) Class A shares produced a return(b) of -0.44% during the six-month period ended April 30th, 2005. The Fund’s benchmark index, the Standard & Poor’s 500 Composite Stock Price Index(c), returned +3.29% and the Russell 1000 Growth Index(c) returned +1.14% for the same period. Please note that performance numbers quoted above for Class A shares are shown without the imposition of a front-end or contingent deferred sales charge. If reflected, the imposition of a front-end or contingent deferred sales charge would reduce the performance. In addition, the performance data quoted represents past performance and 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 the original cost. Also, please bear in mind that past performance does not guarantee future results and current performance may be higher or lower than the performance data quoted. To obtain more current performance, please visit our website at www.HeritageFunds.com.

 

Market Overview

 

After a brief post-election, the equity market rally started to lose steam as investors began to focus on the macro-economic environment and anticipate the actions of the Federal Open Market Committee (FOMC) on short-term interest rates. The real U.S. Gross Domestic Product (“GDP”) growth rate slowed from 3.8% in the fourth quarter of 2004 to a rate of 3.1% in the first calendar quarter of 2005. The real GDP growth in Euroland during the first quarter of 2005 was anemic and domestic demand also was weak. At the same time, global investors began to pay more attention to the structural issues associated with the global macro-economic environment.

 

Discussions on the sustainability of U.S. trade and current account deficits, along with the peg of the Chinese Yuan to the U.S. Dollar, took center stage. The market also was concerned that foreigners’ appetite for U.S. Dollar-denominated assets would wane and that could trigger inflation. At the same time, the FOMC decided to adopt a measured pace of interest rate hikes. This decision by the FOMC was bolstered by the ideology that robust productivity gains would help fuel an economic recovery, while containing longer-term inflation expectations.

 

Higher oil prices were perceived to be a continued drag on consumer sentiment and a possible catalyst for higher inflation. However, the market was comforted by the fact that inflation did not manifest itself in a material fashion during this period. On the job front, the news had been mixed, with the weekly initial jobless claims number struggling to get below the psychological 300,000 number. However, unemployment rates have declined over this period from a high of 5.5% in October to a low of 5.2% in April. The job creation capacity of the economy, as measured by payroll enrollment into the non-farm sector of the economy, has begun to show momentum in recent months.

 

This six-month reporting period was marked by a theme of increased risk aversion among investors. Defensive sectors, such as utilities, energy, health care and consumer staples, outperformed economically sensitive sectors such as consumer discretionary, technology and financial services.

 

(a) The views expressed here are not meant as investment advice. Although some of the described portfolio holdings were viewed favorably as of the date of this letter, there is no guarantee the Fund will continue to hold these securities in the future. Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. Contact Heritage at (800) 421-4184 or your financial advisor for a prospectus, which contains this and other important information about the Fund. Read the prospectus carefully before you invest.

(b) All returns include the effect of reinvesting dividends and the deduction of Fund expenses.

(c) Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Please refer to the inside back cover for index descriptions.

 

5

 

Table of Contents

Portfolio Review

 

At the sector level, the Fund’s performance was negatively affected by the consumer staples, producer durables, technology and health care sectors. Financial services, consumer discretionary, energy, transportation and utility positively contributed to the performance of the Fund.

 

Security selection in the financial services sector was the main driver behind the positive contribution. Underweight positions relative to the Fund’s benchmark index in outperforming stocks, such as CheckFree Corporation, Citigroup, Goldman Sachs Group Inc., and Fiserv, coupled with an underweight position in the underperforming stocks, such as Fannie Mae, helped the performance of the portfolio.

 

The consumer discretionary sector’s out performance was also driven by strong security selection. Overweight positions relative to the Fund’s benchmark index in outperforming names, such as Tempur-Pedic International Inc., IAC/Interactive, Harrah’s Entertaintment Inc., Google Inc. and Walt Disney Co., added value to the portfolio. These gains more than offset the underweight positions in underperforming securities, such as eBay Inc., Target Corp. and Wal-Mart Stores Inc.

 

Underweight allocations to the outperforming defensive sectors, such as consumer staples and health care, hurt the Fund’s relative performance to its benchmark index. However, strong stock selection within the health care sector helped to mitigate the magnitude of the negative contribution from the underweight sector position. Caremark Rx Inc., Aetna Inc. and Allergan Inc. added value, while Boston Scientific detracted value. Furthermore, underweight positions in United Health Group and Johnson & Johnson negatively impacted the Fund’s relative performance to its benchmark index. On the consumer staples front, the positive contribution came from an overweight position in Coca-Cola Company, while negative contribution arose from an underweight position in Procter & Gamble Company and not owning some good performers, such as PepsiCo Inc. and Walgreen & Co.

 

At the stock level, the stocks that negatively impacted the portfolio included Avaya Inc., eBay Inc., McDonald’s Corp., Pfizer, Wal-Mart, Biogen Idec., and Boston Scientific Corp. The stocks that positively contributed the most performance to the fund included Caremark Rx Inc., Tempur-Pedic International Inc., National Semiconductor Corp., IAC/InterActiveCorp, and Aetna Inc.

 

The Fund’s participation in the IPO market was limited to small positions in Foundation Coal Holdings, Inc. and International Securities Exchange, Inc. The positive contribution from these two stocks was negligible during the above mentioned period.

 

Please bear in mind that the Fund invests primarily in common stocks whose value may decrease in response to the activities of the company that issued the stock and general market and economic conditions. In addition the Fund invests in growth and technology companies that entail greater risks. The prices of growth company securities may rise and fall dramatically, based in part on investors’ perceptions of the company rather than on fundamental analysis of the stocks. Technology companies are at risk because the rapid pace of technological development, products, and services produced by them may become obsolete or have relatively short product cycles. As a result, the Fund’s returns may be considerably more volatile than the returns of other mutual funds that do not invest in similarly related companies. Please refer to the Fund’s prospectus for more information about these and other risks. Looking forward, we continue to position the Fund with a bias toward an economic recovery. Thank you for your continued support.

 

 

Sincerely,

LOGO

Ashi Parikh

Senior Managing Director

Eagle Asset Management, Inc.

Portfolio Manager

Heritage Growth Equity Fund

 

6

 

Table of Contents

Heritage Series Trust—Growth Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

 

Shares
         Value
             
Common Stocks—100.2% (a)
Aerospace/Defense—3.2%
30,200   

Boeing Company

    $ 1,797,504
25,900   

United Technologies Corporation

      2,634,548
         
            4,432,052
         
Analog Semiconductors—1.7%
63,550   

Maxim Integrated Products, Inc.

      2,376,770
         
Beverages—4.8%
24,000   

Anheuser-Busch Companies, Inc.

      1,124,880
    126,450   

The Coca-Cola Company

      5,492,988
         
            6,617,868
         
Biotechnology—0.5%
12,350   

Genzyme Corporation*

      723,834
         
Communication Semiconductors—1.8%
82,900   

Broadcom Corporation, Class “A”*

      2,479,539
         
Computers—6.3%
193,400   

Dell, Inc.*

      6,736,122
28,250   

Research In Motion Ltd.*

      1,819,582
         
            8,555,704
         
Cosmetics/Personal Care—1.9%
46,700   

Procter & Gamble Company

      2,528,805
         
Diversified Manufacturer—1.8%
69,450   

General Electric Company

      2,514,090
         
Electrical Components & Equipment—1.9%
41,500   

Emerson Electric Company

      2,600,805
         
Electronics—1.5%
155,150   

Symbol Technologies, Inc.

      2,074,356
         
Financial Services—7.3%
51,350   

American Express Company

      2,706,145
82,433   

Citigroup Inc.

      3,871,054
31,150   

Goldman Sachs Group, Inc.

      3,326,508
         
            9,903,707
         
Healthcare Products—6.9%
93,350   

Boston Scientific Corporation*

      2,761,293
9,300   

Cyberonics, Inc.*

      350,517
75,000   

Johnson & Johnson

      5,147,250
14,600   

Zimmer Holdings, Inc.*

      1,188,732
         
            9,447,792
         
Shares
         Value
           
Common Stocks (continued)
Healthcare Services—1.8%
25,700   

UnitedHealth Group Inc.

    2,428,907
         
Insurance—1.5%
40,600   

American International Group, Inc.

    2,064,510
         
Internet—4.9%
44,000   

Agile Software Corporation*

    289,080
44,900   

eBay Inc.*

    1,424,677
7,850   

Google Inc., Class “A”*

    1,727,000
41,300   

MatrixOne, Inc.*

    176,351
40,750   

VeriSign, Inc.*

    1,078,245
58,600   

Yahoo! Inc.*

    2,022,286
         
          6,717,639
         
Lodging—2.7%
56,200   

Harrah’s Entertainment, Inc.

    3,687,844
         
Logic Semiconductors—5.2%
46,050   

Altera Corporation*

    954,617
200,750   

Intel Corporation

    4,721,640
55,750   

Texas Instruments Inc.

    1,391,520
         
          7,067,777
         
Multimedia—3.3%
149,250   

News Corporation, Class “A”

    2,280,540
132,700   

Time Warner Inc.*

    2,230,687
         
          4,511,227
         
Oil & Gas—1.1%
47,450   

ENSCO International Inc.

    1,546,870
         
Oil & Gas Services—1.9%
61,500   

Halliburton Company

    2,557,785
         
Pharmaceuticals—10.5%
86,200   

Caremark Rx, Inc.*

    3,452,310
43,300   

Eli Lilly & Company

    2,531,751
29,750   

Gilead Sciences, Inc.*

    1,103,725
    156,720   

Pfizer, Inc.

    4,258,082
29,500   

Rigel Pharmaceuticals, Inc.*

    505,925
91,600   

Schering-Plough Corporation

    1,911,692
15,800   

Teva Pharmaceutical Industries Ltd., Sponsored ADR

    493,592
         
          14,257,077
         
Retail—11.5%
74,550   

Home Depot, Inc.

    2,636,834
194,250   

McDonald’s Corporation

    5,693,468
62,150   

Target Corporation

    2,883,760
93,500   

Wal-Mart Stores, Inc.

    4,407,590
         
          15,621,652
         

 

The accompanying notes are an integral part of the financial statements.

 

7

 

Table of Contents

Heritage Series Trust—Growth Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
             
Common Stocks (continued)
Semiconductor Equipment—2.9%
163,400   

Applied Materials, Inc.

    $ 2,429,758
177,050   

Entegris, Inc.*

      1,524,400
         
            3,954,158
         
Software—6.5%
17,000   

First Data Corporation

      646,510
37,850   

Fiserv, Inc.*

      1,601,055
264,150   

Microsoft Corporation

      6,682,995
         
            8,930,560
         
Telecommunications—5.6%
    344,850   

Avaya Inc.*

      2,993,298
5,752   

Enterasys Networks, Inc.*

      4,141
73,500   

Nextel Partners, Inc., Class “A”*

      1,728,720
81,550   

QUALCOMM, Inc.

      2,845,279
         
            7,571,438
         
Transportation—1.2%
19,300   

FedEx Corporation

      1,639,535
         
Total Common Stocks (cost $135,765,276)      136,812,301
         
          Value
  
               
Repurchase Agreement—0.3% (a)
  
Repurchase Agreement with State Street Bank and
Trust Company, dated April 29, 2005 @ 2.72% to
be repurchased at $359,081 on May 2, 2005,
collateralized by $370,000 United States
Treasury Notes, 2.0% due August 31, 2005,
(market value $370,021 including interest)
(cost $359,000)		      359,000  
         
Total Investment Portfolio
(cost $136,124,276) (b), 100.5% (a)		      137,171,301  
Other Assets and Liabilities, net, (0.5%) (a)      (692,528 )
         
Net Assets, 100.0%    $ 136,478,773  
         
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same. Market value includes net unrealized appreciation of $1,047,025 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $12,305,823 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $11,258,798.

 

ADR—American Depository Receipt.

Beginning with the Growth Equity Fund’s fiscal quarter ended July 31, 2004, the Trust began filing its complete schedule of portfolio holdings with the Securities Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q; the Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov; and the Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

The accompanying notes are an integral part of the financial statements.

 

8

 

Table of Contents

May 13, 2005

 

Dear Valued Shareholders:

 

For the six-month period ended April 30, 2005, the Heritage Series Trust–International Equity Fund (the “Fund”)(a) Class A shares provided a total return(b) of +9.20% versus the Fund’s benchmark return, the Morgan Stanley Capital International EAFE Index(c), which returned +8.71% for the same period. Please note that performance numbers quoted above for Class A shares are shown without the imposition of a front-end or contingent deferred sales charge. If reflected, the imposition of a front-end or contingent deferred sales charge would reduce the performance. In addition, the performance data quoted represents past performance and 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 the original cost. Also, please bear in mind that past performance does not guarantee future results and current performance may be higher or lower than the performance data quoted. To obtain more current performance, please visit our website at www.HeritageFunds.com.

 

During this period, our allocation to emerging European markets positively contributed to our performance. Interest in this region has been driven by expectations of increasing integration with Western Europe. However, in the run-up to a May 29th referendum in France on the proposed European Constitution, hostility to further European expansion has become a rallying issue for anti-EU factions. It is far from clear how this will ultimately impact these economies. We continue to view the emerging European countries as having attractive fundamentals and so are retaining our positions in these markets. Top performers within the emerging European markets included Turkiye Garanti Bankasi AS, Turkiye Is Bankasi AS (Turkey), OTP Bank (Hungary), SNP Petrom SA (Romania) and Romanian Bank for Development (a subsidiary of Societe Generale).

 

Our underweight to the Japanese market supported results, although positions held in Japanese financials were disappointing. We have been building positions there in anticipation of margin improvements as restructuring continues. However, concerns over the outlook for the Japanese economy undermined stocks over the period. Detracting from results was an underweight to the United Kingdom which performed well over the period. Positions held in Russia, particularly JSFC Sistema, Yukos and Gazprom, performed poorly over the period. Within the Australian market, stock selection negatively impacted results. Shares of BHP Billiton and Newcrest Mining were particularly weak. They are part of an underweight to materials, a sector we recognize to be particularly volatile, which hurt performance at a time when commodity prices were pushed higher by hedge funds and other speculators.

 

From a sector perspective our overweight to energy supported the strategy. We observe that production growth has failed to keep up with demand. Existing oil fields are depleted, while reserve replacement has been weak. Median production growth in 2004 was negative 3.8%, while consumption was up last year by 3.4%. We anticipate that supply-demand imbalances will keep oil prices high with further pressure on prices coming from China and India. Our underweight within information technology had a positive impact on performance. We have long had concerns over this sector from a valuation perspective amid an environment of slowing earnings momentum and a change in accounting standards related to stock options. Stock selection within health care also was positive. We have recently been increasing our weighting to European health care stocks, which we believe are attractively valued following a long period of relative underperformance.

(a) The views expressed here are not meant as investment advice. Although some of the described portfolio holdings were viewed favorably as of the date of this letter, there is no guarantee the Fund will continue to hold these securities in the future. Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. Contact Heritage at (800) 421-4184 or your financial advisor for a prospectus, which contains this and other important information about the Fund. Read the prospectus carefully before you invest.

(b) All returns include the effect of reinvesting dividends and the deduction of Fund expenses.

(c) Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Please refer to the inside back cover for index descriptions.

 

9

 

Table of Contents

We expect that international equity markets will remain under pressure, given relatively high valuations, even after recent declines, and uncertainty over the direction of economic growth and interest rates. We remain defensively positioned and focused on stocks of companies with strong cash flows and balance sheets, which we believe will be more resilient in the difficult business environment that seems to lie ahead.

 

The Fund seeks capital appreciation principally through investment in a portfolio of international equity securities. Because the Fund is invested in emerging markets, it is important to reiterate that there are risks of greater political uncertainties, an economy’s dependence on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, a limited number of potential buyers for such securities and delays and disruption in securities settlement procedures. Conversely, we also feel that a balanced portfolio should contain some international exposure. These and other risks are more fully described in the Fund’s prospectus. We thank you for your continued investment in the Fund, and look forward to reporting to you in the years to come.

 

Sincerely,

    Sincerely,
LOGO    LOGO

Richard C. Pell

    Rudolph-Riad Younes, CFA

Senior Vice President

    Senior Vice President

Chief Investment Officer

    Head of International Equities

Julius Baer Investment
Management LLC

    Julius Baer Investment
    Management LLC

Portfolio Manager

    Portfolio Manager

Heritage International Equity Fund

    Heritage International Equity Fund

 

10

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

 

Shares
         Value
             
           
Common Stocks—89.2% (a)
       
Australia—2.7%
       
8,969   

Amcor Ltd.

    $ 45,644
50,206   

AMP Ltd.

      265,622
89,606   

BHP Billiton Ltd.

      1,137,190
12,815   

Brambles Industries Ltd.

      78,978
43,850   

Newcrest Mining Ltd.

      512,728
21,593   

Patrick Corporation, Ltd

      92,526
13,486   

Rio Tinto Ltd.

      440,081
21,218   

Southcorp Ltd.

      70,588
         
            2,643,357
         
Austria—2.8%
       
7,875   

Bank Austria Creditanstalt AG

      729,979
8,753   

Erste Bank der Oesterreichischen Sparkassen AG

      426,317
2,492   

Flughafen Wien AG

      162,140
1,419   

OMV AG

      438,737
10,027   

Raiffeisen International Bank Holding AG*

      518,135
13,018   

Telekom Austria AG

      250,872
4,925   

Wienerberger AG

      209,409
         
            2,735,589
         
Belgium—1.4%
       
2,078   

Almancora Comm.VA

      180,102
2,633   

Belgacom SA

      101,224
9,669   

Fortis

      270,191
10,843   

KBC Groupe SA

      861,237
         
            1,412,754
         
Canada—1.2%
       
33,918   

Bema Gold Corporation*

      69,355
4,955   

Canadian Natural Resources Ltd.

      246,005
789   

Centerra Gold Inc.*

      11,927
19,106   

Eldorado Gold Corporation*

      45,604
4,223   

EnCana Corporation

      270,613
4,718   

Ivanhoe Mines Ltd.*

      32,546
2,437   

Petro-Canada

      135,457
2,124   

Talisman Energy Inc.

      64,167
4,742   

Teck Cominco Ltd., Class “B”

      153,369
8,724   

Telesystem International Wireless Inc.*

      133,913
         
            1,162,956
         
China—0.3%
       
    102,000   

Beijing Capital International Airport, Class “H”

      35,641
21,600   

Shenzhen Chiwan Wharf Holdings Ltd., Class “B”

      52,928
114,999   

Weiqiao Textile Company,
Class “H”

      151,724
Shares
         Value
           
           
Common Stocks (continued)
     
China (continued)
     
     51,789   

Wumart Stores, Inc.

    82,107
         
          322,400
         
Cyprus—0.1%
     
12,230   

Bank of Cyprus Public Company Ltd.*

    48,355
         
Czech—1.3%
     
11,800   

Cesky Telecom AS

    222,050
7,914   

CEZ AS

    135,919
7,366   

Komercni Banka, AS

    937,051
         
          1,295,020
         
Denmark—1.0%
     
1,200   

Bryggerigruppen A/S

    92,804
1,075   

Chr. Hansen Holding A/S, Class “B”

    173,303
12,376   

Danske Bank A/S

    363,964
1,233   

Kobenhavns Lufthavne

    276,623
3,600   

Vestas Wind Systems A/S

    45,702
         
          952,396
         
Finland—0.9%
     
5,230   

Fortum Oyj

    79,523
2,050   

KCI Konecranes Oyj

    80,773
3,703   

Neste Oil Oyj*

    83,034
29,119   

Nokia Oyj

    466,082
3,150   

Stockmann Oyj Abp, “B” Shares

    105,858
5,300   

UPM—Kymmene Corporation

    105,935
         
          921,205
         
France—9.0%
     
1,306   

Accor SA

    60,000
267   

Air Liquide

    47,949
31,688   

Alcatel SA*

    342,413
4,138   

Altran Technologies SA

    33,912
1,590   

Atos Origin SA*

    96,489
2,864   

Autoroutes du Sud de la France

    148,394
3,391   

AXA Societe Anonyme

    85,027
7,629   

BNP Paribas

    505,408
9,579   

Bouygues

    383,215
8,531   

Carrefour SA

    415,951
2,166   

Cie. de Saint-Gobain SA

    122,884
4,772   

France Telecom SA

    140,841
575   

Gecina SA

    65,570
3,374   

Générale de Santé

    70,671
455   

Groupe Steria SCA

    17,313
17,532   

Havas SA

    111,807
2,418   

JC Decaux SA*

    64,161

 

The accompanying notes are an integral part of the financial statements.

