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, 2011
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.
PORTFOLIO COMPOSITION
ASSET ALLOCATION AS OF SEPTEMBER 30, 2011
The following graph illustrates asset allocations within certain sectors and
as a percentage of total investments as of September 30, 2011.
[CHART]
Energy 14%
Information Technology 12%
Materials 11%
Industrials 11%
Consumer Discretionary 11%
Health Care 7%
Financials 4%
Other (includes short-term investments) 30%
1
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2011
(UNAUDITED)
($ REPORTED IN THOUSANDS)
PAR VALUE
--------- -------
INVESTMENTS
FOREIGN GOVERNMENT SECURITIES 4.9%
Australia Government Bond
6.500%, 5/15/13.............................. $ 5,000 $ 5,051
5.500%, 12/15/13............................. 9,000 9,055
-------
TOTAL FOREIGN GOVERNMENT SECURITIES (Identified Cost
$14,782).......................................... 14,106
-------
NUMBER OF
SHARES
---------
COMMON STOCKS 76.6%
CONSUMER DISCRETIONARY -- 11.4%
Amazon.com, Inc./(2)/............................ 32,000 6,919
AutoZone, Inc./(2)/.............................. 18,000 5,746
Comcast Corp. Class A............................ 254,000 5,309
Darden Restaurants, Inc.......................... 108,000 4,617
Lululemon Athletica, Inc./(2)/................... 103,000 5,011
McDonald's Corp.................................. 59,000 5,181
-------
32,783
-------
CONSUMER STAPLES -- 3.4%
Altria Group, Inc................................ 190,000 5,094
PepsiCo, Inc..................................... 76,000 4,704
-------
9,798
-------
ENERGY -- 13.8%
Alpha Natural Resources, Inc./(2)/............... 76,000 1,344
Chesapeake Energy Corp........................... 174,000 4,446
Chevron Corp..................................... 54,000 4,996
ConocoPhillips................................... 78,000 4,939
El Paso Corp..................................... 274,000 4,790
Halliburton Co................................... 126,000 3,846
Occidental Petroleum Corp........................ 55,000 3,932
Petroleo Brasileiro S.A. ADR..................... 87,000 1,953
Schlumberger Ltd................................. 78,000 4,659
Williams Cos., Inc. (The)........................ 200,000 4,868
-------
39,773
-------
See Notes to Schedule of Investments
2
NUMBER OF
SHARES VALUE
--------- -------
FINANCIALS -- 4.4%
Bank of America Corp...................... 496,000 $ 3,036
Citigroup, Inc............................ 127,000 3,254
Goldman Sachs Group, Inc. (The)........... 44,000 4,160
Lincoln National Corp..................... 150,000 2,344
-------
12,794
-------
HEALTH CARE -- 7.3%
Abbott Laboratories....................... 105,000 5,370
Biogen Idec, Inc./(2)/.................... 56,000 5,216
Gilead Sciences, Inc./(2)/................ 140,000 5,432
UnitedHealth Group, Inc................... 112,000 5,165
-------
21,183
-------
INDUSTRIALS -- 11.2%
Alaska Air Group, Inc./(2)/............... 95,000 5,348
Caterpillar, Inc.......................... 60,000 4,430
Cummins, Inc.............................. 56,000 4,573
Deere & Co................................ 71,000 4,584
Foster Wheeler AG......................... 226,000 4,021
Union Pacific Corp........................ 57,000 4,655
United Continental Holdings, Inc./(2)/.... 243,000 4,709
-------
32,320
-------
INFORMATION TECHNOLOGY -- 12.1%
Apple, Inc./(2)/.......................... 24,000 9,148
Intel Corp................................ 255,000 5,439
International Business Machines Corp...... 29,000 5,076
QUALCOMM, Inc............................. 101,000 4,912
SanDisk Corp./(2)/........................ 123,000 4,963
Visa, Inc. Class A........................ 62,000 5,315
-------
34,853
-------
MATERIALS -- 11.3%
Alcoa, Inc................................ 324,000 3,101
CF Industries Holdings, Inc............... 38,000 4,689
Cliffs Natural Resources, Inc............. 70,000 3,582
Du Pont (E.I) de Nemours & Co............. 112,000 4,477
Freeport-McMoRan Copper & Gold, Inc....... 116,000 3,532
Monsanto Co............................... 83,000 4,983
Nucor Corp................................ 110,000 3,480
Potash Corp. of Saskatchewan, Inc......... 109,000 4,711
-------
32,555
-------
See Notes to Schedule of Investments
3
NUMBER OF
SHARES VALUE
---------- --------
TELECOMMUNICATION SERVICES -- 1.7%
Verizon Communications, Inc..................... 137,000 $ 5,042
--------
5,042
--------
TOTAL COMMON STOCKS (Identified Cost $229,634)...... 221,101
--------
EXCHANGE-TRADED FUNDS 5.2%
Consumer Staples Select Sector SPDR Fund........ 164,000 4,871
Health Care Select Sector SPDR Fund............. 158,000 5,012
Templeton Dragon Fund, Inc...................... 155,000 3,751
Utilities Select Sector SPDR Fund............... 37,000 1,244
--------
TOTAL EXCHANGE-TRADED FUNDS (Identified Cost $14,652) 14,878
--------
TOTAL LONG TERM INVESTMENTS -- 86.7% (Identified Cost
$259,068)......................................... 250,085
--------
SHORT-TERM INVESTMENTS 13.4%
MONEY MARKET MUTUAL FUNDS -- 0.9%
Dreyfus Cash Management Fund -- Institutional
Shares (seven-day effective yield 0.050%)..... 2,670,616 2,671
--------
PAR
----------
U.S. TREASURY BILLS/(3)/ -- 12.5%
U.S. Treasury Bill
0.160%, 5/31/12............................. $ 9,000 8,996
0.140%, 6/28/12............................. 20,000 19,987
0.160%, 7/26/12............................. 7,000 6,994
--------
35,977
--------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $38,631) 38,648
--------
TOTAL INVESTMENTS (Identified Cost $297,699) --
100.1%/(1)/....................................... 288,733
OTHER ASSETS AND LIABILITIES, NET -- (0.1%)......... (266)
--------
NET ASSETS -- 100.0%................................ $288,467
========
--------
(1) Federal Income Tax Information : For tax information at September 30,
2011, see Note 4 Federal Income Tax Information in the Notes to Schedule
of Investments.
