<PAGE>
May 1, 1999
Dear Shareholder:
The Zweig Fund's net asset value on March 31, 1999, including the $0.29
distribution paid on January 11, 1999, was virtually unchanged from December
31, 1998. During the same three-month period, the Standard & Poor's 500 Index
gained 5.0%, including dividends.
It is important to note that the S&P 500 does not really reflect the
performance of the overall market. Actually the few top stocks in the S&P 500
were responsible for most of the advance. For comparison purposes, the
unweighted S&P 500 was up 1.2% while the S&P 500 midcap was down 6.4%. The
Value Line Index, which measures the average performance of 1,700 major
stocks, also dropped 6.4%. The Russell 2000 Index fell 5.8%.
You can see by those numbers what kind of market it was. We hold many mid-
cap and big-cap value stocks in our portfolio and they have been
underperforming for some time. There has been somewhat of a turnaround in that
picture recently but that was the market situation from mid-April in 1998 to
mid-April this year.
Out of a universe of 8,000 stocks, about 78% were down from April, 1998 to
April, 1999, according to Ned Davis Research. The market was buoyed by some of
the big stocks like Microsoft and Dell, both of which we own. However, the
average stock just wasn't keeping up.
DISTRIBUTION DECLARED
On March 22, 1999, the Fund announced a distribution of $0.30 per share
payable on April 26, 1999, to shareholders of record on April 9, 1999.
Including this distribution, our total payout since the Fund's inception is
now $14.06.
MARKET OUTLOOK
We seem to be in what used to be called a "Goldilocks economy"--not too cold
and not too hot. At this writing, there is no budget deficit, virtually no
inflation, low unemployment, steady wages, and a growing but not overheating
economy.
Under these circumstances, price/earning ratios generally go higher, which
has been happening for some time. They are currently about the highest in
history. As long as the economy continues on its present course, the stock
market will probably be okay. But if the economic variables start to
deteriorate, we will just have further down to go to get more normal
price/earnings levels.
I am not particularly concerned by Commerce Department figures that the
economy expanded by almost 4% last year while profits fell 2.2%. Believe it or
not, the market generally does better when profits are moderately weak. That's
because such a period usually sees less inflation and lower interest rates.
With the exception of Russia, the global financial crisis seems to have
eased but global economic growth is still weaker than ours, and this has had a
market impact. The weak European growth has forced them to cut interest rates
by 50 basis points, probably a plus for the world's stock markets.
Most people do not realize that weak economic growth is not necessarily bad
for stocks. Of course that does not apply to individual companies but to the
market as a whole. As is the case with profits, too strong economic growth
usually ushers in some inflation and rising interest rates. Right now our
markets are benefiting from the relatively weak European economic growth.
<PAGE>
With the market focused on a shrinking number of growth stocks and with most
stocks declining, some market observers see a similarity to the situation in
the 1970's when the steady rise of the so-called "Nifty Fifty" stocks
foreshadowed a bear market. While there are some parallels in the current
market, there are important differences.
For one thing, the "Nifty Fifty" were not as solid as people thought at the
time. Many of today's big stocks are benefiting from the technological
revolution which is far greater than that of the 1970's. What finally derailed
that market wasn't the speculation in those stocks. It was a return to higher
inflation, higher interest rates, and a tight monetary policy by the Federal
Reserve. If we get these conditions, the present market will also go down.
Although the Fed acknowledges that the economy is stronger than expected and
bond yields are creeping higher, I do not think that the Fed will do any
tightening in the near term. At least, that's my guess.
Some market observers believe that the so-called nosebleed valuations of
some fast-growing companies are worrisome. I think valuations will keep going
up until something happens to these individual companies or higher interest
rates hit the entire market. If interest rates and inflation remain low, I
think these stocks can move still higher. However, I would be more comfortable
if price/earnings ratios were lower.
A recent market phenomenon is the belief by a lot of traders that momentum
is the only yardstick and that traditional fundamentals can be ignored. I
strongly disagree. That is not an intelligent way to buy and sell stocks. The
straight momentum players will get killed when the market turns.
Summing up, the market positives include the current economy with low
inflation and okay interest rates--the Fed cut three times last fall with no
apparent increase on the horizon. Among the negatives, there is some excess
speculation in the market and valuations are on the high side but I don't see
these as significant problems. Overall, my indicators are slightly positive.
