[PHOTO APPEARS HERE]
February 1, 1999
Dear Shareholder:
The Zweig Fund's net asset value increased 6.6% for the year ended
December 31,1998, including $1.22 in reinvested distributions. During the same
period, the Standard & Poor's 500 Index gained 28.6% and the Dow Jones
Industrial Average rose 18.1%, both with dividends reinvested.
In the fourth quarter of 1998 the Fund's net asset value, including a
$0.27 distribution, was up 13.6%. During the same period, the S&P's 500 Index
returned 21.3%.
Consistent with our risk-averse strategy, the Fund's average equity
exposure for 1998 was approximately 83%.
I would like to put our performance in perspective. Since we are a
value-oriented fund, most of our stocks have very low price/earnings ratios.
Historical evidence attests to the rewards of such an approach. However last
year was a notable exception. Low P/E's did far worse than high P/E's and the
numbers were almost unbelievable. As a result, value managers dramatically
underperformed the S&P 500.
The market capitalization of an S&P 500 stock was also a factor in its
performance. For example, the fifty largest stocks increased by 36.4% for the
year while the fifty smallest actually declined by 0.5%. On an unweighted basis,
taking equal positions in all the S&P 500 stocks, the index was up only 7.3%. I
have never seen a year like this.
For the twelve full years of operations ended December 31, 1998, The Zweig
Fund showed a total return on net asset value of 327.8% (12.9% on a compounded
annualized basis) including reinvested distributions. Our average equity
exposure for the twelve years was approximately 60%.
If a shareholder had invested $10,000 (1,000 shares) at the time of the
Fund's initial public offering in October of 1986, these holdings, including
reinvested distributions, would have appreciated to $35,789 (3,310 shares) as of
December 31, 1998.
DISTRIBUTION DECLARED
On December 14, 1998, the Fund declared a distribution of $0.29 per share
payable on January 11, 1999 to shareholders of record on December 31, 1998.
Including the fourth-quarter payout, our total distribution to shareholders for
tax purposes in 1998 was $1.20. This brings our total payout since the Fund's
inception to $13.76.
Of the $1.20 taxable in 1998, $0.45 is ordinary income and $0.75 is
long-term capital gains.
MARKET OUTLOOK
At this writing I think the economy is reasonably strong and that earnings
will be decent. I am not worried about the possibility of softer earnings. In
fact, the market usually does pretty well when earnings are down moderately or
up slightly. We may run the risk of higher interest rates if the economy and
earnings show strong gains but we are not there yet.
I see Brazil as a possible trouble spot. The market rebounded after the
initial devaluation but we are not out of the woods yet. The Brazil risks are
twofold. First, that things may get so bad that they will default on some of
their debts.
<PAGE>
While they might stretch out their payments, I don't believe they will default
as Russia did. The second problem with Brazil is that they may cause competitive
devaluations in the rest of Latin America. This could lead to competitive
devaluations in Asia, including China, which would be a negative for the market.
At this moment I do not believe China will devalue, but if they do it will be
months down the road.
As far as the rest of Asia is concerned, South Korea is doing a bit better
and Japan is coming to grips with some of its problems. I don't know whether or
when Japan will turn the corner but we have lived with a weak Japan for nearly a
decade and the markets have survived.
The recent drops in prices of oil, natural gas, and commodities have put
pressure on the economies of emerging countries but are a positive factor for
U.S. markets. We import a lot of their goods such as garments, textiles, smaller
electronics, steel, and even cars -- and this has kept a lid on overall
inflation. We produce much more sophisticated goods -- high technology,
airplanes, movies and other entertainment, medicinal products, and financial and
other services. Here we have a big edge on the rest of the world and this has
been a driving force in our economy. As long as we enjoy this competitive
advantage, I don't have a great concern about the record levels of our trade
deficits.
Clearly some U.S. industries might be suffering but the overall U.S.
economy has probably benefited from the excess supplies around the world. Of
course, too much of a good thing is not a good thing. If supply becomes
overwhelming and prices collapse, it would eventually hurt us. But so far the
impact on the U.S. ranges from modest inflation to mild deflation.
Recently we have seen a shift in investor concerns from inflation to
deflation but I think this worry is misplaced. For one thing, mild deflation has
been very bullish for stock prices. I would define mild deflation as anywhere
from zero to minus 3%. With prices at those levels, the Dow has produced an
average annual return of 26.7% since 1918. It is only extreme deflation that is
bad. When consumer prices have gone down at 3% a year or more, the Dow has
dropped at an annual average rate of 13.3%. Mild deflation is even more bullish
than mild inflation. However, extreme deflation is poison and extreme inflation
is not very good either. The market doesn't like things too hot or too cold. It
likes things nice and in between.
The frenzy in Internet stocks concerns me because a great deal of
speculation is going on by a public that has no conception of the volatility and
the risks involved. Today there are more than fifty Internet stocks. I doubt
that five of them will survive ten years from now. That is what happened with
the automobile industry in the early part of this century. It was the same with
the electronics industry in the late 50's and early 60's and with the computer
business ten, twenty, or thirty years ago. We don't know who the survivors will
be on the Internet. They may not even be the companies that exist today.
