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.
1999 SECOND QUARTER RESULTS
During the second quarter, the investment portfolio increased 8%. Our net asset
value also rose 8% from $7.05 to $7.61.
The latest quarter brought excellent recoveries for several holdings in our
predominantly small and micro-cap portfolio. We also continued to benefit from
extra large holdings in securities like Jardine Lloyd Thompson Plc, a cash-rich
growth company added to last year when its share price traded below net cash per
share. Our true star, however, was Kronos, Inc, a leader in automated time
management systems. Kronos' share price soared 86% during the second quarter,
making it our largest domestic investment. When we first bought these shares
last year, the company was paying ever-higher prices to repurchase its own
shares on the public market. Perhaps this was in anticipation of the current
acceleration in its earnings growth rate. Kronos just reported a 68% rise in
earnings for its latest quarter and its share price has continued to rise thus
far into the third quarter. Nonetheless, the company just announced today it
will pay still higher prices to repurchase even more shares. Interestingly, the
Employee Share Ownership Plan Trust of Jardine Lloyd Thompson, our second
biggest contributor to our second quarter gain, is now paying ever-higher prices
to purchase its company's shares. Even the co-founder of Lloyd Thompson, Mr.
E.J. Lloyd, recently added to his already substantial holding. Is it also in
anticipation of even better growth to come?
<PAGE>
1999 FIRST-HALF RESULTS
Over the first half of 1999, our investments declined 2%. Our net asset value
dipped from $7.80 to $7.61. In our first quarter report, we discussed the
overall decline in domestic small-cap share prices that impacted our portfolio,
as well as the subsequent upturn these shares had early in the second quarter.
This positive trend continued throughout the latest quarter.
OUTLOOK
Much of Z-Seven's promising outlook is based on quality growth companies that
were available at bargain prices during last year's market slide. We certainly
took advantage of exceptional value in the U.K. late last year and early this
year, with much reward. The earnings outlook is excellent for the vast majority
of our U.K. investments, despite a gripping recession in British manufacturing.
In fact, 100% of our U.K. invested assets are in companies still showing
operating earnings growth in their latest reports. As a result of U.K. economic
sluggishness, the Bank of England has been reducing interest rates and may
continue to do so, despite the upturn in U.S. rates. British broad stock market
behavior has also been quite constructive this year. Many of our U.K. holdings
could continue to be productive performers in the second half of 1999, as they
have been in the first half.
To a much greater extent, the bargains found among quality growth stocks late
last year were right here at home, and now domestic small and micro caps
dominate a portfolio that was once mostly British. Any continued stock market
downturns could give us even more quality companies at the values we require for
low-risk, long-term growth investment. The earnings performance for nearly all
<PAGE>
of these recently added small and micro-cap domestic companies continues to be
outstanding, even better than expected in many cases. The few exceptions among
this unusually large group of companies are being weeded out, and we are moving
forward with one of the best portfolios I can remember.
The recent Federal Reserve tightening, along with over a year of new Dow highs
unsupported by the broad market, may bring near-term difficulty for U.S. stocks
before we can realize their long-term profit potential. We are protecting this
promising portfolio, and our net asset value, to the extent we can with cash
reserves and other measures available to us.
I strongly feel that we are exceptionally well positioned for both near-term
volatility, as well as long-term growth, and look forward to the future with
excitement.