 

11

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
             
           
Common Stocks (continued)
       
France (continued)
       
1,343   

Lafarge SA

    $ 122,691
     10,188   

LVMH Moet Hennessy Louis Vuitton SA

      722,932
3,056   

Pernod-Ricard

      464,983
1,296   

Pinault-Printemps-Redoute SA

      128,118
1,770   

Publicis Groupe SA

      50,849
1,339   

Renault SA

      112,669
15,255   

Sanofi-Aventis SA

      1,356,174
681   

Societe des Autoroutes Paris-Rhine-Rhone-SAPRR

      37,533
7,541   

Societe Television Francaise 1

      214,731
8,516   

Suez SA

      233,901
4,827   

Thales SA

      196,698
8,022   

Total SA

      1,790,848
5,583   

Veolia Environnement

      211,728
2,262   

Vinci SA*

      341,290
4,836   

Vivendi Universal SA

      145,256
         
            8,842,406
         
Germany—7.1%
       
1,419   

Adidas-Salomon AG

      221,294
3,698   

Allianz AG

      447,546
4,319   

BASF AG

      284,091
8,701   

Bayerische Hypo—und Vereinsbank AG

      207,824
2,221   

Bilfinger Berger AG

      104,345
19,987   

Commerzbank AG

      440,031
1,351   

Continental AG

      99,977
4,085   

Deutsche Bank AG

      332,744
3,662   

Deutsche Post AG

      86,248
17,670   

Deutsche Telekom AG

      335,218
10,926   

E.ON AG

      929,662
12,396   

Fraport AG Frankfurt Airport Services Worldwide

      501,979
1,284   

Freenet.de AG

      28,869
832   

Fresenius Medical Care AG

      67,123
1,841   

Henkel KGaA

      151,292
3,196   

Hypo Real Estate Holding AG

      133,376
4,173   

IVG Immobilien AG

      72,236
9,559   

KarstadtQuelle AG

      92,616
734   

Linde AG

      48,774
7,166   

MAN AG

      302,797
7,170   

Metro AG

      379,868
3,821   

Muenchener Rueckversicherungs AG

      421,754
2,342   

Premiere AG*

      90,251
407   

Puma AG Rudolf Dassler Sport

      94,168
6,295   

RWE AG

      377,345
10,288   

Siemens AG

      759,094
         
            7,010,522
         
Shares
         Value
           
Common Stocks (continued)
     
Greece—0.2%
     
       7,265   

Hellenic Telecommunications Organization SA

    136,275
1,697   

National Bank of Greece SA

    57,091
         
          193,366
         
Hong Kong—0.2%
     
44,000   

China Merchants Holdings (International) Company Ltd. Limited

    85,931
66,000   

Clear Media Ltd.*

    59,271
97,996   

Texwinca Holdings Ltd.

    81,793
         
          226,995
         
Hungary—1.8%
     
1,502   

Egis Rt.

    118,745
509   

Gedeon Richter Rt.

    62,100
66,769   

Magyar Telekom Rt.

    295,045
1,017   

Mol Magyar Olaj-Es Gazipari Rt.

    83,978
38,905   

OTP Bank Rt.

    1,200,313
         
          1,760,181
         
Indonesia—0.3%
     
483,524   

Bank Mandiri Persero Tbk PT

    81,057
287,000   

Indofood Sukses Makmur Tbk PT

    30,621
309,556   

P.T. Telekomunikasi Indonesia Tbk.

    139,188
44,743   

Semen Gresik Persero Tbk PT

    73,948
         
          324,814
         
Ireland—0.2%
     
10,350   

Celtic Resources Holdings PLC*

    82,047
2,548   

DePfa Bank PLC

    39,409
59,888   

Dragon Oil PLC*

    103,237
         
          224,693
         
Italy—5.7%
     
8,342   

Assicurazioni Generali SPA

    257,443
1,846   

Autostrada Torino-Milano SPA

    37,873
3,423   

Banca Antonveneta SPA

    114,919
101,766   

Banca Intesa SPA (convertible)

    487,847
91,470   

Banca Intesa SPA

    397,115
68,630   

Banca Monte dei Paschi di Siena SPA

    241,643
51,384   

Banca Nazionale del Lavoro SPA*

    162,488
1,024   

Banca Popolare dellEmilia Romagna SCARL

    54,202
31,412   

Banca Popolare di Milano

    299,165
3,612   

Banca Popolare di Sondrio

    55,585
14,028   

Banche Popolari Unite SCARL

    297,967

 

The accompanying notes are an integral part of the financial statements.

 

12

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
           
Common Stocks (continued)
       
Italy (continued)
       
76,276   

Beni Stabili SPA

    $ 77,974
5,868   

Buzzi Unicem SPA

      85,179
89,929   

Capitalia SPA

      483,425
    114,836   

Cassa di Risparmio di Firenze SPA

      295,389
27,689   

Credito Emiliano SPA

      318,617
31,501   

Enel SPA

      299,987
14,267   

ENI SPA

      360,158
10,763   

Mediaset SPA

      140,316
15,314   

Mediobanca SPA

      252,757
9,462   

Saipem SPA

      118,996
24,834   

Sanpaolo IMI SPA

      369,169
3,235   

Societa Iniziative Autostradali e Servizi SPA

      45,231
23,507   

Telecom Italia SPA

      80,010
49,230   

UniCredito Italiano SPA

      276,688
         
            5,610,143
         
Japan—13.3%
       
610   

Acom Company Ltd.

      39,288
2,868   

Aeon Credit Service Company Ltd.

      189,830
525   

Aiful Corporation

      38,885
3,200   

Aisin Seiki Company Ltd

      69,392
8,000   

Asahi Glass Company, Ltd

      88,800
4,017   

Astellas Pharma Inc.

      145,738
6,000   

Bridgestone Corporation

      115,294
11,873   

Canon Inc.

      618,765
5,800   

Casio Computer Company Ltd.

      79,317
11,217   

Credit Saison Company, Ltd.

      383,089
6,000   

Dai Nippon Printing Co., Ltd.

      96,358
4,000   

Daihatsu Motor Company Ltd.

      31,963
11,012   

Denso Corporation

      261,122
34   

East Japan Railway Company

      177,264
2,000   

Exedy Corp.

      33,544
6,266   

Fuji Photo Film Company, Ltd.

      207,107
61   

Fuji Television Network Inc.

      128,922
5,300   

Hitachi Capital Corporation

      100,642
14,751   

Hitachi Ltd.

      86,730
13,109   

Honda Motor Company, Ltd.

      632,116
2,400   

Ibiden Company Ltd.

      51,237
1,500   

Ito En, Ltd.

      73,669
2,697   

Ito-Yokado Company, Ltd

      93,079
63   

Japan Tobacco Inc.

      812,925
15,546   

Kao Corporation

      360,360
18,474   

Koito Manufacturing Company, Ltd.

      181,594
900   

Kyocera Corporation

      65,743
54,846   

Matsushita Electric Industrial Company Ltd.

      803,829
90   

Mitsubishi Tokyo Financial Group
Inc.

      779,408
Shares
         Value
           
Common Stocks (continued)
     
Japan (continued)
     
104   

Mizuho Financial Group Inc.

    489,212
1,100   

Nidec Corporation

    129,391
15,844   

Nikko Cordial Corporation

    74,049
18   

Nippon Telegraph and Telephone Corporation

    75,554
25,261   

Nissan Motor Company Ltd.

    249,075
2,700   

Nissin Food Products Co., Ltd.

    71,766
4,200   

Nitto Denko Corporation

    229,489
     26,521   

Nomura Holdings Inc.

    338,064
112   

NTT DoCoMo, Inc.

    173,766
300   

ORIX Corporation

    40,806
4,000   

Ricoh Company, Ltd.

    63,772
12,416   

Sanyo Electric Company Ltd.

    36,045
2,000   

Secom Co., Ltd.

    79,856
6,217   

Sharp Corporation

    97,019
5,700   

Shin-Etsu Chemical Co., Ltd.

    210,556
26,813   

Shiseido Company, Ltd.

    342,070
644   

SMC Corporation

    67,782
9,486   

Sony Corporation

    350,903
11,000   

Sumitomo Heavy Industries Ltd.

    44,538
63   

Sumitomo Mitsui Financial Group

    407,434
4,300   

Takeda Pharmaceutical Company Ltd.

    209,669
1,920   

Takefuji Corporation

    121,860
1,200   

TDK Corporation

    83,751
2,900   

Terumo Corporation

    86,172
7,000   

The Bank of Fukuoka, Ltd.

    42,511
22,000   

The Bank of Yokohama Ltd*

    126,050
6,000   

The Chiba Bank, Ltd.

    36,976
9,000   

The Joyo Bank, Ltd.

    45,221
44,022   

The Seiyu Ltd.*

    72,691
20,065   

The Sumitomo Trust & Banking Company, Ltd.

    125,385
19,400   

Tokyo Broadcasting System Inc.

    369,455
7,000   

Toppan Printing Company Ltd.

    76,459
31,232   

Toyota Motor Corporation

    1,135,489
3,258   

Uni-Charm Corporation

    145,899
6,100   

Yamaha Motor Co., Ltd.

    106,747
         
          13,101,492
         
Luxembourg—0.2%
     
3,856   

Millicom International Cellular SA*

    68,675
2,232   

SBS Broadcasting SA*

    102,895
         
          171,570
         
Mexico—0.7%
     
1,700   

America Movil SA de CV, Series “L”, Sponsored ADR

    84,405
8,430   

Consorcio ARA SA de CV

    25,935

 

The accompanying notes are an integral part of the financial statements.

 

13

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
           
Common Stocks (continued)
       
Mexico (continued)
       
23,496   

Fomento Economico Mexicano SA de CV

    $ 119,769
2,300   

Grupo Aeroportuario Del Surest, SA de CV, Sponsored ADR

      67,988
54,040   

Grupo Financiero Banorte SA de CV

      348,110
17,535   

Grupo Financiero Inbursa SA

      36,228
9,434   

Urbi, Desarrollos Urbanos, SA de CV*

      45,961
         
            728,396
         
Netherlands—1.9%
       
13,631   

ABN AMRO Holding NV

      331,815
19,896   

Aegon NV

      250,406
700   

Efes Breweries International NV, 144A, Sponsored GDR*

      22,050
7,052   

Heineken NV

      224,830
1,802   

Koninklijke Numico NV

      74,844
6,929   

Koninklijke Philips Electronics NV

      172,555
3,992   

Royal Dutch Petroleum Company

      233,875
2,207   

TNT NV

      60,151
7,750   

Unilever NV

      500,732
         
            1,871,258
         
New Zealand—0.1%
       
93,060   

Auckland International Airport, Ltd.

      136,035
         
Norway—2.0%
       
25,000   

Acta Holding ASA

      45,226
5,869   

DNB Holding ASA

      56,235
8,626   

Norsk Hydro ASA

      690,386
3,900   

Orkla ASA

      131,292
3,924   

Smedvig ASA, “A” Shares

      69,024
46,645   

Statoil ASA

      822,918
7,331   

Telenor ASA

      61,502
1,400   

TGS-NOPEC Geophysical Company ASA*

      38,036
16,400   

Tomra Systems ASA

      60,482
         
            1,975,101
         
Philippines—0.2%
       
    282,000   

Ayala Corporation

      35,958
37,400   

Bank of the Philippine Islands

      33,272
1,910   

Globe Telecom Inc.

      28,600
3,100   

Philippine Long Distance Telephone, Sponsored ADR

      79,887
         
            177,717
         
Shares
         Value
           
Common Stocks (continued)
     
Poland—3.9%
     
6,718   

Agora SA

    121,741
1,555   

Bank BPH

    222,504
50,987   

Bank Millenium SA

    44,546
22,102   

Bank Pekao SA

    872,980
11,770   

Bank Zachodni WBK SA

    326,755
8,720   

Budimex SA*

    125,088
8,398   

CCC SA*

    35,246
3,570   

Cersanit Krasnystaw SA*

    111,160
2,836   

Grupa Kety SA

    90,724
3,447   

Inter Cars SA

    35,046
1,360   

Inter Groclin Auto SA

    39,220
5,063   

Orbis SA

    36,545
2,798   

Polska Grupa Farmaceutyczna SA

    43,606
48,600   

Polski Koncern Miesny DUDA SA

    158,628
5,254   

Polski Koncern Naftowy ORLEN S.A.

    72,846
155,563   

Powszechna Kasa Oszczednosci Bank Polski SA

    1,189,010
899   

STOMIL SANOK SA

    30,690
57,651   

Telekomunikacja Polska SA

    320,497
         
          3,876,832
         
Portugal—0.4%
     
70,895   

Banco Comercial Portugues SA

    191,483
38,531   

Electricidade de Portugal SA

    104,738
4,412   

Jeronimo Martins

    67,826
3,133   

Portugal Telecom SGPS SA

    34,629
         
          398,676
         
Romania—1.0%
     
442,750   

Impact

    97,460
635,500   

Rolast Pitesti*

    24,745
157,037   

Romanian Bank for Development SA

    247,493
    4,681,803   

SNP Petrom SA

    526,831
372,000   

Socep Constanta

    34,481
         
          931,010
         
Russia—2.2%
     
10,000   

JSC MMC Norilsk Nickel, Sponsored ADR

    555,000
6,601   

LUKOIL, Sponsored ADR

    894,436
1,825   

Moscow City Telephone, Sponsored ADR

    26,098
1,169   

North-West Telecom, Sponsored ADR

    35,655
7,595   

OAO Gazprom, Sponsored ADR

    256,331
1,843   

Sibirtelecom, Sponsored ADR

    80,650

 

The accompanying notes are an integral part of the financial statements.

 

14

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
           
Common Stocks (continued)
       
Russia (continued)
       
     15,066   

Uralsvyazinform, Sponsored ADR

    $ 108,475
19,240   

VolgaTelecom, Sponsored ADR

      128,138
6,143   

Wimm-Bill-Dann Foods, Sponsored ADR*

      106,458
         
            2,191,241
         
South Africa—0.3%
       
27,409   

Nedbank Group Ltd.

      339,032
         
South Korea—0.7%
       
1,575   

Samsung Electronics Company, Ltd

      720,341
         
Spain—1.4%
       
2,957   

Actividades de Construcciones y Servicios SA

      72,384
8,032   

Altadis, SA

      341,670
11,731   

Cintra Concesiones de Infraestructuras de Transporte, SA

      126,483
6,591   

Fadesa Inmobiliaria SA

      149,925
1,408   

Gas Natural SDG, SA

      40,265
4,482   

Grupo Empresarial ENCE SA

      125,457
4,245   

Grupo Ferrovial SA

      242,666
5,341   

Inditex SA

      159,113
7,168   

Promotora de Informaciones, SA

      137,244
         
            1,395,207
         
Sweden—4.4%
       
2,953   

Autoliv Inc., Sponsored SDR

      131,390
6,600   

Capio AB

      102,497
4,744   

ELEKTA AB, Class “B”*

      166,981
16,900   

ForeningsSparbanken AB

      398,631
23,634   

Getinge AB

      340,703
1,000   

Lindex AB

      43,778
6,150   

Modern Times Group AB, Class “ B”*

      190,779
2,144   

Nobia AB

      34,468
91,500   

Nordea Bank AB

      873,233
38,186   

Skandia Forsakrings AB

      181,559
37,800   

Skandinaviska Enskilda Banken AB

      670,291
57,062   

Skanska AB, “B” Shares

      688,830
2,100   

Svenska Cellulosa AB, Class “B”

      73,505
14,797   

Svenska Handelsbanken, “A” Shares

      334,562
19,146   

Telefonaktiebolaget LM Ericsson, “B” Shares

      56,878
7,000   

TeliaSonera AB

      37,017
         
            4,325,102
         
Shares
         Value
           
Common Stocks (continued)
     
Switzerland—5.7%
     
59   

BKW FMB Energie AG

    34,356
11,329   

Credit Suisse Group

    478,802
10,415   

Holcim Ltd.

    635,270
4,411   

Nestle SA

    1,165,810
18,068   

Novartis AG

    883,228
14,766   

Roche Holding AG

    1,794,219
55   

SGS SA

    37,399
3,495   

The Swatch Group AG, Class “ B”

    451,020
1,152   

UBS AG

    92,516
132   

Unique Zurich Airport*

    19,465
         
          5,592,085
         
Turkey—3.1%
     
    120,306   

Akbank TAS

    580,797
11,362   

Aygaz AS

    21,933
17,941   

Cimsa Cimento Sanayi VE Tica

    56,359
188,969   

Dogan Sirketler Grubu Holdings AS

    401,577
8,478   

Dogus Otomotiv Servis ve Ticaret

    20,445
158,896   

Haci Omer Sabanci Holding AS

    463,521
17,455   

Hurriyet Gazetecilik ve Matbaacilik, AS

    31,235
5,920   

Is Finansal Kiralama AS*

    18,119
90,636   

KOC Holding AS

    336,886
7,265   

Migros Turk TAS

    50,371
5,926   

Turkcell Iletisim Hizmet AS

    36,655
148,598   

Turkiye Garanti Bankasi AS*

    531,248
85,203   

Turkiye Is Bankasi AS, Class “C”

    433,228
11,849   

Yapi ve Kredi Bankasi AS*

    43,274
         
          3,025,648
         
U.S.A.—0.2%
     
11,256   

News Corporation, Class “B”

    179,196
         
Ukraine—0.1%
     
3,570   

Centrenergo, Sponsored ADR*

    28,988
58   

Ukrnafta, Sponsored ADR

    10,415
9,912   

Ukrtelecom, Sponsored GDR

    68,506
         
          107,909
         
United Kingdom—11.1%
     
10,051   

Allied Domecq PLC

    132,124
4,409   

Anglo American PLC

    98,319
20,566   

Associated British Ports Holdings PLC

    181,693
11,005   

BAA PLC

    122,367
28,501   

Barclays PLC

    294,673
40,170   

BG Group PLC

    312,304
164,808   

BP PLC

    1,683,770

 

The accompanying notes are an integral part of the financial statements.

 

15

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
           
Common Stocks (continued)
       
United Kingdom (continued)
       
3,386   

British Land Company PLC

    $ 53,127
12,783   

British Sky Broadcasting PLC

      132,962
10,093   

Burberry Group PLC

      69,750
20,661   

Cadbury Schweppes PLC

      208,270
28,890   

Compass Group PLC

      129,706
46,503   

Diageo PLC

      690,801
6,007   

Exel PLC

      94,929
1,797   

Forth Ports PLC

      43,866
37,973   

GlaxoSmithKline PLC

      961,458
19,098   

Highland Gold Mining Ltd

      68,097
16,429   

Hilton Group PLC

      86,280
15,514   

Imperial Tobacco Group PLC

      445,590
7,242   

National Grid Transco PLC

      71,382
7,734   

Pearson PLC

      94,311
12,941   

Peter Hambro Mining PLC*

      142,277
29,939   

Prudential PLC

      270,494
8,708   

Rank Group PLC

      43,421
13,502   

Reckitt Benckiser PLC

      439,602
9,753   

Reed Elsevier PLC

      95,810
6,504   

Royal Bank of Scotland Group PLC

      196,833
6,224   

Scottish & Southern Energy PLC

      112,094
66,287   

Shell Transport & Trading Company, PLC

      596,865
20,188   

Smith & Nephew PLC

      208,562
96,049   

Tesco PLC

      568,500
50,204   

The Peninsular and Oriental Steam Navigation Company

      258,570
    686,359   

Vodafone Group PLC

      1,798,435
5,913   

William Hill PLC

      61,259
12,922   

WPP Group PLC

      140,803
         
            10,909,304
         
Venezuela—0.1%
       
5,534   

Cia Anonima Nacional Telefonos de Venezuela (CANTV), Sponsored ADR

      105,921
         
Total Common Stocks (cost $80,551,038)      87,946,225
         
Preferred Stocks—0.6% (a)
       
Germany—0.5%
       
1,024   

Henkel KGaA

      88,618
21,766   

ProsiebenSat.1 Media AG

      375,414
591   

Rhoen-Klinikum AG

      39,380
         
            503,412
         
Poland—0.1%
       
6,301   

Sniezka SA

      52,091
         
Total Preferred Stocks (cost $557,309)      555,503
         
Shares
         Value
           
Warrants—1.7% (a)
     
India—0.3%
     
48,819   

Calyon Financial Products Ltd., /Bharti Televentures, 12/17/09

    232,031
7,756   

Merrill Lynch Intl & Co., / Bharti Televentures, 04/03/06, 144A

    36,863
         
          268,894
         
Russia—1.4%
     
2,046   

UBS AG,/Sberbank RF, 01/26/06, 144A,

    1,336,038
         
Total Warrants (cost $1,411,519)    1,604,932
         
Investment Companies—0.5% (a)
     
Australia—0.4%
     
92,828   

Macquarie Airports

    244,216
46,996   

Macquarie Infrastructure Assets Trust, “B” shares

    134,300
         
          378,516
         
Romania—0.1%
     
71,000   

SIF 1 Banat Crisana Arad

    29,868
77,000   

SIF 2 Moldova Bacau

    28,704
29,000   

SIF 3 Transilvania Brasov

    13,432
53,500   

SIF 4 Muntenia Bucuresti*

    15,256
41,000   

SIF 5 Oltenia Craiova

    18,238
         
          105,498
         
Total Investment Companies (cost $465,339)    484,014
         
Government Issued Securities—0.2% (a) (b)
     
Bulgaria—0.0%
     
20,144   

Republic of Bulgaria/Bulgaria Compensation Notes

    9,113
13,665   

Republic of Bulgaria/Bulgaria Housing Notes

    6,120
20,024   

Republic of Bulgaria/Bulgaria Registered Compensation Vouchers

    9,047
         
          24,280
         
Principal
Amount
         Value
Venezuela—0.2%
     
    $153,000   

Republic of Venezuela, 9.0%, 9/15/24

    150,782
         
Total Government Issued Securities
(cost $181,732)		    175,062
         

 

The accompanying notes are an integral part of the financial statements.

