SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FILING BY:
Z-SEVEN FUND, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
Z-SEVEN FUND, INC.
1819 S. DOBSON ROAD
SUITE 109
MESA, AZ 85202
(480) 897-6214
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 8, 2000
_____________________
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 LLP, One Arizona Center, Suite 1100, 400 E. Van Buren, Phoenix,
Arizona on December 8, 2000, at 11:00 A.M. (Mountain Standard Time) for the
following purposes:
1) To consider and to act upon the election of five 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 LLP as
independent public auditors for the Fund for the fiscal year ending December 31,
2000; and,
3) To consider and act upon a proposal to approve the Investment Advisory
Agreement between the Fund and TOP Fund Management, Inc.
4) 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 31, 2000, 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,
\s\ Barbara Perleberg
Barbara D. Perleberg
Secretary
Dated: November 10, 2000
<PAGE>
Z-SEVEN FUND, INC.
1819 S. DOBSON ROAD
SUITE 109
MESA, AZ 85202
(480) 897-6214
__________________
PROXY STATEMENT
__________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 8, 2000
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 December 8, 2000, 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 November 10, 2000.
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; (ii) in favor of the selection of the independent
auditors for the Fund; and (iii) to approve the Investment Advisory Agreement
between the Fund and TOP Fund Management, Inc. 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 31,
2000, 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 October 13, 2000, there were issued and outstanding 2,027,731
shares of Common Stock. Each share of Common Stock is entitled to one vote.
There is no provision for cumulative voting. Shares held by shareholders
present in person or represented by proxy at the Meeting will be counted both
for the purpose of determining the presence of a quorum and for calculating the
votes cast on the issues before the Meeting. An abstention by a shareholder,
either by proxy or by vote in person at the Meeting, has the same effect as a
negative vote. Shares held by a broker or other fiduciary as record owner for
the account of the beneficial owner are counted toward the required quorum if
the beneficial owner has executed and timely delivered the necessary
instructions for the broker to vote the shares or if the broker has and
exercises discretionary voting power. Where the broker or fiduciary does not
receive instructions from the beneficial owner and does not have discretionary
voting power as to one or more issues before the Meeting, but grants a proxy for
or votes such shares, they will be counted toward the required quorum but will
have the effect of a negative vote on any proposals on which it does not vote.
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.
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 or 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 exceeding 120 days after the record date. 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.
<PAGE>
The Annual Report of the Fund for the fiscal year ended December 31,
1999, including audited financial statements and the Semi-Annual Report for the
period ended June 30, 2000, were mailed to stockholders of record at the close
of business on February 29, 2000, and August 29, 2000, respectively. The Fund
will furnish, without charge, a copy of the Annual Report and the Semi-Annual
Report to a shareholder upon request to the address or phone number listed
above.
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 order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, facsimile, personal interview, or
other means by officers or directors of the Fund.
As of October 13, 2000, 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 465,913 22.98 (1)
P.O. Box 7759
Lyford Cay, Nassau, Bahamas
Barry Ziskin 592,028 29.20 (2)
2302 W. Monterey Circle
Mesa, AZ 85202
Thomas W. Lee 161,664 7.97 (3)
130 - 10th Street
San Francisco, CA 94103
William Wood 136,000 6.71 (4)
P.O Box 143
Bedford, VA 24523-0143
<FN>
(1) Agape Co., S.A. owns 465,913 shares. Agape Co., S.A. is indirectly controlled by Sir John
Templeton. The shares were issued to Agape in a private placement in December, 1992. 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.
(2) The shares shown include 368,002 shares owned by Ziskin Asset Management, Inc., of which Mr.
Ziskin is sole shareholder; 53,200 shares owned by TOP Fund Management, Inc., of which Mr. Ziskin is
sole shareholder; and 102,780 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: 50,050 shares owned by The San Francisco
Advertiser; 43,500 shares owned by Red Cart Market, Inc. Profit Sharing Plan; 28,714 shares owned by The
Lee Investment Partnership; 31,000 shares owned by The San Francisco Advertiser Profit Sharing Plan, of
which Mr. Lee is a Trustee; and 3,200 shares owned by Red Cart Market , Inc. D.B.A. Pet Club Profit
Sharing Plan.
(4) The shares held by Mr. Wood are registered at Norwest Bank Minnesota Shareowner Services in
record name.
</TABLE>
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Bylaws of the Fund provide that the Board of Directors shall
consist of not less than three nor more than fifteen directors, with the exact
number being set from time to time by the Board. The Board currently consists
of five directors, each of whom serves until the next annual meeting of
stockholders and until his or her successor, if there is to be one, is elected
and qualified. 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. All five of the nominees are currently members of
the Board of Directors. Each of the nominees has consented to his or her
nomination and has agreed to serve if elected.
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. Each nominee who receives the
affirmative vote of a majority of all votes cast at the Meeting will be elected
so long as a quorum is present.
<TABLE>
<CAPTION>
Positions Held
Name (age) With Fund Principal Occupation
------------------------------------------- ---------------------------------------- --------------------------------------
<S> <C> <C>
Maria De Los Santos (38) Director Controller, DDC-I, Inc. (1994-2000);
809 Baylor Lane Secretary/Treasurer, Z-Seven Fund,
Chandler, AZ 85225 Inc., TOP Fund Management, Inc., and
Ziskin Asset Management, Inc.
