<PAGE> 1
THIS DOCUMENT IS A COPY OF THE FORM N-30D FILED ON SEPTEMBER 6, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
Z-SEVEN
SECOND QUARTER REPORT
Period Ending
June 30, 1996
1. Accounting Procedures:
Reliability & Conservatism
2. Consistency of Operating
Earnings Growth
3. Strength of Internal
Earnings Growth
4. Balance Sheet:
Working Capital
5. Balance Sheet:
Corporate Liquidity
6. Recognition:
Owner Diversification
7. Value: P/E Under 10
<PAGE> 2
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
No need for you to wait until the end of the letter for an expression of our
gratitude. We do thank you for your confidence in our investment philosophy. We
are particularly thankful for the love, strength, and wisdom given by our
heavenly creator and caring shepherd. We are excited by the prospects
immediately ahead as interest rates are continuing their decline in the U.K.,
Netherlands, and France as well. The years ahead are a period of potentially
rewarding opportunities for our portfolio in these markets. Shorter term,
Z-Seven has begun to raise some cash during the last quarter by cutting back
holdings which no longer meet all criteria and we are positioned well for the
rest of the year of 1996.
1996 SIX MONTH RESULTS
As the year 1996 passes its mid-way point, the second quarter continues to
provide positive returns with a solid gain in our investment portfolio during
the first six months. The second quarter of 1996 brought an advance in our
investment portfolio of nearly 3%. At mid-year, we again have been generating
more cash by taking profits in some holdings which have been approaching prices
at which they are more fully valued. With nearly three-quarters of our portfolio
invested in European equities entering 1996, our gain for the first six months
may be easier to extend itself throughout the year than it may be for domestic
closed-end funds and open-end mutual funds.
FIRST HALF N.A.V.
Our Net Asset Value rose nearly 11% in the first half of 1996 from $17.48 to
$19.38.
SECOND QUARTER N.A.V.
After operating expenses, our Net Asset Value rose over 2% during the fourth,
fifth, and sixth months of 1996 from $18.95 to $19.38. This marks the eighth
quarter in a row (a record for us) of higher Net Asset Value and the thirteenth
quarter in the past fifteen in which our N.A.V. has posted a gain. At this
stage, it appears that there is a reasonable chance that our N.A.V. will be up
in the third quarter also.
GOOD NEWS
In our first quarter report last year we had six stocks in our portfolio achieve
a 20% or more gain, which determines those investments of ours which are
discussed under our "Good News" section. In this year's first quarter, the
number of investments which were up at least 20% for the first three months of
1996 expanded to eight, many of which rose considerably more. This is especially
gratifying inasmuch as we began this year with only 27 holdings in total, a much
smaller number than usual. Of these, most were among Z-Seven's largest one-third
(nine positions). By the second quarter last year, the number of investments up
by 20% or more increased from six to ten; this year, we ended the first three
months with eight and now have fourteen.
<PAGE> 3
From largest to smallest they are as follows: Our largest investment, entering
1996, CALLAWAY GOLF finally makes the grade officially. Callaway was up 18%
during the first three months of 1996 and this did not yet qualify as a 20%
gainer for this section. After a very strong second quarter, Callaway is now up
47% for the first half of this year. Oddly enough, last year, Callaway was only
in the portfolio for nearly eleven months (but not the required twelve months)
and, due to this fact, even its 36% gain in 1995 (since first purchased) did not
qualify for this section. All in all, over a period of nearly 17 months,
Callaway shares have doubled. Most of our Callaway shares have been held for
barely half a year and these more recently purchased shares are already up about
70%.
Our second biggest holding coming into 1996 was Swiss pharmaceutical company
SANDOZ whose shares advanced 32% during the first quarter of 1996, aided by
stronger than expected earnings growth as well as by favorable reaction to a
decision to merge Sandoz with fellow Swiss giant Ciba-Geigy to form the world's
second largest pharmaceuticals firm, surpassing Merck, and smaller only than
Glaxo-Wellcome PLC (the result of the largest ever British merger just last year
which also enriched Z-Seven shareholders during last year's first three months).
