<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
PRE-EFFECTIVE AMENDMENT NO._______
[ ]
POST-EFFECTIVE AMENDMENT NO. 68 [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [x]
OF 1940
AMENDMENT NO. 26 [x]
(Check Appropriate Box or Boxes)
THE AMERICAN HERITAGE FUND, INC.
(Exact Name of Registrant as specified in Charter)
1370 AVENUE OF THE AMERICAS, NEW YORK, NY 10019
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 212-397-3900
JONATHAN B. REISMAN, 5100 TOWN CENTER CIRCLE, BOCA RATON, FL 33486
(Name and Address of Agent for Service)
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION 24(f) OF THE INVESTMENT COMPANY ACT
OF 1940. THE REGISTRANT'S RULE 24f-2 NOTICE FOR ITS FISCAL YEAR ENDED MAY 31,
1997 WAS FILED IN JULY 1997.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[ ] IMMEDIATELY UPON FILING [ ] ON (DATE) PURSUANT TO
PURSUANT TO PARAGRAPH (b) PARAGRAPH (b)
[X] 60 days after filing [ ] ON (DATE) PURSUANT TO
pursuant to paragraph PARAGRAPH (a)(1)
(a)(1)
[ ] 75 days after filing [ ] On (date) pursuant to
pursuant to paragraph paragraph (a)(2) of Rule
(a)(1) 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE> 2
PART A
<PAGE> 3
PROSPECTUS
THE AMERICAN HERITAGE FUND, INC.
A NO-LOAD LEVERAGED MUTUAL FUND
A non-diversified, open-end management investment company having an
investment objective of seeking maximum capital growth
1370 Avenue of the Americas
New York, New York 10019
(212) 397-3900
(800) 828-5050
THE AMERICAN HERITAGE FUND, INC. (the "Fund") is a no-load mutual fund.
The Fund is designed for investors who desire to participate in a carefully
supervised program of seeking maximum capital growth. The Fund may utilize the
investment techniques of short-term trading, hedging, leveraging through
borrowing, the purchase and sale of put and call options and warrants, the
writing of listed put and call options and the purchase of foreign securities.
Through the use of these and other investment techniques described in this
Prospectus, including the types of investments made and to be made by the Fund,
management hopes to take advantage of investment opportunities in both rising
and declining markets. These techniques involve greater than normal risk and
attainment of the Fund's investment objective cannot, of course, be assured.
Common stocks and securities convertible or exchangeable thereto, including
securities issued by small and virtually unknown companies, companies whose
securities are not publicly quoted or are otherwise illiquid and companies that
have no history of operations, or for other reasons, have never earned a profit,
will normally constitute all or substantially all of the Fund's portfolio. The
Fund believes that securities representing approximately *________*% of the
Fund's net assets on the date of this Prospectus were not liquid. On such date,
the Fund's speculative investment in the securities of a small foreign company
represented approximately *________*% of the Fund's net assets. The Fund and
certain others are defendants in a purported class action. See "Special Risk
Considerations," "The Fund's Investment Objective, Policies and Risk Factors"
and "Legal Proceedings."
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. A Statement of Additional
Information dated *________*, 1997 containing additional information about the
Fund, including the Fund's Financial Statements, Notes to Financial Statements
and Independent Auditors' Report, has been filed with the Securities and
Exchange Commission and is available upon request, without charge, by writing to
the Fund at the address set forth above or by calling the Fund at either of the
above telephone numbers. The
<PAGE> 4
Statement of Additional Information is incorporated by reference into the
Prospectus. The Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding registrants
that file electronically with the Securities and Exchange Commission.
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is *________*, 1997
<PAGE> 5
TABLE OF CONTENTS
PAGE NO.
--------
Expense Summary ..................................................... 7
Highlights .......................................................... 8
Financial Highlights and Related Ratios/Supplemental Data ........... 10
Special Risk Considerations ......................................... 11
The Fund's Investment Objective, Policies and Risk Factors .......... 12
Management's Discussion of the Fund's Performance ................... 19
Investment Restrictions ............................................. 20
Management .......................................................... 21
Determination of Net Asset Value .................................... 23
How to Become an Investor in the Fund ............................... 23
How to Redeem Shares ................................................ 24
Distribution of Income Dividends and Realized Capital Gains ......... 25
Total Return ........................................................ 26
Shareholder Services ................................................ 27
Legal Proceedings ................................................... 28
Additional Facts .................................................... 29
<PAGE> 6
EXPENSE SUMMARY
This table is designed to illustrate the various fees and expenses that
you, as an investor in the Fund, will incur.
SHAREHOLDER TRANSACTION EXPENSES
Sales load imposed on purchases ........................... None
Sales load imposed on reinvested dividends ................ None
Deferred sales load ....................................... None
Redemption fees ........................................... None
ANNUAL FUND OPERATING EXPENSES (As a percentage of
Average Net Assets)
Management fees ........................................... 1.25% *
12b-1 fees ................................................ None
Other expenses ............................................ 1.56%
Total Fund operating expenses ....................... 2.81%
- ----------
* Represents the maximum annual rate of compensation payable by the Fund
to its investment advisor. The annual rate of compensation payable by the
Fund to its investment advisor is one and one-quarter percent (1.25%) of
the first $100,000,000 of average daily net assets and one percent (1%) of
any additional net assets.
** Based upon actual expenses incurred by the Fund during the fiscal year
ended May 31, 1997.
The fees and other expenses in the foregoing table are based upon those incurred
by the Fund during the fiscal year ended May 31, 1997.
EXAMPLE
The following example illustrates the expenses (which have been restated
as described above) that you would pay on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period. Since the Fund
charges no redemption fees of any kind, the expenses would be the same if no
redemption was made.
<TABLE>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$30 $90 $154 $324
</TABLE>
The purpose of the table and the example is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. THE EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
7
<PAGE> 7
HIGHLIGHTS
INVESTMENT The investment objective of the Fund is to seek maximum
OBJECTIVE capital growth. Income from the Fund's investment
portfolio will be only an incidental consideration and
entirely subordinate to the Fund's investment objective.
See "The Fund's Investment Objective, Policies and Risk
Factors."
NO SALES No sales charge or load will be deducted from the amount
CHARGE invested. Accordingly, the Fund is a "no load" Fund. See
"How to Become an Investor in the Fund."
MINIMUM The minimum initial investment is $2,500 (or, in the
INVESTMENTS case of an IRA account, $2,000). Subsequent investments
may be made, at the option of the investor, in amounts
of $250 or more. Shareholders may open additional
accounts (e.g. custodian accounts, IRA accounts, and
Keogh accounts) with a minimum investment of $1,000.
REDEMPTION Investors have the right to redeem their shares at the
net asset value next determined after receipt of a duly
made request. There is no redemption fee. The Fund
reserves the right to redeem in cash or in kind. See
"How to Redeem Shares."
DIVERSIFICATION The Fund is a non-diversified investment company. Since
the Fund is non-diversified, certain limitations with
respect to diversification of assets are applicable to
only 50% of the value of the Fund's total assets. To the
extent that the Fund invests a substantial portion of
its assets in the securities of relatively few issuers,
the risks attendant to an investment in the Fund may
increase. See "The Fund's Investment
8
<PAGE> 8
Objective, Policies and Risk Factors."
RISK FACTORS The Fund may utilize the investment techniques of
short-term trading, hedging, leveraging through
borrowing, the purchase and sale of put and call options
and warrants, the writing of listed put and call
options, the purchase of foreign securities, the
purchase of securities issued by small and virtually
unknown companies, companies whose securities are not
publicly traded or are otherwise illiquid and companies
that have no history of operations, or for other
reasons, have never earned a profit, the purchase of
high yield debt securities and the purchase of
restricted and other illiquid securities. These
techniques involve greater than normal risk and
attainment of the Fund's objective cannot, of course, be
assured. The Fund and certain others are defendants in a
purported class action. See "Special Risk
Considerations," "The Fund's Investment Objective,
Policies and Risk Factors" and "Legal Proceedings."
INVESTMENT American Heritage Management Corporation is the Fund's
ADVISOR Investment Advisor. The primary business of the
Investment Advisor is to provide investment advice to
the Fund and American Heritage Growth Fund, Inc. The
Fund pays the Investment Advisor a fee which, on an
annual basis, amounts to one and one-quarter percent
(1.25%) of the first $100,000,000 of average daily net
assets and one percent (1%) of additional net assets.
See "Management."
CAPITAL This Prospectus relates to an offer for sale of shares
STOCK of capital stock, $.01 par value.
RETIREMENT The Fund offers a prototype Individual Retirement Plan
PLANS (IRA), as well as a prototype Self-Employed Retirement
Plan (KEOGH). See "Shareholder Services."
9
<PAGE> 9
FINANCIAL HIGHLIGHTS AND RELATED RATIOS/SUPPLEMENTAL DATA
The Fund's Financial Highlights and Related Ratios/Supplemental Data for the
fiscal years ended May 31 are reflected in the following table. Items 1 through
8 are expressed on a per share basis for a share outstanding throughout the
period. The information was derived from financial statements which have been
audited and reported upon by the Fund's Independent Certified Public
Accountants. Commencing December 16, 1993, pursuant to a new Investment Advisory
Agreement, the annual rate of the investment advisory fee payable to American
Heritage Management Corporation ("AHMC") was increased to one and one-quarter
percent (1.25%) of the first $100,000,000 of average daily net assets and one
percent (1%) of any additional net assets and the Fund began paying its own rent
for office space. The foregoing changes are not reflected in the historical data
prior to such date set forth in the following table. See "Management."
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
1. Net assets value,
beginning of year $ .76 $ .63 $ 1.19 $ 1.42 $ 1.15
Income from investment
operations
2. Net investment
income (loss) (.03) (.02) .06 .19 (.01)
3. Net gains or (losses) on
securities (both realized
and unrealized) .10 .15 (.48) (.35) .36
----------- ----------- ----------- ------------ -----------
4. Total from investment
operations .07 .13 (.42) (.16) .35
Less distributions
5. Dividends (from net
investment income) -- -- .07 -- .08
6. Distributions (from
capital gains) -- -- -- .07 --
7. Tax return capital
distribution -- -- .07 -- --
----------- ----------- ----------- ------------ -----------
8. Net assets value,
end of year $ .83 $ .76 $ .63 $ 1.19 $ 1.42
=========== =========== =========== ============ ===========
Total return 9.21% 20.63% (38.37%) (12.49%) 32.89%
Net assets,
end of period $18,126,591 $21,429,753 $30,779,569 $101,036,392 $68,498,156
Ratio of expenses to
average net assets 6.42% 6.25% 3.69% 2.41% 2.1%
Ratio of net income (loss) to
average net assets (4.97%) (3.53%) 6.55% 3.40% (.46%)
Portfolio turnover rate 470% 606% 620% 434% 278%
Average commission
rate paid $ .0879 $ .0866 N/A N/A N/A
<CAPTION>
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
1. Net assets value,
beginning of year $ 1.12 $ 1.03 $ 1.15 $ 1.14 $ 1.61
Income from investment
operations
2. Net investment
income (loss) 1.07 (.02) (.10) (.08) (.12)
3. Net gains or (losses) on
securities (both realized
and unrealized) (.66) .11 (.02) .09 (.26)
----------- ---------- ---------- --------- --------
4. Total from investment
operations .41 .09 (.12) .01 (.38)
Less distributions
5. Dividends (from net
investment income) .16 -- -- -- --
6. Distributions (from
capital gains) .22 -- -- -- .09
7. Tax return capital
distribution -- -- -- -- --
----------- ---------- ---------- --------- --------
8. Net assets value,
end of year $ 1.15 $ 1.12 $ 1.03 $ 1.15 $ 1.14
=========== ========== ========== ========= ========
Total return 42.49% 8.74% (10.43%) .88% (22.41%)
Net assets,
end of period $26,543,132 $2,287,446 $1,142,677 $ 630,006 $406,305
Ratio of expenses to
average net assets 2.2% 6.79% 11.04% 13.02% 11.9%
Ratio of net income (loss) to
average net assets 21.50% (3.72%) (5.80%) (8.00%) (8.70%)
Portfolio turnover rate 776% 607% 76% 81% 189%
Average commission
rate paid N/A N/A N/A N/A N/A
</TABLE>
AHMC HAS BEEN THE FUND'S INVESTMENT ADVISOR SINCE DECEMBER 1985. BOTH A MAJORITY
OF THE FUND'S BOARD OF DIRECTORS AND CONTROL OF AHMC CHANGED ON FEBRUARY 1,
1990. SINCE THAT DATE, HEIKO H. THIEME HAS BEEN THE CHIEF EXECUTIVE OFFICER OF
THE FUND AND AHMC AND IN SUCH CAPACITIES, HAS BEEN PRIMARILY RESPONSIBLE FOR THE
FUND'S PORTFOLIO. ACCORDINGLY, TO THE EXTENT THAT THE TABLE REPRESENTS RESULTS
PRIOR TO THAT DATE, SUCH RESULTS OCCURRED PRIOR TO THE FOREGOING CHANGES.