Albert I. Feldman (73) Director Retired, CFO, The San Francisco
184 Amber Dr. Advertiser (1970-1998)
San Francisco, CA 94131
Dr. Jeffrey Shuster (48) Director President & CEO,
32 East Ridge Court Jeffrey Shuster, DDS, PC
Cheshire, CT 06410 A Professional Corporation
(1981-present)
Barry Ziskin* (48) (2) Director, President, Ziskin Asset
2302 W. Monterey Circle President Management, Inc. (1975-present);
Mesa, AZ 85202 President, TOP Fund Management,
Inc. (1983-present)
Rochelle Ziskin* (46) (4) Director Assoc. Professor (2000-present), Asst.
5119 Wyandotte, #3 South Professor (1994-2000) Univ. of Missouri
Kansas City, MO 64112 - Kansas City; J.P. Getty Fellow,
(1993-94); Visiting Asst. Professor,
Univ. of Oregon (1993); Ph.D., Harvard
Univ. (1985-1992)
Shares of
Common Stock
Director Beneficially
Name (age) Since Owned % of Class
------------------------------------------- ------------- ------------- ----------
<S> <C> <C> <C>
Maria De Los Santos (38) 12/11/98 N/A **
809 Baylor Lane
Chandler, AZ 85225
Ziskin Asset Management, Inc.
(1988-1994)
Albert I. Feldman (73) 11/6/98 81,050 4.00 (1)
184 Amber Dr.
San Francisco, CA 94131
Dr. Jeffrey Shuster (48) 3/16/86 600 **
32 East Ridge Court
Cheshire, CT 06410
(1981-present)
Barry Ziskin* (48) (2) 9/16/83 592,028 29.20 (3)
2302 W. Monterey Circle
Mesa, AZ 85202
Inc. (1983-present)
Rochelle Ziskin* (46) (4) 4/08/85 17,600 **
5119 Wyandotte, #3 South
Kansas City, MO 64112
(1993-94); Visiting Asst. Professor,
Univ. of Oregon (1993); Ph.D., Harvard
Univ. (1985-1992)
<FN>
** Less than 1%
* Nominees considered "Interested Persons" of the Fund
(1) These shares include 50,050 shares owned by the San Francisco Advertiser, of which Mr. Feldman was CFO until 1998, and
31,000 owned by the San Francisco Advertiser Profit Sharing Plan, of which Mr. Feldman is Trustee with shared voting
power.
(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, Footnote 2.
(4) Ms. Ziskin is the sister of Barry Ziskin.
</TABLE>
<PAGE>
Directors of the Fund as a group own beneficially 691,278 shares
(34.09%) of the outstanding shares. Mr. Ziskin beneficially owns 29.20% of the
outstanding shares, as follows: Mr. Ziskin is the sole shareholder of Ziskin
Asset Management, Inc. which owns approximately 18.2% of the outstanding
shares; Mr. Ziskin is the sole shareholder of TOP Fund Management, Inc., the
Fund's investment Adviser, which owns 2.6% of the outstanding shares; Mr.
Ziskin is Trustee for Ziskin Asset Management, Inc. Profit Sharing Plan which
owns approximately 5.1% of the outstanding shares; and Mr. Ziskin personally
owns approximately 3.2% of the outstanding shares. Mr. Feldman shares
beneficial ownership of the following percentages of outstanding shares: the San
Francisco Advertiser owns 2.5%; The San Francisco Advertiser Profit Sharing
Plan, of which Mr. Feldman is a Trustee and shares voting power in, owns 1.5%.
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 Ziskin Asset Management 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
which was established on August 4, 1988. Members of the Audit Committee are
currently Jeffrey Shuster, Albert Feldman, and Maria De Los Santos. None of the
current members of the Audit Committee are interested persons of the Fund. The
Audit Committee has responsibility for overseeing the 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. The Board does not have nominating or compensation
committees.
During the fiscal year ended December 31, 1999, the Board held 7 Board
meetings and 1 Board committee meeting. Each of the incumbent directors
attended 75% or more of the aggregate of (i) the Board meetings held while s/he
was a director and (ii) the Committee meetings held by Board Committees on which
s/he served. The Fund pays each of its directors $500 in compensation (plus
reimbursement of expenses) for each Board meeting that a director attends.
Accordingly, during the year Dr. Shuster, Mr. Feldman, and Ms. Ziskin each
received $3,500 in compensation for attending 7 Board meetings, and Ms. De Los
Santos received $3,000 for attending 6 Board meetings. The directors do not
receive any additional compensation from the Fund. Mr. Ziskin (also an officer
and director of the Adviser and its affiliates) attended all of the Fund's Board
meetings, but does not receive any compensation from the Fund.
PROPOSAL 2
APPROVAL
OF
INDEPENDENT AUDITORS
The Board of Directors has directed that there be submitted to the
shareholders for approval the selection of KPMG LLP as independent auditors to
report on the Financial Statements of the Fund for the fiscal year ending
December 31, 2000. No member of KPMG LLP has any direct or indirect financial
interest in the Fund.
A representative of KPMG LLP 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 auditors.
PROPOSAL 3
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
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 "Current Agreement"). TOP Fund Management, Inc.
has its principal place of business at 1819 S. Dobson Road, Suite 109, Mesa, AZ
85202. The Board of Directors of the Fund last submitted the Current Agreement
to the shareholders for approval on December 20, 1999, on terms identical to the
existing advisory agreement at that time, except for initial and renewal terms.
A majority of the outstanding shares of the Fund approved the Current Agreement
at that meeting.
<PAGE>
On September 13, 2000, the Fund's Board of Directors, including all of
the directors who are not interested persons of the Fund or the Adviser,
resolved to submit the Current Agreement to the shareholders of the Fund for
their approval in order to give shareholders the opportunity to affirm the
Board's unanimous decision to continue the current management of the Fund. The
Board has determined to recommend that the shareholders vote for approval of the
Current Agreement, as further described below.
