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 R. Flores, Esq.
Secretary and Chief Legal Officer Vice President, Litigation/Employment Counsel
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: March 31, 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, 450 Fifth Street, NW, Washington,
DC 20549-0609. 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.
Basis Point (bp): One-hundredth of a percentage point (0.01%). Basis points are
often used to measure changes in or differences between yields on fixed income
securities, since these often change by very small amounts.
Consumer Price Index (CPI): Measures the change in consumer prices of goods and
services, including housing, electricity, food, and transportation, as
determined by a monthly survey of the U.S. Bureau of Labor Statistics. Also
called the cost-of-living index.
Dow Jones Industrial Average/SM/ (the "Dow"): A price-weighted average of 30
blue chip stocks. The index is calculated on a total return basis with
dividends reinvested.
Federal funds rate: The interest rate charged on overnight loans of reserves by
one financial institution to another in the United States. The federal funds
rate is the most sensitive indicator of the direction of interest rates since
it is set daily by the market.
Federal Reserve (the "Fed"): The central bank of the United States, responsible
for controlling the money supply, interest rates and credit with the goal of
keeping the U.S. economy and currency stable. Governed by a seven-member board,
the system includes 12 regional Federal Reserve Banks, 25 branches and all
national and state banks that are part of the system.
Gross domestic product (GDP): An important measure of the United States'
economic performance, GDP is the total market value of all final goods and
services produced in the U.S. during any quarter or year.
Inflation: Rise in the prices of goods and services resulting from increased
spending relative to the supply of goods on the market.
Initial public offering (IPO): A company's first sale of stock to the public.
NASDAQ Composite(R) Index: A market capitalization-weighted index of all issues
listed in the NASDAQ (National Association Of Securities Dealers Automated
Quotation System) Stock Market, except for closed-end funds, convertible
debentures, exchange traded funds, preferred stocks, rights, warrants, units
and other derivative securities. The index is calculated on a total return
basis with dividends reinvested.
Reuters CRB (Commodity Research Bureau) Index: Tracks 17 component commodities
ranging from key economic indicators like gold and oil to other important
commodities such as cocoa, coffee and orange juice.
Reuters Estimates: Provides major institutional sell-side and buy-side firms,
financial data providers and corporations around the world with research and
analysis on over 14,500 active companies and 10,000 inactive companies in more
than 70 countries.
1
S&P 500(R) Index: A market capitalization-weighted index of 500 of the largest
U.S. companies. The index is calculated on a total return basis with dividends
reinvested.
Short Interest: The total number of shares of a security that have been sold
short by customers and securities firms that have not been repurchased to
settle short positions in the market.
Indexes cited are unmanaged and not available for direct investment; therefore
their performance does not reflect the expenses associated with the active
management of an actual portfolio.
2
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT
March 31, 2005
(Unaudited)
Number of
Shares Value
--------- ------------
INVESTMENTS
DOMESTIC COMMON STOCKS 67.27%
CONSUMER DISCRETIONARY -- 6.70%
Comcast Corp. Class A/(b)/.................... 190,000 $ 6,418,200
Home Depot, Inc............................... 140,000 5,353,600
McDonald's Corp............................... 175,000 5,449,500
Nike, Inc. Class B............................ 72,000 5,998,320
Viacom, Inc. Class B.......................... 175,000 6,095,250
------------
29,314,870
------------
CONSUMER STAPLES -- 9.79%
Altria Group, Inc./(d)/....................... 95,000 6,212,050
Archer-Daniels Midland Co..................... 260,000 6,390,800
Costco Wholesale Corp......................... 125,000 5,522,500
Kimberly-Clark Corp........................... 100,000 6,573,000
Molson Coors Brewing Co....................... 80,000 6,173,600
Procter & Gamble Co........................... 113,200 5,999,600
Sara Lee Corp................................. 270,000 5,983,200
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42,854,750
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ENERGY -- 7.13%
Burlington Resources, Inc..................... 130,000 6,509,100
ConocoPhillips................................ 55,000 5,931,200
Halliburton Co................................ 150,000 6,487,500
Occidental Petroleum Corp..................... 85,000 6,049,450
Valero Energy Corp............................ 85,000 6,227,950
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31,205,200
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FINANCIALS -- 12.40%
Allstate Corp................................. 115,000 6,216,900
Bank of America Corp./(d)/.................... 130,000 5,733,000
Capital One Financial Corp.................... 75,000 5,607,750
Goldman Sach Group, Inc....................... 60,000 6,599,400
Huntington Bancshares, Inc.................... 250,000 5,975,000
Morgan Stanley................................ 115,000 6,583,750
National City Corp............................ 165,000 5,527,500
See notes to schedule of investments and securities sold short
3
Number of
Shares Value
--------- ------------
FINANCIALS (CONTINUED)
Wachovia Corp.............................. 110,000 $ 5,600,100
Wells Fargo & Co........................... 108,000 6,458,400
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54,301,800
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HEALTH CARE -- 8.60%
Amgen, Inc./(b)/........................... 105,000 6,112,050