This 32% gain for Sandoz was widened slightly at the half-year stage to a 36%
increase and comes on the heels of a 76% rise for all of 1995. Since first
purchased a little over four years ago, Sandoz has about quadrupled. Since our
latest purchase of nearly half of our entire Sandoz holding in 1993, these
shares have about tripled in just over three years.
Z-Seven's third most important investment (in size order) entering 1996 was
GETRONICS NV. Like Sandoz, Getronics (a Dutch provider of technical services and
maintenance to the information processing and telecommunications industries) was
aided by its earnings report showing stronger growth for the year of 1995 than
most had anticipated, along with acquisition and strategic alliance discussions
which could add further to long-term growth. As a result, Getronics shares rose
nearly 60% in the first three months of this year alone. Another strong quarter
has catapulted Getronics to a double (+104%) in the first half of this year,
adjusted for a recent 4-for-1 stock split. This gem has been in our portfolio
for nearly 5 1/2 years and has already quintupled.
While our fourth largest position going into 1996, Astra, the Swedish
pharmaceuticals growth company, is only up 10% for the first half of 1996 and
thus does not qualify as "Good News" yet and our fifth largest position entering
1996, DayRunner, is a new holding which hadn't started out very well, but has
since rebounded - see "Mistakes and Disappointments" next after "Good News" -
LINDT AND SPRUNGLI, the Swiss premium chocolates company, which was our sixth
largest investment entering the year, does in fact belong in our "Good News"
section as it is already up 28% in just six months on a better earnings report
than was expected. Higher than expected earnings is the common theme (as it
often is) in not only Lindt but also our three "Good News" stocks thus far. Four
of our top six holdings (Lindt, Sandoz, Callaway, and Getronics) are up 28% -
104% in the opening six months of the year (including all of our largest three
investments). National Dentex, our seventh biggest position going into 1996,
consolidated its huge 1995 gain of 158% with a correction of about 8% during the
first six months of 1996.
<PAGE> 4
L'OREAL, our largest French investment and our eighth biggest overall going into
the year, also qualifies for our "Good News" section with a 30% gain in the
first six months of 1996 alone. The strong Paris bourse is being fueled by lower
interest rates, helping L'Oreal as well as other publicly traded French shares.
In a little over six years, this investment has multiplied almost eight-fold.
Shares have also climbed higher in the Netherlands, as lower interest rates are
helping here as well. Although not up 104% (like Getronics NV our third largest
position) shares of ATAG NV (our ninth biggest entering 1996) are up a
significant 21% during the first half of the year, rebounding after its
underperformance the prior year.
Our next largest and one of our newest British holdings, TT GROUP PLC, already
qualifies for the "Good News" section as its gain for the first half is a
healthy 28%.
Wassall PLC, a British industrial conglomerate and also one of our latest U.K.
investments, like TT Group, did not have as good a first half as TT, up only 6%;
our twelfth largest, Weetabix, lost 13% during the opening half.
This is the "Golden Dozen" (twelve largest) described individually in greater
detail in Z-Seven's latest annual report. Nine of these twelve (three-quarters)
had gains in the first six months. All twelve, as a group, were more than 20%
higher; the largest nine contained six stocks (two-thirds) up 28%-104%.
Just outside of our "Golden Dozen", coming into 1996 is our next (thirteenth)
biggest holding, LVMH. Like L'Oreal, a strong Paris bourse helped lift French
luxury goods company LVMH Moet Hennessy Louis Vuitton to score a 20% gain for
the first six months of 1996.
Our next largest outside our "Golden Dozen", is AIRTOURS PLC, now our fourteenth
biggest position and once by far our number one investment. These are difficult
times for the British company which has managed its air vacation package
business very well over the years, but doesn't have the same ability to leverage
a gain in market share versus its competitors into profit growth, as it did when
it was considerably smaller. Still, excellent management and an effort to raise
margins may help Airtours to report pleasing profits, as it often does, even in
poor times. It has added a Scandinavian cruise ship operation (the largest in
Sweden) to its vacation (holiday in Britain) business and is now taking on
Carnival Cruise as a partner, issuing new shares to Carnival; just under 30% of
its shares are thus now held by Carnival. The immediate result of this
transaction has been to lift these shares 39% during the first half of the year.