 

16

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

          Value
Total Investment Portfolio excluding repurchase
agreement (cost $83,166,937)		    $ 90,765,736
         
Repurchase Agreement—1.4% (a)
       
Repurchase Agreement with State Street Bank and
Trust Company, dated April 29, 2005 @ 2.72% to
be repurchased at $1,370,311 on May 2, 2005,
collateralized by $1,320,000 United States
Treasury Notes, 7.0% due July 15, 2006, (market
value $1,400,893 including interest)
(cost $1,370,000)		      1,370,000
         
Total Investment Portfolio
(cost $84,536,937) (c), 93.6% (a)		      92,135,736
Other Assets and Liabilities, net, 6.4% (a)      6,296,221
         
Net Assets, 100.0%    $ 98,431,957
         
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) U.S. dollar denominated.
(c) The aggregate identified cost for federal income tax purposes is the same. Market value includes net unrealized appreciation of $7,598,799 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $9,986,194 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $2,387,395.

 

ADR—American Depository Receipt.
GDR—Global Depository Receipt.
SDR—Swedish Depository Receipt.

 

Open Forward Foreign Currency Contracts

Contract

To Deliver

   

In
Exchange For

  

Delivery
Date

   Unrealized
Appreciation
(Depreciation)
  
USD   73,044    GBP   38,293   05/04/05   $ 160  
TRY   778,768    USD   549,900   06/24/05     141  
CZK   6,510,167    USD   282,400   06/27/05     6,253  
PLN   1,753,600    USD   548,000   06/27/05     20,300  
TRY   655,246    USD   466,500   06/27/05     4,433  
HUF   52,716,164    USD   273,900   06/29/05     6,142  
USD   677,438    TRY   942,195   06/30/05     (13,729 )
TRY   1,411,006    USD   981,500   06/30/05     (12,454 )
HUF   50,722,740    USD   261,000   07/08/05     3,618  
PLN   799,651    USD   248,000   07/08/05     7,517  
HUF   128,551,694    USD   663,700   07/21/05     12,284  
PLN   6,965,277    USD   2,146,300   07/21/05     53,114  
CZK   12,175,000    USD   542,558   08/31/05     24,643  
TRY   472,152    USD   326,000   10/07/05     4,526  
CZK   1,249,225    USD   54,000   10/11/05     751  
TRY   2,001,917    USD   1,371,700   10/20/05     14,706  
USD   389,477    CZK   9,027,681   10/21/05     (4,478 )
CZK   18,255,072    USD   792,100   10/21/05     13,585  
                    
Net Unrealized Appreciation       $ 141,512  
                    

CZK—Czech Koruna

GBP—Great Britain Pound

HUF—Hungarian Forint

PLN—Polish Zloty

TRY—New Turkish Lira

USD—United States Dollar

Beginning with the International Equity Fund’s fiscal quarter ended July 31, 2004, the Trust began filing its complete schedule of portfolio holdings with the Securities Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q; the Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov; and the Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

The accompanying notes are an integral part of the financial statements.

 

17

 

Table of Contents

Heritage Series Trust—International Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Industry Diversification

    Value
    % of Net
Assets

Advertising

    $ 426,890    0.4%

Aerospace/Defense

      196,698    0.2%

Agriculture

      1,600,185    1.6%

Apparel

      420,458    0.4%

Auto Manufacturers

      2,161,311    2.2%

Auto Parts & Equipment

      962,222    1.0%

Banks

      23,178,151    23.5%

Beverages

      1,891,618    1.9%

Building Materials

      1,505,700    1.5%

Chemicals

      848,921    0.9%

Commercial Services

      859,403    0.9%

Computers

      197,553    0.2%

Cosmetics/Personal Care

      848,329    0.9%

Distribution/Wholesale

      56,978    0.1%

Diversified Manufacturer

      759,094    0.8%

Electric

      2,173,994    2.2%

Electrical Components & Equipment

      1,065,153    1.1%

Electronics

      369,392    0.4%

Engineering & Construction

      3,460,204    3.5%

Entertainment

      147,540    0.1%

Environmental Control

      60,482    0.1%

Financial Services

      4,346,388    4.4%

Food

      4,104,241    4.2%

Food Service

      129,706    0.1%

Forest Products & Paper

      304,897    0.3%

Gas

      40,265    0.0%

Government Obligations & Agencies

      175,062    0.2%

Hand/Machine Tools

      277,946    0.3%

Healthcare Products

      802,418    0.8%

Healthcare Services

      279,671    0.3%

Home Builders

      45,961    0.0%

Home Furnishings

      1,189,200    1.2%

Household Products

      679,512    0.7%

Insurance

      2,179,851    2.2%

Internet

      28,869    0.0%

Investment Companies

      484,014    0.5%

Leisure Time

      106,747    0.1%

Lodging

      96,544    0.1%

Machinery

      347,335    0.4%

Mining

      3,439,265    3.5%

Miscellaneous Manufacturer

      207,107    0.2%

Multimedia

      925,462    0.9%

Office/Business Equipment

      682,536    0.7%

Oil & Gas

      9,677,210    9.8%

Oil & Gas Services

      226,056    0.2%

Packaging & Containers

      45,644    0.0%

Pharmaceuticals

      5,574,937    5.7%

Printing & Publishing

      248,784    0.3%

Real Estate

      379,196    0.4%

REITS

      65,570    0.1%

Retail

      1,248,824    1.3%

Telecommunications

      6,321,969    6.4%

Television, Cable & Radio

      1,376,271    1.4%

Textiles

      233,517    0.2%

Transportation

      858,855    0.9%

Water

      445,630    0.5%
    
  

Total Investments

    $ 90,765,736    92.2%
    
  

 

The accompanying notes are an integral part of the financial statements.

 

18

 

Table of Contents

May 23, 2005

 

Dear Valued Shareholders:

 

For the six-month period ended April 30, 2005, the Heritage Series Trust–Mid Cap Stock Fund (the “Fund”)(a) Class A shares returned(b) +2.28%, trailing the S&P Midcap 400 Index (the “S&P 400 Index” or “Index”)(c), the Fund’s benchmark index, which was up +5.74% during the same reporting period. Please note that performance numbers quoted above for Class A shares are shown without the imposition of a front-end or contingent deferred sales charge. If reflected, the imposition of a front-end or contingent deferred sales charge would reduce the performance. In addition, the performance data quoted represents past performance and 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 the original cost. Also, please remember past performance does not guarantee future results and current performance may be higher or lower than the performance data quoted. To obtain more current performance, please visit our website at www.HeritageFunds.com.

 

When we have mediocre performance such as we have had in the past six months, we often ask ourselves whether it is due to systematic factors or errors that we have made. For the past six-month period, this question is difficult for us to answer. There has been a marked preference for larger mid-cap stocks, with mid-cap indices outperforming smaller cap indices by as much as 7% for the six-month period ended April 30, 2005. Fortunately, our recent increase in market capitalization in the Fund puts us in the same general size range as the major mid-cap indices. So size does not appear to explain any big performance shortfall. The market has shown a preference for value stocks with commodities, utilities and REITS being relative winners, and the relevant value indices outperforming the growth indices by 4% to 5% for the six-month period ended April 30, 2005. Since we are not generally active in these above mentioned industries and our valuation work indicates that many of these sectors are overvalued, the small hit to performance we experienced from being absent in these areas and having a slight growth tilt does not bother us. We think that the current market environment is difficult for active managers in that, except for a few defensive areas (REITS, utilities), valuation disparities between sectors are few and far between. Yes, we have made mistakes and some are outlined below, but we continue to believe that the most exploitable anomalies are hard to find. The largest exploitable anomaly lines up with our current style: stable, free high cash flow growth stocks. In a rush to garner operating leverage that comes with an economic recovery, investors have, to some extent, ignored the cash flow generation of these companies.

 

Top contributing sectors for the period included health care, telecommunication services and industrials. The health care sector was a significant source of positive contribution to returns for both the Fund and the Index. We benefited from being slightly overweight to the Index and having strong stock selection in health care equipment and supplies. Our top performing stocks in the industry included Edwards Lifesciences, ResMed and Beckman Coulter. In telecommunication services, we benefited from strong stock selection in the wireless space, including Western Wireless, Nextel Partners and NII Holdings. The Fund also benefited from strong stock selection within the industrials sector, particularly Republic Services, Ametek and HNI Corp.

 

(a) The views expressed here are not meant as investment advice. Although some of the described portfolio holdings were viewed favorably as of the date of this letter, there is no guarantee the Fund will continue to hold these securities in the future. Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. Contact Heritage at (800) 421-4184 or your financial advisor for a prospectus, which contains this and other important information about the Fund. Read the prospectus carefully before you invest.

(b) All returns include the effect of reinvesting dividends and the deduction of Fund expenses.

(c) Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Please refer to the inside back cover for index descriptions.

 

19

 

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From a sector standpoint, meaningful detractors during the period were energy and consumer discretionary. Due to the continued strength in oil prices throughout the reporting period, energy was one of the top contributing sectors in the S&P 400 Index, and our slight underweight to the Index hurt relative performance. Additionally, as we own higher quality names less leveraged to energy prices, the returns of each of our holdings lagged the average energy stock in the benchmark. Nevertheless, the sector did provide positive absolute performance and we were pleased by the returns of several of our energy holdings, particularly Newfield Exploration, XTO and Unit. In the consumer discretionary sector, our overweight and underperformance of the hotels and leisure group caused some of our lag, with disappointing returns from International Game Technology and Royal Caribbean. In addition, the Fund was underweight and underperformed in household durables. Our lone holding in the space, Mohawk Industries, had negative returns during the period. Our relative performance also suffered from a lack of exposure to the utilities sector. Utilities constituted approximately 6.9% of the S&P 400 Index, with returns that outpaced the Index.

 

The Fund’s worst performing stocks during the reporting period included Tektronix, Intuit and Ambac Financial. Tektronix makes and services test, measurement and monitoring solutions. Higher research and development expenses have temporarily constrained near-term operating margins. While the demand climate has slowed, we believe the company’s core businesses are in good shape and its growth rate should be sustained by its communications test segment. Intuit Inc. provides small-business tax preparation and personal finance software products and services. Early in the tax season, the company released disappointing shipment data. We became concerned as historical growth drivers have begun to slow as top products, like Quicken, have matured. We sold the stock. Ambac Financial Group provides financial guarantee products and other financial services to clients in both the public and private sectors. Company management significantly lowered its revenue growth forecast due to declining international transactions and increasing competition. We believe Ambac’s ability to boost margins through high-value transactions will allow the company to maintain its industry leading return on equity.

 

Top contributing stocks for the six-months ended April 30, 2005 included Edwards Lifesciences, Western Wireless and Advance Auto Parts. Edwards Lifesciences is a global provider of products and technologies that are designed to treat advanced cardiovascular disease. Edwards’ increased focus on efficiency and higher-margin products has driven gross margin improvement. The company has strong operating cash flow, and it is improving its balance sheet. Western Wireless Corp. provides rural wireless communications services in the U.S. We believe rural markets provide growth opportunities greater than those that exist in more densely populated urban areas because these markets typically have lower current penetration rates and less competition. We purchased the stock with the thesis that it is a likely takeover candidate due to its attractive growth prospects. In January, our thesis proved correct when Alltel announced it would be acquiring Western Wireless. Following the news and the accompanying rise in the company’s stock price, we sold our position. Advance Auto Parts primarily operates in the U.S. automotive aftermarket industry. The company has improved same-store sales and steadily increased revenues from its commercial business.

 

As a closing thought, we would like to highlight the various opportunities we see across the market cap spectrum. We continue to find somewhat better values in the larger stocks in our universe. As a consequence, the Fund’s weighted-average market cap is slightly higher than that of the S&P 400 Index. While we continue to search for the best mid-cap opportunities regardless of size, a move into slightly larger mid-cap stocks may prove beneficial to shareholders in the current environment.

 

20

 

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We would like to continue to remind you that investments in mid-cap companies generally involve greater risks than large-capitalization companies, due to their more limited managerial and financial resources. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of the Fund’s portfolio. Generally, the smaller the company size, the greater these risks. In addition, the Fund invests in growth companies that entail greater risks. The prices of growth company securities may rise and fall dramatically, based in part on investors’ perceptions of the company rather than on fundamental analysis of the stocks. These and other risks are more fully described in the Fund’s prospectus. We strongly recommend that you review the Fund’s prospectus and become aware of the risks involved with your investment. We thank you for your continued investment in the Fund and will continue to do our best for our valued shareholders.

 

Sincerely,

LOGO

Todd L. McCallister

Managing Director

Eagle Asset Management, Inc.

Portfolio Manager

Heritage Mid Cap Stock Fund

 

21

 

Table of Contents

Heritage Series Trust—Mid Cap Stock Fund

Investment Portfolio

April 30, 2005

(unaudited)

 

Shares
         Value
             
Common Stocks—99.3% (a)
Advertising—1.0%
109,800   

Getty Images, Inc.*

    $ 7,856,190
         
Analog Semiconductors—1.4%
319,500   

Linear Technology Corporation

      11,418,930
         
Biotechnology—1.8%
214,100   

Charles River Laboratories International, Inc.*

      10,141,917
58,400   

Invitrogen Corporation*

      4,278,968
         
            14,420,885
         
Building Materials—1.9%
345,220   

Rinker Group Ltd., Sponsored ADR

      15,500,378
         
Chemicals—2.5%
    119,500   

Ashland Inc.

      8,035,180
257,600   

Praxair, Inc.

      12,063,408
         
            20,098,588
         
Commercial Services—5.4%
62,100   

Corporate Executive Board Company

      4,081,833
359,300   

Education Management Corporation*

      10,060,400
260,700   

Equifax, Inc.

      8,772,555
390,600   

Interactive Data Corporation*

      7,831,530
319,400   

Manpower Inc.

      12,312,870
         
            43,059,188
         
Computers—2.5%
254,900   

DST Systems, Inc.*

      11,572,460
212,400   

Kronos Inc.*

      8,294,220
         
            19,866,680
         
Cosmetics/Personal Care—2.6%
219,300   

Alberto-Culver Company

      9,758,850
284,700   

The Estee Lauder Companies Inc., Class “A”

      10,935,327
         
            20,694,177
         
Distribution/Wholesale—1.0%
146,400   

CDW Corporation

      8,006,616
         
Diversified Manufacturer—3.0%
314,600   

Danaher Corporation

      15,928,198
108,100   

ESCO Technologies Inc.*

      7,925,892
         
            23,854,090
         
Shares
         Value
           
Common Stocks (continued)
Electrical Components & Equipment—2.2%
464,600   

AMETEK, Inc.

    17,594,402
         
Electronics—3.8%
508,000   

Amphenol Corporation,
Class “A”

    20,035,520
360,300   

Tektronix, Inc.

    7,804,098
290,200   

Vishay Intertechnology, Inc.*

    3,102,238
         
          30,941,856
         
Engineering & Construction—1.4%
487,000   

Chicago Bridge & Iron Company N.V.

    10,899,060
         
Entertainment—3.3%
325,215   

DreamWorks Animation SKG, Inc.*

    12,195,562
593,000   

GTECH Holdings Corporation

    14,510,710
         
          26,706,272
         
Environmental Control—2.2%
    518,900   

Republic Services, Inc.

    17,953,940
         
Financial Services—3.9%
181,900   

Affiliated Managers Group, Inc.*

    11,374,207
54,010   

BlackRock, Inc.

    4,048,590
57,900   

Chicago Mercantile Exchange Holdings Inc.

    11,320,608
179,400   

Eaton Vance Corporation

    4,203,342
         
          30,946,747
         
Forest Products & Paper—1.4%
366,600   

Neenah Paper, Inc.

    11,030,994
         
Healthcare Products—9.1%
121,900   

Beckman Coulter, Inc.

    8,131,949
191,100   

C.R. Bard, Inc.

    13,600,587
140,300   

Dade Behring Holdings, Inc.

    8,652,301
191,300   

Edwards Lifesciences Corporation*

    8,424,852
98,400   

Kinetic Concepts, Inc.*

    6,046,680
178,700   

ResMed Inc.*

    11,097,270
141,400   

Respironics, Inc.*

    8,935,066
239,100   

Varian Medical Systems, Inc.*

    8,067,234
         
          72,955,939
         
Healthcare Services—2.3%
118,500   

Coventry Health Care, Inc.*

    8,108,955
249,300   

Lincare Holdings Inc.*

    10,640,124
         
          18,749,079
         

 

The accompanying notes are an integral part of the financial statements.

 

22

 

Table of Contents

Heritage Series Trust—Mid Cap Stock Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
             
Common Stocks (continued)
Household Products—1.0%
116,345   

The Scotts Miracle-Gro Company, Class “A”*

    $ 8,423,378
         
Insurance—7.5%
207,300   

AMBAC Financial Group, Inc.

      13,858,005
219,800   

Brown & Brown, Inc.

      9,616,250
32,200   

Markel Corporation*

      11,047,820
    411,600   

Primus Guaranty, Ltd.*

      4,692,240
240,300   

Protective Life Corporation

      9,189,072
175,500   

RenaissanceRe Holdings Ltd.

      7,857,135
47,700   

Stancorp Financial Group, Inc.

      3,650,004
         
            59,910,526
         
Leisure Time—1.4%
274,500   

Royal Caribbean Cruises Ltd.

      11,534,490
         
Lodging—1.7%
247,400   

Gaylord Entertainment Company*

      9,896,000
64,800   

Kerzner International Ltd.*

      3,569,832
         
            13,465,832
         
Logic Semiconductors—1.6%
446,900   

Microchip Technology Inc.

      12,727,712
         
Machinery—2.4%
219,100   

IDEX Corporation

      8,161,475
231,900   

Zebra Technologies Corporation, Class “A”*

      11,075,544
         
            19,237,019
         
Memory & Commodity Semiconductors—0.5%
93,200   

International Rectifier Corporation*

      3,964,728
         
Office Furnishings—1.1%
173,200   

HNI Corporation

      8,774,312
         
Oil & Gas—2.4%
142,300   

Newfield Exploration Company*

      10,107,569
142,900   

Noble Energy, Inc.

      9,162,748
         
            19,270,317
         
Oil & Gas Services—1.9%
492,900   

FMC Technologies, Inc.*

      14,949,657
         
Pharmaceuticals—1.3%
317,000   

Hospira, Inc.*

      10,635,350
         
Shares
         Value
           
Common Stocks (continued)
Pipelines—0.5%
116,600   

Western Gas Resources, Inc.

    3,895,606
         
Printing & Publishing—1.3%
459,800   

Dex Media, Inc.

    10,069,620
         
Retail—3.6%
185,300   

Advance Auto Parts, Inc.*

    9,885,755
203,000   

Regis Corporation

    7,253,190
387,100   

Tiffany & Co.

    11,671,065
         
          28,810,010
         
Savings & Loans—1.5%
930,200   

NewAlliance Bancshares, Inc.

    12,185,620
         
Software—2.7%
567,067   

Activision, Inc.*

    8,199,784
61,000   

Global Payments Inc.

    3,950,360
293,500   

SEI Investments Company

    9,629,735
         
          21,779,879
         
Telecommunications—8.4%
    1,078,400   

Alamosa Holdings, Inc.*

    14,008,416
398,200   

Amdocs Ltd.*

    10,635,922
182,000   

NII Holdings, Inc.*

    9,112,740
166,400   

Plantronics, Inc.

    5,239,936
466,370   

Scientific-Atlanta, Inc.

    14,261,595
467,000   

TELUS Corporation

    13,930,610
         
          67,189,219
         
Television, Cable & Radio—3.0%
302,800   

Cablevision Systems Corporation, Class “A”*

    7,857,660
271,200   

EchoStar Communications Corporation, Class “A”

    7,851,240
281,900   

Rogers Communications Inc., Class “B”

    8,107,444
         
          23,816,344
         
Textiles—1.1%
118,700   

Mohawk Industries, Inc.*

    9,236,047
         
Transportation—1.7%
205,200   

Expeditors International of Washington, Inc.

    10,077,372
121,400   

Norfolk Southern Corporation

    3,811,960
         
          13,889,332
         
Total Common Stocks (cost $743,766,220)    796,319,009
         

 

The accompanying notes are an integral part of the financial statements.

 

23

 

Table of Contents

Heritage Series Trust—Mid Cap Stock Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

          Value
  
               
Repurchase Agreement—2.4% (a)
         
Repurchase Agreement with State Street Bank and
Trust Company, dated April 29, 2005 @ 2.72% to
be repurchased at $19,446,407 on May 2, 2005,
collateralized by $19,835,000 United States
Treasury Notes, 2.0% due August 31, 2005,
(market value $19,836,145 including interest)
(cost $19,442,000)		    $ 19,442,000  
         
Total Investment Portfolio
(cost $763,208,220) (b), 101.7% (a)		      815,761,009  
Other Assets and Liabilities, net, (1.7%) (a)      (13,925,825 )
         
Net Assets, 100.0%    $ 801,835,184  
         
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same. Market value includes net unrealized appreciation of $52,552,789 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $71,342,363 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $18,789,574.

 

ADR—American Depository Receipt.

 

Beginning with the Mid Cap Stock Fund’s fiscal quarter ended July 31, 2004, the Trust began filing its complete schedule of portfolio holdings with the Securities Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q; the Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov; and the Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

The accompanying notes are an integral part of the financial statements.

