UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04739
The Zweig Fund, Inc.
(Exact name of registrant as specified in charter)
900 Third Ave, 31st Floor
New York, NY 10022-4728
(Address of principal executive offices) (Zip code)
Kevin J. Carr, Esq.
Vice President, Chief Legal Officer,
Counsel and Secretary for Registrant
100 Pearl Street
Hartford, CT 06103-4506
(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: December 31, 2009
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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 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. (S) 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
OFFICERS AND DIRECTORS
George R. Aylward
President, Chairman and Chief Executive Officer
Carlton Neel
Executive Vice President
David Dickerson
Senior Vice President
Marc Baltuch
Chief Compliance Officer and Vice President
Moshe Luchins
Vice President
Kevin J. Carr
Chief Legal Officer and Secretary
Nancy Curtiss
Treasurer
Jacqueline Porter
Vice President and Assistant Treasurer
Charles H. Brunie
Director
Wendy Luscombe
Director
Alden C. Olson, Ph.D.
Director
James B. Rogers, Jr.
Director
R. Keith Walton
Director
INVESTMENT ADVISER
Zweig Advisers LLC
900 Third Avenue
New York, NY 10022-4793
FUND ADMINISTRATOR
VP Distributors, Inc
100 Pearl Street
Hartford, CT 06103-4506
CUSTODIAN
The Bank of New York Mellon
One Wall Street
New York, NY 10286
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
2001 Market Street
Philadelphia, PA 19103-7042
LEGAL COUNSEL
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022-2585
TRANSFER AGENT
Computershare Trust Company, NA
P.O. Box 43010
Providence, RI 02940-3010
--------------------------------------------------------------------------------
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.
Q4-09
Annual Report
Zweig
THE ZWEIG FUND, INC.
December 31, 2009
[LOGO]
VIRTUS
INVESTMENT PARTNERS
FUND DISTRIBUTIONS AND MANAGED DISTRIBUTION PLAN
The Fund has a Managed Distribution Plan to pay 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.
The Fund estimates that it has distributed more than its income and net
realized capital gains in the fiscal year to date; therefore, a portion of your
distributions may be a return of 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 Section 19(a) notices
of the 1940 Act 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 the remainder
of its fiscal year and may be subject to changes based on tax regulations. The
Fund will send shareholders a Form 1099-DIV for the calendar year that will
tell you 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 Zweig funds is available at www.Virtus.com. Section 19(a)
notices are posted on the website at:.
http://www.virtus.com/products/closed/details.aspx?type=individual&fundid=ZF
February 1, 2010
DEAR FELLOW ZWEIG FUND SHAREHOLDER:
I am pleased to share with you the manager's report and commentary for The
Zweig Fund, Inc. for the fiscal year ended December 31, 2009.
The Zweig's Fund's net asset value increased 5.12% for the quarter ended
December 31, 2009, including $0.095 in reinvested distributions. During the
same period, the S&P 500 Index gained 6.04%, including reinvested dividends.
The Fund's average equity exposure for the quarter was approximately 79%.
For the fiscal year ended December 31, 2009, the Fund's net asset value rose
23.22%, including $0.343 in reinvested distributions. For the same period, the
S&P 500 increased 26.46% including reinvested dividends. The Fund's average
equity exposure for the year was approximately 79%.
Sincerely,
/s/ George R. Aylward
George R. Aylward
President, Chairman and Chief Executive Officer
The Zweig Fund, Inc.
MARKET OVERVIEW AND OUTLOOK
It was famine and feast for the stock market in 2009, capping one of the
most volatile decades in financial history. Following a steep slump early in
the year, the major indexes rebounded strongly to achieve their best year on a
percentage basis since 2003.
Rising 15%/(1)/ in the fourth quarter, the Dow Jones Industrial Average
ended 2009 at 10,428, marking a gain of 18.8%/ (1)/. This was an increase of
59%/(1)/ from its 12-year low touched on March 9, but still 26%/(1)/ below its
record close of 16,164 on October 9, 2007. For the decade, the Dow lost
9.3%/(1)/.
The S&P 500 Index, which gained 15%/(1)/ in the final quarter, closed the
year at 1,115.10, up 65%/(1)/ from its March low, and an increase of 23.5%/(1)/
for 2009. The index slipped 24.1%/(1)/ for the decade.
The technology-heavy Nasdaq Composite, which was hardest hit by the bursting
of the dot-com bubble, rose 15.5%/(1)/ in the last quarter and surged
43.9%/(1)/ for the year. It was the largest annual point gain since 1999 and
the second greatest point rise in its history. However, it still left the
Nasdaq down 44.2%/(1)/ for the past 10 years.
Last year was also comeback time for world markets. Excluding the U.S., the
Dow Jones World Index climbed nearly 40%/(1)/ in dollar terms for 2009. China's
Shanghai Composite exploded 80%/(1)/ and Japan's Nikkei Stock Average of 225
companies gained 19%/(1)/. In Europe, Britain's FTSE 100 rose 22.1%/(1)/ and
Germany's DAX Index was up 23.8%/(1)/.
--------
(1) Return excludes reinvested dividends
Managed Distribution Plan: The Fund has a policy to distribute 10% of its net
asset value annually. Please see the inside front cover for more details.
Back at home, Federal Reserve (the "Fed") Chairman Ben Bernanke said he
expected "moderate" economic growth in 2010 but cautioned that it "would be at
a pace slower than we would like." While conceding that the economy faced
"formidable headwinds," he said he saw no signs of a bubble. Mr. Bernanke also
said low inflation and the economy's slack warranted keeping today's
"exceptionally low interest rates for an extended period." He later warned that
at some point as "the economic recovery takes hold, the Fed will need to
tighten policy to prevent the emerging of an inflation problem down the road."
Although there was an uptick in consumer prices in November, that inflation
component still seems tame. The Labor Department reported that consumer prices
edged up a seasonally adjusted 0.4% in November after an 0.3% rise in October.
Excluding the volatile food and energy sectors, the November core inflation
rate was unchanged from the previous month. At the same time, the Commerce
Department reported that consumer spending increased moderately in November,
going up just 0.2% on an inflation adjusted basis. Wholesale prices climbed
1.8% in November after a 0.3% gain in October. That core rate was up 0.5%, the
largest monthly increase in over a year.
The Fed reported that industrial production increased 0.8% in November from
the previous month. It also noted that the rate by which industries used their
available capacity increased to 71.3% from a revised 70.67% in October. The Fed
also reported that third-quarter worker productivity was not as strong as
previously reported. While the annual rate dipped to 8.13% from the formerly
reported 9.5% estimate, it was still the highest figure in six years.
Another revised estimate revealed that the U.S. economy grew more slowly
than previously reported. The Commerce Department said that the nation's gross
domestic product of goods and services (GDP) increased at a 2.8% annual rate in
the third quarter instead of its earlier projection of 3.5%. However it was
still the first increase since the second quarter of 2008.
The housing market, a key component of the economy, is presenting a mixed
picture. The Commerce Department reported that new home construction increased
8.9% in November on a seasonally adjusted annual rate of 574,000 units, while
the Census Bureau said new home sales tumbled 11.3% that month. Meanwhile, the
National Association of Realtors announced that sales of existing homes
increased 7.4% to a seasonally adjusted rate of 6.54 million units -- the
highest level since February 2007.
Upbeat economic news came from the Institute for Supply Management which
reported that its index of manufacturing activity rose to 55.9 in December from
53.6 in November, to the highest reading since April 2006. Any score above 50
indicates expansion. Bullish sentiment was echoed by the Conference Board,
which said its index of leading economic indicators gained 0.9% in November
following a 0.3% rise in October.
Less positive was the news from the employment front. The Commerce
Department reported that another 85,000 jobs were cut in December, bringing the
total job loss to 7.2 million since the recession began in December 2007. While
the unemployment rate of 10% was unchanged from November, it was only because
many workers stopped looking for jobs that month and thus weren't counted.
Growth prospects for the fourth quarter were heightened by the Commerce
Department report that the U.S. trade deficit narrowed in October to $32.9
billion. Exports rose 2.6%, its sixth straight monthly increase, while imports
gained only 0.4%. The weaker dollar has helped to spur exports. Tracked against
a basket of sixteen other currencies the dollar ended 2009 down 5%, according
to the J.P. Morgan Chase Index. For the year, the dollar declined 2.94% against
the euro and increased 2.6% against the yen.
3
Merger and acquisition deal volume in the U.S. fell 10% in 2009 to $766.8
billion from $850.6 billion in 2008, according to Dealogic. There were 7,140
U.S. deals last year, a drop of 17% from the 8,614 a year earlier. Global
activity also declined, with deal volume totaling $2.3 trillion in 2009, off
22% from $2.94 trillion in 2008 and the lowest volume since $1.98 trillion in
2004.
There was a great disparity in global initial public offerings ("IPO") of
stocks in 2009 with Asia taking the lion's share by far, according to Dealogic.
China alone completed 185 deals totaling $50.5 billion, over double the amount
completed in the U.S. and Europe combined. The U.S. achieved 49 deals totaling
$16.7 billion while Europe had 69 deals valued at only $7.7 billion. While the
global number of IPOs last year declined 15% to 583, the dollar volume
increased 50% over 2008 to $114.7 billion.
Looking to the future, companies in the S&P 500 Index are expected to earn
$77.84 a share in 2010, an increase of about 30% over last year, according to
Thomson Financial. The less optimistic Wall Street Journal consensus survey
forecast a 21% gain to $72.62 a share.
Based on these earning forecasts for 2010, Bloomberg News reported that
stocks in the S&P 500 Index were trading at a price/earnings ratio of 14.18 at
the year end against 13.98 on September 30 and 11.34 at the close of 2008.
These figures compare with an average P/E ratio of 14.9 dating back to 1984.
For trailing twelve-month earnings, the ratios were 24.52, 19.56, and 18.8
respectively. To us, these valuations seem about fairly priced. They are not
cheap but they are also not widely out of line.