PORTFOLIO COMPOSITION
The composition of the leading industry groups in our portfolio showed
little change during the first quarter. On March 31 these sectors included
financial services, utilities, technology, telecommunications, retail trade
and services, and manufacturing. With the exception of retail trade and
services, which replaced oil and oil services, all of the above were in our
top ranking at the close of the fourth quarter of 1998.
In the retail field, our previous holdings appreciated in value and we added
three major factors: Sears, Best Buy Company (a retailer of consumer
electronics and related equipment with over 300 stores in 36 states), and
Claire's Stores (a mall-based retailer of popular-priced teen's fashion
items). As oil stocks fell in value, we trimmed the USX-Marathon group and
several other positions.
Our largest individual holdings include General Motors, Microsoft, Morgan
Stanley Dean Witter, EMC, Telefonos de Mexico, Allstate, Lucent, Ford, Best
Buy, and Burlington Northern. In the above grouping, the only companies new to
our portfolio are General Motors and Best Buy.
Of the above holdings, only Microsoft, Lucent, and Ford were in our top
listing at the end of the fourth quarter. Morgan Stanley Dean
2
<PAGE>
Witter and Burlington Northern gained by appreciation. In Telefonos de Mexico,
we benefited by appreciation and also added to our position. We also increased
our participation in Allstate.
Among other prominent positions noted at the close of the previous quarter,
we have sold out PECO and AT&T and trimmed our holdings in Dell, Daimler
Chrysler, Home Depot, Energy East, and MCI Worldcom.
Sincerely,
Martin E. Zweig, Ph.D.
Chairman
3
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS
March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ------------
<S> <C> <C>
Common Stocks 81.32%
Aerospace & Defense 1.52%
B.F. Goodrich & Co. .................................. 174,200 $ 5,977,238
Northrop Corp. ....................................... 78,700 4,712,162
------------
10,689,400
------------
Apparel Manufacturer 1.62%
Liz Claiborne, Inc. .................................. 90,500 2,952,563
VF Corp. ............................................. 89,700 4,232,719
Warnaco Group, Inc. .................................. 172,900 4,268,469
------------
11,453,751
------------
Automotive 3.72%
Daimler Chrysler AG................................... 87,985 7,550,212
Ford Motor Co. ....................................... 153,700 8,722,475
General Motors Corp. ................................. 114,600 9,955,875
------------
26,228,562
------------
Biotechnology 1.16%
Amgen, Inc. .......................................... 109,600 8,206,300
------------
Cable & Television 0.58%
Comcast Corp. ........................................ 64,700 4,072,056
------------
Chemicals 0.66%
IMC Global, Inc. ..................................... 226,900 4,637,269
------------
Consumer Durables 1.45%
Cooper Tire & Rubber Co. ............................. 157,800 2,899,575
Whirlpool Corp. ...................................... 134,300 7,302,563
------------
10,202,138
------------
Consumer Products 1.13%
Fortune Brands, Inc. ................................. 125,300 4,847,544
Premark International, Inc. .......................... 95,000 3,129,062
------------
7,976,606
------------
Consumer Services 0.43%
Service Corp., Inc. .................................. 212,900 3,033,825
------------
Electronics 0.41%
Avnet, Inc. .......................................... 79,700 2,919,013
------------
Engineering & Construction 0.57%
Fluor Corp. .......................................... 148,800 4,017,600
------------
Financial Services 12.91%
ACE Ltd. ............................................. 211,500 6,596,155
A.G. Edwards & Sons, Inc. ............................ 105,600 3,451,800
Allstate Corp. ....................................... 236,100 8,750,456
Astoria Financial Corp. .............................. 148,300 7,415,000
Bear Stearns & Co., Inc. ............................. 123,229 5,506,796
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ------------
<S> <C> <C>
Financial Services -- (Continued)
Charter One Financial, Inc. .......................... 80,503 $ 2,323,268
Conseco, Inc. ........................................ 184,900 5,708,788
Dime BanCorp., Inc. .................................. 177,800 4,122,738
