AMERICAN HERITAGE FUND INC
497, 2000-11-16
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<PAGE>   1
THE AMERICAN HERITAGE FUND, INC.


                                  PROSPECTUS




                                  ----------


             The Fund is a no-load mutual fund which seeks maximum capital
growth.



AS WITH ALL MUTUAL FUNDS, NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES
OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.


                              SEPTEMBER 27, 2000


<PAGE>   2


                              TABLE OF CONTENTS

<TABLE>
<S>                                                                                <C>
RISK/RETURN SUMMARY....................................................................3

INVESTMENT OBJECTIVE AND PRINCIPAL
     INVESTMENT STRATEGIES.............................................................8

FINANCIAL HIGHLIGHTS..................................................................10

MANAGEMENT'S DISCUSSION OF OUR PERFORMANCE............................................10

MANAGEMENT............................................................................11

PRICING OF SHARES.....................................................................11

PROCEDURES FOR BUYING FUND SHARES.....................................................11

PROCEDURES FOR REDEEMING FUND SHARES..................................................12

DISTRIBUTIONS AND TAXES...............................................................13

SHAREHOLDER SERVICES..................................................................14

LEGAL PROCEEDINGS.....................................................................14

CUSTODIAN AND TRANSFER AGENT..........................................................15
</TABLE>


<PAGE>   3


                             RISK/RETURN SUMMARY

INVESTMENT OBJECTIVE

Our investment objective is to seek maximum capital growth. Income from our
investment portfolio will be only an incidental consideration and entirely
subordinate to our investment objective.

PRINCIPAL INVESTMENT STRATEGIES

We intend to achieve our investment objective by investing a majority of our
net assets in speculative investments in small and virtually unknown
companies, including companies that have never earned a profit. We may also
engage in speculative activities such as short-term trading, leveraging
through borrowing, short sales, 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. An investment in the Fund is not a complete investment
program. We may not, at any particular time, engage in all or any of the
investment activities described in this prospectus. The activities may be
engaged in only periodically or not at all.

Fundamental analysis plays the most important role in choosing the stocks that
we decide to purchase. We review both the available financial data as well as
the experience of the management. In the case of lesser known companies, we
often meet with their management before we make a positive investment
decision. We make our assessment of the growth potential of individual
companies after our review.

We generally identify companies as potential investments based upon our belief
in their future growth potential and the actual share price. Our intention is
to identify companies which promise a price appreciation over the following 12
months of at least 20%. We also consider companies that have fallen out of
favor and might not immediately recover to previous levels.

PRINCIPAL RISKS

Investing in securities is inherently risky, and there is no guarantee that we
will achieve our investment objective and you may lose money by investing in
the Fund. Many of the techniques which we may utilize involve greater than
normal risk and attainment of our investment objective cannot, of course, be
assured. An investment in the Fund is not a complete investment program and is
designed for investors willing to assume risks inherent in our investment
policies and practices. Investors should carefully consider all of the risks
described below as well as the risks described elsewhere in this prospectus:

-     MARKET RISKS. The price of particular securities may fall because of
      declines in the stock market regardless of the success of individual
      companies' businesses. We invest in securities not listed in the
      Standard and Poor's 500 Index. These securities may perform poorly and
      the Standard and Poor's 500 Index as well as other recognized indices
      may outperform us.



<PAGE>   4


-     SPECULATIVE SECURITIES. We purchase securities issued by companies which
      are speculative. These securities may lose all or substantially all
      their value. In addition, because earnings, if any, tend to be less
      predictable, market prices are more volatile and the speculative
      securities less liquid than those of larger, more established companies.
      In the case of speculative debt securities, 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 we
      believe that the prospect of capital appreciation outweighs the risk of
      investment. The risk of investing in those securities, as well as other
      debt securities, can be substantial because their value is based upon
      the ability of the issuer to make all required payments of interest and
      principal. We may purchase and sell put and call options without
      limitation and we make short sales. A relatively small percentage
      movement in the price of the security which is the subject of an option
      can result in a total loss of our investment in the option. An
      unsuccessful short sale can result in a substantial loss. On September
      19, 2000, the securities of each of two companies which are speculative
      represented approximately 78% and 13% of the value our net assets.

-     WE ARE NOT A DIVERSIFIED INVESTMENT COMPANY. Subject only to the
      restrictions described in this prospectus, we can invest without
      limitation in the securities of any one or more companies.

-     UNDERVALUED SECURITIES. We may purchase securities that we believe the
      market undervalues in relation to their actual worth. We assume that the
      market will ultimately recognize the actual worth of these companies,
      thus causing their stock prices to rise. The market may, however,
      indefinitely undervalue these securities, causing their prices to remain
      the same or decline. In addition, our belief that the securities are
      undervalued may be incorrect.

-     SECURITIES PAYING LITTLE OR NO DIVIDENDS. We purchase the securities of
      companies that expect their earnings, if any, to rise and which pay
      little, if any, dividends. Those securities are risky because their
      stock prices often decline in market downturns.

-     MONEY MARKET SECURITIES. Under adverse market conditions, we could
      invest some or all of our assets in money market securities. Although we
      would do so only in seeking to avoid losses, it could reduce the benefit
      from any upswing in the market.

-     EXPENSES. Because of our extremely small size, our aggregate annual
      operating expenses as a percentage of our net assets is substantially
      higher than those of most other mutual funds.

-     SHORT TERM TRADING. We have at times engaged, and may again engage, in
      extensive, active and frequent short term trading. Short term trading
      may increase capital gains distributions, which in turn would increase
      your tax liability. Frequent trading will also increase our transaction
      costs, which may reduce our investment performance. Our past short term
      trading activities have resulted in significant losses.


<PAGE>   5



-     FOREIGN SECURITIES. We may purchase securities issued by companies
      organized in foreign countries. The foreign countries may have either
      developed or emerging markets. Foreign securities markets generally are
      not as developed or efficient as those in the United States. Securities
      of some foreign issuers are less liquid and more volatile than
      securities of comparable U.S. issuers. Similarly, volume and liquidity
      in most foreign securities markets are less than in the United States
      and, at times, volatility of price can be greater than in the United
      States. Because evidences of ownership of foreign securities usually are
      held outside the United States, we will be subject to additional risks
      which include possible adverse political and economic developments,
      seizure or nationalization of foreign deposits and adoption of
      governmental restrictions which might adversely affect or restrict the
      payment of principal, interest and dividends on the foreign securities
      to investors located outside the country of the issuer, whether from
      currency blockage or otherwise. Moreover, foreign securities held by us
      may trade on days when we do not calculate our net asset value and thus
      affect the our net asset value on days when investors cannot purchase or
      redeem our shares. Developing countries have economic structures that
      are generally less diverse and mature, and political systems that are
      less stable, than those of developed countries. The markets of
      developing countries may be more volatile than the markets of more
      mature economies; however, such markets may provide higher rates of
      return to investors. Many developing countries have experienced
      substantial, and in some periods extremely high, rates of inflation for
      many years. Inflation and rapid fluctuations in inflation rates have had
      and may continue to have adverse effects on the economies and securities
      markets of certain of these countries. Since foreign securities often
      are purchased with and payable in currencies of foreign countries, the
      value of these assets as measured in U.S. dollars may be affected
      favorably or unfavorably by changes in currency rates and exchange
      control regulations. On September 19, 2000, approximately 78% of the
      value of our net assets was represented by our investment in a foreign
      company.