Following a dismal year, companies are expected to increase their dividend
payments by 6.1% for 2010, according to Howard Silverblatt, senior index
analyst at Standard and Poor's. Mr. Silverblatt believes that "the dividend
recovery will be slow" and that it will take until 2012 to 2013 to return to
where we were. Last year 804 companies cut dividends against 110 two years ago
and was at the highest level since the S&P began collecting data in 1955. The
number of dividend increases fell 36.4% to a record low.
As far as the market outlook is concerned, analysts are far more optimistic
than individual investors. Surveyed by Investors Intelligence, analysts tallied
52% bulls and 17% bears at the year end. At the same time, the American
Institute of Investors reported that its members were evenly split, with 38%
bulls and 38% bears. Our viewpoint is somewhere between the investors and the
analysts. The public is gun shy. They have been selling domestic stock mutual
funds and buying bond funds. Analysts, meanwhile, are optimistic because
interest rates are still low and the tape has been performing pretty well.
We think that the economy turned around about six months ago and earnings
will be higher than most people expect. Corporations have cut a lot of fat from
their operations and if, or as, the economy turns up, profit margins will be
quite high, which is bullish for the market.
One factor that is making us somewhat nervous right now is the highly
optimistic sentiment indicators. However, as the old saying goes, the bull
market has to climb a wall of worry and there is always plenty to worry about.
There will be a correction at some point but it doesn't necessarily have to be
a big one. On the whole, today's market looks positive. Consequently, we are
about 82% invested, which is somewhat bullish for us.
Sincerely,
[GRAPHIC]
Martin E. Zweig, Ph.D.
President
Zweig Consulting LLC
4
PORTFOLIO COMPOSITION
The Fund's leading stock market sectors as of December 31, 2009 included
Information Technology, Energy, Consumer Staples, Health Care and Industrials.
Although there were some changes in percentages held, all of the above appeared
in our previous listing. During the quarter we added to our holdings in Energy
and Consumer Staples and reduced our positions in Financials and Consumer
Discretionary.
Our leading individual positions as of December 31, 2009, included Biogen
Idec, Cisco, Continental Airlines, Costco, Johnson & Johnson, Microsoft,
Occidental Petroleum, QUALCOMM, Research in Motion and Union Pacific. Although
there were no changes in shares held, Biogen Idec, Johnson & Johnson, Microsoft
and Occidental Petroleum are new to this listing. Also new is Research in
Motion, where we increased our holdings. We have trimmed our positions in
Freeport-McMoRan, NIKE, PepsiCo, Phillip Morris International and Under Armour,
and these companies are no longer among our top positions.
Sincerely,
/s/ Carlton Neel
Carlton Neel
Executive Vice President
Zweig Advisers, LLC
ASSET ALLOCATIONS AS OF DECEMBER 31, 2009
The following graph illustrates asset allocations within certain sectors and
as a percentage of total investments as of December 31, 2009.
[CHART]
($ reported in thousands)
Sector Weightings as of December 31, 2009:
15.0% Information Technology
13.0% Energy
10.0% Consumer Staples
10.0% Health Care
9.0% Industrials
7.0% Materials
4.0% Consumer Discretionary
4.0% Telecommunications Services
28.0% Other (includes short-term investments)
The preceding information is the opinion of portfolio management. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts will be realized.
For information regarding the indexes cited and key investment terms used in
this report see pages 6-7.
5
KEY INVESTMENT TERMS
AMERICAN DEPOSITARY RECEIPT (ADR): Represents shares of foreign companies
traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or a
trust. Foreign companies use ADRs in order to make it easier for Americans to
buy their shares.
CONFERENCE BOARD REPORT: Widely followed economic indicators, particularly the
Consumer Confidence Index ("CCI"). The Conference Board also connects some
2,000 companies via forums and peer-to-peer meetings to discuss what matters to
companies today: issues such as top-line growth in a shifting economic
environment and corporate governance standards.
CONSUMER PRICE INDEX (CPI): Measures the pace of inflation by measuring 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.
DAX INDEX: A total return index of 30 selected German blue chip companies
traded on the Frankfurt Stock exchange. It is a free float weighted index.
DEFLATION: A general decline in prices, if it persists, generally creates a
vicious spiral of negatives such as falling profits, closing factories,
shrinking employment and incomes, and increasing defaults on loans by companies
and individuals. To counter deflation, the Federal Reserve (the Fed) can use
monetary policy to increase the money supply and deliberately induce rising
prices, causing inflation.
DOW JONES GLOBAL EX. U.S. INDEX/SM/: A market capitalization-weighted index
which covers approximately 95% of the market capitalization of the represented
countries of Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hong Kong, Hungary, Indonesia, Ireland, Italy, Japan, Latvia, Lithuania,
Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland,
Portugal, Romania, Singapore, Slovakia, Slovenia, South Africa, South Korea,
Spain, Sweden, Switzerland, Taiwan, Thailand and the United Kingdom.
DOW JONES INDUSTRIAL AVERAGE/SM/: A price-weighted average of 30 blue chip
stocks. The index is calculated on a total return basis with dividends
reinvested.
FEDERAL RESERVE: 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.
FTSE 100 INDEX: A capitalization weighted index of the 100 most capitalized
companies traded on the London Stock Exchange.
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.
INSTITUTE FOR SUPPLY MANAGEMENT (ISM) REPORT ON BUSINESS/(R)/: An economic
forecast, released monthly, that measures U.S. manufacturing conditions and is
arrived at by surveying 300 purchasing professionals in the manufacturing
sector representing 20 industries in all 50 states.
6
INVESTORS INTELLIGENCE SURVEY: A weekly survey published by Chartcraft, an
investment services company, of the current sentiment of approximately 150
market newsletter writers. Participants are classified into three categories:
bullish, bearish or waiting for a correction.
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.
NATIONAL ASSOCIATION OF REALTORS (NAR): A trade organization of Real Estate
professionals, founded in 1908 as the National Association of Real Estate
Exchanges.
NIKKEI 225 STOCK AVERAGE: A price weighted average of 225 top-rated Japanese
companies listed in the First Section of the Tokyo Stock Exchange.
PRICE-TO-EARNINGS RATIO (P/E): A valuation measure calculated by dividing a
stock's price by its current or projected earnings per share. The P/E ratio
gives an idea of how much an investor is paying for current or future earnings
power.
S&P 500/(R)/ INDEX: A free-float market capitalization-weighted index of 500 of
the largest U.S. companies. The index is calculated on a total return basis
with dividends reinvested.
SHANGHAI COMPOSITE INDEX: A capitalization weighted index that tracks the daily
price performance of all A shares and B shares listed on the Shanghai Stock
Exchange.
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.
7
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ REPORTED IN THOUSANDS)
NUMBER OF
SHARES VALUE
--------- --------
INVESTMENTS
COMMON STOCKS 77.2%
CONSUMER DISCRETIONARY -- 4.3%
McDonald's Corp.............................. 94,000 $ 5,869
NIKE, Inc. Class B........................... 94,000 6,211
Under Armour, Inc. Class A/(2)/.............. 109,000 2,972
--------
15,052
--------
CONSUMER STAPLES -- 10.2%
Altria Group, Inc............................ 310,000 6,085
Bunge Ltd.................................... 88,000 5,617
Clorox Co. (The)............................. 98,000 5,978
Costco Wholesale Corp........................ 115,000 6,804
PepsiCo, Inc................................. 96,000 5,837
Philip Morris International, Inc............. 120,000 5,783
--------
36,104
--------
ENERGY -- 13.1%
Chevron Corp................................. 76,000 5,851
ConocoPhillips............................... 115,000 5,873
Halliburton Co............................... 195,000 5,868
Massey Energy Co............................. 128,000 5,377
Occidental Petroleum Corp.................... 81,000 6,589
Petroleo Brasileiro SA ADR................... 130,000 6,199
Valero Energy Corp........................... 245,000 4,104
Williams Cos., Inc. (The).................... 302,000 6,366
--------
46,227
--------
FINANCIALS -- 3.0%
Goldman Sachs Group, Inc. (The).............. 34,000 5,740
Hudson City Bancorp, Inc..................... 360,000 4,943
--------
10,683
--------
HEALTH CARE -- 10.2%
Biogen Idec, Inc./(2)/....................... 124,000 6,634
Gilead Sciences, Inc./(2)/................... 129,000 5,583
Johnson & Johnson............................ 103,000 6,634
See notes to financial statements
8
NUMBER OF
SHARES VALUE
--------- --------
HEALTH CARE (CONTINUED)
Shire plc ADR............................. 102,000 $ 5,987
St. Jude Medical, Inc./(2)/............... 142,000 5,223
UnitedHealth Group, Inc................... 195,000 5,944
--------
36,005
--------
INDUSTRIALS -- 9.4%
Caterpillar, Inc.......................... 62,000 3,533
Continental Airlines, Inc. Class B/(2)/... 370,000 6,631
Dryships, Inc./(2)/....................... 943,000 5,488
Foster Wheeler AG/(2)/.................... 160,000 4,710
L-3 Communications Holdings, Inc.......... 65,000 5,652
Union Pacific Corp........................ 110,000 7,029
--------
33,043
--------
INFORMATION TECHNOLOGY -- 14.9%
Cisco Systems, Inc./(2)/.................. 330,000 7,900
Corning, Inc.............................. 315,000 6,083
Hewlett-Packard Co........................ 117,000 6,027
International Business Machines Corp...... 45,000 5,891
Microsoft Corp............................ 250,000 7,622
Nokia OYJ Sponsored ADR................... 345,000 4,433
QUALCOMM, Inc............................. 170,000 7,864
Research In Motion Ltd./(2)/.............. 101,000 6,822
--------
52,642
--------
MATERIALS -- 7.0%
Alcoa, Inc................................ 335,000 5,400
Freeport-McMoRan Copper & Gold, Inc./(2)/. 81,000 6,503
Nucor Corp................................ 135,000 6,298
Potash Corp. of Saskatchewan, Inc......... 60,000 6,510
--------
24,711
--------
TELECOMMUNICATION SERVICES -- 3.5%
AT&T, Inc................................. 220,000 6,167
Verizon Communications, Inc............... 192,000 6,361
--------
12,528
--------
UTILITIES -- 1.6%
Exelon Corp............................... 119,000 5,816
--------
5,816
--------
TOTAL COMMON STOCKS (Identified Cost $256,657) 272,811
--------
See notes to financial statements
9
NUMBER OF
SHARES VALUE
---------- --------
EXCHANGE TRADED FUNDS 2.8%
PowerShares Deutsche Bank Agriculture Fund/(2)/ 206,000 $ 5,447
Templeton Dragon Fund, Inc..................... 160,000 4,360
--------
TOTAL EXCHANGE TRADED FUNDS (Identified Cost $9,592) 9,807
--------
TOTAL LONG TERM INVESTMENTS -- 80.0% (Identified Cost
$266,249)........................................ 282,618
--------
SHORT-TERM INVESTMENTS 20.0%
MONEY MARKET MUTUAL FUNDS -- 1.8%
Dreyfus Cash Management Fund -- Institutional
Shares (seven-day effective yield 0.080%).... 6,455,887 6,456
--------
PAR
----------
U.S. TREASURY BILLS/(3)/ -- 18.2%
U.S. Treasury Bill
0.136%, 2/11/10............................ $ 44,000 43,999
0.455%, 4/1/10............................. 20,000 19,997
--------
63,996
--------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $70,420) 70,452
--------
TOTAL INVESTMENTS (Identified Cost $336,669) --
100.0%/(1)/...................................... 353,070
OTHER ASSETS AND LIABILITIES, NET -- (0.0)%........ (16)
--------
NET ASSETS -- 100.0%............................... $353,054
========
--------
(1) Federal Income Tax Information : For tax information at December 31, 2009,
see Note 9 Federal Income Tax Information in the Notes to Financial
Statements.
