<PAGE>
August 1, 2000
[PHOTO]
Dear Shareholder:
For the three months ended June 30, 2000, the net asset value for The Zweig
Fund, Inc. decreased 1.3%, including $0.30 in reinvested distributions. During
the same period, the S&P 500 Index fell 2.7% with dividends reinvested.
The Fund's net asset value for the six months ended June 30, 2000 increased
0.1%, including $0.60 per share in reinvested distributions. The S&P 500 In-
dex, with dividends reinvested, fell 0.4% for the same period.
Consistent with our policy of trying to minimize risk while earning reason-
able returns, our average equity exposure during the first six months of 2000
was approximately 55%.
We have been fairly conservative this year and managed to do a bit better
than the market with far less volatility. It has been a difficult market. The
real drop in the quarter was in the Nasdaq. The quarter wasn't nearly as tough
for the S&P 500, which had its decline in the first quarter. After the market
came down, our sentiment indicators improved somewhat. The monetary indicators
got better as bonds rallied. As a result, we increased our exposure from 54%
to 65% during the quarter.
DISTRIBUTION DECLARED
On June 19, 2000, the Fund announced a distribution of $0.29 per share pay-
able to shareholders of record July 10, 2000. This distribution is payable on
July 26, 2000. Including this distribution, the Fund's total payout since its
inception is now $15.55 per share.
MARKET OUTLOOK
People still like to talk about the summer rallies, but I don't think there
is a seasonal tendency to the market one way or another. Years back, the
months of July and August, along with December and January, were seasonally
strong. However, this hasn't been true in the last 20 years or so. July and
August have become ordinary. Some people are still afraid of August, a month
that has not been pleasant for investors in some of the more recent years.
However, I can recall some very large rallies like those in 1982 and 1984 that
began in August.
If our economy slows further, it is feared by some that domestic and foreign
investors may want to balance their portfolios by favoring securities of other
countries. I don't believe that is a concern. In fact, I would be delighted if
our economy slows a bit. It could lead to the end of Fed tightening and per-
haps even loosening, which would be bullish for stocks.
On the negative side, if our economy runs too strong, you risk higher infla-
tion and a tighter Fed, which could be damaging to the stock market. I'll take
my chances on foreigners pulling out their money if we have a domestic slow-
down. Should the U.S. economy slow, it is very possible that economies abroad
would follow suit.
It is estimated that earnings growth for companies in the S&P 500 Index
reached close to 20% in the second quarter versus 24% during the first three
months of the year. I don't think that the quarter-to-quarter comparisons will
be as favorable in the second half. I have seen estimates of 12% to 14%. These
are not my estimates, but
<PAGE>
earnings are still running strong. If the economy slows, some of the earnings
numbers will weaken. But that's not so bad if interest rates also go down.
There have been reports that it is harder to expand profit margins because
most of our assets, especially labor, are being fully utilized. I don't agree
because productivity is increasing with all the technological gains. In many
areas where it is harder to boost productivity, work is exported offshore
where labor is plentiful and costs are lower.
Despite strong earnings and sharp share price increases over the decade,
dividends for the S&P 500 are growing at a slim 1.1% rate. There are several
reasons for this disparity. First, price/earnings ratios have risen. And, when
prices rise relative to earnings, they rise relative to dividends as well.
Second, many companies have chosen to pay out less of their earnings in the
form of dividends. They are using retained earnings to buy in their stock. I
don't think this is necessarily positive or negative for the market.
Remember, the S&P is not a static index. It is dynamic in the sense that
companies in the index are replaced fairly frequently. Some are eliminated by
takeovers and occasionally some hit hard times. A disproportionate number of
technological companies that pay no dividends but have strong growth have also
been added to the index. This group now comprises about 35% of the S&P 500
companies. Also part of the index are companies like General Motors and Philip
Morris, which pay good dividends. Comparing old and new economy companies in
this respect is like comparing apples to oranges.
Heavy merger activity has pushed foreign purchases of American companies to
a record $289.1 billion last year. I consider this a bullish factor. Most re-
cently, we saw PaineWebber taken over by UBS, a Swiss bank. As competition has
grown and trade barriers have broken down, European companies want to become
more global. Outside the technology area, there are a lot of U.S. companies
available at very reasonable prices. So, we are going to see more takeovers by
foreign companies, but the reverse is also true.
