<PAGE> 1
Z-SEVEN FUND, INC.
2651 W. GUADALUPE ROAD
SUITE B-233
MESA, AZ 85202
(602) 897-6214
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 22, 1996
_____________________
To the Shareholders of the Z-Seven Fund, Inc.:
Notice is hereby given that the Annual Meeting of the Shareholders of the
Z-SEVEN FUND, INC. (the "Fund"), a Maryland corporation, will be held at the
offices of KPMG Peat Marwick LLP, One Arizona Center, Suite 1100, 400 E. Van
Buren, Phoenix, Arizona on November 22, 1996, at 2 P.M. (Mountain Standard
Time) for the following purposes:
1) To consider and to act upon the election of four Directors for a term
of one year until the next Annual Meeting or until their successors have been
duly elected and qualified;
2) To approve the selection by the Board of Directors of KPMG Peat
Marwick LLP as independent public accountants for the Fund for the fiscal year
ending December 31, 1996; and,
3) To transact such business as may properly come before the meeting or
at any adjournment thereof.
Shareholders of record at the close of business on October 17, 1996, are
entitled to notice of, and to vote at, the meeting, including any adjournment
thereof. Shareholders are urged to mark, date, sign and return the enclosed
form of proxy at their earliest convenience so that a quorum will be present
and a maximum number of shares may be voted.
By Order of the Board of Directors,
Carol Foster Kahanek
Secretary
Dated: October 24, 1996
<PAGE> 2
Z-SEVEN FUND, INC.
2651 W. GUADALUPE ROAD
SUITE B-233
MESA, AZ 85202
(602) 897-6214
__________________
PROXY STATEMENT
__________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 22, 1996
This statement is furnished in connection with the solicitation of the
accompanying proxy by the Z-Seven Fund, Inc. (the "Fund"), a Maryland
corporation, for use at the Annual Meeting of Shareholders of the Fund to be
held November 22, 1996, and at any adjournment thereof. It is anticipated
that this Proxy Statement and the accompanying form of Proxy will be given or
mailed to shareholders on or about October 24, 1996.
If the enclosed proxy form is executed properly and returned in time to
be voted at the meeting, the shares represented will be voted according to the
instructions contained therein. Executed proxies that are unmarked will be
voted: (i) for the nominees of the Board of Directors of the Fund in the
election of directors; and (ii) in favor of the selection of the independent
accountants for the Fund. Any proxy may be revoked at any time prior to its
exercise by filing with the Fund a written notice of revocation, by delivering
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person.
The Board of Directors has fixed the close of business on October 17,
1996, as the record date for the determination of shareholders entitled to
notice of, and vote at, the meeting or any adjournment thereof, and only
shareholders of record at the close of business on that day will be entitled
to vote.
As of September 23, 1996, there were issued and outstanding 1,385,649
shares of Common Stock. Each share of Common Stock is entitled to one vote.
There is no provision for cumulative voting. In accordance with Maryland law,
shares held by two or more persons (whether as joint tenants, cofiduciaries or
otherwise) will be voted as follows: unless a written instrument or court
order providing to the contrary has been filed with the Secretary of the Fund:
(1) if only one votes, the vote will bind all; (2) if more than one vote, the
vote of the majority will bind all; and (3) if more than one vote and the vote
is evenly divided, the shares will be voted in accordance with the
determination of a majority of such persons and any person appointed to act by
a court of competent jurisdiction, or, in the absence of such appointment, the
vote will be cast proportionately.
As of September 23, 1996, the following persons owned of record or
beneficially 5% or more of the outstanding shares of the Fund:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------------------ ---------------- -----------------
<S> <C> <C>
Sir John M. Templeton 349,105 25.19 (1)
P.O. Box 7759
Lyford Cay, Nassau, Bahamas
Barry Ziskin 305,552 22.05 (2)
2302 W. Monterey Circle
Mesa, AZ 85202
Thomas W. Lee 83,125 5.99 (3)
130 - 10th Street
San Francisco, CA 94103
<PAGE> 3
<FN>
(1) Agape Co., S.A. owns 349,105 shares. Agape Co., S.A. is indirectly
controlled by Sir John Templeton.
(2) The shares shown include 195,801 shares owned by Ziskin Asset Management,
Inc., of which Mr. Ziskin is sole shareholder; 26,600 shares owned by TOP Fund
Management, Inc., of which Mr. Ziskin is sole shareholder; 300 shares owned by
The Opportunity Prospector, Ltd., of which Mr. Ziskin is sole shareholder; and
30,297 shares owned by Ziskin Asset Management, Inc. Profit Sharing Plan, of
which Mr. Ziskin is trustee.