Fidelity National Financial Corp. .................... 96,800 1,452,000
GATX Corp. ........................................... 72,600 2,391,263
Hartford Financial Services Group, Inc. .............. 123,600 7,022,025
Loews Corp. .......................................... 84,200 6,283,425
Morgan Stanley, Dean Witter, Discover & Co. .......... 93,800 9,374,138
Old Republic International Corp. ..................... 149,250 2,723,813
PaineWebber Group Inc. ............................... 156,200 6,228,475
Reliance Group Holdings, Inc. ........................ 67,500 510,469
Reliastar Financial Corp. ............................ 67,200 2,864,400
Ryder Systems, Inc. .................................. 215,500 5,953,185
Selective Insurance Group, Inc. ...................... 48,000 846,000
UnionBancal Corp. .................................... 45,500 1,549,844
------------
91,074,038
------------
Food & Beverage 0.80%
Adolph Coors Co., Class B............................. 104,200 5,626,800
------------
Home Builders & Materials 0.71%
Fleetwood Enterprises, Inc. .......................... 89,500 2,561,937
Kaufman & Broad Home Corp. ........................... 109,400 2,468,338
------------
5,030,275
------------
Industrial Services 0.23%
Ogden Corp. .......................................... 66,400 1,597,750
------------
Investment Companies 2.15%
Blackrock 2001 Term Trust, Inc. ...................... 52,600 473,400
Blackrock Strategic Term Trust, Inc. ................. 52,600 483,263
Central European Equity Fund, Inc. ................... 46,400 559,700
Emerging Markets Infrastructure Fund, Inc. ........... 199,600 1,621,750
Emerging Markets Telecommunications Fund, Inc. ....... 76,800 715,200
France Growth Fund, Inc. ............................. 64,500 874,781
Gabelli Equity Trust, Inc. ........................... 106,000 1,258,750
Gabelli Global Multimedia Trust Fund, Inc. ........... 99,700 1,183,938
Italy Fund, Inc. ..................................... 62,000 933,875
Mexico Fund, Inc. .................................... 161,100 2,446,706
Morgan Stanley Emerging Markets Fund, Inc. ........... 121,900 1,165,669
Portugal Fund, Inc. .................................. 24,000 327,000
Royce Value Trust, Inc. .............................. 144,155 1,630,753
Swiss Helvetia Fund, Inc. ............................ 107,200 1,507,500
------------
15,182,285
------------
Leisure 0.34%
Brunswick Corp. ...................................... 126,300 2,407,594
------------
Lodging 0.46%
Starwood Hotels & Resorts............................. 113,000 3,227,563
------------
Manufacturing 5.64%
Borg-Warner Automotive, Inc. ......................... 82,600 3,949,312
Cummins Engine Company, Inc. ......................... 110,400 3,926,100
Dana Corp. ........................................... 190,600 7,242,800
Dexter Corp. ......................................... 36,700 1,156,050
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ------------
<S> <C> <C>
Manufacturing -- (Continued)
Ingersoll Rand Co. ................................. 105,400 $ 5,230,475
Johnson Controls, Inc. ............................. 55,800 3,480,525
Kennametal, Inc. ................................... 89,700 1,569,750
Milacron, Inc. ..................................... 87,600 1,379,700
PACCAR, Inc. ....................................... 75,900 3,126,131
Timken Co. ......................................... 184,400 2,996,500
Tyco International Ltd. ............................ 79,700 5,718,475
------------
39,775,818
------------
Metals & Mining 2.99%
AK Steel Holdings Corp. ............................ 201,500 4,546,344
Alcan Aluminum Ltd. ................................ 135,300 3,492,431
Reynolds Metals Co. ................................ 133,600 6,454,550
USX-U.S. Steel Group................................ 279,300 6,563,550
------------
21,056,875
------------
Oil & Oil Services 3.67%
Ashland, Inc. ...................................... 122,300 5,006,656
Diamond Offshore Drilling, Inc. .................... 50,100 1,584,413
Santa Fe International Corp. ....................... 137,500 2,569,531
Sunoco, Inc. ....................................... 158,100 5,701,481
Tidewater, Inc. .................................... 113,000 2,923,875
YPF Sociedad Anonima, ADR........................... 255,900 8,076,844
------------
25,862,800
------------
Paper & Forest Products 1.30%
Boise Cascade Corp. ................................ 97,300 3,137,925