-     BROAD AND FLEXIBLE INVESTMENT POWERS. Because of our broad and flexible
      investment powers, our success or failure may be more dependent upon our
      skill and ability and less dependent upon movement of the securities
      market in general than is the case with most mutual funds whose
      investment powers are not as broad or as flexible.

-     BORROWING. We may borrow money to purchase additional securities. If the
      investment performance of the securities purchased with borrowed monies
      fails to cover our interest cost, our net asset value of the Fund will
      decrease faster than would otherwise be the case. If for any reason,
      including market fluctuations, the value of our assets falls below the
      coverage requirement of the Investment Company Act of 1940, we may have
      to sell a portion of our investments at a time when it may be
      disadvantageous to do so.

-     RESTRICTED AND OTHER ILLIQUID SECURITIES. We may acquire portfolio
      securities called restricted securities, which are illiquid because they
      can be sold only pursuant to an effective registration statement under
      the Securities Act of 1933 or an exemption from such registration. We
      will have to bear the risk of market conditions prior to any such
      registration or exemption. In the absence of an agreement obtained at
      the time of


<PAGE>   6


      purchase of such securities, there can be no assurance that the issuer
      will register the restricted securities. Furthermore, if we dispose of
      restricted securities without registration, it may be necessary to sell
      them at a discount similar to or greater than that at which we purchased
      the securities. Other securities held by us may be or become illiquid.
      Based solely upon the reported trading volume of securities in our
      portfolio, on September 19, 2000, securities representing approximately
      90% of our net assets would be considered to be illiquid. We believe,
      however, that on that date substantially all of our securities were
      liquid. Our belief is based primarily upon offers we have received from
      foreign companies, including a company whose investment decisions are
      made by Heiko H. Thieme, to purchase securities from us at their then
      current market values. Because the offers may be withdrawn at any time
      prior to our acceptance, the degree of liquidity of our portfolio is
      subject to rapid change. Although we intend to make, and always have
      made, cash payments for our shares that are redeemed by our
      shareholders, depending on the future liquidity of our portfolio, we may
      pay for redeemed shares in kind. See "Procedures for Redeeming Fund
      Shares."

-     CHANGE IN MARKET PHILOSOPHY. Our principal investment strategies may
      fall out of favor in the securities markets which would adversely affect
      our performance.

-     LITIGATION.  We and certain others are defendants in a purported class
      action. See "Legal Proceedings."

PAST PERFORMANCE

The bar chart and performance table below illustrate some of the risks of
investing in the Fund. The bar chart shows the changes in our performance from
year to year from January 1, 1990 to December 31, 1999. The performance table
shows how our total return for one year, five year and ten year periods ended
December 31, 1999 compared with those of the Standard and Poor's 500 Index, a
broad measure of market performance. When you review the chart and table, be
aware that past investment performance does not necessarily indicate how we
will perform in the future.


                  ANNUAL TOTAL RETURNS FOR EACH CALENDAR YEAR

<TABLE>
                         <S>                 <C>
                         1990                 30.8%
                         1991                 97.1%
                         1992                 19.3%
                         1993                 41.4%
                         1994                 35.3%
                         1995                -30.6%
                         1996                - 5.1%
                         1997                 75.0%
                         1998                -61.2%
                         1999                -31.6%
</TABLE>







<PAGE>   7


During the periods shown above, our best quarter ended on March 31, 1991
during which we had a return of 54% and our worst quarter ended on September
30, 1998 during which we had a return of -34%. Our total return from December
31, 1999 to August 31, 2000 was approximately 19%.


<TABLE>
<CAPTION>


                                                    AVERAGE ANNUAL TOTAL RETURNS
                      -------------------------------------------------------------------------------------------

                                One Year                     Five Years                     Ten Years
                      -------------------------------------------------------------------------------------------

                               Year Ended                  Five Years Ended              Ten Years Ended
                          December 31, 1999               December 31, 1999             December 31, 1999
-----------------------------------------------------------------------------------------------------------------
<S>                     <C>                            <C>                           <C>
        Fund                     -31.6%                        -21.1%                         -7.6%
-----------------------------------------------------------------------------------------------------------------

       S&P 500                    21.0%                         28.5%                         18.2%
-----------------------------------------------------------------------------------------------------------------
</TABLE>


SHAREHOLDER FEES AND EXPENSES

THE FOLLOWING TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU
BUY AND HOLD SHARES OF THE FUND.

<TABLE>
<CAPTION>
<S>                                                                                     <C>
SHAREHOLDER FEES
                     (fees paid directly from your investment)

           Maximum sales charge (load) imposed on purchases
                     (as a percentage of offering price)                                     None

           Maximum deferred sales charge (load)
                     (as a percentage of offering price)                                     None

           Maximum sales charge (load) imposed on reinvested
                     dividends (as a percentage of offering price)                           None

           Redemption fee (as a percentage of amount redeemed)                               None

           Exchange fee                                                                      None

ANNUAL FUND OPERATING EXPENSES
                     (expenses deducted from Fund assets)

           Management fees                                                                   1.25%

           Distribution (12b-1) and service fees                                             None
</TABLE>


<PAGE>   8

<TABLE>
<S>                                                                                     <C>
           Other expenses                                                                    7.12%

                     Total annual Fund operating expenses                                    8.37%
</TABLE>

--------------
* Includes administrative fees of approximately .6%.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes
that:

-          you invest $10,000 in the Fund for the time periods indicated;

-          you redeem all your shares at the end of those time periods;

-          your investment has a 5% return each year; and

-          our operating expenses remain the same.

