<PAGE>
August 1, 1995
Dear Shareholder:
The Zweig Fund's net asset value increased 5.8% during the three months
ended June 30, 1995, including $0.26 in reinvested dividends. During the same
period, the Standard & Poor's 500 Index rose 9.5%.
The Fund's net asset value for the six months ended June 30, 1995 gained
9.8%, including $0.52 per share in reinvested dividends. The S & P's 500 Index
rose 20.2% for the same period.
Consistent with our policy of trying to minimize risk, our average equity
exposure during the first six months of 1995 was approximately 42%.
DISTRIBUTION DECLARED
On June 19, 1995, the Fund announced a distribution of $0.27 payable on July
26, 1995 to shareholders of record July 12, 1995. The Fund's total payout
since inception is now $9.67.
MARKET OUTLOOK
After what might have been an ordinary year-end rally, the stock market
gathered a renewed head of steam a few months ago when the economy began to
weaken at the margin. As recently as February, the Fed was still tightening.
In an effort to fight the threat of inflation, the Fed boosted interest rates
in February for the seventh time in twelve months.
One of my cardinal rules is "Don't fight the Fed." This means that when the
Fed raises short-term interest rates, it generally pays to remain defensive.
Therefore, early in 1995 we carried a significant cash position. As the
economy softened, bond prices took off and stocks followed. We responded by
increasing our market exposure and participating in the rise. Starting from a
24% position in stocks at year-end, we increased to 41% at the end of the
first quarter and 64% at this writing.
Our bond holdings, currently at 8%, show little change from the figure on
March 31. While this appears to be a fairly low exposure, the duration of our
bond portfolio is 4.5 years. Because of the maturities of our bonds, our bond
position is roughly in line with the neutral reading of my bond model.
Falling interest rates and strong corporate earnings lifted domestic stocks
to their best half-year gain since the first six months of 1987. Since one of
my basic rules is "Don't fight the tape," we gradually and consistently
adjusted the asset mix of our fund to meet changing market conditions. In
other words, another reason we increased our exposure was because, in my money
managing philosophy, "The trend is your friend."
Bonds also rallied substantially in the first half of 1995 following the
worst bond bear market in decades in 1994. The slowing economy was a big
factor in the gains. After the Fed's last interest rate increase in February,
inflation fears dissipated. By June the bond market, bolstered by lower-than-
expected economic data, began to discount a Fed rate cut. They were not
disappointed, as the Fed reduced rates by a quarter of a point in early July,
the first reduction since September of 1992.
The key to my results in managing money over the past quarter-century has
been to follow my indicators faithfully. At this writing, my monetary,
sentiment, tape indicator, and short-term indicators are all on the positive
side.
Most likely, the greatest risk to stocks now would be a quick burst of speed
in the economy which would probably knock down bond prices. The bond market
currently is nervous that the
<PAGE>
economy shows signs of stabilizing or even turning up again. However, the good
news is that inflation has eased. If the economy remains cool and bond prices
behave, the bulls would have the edge and stocks could surprise on the upside.
My priority is not to match the market or deliver headline-making returns
during bull market phases. Instead, my aim is to deliver above-average returns
over complete market cycles. If we earn reasonable returns during bull markets
and preserve most of that money during bear markets, we will achieve our
objective and do it with much less risk.
PORTFOLIO COMPOSITION
As stated in the last quarterly report, the majority of our stocks are being
picked on the basis of a proprietary computer-driven stock selection model
that ranks the most liquid higher dividend yielding stocks.
Factors in our evaluation and ranking include earnings momentum, earnings
growth, price-to-book value, cash flow trend, and payout ratio trend. While
weights of the variables will fluctuate over time, valuation will tend to get
more weight.
Our leading industry groups include paper and forest products, oil,
utilities, metals, and technology. These sectors reflect additional purchases
as we increased our exposure and price appreciation, particularly in the
paper, metals, and technology areas.
Among paper stocks, International Paper, Weyerhaeuser, and Bowater showed
significant gains. The same holds true for Aluminum Company of America and
Reynolds Metals Co. in the metals area and IBM in the technology group.
IBM remains our largest single individual holding, a ranking it held at the
close of last quarter. Other top individual positions, in addition to those
named previously, include Citicorp, Union Carbide, DuPont, Mobil, Goodyear
Tire, Georgia-Pacific, Phelps Dodge, Chevron, and British Petroleum.