(2) Non-income producing.
(3) The rate shown is the discount rate.
COUNTRY WEIGHTINGS AS OF DECEMBER 31, 2009+
United States (includes short-term investments). 85%
Canada.......................................... 4%
Bermuda......................................... 3%
Brazil.......................................... 2%
Switzerland..................................... 2%
United Kingdom.................................. 2%
Greece.......................................... 1%
Other........................................... 1%
---
TOTAL........................................... 100%
===
--------
+ % of total investments as of December 31, 2009
See notes to financial statements
10
The following table provides a summary of inputs used to value the Fund's net
assets as of December 31, 2009. (See Security Valuation Note 2A in the Notes to
Financial Statements):
LEVEL 2
TOTAL VALUE AT SIGNIFICANT
DECEMBER 31, LEVEL 1 OBSERVABLE
2009 QUOTED PRICES INPUTS
-------------- ------------- -----------
Equity Securities:
Common Stocks.................. $272,811 $272,811 $ --
Exchange Traded Funds.......... 9,807 9,807 --
Short-Term Investments......... 6,456 6,456 --
Debt Securities:
U.S. Government Securities..... 63,996 -- 63,996
-------- -------- -------
Total Investments................. $353,070 $289,074 $63,996
======== ======== =======
There are no Level 3 (significant unobservable inputs) priced securities.
See notes to financial statements
11
THE ZWEIG FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2009
(REPORTED IN THOUSANDS EXCEPT SHARES OUTSTANDING AND PER SHARE AMOUNTS)
ASSETS
Investment securities at value (Identified Cost $336,669 ). $ 353,070
Cash....................................................... 12
Receivables
Dividends.............................................. 385
Prepaid expenses........................................... 49
---------
Total Assets........................................... 353,516
---------
LIABILITIES
Payables
Investment advisory fee................................ 253
Administration fee..................................... 19
Professional fees...................................... 52
Transfer agent fee..................................... 35
Directors' fees........................................ 9
Other accrued expenses................................. 94
---------
Total Liabilities...................................... 462
---------
NET ASSETS.................................................... $ 353,054
=========
NET ASSET VALUE PER SHARE
($353,054 / 91,955,558).................................... $ 3.84
=========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest........... $ 476,673
Accumulated undistributed net investment income (loss)..... 553
Accumulated net realized gain (loss)....................... (140,573)
Net unrealized appreciation (depreciation)................. 16,401
---------
NET ASSETS.................................................... $ 353,054
=========
See notes to financial statements
12
THE ZWEIG FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2009
(REPORTED IN THOUSANDS)
INVESTMENT INCOME
Income
Dividends................................................................. $ 5,744
Interest.................................................................. 307
Foreign taxes withheld.................................................... (55)
--------
Total Investment Income............................................ 5,996
--------
Expenses
Investment advisory fees.................................................. 2,704
Administration fees....................................................... 207
Transfer agent fees and expenses.......................................... 202
Printing fees and expenses................................................ 216
Directors' fees........................................................... 134
Professional fees......................................................... 116
Custodian fees............................................................ 23
Miscellaneous expenses.................................................... 284
--------
Total Expenses..................................................... 3,886
--------
Net Investment Income........................................... 2,110
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments............................................................... (26,110)
Net change in unrealized appreciation (depreciation) on:
Investments............................................................... 86,302
--------
Net gain (loss) investments............................................ 60,192
--------
Net increase (decrease) in net assets resulting from operations........ $ 62,302
========
See notes to financial statements
13
THE ZWEIG FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(REPORTED IN THOUSANDS)
YEAR ENDED YEAR ENDED
DECEMBER 31, 2009 DECEMBER 31, 2008
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss)..................................... $ 2,110 $ 3,554
Net realized gain (loss)......................................... (26,110) (3,401)
Net change in unrealized appreciation (depreciation)............. 86,302 (149,570)
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................................. 62,302 (149,417)
-------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................................ (2,174) (4,008)
Net realized short-term gains.................................... -- (8,761)
Tax return of capital............................................ (29,367) (34,773)
-------- ---------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS................................................ (31,541) (47,542)
-------- ---------
CAPITAL SHARE TRANSACTIONS
Net proceeds from the sales of shares during rights
offering....................................................... -- 148/(1)/
-------- ---------
Net increase in net assets derived from capital share
transactions................................................ -- 148
-------- ---------
Net increase (decrease) in net assets......................... 30,761 (196,811)
NET ASSETS
Beginning of period.................................................. 322,293 519,104
-------- ---------
End of period........................................................ $353,054 $ 322,293
======== =========
Accumulated undistributed net investment income (loss) at
end of period...................................................... $ 553 $ 665
--------
/(1)/ Adjustment to bring costs estimated in connection with the September 2007
rights offering to actual.
See notes to financial statements
14
THE ZWEIG FUND, INC.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
PER SHARE DATA
Net asset value, beginning of period............... $ 3.50 $ 5.65 $ 5.99 $ 5.82 $ 6.02
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)/(6)/.................. 0.02 0.04 0.05 0.07 0.08
Net realized and unrealized gains (losses)......... 0.66 (1.67) 0.39 0.68 0.31/(5)/
-------- -------- -------- -------- --------
Total from investment operations................... 0.68 (1.63) 0.44 0.75 0.39
-------- -------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income............... (0.02) (0.04) (0.05) (0.07) (0.11)
Distributions from net realized gains.............. -- (0.10) (0.34) (0.21) (0.28)
Tax return of capital.............................. (0.32) (0.38) (0.20) (0.30) (0.20)
-------- -------- -------- -------- --------
Total dividends and distributions.................. (0.34) (0.52) (0.59) (0.58) (0.59)
-------- -------- -------- -------- --------
Dilutive effect on net asset values as a result of
capital contribution............................. -- -- -- -- -- /(4)/
Dilutive effect on net asset values as a result of
rights offering.................................. -- -- /(4)/ (0.19)/(1)/ -- --
-------- -------- -------- -------- --------
Change in net asset value.......................... 0.34 (2.15) (0.34) 0.17 (0.20)
-------- -------- -------- -------- --------
Net asset value, end of period.................. $ 3.84 $ 3.50 $ 5.65 $ 5.99 $ 5.82
======== ======== ======== ======== ========
Market value, end of period/(2)/................ $ 3.31 $ 2.88 $ 5.05 $ 5.90 $ 5.25
======== ======== ======== ======== ========
Total investment return/(3)/....................... 29.08% (35.32)% (5.12)%/(7)/ 24.87% 5.78%
======== ======== ======== ======== ========
Total return on net asset value/(8)/............... 23.22% (29.75)% 8.75% 14.58% 7.90%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........... $353,054 $322,293 $519,104 $438,544 $426,378
Ratio of expenses to average net assets
(excluding dividends on short sales)............. 1.22% 1.18% 1.13% 1.18% 1.26%
Ratio of expenses to average net assets
(including dividends on short sales)............. 1.22% 1.18% 1.13% 1.21% 1.33%
Ratio of net investment income to average net
assets........................................... 0.66% 0.83% 0.82% 1.20% 1.31%
Portfolio turnover rate............................ 35% 39% 58% 39% 45%
For definitions and explanations of the Footnotes see page 16.
See notes to financial statements
15
--------
(1)Shares were sold at a 5% discount from a 5-day average market price from
8/29/07 to 9/5/07.
(2)Closing Price -- New York Stock Exchange.
(3)Total investment return is calculated assuming a purchase of a share of the
Fund's common stock at the opening NYSE share price on the first business
day and a sale at the closing NYSE share price on the last business day of
each period reported. Dividends and distributions, if any, are assumed for
the purpose of this calculation, to be reinvested at prices obtained under
the Fund's Automatic Reinvestment and Cash Purchase Plan. Generally, total
investment return based on net asset value will be higher than total
investment return based on market value in periods where there is an
increase in the discount or a decrease in the premium of the market value to
the net assets from the beginning to the end of such periods. Conversely,
total investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a decrease
in the discount or an increase in the premium of the market value to the net
asset value from the beginning to the end of such periods.
