<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
September 1998
To Our Valued Shareholders:
Our investment philosophy for American Heritage Growth Fund remains principally
unchanged. We continue to focus on the long-term growth potential among a broad
segment of industries. 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. After the recent downturn we see extraordinary investment
opportunities. My investment philosophy is regularly discussed in my monthly
strategy report "The Viewpoint/Der Standpunkt", which is available upon request.
I appreciate your confidence and hope it will be rewarding in the long term.
With kind regards,
/s/ Heiko Thieme
Heiko Thieme
Chairman
<PAGE> 2
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $1,124,933)................ $ 893,297
Cash............................... 158
Dividend and interest receivable... 12
Prepaid expenses................... 931
Due from investment advisor........ 46,832
-----------
TOTAL ASSETS..................... 941,230
-----------
LIABILITIES
Accrued expenses and other
liabilities...................... 8,449
-----------
TOTAL LIABILITIES................ 8,449
-----------
Contingencies --
NET ASSETS
Net assets (equivalent to $.13 per
share based on 7,104,189 shares
of capital stock outstanding).... $ 932,781
===========
Composition of net assets:
Shares of common stock............. 7,104
Paid in capital.................... 3,822,852
Accumulated net investment loss.... (24,837)
Accumulated net realized loss on
investments...................... (2,640,702)
Net unrealized depreciation on
investments...................... (231,636)
-----------
NET ASSETS, July 31, 1998.......... $ 932,781
===========
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 85.91%
APPLIANCES - 3.24%
Whirlpool Corp.................. 500 $ 30,250
--------
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
BANKS AND FINANCE - .62%
Credit Depot Corp.*............. 8,000 $ 5,750
--------
BIOTECHNOLOGY - 11.93%
Genzyme Corp.*.................. 1,500 7,969
Senetek PLC Sponsored ADR*(+)... 25,000 97,656
Xoma Corp.*..................... 1,500 5,625
--------
111,250
--------
COMPUTERS - INTEGRATED SYSTEMS - .32%
Copytele Inc.*.................. 1,500 2,953
--------
COMPUTERS & PERIPHERALS - 5.10%
Quantum Corp.*.................. 2,000 34,875
S3 Inc.*........................ 1,500 6,234
Trident Microsystems*........... 1,500 6,469
--------
47,578
--------
COMPUTER SOFTWARE - 5.51%
American Software Inc.*......... 1,500 8,531
Computer Associates
International Inc. ........... 1,000 33,188
Forte Software Inc.*............ 1,500 7,875
SystemSoft Corp.*............... 1,500 1,781
--------
51,375
--------
DRUG DELIVERY SYSTEMS - .94%
Noven Pharmaceuticals Inc.*..... 1,500 8,813
--------
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 10.91%
Intel Corp. .................... 500 42,187
Motorola Inc. .................. 500 26,125
National Semiconductor Inc.*.... 2,000 24,625
Oak Technology Inc.*............ 1,500 4,875
Ramtron International Inc.*..... 1,500 3,938
--------
101,750
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
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AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
ELECTRONIC MEASURING INSTRUMENTS - .61%
LTX Corp.*...................... 1,500 $ 5,719
--------
HEALTHCARE COST CONTAINMENT - .12%
FPA Medical Management Inc.*.... 5,000 1,094
--------
HUMAN RESOURCES - .39%
Employee Solutions, Inc.*....... 1,500 3,656
--------
MEDICAL TECHNOLOGY - 3.67%
Miravant Medical
Technologies*................. 2,000 34,250
--------
METAL PROCESSORS & FABRICATION - .55%
Rohn Industries Inc. ........... 1,500 5,156
--------
OIL, GAS & MINERALS - 2.78%
Coho Energy Inc.*............... 1,500 7,781
Halliburton Co. ................ 500 18,156
--------
25,937
--------
PHARMACEUTICALS - 4.63%
Magainin Pharmaceuticals
Inc.*......................... 1,500 7,594
U.S. Bioscience Inc.*........... 5,000 35,625
--------
43,219
--------
RADIO - 15.55%
CD Radio Inc.*.................. 5,500 145,062
--------
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
REMEDIATION SERVICES - 1.81%
IDM Environmental Corp.*........ 10,000 $ 16,875