CURRENT AGREEMENT
Under the Current 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 Current Agreement expressly provides that the Fund pays all of the
Fund's expenses not assumed by the Adviser. These expenses include, but are not
limited to, custodian, depository, registrar, transfer agency, shareholder
communications (including preparation and mailing of reports and proxy
statements), exchange listing fees, interest, taxes, distribution costs; legal
and auditing expenses; general office expenses (space and supplies),
compensation, fees and expenses paid to officers, directors and employees of the
Adviser and its affiliates (subject to appropriate allocations), and any
association dues. The Board reviews on an annual basis any expenses the Fund
shares with the Adviser and its affiliates. The Board has approved allocating
shared expenses and employment compensation for Fund employees who are not
regular employees of the Adviser or its affiliates based generally on the ratio
of assets under management between the Fund and the Adviser's affiliates,
subject to annual review by the Board and a maximum allocation of any particular
expense to the Fund of 75%. Based on this formula, for the fiscal year ended
December 31, 1999, the Fund paid $52,953 in office expenses (including rent,
office equipment, and miscellaneous office expenses), which was approximately
73% of the total incurred by the Fund, the Adviser and its affiliates, and
$118,336 in employee compensation and benefits, which was approximately 63% of
the total incurred for employees performing services for the Fund, the Adviser,
and the Adviser's affiliates.
The Current 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 Current
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 Current 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 Current 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 Current Agreement
also provides that the Adviser will receive a bonus or pay the Fund a penalty,
based upon the performance of the Fund and the performance of the Standard &
Poor's Composite Index of 500 Stocks (the "S&P 500") during a rolling twelve
month period, calculated on a quarterly basis. In general, when the Fund
outperforms the S&P 500 by 10% or more during a period, then the Fund pays the
Adviser a bonus based on a formula described in the Agreement. Similarly, when
the Fund underperforms the S&P 500 by 10% or more during a period, then the
Adviser pays the Fund a penalty based on the same formula. 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. Additional details
regarding this bonus/penalty performance arrangement may be found in the
Investment Advisory Agreement attached as Exhibit A on pages A2-A4.
During the fiscal years ended December 31, 1999, 1998 and 1997, the
base advisory fees paid to the Adviser were $228,530, $258,381, and $306,656,
respectively. During the fiscal years ended December 31, 1999, 1998, and 1997
the Adviser paid the Fund a penalty equal to $501,445, $476,146 and $500,990,
respectively. Therefore, the Adviser's payment of penalties under the Agreement
offset the Fund's payment of fees to the Adviser so that the net effect was a
net payment by the Adviser to the Fund of $272,915, $217,765 and $194,334 during
the fiscal years ended December 31, 1999, 1998 and 1997, respectively.
Under an Agreement dated December 29, 1983, the Adviser also
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. This Agreement cannot be terminated without the approval
of the Fund and the Adviser.
<PAGE>
The Current Agreement runs for a term ending on December 31, 2000.
The Current 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 Current 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 Current 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.
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.
PROPOSED AGREEMENT
The terms of the Proposed Agreement are identical to the Current
Agreement, except for its initial and termination dates. If approved by the
shareholders, the Proposed Agreement would be effective on the date of approval
and would be continued in effect from year to year thereafter, 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 Current 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. A copy of the Proposed
Agreement is attached hereto as Exhibit A.
BOARD RECOMMENDATION AND VOTE REQUIRED FOR APPROVAL OF THE PROPOSED AGREEMENT
The Board reviewed various material factors in its evaluation of the
Adviser and the Investment Advisory Agreement, including, but not limited to,
the performance, services and costs of the Adviser in comparison to other
closed-end funds of similar size and nature. The Board of Directors has also
considered that the Fund's investment philosophy centers on the seven criteria
developed by the Adviser and its affiliates, and that the Adviser's years of
experience and research with respect to the seven criteria make the Adviser the
investment manager most capable of applying these principles to manage the Fund.
The Board has also reviewed the Adviser's commitment to the Fund, as evidenced
by the substantial significant portion of the Adviser's and its affiliates' net
worth invested in the Fund.
THEREFORE, THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE INVESTMENT ADVISORY AGREEMENT.
Approval of the Proposed Agreement requires the affirmative vote of a
majority of the outstanding voting shares of the Fund. Under the Investment
Company Act of 1940, the vote of a majority of the outstanding shares means the
lesser of (a) more than 50% of the outstanding shares; or (b) if more than 50%
of the outstanding shares are present at the meeting in person or by proxy, then
67% or more of the shares present. In the event that a quorum is present at the
meeting but sufficient votes in favor of the Proposed Agreement have not been
received, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote by a majority of the shares present in person
or by proxy at the meeting. The persons named as proxies will vote in favor of
such adjournment those proxies which are required to be voted in favor of the
Proposed Agreement. They will vote against such adjournment those proxies
required to be voted against the Proposed Agreement.
If the shareholders approve the Proposed Agreement, the Current
Agreement will be terminated at the same time as the Proposed Agreement becomes
effective. If the Proposed Agreement is not approved by the shareholders at the
Meeting, the Current Agreement will continue in effect and the Board of
Directors will consider such alternative management arrangements as it deems
appropriate and will submit its recommendations to the Fund's shareholders.
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 Barbara D. Perleberg, Secretary. An affiliate of the Adviser is
Ziskin Asset Management, Inc., which owns 18.2% of the Fund's voting securities.