Although your actual costs may be higher or lower, under these assumptions
your costs would be:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Number of Years         1               3                  5                  10
-----------------------------------------------------------------------------------------
<S>                 <C>             <C>               <C>                 <C>
                      $879            $2,538            $4,074              $7,432
-----------------------------------------------------------------------------------------
</TABLE>


                      INVESTMENT OBJECTIVE AND PRINCIPAL
                            INVESTMENT STRATEGIES

Our investment objective is to seek maximum capital growth. Income from our
investment portfolio will be only an incidental consideration entirely
subordinate to the capital growth objective. Our investment objective cannot
be changed without shareholder approval. We seek maximum capital growth by
investing primarily in companies that we believe have above average potential
for growth or whose securities are undervalued in the market.

In contrast to most mutual funds, we intend to achieve our investment
objective by investing a majority of our net assets in speculative investments
in small and virtually unknown companies, including companies that have never
earned a profit. We also intend to certain speculative investment techniques
which entail greater than average risks which are described below. Our success
or failure may be more dependent upon our skill and ability and less dependent
upon movement of the securities market in general than is the case with most
mutual funds whose investment powers are not as broad or as flexible as ours.

Generally, more than 80% of the value of our assets, other than cash and cash
equivalents, will



<PAGE>   9


consist of common stocks and securities convertible into or exchangeable for
common stocks, such as rights, warrants and options. To a limited degree, we
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 we believe that they offer opportunities for growth of
capital or are desirable in the light of prevailing market or economic
conditions. Debt securities we purchase may not be "investment grade." 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. Debt
securities which are not "investment grade"may include obligations of issuers
that are in default or in bankruptcy. Naturally, the risk of investing in
those securities, as well as other debt securities, can be substantial because
their value is based upon the ability of the issuer to make all required
payments of interest and principal. Generally, debt securities which we
believe to offer opportunities for growth of capital, including securities
referred to as "junk bonds," may be purchased by us when we believe (a)
interest rates will decline and, therefore, the value of the debt securities
will increase, or (b) their market value is likely to appreciate due to
factors affecting specific issuers.

We may purchase restricted securities if we receive a substantial discount
from the market value of similar unrestricted securities. In addition, we may
purchase restricted securities issued by companies who do not have any
publicly traded securities.

We may engage in active and frequent trading.

We 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 us for investment in securities we
believe have appreciation potential and to increase the amount of money
available to secure short positions. All of our assets may be pledged as
collateral for bank loans.

We may engage in short sales in an attempt to protect against downward market
movement. A short sale is made 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. In order to make delivery to the buyer and thus effect a sale, we must
borrow the security and agree to replace the security, whatever its price may
be at the time we purchase it for delivery to the lender.

We invest in foreign companies. Although we intend to invest in foreign
companies located in nations which we consider 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
companies issuers.



<PAGE>   10


We buy securities based upon our belief that the market has undervalued them
in relation to their actual worth or because of the potential growth of the
issuer of the securities. We often blend both approaches in making our
selections. In determining which securities to sell, we select securities
which we believe will not yield performance we seek based primarily upon the
foregoing criteria.

We may, from time to time, take temporary defensive positions that are
inconsistent with our principal investment strategies in attempting to respond
to adverse market, economic, political, or other conditions. During any time
that we take a defensive position, we may not achieve our investment
objective. Although we normally invest according to our investment strategy,
we may invest without limitation in preferred stocks and investment-grade debt
instruments for temporary, defensive purposes.

The value of our investments varies in response to many factors. Stock values
fluctuate in response to the activities of individual companies and general
market and economic conditions. Although we may use various investment
techniques to hedge a portion of our risks, we cannot assure you that these
techniques will work as we intend. When you sell or redeem your shares, they
may be worth more or less than what you paid for them.

                             FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand our
financial performance for the period of our operations. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Mathieson Aitken Jemison,
LLP, whose report, along with our financial statements, are included in our
annual report, which is available upon request.


<TABLE>
<CAPTION>
                                                2000           1999          1998            1997            1996
<S>                                          <C>            <C>           <C>             <C>             <C>
 Net assets value, beginning of year          $     .28     $      .93    $       .83     $       .76     $       .63

 Income (loss) from investment operations:
 Net investment income (loss)                     (.04)          (.04)          (.04)           (.03)           (.02)
 Net gains or (losses) on securities
          (Both realized and unrealized)            .03          (.61)            .14             .10             .15
                                             ----------     ----------    -----------     -----------     -----------
  Total from investment operations                (.01)          (.65)            .10             .07             .13

Less distributions:
Dividends (from net investment income)                -              -              -               -               -
Distributions (from capital gains)                    -              -              -               -               -
Return of capital distribution                        -              -              -               -               -
                                             ----------     ----------    -----------     -----------     -----------
Net assets value,  end of year               $      .27     $      .28    $       .93     $       .83     $       .76
                                             ==========     ==========    ===========     ===========     ===========

Total return                                    (3.57%)       (69.89%)         12.05%           9.21%          20.63%

Net assets, end of period                    $3,473,766     $4,348,413    $16,890,738     $18,126,591     $21,429,753

Ratio of expenses to
      average net assets                          8.37%          8.88%          5.85%           6.42%           6.25%

Ratio of net income (loss) to
   average net assets                           (7.90%)        (8.67%)        (4.08%)         (4.97%)         (3.53%)

Portfolio turnover rate                             13%         1,528%         1,180%            470%            606%
</TABLE>


                   MANAGEMENT'S DISCUSSION OF OUR PERFORMANCE

During our fiscal year ended May 31, 2000, the factor that materially affected
our performance were our continued concentration on small companies within the
medical field.