 

24

 

Table of Contents

May 26, 2005

 

Dear Valued Shareholders:

 

We are pleased to present and discuss with you the performance of the Heritage Series Trust–Small Cap Stock Fund (the “Fund”)(a) for the six-month period ended April 30, 2005. During this first half of the fiscal year the Fund’s Class A shares returned(b) -1.89%, underperforming the Fund’s benchmark index, the Russell 2000 Index(c), which returned -0.15%. The Fund performed about in-line with the Russell 2000 Growth Index(c), down -1.98%. Please note that performance numbers quoted above for Class A shares are shown without the imposition of a front end or contingent deferred sales charge. If reflected, the imposition of a front-end or contingent deferred sales charge would reduce the performance. In addition, the performance data quoted represents past performance and 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 the original cost. Also, please remember past performance does not guarantee future results and current performance may be higher or lower than the performance data quoted. To obtain more current performance, please visit our website at www.HeritageFunds.com.

 

As a bottom-up stock picking firm, Awad Asset Management, managed by James Awad, one of the Fund’s two portfolio managers, seeks to find growing companies selling at a value investor price during both the good and challenging periods. Mr. Awad attempts to participate during good periods and protect capital during difficult periods.

 

Eagle Asset Management and Bert Boksen, the Fund’s other portfolio manager, believes the best long-term investment opportunities are those that exhibit characteristics of rapid growth at reasonable prices. Mr. Boksen believes a focused bottom-up approach to stock picking is the most consistent, repeatable long-term methodology and that there is no substitute for fundamental analysis.

 

During this six-month reporting period, top contributing stocks for the Fund included Aleris International, Horizon Health Corp., Patterson-UTI Energy and Respironics. Aleris International, formerly IMCO Recycling before its merger with Commonwealth Industries in December of 2004, is a recycler of aluminum and zinc. Aleris boosted profit expectations for the first quarter of 2005 due to pricing strength and expanding margins in their rolled products segment, as well as productivity initiatives associated with the merger. Aluminum and zinc’s price strength continues to drive the stock’s performance. Horizon Health provides behavioral health and physical rehabilitation services. Horizon is focusing on building out its core clinical expertise as an owner/operator as its primary source of future growth. Growing demand in behavioral health care and expanding mental health parity laws are offering steady demand and improving pricing. Patterson-UTI Energy provides pressure pumping services to oil and natural gas operators. Patterson continues to benefit from strength in oil prices. U.S. land drilling activity is at peak levels, and prices have firmed. Respironics, Inc. develops, manufactures and markets medical devices used primarily for the treatment of patients suffering from sleep and respiratory disorders. Sleep therapy sales growth is improving better than anticipated, and the company continues to increase gross margins. Other top contributing securities include Constellation Brands, Adesa Inc., Energy Partners Ltd. and Capital Crossing.

 

(a) The views expressed here are not meant as investment advice. Although some of the described portfolio holdings were viewed favorably as of the date of this letter, there is no guarantee the Fund will continue to hold these securities in the future. Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. Contact Heritage at (800) 421-4184 or your financial advisor for a prospectus, which contains this and other important information about the Fund. Read the prospectus carefully before you invest.

(b) All returns include the effect of reinvesting dividends and the deduction of Fund expenses.

(c) Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Please refer to the inside back cover for index descriptions.

 

25

 

Table of Contents

Detractors from the Fund’s performance included Martek Biosciences and Medicis Pharmaceuticals. Martek Biosciences develops and sells products derived from microalgae and other microbes. Martek surprised investors when it lowered its revenue guidance for the year. Several of Martek’s major customers have been hoarding inventories of Martek’s products and, accordingly, do not need to order as much in the second half of the year. We viewed this as a significant blunder by the company’s management and sold the stock. Medicis Pharmaceuticals is a specialty pharmaceutical company that focuses primarily in developing and marketing drugs for the treatment of dermatologic conditions. The company is facing increasing competition from both generic drug manufacturers and new products. The company recently announced it will be acquiring Inamed Corp., a surgical and medical device company that develops, makes and markets products for plastic and reconstructive surgery. We believe the combined entity will likely be considered one of the most powerful global companies focused on aesthetics. Other negative contributors to the Fund’s performance were Axcelis Technologies, SIRVA, CommScope, StarTek, Spartech Corp. and NCO Group.

 

Over the six-month period, the Fund added slightly to its position in energy and materials & processing holdings, as well as decreased its consumer discretionary and financials exposure.

 

We would like to remind you again that investments in small- and mid-cap companies generally involve greater risks than large-capitalization companies due to their more limited managerial and financial resources. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of the Fund’s portfolio. Generally, the smaller the company size, the greater these risks. In addition, the Fund invests in growth companies that entail greater risks. The prices of growth company securities may rise and fall dramatically, based in part on investors’ perceptions of the company rather than on fundamental analysis of the stocks. These and other risks are more fully described in the Fund’s prospectus. We strongly recommend that you review the Fund’s prospectus and become aware of the risks involved with your investment. We thank you for your continued investment in the Fund and will continue to do our best for our valued shareholders.

 

Sincerely,

   Sincerely,

LOGO

  

LOGO

Bert Boksen
Managing Director
Eagle Asset Management, Inc.
Portfolio Co-Manager
Heritage Small Cap Stock Fund		   James D. Awad
Chairman
Awad Asset Management, Inc.
Portfolio Co-Manager
Heritage Small Cap Stock Fund

 

26

 

Table of Contents

Heritage Series Trust—Small Cap Stock Fund

Investment Portfolio

April 30, 2005

(unaudited)

 

Shares
         Value
             
Common Stocks—90.9% (a)
Agriculture—1.0%
123,800   

Delta & Pine Land Company

    $ 3,119,760
         
Banks—0.9%
88,000   

Capital Crossing Bank*

      2,845,920
         
Beverages—1.0%
59,500   

Constellation Brands, Inc.,
Class “A”*

      3,136,245
         
Biotechnology—2.8%
10,000   

Bio-Rad Laboratories, Inc., Class “A”*

      483,400
147,200   

Charles River Laboratories International, Inc.*

      6,972,864
193,900   

deCODE genetics, Inc.*

      1,047,060
         
            8,503,324
         
Building Materials—1.4%
    217,000   

Lennox International Inc.

      4,242,350
         
Commercial Services—5.1%
239,900   

ADESA, Inc.

      5,803,181
62,200   

Corrections Corporation of America*

      2,354,270
239,000   

Interactive Data Corporation*

      4,791,950
136,000   

NCO Group, Inc.*

      2,533,680
1,000   

StarTek, Inc.

      14,550
         
            15,497,631
         
Computers—1.9%
118,062   

FactSet Research Systems Inc.

      3,277,401
174,500   

RadiSys Corporation*

      2,443,000
         
            5,720,401
         
Distribution/Wholesale—2.4%
25,000   

ScanSource, Inc.*

      1,156,250
68,200   

SCP Pool Corporation

      2,221,956
108,500   

Tech Data Corporation*

      3,963,505
         
            7,341,711
         
Diversified Manufacturer—3.2%
48,500   

Actuant Corporation, Class “A”*

      2,065,615
66,300   

Applied Films Corporation*

      1,585,233
170,000   

Federal Signal Corporation

      2,385,100
395,000   

Jacuzzi Brands, Inc.*

      3,574,750
         
            9,610,698
         
Electrical Components & Equipment—0.9%
177,200   

General Cable Corporation*

      2,152,980
24,000   

Littelfuse, Inc.*

      646,560
         
            2,799,540
         
Shares
         Value
           
Common Stocks (continued)
Electronics—1.6%
53,000   

Benchmark Electronics, Inc.*

    1,433,120
27,400   

Gentex Corporation

    889,404
42,100   

OYO Geospace Corporation*

    782,639
    209,300   

TTM Technologies, Inc.*

    1,885,793
         
          4,990,956
         
Energy-Alternative Sources—0.2%
23,125   

Headwaters Inc.*

    739,306
         
Engineering & Construction—1.8%
173,000   

URS Corporation*

    5,319,750
         
Entertainment—2.7%
148,900   

Alliance Gaming Corporation*

    1,697,460
266,900   

Lions Gate Entertainment Corporation*

    2,578,254
62,800   

Nevada Gold & Casinos, Inc.*

    784,372
127,100   

Shuffle Master, Inc.*

    3,201,649
         
          8,261,735
         
Environmental Control—3.9%
203,300   

Aleris International Inc.,*

    4,362,818
124,705   

Duratek, Inc.*

    2,889,415
132,462   

Waste Connections Inc.*

    4,665,312
         
          11,917,545
         
Healthcare Products—5.5%
186,850   

American Medical Systems Holdings, Inc.*

    3,262,401
42,400   

Arrow International, Inc.

    1,405,136
63,200   

DJ Orthopedics, Inc.*

    1,589,480
42,500   

INAMED Corporation*

    2,585,700
67,400   

Respironics, Inc.*

    4,259,006
46,200   

The Cooper Companies, Inc.

    3,120,810
25,300   

Thoratec Corporation*

    327,635
         
          16,550,168
         
Healthcare Services—2.3%
72,600   

American Healthways, Inc.*

    2,711,610
47,100   

Centene Corporation*

    1,311,735
70,800   

Horizon Health Corporation*

    2,901,384
         
          6,924,729
         
Home Builders—0.9%
284,000   

Champion Enterprises, Inc.*

    2,680,960
         
Home Furnishings—2.5%
173,200   

Tempur-Pedic International Inc.*

    3,306,388
266,425   

Universal Electronics, Inc.*

    4,366,706
         
          7,673,094
         

 

The accompanying notes are an integral part of the financial statements.

 

27

 

Table of Contents

Heritage Series Trust—Small Cap Stock Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
             
Common Stocks (continued)
Insurance—3.6%
37,200   

Philadelphia Consolidated Holding Corporation*

    $ 2,790,000
62,715   

Primus Guaranty, Ltd.*

      714,951
    428,000   

Quanta Capital Holdings Ltd.*

      3,424,000
114,500   

The PMI Group, Inc.

      4,025,820
         
            10,954,771
         
Internet—1.9%
265,000   

1-800-FLOWERS.COM, Inc.*

      1,775,500
72,600   

eCollege.com*

      808,764
199,300   

Internet Capital Group, Inc.*

      1,098,143
92,050   

Radware Ltd.*

      2,013,134
         
            5,695,541
         
Investment Companies—1.2%
226,000   

MCG Capital Corporation

      3,487,180
         
Leisure Time—0.0%
20,300   

Orange 21 Inc.*

      129,514
         
Machinery—2.0%
335,800   

UNOVA, Inc.*

      5,963,808
         
Memory & Commodity Semiconductors—0.9%
266,000   

Integrated Device Technology, Inc.*

      2,846,200
         
Metal Fabricate/Hardware—1.3%
93,000   

Kaydon Corporation

      2,551,920
45,875   

NS Group, Inc.*

      1,319,365
         
            3,871,285
         
Oil & Gas—6.6%
160,000   

Comstock Resources, Inc.*

      4,048,000
120,000   

Energy Partners, Ltd.*

      2,743,200
236,800   

Patterson-UTI Energy, Inc.

      5,676,096
112,100   

Swift Energy Company*

      2,951,593
117,025   

Unit Corporation*

      4,489,079
         
            19,907,968
         
Oil & Gas Services—1.0%
55,900   

Maverick Tube Corporation*

      1,626,131
54,100   

Tetra Technologies, Inc.*

      1,462,323
         
            3,088,454
         
Pharmaceuticals—2.4%
74,700   

Dendreon Corporation*

      345,114
161,100   

KV Pharmaceutical Company, Class “A”*

      3,769,740
Shares
         Value
           
Common Stocks (continued)
Pharmaceuticals (continued)
49,600   

Medicis Pharmaceutical, Class “A”

    1,393,760
84,250   

NBTY, Inc.*

    1,796,210
         
          7,304,824
         
Printing & Publishing—1.9%
158,200   

John Wiley & Sons, Inc., Class “A”

    5,720,512
         
REITS—3.0%
405,000   

Aames Investment Corporation

    3,422,250
105,000   

Crescent Real Estate Equities Company

    1,764,000
    266,500   

Highland Hospitality Corporation

    2,795,585
60,000   

Saxon Capital, Inc.

    1,032,000
         
          9,013,835
         
Retail—8.1%
136,500   

Brinker International Inc.*

    4,613,700
119,425   

Build-A-Bear Workshop, Inc.*

    3,201,784
100,900   

Cabela’s Inc.*

    2,010,937
64,000   

Cash America International, Inc.

    950,400
100,200   

CBRL Group, Inc.

    3,860,706
135,900   

Genesco Inc.*

    3,496,707
105,600   

Stage Stores Inc.*

    3,993,792
85,500   

United Auto Group Inc.

    2,423,070
         
          24,551,096
         
Savings & Loans—0.8%
26,500   

BankAtlantic Bancorp, Inc.

    452,090
117,000   

Commercial Capital Bancorp, Inc.

    1,847,430
         
          2,299,520
         
Semiconductor Equipment—0.7%
345,000   

Axcelis Technologies, Inc.*

    2,142,450
         
Software—8.6%
89,300   

Altiris, Inc.*

    1,454,697
91,950   

ANSYS, Inc.*

    2,798,958
460,600   

Datastream Systems, Inc.*

    2,694,510
275,900   

Dendrite International, Inc.*

    4,254,378
161,525   

Eclipsys Corporation*

    2,182,203
48,100   

Global Payments Inc.

    3,114,956
368,000   

infoUSA Inc.*

    4,040,640
225,000   

MoneyGram International, Inc.

    4,365,000
131,075   

Netsmart Technologies Inc.*

    1,263,563
         
          26,168,905
         
Telecommunications—4.0%
13,025   

Anixter International, Inc.*

    480,883

 

The accompanying notes are an integral part of the financial statements.

 

28

 

Table of Contents

Heritage Series Trust—Small Cap Stock Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

Shares
         Value
  
               
Common Stocks (continued)
         
Telecommunications (continued)
         
    182,900   

C-COR Inc.*

    $ 1,208,968  
350,000   

CommScope, Inc.*

      4,942,000  
128,700   

EMS Technologies, Inc.*

      1,453,023  
150,000   

NetGear, Inc.*

      2,419,500  
119,400   

TEKELEC*

      1,625,034  
         
            12,129,408  
         
Transportation—0.9%
         
149,600   

OMI Corporation

      2,721,224  
         
Total Common Stocks (cost $239,171,354)      275,872,318  
         
Repurchase Agreement—9.1% (a)
         
Repurchase Agreement with State Street Bank and
Trust Company, dated April 29, 2005 @ 2.72% to
be repurchased at $27,368,202 on May 2, 2005,
collateralized by $27,740,000 United States
Treasury Notes, 3.75% due March 31, 2007,
(market value $27,873,353 including interest)
(cost $27,362,000)		      27,362,000  
         
Total Investment Portfolio
(cost $266,533,354) (b), 100.00% (a)		      303,234,318  
Other Assets and Liabilities, net, (0.0%) (a)      (9,450 )
         
Net Assets, 100.0%    $ 303,224,868  
         
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same. Market value includes net unrealized appreciation of $36,700,964 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $50,209,391 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $13,508,427.

Beginning with the Small Cap Stock Fund’s fiscal quarter ended July 31, 2004, the Trust began filing its complete schedule of portfolio holdings with the Securities Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q; the Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov; and the Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

The accompanying notes are an integral part of the financial statements.

 

29

 

Table of Contents

May 26, 2005

 

Dear Valued Shareholders:

 

For the six-month period ended April 30, 2005, the Russell 1000 Value Index (“Value Index”)(a) was up +6.72%, the Standard & Poor’s 500 Index (“S&P 500”)(a) returned +3.29%. The Heritage Series Trust–Value Equity Fund (the “Fund”)(b) Class A shares, with a return(c) of +6.90%, outperformed both the Value Index and the broader S&P 500 Index.

 

The six-month period ended April 30, 2005, saw two very different markets. The markets exhibited strong performance through the end of calendar year 2004 as all market major equity indices posted strong returns. Conversely, the New Year, however, has seen a much more subdued sentiment, as most of the major indices thus far have retreated somewhat. Given the strong returns across the entire market cap and style spectrum for 2004, the retrenchment is not overly surprising. The first part of 2005 saw the equity markets react to high oil prices and the headwind of rising short-term interest rates. Throughout this six-month period, one of the few constants has been the outperformance of value stocks as large- mid- and small-cap value stocks easily outpaced their growth counterparts.

 

We have expressed our concerns over the last several years that investors have underestimated the potential for price increases in the oil and natural gas markets. At the beginning of 2002, oil traded at approximately $21 per barrel and many were predicting oil in the $20’s for years to come. More recently the tide of opinion has changed. At the end of the first quarter of 2005, oil traded above $55 per barrel.

 

In our view, the oil story is straightforward–demand has been increasing at about 2% a year, and supply is having a hard time keeping up. While we expect a lot of volatility in the price of oil, we believe the days of oil in the $20’s are over. The world currently consumes about 84 million barrels a day, and absent a serious world recession, this figure will continue to rise. While Saudi Arabia talks about increasing their oil output, we see little evidence that they can maintain production in excess of 9.5 million barrels a day. In fact, without significant new investment, we believe they may have a hard time maintaining current production.

 

The reality is that there have been no large discoveries of oil in more than 25 years. There are five oil fields that produce more than one million barrels a day and all of these were discovered more than 25 years ago. The two largest fields, Ghawar in Saudi Arabia and Cantarell in Mexico, which produce 4.5 million and 2.2 million barrels a day, respectively, are in decline. Experts predict that the Cantarell field will decline to less than 1 million barrels a day of production over the next five years. With no real substitutes for oil on the near-term horizon, consumers may unfortunately have to get used to oil at $50 per barrel. The more consumers have to pay for gasoline and other oil related products, the less they will have available for other purchases.

 

(a) Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Please refer to the inside back cover for index descriptions.

(b) The views expressed here are not meant as investment advice. Although some of the described portfolio holdings were viewed favorably as of the date of this letter, there is no guarantee the Fund will continue to hold these securities in the future. Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. Contact Heritage at (800) 421-4184 or your financial advisor for a prospectus, which contains this and other important information about the Fund. Read the prospectus carefully before you invest.

(c) All returns include the effect of reinvesting dividends and the deduction of Fund expenses.

 

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Given the current situation in the energy markets it is not surprising that one of the better performing sectors over the past six months was the energy sector, which makes up about 19% of the Fund’s net assets. As a group these stocks returned approximately 16% over the past six months. ConocoPhilips, the Fund’s largest holding in the sector, was a real standout with a return of around 25%. Even with the strong performance, ConocoPhilips trades at roughly 9 times 2005 earnings with a yield of 2.3%. The market is still valuing the large oil companies as if oil prices will stay in the low $30’s for 2005 and 2006 and then falling to the high $20’s further out in time. Our belief is that oil prices are likely to average closer to $40 rather than $30 over the next few years and even higher longer term. If we are right, the large integrated oil companies have 30% or more upside to reflect $40 per barrel. If we are wrong on the future course of oil prices, we see little downside. Other energy holdings that were top contributors to the Fund’s performance included Devon Energy and Kerr-MeGee.

 

Recent additions to the portfolio’s energy holdings include Apache, Encana and Burlington Resources. These are all exploration and production companies focused on finding and producing natural gas in North America. As a group, they trade at Price/Earnings (“P/E”) ratios of around 10 with growth rates expected in the 8-10% range. Of course, these growth rate assumptions are tied to analyst’s forecast of natural gas prices, which like oil we believe to be too low. Not only is the production of natural gas in North America likely to fall over the next several years (as it did during 2004), but demand is likely to surge if we experience a series of cold winters and hot summers.

 

Health care stocks, about 18% of the Fund’s net assets, were a positive contributor to performance during the last calendar quarter. The holdings in the health care products and services industry were once again the leaders. The best performer was HCA Inc., a large hospital company. Hospital stocks have suffered from extremely high bad debt expenses, but it looks as though they have finally stabilized the situation. If the trend continues, it should bode well for HCA’s earnings outlook over the next several quarters. Medco Health Solutions and Quest Diagnostics were also stand out performers. Health care products and services stocks represent about 7% of the Fund’s net assets and have been one of the best performing industry groups over the last couple of years. Price appreciation has raised their valuation, but with earnings growth in the low to mid teens, we are inclined to continue holding them.

 

Pharmaceutical stocks have been a disappointment since purchase, but their fortunes may be about to change. The fallout from health risks attributed to the COX-2 inhibitor line of pain medication has weighed on the share prices of Merck and Pfizer. It looks as though the legal risks to the companies arising from class action suits will not be as severe as once thought, so part of the decline may turn out to be an overreaction. The more general issues facing all of the pharmaceutical companies are the lack of new blockbuster drugs in the near-term pipeline and the roll off of existing patents that give generic drugs the ability to take market share. These issues have crimped the near-term earnings growth of drug companies. Nonetheless, they continue to invest billions in research and development. Our view is that over the next few years, growth prospects will improve and the market will react well before the turnaround. Pfizer and Merck trade at significant discounts to the market P/E multiple, while Bristol Myers trades about even with the market. As important, the portfolio’s pharmaceutical holdings have an average yield of almost 4% and should provide some downside risk characteristics in a choppy market.