Cash reserves at mutual funds have picked up a bit in the past month or so
but are still historically low. The reason for part of the drop in cash-to-as-
set ratios at mutual funds over the years is that many mutual funds have
changed their policies. Unlike our funds, very few are market timers. They be-
lieve their job is to be fully invested always. As more and more funds go that
route, it means that there is less cash available to use if conditions war-
rant. I don't think that is a positive for the market.
We have already seen a big shakeout in Internet companies. Many of their
stocks are down by three-quarters or more, some deservedly so. A lot of these
companies are burning cash. They have little in reserve and no earnings. Run-
ning at deficits, they can only survive by making profits--some are years away
from such an eventuality--or they have to raise capital. With the collapse in
stock prices, many "dot.com" companies are finding it very difficult to obtain
equity financing publicly or privately.
Actually, this is not a unique phenomenon historically. This is the same
situation that the auto industry faced at the turn of the twentieth century.
Hundreds of companies entered the business, but only some earned any profits.
Eventually many collapsed. We are now down to two and a half domestic auto
companies from as many as 400 to 500 in the century's first 20 years. That is
the kind of shakeout that we are now seeing in the Internet area. Ultimately,
a few colossal companies will emerge. I only wish I knew which ones they will
be.
As of the time of this writing, our monetary model is dead neutral. On a
zero to ten scale, it is a five. Our sentiment model is similar, although we
lost some ground with the Nasdaq rally after the May lows. Sentiment is now
about a six on the zero to ten scale. That is a good sign. It is up from zero
earlier in the year when there was
2
<PAGE>
excessive optimism, which is dangerous and probably the reason the market
fell. The collapse in stock prices accompanied by higher interest rates did
make people more pessimistic.
The monetary and sentiment indicators were on the critical lists earlier
this year. At least that situation has been resolved. The market doesn't
usually collapse when both major indicators are in a neutral position.
In my view, the key to the market outlook is the level of inflation. We have
had many signs of economic slowdown in the last month or two, and except for
oil and natural gas, signs of lower inflation. If inflation were to heat up
again, we'd have some problems. The Fed would keep on raising rates, and even-
tually, it would hurt the market. Conversely, if the slowdown continues at the
margin and inflation behaves itself, perhaps the Fed will stop tightening.
My current market stance ranges from high neutral to moderately positive.
I'm not looking for fireworks on the upside right now, but I think the market
will probably plod upward.
PORTFOLIO COMPOSITION
Our leading industry groups at the close of the second quarter included
technology, financial services, telecommunications, health care, energy and
media. With the exception of technology, our positions in all the listed
groups benefited from appreciation and additional purchases. Financial servic-
es, health care and energy performed particularly well during the quarter.
As of June 30, our leading positions included Intel, General Electric, Amer-
ican International Group, Microsoft, Pfizer, Exxon Mobil, Sun Microsystems,
Nortel Networks and Baxter International.
The only new position in the above listing is Pfizer. We made additional
purchases of American International Group, Exxon Mobil, Sun Microsystems and
Nortel.
Of the stocks included among our top holdings as of March 31, we trimmed our
positions in EMC, Nokia, Morgan Stanley Dean Witter and Applied Materials,
while America Online lost value.
BOARD CHANGE
At this point, I would like to inform you that Anthony M. Santomero, a mem-
ber of the board of The Zweig Fund since its inception, has been appointed the
next president of The Federal Reserve Bank of Philadelphia and has therefore
resigned from our board.
Dr. Santomero was Richard K. Mellon Professor of Finance and had been deputy
director at The Wharton School of the University of Pennsylvania. Since 1995,
he served as the director of The Wharton Financial Institution Center, which
focuses academic research on the financial services industry.
We are honored to have had Dr. Santomero as a member of our board. We want
to thank him for his years of service and wish him the best in his new role.
Sincerely,
/s/ Martin E. Zweig, Ph.D.
Martin E. Zweig, Ph.D.
