LETTER TO OUR SHAREHOLDERS
Dear Fellow Shareholder:
We would like to express our appreciation for the confidence you have shown in
our investment philosophy. We are thankful for the love, strength, and wisdom
given to us by our heavenly creator and caring shepherd.
After a horrific stock market decline through October 8, 1998, followed by an
amazingly swift recovery, I found myself exclaiming, "Stop the roller coaster -
I want to get off!" After the first quarter of 1999, I must once again warn
that, despite the Dow continually reaching new highs, the recent strength in the
market is not enough to rule out danger. The persistence of poor broad stock
market behavior could lead to a bear market. Last year, we witnessed the same
conditions from April through the market's peak in July of last year. Just
weeks after, a mini-bear market followed. While not a full-length feature, the
"short" drop was still devastating, particularly to U.S. and British small-cap
shares.
1999 FIRST QUARTER RESULTS
Even though the popularity of a few well-known large-cap stocks raised some
major market indices to new highs, an overall decline in domestic small-cap
share prices impacted the share prices of our existing holdings. Our investment
portfolio and net asset value both decreased 10% during the first quarter. An
upturn in U.S. small-cap shares has led to better second-quarter results for our
portfolio, thus far.
In the case of our two largest British holdings, Rathbone Brothers and Jardine
Lloyd Thompson, the prices became so undervalued during the last quarter of 1998
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that they were selling for even less than their net cash per share. This means
that these businesses, which generated steady increases in earnings and cash,
were being given away in the market. We took advantage and now hold extra large
positions in these two stocks. They are both still bargains, and the
significant gains we have enjoyed in them are a pair of bright lights from
London amidst a weak opening quarter for domestic small-caps which dominate our
portfolio (over 70% at the end of last year). If the market does indeed give us
a repeat of last year, we are optimistic that the Fund will once again be able
to capitalize on numerous bargain opportunities.
OUTLOOK
The Federal Reserve Board and the Bank of England reversed tight money policies
late last year. While the Bank of England continues to lower interest rates,
which bodes well for our British holdings, the recent lack of movement in either
direction by the Fed gives few clues about current and future monetary policy
here at home. Should the Fed ease again, the stock market response could
potentially either limit the extent of a bear market or add a needed spark to
the broad market. On the other hand, just as the Fed eased to limit the damage
caused by last year's market crash, it may want to temper speculation by raising
rates as the Dow has recently surpassed 11,000. If the Fed does take this
action, the turn in interest rates could be the catalyst that begins the melt
down.
Even renewed strength in the broad market early in the second quarter has failed
to follow through as of this writing. It may be stalled temporarily and will
soon show a more definitive uptrend, one that may eventually lead to a new high
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over its 1998 highs. While this would be excellent news for the U.S. stock
market, no such uptrend is confirmed at this time. The best information may
come by, or before, the Dow makes new highs again.
Z-Seven Fund is carefully watching for both the Fed and the broad market to
resolve these questions. We are positioning ourselves to either take advantage
of additional domestic investment opportunities, or, if necessary, take further
steps to reduce our exposure to a meaningful decline in the U.S. market. In
addition, we are continuing to add new British holdings, where a favorable
interest rate trend has recently been confirmed, while keeping our eyes open for
other foreign securities offering value.
