UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-04739
The Zweig Fund, Inc.
(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: September 30, 2010
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 ((S)(S) 239.24 and 274.5
of this chapter), to file reports with the Commission, not later than 60 days
after the close of the first and third fiscal quarters, pursuant to rule 30b1-5
under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission
may use the information provided on Form N-Q in its regulatory, disclosure
review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. (S) 3507.
ITEM 1.SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
($ REPORTED IN THOUSANDS)
NUMBER OF
SHARES VALUE
--------- -------
INVESTMENTS
COMMON STOCKS 78.5%
CONSUMER DISCRETIONARY -- 8.1%
AutoZone, Inc./(2)/.......................... 26,000 $ 5,952
Best Buy Co., Inc............................ 120,000 4,899
Comcast Corp. Class A........................ 261,000 4,719
Darden Restaurants, Inc...................... 122,000 5,219
McDonald's Corp.............................. 72,000 5,365
-------
26,154
-------
CONSUMER STAPLES -- 4.8%
Altria Group, Inc............................ 221,000 5,309
Clorox Co. (The)............................. 78,000 5,207
PepsiCo, Inc................................. 77,000 5,116
-------
15,632
-------
ENERGY -- 14.1%
Chesapeake Energy Corp....................... 205,000 4,643
Chevron Corp................................. 76,000 6,160
ConocoPhillips............................... 87,000 4,996
El Paso Corp................................. 418,000 5,175
Halliburton Co............................... 177,000 5,853
Massey Energy Co............................. 124,000 3,847
Occidental Petroleum Corp.................... 67,000 5,246
Petroleo Brasileiro SA ADR................... 130,000 4,715
Williams Cos., Inc. (The).................... 256,000 4,892
-------
45,527
-------
FINANCIALS -- 4.5%
Citigroup, Inc./(2)/......................... 1,194,000 4,656
Goldman Sachs Group, Inc. (The).............. 34,000 4,916
Hudson City Bancorp, Inc..................... 415,000 5,088
-------
14,660
-------
HEALTH CARE -- 6.5%
Biogen Idec, Inc./(2)/....................... 96,000 5,388
Gilead Sciences, Inc./(2)/................... 129,000 4,594
See notes to financial statements
1
($ REPORTED IN THOUSANDS)
NUMBER OF
SHARES VALUE
--------- --------
HEALTH CARE (CONTINUED)
Johnson & Johnson......................... 91,000 $ 5,638
UnitedHealth Group, Inc................... 150,000 5,266
--------
20,886
--------
INDUSTRIALS -- 11.2%
Alaska Air Group, Inc./(2)/............... 99,000 5,052
Caterpillar, Inc.......................... 69,000 5,429
Continental Airlines, Inc. Class B/(2)/... 226,000 5,614
DryShips, Inc./(2)/....................... 943,000 4,536
Foster Wheeler AG/(2)/.................... 192,000 4,696
L-3 Communications Holdings, Inc.......... 69,000 4,987
Union Pacific Corp........................ 74,000 6,053
--------
36,367
--------
INFORMATION TECHNOLOGY -- 16.1%
Amkor Technology, Inc./(2)/............... 718,000 4,717
Cisco Systems, Inc./(2)/.................. 231,000 5,059
Corning, Inc.............................. 259,000 4,734
Hewlett-Packard Co........................ 117,000 4,922
Intel Corp................................ 238,000 4,577
International Business Machines Corp...... 42,000 5,634
Microsoft Corp............................ 187,500 4,592
Nokia Oyj Sponsored ADR................... 345,000 3,460
QUALCOMM, Inc............................. 130,000 5,866
Research In Motion Ltd./(2)/.............. 81,000 3,944
SanDisk Corp./(2)/........................ 123,000 4,508
--------
52,013
--------
MATERIALS -- 8.1%
Alcoa, Inc................................ 428,000 5,183
Du Pont (E.I.) de Nemours & Co............ 121,000 5,399
Freeport-McMoRan Copper & Gold, Inc....... 70,000 5,978
Nucor Corp................................ 135,000 5,157
Potash Corp. of Saskatchewan, Inc......... 31,000 4,465
--------
26,182
--------
TELECOMMUNICATION SERVICES -- 3.5%
AT&T, Inc................................. 175,000 5,005
Verizon Communications, Inc............... 192,000 6,257
--------
11,262
--------
UTILITIES -- 1.6%
Exelon Corp............................... 119,000 5,067
--------