          COMPARISON OF A $10,000 INVESTMENT IN THE FUND TO THE SAME
                       INVESTMENT IN THE S&P 500 INDEX

        AVERAGE ANNUAL TOTAL RETURN

June 1, 1990 through May 31, 2000       -7.1%

June 1, 1995 through May 31, 2000      -15.6%

June 1, 1999 through May 31, 2000       -3.6%

<TABLE>
<CAPTION>
                      AMERICAN
                    HERITAGE FUND             S&P 500 INDEX
                      DIVIDENDS                 DIVIDENDS
  DATE            REINVESTED AT NAV        REINVESTED AT INDEX
--------------------------------------------------------------
<C>              <C>                       <C>
 May-90                $9,035                    $11,713
 Jun-90                $9,123                    $11,634
 Jul-90                $8,509                    $11,596
 Aug-90                $7,281                    $10,549
 Sep-90                $6,491                    $10,037
 Oct-90                $6,140                     $9,994
 Nov-90                $6,140                    $10,639
 Dec-90                $6,316                    $10,935
 Jan-91                $6,404                    $11,410
 Feb-91                $8,596                    $12,225
 Mar-91                $9,737                    $12,521
 Apr-91                $9,386                    $12,551
 May-91                $9,737                    $13,091
 Jun-91                $9,649                    $12,491
 Jul-91               $10,175                    $13,073
 Aug-91               $10,877                    $13,382
 Sep-91               $10,877                    $13,158
 Oct-91               $11,667                    $13,334
 Nov-91               $11,491                    $12,798
 Dec-91               $12,451                    $14,260
 Jan-92               $13,916                    $13,994
 Feb-92               $14,771                    $14,175
 Mar-92               $14,649                    $13,900
 Apr-92               $14,160                    $14,308
 May-92               $14,038                    $14,378
 Jun-92               $13,672                    $14,164
 Jul-92               $13,428                    $14,742
 Aug-92               $12,696                    $14,441
 Sep-92               $12,696                    $14,611
 Oct-92               $13,550                    $14,661
 Nov-92               $14,283                    $15,159
 Dec-92               $14,850                    $15,344
 Jan-93               $14,850                    $15,473
 Feb-93               $16,296                    $15,683
 Mar-93               $17,610                    $16,014
 Apr-93               $16,822                    $15,627
 May-93               $18,662                    $16,044
 Jun-93               $19,319                    $16,091
 Jul-93               $19,056                    $16,026
 Aug-93               $19,976                    $16,633
 Sep-93               $20,239                    $16,505
 Oct-93               $21,290                    $16,846
 Nov-93               $20,633                    $16,687
 Dec-93               $20,997                    $16,888
 Jan-94               $20,859                    $17,462
 Feb-94               $19,213                    $16,988
 Mar-94               $17,291                    $16,249
 Apr-94               $16,742                    $16,457
 May-94               $16,331                    $16,727
 Jun-94               $14,958                    $16,317
 Jul-94               $14,821                    $16,852
 Aug-94               $14,821                    $17,542
 Sep-94               $14,821                    $17,114
 Oct-94               $14,272                    $17,497
 Nov-94               $13,998                    $16,861
 Dec-94               $13,578                    $17,110
 Jan-95               $13,419                    $17,554
 Feb-95               $12,939                    $18,237
 Mar-95               $12,141                    $18,775
 Apr-95               $11,342                    $19,327
 May-95               $10,064                    $20,098
 Jun-95               $10,383                    $20,565
 Jul-95               $10,703                    $21,246
 Aug-95               $10,383                    $21,299
 Sep-95               $10,703                    $22,198
 Oct-95               $10,064                    $22,118
 Nov-95                $9,744                    $23,088
 Dec-95                $9,425                    $23,533
 Jan-96               $10,224                    $24,333
 Feb-96               $11,022                    $24,559
 Mar-96               $11,342                    $24,796
 Apr-96               $12,141                    $25,161
 May-96               $12,141                    $25,809
 Jun-96               $11,022                    $25,907
 Jul-96                $9,744                    $24,763
 Aug-96                $9,904                    $25,286
 Sep-96                $9,425                    $26,708
 Oct-96                $9,425                    $27,445
 Nov-96                $8,946                    $29,517
 Dec-96                $8,946                    $28,933
 Jan-97               $11,661                    $30,739
 Feb-97               $12,620                    $30,981
 Mar-97               $13,259                    $29,710
 Apr-97               $13,259                    $31,482
 May-97               $13,259                    $33,398
 Jun-97               $15,975                    $34,893
 Jul-97               $17,093                    $37,669
 Aug-97               $17,412                    $35,560
 Sep-97               $16,614                    $37,506
 Oct-97               $15,815                    $36,255
 Nov-97               $14,537                    $37,932
 Dec-97               $15,655                    $38,583
 Jan-98               $13,578                    $39,009
 Feb-98               $12,939                    $41,821
 Mar-98               $12,620                    $43,961
 Apr-98               $13,259                    $44,403
 May-98               $14,856                    $43,641
 Jun-98               $12,141                    $45,413
 Jul-98               $13,578                    $44,930
 Aug-98                $7,828                    $38,441
 Sep-98                $7,987                    $40,904
 Oct-98                $7,668                    $44,228
 Nov-98                $7,029                    $46,907
 Dec-98                $6,070                    $49,609
 Jan-99                $5,272                    $51,682
 Feb-99                $5,431                    $50,076
 Mar-99                $5,112                    $52,079
 Apr-99                $4,633                    $54,096
 May-99                $4,473                    $52,820
 Jun-99                $4,153                    $55,749
 Jul-99                $3,994                    $54,010
 Aug-99                $3,355                    $53,743
 Sep-99                $3,514                    $52,272
 Oct-99                $4,153                    $55,578
 Nov-99                $4,313                    $56,708
 Dec-99                $4,153                    $60,046
 Jan-00                $5,431                    $57,029
 Feb-00                $8,626                    $55,889
 Mar-00                $6,709                    $61,353
 Apr-00                $5,591                    $59,508
 May-00                $4,313                    $58,286
</TABLE>


Past performance does not predict future performance.



<PAGE>   11


                                  MANAGEMENT

American Heritage Management Corporation (AHMC ), 1370 Avenue of the Americas,
New York, New York 10019 has been our investment adviser since 1990. AHMC
provides continuous investment advice to us and places orders for purchases
and sales of our securities. AHMC also provides investment advice to American
Heritage Growth Fund, Inc

We make our investment decisions based upon advice furnished to us by AHMC.

For the fiscal year ended May 31, 2000, the investment advisory fee
represented 1.25% of our average net assets.

Heiko H. Thieme is our portfolio manager and has been primarily responsible
for the day-to-day management of our portfolio since February 1990.  Mr.
Thieme also renders investment advice to one other U.S. and two foreign
investment companies and is the Chief Executive Officer of a securities
broker-dealer.

We and AHMC have adopted Codes of Ethics governing personal securities
transactions. Under the Codes, our personnel and personnel of AHMC may
purchase and sell securities (including securities held by us) subject to
certain reporting requirements and other procedures.

                                PRICING OF SHARES

The price at which you buy and redeem our shares is the net asset value (NAV)
per share. The NAV represents the value of our total assets less our
liabilities. The NAV per share is generally calculated as of the close of the
regular trading session of the New York Stock Exchange (generally 4 P.M.
Eastern Time). Our shares will not be priced on the days when the New York
Stock Exchange is closed for trading such as weekends and certain national
holidays. In calculating the NAV, portfolio securities will be valued at
market value when there is a reliable quotation available for the securities.
The value of all other assets will be determined by our Board of Directors or
members of a committee of our Board of Directors at amounts which they think
represent their fair value.

