UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-04739
The Zweig Fund, Inc.
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(Exact name of registrant as specified in charter)
900 Third Avenue
New York, NY 10022
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(Address of principal executive offices) (Zip code)
Kevin J. Carr, Esq. John H. Beers, Esq.
Chief Legal Officer and Secretary for Registrant Vice President and Secretary
Phoenix Life Insurance Company Phoenix Life Insurance Company
One American Row One American Row
Hartford, CT 06102 Hartford, CT 06102
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(Name and address of agent for service)
Registrant's telephone number, including area code: 800-272-2700
Date of fiscal year end: December 31
Date of reporting period: September 30, 2005
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (Sections 239.24 and 274.5
of this chapter), to file reports with the Commission, not later than 60 days
after the close of the first and third fiscal quarters, pursuant to rule 30b1-5
under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may
use the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. Section 3507.
Item 1. Schedule of Investments.
The Schedule of Investments is attached herewith.
Glossary
American Depositary Receipt (ADR): Represents shares of foreign companies
traded in U.S. dollars on U.S. exchanges that are held by a bank or a trust.
Foreign companies use ADRs in order to make it easier for Americans to buy
their shares.
1
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT
September 30, 2005
(Unaudited)
Number of
Shares Value
--------- -----------
INVESTMENTS
DOMESTIC COMMON STOCKS 78.47%
CONSUMER DISCRETIONARY -- 7.64%
Comcast Corp. Class A/(b)/.................... 190,000 $ 5,582,200
McDonald's Corp............................... 180,000 6,028,200
Movie Gallery, Inc............................ 250,000 2,597,500
NIKE, Inc. Class B............................ 72,000 5,880,960
Omnicom Group, Inc./(d)/...................... 75,000 6,272,250
Viacom, Inc. Class B.......................... 175,000 5,776,750
-----------
32,137,860
-----------
CONSUMER STAPLES -- 10.27%
Archer Daniels Midland Co..................... 260,000 6,411,600
Costco Wholesale Corp......................... 150,000 6,463,500
Kimberly-Clark Corp........................... 100,000 5,953,000
PepsiCo, Inc.................................. 110,000 6,238,100
Procter & Gamble Co........................... 113,200 6,730,872
Ralcorp Holdings, Inc......................... 150,000 6,288,000
Sara Lee Corp................................. 270,000 5,116,500
-----------
43,201,572
-----------
ENERGY -- 8.21%
Burlington Resources, Inc..................... 90,000 7,318,800
ConocoPhillips................................ 110,000 7,690,100
Halliburton Co................................ 110,000 7,537,200
Occidental Petroleum Corp..................... 85,000 7,261,550
Valero Energy Corp............................ 42,000 4,748,520
-----------
34,556,170
-----------
FINANCIALS -- 16.19%
Allstate Corp................................. 135,000 7,464,150
Bank of America Corp./(d)/.................... 130,000 5,473,000
Capital One Financial Corp.................... 75,000 5,964,000
Goldman Sachs Group, Inc...................... 60,000 7,294,800
Huntington Bancshares, Inc.................... 250,000 5,617,500
Morgan Stanley................................ 115,000 6,203,100
National City Corp............................ 165,000 5,517,600
New York Community Bancorp, Inc............... 340,000 5,576,000
See notes to schedule of investments and securities sold short
2
Number of
Shares Value
--------- ------------
FINANCIALS (CONTINUED)
PNC Financial Services Group, Inc.......... 120,000 $ 6,962,400
Wachovia Corp.............................. 120,000 5,710,800
Wells Fargo & Co........................... 108,000 6,325,560
------------
68,108,910
------------
HEALTH CARE -- 10.71%
Amgen, Inc./(b)/........................... 85,000 6,771,950
Bard (C.R.), Inc........................... 90,000 5,942,700
Bristol-Myers Squibb Co.................... 250,000 6,015,000
Gilead Sciences, Inc./(b)/................. 150,000 7,314,000
Merck & Co., Inc........................... 210,000 5,714,100
Pfizer, Inc................................ 240,000 5,992,800
UnitedHealth Group, Inc.................... 130,000 7,306,000
------------
45,056,550
------------
INDUSTRIALS -- 9.75%
AMR Corp./(b)/............................. 507,000 5,668,260
Boeing Co. (The)........................... 100,000 6,795,000
Continental Airlines, Inc. Class B/(b)/.... 620,000 5,989,200
Deere & Co./(d)/........................... 86,000 5,263,200
L-3 Communications Holdings, Inc./(d)/..... 80,000 6,325,600
Norfolk Southern Corp...................... 170,000 6,895,200
PACCAR, Inc................................ 60,000 4,073,400
------------
41,009,860
------------
INFORMATION TECHNOLOGY -- 12.29%
Cisco Systems, Inc./(b)/................... 315,000 5,647,950
Dell, Inc./(b)/............................ 180,000 6,156,000
EMC Corp./(b)/............................. 470,000 6,081,800
Hewlett-Packard Co......................... 70,000 2,044,000
