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 THIRD QUARTER RESULTS
During the third quarter, the investment portfolio decreased 3%. Our net asset
value also slipped 3% from $7.61 to $7.37.
The latest quarter brought stock market volatility we warned of in our second
quarter report. Because we anticipated this volatility and prepared for it, we
were able to cushion our shareholders from most of the decline seen in the S&P
500 and Russell 2000 indices - both of these market gauges lost nearly 7% during
the quarter. We continue to be defensively postured for even greater potential
volatility ahead, and we are in an excellent position to take advantage of
buying opportunities when they arise.
1999 NINE-MONTH RESULTS
Over the first nine months of 1999, our investments declined 5%. Our net asset
value dipped from $7.80 to $7.37.
Although a difficult opening quarter gave us a disappointing comparison with the
S&P 500 and Russell 2000 for the nine-month period, it is worth noting that a 1%
gain in the more comparable Russell 2000 is not what it appears. Like many
other indices (including the S&P 500 and NASDAQ), the Russell 2000 is heavily
weighted by the biggest and most popular stocks. Removing the relative handful
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of billion dollar plus market stocks from the Russell 2000 illustrates that
without these large-cap stocks the Russell 2000, which is thought of as being
small capitalization in nature, actually declined nearly 9%. In our own Z-Seven
portfolio, most of our equity investment is in domestic stocks (55%) of which
more than 89% are less than $1 billion in market caps.
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, nearly 90% of our U.K. invested assets are in companies still showing
operating earnings growth in their latest reports.
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 significant stock market
downturn 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
of these recently added small and micro-cap domestic companies continues to be
outstanding, even better than expected in many cases. The exceptions among this
unusually large group of companies have mostly been weeded out during the fourth
quarter of 1999, and we are moving forward with one of the best portfolios I can
remember.
The recent Federal Reserve and Bank of England tightenings, along with more than
a year and a half of new Dow, S&P and NASDAQ composite highs unsupported by the
broad market, may bring near-term difficulty for U.S. stocks before we can
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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,
/s/ Barry Ziskin
Barry Ziskin December 10, 1999
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YEAR 2000
Due to the reliance on computing, accounting and trading systems to conduct
their businesses, the Fund, its service providers and its portfolio companies
may be adversely affected if any of such entity's respective computing,
accounting or trading systems, or those systems used by other entities with
which they conduct business, are not capable of processing information with
dates on or after January 1, 2000 properly (i.e., if such systems are not
"Y2K-ready").
The Fund has not incurred any substantial cost 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.
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Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------ ----------- -----------
Investment Securities Shares Value
- ------------------------------------------ ----------- -----------
Common Stocks (a)
- ------------------------------------------ ----------- -----------
<S> <C> <C>
APPAREL & ACCESSORIES - 3.1%
- ------------------------------------------ ----------- -----------
Abbeycrest Plc 10,000 $ 19,352
Nautica Enterprises, Inc. (b) 11,700 188,663
Quiksilver, Inc. (b) 15,150 276,487
Tarrant Apparel Group (b) 5,100 57,375
-----------
541,877
-----------
AUTOMOTIVE & TRANSPORTATION - 3.3%
Autopistas C.E. SA 10,227 113,252
Strattec Security Corporation (b) 13,600 476,000
-----------
589,252
-----------
BUILDING & MATERIALS - 4.3%
Barratt Developments Plc 80,000 345,208
Hughes Supply 12,200 265,350
NCI Building Systems, Inc. (b) 9,400 155,687
-----------
766,245
-----------
COMMUNICATION - 2.1%
AVT Corporation (b) 7,200 220,500
Vertex Communications
Corporation (b) 14,000 156,625
-----------
377,125
-----------
COMPUTER & RELATED - 17.9%
CIBER, Inc. (b) 7,200 110,250
Computer Horizons
Corporation (b) 13,000 151,125
Cybex Computer Products
Corporation (b) 7,650 255,319
Hummingbird
Communications Ltd. (b) 7,800 173,550
Insight Enterprises, Inc. (b) 6,187 201,077
Kronos, Inc. (b) 11,050 405,397
Oracle Corporation (b) 6,600 300,300
Pomeroy Computer