We have sold our positions in Phillips Petroleum, Ford, and Chrysler.
Sincerely,
/s/ Martin E. Zweig
Martin E. Zweig, Ph.D.
Chairman
2
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ------------
<S> <C> <C> <C>
Common Stocks 55.55%
Aerospace & Defense 2.39%
GenCorp, Inc. ...................................... 18,600 $ 199,950
Lockheed Martin Corp. .............................. 53,915 3,403,384
Northrop Grumman Corp. ............................. 40,900 2,131,913
Raytheon Co. ....................................... 26,900 2,088,112
Rockwell International Corp. ....................... 67,900 3,106,425
Sunstrand Corp. .................................... 10,300 615,425
United Technologies Corp. .......................... 12,900 1,007,813
------------
12,553,022
------------
Apparel 0.09%
Oshkosh B'Gosh Inc., Class A........................ 30,900 494,400
------------
Banks 2.93%
Bank of Boston Corp. ............................... 80,700 3,026,250
BankAmerica Corp. .................................. 35,300 1,857,663
Chemical Banking Corp. ............................. 61,800 2,920,050
Citicorp. .......................................... 109,200 6,319,950
SouthTrust Corp. ................................... 52,400 1,211,750
------------
15,335,663
------------
Chemicals 5.40%
ARCO Chemical Co. .................................. 21,900 993,712
Dow Chemical Co. ................................... 66,100 4,750,937
du Pont (E.I.) de Nemours & Co. .................... 87,000 5,981,250
Eastman Chemical Co. ............................... 67,900 4,040,050
Ethyl Corp. ........................................ 34,100 362,313
Imperial Chemical Industries PLC, ADR............... 24,800 1,209,000
Lyondell Petrochemical Co. ......................... 93,800 2,403,625
Olin Corp. ......................................... 28,400 1,462,600
Rohm & Haas Co. .................................... 36,800 2,019,400
Union Carbide Corp. ................................ 152,000 5,073,000
------------
28,295,887
------------
Conglomerates 1.36%
Unilever N.V., ADR.................................. 20,600 2,680,575
Xerox Corp. ........................................ 37,900 4,443,775
------------
7,124,350
------------
Consumer Durables 1.63%
Briggs & Stratton Corp. ............................ 21,700 748,650
Eastman Kodak Co. .................................. 23,300 1,412,563
Goodyear Tire & Rubber Co. ......................... 129,600 5,346,000
Jostens Inc. ....................................... 15,600 331,500
Outboard Marine Corp. .............................. 24,600 482,775
Toro Co. ........................................... 8,200 229,600
------------
8,551,088
------------
Drugs 0.86%
Baxter International Inc. .......................... 123,800 4,503,225
------------
</TABLE>
3
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ------------
<S> <C> <C> <C>
Finance & Financial Services 2.05%
Aetna Life & Casualty Co. .......................... 58,300 $ 3,665,612
American Bankers Insurance Group, Inc. ............. 12,400 393,700
American General Corp. ............................. 48,400 1,633,500
Household International Inc. ....................... 30,800 1,524,600
Providian Corp. .................................... 38,200 1,384,750
St. Paul Companies Inc. ............................ 43,800 2,157,150
------------
10,759,312
------------
Food & Beverage 1.06%
Cadbury Schweppes PLC, ADR.......................... 21,600 642,600
Ralston-Purina Group................................ 43,700 2,228,700
Seagram Co. Ltd. ................................... 77,400 2,679,975
------------
5,551,275
------------
Healthcare 0.33%
Bergen Brunswig Corp., Class A...................... 75,000 1,715,625
------------
Industrial Services 0.07%
Safety-Kleen Corp. ................................. 22,300 359,588
------------
Metals & Mining 3.49%
Aluminum Company of America......................... 114,200 5,724,275
Cyprus Amax Minerals Co. ........................... 34,600 986,100
Homestake Mining Co. ............................... 45,100 744,150
Phelps Dodge Corp. ................................. 90,000 5,310,000
Reynolds Metals Co. ................................ 71,000 3,674,250
USX-U.S. Steel Group................................ 53,900 1,852,813
------------
18,291,588
------------
Oil & Oil Services 7.84%
Amoco Corp. ........................................ 20,800 1,385,800
Atlantic Richfield Co. ............................. 41,300 4,532,675
British Petroleum Co., PLC, ADS..................... 59,100 5,060,437
Chevron Corp. ...................................... 104,800 4,886,300
Exxon Corp. ........................................ 63,800 4,505,875
Halliburton Co. .................................... 82,700 2,956,525