SENIOR SECURITIES
The following table provides certain information with respect to senior
securities (including bank loans) of the Fund during the fiscal years ended May
31, 1988, 1991, 1992, 1993, 1994, 1995, 1996 and 1997. The Fund did not issue
any senior securities during any other of its ten fiscal years ended May 31,
1997.
10
<PAGE> 10
<TABLE>
<CAPTION>
================================================================================
Average
Amount of
Average Average Debt Per
Amount of Amount of Number of Share
Debt Debt Shares During
Fiscal Outstanding Outstanding Outstanding the
Year at End of During During the Fiscal
Ended Fiscal Year Fiscal Year Fiscal Year Year
================================================================================
<S> <C> <C> <C> <C>
1988 -0- $ 2,381 160,155 $ .0148
- --------------------------------------------------------------------------------
1991 -0- 1,918 1,408,391 .0014
- --------------------------------------------------------------------------------
1992 -0- 84,464 8,712,891 .0097
- --------------------------------------------------------------------------------
1993 -0- 9,425 24,775,240 .0004
- --------------------------------------------------------------------------------
1994 921,563 910,271 81,520,942 .0112
- --------------------------------------------------------------------------------
1995 4,400,746 3,427,466 68,082,778 .0503
- --------------------------------------------------------------------------------
1996 -0- 1,834,051 36,781,350 .0499
- --------------------------------------------------------------------------------
1997 1,004,334 2,143,580 24,386,571 .0879
================================================================================
</TABLE>
The averages shown above were determined on a daily basis.
SPECIAL RISK CONSIDERATIONS
The Fund is not a complete investment program and is designed for
investors willing to assume risks inherent in the Fund's investment policies and
practices in order to seek achievement of the Fund's investment objective. No
assurance can be given that the Fund will be successful. See "The Fund's
Investment Objective, Policies and Risk Factors." By purchasing shares in the
Fund, however, an investor may receive advantages he would not readily obtain as
an individual investor, including professional management and continuous
supervision of investments. The Fund may not, at any particular time, engage in
all or any of the investment activities described in this Prospectus. Such
activities may be engaged in only periodically or not at all. In the opinion of
the Fund's management, however, the ability to engage in such activities
provides an opportunity for flexibility in the Fund's operation which it
believes is desirable in order to achieve the Fund's investment objective.
In view of its broad and flexible investment powers, the Fund's success or
failure may be more dependent upon the skill and ability of AHMC and less
dependent upon movement of the securities
11
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market in general, than is the case with most mutual funds whose investment
powers are not as broad or as flexible. In addition to the payment of an
investment advisory fee, the Fund bears all of its other expenses. Because of
the Fund's relatively small size and the amount of the investment advisory fee
payable to AHMC, the ratio of such expenses to the Fund's net assets is higher
than those of most larger management investment companies. See "The Fund's
Investment Objective, Policies and Risk Factors" and "Financial Highlights and
Related Ratios/Supplemental Data."
The Fund and certain others are defendants in a purported class action.
See "Legal Proceedings."
THE FUND'S INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The investment objective of the Fund is to seek maximum capital growth.
Income from the Fund's investment portfolio will be only an incidental
consideration entirely subordinate to the capital growth objective. It is
important that the Fund's objective match the investor's objective. There can be
no assurance that the Fund will, in fact, achieve its objective. The investment
objective of the Fund cannot be changed without shareholder approval.
In contrast to most mutual funds, the Fund, in addition to the usual
investment practices, may seek to obtain its investment objective through the
use of certain speculative investment techniques which entail greater than
average risks. For example, the Fund may increase its security holdings through
the use of money borrowed from banks ("leveraging"); it may engage in short
selling to profit from a decline in price of particular securities or to protect
against downward movement in the market; it may purchase puts, calls and
warrants and combinations thereof; it may purchase foreign securities; it may
purchase restricted and other illiquid securities and it may engage in
short-term trading. The Fund may make speculative investments such as the
purchase of securities issued by small and virtually unknown companies,
companies whose securities are not publicly traded or are otherwise illiquid and
companies that have no history of operations or, for other reasons, have never
earned a profit. Such companies are often extremely thinly capitalized and the
Fund bears the risk of a total loss of its investment in such companies. The
Fund believes that securities representing approximately *________*% of the
Fund's net assets on the date of this Prospectus were not liquid. Put and call
options which may be purchased and written by the Fund, as well as options,
warrants and convertible securities which may be purchased by the Fund are
derivative securities.
In calculating net asset value, all portfolio securities are valued at
market value when there is a reliable quotation available for the securities.
All other portfolio securities are valued as the Board of Directors or a
committee composed of members of the
12
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Board of Directors in good faith determines. On the date of this Prospectus,
approximately *________*% of the value of the Fund's net assets was determined
by the Fund's Board of Directors or such committee. The foregoing includes
approximately *________*% of the value of the Fund's net assets at that date
which consisted of securities issued by companies whose securities were not
publicly quoted. Because of the inherent uncertainty and difficulty of the
valuation process, and in some cases, because of limited information available,
values determined by the Board of Directors may differ significantly from the
values that would have been used had a ready market for the securities existed,
and the differences could be material. See "Determination of Net Asset Value"
and the Fund's Financial Statements, Notes to Financial Statements and
Independent Auditors' Report which have been incorporated by reference into the
Fund's Statement of Additional Information.
To the extent used, the Fund's investment techniques may result in greater
turnover of the Fund's portfolio and greater expense than is customary for most
mutual funds. The Fund anticipates that its annual portfolio turnover rate will
be 150% or more. Although it is difficult to predict the maximum rate, the Fund
does not believe that such rate will generally exceed 700%. A high rate of
portfolio turnover can be expected to result in the payment of a high volume of
brokerage commissions and the recognition of capital gains and losses. To the
extent that the Fund distributes short-term capital gains, such distributions
will be taxable as ordinary dividends to the investor upon declaration. See
"Financial Highlights," "Management" and "Distribution of Income Dividends and
Realized Capital Gains" in this Prospectus and "Brokerage Allocation and Other
Practices" in the Fund's Statement of Additional Information.
Generally, more than 80% of the Fund's investments, other than cash and
cash equivalents, will consist of common stocks and securities convertible into
or exchangeable for common stocks, such as rights, warrants and options. To a
limited degree, the Fund may invest in preferred stocks and debt securities,
such as corporate bonds and debentures and securities issued by the United
States Government and its instrumentalities, when they are believed to offer
opportunities for growth of capital or are desirable in the light of prevailing
market or economic conditions. Any such debt securities so purchased by the Fund
may be either "investment grade" or speculative. Debt securities in the lowest
category of investment grade debt may have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade debt securities. Speculative debt securities may include
obligations of issuers that are in default or in bankruptcy when Management
believes that the prospect of capital appreciation outweighs the risk of
investment therein. Naturally, the risk attendant to the investment in such
securities, as well as other debt securities,
13
<PAGE> 13
can be substantial inasmuch as the value thereof is based upon the ability of
the issuer to make all required payments of interest and principal. Generally,
debt securities which are believed to offer opportunities for growth of capital,
including securities referred to as "junk bonds", may be purchased by the Fund
when Management believes (a) interest rates will decline and, therefore, the
value of the debt securities will increase, or (b) the market value thereof is
likely to appreciate due to factors affecting specific issuers. The Fund does
not intend to purchase any debt securities which are not investment grade, if as
a result of such purchase, more than five percent of the value of the Fund's net
assets will be represented by such securities. When Management believes that a
temporary defensive position is desirable, the Fund may invest in debt
securities, including securities of the United States Government and its
instrumentalities, or retain cash or cash equivalents, all without limitation.
Such debt securities and cash equivalents may include short-term commercial
paper, certificates of deposit and time deposits. The Fund will not acquire time
deposits if (a) at the time of such acquisition more than 10% of the value of
the Fund's net assets will be invested in such time deposits, or (b) the time
deposits cannot be liquidated within seven days. The Fund may also invest in
restricted and other illiquid securities as described herein.
The Fund may invest up to 25% of the value of its total assets at the time
of such investment in securities of companies engaged in a particular industry
if, in the judgment of the Fund, securities of companies in that industry afford
better than average prospects for growth.
The Fund is a non-diversified investment company since it is only with
respect to 50% of the value of the Fund's total assets that (a) not more than 5%
of the value of its total assets may be invested in the securities of any one
issuer (not including securities of the federal government or any
instrumentality thereof) and (b) not more than 10% of the outstanding voting
securities of any one issuer may be acquired by the Fund. To the extent that the
Fund invests a significant portion of the value of its total assets in the
securities of any one issuer, a decline in the value of such securities could
materially adversely affect the value of the Fund's assets.
The Fund and certain others are defendants in a purported class action.
See "Legal Proceedings."
LEVERAGING THROUGH BORROWING
The Fund may borrow money from banks and use the borrowed money
principally to purchase additional securities. This technique may be used in
order to increase the amount of money available to the Fund for investment in
securities believed to have appreciation potential and to increase the amount of
money available to secure
14
<PAGE> 14
short positions. So that the Fund does not have to have specific securities
which it sells released from pledge by a lender, all of the Fund's assets may be
pledged as collateral for such borrowings. The Fund may only borrow money from
banks.
Any investment gains made on the borrowed money in excess of interest paid
will cause the per share net asset value of the Fund to rise faster than would
otherwise be the case. On the other hand, if the investment performance of the
securities purchased with the additional monies fails to cover the interest cost
to the Fund, the net asset value of the Fund will decrease faster than would
otherwise be the case.