We've sold most of our Airtours in previous years at prices ranging from 9 to 12
times what we first paid when starting this investment, adjusted for a 3-for-1
scrip issue (4-for-1 split). The remainder of our Airtours shares are now in
excess of 14 times what we first began to buy them for about 6 1/2 years ago.
Lloyd Thompson PLC is next (number fifteen). This new British investment made
shortly before the year began shares many similar characteristics with Airtours
of 6 years earlier as they both were bought near the company's cash per share,
opportunities made available in
<PAGE> 5
small-cap thinly traded issues whose industry groups were out of favor. Both
have demonstrated resilience to competitive pressures with consistently rising
profits (although Airtours can no longer make this claim) and strong cash-rich
balance sheets. At this point, however, Lloyd Thompson is not yet a "Good News"
stock as its shares gained only modestly during the first half (our first six
full months of owning the shares) atop a year-end rise during our first weeks
after starting to buy the shares in early December. As to two more British
holdings, our sixteenth and seventeenth largest, neither SETON HEALTHCARE PLC
(foot bandage pioneer) nor AIR LONDON, broker and agent for executive private
air travel, made the 20% grade yet for 1996 to be included in "Good News" after
just the first quarter of the year. Seton was up 15% and Air London added even
more to its 68% gain last year in just the next three months alone as these
shares were up another 18% for the first three months of 1996. Although their
gains for the second quarter weren't quite as large, Seton and Air London did
compound upon strong opening quarters to extend these rises to at least 20% for
the first half of the year. For the first six months Seton was up 25% and Air
London 20%.
After several years of solid growth in earnings and share price, our next
(eighteenth) largest position, RCO HOLDINGS PLC, like another successful British
investment (Airtours PLC), has fallen upon hard times. RCO, like Airtours, is
long-term minded and has a great balance sheet to see them through this
transitionary period. In RCO's case, it's diversifying away from government
cleaning contracts to a greater industrial client base. In last year's Z-Seven
annual report RCO was in an unaccustomed position of being one of our two small
"Mistakes and Disappointments" (down 20% or more). At that time, I wrote
"long-term minded managements and debt-free balance sheets have a way of
turning this year's 'Mistakes and Disappointments' into next year's 'Good
News'." In just half a year thus far into 1996, RCO is rebounding, already up
26%.
Our next four largest are actually quite small (ranging from about 1% of our net
assets to as small as around 1/2 of 1%). None were up or down even as much as
15%, let alone 20%. Most were somewhat higher during the first three months of
1996.
Our next (23rd largest) was actually our fifth smallest entering the year (out
of 27). ABBEYCREST PLC is another example of a cash-rich, debt-free company
(like RCO) which fell upon hard times in its industry. Abbeycrest is already
recovering strongly, as it made the "Good News" section upon higher earnings
last year, up 28%. This year, it's already up 23% at the half-way point. This
leaves only our three tiniest holdings, the smallest being down less than 5%,
another, just 1%, and the other (WESTFAIR FOODS LTD.) up 96% for the first six
months. On a common equity basis, Westfair shares are extremely undervalued, but
fluctuate widely depending upon litigation as to whether they are common or
preferred shares, as various courts have expressed different opinions on this
matter.
All in all, we had fourteen investments (just more than half of our twenty-seven
going into the year) which gained between 20% and 104% during the first half of
1996. Even without the diversity of different stocks we had a year ago, this
compares well with the ten which qualified for our "Good News" section last
year.
<PAGE> 6
MISTAKES AND DISAPPOINTMENTS
For purposes of objective responsibility, we employ the following criterion for
selecting these candidates of dubious distinction: they must have lost 20% or
more in their market prices thus far this year. Last year, for the full year of
1995, we had to look to two of our smallest holdings (each comprising just about
1% of our net asset value) in order to find ones that declined at least 20%.