Imperial Oil, Ltd. ................................. 49,500 1,837,688
Kerr-McGee Corp. ................................... 43,300 2,321,963
Mobil Corp. ........................................ 52,900 5,078,400
Nova Corp. ......................................... 61,600 523,600
Occidental Petroleum Corp. ......................... 135,700 3,104,138
Repsol S.A., ADR.................................... 81,800 2,586,925
Unocal Corp. ....................................... 83,500 2,306,687
------------
41,087,013
------------
Paper & Forest Products 7.99%
Boise Cascade Corp. ................................ 102,700 4,159,350
Bowater, Inc. ...................................... 115,400 5,178,575
Federal Paper Board Inc. ........................... 61,500 2,175,563
Georgia-Pacific Corp. .............................. 57,100 4,953,425
International Paper Co. ............................ 70,700 6,062,525
James River Corp. of Virginia....................... 71,600 1,977,950
</TABLE>
4
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ------------
<S> <C> <C> <C>
Paper & Forest Products--(Continued)
Mead Corp. ...................................... 49,800 $ 2,956,875
Temple-Inland Inc. .............................. 31,300 1,490,662
Union Camp Corp. ................................ 51,100 2,957,413
Westvaco Corp. .................................. 32,600 1,442,550
Weyerhaeuser Co. ................................ 113,500 5,348,687
Willamette Industries Inc. ...................... 56,900 3,157,950
------------
41,861,525
------------
Producer Manufacturing 2.90%
Arvin Industries Inc. ........................... 15,700 351,287
Avery Dennison Corp. ............................ 29,300 1,172,000
Crane Co. ....................................... 12,500 453,125
Duriron Co. ..................................... 15,600 351,000
Eaton Corp. ..................................... 44,800 2,604,000
Kennametal Inc. ................................. 21,700 764,925
Parker-Hannifin Corp. ........................... 89,700 3,251,625
Tecumseh Products Co., Class A................... 15,600 686,400
Timken Co. ...................................... 34,100 1,572,862
Trinity Industries Inc. ......................... 32,300 1,073,975
TRW Inc. ........................................ 36,700 2,931,413
------------
15,212,612
------------
Publishing 0.36%
New York Times Co., Class A...................... 80,700 1,896,450
------------
Retail Trade & Services 1.93%
Bruno's Inc. .................................... 92,700 1,077,637
CPI Corp. ....................................... 12,300 235,237
Giant Food Inc. ................................. 17,300 490,888
Rite Aid Corp. .................................. 122,200 3,131,375
Sears, Roebuck and Co. .......................... 77,400 4,634,325
Smith's Food & Drug Centers Inc. ................ 27,700 547,075
------------
10,116,537
------------
Technology 3.26%
Applied Materials, Inc. ......................... 10,400(a) 900,900
Dell Computer Corp. ............................. 18,000(a) 1,082,250
Digital Equipment Corp. ......................... 36,200(a) 1,475,150
Harris Corp. .................................... 55,400 2,860,025
Intel Corp. ..................................... 22,800 1,443,525
International Business Machines Corp. ........... 70,000 6,720,000
Microsoft Corp. ................................. 25,800(a) 2,331,675
National Computer Systems Inc. .................. 12,900 267,675
------------
17,081,200
------------
Telecommunications 2.42%
BellSouth Corp. ................................. 30,700 1,949,450
Cable & Wireless Ltd., ADR....................... 56,600 1,160,300
Cincinnati Bell Inc. ............................ 30,800 777,700
GTE Corp. ....................................... 83,500 2,849,437
NYNEX Corp. ..................................... 64,700 2,604,175
</TABLE>
5
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES/
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<S> <C> <C> <C>
Telecommunications--(Continued)
Southern New England Telecommunications Corp. ...... 15,600 $ 549,900
Sprint Corp. ....................................... 83,100 2,794,238
------------
12,685,200
------------
Textiles 0.01%
Guilford Mills Inc. ................................ 2,800 68,250
------------
Transportation 1.63%
British Airways PLC, ADR............................ 22,300 1,499,675
Conrail Inc. ....................................... 61,300 3,409,813
CSX Corp. .......................................... 48,700 3,658,587
------------
8,568,075
------------
Utilities 5.55%
Centerior Energy Corp. ............................. 38,700 372,487
DQE Inc. ........................................... 41,650 978,775
Enron Corp. ........................................ 13,400 470,675
FPL Group Inc. ..................................... 105,100 4,059,487