(4)Amount is less than $0.005.
(5)The net realized and unrealized gains (losses) includes a voluntary payment
made by the Adviser to fully offset the net gains and losses associated with
a violation of investment restrictions. If this payment was not included,
the per share impact would be less than $0.01.
(6)Computed using average shares outstanding.
(7)Total investment return includes the dilutive effect of the rights offering.
Without this effect, the total investment return would have been (3.83)%.
(8)NAV return is calculated using the opening Net Asset Value price of the
Fund's common stock on the first business day and the closing Net Asset
Value price of the Fund's common stock on the last business day of each
period reported. Dividends and distributions, if any, are assumed for the
purpose of this calculation, to be reinvested at prices obtained under the
Fund's Automatic Reinvestment and Cash Purchase Plan.
See notes to financial statements
16
THE ZWEIG FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 1 -- ORGANIZATION
The Zweig Fund, Inc. (the "Fund") is a closed-end, diversified management
investment company registered under the Investment Company Act of 1940 (the
"Act"). The Fund was incorporated under the laws of the State of Maryland on
June 18, 1986. The Fund's objective is capital appreciation, primarily through
investment in equity securities, consistent with the preservation of capital
and reduction of risk.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principals
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 financial statements and the reported amount of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates and those differences could be significant.
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 utilizes information with respect to
recent sales, market transactions in comparable securities, quotations from
dealers, and various relationships between securities in determining value. Due
to continued volatility in the current market, valuations developed through
pricing techniques may materially vary from the actual amounts realized upon
sale of the securities.
As required, some securities and other 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.
Investments in underlying funds are valued at each fund's closing net asset
value determined as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern time).
17
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels:
. Level 1 -- quoted prices in active markets for identical securities
. 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 Fund's own assumptions in determining the fair value of
investments)
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. The
inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
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. INCOME TAXES:
The Fund is treated as a separate taxable entity. It is the policy of the
Fund to comply with the requirements of Subchapter M of the Internal Revenue
Code and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes or excise taxes
has been made.
The Fund may be subject to foreign taxes on income, gains on investments or
currency repatriation, a portion of which may be recoverable. The Fund will
accrue such taxes and recoveries as applicable based upon current
interpretations of the tax rules and regulations that exist in the markets in
which it invests.
Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold
for financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return. Management has analyzed the Fund's tax
positions and has concluded that no provision for income tax is required in the
Fund's financial statements. The Fund is unaware of any tax positions for which
it is reasonably possible that the total amounts of unrecognized tax benefits
will significantly change in the next twelve months. Each of the Fund's federal
tax returns for the prior three fiscal years remains subject to examination by
the Internal Revenue Service.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from accounting
18
principles generally accepted in the United States of America. These
differences may include the treatment of non-taxable dividends, market premium
and discount, non-deductible expenses, expiring capital loss carryovers,
foreign currency gain or loss, operating losses and losses deferred due to wash
sales. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to capital paid in on shares of
beneficial interest.
The Fund has a Managed Distribution Plan to pay 10 percent of the Fund's net
asset value ("NAV") on an annualized basis. Distributions may represent
earnings from net investment income, realized capital gains, or, if necessary,
return of capital. Shareholders should not draw any conclusions about the
Fund's investment performance from the terms of the Fund's Managed Distribution
Plan. As noted in the Statement of Changes, the Fund distributed a return of
capital.
E. 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.
NOTE 3 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
($ REPORTED IN THOUSANDS UNLESS OTHERWISE NOTED)
Virtus Investment Advisers, Inc. ("VIA" the "Adviser") is an indirect
wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus").
A) INVESTMENT ADVISORY FEE: The Investment Advisory Agreement (the
"Agreement") between the Adviser and the Fund provides that, subject to the
direction of the Board of Directors of the Fund and the applicable provisions
of the Act, the adviser is responsible for the actual management of the Fund's
portfolio. The responsibility for making decisions to buy, sell, or hold a
particular investment rests with the Adviser, subject to review by the Board of
Directors and the applicable provisions of the Act. For the services provided
by the Adviser under the Agreement, the Fund pays the Adviser a monthly fee
equal, on an annual basis to 0.85% of the Fund's average daily net assets.
During the fiscal year ended (the "period") December 31, 2009, the Fund
incurred advisory fees of $2,704.
Zweig Consulting LLC (the "Sub-Adviser"), which serves as the Sub-Adviser
for the Fund, performs certain asset allocation research and analysis and
provides such advice to the Adviser. The Sub-Adviser's fees are paid by the
Adviser.
B) ADMINISTRATION FEE: VP Distributors, Inc., an indirect wholly-owned
subsidiary of Virtus, serves as the Fund's Administrator (the "Administrator")
pursuant to an Administration Agreement. During the period ended December 31,
2009, the Fund incurred Administration fees of $207.
19
C) DIRECTORS FEE ($ NOT REPORTED IN THOUSANDS):
During the period the Fund paid each Director who is not an interested
person of the Fund or the Adviser or a co-lead Director a fee of $11,000 per
year plus $1,500 per Directors' or committee meeting attended, together with
the out-of-pocket costs relating to attendance at such meetings. The co-lead
Directors are paid an additional $10,000 retainer each per year. The Audit
Committee chairperson is paid an additional fee of $5,000 per year. Any
Director of the Fund who is an interested person of the Fund or the Adviser
receives no remuneration from the Fund.
NOTE 4 -- PURCHASES AND SALES OF SECURITIES:
($ REPORTED IN THOUSANDS)
Purchases and sales of securities (excluding U.S. Government and agency
securities and short-term securities) for the period ended December 31, 2009,
were as follows:
Purchases. $ 89,092
Sales..... 118,713
There were no purchases and sales of long-term U.S. Government and agency
securities for the period ended December 31, 2009.
NOTE 5 -- INDEMNIFICATIONS
Under the Fund's organizational documents and related agreements, 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 arrangements.
NOTE 6 -- CAPITAL STOCK AND REINVESTMENT PLAN
At December 31, 2009, the Fund had one class of common stock, par value $.10
per share, of which 200,000,000 shares are authorized and 91,955,558 shares are
outstanding.
Registered shareholders may elect to have all distributions paid by check
mailed directly to the shareholder by Computershare as dividend paying agent.
Pursuant to the Automatic Reinvestment and Cash Purchase Plan (the "Plan"),
shareholders not making such election will have all such amounts automatically
reinvested by Computershare, as the Plan agent, in whole or fractional shares
of the Fund, as the case may be. During the years ended December 31, 2008 and
December 31, 2009, there were no shares issued pursuant to the Plan.
In a non-transferable rights offering ended September 5, 2007, shareholders
exercised rights to purchase 18,400,000 shares of common stock at an offering
price of $4.81 per share for proceeds, net of expenses, of $87,859,000.
Expenses were adjusted by $148,211 in 2008, resulting in final net proceeds of
$88,007,211.
On December 21, 2009, the Fund announced a distribution of $0.095 per share
to shareholders of record on December 31, 2009. This distribution has an
ex-dividend date of January 5, 2010, and is payable on January 11, 2010. Please
see inside front cover for more information on fund distributions.
20
NOTE 7 -- CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as the Fund's ability to
repatriate such amounts.
The Fund may invest a high percentage of its assets in specific sectors of
the market in its pursuit of a greater investment return. Fluctuations in these
sectors of concentration may have a greater impact on the Fund, positive or
negative, than if the Fund did not concentrate its investments in such sectors.
NOTE 8 -- REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries
and conduct examinations regarding compliance by Virtus and its subsidiaries
(collectively "the Company") with securities and other laws and regulations
affecting their registered products.
There are currently no such matters which the Company believes will be
material to these financial statements.
NOTE 9 -- FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At December 31, 2009, federal tax cost and aggregate gross unrealized
appreciation (depreciation) of securities held by the Fund were as follows:
NET UNREALIZED
FEDERAL UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------------- -------------- -------------- --------------
$339,211 $35,954 $(22,095) $13,859
The Fund has capital loss carryover, which may be used to offset future
capital gains as follows:
EXPIRATION YEAR
--------------------------------------------------------------------------
2010 2011 2016 2017 TOTAL
------------- ------------- ------------- ------------- -------------
$83,074 $26,802 $2,219 $20,958 $133,053
The Fund may not realize the benefit of these losses to the extent it does
not realize gains on investments prior to the expiration of the capital loss
carryovers. In addition, under certain conditions, the Fund may lose the
benefit of these losses to the extent that distributions to shareholders exceed
required distribution amounts as defined under the Internal Revenue Code.
Shareholders may also pay additional taxes on these excess distributions.
Under current tax law, foreign currency and capital losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following fiscal year. For the fiscal year ended December 31, 2009, the Fund
deferred $4,979 and recognized $1,625 of post-October losses.
21
The components of distributable earnings on a tax basis (excluding
unrealized appreciation
(depreciation) which is disclosed in the table above) consist of undistributed
ordinary income of $0 and undistributed long-term capital gains of $0.
The differences between the book and tax basis components of distributable
earnings relate principally to the timing of recognition of income and gains
for federal income tax purposes. Short-term gain distributions reported in the
Statement of Changes in Net Assets, if any, are reported as ordinary income for
federal tax purposes. Distributions are determined on a tax basis and may
differ from net investment income and realized capital gains for financial
reporting purposes.
NOTE 10 -- RECLASSIFICATION OF CAPITAL ACCOUNTS
As of December 31, 2009, the Fund increased undistributed net investment
income by $29,319, decreased the accumulated net realized loss by $49, and
decreased capital paid in on shares of beneficial interest by $29,368.