If you tried to pick the winners in the computer business twenty to
twenty-five years ago, you would have lost out. The present leaders --
Microsoft, Intel, Dell, and Cisco -- did not even exist back then. You could
have bought Burroughs, Control Data, or Sperry Rand and done very poorly. We do
know that the Internet will be a very big thing but I don't know whether it will
be economically profitable for a lot of companies.
It is very easy to enter the Internet business and there will be a
tremendous amount of competition. There are too many fly-by-night companies that
are trying to take advantage of the situation with Initial Public Offerings --
and they are not the place to be. Some of the companies might do well but it
will be like picking a needle in a haystack. None of them are cheap. I see the
level of speculation as waving a red flag for the market. However, should the
Internet market collapse, it may not drag down the entire market. We saw a
collapse in biotech stocks in 1992 and the market was relatively unaffected. So
I just don't know how a big drop in Internet stocks would impact the overall
market.
Summing up, the current market positives include the fact that the Federal
Reserve is on the side of the bulls. They loosened three times in the fourth
quarter. Inflation is low and, as indicated previously, even mild deflation
would not be bad. The negatives include possible repercussions from Brazil's
actions and a devaluation by China of its currency. Actually, I think the bigger
threat would be if the economy picks up too much steam and
2
<PAGE>
profits get too strong, leading to the Fed tightening later in the year.
I am keeping a watchful eye on valuation. With the P/E ratio for the S&P
500 climbing from 27.71 in 1997 to 35.27 in 1998, the market is not cheap by any
stretch of the imagination. That means there is not a big shock absorber under
the market. So if something goes wrong, I don't think the value people will be
buying on a 10% dip. It would take a lot more than that.
Meanwhile, our monetary indicators are somewhat positive, reflecting the
Fed's recent moves. Our sentiment indicators are mixed. The long-term ones are
fairly decent but the short-term ones are rather overly optimistic. I am not
thrilled about my indicators but, overall, they are currently moderately
bullish. Obviously, this could change. A month down the road these indicators
could be totally different.
PORTFOLIO COMPOSITION
Following a policy instituted at the beginning of 1995, the majority of
our stocks are acquired or sold on the basis of a proprietary computer-driven
model that is weighted toward a value approach with secondary emphasis on
growth. Various criteria are used to evaluate and rank the most liquid stocks
with the highest dividend yields.
There was very little change in the composition of our leading industry
groups during the fourth quarter. At year-end this listing included financial
services, utilities, technology, telecommunications, manufacturing, and oil and
oil services.
Among the above sectors, financial services, technology,
telecommunications and manufacturing gained in value as a result of increased
exposure and a favorable fourth quarter. Utilities lost ground because of a poor
fourth quarter relative to the other groups. Oil and oil services were adversely
affected by declining prices and weak market performance.
Some of our largest individual holdings include Dell, Microsoft, Daimler
Chrysler, Ford, Home Depot, Energy East, PECO, AT&T, Lucent Technologies, and
MCI Worldcom.
New to our portfolio are Home Depot, the
giant retail building products company, and
Lucent Technologies, a major producer of telecommunications equipment. We
previously held MCI Worldcom and added to our position. Daimler Chrysler
increased in value following the big auto company merger. All of the above
performed
extremely well in the fourth quarter.
Among other large individual holdings, we trimmed our position slightly in
the USX-Marathon Group. Reynolds Metals, GPU, and Edison International all
increased in value but were displaced by better performers in our current top
positions.
ZWEIG ADVISORS TO BE
ACQUIRED BY PHOENIX
As I am sure you are aware, a number of well-known organizations in the
financial services industry have recently combined to build stronger companies.
With that in mind, I am pleased to report that Zweig Advisors, the investment
advisor to The Zweig Fund, Inc., has agreed to be acquired by Phoenix Investment
Partners, Ltd., a large diversified financial services organization listed on
the New York Stock Exchange. The transaction, which is subject to shareholder
approval, is expected to close later in the first quarter of 1999. I will remain
as chairman and president of the Fund and will continue to provide asset
allocation services. I have no plans to retire -- and Jeff Lazar, the portfolio
manager, will remain in place.
Sincerely,
/s/ Martin E. Zweig
Martin E. Zweig, Ph.D.
Chairman
3
<PAGE>
[FLOW CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
SHAREHOLDER QUESTION: I BOUGHT THE FUND WHEN IT FIRST CAME OUT IN 1986 FOR
$10.00. OVER 12 YEARS LATER, AT THE END OF DECEMBER, 1998, THE FUND IS ONLY
TRADING FOR $10.8125. THE INCREASE OF $0.8125 IS EQUAL TO A RETURN OF 8.1%? AM I
MISSING SOMETHING?
<TABLE>
<CAPTION>
1986 PLUS 1988-1998 1998
---- ---- --------- ----
<S> <C> <C> <C> <C> <C>
$10.00=VALUE OF $13.63 PAID THEN $13.63 BOUGHT 1 SHARE PURCHASED AT
1 SHARE AT ON ONE SHARE AN ADDITIONAL INCEPTION PLUS 2.311
INCEPTION FROM 1986- 2.311 SHARES OF SHARES RECEIVED AS A
1998 AS A THE ZWEIG FUND RESULT OF REINVESTING
RESULT OF THE THROUGH THE $13.63 IN MORE SHARES
10% PAYOUT DISTRIBUTION OF THE ZWEIG FUND=
POLICY REINVESTMENT 3.311 SHARES HELD AT
PLAN THE END OF 1998.