                       PROCEDURES FOR BUYING FUND SHARES

The minimum investment requirements for the Fund are:

<TABLE>
<CAPTION>

                               Opening the Account              Adding to the Account
---------------------------------------------------------------------------------------------
<S>                           <C>                              <C>
Regular Accounts                     $1,000                             $500
---------------------------------------------------------------------------------------------

IRAs, Custodian Accounts                500                              500
and Keogh Accounts
---------------------------------------------------------------------------------------------
</TABLE>

We may change these minimum investment amounts at any time and we can refuse
any purchase order that might adversely affect our operations.


<PAGE>   12


Once we accept your order to purchase, the purchase price will be the next
calculated NAV per share. You pay no sales load for buying Fund shares.

You may buy Fund shares in any of these ways:

BY TELEPHONE

Call 1-800-828-5050 to buy shares of the Fund. We must receive your payment
within three business days of your order. To meet this deadline, you may send
a check by overnight mail or wire payment, or you may make an electronic
transfer through your bank.

BY MAIL

Mail your application and check to:

                     The American Heritage Fund, Inc.
                     Location 0637
                     Cincinnati, OH 45264-0637

If you purchase additional shares of the Fund, you must send a completed
investment slip together with a check that has your account number on it.

THROUGH CERTAIN BROKER-DEALERS

Shares of the Fund may be purchased through certain registered broker-dealers.
We impose no sales load or service charge, but the 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 us.

BY COURIER

Deliver your application and check to:

                     The American Heritage Fund, Inc.
                     c/o Firstar Bank, N.A.
                     425 Walnut Street
                     Mutual Fund Custodian Department
                     Cincinnati, OH 45202

If you purchase additional shares of the Fund, you must send a completed
investment slip together with a check that has your account number on it.

                      PROCEDURES FOR REDEEMING FUND SHARES

Any shareholder may redeem his or her shares by making a written request
directly to our Transfer Agent, American Data Services, Inc., 150 Motor
Parkway, Suite 109, Hauppauge, New


<PAGE>   13


York 11788. 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 our sole discretion. We have instructed our 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 us is unauthorized or fraudulent, we
could sustain losses.

The redemption price will be the NAV per share next determined by us following
receipt of a proper request for redemption. There is no redemption charge
imposed by us. We intend to make payment for shares redeemed in cash to the
extent that we are reasonably able to do so although we reserve the right to
make payment in kind.

Payment for shares redeemed will normally be made within seven days after
receipt of a proper written request. Payment will not be mailed before
clearance of the purchaser's check. The determination of the NAV and the right
of redemption may be suspended or the payment date postponed when: (a) trading
on the New York Stock Exchange is restricted as determined by the Securities
and Exchange Commission or the Exchange is closed for other than customary
weekend and holiday closings; (b) when an emergency exists, as determined by
the Securities and Exchange Commission, as a result of which disposal by us of
securities owned by us is not reasonably practicable, or it is not reasonably
practicable for us to fairly determine the value of our net assets; or (c)
when the Securities and Exchange Commission by Order so permits for the
protection of our shareholders.

A proper request for redemption of shares 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.

                             DISTRIBUTIONS AND TAXES

We intend to distribute as dividends our net investment income, if any, and
distribute any net capital gains that we realize once a year. Your
distributions will be reinvested in the Fund unless you instruct us otherwise
in writing. There are no fees or sales charges on reinvestments. Dividends and
distributions are taxable to most investors (unless your investment is in an
IRA or other tax-advantaged account). The tax status of any distribution is
the same regardless of how long you have been in the Fund and whether you
reinvest your distributions or take them in cash.

The tax status of your dividends and distributions will be detailed in your
annual tax statement from the Fund. Because everyone's tax situation is
unique, always consult your tax professional about federal, state and local
tax consequences.

Except in tax-advantaged accounts, any redemption, sale or exchange of Fund
shares may generate a tax liability.



<PAGE>   14


                              SHAREHOLDER SERVICES

We offer the following shareholder services. For further details, please write
or call us.

EXCHANGE PRIVILEGE

A shareholder of the Fund has the privilege of exchanging shares of the Fund
for shares of American Heritage Growth Fund, Inc. (AHGF) by written notice to
our Transfer Agent subject to the following:

      -      Shares of AHGF must be eligible for sale 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 and you may wish to consult with your tax
advisor before making any exchange.

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 value of less than $50,000.

IRA AND KEOGH PLANS

A prototype defined contribution retirement plan and individual retirement
account is available. Charges are imposed by Firstar Bank, N.A. and American
Data Services, Inc. and shareholders should carefully review all documents
provided in connection with a plan or account.

                                LEGAL PROCEEDINGS

On October 5, 1994, one of our shareholders on behalf of himself and a
purported class of others brought an action against the us, AHMC, Heiko H.
Thieme and Richard K. Parker in the United States District Court for the
Southern District of New York. The Complaint, as amended, alleges that certain
of our registration statements and prospectuses failed to disclose certain
risks regarding our investments in illiquid securities and that we invested in
illiquid securities in concentrations which exceeded the our own investment
restrictions and that we improperly



<PAGE>   15


valued our illiquid securities. The amended Complaint also alleges that the
other defendants breached their fiduciary duties in connection with our
investments in and valuation of illiquid securities and by the receipt of AHMC
of substantial compensation for investment advice and that we breached our own
limitations with respect to illiquid securities and that we changed investment
policies without obtaining a shareholder vote. The Plaintiff is seeking
rescission or compensatory damages and pre-judgment interest and the costs and
expense of the litigation and such other and further relief as the Court may
deem just and proper

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
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. If the
Plaintiff were to appeal the Court's denial and if he were to prevail on the
appeal as well as the merits of his case, our potential loss could be as much
as $25 million which is substantially more than our assets.

After conferring with our special counsel, we concluded that the substantive
allegations of the amended compliant are without merit. Although there can be
no assurance of the outcome of the action, based upon the our belief, we have
not established a reserve for potential losses other than the expense of our
defense. We have vigorously defended the action and intend to continue to do
so if the Plaintiff proceeds. Our officers and directors are entitled to be
indemnified by us to the full extent permitted by law.


                          CUSTODIAN AND TRANSFER AGENT

Firstar Bank, N.A. 425 Walnut Street, Cincinnati, Ohio 45202 is the Custodian
of our portfolio securities and monies.

American Data Services, Inc., 150 Motor Parkway, Hauppauge, New York 11788 is
our Transfer Agent.