(3) The shares held by Mr. Lee, who is an Officer and Director of Red Cart
Market, Inc. and President of The San Francisco Advertiser, include: 25,025
shares owned by the San Francisco Advertiser; 22,750 shares owned by Red Cart
Market Inc. Profit Sharing Plan; 14,650 shares owned by The Lee Investment
Partnership; 15,500 shares owned by The San Francisco Advertiser Profit
Sharing Plan, of which Mr. Lee is a trustee; and 600 shares owned by Red Cart
Market Inc. DBA Pet Club Profit Sharing Plan.
</TABLE>
If, by the time scheduled for the meeting, a quorum is not present, or if
a quorum is present but sufficient votes in favor of any of the proposals
described in the Proxy Statement are not received, the persons named as
proxies may propose one of more adjournments of the meeting to permit further
solicitation of proxies. If a quorum is present, votes will be taken for the
election of directors and on any proposal or proposals as to which there are
sufficient votes for approval; and the remaining proposal or proposals may be
considered at an adjourned meeting or meetings. No adjournment will be for a
period ending later than January 22, 1997. Any such adjournment will require
the affirmative vote of a majority of shares present in person or by proxy at
the session of the meeting to be adjourned. The persons named as proxies will
vote in favor of any such adjournment those proxies which instruct them to
vote in favor of the proposals to be considered at the adjourned meeting, and
will vote against any such adjournment those proxies which instruct them to
vote against or to abstain from voting on all proposals to be considered at
the adjourned meeting.
The Annual Report of the Fund for the fiscal year ended December 31,
1995, including financial statements, was mailed to stockholders of record at
the close of business on February 29, 1996.
The cost of solicitation of proxies will be paid by the Fund. Persons
holding stock as nominees will be reimbursed, upon request, for their
reasonable expenses in sending or forwarding solicitation material to the
principals of the accounts. In addition to the solicitation of proxies by
mail, directors and officers of the Fund may solicit proxies in person or by
telephone.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
The individuals named in the following table have been nominated by the
Fund's Board of Directors for election as directors, each to hold office until
the next Annual Meeting of Shareholders and until his or her successor is duly
elected and qualified. Each of the nominees is a member of the current Board
of Directors of the Fund, has consented to his or her nomination and has
agreed to serve if elected. The Board has set the number of directors of the
Fund at four and no vacancy exists at this time. IF THE PROXY CARD IS
PROPERLY EXECUTED BUT UNMARKED, IT WILL BE VOTED FOR ALL THE NOMINEES. If for
any reason, any nominee should not be available for election or able to serve
as a director, the proxies will exercise their voting power in favor of such
substitute nominees, if any, as the Board of Directors of the Fund may
designate. The Fund has no reason to believe that it will be necessary to
designate a substitute nominee. The Directors will be elected by a plurality
of all votes cast at the meeting.
<TABLE>
<CAPTION>
Shares of
Common Stock
Positions Held Principal Occupation Director Beneficially
Name (age) With Fund During Past 5 Years Since Owned % of Class
- ------------------------- -------------- ----------------------------------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
*Barry Ziskin (44) (2) Director, President, Ziskin Asset 9/16/83 305,552 22.05 (3)
2302 W. Monterey Circle President Management, Inc. (1975-
Mesa, AZ 85202 present); President, TOP
Fund Management, Inc.
(1983-present)
*Rochelle Ziskin (42) (1) Director Assistant Professor, 4/8/85 8,800 **
5119 Wyandotte, #3 South Univ. of Missouri-
Kansas City, MO 64112 Kansas City (1994-present);
J.P. Getty Fellow,
(1993-94) Visiting Assistant
Professor, Univ. of Oregon (1993);
Ph.D., Harvard Univ. (1985-1992)
Dr. Jeffrey Shuster (44) Director President & CEO, 3/16/86 300 **
32 East Ridge Court Jeffrey Shuster, DDS, PC
Cheshire, CT 06410 A Professional Corporation
(1981-present)
Thomas W. Lee (56) Director President, The San Francisco 3/1/96 83,125 5.99(3)
130 - 10th Street Advertiser (1970-Present);
San Francisco, CA 94103 Director and Officer Red Cart
Market Inc. DBA Pet Club
(1965-Present)
<FN>
** Less than 1%
* Nominees considered "Interested Persons" of the Fund
(1) Ms. Ziskin is the sister of Barry Ziskin.
(2) Mr. Ziskin is the principal executive officer and only director of the Fund's Investment Adviser.
(3) Please see table of 5% or more Beneficial Owners, Footnotes (2 and 3).