Bard (C.R.), Inc........................... 90,000 6,127,200
Bristol-Myers Squibb Co.................... 250,000 6,365,000
Merck & Co., Inc........................... 205,000 6,635,850
Pfizer, Inc................................ 200,000 5,254,000
UnitedHealth Group, Inc.................... 75,000 7,153,500
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37,647,600
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INDUSTRIALS -- 11.79%
AMR Corp./(b)/............................. 500,000 5,350,000
Boeing Co. (The)........................... 100,000 5,846,000
Continental Airlines, Inc. Class B/(b)/.... 580,000 6,983,200
Deere & Co./(d)/........................... 86,000 5,773,180
L-3 Communication Holdings, Inc............ 80,000 5,681,600
Norfolk Southern Corp...................... 170,000 6,298,500
Paccar, Inc................................ 85,000 6,153,150
United Defense Industries, Inc............. 130,000 9,544,600
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51,630,230
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INFORMATION TECHNOLOGY -- 6.23%
Cisco Systems, Inc./(b)/................... 315,000 5,635,350
Intel Corp................................. 250,000 5,807,500
International Business Machines Corp....... 65,000 5,939,700
Microsoft Corp............................. 175,000 4,229,750
Qualcomm, Inc. ............................ 155,000 5,680,750
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27,293,050
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MATERIALS -- 3.26%
Dow Chemical Co./(d)/...................... 115,000 5,732,750
Freeport-McMoRan Copper & Gold, Inc. Class B 50,000 1,980,500
Georgia-Pacific Corp....................... 185,000 6,565,650
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14,278,900
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TELECOMMUNICATION -- 1.37%
AT&T Corp.................................. 320,000 6,000,000
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Total Domestic Common Stocks
(Identified Cost $251,649,266)................... 294,526,400
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See notes to schedule of investments and securities sold short
4
Number of
Shares Value
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FOREIGN COMMON STOCKS/(c)/ 7.30%
CONSUMER DISCRETIONARY -- 1.94%
Honda Motor Co., Ltd. ADR (Japan)/(d)/............ 240,000 $ 6,009,600
Sony Corp. ADR (Japan)............................ 62,000 2,481,240
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8,490,840
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HEALTH CARE -- 2.76%
Angiotech Pharmaceuticals (United States)......... 400,000 6,140,000
Sanofi Aventis ADR (France)....................... 140,000 5,927,600
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12,067,600
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INFORMATION TECHNOLOGY -- 2.60%
Amdocs Ltd. (United States)/(b)/.................. 200,000 5,680,000
Nokia OYJ ADR (Finland)........................... 370,000 5,709,100
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11,389,100
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Total Foreign Common Stocks (Identified Cost
$30,208,966).............................................. 31,947,540
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PREFERRED STOCKS 0.04%
FINANCIALS -- 0.04%
Citibank NA Series A 6.34% Pfd.................... 2,000 201,438
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Total Preferred Stocks (Identified Cost $202,000)........... 201,438
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Par
(000's)
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U.S. GOVERNMENT SECURITIES 12.08%
U.S. TREASURY NOTES -- 12.08%
U.S. Treasury Note 12.75%, 11/15/10............... $50,000 52,867,200
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Total U.S. Government Securities
(Identified Cost $58,923,127)............................. 52,867,200
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Contracts
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OPTIONS 0.00%
Japan Yen Call Option expiring 4/26/05 @ 102...... 50,000,000 23,600
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Total Options (Identified Cost $258,795).................... 23,600
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Total Long Term Investments -- 86.69%
(Identified Cost $341,242,154)............................ 379,566,178
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See notes to schedule of investments and securities sold short
5
Par
(000's) Value
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SHORT-TERM INVESTMENTS 13.46%
FEDERAL AGENCY SECURITIES -- 4.62%
FNMA 7.00%, 7/15/05
(Identified Cost $20,244,426) ................ $20,000 $ 20,223,060
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COMMERCIAL PAPER -- 8.84%
Consolidated Edison, Inc. 2.83%, 4/1/05......... 5,700 5,700,000
RABOBANK USA 2.82%, 4/1/05...................... 13,000 13,000,000
UBS Finance Delaware LLC 2.83%, 4/1/05.......... 20,000 20,000,000
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Total Commercial Paper
(Identified Cost $38,700,000) ....................... 38,700,000
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Total Short-Term Investments
(Identified cost $58,944,426)........................ 58,923,060
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Total Investments
(Identified Cost $400,186,580) -- 100.15%............ 438,489,238/(a)/
Securities Sold Short
(Proceeds $14,208,568) -- (3.56)%.................... (15,631,050)
Other Assets Less Liabilities -- 3.41%................. 14,965,371
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Net Assets -- 100.00%.................................. $437,823,559
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(a) Federal Tax information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $56,890,684 and gross
depreciation of $19,831,034 for federal tax purposes. At March 31, 2005,
the aggregate cost of securities for federal income tax purposes was
$401,429,588.