</TABLE>
PERFORMANCE CALCULATION
BASED ON THE CLOSING PRICE OF THE ZWEIG FUND ON THE NEW YORK
STOCK EXCHANGE ON DECEMBER 31, 1998:
SHAREHOLDER OWNS 3.311 SHARES
CLOSING PRICE ON NYSE WAS $10.8125
SHAREHOLDER'S ACCOUNT VALUE IS $35.80 (3.311 X $10.8125)
SHAREHOLDER'S ACCOUNT VALUE AT INCEPTION WAS $10.00 (1 X $10.00)
$35.80 ENDING VALUE
- -10.00 BEGINNING VALUE
- ------------------------
$25.80 INCREASE IN VALUE
TOTAL RETURN = 258% ($25.80/$10.00 X 100)
SHAREHOLDERS RECEIVING DISTRUBTIONS IN CASH WOULD HAVE A RETURN OF 144.4%.
$13.63 (DISTRIBUTION)+$10.8125 (NYSE PRICE 12/31/98)=$24.4425-$10.00=
$14.4425/$10.00X100.
THIS RETURN DOES NOT INCLUDE ANY RETURN YOU MAY HAVE EARNED FROM INVESTING THE
CASH ELSEWHERE.
CONCLUSION: Performance cannot be measured by looking only at the beginning and
ending stock price.
Calculations above reflect adjustment for participation in the Primary
Subscription of the Rights Offering (May, 1998)
4
<PAGE>
THE ZWEIG FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS 89.14%
AEROSPACE & DEFENSE 1.26%
B.F. Goodrich & Co .................. 93,700 $ 3,361,488
Northrop Corp ....................... 78,700 5,754,937
------------
9,116,425
------------
AIRLINES 1.42%
AMR Corp. ........................... 102,400 6,080,000
SouthWest Airlines Co. .............. 186,100 4,175,619
------------
10,255,619
------------
APPAREL MANUFACTURER 1.18%
V.F. Corp. .......................... 89,700 4,204,688
Warnaco Group, Inc. ................. 172,900 4,365,725
------------
8,570,413
------------
AUTOMOTIVE 3.12%
Daimler Chrysler AG ................. 117,467 11,284,173
Ford Motor Co. ...................... 191,800 11,256,263
------------
22,540,436
------------
BIOTECHNOLOGY 0.87%
Amgen, Inc. ......................... 60,000 6,273,750
------------
CHEMICALS 1.02%
IMC Global, Inc. .................... 226,900 4,849,988
Millennium Chemicals, Inc. .......... 97,700 1,941,787
Wellman, Inc. ....................... 58,600 596,988
------------
7,388,763
------------
CONSUMER DURABLES 2.59%
Cooper Tire & Rubber Co. ............ 157,800 3,225,037
Maytag Corp. ........................ 129,200 8,042,700
Whirlpool Corp. ..................... 134,300 7,436,863
------------
18,704,600
------------
CONSUMER PRODUCTS 1.00%
Fortune Brands, Inc. ................ 125,300 3,962,613
Premark International, Inc. ......... 95,000 3,289,375
------------
7,251,988
------------
CONTAINERS & PACKAGING 0.10%
Sea Containers Ltd., Class A ........ 25,200 754,425
------------
ELECTRONICS 1.51%
Avnet, Inc. ......................... 79,700 4,821,850
General Motors Corp., Class H ....... 154,100 6,115,844
------------
10,937,694
------------
ENGINEERING & CONSTRUCTION 0.77%
Fluor Corp. ......................... 131,100 5,579,944
------------
FINANCIAL SERVICES 14.00%
A.G. Edwards, Inc. .................. 105,600 3,933,600
Allstate Corp. ...................... 186,100 7,188,113
Astoria Financial Corp. ............. 134,100 6,135,075
BankAmerica Corp. ................... 134,300 8,074,788
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
---------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- (Continued)
Bear Stearns & Co., Inc. ............................. 117,361 $ 4,386,367
CIGNA Corp. .......................................... 94,100 7,275,105
Charter One Financial, Inc. .......................... 80,503 2,233,957
Conseco, Inc. ........................................ 184,900 5,651,006
Countrywide Credit Industries, Inc. .................. 130,400 6,544,450
GATX Corp. ........................................... 82,600 3,128,475
J. P. Morgan & Co., Inc. ............................. 29,000 3,046,813
Loews Corp. .......................................... 84,200 8,272,650
Morgan Stanley, Dean Witter, Discover & Co. .......... 93,800 6,659,800
Old Republic International Corp. ..................... 149,250 3,358,125
Orion Capital Corp. .................................. 58,000 2,309,125
PaineWebber Group Inc. ............................... 181,200 6,998,850
PIMCO Advisors L.P. .................................. 35,200 1,095,600
Provident Companies, Inc. ............................ 115,300 4,784,950
Quinenco S.A., ADR ................................... 61,500 492,000
Reliance Group Holdings, Inc. ........................ 136,500 1,757,438
Reliastar Financial Corp. ............................ 67,200 3,099,600
Ryder Systems, Inc. .................................. 150,800 3,920,800
Selective Insurance Group, Inc. ...................... 48,000 966,000
-----------
101,312,687
-----------
FOOD & BEVERAGE 0.81%
Adolph Coors Co., Class B ............................ 104,200 5,880,788
-----------
HOME BUILDERS & MATERIALS 1.16%
Fleetwood Enterprises, Inc. .......................... 89,500 3,110,125
Kaufman & Broad Home Corp. ........................... 98,600 2,834,750
