AMERICAN HERITAGE GROWTH FUND INC, N-30D, 1998-03-30

AMERICAN HERITAGE GROWTH FUND INC
N-30D, 1998-03-30

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<PAGE> 1

AMERICAN HERITAGE GROWTH FUND, INC.
[LOGO]

1370 Avenue of the Americas
New York, N.Y. 10019
Tel: (212) 397-3900
Fax: (212) 397-4036

March 1998

To Our Valued Shareholders:

Our strategy for the American Heritage Growth Fund is to seek long-term capital
appreciation by investing in established as well as lesser known companies with
above average growth potential.

My investment philosophy is regularly discussed in my monthly strategy piece,
The Viewpoint/Der Standpunkt, which is available upon request.

I appreciate your continued confidence.

With kind regards,

/s/ HEIKO THIEME

Heiko Thieme
Chairman
<PAGE> 2

- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998
- ---------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $1,220,625)................ $ 1,156,344
Cash............................... 888
Dividend and interest receivable... 145
Prepaid expenses................... 9,408
Due from investment advisor........ 39,066
-----------
TOTAL ASSETS..................... 1,205,851
-----------
LIABILITIES
Payable for securities purchased... 26,681
Accrued expenses and other
liabilities...................... 16,876
-----------
TOTAL LIABILITIES................ 43,557
-----------
Contingencies...................... --

NET ASSETS
Net assets (equivalent to $.14 per
share based on 8,086,963 shares
of capital stock outstanding).... $ 1,162,294
===========
Composition of net assets:
Shares of common stock............. 8,087
Paid in capital.................... 3,969,390
Accumulated net investment
income........................... (20,967)
Accumulated net realized loss on
investments...................... (2,729,935)
Net unrealized depreciation on
investments...................... (64,281)
-----------
NET ASSETS, January 31, 1998....... $ 1,162,294
===========
</TABLE>

- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JANUARY 31, 1998
- ---------------------------------------------------------

<TABLE>
<CAPTION>
Number of Market
Shares Value
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 56.64%
BANK AND FINANCE - 0.73%
Credit Depot Corp.* 8,000 $ 8,500
----------
8,500
----------
BIOTECHNOLOGY - 11.37%
Biochem Pharma, Inc.*(+) 1,500 30,562
Senetek PLC Sponsored ADR*(+) 25,000 101,562
----------
132,124
----------
COMPUTER DISK DRIVES &
COMPONENTS - 9.57%
Intel Corp. 500 40,500
L S I Logic Corp.* 1,500 36,000
Seagate Technology, Inc.* 1,500 34,781
----------
111,281
----------
COMPUTERS & PERIPHERALS - 5.58%
Hewlett-Packard Co. 500 30,000
Oracle Systems Corp.* 1,500 34,875
----------
64,875
----------
CONSUMER PRODUCT - 3.57%
Philip Morris Companies, Inc. 1,000 41,500
----------
41,500
----------
INDUSTRIAL PRODUCTS - 2.59%
Advanced Micro Devices, Inc.* 1,500 30,094
----------
30,094
----------
MEDICAL PRODUCTS - 4.82%
QLT Phototherapeutics Inc.*(+) 2,000 27,500
U.S. Surgical Corp. 1,000 28,563
----------
56,063
----------
MISCELLANEOUS - 11.76%
C D Radio Inc.* 5,500 90,750
I D M Environmental
Corporation* 4,000 19,250
Inco Ltd.(+) 1,500 26,625
----------
136,625
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

2
<PAGE> 3

- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JANUARY 31, 1998
(Continued)
- ---------------------------------------------------------

<TABLE>
<CAPTION>
Number of Market
Shares Value
- -------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS
EQUIPMENT - 2.56%
Motorola Inc. 500 $ 29,719
----------
29,719
----------
TRANSPORTATION - 4.09%
Boeing Co. 1,000 47,563
----------
47,563
----------
TOTAL COMMON STOCKS 658,344
----------
SHORT TERM DEBT - 42.85%
Star Bank Repurchase Agreement 498,000 498,000
----------
498,000
----------
TOTAL SHORT TERM DEBT 498,000
----------
TOTAL INVESTMENTS - 99.49% $1,156,344
==========
* Non-income producing
(+) Foreign Security
</TABLE>

- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1998
- ---------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................... $ 11,184
Interest............................ 11,723
---------
TOTAL INVESTMENT INCOME............. 22,907
---------
EXPENSES:
Investment advisory fees............ 20,098
Transfer agent fees................. 7,297
Legal fees.......................... 25,338
Audit fees.......................... 10,500
Custodian fees...................... 4,843
Fund accounting fees................ 32,744
Postage and printing................ 39,771
Registration fees and expenses...... 20,000
Interest expense.................... 2,857
Miscellaneous....................... 4,432
---------
TOTAL EXPENSES...................... 167,880
Less: expense reimbursement from
investment advisor................ (124,827)
---------
Net expenses........................ 43,053
---------
Investment loss -- net.............. (20,146)
---------
Net realized loss on securities
transactions...................... (84,516)
Net change in unrealized
appreciation of investments....... 3,835
---------
Net loss on investments............. (80,681)
---------
Net decrease in net assets resulting
from operations................... $(100,827)
=========
</TABLE>

The accompanying notes are an integral part of these financial statements.

3
<PAGE> 4

- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JANUARY 31,
1998 1997
---------- ----------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS:
Investment income
(loss) -- net............... $ (20,146) $1,075,720
Net realized loss on
securities transactions..... (84,516) (1,024,046)
Net change in unrealized
appreciation/(depreciation)
of investments.............. 3,835 (226,738)
---------- ----------
Net decrease in net assets
resulting from operations... (100,827) (175,064)
Distributions to shareholders:
Investment income -- net.... (51,781) (1,607,086)
Net realized gains on
investments............... 0 0
Capital share transactions.... (925,958) (909,960)
---------- ----------
Net decrease in net
assets.................... (1,078,566) (2,692,110)
NET ASSETS:
Beginning of year............. 2,240,860 4,932,970
---------- ----------
End of year (including
undistributed investment
income of $-0- and $50,960,
respectively)............... $1,162,294 $2,240,860
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

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 having an investment objection of seeking growth of capital.
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.

4
<PAGE> 5

- --------------------------------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1998
(Continued)
- --------------------------------------------------------------------------------
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 income and expenses during the reporting

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, AHMC was not required to reimburse the Fund for $2,857 of
interest expense incurred during the year ended January 31, 1998, which resulted
in the Fund's ratio of expenses to average net assets to be 2.55%.

During the current year the Fund received $154,876 for the prior year's accrual
for reimbursement from AHMC and $79,885 reimbursement from AHMC for the current
year. At year end the Fund had a receivable of $44,942 due from AHMC.
Additionally, the Fund owned AHMC $5,876 for the current year's management fee,
for a net receivable of $39,066.

Heiko H. Thieme is the Fund's Chairman of the Board of Directors and Chief
Executive Officer. Heiko H.

5
<PAGE> 6

During the year ended January 31, 1998, the Fund paid brokerage commissions of
$20,271 to Thieme Securities, Inc. of which Mr. Thieme is the owner. Thieme
Securities, Inc. received 93.5% of all commissions paid by the Fund on security
transactions where a commission was charged. The average commission per share
paid to Theime Securities, Inc. was $.077.

NOTE 3. INVESTMENTS

For the year ended January 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $2,777,647 and
$3,797,986, respectively. The gross unrealized appreciation for all securities
totaled $91,275 and the gross unrealized depreciation for all securities totaled
$155,556 for a net unrealized depreciation of $64,281. The aggregate cost of
securities for federal income tax purposes at January 31, 1998 was $1,220,625.

NOTE 4. CAPITAL SHARE TRANSACTIONS

As of January 31, 1998 there were 250,000,000 shares of $0.001 par value capital
stock authorized and total par value and paid in capital aggregated $3,977,477.

