<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
To Our Valued Shareholders:
Our strategy in American Heritage Growth Fund focuses on what we believe are the
five most attractive sectors at the turn of the millennium. These are
telecommunications; technology including the Internet; healthcare including
pharmaceutical, biotechnology and medical technology; consumer stocks; and the
finance industry. The weighting among these sectors will change from time to
time depending on the relative attractiveness of each industry.
Our stock selection encompasses a mix of well-known blue chips as well as
mid-sized companies along with some microcaps. Our projected holding period for
these stocks ranges from the very short-term -- if the share price exceeds our
target in the short-term -- up to periods of several years if necessary, in
order to maximize our long-term return.
The Fund currently has realized capital losses which can be used to offset
future realized gains. Therefore, any short-term trading gains should not result
in negative tax consequences for the time being. Furthermore, we do not expect
the Fund to have any taxable distribution to shareholders this year.
From time to time we may also carry a significant cash position if we feel that
the market will provide more attractive entry levels in the future. I believe
that the outlook for the stock market for the coming 6-12 months is very
promising and we will utilize any temporary setback as a buying opportunity.
As always, I thank you for your confidence.
Sincerely
/s/ Heiko Tieme
Heiko H. Thieme
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $622,838).................. $ 370,788
Cash............................... 250,923
Receivable for investment
securities sold.................. 63,543
Receivable for capital stock
sold............................. 1,140
Receivable for dividends and
interest......................... 953
Prepaid expenses................... 1,000
Due from investment advisor........ 21,055
-----------
TOTAL ASSETS..................... 709,402
-----------
LIABILITIES
Accrued expenses and other
liabilities...................... 20,159
-----------
TOTAL LIABILITIES................ 20,159
-----------
Contingencies --
NET ASSETS
Net assets (equivalent to $.14 per
share based on 4,796,437 shares
of capital stock outstanding).... $ 689,243
===========
Composition of net assets:
Shares of common stock............. $ 4,993
Paid in capital.................... 3,524,485
Accumulated net investment loss.... (33,233)
Accumulated net realized loss on
investments...................... (2,554,952)
Net unrealized depreciation on
investments...................... (252,050)
-----------
NET ASSETS, July 31, 1999.......... $ 689,243
===========
</TABLE>
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AMERICAN HERITAGE GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1999
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 49.01%
BANKS AND FINANCE - 0.01%
Credit Depot Corp.*............. 8,000 $ 100
--------
BIOTECHNOLOGY - 4.65%
Senetek PLC Sponsored ADR*...... 24,400 $ 32,025
--------
COMPUTER DISK DRIVES &
COMPONENTS - 3.90%
Seagate Technology*............. 1,000 26,875
--------
COMPUTERS & PERIPHERALS - 6.26%
Iomega Corp.*................... 4,000 16,000
Peoplesoft Inc.*................ 2,000 27,125
--------
43,125
--------
CONSUMER PRODUCTS - 5.40%
Philip Morris Cos Inc........... 1,000 37,250
--------
ENTERTAINMENT - 4.01%
Disney (Walt) Co.*.............. 1,000 27,625
--------
HEALTHCARE - 7.89%
FPA Medical Management Inc.*.... 5,000 50
Pfizer Inc...................... 1,600 54,300
--------
54,350
--------
MEDICAL TECHNOLOGY - 7.89%
Fusion Medical Technologies
Inc.*......................... 2,000 20,000
Inhale Therapeutic Systems
Inc.*......................... 600 14,625
Miravant Medical
Technologies*................. 2,000 19,750
--------
54,375
--------
MINING - 1.90%
Echo Bay Mines Ltd.*............ 10,000 13,125
--------
OIL GAS & MINERALS - 2.68%
Parker Drilling Co.*............ 5,000 18,438
--------
RADIO - 4.43%
CD Radio Inc.*.................. 1,000 30,500
--------
TOTAL COMMON STOCKS............. 337,788
--------
</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, 1999
(Continued) -- (Unaudited)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS - 4.79%
Star Treasury Fund.............. 33,000 $ 33,000
--------
TOTAL INVESTMENTS - 53.80% $370,788
========
</TABLE>
* Non-income producing
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1999
(Unaudited)
- ---------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................ $ 1,132
Interest............................. 4,984
--------
TOTAL INVESTMENT INCOME.............. 6,116
--------
EXPENSES:
Investment advisory fees............. 4,656
Transfer agent fees.................. 2,609
Legal fees........................... 2,500
Audit fees........................... 3,640
Custodian fees....................... 2,813
Fund accounting fees................. 6,252
Postage and printing................. 8,566
Registration fees and expenses....... 2,135
Miscellaneous........................ 1,733
--------
TOTAL EXPENSES....................... 34,904
Less: expense reimbursement from
investment advisor................. (25,711)
--------
Net expenses......................... 9,193
--------
Investment loss -- net............... (3,077)
--------
Net realized gain on securities
transactions....................... 6,113
Net change in unrealized depreciation
of investments..................... 42,925
--------
Net gain on investments.............. 49,038
--------
Net increase in net assets resulting
from operations.................... $ 45,961
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
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AMERICAN HERITAGE GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE
JULY 31, YEAR ENDED
1999 JANUARY 31,
(UNAUDITED) 1999
----------- -----------
<S> <C> <C>
Investment loss -- net......... $ (3,077) $ (9,189)
Net realized gain on securities
transactions................. 6,113 168,870
Net change in unrealized
appreciation/(depreciation)
of investments............... 42,925 (230,694)
--------- ----------
Net increase (decrease) in net
assets resulting from
operations................... 45,961 (71,013)
Distributions to shareholders:
Investment income -- net..... 0 0
Net realized gains on
investments................ 0 0
Capital share transactions..... (227,598) (220,401)
--------- ----------
Net decrease in net assets... (181,637) (291,414)
NET ASSETS:
Beginning of period............ 870,880 1,162,294
--------- ----------
End of period.................. $ 689,243 $ 870,880
========= ==========
</TABLE>
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1999
(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 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
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1999
(Continued) -- (Unaudited)
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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
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1999
(Continued) -- (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 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
reimburse the Fund to the extent that the Fund's maximum aggregate operating
expenses exceeds specified percentages of the Fund's average net assets. AHMC
has agreed to waive any investment advisory fee from the Fund to the extent that
such expenses exceed 2 1/2% after giving effect to the payment of the fee. 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. The obligation of AHMC to
reimburse the Fund terminated July 18, 1999.
