QUARTERLY REPORT
The Zweig Fund, Inc.
| Not FDIC Insured No Bank Guarantee May Lose Value |
September 30, 2016 |
FUND DISTRIBUTIONS AND MANAGED DISTRIBUTION PLAN
The Fund has a Managed Distribution Plan to pay 6% (effective with the April dividend declaration this rate was revised to 10%) of the Fund’s net asset value on an annualized basis. Distributions may represent earnings from net investment income, realized capital gains, or, if necessary, return of capital. The board believes that regular quarterly, fixed cash payouts will enhance shareholder value and serve the long-term interests of shareholders. You should not draw any conclusions about the Fund’s investment performance from the amount of the distributions or from the terms of the Fund’s Managed Distribution Plan.
On a tax basis, the Fund estimates it distributed more than its income and net realized capital gains in the fiscal year to date. Shareholders should note, however, that if the Fund’s aggregate investment income and net realized capital gains are less than the amount of the distribution level, the difference will be paid from the Fund’s capital and will constitute a return of the shareholder’s capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.”
The amounts and sources of distributions reported in the Fund’s notices pursuant to Section 19(a) of the Investment Company Act of 1940 are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during its fiscal year and may be subject to changes based on tax regulations. The Fund will send shareholders a Form 1099-DIV for 2016 that tells them how to report distributions for federal income tax purposes.
The Board may amend, suspend or terminate the Managed Distribution Plan at any time, without prior notice to shareholders if it deems such action to be in the best interest of the Fund and its shareholders.
Information on the Fund is available at www.Virtus.com. Section 19(a) notices are posted on the website at: http://www.virtus.com/our-products/closed-end-fund-details/ZF.
MESSAGE TO SHAREHOLDERS
Dear Fellow Zweig Fund Shareholder:
I am pleased to share with you the manager’s report for the Zweig Fund, Inc. for the three months ended September 30, 2016.
Effective September 7, 2016, Virtus Investment Advisers became the investment adviser to the fund and Duff & Phelps Investment Management and Newfleet Asset Management were appointed to manage the fund. Performance and characteristics prior to that date were attained by the previous adviser using a different investment strategy.
For the three months ended September 30, 2016, the fund’s NAV increased 2.62%, including $0.356 in reinvested distributions. During the same period, the Zweig Fund Linked Benchmark, a composite index that consists of 60% MSCI World Infrastructure Sector Capped Index(1) and 40% Bloomberg Barclays U.S. Aggregate Bond Index(2), increased 5.73%, including reinvested dividends(3). Performance for the composite’s underlying indices over this period was a 0.87% increase for the MSCI World Infrastructure Sector Capped Index and a 0.46% increase in the Bloomberg Barclays U.S. Aggregate Bond Index.
On behalf of the fund’s investment professionals, I thank you for entrusting your assets to us. Should you have any questions or require support, our customer service team is ready to assist you at 1-866-270-7788 or through the closed-end fund section of our website, www.virtus.com.
Sincerely,
George R. Aylward
President, Chairman and
Chief Executive Officer
The Zweig Fund, Inc.
November 2016
Performance data quoted represents past results. Past performance is no guarantee of future results and current performance may be higher or lower than performance shown above. Any market index referenced herein is unmanaged; its returns do not reflect any fees, expenses, or sales charges; and is not available for direct investment.
| (1) | The MSCI World Infrastructure Sector Capped Index is a market capitalization weighted index that measures performance of global infrastructure companies by capturing broad and diversified opportunities across telecommunication, utilities, energy, transportation, and social infrastructure sectors. The telecommunication, infrastructure, and utilities sectors each represent one-third of the index weight, while energy, transportation, and social infrastructure sectors have a combined weight of the remaining one-third of the index. The index is calculated on a total return basis with net dividends reinvested. |
| (2) | The Bloomberg Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market, calculated on a total return basis. |
| (3) | Performance of the Zweig Fund Linked Benchmark prior to 9/7/16 represents an allocation consisting of 100% S&P 500® Index. The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies, calculated on a total return basis with dividends reinvested. |
1
MESSAGE TO SHAREHOLDERS (Continued)
Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium sized companies may enhance that risk.
Leverage: When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded.
Market Price/NAV: Shares of closed-end funds often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the fund’s NAV.