Sincerely,
Barry Ziskin May 28, 1999
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Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------ ----------- ----------
Investment Securities Shares Value
- ------------------------------------------ ----------- -----------
<S> <C> <C>
Common Stocks (a)
- ------------------------------------------ ----------- -----------
APPAREL & ACCESSORIES - 6.4%
Abbeycrest Plc. . . . . . . . . . . . . . 10,000 $ 16,676
The Men's Wearhouse, Inc. (b) . . . . . . 10,400 300,300
Nautica Enterprises, Inc. (b) . . . . . . 15,400 174,213
Quiksilver, Inc. (b). . . . . . . . . . . 10,100 426,725
Tarrant Apparel Group (b) . . . . . . . . 5,100 214,200
-----------
1,132,114
-----------
AUTOMOTIVE & TRANSPORTATION - 5.9%
Autopistas C.E. SA. . . . . . . . . . . . 9,740 124,459
IMPCO Technologies, Inc. (b). . . . . . . 21,400 219,350
Motorcar Parts
and Accessories, Inc. (b) . . . . . . 29,200 326,675
Strattec Security Corporation (b) . . . . 13,600 382,500
-----------
1,052,984
-----------
BUILDING & MATERIALS - 5.1%
American Homestar Corporation (b) . . . . 8,850 64,716
Barratt Developments Plc. . . . . . . . . 103,000 489,559
NCI Building Systems, Inc. (b). . . . . . 9,400 220,900
Nobility Homes, Inc. (b). . . . . . . . . 14,080 129,360
-----------
904,535
-----------
BUSINESS SERVICES & SUPPLIES - 1.1%
Day Runner, Inc. (b). . . . . . . . . . . 16,800 203,700
-----------
COMMUNICATION - 2.9%
AVT Corporation (b) . . . . . . . . . . . 7,200 171,900
Vertex Communications
Corporation (b) . . . . . . . . . . . 21,200 337,875
-----------
509,775
-----------
COMPUTER & RELATED - 16.6%
CIBER, Inc. (b) . . . . . . . . . . . . . 7,200 138,150
Computer Horizons
Corporation (b) . . . . . . . . . . . 13,000 142,187
Cybex Computer Products
Corporation (b) . . . . . . . . . . . 7,650 137,222
Hummingbird
Communications Ltd. (b) . . . . . . . 15,300 231,413
Insight Enterprises, Inc. (b) . . . . . . 6,187 153,128
First Consulting Group, Inc. (b) . . . . 24,300 270,337
Kronos, Inc. (b). . . . . . . . . . . . . 13,650 334,425
Oracle Corporation (b). . . . . . . . . . 6,600 174,075
Pomeroy Computer
Resources, Inc. (b) . . . . . . . . . 19,900 258,700
Rainbow Technologies, Inc. (b). . . . . . 3,500 35,000
Sanderson Group Plc . . . . . . . . . . . 199,000 529,042
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Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at March 31, 1999 (Unaudited) Continued
- ------------------------------------------ ----------- -----------
Investment Securities Shares Value
- ------------------------------------------ ----------- -----------
Smart Modular
Technologies, Inc. (b). . . . . . . . 8,700 $ 129,956
Synopsys, Inc. (b). . . . . . . . . . . . 7,700 413,875
-----------
2,947,510
-----------
ELECTRICAL & ELECTRONICS - 8.7%
AFC Cable Systems, Inc. (b) . . . . . . . 11,700 348,075
Benchmark Electronics, Inc. (b) . . . . . 9,100 273,000
LSI Industries, Inc.. . . . . . . . . . . 18,000 303,750
Roxboro Group Plc . . . . . . . . . . . . 100,500 441,245
TT Group Plc. . . . . . . . . . . . . . . 61,900 176,031
-----------
1,542,101
-----------
FINANCIAL SERVICES - 11.5%
Jardine Lloyd Thompson Group Plc. . . . . 269,100 930,010
Rathbone Brothers Plc . . . . . . . . . . 88,500 1,101,515
-----------
2,031,525
-----------
FOOD & BEVERAGE - 1.3%
Carlsberg A/S . . . . . . . . . . . . . . 2,700 108,746
Lindt & Spr ngli AG . . . . . . . . . . . 46 124,156
-----------
232,902
-----------
HEALTH & PERSONAL CARE - 4.7%
Astra AB. . . . . . . . . . . . . . . . . 10,586 239,203
L'Or al . . . . . . . . . . . . . . . . . 325 205,020
Nature's Sunshine Products, Inc.. . . . . 20,600 226,600
Novartis AG . . . . . . . . . . . . . . . 99 160,391
-----------
831,214
-----------
LEISURE - 5.1%
Anchor Gaming (b) . . . . . . . . . . . . 6,000 262,500
Ballantyne of Omaha, Inc. (b) . . . . . . 50,505 378,788
Dave and Buster's, Inc. (b) . . . . . . . 12,000 246,000
-----------
887,288
-----------
MEDICAL SERVICES & SUPPLIES - 3.2%
National Dentex Corporation (b) . . . . . 17,100 247,950
SeaMED Corporation (b). . . . . . . . . . 34,500 327,750
-----------
575,700
-----------
MULTI-INDUSTRY - 4.4%
Technitrol, Inc.. . . . . . . . . . . . . 12,600 290,587
Tomkins Plc . . . . . . . . . . . . . . . 42,666 157,079
VT Holding A/S. . . . . . . . . . . . . . 10,565 340,569
-----------
788,235
-----------
PLASTICS - 2.1%
Northern Technologies
International Corporation . . . . . . 23,300 154,363
Polypipe Plc. . . . . . . . . . . . . . . 88,200 218,842
-----------
373,205
-----------
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Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at March 31, 1999 (Unaudited) Continued
- ------------------------------------------ ----------- -----------
Investment Securities Shares Value
- ------------------------------------------ ----------- -----------
RETAIL - 1.9%
Grow Biz International, Inc. (b). . . . . 26,700 $ 327,075
Westfair Foods Ltd. . . . . . . . . . . . 360 16,512
-----------
343,587
-----------
MISCELLANEOUS - 1.3% (b) . . . . . . . . 27,500 224,656
- ------------------------------------------ ----------- -----------
TOTAL COMMON STOCKS - 82.2%
(Cost $15,015,152). . . . . . . . . . 14,581,031
- ------------------------------------------ ----------- -----------
Temporary Cash Investment
- ------------------------------------------ ----------- -----------
U.S. TREASURY BILLS, DUE 4-15-99 - 11.3%
(Cost $1,978,600) . . . . . . . . . . 1,996,472
- ------------------------------------------ ----------- -----------
TOTAL INVESTMENT SECURITIES - 93.5%
(Cost $16,993,752). . . . . . . . . . 16,577,503
- ------------------------------------------ ----------- -----------
CASH, RECEIVABLES, AND OTHER ASSETS
LESS LIABILITIES - 6.5% . . . . . . 1,150,879
- ------------------------------------------ ----------- -----------
NET ASSETS - 100.0%
(Equivalent to $7.05 per share based
on 2,515,031 shares of capital stock
outstanding). . . . . . . . . . . . . $17,728,382
========================================== =========== ===========
<FN>
(a) Percentages are based on net assets of $17,728,382.