Intel Corp................................. 250,000 6,162,500
International Business Machines Corp....... 80,000 6,417,600
Microsoft Corp............................. 240,000 6,175,200
QUALCOMM, Inc.............................. 160,000 7,160,000
VeriSign, Inc./(b)/........................ 275,000 5,876,750
------------
51,721,800
------------
MATERIALS -- 3.41%
Dow Chemical Co./(d)/...................... 135,000 5,625,450
Freeport-McMoRan Copper & Gold, Inc. Class B 50,000 2,429,500
Georgia-Pacific Corp....................... 185,000 6,301,100
------------
14,356,050
------------
Total Domestic Common Stocks
(Identified Cost $294,804,524)............ 330,148,772
------------
See notes to schedule of investments and securities sold short
3
Number of
Shares Value
--------- ------------
FOREIGN COMMON STOCKS/(c)/ 9.15%
CONSUMER DISCRETIONARY -- 2.92%
Honda Motor Co. Ltd ADR (Japan)/(d)/............. 240,000 $ 6,816,000
Sony Corp. ADR (Japan)........................... 165,000 5,476,350
------------
12,292,350
------------
FINANCIALS -- 0.44%
Deutsche Bank AG (Germany)....................... 20,000 1,870,400
------------
HEALTH CARE -- 2.72%
Angiotech Pharmaceuticals, Inc. (United
States)/(b)/................................... 400,000 5,608,000
Sanofi-aventis ADR (France)...................... 140,000 5,817,000
------------
11,425,000
------------
INFORMATION TECHNOLOGY -- 3.07%
Amdocs Ltd. (United States)/(b)/................. 240,000 6,655,253
Nokia OYJ ADR (Finland).......................... 370,000 6,256,700
------------
12,911,953
------------
Total Foreign Common Stocks
(Identified Cost $37,393,871)................... 38,499,703
------------
PREFERRED STOCKS 0.05%
FINANCIALS -- 0.05%
Citibank NA Series A 6.34% Pfd................... 2,000 201,438
------------
Total Preferred Stocks
(Identified Cost $202,000)...................... 201,438
------------
EXCHANGE TRADED FUNDS -- 3.81%
iShares MSCI Japan Index Fund.................... 500,000 6,095,000
NASDAQ-100 Shares................................ 252,000 9,943,920
------------
Total Exchange Traded Funds
(Identified Cost $15,369,592)................... 16,038,920
------------
Par
(000's)
---------
U.S. GOVERNMENT SECURITIES 7.20%
U.S. TREASURY NOTES -- 7.20%
U.S. Treasury Note 12.75%, 11/15/10.............. $30,000 30,307,020
------------
Total U.S. Government Securities
(Identified Cost $34,918,462)................... 30,307,020
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Total Long Term Investments -- 98.68%
(Identified Cost $382,688,449).................. 415,195,853
------------
See notes to schedule of investments and securities sold short
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Par
(000's) Value
------- ------------
SHORT-TERM INVESTMENTS 2.38%
COMMERCIAL PAPER -- 2.38%
Target Corp. 3.86%, 10/3/05...................... $10,000 $ 10,000,000
------------
Total Short-Term Investments
(Identified cost $9,997,855).................. 10,000,000
------------
Total Investments
(Identified Cost $392,686,304) -- 101.06%..... 425,195,853/(a)/
Securities Sold Short
(Proceeds $17,943,931) -- (5.28)%............. (22,201,200)
Other Assets Less Liabilities -- 4.22%............ 17,736,874
------------
Net Assets -- 100.00%............................. $420,731,527
============
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(a) Federal Tax information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $62,123,452 and gross
depreciation of $30,837,423 for federal tax purposes. At September 30,
2005, the aggregate cost of securities for federal income tax purposes was
$393,909,824.
(b) Non-income producing.
(c) Foreign common stocks are determined based on the country in which the
security is issued. The country of risk is determined based on criteria in
Note 1D "Foreign security country determination" in the notes to schedule
of investments and securities sold short.
(d) Position, or a portion thereof, has been segregated to collateralize
securities sold short.
See notes to schedule of investments and securities sold short
5
Number of
Shares Value
--------- -----------
SECURITIES SOLD SHORT
DOMESTIC COMMON STOCKS 3.31%
CONSUMER DISCRETIONARY -- 1.45%
Wendy's International, Inc....................... 135,000 $ 6,095,250
MATERIALS -- 1.12%
Nucor Corp....................................... 80,000 4,719,200
UTILITIES -- 0.74%
Reliant Energy, Inc.............................. 200,000 3,088,000
-----------
Total Domestic Common Stocks
(Proceeds $10,188,455).......................... 13,902,450
-----------
EXCHANGE TRADED FUNDS 1.97%
iShares Russell 2000 Index Fund.................. 125,000 8,298,750
-----------
Total Exchange Traded Funds
(Proceeds $7,755,476)........................... 8,298,750
-----------
Total Securities Sold Short
(Proceeds $17,943,931).......................... $22,201,200/(e)/
===========
--------
(e) Federal Tax information: Net unrealized depreciation of securities sold
short is comprised of gross appreciation of $0 and gross depreciation of
$4,257,269 for federal income tax purposes. At September 30, 2005, the
aggregate proceeds of securities sold short for federal income tax
purposes was ($17,943,931).