Neither the Custodian nor the Transfer Agent performs any managerial or
policy-making functions for us.





<PAGE>   16


                        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>


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.

     <TABLE>
     <S>                                                          <C>
     [ ][ ][ ][ ][ ][ ][ ][ ][ ]
     -------------------------------------------------            ---------------------------------
     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 your tax advisor.
     </TABLE>


<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?   ------------------

--------------------------------------------------------------------------------
                                                                          09/00



                                       16
<PAGE>   17


PROSPECTUS

                        THE AMERICAN HERITAGE FUND, INC.

                                   ----------

Our Statement of Additional Information (SAI) includes additional information
about us. Additional information about our investments is available in our
annual and semi-annual reports to shareholders. The SAI and the annual and
semi-annual reports are available, without charge, upon request. You may call
us at 1-800-828-5050 to request the SAI; to request our annual report; to
request our semi-annual report; to request other information about us; and to
make shareholder inquiries.

The SAI, including the annual report, is incorporated by reference into this
prospectus.

Information about us, including the SAI, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
Information on the operation of the public reference room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information about
us are available on the EDGAR database on the Commission's Internet site at
http:/www.sec.gov. Copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing to the Commission's Public Reference
Section, Washington, D.C. 20549-0102.












                              SEPTEMBER 27, 2000






                    Our Investment Company Act of 1940 file number is 811-601.





<PAGE>   18
                        THE AMERICAN HERITAGE FUND, INC.


                       STATEMENT OF ADDITIONAL INFORMATION


           This Statement of Additional Information, which is not a
prospectus, relates to the prospectus of The American Heritage Fund, Inc dated
September 27, 2000 as it may be revised from time to time. To obtain a free
copy of the prospectus, please write to us at 1370 Avenue of the Americas, New
York, NY 10019 or call us at 1-800-828-5050.


           Our most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information unless the information has been previously delivered in a
shareholder report. The shareholder reports are available, without charge,
upon request by calling us at 1-800-828-5050. The financial statements,
accompanying notes and report of independent auditors appearing in the Annual
Report are incorporated by reference into this Statement of Additional
Information.




                               SEPTEMBER 27, 2000


<PAGE>   19





                                TABLE OF CONTENTS

<TABLE>
<S>                                                                    <C>
Description of the Fund                                                            B-3

Certain Investments, Techniques and Risks                                          B-3

Certain Investment Restrictions                                                    B-6

Management                                                                         B-8

Brokerage Allocations and Other Practices                                          B-10

Control Persons and Principal Holders of Securities                                B-12

Investment Advisory and Other Services                                             B-14

Returns                                                                            B-15

Custodian                                                                          B-15

Independent Accountants                                                            B-15

Transfer Agent                                                                     B-15

Information About the Fund                                                         B-16

Financial Statements                                                               B-16
</TABLE>




                                      2

<PAGE>   20


                             DESCRIPTION OF THE FUND

           The American Heritage Fund, Inc., a New York corporation organized
on December 28, 1951, is a non-diversified, open-end management investment
company.

                    CERTAIN INVESTMENTS, TECHNIQUES AND RISKS

           We may invest in convertible securities. Convertible securities may
be converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have characteristics similar to both
fixed-income and equity securities. Convertible securities may be subordinate
to other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity securities, and convertible preferred stock is senior to
common stock, of the same issuer. Because of the subordination feature,
however, convertible securities typically have lower ratings than similar
non-convertible securities.

           Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying common stock. A unique feature of convertible securities is that as
the market price of the underlying common stock declines, convertible
securities tend to trade increasingly on a yield basis, and so may not
experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.

           There can be no assurance of current income from convertible
securities because the issuers of the convertible securities may default on
their obligations. A convertible security, in addition to providing fixed
income, offers the potential for capital appreciation through the conversion
feature, which enables the holder to benefit from increases in the market
price of the underlying common stock. There can be no assurance of capital
appreciation, however, because securities prices fluctuate. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.


           The Fund may purchase high yield debt securities which are not
investment grade, including securities referred to as "junk bonds." 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

                                      3

<PAGE>   21




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.

           The Fund may invest in securities issued by other investment
companies to the extent consistent with its investment objective. Under the
Investment Company Act of 1940, the Fund's investment in such securities,
subject to certain exceptions, currently is limited to (a) 3% of the total
voting stock of any one investment company, (b) 5% of the Fund's total assets
with respect to any one investment company and (c) 10% of the Fund's total
assets in the aggregate. Investments in the securities of other investment
companies may involve duplication of advisory fees and certain other expenses.

           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 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 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.

           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.
The gain is decreased and the 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.

                                      4

<PAGE>   22


           The Fund may purchase and sell put and call options 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. Any puts and calls which the
Fund purchases 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 the 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 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. The 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

                                      5

<PAGE>   23


           (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.

                         CERTAIN INVESTMENT RESTRICTIONS

           The Fund's investment objective is a fundamental policy.
Fundamental policies cannot be changed without approval by the holders 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. In addition, the Fund has adopted
investment restrictions numbered 1 through 18 as fundamental policies. The
other investment restriction is not a fundamental policy and may be changed by
the Fund without shareholder approval. 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.         Issue senior securities, except that the Fund may borrow from any
           bank;

3.         Invest in companies for the purpose of exercising control or
           management;

4.         Purchase or sell commodities or commodity contracts, including
           futures contracts;

5.         Borrow money in excess of 33-1/3% of the value of the Fund's assets
           (including the amount of the 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);

6.         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 into equity
           securities of an issuer without regard to whether the securities
           are types commonly distributed publicly or privately to financial


                                      6

<PAGE>   24


           institutions.

7.         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;

8.         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.

9.         Effect a short sale transaction which will, at the time of making
           and after giving effect to the sale, 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;

10.        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. 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.

11.        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;

12.        Invest more than 25% of the value of its total assets in securities
           of companies engaged in a particular industry;

13.        Invest more than 35% of the value of its total assets in securities
           issued by foreign companies.

14.        Acquire time deposits if more than 10% of the value of the Fund's
           net assets will be invested in time deposits or the time deposits
           cannot be liquidated within seven days.

15.        Purchase securities (other than securities issued or guaranteed by
           domestic or foreign governments or political subdivisions thereof)
           if, as a result of such purchase, more than 5% of the value of the
           Fund's total assets would be represented by issuers that, including
           predecessors, have then been in continuous operation for less than
           three years.

16.        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.

                                      7

<PAGE>   25

17.        With respect to 50% of the value of the Fund's total assets,
           acquire more than (a) 5% of the value of its total assets in the
           securities of any one issuer (not including securities of the
           federal government or any instrumentality thereof) and (b) 10% of
           the outstanding voting securities of any one issuer.