</TABLE>
<PAGE> 5
Directors of the Fund as a group own beneficially 397,777 shares (28.71%)
of the outstanding shares. Mr. Ziskin owns 22.05% of the outstanding shares,
as follows: Mr. Ziskin is the sole shareholder of Ziskin Asset Management,
Inc. which owns 14.13% of the outstanding shares; Mr. Ziskin is the sole
shareholder of TOP Fund Management, Inc., the Fund's investment adviser, which
owns almost 2% of the outstanding shares; Mr. Ziskin is the sole shareholder
of The Opportunity Prospector, Ltd. which owns less than 1% of the outstanding
shares; Mr. Ziskin is trustee for Ziskin Asset Management, Inc. Profit Sharing
Plan which owns 2.19% of the outstanding shares; and Mr. Ziskin personally
owns almost 4% of the outstanding shares. Mr. Lee as an individual and
through his indirect control of Red Cart Market, Inc. as an Officer and
Director, and The San Francisco Advertiser as President, owns 5.99% of the
outstanding shares. Mr. Lee personally owns less than 1% of the outstanding
shares. He has shared voting power in and shares beneficial ownership of the
following percentages of outstanding shares: The San Francisco Advertiser
owns over 1.8%; The San Francisco Advertiser Profit Sharing Plan owns over
1.1%, of which Mr. Lee is a Trustee; nearly 1.7% is owned by two separate Red
Cart Market, Inc. Profit Sharing Plans; and, The Lee Investment Partnership
owns about 1%. Other directors each own less than 1% of the total shares
outstanding.
Under an agreement dated December 29, 1983, between the Fund and Ziskin
Asset Management, Inc., Mr. Ziskin must vote all shares of the Fund's Common
Stock, which he owns directly or indirectly, on each matter presented to the
shareholders for their vote, in the same proportion for and against such
matters as all outstanding shares owned by other shareholders of the Fund are
voted on such matters.
The Board of Directors of the Fund has a standing Audit Committee
effective August 4, 1988. Members of the Audit Committee are Jeffrey Shuster
and Thomas Lee. The Audit Committee has responsibility for recommending
independent auditors, approving annual financial statements and assisting the
Board of Directors with respect to the review of the adequacy and
effectiveness of the Fund's accounting and operating controls.
During the year ending December 31, 1995, directors fees and expenses
aggregating $6,229 were paid to directors by the Fund. Barry Ziskin, as
director of the Fund, receives no remuneration from the Fund, and is also an
officer of the Fund's investment adviser. Since the last Annual Meeting of
Shareholders, the Board of Directors held four meetings. All members of the
Board of Directors attended 75% or more of all Board and Committee meetings
combined.
PROPOSAL 2
APPROVAL
OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has directed that there be submitted to the
shareholders for approval the selection of KPMG Peat Marwick LLP as
independent accountants to report on the Financial Statements of the Fund for
the fiscal year ending December 31, 1996. No member of KPMG Peat Marwick LLP
has any direct or indirect financial interest in the Fund.
A representative of KPMG Peat Marwick is expected to attend the Annual
Meeting of Shareholders, and such representative will be given the opportunity
to make a statement, and is expected to be available to respond to appropriate
questions. The affirmative vote of a majority of the outstanding stock is
required to approve the selection of independent accountants.
INVESTMENT MANAGER
Investment management services are furnished to the Fund by TOP Fund
Management, Inc. (the "Adviser") pursuant to an Investment Advisory Agreement
dated February 17, 1987 (the "Agreement"). TOP Fund Management, Inc. has its
principal place of business at 2651 W. Guadalupe Road, Suite B-233, Mesa, AZ
85202. The Agreement was approved by a vote of the Fund's shareholders at the
Annual Meeting of Shareholders held on January 11, 1988, and is currently in
effect until December 31, 1996.
<PAGE> 6
The Agreement may be continued in effect from year to year, in accordance
with its terms, so long as such continuance is approved at least annually by
the Board of Directors of the Fund, including a majority of the directors who
are not parties to the Agreement or "Interested Parties" (as defined in the
Investment Company Act of 1940) of the Adviser or the Fund, or by a vote of a
majority of the outstanding voting shares of the Fund.
The Advisory Agreement may be terminated at any time, without payment of
any penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting shares of the Fund.
Under the Agreement, the Adviser furnishes advice to the Fund with
respect to investing in, purchasing and selling securities, stock index
futures contracts and options thereon.
The Agreement expressly provides that the Adviser is not responsible for
providing the Fund with office space, equipment or supplies, or persons to
perform administrative, clerical or bookkeeping functions on behalf of the
Fund. All expenses not assumed by the Adviser are paid by the Fund. Although
the Adviser is responsible for compensation of officers and directors, the
Agreement provides that the Fund is responsible for compensation of such
persons who are not regular members of the Adviser's staff.
The Agreement provides that the Adviser, at its own expense, shall
maintain Key Man Insurance covering Barry Ziskin, in an amount not less than
$2,000,000. The policy designates the Fund as beneficiary. The Agreement
further provides that the Adviser will not pay or declare dividends on its
stock, redeem, purchase or acquire any share of its stock or make distribution
or disposition of its assets if its tangible net worth plus that of Ziskin
Asset Management, Inc., which guarantees the obligations of the Adviser under
the Agreement, would be less than the greater of (i) $1,500,000 or (ii) 10% of
the net assets of the Fund as of the last day of the last calendar quarter,
but not more than $2,700,000.
