<PAGE> 1
THE AMERICAN HERITAGE FUND, INC.
[THE AMERICAN HERITAGE FUND LOGO]
1370 Avenue of the Americas
New York, N.Y. 10019
Tel: (212) 397-3900
Fax: (212) 397-4036
Heiko Thieme
Chairman
January, 1998
To Our Valued Shareholders:
After three disappointing years, The American Heritage Fund was able to
finish 1997 as the best performing fund, on a total return basis, among all
mutual funds in the United States. To be Number One out of more than 10,000
funds is certainly gratifying but also offers a challenge for 1998 which I
am willing to meet.
The Fund remains focused. Only ten holdings presently make up 90% of the
portfolio. One investment represents more than half of the portfolio. While
such a concentrated asset allocation may change periodically and depends on
the performance of individual stocks, volatility in the Fund's net asset
value should not come as a surprise.
This is not a Fund for investors faint of heart and those who are not
willing to take above-average risks.
1998 will be a more difficult year than the prior three years. Not only will
volatility again represent a major challenge, but it is also unlikely that
the major indices can again reflect an increase of well over 20%. This year
will bring us back to normalcy. A 10% return has been the average over the
past 75 years. The first month has already given us some warning signals not
to expect too much after a 7-year bull market.
Our strategy will continue to focus on undervalued blue chips and unknown,
small companies with a high appreciation potential over time. As a
consequence of my strategy, I do expect significant swings in the net asset
value as it is hardly possible, giving our risk exposure, to achieve a
smooth, linear appreciation. Thank you for the confidence you have shown me
over the years. I hope in the long run the performance of the Fund will not
disappoint the trust you have put in me.
Being the portfolio manager as well as a shareholder of the Fund, I am as
keen as you are to maintain our lead in the market.
With kind regards,
Heiko Thieme
Chairman
<PAGE> 2
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at
value (cost $21,435,215)........ $ 19,397,772
Receivable for investment
securities sold................. 2,358,956
Receivable for capital stock
sold............................ 1,999
Receivable for dividends and
interest........................ 8,181
Other assets...................... 44,273
------------
TOTAL ASSETS.................... 21,811,181
------------
LIABILITIES
Payable for investment securities
purchased....................... 1,234,150
Demand loan payable to bank....... 676,691
Payable for capital stock
reacquired...................... 30,734
Accrued advisory fees............. 21,160
Accrued expenses and other
payables........................ 127,411
------------
TOTAL LIABILITIES............... 2,090,146
------------
Commitments & Contingencies --
NET ASSETS
Net assets (equivalent to $.91 per
share based on 21,672,683 shares
of capital stock outstanding)... $ 19,721,035
============
Composition of net assets:
Shares of capital stock........... 216,727
Paid in capital................... 64,783,759
Accumulated net investment loss... (2,512,803)
Accumulated net realized loss on
investments..................... (40,729,205)
Net unrealized depreciation of
investments..................... (2,037,443)
------------
NET ASSETS, November 30,
1997....................... $ 19,721,035
============
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS & WARRANTS - 98.25%
</TABLE>
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
NOVEMBER 30, 1997
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ------------------------------------------------------
<S> <C> <C>
AEROSPACE & TRANSPORTATION - 2.69%
Boeing Co..................... 10,000 $ 531,250
-----------
BANKS & FINANCE - 3.66%
Auer Von Welsbach Invest.
AG*(+)...................... 6,500 379,082
Dime Bancorp Inc.............. 10,000 242,500
Kouri Capital Group Inc.*+.... 200 100,000
-----------
721,582
-----------
BIOTECHNOLOGY - 62.79%
Direct Therapeutics, Inc.*+... 160,000 48,000
Senetek PLC Sponsored
ADR*(+)..................... 2,903,000 12,247,031
Synthetic Blood International
Inc.*+...................... 466,800 88,225
-----------
12,383,256
-----------
CHEMICALS - 2.25%
Advanced Materials Group
Inc.*+...................... 128,000 444,000
-----------
COMMUNICATION & EQUIPMENT - 1.59%
American Satellite Network
Inc. Wts*+.................. 6,775 0
Millicom International
Cellular SA Rights*(+)+..... 27,100 0
Motorola Inc. ................ 5,000 314,375
-----------
314,375
-----------
COMPUTER EQUIPMENT & SOFTWARE - 4.29%
Jot-It Inc.*(+)............... 321,700 185,331
JTS Corporation*.............. 185,000 69,375
Management Technologies
Inc.*....................... 95,238 2,976
Management Technologies Inc. C
Wts*........................ 419,047 0
Micron Technology Inc.*....... 10,000 248,750
Seagate Technology Inc.*...... 15,000 340,313
-----------
846,745
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
<TABLE>
- ------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ------------------------------------------------------
Number of
Shares Value
- ------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS - 2.69%
Philip Morris Companies
Inc......................... 10,000 $ 435,000
Veridian Corp.*+.............. 250,000 95,000
-----------
530,000
-----------
ENTERTAINMENT & LEISURE - 0.25%
Gold Star International Inc.