18.        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;

19.        Invest more than 10% of the value of its net assets in warrants.

All of the foregoing percentages are applicable only at the time of
investment. A later increase or decrease in percentage resulting from a change
in values or net assets will not constitute a violation of any restriction.

                                   MANAGEMENT

                The Fund's Board of Directors is responsible for the
management of the Fund. 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 an advisory board.


                                      8


<PAGE>   26



<TABLE>
<CAPTION>
                                                  Positions Held With                   Principal Occupation(s) During
Name and Address                      Age               the Fund                               the Past Five Years
----------------                      ---               --------                               -------------------
<S>                                <C>        <C>                               <C>
Heiko H. Thieme*                      57        Chairman of the Board of          Chairman of the Board of Directors, Chief
1370 Avenue of the Americas                     Directors, Chief Executive        Executive Officer and Secretary of the Fund and
New York, NY                                    Officer and Secretary             American Heritage Growth Fund, Inc. Chief
                                                                                  Executive Officer of American Heritage
                                                                                  Management Corporation and Thieme Associates,
                                                                                  Inc. (investment advisor). Chief Executive
                                                                                  Officer of Thieme Securities, Inc.
                                                                                  (broker-dealer)  and Thieme Consulting, Inc.
                                                                                  Chief Executive Officer of Thieme Fonds
                                                                                  International (foreign investment company) and
                                                                                  The Global Opportunity Fund Limited (foreign
                                                                                  investment company) and their respective
                                                                                  investment advisors.

Stephen Swope                         64        Director                          Mr. Swope has been retired for more than five
75 Club Road                                                                      years.
Riverside, CT


Eugene Sarver                         57        Director                          Sole proprietor of Sarver International
241 W. 97th St.                                                                   (financial and economic consulting) and
New York, NY                                                                      Associate of Intercap Investments, Inc. since
                                                                                  1996.  Prior to that time,  Associate Professor
                                                                                  of Finance of Lubin School of Business -
                                                                                  Graduate Division, Pace University.

</TABLE>

* An "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. Swope became a member of the Board of
Directors in November 1999. Each of the Fund's Directors is also a member of
the Board of Directors of American Heritage Growth




                                      9

<PAGE>   27


Fund, Inc. (AHGF).

           Thieme Consulting, Inc., which is wholly owned by Mr. Thieme, has
provided consulting services to companies whose securities are held by the
Fund for compensation.  Similar arrangements may be made with other companies
whose securities may become held by the Fund.

           During the fiscal year ended May 31, 2000, no compensation was paid
by the Fund to its officers. Each of the Fund's Directors who is not an
interested person of the Fund received compensation of $5,000.

           From time to time, the Fund, American Heritage Management
Corporation, the Fund's investment advisor (AHMC), AHGF, two foreign
investment companies and other clients of affiliated persons of AHMC may hold
securities issued by the same company. When the Fund and those investors 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.

                    BROKERAGE ALLOCATIONS AND OTHER PRACTICES

           AHMC 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. Subject to this
consideration, the brokers selected include those that supplement AHMC's
research with statistical data, investment information, economic facts and
opinions or provide quotation services. Information so received is in addition
to and not in lieu of services required to be performed by AHMC and AHMC's fee
is not reduced as a consequence of the receipt of supplemental information.
Such information may be useful to AHMC in serving both the Fund and AHGF and,
conversely, supplemental information obtained by the placement of orders for
AHGF maybe useful to AHMC in carrying out its obligation to the Fund. Brokers
may also be selected based upon their sales of shares of 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.

           Section 28(e) of the Securities Exchange Act of 1934 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


                                      10



<PAGE>   28

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. Research
services so received by AHMC may be used by AHMC for the benefit of the Fund
or any other client of 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
overall reasonableness of brokerage commissions paid is evaluated by AHMC
based upon its knowledge of available information as to the general level of
commissions paid by other institutional investors for comparable services.

           It is anticipated that a substantial portion of the Fund's
portfolio transactions will be allocated to Thieme Securities, Inc. (TSI).
Heiko H. Thieme is the Chief Executive Officer and sole shareholder of TSI.
Except for executing portfolio transactions, TSI is not in any other respect
associated with the Fund or responsible for any investment advice or other
service provided to the Fund by Mr. Thieme personally or AHMC.

           During the fiscal years ended May 31, 1998, 1999 and 2000, the Fund
paid brokerage commissions of $990,836, $444,766 and $1,800, respectively, to
TSI. During the fiscal year ended May 31, 2000, the commissions paid by the
Fund to TSI represented approximately 10% of the total brokerage commissions
paid by the Fund that year. During the same year, approximately 16% of the
Fund's aggregate dollar transactions involving the payment of brokerage
commissions was effected through TSI.

           Richard K. Parker is a Managing Director of Bear, Stearns & Co.
Inc. (BSI).  Prior to December 31, 1998, Mr. Parker owned 10% of the
outstanding capital stock of AHMC.  During the fiscal years ended May 31, 1998
and 1999 during the time Mr. Parker held his shares of AHMC, the Fund paid
brokerage commissions of $136,527 and $14,520, respectively to BSI.

               CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

           On September 20, 2000 Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104 owned of record shares of the Fund's capital
stock which represented approximately 7% 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.

                                      11

<PAGE>   29


                       DIVIDENDS, DISTRIBUTIONS AND TAXES

           The Fund believes that for the fiscal year ended May 31, 1999 it
qualified as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). The Fund intends to continue to so qualify
if qualification is in the best interests of its shareholders. Qualification
relieves the Fund of any liability for Federal income taxes to the extent its
net investment income and net realized capital gains are distributed in
accordance with the applicable provisions of the Code. To qualify as a
regulated investment company, the Fund must distribute at least 90% of its net
income (consisting of net investment income and net short-term capital gain)
to its shareholders, and meet certain asset diversification and other
requirements. If the Fund did not qualify as a regulated investment company,
it would be treated for tax purposes as an ordinary corporation subject to
Federal income tax. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.

           If you elect to receive dividends and distributions in cash, and
your dividend and distribution check is returned to the Fund as undeliverable
or remains uncashed for six months, the Fund reserves the right to reinvest
the dividend or distribution and all future dividends and distributions
payable to you in additional Fund shares at net asset value. No interest will
accrue on amounts represented by uncashed distribution or redemption checks.

