<PAGE>
"THIS IS A CONFIRMING COPY OF A PAPER FILING OF OUR MARCH 31, 1995 INTERIM
REPORT TO SHAREHOLDERS (N-30B-2) SUBMITTED IN MAY 1995."
May 1, 1995
Dear Shareholder:
The Zweig Fund's net asset value increased 3.8% during the three months ended
March 31, 1995, including $0.26 in reinvested distributions. During the same
period, the Standard & Poor's 500 Index gained 9.8%, including dividends.
Maintaining our risk-averse policy, the Fund's equity exposure during the first
quarter averaged approximately 34%.
DISTRIBUTION DECLARED
On March 31, 1995, the Fund announced a distribution of $0.26 payable on
April 26, 1995 to shareholders of record on April 12, 1995. Including this
distribution, our total payout since the Fund's inception is now $9.40.
MARKET OUTLOOK
At the beginning of the quarter, my research indicated that there were very
high levels of risk in the market. As my monetary and momentum indicators
improved, we gradually increased our exposure from 24% at year-end to 44% as of
this writing. There are times when the market shows high levels of risk, but
continues to go up. However, I've found that I must remain true to my time
tested research, and if I make a mistake, I'd rather it be holding too much
cash in an up market than being over invested in a declining market.
I did expect a year-end rally but it lasted longer and went further than I
thought it would. But I am not going to get 100% invested on the basis of a
year-end rally because the long-term risk is very high. For one thing, the
valuation problems are still with us. The dividend yield in March was under
2.7%, historically one of the lowest in history. Since 1926, the yield was this
low only in January of 1973 and October of 1987. Subsequently, the S&P 500
dropped a total of 48.2% in the calendar years of 1973 and 1974 and crashed
33.5% in October 1987.
Sometimes the market behaves irrationally. The only way to get an edge is to
have enough people go wrong. It is often enough just to be the one-eyed man in
the land of the blind. Maybe I get bearish a little too soon. But if the rest
of the world were rational, then stocks would not have risen to overvalued
levels to begin with.
Although there has been some weakness in the economy in recent months, I
still see inflation as a threat. In recent weeks, our bond model deteriorated
quite a bit, primarily because of rising commodity prices. For example, copper,
crude oil, gold, and the Commodity Research Bureau Price Index have all been
strong.
Gross domestic product (GDP) growth had averaged better than 4 1/2% in the
previous five quarters. This was an exceptionally high rate this late in the
business cycle. Given the heavy capacity utilization and the continued tight
inventory position relative to sales, it was unreasonable to expect that growth
could continue at that pace. Other factors in the slowdown include the Fed's
jacking up of interest rates last year, which had some marginal effect. Also,
the upheaval in Mexico may have knocked a half-point off the GDP as well. My
worry is that even if we get growth down to 2% or 3%, inflation would still
pose a threat to the market.
While I have no prediction over which direction the dollar will go, it
probably would be inflationary if it doesn't recover. The dollar has been weak
against the Japanese yen and the German mark while strong against the Mexican
and Canadian currencies. However, even from
<PAGE>
Canada, our leading trading partner, import prices have gone up over 7% in the
past year. Overall, import prices in the last year are up about 6% against a 1%
decline twelve months ago. Continuation of that trend could result in a full
point rise in the Consumer Price Index. In addition, the extent to which
Japanese and German companies increase their import prices would give more
leeway for domestic producers to follow suit.
Summing up, the market negatives, in addition to overvaluation and the threat
of inflation, also include the continuing mutual fund bubble, with people still
heavily buying mutual funds. My long-term sentiment trends are still negative.
At this writing, the short-term sentiment indicators, which were very positive
in November and December, have also turned negative. The market positives
include momentum, which has been on the plus side for the past several months,
and possibly the action of the bond market.
My current market stance is somewhere between low neutral and moderately
bearish. As mentioned earlier, we did raise our exposure by some 20 points
during the quarter and I would be glad to boost it by another 20 points if
conditions improve. However, I still believe the risk in the major trend is
very high.
