<PAGE> 1
AMERICAN HERITAGE GROWTH FUND, INC.
[AMERICAN HERITAGE LOGO]
1370 Avenue of the Americas
New York, N.Y. 10019
Tel: (212) 397-3900
Fax: (212) 397-4036
September 1997
To Our Valued Shareholders:
Our investment philosophy for American Heritage Growth Fund remains
unchanged. We focus on the long-term growth potential among a widespread
segment of corporations. The stock selection includes 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. My investment
philosophy is regularly discussed in my monthly strategy piece, The
Viewpoint / Der Standpunkt, which is available upon request.
I appreciate your confidence and hope it will be rewarded over the long
term.
With kind regards,
/s/ HEIKO THIEME
Heiko Thieme
Chairman
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1997
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $1,553,831)................ $ 1,756,963
Receivable for capital stock
sold............................. 900
Prepaid expenses................... 28,143
Due from investment advisor........ 50,261
Other receivables.................. 2,100
------------
TOTAL ASSETS..................... 1,838,367
------------
LIABILITIES
Accrued expenses and other
liabilities...................... 4,832
Demand loan payable to bank........ 8,327
------------
TOTAL LIABILITIES................ 13,159
------------
Contingencies --
NET ASSETS
Net assets (equivalent to $.17 per
share based on 10,486,679 shares
of capital stock outstanding).... $ 1,825,208
============
Composition of net assets:
Shares of common stock............. 10,487
Paid in capital.................... 4,326,087
Accumulated net investment
income........................... 38,469
Accumulated net realized loss on
investments...................... (2,752,967)
Net unrealized appreciation on
investments...................... 203,132
------------
NET ASSETS, July 31, 1997.......... $ 1,825,208
============
</TABLE>
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AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1997
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C>
COMMON STOCKS 96.26%
AUTOMOBILES - 11.20%
Ford Motor Co.................. 5,000 $ 204,375
-----------
BANKS & FINANCE - 2.05%
Credit Depot Corp.*............ 40,000 37,500
-----------
BIOTECHNOLOGY - 10.22%
Senetek PLC Sponsored ADR*(+).. 25,000 125,000
U S Bioscience Inc.*........... 6,000 61,500
-----------
186,500
-----------
COMPUTER EQUIPMENT - 22.25%
3COM Corp.*.................... 1,750 95,594
JTS Corporation*............... 10,000 7,500
Micron Technology*............. 2,000 97,375
S Three Inc.*.................. 6,000 92,250
Three-Five Systems Inc.*....... 5,000 113,437
-----------
406,156
-----------
COMPUTERS & PERIPHERALS - 7.38%
Apple Computer Inc.*........... 3,000 52,312
Digital Equipment Corp.*....... 2,000 82,375
-----------
134,687
-----------
CONSUMER PRODUCTS - 21.02%
Eastman Kodak Co............... 1,200 80,400
Motorola Inc................... 3,000 240,938
Nike Inc. ClB.................. 1,000 62,313
-----------
383,651
-----------
INDUSTRIAL PRODUCTS - 5.27%
Westinghouse Electric Corp..... 4,000 96,250
-----------
PHARMACEUTICAL - 7.10%
Polydex Pharmaceuticals
Ltd.*(+)..................... 12,200 129,625
-----------
STEEL - 4.93%
Bethlehem Steel Corp........... 8,000 90,000
-----------
TRANSPORTATION - 4.84%
Boeing Co...................... 1,500 88,219
-----------
TOTAL INVESTMENTS - 96.26%
(Cost $1,553,831)............ $1,756,963
===========
* Non-income producing
(+) Foreign security
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1997
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................... $ 7,401
Interest............................ 1,206
-----------
TOTAL INVESTMENT INCOME............. 8,607
-----------
EXPENSES:
Investment advisory fees............ 10,339
Transfer agent fees................. 4,228
Legal fees.......................... 14,057
Audit fees.......................... 10,286
Custodian fees...................... 3,894
Fund accounting fees................ 6,373
Postage and printing................ 16,667
Registration fees and expenses...... 13,828
Interest expense.................... 420
Miscellaneous....................... 1,606
-----------
TOTAL EXPENSES...................... 81,698
Less: expense reimbursement from
investment advisor................ (60,600)
-----------
Net expenses........................ 21,098
-----------
Investment loss -- net.............. (12,491)
-----------
Net realized loss on securities
transactions...................... (107,548)
Net change in unrealized
appreciation of investments....... 271,248
-----------
Net gain on investments............. 163,700
-----------
Net increase in net assets resulting
from operations................... $ 151,209
===========
</TABLE>
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
JULY 31, 1997 JANUARY 31, 1997
------------- ----------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Investment
income/(loss) -- net........ $ (12,491) $ 1,075,720