Resources, Inc. (b) 19,900 220,144
Sanderson Group Plc 199,000 578,493
Smart Modular
Technologies, Inc. (b) 8,000 272,500
Synopsys, Inc. (b) 8,600 482,944
-----------
3,151,099
-----------
</TABLE>
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Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at September 30, 1999 (Unaudited) Continued
<TABLE>
<CAPTION>
- ------------------------------------------ ----------- -----------
Investment Securities Shares Value
- ------------------------------------------ ----------- -----------
Common Stocks (a)
- ------------------------------------------ ----------- -----------
<S> <C> <C>
ELECTRICAL & ELECTRONICS - 10.8%
AFC Cable Systems, Inc. (b) 3,100 $ 131,750
Benchmark Electronics, Inc. (b) 7,100 250,719
LSI Industries, Inc. 11,600 265,350
Plexus 8,600 263,375
Roxboro Group Plc 100,500 409,668
TT Group Plc 61,900 139,925
Technitrol, Inc. 12,600 444,150
-----------
1,904,937
-----------
FINANCIAL SERVICES - 11.9%
Jardine Lloyd Thompson Group Plc 244,100 1,029,199
Rathbone Brothers Plc 86,000 1,062,315
-----------
2,091,514
-----------
FOOD & BEVERAGE - 1.2%
Carlsberg A/S 2,700 99,928
Lindt & Spr ngli AG 46 116,916
-----------
216,844
-----------
HEALTH & PERSONAL CARE - 4.9%
AstraZeneca Plc (c) 5,340 224,014
L'Or al 325 208,262
National Dentex Corporation (b) 17,100 291,769
Novartis AG 99 147,437
-----------
871,482
-----------
LEISURE - 4.4%
Anchor Gaming (b) 6,000 357,000
Ballantyne of Omaha, Inc. (b) 50,505 284,090
Dave and Buster's, Inc. (b) 12,000 143,250
-----------
784,340
-----------
MULTI-INDUSTRY - 5.1%
Day Runner, Inc. (b) 16,800 140,700
Northern Technologies
International Corporation 23,300 164,556
Tomkins Plc 40,966 172,725
VT Holding A/S 10,565 429,663
-----------
907,644
-----------
RETAIL - 2.0%
Grow Biz International, Inc. (b) 26,700 81,769
The Men's Wearhouse, Inc. (b) 10,400 223,600
Westfair Foods Ltd. 360 39,245
-----------
344,614
-----------
MISCELLANEOUS - 3.5% 66,000 625,040
-----------
</TABLE>
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Z-Seven Fund, Inc.
SCHEDULE OF INVESTMENTS
at September 30, 1999 (Unaudited) Continued
<TABLE>
<CAPTION>
- ------------------------------------------ ----------- -----------
Investment Securities Shares Value
- ------------------------------------------ ----------- -----------
Common Stocks (a)
- ------------------------------------------ ----------- -----------
<S> <C> <C>
TOTAL COMMON STOCKS - 74.6%
(Cost $12,980,968) $13,172,013
- ------------------------------------------ ----------- -----------
Options
- ------------------------------------------ ----------- -----------
S & P 500 PUTS - 6.4%
(Cost $995,500) 100 1,137,500
- ------------------------------------------ ----------- -----------
Temporary Cash Investments
- ------------------------------------------ ----------- -----------
U.S. TREASURY BILLS,
TOTAL TEMPORARY CASH INVESTMENTS - 5.6%
(Cost $982,002) 982,002
- ------------------------------------------ ----------- -----------
TOTAL INVESTMENT SECURITIES - 86.6%
(Cost $14,958470) 15,291,515
- ------------------------------------------ ----------- -----------
CASH, RECEIVABLES, AND OTHER ASSETS
LESS LIABILITIES - 13.4% 2,357,717
- ------------------------------------------ ----------- -----------
NET ASSETS - 100.0%
(Equivalent to $7.37 per share based
on 2,394,531 shares of capital stock
outstanding) $17,649,232
========================================== =========== ===========
<FN>
(a) Percentages are based on net assets of $17,649,232.
(b) Non-income producing investment.
(c) Formerly Astra AB.
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------
COMMON STOCKS BY COUNTRY
- -------------------------------------
Percent Country Value
- -------------------------------------
<C> <S> <C>
54.9% United States $ 7,237,822
33.3% United Kingdom 4,381,925
4.0% Denmark 529,591
1.6% Canada 212,795
2.0% Switzerland 264,352
1.7% Sweden 224,014
1.6% France 208,262
.9% Spain 113,252
- -------------------------------------
100.0% $13,172,013
=====================================
</TABLE>
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BOARD OF DIRECTORS
Barry Ziskin
Albert Feldman
Dr. Jeffrey Shuster
Rochelle Ziskin
Maria De Los Santos
INVESTMENT ADVISOR
TOP Fund Management, Inc.
OFFICERS
Barry Ziskin
President and Treasurer
Barbara Perleberg
Secretary
CUSTODIAN
Chase Manhattan Bank
TRANSFER AGENT
Norwest Bank Minnesota, N.A.
Shareowner Services
INDEPENDENT AUDITORS
KPMG LLP
GENERAL COUNSEL
Kilpatrick Stockton LLP
STOCK LISTINGS
NASDAQ
Symbol: ZSEV
Pacific Exchange
Symbol: ZSE
CORPORATE OFFICE
1819 South Dobson Road
Suite 109
Mesa, AZ 85202
(602) 897-6214
Fax (602) 345-9227
[email protected]
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