I will continue to be conservative, careful, and constantly concerned not to
lose money. You can beat the market over time if you don't lose too much in the
bad markets. It only takes one iceberg to sink a ship. I believe in letting
some other guy cross the Atlantic a little bit faster. I want to be around for
the return voyage.
PORTFOLIO COMPOSITION
While my asset allocation strategy remains an important part of the Fund's
portfolio management, we have materially increased the emphasis on quantitative
models for stock picking. As I stated in last year's annual report, the
majority of our stocks are now being purchased on the basis of a proprietary
computer-driven stock selection model that evaluates and ranks higher dividend
yielding stocks. This model has been developed and tested by me and my research
staff over a period of many years.
For possible portfolio acquisition, we currently consider about 750 stocks
with the highest dividend yields from a list of approximately 1,500 of the most
liquid stocks. We then evaluate and rank each stock on the basis of various
factors that may include earnings momentum, earnings growth, price-to-book
value, cash flow trend, payout ratio trend and other market measurements.
Weights of the variables will change over time but valuation will tend to get
more weight.
Based on the above criteria, we have sharply reduced our holdings in the
technology sector which encompasses software, hardware and semiconductors.
However, we have maintained our position in IBM which incidentally, remains our
largest individual position--and it has done quite well recently.
At this writing, oil is the leading industry group in our portfolio followed
closely by utilities. Other top ranking sectors include chemicals, banks,
telecommunications, and paper.
In accordance with the findings of our computer models, our top individual
holdings no longer include HealthTrust, Oracle Systems, Applied Materials, and
Hercules, Inc. New to our leading positions are Georgia-Pacific, Dow Chemical,
Ford, and duPont.
Other prominent individual positions, in addition to those previously
mentioned, include Phillips Petroleum, British Petroleum, Philip Morris,
Citicorp, and Union Carbide.
Sincerely,
/s/ Martin E. Zweig
Martin E. Zweig, Ph.D.
Chairman
2
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ----------
<S> <C> <C>
Common Stocks 37.29%
Aerospace & Defense 0.88%
Lockheed Martin Corp. .................................. 59,715 $3,157,431
Northrop Grumman Corp. ................................. 15,400 752,675
Sunstrand Corp. ........................................ 10,300 518,862
----------
4,428,968
----------
Air Transportation 0.24%
British Airways, ADS.................................... 18,600 1,222,950
----------
Automotive 1.48%
Chrysler Corp. ......................................... 87,400 3,659,875
Ford Motor Corp. ....................................... 140,700 3,798,900
----------
7,458,775
----------
Banks 2.86%
Bank of Boston Corp. ................................... 67,200 1,999,200
Bank of New York Inc. .................................. 61,600 2,025,100
BankAmerica Corp. ...................................... 27,400 1,322,050
Citicorp. .............................................. 93,500 3,973,750
GP Financial Corp. ..................................... 107,300 2,481,313
Great Western Financial Corp. .......................... 23,200 435,000
Norwest Corp. .......................................... 48,400 1,228,150
SouthTrust Corp. ....................................... 43,700 917,700
----------
14,382,263
----------
Chemicals 3.01%
Dow Chemical Co. ....................................... 51,400 3,752,200
duPont (E.I.) de Nemours & Co. ......................... 48,400 2,928,200
Eastman Chemical Co. ................................... 25,700 1,429,563
Lyondell Petrochemical Co. ............................. 78,300 1,898,775
Olin Corp. ............................................. 23,500 1,263,125
Union Carbide Corp. .................................... 126,900 3,886,312
----------
15,158,175
----------
Computer Hardware 1.41%
IBM Corp. .............................................. 86,800 7,106,750
----------
Conglomerates 1.36%
ITT Corp. .............................................. 27,300 2,801,663