Chairman
3
<PAGE>
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (Note 3)
--------- -----------
<S> <C> <C>
Common Stocks 64.46%
Aerospace & Air Transport 0.42%
Boeing Co. .......................................... 69,900 $ 2,922,694
-----------
Automotive 0.29%
Delphi Automotive Systems Corp. ..................... 140,000 2,038,750
-----------
Building & Forest Products 0.68%
Cemex S.A. de CV, ADR................................ 105,000 2,454,375
Georgia-Pacific Group................................ 70,000 1,837,500
Louisiana-Pacific Corp. ............................. 35,000 380,625
-----------
4,672,500
-----------
Chemicals 0.71%
Air Products & Chemicals, Inc. ...................... 56,000 1,725,500
Dow Chemical Co. .................................... 105,000 3,169,688
-----------
4,895,188
-----------
Commercial Services 0.73%
Modis Professional Services, Inc. ................... 174,900(a) 1,333,613
Omnicom Group, Inc. ................................. 42,000 3,740,625
-----------
5,074,238
-----------
Consumer Products 1.92%
Adolph Coors Co., Class B............................ 53,800 3,254,900
Kimberly-Clark Corp. ................................ 52,500 3,012,188
PepsiCo, Inc. ....................................... 157,500 6,998,906
-----------
13,265,994
-----------
Electronics -- Electrical 2.39%
General Electric Co. ................................ 227,500 12,057,500
Sanmina Corp. ....................................... 52,500(a) 4,488,750
-----------
16,546,250
-----------
Engineering & Machinery 0.61%
Ingersoll-Rand Co. .................................. 105,000 4,226,250
-----------
</TABLE>
See notes to financial statements
4
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (Note 3)
--------- -----------
<S> <C> <C>
Financial Services 9.06%
ACE Ltd. ............................................ 78,000 $ 2,184,000
Allstate Corp. ...................................... 141,800 3,155,050
American Express Co. ................................ 35,000 1,824,375
American International Group, Inc. .................. 77,000 9,047,500
Bank of America Corp. ............................... 70,000 3,010,000
Capital One Financial Corp. ......................... 70,000 3,123,750
Chase Manhattan Corp. ............................... 70,050 3,226,678
CIGNA Corp. ......................................... 69,900 6,535,650
Citigroup, Inc. ..................................... 105,000 6,326,250
Fannie Mae........................................... 87,500 4,566,406
FleetBoston Financial Corp. ......................... 70,000 2,380,000
H & R Block, Inc. ................................... 71,600 2,318,050
Lehman Brothers Holdings, Inc. ...................... 35,000 3,309,688
Marsh & McLennan Cos., Inc. ......................... 35,000 3,655,313
Morgan Stanley Dean Witter & Co. .................... 42,100 3,504,825
Washington Mutual, Inc. ............................. 87,500 2,526,562
Wells Fargo & Co. ................................... 52,500 2,034,375
-----------
62,728,472
-----------
Health Care 7.24%
Amgen, Inc. ......................................... 45,400(a) 3,189,350
Baxter International, Inc. .......................... 105,000 7,382,813
Bristol-Myers Squibb Co. ............................ 101,300 5,900,725
Johnson & Johnson.................................... 52,500 5,348,437
MedImmune, Inc. ..................................... 71,100(a) 5,261,400
Pfizer, Inc. ........................................ 185,400 8,899,200
Pharmacia Corp. ..................................... 84,000 4,341,750
Schering-Plough Corp. ............................... 122,500 6,186,250
UnitedHealth Group, Inc. ............................ 42,000 3,601,500
-----------
50,111,425
-----------
Investment Companies 1.29%
Asia Tigers Fund, Inc. .............................. 70,000 630,000
Emerging Markets Infrastructure Fund, Inc. .......... 135,616 1,593,488
Gabelli Global Multimedia Trust, Inc. ............... 82,700 1,137,125
INVESCO Global Health Sciences Fund, Inc. ........... 88,900 1,611,313
Korea Fund, Inc. .................................... 105,000 1,476,562
Morgan Stanley Dean Witter Asia Pacific Fund, Inc. .. 70,000 713,125
Morgan Stanley Dean Witter Emerging Markets Fund,
Inc. ............................................... 119,600 1,794,000
-----------
8,955,613
-----------
Manufacturing 1.30%
Honeywell International, Inc. ....................... 69,900 2,354,756
Tyco International Ltd. ............................. 140,000 6,632,500
-----------
8,987,256
-----------
</TABLE>
See notes to financial statements
5
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (Note 3)
--------- -----------
<S> <C> <C>
Media 3.93%
Comcast Corp., Class A............................... 107,200(a) $ 4,341,600
Grupo Televisa S.A., GDR............................. 70,000(a) 4,825,625
Infinity Broadcasting Corp., Class A................. 122,500(a) 4,463,594