See notes to schedule of investments and securities sold short
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THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT
September 30, 2005
(Unaudited)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Zweig Fund, Inc. (the "Fund") in the preparation of the
Schedule of Investments and Securities Sold Short. The preparation of the
Schedule of Investments and Securities Sold Short in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, and contingent assets and liabilities at the date of
the Schedules of Investments. Actual results could differ from those estimates.
A. Security Valuation:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service, which in determining value utilizes information
with respect to recent sales, market transactions in comparable securities,
quotations from dealers, and various relationships between securities in
determining value.
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Trustees.
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement in
the U.S. securities market, or other regional and local developments) may occur
between the time that foreign markets close (where the security is principally
traded) and the time that the Fund calculates its net asset value (generally,
the close of the NYSE) that may impact the value of securities traded in these
foreign markets. In these cases, information from an external vendor may be
utilized to adjust closing market prices of certain foreign common stocks to
reflect their fair value. Because the frequency of significant events is not
predictable, fair valuation of certain foreign common stocks may occur on a
frequent basis.
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
B. Security Transactions and Related Income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date, or in the case of certain foreign securities,
as soon as the Fund is notified. Interest income is recorded on the accrual
basis. The Fund amortizes premiums and accretes discounts using the effective
interest method. Realized gains and losses are determined on the identified
cost basis.
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C. Foreign Currency Translation:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date.
D. Foreign Security Country Determination:
A combination of the following criteria is used to assign the countries of
risk listed in the schedule of investments and securities sold short: country
of incorporation, actual building address, primary exchange on which the
security is traded and country in which the greatest percentage of company
revenue is generated.
E. Options:
The Fund may write covered options or purchase options contracts for the
purpose of hedging against changes in the market value of the underlying
securities or foreign currencies. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When a written option is
exercised, the proceeds on sales or amounts paid are adjusted by the amount of
premium received.
The Fund may purchase options, which are included in the Fund's Schedule of
Investments and Securities Sold Short and subsequently marked-to-market to
reflect the current value of the option. When a purchased option is exercised,
the cost of the security is adjusted by the amount of premium paid. The risk
associated with purchased options is limited to the premium paid.
Transactions in written options for the period ended September 30, 2005 were
as follows:
Number of Premiums
Contracts Received
--------- ---------
Option contracts outstanding at December 31, 2004. -- $ --
Option contracts written.......................... 430 183,610
Option contracts sold............................. -- --
Option contracts exercised........................ (430) (183,610)
Option contracts expired.......................... -- --
---- ---------
Option contracts outstanding at September 30, 2005 -- $ --
==== =========
F. Short Sales:
A short sale is a transaction in which the Fund sells a security it does not
own in anticipation of a decline in market price. To sell a security short, the
Fund must borrow the security. The Fund's obligation to replace the security
borrowed and sold short will be fully collateralized at all times by the
proceeds from the short sale retained by the broker and by cash and securities
deposited in a segregated account with the Fund's custodian. If the price of
the security sold short increases between the time of the short sale and the
time the Fund replaces the borrowed security, the Fund will realize a loss, and
if the price declines during the period, the Fund will realize a gain. Any
realized gain will be decreased, and any realized loss increased, by the amount
of transaction costs. On ex-dividend date, dividends on short sales are
recorded as an expense to the Fund. At September 30, 2005, the value of
securities sold short amounted to $22,201,200 against which collateral of
$46,585,750 was held. The collateral includes the deposits with broker for
securities held short and the value of the segregated investments held long,
8
as shown in the Schedule of Investments and Securities Sold Short. Short
selling used in the management of the Fund may accelerate the velocity of
potential losses if the prices of securities sold short appreciate quickly.
Stocks purchased may decline in value at the same time stocks sold short may
appreciate in value, thereby increasing potential losses.
NOTE 2 -- CREDIT RISK AND ASSET CONCENTRATION
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as the Fund's ability to
repatriate such amounts.
The Fund may invest a high percentage of their assets in specific sectors of
the market in their pursuit of a greater investment return. Fluctuations in
these sectors of concentration may have a greater impact on the Fund, positive
or negative, than if the Fund did not concentrate its investments in such
sectors.
9
Item 2. Controls and Procedures.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
Item 3. Exhibits.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Zweig Fund, Inc.
By (Signature and Title)* /s/ Daniel T. Geraci
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Daniel T. Geraci, President and
Chief Executive Officer
(principal executive officer)
Date November 22, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Daniel T. Geraci
---------------------------------------------------
Daniel T. Geraci, President and
Chief Executive Officer
(principal executive officer)
Date November 22, 2005
By (Signature and Title)* /s/ Nancy G. Curtiss
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Nancy G. Curtiss, Treasurer
(principal financial officer)
Date November 22, 2005
* Print the name and title of each signing officer under his or her signature.