(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 1E "Foreign security country determination" in the Notes to
Schedule of Investments and Securities Sold Short.
(d) Position, or portion thereof, has been segregated to collateralize
securities sold short.
See notes to schedule of investments and securities sold short
6
Number of
Shares Value
--------- -----------
SECURITIES SOLD SHORT
DOMESTIC COMMON STOCKS -- (2.04)%
CONSUMER DISCRETIONARY -- (1.52)%
Wendy's International, Inc................... 170,000 $ 6,636,800
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UTILITIES -- (0.52)%
Reliant Resources, Inc....................... 200,000 2,276,000
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Total Domestic Common Stocks (Proceeds $7,340,044) 8,912,800
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EXCHANGE TRADED FUNDS -- (1.52)%
iShares Russell 2000 Index Fund (Proceeds
$6,868,524)................................ 55,000 6,718,250
-----------
Total Securities Sold Short (Proceeds $14,208,568) 15,631,050/(e)/
===========
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(e) Federal Tax information: Net unrealized depreciation of securities sold
short is comprised of gross appreciation of $150,274 and gross
depreciation of $1,572,756 for federal income tax purposes. At March 31,
2005, the aggregate proceeds of securities sold short for federal income
tax purposes was ($14,208,568).
See notes to schedule of investments and securities sold short
7
THE ZWEIG FUND, INC.
NOTES TO ITS SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (Unaudited)
MARCH 31, 2005
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Zweig Fund in the preparation of its Schedule of Investments and
Securities Sold Short. The preparation of its 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 its 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 other assets, if any, 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.
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. The gain or loss resulting from a change in currency exchange rates
between the trade and settlement dates 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 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 exchange rates and
that portion arising from changes in the market prices of securities.
THE ZWEIG FUND, INC.
NOTES TO ITS SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (Unaudited)
MARCH 31, 2005
D. Forward Currency Contracts:
The Fund may enter into forward currency contracts in conjunction with the
planned purchase or sale of foreign denominated securities in order to hedge the
U.S. dollar cost or proceeds. Forward currency contracts involve, to varying
degrees, elements of market risk in excess of the amount recognized in the
Statement of Assets and Liabilities. Risks arise from the possible movements in
foreign exchange rates or if the counterparty does not perform under the
contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in market
value is recorded by the Fund as an unrealized gain or loss. When the contract
is closed or offset with the same counterparty, the Fund records a realized gain
or loss equal to the change in the value of the contract when it was opened and
the value at the time it was closed or offset.
E. 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 greatest percentage of company revenue is
generated.
F. 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. Gains and losses on written
options are reported separately in the Statement of Operations. 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. As of March
31, 2005, the Fund has one option outstanding.
G. 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. Dividends on short sales are recorded as an expense to the
Fund on ex-dividend date. At March 31, 2005 the value of securities sold short
amounted to $15,631,050 against which collateral of $37,023,700 was held. The
collateral includes the deposits with 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.
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
THE ZWEIG FUND, INC.
NOTES TO ITS SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (Unaudited)
MARCH 31, 2005
of these investments and the income they generate, as well as a fund's ability
to repatriate such amounts.
The Fund may invest a high percentage of its assets in specific sectors of
the market in its 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.
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
----------------------------------------------
Daniel T. Geraci, Director, President and
Chief Executive Officer
(principal executive officer)
Date May 24, 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, Director, President and
Chief Executive Officer
(principal executive officer)
Date May 24, 2005
By (Signature and Title)* /s/ Nancy G. Curtiss
----------------------------------------------
Nancy G. Curtiss, Treasurer and
Chief Financial Officer
(principal financial officer)
Date May 23, 2005
* Print the name and title of each signing officer under his or her signature.