<PAGE>
May 1, 2000
[PHOTO]
Dear Shareholder:
The Zweig Fund, Inc.'s net asset value increased 1.4% for the three months
ended March 31, 2000. This includes the $0.30 distribution paid on January 10,
2000. During the same period, the S&P 500 Index/1/ gained 2.3%, including
dividends. Maintaining our risk-averse policy, the Fund's equity exposure
during the first quarter averaged approximately 54%.
We were very conservative during the quarter. Our models were not favorable,
so we held a high amount of cash. The main problem was our sentiment indica-
tor. It showed high speculation in the over-the-counter market, a large margin
debt build-up, and poor put-call ratios. These figures pointed to excessive
optimism, a market negative.
Our monetary models did improve from poor to neutral because we had a fairly
good rally in the government bond market. Long rates fell 100 basis points.
However, government agency and corporate bonds did not rally nearly as much as
the 30-year Treasury bond. On the monetary negative side, the Federal Reserve
has tightened five times and may tighten some more.
Short-term rates for Treasury bills have gone up in yield, and that is not a
good sign. Because short-term rates rose while long-term rates declined, the
yield curve (the relationship between short- and long-term rates) has gotten
flat and, in some cases, has actually inverted. This is not generally a great
sign for the economy or the stock market, another reason for our cautious pos-
ture.
DISTRIBUTION DECLARED
On March 20, 2000, the Fund announced a distribution of $0.30 payable on
April 26, 2000, to shareholders of record on April 10, 2000. Including this
distribution, our total payout since the Fund's inception totals $15.26.
MARKET OUTLOOK
The Nasdaq made headlines last month. After outperforming the S&P 500 Index
and the Dow Jones Industrial Average, it started to fall by its own weight. I
think it just got too far ahead of itself. In some instances, price/earnings
ratios ranged from ultra-high to infinite, while the Nasdaq soared 255% in 18
months. It's hard to know what triggered the fall. Perhaps it was excessive
speculation or the temporary bad news on bio-tech stocks.
We have seen two markets lately--the Nasdaq technology-type and the old-
economy stocks. Aside from Nasdaq, the rest of the market did not perform very
well in the first quarter until March when it somewhat rallied. The average
stock has done poorly for two years. However, the Nasdaq technology stocks had
very strong performance until March and have been pounded for the last month
or so.
In March money began to flow out of the technology, or new-economy stocks,
into the old-economy stocks. Some of the older more mundane companies just
reached fairly reasonable price levels. Some investors started to think that
they became so cheap that there could be leveraged buyouts or cash takeovers.
Also, some
- --------
/1/ The S&P 500 Index is an unmanaged, commonly used measure of stock market
total-return performance. The index is not available for direct investment.
<PAGE>
of the tech stocks, especially the Internet-related ones, had achieved ex-
tremely high price/earnings ratios. Investors may have decided to get more de-
fensive, and money shifted from one group to another. The market could just as
easily shift back again. It may or may not indicate the end of the "Wild West"
style of investing. That is why we have to keep monitoring the indicators.
As of this writing, the market is wondering what the Fed will do at its next
meeting. My guess is that it will raise rates another 25 basis points. I think
a 50 basis-point boost would shock the market, and I don't believe the Fed
really wants to do that. But, it is worried about inflation, which did
accelerate recently.
We had a very poor report on the Consumer Price Index, which is now running
at an increase of about 3.7% annually. This is up from a low of perhaps 1.4%.
Other indicators, such as the purchasing managers' price index, are also
moving up. Rightly or wrongly, the Fed is concerned about the danger of
inflation and has been increasing interest rates.
The Fed has already had an impact on the stock market, but it has affected
the new- and old-economy stocks differently. It adversely affected the old-
economy stocks first and only belatedly hurt the technology stocks. No indica-
tor is perfect. Following the Fed is not a foolproof way to play the market,
but it does give you some odds. If the Fed keeps on raising rates, it is prob-
ably not a great thing for the stock market.
Another problem facing the market is the huge amount of margin debt, which
has soared to a record $278 billion in the last 12 months. A big part of that
increase came within the last five months--almost $100 billion in five months!
I don't think that's at all healthy.
The good news is that undoubtedly some of the margin debt was taken off the
books when the Nasdaq slumped recently. It's too soon to know what the current
numbers are. During the 1998 market slide, approximately 16% of the debt was
wiped out. Even if that much was taken off here, the figure would still be way
above where it was even a few months ago.
Also overhanging the market are the hundreds of billion dollars worth of
shares held by insiders that will reach their so-called lockup limits in the
months ahead and be eligible for sale. These are options held by early invest-
ors or management, primarily in companies with initial public offerings in the
last year or so, that cannot be exercised before a certain date. This is defi-
nitely a threat. Some of these stocks were already sold in the marketplace in
record numbers and hurt the companies involved.