NOTE 11 -- RECENT ACCOUNTING PRONOUCEMENTS
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 amends FASB Accounting Standards
Codification Topic 820, Fair Value Measurements and Disclosures, to require
additional disclosures regarding fair value measurements. Certain disclosures
required by ASU No. 2010-06 are effective for interim and annual reporting
periods beginning after December 15, 2009, and other required disclosures are
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. Management is currently evaluating the
impact ASU No. 2010-06 will have on its financial statement disclosures.
NOTE 12 -- SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Fund
through February 16, 2010, the date the financial statements were issued, and
has determined that the following subsequent event requires recognition or
disclosure in these financial statements.
Virtus Distributors, Inc., the Fund's administrator, sub-contracts with PNC
Global Investment Servicing for certain sub-administrative duties.
On February 2, 2010, The PNC Financial Services Group, Inc. ("PNC") entered
into a Stock Purchase Agreement (the "Stock Purchase Agreement") with The Bank
of New York Mellon Corporation ("BNY Mellon"). Upon the terms and subject to
the conditions set forth in the Stock Purchase Agreement, which has been
approved by the board of directors of each company, PNC will sell to BNY Mellon
(the "Stock Sale") 100% of the issued and outstanding shares of PNC Global
Investment Servicing Inc., an indirect, wholly-owned subsidiary of PNC. The
Stock Sale includes PNC Global Investment Servicing (U.S.) Inc., and is
expected to close in the third quarter of 2010.
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of The Zweig Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of The Zweig Fund, Inc. (the
"Fund") at December 31, 2009, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2009 by correspondence with the
custodian, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Philadelphia PA
February 16, 2010
23
CERTIFICATION (UNAUDITED)
In accordance with the requirements of the Sarbanes-Oxley Act, the Fund's
CEO (the President of the Fund) and CFO (the Treasurer of the Fund) have filed
the required "Section 302" certifications with the SEC on Form N-CSR.
In accordance with Section 303A of the NYSE listed company manual, the CEO
certification has been filed with the NYSE.
TAX INFORMATION (UNAUDITED)
For the fiscal year ended December 31, 2009, for federal income tax
purposes, 100% of the ordinary income dividends earned by the Fund qualify for
the dividends received deduction ("DRD") for corporate shareholders.
For the fiscal year ended December 31, 2009, the Fund hereby designates
100%, or the maximum amount allowable, of its ordinary income dividends ("QDI")
to qualify for the lower tax rates applicable to individual shareholders.
For the fiscal year ended December 31, 2009, the Fund hereby designates $0,
or if subsequently different, as long-term capital gains dividends.
The actual percentages for the calendar year will be designated in the
year-end tax statements.
24
FUND MANAGEMENT
Information pertaining to the Directors and officers of the Fund as of
December 31, 2009 is set forth below. The address of each individual, unless
otherwise noted, is c/o Zweig Advisers LLC, 900 Third Avenue, New York, NY
10022.
DISINTERESTED DIRECTORS
NAME YEAR OF BIRTH (YOB)
POSITION(S) WITH FUND AND
NUMBER OF PORTFOLIOS IN TERM OF OFFICE
FUND COMPLEX OVERSEEN AND LENGTH OF PRINCIPAL OCCUPATION(S)
BY DIRECTOR TIME SERVED DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD
------------------------- ------------------ --------------------------------------------------------------------------------
Charles H. Brunie....... Term: Until 2012. Director, The Zweig Total Return Fund, Inc. (since 1988); Chairman, Brunie
YOB: 1930 Served since: Associates (investments) (since April 2001); Oppenheimer Capital (1969-
Director 1998. 2000); Chairman (1980-1990), Chairman Emeritus (1990-2000). Chairman
2 Emeritus, Board of Trustees, Manhattan Institute (since 1990); Trustee,
Milton and Rose D. Friedman Foundation for Vouchers (since 1996); Trustee,
Hudson Institute (2002-2008); Chairman of the Board, American Spectator
(since 2002); Chartered Financial Analyst (since 1969).
Wendy Luscombe.......... Term: Until 2011. Director of The Zweig Total Return Fund, Inc. (since 2002); Co-lead
YOB: 1951 Served since: Independent Director of the Zweig Total Return Fund, Inc. and of The Zweig
Director 2002. Fund, Inc. (since 2006); Principal, WKL Associates, Inc. (Independent Fiduciary
2 and Consultant) (since 1994); Fellow, Royal Institution of Chartered Surveyors;
Member, Chartered Institute of Arbitrators; Director, Endeavour Real Estate
Securities, Ltd. REIT Mutual Fund (2000-2005); Director, PXRE, Group
(reinsurance) (1994-2007); Member and Chairman of Management Oversight
Committee, Deutsche Bank Real Estate Opportunity Fund 1A and 1B (since
2003); Trustee Acadia Realty Trust (since 2004); Member of National
Association of Corporate Directors Teachers Facility (since 2007). Independent
Director of Feldman Mall Properties a private REIT (since 2008).
Alden C. Olson.......... Term: Until 2010. Director of The Zweig Total Return Fund, Inc. (since 1996); Currently retired;
YOB: 1928 Served since: Chairman Audit Committee of The Zweig Fund, Inc. and The Zweig Total
Director 1996. Return Fund, Inc. (since 2004); Chartered Financial Analyst (since 1964);
2 Professor of Financial Management, Investments at Michigan State University
(1959 to 1990).
James B. Rogers, Jr..... Term: Until 2012. Director of The Zweig Total Return Fund, Inc. (since 1988); Private investor
YOB: 1942 Served since: (since 1980); Chairman, Beeland Interests (Media and Investments) (since
Director 1986. 1980); Regular Commentator on Fox News (2002-2007); Author of
2 "Investment Biker: On the Road with Jim Rogers" (1994), "Adventure
Capitalist" (2003); "Hot Commodities" (2004); "A Bull in China" (2007); and A
Gift to My Children (2009). Director, Levco Series Trust (1996-2006)
R. Keith Walton......... Term: Until 2011. Director of The Zweig Total Return Fund, Inc. (since 2004); Co-lead
YOB: 1964 Served since: Independent Director of the Zweig Total Return Fund, Inc. and of The Zweig
Director 2004. Fund, Inc. (since 2006); Senior Managing Director, BSE Management LLC
2 (since 2010); Principal and Chief Administrative Officer, Global Infrastructure
Partners (2007-2009); Director, Blue Crest Capital Management Funds (since
2006); Executive Vice President and the Secretary (1996-2007) of the
University at Columbia University; Director (since 2002), Member, Executive
Committee (since 2002), Chair, Audit Committee (since 2003), Apollo Theater
Foundation, Inc.; Director, Orchestra of St. Luke's (since 2000); Vice
President and Trustee, The Trinity Episcopal School Corporation (since
2003); Member (since 1997), Nominating and Governance Committee Board
of Directors (since 2004), Council on Foreign Relations.
25
INTERESTED DIRECTOR/(1)/
NAME, YEAR OF BIRTH (YOB),
POSITION(S) WITH FUND,
NUMBER OF PORTFOLIOS IN TERM OF OFFICE
FUND COMPLEX OVERSEEN AND LENGTH OF PRINCIPAL OCCUPATION(S)
BY DIRECTOR TIME SERVED DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD
-------------------------- ------------------ -----------------------------------------------------------------------------
George R. Aylward......... Term: Until 2010. Director, President and Chief Executive Officer (2008-present), Director and
100 Pearl Street Served since: President (2006-2008), Chief Operating Officer (2004-2006), Vice President,
Hartford, CT 06103 2006. Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its
YOB: 1964 subsidiaries. Various senior officer and directorship positions with Virtus
Director, Chairman of affiliates (2005-present). Senior Executive Vice President and President,
the Board and President Asset Management (2007-2008), Senior Vice President and Chief Operating
48 Officer, Asset Management (2004-2007), Vice President and Chief of Staff
(2001-2004), The Phoenix Companies, Inc. Various senior officer and
directorship positions with Phoenix affiliates (2005-2008). President (2006-
present), Executive Vice President (2004-2006), the Virtus Mutual Funds
Family. Chairman, President and Chief Executive Officer, The Zweig Fund
Inc. and The Zweig Total Return Fund Inc. (2006-present).
OFFICERS WHO ARE NOT DIRECTORS/(2)/
POSITION
WITH THE FUND
NAME, ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH TIME SERVED DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD
----------------- ------------------------- ----------------------------------------------------------------------------
Carlton Neel...... Executive Vice Executive Vice President of The Zweig Total Return Fund, Inc. (since 2003);
YOB: 1967 President Senior Vice President and Portfolio Manager, Zweig Advisers, LLC (f/k/a
since: 2003. Phoenix/Zweig Adviser, LLC) (since 2003); Managing Director and Co-
Founder, Shelter Rock Capital Partners, LP (2002-2003); Senior Vice
President and Portfolio Manager, Zweig Advisers, LLC (1995-2002); Vice
President, JP Morgan & Co. (1990-1995).
David Dickerson... Senior Vice President Senior Vice President of The Zweig Total Return Fund, Inc. (since 2003);
YOB: 1967 since: 2003. Senior Vice President and Portfolio Manager, Zweig Advisers, LLC (f/k/a
Phoenix/Zweig Adviser, LLC) (since 2003); Managing Director and Co-
Founder, Shelter Rock Capital Partners, LP (2002-2003); Vice President and
Portfolio Manager, Zweig Advisers, LLC (1993-2002).
Marc Baltuch...... Vice President and Chief Vice President and Chief Compliance Officer of The Zweig Total Return Fund,
YOB: 1945 Compliance Officer Inc. (since 2004); Chief Compliance Officer of Zweig Advisers, LLC (f/k/a
since: 2004. Phoenix/Zweig Adviser, LLC) (since 2004); President and Director of
Watermark Securities, Inc. (since 1991); Secretary of Phoenix-Zweig Trust
(1989-2003); Secretary of Phoenix-Euclid Market Neutral Fund (1998-2002);
Assistant Secretary of Gotham Advisors, Inc. (1990-2005); Chief Compliance
Officer of the Zweig Companies (since 1989) and of the Virtus Mutual Funds
Complex (since 2004). Chief Compliance Officer, The Phoenix Edge Series
Fund (since 2004).