Sincerely,
Barry Ziskin August 5, 1999
<PAGE>
<TABLE>
<CAPTION>
Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at June 30, 1999 (Unaudited)
- -------------------------------------------------------------------
Investment Securities Shares Value
- ------------------------------------------ ----------- ----------
Common Stocks (a)
- -------------------------------------------------------------------
<S> <C> <C>
APPAREL & ACCESSORIES - 5.7%
Abbeycrest Plc 10,000 $ 18,372
The Men's Wearhouse, Inc. (b) 10,400 265,200
Nautica Enterprises, Inc. (b) 15,400 259,875
Quiksilver, Inc. (b) 15,150 394,847
Tarrant Apparel Group (b) 5,100 116,025
----------
1,054,319
----------
AUTOMOTIVE & TRANSPORTATION - 5.2%
Autopistas C.E. SA 10,227 120,140
IMPCO Technologies, Inc. (b) 17,400 221,850
Motorcar Parts
and Accessories, Inc. (b) 29,200 156,950
Strattec Security Corporation (b) 13,600 459,000
----------
957,940
----------
BUILDING & MATERIALS - 4.8%
Barratt Developments Plc 103,000 578,252
NCI Building Systems, Inc. (b) 9,400 200,925
Nobility Homes, Inc. (b) 14,080 105,600
----------
884,777
----------
BUSINESS SERVICES & SUPPLIES - 1.1%
Day Runner, Inc. (b) 16,800 207,900
----------
COMMUNICATION - 2.6%
AVT Corporation (b) 7,200 272,700
Vertex Communications
Corporation (b) 15,400 210,788
----------
483,488
----------
COMPUTER & RELATED - 17.2%
CIBER, Inc. (b) 7,200 137,700
Computer Horizons
Corporation (b) 13,000 179,562
Cybex Computer Products
Corporation (b) 7,650 213,244
Hummingbird
Communications Ltd. (b) 13,600 255,000
Insight Enterprises, Inc. (b) 6,187 153,128
First Consulting Group, Inc. (b) 4,300 45,688
Kronos, Inc. (b) 12,750 580,125
Oracle Corporation (b) 6,600 245,025
Pomeroy Computer
Resources, Inc. (b) 19,900 277,356
Sanderson Group Plc 199,000 522,514
<PAGE>
Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at June 30, 1999 (Unaudited)
- -------------------------------------------------------------------
Investment Securities Shares Value
- ------------------------------------------ ----------- ----------
Smart Modular
Technologies, Inc. (b) 8,700 $ 151,162
Synopsys, Inc. (b) 7,700 424,944
----------
3,185,448
----------
ELECTRICAL & ELECTRONICS - 9.1%
AFC Cable Systems, Inc. (b) 11,700 413,156
Benchmark Electronics, Inc. (b) 9,100 327,031
LSI Industries, Inc. 18,000 434,250
Roxboro Group Plc 100,500 385,920
TT Group Plc 61,900 131,296
----------
1,691,653
----------
FINANCIAL SERVICES - 11.6%
Jardine Lloyd Thompson Group Plc 269,100 1,054,549
Rathbone Brothers Plc 88,500 1,081,629
----------
2,136,178
----------
FOOD & BEVERAGE - 1.2%
Carlsberg A/S 2,700 112,274
Lindt & Spr ngli AG 46 117,614
----------
229,888
----------
HEALTH & PERSONAL CARE - 4.3%
AstraZeneca Plc (c) 5,340 209,437
L'Or al 325 220,494
Nature's Sunshine Products, Inc. 20,600 216,300
Novartis AG 99 145,099
----------
791,330
----------
LEISURE - 5.5%
Anchor Gaming (b) 6,000 288,375
Ballantyne of Omaha, Inc. (b) 50,505 385,101
Dave and Buster's, Inc. (b) 12,000 348,000
----------
1,021,476
----------
MEDICAL SERVICES & SUPPLIES - 3.8%
National Dentex Corporation (b) 17,100 294,975
SeaMED Corporation (b) 34,500 405,375
----------
700,350
----------
MULTI-INDUSTRY - 5.4%
Technitrol, Inc. 12,600 406,350
Tomkins Plc 42,666 185,537
VT Holding A/S 10,565 406,374
----------
998,261
----------
PLASTICS - 0.9%
Northern Technologies
International Corporation 23,300 166,012
----------
<PAGE>
Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at June 30, 1999 (Unaudited)
- -------------------------------------------------------------------
Investment Securities Shares Value
- ------------------------------------------ ----------- ----------
RETAIL - 1.3%
Grow Biz International, Inc. (b) 26,700 $ 216,938
Westfair Foods Ltd. 360 17,232
----------
234,170
----------
MISCELLANEOUS - 3.2% 66,000 598,475
- -------------------------------------------------------------------
TOTAL COMMON STOCKS - 82.9%
(Cost $14,193,197) 15,341,665
- -------------------------------------------------------------------
Temporary Cash Investments
- -------------------------------------------------------------------
U.S. TREASURY BILLS,
- -------------------------------------------------------------------
3.14%, due 7/15/99 1,996,550
3.98%, due 8/5/99 497,830
TOTAL TEMPORARY CASH INVESTMENTS - 13.5%
- -------------------------------------------------------------------
(Cost $2,494,380)
TOTAL INVESTMENT SECURITIES - 96.4%
(Cost $16,687,577) 17,836,045
- -------------------------------------------------------------------
CASH, RECEIVABLES, AND OTHER ASSETS
LESS LIABILITIES - 3.6% 662,351
- -------------------------------------------------------------------
NET ASSETS - 100.0%
(Equivalent to $7.61 per share based
on 2,431,531 shares of capital stock
outstanding) $18,498,396
===================================================================
</TABLE>
(a) Percentages are based on net assets of $18,498,396.