New York Times Co., Class A.......................... 71,800 2,836,100
Tribune Co. ......................................... 35,000 1,225,000
Viacom, Inc., Class B................................ 69,800(a) 4,759,488
Walt Disney Co. ..................................... 122,500 4,754,531
-----------
27,205,938
-----------
Metals 0.35%
Aloca, Inc. ......................................... 84,000 2,436,000
-----------
Oil & Oil Services 4.14%
Apache Corp. ........................................ 70,000 4,116,875
BJ Services Co. ..................................... 47,300(a) 2,956,250
Exxon Mobil Corp. ................................... 104,900 8,234,650
Talisman Energy, Inc. ............................... 70,000(a) 2,318,750
Transocean Sedco Forex, Inc. ........................ 55,900 2,987,156
USX-Marathon Group................................... 175,000 4,385,937
Williams Cos., Inc. ................................. 87,400 3,643,488
-----------
28,643,106
-----------
Railroad 0.41%
Burlington Northern Santa Fe Corp. .................. 122,500 2,809,844
-----------
Retailing 2.65%
Best Buy Co., Inc. .................................. 35,000(a) 2,213,750
CVS Corp. ........................................... 105,000 4,200,000
Home Depot, Inc. .................................... 56,200 2,806,487
Lowe's Cos., Inc. ................................... 35,000 1,437,187
Safeway, Inc. ....................................... 87,500(a) 3,948,438
Wal-Mart Stores, Inc. ............................... 65,200 3,757,150
-----------
18,363,012
-----------
Steel & Heavy Machinery 0.09%
Bethlehem Steel Corp. ............................... 175,000(a) 623,437
-----------
</TABLE>
See notes to financial statements
6
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (Note 3)
--------- ------------
<S> <C> <C>
Technology 16.30%
Adobe Systems, Inc. ................................ 27,900 $ 3,627,000
America Online, Inc. ............................... 119,000(a) 6,277,250
Applied Materials, Inc. ............................ 59,800(a) 5,419,375
Atmel Corp. ........................................ 35,000(a) 1,290,625
Cisco Systems, Inc. ................................ 175,300(a) 11,142,506
Citrix Systems, Inc. ............................... 35,000(a) 662,813
Compaq Computer Corp. .............................. 70,000 1,789,375
Cypress Semiconductor Corp. ........................ 70,000(a) 2,957,500
Dell Computer Corp. ................................ 106,000(a) 5,227,125
EMC Corp. .......................................... 97,400(a) 7,493,712
Fiserv, Inc. ....................................... 52,500(a) 2,270,625
Intel Corp. ........................................ 88,400 11,817,975
Jabil Circuit, Inc. ................................ 69,900(a) 3,468,787
JDS Uniphase Corp. ................................. 42,000(a) 5,034,750
Lucent Technologies, Inc. .......................... 105,200 6,233,100
Microsoft Corp. .................................... 117,000(a) 9,360,000
Motorola, Inc. ..................................... 125,700 3,653,156
Network Appliance, Inc. ............................ 35,000(a) 2,817,500
Oracle Corp. ....................................... 87,400(a) 7,347,063
QUALCOMM, Inc. ..................................... 42,000(a) 2,520,000
Sun Microsystems, Inc. ............................. 87,500(a) 7,957,031
USinternetworking, Inc. ............................ 70,050(a) 1,431,647
Yahoo!, Inc. ....................................... 24,500(a) 3,034,938
------------
112,833,853
------------
Telecommunications 7.86%
ADC Telecommunications, Inc. ....................... 52,500(a) 4,403,438
Amdocs Ltd. ........................................ 34,900(a) 2,678,575
AT&T Corp. ......................................... 70,000 2,213,750
AT&T Wireless Group................................. 70,300(a) 1,959,612
CenturyTel, Inc. ................................... 69,900 2,009,625
General Motors Corp., Class H....................... 52,499 4,606,787
Nokia Corp., ADR.................................... 108,300 5,408,231
Nortel Networks Corp. .............................. 112,000 7,644,000
SBC Communications, Inc. ........................... 140,000 6,055,000
Tele Norte Leste Participacoes S.A., ADR............ 107,000 2,527,875
Telefonos de Mexico S.A., Class L, ADR.............. 70,200 4,010,175
Telephone & Data Systems, Inc. ..................... 35,000 3,508,750
WorldCom, Inc. ..................................... 161,650(a) 7,415,694
------------
54,441,512
------------
</TABLE>
See notes to financial statements
7
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 3)
----------- ------------
<S> <C> <C>
UTILITIES -- ELECTRIC & GAS 2.09%
AES Corp. ...................................... 105,000 $ 4,790,625
Enron Corp. .................................... 52,500 3,386,250
PECO Energy Co. ................................ 105,000 4,232,812