           Any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the aggregate net asset value of his
shares below the cost of the investment. Such a dividend or distribution would
be a return of investment in an economic sense, although taxable. In addition,
the Code provides that if a shareholder holds shares of a Fund for six months
or less and has received a capital gain distribution with respect to the
shares, any loss incurred on the sale of the shares will be treated as
long-term capital loss to the extent of the capital gain distribution
received.

           Depending upon the composition of the Fund's income, if any, the
entire amount or a portion of the dividends from net investment income may
qualify for the dividends received deduction allowable to qualifying U.S.
corporate shareholders. In general, dividend income from the Fund distributed
to qualifying corporate shareholders will be eligible for the dividends
received deduction only to the extent that the Fund's income consists of
dividends paid by U.S. corporations. However, Section 246(c) of the Code
provides that if a qualifying corporate shareholder has disposed of Fund
shares not held for less than 46 days, which 46 days generally must be during
the 90-day period commencing 45 days before the shares become ex-divided, and
has received a dividend from net investment income with respect to such
shares, the portion designated by the Fund as qualifying for the dividends
received deduction will not be eligible for such shareholder's dividends
received deduction. In addition, the Code provides other limitations with
respect to the ability of a qualifying corporate shareholder to claim the
dividends received deduction in connection with holding Fund shares.


                                      12


<PAGE>   30


           Ordinarily, gains or losses realized from portfolio transactions
will be treated as capital gains or losses. However, a portion of the gain or
loss realized from the disposition of certain non-U.S. dollar denominated
securities (including debt instruments) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of the gain
realized from the disposition of certain market discount bonds will be treated
as ordinary income under Section 1276 of the Code. Finally, all or a portion
of the gains realized from engaging in "conversion transactions" may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" include certain transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in the
future.

           Under Section 1256 of the Code, any gain or loss realized by the
Fund from certain options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss
will arise upon exercise or lapse of the options as well as from closing
transactions. In addition, any such option remaining unexercised at the end of
the Fund's taxable year will be treated as sold for its then fair market
value, resulting in additional gain or loss to the Fund characterized in the
manner described above.

           Offsetting positions held by the Fund involving certain futures
options transactions may be considered, for tax purposes, to constitute
straddles. Straddles are defined to include offsetting positions in actively
traded personal property. The tax treatment of straddles is governed by
Sections 1092 and 1258 of the Code, which, in certain circumstances, overrides
or modifies the provisions of Sections 988 and 1256 of the Code. As such, all
or a portion of any short or long-term capital gain from certain "straddle"
and/or conversion transactions may be recharacterized as ordinary income.

           If the Fund were treated as entering into straddles by reason of
its engaging in certain options transactions, such straddles could be
characterized as mixed straddles if the options transactions comprising a part
of such straddles were governed by Section 1256 of the Code. The Fund may make
one or more elections with respect to "mixed straddles." Depending upon which
election is made, if any, the results to the Fund may differ. If no election
is made, to the extent the straddle rules apply to positions established by
the Fund, losses realized by the Fund will be deferred to the extent of
unrealized gain in any offsetting positions. Moreover, as a result of the
straddle and conversion transaction rules, short-term capital loss on straddle
positions may be recharacterized as long-term capital loss, and long-term
capital gain may be recharacterized as short-term capital gain or ordinary
income.

                     INVESTMENT ADVISORY AND OTHER SERVICES

           Heiko H. Thieme controls AHMC by virtue of his record and
beneficial ownership of all of it's the outstanding capital stock.  Mr. Thieme
is the Chairman of the Board of Directors and the Chief Executive Officer of
AHMC. See "Management."


           In connection with the Fund's Investment Advisory Agreement with
AHMC, AHMC

                                      13


<PAGE>   31


provides the Fund with continuous investment advice. AHMC bears the expenses
of the Fund's trading operations. Trading operations do not include the
payment of brokerage commissions. All expenses of the Fund, other than its
trading operations, are borne by the Fund. The Fund pays AHMC a fee which, on
an annual basis, amounts to one and one-quarter percent (1.25%) of the first
$100 million of the value of average daily net assets of the Fund and one
percent (1%) of the value of any additional net assets.

           During the fiscal years ended May 31, 1998, 1999 and 2000, the Fund
incurred investment advisory fees to AHMC of $250,628, $103,112 and $53,449
respectively.

           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, 2000.

           The Fund has entered into an agreement with American Data Services,
Inc.(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. to maintain
certain books, records and other documents that the Fund is required to keep
and calculate the Fund's daily net asset value.



                                      14

<PAGE>   32


                                     RETURNS

           Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends
and distributions), dividing by the amount of the initial investment, taking
the "n"-th root of the quotient (where "n" is the number of years in the
period) and subtracting 1 from the result. Total return is calculated by
subtracting the amount of the Fund's net asset value per share at the
beginning of a stated period from the net asset value per share at the end of
the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset
value per share at the beginning of the period.

           Comparative performance information may be used from time to time
in advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., the Dow Jones Industrial Average, Morningstar,
Inc., Standard & Poor's 500 Composite Stock Price Index and other industry
publications.  From time to time, advertising materials for the Fund may
provide historical information about the Fund, AHMC and Heiko H. Thieme.

           From time to time, advertising materials for the Fund may refer to
or discuss current or past business, political, economic or financial
conditions, such as any U.S. monetary or fiscal policies. In addition, from
time to time, advertising materials for the Fund may include information
concerning retirement and investing for retirement.

                                    CUSTODIAN

           Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio is the
Fund's Custodian.  The Custodian maintains custody of the Fund's cash and
securities.

                             INDEPENDENT ACCOUNTANTS

           Mathieson Aitken Jemison, LLP are the Fund's independent certified
public accountants. The financial statements included herein have been
examined by such firm to the extent set forth in their report.

                                 TRANSFER AGENT

           American Data Services, Inc., 150 Motor Parkway, Suite 109,
Hauppauge, New York 11788 is the Fund's transfer agent. The transfer agent
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.

                                      15

<PAGE>   33


                           INFORMATION ABOUT THE FUND

           Each Fund share has one vote, and when issued and paid for in
accordance with the terms of the offering, is fully paid and nonassessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.

           The Fund is intended to be a long-term investment vehicle and is
not designed to provide investors with a means of speculating on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Funds' performance and its shareholders. Accordingly, if
the Fund determines that an investor is following a market timing strategy or
is otherwise engaging in excessive trading, the Fund, with or without prior
notice, may temporarily or permanently reject in whole or part any purchase,
with respect to such investor's account.

           The Fund sends annual and semi-annual financial statements to all
its shareholders.

                              FINANCIAL STATEMENTS

                The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information. The financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.


                                      16






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