Units*(+)+.................. 5,000 50,000
-----------
ENVIRONMENTAL SERVICES - 1.56%
I D M Environmental
Corporation*................ 50,000 307,813
-----------
HEALTHCARE - 0.51%
Medaphis Corp.*............... 20,000 100,000
-----------
MEDICAL TECHNOLOGY - 12.56%
A D M Tronics Unlimited
Inc.*+...................... 4,230,000 793,125
Life Medical Sciences Inc.*... 54,500 275,906
Life Medical Sciences Inc. Cl
A Wts*...................... 25,000 42,188
Medtrack Inc.*+............... 300,000 200,001
Miravant Medical
Technologies*............... 25,000 1,165,625
-----------
2,476,845
-----------
MISCELLANEOUS - 1.83%
Mark Solutions Inc.*.......... 50,000 146,875
Marketing Service*............ 50,000 212,500
-----------
359,375
-----------
- ------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ------------------------------------------------------
Number of
Shares Value
- ------------------------------------------------------
PHARMACEUTICALS - 1.58%
Interactive Medical
Technologies Ltd.*.......... 380,000 $ 28,500
Polydex Pharmaceuticals
Ltd.*(+).................... 31,500 281,531
-----------
310,031
-----------
TOTAL COMMON STOCKS & WARRANTS
(Cost $21,285,215).......... $19,375,272
-----------
PREFERRED STOCKS - 0.00%
Medtrack Inc. Pf B+ (Cost
$0)......................... 30,000 0
-----------
BONDS AND NOTES - 0.11%
International Fast Food G-Bond
9%, due 12/15/2007 (Cost
$150,000)................... 150,000 22,500
-----------
TOTAL SECURITIES (Cost $21,435,215).....
$19,397,772
===========
* Non-income producing property
(+) Foreign security
+ Illiquid security
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................... $ 9,781
Dividends......................... 86,399
---------
TOTAL INVESTMENT INCOME........... 96,180
---------
EXPENSES:
Investment advisory fees.......... 144,484
Transfer agent fees............... 39,572
Legal fees........................ 75,134
Audit fees........................ 24,781
Custodian fees.................... 22,941
Administrative fees............... 83,171
Fund accounting fees.............. 22,938
Insurance......................... 15,431
Postage and printing expense...... 44,465
Registration fees and expenses.... 12,987
Directors' fees................... 21,415
Interest expense.................. 51,911
Consulting and professional fees.. 2,554
Rent.............................. 45,136
Telephone......................... 2,931
Miscellaneous..................... 4,490
---------
TOTAL EXPENSES.................... 614,341
---------
Investment loss -- net............ (518,161)
---------
Net realized loss on securities
transactions.................... (8,962,447)
Net change in unrealized
appreciation of investments..... 11,083,806
---------
Net gain on investments........... 2,121,359
---------
Net increase in net assets
resulting from operations....... $ 1,603,198
=========
</TABLE>
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Investment loss -- net... $ (518,161) $ (819,245)
Net realized gain (loss)
on securities
transactions........... (8,962,447) 2,967
Net change in unrealized
appreciation of
investments............ 11,083,806 1,113,728
----------- -----------
Net increase in net
assets resulting from
operations............. 1,603,198 297,450
Distributions to
shareholders from --
Investment
income -- net........ 0 0
Net realized gains on
investments.......... 0 0
Return of capital...... 0 0
Capital share
transactions........... (8,754) (3,600,612)
----------- -----------
Net increase/(decrease)
in net assets........ 1,594,444 (3,303,162)
NET ASSETS:
Beginning of period...... 18,126,591 21,429,753
----------- -----------
End of period............ $19,721,035 $ 18,126,591
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Unaudited)
- ---------------------------------------------------------
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The American Heritage Fund, Inc. ("the Fund") is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-end management
investment company. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles. Significant accounting policies of the Fund are as follows:
SECURITY VALUATIONS
The Fund values its securities, where market quotations are readily available,
at market value based on the last recorded sales price as reported by the
principal securities exchange on which the security is traded, or if the
security is not traded on an exchange, market value is based on the latest bid
price. Foreign securities are converted to U.S. dollars using exchange rates at
the close of the trading day. Securities for which market quotations are not
readily available are valued as the Board of Directors or a committee composed
of members of the Board of Directors, in good faith determines.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute all
its taxable income to its shareholders. Therefore, no federal income tax
provision is required.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund intends to distribute to shareholders substantially all of its net
investment income, and net realized and long-term capital gains, after provision
for carryover losses, if any, after the end of the fiscal year.