This year, the only stock down 20% or more for the first six months has already
rebounded at this writing, recovering 44% of its first half drop and is now down
just 14%, despite the drop in the U.S. market these first few weeks of the
second half. DAYRUNNER worried some investors when one of its major customers
(WalMart) had deliveries and orders temporarily discontinued. Still, it has a
full new line of Warner Brothers and Disney licensed character products set to
take this office supply leader into higher-end retail markets and, more
importantly, DayRunner has already demonstrated its superb management by
achieving substantially higher profits even before its sales grow again. Down
25% in price for the first half year, this new holding has a real shot at moving
from "Mistakes and Disappointments" into our "Good News" category before too
long.
OUTLOOK
While most people have been convinced that U.S. interest rates are beginning to
climb, my leading indicator for interest rates suggests this may not be the
case. Sooner or later, logic dictates that normal cyclical influences will make
the majority correct. Until then, enjoy the ride. While share prices are clearly
overvalued, they are likely to become even more so as share prices lag bond
prices by an average of nine months. Despite the rosy near-term outlook, and the
possibility of another good quarter and maybe a third year (out of four) of
N.A.V. rising each quarter, we have begun to take some profits which now have
been mostly reinvested in Tomkins PLC, leaving still a small cash reserve.
While Swiss interest rates may not have any further room for decline, in
Britain, France, the Netherlands, Sweden, Denmark, and Spain, our holdings may
well continue to benefit from monetary easing for some time to come.
As mentioned in our first quarter report, I do have more positive developments
(in addition to expanding research coverage) in mind which I have been planning
for a few years and can now announce. In keeping with my own sincere application
of both letter and spirit of our heavenly creator's commandments, I will not
allow myself to "harvest" any financial reward (salary, profit, etc.) for the
twelve month period to end November 30, 1997. All advisory fees, including
bonuses (or penalties) paid during this year less expenses (no salary for me)
will be disbursed among the Z-Seven Fund, staff, and charity. I plan for the
disbursements to be repeated every seventh year.
Sincerely,
Barry Ziskin July 29, 1996
<PAGE> 7
Z-SEVEN FUND, INC.
SCHEDULE OF INVESTMENTS
at June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Percent (a) Common Stock Shares Value
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
5.04% BUILDING MATERIALS & SUPPLIES
Polypipe PLC 432,200 1,348,896
UDO Holdings PLC 1,700 6,281
--------------
1,355,177
- ---------------------------------------------------------------------------------
10.82% ELECTRONIC COMPONENTS & SERVICE
Getronics NV 70,204 1,552,632
Zilog Inc. 56,400 1,353,600
--------------
2,906,232
- ---------------------------------------------------------------------------------
4.88% FINANCIAL SERVICES
City of London PR Group PLC 7,500 9,548
Lloyd Thompson Group PLC 471,800 1,303,583
--------------
1,313,131
- ---------------------------------------------------------------------------------
6.50% FOOD, CONFECTION, AND BEVERAGE
Carlsberg AS 4,100 240,846
Lindt & Sprungli AG 512 878,181
Weetabix Ltd. 17,550 626,675
--------------
1,745,702
- ---------------------------------------------------------------------------------
13.77% HEALTH & PERSONAL CARE PRODUCTS
AB Astra Class B 25,500 1,109,454
L'Oreal Ord.* 3,998 1,325,685
Sandoz AG* 1,106 1,262,614
--------------
3,697,753
- ---------------------------------------------------------------------------------
8.61% LUXURY & DESIGNER PRODUCTS
Abbeycrest PLC 20,800 43,597
Callaway Golf Co. 46,100 1,532,825
LVMH Moet Hennessy
Louis Vuitton S.A.* 3,105 735,584
--------------
2,312,006
- ---------------------------------------------------------------------------------
5.86% MEDICAL & DENTAL SUPPLIES
National Dentex Corporation* 51,000 1,147,500
Seton Healthcare Group PLC 55,800 426,200
--------------
1,573,700
- ---------------------------------------------------------------------------------
22.30% MULTI-INDUSTRY
Atag Holding NV 11,098 831,118
TT Group PLC 247,300 1,316,873
Tomkins 711,500 2,662,433
Wassall PLC 264,100 1,178,678
--------------
5,989,102
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
Z-SEVEN FUND, INC.