Mr. Ziskin is the sole stockholder of Ziskin Asset Management, Inc.
<PAGE>
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 1999, 1998, and 1997, the aggregate amount of
commissions paid by the Fund were $30,675, $76,814, and $172,425, respectively.
Commissions expressed as a percentage of average daily net assets are as
follows: 1999: 0.168%; 1998: 0.372%; and 1997: 0.703%.
The portfolio turnover rate of the Fund in each of the last three
years has been as follows: 1999: 14.9%; 1998: 73.1%; and 1997: 111.3%.
APPRAISAL RIGHTS
Shareholders of the Fund are not entitled to rights of appraisal with respect to
the proposals to be voted upon at the Annual Meeting.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
If a shareholder wishes to present a proposal to be included in the
Proxy Statement for the 2001 Annual Meeting of Shareholders, which the Board of
Directors anticipates will be held on or about December 7, 2001, such proposal
must be submitted in writing and received at the Fund's principal executive
office not less than 120 days in advance of November 9, 2001.
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, during the most recently completed fiscal year ended December 31,
1999, all directors, officers, and 10% stockholders complied with Section 16(a)
filing requirements with the following exceptions: Mr. Ziskin was delinquent in
filing (1) a Form 4 due January 10, 2000 reporting the acquisition by Ziskin
Asset Management, Inc. Profit Sharing Plan of 249.81 shares on December 31,
1999 and (2) a Form 5 due February 14, 2000 reporting charitable gifts totaling
5,000 shares during 1999.
<PAGE>
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,
\s\ Barbara Perleberg
Barbara D. Perleberg
Secretary
Dated: November 10, 2000
Mesa, Arizona
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
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, 1999. 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, 1999, in conformity with generally accepted accounting principles.
\s\ Secore & Niedzialek, P.C.
March 14, 2000
<PAGE>
<TABLE>
<CAPTION>
TOP FUND MANAGEMENT, INC.
Balance Sheet
December 31, 1999
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents (Note A) $ 4,967
Dividend receivable (Notes A and C) 2,655
Note receivable from affiliate (Note B) 184,538
----------
Total current assets 192,160
Investments (Notes A and C) 409,108
----------
Total assets $ 601,268
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accrued expenses $ 10,461
Due to affiliate (Note B) 59,144
----------
Total current liabilities 69,605
Note payable to bank (Note D) 459,577
----------
Total liabilities 529,182
----------
Shareholder's equity:
Common shares, no par value; 200 shares
authorized, 10 shares issued and outstanding 809,100
Retained deficit (Note E) (584,937)
Accumulated other comprehensive loss
(Notes A, C and E) (152,077)
----------
Total shareholder's equity 72,086
----------
Total liabilities and shareholder's equity $ 601,268
==========
Commitments and contingencies (Note B)
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
TOP FUND MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
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.
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, see Note E.
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.
CONCENTRATIONS OF CREDIT RISK
--------------------------------
The Company occasionally maintains deposits in excess of federally insured
limits. Statement of Financial Accounting Standards No. 105 identifies these
items as a concentration of credit risk requiring disclosure, regardless of the
degree of risk. The risk is managed by maintaining all deposits in high quality
financial institutions.
<PAGE>
TOP FUND MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
(Continued)
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 Fund's net asset value's performance will be measured. The bonus or penalty
is payable at the end of each calendar quarter and will not exceed 2.5% of the
average daily net assets in the calendar quarter. The performance penalty fee
can exceed the base management fee. Furthermore, the bonus/penalty arrangement
will not become operative unless the performance of the 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, 1999, TFM owes the Fund a
net $59,144 comprised of $114,265 owed to the Fund in penalties as determined by
the bonus/penalty arrangement and $55,121 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, 1999, an expense
reimbursement was not required.
Ziskin Asset Management, Inc. ("ZAM"), an affiliated company has guaranteed and
pledged stock to the Fund to cover any penalty or expenses incurred by TFM under
the Agreement with the Fund. In addition, the Agreement has several covenants,
among them, that ZAM and TFM agree 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
fiscal quarter, but not more than $2,700,000. At December 31, 1999, the net
assets of the Fund were approximately $17,569,000. TFM and ZAM were in
compliance with all covenants at December 31, 1999.
<PAGE>
TOP FUND MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
(Continued)
NOTE B - RELATED PARTY TRANSACTIONS (CONTINUED)
AFFILIATES
----------
At December 31, 1999, TFM has a 9% note receivable totaling $184,538 from ZAM.
The sole shareholder of TFM is also the Director and President of the Fund, and
the sole shareholder of ZAM.
NOTE C - INVESTMENTS
The Company owns 53,200 shares of Z-Seven Fund, Inc. These shares have an
original cost of $561,185 and a fair market value of $409,108 at December 31,
1999. The unrealized loss for these equity securities at December 31, 1999, was
$152,077. In September 1999, the Fund declared dividends payable totaling
$0.0499 per share to the shareholders of record at December 21, 1999, to be paid
on December 30, 1999, of which $2,655 was received in 2000.
NOTE D - NOTE PAYABLE TO BANK
In April 1999, the Company obtained a $700,000 line of credit with Wells Fargo
Bank, NA with interest at the prime rate (8.5% at December 31, 1999) plus 0.5%.
The note matures May 2004 and requires only monthly interest payments. The note
is co-guaranteed by ZAM and by the sole shareholder of TFM. In addition, ZAM
has pledged 225,000 shares of Z-Seven stock as additional collateral. At
December 31, 1999 the unused portion of the note was $240,423.