One thing I am not particularly concerned about is our trade deficit, which
jumped to a record $29.2 billion in February. Some analysts have voiced
concern that a weaker dollar, which could raise the prices of imported
products, could be inflationary and ultimately cause a recession. I don't put
much stock in that reasoning. Look at Japan--despite an enormous trade
surplus, it is in a depression.
Meanwhile, the U.S. economy grew at a 7.3% annual rate in the fourth
quarter, the fastest in almost 16 years. However, there are potential factors
that could bring our longest economic expansion to an end. The Fed could do it
by raising rates high enough to put a monkey wrench into the economy. The drop
in Nasdaq might already have had a somewhat negative wealth effect. Further
declines might lop a point or more from our gross national product.
It is always hard to say in advance what might slow down an economy. The
yield curve, which I mentioned earlier, is inverted or close to it. That has
been a reasonably reliable indicator for forecasting a recession. We have not
always had a recession after an inverted yield curve, but the odds are better
than even. It is possible that we could have one, maybe next year. I don't
2
<PAGE>
really have an opinion whether there will be a recession; however, I do know
that the law of business cycles has not been repealed. We will still have
cycles, but I don't think they will be as violent as they were in the past.
Summing up, the market positives include the fact that the bond market has
acted fairly well, and a few of our sentiment indicators got better when the
Nasdaq recently broke down. The negatives include the uptick in inflation, the
five interest rate hikes by the Fed, and our overall package of sentiment indi-
cator numbers that still aren't very good.
Valuations, or price/earnings ratios, appear on both sides of the ledger.
They are still very high on a number of new-economy stocks but are modest and,
in some cases, cheap on some of the old-economy stocks. This indicator seems
neutral to me.
In view of the above, we are sitting here in a conservative position right
now. I am not bearish and I am not bullish. I would be glad to raise our
exposure, especially if there is more pessimism on the market. As always, we
will be defensive, a posture that has helped us so far this year.
PORTFOLIO COMPOSITION
At the end of the first quarter, our leading industry groups included tech-
nology, telecommunications, financial services, energy, and health care. We
added to our holdings in technology, energy, and health care. Our positions in
telecommunications and financial services were little changed. We trimmed our
holdings in media and retail, both of which had appeared among our top sectors
at year-end.
Our leading individual holdings as of March 31, 2000, included Microsoft,
General Electric, Cisco, EMC, Intel, Nokia, Morgan Stanley Dean
Witter, Dell, Applied Materials, and America Online. During the quarter we
increased our positions in Microsoft, America Online, Dell, and Applied
Materials, while Intel gained through appreciation. We sold out our stake in
Knight-Ridder and trimmed our holdings in Wal-Mart, Amgen, Grupo Televisa, and
Tribune Co., all of which had been listed among our top individual holdings at
year-end.
Sincerely,
/s/ Martin E. Zweig, Ph.D.
Martin E. Zweig, Ph.D.
Chairman
3
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF NET ASSETS
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ----------
<S> <C> <C>
Common Stocks 54.52%
Aerospace & Air Transport 0.37%
Boeing Co. ........................................... 69,900 $2,651,831
----------
Automotive 1.06%
Delphi Automotive Systems Corp. ...................... 210,000 3,360,000
General Motors Corp. ................................. 52,200 4,322,813
----------
7,682,813
----------
Building & Forest Products 0.92%
Cemex S.A. de CV, ADR................................. 140,000(a) 3,167,500
Georgia-Pacific Group................................. 87,500 3,461,719
----------
6,629,219
----------
Chemicals 0.34%
Air Products & Chemicals, Inc. ....................... 87,500 2,488,281
----------
Commercial Services 0.30%
Modis Professional Services, Inc. .................... 174,900(a) 2,164,388
----------
Consumer Products 1.43%
Adolph Coors Co., Class B............................. 89,600 4,284,000
PepsiCo, Inc. ........................................ 175,000 6,048,437
----------
10,332,437
----------
Electronics -- Electrical 2.13%
General Electric Co. ................................. 63,000 9,776,813
SCI Systems, Inc. .................................... 104,900(a) 5,644,931
----------
15,421,744
----------
Engineering & Machinery 0.86%
Ingersoll-Rand Co. ................................... 140,000 6,195,000
----------
Financial Services 6.39%
Allstate Corp. ....................................... 177,300 4,221,956