Lafarge Corp. ........................................ 60,400 2,446,200
-----------
8,391,075
-----------
INDUSTRIAL SERVICES 0.26%
Ogden Corp. .......................................... 75,800 1,899,738
-----------
INVESTMENT COMPANIES 2.44%
Blackrock 2001 Term Trust, Inc. ...................... 52,600 473,400
Blackrock Strategic Term Trust, Inc. ................. 52,600 483,263
Central European Equity Fund, Inc. ................... 46,400 617,700
Emerging Markets Infrastructure Fund, Inc. ........... 199,600 1,447,100
Emerging Markets Telecommunications Fund, Inc. ....... 76,800 686,400
France Growth Fund, Inc. ............................. 64,500 878,812
Gabelli Equity Trust, Inc. ........................... 106,000 1,225,625
Gabelli Global Multimedia Trust Fund, Inc. ........... 99,700 1,090,469
Italy Fund, Inc. ..................................... 29,700 445,500
Mexico Fund, Inc. .................................... 173,900 1,945,506
Morgan Stanley Emerging Markets Fund, Inc. ........... 121,900 990,437
Morgan Stanley India Investment Fund, Inc. ........... 70,600 476,550
Portugal Fund, Inc. .................................. 56,300 879,688
Royce Value Trust, Inc. .............................. 144,155 1,982,131
Scudder New Europe Fund, Inc. ........................ 133,400 2,351,174
Swiss Helvetia Fund, Inc. ............................ 107,200 1,715,200
-----------
17,688,955
-----------
LEISURE 1.28%
Brunswick Corp. ...................................... 79,500 1,967,625
Royal Caribbean Cruises Ltd. ......................... 196,900 7,285,300
-----------
9,252,925
-----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
---------- -------------
<S> <C> <C>
MANUFACTURING 5.88%
Aeroquip-Vickers, Inc. .................. 95,900 $2,871,006
Borg-Warner Automotive, Inc. ............ 82,600 4,610,112
Cummins Engine Company, Inc. ............ 110,400 3,919,200
Dana Corp. .............................. 190,600 7,790,775
Dexter Corp. ............................ 36,700 1,153,756
Herman Miller, Inc. ..................... 155,200 4,171,000
Johnson Controls, Inc. .................. 55,800 3,292,200
Kennametal, Inc. ........................ 89,700 1,906,125
Milacron, Inc. .......................... 87,600 1,686,300
PACCAR, Inc. ............................ 67,800 2,788,275
Timken Co. .............................. 184,400 3,480,550
Trinity Industries, Inc. ................ 125,800 4,843,300
----------
42,512,599
----------
METALS & MINING 2.97%
AK Steel Holdings Corp. ................. 167,000 3,924,500
Alcan Aluminum Ltd. ..................... 135,300 3,661,556
British Steel Plc, ADR. ................. 116,400 1,702,350
Reynolds Metals Co. ..................... 158,200 8,335,163
USX-U.S. Steel Group. ................... 169,300 3,893,900
----------
21,517,469
----------
OIL & OIL SERVICES 5.28%
Ashland, Inc. ........................... 122,300 5,916,262
Equitable Resources, Inc. ............... 44,300 1,290,238
Occidental Petroleum Corp. .............. 104,100 1,756,688
PennzEnergy Co. ......................... 124,600 2,032,538
Pennzoil-Quaker State Co. ............... 124,600 1,845,638
Santa Fe International Corp. ............ 173,100 2,531,587
Sunoco, Inc. ............................ 158,100 5,701,480
Tidewater, Inc. ......................... 113,000 2,620,188
Transocean Offshore, Inc. ............... 87,200 2,338,050
USX-Marathon Group. ..................... 166,900 5,027,863
YPF Sociedad Anonima, ADR. .............. 255,900 7,149,206
----------
38,209,738
----------
PAPER & FOREST PRODUCTS 1.47%
Bowater, Inc. ........................... 187,800 7,781,963
Mead Corp. .............................. 96,800 2,837,450
----------
10,619,413
----------
PHARMACEUTICALS 1.96%
McKesson Corp. .......................... 94,700 7,487,218
Warner Lambert Co. ...................... 88,600 6,661,613
----------
14,148,831
----------
REAL ESTATE INVESTMENT TRUSTS 0.98%
Camden Property Trust ................... 46,000 1,196,000
Crescent Real Estate Equities Co. ....... 108,200 2,488,600
Felcor Lodging Trust .................... 64,700 1,492,144
New Plan Excel Realty Trust, Inc. ....... 38,040 844,013
Reckson Associates Realty Corp. ......... 47,600 1,056,124
----------
7,076,881
----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
------------------ -------------
<S> <C> <C>
RESTAURANTS 0.49%
Bob Evans Farms, Inc. ........................... 49,500 $1,290,094
Wendy's International, Inc. ..................... 104,500 2,279,406
----------
3,569,500
----------
RETAIL TRADE & SERVICES 3.27%
Home Depot, Inc. ................................ 163,800 10,022,513
Pier 1 Imports, Inc. ............................ 113,100 1,095,656
Ross Stores, Inc. ............................... 74,600 2,937,375
Saks, Inc. ...................................... 71,100 2,244,094
Supervalu, Inc. ................................. 263,300 7,372,400
