<PAGE> 1
[AMERICAN HERITAGE GROWTH FUND, INC. LOGO]
- --------------------------------------------------------------------------
SEMI-ANNUAL
REPORT
July 31, 1996
This report and the financial statements contained
herein are submitted for the general information of
shareholders and are not authorized for distribution
to prospective investors unless preceded or
accompanied by an effective prospectus. Nothing
herein contained is to be considered an offer of
sale or solicitation of an offer to buy shares of
American Heritage Growth Fund, Inc. Such offering
is made only by prospectus, which includes details
as to offering price and other material information.
AMERICAN HERITAGE GROWTH FUND, INC. --------------
1370 Avenue of the Americas BULK RATE
New York, NY 10019 U.S. POSTAGE
PAID
HACKENSACK, NJ
PERMIT NO. 552
--------------
ADDRESS CORRECTION REQUESTED
<PAGE> 2
AMERICAN HERITAGE GROWTH FUND, INC. [LOGO]
1370 Avenue of the Americas
New York, N.Y. 10019
Tel: (212) 397-3900
Fax: (212) 397-4036
September 1996
To our valued shareholders:
Our investment philosophy for American Heritage Growth Fund continues to focus
on the long-term growth potential among a widespread segment of corporations.
The stock selection continues to include blue-chips and lesser known companies.
The holding period for our investments depends on the individual price
movements and general market conditions and therefore varies between long and
short term.
We continue to see attractive investment opportunities although this bull
market is already the longest of the century without having a correction of at
least 10%. In retrospect, the short but sharp sell-off in July was nothing but
an excellent buying opportunity. Short-term under-performance does not distract
us from our long-term goal to seek above average performance. Our investment
philosophy is discussed in my monthly strategy piece, The Viewpoint/Der
Standpunkt and in our quarterly conference call which is available to all our
shareholders without charge. My daily Hotline 1-900-884-2855 covers the most
current issues and recommendations for Wall Street and overseas markets; the
cost is 95 cents a minute.
I appreciate your confidence and hope it will be rewarded over the long term.
With kind regards,
[Signature]
<PAGE> 3
AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
------ -----
<S> <C>
COMMON STOCK 77.67%
AIRLINES 5.39%
4,000 U A L Corp.* ......................... $ 204,000
-----------
BANKS & FINANCE 5.15%
40,000 Credit Depot Corp.* .................. 115,000
5,000 Olympic Financial Ltd.* .............. 80,000
-----------
195,000
-----------
BIOTECHNOLOGY 4.46%
10,000 Cardiothoracic Systems Inc. .......... 108,750
10,000 Dimethaid Research Inc. .............. 25,830
25,000 Senetek PLC Sponsored ADR* **......... 34,375
-----------
168,955
-----------
COMMUNICATIONS & EQUIPMENT 4.70%
10,000 Glasgal Communications Inc.* ......... 66,250
7,500 Nextel Communications Inc.Cl A* ...... 111,563
-----------
177,813
-----------
COMPUTERS & PERIPHERALS 8.39%
15,000 Cypress Semiconductor Corp. .......... 148,125
14,000 Quantum Corp.* ....................... 169,750
-----------
317,875
-----------
CONSTRUCTION 3.53%
10,000 Empress ICA Sociedad Controladora SA
DE CV ADR ........................... 133,750
-----------
CONSUMER PRODUCTS 8.98%
5,000 Alberto Culver Co Cl A ............... 183,125
2,000 Colgate Palmolive Co. ................ 157,000
-----------
340,125
-----------
ENTERTAINMENT 1.38%
10,000 Alliance Entertainment Corp.* ........ 52,500
-----------
ENVIRONMENTAL SERVICES 1.55%
10,000 IDM Environmental Corporation* ....... 58,750
-----------
GAMING 4.62%
10,000 International Game Technology ........ 175,000
-----------
INSURANCE 5.03%
12,000 USF&G Corp. .......................... $ 190,500
-----------
MEDICAL SUPPLIES 1.05%
5,000 Graham-Field Health Products Inc.* ... 40,000
-----------
MEDICAL TECHNOLOGY 0.88%
1,000 PDT Inc.* ............................ 33,250
-----------
MISCELLANEOUS 5.17%
20,000 Mark Solutions Inc.* ................. 107,500
5,000 Stratasys Inc.* ...................... 88,125
-----------
195,625
-----------
OIL & GAS EXPLORATION 2.38%
10,000 Ensearch Exploration Inc.* ........... 90,000
-----------
PHARMACEUTICALS 9.01%
10,000 Ivax Corp. ........................... 146,250
297,000 Polydex Pharmaceuticals Ltd.* **...... 194,906
-----------
341,156
-----------
RETAIL 6.00%
500 Department 56 Inc.* .................. 10,938
15,000 K Mart Corp.* ........................ 150,000
5,000 Officemax Inc.* ...................... 66,250
-----------
227,188
-----------
TOTAL COMMON STOCKS
(Cost $3,534,193) ..................................... $ 2,941,487
-----------
SHORT TERM DEBT 4.49%
170,000 Star Bank repurchase agreement
(Cost $170,000) ..................... $ 170,000
-----------
TOTAL INVESTMENTS
(Cost $3,704,193) ............................. 82.16% 3,111,487
Other assets less liabilities .................. 17.84% 675,554
TOTAL NET ASSETS ............................... 100.00% $ 3,787,041
======= ===========
</TABLE>
* Non-income producing
** Foreign security
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value