Illinova Corp. ..................................... 43,200 1,096,200
Kansas City Power & Light Co. ...................... 30,900 706,837
Ohio Edison Co. .................................... 64,800 1,466,100
Pacific Enterprises................................. 43,200 1,058,400
Pacific Gas & Electric Co. ......................... 104,500 3,030,500
Panhandle Eastern Corp. ............................ 140,900 3,434,438
Pinnacle West Capital Corp. ........................ 58,800 1,440,600
Portland General Corp. ............................. 113,700 2,515,613
Public Service Co. of Colorado...................... 44,500 1,446,250
Questar Corp. ...................................... 12,900 370,875
SCEcorp. ........................................... 126,200 2,161,175
Unicom Corp. ....................................... 33,700 1,175,288
Williams Companies Inc. ............................ 123,500 3,288,187
------------
29,071,887
------------
Total Common Stocks
(Cost $267,001,064)............................... 291,183,772
------------
Corporate Bonds 0.65%
Exxon Capital Corp., 7.875%, 8/15/97................ $ 1,590,000 1,643,591
General Electric Capital Corp., 8.375%, 3/1/2001.... 1,590,000 1,739,981
------------
Total Corporate Bonds
(Cost $3,550,534)................................. 3,383,572
------------
United States Government & Agency Obligations 9.17%
Federal Home Loan Mortgage Corp., 7.05%,
3/24/2004......................................... 3,195,000 3,202,464
Federal Home Loan Mortgage Corp., 7.61%,
9/1/2004.......................................... 1,100,000 1,126,534
Federal National Mortgage Association, 6.20%,
7/10/2003.......................................... 1,180,000 1,134,662
Federal National Mortgage Association, 6.48%,
2/18/2004.......................................... 1,100,000 1,048,918
Federal National Mortgage Association, 6.90%,
3/10/2004.......................................... 1,300,000 1,307,926
Federal National Mortgage Association, 6.85%,
4/5/2004........................................... 2,765,000 2,844,773
Federal National Mortgage Association, 7.60%,
4/14/2004.......................................... 1,810,000 1,845,480
</TABLE>
6
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONCLUDED)
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/
NUMBER OF VALUE
CONTRACTS (NOTE 1)
----------- ------------
<S> <C> <C>
United States Government & Agency Obligations--
(Continued)
United States Treasury Notes, 4.625%, 2/15/96.... $ 700,000 $ 695,625
United States Treasury Notes, 4.25%, 5/15/96..... 5,000 4,939
United States Treasury Bonds, 7.625%, 2/15/2025.. 30,900,000(b) 34,868,672
------------
Total United States Government & Agency
Obligations (Cost $45,862,719)................. 48,079,993
------------
Short-Term Money Market Instruments 34.06%
Abbott Laboratories, 5.93%, 7/11/95.............. 15,900,000 15,873,809
AIG Funding Corp., 6.05%, 7/7/95................. 16,100,000 16,083,766
AT&T Capital Corp., 5.95%, 7/10/95............... 5,800,000 5,791,372
Bell Atlantic Financial Services, 5.95%, 7/26/95. 20,000,000 19,917,361
Cargill Financial Services Corp., 5.95%, 7/6/95.. 4,700,000 4,696,116
Cargill Financial Services Corp., 5.97%, 7/20/95. 9,300,000 9,270,697
Heinz (H.J.) Co., 6.03%, 7/13/95................. 9,300,000 9,281,307
IBM Credit Corp., 6.15%, 7/5/95.................. 5,700,000 5,696,105
IBM Credit Corp., 5.98%, 7/12/95................. 12,200,000 12,177,708
Met Life Funding Inc., 5.85%, 7/5/95............. 21,800,000 21,785,830
Motorola Credit Corp., 5.95%, 7/6/95............. 11,600,000 11,590,414
Nike Inc., 5.97%, 7/5/95......................... 13,000,000 12,991,377
Philip Morris Capital Corp., 6.15%, 7/3/95....... 5,000,000 4,998,292
Raytheon Co., 5.95%, 7/10/95..................... 13,300,000 13,280,216
Wal-Mart Stores Inc., 5.95%, 7/7/95.............. 15,100,000 15,085,026
------------
Total Short-Term Money Market Instruments
(Cost $178,519,396)............................ 178,519,396
------------
Net Unrealized Appreciation on Futures
Contracts 0.06%
Standard and Poor's 500 Index, September 1995
Long futures.................................... 71 303,525
United States Treasury Bond Index, September 1995
Short futures................................... 79 8,141
------------
Total Appreciation on Futures Contracts(c)...... 311,666
------------
Total Investments (Cost $494,933,713)........... 99.48% 521,478,399
Cash and Other Assets, Less Liabilities......... 0.52 2,708,917
----------- ------------
Net Assets (Equivalent to $10.79 per share based
on 48,577,933 shares of capital stock outstand-
ing)........................................... 100.00% $524,187,316
=========== ============
</TABLE>
--------
(a) Non-income producing security.