TXU Corp. ...................................... 70,000 2,065,000
------------
14,474,687
------------
TOTAL COMMON STOCK
(Cost $392,157,883)...................................... 446,256,019
------------
RIGHTS 0.00%
INVESTMENT COMPANIES 0.00%
Gabelli Global Multimedia Trust, Inc., expiring
7/19/00........................................ 82,700(a) 16,798
------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS 35.57%
Electronic Data System Corp., 6.95%, 7/05/00.... $25,000,000 24,980,694
Ford Motor Credit Corp., 6.77%, 7/07/00......... 30,000,000 29,966,150
General Electric Capital Corp., 6.81%, 7/06/00.. 20,000,000 19,981,083
Goldman Sachs Group L.P., 6.65%, 7/06/00........ 30,000,000 29,972,292
Pharmacia & Upjohn Co., 7.00%, 7/05/00.......... 25,000,000 24,980,556
Philip Morris Capital Corp., 6.56%, 7/05/00..... 28,800,000 28,779,008
SLM Holdings Corp., 6.85%, 7/05/00.............. 30,000,000 29,977,167
UBS Financial Corp., 6.75%, 7/05/00............. 20,000,000 19,985,000
UBS Financial Corp., 6.96%, 7/03/00............. 10,000,000 9,996,133
Washington Post Co., 6.95%, 7/05/00............. 27,600,000 27,578,687
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $246,196,770).......... 246,196,770
------------
TOTAL INVESTMENTS (Cost $638,354,653) -- 100.03%.......... 692,469,587
Other Assets Less Liabilities -- (0.03)%.................. (222,267)
------------
NET ASSETS -- 100.00%..................................... $692,247,320
============
</TABLE>
--------
(a) Non-income producing security.
For Federal income tax purposes, the tax basis of investments owned at June
30, 2000 was $638,354,653 and net unrealized appreciation of investments
consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation.................................. $ 82,415,167
Gross unrealized depreciation.................................. (28,300,233)
------------
Net unrealized appreciation.................................... $ 54,114,934
============
</TABLE>
See notes to financial statements
8
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost $638,354,653)............ $692,469,587
Cash............................................................ 4,557
Securities sold receivable...................................... 542,165
Dividends receivable............................................ 381,017
Prepaid expenses................................................ 52,868
------------
Total Assets.................................................. 693,450,194
============
LIABILITIES
Payable for investment securities purchased..................... 483,192
Accrued advisory fees (Note 5).................................. 482,605
Accrued administration fees (Note 5)............................ 73,810
Other accrued expenses.......................................... 163,267
------------
Total Liabilities............................................. 1,202,874
------------
NET ASSETS........................................................ $692,247,320
============
NET ASSET VALUE, PER SHARE
($692,247,320/60,135,623 shares outstanding--Note 6)........... $ 11.51
============
Net Assets consist of
Capital paid-in................................................. $618,446,376
Distribution in excess of net investment income................. (25,811,682)
Undistributed net realized gain on investments.................. 45,497,692
Net unrealized appreciation on investments...................... 54,114,934
------------
$692,247,320
============
</TABLE>
See notes to financial statements
9
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
Investment Income
Income
Interest..................................................... $ 9,450,317
Dividends (net of foreign withholding taxes of $8,474)....... 1,692,606
------------
Total Income............................................... 11,142,923
------------
Expenses
Investment advisory fees (Note 5)............................ 2,936,487
Administration fees (Note 5)................................. 449,110
Transfer agent fees.......................................... 193,547
Printing and postage expenses................................ 61,399
Custodian fees............................................... 46,409
Professional fees (Note 5)................................... 29,815
Directors' fees and expenses (Note 5)........................ 26,765
Miscellaneous................................................ 91,972
------------
Total Expenses............................................. 3,835,504
------------
Net Investment Income.................................... 7,307,419
------------
Net Realized and Unrealized Gains (Losses)
Net realized gain on investments............................... 30,038,004
Decrease in unrealized appreciation on investments............. (42,539,258)
------------
Net realized and unrealized loss on investments.............. (12,501,254)
------------
Net decrease in net assets resulting from operations......... $ (5,193,835)