The amount of money the Fund may borrow is limited by the Investment
Company Act of 1940. Immediately after such borrowing, the total amount borrowed
may not exceed 33-1/3% of the value of the Fund's assets (including the amount
of such borrowings), less its liabilities (not including any borrowings, but
including the fair market value at the time of computation of any securities
with respect to which there are open short positions). If for any reason,
including market fluctuations, the value of the Fund's assets falls below the
coverage requirement of the statute, the Fund will, within three business days,
reduce its borrowings to the extent necessary to again comply with the 33-1/3%
test. To do this, the Fund may have to sell a portion of its investments at a
time when it may be disadvantageous to do so. The use of leveraging, to a
material extent, will significantly increase the level of risk of an investment
in the Fund. See "Senior Securities."
SHORT SALES AND PUT AND CALL OPTIONS
A short sale is effected by selling a security which the seller does not
own in the hope of purchasing the same security at a later date at a lower
price. Accordingly, the Fund may engage in short sales in an attempt to protect
against downward market movement. In order to make delivery to the buyer and
thus effect a sale, the Fund must borrow the security and in so doing, the Fund
incurs the obligation to replace the security, whatever its price may be at the
time the Fund purchases it for delivery to the lender. The Fund will place in a
segregated account (not with the broker) cash or United States Government
securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short, and (b) any cash or
United States Government securities required to be deposited as collateral with
the broker in connection with the short sale (not including the proceeds from
the short sale). In addition, until the Fund replaces the borrowed securities,
it must daily maintain the segregated account at such level that (1) the amount
deposited in it plus the amount deposited with the broker as collateral will
equal the current market value of the securities sold short, and (2) the amount
deposited in it plus the amount deposited with the broker as collateral will not
be less than the market value of the
15
<PAGE> 15
securities at the time they were sold short. Deposits to the segregated account
do not diminish the risk of loss to the Fund with respect to short sales. The
foregoing requirements do not apply to securities sold short "against the box,"
which is a short sale to the extent that the Fund contemporaneously has or has
the right to obtain at no added cost securities identical to those sold short.
The Fund will not make any short sales during any time that the amount required
to be deposited in the segregated account exceeds 35% of the value of the Fund's
net assets.
Generally, short sales will result in a gain if the price of the
securities declines between the date of the short sale and the date upon which
the securities are purchased to replace those borrowed; conversely, a loss will
result if the security increases in price during such period or if the security
becomes unavailable so that the Fund cannot cover its short position. Such gain
is decreased and loss is increased by the amount of any premium, dividends,
interest or brokerage commission the Fund may be required to pay with respect to
such short sale. Any income from short sales generally is, when distributed,
taxable to shareholders at ordinary income tax rates.
The Fund may purchase and sell put and call options without limitation for
purposes of hedging or to seek capital growth. The Fund may hedge its
investments by combining puts and calls with other investment techniques. For
example, the Fund may sell short securities for which it holds a call or the
Fund may purchase securities for which it holds a put. The puts and calls which
the Fund will purchase will be listed for trading on one or more domestic
securities exchanges. From time to time, the Fund may obtain a put option from
the seller of securities purchased by the Fund or an affiliate of such seller in
connection with a purchase of securities by the Fund. Generally, no market will
exist for any such option. The Fund intends to purchase put and call options
when Management believes that such purchase will result in an opportunity for
capital appreciation based upon specific facts and circumstances. A call option
permits the holder thereof to purchase the securities of an issuer at a
predetermined price. Call options can be expected to increase in value if the
value of such securities increases, and, conversely, call options can be
expected to decrease in value if the value of such securities decreases. A put
option permits the holder to sell the securities of an issuer at a predetermined
price. Put options, can be expected to increase in value if the value of such
securities decreases. Put and call options can be purchased and sold by the Fund
without limitation. In order for the Fund to realize a profit from purchase of a
put option, the value of the security underlying such option must decrease below
the exercise price of the option by an amount which is greater than the option
premium paid by the Fund plus transaction costs. In order for the Fund to
realize a profit from purchase of a call option, the value of the security
underlying such option must increase above the exercise price of the option by
16
<PAGE> 16
an amount which is greater than the option premium paid by the Fund plus
transaction costs.
The Fund may write listed put and call options. The Fund will not write a
call option unless, at the time of the sale, the Fund:
(1) owns the securities (or securities convertible into the securities
without additional consideration) against which the call option is written and
will continue to own such securities during the time that the Fund is obligated
under the option; or
(2) purchases a call option on the same securities upon the same terms; or
(3) establishes and maintains for the term of the option a segregated
account consisting of cash, U.S. Government securities or high-grade debt
securities, equal to the fluctuating market value of the optioned securities.
Such account will be adjusted at least once daily to reflect changes in the
market value of the optioned securities.
The Fund will not write a put option unless, at the time of the sale, the
Fund:
(1) purchases a put option on the same securities upon the same terms; or
(2) establishes a segregated account consisting of cash, U.S. Government
securities or high-grade debt securities equal to the option price, i.e., the
price at which the securities underlying the option may be sold to the Fund; or
(3) makes a corresponding short sale, although, if the short position is
closed out before the put option expires, then the requirements of (1) or (2)
above must be met.
The Fund anticipates that most of the options written by it will be for a
duration of not exceeding nine months. The Fund will not write any options with
respect to which it is required to maintain a segregated account or make any
short sales (except short sales against the box) during any time that the total
of (a) the amount required to be deposited in any such segregated account, and
(b) the amount required to be deposited in a segregated account in connection
with any short sales made by the Fund, exceeds 35% of the value of the Fund's
net assets. All the options written by the Fund will be listed for trading on
one or more domestic securities exchanges. The writing of options by the Fund
may be deemed to be inconsistent with its investment objective.
RESTRICTED AND OTHER ILLIQUID SECURITIES
The Fund may acquire portfolio securities called restricted
17
<PAGE> 17
securities, which can be sold only pursuant to an effective registration
statement under the Securities Act of 1933 or an exemption from such
registration. In addition, other securities held by the Fund may be illiquid
which means they can not be sold or disposed in seven days at their approximate
carrying value.
The Fund will not invest in restricted and other illiquid securities if,
as a result of such investment, the value of the Fund's illiquid assets would
exceed 15% of the value of the Fund's net assets. In the event that the Fund's
portfolio or other external events cause the Fund's illiquid assets to exceed
15% of the value of the Fund's net assets, the Fund will take steps to reduce
the aggregate amount of its illiquid assets to an amount not in excess of 15% of
the value of its net assets on an orderly basis. Restricted securities eligible
for resale under Rule 144A under the Securities Act of 1933 that have been
determined to be liquid by the Fund's Board of Directors based upon trading
markets for the securities and any other restricted securities that become
registered under the Securities Act of 1933 or that may be otherwise freely sold
without registration thereunder are not subject to the foregoing limitation,
unless they are otherwise illiquid.
The Fund normally will be able to purchase restricted securities at a
substantial discount from the market value of similar unrestricted securities,
but there are certain risks which the Fund will necessarily assume in acquiring
restricted securities. The principal risk is that the Fund may have difficulty
in disposing of such securities without registration under the Securities Act of
1933 and the Fund will have to bear the risk of market conditions prior to such
registration. In the absence of an agreement obtained at the time of purchase of
such securities, there can be no assurance that the issuer will register the
restricted securities. Furthermore, if the Fund disposes of restricted
securities without registration, it may be necessary to sell such shares at a
discount similar to or greater than that at which the Fund purchased the shares.
The Fund believes that securities representing approximately *________*%
of the Fund's net assets on the date of this Prospectus were not liquid. In
addition, on such date the Fund's investment in the securities of Senetek PLC
("Senetek") represented approximately *________*% of the Fund's net assets.
Senetek is a small foreign company and the Fund's investment therein is
speculative.
For purposes of determining the Fund's net asset value, restricted
securities are valued at fair value as determined in good faith by the Board of
Directors of the Fund or a committee composed of members of the Board of
Directors.
18
<PAGE> 18
FOREIGN SECURITIES
The Fund may purchase securities issued by companies organized in foreign
countries, provided that, as a result of any such purchase, not more than 35% of
the value of the Fund's total assets will be represented by such securities.
Although the Fund intends to invest in foreign companies located in nations
which it considers to have relatively stable governments, there is the
possibility of expropriation, nationalization or confiscatory taxation, taxation
of income earned in a foreign country and other foreign taxes, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a country), default in foreign government securities, political or social
instability or diplomatic developments which could adversely affect investments
in securities of foreign issuers. In addition, in many countries there is less
publicly available information about issuers than is generally available with
respect to domestic companies. Furthermore, foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
domestic companies. In many foreign countries, there is less government
supervision and regulation of business and industry practices, stock exchanges,
brokers and listed companies than in the United States. Foreign securities
transactions may be subject to higher brokerage costs than domestic securities
transactions. In addition, the foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States.
Transactions in foreign securities may involve greater time from the trade date
until settlement than for domestic securities transactions and involve the risk
of possible losses through holding of securities by custodian and securities
depositories in foreign countries. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
MANAGEMENT'S DISCUSSION OF THE FUND'S PERFORMANCE
The Fund's performance during the fiscal year ended May 31, 1997 was
materially affected by the general upturn in securities markets and the
restructuring of the Fund's portfolio in order to focus on fewer investments.
