<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 1999
To Our Valued Shareholders:
American Heritage Growth Fund continues to focus on a small number of stocks
covering a wide assortment of industries. Although our goal remains long-term
growth, some holdings may be short-term due to recent market volatility and the
desire to capitalize on stock performance. Our investments, as usual, consist of
some well known corporations, including blue chips, and also small lesser-known
companies.
I appreciate your confidence and hope our relationship will be rewarding.
With kind regards,
/s/ Heiko Thieme
Heiko Thieme
Chairman
<PAGE> 2
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1999
- ---------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $1,084,995)................ $ 790,020
Cash............................... 100
Receivable for investment
securities sold.................. 52,692
Receivable for capital stock
sold............................. 3,413
Receivable for dividends and
interest......................... 1,184
Prepaid expenses................... 3,418
Due from investment advisor........ 75,610
-----------
TOTAL ASSETS..................... 926,437
-----------
LIABILITIES
Payable for investment securities
purchased........................ 22,112
Payable for capital stock
reacquired....................... 19,589
Accrued expenses and other
liabilities...................... 13,856
-----------
TOTAL LIABILITIES................ 55,557
-----------
Contingencies --
NET ASSETS
Net assets (equivalent to $.13 per
share based on 6,471,904 shares
of capital stock outstanding).... $ 870,880
===========
Composition of net assets:
Shares of common stock............. $ 6,472
Paid in capital.................... 3,750,604
Accumulated net investment loss.... (30,156)
Accumulated net realized loss on
investments...................... (2,561,065)
Net unrealized depreciation on
investments...................... (294,975)
-----------
NET ASSETS, January 31, 1999....... $ 870,880
===========
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JANUARY 31, 1999
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 47.68%
APPLIANCES - 5.16%
Whirlpool Corp.................. 1,000 $ 44,938
AUTOMOTIVE - 0.75%
Spectre Industries Inc.*........ 5,000 6,563
--------
BANKS AND FINANCE - 0.01%
Credit Depot Corp.*............. 8,000 64
--------
BIOTECHNOLOGY - 6.78%
Senetek PLC Sponsored ADR*(+)... 24,400 37,362
US Bioscience Inc.*............. 2,500 21,719
--------
59,081
--------
COMPUTERS & PERIPHERALS - 4.55%
Peoplesoft Inc.*................ 2,000 39,625
--------
ELECTRONIC COMPONENTS -
SEMICONDUCTOR - 2.97%
National Semiconductor Inc.*.... 2,000 25,875
--------
HEALTHCARE - 0.01%
FPA Medical Management, Inc.*... 5,000 100
--------
MEDICAL TECHNOLOGY - 5.17%
Fusion Medical Technologies
Inc.*......................... 4,000 23,500
Miravant Medical
Technologies*................. 2,000 21,500
--------
45,000
--------
MISCELLANEOUS - 3.15%
Mark Solutions Inc.*............ 27,400 27,400
--------
OIL, GAS & MINERALS - 3.04%
Rowan Companies Inc.*........... 3,000 26,437
--------
RADIO - 11.63%
CD Radio Inc.*.................. 3,000 101,250
--------
REMEDIATION SERVICES - 0.50%
IDM Environmental
Corporation*.................. 10,000 4,375
--------
TRANSPORTATION - 3.97%
Boeing Co. ..................... 1,000 34,562
--------
TOTAL COMMON STOCKS 415,270
--------
</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, 1999
(Continued)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- -------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS - 43.03%
Star Treasury Fund............. $374,750 $ 374,750
----------
TOTAL INVESTMENTS - 90.72% $ 790,020
==========
</TABLE>
<TABLE>
<C> <S>
* Non-income producing
(+) Foreign security
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1999
- ---------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................... $ 3,587
Interest............................ 10,953
Other............................... 670
---------
TOTAL INVESTMENT INCOME............. 15,210
---------
EXPENSES:
Investment advisory fees............ 12,200
Transfer agent fees................. 7,417
Legal fees.......................... 13,885
Audit fees.......................... 11,810
Custodian fees...................... 5,888
Fund accounting fees................ 13,863
Postage and printing................ 32,653
Registration fees and expenses...... 10,904
Miscellaneous....................... 3,589
---------
TOTAL EXPENSES...................... 112,209
Less: expense reimbursement from
investment advisor................ (87,810)
---------
Net expenses........................ 24,399
---------
Investment loss -- net.............. (9,189)
---------
Net realized gain on securities
transactions...................... 168,870
Net change in unrealized
depreciation of investments....... (230,694)
---------
Net loss on investments............. (61,824)
---------
Net decrease in net assets resulting
from operations................... $ (71,013)
=========
</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 FOR THE
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1999 1998
----------- -----------
<S> <C> <C>
Investment loss -- net....... $ (9,189) $ (20,146)
Net realized gain (loss) on
securities transactions.... 168,870 (84,516)
Net change in unrealized
appreciation/(depreciation)
of investments............. (230,694) 3,835
---------- -----------
Net decrease in net assets
resulting from
operations................. (71,013) (100,827)
Distributions to
shareholders:
Investment income -- net... 0 (51,781)
Net realized gains on
investments.............. 0 0
Capital share transactions... (220,401) (925,958)
---------- -----------
Net decrease in net
assets................... (291,414) (1,078,566)
NET ASSETS:
Beginning of year............ 1,162,294 2,240,860
---------- -----------
End of year.................. $ 870,880 $ 1,162,294
========== ===========
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1999
- ---------------------------------------------------------
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 undistrib-
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1999
(Continued)
- ---------------------------------------------------------
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 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 January 31, 1999 the Fund had a receivable of
$87,810 due from AHMC. Additionally, the Fund owed AHMC $12,200 for the current
period's management fee, for a net receivable of $75,610.