============
</TABLE>
See notes to financial statements
10
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
June 30, 2000 Ended
(Unaudited) December 31, 1999
------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income..................... $ 7,307,419 $ 11,938,706
Net realized gain on investments.......... 30,038,004 60,575,456
Increase (decrease) in unrealized
appreciation of investments and
securities sold short.................... (42,539,258) 9,048,663
------------ ------------
Net increase (decrease) in net assets
resulting from operations.............. (5,193,835) 81,562,825
------------ ------------
Dividends and distributions to shareholders
from
Net investment income..................... (36,081,382) (11,381,848)
Net realized gain on investments,
securities sold short and futures........ -- (60,179,570)
------------ ------------
Total dividends and distributions to
shareholders........................... (36,081,382) (71,561,418)
------------ ------------
Net increase (decrease) in net assets..... (41,275,217) 10,001,407
Net Assets
Beginning of period......................... 733,522,537 723,521,130
------------ ------------
End of period (including distributions in
excess of net investment income and
undistributed net investment income of
($25,811,682) and $2,962,281,
respectively).............................. $692,247,320 $733,522,537
============ ============
</TABLE>
See notes to financial statements
11
<PAGE>
THE ZWEIG FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 1 -- Acquisition
On March 1, 1999, Phoenix Investment Partners, Ltd. ("Phoenix"), completed
the acquisition of Zweig Advisors, Inc. (the "ZF Adviser"), the Fund's
investment adviser, Phoenix/Zweig Advisers, the Fund's administrator
("Administrator") and Zweig Securities Corp. (currently PXP Securities Corp.),
an affiliated broker-dealer registered under the Securities Exchange Act of
1934.
As a result of the acquisition, effective January 1, 2000, Phoenix/Zweig
Advisers, LLC (the "Adviser") succeeds ZF Adviser, as the Fund's investment
adviser. In order to continue to have access to the advisory and consulting
services of Dr. Martin E. Zweig and his associates, the Adviser entered into a
sub-advisory servicing agreement with Zweig Consulting, LLC.
As of October 31, 1999, the Administrator assigned the rights and
obligations under the Administration Agreement dated March 1, 1999, between
the Fund and the Administrator to Phoenix Equity Planning Corp. ("PEPCO")
under the same terms as the previous Administration Agreement. Effective
October 31, 1999, PEPCO sub-contracted the Fund's mutual fund accounting to
The Bank of New York. PEPCO is an affiliate of the Adviser and the Fund.
NOTE 2 -- Organization
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.
NOTE 3 -- Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A. Portfolio Valuation
Portfolio securities that are traded only on stock exchanges are valued at
the last sale price. Securities traded in the over-the-counter market which
are National Market System securities are valued at the last sale price. Other
over-the-counter securities are valued at the most recently quoted bid price
provided by the principal market makers. Portfolio securities which are traded
both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market, as determined by the
Investment Adviser. Debt securities may be valued on the basis of prices
provided by an independent pricing service, when such prices are believed by
the Investment Adviser to reflect the fair market value of such securities.
Short-term investments having a remaining maturity of 60 days or less when
purchased are valued at amortized cost (which approximates market value).
12
<PAGE>
Futures contracts traded on commodities exchanges are valued at their closing
settlement price on such exchange. Securities for which market quotations are
not readily available,(of which there were none at June 30, 2000) and other
assets, if any, are valued at fair value as determined under procedures
approved by the Board of Directors of the Fund.
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 and losses on sales of investments are determined on the
identified cost basis for financial reporting and tax purposes.
C. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recorded as assets. During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
marking the contract 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 or liabilities, depending upon
whether unrealized gains or losses are incurred. When a futures contract is
closed, the Fund realizes a 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. There are several risks in connection with the use of futures
contracts as a hedging device. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments, which
may not correlate with the change in value of the hedged investments.