--------
(1)Director considered to be an "interested person" as that term is defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder. Mr. Aylward is considered to be an
interested person by reason of his relationship with the Fund.
(2)The term of each officer expires immediately following the 2010 Annual
Meeting of Shareholders. Each Board considers reappointments annually.
26
OFFICERS WHO ARE NOT DIRECTORS/(2)/
POSITION
WITH THE FUND
NAME, ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH TIME SERVED DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD
----------------- -------------------- -------------------------------------------------------------------------------
Kevin J. Carr...... Secretary and Chief Secretary and Chief Legal Officer of Zweig Total Return Fund, Inc. (since
100 Pearl Street Legal Officer 2005); Vice President, Counsel and Secretary, Virtus Investment Partners, Inc.
Hartford, CT 06103 since: 2005. and/or certain of its subsidiaries (since 2008). Vice President and Counsel,
YOB: 1954 Phoenix Life Insurance Company (2005-2008). Vice President, Counsel, Chief
Legal Officer and Secretary, certain funds within Virtus Mutual Fund
Complex (since 2005). Compliance Officer of Investments and Counsel,
Travelers Life & Annuity Company (January 2005-May 2005). Assistant
General Counsel and certain other positions, The Hartford Financial Services
Group (1995-2005).
Moshe Luchins...... Vice President Vice President of The Zweig Total Return Fund, Inc. (since 2004); Associate
YOB: 1971 since: 2004. Counsel (1996-2005), Associate General Counsel (since 2006) of the Zweig
Companies.
Nancy Curtiss...... Treasurer Treasurer of The Zweig Total Return Fund, Inc. (since 2003); Senior Vice
100 Pearl Street since: 2003. President, Operations (since 2008), Vice President, Head of Asset
Hartford, CT 06103 Management Operations (2007-2008), Vice President (2003-2007), Virtus
YOB: 1952 Investment Partners, Inc. and/or certain of its subsidiaries. Assistant
Treasurer (since 2001), VP Distributors, Inc. (f/k/a Phoenix Equity Planning
Corporation). Treasurer of various other investment companies within the
Virtus Mutual Funds Complex (since 1994).
Jacqueline Porter.. Vice President and Vice President and Assistant Treasurer of The Zweig Total Return Fund, Inc.
100 Pearl Street Assistant Treasurer (since 2006); Assistant Vice President, Fund Administration and Tax, VP
Hartford, CT 06103 since: 2006. Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation )(since 1995);
YOB: 1958 Vice President and Assistant Treasurer, multiple funds in the Virtus Mutual
Fund Complex (since 1995). Vice President and Assistant Treasurer, The
Phoenix Edge Series Fund (since 1999).
--------
(2)The term of each officer expires immediately following the 2010 Annual
Meeting of Shareholders. Each Board considers reappointments annually.
27
KEY INFORMATION
ZWEIG SHAREHOLDER RELATIONS: 1-800-272-2700
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 and Sub-Adviser vote 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, 2009, free of charge, by calling toll-free
1-800-243-1574. 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.
28
AUTOMATIC REINVESTMENT AND CASH PURCHASE PLAN
The Zweig Fund, Inc. (the "Fund") allows you to conveniently reinvest
distributions quarterly in additional Fund shares thereby enabling you to
compound your returns from the Fund. By choosing to reinvest, you'll be able to
invest money regularly and automatically, and watch your investment grow.
It is important to note that an automatic reinvestment plan does not ensure
a profit, nor does it protect you against loss in a declining market.
ENROLLMENT IN THE REINVESTMENT PLAN
It is the policy of the Fund to automatically reinvest distributions payable
to shareholders. A "registered" shareholder automatically becomes a participant
in the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan (the
"Plan"). The Plan authorizes the Fund to credit all shares of common stock to
participants upon a distribution regardless of whether the shares are trading
at a discount or premium to the net asset value. Registered shareholders may
terminate their participation and receive distributions in cash by contacting
Computershare Trust Company, N.A. (the "Plan Administrator"). The termination
will become effective with the next distribution if the Plan Administrator is
notified at least 7 business days prior to the distribution payment date.
Registered shareholders that wish to change their distribution option from cash
payment to reinvest may do so by contacting the Plan Administrator at
1-800-272-2700.
In the case of banks, brokers, or other nominees which hold your shares for
you as the beneficial owner, the Plan Administrator will administer the Plan
based on the information provided by the bank, broker or nominee. To the extent
that you wish to participate in the Plan, you should contact the broker, bank
or nominee holding your shares to ensure that your account is properly
represented. If necessary, you may have your shares taken out of the name of
the broker, bank or nominee and register them in your own name.
HOW SHARES ARE PURCHASED THROUGH THE REINVESTMENT PLAN
When a distribution is declared, nonparticipants in the plan will receive
cash. Participants in the plan will receive shares of the Fund valued as
described below:
If on the record date of the distribution, the market price of the Fund's
common stock is less than the net asset value, the Plan Administrator will buy
Fund shares on behalf of the Participant in the open market, on the New York
Stock Exchange (NYSE) or elsewhere. The price per share will be equal to the
weighted average price of all shares purchased, including commissions.
Commission rates are currently $0.02 per share, although the rate is subject to
change and may vary. If, following the commencement of purchases and before the
Plan Administrator has completed its purchases, the trading price equals or
exceeds the most recent net asset value of the common shares, the Plan
Administrator may cease purchasing shares on the open market and the Fund may
issue the remaining shares at a price equal to the greater of (a) the net asset
value on the last day the Plan Administrator purchased shares or (b) 95% of the
market price on such day. In the case where the Plan Administrator has
terminated open market purchase and the Fund has issued the remaining shares,
the number of shares received by the Participant in respect of the cash
distribution will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which the Fund issued the
remaining shares. Under certain circumstances, the rules and regulations of the
Securities and Exchange Commission may require
29
limitation or temporary suspension of market purchases of shares under the
Plan. The Plan Administrator will not be accountable for its inability to make
a purchase during such a period.
If on the record date of the distribution, the market price is equal to or
exceeds the net asset value, Participants will be issued new shares by the Fund
at the greater of the (a) the net asset value on the record date or (b) 95% of
the market price on such date.
The automatic reinvestment of distributions will not relieve Participants of
any income tax which may be payable on such distributions. A Participant in the
Plan will be treated for federal income tax purposes, as having received on a
payment date, a distribution in an amount equal to the cash the participant
could have received instead of shares. If you participate in the Plan, you will
receive a Form 1099-DIV concerning the Federal tax status of distributions paid
during the year.
VOLUNTARY CASH PURCHASE PLAN
Participants in the Plan have the option of making additional cash payments
for investment in shares of the Fund. Such payments can be made in any amount
from $100 per payment to $3,000 per month. The Plan Administrator will use the
funds received to purchase Fund shares in the open market on the 15/th/ of each
month or the next business day if the 15/th/ falls on a weekend or holiday (the
"Investment Date"). The purchase price per share will be equal to the weighted
average price of all shares purchased on the Investment Date, including
commissions. There is no charge to shareholders for Cash Purchases. The plan
administrator's fee will be paid by the Fund. However, each participating
shareholder will pay pro rata share of brokerage commissions incurred
(currently $0.02 per share, but may vary and is subject to change) with respect
to the Plan Administrator's open market purchases in connection with all cash
investments. Voluntary cash payments should be sent to Computershare Trust
Company, N.A., PO Box 43078, Providence, RI 02940-3078.
Participants have an unconditional right to obtain the return of any cash
payment if the Plan Administrator receives written notice at least 5 business
days before such payment is to be invested.
AUTOMATIC MONTHLY INVESTMENT
Participants in the Plan may purchase additional shares by means of an
Automatic Monthly Investment of not less than $100 nor more than $3,000 per
month by electronic funds transfer from a predesignated U.S. bank account. If a
Participant has already established a Plan account and wishes to initiate
Automatic Monthly Investments, the Participant must complete and sign an
automatic monthly investment form and return it to the Plan Administrator
together with a voided check or deposit slip for the account from which funds
are to be withdrawn. Automatic monthly investment forms may be obtained from
the Plan Administrator by calling 1-800-272-2700.
TERMINATION OF SHARES
Shareholders wishing to liquidate shares held with the Plan Administrator
must do so in writing or by calling 1-800-272-2700. The Plan Administrator does
not charge a fee for liquidating your shares; however, a brokerage commission
of $0.02 will be charged. This charge may vary and is subject to change.
Once terminated, you may re-enroll in the Plan (provided you still have
shares registered in your name) by contacting the Plan Administrator at
1-800-272-2700.
30
ADDITIONAL INFORMATION
For more information regarding the Automatic Reinvestment and Cash Purchase
Plan, please contact the Plan Administrator at 1-800-272-2700 or visit our
website at Virtus.com.
The Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any distribution paid subsequent to written
notice of the change sent to the members of the Plan at least 90 days before
the record date for such distribution. The Plan also may be amended or
terminated by the Plan Administrator with at least 90 days written notice to
participants in the Plan.
31
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, and
that relates to any element of the code of ethics described in Item
2(b) of the instructions for completion of Form N-CSR.
(d) The registrant has not granted any waivers, during the period
covered by this report, including an implicit waiver, from a
provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of the instructions for completion
of this Item.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant's Board of Trustees has determined that the Registrant
has an "audit committee financial expert" serving on its Audit
Committee.
(a)(2) Wendy Luscombe has been determined by the Registrant to possess the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert" effective
December 12, 2007. Ms. Luscombe is an "independent" trustee pursuant to
paragraph (a)(2) of Item 3 to Form N-CSR.
(a)(3) Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
----------
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services
that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal
years are $ 32,000 for 2009 and $32,600 for 2008.