American International Group, Inc. ................... 70,000 7,665,000
Chase Manhattan Corp. ................................ 70,000 6,103,125
Fannie Mae............................................ 105,000 5,925,938
H & R Block, Inc. .................................... 71,600 3,204,100
Lehman Brothers Holdings, Inc. ....................... 63,000 6,111,000
Merrill Lynch & Co., Inc. ............................ 45,500 4,777,500
Morgan Stanley Dean Witter & Co. ..................... 100,200 8,172,562
----------
46,181,181
----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ----------
<S> <C> <C>
Health Care 3.53%
Amgen, Inc. .......................................... 88,800(a) $5,450,100
Baxter International, Inc. ........................... 122,500 7,679,219
Bristol-Myers Squibb Co. ............................. 52,400(a) 3,026,100
Schering-Plough Corp. ................................ 140,000 5,145,000
United HealthCare Corp. .............................. 70,000 4,173,750
----------
25,474,169
----------
Investment Companies 1.51%
Asia Tigers Fund, Inc. ............................... 70,000 726,250
Emerging Markets Infrastructure Fund, Inc. ........... 142,716 1,855,308
Gabelli Global Multimedia Trust, Inc. ................ 82,700 1,457,587
INVESCO Global Health Sciences Fund, Inc. ............ 143,400 2,446,763
Korea Fund, Inc. ..................................... 105,000 1,568,437
Morgan Stanley Dean Witter Asia Pacific Fund, Inc. ... 70,000 761,250
Morgan Stanley Dean Witter Emerging Markets Fund,
Inc. ................................................ 119,600 2,078,050
----------
10,893,645
----------
Manufacturing 0.72%
Tyco International Ltd. .............................. 105,000 5,236,875
----------
Media 3.46%
Comcast Corp., Class A................................ 125,100 5,426,213
Grupo Televisa S.A., GDR.............................. 70,000 4,760,000
Infinity Broadcasting Corp. .......................... 140,000(a) 4,532,500
New York Times Co. (The), Class A..................... 71,800 3,082,912
Tribune Co. .......................................... 70,000 2,559,375
Viacom, Inc., Class B................................. 87,300(a) 4,605,075
----------
24,966,075
----------
Oil & Oil Services 4.44%
AES Corp. ............................................ 52,500 4,134,375
Apache Corp. ......................................... 105,000 5,223,750
BJ Services Co. ...................................... 52,500(a) 3,878,438
Enron Corp. .......................................... 70,000 5,241,250
Exxon Mobil Corp. .................................... 70,000 5,446,875
Transocean Sedco Forex, Inc. ......................... 69,900 3,586,744
USX-Marathon Group.................................... 175,000 4,560,937
----------
32,072,369
----------
Retailing 3.13%
Best Buy Co., Inc. ................................... 71,500(a) 6,149,000
Home Depot, Inc. ..................................... 70,200 4,527,900
Lowe's Companies, Inc. ............................... 70,000 4,086,250
Target Corp. ......................................... 52,500 3,924,375
Wal-Mart Stores, Inc. ................................ 70,200 3,896,100
----------
22,583,625
----------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----------
<S> <C> <C>
Steel & Heavy Machinery 0.14%
Bethlehem Steel Corp. ............................... 175,000(a) $ 1,050,000
-----------
Technology 16.04%
Adobe Systems, Inc. ................................. 34,900 3,884,806
America Online, Inc. ................................ 122,500(a) 8,238,125
Applied Materials, Inc. ............................. 86,000(a) 8,105,500
Atmel Corp. ......................................... 35,000(a) 1,806,875
Cisco Systems, Inc. ................................. 127,800(a) 9,880,537
Compuware Corp. ..................................... 140,000(a) 2,948,750
Cypress Semiconductor Corp. ......................... 77,000(a) 3,797,063
Dell Computer Corp. ................................. 160,600(a) 8,662,362
EarthLink, Inc. ..................................... 122,500(a) 2,381,094
EMC Corp. ........................................... 71,000(a) 8,875,000
Fiserv, Inc. ........................................ 70,000(a) 2,603,125
Intel Corp. ......................................... 72,500 9,565,469
Jabil Circuit, Inc. ................................. 104,800(a) 4,532,600
JDS Uniphase Corp. .................................. 35,000(a) 4,219,688
Lucent Technologies, Inc. ........................... 70,300 4,270,725
Microsoft Corp. ..................................... 104,500(a) 11,103,125
Motorola, Inc. ...................................... 41,900 5,965,513
Remedy Corp. ........................................ 52,500(a) 2,211,563
Sawtek, Inc. ........................................ 35,000(a) 1,839,687
Sun Microsystems, Inc. .............................. 52,500(a) 4,919,414