----------
23,672,038
----------
TECHNOLOGY 8.40%
Applied Materials, Inc. ......................... 77,900(a) 3,325,356
Cisco Systems, Inc. ............................. 64,400 5,977,125
Compaq Computer Corp. ........................... 187,626 7,868,565
Dell Computer Corp. ............................. 225,700(a) 16,518,419
EMC Corp. ....................................... 100,500 8,542,500
Intel Corp. ..................................... 59,800 7,090,038
Microsoft Corp. ................................. 82,400(a) 11,427,850
----------
60,749,853
----------
TELECOMMUNICATIONS 7.98%
AT&T Corp. ...................................... 129,300 9,729,825
BCE, Inc. ....................................... 64,700 2,454,556
L.M. Ericsson Telephone Co. ..................... 158,100 3,784,519
Lucent Technologies Co. ......................... 87,400 9,614,000
MCI Worldcom, Inc. .............................. 121,800 8,739,150
Telebras Holders, S.A., ADR ..................... 106,000 7,704,874
Telefonica De Argentina S.A., ADR ............... 148,200 4,140,338
Telefonica de Espana S.A., ADR. ................. 47,436 6,421,649
Telefonos de Mexico S.A., ADR. .................. 105,600 5,141,400
----------
57,730,311
----------
TEXTILES 1.01%
Interface, Inc. ................................. 120,200 1,115,612
Shaw Industries, Inc. ........................... 254,000 6,159,500
----------
7,275,112
----------
TOBACCO 0.16%
Universal Corp. ................................. 32,300 1,134,538
----------
TRANSPORTATION 4.57%
Airborne Freight Corp. .......................... 122,900 4,432,081
Burlington Northern Santa Fe Corp. .............. 258,300 8,717,625
Canadian Pacific Ltd. ........................... 185,600 3,503,200
CNF Transportation, Inc. ........................ 195,400 7,339,713
FDX Corp. ....................................... 62,640 5,574,960
USFreightways Corp. ............................. 118,900 3,462,962
----------
33,030,541
----------
UTILITIES -- ELECTRIC & NATURAL GAS 9.93%
CMS Energy Corp. ................................ 91,100 4,412,656
Central & South West Corp. ...................... 120,700 3,311,706
Consolidated Edison Co. of New York, Inc. ....... 60,100 3,177,788
DTE Energy Co. .................................. 112,000 4,802,000
Edison International ............................ 278,500 7,763,187
Energy East Corp. ............................... 174,900 9,881,850
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
---------- --------------
<S> <C> <C>
UTILITIES -- ELECTRIC & NATURAL GAS -- (Continued)
GPU, Inc. ..................................... 187,700 $ 8,293,993
PECO Energy Co. ............................... 233,800 9,731,924
PG&E Corp. .................................... 208,300 6,561,450
Pinnacle West Capital Corp. ................... 32,900 1,394,138
Public Service Co. of New Mexico .............. 73,500 1,502,156
UniCom Corp. .................................. 226,300 8,726,694
UtiliCorp United, Inc. ........................ 63,000 2,311,313
-----------
71,870,855
-----------
TOTAL COMMON STOCKS (Cost $559,506,036) ................ 644,917,904
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------------
<S> <C> <C>
UNITED STATES GOVERNMENT OBLIGATIONS 6.73%
United States Treasury Notes, 10.75%, 5/15/2003 ....... $4,000,000 4,937,500
United States Treasury Notes, 6.875%, 5/15/2006 ....... 7,500,000 8,479,688
United States Treasury Notes, 6.50%, 10/15/2006 ....... 8,100,000|pS(b) 8,993,535
United States Treasury Notes, 6.62%, 5/15/2007 ........ 12,600,000 14,175,000
United States Treasury Notes, 6.125%, 8/15/2007 ....... 5,200,000 5,684,250
United States Treasury Bonds, 7.50%, 11/15/2024 ....... 600,000 778,125
United States Treasury Bonds, 6.50%, 11/15/2026 ....... 600,000 698,438
United States Treasury Bonds, 6.375%, 8/15/2027 ....... 4,300,000 4,946,346
----------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS
(Cost $46,750,375) .................................................... 48,692,882
----------
SHORT-TERM INVESTMENTS 3.73%
Goldman Sachs Corp., 5.20%, 1/4/99 .................... 17,000,000 16,992,632
Xerox Credit Corp., 5.30%, 1/7/99 ..................... 10,000,000 9,991,164
----------
TOTAL SHORT-TERM INVESTMENTS (Cost $26,983,796) ......................... 26,983,796
----------
TOTAL INVESTMENTS (Cost $633,240,207) - 99.60%........................... 720,594,582
Other assets less liabilities - 0.40% ................................... 2,926,548
-----------
NET ASSETS - 100.00% .................................................... $723,521,130
============
NUMBER OF
SHARES
----------
SECURITIES SOLD SHORT (NOTE 1D)
W.E.B.S. INDEX FUND, INC. - MEXICO SERIES
(PROCEEDS $985,054) .................................. 71,600 $ 733,900
============
</TABLE>
- ----------
(a) Non-income producing security.