Short Sales: The fund may engage in short sales, and may experience a loss if the price of a borrowed security increases before the date on which the fund replaces the security.
This information does not represent an offer, or the solicitation of an offer, to buy or sell securities of the fund.
2
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2016 (Unaudited)
|
Asset Allocation as of September 30, 2016 |
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| The following table illustrates asset allocations within certain sectors as a percentage of total investments net of written options | ||||
| Common Stocks |
54 | % | ||
| Corporate Bonds and Notes |
21 | |||
| Mortgage-Backed Securities |
7 | |||
| Foreign Government Securities |
4 | |||
| Exchange Traded Funds |
2 | |||
| Asset-Backed Securities |
2 | |||
| Loan Agreements |
1 | |||
| Preferred Stock |
1 | |||
| Other (includes Short-Term Investments) |
8 | |||
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| Total |
100 | % | ||
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($ reported in thousands)
See Notes to Schedule of Investments
3
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
4
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
5
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
6
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
7
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
8
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
9
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
10
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
11
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
12
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
13
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
See Notes to Schedule of Investments
14
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
($ reported in thousands)
The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2016 (See Security Valuation Note 1A in the Notes to Schedules of Investments):
| Total Value at September 30, 2016 |
Level 1 Quoted Prices |
Level 2 Significant Observable Inputs |
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| Debt Securities: |
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| Asset-Backed Securities |
$ | 5,392 | $ | — | $ | 5,392 | ||||||
| Corporate Bonds And Notes |
71,141 | — | 71,141 | |||||||||
| Foreign Government Securities |
12,081 | — | 12,081 | |||||||||
| Loan Agreements |
4,970 | — | 4,970 | |||||||||
| Mortgage-Backed Securities |
22,777 | — | 22,777 | |||||||||
| Equity Securities: |
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| Common Stocks |
179,329 | 160,844 | 18,485 | |||||||||
| Exchange-traded Funds |
6,427 | 6,427 | — | |||||||||
| Preferred Stocks |
3,089 | 958 | 2,131 | |||||||||
| Purchased Options |
163 | 163 | — | |||||||||
| Short-Term Investment |
27,640 | 27,640 | — | |||||||||
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| Total Investments before Written Options |
$ | 333,009 | $ | 196,032 | $ | 136,977 | ||||||
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| Written Options |
$ | (459 | ) | $ | (459 | ) | $ | — | ||||
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| Total Investments Net of Written Options |
$ | 332,550 | $ | 195,573 | $ | 136,977 | ||||||
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There are no Level 3 (significant unobservable inputs) priced securities.
There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2016.
See Notes to Schedule of Investments
15
THE ZWEIG FUND, INC.
FINANCIAL HIGHLIGHTS
SEPTEMBER 30, 2016 (Unaudited)
(Reported in thousands except for the per share amounts)
| Total Net Assets | Net Asset Value per share |
|||||||||||||||
| Beginning of period: December 31, 2015 |
$ | 296,844 | $ | 14.78 | ||||||||||||
| Net investment income* |
$ | 2,217 | $ | 0.12 | ||||||||||||
| Net realized and unrealized gain on investments |
(1,530 | ) | (0.01 | ) | ||||||||||||
| Dividends from net investment income and distributions from net long-term and short-term capital gains** |
(13,344 | ) | (0.72 | ) | ||||||||||||
| Capital shares transactions—Common shares repurchased |
(41,517 | ) | 0.05 | |||||||||||||
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| Net increase (decrease) in net assets/net asset value |
(54,174 | ) | (0.56 | ) | ||||||||||||
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| End of period: September 30, 2016 |
$ | 242,670 | $ | 14.22 | ||||||||||||
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| * | Computed using average shares outstanding. |
| ** | Please note that the tax status of our distributions is determined at the end of the taxable year. However, based on interim data as of September 30, 2016, we estimate that 10.6% of distributions will represent net investment income, 83.4% will represent long-term capital gains and 6.0% will represent return of capital. Also refer to inside front cover for information on the Managed Distribution Plan. |
See notes to schedule of investments and securities sold short
16
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2016 (Unaudited)
Note 1 — Significant Accounting Policies
The significant accounting policies consistently followed by the Fund in the preparation of its Schedule of Investments are summarized below and, for derivatives, included in Note 2 below. The preparation of the Schedule of Investments 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. Actual results could differ from those estimates and those differences could be significant.