Therefore, anticipated gains may not result and anticipated losses may not be
offset. In addition, as no secondary market exists for futures contracts,
there is no assurance that there will be an active market at any particular
time.
D. Short Sales
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. To sell a security short,
the Fund must borrow the security. The Fund's obligation to replace the
security borrowed and sold short will be fully collateralized at all times by
the proceeds from the short sale retained by the broker and by cash and
securities deposited in a segregated account with the Fund's custodian. 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 realized gain will be decreased, and any incurred loss increased, by
the amount of transaction costs. Dividends or interest the Fund pays in
connection with such short sales are recorded as expenses. In addition to the
short sales described above, the Fund may make short sales "against the box".
A short sale "against the box" is a short sale whereby at the time of the
short sale, the Fund owns or has the immediate and unconditional right, at no
added cost, to obtain the identical security.
E. Federal Income Tax
The Fund has elected to qualify and intends to remain qualified, as long as
management's view is that it is in the best interests of the shareholders, as
a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended. The principal tax benefits of qualifying
13
<PAGE>
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 gains.
F. Dividends and Distributions to Shareholders
Dividends and distributions to shareholders are recorded on the ex-dividend
date. In the event that amounts distributed are in excess of accumulated net
investment income and net realized gains on investments (as determined for
financial statement purposes), such amounts would be reported as a
distribution from paid-in capital during the fiscal year in which such a
distribution is made. Income dividends and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to timing differences and differing characterization of distributions made by
the Fund as a whole.
NOTE 4 -- Portfolio Transactions
During the six months ended June 30, 2000, purchases and sales of
investments, excluding short-term investments were:
<TABLE>
<CAPTION>
United States
Government
Common and Agency
Stocks Obligations
------------ -------------
<S> <C> <C>
Purchases ........................................ $371,387,307 $ 0
============ ===
Sales ............................................ $339,891,849 $ 0
============ ===
</TABLE>
NOTE 5 -- Investment Advisory Fees and Other Transactions with Affiliates
a) Investment Advisory Fee: The Investment Advisory Agreement (the
"Agreement") between the Adviser 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 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 Adviser, subject to review by the Board
of Directors and the applicable provisions of the Act. For the services
provided by the Adviser under the Agreement, the Fund pays the Adviser a
monthly fee equal, on an annual basis, to 0.85% of the Fund's average daily
net assets. During the six months ended June 30, 2000, the Fund accrued
advisory fees of $2,936,487.
b) Administration Fee: Phoenix Equity Planning Corp. serves as the Fund's
Administrator pursuant to an Administration Agreement with the Fund. The
Administrator generally assists in all aspects of the Fund's operations, other
than providing 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 Agreement, the Fund pays the
Administrator a monthly fee equal, on an annual basis, to 0.13% of the Fund's
average daily net assets. During the six months ended June 30, 2000, the Fund
accrued administration fees of $449,110.
14
<PAGE>
c) Directors' Fee: The Fund pays each Director who is not an interested
person of the Fund or the Adviser a fee of $10,000 per year plus $1,500 per
Directors' or committee meeting attended, together with the out-of-pocket
costs relating to attendance at such meetings. Any Director of the Fund who is
an interested person of the Fund or the Adviser receives no remuneration from
the Fund.
d) Legal Fee: The Fund accrued legal fees of $1,605 during the six months
ended June 30, 2000, for the services of Rosenman & Colin LLP, of which Robert
E. Smith, a former Director of the Fund, is counsel.
e) Brokerage Commission: During the six months ended June 30, 2000, the Fund
paid PXP Securities Corp. brokerage commissions of $58,643 in connection with
portfolio transactions effected through them. In addition, PXP Securities
Corp. charged $49,400 in commissions for transactions effected on behalf of
the participants in the Fund's Automatic Reinvestment and Cash Purchase Plan.
NOTE 6 -- Capital Stock and Reinvestment Plan
At June 30, 2000, the Fund had one class of common stock, par value $.010
per share, of which 100,000,000 shares are authorized and 60,135,623 shares
are outstanding.
Registered shareholders may elect to receive all distributions in cash paid
by check mailed directly to the shareholder by EquiServe 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 EquiServe, as the Plan agent in whole or
fractional shares of the Fund, as the case may be. For the six months ended
June 30, 2000 and the year ended December 31, 1999 there were no shares issued
pursuant to the Plan.
