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 Ave, 31st Floor
New York, NY 10022-4728
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(Address of principal executive offices) (Zip code)
Kevin J. Carr, Esq.
Chief Legal Officer and Secretary for John H. Beers, Esq.
Registrant Vice President and Counsel
Phoenix Life Insurance Company Phoenix Life Insurance Company
One American Row One American Row
Hartford, CT 06103-2899 Hartford, CT 06103-2899
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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, 2006
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
ADR (American Depositary Receipt): 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, 2006
(Unaudited)
Number of
Shares Value
--------- -----------
INVESTMENTS
DOMESTIC COMMON STOCKS 74.39%
CONSUMER DISCRETIONARY -- 9.39%
Abercrombie & Fitch Co./(e)/.................. 105,000 $ 7,295,400
Ford Motor Corp./(e)/......................... 800,000 6,472,000
Gap, Inc. (The)............................... 330,000 6,253,500
McDonald's Corp............................... 180,000 7,041,600
Newell Rubbermaid, Inc./(e)/.................. 235,000 6,655,200
Nike, Inc. Class B/(e)/....................... 72,000 6,308,640
-----------
40,026,340
-----------
CONSUMER STAPLES -- 7.15%
Archer-Daniels-Midland Co./(e)/............... 140,000 5,303,200
Costco Wholesale Corp./(e)/................... 125,000 6,210,000
Kimberly-Clark Corp........................... 100,000 6,536,000
PepsiCo, Inc./(d)/............................ 95,000 6,199,700
Procter & Gamble Co........................... 100,000 6,198,000
-----------
30,446,900
-----------
ENERGY -- 5.29%
ConocoPhillips................................ 95,000 5,655,350
Halliburton Co................................ 190,000 5,405,500
Occidental Petroleum Corp..................... 110,000 5,292,100
Valero Energy Corp............................ 120,000 6,176,400
-----------
22,529,350
-----------
FINANCIALS -- 17.56%
Allstate Corp................................. 115,000 7,213,950
Bank of America Corp./(d)/.................... 130,000 6,964,100
Goldman Sachs Group, Inc...................... 45,000 7,612,650
Huntington Bancshares, Inc./(e)/.............. 250,000 5,982,500
JPMorgan Chase & Co........................... 150,000 7,044,000
Merrill Lynch & Co., Inc...................... 90,000 7,039,800
Morgan Stanley................................ 100,000 7,291,000
New York Community Bancorp, Inc./(e)/......... 340,000 5,569,200
PNC Financial Services Group, Inc............. 90,000 6,519,600
Wachovia Corp................................. 120,000 6,696,000
Wells Fargo & Co.............................. 190,000 6,874,200
-----------
74,807,000
-----------
See notes to schedule of investments and securities sold short
2
Number of
Shares Value
--------- ------------
HEALTH CARE -- 8.96%
Amgen, Inc./(b)/................................. 85,000 $ 6,080,050
Bristol-Myers Squibb Co.......................... 250,000 6,230,000
Gilead Sciences, Inc./(b)/....................... 100,000 6,870,000
Merck & Co., Inc................................. 150,000 6,285,000
Pfizer, Inc...................................... 240,000 6,806,400
UnitedHealth Group, Inc./(e)/.................... 120,000 5,904,000
------------
38,175,450
------------
INDUSTRIALS -- 7.75%
AMR Corp./(b)(e)/................................ 300,000 6,942,000
Boeing Co. (The)................................. 70,000 5,519,500
Continental Airlines, Inc. Class B/(b)(e)/....... 230,000 6,511,300
General Electric Co./(d)/........................ 170,000 6,001,000
L-3 Communications Holdings, Inc./(d)/........... 80,000 6,266,400
Norfolk Southern Corp............................ 40,000 1,762,000
------------
33,002,200
------------
INFORMATION TECHNOLOGY -- 12.56%
Cisco Systems, Inc./(b)/......................... 315,000 7,245,000
EMC Corp./(b)/................................... 575,000 6,888,500