<TABLE>
<CAPTION>
Since End May 85
to End May 97
----------------------
AHF SPX
<S> <C> <C>
May-31-1986 10,000 10,000
Jun-86 9,444 10,169
Jul-86 8,565 9,600
Aug-86 8,704 10,312
Sep-86 8,611 9,460
Oct-86 8,611 10,005
Nov-86 8,565 10,248
Dec-86 8,166 9,987
Jan-87 8,971 11,332
Feb-87 9,776 11,779
Mar-87 9,776 12,119
Apr-87 9,316 12,012
May-87 10,000 10,000
Jun-87 10,185 10,505
Jul-87 10,432 11,037
Aug-87 10,309 11,449
Sep-87 10,185 11,198
Oct-87 7,346 8,542
Nov-87 6,667 8,063
Dec-87 7,102 8,676
Jan-88 7,373 9,041
Feb-88 7,778 9,461
Mar-88 7,778 9,169
Apr-88 7,846 9,270
May-88 7,711 9,349
Jun-88 7,914 9,778
Jul-88 7,373 9,741
Aug-88 7,305 9,410
Sep-88 7,508 9,811
Oct-88 7,440 10,084
Nov-88 7,170 9,940
Dec-88 7,237 10,113
Jan-89 7,373 10,852
Feb-89 7,305 10,582
Mar-89 7,305 10,829
Apr-89 7,508 11,390
May-89 7,711 11,795
Jun-89 7,576 11,783
Jul-89 7,778 12,846
Aug-89 7,846 13,096
Sep-89 7,643 13,043
Oct-89 7,170 12,740
Nov-89 7,102 12,999
Dec-89 7,034 13,311
Jan-90 6,899 12,418
Feb-90 6,899 12,579
Mar-90 6,899 12,912
Apr-90 6,764 12,590
May-90 6,967 13,815
Jun-90 7,034 13,722
Jul-90 6,561 13,678
Aug-90 5,614 12,443
Sep-90 5,005 11,839
Oct-90 4,735 11,789
Nov-90 4,735 12,549
Dec-90 4,870 12,898
Jan-91 4,938 13,459
Feb-91 6,629 14,420
Mar-91 7,508 14,769
Apr-91 7,237 14,804
May-91 7,508 15,441
Jun-91 7,440 14,734
Jul-91 7,646 15,420
Aug-91 8,387 15,784
Sep-91 8,387 15,520
Oct-91 8,996 15,728
Nov-91 8,861 15,096
Dec-91 9,601 16,820
Jan-92 10,731 16,506
Feb-92 11,389 16,720
Mar-92 11,295 16,395
Apr-92 10,919 16,876
May-92 10,825 16,959
Jun-92 10,542 16,706
Jul-92 10,354 17,389
Aug-92 9,789 17,033
Sep-92 9,789 17,233
Oct-92 10,448 17,293
Nov-92 11,013 17,880
Dec-92 11,451 18,099
Jan-93 11,451 18,250
Feb-93 12,566 18,499
Mar-93 13,579 18,889
Apr-93 12,971 18,432
May-93 14,390 18,924
Jun-93 14,896 18,979
Jul-93 14,694 18,903
Aug-93 15,403 19,619
Sep-93 15,606 19,468
Oct-93 16,416 19,871
Nov-93 15,910 19,682
Dec-93 16,190 19,920
Jan-94 16,084 20,597
Feb-94 14,814 20,038
Mar-94 13,333 19,166
Apr-94 12,910 19,412
May-94 12,592 19,729
Jun-94 11,534 19,246
Jul-94 11,428 19,878
Aug-94 11,428 20,691
Sep-94 11,428 20,186
Oct-94 11,005 20,638
Nov-94 10,793 19,888
Dec-94 10,470 20,182
Jan-95 10,347 20,705
Feb-95 9,977 21,511
Mar-95 9,361 22,145
Apr-95 8,746 22,797
May-95 7,760 23,706
Jun-95 8,006 24,256
Jul-95 8,253 25,060
Aug-95 8,006 25,123
Sep-95 8,253 26,183
Oct-95 7,760 26,089
Nov-95 7,514 27,233
Dec-95 7,267 27,758
Jan-96 7,883 28,701
Feb-96 8,499 28,968
Mar-96 8,746 29,247
Apr-96 9,361 29,678
May-96 9,361 30,442
Jun-96 8,499 30,558
Jul-96 7,514 29,209
Aug-96 7,637 29,826
Sep-96 7,267 31,503
Oct-96 7,267 32,372
Nov-96 6,898 34,816
Dec-96 6,898 34,127
Jan-97 8,992 36,258
Feb-97 9,731 36,542
Mar-97 10,224 35,044
Apr-97 10,224 37,134
May-97 10,224 39,393
</TABLE>
19
<PAGE> 19
On February 1, 1990, Heiko H. Thieme became the chief executive officer of
the Fund and AHMC. In such capacities, Mr. Thieme has been primarily responsible
for the Fund's portfolio. Past performance is not predictive of future
performance.
INVESTMENT RESTRICTIONS
The Fund operates under certain investment policies and restrictions.
Restrictions (1) through (7) cannot be changed or eliminated without the
approval of the lesser of (a) 67% or more of the voting securities of the Fund
present at a meeting, if the holders of more than 50% of the outstanding
securities of the Fund are present or represented by proxy, or (b) more than 50%
of the outstanding voting securities of the Fund. These policies and
restrictions provide, in part, that the Fund may not:
(1) Borrow money in excess of 33-1/3% of the value of the Fund's assets
(including the amount of such borrowing), less its liabilities (not including
any borrowings, but including the fair market value at the time of computation
of any securities with respect to which there are open short positions);
(2) With respect to at least 50% of the Fund's total assets, invest more
than 5% of the value of its total assets in securities of any one issuer (except
securities of the United States Government or any instrumentality thereof) or
purchase more than 10% of the outstanding voting securities of any issuer;
(3) Invest 25% or more of the value of its total assets in securities of
companies in any one industry;
(4) Effect a short sale transaction which will, at the time of making such
short sale transaction and giving effect thereto, cause the aggregate dollar
amount of the total deposits and deferred charges on short sales to exceed 35%
of the value of the Fund's net assets;
(5) Purchase securities of other investment companies unless purchased on
the open market without the payment of any fee or charge other than regular
brokerage commissions;
(6) Underwrite securities of other issuers or participate in any
underwriting or selling group in connection with the public distribution of
other's securities except that it may acquire "restricted securities." See
"Restricted and other Illiquid Securities;"
(7) Loan money to other persons, except that the Fund may (a) invest up to
15% of the value of its total assets in debentures, bonds or similar
governmental or corporate obligations of types commonly distributed publicly or
privately to financial institutions and (b) purchase debt securities which are
convertible
20
<PAGE> 20
into equity securities of an issuer without regard to whether such debt
securities are types commonly distributed publicly or privately to financial
institutions. Any debt securities which are "restricted securities" would be
included in the limitation set forth under "Restricted and other Illiquid
Securities;"
(8) Invest more than 5% of the value of its assets in debt securities
which are not "investment grade" or which are not convertible into equity
securities;
(9) Invest more than 10% of the value of its net assets in warrants.
The percentage limitations contained in the investment restrictions
described above are all applied solely at the time of any proposed transaction
on the basis of values or amounts determined at that time. Unless otherwise
specifically stated, a restriction would not apply if a percentage limitation
were exceeded only as a result of changes in values or amounts not resulting
from a subsequent transaction subject to the restriction.
MANAGEMENT
The business of the Fund is managed under the direction of its Board of
Directors. The Fund has retained AHMC, 1370 Avenue of the Americas, New York,
New York 10019 to provide the Fund with investment research advice and to
continuously furnish an investment program for the Fund's portfolio. AHMC
recommends securities to be purchased and sold by the Fund and the portion of
the Fund's assets which is to be held uninvested. AHMC advises and assists the
officers of the Fund in carrying out policy decisions of the Fund's Board of
Directors. The role of AHMC is advisory only. All investment decisions are made
by the Fund. Although, as set forth below, control of AHMC changed on February
1, 1990, AHMC has been the Fund's Investment Advisor since December 1985.
Both a majority of the Fund's Board of Directors and control of AHMC
changed on February 1, 1990. Since that date, Heiko H. Thieme has been the Chief
Executive Officer of the Fund and its Investment Advisor and in such capacities,
has been primarily responsible for the day-to-day management of the Fund's
portfolio. Mr. Thieme has been a Consultant/Strategist to Deutsche Bank A.G. and
previously had been the Executive Vice President in charge of U.S. equity of its
wholly-owned subsidiary, Deutsche Bank Capital Corp. Mr. Thieme began his career
at the British brokerage firm of Wood & McKenzie of Edinburgh and London. In
1976 Mr. Thieme joined White Weld & Co. in London as Vice President in charge of
marketing for Germany and Austria. Mr. Thieme publishes an investment newsletter
in both English and German which is distributed worldwide. In addition, Mr.
Thieme writes a weekly column for one of the major German newspapers,
Frankfurter Allgemeine Zeitung, and appears frequently on German television as
well as on numerous
21
<PAGE> 21
American television stations with commentaries on the U.S. markets and global
issues. In May 1989, Mr. Thieme was chosen as "Best Investment Advisor" of 1988
in West Germany at the International Investment Congress held in Frankfurt.
Further, Mr. Thieme regularly makes presentations to institutional investors in
Europe, Asia, the United States and Canada. Mr. Thieme is known worldwide for
his undaunted optimism and frequently contrarian views and has been the author
of "The Viewpoint" for more than 16 years. Mr. Thieme is the beneficial owner of
90% of the outstanding capital stock of AHMC.
Richard K. Parker, who controls 10% of the outstanding capital stock of
AHMC, is a Managing Director of Bear, Stearns & Co. Inc. Except for executing
portfolio transactions as described below, Bear, Stearns & Co. Inc. is not
otherwise associated with AHMC or the Fund and is not responsible for any of the
investment advice rendered to the Fund by AHMC or Mr. Parker.
AHMC is compensated for the investment advisory services it renders by the
payment of a fee at the annual rate of one and one-quarter percent (1.25%) of
the first $100,000,000 of average daily net assets and one percent (1%) of
additional net assets of the Fund, payable monthly. Such fee is substantially
higher than the fee paid by most other management investment companies to their
investment advisors.
The Fund anticipates that a substantial portion of its portfolio
transactions will be allocated to Bear, Stearns & Co. Inc. and Thieme
Securities, Inc. ("TSI"). Mr. Thieme is the Chief Executive Officer and sole
shareholder of TSI. The Fund may also allocate portfolio transactions to brokers
who provide research or recommendations for the benefit of the Fund or who are
instrumental in sales of shares of the Fund.
Messrs. Thieme and Parker receive compensation from TSI and Bear, Stearns
& Co. Inc., respectively, in connection with portfolio transactions allocated to
them by the Fund. Reference is made to the Fund's Statement of Additional
Information with respect to Mr. Parker's compensation and for a more complete
description of the Fund's policies with respect to portfolio transactions.
AHMC is also the investment advisor to American Heritage Growth Fund, Inc.
("AHGF"), an investment company whose investment objective is to seek growth of
capital. Four of the Fund's five Directors constitute the full Board of
Directors of AHGF. Mr. Thieme is the Chief Executive Officer of both AHGF and a
foreign investment company and may hold similar positions with other foreign
investment companies (the "Foreign Companies") whose investment objective is
also to seek growth of capital, and the investment advisor of the Foreign
Companies. The Fund, AHGF and the Foreign Companies may, from time to time, hold
securities
22
<PAGE> 22
issued by the same company. When the Fund and such other investment companies
are engaged in the purchase or sale of the same security, the prices and amounts
will be allocated in a manner considered by Management to be fair to each of
them.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share for the purpose of pricing purchase
and redemption orders is determined as of the close of business of the New York
Stock Exchange on each day such Exchange is open for trading. The Fund's net
asset value will not be determined on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas,
on which days the New York Stock Exchange is not presently open for trading. In
the event, however, that the New York Stock Exchange is open for trading on any
of such days, the Fund's net asset value will be determined thereon. The net
asset value per share is computed by dividing the value of the net assets of the
Fund (i.e., the value of total assets less liabilities) by the total number of
the Fund's shares outstanding. In calculating net asset value, all portfolio
securities will be valued at market value when there is a reliable quotation
available for the securities and otherwise as the Board of Directors or a
committee composed of members of the Board of Directors in good faith
determines.
HOW TO BECOME AN INVESTOR IN THE FUND
An investor may purchase shares of the Fund by submitting a completed
application with a check made payable to The American Heritage Fund, Inc. and
mailing it to The American Heritage Fund, Inc., Location 0637, Cincinnati, Ohio
45264-0637. Applications and checks which are sent by courier should be sent to
The American Heritage Fund, Inc., c/o Star Bank, N.A., 425 Walnut Street, Mutual
Fund Custody Department, Cincinnati, Ohio 45202. An application is included in
this Prospectus. All investments are made at the net asset value next computed
after receipt of an order accompanied by payment without the imposition of any
sales charge.
Initial investments must be at least $2,500 (or, in the case of an IRA
account, $2,000). Subsequent investments may be made in amounts of $250 or more.
An open account is automatically created for each new investor so that
additional investments may be made at any time without completing a new
application. The above-stated minimums are applicable to all accounts although
the minimums may be waived for persons purchasing in a group if the total
payment received from the group exceeds the stated minimum. In addition,
shareholders may open additional accounts (e.g. custodian accounts, IRA
accounts, Trusts, and Keogh accounts) with a minimum of $1,000.