15
<PAGE>
NOTE 7 -- Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, 2000 -------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net asset value,
begining of period..... $ 12.20 $ 12.03 $ 12.63 $ 11.45 $ 11.06 $ 10.33
-------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net investment income... 0.12 0.20 0.23 0.35 0.34 0.39
Net realized and
unrealized
gains(losses).......... (0.21) 1.16 0.55 2.03 1.15 1.41
-------- -------- -------- -------- -------- --------
Total from investment
operations............. (0.09) 1.36 0.78 2.38 1.49 1.80
-------- -------- -------- -------- -------- --------
Dividends and
Distributions:
Dividends from net
investment income...... (0.60) (0.19) (0.35) (0.31) (0.30) (0.51)
Distributions from net
realized gains......... -- (1.00) (0.87) (0.89) (0.80) (0.56)
-------- -------- -------- -------- -------- --------
Total Dividends and
Distributions.......... (0.60) (1.19) (1.22) (1.20) (1.10) (1.07)
-------- -------- -------- -------- -------- --------
Effect on net asset
value as a result of
rights offering*....... -- -- (0.16) -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of
period................ $ 11.51 $ 12.20 $ 12.03 $ 12.63 $ 11.45 $ 11.06
======== ======== ======== ======== ======== ========
Market value, end of
period**.............. $ 10.00 $ 10.06 $ 10.81 $ 13.25 $ 10.88 $ 11.25
======== ======== ======== ======== ======== ========
Total investment
return***.............. 5.38% 3.61% (8.68)% 34.76% 6.92% 19.83%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data
Net assets, end of
period (in thousands).. $692,247 $733,523 $723,521 $666,366 $589,081 $547,886
Ratio of expenses to
average net assets..... 1.11%**** 1.12% 1.12% 1.16% 1.18% 1.22%
Ratio of net investment
income to average net
assets................. 2.12%**** 1.68% 1.90% 2.88% 3.12% 3.62%
Portfolio turnover rate. 83.8% 114.9% 68.7% 93.0% 137.2% 160.2%
</TABLE>
--------
* Shares were sold at a 5% discount from the average market price.
**Closing Price -- New York Stock Exchange.
*** Total investment return is calculated assuming a purchase of common stock
on the opening of the first business day and a sale on the closing of the
last business day of each period reported. Dividends and distributions,
if any, are assumed for the purposes of this calculation, to be
reinvested at prices obtained under the Fund's Distribution Reinvestment
and Cash Purchase Plan. Generally, total investment return based on net
asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease
in the premium of the market value to the net assets from the beginning
to the end of such years. Conversely, total investment return based on
net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from
the beginning to end of such periods.
**** Annualized.
16
<PAGE>
SUPPLEMENTARY PROXY INFORMATION
The Annual Meeting of Shareholders of The Zweig Fund, Inc. was held on May
22, 2000. The meeting was held for the purpose of electing Charles H. Brunie
and James B. Rogers, Jr. as Directors and to ratify PricewaterhouseCoopers LLP
as the Fund's independent accountants for the year ending December 31, 2000.
The Fund's other Directors who continue in office are Elliot S. Jaffe, Alden
C. Olson and Martin Zweig.
The results of the above matters were as follows:
<TABLE>
<CAPTION>
Votes Votes
Directors/Independent Accountants Votes For Against Withheld Abstentions
--------------------------------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C>
Charles H. Brunie................... 46,510,724 N/A 945,517 N/A
James B. Rogers, Jr. ............... 46,540,479 N/A 915,762 N/A
PricewaterhouseCoopers LLP.......... 46,657,205 318,603 -- 480,433
</TABLE>
-------------------------------------------------------------------------------
KEY INFORMATION
1-800-272-2700 Zweig Shareholder Relations:
For general information and literature
1-800-272-2700 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 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
from their net asset value.
17
<PAGE>
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<PAGE>
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
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 in-
tended for use in the purchase of shares of the Fund or any securities men-
tioned in this report.
PXP 1375 4902-SEM 06/00
Semiannual Report
Zweig
The Zweig Fund, Inc.
June 30, 2000
{LOGO OF ZWEIG]
[LOGO] PHOENIX
INVESTMENT PARTNERS