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
OPTION WRITING
When the Fund sells an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
market value of the option written. Premiums received from writing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains from the sales of securities. The difference between the premium and the
amount paid on effecting a closing purchase transaction, including brokerage
commissions, are also treated as a realized gain, or if the premium is less than
the amount paid for the closing purchase transaction, as a realized loss. If a
call option is exercised, the premium is added to the proceeds from the sale of
the underlying security in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Fund.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
OTHER
The Fund follows industry practice and records security transactions on the
trade date. The specific identification method is used for determining gains or
losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrued
basis.
5
<PAGE> 6
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
NOTE 2. INVESTMENT ADVISORY AGREEMENT
AND OTHER RELATED TRANSACTIONS
The Fund has an investment advisory agreement with American Heritage Management
Corporation (AHMC), whereby AHMC receives a fee of 1.25% of the Fund's first
$100,000,000 average net asset value and 1% of such value on any additional net
assets, computed daily and payable monthly. For the six months ended November
30, 1997 AHMC received $144,484 in investment advisory fees. Heiko H. Thieme is
the Fund's Chairman of the Board of Directors, Chief Executive Officer and
Secretary. Heiko H. Thieme is also the Chairman of the Board of Directors, Chief
Executive Officer and Secretary of AHMC, of which he owns 90% of the outstanding
shares.
For the six months ended November 30, 1997, the Fund paid brokerage commissions
of $593,795 to Thieme Securities, Inc. of which Mr. Thieme is the owner.
The Fund has agreed to reimburse AHMC for office space utilized by the Fund. For
the six months ended November 30, 1997, the Fund reimbursed AHMC $45,136 for the
use of its office space.
AHMC is also reimbursed for administrative personnel utilized by the Fund. Total
reimbursement was $83,171 for the six months ended November 30, 1997.
NOTE 3. INVESTMENTS
For the six months ended November 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $136,180,831 and
$136,457,025, respectively. The gross unrealized appreciation for all securities
totaled $6,267,218 and the gross unrealized depreciation for all securities
totaled $8,304,661, or a net unrealized depreciation of $2,037,443. The
aggregate cost of securities for federal income tax purposes at November 30,
1997 was $21,435,215.
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
Net realized loss on investments for the six months ended November 30, 1997 was
$8,962,447. The components are as follows:
<TABLE>
<S> <C>
Long transactions $(8,970,980)
Short sales transactions 53,760
Option transactions (45,227)
-----------
$(8,962,447)
===========
</TABLE>
Option activity for the six months ended November 30, 1997 follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
--------- --------
<S> <C> <C>
Options outstanding at May
31, 1997 0 $ 0
Options purchased 100 45,227
Options expired (100) (45,227)
---- --------
Options outstanding at
November 30, 1997 0 $ 0
==== ========
</TABLE>
NOTE 4. RESTRICTED AND OTHER ILLIQUID SECURITIES
Investments in restricted securities and investments, where market quotations
are not available, are valued at fair value as determined in good faith by the
Board of Directors, or a committee composed of members of the Board of Directors
of the Fund.
The Fund may acquire portfolio securities called restricted 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 cannot be
sold or disposed of in the ordinary course of business at approximately the
quoted market value of such securities, or in the absence of such quoted market
value, the price at which the Fund has valued such securities. The Fund will not
invest in restricted and other illiquid securities if, as a result of such
investment, the value of the
6
<PAGE> 7
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
Fund's illiquid assets would exceed 15% of the value of the Fund's net assets.
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.
Certain securities held by the Fund, which were restricted at the time of their
acquisition, have been deemed to no longer be restricted pursuant to Rule 144
under the Securities Act of 1933.
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.
NOTE 5. CARRYOVERS
At November 30, 1997, the Fund had net capital loss carryforwards of
approximately $31,504,000 expiring in 2003 through 2005 and net operating loss
carryforwards of approximately $1,995,000, which begin to expire in 1998 through
2013.
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
NOTE 6. REDEMPTIONS
The Fund reserves the right to make payments for shares redeemed in cash or in
kind.
NOTE 7. CAPITAL SHARE TRANSACTIONS
As of November 30, 1997 the total par value and paid in capital totaled
$65,000,486.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED NOVEMBER 30, 1997 MAY 31, 1997
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 9,748,714 $ 10,199,275 8,704,545 $ 6,830,024
Shares issued in
reinvestment of
dividends 0 0 0 0
Shares redeemed (9,951,074) (10,208,029) (14,977,593) (10,430,636)
----------- ------------ ----------- ------------
Net decrease (202,360) $ (8,754) (6,273,048) $ (3,600,612)
=========== ============ =========== ============
</TABLE>
NOTE 8. BANK LOANS
The Fund has a demand secured $10,000,000 bank line of credit; borrowings under
this arrangement bear interest at the bank's prime rate. The outstanding balance
as of November 30, 1997 was $676,691. Total interest paid on the credit line
during the six months ended November 30, 1997 totaled $51,911.
