<PAGE> 1
Z-SEVEN
THIRD QUARTER REPORT
Period Ending
September 30, 1997
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:
We would like to express our gratitude for your confidence in our investment
philosophy. We are thankful for the love, strength, and wisdom given to us by
our heavenly creator and caring shepherd.
1997 NINE MONTH INVESTMENT RESULTS
As 1997 reached its nine-month point, our investments have provided positive
returns with a significant increase in the portfolio. Over the nine months,
the investment portfolio grew 19%. The third quarter brought an increase of
8%.
THIRD QUARTER NET ASSET VALUE
Our net asset value increased 18%, from $16.40 to $19.35, in the nine months.
During the third quarter, the net asset value rose 8% from $17.95 to $19.35.
This is the fourth consecutive quarter in which our net asset value advanced,
and the twelfth out of the last thirteen quarters.
GOOD NEWS
Investments with increases of 20% or more since the end of last year are
discussed under our "Good News" section. In the first nine months, seven
stocks in our portfolio gained 20% or more. Six of these are large
positions.
DAY RUNNER, INC., the leading manufacturer of paper-based organizers for the
retail market, was up 16% in the third quarter. Year-to-date, the company's
share price rose 97%. In August, the company repurchased almost 350,000
shares or 6% of its outstanding stock. This repurchase program is in Day
Runner's and its shareholders' interest and probably contributed to this
quarter's price increase. Day Runner was in our "Mistakes and
Disappointments" section at the end of 1996, but rebounded strongly over the
last nine months and is now well over its purchase price in late 1995.
<PAGE> 3
L'OREAL, the world's largest cosmetics company, was up 22% during the first
nine months of the year. The French giant announced that it will acquire 100%
control of its Spanish joint-venture, Procasa, and buy three other companies
which market their products in Spain. Together the four companies had sales
of two billion French francs in 1996.
NOVARTIS AG, the Swiss pharmaceutical concern formed by the merger of Sandoz
AG and Ciba-Geigy AG last year, advanced 45% year-to-date. With net income up
27% in its latest results, Novartis has taken off to a great start since its
January debut.
Golf equipment producer CALLAWAY GOLF had a share price increase of 21% in the
first nine months. Callaway Golf and Bausch & Lomb formed a partnership to
develop and market an exclusive line of premium sunglasses, designed
specifically for golf enthusiasts.
BORDER TELEVISION PLC, a regional broadcaster in television and radio in the
U.K., had a 21% share-price advance year-to-date. The company's growth slowed
down slightly with the acquisition of Sunderland City Radio due to related
refurbishing and integration. Border also bought out its joint-venture
partner in a radio license serving the Darlington area giving it a 35% stake
in the region.
British diversified manufacturing group TOMKINS PLC was up 29% at the
nine-month point. The share price was lifted by a record pre-tax profit
increase of 34%. The results included the first contribution from U.S.-based
Gates, their major acquisition in 1996. Gates is a world-wide manufacturer of
belts and hoses. Tomkins' latest acquisition, Stant, a U.S. market leader in
the automotive after-market, adds highly complementary products to Gates'
well-established global distribution network.
<PAGE> 4
WESTFAIR FOODS LTD., a Canadian retail grocery chain, our smallest holding,
advanced 36% year-to-date.
This concludes the "Good News" section. However, we would like to mention
Amrion, Inc., which did well for the Fund but at the end of the third quarter
was not in the portfolio. Amrion, held for only four months, had a price
increase of 58% before it was sold. The company was acquired by Whole Foods
Market which did not meet several of our purchase criteria, therefore, the
Amrion shares were sold prior to the merger in September.
MISTAKES AND DISAPPOINTMENTS
For purposes of objectivity, we also talk about the investments which fell 20%
or more since the end of last year. Three U.K. companies belong in this
section. They suffered from the overall price weakness among U.K. small caps.
Two of them, Essex Furniture and Abbeycrest, are very small investments
accounting for under one-half of one percent of the Fund's market value.
FAIRWAY GROUP PLC is a U.K. provider of print facilities management and
finishing services, and a distributor of educational equipment. At the end of
last year, difficult market conditions required Fairway to announce that
earnings would be above last year, but significantly lower than market
expectations. The uncertainty in earnings continued to drive the share price
down. Year-to-date, the company's share price fell 46%. For its first-half,
Fairway reported a net loss after an exceptional charge from the disposal of
their troubled printing facility. The educational supplies division reported
increased profits despite a moderate decline in sales.
ESSEX FURNITURE PLC, a British retailer, continues to have earnings
difficulties and at the nine-month point its share price was down 22%. We have
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been reducing our position in Essex because the company no longer meets all of
our criteria.
ABBEYCREST PLC, the U.K.'s largest designer and manufacturer of gold and
silver jewelry, had a share-price decrease of 20% over the nine months. After
reporting strong results, their share price rebounded 16% in the third
quarter.
OUTLOOK
In the U.S., interest rates are steady and broad market conditions continue to
be favorable. The outlook for the U.S. stock market is positive.