Investors may, if they so desire, purchase shares of the Fund through
certain registered broker-dealers. The Fund imposes no
23
<PAGE> 23
sales load or service charge, but such broker-dealers may make a charge to
investors for their services. The charge and services may vary in amount among
broker-dealers, some of which may impose higher initial or subsequent investment
requirements than those established by the Fund.
HOW TO REDEEM SHARES
ALL REQUESTS FOR REDEMPTION OF SHARES, WHETHER OR NOT REPRESENTED BY
CERTIFICATES, MUST BE SIGNED BY ALL REGISTERED OWNERS EXACTLY AS REGISTERED,
INCLUDING FIDUCIARY TITLES, IF ANY, WITH SIGNATURES GUARANTEED BY A MEMBER OF A
NATIONAL SECURITIES EXCHANGE OR A UNITED STATES COMMERCIAL BANK OR A FOREIGN
BANK HAVING A NEW YORK CITY CORRESPONDENT.
Any shareholder may require the Fund to redeem such shareholder's
shares by making a written request directly to American Data Services, Inc., 24
West Carver Street, Huntington, New York 11743, the Fund's Transfer Agent. When
certificates for shares are held by the shareholder, they may be mailed to or
deposited with the Transfer Agent, duly endorsed and accompanied by a written
request for redemption. Redemptions may be made by telephone upon the request of
certain financial institutions who are holders of record of shares issued by the
Fund, within the sole discretion of the Fund. The Fund has instructed its
Transfer Agent to confirm the authenticity of any such request for redemption by
telecopier and telephone. Proceeds of redemptions made by telephone will be sent
only to the respective financial institution making the request. In the event
that a telephone redemption which is honored by the Fund is unauthorized or
fraudulent, the Fund could sustain losses.
The redemption price will be the net asset value next determined by the
Fund following receipt of the request accompanied by any issued certificates in
form for transfer. There is no redemption charge imposed by the Fund.
The value of shareholder's shares on redemption may be more or less
than the shareholder's cost depending upon the net asset value at the time of
redemption.
Payment for shares redeemed will normally be made within seven days
after receipt of the certificates, duly endorsed, or in the case of shares where
no certificate has been issued, a written request duly executed. Payment for
shares redeemed which have been purchased by check will not be mailed prior to
the time that the Fund reasonably believes that such check has cleared, usually
within fifteen days of the Fund's receipt. Investors who anticipate that they
will redeem their shares prior to the expiration of such fifteen day period,
should pay for their shares by means of Federal Funds or bank wire transfer. The
determination of the net asset
24
<PAGE> 24
value of the Fund's shares may be suspended and the right of redemption may be
suspended or the payment date postponed when: (i) trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission
or such Exchange is closed for other than customary weekend and holiday
closings; (ii) when an emergency exists, as determined by the Securities and
Exchange Commission, as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable, or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets; or (iii) when the
Securities and Exchange Commission by Order so permits for the protection of the
shareholders of the Fund.
The Fund intends to make payment for shares redeemed in cash to the
extent that it is reasonably able to do so. The Fund, however, reserves the
right to make such payment in kind. See Notes to the Fund's Financial Statements
for the fiscal year ended May 31, 1997 which have been incorporated by reference
into the Fund's Statement of Additional Information. If the Fund makes payment
for shares redeemed in kind, such payment may be in the form of securities which
are illiquid. Any shareholders to whom redemptions in kind are made will likely
incur brokerage commissions upon disposition of the securities acquired from the
Fund. Shareholders who receive illiquid securities in connection with a
redemption in kind may incur difficulty in disposing of such securities.
DISTRIBUTION OF INCOME DIVIDENDS AND REALIZED CAPITAL GAINS
Dividend income will be incidental to the investment objective of
maximum capital growth. The Fund will, at the end of each fiscal year, consider
the declaration of a cash dividend from net investment income, if earned, and
the distribution of net capital gains, if any, realized on investments. The Fund
intends to distribute to its shareholders, at least annually, substantially all
of its net investment income and realized capital gains. There will be no such
distribution, however, until the Fund has taken advantage of any capital loss
carryovers available to it.
At the time a shareholder applies to purchase Fund shares, he
automatically gives written authority to the Fund to receive as the
shareholder's agent, income dividends and capital gains distributions, if any,
and to cause them to be reinvested for his account in additional Fund shares at
net asset value. However, a shareholder may, either at the time of purchase or
at a later time, request in writing to the Fund that his income dividends
and capital gains distributions, if any, be paid to such shareholder by check
rather than reinvested in Fund shares. A shareholder who requests in writing
that his dividends and distributions be paid to such shareholder by check may,
at any time prior to a record date, elect to have subsequent dividends and
distributions reinvested in Fund shares at net asset value.
25
<PAGE> 25
The Fund intends to qualify for treatment under Subchapter M of the
Internal Revenue Code. In such case, the Fund will distribute any of its net
income and gains to shareholders and shareholders may be proportionately liable
for taxes on any income and gains of the Fund although shareholders not subject
to taxes on their income will not be required to pay tax on any amounts
distributed to them. Any distribution of net income or short-term capital gains
will be taxed as ordinary dividends and any distribution of long-term capital
gains will be taxed as long-term capital gains. The Fund will inform
shareholders of the amount and nature of any such income or gains. If an
investor purchases shares of the Fund immediately prior to the declaration of a
dividend by the Fund, the investor will pay the full price per share and then
receive a portion of the price back as a taxable distribution. The Fund's net
asset value is reduced by the amount of any distribution.
TOTAL RETURN
From time to time the Fund may advertise total return. Total return is
based on historical results and is not intended to predict future performance.
Total return is the change in value of an investment in the Fund over a
given period of time, assuming reinvestment of any dividends and capital gains
distributions. Average annual return is a hypothetical rate of return that, if
achieved annually, would produce a cumulative total return if performance had
been constant over the entire period of time. The Fund also may advertise a
return which is calculated in a different manner (a "nonstandardized
quotation"). A non-standardized quotation of return measures the change in value
of a hypothetical account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. In the event the Fund incurs any non-recurring charges, the
reported total return for a period during which such charges were incurred would
be higher than it would otherwise be if non-recurring charges were reflected.
26
<PAGE> 26
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. For further details
about such services write to or call the Fund.
EXCHANGE PRIVILEGE
A shareholder of the Fund has the privilege of exchanging shares of the
Fund for shares of AHGF subject to the following:
- AHGF and its shares must be registered for sale or exempt
from registration in the state of residence of the
shareholder.
- Shareholders may only exchange between accounts that are
registered in the same name, address, and have the same
taxpayer identification number.
- A shareholder must have received a current Prospectus
of AHGF before the exchange.
- Both the Fund and AHGF reserve the right to temporarily
or permanently terminate the exchange privilege.
Exchanges may have tax consequences. Accordingly, you may wish to
consult with your tax advisor before making any exchange.
AUTOMATIC INVESTMENT PLAN
The Fund has an Automatic Investment Plan which enables shareholders to
make regular monthly investments in shares through automatic charges to their
bank checking accounts. The Fund's minimum investments shall be waived for
Automatic Investment Plan participants making regular monthly payments of not
less than $100 per month.
AUTOMATIC WITHDRAWAL PLAN
With an Automatic Withdrawal Plan, a shareholder can arrange for
automatic distributions to be made monthly or quarterly in amounts not less than
$1,000. An Automatic Withdrawal Plan may neither be opened nor maintained by a
shareholder holding shares of the Fund having a total net asset value of less
than $50,000.
IRA AND KEOGH PLANS
A prototype defined contribution retirement plan and individual
retirement account is available. Certain charges are imposed by Star Bank, N.A.
and American Data Services, Inc. and shareholders should carefully review all
documents provided in connection with such plan or account.
27
<PAGE> 27
LEGAL PROCEEDINGS
On October 5, 1994, a shareholder of the Fund on behalf of himself and
a purported class of others brought an action against the Fund, AHMC, Heiko H.
Thieme and Richard K. Parker in the United States District Court for the
Southern District of New York. Although the Fund cannot now determine the exact
amount of the losses incurred by members of the purported class, the Fund
believes that such losses do not exceed $25 million and could be less. As of the
date of this Prospectus, the value of the Fund's net assets was approximately
$*________* million. The amount of outstanding shares of the Fund has generally
rapidly diminished since early 1994.
The Complaint alleged that certain registration statements and
prospectuses of the Fund did not disclose certain risks involving the Fund's
investments in restricted securities and companies having small capitalizations
and which lack significant operating histories or established products and that
the Fund invests significant amounts of money in such companies based "merely"
on an interview between the companies' executives and Mr. Thieme and a review of
the companies' financial statements or products. The Complaint also alleged that
certain assets of the Fund were overvalued. On September 11, 1995, the Court, in
ruling on the Fund's Motion to Dismiss, dismissed the Complaint. The Court's
Order permitted the Plaintiff to move the Court for leave to file an amended
complaint limited to claims relating to the Fund's investments in restricted and
other illiquid securities.
On July 11, 1996, the Court issued an Order permitting the Plaintiff to
file an amended complaint. The amended complaint alleges that certain
registration statements and prospectuses of the Fund failed to disclose certain
risks regarding the Fund's investments in illiquid securities and that the Fund
invested in illiquid securities in concentrations which exceeded the Fund's own
investment restrictions and that the Fund improperly valued its illiquid
securities. The amended complaint also alleges that the other defendants
breached their fiduciary duties in connection with the Fund's investments in and
valuation of illiquid securities and by the receipt of AHMC of substantial
compensation for investment advice and that the Fund breached its own
limitations with respect to illiquid securities and that the Fund changed
investment policies without obtaining a shareholder vote.
The Plaintiff has made a motion to permit the action to proceed as a
class action and in which the Plaintiff would serve as the sole class
representative of all persons who acquired shares of the Fund from July 1, 1993
through August 31, 1994.
The Fund, after conferring with its special counsel, has concluded that
the substantive allegations of the amended compliant are without merit. Although
there can be no assurance of the
28
<PAGE> 28
outcome of the action, based upon the Fund's belief, the Fund has not
established a reserve for potential losses other than the expense of its
defense. The Fund intends to vigorously defend the action.
The Plaintiff is seeking rescission or compensatory damages and
pre-judgment interest thereon and the costs and expense of the litigation and
such other and further relief as the Court may deem just and proper. The Fund's
officers and directors are entitled to be indemnified by the Fund to the full
extent permitted by law.
On August 4, 1995 the Fund commenced an action against Kouri Capital
Group, Inc. ("KCG") and Pentti Kouri in the Supreme Court of the State of New
York, County of New York. The action was based upon a Stock Purchase Agreement
between the Fund and KCG pursuant to which KCG agreed to repurchase certain
shares issued thereby and sold to the Fund for $4,400,000. Such obligation of
KCG was personally guaranteed by Mr. Kouri. Neither KCG nor Mr. Kouri has
honored its or his obligation to the Fund. The Fund sought a recovery in the
amount of $4,400,000 plus interest. The defendants denied the substantive
allegations of the Complaint and asserted counterclaims which would declare
their obligations to the Fund to have been terminated and to obtain damages in
excess of $4,400,000. The Fund, after conferring with its special counsel,
concluded that the substantive allegations of the counterclaims were without
merit. Although there could be no assurance of the outcome of the action, based
upon the Fund's belief, the Fund did not establish a reserve for potential
losses other than the expense of its defense of the counterclaims. Upon
agreement of the parties, the action has been dismissed without prejudice. In
the event that the Fund is unable to reach a settlement of its claims acceptable
to the Fund, the Fund intends to bring another action against KCG and Mr. Kouri.