Net realized loss on
securities transactions..... (107,548) (1,024,046)
Net change in unrealized
appreciation/(depreciation)
of investments.............. 271,248 (226,738)
----------- ------------
Net increase/(decrease) in net
assets resulting from
operations.................. 151,209 (175,064)
----------- ------------
Distributions to shareholders:
Investment income -- net.... 0 (1,607,086)
Net realized gains on
investments............... 0 0
Capital share transactions.... (566,861) (909,960)
----------- ------------
Net decrease in net
assets.................... (415,652) (2,692,110)
NET ASSETS:
Beginning of period........... 2,240,860 4,932,970
----------- ------------
End of period (including
undistributed investment
income of $38,469 and
$50,960, respectively)...... $ 1,825,208 $ 2,240,860
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(Unaudited)
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NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
American Heritage Growth Fund, Inc. ( the "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.
DISTRIBUTIONS 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 distributions.
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
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
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 of the financial statements and
the reported amounts of
4
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
income and expenses during the reporting period. Actual results could differ
from those estimates.
OTHER
The Fund follows industry practice and records security transactions on the
trade date. The specific identification method is used for determining gains or
losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an 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 receives a fee of 1.25% of the Fund's average
net asset value, computed daily and payable monthly. 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, the Fund's investment advisor was not required to reimburse the
Fund for $420 of interest expense incurred during the six months ended July 31,
1997, which resulted in the Fund's ratio of expenses to average net assets to be
2.55%.
Heiko H. Thieme is the Fund's Chairman of the Board of Directors and Chief
Executive Officer. Heiko H. Thieme is the Chairman of the Board of Directors,
Chief Executive Officer, and Secretary of AHMC, of
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
which he owns 90% of the outstanding shares. Richard K. Parker, who controls 10%
of the outstanding capital stock of AHMC, is a Managing Director of Bear,
Stearns & Co. Inc. Except for executing portfolio transactions as described
below, Bear, Stearns & Co. Inc. is not otherwise associated with AHMC or the
Fund and is not responsible for any of the investment advice rendered to the
Fund by AHMC or Mr. Parker.
Mr. Parker and his immediate family, on January 29, 1997, redeemed 5,620,880
outstanding shares of the Fund with a value of $882,206. This represented Mr.
Parker's and his immediate family's entire interest in the Fund.
During the six months ended July 31, 1997, the Fund paid brokerage commissions
of $600 to Bear, Stearns & Co. Inc. During the six months ended July 31, 1997,
the Fund paid brokerage commissions of $11,671 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 or Mr. Parker.
NOTE 3. INVESTMENTS
For the six months ended July 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $1,939,698 and
$2,105,800, respectively. The gross unrealized appreciation for all securities
totaled $365,581 and the gross unrealized depreciation for all securities
totaled $162,449 for a net unrealized appreciation of $203,132. The aggregate
cost of securities for federal income tax purposes at July 31, 1997 was
$1,553,831.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of July 31, 1997 there were 250,000,000 shares of $0.001 par value capital
stock authorized and total par value and paid in capital aggregated $4,336,574.
5
<PAGE> 6
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JULY 31, 1997 JANUARY 31, 1997
--------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold 1,750,662 $ 269,835 11,315,305 $ 2,290,872
Shares issued in
reinvestment of
dividends 0 0 8,781,956 1,405,113
Shares redeemed (5,543,428) (836,696) (8,795,309) (4,605,945)
---------- ---------- ---------- -----------
Net increase/
(decrease) (3,792,766) $(566,861) 11,301,952 $ (909,960)
========== ========== ========== ===========
</TABLE>
NOTE 5. BANK LOAN
The Fund has a demand secured $2,000,000 bank line of credit; borrowings under
this arrangement bear interest at the bank's prime rate. On July 31, 1997, the
outstanding balance was $8,327. Total interest paid on the credit line during
the six months ended July 31, 1997 totaled $420. The maximum amount of debt
outstanding during the six months ended July 31, 1997 was $178,608. The average
amount of borrowing during the six months ended July 31, 1997 was $33,996.