Unilever N.V. ADR....................................... 8,000 1,050,000
Xerox Corp. ............................................ 25,700 3,016,537
----------
6,868,200
----------
</TABLE>
3
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ---------
<S> <C> <C>
Consumer Durables 0.11%
Outboard Marine Corp. ................................... 14,000 $ 294,000
Toro Co. ................................................ 8,200 234,725
---------
528,725
---------
Containers & Packaging 0.46%
Federal Paper Board Inc. ................................ 39,600 1,128,600
Temple-Inland Inc. ...................................... 26,200 1,175,725
---------
2,304,325
---------
Drugs 0.67%
Baxter International Inc. ............................... 103,400 3,386,350
---------
Electrical & Electronic Equipment 0.44%
Harris Corp. ............................................ 46,200 2,211,825
---------
Finance & Financial Services 1.20%
Aetna Life & Casualty Co. ............................... 30,800 1,775,600
American General Corp. .................................. 43,700 1,409,325
Household International Inc. ............................ 25,700 1,117,950
Ryder Systems Inc. ...................................... 73,500 1,764,000
---------
6,046,875
---------
Forest Products 0.98%
Georgia-Pacific Corp. ................................... 45,400 3,620,650
Weyerhaeuser Co. ........................................ 33,400 1,298,425
---------
4,919,075
---------
Healthcare 0.14%
Bergen Brunswig Corp. ................................... 25,700 687,475
---------
Industrial Services 0.59%
Safety-Kleen Corp. ...................................... 13,400 239,525
WMX Technologies, Inc. .................................. 99,000 2,722,500
---------
2,962,025
---------
Metals & Mining 1.65%
Aluminum Company of America.............................. 20,600 852,325
Cyprus Amax Minerals Co. ................................ 28,800 817,200
Homestake Mining Co. .................................... 45,100 834,350
Phelps Dodge Corp. ...................................... 57,100 3,247,563
Reynolds Metal Co. ...................................... 51,500 2,536,375
---------
8,287,813
---------
</TABLE>
4
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C> <C>
Oil & Oil Services 4.56%
Atlantic Richfield Co. ................................ 28,200 $ 3,243,000
British Petroleum Co., PLC............................. 49,700 4,168,588
Chevron Corp........................................... 25,600 1,228,800
Diamond Shamrock Inc. ................................. 14,000 369,250
Halliburton Co. ....................................... 56,500 2,055,187
Mobil Corp. ........................................... 20,000 1,852,500
Nova Corp. ............................................ 51,400 449,750
Phillips Petroleum Co. ................................ 117,700 4,310,762
Repsol S.A., ADS....................................... 51,400 1,490,600
Royal Dutch Petroleum Co. ............................. 27,200 3,264,000
Unocal Corp. .......................................... 18,000 517,500
-----------
22,949,937
-----------
Paper 1.94%
Boise Cascade Corp..................................... 25,700 893,075
Bowater Inc. .......................................... 96,400 3,446,300
International Paper Co. ............................... 44,100 3,313,013
Westvaco Corp. ........................................ 19,500 809,250
Willamette Industries Inc. ............................ 23,500 1,280,750
-----------
9,742,388
-----------
Photography 0.18%
Polaroid Corp. ........................................ 25,700 893,075
-----------
Producer Manufacturing 0.94%
Corning Inc. .......................................... 25,700 925,200
Eaton Corp. ........................................... 24,100 1,307,425
Parker Hannifin Corp................................... 12,900 570,825
Timken Co. ............................................ 20,700 734,850
TRW Inc. .............................................. 17,400 1,198,425
-----------
4,736,725
-----------
Publishing 0.31%
New York Times Co. .................................... 67,200 1,554,000
-----------
Retail Trade & Services 1.28%
Bruno's Inc. .......................................... 98,300 884,700
CPI Corp. ............................................. 10,200 161,925
Limited Inc. .......................................... 143,800 3,325,375