5,067
--------
TOTAL COMMON STOCKS (Identified Cost $251,610) 253,750
--------
See notes to financial statements
2
($ REPORTED IN THOUSANDS)
NUMBER OF
SHARES VALUE
----------- --------
EXCHANGE-TRADED FUNDS 1.3%
Templeton Dragon Fund, Inc....................... 150,000 $ 4,337
--------
TOTAL EXCHANGE-TRADED FUNDS (Identified Cost $2,520).. 4,337
--------
TOTAL LONG TERM INVESTMENTS -- 79.8% (Identified Cost
$254,130)........................................... 258,087
--------
SHORT-TERM INVESTMENTS 20.2%
MONEY MARKET MUTUAL FUNDS -- 3.5%
Dreyfus Cash Management Fund -- Institutional
Shares (seven-day effective yield 0.210%)...... 11,459,607 11,460
--------
PAR
-----------
U.S. TREASURY BILLS/(3)/ -- 16.7%
U.S. Treasury Bill
0.230%, 10/21/10/(4)/........................ $ 34,000 33,997
0.180%, 2/24/11/(4)/......................... 11,000 10,993
0.190%, 6/2/11............................... 9,000 8,988
--------
53,978
--------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $65,436) 65,438
--------
TOTAL INVESTMENTS (Identified Cost $319,566) --
100.0%/(1)/......................................... 323,525
OTHER ASSETS AND LIABILITIES, NET -- (0.0%)........... (82)
--------
NET ASSETS -- 100.0%.................................. $323,443
========
--------
(1) Federal Income Tax Information: For tax information at September 30, 2010,
see Note 3 Federal Income Tax Information in the Notes to Schedule of
Investments.
(2) Non-income producing.
(3) The rate shown is the discount rate.
(4) All or a portion of security is on loan.
See notes to financial statements
3
COUNTRY WEIGHTINGS AS OF 9/30/10+
United States (includes short-term investments). 92%
Canada.......................................... 3%
Brazil.......................................... 2%
Bermuda......................................... 1%
Finland......................................... 1%
Greece.......................................... 1%
---
Total........................................... 100%
===
--------
+ % of total investments as of September 30, 2010
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2010. (See Security Valuation Note 1A in the Notes
to Schedule of Investments) ($ reported in thousands):
LEVEL 2
TOTAL VALUE AT SIGNIFICANT
SEPTEMBER 30, LEVEL 1 OBSERVABLE
2010 QUOTED PRICES INPUTS
-------------- ------------- -----------
Equity Securities:
Common Stocks.................. $253,750 $253,750 $ --
Exchange-Traded Funds.......... 4,337 4,337 --
Money Market Mutual Funds...... 11,460 11,460 --
Debt Securities:
U.S. Government Securities..... 53,978 -- 53,978
-------- -------- -------
Total............................. $323,525 $269,547 $53,978
======== ======== =======
There are no Level 3 (significant unobservable input) securities.
See notes to financial statements
4
NOTES TO SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
NOTE 1 -- 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:
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 description of the valuation techniques applied to the Fund's major
categories of assets and liabilities measured at fair value on a recurring
basis is as follows:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price and are categorized as Level
1 in the hierarchy. Restricted equity securities and private placements that
are not widely traded, are illiquid or are internally fair valued by the
advisor, are generally categorized as Level 3 in the hierarchy.
Certain foreign securities may be fair valued in cases where closing prices
are not readily available or are deemed not reflective of readily available
market prices. For example, significant events (such as movement in the U.S.
securities market, or other regional and local developments) may occur between
the time that 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 such cases the Fund fair values foreign securities using an
independent pricing service which considers the correlation of the trading
patterns of the foreign security to the intraday trading in the U.S. markets
for investments such as American depositary receipts, financial futures,
exchange-traded funds, and certain indexes as well as prices for similar
securities. Such fair valuations are categorized as Level 2 in the hierarchy.