(b) Used as collateral on short sales
For Federal income tax purposes, the tax basis of investments owned at
December 31, 1998 was $633,486,171 and net unrealized appreciation on
investments consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation ......... $136,382,032
Gross unrealized depreciation ......... (49,273,621)
------------
Net unrealized appreciation ........... $87,108,411
============
</TABLE>
See notes to financial statements
9
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost $633,240,207)........................ $ 720,594,582
Cash ....................................................................... 552,035
Deposit with broker for securities sold short .............................. 985,054
Dividends and interest receivable .......................................... 2,794,580
Prepaid expenses ........................................................... 42,911
-------------
Total Assets ............................................................ 724,969,162
-------------
LIABILITIES
Accrued advisory fees (Note 3) ............................................. 506,590
Accrued administration fees (Note 3) ....................................... 2,538
Other accrued expenses ..................................................... 205,004
Securities sold short, at value (proceeds $985,054)......................... 733,900
-------------
Total Liabilities ....................................................... 1,448,032
-------------
NET ASSETS .................................................................... $ 723,521,130
=============
NET ASSET VALUE, PER SHARE
($723,521,130/60,135,617 shares outstanding--Note 4)........................ $ 12.03
=============
NET ASSETS CONSIST OF
Capital paid-in ............................................................ $ 618,446,376
Undistributed net investment income ........................................ 2,405,423
Undistributed net realized gains on investments, securities sold short and
futures ................................................................... 15,063,802
Net unrealized appreciation on investments ................................. 87,354,375
Net unrealized appreciation on securities sold short ....................... 251,154
-------------
$ 723,521,130
=============
</TABLE>
See notes to financial statements
10
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends ................................................................. $ 13,983,589
Interest .................................................................. 7,041,994
-------------
Total Income ........................................................... 21,025,583
-------------
Expenses
Investment advisory fees (Note 3) ......................................... 5,900,275
Administration fees (Note 3) .............................................. 902,395
Transfer agent fees ....................................................... 344,129
Printing and postage expenses ............................................. 232,323
Professional fees (Note 3) ................................................ 82,894
Custodian fees ............................................................ 81,798
Directors' fees and expenses (Note 3) ..................................... 94,757
Miscellaneous ............................................................. 170,357
-------------
Total Expenses ......................................................... 7,808,928
-------------
Net Investment Income ............................................... 13,216,655
-------------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
Net realized gains on
Investments ............................................................... 54,621,891
Securities sold short ..................................................... 1,426,248
Futures ................................................................... 2,010,264
-------------
Net realized gains .................................................. 58,058,403
Decrease in unrealized appreciation on investments and securities sold short . (31,996,047)
-------------
Net realized and unrealized gains on investments, securities sold short and
futures .................................................................. 26,062,356
-------------
Net increase in net assets resulting from operations ...................... $ 39,279,011
=============
</TABLE>
See notes to financial statements
11
<PAGE>
THE ZWEIG FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended
December 31
-----------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ............................................... $ 13,216,655 $ 18,023,151
Net realized gains on investments, securities sold short and
futures ........................................................... 58,058,403 43,769,049
Increase (decrease) in unrealized appreciation on
investments and securities sold short ............................. (31,996,047) 61,835,402
------------ ------------
Net increase in net assets resulting from operations ............. 39,279,011 123,627,602
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income ............................................... (20,309,033) (16,029,830)
Net realized gains on investments, securities sold short and
futures ........................................................... (48,234,897) (46,130,976)
------------ ------------
Total dividends and distributions to shareholders ................ (68,543,930) (62,160,806)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net asset value of shares issued to shareholders in
reinvestment of dividends from net investment income and
distributions from net realized gains ............................. 15,249,865 15,818,485
Net proceeds from the sale of shares during rights offering ......... 71,170,393 --
------------ ------------
Net increase in net assets derived from capital share
transactions ...................................................... 86,420,258 15,818,485
------------ ------------
Net increase in net assets .......................................... 57,155,339 77,285,281
NET ASSETS
Beginning of year .................................................... 666,365,791 589,080,510
------------ ------------
End of year (including undistributed net investment income of
$2,405,423 and 9,497,801, respectively).............................. $723,521,130 $666,365,791
============ ============
</TABLE>
See notes to financial statements.
12
<PAGE>
THE ZWEIG FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The Zweig Fund, Inc. (the "Fund") is a closed-end, diversified management
investment company registered under the Investment Company Act of 1940 (the
"Act"). The Fund was incorporated under the laws of the State of Maryland on
June 18, 1986. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles. The preparation of financial statements in accordance with generally
accepted accounting principals 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). 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 December 31, 1998) and other assets, if any, are
valued at fair value as determined under procedures approved by the Board of
Directors of the Fund.