The Agreement provides that the Adviser will receive a base advisory fee
at the rate of .3125% of the Fund's average daily net assets during each
calendar quarter (equivalent to 1.25% per annum). The Agreement also provides
that the Adviser will receive a bonus or pay the Fund a penalty, depending
upon performance relative to the Standard & Poor's Composite Index of 500
Stocks. The bonus or penalty is payable at the end of each calendar quarter
and will not exceed 2.5% of the Fund's average daily net assets in any
calendar quarter.
Under an Agreement dated December 29, 1983, the Adviser reimburses the
Fund to the extent that the Fund's aggregate annual expenses (including the
advisory fee but excluding bonus or penalty payments, interest, taxes,
brokerage commissions and expenses related to litigation or indemnification of
officers and directors) exceeds 3 1/2% of the Fund's average daily net assets
up to $20,000,000 plus 1 1/2% of average daily net assets in excess of
$20,000,000. For the fiscal years ended December 31, 1995, 1994, and 1993,
the base advisory fees paid to the Adviser were $329,328, $329,938, and
$321,543. The bonus paid to the Adviser was $66,384 in 1994 and the penalties
received from the Adviser in 1995 and 1993 were $228,874 and $186,948
respectively.
A copy of the Financial Statements of TOP Fund Management, Inc. and of
Ziskin Asset Management, Inc. are included as exhibits to this Proxy
Statement.
FURTHER INFORMATION
The sole director of the Adviser is Barry Ziskin. Mr. Ziskin's principal
occupation is President of TOP Fund Management, Inc. and Ziskin Asset
Management, Inc. The officers of the Adviser are: Barry Ziskin, President
and Treasurer; and Carol Foster Kahanek, Secretary. An affiliate of the
Adviser is Ziskin Asset Management, Inc., which owns 14.13% of the Fund's
voting securities. Mr. Ziskin is the sole stockholder of Ziskin Asset
Management, Inc.
<PAGE> 7
PORTFOLIO INFORMATION
The Adviser is responsible for making recommendations to the Fund to buy
and sell portfolio securities, to hold assets in cash, to invest in all types
of securities and to enter into options on stock indexes, stock index futures
contracts and options thereon, and foreign exchange contracts in whatever
amounts or proportions the Adviser believes best suited to current and
anticipated economic and market conditions consistent with the investment
policies and restrictions of the Fund. The Adviser is also responsible for
placing orders.
There is no set formula for allocation of brokerage. The Fund's primary
objective in selecting broker-dealers through which the Adviser will effect
securities transactions is to obtain the most favorable net results, taking
into account various factors, including size and difficulty of the order, the
reliability, integrity, financial condition, general execution and operational
capabilities of competing broker-dealers, the best net price available, and
the brokerage and research services they are expected to provide the Fund.
The Fund may allocate orders to the broker-dealers who provide brokerage
or research services to the Fund (as such services are defined in section
28(e) of the Securities and Exchange Act of 1934), and may pay such
broker-dealers a commission that is in excess of the commission another
qualified broker-dealer would have received if it is determined that the
commission is reasonable in relation to the value of the services provided.
The Fund pays for investment advisory publications or other research,
other than advisory fees paid to the Adviser under the terms of the Agreement,
with "soft" (i.e. commission ) dollars. The research obtained through the
Fund's brokerage allocations, whether or not directly useful to the Fund, may
be useful to the Adviser in connection with services rendered to the Fund
and/or to other accounts managed by the Adviser or by Ziskin Asset Management,
Inc. Similarly, research obtained by the Adviser may be useful to the Fund.
The Board of Directors, in considering the reasonableness of the brokerage
commissions paid by the Fund, will not attempt to allocate, or require the
Adviser to allocate the relative cost or benefits to the Fund.
Futures transactions generally will be effected through those futures
commissions merchants ("FCMs") the Fund believes will obtain the most
favorable net results. The Fund may allocate futures contract orders to FCMs
who provide commodity brokerage research services. The normal operation of
the commodities marketplace will require that the FCM have a beneficial
interest in any Sub-Custodial account created for the benefit of the Fund.
For the years 1995, 1994, and 1993, the aggregate amount of commissions
paid by the Fund were $145,000, $57,592, and $51,360, respectively.
Commissions expressed as a percentage of average daily net assets are as
follows: 1995: 0.556; 1994: 0.218; and 1993: 0.200.
The portfolio turnover rate of the Fund in each of the last three years
has been as follows: 1995: 36.12%, 1994: 17.45%, and 1993: 42.13%.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Fund's
directors and officers and persons who beneficially own more than 10% of a
registered class of the Fund's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Copies of all Section 16(a) forms filed by directors, officers
and 10% shareholders are required to be provided to the Fund. To the Fund's
knowledge, based solely on review of the copies of such reports furnished to
the Fund and written representations that no other reports were required,
during the fiscal year ended December 31, 1995 all Section 16(a) filing
requirements were complied with except: Ms. Carol F. Kahanek, Secretary,
inadvertently filed Form 3 late and reported no holdings in the Fund; Ms.