Because the frequency of significant events is not predictable, fair valuation
of certain foreign common stocks may occur on a frequent basis.
5
Debt securities, including restricted securities, are valued based on
evaluated quotations received from independent pricing services or from dealers
who make markets in such securities. For most bond types, the pricing service
utilizes matrix pricing which considers yield or price of bonds of comparable
quality, coupon, maturity, current cash flows, type, and current day trade
information, as well as dealer supplied prices. These valuations are generally
categorized as Level 2 in the hierarchy. Structured debt instruments may also
incorporate collateral analysis and utilize cash flow models for valuation and
are generally categorized as Level 2 in the hierarchy. Pricing services do not
provide pricing for all securities and therefore indicative bids from dealers
are utilized which are based on pricing models used by market makers in the
security and are generally categorized as Level 2 in the hierarchy. Debt
securities that are not widely traded, are illiquid, or are internally fair
valued by the advisor are generally categorized as Level 3 in the hierarchy.
Listed derivatives that are actively traded are valued based on quoted
prices from the exchange and are categorized as Level 1 in the hierarchy. Over
the counter (OTC) derivative contracts, which include forward currency
contracts and equity linked instruments, do not require material subjectivity
as pricing inputs are observed from actively quoted markets and are categorized
as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset
value determined as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern time) each business day and are categorized as
Level 1 in the hierarchy.
Short-term Notes having a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market.
A summary of the inputs used to value the Fund's net assets by each major
security type is disclosed at the end of the Schedule of Investments for the
Fund. The inputs or 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. SECURITY LENDING ($ REPORTED IN THOUSANDS)
The Fund may loan securities to qualified brokers through an agreement with
The Bank of New York Mellon ("BNY Mellon"). Under the terms of the agreement,
the Fund is required to maintain collateral with a market value not less than
100% of the market value of loaned securities. Collateral is adjusted daily in
connection with changes in the market value of securities on loan. Collateral
may consist of cash or U.S. Government securities. Cash collateral is invested
in a short-term money market fund. Dividends earned on the collateral and
premiums paid by the broker are recorded as income by the Fund net of fees and
rebates charged by BNY Mellon for its services in connection with this
securities lending program. Lending portfolio securities involves a risk of
delay in the recovery of the loaned securities or in the foreclosure on
collateral.
6
At September 30, 2010, the Fund had securities on loan with a market value
of $9,455 for which the Fund received U.S. Government Securities Collateral of
$9,574.
NOTE 2 -- INDEMNIFICATIONS
Under the Fund's organizational documents and related agreements, its
directors and officers are indemnified against certain liabilities arising out
of the performance of their duties to the Fund. In addition, the Fund enters
into contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these arrangements.
NOTE 3 -- FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At September 30, 2010, 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)
-------------- -------------- -------------- --------------
$321,646 $31,242 $(29,363) $1,879
NOTE 4 -- 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 5 -- RECENT ACCOUNTING PRONOUNCEMENT
In January 2010, the Financial Accounting Standards Board issued Accounting
Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value
Measurements". ASU 2010-06 will require reporting entities to make new
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. The new and revised
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2010. At this time, management is evaluating the
implications of ASU No. 2010-06 and its impact on the financial statements has
not been determined.
NOTE 6 -- SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Fund
through the date the Schedule of Investments were available for issuance and
has determined that no subsequent events require recognition or disclosure in
this Schedule of Investments.
7
ITEM 2.CONTROLS AND PROCEDURES.
(a)The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing date
of the report that includes the disclosure required by this paragraph, based
on the evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b)
or 240.15d-15(b)).
(b)There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 3.EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Zweig Fund, Inc.
By (Signature and Title)* /s/ George R. Aylward
-----------------------------
George R. Aylward, President
(principal executive officer)
Date November 23, 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 November 23, 2010
By (Signature and Title)* /s/ W. Patrick Bradley
-----------------------------
W. Patrick Bradley, Treasurer
(principal financial officer)
Date November 23, 2010
* Print the name and title of each signing officer under his or her signature.