Hewlett-Packard Co............................... 190,000 6,971,100
International Business Machines Corp............. 85,000 6,964,900
Microsoft Corp./(e)/............................. 250,000 6,832,500
National Semiconductor Corp./(e)/................ 250,000 5,882,500
Palm, Inc./(b)(e)/............................... 400,000 5,824,000
QUALCOMM, Inc.................................... 190,000 6,906,500
------------
53,515,000
------------
MATERIALS -- 2.40%
Dow Chemical Co./(d)/............................ 160,000 6,236,800
Freeport-McMoRan Copper & Gold, Inc. Class B
(Indonesia)/(c)(e)/............................ 75,000 3,994,500
------------
10,231,300
------------
TELECOMMUNICATIONS SERVICES -- 3.33%
AT&T Corp./(e)/.................................. 220,000 7,163,200
Verizon Communications, Inc./(e)/................ 190,000 7,054,700
------------
14,217,900
------------
Total Domestic Common Stocks (Identified Cost
$263,246,254)..................................... 316,951,440
------------
FOREIGN COMMON STOCKS/(c) / 9.43%
CONSUMER DISCRETIONARY -- 2.05%
Honda Motor Co., Ltd. ADR (Japan)/(d)/........... 170,000 5,717,100
Sony Corp. ADR (Japan)........................... 75,000 3,027,000
------------
8,744,100
------------
See notes to schedule of investments and securities sold short
3
Number of
Shares Value
---------- ------------
ENERGY -- 1.43%
Nabors Industries Ltd. (United States)/(b)(e)/.... 205,000 $ 6,098,750
------------
FINANCIALS -- 1.56%
Deutsche Bank AG (Germany)........................ 55,000 6,638,500
------------
INFORMATION TECHNOLOGY --4.39%
Amdocs Ltd. (United States)/(b)(e)/............... 170,000 6,732,000
Nokia Oyj ADR (Finland)........................... 315,000 6,202,350
Seagate Technology (Singapore)/(b)(e)/............ 250,000 5,772,500
------------
18,706,850
------------
Total Foreign Common Stocks (Identified Cost
$34,355,913)........................................ 40,188,200
------------
EXCHANGE TRADED FUNDS 2.46%
iShares MSCI Japan Index Fund..................... 145,000 1,963,300
NASDAQ-100 Shares/(e)/............................ 210,000 8,536,500
------------
Total Exchange Traded Funds (Identified Cost $9,847,164) 10,499,800
------------
Total Long Term Investments --86.28% (Identified Cost
$307,449,331)....................................... 367,639,440
------------
SHORT-TERM INVESTMENTS 27.25%
MONEY MARKET MUTUAL FUNDS -- 13.21%
State Street Navigator Prime Plus (5.28% seven
day effective yield)/(f)/ (Identified Cost
$56,285,777).................................... 56,285,777 56,285,777
------------
Par
(000's)
----------
FEDERAL AGENCY SECURITIES -- 7.02%
FNMA 2.625%, 11/15/06/(d)/ (Identified Cost
$29,910,507).................................... $30,000 29,902,860
------------
See notes to schedule of investments and securities sold short
4
Par
(000's) Value
------- ------------
COMMERCIAL PAPER -- 7.02%/(g)/
Manhattan Associates, Inc. 5.37%, 10/2/06.... $ 9,900 $ 9,898,523
Rabobank USA Finance Corp. 5.35%, 10/2/06.... 20,000 19,997,028
------------
Total Commercial Paper (Identified Cost
$29,895,551)................................ 29,895,551
------------
Total Short-Term Investments (Identified cost
$116,091,835)............................... 116,084,188
------------
Total Investments (Identified Cost
$423,541,166) -- 113.53%.................... 483,723,628/(a)/
Securities Sold Short (Proceeds $7,354,178) --
(2.45)%..................................... (10,450,000)
Other Assets Less Liabilities -- (11.08)%..... (47,189,182)
------------
Net Assets -- 100.00%......................... $426,084,446
============
--------
(a) Federal Tax information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $69,358,691 and gross
depreciation of $10,124,781 for federal tax purposes. At September 30,
2006, the aggregate cost of securities for federal income tax purposes was
$424,489,718.