NOTE E - RETAINED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in retained deficit for 1999 are as follows:
Balance, beginning of year $(282,203)
Net loss (302,734)
----------
Balance, end of year $(584,937)
==========
Changes in accumulated other comprehensive loss resulting from unrealized
Loss on investments for 1999 are as follows:
Balance, beginning of year $(135,585)
Unrealized loss incurred (16,492)
----------
Balance, end of year $(152,077)
==========
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
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, 1999. 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, 1999, in conformity with generally accepted accounting principles.
\s\ Secore & Niedzialek, P.C.
March 14, 2000
<PAGE>
ZISKIN ASSET MANAGEMENT, INC.
Balance Sheet
December 31, 1999
ASSETS
Current assets:
Cash and cash equivalents (Note A) $ 74,880
Accounts receivable (Note A) 11,247
Dividend receivable (Notes A and C) 18,363
Refundable income taxes (Notes A and D) 17,950
Other 914
----------
Total current assets 123,354
Note receivable from shareholder (Note B) 339,131
Deferred income tax assets (Notes A and D) 547,300
Investments (Notes A, B and C) 2,829,935
----------
Total assets $3,839,720
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,339
Unearned portfolio fees (Note A) 42,401
Note payable to affiliate (Note B) 184,538
----------
Total current liabilities 229,278
Unearned subscription revenues (Note A) 62,000
----------
Total liabilities 291,278
----------
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) 3,280,729
Accumulated other comprehensive income (Notes A and E) 260,022
----------
Total shareholder's equity 3,548,442
----------
Total liabilities and shareholder's equity $3,839,720
==========
Commitments and contingencies (Note B)
The accompanying notes are an integral part of this financial statement.
<PAGE>
ZISKIN ASSET MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
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 management 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, 1999
was $0.
REVENUE RECOGNITION
--------------------
Investment management fees are recognized as the related services are performed.
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, see Note E. Dividend income is recorded on the
ex-dividend date.
<PAGE>
ZISKIN ASSET MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
(Continued)
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 carried forward to future
periods or are refunded.
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 or losses on investments (not recognized
for income tax purposes until the investments are disposed). 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, 1999 all contributions to the plan have been fully
funded.
CONCENTRATION OF CREDIT RISK
-------------------------------
The Company occasionally maintains deposits in excess of federally insured
limits. Statement of Financial Accounting Standards No. 105 identifies these
items as a concentration of credit risk requiring disclosure, regardless of the
degree of risk. The risk is managed by maintaining all deposits in high quality
financial institutions.
<PAGE>
ZISKIN ASSET MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
(Continued)
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, 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 agree 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 fiscal quarter, but not more than
$2,700,000. At December 31, 1999, the net assets of the Fund were approximately
$17,569,000. ZAM and TFM were in compliance with all covenants at December 31,
1999.
The sole shareholder of ZAM is also the Director and President of the Fund, and
the sole shareholder of TFM.
The Company subleases office space from the Fund on a month to month basis.
At December 31, 1999, the Company has a note receivable from its sole
shareholder totaling $339,131 with interest at the prime rate (8.5% at December
31, 1999) plus 0.5%. The note requires annual interest only payments and
matures December 31, 2002.
At December 31, 1999, the Company has a 9% note payable to TFM totaling $184,538
due December 31, 2000.
The Company and its sole shareholder, co-guaranteed a $700,000 bank line of
credit agreement for TFM. As part of the loan agreement, ZAM has also pledged
225,000 shares of the Fund. At December 31, 1999, $459,577 was outstanding on
the bank loan to TFM.
NOTE C - INVESTMENTS
The Company owns 368,002 shares of Z-Seven Fund, Inc. These shares have an
original cost of $3,064,358 and a fair market value of $2,829,935 at December
31, 1999. ZAM has pledged 21,900 shares as collateral under a guarantee
agreement with the Fund, as described in Note B. In addition, the Company has
pledged 225,000 shares as collateral under a line of credit agreement on behalf
of TFM. In September 1999, the Fund declared dividends payable totaling $0.0499
per share to the shareholders of record at December 21, 1999, to be paid on
December 30, 1999, which was received in 2000.
<PAGE>
ZISKIN ASSET MANAGEMENT, INC.
Notes to Balance Sheet
December 31, 1999
(Continued)
NOTE D - INCOME TAXES
The Company's total deferred tax assets and liabilities are as follows:
Total deferred tax assets, long-term $ 547,300
Less valuation allowance -
Total deferred tax liabilities -
-----------
Net deferred tax assets $ 547,300
===========
As of December 31, 1999, loss carrybacks of approximately $53,300 are
available to offset prior years' federal income taxes. The tax benefit
of the loss carryback is approximately $18,000. In addition, $355,000
of loss carryforwards are available to offset future state income
taxes. If not used, the carryforwards expire in 2003 and 2004. The tax
benefit of the loss carryforward is approximately $28,000.
NOTE E - RETAINED EARNINGS AND ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in retained earnings for 1999 are as follows:
Balance, beginning of year $3,309,527
Net loss (28,798)
-----------
Balance, end of year $3,280,729
===========
Changes in accumulated other comprehensive income resulting from unrealized loss
on investments for 1999 are as follows:
Balance, beginning of year $ 328,103
Unrealized loss incurred, net of deferred income tax benefit (68,081)
------------
Balance, end of year $ 260,022
============
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT, dated , made and
entered into by and between Z-Seven Fund, Inc., a
Maryland corporation (hereinafter called the Investment Company") and TOP
Fund Management, Inc., a New York Corporation (hereinafter called "The
Adviser").