(b) Non-income producing investment.
(c) Formerly Astra AB.
<TABLE>
<CAPTION>
COMMON STOCKS BY COUNTRY
- ---------------------------------------
Percent Country Value
- -------- ----------------- ----------
<C> <S> <C>
59.8% United States $9,181,457
31.1% United Kingdom 4,765,981
3.4% Denmark 518,648
1.8% Canada 272,232
1.7% Switzerland 262,713
1.4% France 220,494
.8% Spain 120,140
- ---------------------------------------
100.0% 15,341,665
=======================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Z-Seven Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES
at June 30, 1999 (Unaudited)
<S> <C>
ASSETS
Investment securities, at value
(identified cost $16,687,577) $17,836,045
Cash 378,460
Receivables
Dividends and interest 40,502
Securities sold 186,255
Due from investment advisor 85,159
Other assets 13,443
------------
Total assets 18,539,864
------------
LIABILITIES
Accounts payable and accrued
expenses 41,468
------------
Total liabilities 41,468
------------
NET ASSETS $18,498,396
============
NET ASSETS REPRESENTED BY
Capital stock, $1.00 par value:
7,700,000 shares authorized,
3,268,858 shares issued $ 3,268,858
Additional paid-in capital 21,050,898
Treasury stock, 837,327 shares, at cost (6,907,876)
------------
17,411,880
Accumulated net realized losses on
investments and currency transactions (401,184)
Net unrealized appreciation on
investments and currency translations 1,321,619
Undistributed net investment income 166,081
------------
NET ASSETS (EQUIVALENT TO $7.61 PER
SHARE BASED ON 2,431,531 SHARES
OF CAPITAL STOCK OUTSTANDING) $18,498,396
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Z-Seven Fund, Inc.
STATEMENT OF OPERATIONS
Period Ended June 30, 1999 (Unaudited)
<S> <C>
INVESTMENT INCOME
Dividends, net of nonreclaimable
foreign taxes of $11,469 $ 99,081
Interest 54,679
-----------
Total investment income 153,760
-----------
EXPENSES
Investment advisory base fee 116,528
Compensation and benefits 58,934
Transfer agent fees 6,100
Professional fees 50,876
Custodian fees 18,500
Printing and postage 17,373
Office and miscellaneous 18,247
Insurance expense 1,276
Directors' fees and expenses 4,828
Dues and filing fees 9,170
Shareholder relations and
communications 3,928
Rent expense 7,996
-----------
Total expenses before credits 313,756
Performance penalty (317,640)
Expense-offset arrangement (8,437)
-----------
Credits net of expenses (12,321)
-----------
Net investment income 166,081
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized loss on investments
and currency transactions (523,184)
Change in unrealized depreciation
of investments and currency
translations for the period (169,119)
-----------
Net loss on investments (692,303)
-----------
Net decrease in net assets
resulting from operations ($526,222)
==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Z-Seven Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
Period Ended June 30, 1999 (Unaudited)
and Year Ended December 31, 1998
1999 1998
------------ ------------
<S> <C> <C>
NET ASSETS,
BEGINNING OF PERIOD $19,854,868 $20,161,112
------------ ------------
OPERATIONS
Net investment
income (loss) 166,081 (35,905)
Net realized gain (loss) on
investments, currency
transactions and options (523,184) 994,747
Change in unrealized
appreciation (depreciation)
of investments and
currency translations (169,119) 146,341
------------ ------------
Net increase (decrease) in
net assets from operations (526,222) 1,105,183
------------ ------------
DIVIDENDS AND DISTRIBUTIONS
From net investment
income 0 (146,606)
From net realized gain on
investments, currency
transactions and options 0 (300,388)
------------ ------------
Decrease in net assets
from dividends and
distributions 0 (446,994)
------------ ------------
SHARE TRANSACTIONS
Treasury stock purchases (830,250) (980,119)
Reinvested dividends
and distributions 0 15,686
------------ ------------
Decrease in net assets
from share transactions (830,250) (964,433)
------------ ------------
NET DECREASE
IN NET ASSETS (1,356,472) (306,244)
------------ ------------
NET ASSETS,
END OF PERIOD $18,498,396 $19,854,868
=========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Z-Seven Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (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 non-diversified, 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, other
than the London Stock Exchange, 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, except VT Holding A/S which is valued at the midpoint between the bid
and the ask. Securities traded on the London Stock Exchange are valued at the
mid-close price. 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 based on quoted
third-party prices. Quotations of foreign securities in foreign currencies 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.