| A. | Security Valuation |
Security valuation procedures for the Fund, which include nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Fund’s policy is to recognize transfers between levels at the end of the reporting period.
| • Level 1 – | quoted prices in active markets for identical securities (security types generally include listed equities). |
| • Level 2 – | prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| • Level 3 – | prices determined using significant unobservable inputs (including the Valuation Committee’s own assumptions in determining the fair value of investments). |
A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:
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 and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid, or are internally fair valued by the Valuation Committee, are generally categorized as Level 3 in the hierarchy.
Certain non-U.S. securities 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 non-U.S. markets
17
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
close (where the security is principally traded) and the time that a Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets.
In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as ADRs, financial futures, exchange-traded funds and certain indexes, as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain non-U.S. common stocks may occur on a frequent basis.
Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing that considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer-supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured debt instruments, such as mortgage-backed and asset-backed securities, may also incorporate collateral analysis and utilize cash flow models for valuation, and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities and therefore indicative bids from dealers are utilized which are based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued by the Valuation Committee, are generally categorized as Level 3 in the hierarchy.
Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over-the-counter derivative contracts, which include forward currency contracts and equity-linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.
A summary of the inputs used to value the Fund’s net assets by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| B. | Security Transactions and Investment Income: |
Security transactions are recorded on the trade date. Realized gains and losses from sales of securities are determined on the identified cost basis. Dividend income is recognized 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. Any distributions from the underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.
18
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
| C. | Foreign Currency Translation: |
Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at 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. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. The Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
| D. | 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 by, 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.
In accordance with the terms of its prime brokerage agreement, the Fund may receive rebate income or be charged a fee based on borrowed securities which is under interest expense on short sales on the Statement of Operations. Such income or fee is calculated on a daily basis based on the market value of each borrowed security and a variable rate that is dependent upon the availability of such security.
At September 30, 2016, the Fund did not hold any securities sold short.
| E. | Loan Agreements |
The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. Loan agreements are generally non-investment grade and often involve borrowers that are highly leveraged. The Fund may invest in obligations of borrowers who are in bankruptcy proceedings. Loan agreements are typically senior in the corporate capital structure of the borrower. A loan is often administered by a bank or other financial institution (the “lender”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. The Fund’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. When investing in loan participations, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan participation and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to
19
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan.
The Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. Loan agreements may involve foreign borrowers, and investments may be denominated in foreign currencies. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due.
The loan agreements have floating rate loan interests which generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally LIBOR (London Interbank Offered Rate), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. When a loan agreement is purchased the Fund may pay an assignment fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.
At September 30, 2016, all loan agreements held by the Fund are assignment loans.
Note 2 — Derivative Financial Instruments
Disclosures about derivative instruments and hedging activities are intended to enable investors to understand how and why a Fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a Fund’s results of operations and financial position. Summarized below are such disclosures and accounting policies for each specific type of derivative instrument used by the Fund.
Options contracts
An options contract provides the purchaser with the right, but not the obligation, to buy (call option) or sell (put option) a financial instrument at an agreed-upon price. The Fund pursues an option income strategy whereby it purchases and sells out-of-the-money puts and calls, creating an options spread designed to generate a consistent level of option cash flow which should result in additional yield. The Fund is subject to equity price risk in the normal course of pursuing its investment objectives.
When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option.
Holdings of the Fund designated to cover outstanding written options are noted in the Schedule of Investments. Purchased options are reported as an asset within “Investment in securities at value” in the Statement of Assets and Liabilities. Options written are reported as a liability within “Written options outstanding at value”. Changes in value of the purchased option is included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. Changes in value of written options is included in “Net change in unrealized appreciation (depreciation) on written options”.
20
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
If an option expires unexercised, the Fund realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost basis of the purchase. The difference between the premium and the amount received or paid on effecting a closing purchase or sale transaction is also treated as a realized gain or loss. Gain or loss on purchased options is included in “Net realized gain (loss) on investments” in the Statement of Operations. Gain or loss on written options is presented separately as “Net realized gain (loss) on written options” in the Statement of Operations.