 

Tobacco stocks, which represent approximately 15% of the Fund’s net assets, also had a positive contribution to the Fund performance over the past six months. Altria Group, the portfolio’s largest holding, returned better than 35%. UST Inc., the smokeless tobacco producer, returned almost 13%. There was little new news on the tobacco litigation front during the first calendar quarter, but we expect that to change in the coming months. We still expect to see Altria Group move to break up the company over the next twelve months. As the stock closes in on our target, we expect to pare back the position to keep the portfolio weight at or below current levels. The tobacco holdings have worked well for the portfolio and we would be delighted to find another industry play that offered such attractive return potential due to market overreaction to perceived risk.

 

Financial stocks, which represent about 29% of the Fund’s net assets, suffered during the past six months as rising short-term rates caused investors to reassess the earnings outlook for these stocks. The portfolio’s financial stocks declined approximately 5% on average during the six months ended April 30, 2005. Fannie Mae was the worst performer, declining more than 20% as accounting and regulatory issues continued to generate negative

 

31

 

Table of Contents

headlines. At current levels we see little downside in the stock, as the market value of its underlying portfolio of mortgages and other assets are worth as much as the stock. The market is currently not giving any value to Fannie Mae as an ongoing concern, which seems a huge overreaction given the primary role Fannie plays in supporting the market for home mortgages. The stocks trade at P/E multiples around 8, with growth likely to continue in the high single digit range. Freddie Mac, a mortgage product provider similar to Fannie Mae, also contributed negatively to the Fund’s performance.

 

AIG International Group rivaled Fannie Mae for the most negative headlines over the last six months and the stock reacted similarly, posting a decline of roughly 16%. New York Attorney General, Eliot Spitzer, charged that AIG committed accounting fraud by the way it reported certain finite life insurance policies. Long-time Chairman of AIG, Hank Greenberg, was forced to resign after Spitzer told AIG’s Board to fire Greenberg or face criminal charges. Having looked at the issue in great detail, we see little that changes our view of the superior long-term prospects of AIG’s business.

 

Despite our disappointment in the accounting issues that are plaguing AIG, we believe the stock represents a good value at current prices. It trades at approximately 10 times 2005 earnings and should be able to grow earnings at better than 12% annually over the next five years because of its focus on providing insurance products in fast-growing foreign markets.

 

While we would not be surprised to see the market trade sideways for the near-term, we believe the portfolio can continue to gain ground in this environment. We have positioned the portfolio in sectors whose earnings growth is less dependent on strong economic growth than the market as a whole. As important, we believe the individual stocks held in the portfolio are extremely cheap relative to the market. Consequently, we believe that as the earning growth we expect materializes, we will see continued appreciation even if the market languishes. Our low P/E value approach, which focuses on companies with long-term earnings growth and above market dividend yields, has proven over time to offer better risk-adjusted returns than the market. Given the current market environment, we believe our value approach will continue to offer superior returns. With that being said, a word of caution is also warranted. The Fund invests in value stocks that are subject to the risk that their intrinsic value may never be realized by the market or that their prices may go down. While the Fund’s investments in value stocks may limit its downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. These and other risks are more fully described in the Fund’s prospectus. We thank you for your support and look forward to reporting to you in the years to come.

 

Sincerely,

LOGO

David Dreman
Chairman and Chief Investment Officer
Dreman Value Management, LLC
Portfolio Manager
Heritage Value Equity Fund

 

32

 

Table of Contents

Heritage Series Trust—Value Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

 

Shares
         Value
             
Common Stocks—91.8% (a)
Agriculture—14.6%
44,500   

Altria Group, Inc.

    $ 2,892,053
3,300   

Imperial Tobacco Group PLC., Sponsored ADR

      191,433
11,600   

Universal Corporation

      529,540
    34,750   

UST, Inc.

      1,591,550
         
            5,204,576
         
Auto Manufacturers—0.4%
15,500   

Ford Motor Company

      141,205
         
Banks—7.0%
25,860   

Bank of America Corporation

      1,164,734
13,500   

KeyCorp

      447,660
5,400   

The PNC Financial Services Group, Inc.

      287,442
11,300   

U.S. Bancorp

      315,270
5,500   

Wachovia Corporation

      281,490
         
            2,496,596
         
Computers—2.2%
40,225   

Electronic Data Systems Corporation

      778,354
         
Diversified Manufacturer—2.7%
14,100   

General Electric Company

      510,420
14,500   

Tyco International Ltd.

      453,995
         
            964,415
         
Financial Services—12.3%
15,650   

CIT Group Inc.

      630,382
2,300   

Citigroup Inc.

      108,008
25,400   

Fannie Mae

      1,370,330
36,800   

Freddie Mac

      2,263,936
55   

Piper Jaffray Companies*

      1,521
         
            4,374,177
         
Food—0.3%
5,700   

Safeway Inc.*

      121,353
         
Healthcare Products—0.8%
4,825   

Becton, Dickinson and Company

      282,359
         
Healthcare Services—6.2%
13,000   

HCA Inc.

      725,920
15,080   

Laboratory Corporation of America Holdings*

      746,460
6,940   

Quest Diagnostics Inc.

      734,252
         
            2,206,632
         
Shares
         Value
           
Common Stocks (continued)
Insurance—2.3%
14,400   

American International Group, Inc.

    732,240
3,100   

The St. Paul Travelers Companies, Inc.

    110,980
         
          843,220
         
Oil & Gas—18.1%
1,100   

Anadarko Petroleum Corporation

    80,344
6,300   

Apache Corporation

    354,627
5,400   

Burlington Resources, Inc.

    262,494
24,500   

ChevronTexaco Corporation

    1,274,000
20,323   

ConocoPhillips

    2,130,867
22,200   

Devon Energy Corporation

    1,002,774
1,400   

EnCana Corporation

    89,404
7,150   

Kerr-McGee Corporation

    554,840
6,400   

Occidental Petroleum Corporation

    441,600
4,100   

Pioneer Natural Resources Company

    166,706
2,400   

Pogo Producing Company

    108,024
200   

Transocean Inc.*

    9,274
         
          6,474,954
         
Pharmaceuticals—11.0%
9,500   

AmerisourceBergen Corporation

    582,160
35,395   

Bristol-Myers Squibb Company

    920,270
5,200   

Cardinal Health, Inc.

    288,964
13,763   

Medco Health Solutions, Inc.*

    701,500
    13,825   

Merck & Company, Inc.

    468,668
26,905   

Pfizer, Inc.

    731,009
3,135   

Schering-Plough Corporation

    65,427
3,325   

Wyeth

    149,426
         
          3,907,424
         
Pipelines—0.8%
28,600   

El Paso Corporation

    285,714
         
Retail—6.1%
1,150   

Best Buy Company, Inc.

    57,891
26,850   

Borders Group, Inc.

    649,502
8,700   

Federated Department Stores, Inc.

    500,250
15,600   

Home Depot, Inc.

    551,772
22,050   

Staples, Inc.

    420,494
         
          2,179,909
         
Savings & Loans—7.0%
26,800   

Sovereign Bancorp Inc.

    551,276
46,800   

Washington Mutual, Inc.

    1,933,776
         
          2,485,052
         
Total Common Stocks (cost $26,416,134)    32,745,940
         

 

The accompanying notes are an integral part of the financial statements.

 

33

 

Table of Contents

Heritage Series Trust—Value Equity Fund

Investment Portfolio

April 30, 2005

(unaudited)

(continued)

 

          Value
Repurchase Agreement—7.9% (a)
Repurchase Agreement with State Street Bank and
Trust Company, dated April 29, 2005 @ 2.72% to
be repurchased at $2,803,635 on May 2, 2005,
collateralized by $2,860,000 United States
Treasury Notes, 2.0% due August 31, 2005,
(market value $2,860,165 including interest)
(cost $2,803,000)		    $ 2,803,000
         
Total Investment Portfolio
(cost $29,219,134) (b), 99.7% (a)		      35,548,940
Other Assets and Liabilities, net, 0.3% (a)      105,925
         
Net Assets, 100.0%    $ 35,654,865
         
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same. Market value includes net unrealized appreciation of $6,329,806 which consists of aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $7,290,501 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value of $960,695.

 

ADR—American Depository Receipt.

 

Open Futures Contracts

 

Number of
Contracts

    Contract Type
    Expiration
Date
    Unrealized
Depreciation
  
8    S&P 500 Index    Jun-05    ($139,506 )

Beginning with the Value Equity Fund’s fiscal quarter ended July 31, 2004, the Trust began filing its complete schedule of portfolio holdings with the Securities Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q; the Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov; and the Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

The accompanying notes are an integral part of the financial statements.

 

34

 

Table of Contents

Heritage Series Trust

Sector Allocation (% of net assets)

April 30, 2005

(unaudited)

 

Diversified Growth Fund

 

LOGO

 

Growth Equity Fund

 

LOGO

 

35

Table of Contents

Heritage Series Trust

Sector Allocation (% of net assets)

April 30, 2005

(unaudited)

(continued)

 

International Equity Fund

 

LOGO

 

Mid Cap Stock Fund

 

LOGO

 

36

Table of Contents

Heritage Series Trust

Sector Allocation (% of net assets)

April 30, 2005

(unaudited)

(continued)

 

Small Cap Stock Fund

 

LOGO

 

Value Equity Fund

 

LOGO

 

37

Table of Contents

Heritage Series Trust

Understanding Your Fund’s Expenses

(unaudited)

 

Understanding Your Fund’s Expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees and other expenses. Using the tables below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect one-time transaction expenses, such as sales charges (loads) or redemption fees. Therefore, if these transactional costs were included, your costs would have been higher. For more information, see the Trust’s prospectus or talk to your financial advisor.

 

Review Your Fund’s Actual Expenses

The table below shows the actual expenses you would have paid on a $1,000 investment in Heritage Series Trust on November 1, 2004 and held through April 30, 2005. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns after ongoing expenses. This table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Actual

    Beginning
Account Value
November 1, 2004
    Ending Account
Value
April 30, 2005
    Expenses Paid
During Period*

Diversified Growth Fund

               

Class A

    $ 1,000    $ 1,023    $ 6.87

Class B

    $ 1,000    $ 1,019    $ 10.61

Class C

    $ 1,000    $ 1,019    $ 10.61

Growth Equity Fund

               

Class A

    $ 1,000    $ 996    $ 6.68

Class B

    $ 1,000    $ 992    $ 10.37

Class C

    $ 1,000    $ 992    $ 10.37

International Equity Fund

               

Class A

    $ 1,000    $ 1,092    $ 9.23

Class B

    $ 1,000    $ 1,088    $ 13.10

Class C

    $ 1,000    $ 1,088    $ 13.10

Mid Cap Stock Fund

               

Class A

    $ 1,000    $ 1,023    $ 5.82

Class B

    $ 1,000    $ 1,019    $ 9.56

Class C

    $ 1,000    $ 1,019    $ 9.56

Small Cap Stock Fund

               

Class A

    $ 1,000    $ 981    $ 6.69

Class B

    $ 1,000    $ 977    $ 10.05

Class C

    $ 1,000    $ 977    $ 10.05

Value Equity Fund

               

Class A

    $ 1,000    $ 1,069    $ 7.44

Class B

    $ 1,000    $ 1,065    $ 11.26

Class C

    $ 1,000    $ 1,065    $ 11.27

 

* See the following page for expense calculation.

 

38

Table of Contents

Heritage Series Trust

Understanding Your Fund’s Expenses

(unaudited)

(continued)

 

Hypothetical Example for Comparison Purposes

All mutual funds now follow guidelines to assist shareholders in comparing expenses between different funds. Per these guidelines, the table below shows each fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return before ongoing expenses invested at the beginning of the period and held for the entire period. Please note that you should not use this information to estimate your actual ending account balance and expenses paid during the period. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the funds with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison.

 

Hypothetical

    Beginning
Account Value
November 1, 2004
    Ending Account
Value
April 30, 2005
    Expenses Paid
During Period*

Diversified Growth Fund

               

Class A

    $ 1,000    $ 1,018    $ 6.85

Class B

    $ 1,000    $ 1,014    $ 10.59

Class C

    $ 1,000    $ 1,014    $ 10.59

Growth Equity Fund

               

Class A

    $ 1,000    $ 1,018    $ 6.76

Class B

    $ 1,000    $ 1,014    $ 10.49

Class C

    $ 1,000    $ 1,014    $ 10.49

International Equity Fund

               

Class A

    $ 1,000    $ 1,016    $ 8.90

Class B

    $ 1,000    $ 1,012    $ 12.62

Class C

    $ 1,000    $ 1,012    $ 12.62

Mid Cap Stock Fund

               

Class A

    $ 1,000    $ 1,019    $ 5.81

Class B

    $ 1,000    $ 1,015    $ 9.54

Class C

    $ 1,000    $ 1,015    $ 9.54

Small Cap Stock Fund

               

Class A

    $ 1,000    $ 1,018    $ 6.51

Class B

    $ 1,000    $ 1,015    $ 10.24

Class C

    $ 1,000    $ 1,015    $ 10.24

Value Equity Fund

               

Class A

    $ 1,000    $ 1,018    $ 7.25

Class B

    $ 1,000    $ 1,014    $ 10.99

Class C

    $ 1,000    $ 1,014    $ 10.99
 
  * Expenses for the Series Trust are calculated using each funds’ annualized expense ratios for Class A, Class B and Class C shares, multiplied by the average account value for the period, then multiplying the result by the actual number of days in the period (181); and then dividing that result by the actual number of days in the fiscal year (365). Annualized expense ratios used for each Fund are as follows:

 

     Class A
     Class B
     Class C
  

Diversified Growth Fund

    1.37 %   2.12 %   2.12 %

Growth Equity Fund

    1.35 %   2.10 %   2.10 %

International Equity Fund

    1.78 %   2.53 %   2.53 %

Mid Cap Stock Fund

    1.16 %   1.91 %   1.91 %

Small Cap Stock Fund

    1.30 %   2.05 %   2.05 %

Value Equity Fund

    1.45 %   2.20 %   2.20 %

 

 

39

Table of Contents

Heritage Series Trust

Statements of Assets and Liabilities

April 30, 2005

(unaudited)

 

     Diversified
Growth
Fund
     Growth
Equity Fund
     International
Equity Fund
  

Assets

                         

Investments, at value (identified cost $152,039,410, $135,765,276 and $83,166,937, respectively)

    $ 175,396,127     $ 136,812,301     $ 90,765,736  

Repurchase agreement, at market value (identified cost is the same as value)

      8,286,000       359,000       1,370,000  

Cash

      86       944       24,792  

Foreign currency (cost $5,391,960)

      —         —         5,446,558  

Receivables:

                         

Investments sold

      5,575,131       3,209,432       11,179,098  

Fund shares sold

      1,203,639       33,612       743,488  

Dividends and interest

      4,696       59,166       236,551  

Foreign taxes recoverable

      —         —         21,974  

Unrealized appreciation of forward currency contracts

      —         —         141,512  

Deferred state qualification expenses

      14,634       13,955       22,434  
    
 
 

Total assets

    $ 190,480,313     $ 140,488,410     $ 109,952,143  
    
 
 

Liabilities

                         

Payables:

                         

Investments purchased

    $ 1,240,507     $ 2,109,641     $ 11,092,023  

Fund shares redeemed

      348,876       1,486,511       199,208  

Accrued management fee

      129,530       153,879       22,216  

Accrued distribution fees

      94,184       68,217       58,830  

Accrued shareholder servicing fee

      93,765       134,302       38,166  

Accrued fund accounting fee

      24,800       24,000       21,814  

Other accrued expenses

      27,341       33,087       87,929  
    
 
 

Total liabilities

      1,959,003       4,009,637       11,520,186  
    
 
 

Net assets, at market value

    $ 188,521,310     $ 136,478,773     $ 98,431,957  
    
 
 

Net Assets

                         

Net assets consist of:

                         

Paid-in capital

    $ 165,243,021     $ 240,295,377     $ 85,593,797  

Undistributed net investment loss

      (1,117,972 )     (272,326 )     (254,328 )

Accumulated net realized gain (loss)

      1,039,544       (104,591,303 )     5,288,454  

Net unrealized appreciation on investments and other assets and liabilities denominated in foreign currencies

      23,356,717       1,047,025       7,804,034  
    
 
 

Net assets, at market value

    $ 188,521,310     $ 136,478,773     $ 98,431,957  
    
 
 

Net assets, at market value

                         

Class A shares

    $ 103,733,180     $ 75,426,318       36,446,569  

Class B shares

      19,804,760       17,253,917       3,211,192  

Class C shares

      64,983,370       43,798,538       58,774,196  
    
 
 

Total

    $ 188,521,310     $ 136,478,773     $ 98,431,957  
    
 
 

Shares of beneficial interest outstanding

                         

Class A shares

      4,197,794       3,062,884       1,615,666  

Class B shares

      848,255       762,312       151,527  

Class C shares

      2,782,724       1,935,492       2,773,031  
    
 
 

Total

      7,828,773       5,760,688       4,540,224  
    
 
 

Net Asset Value—offering and redemption price per share
Class A shares

    $ 24.71     $ 24.63     $ 22.56  
    
 
 

Maximum offering price per Class A share (100/95.25 of $24.71, $24.63 and $22.56), respectively.

    $ 25.94     $ 25.86     $ 23.69  
    
 
 

Class B shares

    $ 23.35     $ 22.63     $ 21.19  
    
 
 

Class C shares

    $ 23.35     $ 22.63     $ 21.19  
    
 
 

 

The accompanying notes are an integral part of the financial statements.

 

40

Table of Contents

Heritage Series Trust

Statements of Assets and Liabilities

April 30, 2005

(unaudited)

(continued)

 

     Mid Cap
Stock Fund
     Small Cap
Stock Fund
     Value
Equity
Fund
  

Assets

                         

Investments, at value (identified cost $743,766,220, $239,171,354 and $26,416,134, respectively)

    $ 796,319,009     $ 275,872,318     $ 32,745,940  

Repurchase agreement, at market value (identified cost is the same as value)

      19,442,000       27,362,000       2,803,000  

Cash

      663       936       130  

Initial futures margin deposit

      —         —         126,000  

Receivables:

                         

Investments sold

      8,911,405       2,602,390       —    

Fund shares sold

      3,424,151       756,508       29,392  

Dividends and interest

      83,317       197,884       51,471  

Futures variation margin

      —         —         30,800  

Deferred state qualification expenses

      24,302       39,885       17,916  
    
 
 

Total assets

    $ 828,204,847     $ 306,831,921     $ 35,804,649  
    
 
 

Liabilities

                         

Payables:

                         

Investments purchased

    $ 23,420,856     $ 2,106,824     $ —    

Fund shares redeemed

      1,679,503       948,141       47,559  

Accrued management fee

      486,805       215,621       17,985  

Accrued distribution fees

      353,282       125,373       20,886  

Accrued shareholder servicing fee

      352,991       140,741       20,892  

Accrued fund accounting fee

      24,300       24,300       20,300  

Other accrued expenses

      51,926       46,053       22,162  
    
 
 

Total liabilities

      26,369,663       3,607,053       149,784  
    
 
 

Net assets, at market value

    $ 801,835,184     $ 303,224,868     $ 35,654,865  
    
 
 

Net Assets

                         

Net assets consist of:

                         

Paid-in capital

    $ 715,325,064     $ 262,478,725     $ 36,024,440  

Undistributed net investment income (loss)

      (3,473,746 )     (1,027,006 )     56,314  

Accumulated net realized gain (loss)

      37,431,077       5,072,185       (6,616,189 )

Net unrealized appreciation on investments and futures contracts

      52,552,789       36,700,964       6,190,300  
    
 
 

Net assets, at market value

    $ 801,835,184     $ 303,224,868     $ 35,654,865  
    
 
 

Net assets, at market value

                         

Class A shares

    $ 501,923,154     $ 206,268,892     $ 14,046,806  

Class B shares

      56,856,051       13,477,538       3,510,711  

Class C shares

      243,055,979       83,478,438       18,097,348  
    
 
 

Total

    $ 801,835,184     $ 303,224,868     $ 35,654,865  
    
 
 

Shares of beneficial interest outstanding

                         

Class A shares

      19,973,927       6,837,347       754,113  

Class B shares

      2,409,908       488,260       193,173  

Class C shares

      10,297,830       3,022,613       995,516  
    
 
 

Total

      32,681,665       10,348,220       1,942,802  
    
 
 

Net Asset Value—offering and redemption price per share

                         

Class A shares

    $ 25.13     $ 30.17     $ 18.63  
    
 
 

Maximum offering price per Class A share (100/95.25 of $25.13, $30.17 and $18.63), respectively.

    $ 26.38     $ 31.67     $ 19.56  
    
 
 

Class B shares

    $ 23.59     $ 27.60     $ 18.17  
    
 
 

Class C shares

    $ 23.60     $ 27.62     $ 18.18  
    
 
 

 

The accompanying notes are an integral part of the financial statements.