Rite Aid Corp. ........................................ 41,100 1,006,950
Woolworth Corp. ....................................... 59,100 1,085,962
-----------
6,464,912
-----------
Rubber & Plastic 0.37%
Goodyear Tire & Rubber Co. ............................ 51,300 1,885,275
-----------
</TABLE>
5
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------- ------------
<S> <C> <C>
Telecommunications 2.78%
BellSouth Corp. ........................................ 25,700 $ 1,529,150
GTE Corp. .............................................. 69,900 2,324,175
NYNEX Corp. ............................................ 43,700 1,731,612
Pacific Telesis Group .................................. 49,600 1,500,400
Sprint Corp. ........................................... 72,800 2,202,200
Telefonica de Espana SA ................................ 56,800 2,130,000
U.S. West Inc. ......................................... 64,400 2,576,000
------------
13,993,537
------------
Tobacco 1.32%
American Brands Inc. ................................... 66,800 2,621,900
Philip Morris Co., Inc. ................................ 61,600 4,019,400
------------
6,641,300
------------
Transportation 1.21%
Alexander & Baldwin Inc. ............................... 28,100 632,250
Conrail Inc. ........................................... 28,100 1,577,113
CSX Corp. .............................................. 34,300 2,701,125
Norfolk Southern Corp. ................................. 17,400 1,163,625
------------
6,074,113
------------
Utilities 4.92%
American Electric Power Inc. ........................... 117,900 3,743,325
Central & South West Utilities Corp. ................... 49,700 1,205,225
Cincinnati Bell Inc. ................................... 25,700 552,550
DQE Inc. ............................................... 17,900 588,463
Enron Corp.............................................. 11,200 369,600
FPL Group Inc. ......................................... 88,400 3,215,550
Long Island Lighting Co. ............................... 14,100 206,212
Niagara Mohawk Power Corp. ............................. 51,400 706,750
Northeast Utilities .................................... 73,600 1,564,000
Ohio Edison Co. ........................................ 58,500 1,170,000
Pacific Gas & Electric Co. ............................. 56,000 1,393,000
Panhandle Eastern Corp. ................................ 113,600 2,612,800
Portland General Corp. ................................. 95,500 1,993,563
Public Service Co. of Colorado ......................... 37,400 1,150,050
Public Service Enterprises Group ....................... 40,900 1,119,637
SCEcorp. ............................................... 53,700 839,062
Unicom Corp. ........................................... 51,400 1,220,750
Union Electric Co. ..................................... 30,800 1,089,550
------------
24,740,087
------------
Total Common Stocks .................................. 187,635,918
------------
</TABLE>
6
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Corporate Bonds 0.65%
Exxon Capital Corp., 7.875%, 8/15/1997. ........... $1,590,000 $ 1,614,157
General Electric Capital Corp., 8.375%, 3/1/2001... 1,590,000 1,654,538
-----------
3,268,695
-----------
U.S. Government & Other Agency Obligations 8.67%
Federal Home Loan Mortgage Corp. Note 7.05%,
3/24/2004......................................... 3,195,000 3,034,461
Federal Home Loan Mortgage Corp. Note 7.61%,
9/1/2004.......................................... 1,100,000 1,079,639
Federal National Mortgage Association 6.20%,
7/10/2003......................................... 1,180,000 1,077,188
Federal National Mortgage Association 6.48%,
2/18/2004......................................... 1,100,000 1,003,255
Federal National Mortgage Association 6.90%,
3/10/2004......................................... 1,300,000 1,229,625
Federal National Mortgage Association 6.85%,
4/5/2004.......................................... 2,765,000 2,659,244
Federal National Mortgage Association 7.60%,
4/14/2004......................................... 1,810,000 1,771,909
U.S. Treasury Notes, 4.625%, 2/15/1996............. 700,000 689,062
U.S. Treasury Notes, 4.25%, 5/15/1996.............. 5,000 4,875
U.S. Treasury Notes, 5.50%, 4/15/2000.............. 9,240,000 8,633,625