Transactions in capital stock were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JANUARY 31, 1998 JANUARY 31, 1997
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold 3,789,015 $ 623,383 11,315,305 $ 2,290,872
Shares issued in
reinvestment of
dividends 338,893 48,090 8,781,956 1,405,113
Shares redeemed (10,320,390) (1,597,431) (8,795,309) (4,605,945)
----------- ----------- ---------- -----------
Net increase/
(decrease) (6,192,482) $ (925,958) 11,301,952 $ (909,960)
=========== =========== ========== ===========
</TABLE>

NOTE 5. BANK LOAN

The Fund has a demand secured bank line of credit; borrowings under this
arrangement bear interest at the bank's prime rate. On January 31, 1998, there
was no outstanding balance. Total interest paid on the credit line during the
year ended January 31, 1998 totaled
- --------------------------------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1998
(Continued)
- --------------------------------------------------------------------------------
$2,857. The maximum amount of debt outstanding during the year ended January 31,
1998 was $382,731. The average amount of borrowing during the year ended January
31, 1998 was $46,754.

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 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, 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 23, 1997, a distribution of $.0056 per share aggregating $51,781 was
paid to shareholders of record on December 19, 1997 from net investment income
which is treated as ordinary income for federal tax purposes.

As of January 31, 1998, the Fund had available for federal income tax purposes
an unused capital loss carryover of approximately $2,730,000 which will expire
between 2003 and 2006. 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.

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 FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED FROM MAY 25, 1994**
JANUARY 31, JANUARY 31, JANUARY 31, THROUGH JANUARY 31,
1998 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).... (.01) (1.42) (2.73) (2.36)
Dividends (from net realized gains on
investments)........................... -- -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period.............. $ .14 $ .16 $ 1.66 $ 3.57
========== ========== ========== ==========
Total return................................ (9.00)% (4.66)% 29.48% 30.42%*
Net assets, end of period................... $1,162,294 $2,240,860 $4,932,970 $3,898,560
Ratio of expenses to average net assets..... 2.67% 2.81% 2.62% 2.50%*
Ratio of net investment income (loss) to
average net assets........................ (1.25)% 25.97% 44.46% 63.52%*
Portfolio turnover rate..................... 172.20% 1,378.14% 4,262.64% 3,213.89%
Average commission per share................ $ .0780 $ .0627 $ .0388 N/A
</TABLE>

* 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

LANDSBURG PLATT RASCHIATORE & DALTON
Certified Public Accountants

117 South 17th Street 13th Floor Philadelphia, PA 19103
215-561-6633 FAX 215-561-2070

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors
American Heritage Growth Fund, Inc.

We have audited the accompanying statement of assets and liabilities of American
Heritage Growth Fund, Inc., including the schedule of investments in securities
as of January 31, 1998, the related statement of operations for the year then
ended, the statements of changes in net assets and the financial highlights and
related ratios/supplemental data for each of the periods indicated. These
financial statements and financial highlights and related ratios/supplemental
data are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
and related ratios/supplemental data based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights and related ratios/supplemental data are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 1998, by correspondence with
the custodian and the application of alternative auditing procedures for
unsettled security transactions. An audit includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provides a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights and
related ratios/supplemental data referred to above present fairly, in all
material respects, the financial position of American Heritage Growth Fund, Inc.
as of January 31, 1998, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights and related
ratios/supplemental data for each of the periods indicated, in conformity with
generally accepted accounting principles.

/s/ Landsburg Platt Raschiatore & Dalton

February 18, 1998
<PAGE> 9

AMERICAN HERITAGE GROWTH FUND, INC. BULK RATE
1370 Avenue of the Americas U.S. POSTAGE
New York, NY 10019 PAID
HACKENSACK, NJ
PERMIT NO. 237

ADDRESS CORRECTION REQUESTED

AMERICAN
[LOGO] HERITAGE
GROWTH
FUND, INC.
-------------------------------------------
ANNUAL
REPORT

January 31, 1998

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.