(cost $3,704,193) ............................ $ 3,111,487
Cash .......................................... 356
Receivable for investment securities sold ..... 3,647,801
Receivable for dividends and interest ......... 92,943
Prepaid expenses .............................. 37,698
Due from investment adviser ................... 6,189
-----------
TOTAL ASSETS .............................. 6,896,474
-----------
LIABILITIES
Payable for investment securities
purchased .................................... 3,098,447
Payable for capital stock reacquired .......... 8,092
Accrued expenses and other liabilities ........ 2,894
-----------
TOTAL LIABILITIES .......................... 3,109,433
-----------
Contingencies ................................. --
NET ASSETS
Net assets (equivalent to $1.43 per share
based on 2,641,146 shares of capital
stock outstanding) ........................... $ 3,787,041
===========
Composition of net assets:
Shares of common stock ........................ $ 2,641
Paid in capital ............................... 5,270,124
Accumulated net investment income ............. 891,328
Accumulated net realized loss
on investments ............................... (1,784,346)
Net unrealized depreciation
on investments ............................... (592,706)
-----------
NET ASSETS, July 31, 1996 ..................... $ 3,787,041
===========
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1996
(Unaudited)
INVESTMENT INCOME:
Dividends ..................................... $ 358,055
Interest ...................................... 15,955
-----------
TOTAL INVESTMENT INCOME ....................... 374,010
-----------
EXPENSES:
Investment advisory fees ...................... 28,771
Transfer agent fees ........................... 4,615
Legal fees .................................... 20,668
Audit fees .................................... 6,000
Other professional fees ....................... 2,914
Custodian fees ................................ 6,874
Fund accounting fees .......................... 6,545
Postage and printing .......................... 6,639
Registration fees and expenses ................ 9,505
Interest expense .............................. 7,467
Miscellaneous ................................. 2,543
-----------
TOTAL EXPENSES ............................ 102,541
-----------
Less: expense reimbursement from
investment advisor ............................ (37,532)
-----------
NET EXPENSES .............................. 65,009
-----------
Investment income - net ....................... 309,001
-----------
Net realized loss on
securities transactions ...................... (162,973)
Net change in unrealized appreciation/
(depreciation) of investments ................ (751,327)
-----------
Net loss on investments ....................... (914,300)
-----------
Net decrease in net assets
resulting from operations .................... $ (605,299)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
JULY 31, 1996
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JULY 31, 1996 JANUARY 31, 1996
(UNAUDITED) (AUDITED)
------------------- ------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Investment income - net .................. $ 309,101 $ 2,109,462
Net realized loss on securities
transactions ............................ (162,973) (1,025,634)
Net change in unrealized appreciation/
(depreciation) of investments ........... (751,327) 3,826
----------- -----------
Net increase/(decrease) in net assets
resulting from operations ............... (605,299) 1,087,654
----------- -----------
Distribution to shareholders:
Investment income - net ................. 0 (1,596,535)
Net realized gain on investments ........ 0 0
Capital share transactions ............... (540,630) 1,543,291
----------- -----------
Net increase/(decrease) in net assets ... (1,145,929) 1,034,410
NET ASSETS:
Beginning of the period .................. 4,932,970 3,898,560
----------- -----------
End of the period (including undistributed
investment income of $891,327 and
$582,326, respectively) ................. $ 3,787,041 $ 4,932,970
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
(Unaudited)
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
American Heritage Growth Fund, Inc. ("Fund") was incorporated on
February 14, 1994 and commenced operations on May 25, 1994. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end investment company. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. These policies are in conformity with
generally accepted accounting principles. Significant accounting policies of the
Fund are as follows:
Security Valuations
The Fund values investment securities, where reliable market quotations
are available, at market value based on the last recorded sales prices as
reported on the principal securities exchange on which the security is traded,
or, if the security is not traded on an exchange, market value is based on the
latest bid price. Portfolio securities for which reliable market quotations are
not readily available are valued as the Board of Directors in good faith
determines.
Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
Distribution to Shareholders
The Fund intends to distribute to shareholders substantially all of its
net investment income, if any, and net realized capital gains, after provision
for carryover losses, if any, during each fiscal year. Any undistributed amounts
for any fiscal year will be paid first out of the subsequent year's
distribution.
Option writing
When the Fund writes an option, an amount equal to the premium received
by the Fund is recorded as a liability and is subsequently adjusted to the
current market value of the option written. Premiums received from writing
options which expire unexercised are treated by the Fund on the expiration date
as realized gains from the sale of securities. The difference between the
premium and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction, as a
realized loss. If a call option is exercised, the premium is added to the
proceeds from the sale of the underlying security in determining whether the
Fund has realized a gain or a loss.
Repurchase agreements
The Fund may enter into repurchase agreements as a money market
alternative with respect to its otherwise uninvested cash. There is no
limitation of the amount of repurchase agreements which may be entered into by
the Fund. In connection with a repurchase agreement, the Fund will acquire a
security and simultaneously agree to resell it at a higher price. A repurchase
agreement, therefore, involves a loan by the Fund to the seller who agrees to
pay the resale price to the Fund, which loan is collateralized by the value of
the underlying security. Delays or losses could result if the other party to the
repurchase agreement defaults or becomes insolvent. All repurchase agreements
entered into by the Fund will be fully collateralized by securities issued by
the United States Government.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date
<PAGE> 7
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
(Unaudited)
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
Other
The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statement and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis.
NOTE 2 INVESTMENT ADVISORY AGREEMENT AND OTHER RELATED TRANSACTIONS
The Fund has an investment advisory agreement with American Heritage
Management Corporation (AHMC), whereby AHMC is entitled to receive an annual fee
of 1.25% of the Fund's average net asset value, computed daily and payable
monthly. In accordance with the California Code of Regulations, AHMC has agreed
to decrease the investment advisory fee or, if necessary, to reimburse the Fund
if and to the extent that the Fund's aggregate annual operating expenses exceed
specified percentages of the Fund's net assets. The percentages are 2.5% of the
first $30,000,000, 2% of the next $70,000,000 and 1.5% of the average net assets
in excess of $100,000,000. When calculating the Fund's expenses for the
foregoing purpose, interest, taxes, brokerage commissions, extraordinary
expenses, including expenses from litigation, as well as a portion of the Fund's
custodian fees attributable to investment in foreign countries are excluded. In
accordance with the above regulations, AHMC was not required to reimburse the
Fund for $7,467 of interest expense incurred during the six months ended July
31, 1996, which resulted in the Fund's annualized ratio of expenses to average
net assets to be 2.83%.
Heiko H. Thieme is the Fund's Chairman of the Board of Directors and
Chief Executive Officer. Mr. Thieme is also the Chairman of the Board of
Directors and Chief Executive Officer of AHMC, of which he owns 90% of the
outstanding shares. Richard K. Parker is the Fund's President and a Director and
also owns 10% of the outstanding shares of AHMC and is its President and a
Director. Mr. Parker is also a Managing Director of Bear, Stearns, & Co. Inc.
Mr. Parker and members of his immediate family beneficially owned approximately
8.7% and 8.4% respectively of the outstanding shares of the Fund at July 31,
1996. Mr. Parker disclaims any beneficial interest in the shares owned by such
family members.
During the six months ended July 31, 1996, the Fund paid brokerage
commissions of $64,616 to Bear, Stearns & Co. Inc. During the six months ended
July 31, 1996, the Fund paid brokerage commissions of $320 to Thieme Securities,
Inc. of which Mr. Thieme is the owner. Bear, Stearns & Co., Inc. and Thieme
Securities, Inc. are not otherwise associated with AHMC and are not responsible
for any of the investment advice rendered to the Fund by AHMC, Mr. Parker, or
Mr. Thieme.