USinternetworking, Inc. ............................. 78,750(a) 3,051,562
Yahoo! Inc. ......................................... 17,500(a) 2,999,062
-----------
115,861,645
-----------
Telecommunications 6.81%
ADC Telecommunications, Inc. ........................ 52,500(a) 2,828,438
AT&T Corp. ......................................... 70,000 3,937,500
CenturyTel, Inc. .................................... 69,900 2,595,037
MCI WorldCom, Inc. .................................. 144,150 6,531,797
Nokia Corp., ADR..................................... 43,200(a) 9,385,200
Nortel Networks Corp. ............................... 42,000 5,292,000
SBC Communications, Inc. ............................ 70,000 2,940,000
Tele Norte Leste Participacoes S.A., ADR............. 177,900 4,736,588
Telefonos de Mexico S.A., Class L, ADR............... 105,400 7,061,800
Telephone & Data Systems, Inc........................ 35,000 3,885,000
Telocity, Inc. ...................................... 700(a) 8,662
-----------
49,202,022
-----------
Utilities--Electric 0.94%
Energy East Corp. ................................... 68,200 1,351,212
PECO Energy Co. ..................................... 105,000 3,871,875
Texas Utilities Co. ................................. 52,500 1,558,594
-----------
6,781,681
-----------
Total Common Stocks.......................................... 393,869,000
-----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ------------
<S> <C> <C> <C>
Short-Term Investments 45.33%
Avery Dennison Corp., 6.28%, 4/03/00............ $28,500,000 $ 28,490,057
Citibank Capital Market, 6.31%, 4/03/00......... 30,000,000 29,989,484
Emerson Electric Co., 6.07%, 4/04/00............ 30,800,000 30,784,420
Ford Motor Credit Corp., 6.08%, 4/06/00......... 30,000,000 29,974,667
General Electric Capital Corp., 6.05%, 4/04/00.. 25,000,000 24,987,396
General Mills Corp., 6.06%, 4/13/00............. 24,000,000 23,951,520
Goldman Sachs Group L.P., 6.04%, 4/17/00........ 25,000,000 24,932,889
Honeywell Corp., 6.25%, 4/03/00................. 26,400,000 26,390,833
Merrill Lynch & Co., 6.08%, 4/07/00............. 30,000,000 29,969,600
Pharmacia & Upjohn Co., 6.06%, 4/03/00.......... 30,000,000 29,989,900
SLM Holdings Corp., 6.27%, 4/03/00.............. 18,100,000 18,093,695
UBS Financial Corp., 6.25%, 4/03/00............. 30,000,000 29,989,583
------------
Total Short-Term Investments.............................. 327,544,044
------------
Total Investments -- 99.85%............................... 721,413,044
Cash and Other Assets Less Liabilities -- 0.15%........... 1,109,622
------------
Net Assets (Equivalent to $12.01 per share based on
60,135,623 shares
of capital stock outstanding) -- 100.00%................. $ 722,522,666
============
</TABLE>
- --------
(a) Non-income producing security.
7
<PAGE>
THE ZWEIG FUND, INC.
FINANCIAL HIGHLIGHTS
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Net Asset Value
Total Net Assets per share
------------------------- ----------------
<S> <C> <C> <C> <C>
Beginning of period: December 31,
1999 ............................ $733,522,537 $ 12.20
Net investment income........... $ 3,465,427 $ 0.06
Net realized and unrealized
gains on investments........... 3,575,397 0.05
Dividends from net investment
income and distributions from
net long-term and short-term
capital gains.................. (18,040,695) (0.30)
----------- -----
Net decrease in net assets/net
asset value.................... $(10,999,871) (0.19)
------------ --------
End of period: March 31, 2000..... $722,522,666 $ 12.01
============ ========
</TABLE>
- -------------------------------------------------------------------------------
KEY INFORMATION
1-800-272-2700Zweig Shareholder
Relations:
For general information
and literature
1-800-272-2700The Zweig Fund, Inc. 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 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.
8
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OFFICERS AND DIRECTORS
Martin E. Zweig, Ph.D.
Chairman of the Board and President
Jeffrey Lazar
Executive Vice President and Treasurer
Christopher M. Capano
Vice President
Nancy J. Engberg
Secretary
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
Phoenix/Zweig Advisers LLC
900 Third Avenue
New York, NY 10022
Fund Administrator
Phoenix Equity Planning Corp.
100 Bright Meadow Boulevard
PO Box 2200
Enfield, CT 06083-2200
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer Agent
State Street Bank & Trust Co.
c/o EquiServe
PO Box 8040
Boston, MA 02266
Legal Counsel
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
- --------------------------------------------------------------------------------
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.
PXP 1375 4902-1Q-00
Quarterly Report
Zweig
The Zweig Fund, Inc.
March 31, 2000
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INVESTMENT PARTNERS