(b) $2,900,000 of this security has been pledged as collateral for futures
transactions.
(c) The market value of the long futures was $19,423,825 (representing 3.71%
of the Fund's net assets) with a cost of $19,120,300. The market value of
the short futures was $8,968,969 (representing 1.71% of the Fund's net
assets) with a cost of $8,977,110.
For Federal income tax purposes, the tax basis of investments owned at June
30, 1995 was $494,933,713 and unrealized appreciation on investments consisted
of:
<TABLE>
<S> <C>
Gross unrealized appreciation.... $28,603,146
Gross unrealized depreciation.... 2,058,460
-----------
Net unrealized appreciation...... $26,544,686
===========
</TABLE>
See notes to financial statements.
7
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $494,933,713)............. $521,478,399
Cash.............................................................. 810,784
Dividends and interest receivable................................. 1,929,807
Receivable for investments sold................................... 4,833,057
Short sale maintenance margin..................................... 1,045,492
------------
Total Assets..................................................... 530,097,539
------------
Liabilities:
Payable for investments purchased................................. 5,256,580
Variation margin for futures contracts............................ 83,181
Accrued advisory fees............................................. 362,243
Other accrued expenses............................................ 208,219
------------
Total Liabilities................................................ 5,910,223
------------
NET ASSETS.......................................................... $524,187,316
============
NET ASSET VALUE, PER SHARE:
($524,187,316 / 48,577,933 shares outstanding).................... $10.79
======
Net Assets consist of:
Capital paid-in (Note 4).......................................... $485,752,371
Undistributed net investment income............................... 2,349,063
Undistributed net realized gain on investments.................... 9,541,196
Net unrealized appreciation on investments........................ 26,544,686
------------
$524,187,316
============
</TABLE>
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income:
Income:
Dividends....................................................... $ 3,544,178
Interest........................................................ 9,508,428
-----------
Total income.................................................. 13,052,606
-----------
Expenses:
Investment advisory fees (Note 3)............................... 2,106,504
Administration fees (Note 3).................................... 371,736
Printing and postage expenses................................... 205,850
Professional fees (Note 3)...................................... 35,800
Custodian fees.................................................. 48,151
Transfer agent fees............................................. 195,647
Directors' fees and expenses (Note 3)........................... 28,461
Miscellaneous................................................... 107,579
-----------
Total expenses................................................ 3,099,728
-----------
Net investment income....................................... 9,952,878
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments (Note 2):
Security transactions........................................... 13,070,880
Futures transactions............................................ 1,576,659
-----------
Net realized gain on investments............................ 14,647,539
Increase in unrealized appreciation on investments............... 22,561,738
-----------
Net realized and unrealized gain on investments............. 37,209,277
-----------
Net increase in net assets resulting from operations........ $47,162,155
===========
</TABLE>
See notes to financial statements.