WITNESSETH:
The parties agree as follows:
1. Investment Services. The Adviser shall furnish advice to the
Investment Company with respect to investing in and purchasing and selling
securities and stock index futures contracts and related options thereon, and,
subject to the control of the Board of Directors of the Investment Company,
shall determine what securities and stock index futures contracts and related
options thereon shall be purchased or sold by the Investment Company and shall
effect such purchases and sales. The Adviser shall attempt to effect the
purchase and sale of such securities and stock index futures contracts and
related options thereon with and through such broker-dealers or futures
commissions merchants, as the case may be, as the Invest-ment Company directs.
In the case of any transactions where the Investment Company determines that
more than one broker-dealer would provide the best price and execution, the
Adviser may in its discretion, effect such transaction with or through any of
such broker-dealers or futures commission merchants, as the case may be, on the
basis of the furnishing of research, statistical or other services by such
broker-dealers or futures commissions merchants, as the case may be, to the
Adviser or Investment Company, or on such other reasonable basis as the Adviser
or the Investment Company determines. Any such sales, statistical, research or
other services rendered by broker-dealers or futures commissions merchants shall
not in any way offset or reduce the compensation to be paid to the Adviser
hereunder.
2. Additional Services. The Adviser shall furnish at the request of
the Board of Directors of the Investment Company, without expense to the
Investment Company, the services of all persons, including all directors,
officers and employees of the Adviser (such persons to be satisfactory to the
Investment Com-pany's Board of Directors), to serve as directors and officers of
the Investment Company, if any of such persons are elected or appointed to such
capacities The Adviser shall pay the compensation and travel expenses of all
persons acting as directors or officers of the Investment Company, and they
shall serve without additional compensation of any kind from the Investment
Company. No other employee of the Investment Company shall receive from the
Investment Company any salary or other compensation there-fore while such person
is at the same time a director, officer or employee of the Adviser or any of its
affili-ates. The foregoing prohibitions on the payment of compensation by the
Investment Company shall not apply to consultants and other persons who are not
regular members of the Adviser's staff and who are directors, officers or
employees of the Investment Company. The Adviser shall have no responsibility
to provide the Investment Company with office space or any office equipment or
supplies, or persons to per-form administrative, clerical or bookkeeping
functions on behalf of the Investment Company.
The Adviser shall supply the Board of Directors and officers of the
Investment Company with all statistical information reasonably required by them
and reasonably available to the Adviser.
A - 1
<PAGE>
3. Information to be Supplied by the Investment Company. The
Investment Company shall at all times keep the Adviser fully informed with
regard to the securities owned by it, its funds available or to become available
for investment, and generally as to the condition of its affairs. It shall
furnish the Adviser with a copy of all financial statements certified by its
financial officer, and a signed copy of each report prepared by certified public
accountants with respect to it, and with such other information with regard to
its affairs, as the Adviser may from time to time reasonably request.
4. EXPENSES OF THE INVESTMENT COMPANY. The Investment Company shall
pay all its expenses not assumed by the Adviser as provided herein. Such
expenses shall include, but shall not be limited to, custodian, depository,
registrar, stock transfer and dividend disbursing fees and expenses; costs of
the designing, printing and mailing of reports, proxy statements and notices to
its shareholders; expenses and fees of listing the Investment Company's
securities on an exchange; interest; taxes; expenses of the issu-ance or sale of
shares of the Investment Company (including registration and qualification
expenses and the cost of stock certificates); legal and auditing expenses;
telephone and telegraph expenses; the expenses of office space, equipment and
supplies; compensation, fees and expenses paid to the directors, officers or
employees of the Adviser or any of its affiliates; association dues; costs of
stationery and forms prepared exclusively for the Investment Company; and costs
of data transmissions. In the event that any employee of the Investment Company
performs services for the Adviser, there shall be charged to the Adviser a pro
rata share of the costs (allocated on the basis of working hours devoted to the
Adviser's affairs) associated with the employment of such employee incurred by
the Investment Company including, without limita-tion, salary expense, social
security and other employee taxes and health insurance and other fringe
benefits.
5. COMPENSATION OF THE ADVISER. The Investment Company shall pay to
the Adviser on or before the tenth (10th) day following the end of each calendar
quarter, as compensation for the services rendered by the Adviser under this
Agreement during such calendar quarter, a base advisory fee (hereinafter called
the "Base Advisory Fee") in an amount equal to .3125% of the average daily net
asset value of the Invest-ment Company during such calendar quarter, determined
on the last day of such calendar quarter; provided, however, that the Base
Advisory Fee for the period from the effective date hereof to the last day of
the calendar quarter in which such effective date occurs shall be prorated
according to the proportion which such period bears to the full calendar
quarter, and provided, further, that upon any termination of this Agreement on a
day other than the last day of a calendar quarter, the Base Advisory Fee for the
period from the beginning of the calendar quarter in which termination occurs to
the date of termination shall be prorated according to the proportion which such
period bears to the full calendar quarter.
In addition to the Base Advisory Fee, the Investment Company shall pay
to the Adviser a bonus or the Adviser shall pay to the Investment Company a
penalty, in each case on a quarterly basis, depending upon the performance
relative to the Standard & Poor's Index of 500 Composite Stocks (hereinafter
called the "Index"). The quarterly bonus or penalty, if any, shall be
calculated and paid as follows:
(a) The net asset value of the Investment Company at the beginning of
the fourth full calendar quarter preceding the date of determination (the
"Beginning NAV") shall be subtracted from the sum of the net asset value of the
Investment Company at the end of the calendar quarter immediately preceding the
date of determination plus the value of any distributions made by the Investment
Com-pany to its shareholders during any of the four calendar quarters that are
the subject of the determina-tion. The difference shall be divided by the
Beginning NAV and the quotient shall be expressed as a percentage (hereinafter
called the "Net Asset Value Percentage Change").