French and Danish interest rates were raised after the end of the third
quarter. Switzerland, Sweden, and Spain are among the few countries that had
steady or declining interest rates. As conditions change in the various
markets, we will continue to sell stocks that no longer meet all of our
criteria, as we have been doing in the U.K.
While the sharp correction in the U.S. and other major stock markets and
bourses may impact the market performance in the current quarter, it opens
good buying opportunities. It also could provide a strong platform for a good
performance in 1998.
Z-Seven's share price is currently below the net asset value. We believe this
small discount position represents a good opportunity for the Z-Seven Fund
and individual shareholders to take advantage of the current value in the
marketplace.
Sincerely,
Barry Ziskin November 11, 1997
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<TABLE>
<CAPTION>
Z-Seven Fund, Inc.
Schedule of Investments
at September 30, 1997 (Unaudited)
- ---------------------------------------------------------------
Common Stocks (a) Shares Value
- ---------------------------------------------------------------
<S> <C> <C>
APPAREL & ACCESSORIES - 1.2%
Abbeycrest PLC 10,000 $ 19,180
Fila Holding S.p.A. ADS (b) 9,300 287,723
----------
306,903
----------
AUTOMOTIVE & TRANSPORTATION - 7.0%
Autopistas C.E. SA 20,991 281,972
Linamar Corporation 13,800 850,259
Motorcar Parts and Accessories, Inc. 35,000 706,580
----------
1,838,811
----------
BUILDING & MATERIALS - 8.8%
American Homestar Corporation 36,100 866,400
NCI Building Systems, Inc. 22,800 820,800
Polypipe PLC 88,200 308,347
Wolverine Tube, Inc. (c) 10,600 332,575
----------
2,328,122
----------
BUSINESS SERVICES & SUPPLIES - 10.2%
Day Runner, Inc. 23,600 908,600
Dudley Jenkins Group PLC 228,000 880,080
Fairway Group PLC 1,377,500 902,263
----------
2,690,943
----------
COMPUTER & ELECTRONICS - 13.9%
Communications Systems, Inc. 26,700 554,025
Cybex Computer Products Corporation 36,500 985,500
Hummingbird Communications Ltd. 16,200 631,800
Insight Enterprises, Inc. 27,550 912,594
Intel Corporation (c) 6,300 581,572
----------
3,665,491
----------
FINANCIAL SERVICES - 6.8%
Jardine Lloyd Thompson Group PLC 280,100 831,897
Rathbone Brothers PLC 158,000 961,588
----------
1,793,485
----------
FOOD & BEVERAGE - 6.4%
Carlsberg AS 4,100 226,500
Lindt & Sprungli AG 329 573,983
Lone Star Steakhouse & Saloon, Inc. (c) 38,000 793,250
Weetabix Ltd. 2,050 82,949
----------
1,676,682
----------
HEALTH & PERSONAL CARE - 12.4%
Astra AB 48,266 855,322
Del Laboratories, Inc. 19,500 726,375
L'Oreal 2,157 867,226
Novartis AG 529 815,083
----------
3,264,006
----------
LEISURE & MEDIA - 11.3%
Border Television PLC 193,000 1,172,861
Callaway Golf Co. 17,500 610,313
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Common Stocks (a) Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
LVMH Moet Hennessy Louis Vuitton 2,145 457,889
Seattle FilmWorks, Inc. (c) 66,800 726,450
-----------
2,967,513
-----------
MEDICAL SERVICES & SUPPLIES - 6.9%
National Dentex Corporation 38,500 818,125
Protean PLC 266,300 797,302
Seton Healthcare Group PLC 26,300 194,752
-----------
1,810,179
-----------
MULTI-INDUSTRY - 3.9%
Tomkins PLC 106,166 600,581
TT Group PLC 67,900 415,955
-----------
1,016,536
-----------
RETAIL - 0.3%
Essex Furniture PLC 57,600 73,210
Westfair Foods Ltd. 360 15,638
-----------
88,848
-----------
MISCELLANEOUS - 5.0% 117,500 1,314,300
- ---------------------------------------------------------------------
TOTAL COMMON STOCKS - 94.1%
(Cost $21,269,214) 24,761,819
- ---------------------------------------------------------------------
CASH, RECEIVABLES, AND OTHER ASSETS
LESS LIABILITIES - 5.9% 1,559,543
- ---------------------------------------------------------------------
NET ASSETS - 100.0%
(Equivalent to $19.35 per share based on
1,360,517 shares of capital stock outstanding) $26,321,362
=====================================================================
<FN>
(a) Percentages indicated are based on net assets of
$26,321,362.
(b) American Depository Shares.
(c) All or a portion of this stock was pledged as collateral for a
line of credit.
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS BY COUNTRY
- -------------------------------------
Percent Country Value
- -------------------------------------
<C> <S> <C>
47.6% United States $11,795,481
29.8% United Kingdom 7,390,665
6.1% Canada 1,497,698
5.6% Switzerland 1,389,066
5.4% France 1,325,115
3.5% Sweden 855,322
1.1% Spain 281,972
0.9% Denmark 226,500
- -------------------------------------
100.0% $24,761,819
=====================================
</TABLE>