Investment income 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
<PAGE>
Fund. Due to the differing treatment for tax purposes of certain income and
capital gain items, as of December 31, 1998, the Fund has reclassified to
paid-in capital, <$251,119> from undistributed net investment income and
$262,488 from accumulated capital gains.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities transactions
are accounted for on trade date plus one 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 or sells
forward exchange contracts as of the trade date for the amount of purchase or
proceeds, and no exchange gains or losses are thus realized on these
transactions. Foreign dividends are shown net of exchange gains or losses which
arise when currency gains or losses are realized between the ex-dividend and
payment dates on dividends receivable.
FORWARD CURRENCY CONTRACTS - As foreign securities are purchased or sold, the
Fund enters into or closes 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
<PAGE>
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 gains on investments and currency transactions in the Statement of
Operations.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires the Fund's management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, and contingent liabilities at the date of the financial statements
and the reported amounts of income and expenses during the reporting period.
Actual results could differ from these estimates.
NOTE 2 - TREASURY STOCK TRANSACTIONS
From January 1, 1997, through June 30, 1999, the Board of Directors authorized
the following purchases of the Fund's capital shares on the open market:
<TABLE>
<CAPTION>
Year Number of Shares Cost
- ---- ---------------- ---------
<S> <C> <C>
1999 113,500 830,250
1998 127,500 980,119
1997 106,400 1,007,031
</TABLE>
In 1996, the Fund established a distribution reinvestment plan to allow
shareholders to reinvest their distributions in shares of the Fund. When the
Fund is selling at a premium, distributions will be reinvested at the greater of
net asset value or 95% of the market price. When the Fund is selling at a
discount, distributions will be reinvested at market price. On December 30,
1998, 1,995 shares of the Fund were distributed to plan participants at $7.86
per share (net asset value). This distribution increased the Fund's total net
assets by $15,686.
In 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 698,210 unregistered Fund shares were issued to
Agape in the transaction at a slight premium to net asset value. The federal
income tax basis of the securities received by the Fund in this transaction was
<PAGE>
equivalent to the market value of those securities on the date of the
transaction. The Fund is obligated to register these shares for sale in the
open market upon Agape's request. Previous negotiations for the repurchase of
these shares by the Fund have been discontinued.
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, 1999, were:
<TABLE>
<CAPTION>
Common Stocks Treasury Bills
<S> <C> <C>
Purchases $ 1,260,961 $ 4,452,144
Sales $ 2,105,134 $ 2,000,000
</TABLE>
NOTE 4 - FOREIGN CURRENCY CONTRACTS
At June 30, 1999, the Fund had contracts, maturing on August 18, 1999, and
November 16, 1999, to sell $5.0 million in foreign currency (1.9 million Swiss
francs, 2.8 million British pounds, and .3 million Canadian dollars). These
contracts were marked-to-market on June 30, 1999, resulting in a net unrealized
gain of $173,150. This unrealized gain is included as a component of
receivables from securities sold, in the Statement of Assets and Liabilities.