(2) Non-income producing.
(3) The rate shown is the discount rate.
See Notes to Schedule of Investments
4
COUNTRY WEIGHTINGS (UNAUDITED)+
United States................... 88%
Australia....................... 5%
Canada.......................... 3%
Switzerland..................... 2%
Brazil.......................... 1%
China........................... 1%
---
Total........................... 100%
===
--------
+ % of total investments as of September 30, 2011
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2011. (See Security Valuation Note 1A in the Notes
to Schedule of Investments):
LEVEL 2
SIGNIFICANT
TOTAL VALUE AT LEVEL 1 OBSERVABLE
SEPTEMBER 30, 2011 QUOTED PRICES INPUTS
------------------ ------------- -----------
Equity Securities:
Common Stocks........................................ $221,101 $221,101 $ --
Exchange-Traded Funds................................ 14,878 14,878 --
Short-Term Investments............................... 2,671 2,671 --
Debt Securities:
Foreign Government Securities........................ 14,106 -- 14,106
U.S. Government Securities (includes short-term
investments)........................................ 35,977 -- 35,977
-------- -------- -------
Total................................................... $288,733 $238,650 $50,083
======== ======== =======
There are no Level 3 (significant unobservable input) securities.
See Notes to Schedule of Investments
5
THE ZWEIG FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2011
(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:
Security Valuation procedures for the funds have been approved by the Board
of Trustees. All internally fair valued securities referred to below are
approved by a valuation committee appointed under the direction of the Board of
Trustees.
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 valuation committee's own assumptions in determining the
fair value of investments)
A description of the valuation techniques applied to the Fund's major
categories of assets and liabilities measured at fair value on a recurring
basis is as follows:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price and are categorized as Level
1 in the hierarchy. Restricted equity securities and private placements that
are not widely traded, are illiquid or are internally fair valued by the
valuation committee, are generally categorized as Level 3 in the hierarchy.
Certain 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
external pricing service which considers the correlation of the trading
patterns of the foreign security to the
6
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.
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 such as
mortgage-backed and asset-backed securities may also incorporate collateral
analysis and utilize cash flow models for valuation and are generally
categorized as Level 2 in the hierarchy. Pricing services do not provide
pricing for all securities and therefore dealer supplied prices are utilized
representing indicative bids based on pricing models used by market makers in
the security and are generally categorized as Level 2 in the hierarchy. Debt
securities that are not widely traded, are illiquid, or are internally fair
valued by the valuation committee are generally categorized as Level 3 in the
hierarchy.
Listed derivatives that are actively traded are valued based on quoted
prices from the exchange and are categorized as Level 1 in the hierarchy. Over
the counter (OTC) derivative contracts, which include forward currency
contracts and equity linked instruments, are valued based on inputs 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 and are generally categorized as
Level 2 in the hierarchy.
A summary of the inputs used to value the Fund's major categories of assets
and liabilities, which primarily include investments of the Fund, 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.
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
7
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these arrangements.
NOTE 3 -- 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 4 -- FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At September 30, 2011, 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)
------------------ ------------------ ------------------ ------------------
$299,601 $19,317 $(30,185) $(10,868)
NOTE 5 -- RECENT ACCOUNTING PRONOUNCEMENT
In May 2011, the Financial Accounting Standards Board issued Accounting
Standards Update ("ASU") No. 2011-04 "Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs". ASU 2011-04
includes common requirements for measurement of and disclosure about fair value
between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to
disclose quantitative information about the unobservable inputs used in the
fair value measurements categorized within Level 3 of the fair value hierarchy.
In addition, ASU 2011-04 will require reporting entities to make disclosures
about amounts and reasons for all transfers in and out of Level 1 and Level 2
fair value measurements. The new and revised disclosures are effective for
interim and annual reporting periods beginning after December 15, 2011. At this
time, management is evaluating the implications of ASU No. 2011-04 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 financial statements were issued, and has determined that
there are no subsequent events that require recognition or disclosure in these
financial statements.
8
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 11/23/11
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 11/23/11
By (Signature and Title)* /s/ W. Patrick Bradley
-------------------------------------------
W. Patrick Bradley, Treasurer
(principal financial officer)
Date 11/23/11
* Print the name and title of each signing officer under his or her signature.