Georgia Pacific Corp. .............................. 70,700 5,249,475
Mead Corp. ......................................... 25,000 768,750
------------
9,156,150
------------
Pharmaceuticals 0.83%
Warner Lambert Co. ................................. 88,600 5,864,213
------------
Printing & Publishing 0.50%
Knight Ridder, Inc. ................................ 69,800 3,490,000
------------
Real Estate Investments Trusts 0.35%
Crescent Real Estate Equities Co. .................. 71,200 1,530,800
Felcor Lodging Trust................................ 41,600 964,600
------------
2,495,400
------------
Retail Trade & Services 6.34%
Best Buy, Inc. ..................................... 167,400 8,704,800
Claire's Stores, Inc. .............................. 87,500 2,635,937
Home Depot, Inc. ................................... 133,900 8,335,275
May Department Stores Co. .......................... 35,000 1,369,375
Pier 1 Imports, Inc. ............................... 354,800 2,882,750
Sears Roebuck & Co. ................................ 175,000 7,907,812
Supervalu, Inc. .................................... 263,300 5,430,563
Wal Mart Stores, Inc. .............................. 80,800 7,448,750
------------
44,715,262
------------
Technology 7.72%
Applied Materials, Inc. ............................ 65,400(a) 4,034,363
Broadvision, Inc. .................................. 97,000(a) 5,795,750
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ------------
<S> <C> <C>
Technology -- (Continued)
Cisco Systems, Inc. ................................ 52,700(a) $ 5,773,944
Compaq Computer Corp. .............................. 173,726 5,504,942
Dell Computer Corp. ................................ 204,400(a) 8,354,850
EMC Corp. .......................................... 70,900(a) 9,057,475
Intel Corp. ........................................ 53,800 6,408,925
Microsoft Corp. .................................... 105,800(a) 9,482,325
------------
54,412,574
------------
Telecommunications 6.59%
Lucent Technologies Co. ............................ 81,000 8,727,750
MCI Worldcom, Inc. ................................. 89,800(a) 7,952,913
Nokia Corp. ........................................ 48,500(a) 7,553,874
Tele Norte Leste Participacoes S.A., ADR............ 238,700 3,670,013
Telefonica de Argentina S.A., ADR................... 148,200 4,483,050
Telefonos de Mexico S.A., ADR....................... 135,400 8,868,700
Telephone & Data Systems, Inc. ..................... 21,800 1,231,700
Telesp Participacoes S.A., ADR...................... 193,600(a) 3,993,000
------------
46,481,000
------------
Textiles 0.51%
Armstrong World Industries, Inc. ................... 64,500 2,914,594
Shaw Industries, Inc. .............................. 35,000 647,500
------------
3,562,094
------------
Tobacco 0.87%
RJR Nabisco Holdings Corp. ......................... 244,300 6,107,500
------------
Transportation 4.32%
Airborne Freight Corp. ............................. 122,900 3,825,263
Burlington Northern Santa Fe Corp. ................. 258,300 8,491,613
Canadian Pacific Ltd. .............................. 114,700 2,229,481
CNF Transportation, Inc. ........................... 208,600 7,887,688
Comair Holdings, Inc. .............................. 173,100 4,089,486
USFreightways Corp. ................................ 118,900 3,908,838
------------
30,432,369
------------
Utilities-Electric & Natural Gas 8.84%
Central & South West Corp. ......................... 120,700 2,828,906
DTE Energy Co. ..................................... 112,000 4,305,000
Edison International................................ 248,200 5,522,450
Energy East Corp. .................................. 124,900 6,565,056
Entergy, Inc. ...................................... 237,000 6,517,500
GPU, Inc. .......................................... 187,700 7,003,556
PG&E Corp. ......................................... 238,700 7,414,619
Pinnacle West Capital Corp. ........................ 97,500 3,546,563
Public Service Co. of New Mexico.................... 73,500 1,249,500
Texas Utilities Co. ................................ 175,000 7,295,313
UniCom Corp. ....................................... 216,300 7,908,468
UtiliCorp United, Inc. ............................. 94,500 2,149,875
------------
62,306,806
------------
Total Common Stocks............................... 573,301,686
------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ------------