SCHEDULE OF INVESTMENTS
at June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Percent (a) Common Stock Shares Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
8.09% PRINTING & BUSINESS SERVICES
Air London Intl. PLC 192,300 382,100
Day Runner Inc. 55,800 1,443,825
RCO Holdings PLC 93,300 347,636
------------
2,173,561
- ---------------------------------------------------------------------------
0.90% RETAILING
Essex Furniture PLC 155,100 228,773
Westfair Foods Ltd. 360 13,201
------------
241,974
- ---------------------------------------------------------------------------
4.02% TRAVEL
Airtours PLC 108,560 856,973
Autopistas C.E. SA 19,040 221,549
------------
1,078,522
- ---------------------------------------------------------------------------
3.96% MISCELLANEOUS 266,300 1,062,537
- ---------------------------------------------------------------------------
94.75% TOTAL COMMON STOCK 25,449,397
(Cost $19,556,362)
- ---------------------------------------------------------------------------
3.71% TREASURY BILLS 996,599
(Cost $990,553)
- ---------------------------------------------------------------------------
1.54% CASH, RECEIVABLES AND OTHER
ASSETS LESS LIABILITIES 414,519
- ---------------------------------------------------------------------------
100.00% NET ASSETS
(equivalent to $19.38 per share based on
1,385,649 shares of capital stock outstanding $ 26,860,515
============
* All or a portion of this stock was pledged as collateral for the line of
credit.
(a) Percentages indicated are on net assets of $26,860,515.
- ---------------------------------------------------------------------------
COMMON STOCKS BY COUNTRY June 30, 1996
- ---------------------------------------------------------------------------
Percent Country Value
- ---------------------------------------------------------------------------
<S> <C> <C>
46.37% United Kingdom 11,800,783
32.11% Western Europe 8,170,864
(non U.K.) (b)
21.52% United States 5,477,750
-------------- ----------
100.00% 25,449,397
============== ==========
</TABLE>
(b) The Z-Seven Fund does not invest in Eastern European companies.
<PAGE> 9
Z-SEVEN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
at June 30, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------
<S> <C>
Investments in securities,
at value (identified cost
$20,546,915) $ 26,445,996
Cash 91,395
Receivables:
Dividends and interest 70,632
Securities sold 343,060
Other assets 22,121
------------
Total assets 26,973,204
- -------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------
Due to investment advisor 84,667
Other accrued expenses 28,022
------------
Total liabilities 112,689
------------
NET ASSETS $ 26,860,515
============
- -------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY
- -------------------------------------------------------------------------------
Capital stock, $1.00 par value:
7,700,000 shares authorized,
1,634,429 shares issued $ 1,634,429
Additional paid-in capital 19,823,153
Treasury stock, 248,780 shares, at cost (4,345,077)
------------
17,112,505
Accumulated net realized gains on investments
and currency transactions 3,613,425
Net unrealized appreciation on investments
and currency translations 6,196,456
Accumulated net investment loss (61,871)
------------
Net assets (equivalent to $19.38 per share
based on 1,385,649 shares of capital
stock outstanding) $ 26,860,515
============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> 10
Z-SEVEN FUND, INC.
STATEMENT OF OPERATIONS
For the period ended June 30, 1996 (Unaudited)
<TABLE>
- ----------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends, net of nonreclaimable
foreign taxes of $48,275 $ 257,468
Interest 28,938
----------
Total investment income $ 286,406
EXPENSES:
Investment advisory fees 162,270
Compensation and benefits 74,664
Transfer agent fees 4,889
Professional fees 17,591
Custodian fees 18,500
Printing and postage 49,219
Office and miscellaneous expenses 30,345
Insurance expense 1,884
Directors' fees and expenses 1,500
Dues and filing fees 10,742
Shareholder relations and
communications 20,539
Interest expense 32,485
Rent expense 5,606
-------
Total expenses 430,234
-------
Net investment loss (143,828)
--------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from investment and
currency transactions 3,445,120
Net unrealized depreciation of investments
and currency translations during the period (660,301)
----------
Net gain on investments 2,784,819
----------
Net increase in net assets resulting from
operations $2,640,991
==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> 11
Z-SEVEN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the period ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
For the For the
period ended year ended
June 30, 1996 Dec. 31, 1995
- -------------------------------------------------------------------------
NET ASSETS, BEGINNING OF YEAR $24,219,524 $25,241,133
- ------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From investment activities:
Net investment income (loss) (143,828) 236,601
Net realized gain on investment
and currency transactions 3,445,120 4,210,464
Net unrealized appreciation
(depreciation) on investments
and currency translations (660,301) 1,105,641
----------- -----------
Net increase (decrease) in net
assets resulting from operations 2,640,991 5,552,706
Distributions to shareholders from
net investment income -0- (1,205,515)
Distributions to shareholders from
net capital gains -0- (3,006,858)
Decrease in net assets resulting
from share repurchases -0- (2,361,942)
-----------
Increase (Decrease) in net assets 2,640,991 (1,021,609)
----------- -----------
Net assets, end of period $26,860,515 $24,219,524
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> 12
Z-SEVEN FUND, INC.