Audit-Related Fees
------------------
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under
paragraph (a) of this Item are $4,447 for 2009 and $3,097 for 2008.
This represents the review of the semi-annual financial statements,
and out of pocket expenses.
Tax Fees
--------
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $4,644 for 2009 and
$4,600 for 2008.
"Tax Fees" are those primarily associated with review of the Trust's
tax provision and qualification as a regulated investment company
(RIC) in connection with audits of the Trust's financial statement,
review of year-end distributions by the Fund to avoid excise tax for
the Trust, periodic discussion with management on tax issues
affecting the Trust, and reviewing and signing the Fund's federal
income tax returns.
All Other Fees
--------------
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other
than the services reported in paragraphs (a) through (c) of this
Item are $0 for 2009 and $7,500 for 2008.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Zweig Fund, Inc. (the "Fund") Board has adopted policies and
procedures with regard to the pre-approval of services provided by
PwC. The Audit Committee pre-approves: (i) all audit and non-audit
services to be rendered to the Fund by PwC; and (ii) all non-audit
services to be rendered to the Fund, financial reporting of the Fund
provided by PwC to the Adviser or any affiliate thereof that
provides ongoing services to the Fund (collectively, "Covered
Services"). The Audit Committee has adopted pre-approval procedures
authorizing a member of the Audit Committee to pre-approve from time
to time, on behalf of the Audit Committee, all Covered Services to
be provided by PwC which are not otherwise pre-approved at a meeting
of the Audit committee, provided that such delegate reports to the
full Audit Committee at its next meeting. The pre-approval
procedures do not include delegation of the Audit committee's
responsibilities to management. Pre-approval has not been waived
with respect to any of the services described above since the date
on which the Audit Committee adopted its current pre-approval
procedures.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) 100% for 2009 and 100% for 2008
(c) 100% for 2009 and 100% for 2008
(d) Not applicable for 2009 and 100% for 2008
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the
most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the last two
fiscal years of the registrant was $446,121 for 2009 and $1,624,671
for 2008.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and
any entity controlling, controlled by, or under common control with
the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated audit committee consisting of all the
independent directors of the registrant. Audit Committee Members are: Charles H.
Brunie, Wendy Luscombe, Prof. Alden C. Olson, James B. Rogers and R. Keith
Walton.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
THE ZWEIG FUND, INC
THE ZWEIG TOTAL RETURN FUND, INC
STATEMENT OF POLICY WITH RESPECT TO PROXY VOTING
I Definitions. As used in this Statement of Policy, the following terms shall
have the meanings ascribed below:
A. "Adviser" refers to Phoenix/Zweig Advisers LLC.
B. "Corporate Governance Matters" refers to changes involving the
corporate ownership or structure of an issuer whose securities are
within a Portfolio Holding, including changes in the state of
incorporation, changes in capital structure, including increases and
decreases of capital and preferred stock issuance, mergers and other
corporate restructurings, and anti-takeover provisions such as
staggered boards, poison pills, and supermajority voting provisions.
C. "Delegate" refers to the Adviser or Subadviser to whom responsibility
has been delegated to vote proxies for the applicable Portfolio
Holding, including any qualified, independent organization engaged by
the Adviser to vote proxies on behalf of such delegated entity.
D. "Fund" shall individually and collectively mean and refer to The Zweig
Fund, Inc. and The Zweig Total Return Fund, Inc., and each of them.
E. "Management Matters" refers to stock option plans and other management
compensation issues.
F. "Portfolio Holding" refers to any company or entity whose securities
is held within the investment portfolio(s) of one or more of the Fund
as of the date a proxy is solicited.
G. "Proxy Contests" refer to any meeting of shareholders of an issuer for
which there are at least two sets of proxy statements and proxy cards,
one solicited by management and the others by a dissident or group of
dissidents.
H. "Social Issues" refers to social and environmental issues.
I. "Takeover" refers to "hostile" or "friendly" efforts to effect radical
change in the voting control of the board of directors of a company.
II. General Policy. It is the intention of the Fund to exercise stock ownership
rights in Portfolio Holdings in a manner that is reasonably anticipated to
further the best economic interests of shareholders of the Fund.
Accordingly, the Fund or its Delegate(s) shall endeavor to analyze and vote
all proxies that are considered likely to have financial implications, and,
where appropriate, to participate in corporate governance, shareholder
proposals, management communications and legal proceedings. The Fund and
its Delegate(s) must also identify potential or actual conflicts of
interests in voting proxies and address any such conflict of interest in
accordance with this Statement of Policy.
III Factors to Consider When Voting.
A. A Delegate may abstain from voting when it concludes that the effect
on shareholders' economic interests or the value of the Portfolio
Holding is indeterminable or insignificant.
B In analyzing ANTI-TAKEOVER MEASURES, the Delegate shall vote on a
case-by-case basis taking into consideration such factors as overall
long-term financial performance of the target company relative to its
industry competition. Key measures which shall be considered include,
without limitation, five-year annual compound growth rates for sales,
operating income, net income, and total shareholder returns (share
price appreciation plus dividends). Other financial indicators that
will be considered include margin analysis, cash flow, and debit
levels.
C. In analyzing CONTESTED ELECTIONS, the Delegate shall vote on a
case-by-case basis taking into consideration such factors as the
qualifications of all director nominees. The Delegate shall also
consider the independence and attendance record of board and key
committee members. A review of the corporate governance profile shall
be completed highlighting entrenchment devices that may reduce
accountability.
D. In analyzing CORPORATE GOVERNANCE MATTERS, the Delegate shall vote on
a case-by-case basis taking into consideration such factors as tax and
economic benefits associated with amending an issuer's state of
incorporation, dilution or improved accountability associated with
changes in capital structure, management proposals to require a
supermajority shareholder vote to amend charters and bylaws and
bundled or "conditioned" proxy proposals.
E. In analyzing EXECUTIVE COMPENSATION PROPOSALS and MANAGEMENT MATTERS,
the Adviser shall vote on a case-by-case basis taking into
consideration such factors as executive pay and spending on
perquisites, particularly in conjunction with sub-par performance and
employee layoffs.
F. In analyzing PROXY CONTESTS FOR CONTROL, the Delegate shall vote on a
case-by-case basis taking into consideration such factors as long-term
financial performance of the target company relative to its industry;
management's track record; background to the proxy contest;
qualifications of director nominees (both slates); evaluation of what
each side is offering shareholders as well as the likelihood that the
proposed objectives and goals can be met; and stock ownership
positions.
G. A Delegate shall generally vote against shareholder SOCIAL MATTERS
proposals.
IV Delegation.
A. In the absence of a specific direction to the contrary from the Board
of Trustees of the Fund, the Adviser will be responsible for voting
proxies for all Portfolio Holdings in accordance with this Statement
of Policy, or for delegating such responsibility as described below.
B. The Adviser delegated with authority to vote proxies for Portfolio
Holdings shall be deemed to assume a duty of care to safeguard the
best interests of the Fund and its shareholders. No Delegate shall
accept direction or inappropriate influence from any other client,
director or employee of any affiliated company and shall not cast any
vote inconsistent with this
Statement of Policy without obtaining the prior approval of the Fund
or its duly authorized representative(s).
C. With regard to each Series for which there is a duly appointed
Subadviser acting pursuant to an investment advisory agreement
satisfying the requirements of Section 15(a) of the Investment Company
Act of 1940, as amended, and the rules thereunder, the Subadviser may,
pursuant to delegated authority from the Adviser, vote proxies for
Portfolio Holdings with regard to the Series or portion of the assets
thereof for which the Subadviser is responsible. In such case, the
Subadviser shall vote proxies for the Portfolio Holdings in accordance
with Sections II, III and V of this Statement of Policy, provided,
however, that the Subadviser may vote proxies in accordance with its
own proxy voting policy/procedures ("Subadviser Procedures") if the
following two conditions are satisfied: (1) the Adviser must have
approved the Subadviser Procedures based upon the Adviser's
determination that the Subadviser Procedures are reasonably designed
to further the best economic interests of the affected Fund
shareholders, and (2) the Subadviser Procedures are reviewed and
approved annually by the Board of Trustees. The Subadviser will
promptly notify the Adviser of any material changes to the Subadviser
Procedures. The Adviser will periodically review the votes by the
Subadviser for consistency with this Statement of Policy.
V. Conflicts of Interest
A. The Fund and its Delegate(s) seek to avoid actual or perceived
conflicts of interest in the voting of proxies for Portfolio Holdings
between the interests of Fund shareholders, on one hand, and those of
the Adviser, Delegate, principal underwriter, or any affiliated person
of the Fund, on the other hand. The Board of Trustees may take into
account a wide array of factors in determining whether such a conflict
exists, whether such conflict is material in nature, and how to
properly address or resolve the same.
B. While each conflict situation varies based on the particular facts
presented and the requirements of governing law, the Board of Trustees
or its delegate(s) may take the following actions, among others, or
otherwise give weight to the following factors, in addressing material
conflicts of interest in voting (or directing Delegates to vote)
proxies pertaining to Portfolio Holdings: (i) rely on the
recommendations of an established, independent third party with
qualifications to vote proxies such as Institutional Shareholder
Services; (ii) vote pursuant to the recommendation of the proposing
Delegate; (iii) abstaining; or (iv) where two or more Delegates
provide conflicting requests, vote shares in proportion to the assets
under management of the each proposing Delegate.
C. The Adviser shall promptly notify the President of the Fund once any
actual or potential conflict of interest exists and their
recommendations for protecting the best interests of Fund's
shareholders. No Adviser shall waive any conflict of interest or vote
any conflicted proxies without the prior written approval of the Board
of Trustees or the President of the Fund pursuant to section D of this
Article.
D. In the event that a determination, authorization or waiver under this
Statement of Policy is requested at a time other than a regularly
scheduled meeting of the Board of Trustees, the President of the Fund
shall be empowered with the power and responsibility to interpret and
apply this Statement of Policy and provide a report of his or her
determinations at the next following meeting of the Board of Trustees.