Laurie S. Doane, Treasurer, inadvertently filed Form 3 late and reported no
holdings in the Fund; and Thomas W. Lee, Director, inadvertently filed Form 3
late and reported beneficial ownership of Fund shares. Sir John Templeton, an
affiliate of the Fund, is late reporting one transaction.
<PAGE> 8
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
If a shareholder wishes to present a proposal to be included in the Proxy
Statement for the 1997 Annual Meeting of Shareholders, which the Board of
Directors anticipates will be held on or about December 12, 1997, such
proposal must be submitted in writing and received at the Fund's principal
executive office not less than 120 days in advance of such Meeting.
OTHER MATTERS
The Board of Directors knows of no matters as of this date to be
presented at the meeting other than those specified in the Proxy Statement.
However, if any other matters come before the meeting it is intended that the
proxies will vote thereon in their discretion.
All shareholders are urged to execute, date and return promptly the
enclosed Form of Proxy in the enclosed return envelope, regardless of whether
they intend to be present in person at the Annual Meeting.
By Order of the Board of Directors,
Carol Foster Kahanek
Secretary
Dated: October 24, 1996
Mesa, Arizona
<PAGE> 9
INDEPENDENT ACCOUNTANTS' REPORT
TOP FUND MANAGEMENT, INC.
DECEMBER 31, 1995
Board of Directors
TOP Fund Management, Inc.
Mesa, Arizona
We have audited the accompanying balance sheet of TOP Fund Management,
Inc. (a New York corporation) as of December 31, 1995. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of TOP Fund Management, Inc. as
of December 31, 1995, in conformity with generally accepted accounting
principles.
March 15, 1996
<PAGE> 10
<TABLE>
<CAPTION>
TOP FUND MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995
Assets
- ----------------------------------------------------
<S> <C>
Current assets:
Cash $ 663
Dividends receivable (Notes A and C) 80,864
--------
Total current assets 81,527
Office equipment, net (Note A) 1,106
Investments (Notes A and C) 591,850
--------
Total assets $674,483
========
Liabilities and Shareholder's Equity
- ----------------------------------------------------
Current liabilities:
Due to affiliates (Note B) $354,679
Accrued expenses 9,151
--------
Total current liabilities 363,830
--------
Shareholder's equity:
Common shares, no par value; 200 shares authorized,
10 shares issued and outstanding 1,100
Retained earnings (Note D) 278,888
Unrealized gain on investments (Notes A, C and D) 30,665
--------
Total shareholder's equity 310,653
--------
Total liabilities and shareholder's equity $674,483
========
</TABLE>
Commitments and contingencies (Notes B and E)
See accountants' report.
The accompanying notes are an integral part
of this financial statement.
<PAGE> 11
TOP FUND MANAGEMENT, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
TOP Fund Management, Inc. (TFM), organized under the laws of the state
of New York, is a registered investment advisor which manages the portfolio of
the Z-Seven Fund, Inc. (the Fund), a registered investment company. The
objective of the Fund is long-term capital appreciation through investment,
primarily in common stocks and securities immediately convertible into common
stock, believed by TFM to have significant growth potential. TFM at no time
has custody or possession of the Fund's portfolio, but rather is authorized by
the Fund to make trades on its behalf in the Fund's account.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Office Equipment
Office equipment is stated net of depreciation. At December 31, 1995,
the total cost was $2,655 with accumulated depreciation of $1,549.
Depreciation is computed using the straight line method based on the estimated
useful life of the related asset of 3 years.
Investments
The Company classifies its marketable equity securities as available for
sale. These securities are carried in the financial statements at fair value.
Realized gains and losses are included in earnings, and unrealized gains and
losses are reported as a separate component of shareholder's equity. Dividend
income is recorded on the ex-dividend date.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under those provisions, the shareholder is
liable for individual federal and state income taxes on the Company's taxable
income. As a result, no provision or liability for federal or state income
taxes has been included in the financial statements.
.
NOTE B - RELATED PARTY TRANSACTIONS
Investment Advisory Agreement
TFM has entered into an Investment Advisory Agreement (the Agreement)
with the Fund. 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.
In addition to such base management fee, TFM will receive a bonus for
extraordinary performance (change in net asset value) or pay a penalty for
under performance. 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 Fund 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.
See accountants' report.
<PAGE> 12
TOP FUND MANAGEMENT, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995 (CONTINUED)
NOTE B - RELATED PARTY TRANSACTIONS (CONTINUED)
The performance penalty fee can exceed the base management fee.
Furthermore, the bonus/penalty arrangement will not become operative unless
the performance of the Fund exceeds, either positively or negatively, the S&P
500 Index percentage change during the same period of time by more than 10.0%.
At December 31, 1995, TFM owes the Fund a net $14,915 comprised of $98,798
owed to the Fund in penalties as determined by the bonus/penalty arrangement
and $83,883 due to TFM in base management fees.