Notes to Financial Statements
(Unaudited)
Note 1 - Significant Accounting Policies
Z-Seven Fund, Inc. (the "Fund") is registered under the Investment Company Act
of 1940, as amended, as a nondiversified, closed-end management investment
company incorporated under the laws of Maryland on July 29, 1983, and became a
publicly traded company on December 29, 1983. The following is a summary of
significant accounting policies followed by the Fund in the preparation of
financial statements.
Security Valuation - Securities traded on national securities exchanges are
valued at the last sale price or, in the absence of any sale, at the closing bid
price on such exchanges or over the counter. If no quotations are available, the
fair value of securities is determined in good faith by the Board of Directors.
Temporary investments in short-term money market securities are valued at
market. Quotations of foreign securities in foreign currency are converted to
U.S. dollar equivalents at the date of valuation.
Federal Income Taxes - It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies. The
Fund intends to distribute substantially all of its net investment taxable
income, if any, annually.
Distributions to Shareholders - Dividends and distributions of net capital gains
to shareholders are recorded on the ex-dividend date.
Securities Transactions and Related Investment Income - Securities transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities transactions are
determined on the basis of identified cost for book and tax purposes.
Foreign Currency Translation - The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
closing daily rate of exchange,
and
(ii) purchases and sales of investment securities and dividend income at the
rate of exchange prevailing on the respective dates of such transactions.
Investment companies generally do not isolate that portion of the results of
operations that arises as a result of changes in exchange rates from the portion
that arises from changes in market prices of investments during the period. When
foreign securities are purchased or sold, the Fund acquires forward exchange
contracts as
<PAGE> 13
of the trade date for the amount of purchase or proceeds, and no exchange gains
or losses are thus realized on these transactions. Dividends are shown net of
foreign exchange gains or losses which represent currency gains or losses
realized between the ex and payment dates on dividends and interest.
Forward Currency Contracts - As foreign securities are purchased, the Fund
enters into forward currency exchange contracts in order to hedge against
foreign currency exchange rate risks. The market value of the contract
fluctuates with changes in currency exchange rates. The contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Realized
gains and losses from contract transactions are included as a component of net
realized gain on investment and currency transactions in the Statement of
Operations.
Note 2 - Treasury Stock Transactions
From 1993 through 1995, the Board of Directors authorized the following
purchases of the Fund's capital shares on the open market:
<TABLE>
<CAPTION>
Number of
Year Shares Cost
--------------------------------------
<S> <C> <C>
1995 130,480 $ 2,361,942
1994 78,000 1,308,710
1993 40,300 674,425
-----------------------
248,780 $4,345,077
=======================
</TABLE>
In December, 1992, the Fund reissued all of its existing treasury stock in
addition to newly issued stock in a private placement of shares to Agape Co.,
S.A. in exchange for securities which were generally the same as those contained
in the Fund's portfolio. A total of 349,105 unregistered Fund shares were issued
to Agape in the transaction at a slight premium to net asset value. In the event
that these shares are registered, the Fund may incur legal fees of approximately
$30,000 to $50,000 in connection with such registration. The federal income tax
basis of the securities received by the Fund in this transaction was equivalent
to the market value of those securities on the date of the transaction.