 

41

Table of Contents

Heritage Series Trust

Statements of Operations

For the Six-Month Period Ended April 30, 2005

(unaudited)

 

    Diversified
Growth
Fund
     Growth
Equity
Fund
     International
Equity
Fund
     Mid Cap
Stock
Fund
     Small Cap
Stock
Fund
     Value
Equity
Fund
  

Investment Income

                                                

Income:

                                                

Gross dividends

   $ 389,449     $ 1,162,329     $ 1,032,020     $ 1,891,079     $ 1,146,701     $ 394,693  

Foreign withholding tax

     (2,551 )     —         (122,848 )     (12,666 )     (4,978 )     (42 )
   
 
 
 
 
 

Net dividends

     386,898       1,162,329       909,172       1,878,413       1,141,723       394,651  

Interest

     105,808       6,060       43,494       210,474       252,348       34,472  
   
 
 
 
 
 

Total income

     492,706       1,168,389       952,666       2,088,887       1,394,071       429,123  

Expenses:

                                                

Management fee

     760,210       637,352       459,739       2,807,208       1,241,119       135,963  

Distribution fee (Class A)

     119,635       114,623       43,566       587,204       266,356       17,978  

Distribution fee (Class B)

     109,186       104,248       12,601       298,198       75,313       17,762  

Distribution fee (Class C)

     343,240       287,062       273,247       1,186,177       431,441       91,611  

Shareholder servicing fees

     125,023       167,956       48,817       454,246       184,985       26,538  

Custodian fee

     10,838       16,158       195,250       31,125       20,895       7,382  

Fund accounting fee

     36,814       35,626       44,277       36,272       36,207       30,378  

Professional fees

     38,522       39,051       43,417       39,076       39,701       39,401  

State qualification expenses

     29,101       31,160       26,341       56,247       23,534       23,845  

Federal registration expense

     2,390       —         1,227       12,404       4,147       —    

Reports to shareholders

     15,877       20,520       13,734       32,340       21,681       9,524  

Trustees’ fees and expenses

     9,698       9,698       9,698       9,636       9,698       9,698  

Other

     10,144       8,398       7,771       12,500       —         7,516  
   
 
 
 
 
 

Total expenses before waiver

     1,610,678       1,471,852       1,179,685       5,562,633       2,355,077       417,596  

Fees recovered (waived) by Manager

     —         (31,137 )     (146,302 )     —         66,000       (72,705 )
   
 
 
 
 
 

Total expenses after waiver and recovery

     1,610,678       1,440,715       1,033,383       5,562,633       2,421,077       344,891  
   
 
 
 
 
 

Net investment income (loss)

     (1,117,972 )     (272,326 )     (80,717 )     (3,473,746 )     (1,027,006 )     84,232  
   
 
 
 
 
 

Realized and Unrealized Gain (Loss) on Investments

 

                                        

Net realized gain from investment transactions

     2,271,799       13,515,620       5,658,628       42,583,509       5,684,334       337,611  

Net realized gain from futures transactions

     —         —         —         —         —         203,315  

Net realized gain from foreign currency transactions

     —         —         49,257       —         —            

Net unrealized appreciation (depreciation) of investments during the period

     1,605,625       (11,430,190 )     777,594       (29,995,495 )     (12,759,958 )     1,818,169  

Net unrealized appreciation on the translation of assets and liabilities denominated in foreign currencies

     —         —         205,235       —         —         —    

Net unrealized depreciation on futures contracts

     —         —         —         —         —         (139,506 )
   
 
 
 
 
 

Net gain (loss) on investments

     3,877,424       2,085,430       6,690,714       12,588,014       (7,075,624 )     2,219,589  
   
 
 
 
 
 

Net increase (decrease) in net assets resulting from operations

   $ 2,759,452     $ 1,813,104     $ 6,609,997     $ 9,114,268     $ (8,102,630 )   $ 2,303,821  
   
 
 
 
 
 

 

The accompanying notes are an integral part of the financial statements.

 

42

Table of Contents

Heritage Series Trust

Statements of Changes in Net Assets

 

Diversified Growth Fund

    For the Six-Month
Period Ended
April 30, 2005
(unaudited)
     For the
Fiscal Year Ended
October 31, 2004
  

Increase in net assets:

                 

Operations:

                 

Net investment loss

    $ (1,117,972 )   $ (2,020,182 )

Net realized gain from investment transactions . . . . . . . . . . . . . . . . . . . . . .

      2,271,799       10,039,670  

Net unrealized appreciation (depreciation) of investments during the period .

      1,605,625       (1,127,347 )
    
 

Net increase in net assets resulting from operations .

      2,759,452       6,892,141  

Distributions to shareholders from:

                 

Net realized gains Class A shares, ($1.21 per share).

      (4,068,205 )     —    

Net realized gains Class B shares, ($1.21 per share).

      (1,061,842 )     —    

Net realized gains Class C shares, ($1.21 per share).

      (3,289,914 )     —    
    
 

Net distributions to shareholders . . . . . . . . . . .

      (8,419,961 )     —    

Increase in net assets from Fund share transactions .

      27,420,279       26,244,067  
    
 

Increase in net assets . .

      21,759,770       33,136,208  

Net assets, beginning of period .

      166,761,540       133,625,332  
    
 

Net assets, end of period (including accumulated net investment loss of $1,117,972 for the period ended April 30, 2005) . . . . . . . . . . . . .

    $ 188,521,310     $ 166,761,540  
    
 

Growth Equity Fund

    For the Six-Month
Period Ended
April 30, 2005
(unaudited)
     For the
Fiscal Year Ended
October 31, 2004
  

Decrease in net assets:

                 

Operations:

                 

Net investment loss

    $ (272,326 )   $ (2,157,111 )

Net realized gain from investment transactions

      13,515,620       20,213,073  

Net unrealized depreciation of investments during the period

      (11,430,190 )     (34,516,679 )
    
 

Net increase (decrease) in net assets resulting from operations

      1,813,104       (16,460,717 )

Decrease in net assets from Fund share transactions

      (60,304,645 )     (76,442,542 )
    
 

Decrease in net assets

      (58,491,541 )     (92,903,259 )

Net assets, beginning of period

      194,970,314       287,873,573  
    
 

Net assets, end of period (including accumulated net investment loss of $272,326 for the period ended April 30, 2005)

    $ 136,478,773     $ 194,970,314  
    
 

International Equity Fund

    For the Six-Month
Period Ended
April 30, 2005
(unaudited)
     For the
Fiscal Year Ended
October 31, 2004
  

Increase in net assets:

                 

Operations:

                 

Net investment loss

    $ (80,717 )   $ (122,148 )

Net realized gain from investment transactions

      5,658,628       8,126,111  

Net realized gains from foreign currency transactions

      49,257       38,379  

Net unrealized appreciation of investments during the period

      777,594       1,825,187  

Net unrealized appreciation on the translation of assets and liabilities denominated in foreign currrencies during the period

      205,235       15,891  
    
 

Net increase in net assets resulting from operations

      6,609,997       9,883,420  

Distributions to shareholders from:

                 

Net investment income Class A shares, ($0.33 and $0.15 per share, respectively)

      (465,138 )     (210,635 )

Net investment income Class B shares, ($0.20 and $0.07 per share, respectively)

      (22,104 )     (6,122 )

Net investment income Class C shares, ($0.20 and $0.07 per share, respectively)

      (493,411 )     (130,538 )
    
 

Net distributions to shareholders

      (980,653 )     (347,295 )

Increase in net assets from Fund share transactions

      14,828,108       18,049,593  
    
 

Increase in net assets

      20,457,452       27,585,718  

Net assets, beginning of period

      77,974,505       50,388,787  
    
 

Net assets, end of period (including accumulated net investment loss of $254,328 and net investment income of $807,092, respectively)

    $ 98,431,957     $ 77,974,505  
    
 

 

The accompanying notes are an integral part of the financial statements.

 

43

Table of Contents

Heritage Series Trust

Statements of Changes in Net Assets

(continued)

 

Mid Cap Stock Fund

    For the Six-Month
Period Ended
April 30, 2005
(unaudited)
     For the
Fiscal Year Ended
October 31, 2004
  

Increase in net assets:

                 

Operations:

                 

Net investment loss

    $ (3,473,746 )   $ (5,063,671 )

Net realized gain from investment transactions

      42,583,509       43,858,578  

Net unrealized appreciation (depreciation) of investments during the period

      (29,995,495 )     22,465,233  
    
 

Net increase in net assets resulting from operations

      9,114,268       61,260,140  

Increase in net assets from Fund share transactions

      150,344,757       162,676,034  
    
 

Increase in net assets

      159,459,025       223,936,174  

Net assets, beginning of period

      642,376,159       418,439,985  
    
 

Net assets, end of period (including accumulated net investment loss of $3,473,746 for the period ended April 30, 2005)

    $ 801,835,184     $ 642,376,159  
    
 

Small Cap Stock Fund

    For the Six-Month
Period Ended
April 30, 2005
(unaudited)
     For the
Fiscal Year Ended
October 31, 2004
  

Increase in net assets:

                 

Operations:

                 

Net investment loss . . . .

    $ (1,027,006 )   $ (1,707,839 )

Net realized gain from investment transactions . . . . . . . . . . . . . . . . . . . .

      5,684,334       19,753,261  

Net unrealized appreciation (depreciation) of investments during the period .

      (12,759,958 )     1,619,772  
    
 

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . .

      (8,102,630 )     19,665,194  

Distributions to shareholders from:

                 

Net realized gains Class A shares, ($1.56 per share).

      (9,981,079 )     —    

Net realized gains Class B shares, ($1.56 per share).

      (773,229 )     —    

Net realized gains Class C shares, ($1.56 per share).

      (4,257,737 )     —    
    
 

Net distributions to shareholders . . . . . . . . . . . . . . .

      (15,012,045 )     —    

Increase in net assets from Fund share transactions .

      50,863,970       74,408,815  
    
 

Increase in net assets .

      27,749,295       94,074,009  

Net assets, beginning of period .

      275,475,573       181,401,564  
    
 

Net assets, end of period (including accumulated net investment loss of $1,027,006 for the period ended April 30, 2005) .

    $ 303,224,868     $ 275,475,573  
    
 

Value Equity Fund

    For the Six-Month
Period Ended
April 30, 2005
(unaudited)
     For the
Fiscal Year Ended
October 31, 2004
  

Increase in net assets:

                 

Operations:

                 

Net investment income

    $ 84,232     $ 188,724  

Net realized gain from investment transactions

      337,611       594,291  

Net realized gains from futures transactions

      203,315       89,250  

Net unrealized appreciation of investments during the period

      1,818,169       2,107,376  

Net unrealized appreciation (depreciation) of investments in futures contracts during the period

      (139,506 )     20,902  
    
 

Net increase in net assets resulting from operations

      2,303,821       3,000,543  

Distributions to shareholders from:

                 

Net investment income Class A shares, ($0.16 and $0.14 per share, respectively)

      (126,819 )     (97,586 )

Net investment income Class B shares, ($0.04 and $0.06 per share, respectively)

      (7,523 )     (12,029 )

Net investment income Class C shares, ($0.04 and $0.06 per share, respectively)

      (38,925 )     (60,360 )
    
 

Net distributions to shareholders

      (173,267 )     (169,975 )

Increase (decrease) in net assets from Fund share transactions

      (836,123 )     5,739,352  
    
 

Increase in net assets

      1,294,431       8,569,920  

Net assets, beginning of period

      34,360,434       25,790,514  
    
 

Net assets, end of period (including undistributed net investment income of $56,314 and $145,349, respectively)

    $ 35,654,865     $ 34,360,434  
    
 

 

The accompanying notes are an integral part of the financial statements.

 

44

Table of Contents

Heritage Series Trust — Diversified 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*
     Class C Shares*
  
   

For the Six-
Month Period
Ended
April 30,
2005

(unaudited)

     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
  
      2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
  

Net asset value, beginning of period

   $ 25.26     $ 23.92     $ 18.21     $ 17.98     $ 27.46     $ 20.80     $ 24.02     $ 22.92     $ 17.57     $ 17.48     $ 26.98     $ 20.61     $ 24.02     $ 22.92     $ 17.57     $ 17.48     $ 26.98     $ 20.61  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Income from Investment Operations:

                                                                                                                                                

Net investment loss

     (0.11 )     (0.23 )     (0.23 )     (0.23 )     (0.13 )     (0.24 )(a)     (0.19 )     (0.40 )     (0.37 )     (0.37 )     (0.28 )     (0.43 )(a)     (0.19 )     (0.40 )     (0.37 )     (0.37 )     (0.28 )     (0.43 )(a)

Net realized and unrealized gain (loss) on investments

     0.77       1.57       5.94       0.46       (5.82 )     9.10       0.73       1.50       5.72       0.46       (5.69 )     9.00       0.73       1.50       5.72       0.46       (5.69 )     9.00  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total from Investment Operations

     0.66       1.34       5.71       0.23       (5.95 )     8.86       0.54       1.10       5.35       0.09       (5.97 )     8.57       0.54       1.10       5.35       0.09       (5.97 )     8.57  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Less Distributions:

                                                                                                                                                

Distributions from net realized gains

     (1.21 )     —         —         —         (3.53 )     (2.20 )     (1.21 )     —         —         —         (3.53 )     (2.20 )     (1.21 )     —         —         —         (3.53 )     (2.20 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net asset value, end of period

   $ 24.71     $ 25.26     $ 23.92     $ 18.21     $ 17.98     $ 27.46     $ 23.35     $ 24.02     $ 22.92     $ 17.57     $ 17.48     $ 26.98     $ 23.35     $ 24.02     $ 22.92     $ 17.57     $ 17.48     $ 26.98  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Return (%) (b)

     2.33 (c)     5.60       31.36       1.28       (23.66 )     44.87       1.94 (c)     4.80       30.45       0.51       (24.23 )     43.80       1.94 (c)     4.80       30.45       0.51       (24.23 )     43.80  

Ratios and Supplemental Data

                                                                                                                                                

Expenses to average daily net assets

                                                                                                                                                

With expenses waived/recovered (%)

     1.37 (d)     1.38       1.48       1.45       1.47       1.57 (a)     2.12 (d)     2.13       2.23       2.20       2.22       2.32 (a)     2.12 (d)     2.13       2.23       2.20       2.22       2.32 (a)

Without expenses waived/recovered (%)

     1.37 (d)     1.38       1.48       1.45       1.47       1.48       2.12 (d)     2.13       2.23       2.20       2.22       2.23       2.12 (d)     2.13       2.23       2.20       2.22       2.22  

Net investment loss to average daily net assets (%)

     (0.84 )(d)     (0.92 )     (1.14 )     (1.13 )     (0.63 )     (0.88 )     (1.57 )(d)     (1.67 )     (1.89 )     (1.88 )     (1.39 )     (1.64 )     (1.58 )(d)     (1.68 )     (1.89 )     (1.88 )     (1.39 )     (1.62 )

Portfolio turnover rate (%)

     31       92       152       201       249       252       31       92       152       201       249       252       31       92       152       201       249       252  

Net assets, end of period ($ millions)

     104       80       60       41       38       50       20       22       22       16       15       19       65       65       52       36       30       38  
* Per share amounts have been calculated using the monthly average share method.
(a) The fiscal year ended October 31, 2000 includes payment of previously waived management fees to the Manager for Class A, B and C Shares.
(b) These returns are calculated without the imposition of either front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

45

 

Table of Contents

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*
     Class B Shares*
     Class C Shares*
  
    For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
  
      2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
  

Net asset value, beginning of period

   $ 24.74     $ 26.06     $ 22.18     $ 27.20     $ 50.91     $ 43.44     $ 22.82     $ 24.22     $ 20.77     $ 25.66     $ 48.87     $ 42.17     $ 22.82     $ 24.21     $ 20.77     $ 25.65     $ 48.86     $ 42.15  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Income from Investment Operations:

                                                                                                                                                

Net investment income (loss)

     —         (0.12 )     (0.05 )     (0.10 )     (0.18 )     (0.39 )     (0.09 )     (0.30 )     (0.21 )     (0.28 )     (0.40 )     (0.77 )     (0.08 )     (0.30 )     (0.21 )     (0.28 )     (0.40 )     (0.76 )

Net realized and unrealized gain (loss) on investments

     (0.11 )     (1.20 )     3.93       (4.92 )     (14.92 )     13.33       (0.10 )     (1.10 )     3.66       (4.61 )     (14.20 )     12.94       (0.11 )     (1.09 )     3.65       (4.60 )     (14.20 )     12.94  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total from Investment Operations

     (0.11 )     (1.32 )     3.88       (5.02 )     (15.10 )     12.94       (0.19 )     (1.40 )     3.45       (4.89 )     (14.60 )     12.17       (0.19 )     (1.39 )     3.44       (4.88 )     (14.60 )     12.18  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Less Distributions:

                                                                                                                                                

Distributions from net realized gains

     —         —         —         —         (8.61 )     (5.47 )     —         —         —         —         (8.61 )     (5.47 )     —         —         —         —         (8.61 )     (5.47 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net asset value, end of period

   $ 24.63     $ 24.74     $ 26.06     $ 22.18     $ 27.20     $ 50.91     $ 22.63     $ 22.82     $ 24.22     $ 20.77     $ 25.66     $ 48.87     $ 22.63     $ 22.82     $ 24.21     $ 20.77     $ 25.65     $ 48.86  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Return (%) (a)

     (0.44 )(b)     (5.07 )     17.49       (18.46 )     (34.31 )     31.04       (0.79 )(b)     (5.78 )     16.61       (19.06 )     (34.82 )     30.05       (0.83 )(b)     (5.74 )     16.62       (19.03 )     (34.82 )     30.09  

Ratios and Supplemental Data

                                                                                                                                                

With expenses waived (%)

     1.35 (c)     1.28       1.30       1.26       1.22       1.19       2.10 (c)     2.03       2.05       2.01       1.97       1.94       2.10 (c)     2.03       2.05       2.01       1.97       1.94  

Without expenses waived (%)

     1.39 (c)     1.28       1.30       1.26       1.22       1.19       2.14 (c)     2.03       2.05       2.01       1.97       1.94       2.14 (c)     2.03       2.05       2.01       1.97       1.94  

Net investment income (loss) to average daily net assets (%)

     0.01 (c)     (0.46 )     (0.22 )     (0.37 )     (0.53 )     (0.73 )     (0.74 )(c)     (1.22 )     (0.96 )     (1.12 )     (1.28 )     (1.48 )     (0.70 )(c)     (1.22 )     (0.97 )     (1.12 )     (1.28 )     (1.48 )

Portfolio turnover rate (%)

     69       122       177       158       205       392       69       122       177       158       205       392       69       122       177       158       205       392  

Net assets, end of period ($ millions)

     75       103       166       117       93       135       17       23       29       27       40       45       44       69       93       78       92       141  
* Per share amounts have been calculated using the monthly average share method.
(a) These returns are calculated without the imposition of either front-end or contingent deferred sales charges.
(b) Not annualized.
(c) Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

46

 

Table of Contents

Heritage Series Trust — International 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*
     Class B Shares*
     Class C Shares*
  
   

For the
Six-Month
Period Ended
April 30,
2005

(unaudited)

    

For the Fiscal Years Ended

October 31

    

For the
Six-Month

Period Ended
April 30,
2005

(unaudited)

    

For the Fiscal Years Ended

October 31

    

For the
Six-Month

Period Ended
April 30,
2005

(unaudited)

    

For the Fiscal Years Ended

October 31

  
      2004
     2003
   2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
  

Net asset value, beginning of period

   $ 20.95     $ 17.93     $ 14.68   $ 17.14     $ 27.41     $ 31.56     $ 19.66     $ 16.89     $ 13.94     $ 16.39     $ 26.49     $ 30.83     $ 19.66     $ 16.89     $ 13.94     $ 16.39     $ 26.48     $ 30.83  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Income from Investment Operations:

                                                                                                                                              

Net investment income (loss)

     0.03       0.05       0.10     (0.09 )(a)     (0.13 )     (0.22 )     (0.04 )     (0.09 )     (0.03 )     (0.20 )(a)     (0.29 )     (0.43 )     (0.05 )     (0.09 )     (0.03 )     (0.20 )(a)     (0.28 )     (0.44 )

Net realized and unrealized gain (loss) on investments

     1.91       3.12       3.15     (2.37 )     (7.83 )     0.51       1.77       2.93       2.98       (2.25 )     (7.50 )     0.53       1.78       2.93       2.98       (2.25 )     (7.50 )     0.53  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total from Investment Operations

     1.94       3.17       3.25     (2.46 )     (7.96 )     0.29       1.73       2.84       2.95       (2.45 )     (7.79 )     0.10       1.73       2.84       2.95       (2.45 )     (7.78 )     0.09  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Less Distributions:

                                                                                                                                              

Dividends from net investment income

     (0.33 )     (0.15 )     —       —         —         —         (0.20 )     (0.07 )     —         —         —         —         (0.20 )     (0.07 )     —         —         —         —    

Distributions from net realized gains

     —         —         —       —         (2.31 )     (4.44 )     —         —         —         —         (2.31 )     (4.44 )     —         —         —         —         (2.31 )     (4.44 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Distributions

     (0.33 )     (0.15 )     —       —         (2.31 )     (4.44 )     (0.20 )     (0.07 )     —         —         (2.31 )     (4.44 )     (0.20 )     (0.07 )     —         —         (2.31 )     (4.44 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net asset value, end of period

   $ 22.56     $ 20.95     $ 17.93   $ 14.68     $ 17.14     $ 27.41     $ 21.19     $ 19.66     $ 16.89     $ 13.94     $ 16.39     $ 26.49     $ 21.19     $ 19.66     $ 16.89     $ 13.94     $ 16.39     $ 26.48  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Return (%) (b)