8
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income.................... $ 9,952,878 $ 11,269,495
Net realized gain on investments......... 14,647,539 40,463,314
Increase (decrease) in unrealized
appreciation on investments............. 22,561,738 (63,271,850)
------------ ------------
Net increase (decrease) in net assets
resulting from operations............. 47,162,155 (11,539,041)
------------ ------------
Dividends and distributions to sharehold-
ers:
From net investment income............... (17,695,377) (1,178,509)
From realized gains on investments....... (7,190,285) (51,758,709)
------------ ------------
Total dividends and distributions to
shareholders.......................... (24,885,662) (52,937,218)
------------ ------------
Capital share transactions (Note 4):
Net asset value of shares issued to
shareholders in reinvestment of
dividends from net investment income and
distributions from realized gains....... 9,907,316 21,667,228
------------ ------------
Increase in net assets derived from
capital share transactions.............. 9,907,316 21,667,228
------------ ------------
Increase (decrease) in net assets......... 32,183,809 (42,809,031)
------------ ------------
Net Assets:
Beginning of period....................... 492,003,507 534,812,538
------------ ------------
End of period (including undistributed net
investment income of $2,349,063 and
$10,091,562, respectively)............... $524,187,316 $492,003,507
============ ============
</TABLE>
See notes to financial statements.
9
<PAGE>
THE ZWEIG FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
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 following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Portfolio Valuation
Portfolio securities (including stock options and short sales) which are
traded only on stock exchanges will be valued at the last sale price.
Securities traded in the over-the-counter market which are National Market
System securities will be valued at the last sale price. Other over-the-
counter securities will be valued at the most recent bid prices (asked prices
for short sales) as obtained from one or more dealers that make markets in
such securities. Portfolio securities which are traded both in the over-the-
counter market and on a stock exchange will be valued according to the
broadest and most representative market, as determined by the Investment
Adviser. Debt securities that have an original maturity of less than 61 days
will be valued at their cost, plus or minus amortized discount or premium,
unless the Board of Directors (the "Board") determines that such valuation
does not constitute fair value. Covered call options will be valued as
described above, except that options for which no sale is reported will be
valued at the closing asking price. Futures and options thereon which are
traded on commodities exchanges will be valued at their closing settlement
price on such exchange. Securities and assets for which market quotations are
not readily available, and other assets, if any, will be valued at fair value
as determined in good faith by the Board.
B. Security Transactions and Investment Income
Security transactions are recorded on trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis.
Realized gains or losses on sales of investments are determined on the
identified cost basis for accounting and tax purposes.
C. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are made
or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Fund's basis in the contract.
D. Federal Income Taxes
The Fund has elected to qualify and intends to remain qualified as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. The principal tax
10
<PAGE>
benefits of qualifying as a regulated investment company, as compared to an
ordinary taxable corporation, are that a regulated investment company is not
itself subject to Federal income tax on ordinary investment income and net
capital gains that are currently distributed (or deemed distributed) to its
shareholders and that the tax character of long-term capital gains recognized
by a regulated investment company flows through to its shareholders who
receive distributions of such income.
E. Short Sales
The Fund may engage in short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
of a decline in market price. When the Fund engages in a short sale, the
proceeds it receives are retained by the broker until the Fund replaces the
borrowed security. If the price of the security sold short increases between
the time of the short sale and the time the Fund replaces the borrowed
security, the Fund will incur a loss, and if the price declines during the
period, the Fund will realize a gain. Any gain will be decreased, and any
incurred loss increased, by the amount of transaction costs. Dividends or
interest which the Fund may have to pay in connection with such short sales
are recorded as expenses. While the short sales are outstanding, the Fund
pledges cash and securities to cover its margin requirements. At June 30,
1995, cash of $1,045,492 was on deposit, in an interest bearing account, with
a broker to cover any short sales the Fund may enter into.
NOTE 2--PORTFOLIO TRANSACTIONS
A. Purchases and Sales
During the six months ended June 30, 1995, the Fund entered into purchase
and sale transactions, excluding short-term instruments and futures
transactions, as follows:
<TABLE>
<S> <C>
Cost of Purchases............................................ $367,819,611
============
Proceeds from Sales.......................................... $238,967,218
============
</TABLE>
NOTE 3--INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
a) Investment Advisory Fees: The Investment Advisory Agreement (the
"Advisory Agreement") between the Investment Adviser, Zweig Advisors Inc., 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 Investment 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 Investment Adviser, subject to review by the Board
of Directors and the applicable provisions of the Act.