During the current period the Fund received $75,610 for the prior year's accrual
for reimbursement from AHMC. At July 31, 1999 the Fund had a receivable of
$25,711 due from AHMC. Additionally, the Fund owed AHMC $4,656 for the current
period's management fee, for a net receivable of $21,055.
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 which he owns 90% of the
outstanding shares.
5
<PAGE> 6
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1999
(Continued) -- (Unaudited)
- ---------------------------------------------------------
During the six months ended July 31, 1999, the Fund paid brokerage commissions
of $8,510 to Thieme Securities, Inc. of which Mr. Thieme is the owner. Thieme
Securities, Inc. received 83.9% of all commissions paid by the Fund on security
transactions where a commission was charged. The average commission per share
paid to Thieme Securities, Inc. was $.093.
NOTE 3. INVESTMENTS
For the six months ended July 31, 1999, purchases and sales of investment
securities other than short-term investments aggregated $1,125,491 and
$1,252,012 respectively. The gross unrealized appreciation for all securities
totaled $2,925 and the gross unrealized depreciation for all securities totaled
$254,975 for a net unrealized depreciation of $252,050. The aggregate cost of
securities for federal income tax purposes at July 31, 1999 was $622,838.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of July 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 $3,529,478.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31, 1999 FOR THE YEAR ENDED
(UNAUDITED) JANUARY 31, 1999
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Shares sold.......... 92,983 $ 12,396 1,935,149 $ 271,669
Shares issued in
reinvestment of
dividends........... 0 0 0 0
Shares redeemed...... (1,768,450) (239,994) (3,550,208) (492,070)
---------- --------- ---------- ---------
Net increase/
(decrease).......... (1,675,467) $(227,598) (1,615,059) $(220,401)
========== ========= ========== =========
</TABLE>
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AMERICAN HERITAGE GROWTH FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1999
(Continued) -- (Unaudited)
- ---------------------------------------------------------
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, 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 July 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 PERIOD
SIX MONTHS FROM
ENDED FOR THE FOR THE FOR THE FOR THE MAY 25, 1994**
JULY 31, YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
1999 JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ .13 $ .14 $ .16 $ 1.66 $ 3.57 $ 5.00
Income from investment operations:
Net investment income............ .00 .00 .00 .24 1.51 2.17
Net losses on securities (both
realized and unrealized)......... .01 (.01) (.01) (.32) (.69) (1.24)
-------- -------- ---------- ---------- ---------- ----------
Total from investment operations... .01 (.01) (.01) (.08) .82 .93
Less distributions:
Dividends (from net investment
income)....................... .00 .00 (.01) (1.42) (2.73) (2.36)
Dividends (from net realized
gains on investments)......... -- -- -- -- -- --
-------- -------- ---------- ---------- ---------- ----------
Net asset value, end of period..... $ .14 $ .13 $ .14 $ .16 $ 1.66 $ 3.57
======== ======== ========== ========== ========== ==========
Total return....................... 7.69% (7.14)% (9.00)% (4.66)% 29.48% 30.42%*
Net assets, end of period.......... $689,243 $870,880 $1,162,294 $2,240,860 $4,932,970 $3,898,560
Ratio of expenses to average net
assets........................... 2.77% 2.50% 2.67% 2.81% 2.62% 2.50%*
Ratio of net investment income
(loss) to average net assets .... (.93)% (.94)% (1.25)% 25.97% 44.46% 63.52%*
Portfolio turnover rate............ 272.17% 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
AMERICAN HERITAGE GROWTH FUND, INC.
1370 Avenue of the Americas
New York, NY 10019
ADDRESS CORRECTION REQUESTED
<TABLE>
<S> <C>
AMERICAN
HERITAGE
[Logo] GROWTH
FUND, INC.
- -------------------------------------
SEMI-ANNUAL
REPORT
July 31, 1999
</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.