--------
RETAIL - 3.18%
Charming Shoppes Inc.*.......... 1,500 6,891
Toys "R" Us Inc.*............... 1,000 22,750
--------
29,641
--------
STEEL PRODUCERS - 2.98%
Armco Inc.*..................... 5,000 27,812
--------
TELECOMMUNICATION EQUIPMENT & SOFTWARE - 1.69%
TCSI Corp.*..................... 1,500 7,313
Vtel Corp.*..................... 1,500 8,438
--------
15,751
--------
TOBACCO - 4.70%
Philip Morris Companies,
Inc. ......................... 1,000 43,813
--------
TRANSPORTATION - 4.16%
Boeing Co. ..................... 1,000 38,812
--------
WHOLESALE DISTRIBUTORS - .51%
Merisel Inc.*................... 1,500 4,781
--------
TOTAL COMMON STOCKS 801,297
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
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AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value
- -------------------------------------------------------
<S> <C> <C>
SHORT TERM DEBT - 9.86%
Star Bank Repurchase
Agreement.................... $92,000 $ 92,000
----------
TOTAL INVESTMENTS - 95.77% $ 893,297
==========
</TABLE>
<TABLE>
<C> <S>
* Non-income producing
(+) Foreign security
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1998
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................... $ 1,637
Interest............................ 8,601
---------
TOTAL INVESTMENT INCOME............. 10,238
---------
EXPENSES:
Investment advisory fees............ 7,055
Transfer agent fees................. 4,198
Legal fees.......................... 13,981
Audit fees.......................... 4,810
Custodian fees...................... 3,382
Fund accounting fees................ 6,612
Postage and printing................ 17,128
Registration fees and expenses...... 7,753
Miscellaneous....................... 3,076
---------
TOTAL EXPENSES...................... 67,995
Less: expense reimbursement from
investment advisor................ (53,886)
---------
Net expenses........................ 14,109
---------
Investment loss -- net.............. (3,871)
---------
Net realized gain on securities
transactions...................... 89,233
Net change in unrealized
depreciation of investments....... (167,355)
---------
Net loss on investments............. (78,122)
---------
Net decrease in net assets resulting
from operations................... $ (81,993)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS YEAR ENDED
ENDED JANUARY 31,
JULY 31, 1998 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
DECREASE IN NET ASSETS FROM OPERATIONS:
Investment loss -- net....... $ (3,871) $ (20,146)
Net realized gain (loss) on
securities transactions.... 89,233 (84,516)
Net change in unrealized
appreciation/(depreciation)
of investments............. (167,355) 3,835
---------- -----------
Net decrease in net assets
resulting from
operations................. (81,993) (100,827)
Distributions to
shareholders:
Investment income -- net... 0 (51,781)
Net realized gains on
investments.............. 0 0
Capital share transactions... (147,520) (925,958)
---------- -----------
Net decrease in net
assets................... (229,513) (1,078,566)
NET ASSETS:
Beginning of period.......... 1,162,294 2,240,860
---------- -----------
End of period................ $ 932,781 $ 1,162,294
========== ===========
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1998
(Unaudited)
- ---------------------------------------------------------
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
American Heritage Growth Fund, Inc. (the "Fund") was incorporated on February
14, 1994 and
com
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
menced 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 undistrib-
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
uted amounts for any fiscal year will be paid first out of the subsequent year's
distributions.
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
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
OTHER
The Fund follows industry practice and records security transactions on the
trade date. The specific identification method is used for determining gains or
losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an 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.