NOTE 5 - OPTIONS TRANSACTIONS
The Fund may from time to time purchase and sell call and put options on stock
indexes which are traded on national securities exchanges as a method of hedging
market fluctuations. The Fund may liquidate the call and put option purchased
or sold by effecting a closing sale transaction (rather than exercising the
option). This is accomplished by purchasing or selling an option of the same
series as the option previously purchased or sold. There is no guarantee that
the closing sale transaction can be effected. The Fund will realize a profit
from a closing transaction if the price at which the transaction is effected is
greater than the premium paid to purchase the option. The Fund will realize a
<PAGE>
loss from a closing transaction if the price is less than the premium paid.
An option may be closed out only on an exchange which provides a market for
options on the same index and in the same series. Although the Fund will
generally purchase or sell only those options for which there appears to be an
active market, there is no assurance that a liquid market on the exchange will
exist for any particular option, or at any particular time. In such event, it
might not be possible to execute closing transactions in particular options,
with the result that the Fund would have to exercise its options in order to
realize any profit.
NOTE 6 - LEASE COMMITMENT
The Fund is obligated under a three-year operating lease, for its Mesa, Arizona
corporate office, which expires on June 30, 2001. Minimum lease payments due
are as follows:
July 1 - December 31, 1999 $11,808
January 1 - December 31, 2000 23,807
January 1 - June 30, 2001 11,999
- -----------------------------------------------
Total minimum lease payments $47,614
Rent expense for the period ended June 30, 1999 was $7,996.
NOTE 7 - INVESTMENT ADVISORY FEES AND PERFORMANCE BONUS/PENALTIES
TOP Fund Management is the Fund's investment advisor (the Advisor). 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 base management fees 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, 1999, the base management fees aggregated
$116,528.
In addition to the base management fees, the Advisor will receive a bonus for
extraordinary performance or pay a penalty 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
<PAGE>
calendar quarter and will not exceed 2.5% of the average daily net assets in the
calendar quarter. The performance penalty can exceed the base management fees.
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, 1999, the performance penalty aggregated $317,640.
The agreement also provides that if the Fund's expenses on an annual basis
(including the base management fees, 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 year ended December 31, 1998, an expense reimbursement
was not required.
NOTE 8 - DISTRIBUTIONS TO SHAREHOLDERS
On September 15, 1998, the Board of Directors declared a $0.1744 per share
remainder distribution. This represented undistributed net investment income
and short-term capital gains for 1997. These distributions were paid on
December 30, 1998, to shareholders of record on December 21, 1998. The Fund
intends to distribute the balance of short-term capital gains and net investment
income for 1998 on or before December 31, 1999.
NOTE 9 - FEDERAL INCOME TAX INFORMATION
For federal income tax purposes, in 1998, the Fund realized net capital gains of
$897,508 and investment company taxable income of $121,963. The Board of
Directors elected to retain 1998 net capital gains and provided federal income
taxes of $314,128 on these retained gains.
<PAGE>
NOTE 10 - 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, 1999, Barry Ziskin, an officer and director of the Fund, owned
599,628 shares of the Fund's capital stock. He is also an officer and director
of the Advisor.
On December 31, 1997, the Fund received a contribution of 23,600 shares of
Z-Seven Fund stock from Ziskin Asset Management, an affiliate of the Fund. The
shares are included in the Treasury Stock balance.
NOTE 11 - LINE OF CREDIT
The Fund has a $1,300,000 line of credit with its custodian bank which is
secured by investment securities with an aggregate market value not to exceed
15% of the value of the Fund's total assets. Borrowings against the line are
charged interest at a rate of prime plus 1/2%. There were no borrowings
outstanding against the line during the six months ended June 30, 1999. The
line of credit expires August 7, 1999.
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, 1999.
NOTE 12 - EXPENSE-OFFSET ARRANGEMENT
Through an arrangement with Standard & Poor's Securities (S&P), commissions paid
to S&P earn soft dollar credits. The Advisor may direct S&P to use the credits
to pay certain Fund expenses. For the period ended June 30, 1999, the Advisor
applied $8,437 of these soft dollar credits towards the payment of filing fees
and office and miscellaneous expenses of the Fund.