NOTE 9. CONTINGENCIES
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. The
amount of the outstanding shares of the Fund has been rapidly
7
<PAGE> 8
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
diminishing since early 1994. The Fund had approximately 21 million outstanding
shares as of January 14, 1998.
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 company's 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 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
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
persons who acquired shares of the Fund from July 1, 1993 through August 31,
1994. On August 1, 1997, the Court denied the Plaintiff's motion.
The Fund, after conferring with its special counsel, has concluded that the
substantive allegations of the amended complaint are without merit. Although
there can be no assurance of the outcome of the action, based upon the Funds
belief, the Fund has not established a reserve for potential losses other than
the expenses 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.
The Fund has borne expenses related to the above litigation which for the six
months ended November 30, 1997 totaled $117,649. All of these expenses, along
with $53,661 relating to expenses borne in prior periods, were recovered from
the Fund's insurance carrier.
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
8
<PAGE> 9
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
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 again KCG and Mr. Kouri. In such event, it can be expected that
they will again assert counterclaims against the Fund.
The Fund has borne all expenses related to the above litigation which for the
six months ended November 30, 1997 totaled $64,750.
- ---------------------------------------------------------
THE AMERICAN HERITAGE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
NOTE 10. SUBSEQUENT EVENTS
On January 14, 1998, the Funds investment in the securities of Senetek PLC
(Senetek) represented approximately 69% of the Funds net assets. As set forth in
the Funds Prospectus, the restriction limiting investments of more than 50% of
the value of total assets in the securities of any one issuer is applied solely
at the time of any proposed transaction. Senetek is a small foreign company and
the Funds investment therein is speculative.
9
<PAGE> 10
THE AMERICAN HERITAGE FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED
RATIOS/SUPPLEMENTAL DATA
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
NOVEMBER 30, FOR THE FISCAL YEARS ENDED MAY 31,
1997 ----------------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ .83 $ .76 $ .63 $ 1.19 $ 1.42 $ 1.15
Income from investment
operations:
Net investment income
(loss)................. (.02) (.03) (.02) .06 .19 (.01)
Net gains or (losses) on
securities (both
realized and
unrealized)............ .10 .10 .15 (.48) (.35) .36
----------- ----------- ----------- ----------- ------------ -----------
Total from investment
operations............... .08 .07 .13 (.42) (.16) .35
Less distributions
Dividends (from net
investment income)..... -- -- -- .07 -- .08
Distributions (from
capital gains)......... -- -- -- -- .07 --
Return of capital
distribution........... -- -- -- .07 -- --
----------- ----------- ----------- ----------- ------------ -----------
Net asset value, end of
period................... $ .91 $ .83 $ .76 $ .63 $ 1.19 $ 1.42
=========== =========== =========== =========== ============ ===========
Total return............... 20.15% 9.21% 20.63% (38.37)% (12.49)% 32.89%
Net assets, end of
period................... $ 19,721,035 $ 18,126,591 $ 21,429,753 $ 30,779,569 $101,036,392 $ 69,498,156
Ratio of expenses to
average net assets....... 5.31% 6.42% 6.25% 3.69% 2.41% 2.1%
Ratio of net income (loss)
to average net assets.... (4.48)% (4.97)% (3.53)% 6.55% 3.40% (.46)%
Portfolio turnover rate.... 594% 470% 606% 620% 434% 278%
Average commission per
share.................... $ .0625 $ .0879 $ .0866 N/A N/A N/A
</TABLE>
N/A -- Disclosure not applicable to prior periods.
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
THE AMERICAN HERITAGE FUND, INC.
1370 Avenue of the Americas
ADDRESS CORRECTION REQUESTED New York, NY 10019
BULK RATE
U.S. POSTAGE
PAID
SECAUCUS, NJ
PERMIT NO. 237
[THE AMERICAN HERITAGE FUND, INC. LOGO]
THE
AMERICAN
HERITAGE
FUND, INC.
- ---------------------------
SEMI-ANNUAL
REPORT
November 30, 1997
This report and the financial statements contained herein are submitted for the
general information of shareholders and are not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
Nothing herein contained is to be considered an offer of sale or solicitation of
an offer to buy shares of The American Heritage Fund, Inc. Such offering is made
only by prospectus, which includes details as to offering price and other
material information.