B. SECURITIES 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
13
<PAGE>
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 TAXES
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 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.
NOTE 2 -- PORTFOLIO TRANSACTIONS
During the year ended December 31, 1998, the Fund entered into purchase and
sale transactions, excluding short-term investments and futures transactions, as
follows:
<TABLE>
<CAPTION>
UNITED STATES
GOVERNMENT
COMMON AND AGENCY
STOCKS OBLIGATIONS
--------------- --------------
<S> <C> <C>
Purchases .............................. $429,479,329 $44,889,531
============ ===========
Sales .................................. $371,700,357 $49,030,222
============ ===========
Short sales ............................ $ 985,054
============
Purchases to cover short sales ......... $ 14,341,048
============
</TABLE>
NOTE 3 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A) INVESTMENT ADVISORY FEE: The Investment Advisory Agreement (the
"Agreement") between the Investment Adviser, Zweig Advisors Inc., and the Fund
provides that, subject to the direction of the Board of Directors of the Fund
and the applicable provisions of the Act, the Investment Adviser
14
<PAGE>
is responsible for the actual management of the Fund's portfolio. The
responsibility for making decisions to buy, sell or hold a particular investment
rests with the Investment Adviser, subject to review by the Board of Directors
and the applicable provisions of the Act. For the services provided by the
Investment Adviser under the Agreement, the Fund pays the Investment Adviser a
monthly fee equal, on an annual basis, to 0.85% of the Fund's average daily net
assets. During the year ended December 31, 1998, the Fund accrued advisory fees
of $5,900,275.
B) ADMINISTRATIVE FEE: Zweig/Glaser Advisers serves as the Fund's
Administrator pursuant to an Administration Agreement with the Fund. Under such
Agreement, the Administrator generally assists in all aspects of the Fund's
operations, other than providing 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 year ended December 31, 1998, the Fund
accrued administration fees of $902,395.
C) DIRECTORS' FEE: The Fund pays each Director who is not an interested
person of the Fund or the Investment Adviser a fee of $10,000 per year plus
$1,500 per Directors' or committee meeting attended, together with out-of-pocket
costs relating to attendance at such meetings. The Directors of the Fund who are
interested persons of the Fund or the Investment Adviser receive no remuneration
from the Fund.
D) LEGAL FEE: The Fund paid legal fees of $26,315 during the year ended
December 31, 1998, for the services of Rosenman & Colin LLP, of which Robert E.
Smith, a Director of the Fund, is counsel. In addition, the Fund paid legal fees
of $52,915 for the services of Rosenman & Colin LLP in connection with its
rights offering.
E) BROKERAGE COMMISSION: During the year ended December 31, 1998, the Fund
paid Zweig Securities Corp. brokerage commissions of $132,397 in connection with
portfolio transactions effected through them. In addition, Zweig Securities
Corp. charged $27,401 in commissions for transactions effected on behalf of the
participants in the Fund's Automatic Reinvestment and Cash Purchase Plan.
Pursuant to an Acquisition Agreement dated December 15, 1998, the
Investment Adviser and the Administrator have agreed to be acquired by Phoenix
Investment Partners, Ltd. ("Phoenix"), a large financial services organization
listed on the New York Stock Exchange (the "Acquisition"). Since completion of
the Acquisition would provide for the automatic termination of the current
Investment Advisory Agreement, a new investment advisory agreement (the
"Advisory Agreement") has been proposed between the Fund and Zweig Advisors Inc.
The Advisory Agreement has been approved by the Board of Directors (the "Board")
and has been submitted to shareholders for approval. Except for the effective
dates, the Advisory Agreement is on the same terms as the current Investment
Advisory Agreement. In addition, in order for the Fund to continue to avail
itself of the services of Dr. Martin E. Zweig and his associates, a new
sub-advisory servicing agreement with Zweig Consulting LLC has been approved by
the Board and submitted to the shareholders for approval. It is anticipated that
the Acquisition will be completed in the first quarter of 1999.
Certain directors and officers of the Fund are also directors and/or
officers of the Investment Adviser and the Administrator.
15
<PAGE>
NOTE 4 -- CAPITAL STOCK AND REINVESTMENT PLAN
At December 31, 1998, the Fund had one class of common stock, par value
$0.10 per share, of which 100,000,000 shares are authorized and 60,135,617
shares are outstanding.
Registered shareholders may elect to receive all distributions in cash paid
by check mailed directly to the shareholder by State Street Bank & Trust Co. 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 State Street, as the Plan agent in whole or
fractional shares of the Fund, as the case may be. For the years ended December
31, 1998 and December 31, 1997, 1,262,934 and 1,322,870 shares, respectively,
were issued pursuant to the Plan.
In a rights offering ending May 8, 1998, shareholders exercised rights to
purchase 6,107,124 shares of common stock at an offering price of $12.15 per
share for proceeds, net of expenses, of $71,170,393.
On December 14, 1998, the Fund declared a distribution of $0.29 per share
to shareholders of record on December 31, 1998. This distribution has an
ex-dividend date of January 6, 1999 and is payable on January 11, 1999.