(b) Non-income producing.
(c) A common stock is considered to be foreign if the security is issued in a
foreign country. The country of risk, noted parenthetically, 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 for
securities sold short.
(e) All or a portion of security is on loan.
(f) Represents security purchased with cash collateral for securities on loan.
(g) The rate shown is the discount rate.
See notes to schedule of investments and securities sold short
5
Number of
Shares Value
--------- -----------
SECURITIES SOLD SHORT
DOMESTIC COMMON STOCKS 1.10%
CONSUMER DISCRETIONARY -- 1.45%
Wendy's International, Inc................... 70,000 $ 4,690,000
-----------
Total Domestic Common Stocks (Proceeds $2,424,303) 4,690,000
-----------
EXCHANGE TRADED FUNDS 1.35%
iShares Russell 2000 Index Fund.............. 80,000 5,760,000
-----------
Total Exchange Traded Funds (Proceeds $4,929,875) 5,760,000
-----------
Total Securities Sold Short (Proceeds $7,354,178) 10,450,000/(h)/
===========
--------
(h) Federal Tax information: Net unrealized depreciation of securities sold
short is comprised of gross appreciation of $0 and gross depreciation of
$3,095,822 for federal income tax purposes. At September 30, 2006, the
aggregate proceeds of securities sold short for federal income tax
purposes was ($7,354,178).
See notes to schedule of investments and securities sold short
6
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT
September 30, 2006
(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 disclosure of contingent assets and liabilities
at the date of the Schedule of Investments and Securities Sold Short. 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 Directors.
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.
7
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. 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, 2006, the value of
securities sold short amounted to $10,450,000 against which collateral of
$34,170,163 was held. The collateral includes the deposits with the broker for
securities held short and the value of the segregated investments held long, 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.
F. Security Lending
The Fund loans securities to qualified brokers through an agreement with
State Street Bank (the "Custodian") and the Fund. Under the terms of the
agreement, the Fund receives collateral with a market value not less than 100%
of the market value of loaned securities. Collateral is adjusted daily in
connection with changes in the market value of securities on loan. Collateral
may consist of cash, securities issued or guaranteed by the U.S. Government or
its agencies and the sovereign debt of foreign countries. Cash collateral has
been invested in a short-term money market fund. Dividends earned on the
collateral and premiums paid by the borrower are recorded as income by the Fund
net of fees and rebates charged by the Custodian for its services in connection
with this securities lending program. Lending portfolio securities involves a
risk of delay in the recovery of the loaned securities or in the foreclosure on
collateral.
NOTE 2 -- Credit Risk and Asset Concentrations
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 a Fund's ability to
repatriate such amounts.
8
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 a Fund, positive or
negative, than if a Fund did not concentrate its investments in such sectors.
NOTE 3 -- INDEMNIFICATIONS
Under the Fund's organizational documents, its directors and officers are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, the Fund enters into contracts that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expect the risk of loss to be remote.
NOTE 4 -- SUBSEQUENT EVENT
Effective November 9, 2006 Daniel T. Geraci resigned as director and
president of the Fund, coincident with the notification of his resignation from
Phoenix Investment Partners Ltd., parent of the adviser, and subsidiary of The
Phoenix Companies, Inc.
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 the 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/ Nancy G. Curtiss
---------------------------------------------
Nancy G. Curtiss, Principal Executive Officer
and Treasurer
(principal executive officer)
Date November 27, 2006
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/ Nancy G. Curtiss
---------------------------------------------
Nancy G. Curtiss, Principal Executive Officer
and Treasurer
(principal executive officer)
Date November 27, 2006
By (Signature and Title)* /s/ Nancy G. Curtiss
-----------------------------
Nancy G. Curtiss, Treasurer
(principal financial officer)
Date November 27, 2006
* Print the name and title of each signing officer under his or her signature.