VI. Miscellaneous.
A. A copy of the current Statement of Policy with Respect to Proxy Voting
and the voting records for the Fund reconciling proxies with Portfolio
Holdings and recording proxy voting guideline compliance and
justification, shall be kept in an easily accessible place and
available upon request.
B. The Adviser shall present a report of any material deviations from
this Statement of Policy at every regularly scheduled meeting of the
Board of Trustees and shall provide such other reports as the Board of
Trustees may request from time to time. The Adviser shall provide to
the Fund or any shareholder a record of its effectuation of proxy
voting pursuant to this Statement of Policy at such times and in such
format or medium as the Fund shall reasonably request. The Adviser
shall be solely responsible for complying with the disclosure and
reporting requirements under applicable laws and regulations,
including, without limitation, Rule 206(4)-6 under the Investment
Advisers Act of 1940. The Adviser shall gather, collate and present
information relating to the its proxy voting activities of those of
each Delegate in such format and medium as the Fund shall determine
from time to time in order for the Fund to discharge its disclosure
and reporting obligations pursuant to Rule 30b1-4 under the Investment
Company Act of 1940, as amended.
C. The Adviser shall pay all costs associated with proxy voting for
Portfolio Holdings pursuant to this Statement of Policy and assisting
the Fund in providing public notice of the manner in which such
proxies were voted.
D. The Adviser may delegate its responsibilities hereunder to a proxy
committee established from time to time by the Adviser, as the case
may be. In performing its duties hereunder, the Adviser, or any duly
authorized committee, may engage the services of a research and/or
voting adviser or agent, the cost of which shall be borne by such
entity.
This Statement of Policy shall be presented to the Board of Trustees
annually for their amendment and/or approval.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(A)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
Following are the names, titles and length of service of the person or
persons employed by or associated with the registrant or an investment
adviser of the registrant who are primarily responsible for the
day-to-day management of the registrant's portfolio ("Portfolio Manager")
and each Portfolio Manager's business experience during the past 5 years
as of the date of filing of this report: Carlton Neel and David Dickerson
have served as Co-Portfolio Managers of the Zweig Fund, Inc. (the
"Fund"), a closed end fund managed by Zweig Advisers LLC ("ZA") since
April 1, 2003. Mr. Neel and Mr. Dickerson are Senior Vice Presidents of
ZA and Euclid Advisors, LLC ("Euclid"), a subsidiary of ZA. Since April
1, 2003, they have also served as Co-Portfolio Managers for The Zweig
Total Return Fund, Inc., a closed-end fund managed by ZA, and as
Portfolio Managers for the Alternatives Diversifier Fund and Virtus
Small-Cap Value Fund (through February 20, 2009 when the fund merged into
another Virtus Fund). From April 1, 2003
to June 9, 2008, Messrs. Neil and Dickerson were portfolio managers of
the Virtus Market Neutral Fund,. For the period from July 2002 until
returning to ZA on April 1, 2003, Mr. Neel and Mr. Dickerson co-founded
and managed a hedge fund. From 2008 through September, 2009 Messrs. Neil
and Dickerson also assumed responsibility for asset allocation activities
for three Virtus mutual fund of funds. During March 2009, Messrs. Neil
and Dickerson became Portfolio Managers for the Virtus Growth & Income
Fund, Virtus Balanced Fund (equity portion), Virtus Tactical Allocation
Fund (equity portion), Phoenix Growth & Income Series and Phoenix
Strategic Allocation Series.
Mr. Neel and Mr. Dickerson began their investment career at the Zweig
Companies in 1995 and 1993, respectively.
(A)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
AND POTENTIAL CONFLICTS OF INTEREST
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
The following information is provided as of the fiscal year ended
December 31, 2009.
Mr. Neel and Mr. Dickerson are responsible for the day-to-day management
of other portfolios of other accounts, namely The Zweig Total Return
Fund, Inc., the Virtus Alternatives Diversifier, Virtus Growth & Income
Fund, Virtus Balanced Fund (equity portion), Virtus Tactical Allocation
Fund (equity portion), Phoenix Growth & Income Series and Phoenix
Strategic Allocation Series. For both Mr. Neel and Mr. Dickerson, the
following are tables which provide the number of other accounts managed
within the Type of Accounts and the Total Assets for each Type of
Account. Also provided for each Type of Account is the number of accounts
and the total assets in the accounts with respect to which the advisory
fee is based on the performance of the account.
No. of Total Assets
Accounts in Accounts
Name of Total where where
Portfolio No. of Advisory Fee Advisory Fee
Manager or Type of Accounts is Based on is Based on
Team Member Accounts Managed Total Assets Performance Performance
--------------- --------------- -------- ------------ -------------- ------------
David Dickerson Registered 5 $1,375.7 mil None None
Investment
Companies:
Other Pooled 2 $ 194.1 mil None None
Investment
Vehicles:
Other Accounts: None None None None
Carlton Neel Registered 5 $1,375.7 mil None None
Investment
Companies:
Other Pooled 2 $ 194.1 mil None None
Investment
Vehicles:
Other Accounts: None None None None
POTENTIAL CONFLICTS OF INTERESTS
There may be certain inherent conflicts of interest that arise in
connection with the Mr. Neel's and Mr. Dickerson's management of each
Fund's investments and the investments of any other accounts he manages.
Such conflicts could arise from the aggregation of orders for all
accounts managed by a particular portfolio manager, the allocation of
purchases across all such accounts, the allocation of IPOs and any soft
dollar arrangements that the Adviser may have in place that could benefit
the Funds and/or such other accounts. The Board of Trustees/Directors has
adopted on behalf of the Funds policies and procedures designed to
address any such conflicts of interest to ensure that all transactions
are executed in the best interest of the Funds' shareholders. The
Advisers and Sub adviser are required to certify their compliance with
these procedures to the Board of Trustees on a quarterly basis. There
have been no material compliance issues with respect to any of these
policies and procedures during the Funds' most recent fiscal year ended
December 31, 2009. Additionally, there are no material conflicts of
interest between the investment strategy of a Fund and the investment
strategy of other accounts managed by Mr. Neel and Mr. Dickerson since
portfolio managers generally manage funds and other accounts having
similar investment strategies.
(A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
For the most recently completed fiscal year ended December 31, 2009,
following is a description of Mr. Neel's and Mr. Dickerson's compensation
structure as portfolio managers of ZA and Euclid.
Virtus Investment Partners, Inc. and its affiliated investment management
firms (collectively, "Virtus"), believe that the firm's compensation
program is adequate and competitive to attract and retain high-caliber
investment professionals. Investment professionals at Virtus receive a
competitive base salary, an incentive bonus opportunity and a benefits
package. Portfolio managers may also have the opportunity to participate
in long-term equity programs, including potential awards of Virtus
restricted stock units ("RSUs") with multi-year vesting, subject to
Virtus board approval.
Following is a more detailed description of the compensation structure of
the Fund's portfolio managers.
Base Salary. Each Portfolio Manager is paid a fixed base salary, which is
designed to be competitive in light of the individual's experience and
responsibilities. Base salary is determined using compensation survey
results of investment industry compensation conducted by an independent
third party in evaluating competitive market compensation for its
investment management professionals.
Incentive Bonus. Annual incentive payments are based on targeted
compensation levels, adjusted based on profitability, investment
performance factors and a subjective assessment of contribution to the
team effort. The short-term incentive payment is generally paid in cash,
but a portion may be made in Virtus RSUs. Individual payments are
assessed using comparisons of actual investment performance compared with
specific peer groups or index measures. Performance of the funds managed
is generally measured over one-, three- and five year periods and an
individual manager's participation is based on the performance of each
fund/account managed.
While portfolio manager compensation contains a performance component,
this component is further adjusted to reward investment personnel for
managing within the stated framework and for not taking unnecessary
risks. This approach ensures that investment management personnel remain
focused on managing and acquiring securities that correspond to a fund's
mandate and risk profile and are discouraged from taking on more risk and
unnecessary exposure to chase performance for personal gain. We believe
we have appropriate controls in place to handle any potential conflicts
that may result from a substantial portion of portfolio manager
compensation being tied to performance
Other Benefits. Portfolio managers are also eligible to participate in
broad-based plans offered generally to employees of Virtus and its
affiliates, including 401(k), health and other employee benefit plans.
In summary, the Investment Manager believes that overall compensation is
both fair and competitive while rewarding employees for not taking
unnecessary risks to chase personal performance.
(A)(4) DISCLOSURE OF SECURITIES OWNERSHIP
For the most recently completed fiscal year ended December 31, 2009,
beneficial ownership of shares of the Fund by Messrs. Dickerson and Neel
are as follows. Beneficial ownership was determined in accordance with
rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (17 CFR
240.161-1(a)(2)).
Name of Portfolio Dollar ($) Range of
Manager or Fund Shares
Team Member Beneficially Owned
----------------- --------------------
David Dickerson $ 50,001-$100,000
Carlton Neel $100,001-$150,000
(B) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. 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 second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(c) A copy of the Registrant's notice to shareholders pursuant to Rule
19(a) under the 1940 Act which accompanied distributions paid
during the six month period ended December 31, 2009 pursuant to the
Registrant's Managed Distribution Plan are filed herewith as
required by the terms of the Registrant's exemptive order issued on
November 17, 2008.
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/ George R. Aylward
--------------------------------
George R. Aylward, President
(principal executive officer)
Date March 10, 2010
--------------
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/ George R. Aylward
--------------------------------
George R. Aylward, President
(principal executive officer)
Date March 10, 2010
--------------
By (Signature and Title)* /s/ Nancy G. Curtiss
--------------------------------
Nancy G. Curtiss, Treasurer
(principal financial officer)
Date March 10, 2010
--------------
* Print the name and title of each signing officer under his or her
signature.