A - 2
<PAGE>
(b) The level of the Index at the beginning of the fourth full calendar
quarter preceding the date of determination (the "Beginning Index") shall be
subtracted from the level of the Index at the end of the calendar quarter
immediately preceding the date of determination. Adjustments for each
distribu-tions, if any, paid on the stocks included in the Index shall be made
in the same manner as provided in subparagraph (a) for adjusting net asset value
of the Investment Company. The difference shall be divided by the Beginning
Index and the quotient shall be expressed as a percentage (hereinafter called
the "Index Percentage Change").
(c) The Index Percentage Change shall then be subtracted from the Net
Asset Value Percentage Change, and the difference is hereinafter called the
"Performance Differential". It is understood that at any time the Net Asset
Value Percentage Change, the Index Percentage Change and the Perfor-mance
Differential, or any of them, could be a negative figure. To the extent that
the Performance Differential, whether positive or negative, exceeds nine and
nine-tenths (9.9) percentage points, there shall be payable, subject to the
second proviso of subparagraph (e) below, a bonus or penalty, depending on
whether the performance was positive or negative, equal to the product of (x)
the average daily net asset of the Investment Company for the four calendar
quarters that are utilized in the determina-tion times (y) 25% of the annual
bonus/penalty rate computed in accordance with the following table:
BONUS OR PENALTY
(ANNUAL PERCENTAGE
RATE APPLIED TO
AVERAGE DAILY
PERFORMANCE DIFFERENTIAL NET ASSETS)
----------------------------- -------------------
10 to 14.9 percentage points. . . . . . . . . . . . . . . . . . . . 1.0%
15 to 19.9 percentage points. . . . . . . . . . . . . . . . . . . . 1.5%
20 to 24.9 percentage points. . . . . . . . . . . . . . . . . . . . 2.0%
25 to 29.9 percentage points. . . . . . . . . . . . . . . . . . . . 2.5%
30 to 34.9 percentage points. . . . . . . . . . . . . . . . . . . . 3.0%
35 to 39.9 percentage points. . . . . . . . . . . . . . . . . . . . 3.5%
40 to 44.9 percentage points. . . . . . . . . . . . . . . . . . . . 4.0%
45 to 49.9 percentage points. . . . . . . . . . . . . . . . . . . . 4.5%
50 to 54.9 percentage points. . . . . . . . . . . . . . . . . . . . 5.0%
55 to 59.9 percentage points. . . . . . . . . . . . . . . . . . . . 5.5%
60 to 64.9 percentage points. . . . . . . . . . . . . . . . . . . . 6.0%
65 to 69.9 percentage points. . . . . . . . . . . . . . . . . . . . 6.5%
70 to 74.9 percentage points. . . . . . . . . . . . . . . . . . . . 7.0%
75 to 79.9 percentage points. . . . . . . . . . . . . . . . . . . . 7.5%
80 to 84.9 percentage points. . . . . . . . . . . . . . . . . . . . 8.0%
85 to 89.9 percentage points. . . . . . . . . . . . . . . . . . . . 8.5%
90 to 94.9 percentage points. . . . . . . . . . . . . . . . . . . . 9.0%
95 to 99.9 percentage points. . . . . . . . . . . . . . . . . . . . 9.5%
100 or more percentage points. . . . . . . . . . . . . . . . . . . 10.0%
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(d) The bonus or penalty payable in respect of any calendar quarter
shall not exceed 2.5% of the average daily net asset value of the Investment
Company for the four calendar quarters that are utilized in the determination of
the bonus or penalty.
(e) The bonus or penalty earned or payable by the Adviser shall be
determined and paid within 10 days following the close of each calendar quarter;
provided, however, that no bonus or penalty was paid in respect of the calendar
quarter in which the Investment Company commenced doing business; and provided
further that the bonus or penalty that would have been paid at the end of each
of the first four full calendar quarters during the first year of business was
computed at the end of the fourth such quarter and the bonus or penalty, as the
case may be, was computed for such four calendar quarter periods on the basis of
the full annual rate set forth in the table included as part of subparagraph
(c), and the bonus and penalty so computed was paid within ten days following
the close of the fourth such quarter. Any such payment made within ten days
after the close of a calendar quarter shall be considered for all purposes
hereunder as having been paid within said calendar quarter but no such payment,
whether to or by the Adviser, shall be deemed to increase or decrease Net Asset
Value for purposes of com-puting the Base Advisory Fee or the bonus or penalty
payment for such period.
(f) If this agreement terminates on a date other than at the end of a
calendar quarter, or if there is any other short fiscal period resulting from a
change of the Investment Company's fiscal year or otherwise, the incentive
adjustment for such period shall be computed as follows: (1) the effective date
or other commencement of the short fiscal period shall be deemed the beginning
of a calendar quarter, and the termination date or other end of a short fiscal
period shall be deemed the end of a calendar quarter; (2) in determining the
annual rate of the bonus or penalty applicable to any Perfor-mance Differential
for any four calendar quarters including such short fiscal period, each of the
per-centage figures set forth in the column labeled "Performance Differential"
in the table included as part of subparagraph (c) shall be changed to the
fraction of such percentage point which 270 plus the number of days in such
short fiscal period bears to 360; and (3) the maximum limitation of 2.5% which
the number of days in such short fiscal period bears to 90.