The risk in writing covered call options is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
The risk in writing covered put options is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying options is that the Fund pays a premium whether or not the option is exercised. The use of such instruments may involve certain additional risks as a result of unanticipated movements in the market. Writers (sellers) of options are normally subject to unlimited risk of loss, as the seller will be obligated to deliver or take delivery of the security at a predetermined price which may, upon exercise of the option, be significantly different from the then-market value. However, the Fund may limit its risk of loss when writing an option by purchasing an option by purchasing an option similar to the one that is sold except for the fact it is further “out of the money”.
The Fund had transactions in written call options for the period ended September 30, 2016 as follows:
| Calls | Puts | |||||||||||||||
| Written Options |
Number of Contracts |
Premiums Received |
Number of Contracts |
Premiums Received |
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| Written Options outstanding at December 31, 2015 |
— | $ | — | — | $ | — | ||||||||||
| Options written |
28,015 | 1,366 | 28,015 | 9,734 | ||||||||||||
| Options closed |
(21,423 | ) | (1,092 | ) | (20,626 | ) | (7,411 | ) | ||||||||
| Options expired |
(4,474 | ) | (207 | ) | (5,271 | ) | (1,604 | ) | ||||||||
| Options exercised |
— | — | — | — | ||||||||||||
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| Written Options outstanding at September 30, 2016 |
2,118 | $ | 67 | 2,118 | $ | 719 | ||||||||||
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Note 3 — Federal Income Tax Information
($ reported in thousands)
At September 30, 2016, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows:
| Federal Tax Cost |
Unrealized Appreciation |
Unrealized (Depreciation) |
Net Unrealized Appreciation (Depreciation) |
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| Investments (before written options) |
$ | 334,651 | $ | 1,382 | $ | (3,024 | ) | $ | (1,642 | ) | ||||||
| Written Options |
(786 | ) | 337 | (10 | ) | 327 | ||||||||||
The differences between book basis cost and tax basis cost were attributable primarily to the tax deferral of losses on wash sales.
21
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS (Continued)
SEPTEMBER 30, 2016 (Unaudited)
Note 4 — Regulatory Matters and Litigation
From time to time, the Fund, the Fund’s Adviser and/or subadvisers and/or their affiliates may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Fund’s Adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.
Note 5 — Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there the following subsequent events that require recognition or disclosure in these financial statements.
On November 25, 2016, the Fund announced the commencement of a tender offer to acquire for cash up to 5 percent of its outstanding shares at a price equal to 98 percent of the Fund’s net asset value per share as of the close regular trading on the New York Stock Exchange on the date the offer expires. If more than 5 of a Fund’s outstanding shares are tendered, the will purchase shares from tendering stockholders on a pro-rata basis.
22
KEY INFORMATION
Zweig Shareholder Relations: 1-866-270-7788
For general information and literature, as well as updates on net asset value, share price, major industry groups and other key information
REINVESTMENT PLAN
Many of you have questions about our reinvestment plan. We urge shareholders who want to take advantage of this plan and whose shares are held in “Street Name,” to consult your broker as soon as possible to determine if you must change registration into your own name to participate.
REPURCHASE OF SECURITIES
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may from time to time purchase its shares of common stock in the open market when Fund shares are trading at a discount from their net asset value.
PROXY VOTING INFORMATION (FORM N-PX)
The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Fund’s Board of Directors. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, free of charge, by calling toll-free 1-800-272-2700. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
FORM N-Q INFORMATION
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC’s Public Reference Room. Information on the operation of the SEC’s Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330.
23
DIRECTORS AND OFFICERS
George R. Aylward, Chairman, President, and Chief Executive Officer
Philip R. McLoughlin, Director
James M. Oates, Director
James B. Rogers, Jr., Director
R. Keith Walton, Director
Brian T. Zino, Director
W. Patrick Bradley, Executive Vice President, Treasurer, and Chief Financial Officer
William Renahan, Vice President, Chief Legal Officer, and Secretary
Jacqueline Porter, Vice President and Assistant Treasurer
Nancy Engberg, Vice President and Chief Compliance Officer
This report is transmitted to the shareholders of The Zweig Fund, Inc. for their information. This is not a prospectus, circular, or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.