NOTE 3 INVESTMENTS
For the six months ended July 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated $26,609,374
and $26,595,780, respectively. The gross unrealized appreciation for all
securities totaled $21,788 and the gross unrealized depreciation for all
securities totaled $636,142 for a net unrealized depreciation of $614,354. The
aggregate cost of securities for federal income tax purposes at July 31, 1996
was $3,725,841.
<PAGE> 8
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1996
(Unaudited)
NOTE 4 CAPITAL SHARE TRANSACTIONS
As of July 31, 1996, there were 250,000,000 shares of $0.001 par value
capital stock authorized and total par value and paid in capital aggregated
$5,272,765.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JULY 31, 1996 JANUARY 31, 1996
------------------- ----------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 257,342 $ 428,483 2,497,797 $ 6,240,240
Shares issued in reinvestment
of dividends 0 0 999,038 1,528,523
Shares redeemed (593,688) (969,113) (1,610,423) (6,225,472)
-------- --------- ---------- ----------
Net Increase/(decrease) (336,346) $(540,630) 1,886,412 $ 1,543,291
======== ========= ========= ===========
</TABLE>
NOTE 5 BANK LOAN
The Fund has a demand secured $2,000,000 line of credit with a bank.
Borrowings under this arrangement bear interest at the bank's prime rate. On
July 31, 1996, there was no outstanding balance. Total interest paid on the
credit line during the six months ended July 31, 1996 totaled $7,467.
NOTE 6 CONTINGENCIES
Certain expenses of the Fund aggregating approximately $15,000 have been
paid by AHMC. AHMC has agreed to permit the Fund to defer repayment of that
amount to AHMC until such time, if any, as the value of the Fund's net assets
reaches $30,000,000. In addition, certain creditors of the Fund have agreed also
to defer payment to them of approximately $70,000 in various fees until the
value of the Fund's net assets reaches $30,000,000. If the value of the Fund's
net assets reaches $30,000,000, the Fund will pay the foregoing amounts at that
time. In such event, for purposes of computing the Fund's net asset value, the
amount so paid will be amortized over a period of twelve months.
NOTE 7 DISTRIBUTION TO SHAREHOLDERS
As of July 31, 1996, the Fund had available for federal income tax
purposes an unused capital loss carryover of approximately $1,621,000 which will
expire in 2003 and 2004.
The Fund has and may continue to purchase securities on or shortly prior
to their respective ex-dividend dates and to dispose of such securities soon
thereafter. Such practice can increase the amount of taxable income of
shareholders while decreasing the Fund's total return.
<PAGE> 9
AMERICAN HERITAGE GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED RATIOS/SUPPLEMENTAL DATA
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS FOR THE YEAR MAY 25, 1994**
ENDED JULY 31, 1996 ENDED THROUGH JANUARY 31,
(UNAUDITED) JANUARY 31, 1996 1995
----------- ---------------- ----
<S> <C> <C> <C>
Net asset value, beginning of period ...... $ 1.66 $ 3.57 $ 5.00
Income from investment operations:
Net investment income ................... .11 1.51 2.17
Net gains or (losses) on securities
both realized and unrealized .......... (.34) (.69) (1.24)
--------------- --------------- ---------------
Total from investment operations .......... (.23) .82 .93
Less distributions:
Dividends (from net investment income) .. -- (2.73) (2.36)
Distributions (from capital gains) ...... -- -- --
--------------- --------------- ---------------
Net asset value end of period ............. $ 1.43 $ 1.66 $ 3.57
=============== =============== ===============
Total return .............................. (27.86%)* 29.48% 30.42%)*
Net assets, end of period ................. $ 3,787,041 $ 4,932,970 $ 3,898,560
Ratio of expenses to average net assets (1) 2.83%* 2.62% 2.50%*
Ratio of net investment income (loss)
to average net assets ................... 13.44%* 44.46% 63.52%*
Portfolio turnover rate ................... 689.80% 4,262,64% 3,213.89%
Average commission per share .............. $ .0661 $ .0388
</TABLE>
(1) If expense reimbursement from the investment advisor had not been in
effect the ratio of expenses to average net assets would have been
4.13% for the six months ended July 31, 1996, 3.94% for the year ended
January 31, 1996, and 4.35% for the period ended January 31, 1995. See
also Note 2 to the Financial Statements.
* Annualized
** Commencement of operations
The accompanying notes are an integral part of these financial statements.