     9.20 (c)     17.74       22.14     (14.35 )     (31.37 )     (1.31 )(d)     8.79 (c)     16.85       21.16       (14.95 )     (31.86 )     (2.00 )     8.84 (c)     16.85       21.16       (14.95 )     (31.83 )     (2.04 )

Ratios and Supplemental Data

                                                                                                                                              

Expenses to average daily net assets

                                                                                                                                              

With expenses waived (%)

     1.78 (d)     1.78       1.78     1.85 (a)     1.90       1.97       2.53 (d)     2.53       2.53       2.60 (a)     2.65       2.72       2.53 (d)     2.53       2.53       2.60 (a)     2.65       2.72  

Without expenses waived (%)

     2.10 (d)     2.15       2.43     2.81       2.16       1.97       2.85 (d)     2.90       3.18       3.56       2.91       2.72       2.85 (d)     2.90       3.18       3.56       2.91       2.72  

Net investment income (loss) to average daily net assets (%)

     0.29 (d)     0.24       0.63     (0.54 )     (0.63 )     (0.71 )     (0.40 )(d)     (0.46 )     (0.17 )     (1.30 )     (1.36 )     (1.46 )     (0.46 )(d)     (0.46 )     0.25       (1.30 )     (1.36 )     (1.45 )

Portfolio turnover rate (%)

     37       162       133     234       174       67       37       162       133       237       174       67       37       162       133       234       174       67  

Net assets, end of period ($ millions)

     36       29       23     7       5       10       3       2       1       1       1       1       59       47       26       11       5       8  
* Per share amounts have been calculated using the monthly average share method.
(a) Effective July 1, 2002, Eagle Class shares of the International Equity Fund were discontinued and redesignated as Class C shares. Prior to July 1, 2002, the expense limits of the International Equity Fund’s Class A, Class B and Class C shares were 1.90%, 2.65% and 2.65%, respectively. Thereafter, the expense limits of Class A, Class B and Class C shares were 1.78%, 2.53% and 2.53%, respectively.
(b) These returns are calculated without the imposition of either front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

47

 

Table of Contents

Heritage Series Trust — Mid 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*
     Class B Shares*
     Class C Shares*
  
    For the
Six-Month
Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the
Six-Month
Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the
Six-Month
Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
  
      2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
  

Net asset value, beginning of period

   $ 24.57     $ 21.67     $ 17.99     $ 20.21     $ 23.19     $ 16.56     $ 23.15     $ 20.58     $ 17.21     $ 19.50     $ 22.66     $ 16.32     $ 23.16     $ 20.59     $ 17.22     $ 19.51     $ 22.67     $ 16.32  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Income from Investment Operations:

                                                                                                                                                

Net investment loss

     (0.08 )     (0.15 )     (0.14 )     (0.19 )(a)     (0.21 )(a)     (0.24 )     (0.16 )     (0.30 )     (0.27 )     (0.33 )(a)     (0.35 )(a)     (0.39 )     (0.17 )     (0.31 )     (0.27 )     (0.33 )(a)     (0.35 )(a)     (0.39 )

Net realized and unrealized gain (loss) on investments

     0.64       3.05       3.82       (1.44 )     1.34       7.17       0.60       2.87       3.64       (1.37 )     1.30       7.03       0.61       2.88       3.64       (1.37 )     1.30       7.04  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total from Investment Operations

     0.56       2.90       3.68       (1.63 )     1.13       6.93       0.44       2.57       3.37       (1.70 )     0.95       6.64       0.44       2.57       3.37       (1.70 )     0.95       6.65  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Less Distributions:

                                                                                                                                                

Distributions from net realized gains

     —         —         —         (0.59 )     (4.11 )     (0.30 )     —         —         —         (0.59 )     (4.11 )     (0.30 )     —         —         —         (0.59 )     (4.11 )     (0.30 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net asset value, end of period

   $ 25.13     $ 24.57     $ 21.67     $ 17.99     $ 20.21     $ 23.19     $ 23.59     $ 23.15     $ 20.58     $ 17.21     $ 19.50     $ 22.66     $ 23.60     $ 23.16     $ 20.59     $ 17.22     $ 19.51     $ 22.67  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Return (%) (b)

     2.28 (c)     13.38       20.46       (8.50 )     6.70       42.30       1.90 (c)     12.49       19.58       (9.18 )     5.93       41.13       1.90 (c)     12.48       19.57       (9.18 )     5.93       41.19  

Ratios and Supplemental Data

                                                                                                                                                

Expenses to average daily net assets

                                                                                                                                                

With expenses waived/recovered (%)

     1.16 (d)     1.20       1.28       1.27 (a)     1.55 (a)     1.55       1.91 (d)     1.95       2.03       2.02 (a)     2.30 (a)     2.30       1.91 (d)     1.95       2.03       2.02 (a)     2.30 (a)     2.30  

Without expenses waived/ recovered (%)

     1.16 (d)     1.20       1.28       1.26       1.50       1.63       1.91 (d)     1.95       2.03       2.01       2.25       2.38       1.91 (d)     1.95       2.03       2.01       2.25       2.38  

Net investment loss to average daily net assets (%)

     (0.62 )(d)     (0.64 )     (0.72 )     (0.88 )     (1.04 )     (1.13 )     (1.36 )(d)     (1.38 )     (1.47 )     (1.64 )     (1.80 )     (1.87 )     (1.36 )(d)     (1.39 )     (1.46 )     (1.64 )     (1.80 )     (1.88 )

Portfolio turnover rate (%)

     71       124       163       171       218       265       71       124       163       171       218       265       71       124       163       171       218       265  

Net assets, end of period ($ millions)

     502       370       217       174       56       23       57       58       53       39       13       4       243       214       149       100       31       12  
* Per share amounts have been calculated using the monthly average share method.
(a) The fiscal years ended October 31, 2002 and 2001 includes payment of previously waived management fees to the Manger for Class A, B and C Shares.
(b) These returns are calculated without the imposition of either front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

48

 

Table of Contents

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*
     Class B Shares*
     Class C Shares*
  
    For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
  
      2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
       2004
     2003
     2002
     2001
     2000
  

Net asset value, beginning of period

   $ 32.19     $ 29.00     $ 21.36     $ 24.41     $ 29.17     $ 23.21     $ 29.69     $ 26.95     $ 19.99     $ 23.11     $ 27.97     $ 22.41     $ 29.70     $ 26.96     $ 20.00     $ 23.12     $ 27.98     $ 22.42  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Income from Investment Operations:

                                                                                                                                                

Net investment income (loss)

     (0.07 )(a)     (0.16 )     (0.19 )     0.02       (0.11 )     (0.12 )     (0.17 )(a)     (0.37 )     (0.35 )     (0.15 )     (0.29 )     (0.33 )     (0.17 )(a)     (0.36 )     (0.35 )     (0.15 )     (0.29 )     (0.32 )

Net realized and unrealized gain (loss) on investments

     (0.39 )     3.35       7.83       (1.48 )     (1.70 )     6.08       (0.36 )     3.11       7.31       (1.38 )     (1.62 )     5.89       (0.35 )     3.10       7.31       (1.38 )     (1.62 )     5.88  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total from Investment Operations

     (0.46 )     3.19       7.64       (1.46 )     (1.81 )     5.96       (0.53 )     2.74       6.96       (1.53 )     (1.91 )     5.56       (0.52 )     2.74       6.96       (1.53 )     (1.91 )     5.56  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Less Distributions:

                                                                                                                                                

Distributions from net realized gains

     (1.56 )     —         —         (1.59 )     (2.95 )     —         (1.56 )     —         —         (1.59 )     (2.95 )     —         (1.56 )     —         —         (1.59 )     (2.95 )     —    
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net asset value, end of period

   $ 30.17     $ 32.19     $ 29.00     $ 21.36     $ 24.41     $ 29.17     $ 27.60     $ 29.69     $ 26.95     $ 19.99     $ 23.11     $ 27.97     $ 27.62     $ 29.70     $ 26.96     $ 20.00     $ 23.12     $ 27.98  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Return (%) (b)

     (1.89 )(c)     11.00       25.68       2.61       (20.96 )     36.68       (2.27 )(c)     10.17       34.82       (7.72 )     (7.10 )     24.81       (2.27 )(c)     10.16       34.79       (7.72 )     (7.10 )     24.80  

Ratios and Supplemental Data

                                                                                                                                                

Expenses to average daily net assets

                                                                                                                                                

With expenses waived/recovered (%)

     1.30 (a)(d)     1.33       1.30       1.30       1.30       1.30       2.05 (a)(d)     2.08       2.05       2.05       2.05       2.05       2.05 (a)(d)     2.08       2.05       2.05       2.05       2.05  

Without expenses waived/recovered (%)

     1.26 (d)     1.33       1.42       1.34       1.33       1.30       2.01 (d)     2.08       2.17       2.09       2.08       2.05       2.01 (d)     2.08       2.17       2.09       2.08       2.05  

Net investment income (loss) to average daily net assets (%)

     (0.41 )(d)     (0.50 )     (0.83 )     0.06       (0.42 )     (0.44 )     (1.15 )(d)     (1.26 )     (1.58 )     (0.64 )     (1.17 )     (1.19 )     (1.15 )(d)     (1.26 )     (1.58 )     (0.66 )     (1.17 )     (1.18 )

Portfolio turnover rate (%)

     30       59       45       54       85       85       30       59       45       54       85       85       30       59       45       54       85       85  

Net assets, end of period ($ millions)

     206       182       111       83       92       107       13       15       14       10       10       10       83       78       57       43       44       51  
* Per share amounts have been calculated using the monthly average share method.
(a) The six-month period ended April 30, 2005 includes payment of previously waived management fees to the Manager for Class A, B and C Shares.
(b) These returns are calculated without the imposition of either front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

49

 

Table of Contents

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*
     Class B Shares*
     Class C Shares*
  
    For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
     For the Six-
Month Period
Ended
April 30,
2005
(unaudited)
     For the Fiscal Years Ended
October 31
  
      2004
     2003
     2002
     2001
     2000
       2004
     2003
   2002
     2001
     2000
       2004
     2003
   2002
     2001
     2000
  

Net asset value, beginning of period

   $ 17.58     $ 16.00     $ 13.43     $ 16.99     $ 20.49     $ 18.33     $ 17.10     $ 15.62     $ 13.15   $ 16.70     $ 20.16     $ 18.06     $ 17.10     $ 15.62     $ 13.16   $ 16.69     $ 20.16     $ 18.06  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Income from Investment Operations:

                                                                                                                                            

Net investment income (loss)

     0.09       0.18       0.14       0.10       0.19       0.21       0.01       0.05       0.04     (0.02 )     0.02       0.07       0.02       0.05       0.04     (0.02 )     0.04       0.07  

Net realized and unrealized gain on investments

     1.12       1.54       2.50       (3.59 )     (2.42 )     2.48       1.10       1.49       2.43     (3.53 )     (2.35 )     2.45       1.10       1.49       2.42     (3.51 )     (2.38 )     2.45  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total from Investment Operations

     1.21       1.72       2.64       (3.49 )     (2.23 )     2.69       1.11       1.54       2.47     (3.55 )     (2.33 )     2.52       1.12       1.54       2.46     (3.53 )     (2.34 )     2.52  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Less Distributions:

                                                                                                                                            

Dividends from net investment income

     (0.16 )     (0.14 )     (0.07 )     (0.07 )     (0.30 )     (0.11 )     (0.04 )     (0.06 )     —       —         (0.16 )     —         (0.04 )     (0.06 )     —       —         (0.16 )     —    

Distributions from net realized gains

     —         —         —         —         (0.97 )     (0.42 )     —         —         —       —         (0.97 )     (0.42 )     —         —         —       —         (0.97 )     (0.42 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Distributions

     (0.16 )     (0.14 )     (0.07 )     (0.07 )     (1.27 )     (0.53 )     (0.04 )     (0.06 )     —       —         (1.13 )     (0.42 )     (0.04 )     (0.06 )     —       —         (1.13 )     (0.42 )
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net asset value, end of period

   $ 18.63     $ 17.58     $ 16.00     $ 13.43     $ 16.99     $ 20.49     $ 18.17     $ 17.10     $ 15.62   $ 13.15     $ 16.70     $ 20.16     $ 18.18     $ 17.10     $ 15.62   $ 13.16     $ 16.69     $ 20.16  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Return (%) (a)

     6.90 (b)     10.78       19.78       (20.63 )     (11.57 )     15.13       6.48 (b)     9.90       18.78     (21.16 )     (12.21 )     14.28       6.54 (b)     9.90       18.69     (21.15 )     (12.26 )     14.28  

Ratios and Supplemental Data

                                                                                                                                            

Expenses to average daily net assets

                                                                                                                                            

With expenses waived (%)

     1.45 (c)     1.45       1.45       1.45       1.45       1.45       2.20 (c)     2.20       2.20     2.20       2.20       2.20       2.20 (c)     2.20       2.20     2.20       2.20       2.20  

Without expenses waived (%)

     1.85 (c)     1.85       2.04       1.72       1.69       1.72       2.60 (c)     2.60       2.79     2.47       2.44       2.47       2.60 (c)     2.60       2.79     2.47       2.44       2.47  

Net investment income (loss) to average daily net assets (%)

     0.92 (c)     1.03       1.02       0.60       0.94       1.14       0.16 (c)     0.27       0.29     (0.14 )     0.11       0.40       0.17 (c)     0.29       0.27     (0.15 )     0.18       0.40  

Portfolio turnover rate (%)

     6       9       123       66       76       95       6       9       123     66       76       95       6       9       123     66       76       95  

Net assets, end of period ($ millions)

     14       14       11       10       13       13       4       3       3     2       2       1       18       17       12     10       13       12  
* Per share amounts have been calculated using the monthly average share method.
(a) These returns are calculated without the imposition of either front-end or contingent deferred sales charges.
(b) Not annualized.
(c) Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

50

 

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

 

Note 1: Significant Accounting Policies.    Heritage Series Trust (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company and presently offers shares in six series, the Diversified Growth Fund, the Growth Equity Fund, the International Equity Fund, the Mid Cap Stock Fund, the Small Cap Stock Fund and the Value Equity Fund (each, a “Fund” and collectively, the “Funds”). The Diversified Growth Fund primarily seeks long-term capital appreciation by investing in equity securities of companies that may have significant growth potential. The Growth Equity Fund primarily seeks growth through long-term capital appreciation. The International Equity Fund primarily seeks capital appreciation through investments in a portfolio of international equity securities. The Mid Cap Stock Fund seeks long-term capital appreciation by investing primarily in equity securities of companies with medium market capitalization. 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 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 A share investments greater than $1 million, where a maximum sales charge is waived, may be subject to a maximum contingent deferred sales charge of 1% upon redemptions made in less than 18 months of purchase. Effective February 1, 2004, Class B shares were not available for direct purchase. Class B shares will continue to be available through exchanges and dividend reinvestments as described in the Fund’s prospectus. Class B shares were sold and are still subject to a 5% maximum contingent deferred sales charge (based on the lower of purchase price or redemption price), declining over a six-year period. Class C shares 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 preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates and those differences could be material. 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 the security is traded on the Nasdaq Stock Market, the official NASDAQ closing price is used. If no sale is reported, market value is based on the most recent quoted bid price and in the absence of a market quote, when prices are not reflective of market value, or when a significant event has been recognized with respect to a security, securities are valued using such methods as the Board of Trustees believes would reflect fair market value. Effective March 9, 2004, the International Equity Fund began using an independent source to fair value securities based on methods approved by the Board of Trustees. Securities that are quoted in a foreign currency are valued daily in U.S. dollars at the foreign currency exchange rates prevailing at the time the International Equity Fund calculates its daily net asset value per share. 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 International Equity Fund 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 International Equity Fund 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

 

51

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

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 purchase and sale 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 International Equity Fund is authorized to enter into forward foreign currency contracts for the purpose of hedging against exchange risk arising from current or anticipated investments in securities denominated in foreign currencies and to enhance total return. Forward foreign currency contracts are valued at the contractual forward rate and are marked-to-market daily, with the change in market value recorded as an unrealized gain or loss. When the contracts are closed the gain or loss is realized. Risks may arise from unanticipated movements in the currency’s value relative to the U.S. dollar and from the possible inability of counter-parties to meet the terms of their contracts.

 

Index Futures Contracts: The Value Equity Fund uses index futures contracts to a limited extent. A stock index assigns relative values to the common stocks comprising the index. A stock index futures contract is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of the last trading day of the contract and the price at which the futures contract is originally struck. No physical delivery of the underlying stocks in the index is made. Futures contracts are valued at their quoted daily settlement prices by the board of trade or exchange by which they are traded. The Fund is required to maintain margin deposits through which it buys and sells futures contracts or writes future contracts. Initial margin deposits vary from contract to contract and are subject to change. Margin balances are adjusted daily to reflect unrealized gains and losses on open contracts. If the price of an open futures position declines so that a fund has market exposure on such contract, the broker will require the Fund to deposit variation margin. If the value of an open futures position increases so that a fund no longer has market exposure on such contract, the broker will pay any excess variation margin to the Fund. The aggregate principal amounts of the contracts are not recorded in the financial statements. The variation margin receivable or payable, as applicable, is included in the accompanying Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset or liability and in the Statement of Operations as unrealized appreciation or depreciation until the contracts are closed, when they are recorded as realized futures gains (losses). Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument and the same delivery date.

 

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. Repurchase agreements involve the risk that the seller will fail to repurchase the security, as agreed. In that case, the Fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. In the event of bankruptcy or insolvency of the seller, delays and costs may be incurred.

 

Federal Income Taxes: Each Fund is treated as a single corporate taxpayer as provided for in the Tax Reform Act of 1986, as amended. Each 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.

 

52

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Distribution of Income and Gains: Distributions of net investment income are made annually. 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.

 

Expenses: Each Fund is charged for those expenses that are directly attributable to it, while other expenses are allocated proportionately among the Heritage mutual funds based upon methods approved by the Board of Trustees. Expenses that are directly attributable to a specific class of shares, such as distribution fees, are charged directly to that class. Other expenses of each Fund are allocated to each class of shares based upon their relative percentage of net assets.

 

Other: 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.

 

In the normal course of business the Trust enters into contracts that contain a variety of representations and warranties, which provide general indemnifications. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust and/or its affiliates that have not yet occurred. However, based on experience, the Trust expects the risk of loss to be remote.

 

Note 2: Fund Shares.    At April 30, 2005, there were an unlimited number of shares of beneficial interest of no par value authorized.