(g) Payments described herein shall be accompanied by a report of the
Investment Company prepared either by the Investment Company or by a reputable
firm of independent accountants which shall show the amount properly payable to
the Adviser under this agreement and the detail or com-putation thereof. If the
Adviser does not dispute such report within 30 days from the receipt thereof, it
shall be deemed binding and conclusive on the parties hereto.
6. ADVISER'S RESPONSIBILITY. The Adviser assumes no responsibility
other than to render the ser-vices called for hereunder and to make the penalty
payments, if any, prescribed in paragraph 5 above. The Adviser shall have no
liability to the Investment Company, or to its shareholders or creditors, for
any error in judgment, mistake of law, or for any loss arising out of any
investment, or for any other act of omission in the performance of its
obligations to the Investment Company, except for liability to which it would be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations hereunder.
7. NO LIMITATIONS ON OTHER EMPLOYMENT. Nothing in this Agreement shall
limit or restrict the right of any director, officer or employee of the Adviser
who may also be a director, officer or employee of the Investment Company to
engage in any other business, whether of a similar nature or a dissimilar
nature, however, the Adviser shall not act as an investment Adviser to anyone
but the Investment Company.
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8. COVENANTS OF THE ADVISER. (a) Key Man Insurance. The Adviser shall
at its expense cause to be maintained Key Man Insurance covering Barry Ziskin in
an amount not less than $2 million (and, to the extent any such insurance
consists of a whole life or similar type policy, not make any borrowings in
connection therewith which would cause the benefits payable thereunder to be
less than $2 million). The Adviser shall further cause the Investment Company
to be duly designated, by means in form and substance satisfactory to the
Investment Company, a beneficiary on policies of Key Man Insurance covering
Barry Ziskin owned by the Adviser. Upon request of the Investment Company, the
Adviser shall fur-nish the Investment Company, with copies of all such insurance
policies and such other evidence as to com-pliance with the foregoing, and as
the Investment Company may reasonably request.
(b) Dividend Restriction. The Adviser covenants and agrees that, so
long as this Agreement is in effect, the Adviser, unless the Adviser receives
written consent of the Investment Company allowing ac-tions or omissions to the
contrary, will not pay or decree any dividend on its stock or make any other
distribu-tion on account of its stock or redeem, purchase or otherwise acquire,
directly or indirectly, any share of its stock, or otherwise make any
distribution or other disposition of any of its assets whether in the or-dinary
course of business or otherwise, if after and giving effect to such action the
sum of the tangible net worth (being the excess of total assets over total
liabilities, excluding from total assets all assets classified as intangible
assets under generally accepted accounting principles) of the Adviser plus the
tangible net worth of Ziskin Asset Management, Inc., which has guaranteed the
obligations of the Adviser hereunder, would be less than the greater of (i)
$1,500,000 or (ii) 10% of the net assets of the Investment Company as of the
last day of the most recently ended fiscal quarter of the Investment Company but
not more than $2,700,000.
9. TERMINATION. Subject to the next sentence of this paragraph, this
Agreement shall be in effect until the close of business on December 31, 2000
and shall continue in effect from year to year thereafter, but only so long as
such continuance shall be specifically approved at least annually by the Board
of Direc-tors of the Investment Company, including a majority of the directors
who are not parties to this Agreement or interested persons (within the meaning
of the Investment Company Act of 1940) of the Adviser or of the Investment
Company, cast in person at a meeting called for the purpose of voting on such
approval, or by vote of a majority (within the meaning of the Investment Company
Act of 1940) of the outstanding voting shares of the Investment Company.
Notwithstanding anything herein to the contrary, this Agree-ment may be
terminated at any time, without payment of any penalty, by the Board of
Directors of the Investment Company or by vote of a majority (within the meaning
of the Investment Company Act of 1940) of the outstanding voting shares of the
Investment Company, on sixty (60) days' written notice to the Adviser.
10. NON-ASSIGNABILITY. This agreement shall not be assignable by
either party hereto, and in the event of assignment (within the meaning of the
Investment Company Act of 1940) by the Adviser, this agreement shall
automatically be terminated forthwith.
11. APPROVAL OF THIS AGREEMENT AND AMENDMENTS. This Agreement and any
amendments made hereto shall be approved by vote of the holders of a majority of
the outstanding shares of the Investment Company. Thereafter; no amendment to
this Agreement shall become effective until approved by vote of the holders of a
majority of the outstanding shares of the Investment Company. In the event that
this agreement is not ratified by shareholders of the Investment Company at the
Annual Meeting in 1999, the Investment Company and the Adviser shall continue to
be bound by the Investment Advisory Agreement in effect immediately prior to
said Annual Meeting.
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12. NOTICES. Any notices required hereunder shall be in writing and
shall be deemed given when delivered in person or when sent by first-class
registered or certified mail to the parties at the following address or at such
addresses as either party may from time to time specify by notice to the other:
If to the Investment Company at:
Z-Seven Fund, Inc.
1819 S. Dobson Road
Suite #109
Mesa, AZ 85202
If to the Adviser at:
TOP Fund Management, Inc.
1819 S. Dobson Road
Suite #109
Mesa, AZ 85202
13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the law of the State of New York.
IN WITNESS WHEREOF the parties hereto have executed these presents on the
date first above mentioned.
Z-SEVEN FUND, INC.
By_________________________________
President
TOP FUND MANAGEMENT, INC.
By_________________________________
President
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