U.S. Treasury Notes, 5.75%, 8/15/2003.............. 802,,000 728,065
U.S. Treasury Notes, 5.875%, 2/15/2004............. 2,000,000 1,822,500
U.S. Treasury Notes, 7.25%, 8/15/2004.............. 1,830,000 1,831,713
U.S. Treasury Notes, 7.875%, 11/15/2004............ 1,200,000 1,252,500
U.S. Treasury Bonds, 8.125%, 08/15/2019............ 4,200,000 4,453,306
U.S. Treasury Bonds, 7.625%, 11/15/2022............ 298,000 302,004
U.S. Treasury Bonds, 7.125%, 2/15/2023............. 4,700,000(a) 4,495,837
U.S. Treasury Bonds, 6.25%, 11/15/2024............. 300,000 301,030
U.S. Treasury Bonds, 7.625%, 2/15/2025............. 7,100,000 7,261,958
-----------
Total U.S. Government & Other Agency Obligations. 43,631,796
-----------
Short-Term Money Market Instruments 53.04%
AIG Funding Corp., 5.95%, 4/18/95.................. 20,800,000 20,748,434
Anheuser Busch Co., Inc. 5.95%, 4/13/95............ 20,000,000 19,966,945
Bell Atlantic Financial Services, 5.97%, 4/24/95... 20,100,000 20,030,002
Colgate-Palmolive Co., 5.96%, 4/19/95.............. 22,600,000 22,540,135
Emerson Electric Co., 5.93%, 4/5/95................ 19,600,000 19,593,543
Heinz (H.J.) Co. 5.95%, 4/3/95..................... 20,400,000 20,400,000
Koch Industries Inc., 6.07%, 4/3/95................ 20,300,000 20,300,000
Nestle Capital Corp., 6.25%, 4/3/95................ 5,000,000 5,000,000
Nestle Capital Corp., 5.95%, 4/20/95............... 11,700,000 11,667,126
PepsiCo Inc., 5.95%, 4/7/95........................ 13,800,000 13,790,877
Pfizer Inc., 5.95%, 4/17/95........................ 9,900,000 9,888,546
Pfizer Inc., 5.95%, 4/17/95........................ 12,000,000 11,972,233
Procter & Gamble, 5.93%, 4/6/95.................... 10,000,000 9,995,058
Raytheon Co., 5.95%, 4/18/95....................... 15,000,000 14,962,813
Smithkline Beecham Corp., 5.96%, 4/21/95........... 7,400,000 7,377,948
Southwestern Bell Telephone Co., 5.97%, 4/6/95..... 8,900,000 8,895,572
U.S. West Telecommunications Inc., 5.95%, 4/4/95... 20,000,000 19,996,694
Xerox Credit Corp., 6.05%, 4/27/95................. 9,800,000 9,760,473
-----------
Total Short-Term Money Market Instruments........ 266,886,399
-----------
</TABLE>
7
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS--(CONCLUDED)
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS VALUE
--------- ------------
<S> <C> <C>
Futures 0.07%
Standard & Poor's 500 Index, June 1995................ 71 $ 377,249
------------
Total Investments..................................... 99.71% 501,800,057
Cash & Other Assets, Less Liabilities................. 0.29 1,366,277
------ ------------
Net Assets (Equivalent to $10.46 per share based on 100.00% $503,166,334
48,091,714 shares of capital stock outstanding)...... ====== ============
</TABLE>
- --------
(a) This security has been pledged as collateral for futures transactions.
8
<PAGE>
THE ZWEIG FUND, INC.
FINANCIAL HIGHLIGHTS*
MARCH 31, 1995
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS PER SHARE
------------------------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period: 12/31/94... $492,003,507 $10.33
Net investment income.......... $ 5,191,875 $ 0.11
Net realized and unrealized
gains from
security transactions......... 13,448,661 0.28
Dividends from net investment
income and distributions from
net short-term capital gains.. (12,381,821) (0.26)
Net asset value of shares
issued to share-holders for
reinvestment of dividends and 4,904,122 0.00
distributions................. ----------- -------
Net increase in net asset
value........................ 11,162,827 0.13
------------ --------
End of period: 3/31/95.......... $503,166,334 $10.46
============ ========
</TABLE>
- --------
* Financial information included in this report has been taken from the records
of the Fund without examination by independent accountants.
9
<PAGE>
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 participate.
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 of
10% or more from their net asset value.
10
<PAGE>
OFFICERS AND DIRECTORS
Martin E. Zweig, Ph.D.
Chairman of the Board and President
Jeffrey Lazar
Vice President, Treasurer and
Secretary
Timothy R. Clark
Vice President
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
11
<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] THE ZWEIG FUND
QUARTERLY REPORT
MARCH 31, 1995