In such event, it can be expected that they will again assert counterclaims
against the Fund.
ADDITIONAL FACTS
ORGANIZATION
The American Heritage Fund, Inc., a New York corporation organized on
December 28, 1951, is a non-diversified, open-end management investment company.
CUSTODIAN
Star Bank, N.A. 425 Walnut Street, Cincinnati, Ohio 45202 is the
Custodian of the portfolio securities and monies of the Fund. The Custodian
performs no managerial or policy-making functions for the Fund.
29
<PAGE> 29
CAPITALIZATION
The authorized capital stock of the Fund consists of 1,000,000,000
shares of capital stock, $.01 par value per share. Each share has equal voting,
dividend and liquidation rights.
TRANSFER AGENT
American Data Services, Inc. ("ADS") 24 West Carver Street,
Huntington, New York 11743 is the Fund's Transfer Agent.
ADMINISTRATIVE SERVICES
The Fund has entered into an agreement with ADS whereby ADS maintains
certain books, records and other documents that the Fund is required to keep and
calculates the Fund's daily net asset value. The Fund has agreed to pay ADS a
monthly fee of 1/12th of .1% of the first $25,000,000 of the Fund's average
monthly net assets, plus 1/12th of .05% of the next $25,000,000 of the Fund's
average monthly net assets, plus 1/12th of .02% of any additional average
monthly net assets.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be made by writing to American Data
Services, Inc. at 24 West Carver Street, Huntington, New York 11743.
30
<PAGE> 30
THE AMERICAN HERITAGE FUND, INC.
- --------------------------------------------------------------------------------
Mail to: The American Heritage Fund, Inc., Location 0637, Cincinnati, Ohio
45264-0637
(DO NOT USE THIS FORM FOR IRA PLANS. Please request separate forms)
================================================================================
Complete only the applicable sections which will tell us how your account should
be registered.
<TABLE>
<S> <C> <C>
ACCOUNT [ ] Individual
REGISTRATION ------------------------------------------------------
First Name Middle
Name Last Name
[ ] Joint Tenant
------------------------------------------------------
First Name Middle
Name Last Name
[ ] Gifts to
Minors
-------------------------- As Custodian For
------------------------
Name of Custodian (only 1 permitted) Name
of Minor (only 1 permitted)
UNDER THE ------------------ UNIFORM GIFT TO MINORS
State
[ ] Corporations, ------------------------------------------------------
Trusts & Name of corporation or partnership. If a trust,
Others include the name(s) of trustees in which account will
be registered and the date of the trust investment. An
account for a pension or profit sharing plan or trust
may be registered in the name of the plan or trust
itself.
- -------------------------------------------------------------------------------------------
ADDRESS
------------------------------------------------------
Street
()
------------------------------------------------------
City Home Phone
Number
()
------------------------------------------------------
State Zip Code Business
Phone Number
- -------------------------------------------------------------------------------------------
INVESTMENT $ (Minimum initial $2,500 or, in the case of an IRA
------------------ account, $2,000. Subsequent Investments of $250 or
more.) Make checks payable to The American Heritage
Fund, Inc. Application is not needed for subsequent
investments.
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS Reinvest all income and capital gain distributions in additional shares of
the Fund unless this box is checked.
[ ] Pay dividends and capital gain distributions in cash. If any dividend
or capital gain distribution check addressed and sent to (me)(us) is
returned to you, you hereby are authorized to invest the proceeds of that
check in Fund shares at the net asset value next determined after receipt
by you of the returned check. In such event (I)(we) understand and agree
that all subsequent dividend and capital gain distributions automatically
will be reinvested in Fund shares unless and until (I)(we) have signed and
filed with you a new request to receive dividends and capital gain
distributions in cash.
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
TAX IDENTIFICATION CERTIFICATION
Because of important changes made to the Internal Revenue Code in 1983, we
must be certain that we have a record of your correct Social Security or
other Taxpayer Identification Number. If you have not certified that you
have provided us with the correct number, your account will be subject to
special Federal income tax withholding of 20% of dividends and other
payments. To avoid this, please fill in your Social Security or Taxpayer
Identification Number.
[ ]NNNNNNNN --------------------------------------------------------
Social Security or Taxpayer Identification Number
Citizenship--If other than U.S.A.
If appropriate, check one of the following boxes:
[ ] I have been notified by the IRS that I am subject to backup withholding
for failure to report all interest or dividends.
[ ] I do not have a Social Security Number or Taxpayer Identification
Number, but I have applied for or intend to apply for one. I understand
that if I do not provide this number within 60 days, the required 20%
withholding will begin.
[ ] I am exempt because I am a Non-Resident Alien (not a U.S. citizen or
U.S. resident), a foreign corporation, partnership, estate or trust,
and, as a result, I am not required to submit a number.
[ ] I am an exempt recipient (see explanation below)
If you are an exempt recipient, you must certify your Tax Identification
Number as well as your exempt status to prevent withholding. A partial
listing of exempt recipients follows. For further information, see Internal
Revenue Code Sec. 3452 or consult you tax advisor.
<TABLE>
<S> <C>
- Retirement Plans - Common Trust Funds
- Corporations - Financial Institutions
- Colleges, Churches, Charitable Organizations - Registered Securities Dealers
- Agents, Fiduciaries, Middlemen
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SIGNATURE I understand and agree that:
(1) This application is subject to your acceptance or rejection.
(2) All shares will be purchased at the net asset value next determined
after receipt and acceptance.
(3) The Fund has the right to redeem shares held in my account to reimburse
the Fund for any loss it has sustained if my check for the purchase of or
subscription for the Fund shares is dishonored, regardless of whether
the undersigned was already an existing shareholder at the time of such
purchase or subscription.
(4) Under penalties of perjury, I certify that the information I have
provided in this application under the caption TAX IDENTIFICATION
CERTIFICATION is true, correct, and complete.
I acknowledge receipt of your Prospectus and I understand that all of its
terms and provisions are incorporated herein by reference.
</TABLE>
X
- --------------------------------------------------------------------------------
Signature of Individual and Joint Tenant or Custodian, Corporate Officer or
Trustee.
- ------------------------------------------------------------------
------------------------------------------------------------------------
Title of Corporate Officer or Trustee Date
WHERE DID YOU FIRST LEARN ABOUT THE AMERICAN HERITAGE FUND?
- -------------------------------------
- --------------------------------------------------------------------------------
1097
<PAGE> 32
THE AMERICAN HERITAGE FUND, INC.
- --------------------------------------------------------------------------------
Mail to: The American Heritage Fund, Inc., Location 0637, Cincinnati, Ohio
45264-0637
(DO NOT USE THIS FORM FOR IRA PLANS. Please request separate forms)
================================================================================
Complete only the applicable sections which will tell us how your account should
be registered.
<TABLE>
<S> <C> <C>
ACCOUNT [ ] Individual
REGISTRATION ------------------------------------------------------
First Name Middle
Name Last Name
[ ] Joint Tenant
------------------------------------------------------
First Name Middle
Name Last Name
[ ] Gifts to
Minors
-------------------------- As Custodian For
------------------------
Name of Custodian (only 1 permitted) Name
of Minor (only 1 permitted)
UNDER THE ------------------ UNIFORM GIFT TO MINORS
State
[ ] Corporations, ------------------------------------------------------
Trusts & Name of corporation or partnership. If a trust,
Others include the name(s) of trustees in which account will
be registered and the date of the trust investment. An
account for a pension or profit sharing plan or trust
may be registered in the name of the plan or trust
itself.
- -------------------------------------------------------------------------------------------
ADDRESS
------------------------------------------------------
Street
()
------------------------------------------------------
City Home Phone
Number
()
------------------------------------------------------
State Zip Code Business
Phone Number
- -------------------------------------------------------------------------------------------
INVESTMENT $ (Minimum initial $2,500 or, in the case of an IRA
------------------ account, $2,000. Subsequent Investments of $250 or
more.) Make checks payable to The American Heritage
Fund, Inc. Application is not needed for subsequent
investments.
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS Reinvest all income and capital gain distributions in additional shares of
the Fund unless this box is checked.
[ ] Pay dividends and capital gain distributions in cash. If any dividend
or capital gain distribution check addressed and sent to (me)(us) is
returned to you, you hereby are authorized to invest the proceeds of that
check in Fund shares at the net asset value next determined after receipt
by you of the returned check. In such event (I)(we) understand and agree
that all subsequent dividend and capital gain distributions automatically
will be reinvested in Fund shares unless and until (I)(we) have signed and
filed with you a new request to receive dividends and capital gain
distributions in cash.
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
TAX IDENTIFICATION CERTIFICATION
Because of important changes made to the Internal Revenue Code in 1983, we
must be certain that we have a record of your correct Social Security or
other Taxpayer Identification Number. If you have not certified that you
have provided us with the correct number, your account will be subject to
special Federal income tax withholding of 20% of dividends and other
payments. To avoid this, please fill in your Social Security or Taxpayer
Identification Number.
[ ]NNNNNNNN --------------------------------------------------------
Social Security or Taxpayer Identification Number
Citizenship--If other than U.S.A.
If appropriate, check one of the following boxes:
[ ] I have been notified by the IRS that I am subject to backup withholding
for failure to report all interest or dividends.
[ ] I do not have a Social Security Number or Taxpayer Identification
Number, but I have applied for or intend to apply for one. I understand
that if I do not provide this number within 60 days, the required 20%
withholding will begin.
[ ] I am exempt because I am a Non-Resident Alien (not a U.S. citizen or
U.S. resident), a foreign corporation, partnership, estate or trust,
and, as a result, I am not required to submit a number.
[ ] I am an exempt recipient (see explanation below)
If you are an exempt recipient, you must certify your Tax Identification
Number as well as your exempt status to prevent withholding. A partial
listing of exempt recipients follows. For further information, see Internal
Revenue Code Sec. 3452 or consult you tax advisor.
<TABLE>
<S> <C>
- Retirement Plans - Common Trust Funds
- Corporations - Financial Institutions
- Colleges, Churches, Charitable Organizations - Registered Securities Dealers
- Agents, Fiduciaries, Middlemen
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SIGNATURE I understand and agree that:
(1) This application is subject to your acceptance or rejection.
(2) All shares will be purchased at the net asset value next determined
after receipt and acceptance.
(3) The Fund has the right to redeem shares held in my account to reimburse
the Fund for any loss it has sustained if my check for the purchase of or
subscription for the Fund shares is dishonored, regardless of whether
the undersigned was already an existing shareholder at the time of such
purchase or subscription.
(4) Under penalties of perjury, I certify that the information I have
provided in this application under the caption TAX IDENTIFICATION
CERTIFICATION is true, correct, and complete.
I acknowledge receipt of your Prospectus and I understand that all of its
terms and provisions are incorporated herein by reference.
</TABLE>
X
- --------------------------------------------------------------------------------
Signature of Individual and Joint Tenant or Custodian, Corporate Officer or
Trustee.
- ------------------------------------------------------------------
------------------------------------------------------------------------
Title of Corporate Officer or Trustee Date
WHERE DID YOU FIRST LEARN ABOUT THE AMERICAN HERITAGE FUND?