 

Diversified Growth Fund

 

Transactions in Class A, B and C shares of the Fund during the six-month period ended April 30, 2005, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   1,247,223     $ 32,572,899     29,286     $ 727,408     262,682     $ 6,516,954  

Shares issued on reinvestment of distributions

   149,383       3,912,348     35,477       880,550     129,075       3,203,643  

Shares redeemed

   (361,885 )     (9,463,286 )   (117,841 )     (2,928,804 )   (322,963 )     (8,001,433 )
   
 
 
 
 
 

Net increase (decrease)

   1,034,721     $ 27,021,961     (53,078 )   $ (1,320,846 )   68,794     $ 1,719,164  
         
       
       

Shares outstanding:

                                          

Beginning of period

   3,163,073             901,333             2,713,930          
   
         
         
       

End of period

   4,197,794             848,255             2,782,724          
   
         
         
       

 

53

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Transactions in Class A, B and C shares of the Fund during the fiscal year ended October 31, 2004, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   1,283,804     $ 32,301,743     86,265     $ 2,062,627     830,552     $ 20,082,605  

Shares redeemed

   (614,553 )     (15,465,892 )   (132,499 )     (3,195,043 )   (396,125 )     (9,541,973 )
   
 
 
 
 
 

Net increase (decrease)

   669,251     $ 16,835,851     (46,234 )   $ (1,132,416 )   434,427     $ 10,540,632  
         
       
       

Shares outstanding:

                                          

Beginning of fiscal year

   2,493,822             947,567             2,279,503          
   
         
         
       

End of fiscal year

   3,163,073             901,333             2,713,930          
   
         
         
       

 

Growth Equity Fund

 

Transactions in Class A, B and C shares of the Fund during the six-month period ended April 30, 2005, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   247,051     $ 6,372,772     1,275     $ 30,254     44,462     $ 1,053,850  

Shares redeemed

   (1,338,736 )     (34,644,578 )   (254,252 )     (6,062,495 )   (1,133,709 )     (27,054,448 )
   
 
 
 
 
 

Net decrease

   (1,091,685 )   $ (28,271,806 )   (252,977 )   $ (6,032,241 )   (1,089,247 )   $ (26,000,598 )
         
       
       

Shares outstanding:

                                          

Beginning of period

   4,154,569             1,015,289             3,024,739          
   
         
         
       

End of period

   3,062,884             762,312             1,935,492          
   
         
         
       

 

Transactions in Class A, B and C shares of the Fund during the fiscal year ended October 31, 2004, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   1,440,408     $ 38,560,709     35,833     $ 887,618     416,191     $ 10,299,687  

Shares issued on reinvestment of distributions

   322,124       8,816,532     162,348       4,125,251     238,173       6,049,594  

Shares redeemed

   (3,963,192 )     (101,362,002 )   (375,412 )     (8,855,776 )   (1,487,218 )     (34,964,155 )
   
 
 
 
 
 

Net decrease

   (2,200,660 )   $ (53,984,761 )   (177,231 )   $ (3,842,907 )   (832,854 )   $ (18,614,874 )
         
       
       

Shares outstanding:

                                          

Beginning of fiscal year

   6,355,229             1,192,520             3,857,593          
   
         
         
       

End of fiscal year

   4,154,569             1,015,289             3,024,739          
   
         
         
       

 

54

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

International Equity Fund

 

Transactions in Class A, B and C shares of the Fund during the six-month period ended April 30, 2005, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   523,755     $ 12,074,618     52,048     $ 1,123,007     588,515     $ 12,811,709  

Shares issued on reinvestment of distributions

   18,455       426,865     915       19,946     21,264       463,338  

Shares redeemed

   (291,204 )     (6,700,617 )   (4,054 )     (87,953 )   (245,797 )     (5,302,805 )
   
 
 
 
 
 

Net increase

   251,006     $ 5,800,866     48,909     $ 1,055,000     363,982     $ 7,972,242  
         
       
       

Shares outstanding:

                                          

Beginning of period

   1,364,660             102,618             2,409,049          
   
         
         
       

End of period

   1,615,666             151,527             2,773,031          
   
         
         
       

 

Transactions in Class A, B and C shares of the Fund during the fiscal year ended October 31, 2004, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   822,448     $ 16,156,244     35,518     $ 652,816     1,115,397     $ 20,359,090  

Shares issued on reinvestment of distributions

   9,797       187,619     310       5,596     6,788       122,733  

Shares redeemed

   (737,793 )     (14,265,252 )   (14,489 )     (266,500 )   (266,565 )     (4,902,753 )
   
 
 
 
 
 

Net increase

   94,452     $ 2,078,611     21,339     $ 391,912     855,620     $ 15,579,070  
         
       
       

Shares outstanding:

                                          

Beginning of fiscal year

   1,270,208             81,279             1,553,429          
   
         
         
       

End of fiscal year

   1,364,660             102,618             2,409,049          
   
         
         
       

 

Mid Cap Stock Fund

 

Transactions in Class A, B and C shares of the Fund during the six-month period ended April 30, 2005, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   6,574,112     $ 170,296,773     68,736     $ 1,674,225     1,708,961     $ 41,736,883  

Shares redeemed

   (1,671,609 )     (43,307,620 )   (159,325 )     (3,887,814 )   (661,028 )     (16,167,690 )
   
 
 
 
 
 

Net increase (decrease)

   4,902,503     $ 126,989,153     (90,589 )   $ (2,213,589 )   1,047,933     $ 25,569,193  
         
       
       

Shares outstanding:

                                          

Beginning of period

   15,071,424             2,500,497             9,249,897          
   
         
         
       

End of period

   19,973,927             2,409,908             10,297,830          
   
         
         
       

 

55

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Transactions in Class A, B and C shares of the Fund during the fiscal year ended October 31, 2004, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   7,380,370     $ 173,167,713     212,929     $ 4,593,048     3,165,821     $ 69,748,380  

Shares redeemed

   (2,332,922 )     (54,047,340 )   (267,117 )     (5,835,738 )   (1,135,325 )     (24,950,029 )
   
 
 
 
 
 

Net increase (decrease)

   5,047,448     $ 119,120,373     (54,188 )   $ (1,242,690 )   2,030,496     $ 44,798,351  
         
       
       

Shares outstanding:

                                          

Beginning of fiscal year

   10,023,976             2,554,685             7,219,401          
   
         
         
       

End of fiscal year

   15,071,424             2,500,497             9,249,897          
   
         
         
       

 

Small Cap Stock Fund

 

Transactions in Class A, B and C shares of the Fund during the six-month period ended April 30, 2005, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   2,092,813     $ 69,124,994     11,785     $ 360,491     463,741     $ 13,961,671  

Shares issued on reinvestment of distributions

   265,169       8,840,746     24,233       741,274     132,386       4,052,329  

Shares redeemed

   (1,178,165 )     (38,330,681 )   (51,607 )     (1,545,759 )   (212,596 )     (6,341,095 )
   
 
 
 
 
 

Net increase (decrease)

   1,179,817     $ 39,635,059     (15,589 )   $ (443,994 )   383,531     $ 11,672,905  
         
       
       

Shares outstanding:

                                          

Beginning of period

   5,657,530             503,849             2,639,082          
   
         
         
       

End of period

   6,837,347             488,260             3,022,613          
   
         
         
       

 

Transactions in Class A, B and C shares of the Fund during the fiscal year ended October 31, 2004, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   2,543,574     $ 81,326,669     58,779     $ 1,676,185     831,936     $ 24,201,478  

Shares redeemed

   (717,885 )     (22,488,981 )   (61,671 )     (1,789,357 )   (292,791 )     (8,517,179 )
   
 
 
 
 
 

Net increase (decrease)

   1,825,689     $ 58,837,688     (2,892 )   $ (113,172 )   539,145     $ 15,684,299  
         
       
       

Shares outstanding:

                                          

Beginning of fiscal year

   3,831,841             506,741             2,099,937          
   
         
         
       

End of fiscal year

   5,657,530             503,849             2,639,082          
   
         
         
       

 

56

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Value Equity Fund

 

Transactions in Class A, B and C Shares of the Fund during the six-month period ended April 30, 2005, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   58,592     $ 1,094,095     9,585     $ 176,201     71,329     $ 1,307,276  

Shares issued on reinvestment of distributions

   6,296       117,354     396       7,229     2,022       36,876  

Shares redeemed

   (85,379 )     (1,600,917 )   (13,731 )     (253,659 )   (93,788 )     (1,720,578 )
   
 
 
 
 
 

Net decrease

   (20,491 )   $ (389,468 )   (3,750 )   $ (70,229 )   (20,437 )   $ (376,426 )
         
       
       

Shares outstanding:

                                          

Beginning of period

   774,604             196,923             1,015,953          
   
         
         
       

End of period

   754,113             193,173             995,516          
   
         
         
       

 

Transactions in Class A, B and C shares of the Fund during the fiscal year ended October 31, 2004, were as follows:

 

    Class A Shares
     Class B Shares
     Class C Shares
  
    Shares
     Amount
     Shares
     Amount
     Shares
     Amount
  

Shares sold

   219,801     $ 3,721,729     38,172     $ 635,457     396,294     $ 6,449,332  

Shares issued on reinvestment of distributions

   5,582       91,539     715       11,478     3,571       57,354  

Shares redeemed

   (157,192 )     (2,666,029 )   (28,085 )     (469,493 )   (125,147 )     (2,092,015 )
   
 
 
 
 
 

Net increase

   68,191     $ 1,147,239     10,802     $ 177,442     274,718     $ 4,414,671  
         
       
       

Shares outstanding:

                                          

Beginning of fiscal year

   706,413             186,121             741,235          
   
         
         
       

End of fiscal year

   774,604             196,923             1,015,953          
   
         
         
       

 

Note 3: Purchases and Sales of Securities.    For the six-month period ended April 30, 2005, purchases and sales of investment securities (excluding repurchase agreements and short-term obligations) were as follows:

 

     Investment Securities
     Purchases
    Sales

Diversified Growth Fund

    $ 65,602,488    $ 54,169,687

Growth Equity Fund

      117,089,915      176,533,054

International Equity Fund

      47,984,423      33,264,926

Mid Cap Stock Fund

      700,628,507      528,469,185

Small Cap Stock Fund

      126,980,732      87,774,541

Value Equity Fund

      2,026,230      2,266,206

 

57

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(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” or “Heritage”), the Funds agreed to pay to the Manager the following annual fee as a percentage of each Fund’s average daily net assets, which is computed daily and payable monthly. When average daily net assets exceed the Fund’s respective break point, the management fee is reduced to the subsequent management fee on those assets greater than the break point.

 

     Management
Fee
    

Break Point

Diversified Growth Fund

   1.00 %   First $50 million
     0.75 %   $50 million to $500 million
     0.70 %   $500 million to $1 billion
     0.65 %   Over $1 billion

Growth Equity Fund

   0.75 %   First $1 billion
     0.70 %   Over $1 billion

International Equity Fund

    1.00 %   First $100 million
     0.80 %   $100 million to $1 billion
     0.70 %   Over $1 billion

Mid Cap Stock Fund

    0.75 %   First $500 million
     0.70 %   $500 million to $1 billion
     0.65 %   Over $1 billion

Small Cap Stock Fund

    1.00 %   First $50 million
     0.75 %   Over $50 million

Value Equity Fund

    0.75 %   First $500 million
     0.70 %   Over $500 million

 

The Manager contractually waived its management fee and, if necessary, reimbursed each Fund to the extent that Class A, B and C shares annual operating expenses exceed that Fund’s average daily net assets attributable to that class for the 2005 fiscal year as follows:

 

     Class A Shares
     Class B and
Class C Shares
  

Diversified Growth Fund

    1.60 %   2.35 %

Growth Equity Fund

    1.35 %   2.10 %

International Equity Fund

    1.78 %   2.53 %

Mid Cap Stock Fund

    1.45 %   2.20 %

Small Cap Stock Fund

    1.40 %   2.15 %

Value Equity Fund

    1.45 %   2.20 %

 

If total Fund expenses fall below the expense limitation agreed to by the Manager before the end of the fiscal years ending October 31, 2007, 2006 and 2005, respectively, each Fund may be required to pay the Manager a portion or all of the waived management fees for the following funds in the amount indicated:

 

       2007
      2006
      2005

Growth Equity Fund

      $ 31,137      $ —        $ —  

International Equity Fund

        146,302        255,378        202,753

Small Cap Stock Fund

        —          —          176,172

Value Equity Fund

        72,705        131,340        129,328

 

58

Table of Contents

Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Management fees of $66,000 were recovered from the Small Cap Stock Fund for the six-month period ended April 30, 2005. For the same period, no other management fees were recovered in any of the other funds in the Trust.

 

The Manager entered into a subadvisory agreement with Julius Baer Investment Management Inc. (“Julius Baer”) to provide to the International Equity Fund investment advice, portfolio management services (including the placement of brokerage orders) and certain compliance and other services for an annualized fee payable by the Manager.

 

The Manager entered into a subadvisory agreement with Dreman Value Management, LLC (“Dreman”) 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. Eagle Asset Management, Inc. (“Eagle”), serves as an additional subadviser to the Fund. However, the Manager currently has not allocated any assets of the Fund to Eagle.

 

The Manager has entered into agreements with Eagle (with respect to Diversified Growth Fund, Growth Equity Fund, Mid Cap Stock Fund and 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 0.50% of the Fund’s average daily net assets without regard to any reduction due to the imposition of expense limitations.

 

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 Raymond James & Associates, Inc. (the “Distributor”) a fee pursuant to the Class A shares Distribution Plan of up to 0.35% of the average daily net assets. However, at the present time the Board of Trustees has authorized payments of only 0.25% 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. (“RJF”).

 

The Manager also is the Fund Accountant and Shareholder Servicing Agent for Diversified Growth Fund, Growth Equity Fund, Mid Cap Stock Fund, Small Cap Stock Fund, and Value Equity Fund. In addition, the Manager is the Shareholder Servicing Agent for International Equity Fund. For providing Shareholder Servicing and Fund Accounting Services the Manager is reimbursed for expenses incurred plus an additional amount up to 10%.

 

Trustees of the Trust also serve as Trustees for Heritage Cash Trust, Heritage Capital Appreciation Trust, Heritage Growth and Income Trust and Heritage Income Trust, investment companies that also are advised by the Manager (collectively referred to as the “Heritage Mutual Funds”). Each Trustee of the Heritage Mutual Funds who is not an employee of the Manager or employee of an affiliate of the Manager receives an annual fee of $23,000 and an additional fee of $3,000 for each combined quarterly meeting of the Heritage Mutual Funds attended. Trustees’ fees and expenses are paid equally by each of the Heritage Mutual Funds. In addition, each independent Trustee that serves on the Audit Committee or Compliance Committee will receive $500 for attendance at their respective meeting (in person or telephonic). The Lead Independent Trustee, the Audit Committee Chair, and the Compliance Committee Chair each will receive an annual retainer of $2,500 in addition to meeting fees. Trustees’ fees and expenses are paid equally by each portfolio in the Heritage Mutual Funds.

 

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Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Total front-end and contingent deferred sales charges received by the Distributor for the six-month period ended April 30, 2005, were as follows:

 

     Front-end
Sales Charge
    Contingent Deferred Sales Charge
     Class A Shares
    Class A Shares
    Class B Shares
    Class C Shares

Diversified Growth Fund

    $ 57,451    $ 34    $ 20,334    $ 4,678

Growth Equity Fund

      19,840      141      55,736      4,274

International Equity Fund

      71,581      —        1,373      2,478

Mid Cap Stock Fund

      589,476      3,259      70,880      15,461

Small Cap Stock Fund

      289,291      171      12,034      5,202

Value Equity Fund

      14,316      —        2,320      1,278

 

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 brokerage commissions paid directly to the Distributor for the six-month period ended April 30, 2005 were as follows:

 

       Total Agency
Brokerage
Commissions
     

Paid To
Raymond James

& Associates, Inc.

Diversified Growth Fund

      $ 202,338      $ 4,220

Growth Equity Fund

        398,993        —  

International Equity Fund

        140,517        7,667

Mid Cap Stock Fund

        1,645,916        35,725

Small Cap Stock Fund

        482,820        19,154

Value Equity Fund

        3,416        —  

 

Note 5: Federal Income Taxes.    The timing and character of certain income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. As a result, net investment income (loss) and net realized gain (loss) from investment transactions for a reporting period may differ from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent; they are charged or credited to paid in capital or accumulated net realized loss, as appropriate, in the period that the differences arise. These reclassifications have no effect on net assets or net asset value per share.

 

Diversified Growth Fund:

 

For the fiscal year ended October 31, 2004, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund increased (credited) accumulated net investment loss $2,020,182, decreased (debited) accumulated net realized gain $602,988, and decreased (debited) paid in capital $1,417,194. Capital loss carryforwards in the amount of $1,441,711 were utilized in the fiscal year ended October 31, 2004.

 

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Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

Growth Equity Fund:

 

For the fiscal year ended October 31, 2004, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss and wash sales and capital loss carryforwards (from merger), the Fund increased (credited) accumulated net investment loss $2,157,111, increased (credited) paid in capital $4,150,121, and decreased (debited) net undistributed realized loss $6,307,232. The Fund has net tax basis capital loss carryforwards of $112,006,617. Capital loss carryforwards of $18,659,106 were utilized in the fiscal year ended October 31, 2004. Capital loss carryforwards in the amount of $54,691,256, $57,002,642, and $312,719 may be applied to any net taxable gains until their expiration dates in 2009, 2010 and 2011, respectively.

 

International Equity Fund:

 

For the fiscal year ended October 31, 2004, to reflect reclassifications arising from permanent book/tax differences primarily attributable to foreign currency losses and investments in passive foreign investment companies, the Fund increased (credited) undistributed net investment income and decreased (debited) accumulated net realized loss $1,272,473. The Fund has net tax basis capital loss carryforwards of $275,104 which may be applied to any net taxable gains until their expiration dates in 2010. Capital loss carryforwards of $6,759,722 were utilized in the fiscal year ended October 31, 2004.

 

Mid Cap Stock Fund:

 

For the fiscal year ended October 31, 2004, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund increased (credited) accumulated net investment loss and decreased (debited) paid in capital $5,063,671. The Fund has net tax basis capital loss carryforwards of $4,601,400 which may be applied against any realized net taxable gains until its expiration date of October 31, 2010. Capital loss carryforwards of $42,693,522 were utilized in the fiscal year ended October 31, 2004.

 

Small Cap Stock Fund:

 

For the fiscal year ended October 31, 2004, to reflect reclassifications arising from permanent book/tax differences primarily attributable to a net operating loss, the Fund increased (credited) accumulated net investment loss $1,707,839, and decreased (debited) accumulated net realized gain $810 and paid in capital $1,707,029. Capital loss carryforwards of $3,846,459 were utilized in the fiscal year ended October 31, 2004.

 

Value Equity Fund:

 

The Fund has net tax basis capital loss carryforward of $7,028,352. Capital loss carryforwards of 704,443 were utilized in the fiscal year ended October 31, 2004. Capital loss carryforwards in the amount of $5,176,376 and $1,851,976 may be applied to any net taxable gains until their expiration dates in 2010 and 2011, respectively.

 

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Heritage Series Trust

Notes to Financial Statements

(unaudited)

(continued)

 

For income tax purposes, distributions paid during the fiscal years ended October 31, 2004 and 2003 were as follows:

 

     Ordinary Income
   

Long-Term

Capital Gains

     2004
    2003
    2004
    2003

Diversified Growth Fund

    $ —      $ —      $       —      $       —  

Growth Equity Fund

      —        —        —        —  

International Equity Fund

      347,295      —        —        —  

Mid Cap Stock Fund

      —        —        —        —  

Small Cap Stock Fund

      —        —        —        —  

Value Equity Fund

      169,975      51,972      —        —  

 

As of October 31, 2004, the components of distributable earnings on a tax basis were as follows:

 

     Undistributed
Ordinary
Income
    Undistributed
Long-Term Gain
    Capital Loss
Carryforwards
  

Diversified Growth Fund

    $ —      $ 8,421,888    $ —    

Growth Equity Fund

      —        —        (188,871,524 )

International Equity Fund

      980,538      —        (275,104 )

Mid Cap Stock Fund

      —        —        (4,601,400 )

Small Cap Stock Fund

      —        15,012,179      —    

Value Equity Fund

      145,349      —        (7,028,352 )

 

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Heritage Series Trust

Descriptions of Indices

 

Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index): An index, with dividends reinvested, representative of the securities markets of twenty developed market countries in Europe, Australasia and the Far East.

 

Russell 1000® Index: Measures the performance of the 1,000 largest companies in the Russell 3000® Index, representative of the U.S. large capitalization securities market.

 

Russell 2000® Index: Measures the performance of the 2,000 smallest companies in the Russell 3000® Index, representative of the U.S. small capitalization securities market.

 

Russell 1000® Growth Index: Measures the performance of those Russell 1000® Index securities with higher price-to-book ratios and higher forecasted growth values, representative of U.S. securities exhibiting growth characteristics.

 

Russell 1000® Value Index: Measures the performance of those Russell 1000® Index securities with lower price-to-book ratios and lower forecasted growth values, representative of U.S. securities exhibiting value characteristics.

 

Russell 2000® Growth Index: Measures the performance of those Russell 2000® Index securities with higher price-to-book ratios and higher forecasted growth values, representative of U.S. securities exhibiting growth characteristics.

 

Russell 2000® Value Index: Measures the performance of those Russell 2000® companies with lower price-to-book ratios and lower forecasted growth values, representative of U.S. securities exhibiting value characteristics.

 

Russell Midcap® Index: Measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 26% of the total market capitalization of the Russell 1000® Index. As of May 28, 2004, the average market capitalization was approximately $4.2 billion; the median market capitalization was approximately $3.2 billion.

 

Russell Midcap® Growth Index: Measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth index.

 

Russell Midcap® Value Index: Measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value index.

 

Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index): is an unmanaged index of 500 widely-held large stocks that are considered representative of the U.S. stock market.

 

Standard & Poor’s MidCap 400 Index: is an unmanaged index consisting of 400 mid-sized domestic companies chosen for market size, liquidity and industry group representation.

 

Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.

 

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LOGO

 

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Item 2. Code of Ethics

 

Not applicable to semi-annual reports.

 

Item 3. Audit Committee Financial Expert

 

Not applicable to semi-annual reports.

 

Item 4. Principal Accountant Fees and Services

 

Not applicable to semi-annual reports.

 

Item 5. Audit Committee of Listed Registrants

 

Not applicable to the registrant.

 

Item 6. Schedule of Investments

 

Included as part of report to shareholders under Item 1.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

 

Not applicable to the registrant.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies

 

Not applicable to the registrant.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

 

Not applicable to the registrant.

 

Item 10. Submission of Matters to a Vote of Security Holders

 

There have been no material changes to the Nominating Committee Charter, which sets forth procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees, since the Trust last provided disclosure in response to this item.

 

Item 11. Controls and Procedures

 

(a) Based on an evaluation of the disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act), the Principal Executive Officer and Principal Financial Officer of Heritage Series Trust have concluded that such disclosure controls and procedures are effective as of June 28, 2005.

 

(b) There was no change in the internal controls over financial reporting (as defined in Rule 30a-3(d) of Heritage Series Trust that occurred during the second fiscal quarter that has materially affected or is reasonably likely to materially affect, its internal control over financial reporting.

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Item 12. Exhibits

 

(a)(1) Not applicable to semi-annual reports.

 

(a)(2) The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 is filed and attached hereto as Exhibit 99.CERT.

 

(a)(3) Not applicable to the registrant.

 

(b) The certification required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 is filed and attached hereto as Exhibit 99.906CERT.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

HERITAGE SERIES TRUST

 

Date: June 28, 2005

    /s/    K.C. Clark         
   

K.C. Clark

Executive Vice President and

Principal Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Date: June 28, 2005

    /s/    K.C. Clark         
   

K.C. Clark

Executive Vice President and

Principal Executive Officer

Date: June 28, 2005

    /s/    Andrea N. Mullins         
   

Andrea N. Mullins

Principal Financial Officer and

Treasurer