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 of the Fund up to $20
million plus 1.5% of the average daily net assets in excess of $20 million,
TFM shall reimburse the Fund annually for any such excess expenses up to the
aggregate amount of the basic advisory fee. For the year ended December 31,
1995, there were no excess expenses required to be reimbursed.
Affiliates
Ziskin Asset Management, Inc. (ZAM), an affiliated company has
guaranteed and pledged stock to the Fund to cover any penalty or expenses
incurred under the Agreement with the Fund. At December 31, 1995, TFM owes
$254,846 to ZAM for business expenses paid by ZAM in current and prior years.
In addition, the Agreement has several covenants, amount them, that ZAM and
TFM agree not to declare or pay any dividends or make any other distribution
of their common stock unless the tangible net worth of both companies is not
less than the greater of (i) $1,500,000 or (ii) 10% of the net assets of the
Fund, as of the last day of the most recently ended fiscal quarter, but not
more than $2,700,000. At December 31, 1995, the net assets of the Fund were
approximately $24,220,000. TFM and ZAM were in compliance with all covenants
at December 31, 1995.
The Opportunity Prospector, Ltd. (TOP), which has the same ownership as
TFM, receives fees from TFM for services rendered regarding research of
foreign securities. At December 31, 1995, TFM owes $84,918 to TOP for these
research fees.
The sole shareholder of TFM is also a Director and the President of the
Fund, and sole shareholder of both ZAM and TOP. The Company and ZAM have
co-guaranteed a $550,000 personal loan on behalf of their sole shareholder.
The note is further collateralized by 210,400 shares of the Fund, of which
26,600 shares are owned by TFM and 183,800 shares are owned by ZAM.
NOTE C - INVESTMENTS
The Company owns 26,600 shares of Z-Seven Fund, Inc. These shares have
an original cost of $561,185 and a fair market value of $591,850 at December
31, 1995. The unrealized gain for these equity securities at December 31,
1995, was $30,665. The Company has pledged these shares as collateral for a
personal loan of the sole shareholder of the Company as described in Note B.
In December 1995, the Fund declared a $3.04 dividend payable to shareholders
of record on December 29, 1995. The dividend was received in January 1996.
See accountants' report.
<PAGE> 13
TOP FUND MANAGEMENT, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
NOTE D - RETAINED EARNINGS AND UNREALIZED GAIN ON INVESTMENTS
Changes in retained earnings for 1995 are as follows:
<S> <C>
Balance, at beginning of year $ 463,732
Distribution to shareholder (223,315)
Net income for year 38,471
----------
Balance, at end of year $ 278,888
==========
Changes in unrealized gain(loss) on investments for 1995 are as follows:
Balance, at beginning of year $(122,285)
Increase in unrealized gain 152,950
----------
Balance, at end of year $ 30,665
==========
</TABLE>
NOTE E - LITIGATION
On January 18, 1996, an action titled "Amanda Kahn and Kimberly
Kahn, directly and derivatively on behalf of Z-Seven Fund, Inc. v. Top Fund
Management, Inc., Ziskin Asset Management, Inc., Barry Ziskin (their sole
shareholder) and Z-Seven Fund Inc., a nominal defendant" was filed in the
United States District Court in Arizona. The complaint alleges that the
defendants improperly used funds of Z-Seven Fund, Inc. to promote separate
activities of Ziskin Asset Management, Inc. The plaintiffs seek unspecified
money damages. The Company believes it has good defenses to the claims
alleged in the suit and intends to defend itself vigorously. The litigation
is still in the preliminary stages. Outside counsel for the Company has
advised that, at this stage of the litigation, they cannot give an opinion as
to the outcome, nor the amount or the range of potential loss, if any.
See accountants' report.
<PAGE> 14
INDEPENDENT ACCOUNTANTS' REPORT
ZISKIN ASSET MANAGEMENT, INC.
DECEMBER 31, 1995
Board of Directors
Ziskin Asset Management, Inc.
Mesa, Arizona
We have audited the accompanying balance sheet of Ziskin Asset
Management, Inc. (a New York corporation) as of December 31, 1995. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Ziskin Asset Management, Inc.
as of December 31, 1995, in conformity with generally accepted accounting
principles.