- -------------------------------------
- --------------------------------------------------------------------------------
1097
<PAGE> 34
THE AMERICAN
HERITAGE FUND, INC.
1370 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
BOARD OF DIRECTORS
JOHN O. KOEHLER
EUGENE SARVER
HEIKO H. THIEME
INVESTMENT ADVISOR
AMERICAN HERITAGE MANAGEMENT
CORPORATION
THE AMERICAN
HERITAGE FUND, INC.
LOGO
PROSPECTUS
*________*, 1997
32
<PAGE> 35
PART B
33
<PAGE> 36
THE AMERICAN HERITAGE FUND, INC.
A NO-LOAD MUTUAL FUND
1370 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 397-3900
(800) 828-5050
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's Prospectus dated *________*, 1997. A copy
of the Fund's Prospectus may be obtained from the Fund without charge at the
address set forth above.
*________*, 1997
B-1
<PAGE> 37
TABLE OF CONTENTS
Brokerage Allocation and Other Practices B-3
Purchase of Certain Debt Securities B-4
Investment Restrictions B-5
Management B-6
Control Persons and Principal Holders of
Securities B-6
Investment Advisory and Other Services B-6
Total Return B-7
Custodian B-7
Independent Accountants B-7
Transfer Agent B-7
Financial Statements B-8
<PAGE> 38
BROKERAGE ALLOCATIONS AND OTHER PRACTICES
American Heritage Management Corporation ("AHMC" )or the Fund places
orders with brokers and dealers for the purchase and sale of securities for the
Fund's portfolio. In performing this service, AHMC is required to place orders
with the primary objective of obtaining the most favorable price and a
reasonable execution for the Fund. Normally, over-the-counter transactions will
be executed on a principal basis with a broker-dealer who makes a market in or
is otherwise a traditional source of the security traded except in those cases
in which the Fund can obtain a better price or execution on an agency basis.
Transactions executed on an agency basis involve the payment of a brokerage
commission.
In selecting brokers and dealers to execute the Fund's portfolio
transactions, AHMC may consider research, statistical and quotation services
received by the Fund or AHMC from such other brokers. If such information is
received and if it is, in fact, useful to AHMC, the information may tend to
reduce its costs of providing investment advice to the Fund.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment advisor, under certain circumstances, to cause an account
to pay a broker or dealer which supplies brokerage and research services a
commission for effecting a securities transaction in excess of the amount of the
commission another broker or dealer would have charged for effecting the
transaction. Brokerage and research services include (a) furnishing advice as to
the value of securities and the availability of securities or purchasers or
sellers of securities, (b) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts, and (c) effecting securities transactions and
performing functions incidental thereto, such as clearance, settlement and
custody.
AHMC may cause the Fund to incur brokerage commissions in an amount
higher than the lowest available rate in return for such services provided to
AHMC. AHMC is of the opinion that the continued receipt of supplemental
investment research services from broker-dealers will be essential to its
provision of portfolio management services to the Fund. AHMC has represented
that such commissions will not be paid by the Fund unless (a) AHMC determines in
good faith that the amount is reasonable in relation to the services in terms of
the particular transaction, (b) such payment is made in compliance with Section
28(e) and other applicable state and federal laws, and (c) in the opinion of
AHMC, the total commissions paid by the Fund are reasonable in relation to the
benefits to the Fund over the long term.
The Fund anticipates that a substantial portion of its portfolio
transactions will be allocated to Bear, Stearns & Co. Inc. ("Bear, Stearns") and
Thieme Securities, Inc. ("TSI"). Heiko H. Thieme is the Chief Executive Officer
and sole shareholder of TSI. Richard K. Parker is a Managing Director of Bear,
Stearns. Except for executing portfolio transactions, neither Bear, Stearns nor
TSI is in any other respect associated with the Fund or in any way responsible
for any investment advice or other service provided to the Fund by either of
Messrs. Thieme or Parker personally or AHMC. See "Management" and "Investment
Advisory and Other
B-3
<PAGE> 39
Services."
During the fiscal year ended May 31, 1997, the Fund paid an aggregate
of approximately $465,000 in brokerage commissions. Brokerage commissions paid
by the Fund for its fiscal year ended May 31, 1997 were significantly lower than
those paid during the fiscal years ended May 31, 1995 and 1996 because of
substantial changes in the amount of the Fund's assets. During the three fiscal
years ended May 31, 1997, the Fund paid aggregate brokerage commissions to Bear,
Stearns and TSI of approximately $861,000 and $578,000, respectively. During the
fiscal year ended May 31, 1997, Bear, Stearns and TSI received approximately
$63,000 and $380,000 in brokerage commissions from the Fund, respectively, or
approximately 13.5% and 81.7% of the total brokerage commissions paid by the
Fund during such year, respectively. During the same year, approximately 22.8%
and 78.2% of the Fund's aggregate dollar transactions involving the payment of
brokerage commissions were effected through Bear, Stearns and TSI, respectively.
The difference in the percentage of brokerage commissions paid to and the
percentage of the dollar amount of transactions effected through Bear, Stearns
and TSI is a result of lower commission rates charged on certain transactions by
certain brokerage firms. Mr. Parker received compensation of approximately
$20,000 from Bear, Stearns in connection with brokerage commissions paid to
such firm by the Fund during the fiscal year ended May 31, 1997.
PURCHASE OF CERTAIN DEBT SECURITIES
The Fund may purchase high yield debt securities which are not
investment grade, including securities referred to as "junk bonds", if as a
result of such purchase, no more than 5% of the value of the Fund's net assets
will be represented by such securities.
An economic downturn or increase in interest rates is likely to have an
adverse effect on the high yield securities market. The widespread expansion of
government, consumer and corporate debt within the United States economy has
made the corporate sector, especially cyclically sensitive industries, more
vulnerable to economic downturns or increased interest rates. The prices of high
yield securities have been found to be less sensitive to interest rate changes
than are those of higher rated investments, but more sensitive to adverse
economic changes or individual corporate developments. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect the ability
to service their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. In periods of economic
uncertainty and change, increased volatility of market prices of high yield
securities can be expected. To the extent that there is no established retail
secondary market, there may be thin trading of high yield securities. In the
absence of readily available market quotations, the valuation of high yield
securities held by the Fund will be determined by the Fund's Board of Directors.
The fulfillment of such responsibility may become difficult and judgment will
play a greater role in valuation because there may be less reliable, objective
data available.
B-4
<PAGE> 40
INVESTMENT RESTRICTIONS
In addition to the investment restrictions described in the Fund's
Prospectus, the Fund operates under the following fundamental investment
policies and restrictions which cannot be changed or eliminated without the
approval of the lesser of (a) 67% or more of the voting securities of the Fund
present at a meeting if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy, or (b) more than 50%
of the outstanding voting securities of the Fund. These policies and
restrictions provide, in part, that the Fund may not:
(1) Issue any of its securities (a) for services, or (b) for property
other than cash or securities (including securities of which the Fund is the
issuer), except as a dividend or distribution to its security holders or in
connection with a reorganization;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Purchase or sell commodities or commodity contracts, including
futures contracts;
(4) Invest in oil, gas and other mineral leases, but the Fund shall not
be prohibited from investing in marketable securities of companies investing in
such leases;
(5) Invest in real estate or real estate mortgage loans, but the Fund
shall not be prohibited from investing in marketable securities of companies
engaged in real estate activities or investments.
(6) Issue any senior securities except that the Fund may borrow from
any bank as set forth in the Fund's Prospectus.
B-5
<PAGE> 41
MANAGEMENT
The following table sets forth certain information with respect to each
member of the Fund's Board of Directors and each officer of the Fund. The Fund
does not have any advisory board.
<TABLE>
<CAPTION>
Positions Held With Principal Occupation(s)
Name and Address the Fund During the Past Five Years
- ---------------- -------- --------------------
<S> <C> <C>
Heiko H. Thieme* Chairman of the Chairman of the Board
1370 Avenue of the Board of Directors, of Directors, Chief
Americas Chief Executive Executive Officer and
New York, NY Officer and Secretary of the Fund
Secretary and American Heritage
Growth Fund, Inc.
("AHGF") since February
1990 and May 1994,
respectively. Chief
Executive Officer of
AHMC and Thieme
Associates, Inc.
(investment advisor)
since 1990. Chief
executive officer of
Thieme Consulting, Inc.
and Thieme Securities, Inc.
since 1995 and 1996,
respectively. Chief
Executive Officer of
The Thieme Fonds since
May 1994.
Consultant/Strategist
for Deutsche Bank A.G.
from 1989 to 1993.
John O. Koehler Director Chief Executive Officer
One Strawberry of Koehler
Hill Avenue - 14H International, Ltd.
Stamford, CT (consultant on public
affairs, risk analysis,
communications,
planning and crisis
management)
Eugene Sarver Director Associate Professor of
241 W. 97th St. Finance of Lubin School
New York, NY of Business - Graduate
Division, Pace University
until October 1996.
Subsequent thereto, sole
proprietor of Sarver
International (financial
and economic consulting)
and Associate of Intercap
Investments, Inc.
</TABLE>
* "Interested person" as defined in the Investment Company Act of 1940.
Dr. Sarver and Mr. Thieme have served as members of the Board of
Directors since February 1990. Mr. Koehler became a member of the Board of
Directors in May 1997. Each of the Fund's Directors is also a member of the
Board of Directors of AHGF.
Thieme Consulting, Inc., which is wholly owned by Mr. Thieme, provides
consulting services to certain companies whose securities are held by the Fund
and receives compensation therefor.
During the fiscal year ended May 31, 1997, no cash compensation was
paid by the Fund to its executive officers in such capacity. Each Director who
is not an "Interested Person" of the Fund receives annual compensation from the
Fund of $10,000.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On July 21, 1997, Charles Schwab & Co. Inc., 101 Montgomery Street,
San Francisco, CA 94104 owned of record shares of the Fund's capital stock which
represented approximately 11% of the Fund's outstanding capital stock on
that date and National Financial Services, Corp., P.O. Box 3908, New York, NY
10008 owned approximately 8% of the Fund's outstanding capital stock. As of
such date, no other person owned of record or was known to the Fund to own
beneficially 5% or more of the Fund's outstanding capital stock and the Fund's
officers and directors as a group owned less than 1% of such capital stock.
INVESTMENT ADVISORY AND OTHER SERVICES
Heiko H. Thieme may be deemed to control AHMC by virtue of his record
and beneficial ownership of 90% of the outstanding capital stock thereof. Mr.
Thieme acquired such stock on February 1, 1990. Mr. Thieme is the Chairman of
the Board of Directors and the Chief Executive Officer of AHMC. Northern
Westchester Industries, Inc., a corporation which is wholly owned by Richard K.
Parker, is the record and beneficial owner of 10% of the outstanding capital
stock of AHMC. See "Management".
B-6
<PAGE> 42
AHMC became the Fund's investment advisor on December 27, 1985. During
the Fund's fiscal years ended May 31, 1995, 1996 and 1997, AHMC received
investment advisory fees from the Fund of $824,115, $303,534 and $206,091,
respectively. In connection with the Investment Advisory Agreement with AHMC,
AHMC bears the expenses of certain of the Fund's trading operations. All other
expenses of the Fund are borne by the Fund.