<PAGE>
GENERAL INFORMATION
THE FUND
Z-Seven Fund, Inc. is a non-diversified, closed-end management investment
company whose shares trade on the Nasdaq National Market System and on the
Pacific Exchange. Its investment objective is long-term capital appreciation
through investments in quality growth companies whose shares are undervalued.
SHARE REPURCHASES
Notice is hereby given, in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may purchase, at market prices,
from time to time, shares of its common stock in the open market.
<PAGE>
Z-Seven Fund, Inc.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following represents selected data for a share outstanding throughout the periods. All share and per share data has been
adjusted to reflect the two-for-one stock split in December 1997.
The following represents selected data for a share outstanding throughout the periods. All share and per share data has been
adjusted to reflect the two-for-one stock split in December 1997.
- ------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
For the periods ended 1999 1998 1997 1996 1995 1994
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period. . . . . . . . . . . . . . $ 7.80 $ 7.55 $ 8.20 $ 8.74 $ 8.32 $ 8.50
---------- -------- --------- -------- -------- --------
Net investment income (loss). . . . . . . . . . . . . . . . . . .07 -0- .11 (.06) .06 (.08)
Net realized and unrealized gains (losses) on investments
and currency transactions before income taxes. . . . . . . . (.26) .55 1.05 1.01 1.88 (.07)
---------- -------- --------- -------- -------- --------
Total increase (decrease) from investment operations. . . . . . (.19) .55 1.16 .95 1.94 (.15)
Distributions to shareholders from net investment income. . . . -0- (.06) (.05) (.03) (.44) -0-
Distributions to shareholders from net capital gains. . . . . . -0- (.12) (1.38) (1.46) (1.08) -0-
Income taxes on capital gains paid on behalf of shareholders. . -0- (.12) (.45) -0- -0- (.03)
Capital contribution. . . . . . . . . . . . . . . . . . . . . . -0- -0- .07 -0- -0- -0-
---------- -------- --------- -------- -------- --------
Net increase (decrease) in net asset value. . . . . . . . . . . (.19) (.30) (.65) (.54) .42 (.18)
-------- --------- -------- -------- --------
Net asset value, end of period. . . . . . . . . . . . . . . . . $ 7.61 $ 7.80 $ 7.55 $ 8.20 $ 8.74 $ 8.32
========== ======== ========= ======== ======== ========
Per share market value, end of period . . . . . . . . . . . . . $ 7.44 $ 8.00 $ 11.00 $ 10.25 $ 11.13 $ 8.25
Total investment return (a) . . . . . . . . . . . . . . . . . . (7.0%)(b) (24.5%) 34.0%(e) 8.9% 58.3% (9.3%)
---------- -------- --------- -------- -------- --------
Ratio of expenses before performance
bonus/penalty to average net assets (c) . . . . . . . . . . . 3.3%(d) 3.8% 3.0% 3.2% 2.9% 2.7%
Ratio of total expenses (credits) to average net assets (c) . . (.1%)(d) 1.5% 1.0% 3.0% 2.0% 3.0%
Ratio of net investment income (loss) to average net assets (c) 1.7%(d) (.2%) 1.1% (.6%) .9% (.8%)
---------- -------- --------- -------- -------- --------
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . 8.0%(b) 73.1% 111.3% 66.4% 36.1% 17.5%
---------- -------- --------- -------- -------- --------
Number of shares outstanding at end of period (in 000's). . . . 2,432 2,545 2,671 2,785 2,771 3,032
Net assets, end of period (in 000's). . . . . . . . . . . . . . 18,498 19,855 20,161 22,841 24,220 25,241
- --------------------------------------------------------------- ---------- -------- --------- -------- -------- --------
<FN>
(a) 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.
(b) Not annualized.
(c) Ratios reflect expenses gross of expense-offset arrangements for the periods ended December 31, 1995 through June 30,
1999.
(d) Annualized.
(e) Total investment return without the capital contribution would have been 33.2%.
</TABLE>
<PAGE>
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").
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.
<PAGE>
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 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]
<PAGE>