(b) Non-income producing investment.
</TABLE>
<TABLE>
<CAPTION>
- -------- --------------- -----------
COMMON STOCKS BY COUNTRY
- -------- --------------- -----------
Percent. Country Value
- -------- --------------- -----------
<S> <C> <C>
60.9% United States $ 8,880,658
28.5% United Kingdom 4,149,904
3.1% Denmark 449,315
1.9% Switzerland 284,547
1.7% Canada 247,925
1.6% Sweden 239,203
1.4% France 205,020
.9% Spain 124,459
- -------- --------------- -----------
100.0% $14,581,031
======== =============== ===========
</TABLE>
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YEAR 2000
Due to the reliance on computing, accounting and trading systems to conduct
their businesses, the Fund, its service providers and its portfolio companies
may be adversely affected if any of such entity's respective computing,
accounting or trading systems, or those systems used by other entities with
which they conduct business, are not capable of processing information with
dates on or after January 1, 2000 properly (i.e., if such systems are not
"Y2K-ready").
At this time, management has targeted June 30, 1999 for the completion of
testing and implementation of any systems or software necessary for Y2K
compliance. The Fund has not incurred any costs to date as a result of its Y2K
compliance efforts. Due to the Fund's reliance on third party vendors and
service providers, management does not anticipate any material Y2K compliance
costs prior to the Year 2000. No assurance can be given that all service
providers will not be materially affected by Y2K-related problems or that
replacements for deficient products or service providers can be obtained in a
timely manner and without additional expense to the Fund.
The Investment Adviser may consider Y2K-related public disclosures made by the
Fund's current and potential portfolio companies in its investment
decision-making process for the Fund, but many foreign corporations are not
subject to reporting requirements (or liability with respect to statements in
such reports) comparable to those applicable to U.S. companies. Accordingly,
little or no reliable Y2K-readiness information may be available with respect to
foreign companies, and the Investment Adviser will be unable to verify the
accuracy or completeness of any Y2K-readiness information that is available. As
a result, the Fund is unable to protect itself against misleading, incomplete or
unavailable Y2K-related disclosures, unanticipated Y2K problems at any of the
Fund's portfolio companies, or Y2K-readiness information for any of the Fund's
portfolio companies not received or not reviewed by the Fund. In addition, the
Fund is unable to protect itself from a general market downturn in one or more
markets due to widespread Y2K-related panic.
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BOARD OF DIRECTORS
Barry Ziskin
Albert Feldman
Dr. Jeffrey Shuster
Rochelle Ziskin
Maria De Los Santos
INVESTMENT ADVISOR
TOP Fund Management, Inc.
OFFICERS
Barry Ziskin
President and Treasurer
Barbara Perleberg
Secretary
CUSTODIAN
Chase Manhattan Bank
TRANSFER AGENT
Norwest Bank Minnesota, N.A.
Shareowner Services
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
GENERAL COUNSEL
Kilpatrick Stockton LLP
STOCK LISTINGS
NASDAQ
Symbol: ZSEV
Pacific Exchange
Symbol: ZSE
CORPORATE OFFICE
1819 South Dobson Road
Suite 109
Mesa, AZ 85202
(602) 897-6214
Fax (602) 345-9227
[email protected]
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