March 15, 1996
<PAGE> 15
<TABLE>
<CAPTION>
ZISKIN ASSET MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995
Assets
- ------------------------------------------------------
<S> <C>
Current assets:
Cash $ 1,710
Accounts receivable (Note A) 78,446
Dividend receivable (Notes A and C) 593,411
Due from affiliate (Note B) 189,846
Deferred income tax assets (Notes A and D) 53,000
Other 398
----------
Total current assets 916,811
Office equipment, net (Note A) 1,106
Investments (Notes A, B and C) 4,343,223
----------
Total assets $5,261,140
==========
Liabilities and Shareholder's Equity
- ------------------------------------------------------
Current liabilities:
Accounts payable $ 40,311
Accrued expenses 227,485
Unearned portfolio fees (Note A) 51,952
Due to affiliate (Note B) 267,001
Income taxes payable (Notes A and D) 107,140
----------
Total current liabilities 693,889
Unearned subscription revenues (Note A) 62,000
Deferred income taxes (Notes A and D) 232,000
----------
Total liabilities 987,889
----------
Shareholder's equity:
Common shares, no par value; 200 shares authorized,
100 shares issued and outstanding 1,500
Additional paid in capital 6,191
Retained earnings (Note E) 3,432,814
Unrealized gain on investments, net (Notes A, C and E) 832,746
----------
Total shareholder's equity 4,273,251
----------
Total liabilities and shareholder's equity $5,261,140
==========
</TABLE>
Commitments and contingencies (Notes B and F)
See accountants' report.
The accompanying notes are an integral part
of this financial statement.
<PAGE> 16
ZISKIN ASSET MANAGEMENT, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Ziskin Asset Management, Inc. (ZAM), organized under the laws of the
state of New York, is a registered investment advisor which manages accounts
for various individuals and institutions on a discretionary basis for a fee.
The objective of such accounts is long-term capital appreciation through
investment, primarily in common stocks and securities immediately convertible
into common stock, believed by ZAM to have significant growth potential. ZAM
at no time has custody or possession of the clients' funds or securities,
except for prepaid investment fees, but rather is authorized by the clients to
make investments on their behalf in their accounts.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Accounts receivable
The Company uses the allowance method to provide a reserve for
uncollectible accounts receivable. Uncollectible accounts are charged to the
allowance account when incurred. Management believes the allowance is
sufficient for any uncollectible amounts. The allowance for doubtful accounts
at December 31, 1995 was $-0-.
Revenue Recognition
Investment management fees are recognized as the related services are
performed.
Office Equipment
Office equipment is stated net of depreciation. At December 31, 1995,
the total cost was $9,550 with accumulated depreciation of $8,444.
Depreciation is computed using the straight line method based on the estimated
useful lives of the related assets of 3 years.
Investments
The Company classifies its marketable equity securities as available for
sale. These securities are carried in the financial statements at fair value.
Realized gains and losses are included in earnings, and unrealized gains and
losses, net of income taxes, are reported as a separate component of
shareholder's equity. Dividend income is recorded on the ex-dividend date.
Unearned Portfolio Fees
Unearned portfolio fees represents annual advance fees paid by clients.
These fees are recognized as revenue based on the annual account performance
when the clients investment portfolios increase in value. If the investment
portfolios decrease in value, the unearned advance fees are refunded.
See accountants' report.
.
<PAGE> 17
ZISKIN ASSET MANAGEMENT, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995 (CONTINUED)
Unearned Subscription Revenues
In prior years, the Company published and distributed, for a fee, an
investment newsletter. The newsletter was discontinued and the amounts shown
represent unearned revenues. The Company is currently negotiating with these
subscribers, with the possibility of offering other services in satisfaction
of the revenues collected.
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes are recognized for differences between the basis of
assets and liabilities for financial statement and income tax purposes. The
differences relate primarily to unrealized gains on investments (not
recognized for income tax purposes until the investments are disposed) and
certain accrued expenses (not deductible for income tax purposes until paid).
The deferred tax assets and liabilities represent the future tax consequences
of these differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
Profit Sharing Plan
The Company maintains a profit sharing plan covering all eligible full
time employees. Contributions to the plan are at the discretion of the Board
of Directors. As of December 31, 1995, all contributions to the plan have
been fully funded.
NOTE B - RELATED PARTY TRANSACTIONS
Under the Guarantee and Pledge Agreement (the Guarantee) that the Company
has with the Z-Seven Fund, Inc. (the Fund), ZAM has guaranteed to pay any
penalties and expenses incurred by TOP Fund Management, Inc. (TFM), an
affiliated company, which could be created under TFM's advisory agreement with
the Fund. Additionally, the Company has pledged marketable equity securities
(Note C) as collateral under the Guarantee.
The Guarantee has several covenants, among them, that ZAM and TFM, have
agreed not to declare or pay any dividends or make any other distribution of
their common stock unless the combined tangible net worth of the companies is
not less than the greater of (i) $1,500,000 or (ii) 10% of the net assets of
the Fund, as of the last day of the most recently ended calendar quarter, but
not more than $2,700,000. At December 31, 1995, the net assets of the Fund
were approximately $24,220,000.
At December 31, 1995, the Company has a receivable from TFM totaling
$254,846 offset by a reserve of $65,000. This advance represents business
expenses paid by ZAM on behalf of TFM in current and prior years.
The Opportunity Prospector, Ltd. (TOP), an affiliated company, was owed
$267,001 at December 31, 1995, by the Company for services rendered in current
and prior years regarding research on foreign securities.