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,
5
<PAGE> 6
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1999
(Continued)
- ---------------------------------------------------------
Chief Executive Officer, and Secretary of AHMC, of which he owns 90% of the
outstanding shares.
During the year ended January 31, 1999, the Fund paid brokerage commissions of
$9,256 to Thieme Securities, Inc. of which Mr. Thieme is the owner. Thieme
Securities, Inc. received 71.1% 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 $.094.
NOTE 3. INVESTMENTS
For the year ended January 31, 1999, purchases and sales of investment
securities other than short-term investments aggregated $1,848,082 and
$2,028,609, respectively. The gross unrealized appreciation for all securities
totaled $23,467 and the gross unrealized depreciation for all securities totaled
$318,442 for a net unrealized depreciation of $294,975. The aggregate cost of
securities for federal income tax purposes at January 31, 1999 was $1,084,995.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of January 31, 1999 there were 250,000,000 shares of $0.001 par value capital
stock authorized and total par value and paid in capital aggregated $3,757,076.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JANUARY 31, 1999 JANUARY 31, 1998
---------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 1,935,149 $ 271,669 3,789,015 $ 623,383
Shares issued in
reinvestment of
dividends 0 0 338,893 48,090
Shares redeemed (3,550,208) (492,070) (10,320,390) (1,597,431)
---------- --------- ----------- -----------
Net increase/
(decrease) (1,615,059) $(220,401) (6,192,482) $ (925,958)
========== ========= =========== ===========
</TABLE>
- ---------------------------------------------------------
AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1999
(Continued)
- ---------------------------------------------------------
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 year ended
January 31, 1999, there was no outstanding balance.
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
As of January 31, 1999, the Fund had available for federal income tax purposes
an unused capital loss carryover of approximately $2,561,000 which will expire
between 2003 and 2006. If not utilized by then, the loss will be charged against
paid in capital.
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 FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED FROM MAY 25, 1994**
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, THROUGH JANUARY 31,
1999 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 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....... $ 870,880 $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........................ (.94)% (1.25)% 25.97% 44.46% 63.52%*
Portfolio turnover rate......... 274.25% 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.
7
<PAGE> 8
[MATHIESON AITKEN JEMISON, LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
American Heritage Growth Fund, Inc.
New York, NY
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, 1999, and the related statement of operations for the year
then ended, the statement 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/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. The financial statements for the
year ended January 31, 1998 were audited by Landsburg Platt Raschiatore &
Dalton, who merged with Mathieson Aitken Jemison, LLP as of January 1, 1999,
whose auditors' report was dated February 18, 1998 expressed an unqualified
opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, 1999 by correspondence with
the custodian and the application of alternative auditing procedures for
unsettled security transactions. An audit also 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 provide 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, 1999, and 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/ Mathieson Aitken Jemison, LLP
March 17, 1999 [LOGO]
<PAGE> 9
AMERICAN HERITAGE GROWTH FUND, INC.
1370 Avenue of the Americas
New York, NY 10019
ADDRESS CORRECTION REQUESTED
-----------------
BULK RATE
U.S. POSTAGE
PAID
JERSEY CITY, NJ
PERMIT NO. 412
-----------------
AMERICAN
HERITAGE
[LOGO] GROWTH
FUND, INC.
- -------------------------------------
ANNUAL
REPORT
January 31, 1999
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.