For the services provided by the Investment Adviser under the Advisory
Agreement, the Fund will pay the Investment Adviser a monthly fee computed at
the annual rate of 0.85 of 1% of the Fund's average daily net assets during
the previous month. During the six months ended June 30, 1995, the Fund has
accrued advisory fees of $2,106,504.
b) Administrative Fees: Zweig/Glaser Advisers (the "Administrator") serves
as the Fund's administrator pursuant to an Administration Agreement with the
Fund. Under such Agreement, the Administrator generally assists in all aspects
of the Fund's operations, other than providing
11
<PAGE>
investment advice, subject to the overall authority of the Fund's Board of
Directors. The Administrator determines the Fund's net asset value daily,
prepares such figures for publication on a weekly basis, maintains certain of
the Fund's books and records that are not maintained by the Investment
Adviser, custodian or transfer agent, assists in the preparation of financial
information for the Fund's income tax returns, proxy statements, quarterly and
annual shareholder reports, and responds to shareholder inquiries.
Under the terms of the Administration Agreement, the Fund has agreed to pay
the Administrator a monthly fee computed at the annual rate of 0.15 of 1%
(0.13 of 1% effective July 1, 1995) of the Fund's average daily net assets
during the previous month. During the six months ended June 30, 1995, the Fund
accrued administrative fees of $371,736.
c) Directors' Fees: Certain directors of the Fund are also directors,
officers and/or employees of the Investment Adviser or the Administrator. None
of the directors so affiliated received compensation for services as director
of the Fund.
d) Legal Fees: Legal fees aggregating $8,055 for the six months ended June
30, 1995, have been accrued to Rosenman & Colin, of which Robert E. Smith,
Director of the Fund, is a partner.
e) Brokerage Commissions: During the six months ended June 30, 1995, the
Fund paid Watermark Securities, Inc. brokerage commissions of $142,874 in
connection with portfolio transactions effected through Watermark Securities,
Inc.
NOTE 4--CAPITAL STOCK AND DISTRIBUTIONS REINVESTMENTS
At June 30, 1995, the Fund has one class of common stock, par value $0.10
per share, of which 100,000,000 shares are authorized and 48,577,933 shares
are outstanding.
Registered shareholders may elect to receive all distributions in cash paid
by check mailed directly to the shareholder by The Bank of New York (the
"Bank") 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 the Bank, as the Plan agent,
in whole or fractional shares of the Fund, as the case may be. During the six
months ended June 30, 1995, 955,513 shares were issued pursuant to the Plan.
The Fund announced on June 19, 1995 a distribution of $0.27 per share to
shareholders of record July 12, 1995. This distribution has an ex-dividend
date of July 10, 1995, payable July 26, 1995.
12
<PAGE>
NOTE 5--FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
JUNE 30, -------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period.... $ 10.33 $ 11.68 $ 11.36 $ 12.40 $ 10.48 $ 11.43
-------- -------- -------- -------- -------- --------
Net investment income... 0.21 0.24 0.13 0.20 0.26 0.47
Net realized and
unrealized gains
(losses) on
investments............ 0.77 (0.45) 1.41 (0.10) 2.78 (0.24)
-------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.98 (0.21) 1.54 0.10 3.04 0.23
Distributions:
Dividends from net in-
vestment income........ (0.37) (0.03) (0.22) (0.10) (0.30) (0.49)
Distributions from
realized gains from
investment
transactions........... (0.15) (1.11) (1.00) (1.04) (0.82) (0.69)
-------- -------- -------- -------- -------- --------
Total Distributions..... (0.52) (1.14) (1.22) (1.14) (1.12) (1.18)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period............ $ 10.79 $ 10.33 $ 11.68 $ 11.36 $ 12.40 $ 10.48
======== ======== ======== ======== ======== ========
Market value, end of
period**............. $ 11.125 $ 10.375 $ 13.75 $ 13.00 $ 13.75 $ 11.00
======== ======== ======== ======== ======== ========
Total investment re-
turn................. 12.67% (16.95)% 16.59% 3.61% 37.42% (1.20)%
======== ======== ======== ======== ======== ========
Ratios/supplemental da-
ta:
Net assets, end of pe-
riod (in thousands).... $524,187 $492,004 $534,813 $500,101 $526,252 $389,816
Ratio of expenses to av-
erage net assets....... 1.24%* 1.25% 1.23% 1.26% 1.28% 1.27%
Ratio of net investment
income to average net
assets................. 3.99%* 2.24% 1.18% 1.73% 2.37% 4.39%
Portfolio turnover rate. 92.3% 257.0% 235.5% 172.5% 144.3% 201.8%
</TABLE>
--------
* Annualized
** Closing Price--New York Stock Exchange.
NOTE 6--SELECTED QUARTERLY FINANCIAL DATA
Shown in total dollars and per common share:
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED (DECREASE)
NET AND UNREALIZED IN NET ASSETS
TOTAL INVESTMENT INVESTMENT GAIN (LOSS) ON RESULTING FROM
INCOME INCOME INVESTMENTS OPERATIONS
---------------- ---------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Quarter Ended
06/30/95............... $6,302,055 $0.15 $4,761,003 $0.10 $ 23,760,626 $ 0.49 $ 28,521,629 $ 0.59
03/31/95............... 6,750,551 0.14 5,191,875 0.11 13,448,651 0.28 18,640,526 0.39
1994--Quarter Ended
12/31/94............... 5,639,871 0.12 4,044,984 0.09 (3,524,794) (0.08) 520,190 0.01
09/30/94............... 4,973,809 0.11 3,412,314 0.07 9,142,331 0.19 12,554,645 0.26
06/30/94............... 3,742,866 0.08 2,256,620 0.05 (12,726,865) (0.26) (10,470,245) (0.21)
03/31/94............... 3,210,824 0.07 1,555,577 0.03 (15,699,208) (0.30) (14,143,631) (0.27)
</TABLE>
13
<PAGE>
SUPPLEMENTARY PROXY INFORMATION
The annual meeting of shareholders of The Zweig Fund, Inc. was held on May
1, 1995. The meeting was held for the purpose of reelecting William M. Batten,
Anthony M. Santomero and Martin E. Zweig as Directors; and to ratify the
selection of Coopers & Lybrand L.L.P. as the Fund's independent certified
public accountants for the year ending December 31, 1995. The Fund's other
Directors who continued in office are Edward S. Babbitt, Jr., Eugene J.
Glaser, Elliot S. Jaffe, James B. Rogers, Jr. and Robert E. Smith.
The results of the voting on the above matters were as follows:
<TABLE>
<CAPTION>
DIRECTOR/AUDITOR VOTES FOR VOTES AGAINST VOTES WITHHELD ABSTENTIONS
---------------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
William M. Batten........... 34,021,244 -- 893,252 --
Anthony M. Santomero........ 34,340,216 -- 574,280 --
Martin E. Zweig............. 34,393,080 -- 521,416 --
Coopers & Lybrand L.L.P. ... 34,209,815 241,397 -- 463,284
</TABLE>
-------------------------------------------------------------------------------
KEY INFORMATION
THE BANK OF NEW YORK
P.O. Box 11258
Church Street Station
New York, New York 10286-1258
Attn: Reinvestment Service
For questions about our Reinvestment and Cash Purchase Plan, shareholders
may write to The Bank of New York or call 1-800-432-8224.
THE ZWEIG FUND, INC. GENERAL INFORMATION
1-800-272-2700
THE ZWEIG FUND HOTLINE
For weekly updates on the Fund's major industry holdings, our market stance
and our net asset value (NAV) call (212) 644-2188.
-------------------------------------------------------------------------------
REINVESTMENT PLAN
Many of you have questions about the 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 partici-pate .
-------------------------------------------------------------------------------
Notice is hereby given in ac cordance 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 of
10% or more from their net asset value.
14
<PAGE>
OFFICERS AND DIRECTORS
Martin E. Zweig, Ph.D.
Chairman of the Board and President
Jeffrey Lazar
Vice President and Treasurer
Stuart B. Panish
Vice President and Secretary
Edward S. Babbitt, Jr.
Director
William M. Batten
Director
Eugene J. Glaser
Director
Elliot S. Jaffe
Director
James B. Rogers, Jr.
Director
Anthony M. Santomero, Ph.D.
Director
Robert E. Smith
Director
INVESTMENT ADVISER
Zweig Advisors Inc.
900 Third Avenue
New York, New York 10022
FUND ADMINISTRATOR
Zweig/Glaser Advisers
5 Hanover Square
New York, New York 10004
CUSTODIAN AND TRANSFER AGENT
The Bank of New York
48 Wall Street
New York, New York 10015
LEGAL COUNSEL
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
15
<PAGE>
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.
[LOGO OF THE ZWEIG FUND APPEARS HERE]
SEMI-ANNUAL REPORT
JUNE 30, 1995