The Fund reimburses AHMC for office space and administrative personnel
utilized by the Fund. See Notes to the Financial Statements in the Fund's Annual
Report for the fiscal year ended May 31, 1997.
TOTAL RETURN
The Fund's average annual total returns for the one, five and ten year
periods ended May 31, 1997 are set forth below:
<TABLE>
<CAPTION>
<S> <C>
One Year ................... 9.21%
Five Years.................. -1.14%
Ten Years................... .22%
</TABLE>
See "Total Return" in the Fund's Prospectus for a description of the
method by which total return is computed.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202 is the
Fund's Custodian. In such capacity, the Custodian maintains custody of the
Fund's cash and securities and delivers securities which are purchased and sold
by the Fund.
INDEPENDENT ACCOUNTANTS
Landsburg Platt Raschiatore & Dalton are the Fund's independent
certified public accountants. The financial statements incorporated herein by
reference have been examined by such firm to the extent set forth in their
respective reports included herein by reference. See Financial Statements.
TRANSFER AGENT
American Data Services, Inc., 24 West Carver Street, Huntington, New
York 11743 ("ADS") is the Fund's Transfer Agent. In such capacity, ADS maintains
the Fund's capital stock records, effects issuances and transfers of capital
stock, handles all correspondence with respect to shareholder accounts and
processes redemptions.
B-7
<PAGE> 43
FINANCIAL STATEMENTS
The Fund's Annual Reports for the fiscal years ended May 31, 1996 and
1997 are hereby incorporated by reference.
B-8
<PAGE> 44
PART C
<PAGE> 45
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial Highlights (1)
Reports of Independent Certified Public Accountants (2)
Statements of Assets and Liabilities at May 31, 1996
and 1997 (2)
Schedules of Investments at May 31, 1996 and 1997 (2)
Statements of Operations for the Fiscal Years Ended May
31, 1996 and 1997 (2)
Statements of Changes in Net Assets for each of the
Fiscal Years Ended May 31, 1995, 1996 and 1997 (2)
Notes to Financial Statements (2)
- ------------------
(1) Included in Part A of this Registration Statement.
(2) Incorporated by reference in Part B of this Registration
Statement.
(b) Exhibits
1. Certificate of Incorporation, as amended. Exhibit
1 to the Registrant's Post Effective Amendment 64
on Form N-1A is hereby incorporated by reference.
2. By-Laws, as amended. Exhibit 2 to the Registrant's
Post Effective Amendment 64 on Form N-1A is hereby
incorporated by reference. Exhibit 2 to the
Registrant's Post Effective Amendment 64 on Form N-1A
is hereby incorporated by reference.
4. Specimen Common Stock Certificate. Exhibit 4 to
the Registrant's Post Effective Amendment 64 on
Form N-1A is hereby incorporated by reference.
5. Form of Investment Advisory Agreement by and between
the Registrant and American Heritage Management
Corporation. Exhibit A to the Registrant's definitive
Proxy Statement for its Special Meeting of
C-1
<PAGE> 46
Shareholders held on December 16, 1993 is hereby
incorporated by reference.
8. Custodian Agreement of December 29, 1993 by and
between the Registrant and Star Bank, N.A. Exhibit 8
to the Registrant's Post Effective Amendment 64 on
Form N-1A is hereby incorporated by reference.
9(a). Shareholder Servicing Agent Agreement of December
9, 1993 by and between the Registrant and American
Data Services, Inc. Exhibit 9(a) to the
Registrant's Post Effective Amendment 64 on Form
N-1A is hereby incorporated by reference.
9(b). Fund Accounting Service Agreement of April 10,
1991 by and between the Registrant and American
Data Services, Inc. Exhibit 9 to the Registrant's
Post Effective Amendment 60 on Form N-1A is hereby
incorporated by reference.
11. Consent of Landsburg Platt Raschiatore & Dalton.
16. Schedule for computation of each performance
quotation provided in the Registration Statement
in response to Item 22.
17. Financial Data Schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
On July 1, 1997 there were approximately 5,144 record holders of
shares of the Registrant's capital stock.
ITEM 27. INDEMNIFICATION
Pursuant to the Registrant's Certificate of Incorporation and By-Laws,
each director, officer and employee of the Registrant shall be indemnified by
the Registrant in connection with any proceeding in which he has been made a
party by reason of such capacity other than for liabilities resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Pursuant to a contract of
insurance, each of the Registrant's directors, officers and employees and its
investment advisor is insured against claims based upon any breach of duty,
neglect, error, misstatement, misleading statement, omission or act wrongfully
done or attempted other than actual or alleged fraud, dishonesty criminal or
malicious acts or omissions unless such allegations are subsequently disproven.
C-2
<PAGE> 47
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Reference is made to the disclosure under the caption "Management" in
Part B of this Post-Effective Amendment.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
As used herein, the term "records" shall refer to accounts, books or
other documents.
The Registrant maintains physical possession of each record set forth
in Rule 31a-1(b)(1) under the Investment Company Act of 1940 (the "Act"), except
that records relating to receipts and deliveries of portfolio securities are in
the physical possession of Star Bank, N.A., 425 Walnut Street, ML 5127,
Cincinnati, Ohio 45202 and records relating to securities issued by the
Registrant are in the physical possession of American Data Services, Inc., 24
West Carver Street, Huntington, New York 11743 ("ADS").
The records referred to in Rule 31a-1(b)(2)(i)(a), (b) and (c) under
the Act are in the physical possession of Star Bank, N.A.
The records referred to in Rule 31a-1(a) and Rule 31a-1(b)(2)(i)(d),
(e) and (f) under the Act are in the physical possession of ADS.
The records referred to in Rule 31a-1(b)(2)(ii), (iii) and (iv) and
Rule 31a-1(b)(3) and (8) under the Act are in the physical possession of ADS.
The records referred to in Rule 31a-1(b)(2)(iv) and Rule 31a-1(b)(11)
under the Act are in the physical possession of ADS.
The records referred to in Rule 31a-1(b)(4), (5), (6), (7), (9),(10)
and (11) under the Act are in the physical possession of the Registrant, 1370
Avenue of the Americas, New York, New York
10019.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Not applicable.
C-3
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and the State of New York on the 23rd
day of July, 1997.
THE AMERICAN HERITAGE FUND, INC.
By: /s/ Heiko H. Thieme
---------------------------------------
Heiko H. Thieme, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Heiko H. Thieme
- -------------------- Chief Executive July 23, 1997
Heiko H. Thieme Officer, Principal
Financial and
Accounting Officer
and Director
/s/ John O. Koehler
- -------------------- Director July 23, 1997
John O. Koehler
/s/ Eugene Sarver
- -------------------- Director July 23, 1997
Eugene Sarver
</TABLE>
C-4
<PAGE> 49
EXHIBIT INDEX
Exhibits
1. Certificate of Incorporation, as amended. Exhibit
1 to the Registrant's Post Effective Amendment 64
on Form N-1A is hereby incorporated by reference.
2. By-Laws, as amended. Exhibit 2 to the Registrant's
Post Effective Amendment 64 on Form N-1A is hereby
incorporated by reference. Exhibit 2 to the
Registrant's Post Effective Amendment 64 on Form N-1A
is hereby incorporated by reference.
4. Specimen Common Stock Certificate. Exhibit 4 to
the Registrant's Post Effective Amendment 64 on
Form N-1A is hereby incorporated by reference.
5. Form of Investment Advisory Agreement by and between
the Registrant and American Heritage Management
Corporation. Exhibit A to the Registrant's definitive
Proxy Statement for its Special Meeting of
Shareholders held on December 16, 1993 is hereby
incorporated by reference.
8. Custodian Agreement of December 29, 1993 by and
between the Registrant and Star Bank, N.A. Exhibit 8
to the Registrant's Post Effective Amendment 64 on
Form N-1A is hereby incorporated by reference.
9(a). Shareholder Servicing Agent Agreement of December
9, 1993 by and between the Registrant and American
Data Services, Inc. Exhibit 9(a) to the
Registrant's Post Effective Amendment 64 on Form
N-1A is hereby incorporated by reference.
9(b). Fund Accounting Service Agreement of April 10,
1991 by and between the Registrant and American
Data Services, Inc. Exhibit 9 to the Registrant's
Post Effective Amendment 60 on Form N-1A is hereby
incorporated by reference.
11. Consent of Landsburg Platt Raschiatore & Dalton.
16. Schedule for computation of each performance
quotation provided in the Registration Statement
in response to Item 22.
17. Financial Data Schedule.
<PAGE> 1
Exhibit 11
Landsburg Platt Raschiatore & Dalton
Certified Public Accountants
117 South 17th Street 13th Floor Philadelphia, Pennsylvania 19103
215-561-6633 FAX 215-561-2070
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the inclusion by reference to Post Effective Amendment No. 68 on
Form N-1A of The American Heritage Fund, Inc. of our report dated June 27, 1997
on our examination of the Financial Statements of such company. We also consent
to the reference to our firm in such Registration Statement.
/S/ LANDSBURG PLATT RASCHIATORE & DALTON
July 22, 1997
<PAGE> 1
Exhibit 16
Quotations of the Fund's total return will represent the average annual
compounded rate of return of a hypothetical investment in the fund over a
period of years, assuming reinvestment of any dividends and capital gains
distributions, and are calculated pursuant to the following formula:
T = n (square root of ERV/P) - 1
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period).
<PAGE> 1
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] MAY-31-1997
[PERIOD-START] JUN-01-1996
[PERIOD-END] MAY-31-1997
[INVESTMENTS-AT-COST] 30,628,657
[INVESTMENTS-AT-VALUE] 17,507,408
[RECEIVABLES] 4,162,325
[ASSETS-OTHER] 19,302
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 21,689,035
[PAYABLE-FOR-SECURITIES] 2,344,235
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,218,209
[TOTAL-LIABILITIES] 3,562,444
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 64,790,498
[SHARES-COMMON-STOCK] 218,741
[SHARES-COMMON-PRIOR] 281,474
[ACCUMULATED-NII-CURRENT] (819,245)
[OVERDISTRIBUTION-NII] (1,994,642)
[ACCUMULATED-NET-GAINS] (31,766,757)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (13,121,249)
[NET-ASSETS] 18,126,591
[DIVIDEND-INCOME] 157,588
[INTEREST-INCOME] 61,850
[OTHER-INCOME] 19,654
[EXPENSES-NET] 1,058,337
[NET-INVESTMENT-INCOME] (819,245)
[REALIZED-GAINS-CURRENT] 2,967
[APPREC-INCREASE-CURRENT] 1,113,728
[NET-CHANGE-FROM-OPS] 297,450
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 8,704,544
[NUMBER-OF-SHARES-REDEEMED] 14,977,593
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (6,273,049)
[ACCUMULATED-NII-PRIOR] (1,175,397)
[ACCUMULATED-GAINS-PRIOR] (31,769,724)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 206,091
[INTEREST-EXPENSE] 23,081
[GROSS-EXPENSE] 1,058,337
[AVERAGE-NET-ASSETS] 16,478,298
[PER-SHARE-NAV-BEGIN] .76
[PER-SHARE-NII] (.03)
[PER-SHARE-GAIN-APPREC] .10
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] .83
[EXPENSE-RATIO] 6.42
[AVG-DEBT-OUTSTANDING] 2,143,580
[AVG-DEBT-PER-SHARE] .09
</TABLE>