During the current period the Fund received $44,942 for the prior year's accrual
for reimbursement from AHMC. At July 31, 1998 the Fund had a receivable of
$53,886 due from AHMC. Additionally, the Fund owed AHMC $7,054 for the current
period's management fee, for a net receivable of $46,832.
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,
6
<PAGE> 7
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
Chief Executive Officer, and Secretary of AHMC, of which he owns 90% of the
outstanding shares.
During the six months ended July 31, 1998, the Fund paid brokerage commissions
of $5,680 to Thieme Securities, Inc. of which Mr. Thieme is the owner. Thieme
Securities, Inc. received 86.9% 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 $.083.
NOTE 3. INVESTMENTS
For the six months ended July 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $1,122,660 and $901,586,
respectively. The gross unrealized appreciation for all securities totaled
$124,100 and the gross unrealized depreciation for all securities totaled
$355,736 for a net unrealized depreciation of $231,636. The aggregate cost of
securities for federal income tax purposes at July 31, 1998 was $1,124,933.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of July 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 $3,829,956.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31, 1998 FOR THE YEAR ENDED
(UNAUDITED) JANUARY 31, 1998
---------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 1,073,752 $ 159,622 3,789,015 $ 623,383
Shares issued in
reinvestment of
dividends 0 0 338,893 48,090
Shares redeemed (2,056,525) (307,142) (10,320,390) (1,597,431)
---------- --------- ----------- -----------
Net increase/
(decrease) (982,773) $(147,520) (6,192,482) $ (925,958)
========== ========= =========== ===========
</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. During the six-months ended
July 31, 1998, there was no outstanding balance.
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1998
(Continued) -- (Unaudited)
- ---------------------------------------------------------
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.
7
<PAGE> 8
AMERICAN HERITAGE GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED
RATIOS/SUPPLEMENTAL DATA
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE FOR THE FOR THE FOR THE PERIOD
JULY 31, YEAR ENDED YEAR ENDED YEAR ENDED FROM MAY 25, 1994**
1998 JANUARY 31, JANUARY 31, JANUARY 31, THROUGH JANUARY 31,
(UNAUDITED) 1998 1997 1996 1995
----------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ .14 $ .16 $ 1.66 $ 3.57 $ 5.00
Income from investment
operations:
Net investment income......... .00 .00 .24 1.51 2.17
Net gains or (losses) on
securities (both realized and
unrealized)................... (.01) (.01) (.32) (.69) (1.24)
---------- ---------- ---------- ---------- ----------
Total from investment
operations.................... (.01) (.01) (.08) .82 .93
Less distributions:
Dividends (from net investment
income).................... .00 (.01) (1.42) (2.73) (2.36)
Dividends (from net realized
gains on investments)...... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of
period........................ $ .13 $ .14 $ .16 $ 1.66 $ 3.57
========== ========== ========== ========== ==========
Total return.................... (7.14)% (9.00)% (4.66)% 29.48% 30.42%*
Net assets, end of period....... $ 932,781 $1,162,294 $2,240,860 $4,932,970 $3,898,560
Ratio of expenses to average net
assets........................ 2.50%* 2.67% 2.81% 2.62% 2.50%*
Ratio of net investment income
(loss) to average net
assets........................ (.69)%* (1.25)% 25.97% 44.46% 63.52%*
Portfolio turnover rate......... 123.56% 172.20% 1,378.14% 4,262.64% 3,213.89%
</TABLE>
* Annualized
** Commencement of operations
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
AMERICAN HERITAGE GROWTH FUND, INC.
1370 Avenue of the Americas
ADDRESS CORRECTION REQUESTED New York, NY 10019
BULK RATE
U.S. POSTAGE
PAID
SECAUCUS, NJ
PERMIT NO. 237
<TABLE>
<S> <C>
AMERICAN
HERITAGE
LOGO GROWTH
FUND, INC.
- -------------------------------------
SEMI-ANNUAL
REPORT
July 31, 1998
</TABLE>
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.