<PAGE> 14
Note 3 - Purchases and Sales of Securities Purchases and sales of investment
securities (excluding short-term money market securities) during the period
ended June 30, 1996, were:
<TABLE>
<CAPTION>
Common Treasury
Stocks Bills
----------------------------
<S> <C> <C>
Purchases $11,553,925 $ 2,965,491
Sales $10,452,434 $ 1,990,110
</TABLE>
Note 4 - Foreign Exchange Contracts
At June 30, 1996, the Fund had contracts maturing on September 18, 1996, to sell
$20 million in foreign currency ( 10 million Swiss francs, and 8 million British
pounds). These contracts were marked-to-market on June 30, resulting in a net
unrealized gain of $297,375. This unrealized gain is included as a component of
receivables from securities sold, in the accompanying Statement of Assets and
Liabilities.
Note 5 - Investment Advisory Fees and Performance Bonus/Penalties
Under an agreement between the Fund and the Advisor, the latter supervises the
investments of the Fund and pays certain expenses related to employees
principally engaged as directors, officers or employees of the Advisor. The
agreement provides for a base management fee equal to .3125% per quarter
(equivalent to 1.25% per annum) of the average daily net assets of the Fund.
For the period ended June 30, 1996, the base management fee aggregated $162,270.
In addition to such base management fee, the Advisor will receive a bonus for
extraordinary performance or pay a penalty fee for underperformance. The
bonus/penalty performance arrangement uses the S&P Index of 500 Composite Stocks
("S&P 500 Index") as a measure of performance against which the performance of
the Advisor will be measured. The bonus/penalty is payable at the end of each
calendar quarter and will not exceed 2.5% of the average daily net assets in the
calendar quarter. The performance penalty fee can exceed the base management
fee. Furthermore, the bonus/penalty arrangement will not become operative unless
the performance of the Advisor exceeds, either positively or negatively, the
S&P 500 Index percentage change during the same period of time by more than 10%.
For the period ended June 30, 1996, no bonus or penalty was required.
The Agreement also provides that if the Fund's expenses on an annual basis
(including the base management fee, but excluding any bonus or penalty payments,
taxes, interest, brokerage commission and certain litigation expenses) exceed
3.5% of the average daily net assets up to $20,000,000 plus 1.5% of the average
daily net assets in excess of $20,000,000, the Advisor shall reimburse the Fund
for any such excess up to the aggregate amount of the basic advisory fee. For
the period ended June 30, 1996, an expense reimbursement was not required.
<PAGE> 15
Note 6 - Distributions to Shareholders
On December 8, 1995, a distribution of $3.04 per share, aggregating $4,212,373,
was declared from net realized gains on investment and currency transactions
($2.17 per share) and net investment income ($.87 per share) during 1995. The
distribution was paid on January 10, 1996, to shareholders of record on December
29, 1995.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on foreign denominated assets and liabilities
held by the Fund, timing differences, and differing characterizations of
distributions made by the Fund.
Note 7 - Federal Income Taxes
For federal income tax purposes, in 1995, the Fund experienced a net capital
gain of $3,182,401 and investment company taxable income of $1,290,672. The
Board of Directors elected to distribute substantially all of the 1995 net
capital gain, accordingly, there was no tax provision for 1995.
Note 8 - Related Parties
Directors of the Fund who are not officers or otherwise affiliated with the
Advisor are paid $500 per meeting plus out-of-pocket expenses.
At June 30, 1996, Barry Ziskin, an officer and director of the Fund, owned
304,852 shares of the Fund's capital stock. He is also an officer and director
of the Advisor.
Note 9 - Line of Credit
The Fund has a $2 million line of credit with its custodian bank which is
secured by certain investment securities with an aggregate market value of
$3,779,571 at June 30, 1996. Borrowings against the line are charged interest
at a rate of prime plus 1/2%. The maximum amount outstanding against the line
during the six months ended June 30, 1996 , was $1,850,000. The purpose of the
line is to enable the Advisor flexibility in selling shares of portfolio
investments at such time and price as is consistent with the investment
discipline employed and is in the best interest of the shareholders. If the
full amount of the line of credit were utilized, it would represent less than
10% of the net assets of the Fund at June 30, 1996.