<S> <C> <C>
United States Government & Agency Obligations 4.35%
Federal Home Loan Mortgage Corp., 5.125%,
10/15/2008...................................... $12,100,000 $ 11,502,442
United States Treasury Notes, 10.75%, 5/15/2003.. 4,000,000 4,801,252
United States Treasury Notes, 6.875%, 5/15/2006.. 2,500,000 2,714,063
United States Treasury Notes, 6.50%,10/15/2006... 3,500,000(b) 3,730,783
United States Treasury Notes, 6.125%, 8/15/2007.. 1,900,000 1,987,282
United States Treasury Bonds, 7.50%,11/15/2024... 600,000 726,000
United States Treasury Bonds, 6.50%, 11/15/2026.. 3,600,000 3,898,126
United States Treasury Bonds, 6.375%, 8/15/2027.. 1,200,000 1,281,750
------------
Total United States Government & Agency
Obligations................................... 30,641,698
------------
Short-Term Investments 11.63%
BP Amoco Capital Corp., 5.00%, 4/1/99............ 25,000,000 25,000,000
General Electric Capital Corp., 4.81%, 4/5/99.... 18,500,000 18,490,100
Gillette Company, 5.00%, 4/1/99.................. 25,000,000 25,000,000
Merrill Lynch & Co., 4.88%, 4/12/99.............. 13,500,000 13,479,867
------------
Total Short-Term Investments................... 81,969,967
------------
<CAPTION>
Number of
Contracts
-----------
<S> <C> <C>
Net Unrealized Appreciation on Futures Con-
tracts 0.02%
Standard and Poor's June 1999 Short Futures...... 87(c) 193,157
------------
Total Investments.............................. 97.32% 686,106,508
Cash and Other Assets Less Liabilities......... 2.68% 18,874,386
------ ------------
Net Assets (Equivalent to $11.72 per share
based on 60,135,623 shares of capital stock
outstanding).................................. 100.00% $704,980,894
====== ============
<CAPTION>
Number of
Shares
-----------
<S> <C> <C>
Security Sold Short
W.E.B.S. Index Fund, Inc. -- Mexico Series
(Proceeds $985,054)............................. 71,600 $ 944,225
============
</TABLE>
- --------
(a) Non-income producing security.
(b) Used as collateral on short sales
(c) The market value of short futures was $28,129,275 (representing 3.99% of
the Fund's net assets) with a cost of $27,936,118.
8
<PAGE>
THE ZWEIG FUND, INC.
FINANCIAL HIGHLIGHTS
March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Net Asset Value
Total Net Assets per share
-------------------------- ----------------
<S> <C> <C> <C> <C>
Beginning of period: December 31,
1998............................ $723,521,130 $ 12.03
Net investment income........... $ 2,068,906 $ 0.03
Net realized and unrealized
losses on investments.......... (3,169,805) (0.05)
Dividends from net investment
income and distributions from
net long-term and short-term
capital gains.................. (17,439,337) (0.29)
------------ -------
Net decrease in net assets/net
asset value.................... (18,540,236) (0.31)
------------ -------
End of period: March 31, 1999.... $704,980,894 $ 11.72
============ =======
</TABLE>
9
<PAGE>
KEY INFORMATION
1-800-272-2700 Zweig Shareholder Relations: For general information and
literature
(212) 644-2188 The Zweig Fund Hot Line:
For updates on net asset value, share price, major industry
groups and other key information
REINVESTMENT PLAN
Many of you have questions
about our reinvestment plan. We
urge shareholders who want to
take advantage of this plant 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 and Treasurer
Stuart B. Panish
Vice President and Secretary
Christopher M. Capano
Assistant Vice President
Charles H. Brunie
Director
Elliot S. Jaffe
Director
Alden C. Olson, Ph.D.
Director
James B. Rogers, Jr.
Director
Anthony M. Santomero, Ph.D.
Director
Investment Adviser
Zweig Advisors Inc.
900 Third Avenue
New York, New York 10022
Fund Administrator
Zweig/Glaser Advisers LLC
900 Third Avenue
New York, New York 10022
Custodian
The Bank of New York
One Wall Street
New York, New York 10286
Transfer Agent
State Street Bank & Trust Co.
225 Franklin Street
Boston, Massachusetts 02110
Legal Counsel
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
________________________________________________________________________________
This report is transmitted to the shareholders of The Zweig Fund, Inc. for
their information. This is not a prospectus, circular or representation in-
tended for use in the purchase of shares of the Fund or any securities men-
tioned in this report.
ZF991 4902-1Q-99
[LOGO OF ZWEIG FUND]
QUARTERLY REPORT
--------------------
March 31, 1999