The Company subleases office space from the Fund on a month to month
basis.
The sole shareholder of ZAM is also a Director and the President of the
Fund, and sole shareholder of both TFM and TOP. The Company and TFM have
co-guaranteed a $550,000 personal bank loan on behalf of their sole
shareholder. This note is further collateralized by 210,400 shares of the
Fund, of which 183,800 shares are owned by ZAM and 26,600 shares are owned by
TFM.
See accountants' report.
<PAGE> 18
ZISKIN ASSET MANAGEMENT, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995 (CONTINUED)
NOTE C - INVESTMENTS
Investments which the Company has classified as available for sale
securities, consist of 195,201 shares of the Z-Seven Fund, Inc. These shares
have an original cost of $3,253,923 and a fair market value of $4,343,223.
The unrealized gain, net of deferred income taxes for these equity securities
at December 31, 1995 was $832,746. ZAM has pledged 10,950 shares as
collateral under a guarantee agreement with the Fund, as described in Note B.
In December 1995, the Z-Seven Fund, Inc. declared a $3.04 dividend payable to
shareholders of record December 29, 1995. The dividend was received in
January 1996.
<TABLE>
<CAPTION>
NOTE D - INCOME TAXES
The Company's total deferred tax assets and liabilities are as follows:
<S> <C>
Total deferred tax assets $ 53,000
Less valuation allowance - -
Total deferred tax liabilities (232,000)
----------
Net deferred tax liabilities $(179,000)
==========
The net deferred tax assets and liabilities have been presented in the Company's financial statements as follows:
Current deferred tax assets $ 53,000
Noncurrent deferred tax liabilities (232,000)
----------
Net deferred tax liabilities $(179,000)
==========
For tax return purposes, the Company has contribution carryforwards of approximately $21,000 which expire in 2000.
</TABLE>
<TABLE>
<CAPTION>
NOTE E - RETAINED EARNINGS AND UNREALIZED GAIN ON INVESTMENTS
Changes in retained earnings for 1995 are as follows:
<S> <C>
Balance, at beginning of year $3,016,422
Net income 416,392
-----------
Balance, at end of year $3,432,814
===========
Changes in unrealized gain on investments, net are as follows:
Balance, at beginning of year $ 72,936
Increase in unrealized gains 986,810
Increase in deferred income taxes (227,000)
-----------
Balance, at end of year $ 832,746
===========
</TABLE>
NOTE F - LITIGATION
On January 18, 1996, an action titled "Amanda Kahn and Kimberly Kahn,
directly and derivatively on behalf of Z-Seven Fund, Inc. v. Ziskin Asset
Management, Inc., Top Fund Management, Inc., Barry Ziskin (their sole
shareholder), and Z-Seven Fund, Inc., a nominal defendant" was filed in the
United States District Court in Arizona. The complaint alleges that the
defendants improperly used funds of Z-Seven Fund, Inc. to promote separate
activities of ZAM. The plaintiffs seek unspecified money damages. The
Company believes it has good defenses to the claims alleged in the lawsuit,
and intends to defend itself vigorously. The litigation is still in the
preliminary stages. Outside counsel for the Company advised that, at this
stage of the litigation, they cannot give an opinion as to the outcome, nor
the amount or the range of potential loss, if any.
See accountants' report
<PAGE> 19
Z-SEVEN FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS, NOVEMBER 22, 1996
KNOW ALL MEN BY THESE PRESENTS, that the undersigned holder of shares of
Z-SEVEN FUND, INC. (the "Fund"), a Maryland corporation, does hereby
constitute and appoint Carol F. Kahanek, the attorneys, and the proxies of
the undersigned with full power of substitution and appointment, collectively
and as individuals, for and in the name, place, and stead, of the undersigned
to vote all of the undersigned's shares of said Fund at the Annual Meeting of
such shareholders of said Fund to be held at the offices of KPMG Peat Marwick
LLP, One Arizona Center, 400 E. Van Buren Street, Phoenix, Arizona on
November 22, 1996 at 2 p.m. (Mountain Standard Time), and at any and all
adjournments thereof.
(Continued on other side)
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder.
If no direction is made, this Proxy will be voted for Proposals 1, 2 and 3.
The Board of Directors recommends a vote for Items 1, 2 and 3.
1. Election of Directors:
_ _
|_| FOR all nominees |_| WITHHOLD AUTHORITY
(except as withheld in to vote for all
the space provided) nominees listed
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the line below.)
Barry Ziskin, Thomas W. Lee, Jeffrey Shuster and Rochelle Ziskin
_________________________________________________________________
2. Approval of the selection of KPMG Peat Marwick LLP as independent public
accountants for the Fund.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
_
I PLAN TO ATTEND THE MEETING |_|
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
(PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE)
Dated:______________________________________, 1996
--------------------------------------------------
Signature
--------------------------------------------------
Signature if held jointly