<PAGE> 16
Z-SEVEN FUND, INC.
The following represents selected data for a share outstanding throughout the
year.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
===========================================================================================================================
December 31 June 30, 1996
For the period ended 1991 1992** 1993 1994 1995 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------- ---------- ---------- ---------- ---------- -----------
Net Asset Value, beginning of year $ 12.16 $ 17.65 $ 15.12 $ 17.00 $ 16.65 17.48
---------- ---------- ---------- ---------- ---------- -----------
Net realized and unrealized gains
(losses) on investments and currency
transactions before income taxes 5.67 (2.57) 2.22 (0.14) 3.76 2.00
Net investment income (loss)
resulting from dividends and
interest less total expenses (0.18) 0.04 0.11 (0.16) 0.11 (0.10)
---------- ---------- ---------- ---------- ---------- -----------
Total increase (decrease) from
investment operations 5.49 (2.53) 2.33 (0.30) 3.87 1.90
Distributions to Shareholders
from net investment income -0- -0- -0- -0- (0.87) -0-
Distributions to Shareholders
from net capital gains -0- -0- -0- -0- (2.17) -0-
Income taxes on capital gains
paid on behalf of Shareholders -0- -0- (0.45) (0.05) -0- -0-
---------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in
Net Asset Value 5.49 (2.53) 1.88 (0.35) 0.83 1.90
---------- ---------- ---------- ---------- ---------- -----------
Net Asset Value, end of period $ 17.65 $ 15.12 $ 17.00 $ 16.65 $ 17.48 19.38
========== ========== ========== ========== ========== ===========
Per share market value, end of period $ 21.50 $ 17.00 $ 18.25 $ 16.50 $ 22.25 $ 20.25
Total investment return* 68.63% (20.93%) 10.17% (9.30%) 58.34% (8.99%)
Ratio of expenses before performance
bonus/penalty to average net assets 3.38% 3.50% 2.86% 2.74% 2.86% 3.31%***
Ratio of total expenses to average
net assets 4.33% 2.35% 2.13% 2.99% 1.99% 3.31%***
Ratio of net investment income (loss)
to average net assets (1.09%) 0.24% 0.74% (0.78%) 0.90% (1.11%)***
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 44.12% 17.94% 42.13% 17.45% 36.12% 42.06%
Average Commission Rate .0392 .0370
- --------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding,
at end of period 1,285,324 1,634,429 1,594,129 1,516,129 1,385,649 1,385,649
Net assets, end of period (in 000's) 22,687 24,714 27,097 25,241 24,220 26,860
==========================================================================================================================
</TABLE>
* Based on market price per share with dividends, distributions, and deemed
distributions reinvested at lower of net asset value or closing market price
on the distribution date.
**Calculations based on weighted average number of shares outstanding for the
year of 1,294,188.
***Annualized.
<PAGE> 17
Investment Manager
TOP Fund Management, Inc.
Custodian
Chase Manhattan Bank, N.A.
General Counsel
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Kilpatrick & Cody
Transfer Agent
ChaseMellon Shareholder Services
Independent Accountants
KPMG Peat Marwick LLP
Stock Listings
NASDAQ (NMS)
Symbol ZSEV
Pacific Stock Exchange
Symbol ZSE
Officers
Barry Ziskin
President
Carol F. Kahanek
Secretary
Laurie S. Doane
Treasurer
Board of Directors
Barry Ziskin
Dr. Jeffrey Shuster
Rochelle Ziskin
Thomas W. Lee
Z-Seven Fund, Inc.
2651 W. Guadalupe Rd.
Suite B-233
Mesa, AZ 85202
(602) 897-6214
Fax (602) 345-9227
<PAGE> 18
Share Repurchases
In accordance with Section 23(c) of the Investment Company Act of 1940, as
amended, notice is hereby given that the Fund may purchase shares of its capital
stock in the open market, from time to time, when the Fund shares are trading at
a discount from the net asset value of the shares, or in order to increase the
net asset value of the shares, or both.