NOTE 5 -- FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each year:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year ................ $ 12.63 $ 11.45 $ 11.06 $ 10.33 $ 11.68
------- ------- -------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ............................. 0.23 0.35 0.34 0.39 0.24
Net realized and unrealized gains(losses) ......... 0.55 2.03 1.15 1.41 ( 0.45)
------- ------- -------- ---------- --------
Total from investment operations .................. 0.78 2.38 1.49 1.80 ( 0.21)
------- ------- -------- ---------- --------
Dividends and Distributions:
Dividends from net investment income .............. ( 0.35) ( 0.31) ( 0.30) ( 0.51) ( 0.03)
Distributions from net realized gains ............. ( 0.87) ( 0.89) ( 0.80) ( 0.56 |pS) ( 1.11)
-------- ------- -------- ----------- --------
Total Dividends and Distributions ................. ( 1.22) ( 1.20) ( 1.10) ( 1.07) ( 1.14)
-------- ------- -------- ----------- --------
Effect on net asset value as a result of rights
offering* ....................................... ( 0.16) -- -- -- --
-------- ------- -------- ----------- --------
Net asset value, end of year ................... $ 12.03 $ 12.63 $ 11.45 $ 11.06 $ 10.33
======== ======= ======== =========== ========
Market value, end of year** .................... $ 10.8125 $ 13.25 $ 10.875 $ 11.25 $ 10.375
========= ======= ======== =========== ========
Total investment return ........................... ( 8.68) % 34.76% 6.92 % 19.83|pS% (16.95) %
========= ======= ======== =========== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............ $723,521 $666,366 $589,081 $ 547,886 $492,004
Ratio of expenses to average net assets ........... 1.12 % 1.16% 1.18 % 1.22|pS% 1.25 %
Ratio of net investment income to average net
assets .......................................... 1.90 % 2.88% 3.12 % 3.62|pS% 2.24 %
Portfolio turnover rate ........................... 68.7 % 93.0 % 137.2 % 160.2 % 257.0 %
</TABLE>
- ----------
* Shares were sold at a 5% discount from the average market price.
** Closing Price -- New York Stock Exchange.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Zweig Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Zweig Fund, Inc. (the "Fund")
at December 31, 1998, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
New York, New York
February 1, 1999
17
<PAGE>
THE ZWEIG FUND, INC.
YEAR END RESULTS
<TABLE>
<CAPTION>
Total Return
on Net Asset Net Asset NYSE Premium
Value Value Share Price (Discount)
-------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Year ended 12/31/1998 ................ 6.6% $ 12.03 $ 10.8125 (10.1%)
Year ended 12/31/1997 ................ 22.0% 12.63 13.2500 4.9%
Year ended 12/31/1996 ................ 14.5% 11.45 10.8750 ( 5.0%)
Year ended 12/31/1995 ................ 18.3% 11.06 11.2500 1.7%
Year ended 12/31/1994 ................ (2.7%) 10.33 10.3750 0.4%
Year ended 12/31/1993 ................ 13.3% 11.68 13.7500 17.7%
Year ended 12/31/1992 ................ 0.4% 11.36 13.0000 14.4%
Year ended 12/31/1991 ................ 30.1% 12.40 13.7500 10.9%
Year ended 12/31/1990 ................ 1.9% 10.48 11.0000 5.0%
Year ended 12/31/1989 ................ 22.3% 11.43 12.3750 8.3%
Year ended 12/31/1988 ................ 17.9% 10.35 10.3750 0.2%
Year ended 12/31/1987 ................ 14.7% 9.73 9.0000 ( 7.5%)
Inception 10/2/86 - 12/31/86 ......... (0.4%) 9.31 9.1250 ( 2.0%)
</TABLE>
- --------------------------------------------------------------------------------
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 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.
YEAR 2000 PREPAREDNESS
Because computer programs were designed using only two fields to indicate the
year, at midnight December 31, 1999, computers will be unable to recognize that
January 1 is the year 2000. The major systems that would impact the Fund with
respect to the year 2000 are those of the transfer agent and custodian. The Fund
has been advised in writing by both the transfer agent and the custodian that
they are working to fix, and expect to have fixed in time, all of the issues
relating to the year 2000. Management of the Fund will continue to monitor the
progress of the transfer agent and the custodian in solving the year 2000
problem. However, no assurance can be given that their systems will be fixed on
time, or what the magnitude of the problems would be if such systems are not
fixed.
18
<PAGE>
OFFICERS AND DIRECTORS
Martin E. Zweig, Ph.D.
Chairman of the Board and President
Jeffrey Lazar
Director, Vice President and Treasurer
Stuart B. Panish
Vice President & Secretary
Christopher M. Capano
Assistant Vice President
Charles H. Brunie
Director
Annemarie Gilly
Director
Eugene J. Glaser
Director
Elliot S. Jaffe
Director
Alden C. Olson, Ph.D.
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
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, MA 02110
LEGAL COUNSEL
Rosenman & Colin LLP
575 Madison Avenue
New York, New York10022
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
- --------------------------------------------------------------------------------
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.
ZF984 4902-ANN 12/98
[ZWEIG FUND LOGO APPEARS HERE]
ANNUAL REPORT
-----------------------------------------------
December 31, 1998