NOTE 6. CONTINGENCIES
Certain expenses of the Fund aggregating approximately $15,000 have been paid by
the Fund's investment advisor, 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 also agreed 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,
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(Continued) -- (Unaudited)
- ---------------------------------------------------------
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
On December 20, 1996, a distribution of $1.4227 per share aggregating $1,607,086
was paid to shareholders of record on December 20, 1996 from net investment
income which is treated as ordinary income for federal tax purposes.
As of January 31, 1997, the Fund had available for federal income tax purposes
an unused capital loss carryover of approximately $2,645,000 which will expire
between 2003 and 2005. If not utilized by then, the loss will be charged against
paid in capital.
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.
When the Fund deducts a distribution from its net asset value (NAV), automatic
reinvestments are made at the Fund's NAV at the close of business that day. Cash
distribution will be mailed within seven days of the distribution.
NOTE 8. OTHER
The Fund has changed its pricing policy for sales redemption from 2 decimal
places to 6 decimal places, effective January 29, 1997.
6
<PAGE> 7
AMERICAN HERITAGE GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED
RATIOS/SUPPLEMENTAL DATA
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE PERIOD
FOR THE SIX MONTHS YEAR ENDED YEAR ENDED FROM MAY 25, 1994**
ENDED JULY 31, 1997 JANUARY 31, JANUARY 31, THROUGH JANUARY 31,
(UNAUDITED) 1997 1996 1995
------------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ .16 $ 1.66 $ 3.57 $ 5.00
Income from investment operations:
Net investment income............... .00 .24 1.51 2.17
Net gains or (losses) on securities
(both realized and unrealized)...... .01 (.32) (.69) (1.24)
---------- ---------- ----------
Total from investment operations...... .01 (.08) .82 .93
Less distributions:
Dividends (from net investment
income).......................... -- (1.42) (2.73) (2.36)
Distributions (from capital
gains)........................... -- -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period........ $ .17 $ .16 $ 1.66 $ 3.57
========== ========== ========== ==========
Total return.......................... 13.04%* (4.66)% 29.48% 30.42%*
Net assets, end of period............. $ 1,825,208 $ 2,240,860 $ 4,932,970 $ 3,898,560
Ratio of expenses to average net
assets(1)........................... 2.55%* 2.81% 2.62% 2.50%*
Ratio of net investment income to
average net assets.................. (1.51)%* 25.97% 44.46% 63.52%*
Portfolio turnover rate............... 120.04% 1,378.14% 4,262.64% 3,213.89%
Average commission per share.......... $ .0887 $ .0627 $ .0388 N/A
</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 9.89% for the
six months ended July 31, 1997, and 4.82% for the year ended January 31,
1997, and 3.94% for the year ended January 31, 1996, and 4.35% for the
period ended January 31, 1995.
See notes to the financial statements for the six months ended July 31,
1997.
* Annualized
** Commencement of operations
N/A -- Disclosure not applicable to prior periods.
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
AMERICAN HERITAGE GROWTH FUND, INC.
1370 Avenue of the Americas
New York, NY 10019
ADDRESS CORRECTION REQUESTED
BULK RATE
U.S. POSTAGE
PAID
SECAUCUS, NJ
PERMIT NO. 237
[AMERICAN AMERICAN
HERITAGE HERITAGE
LOGO] GROWTH
FUND, INC.
---------------------------------------
SEMI-ANNUAL
REPORT
July 31, 1997
This report and the financial
statements contained herein are
submitted for the general information
of shareholders and are not authorized
for distribution to prospective
investors unless preceded or
accompanied by an effective prospectus.
Nothing herein contained is to be
considered an offer of sale or
solicitation of an offer to buy shares
of American Heritage Growth Fund, Inc.
Such offering is made only by
prospectus, which includes details as
to offering price and other material
information.
