0001193125-12-108587.txt : 20120312 0001193125-12-108587.hdr.sgml : 20120310 20120312115322 ACCESSION NUMBER: 0001193125-12-108587 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20111231 FILED AS OF DATE: 20120312 DATE AS OF CHANGE: 20120312 EFFECTIVENESS DATE: 20120312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZWEIG FUND INC /MD/ CENTRAL INDEX KEY: 0000812090 IRS NUMBER: 133353326 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04739 FILM NUMBER: 12682963 BUSINESS ADDRESS: STREET 1: 100 MUNSON STREET CITY: GREENFIELD STATE: MA ZIP: 01301 BUSINESS PHONE: 800-272-2700 MAIL ADDRESS: STREET 1: 100 MUNSON STREET CITY: GREENFIELD STATE: MA ZIP: 01301 N-CSR 1 d279098dncsr.txt THE ZWEIG FUND, INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES INVESTMENT COMPANY ACT FILE NUMBER 811-04739 THE ZWEIG FUND, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) 900 THIRD AVE, 31ST FLOOR NEW YORK, NY 10022-4728 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) KEVIN J. CARR, ESQ. VICE PRESIDENT, CHIEF LEGAL OFFICER, COUNSEL AND SECRETARY FOR REGISTRANT 100 PEARL STREET HARTFORD, CT 06103-4506 (NAME AND ADDRESS OF AGENT FOR SERVICE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 800-272-2700 DATE OF FISCAL YEAR END: DECEMBER 31 DATE OF REPORTING PERIOD: DECEMBER 31, 2011 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. (S) 3507. ================================================================================ ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. THE ZWEIG FUND, INC. ================================================================================ Annual Report December 31, 2011 [LOGO] Zweig Advisers A VIRTUS INVESTMENT PARTNER OFFICERS AND DIRECTORS GEORGE R. AYLWARD, President, Chairman and Chief Executive Officer CARLTON NEEL, Executive Vice President DAVID DICKERSON, Senior Vice President KEVIN J. CARR, Chief Legal Officer and Secretary W. PATRICK BRADLEY, Treasurer and Chief Financial Officer JACQUELINE PORTER, Vice President and Assistant Treasurer NANCY ENGBERG, Chief Compliance Officer and Vice President* CHARLES H. BRUNIE, Director WENDY LUSCOMBE, Director ALDEN C. OLSON, PH.D., Director JAMES B. ROGERS, JR., Director R. KEITH WALTON, Director * As of January 1, 2012 INVESTMENT ADVISER ZWEIG ADVISERS LLC 900 Third Avenue New York, NY 10022-4793 FUND ADMINISTRATOR VP DISTRIBUTORS, INC. 100 Pearl Street Hartford, CT 06103-4506 CUSTODIAN THE BANK OF NEW YORK MELLON One Wall Street New York, NY 10005-2588 TRANSFER AGENT COMPUTERSHARE TRUST COMPANY, NA P.O. Box 43078 Providence, RI 02940-3078 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PRICEWATERHOUSECOOPERS LLP 2001 Market Street Philadelphia, PA 19103-7042 FUND COUNSEL DECHERT LLP 200 Clarendon St. 27/th/ Floor Boston, MA 02116-5021 -------------------------------------------------------------------------------- THIS REPORT IS TRANSMITTED TO THE SHAREHOLDERS OF THE ZWEIG FUND, INC. FOR THEIR INFORMATION. THIS IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE PURCHASE OF SHARES OF THE FUND OR ANY SECURITIES MENTIONED IN THIS REPORT. [LOGO] VIRTUS INVESTMENT PARTNERS Q4-11 FUND DISTRIBUTIONS AND MANAGED DISTRIBUTION PLAN The Fund has a Managed Distribution Plan to pay 10% of the Fund's net asset value on an annualized basis. Distributions may represent earnings from net investment income, realized capital gains, or, if necessary, return of capital. The board believes that regular quarterly, fixed cash payouts will enhance shareholder value and serve the long-term interests of shareholders. You should not draw any conclusions about the Fund's investment performance from the amount of the distributions or from the terms of the Fund's Managed Distribution Plan. The Fund estimates that it has distributed more than its income and net realized capital gains in the fiscal year to date; therefore, a portion of your distributions may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income". The amounts and sources of distributions reported in Section 19(a) notices of the 1940 Act are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send shareholders a Form 1099-DIV for the calendar year that will tell you how to report distributions for federal income tax purposes. The Board may amend, suspend or terminate the Managed Distribution Plan at any time, without prior notice to shareholders if it deems such action to be in the best interest of the Fund and its shareholders. Information on the Zweig funds is available at www.Virtus.com. Section 19(a) notices are posted on the website at:. http://www.virtus.com/products/closed/details.aspx?type=individual&fundid=ZF February 1, 2012 DEAR FELLOW ZWEIG FUND SHAREHOLDER: I am pleased to share with you the manager's report and commentary for the Zweig Fund, Inc. for the fiscal year ended December 31, 2011. The Zweig Fund's net asset value increased 10.40% for the quarter ending December 31, 2011, including $0.087 in re-invested distributions. During the same period, the S&P 500 Index gained 11.82%, including re-invested dividends. The Fund's average equity exposure for the quarter was approximately 84% in stock and 5% in bonds. For the fiscal year ended December 31, 2011, the Fund's net asset value declined 1.18%, including $0.365 in re-invested distributions. For the same period, the S&P 500 Index rose 2.11%, including re-invested dividends. The Fund's average exposure for the year was 79% in equities, and 2% in bonds. Sincerely, /s/ George R. Aylward George R. Aylward President, Chairman and Chief Executive Officer The Zweig Fund, Inc. MARKET OVERVIEW AND OUTLOOK After a tumultuous year that was among the most volatile on record, the domestic stock markets survived a sluggish U.S. economy, a spreading euro debt crisis, and a gridlocked Washington to end 2011 virtually where they started. Propelled by a fourth-quarter boost of 11.9%/(1)/, the blue-chip Dow Jones Industrial Average closed the year at 12,217.56, an increase of 5.6%/(1)/, the third consecutive positive year for the Dow. The S&P 500, a broader gauge of market activity, climbed 11.1%/(1)/ in the final quarter and ended at 1,251.60, almost dead even with last year's 1,251.64 close. The technical 0.003%/(1)/ difference was its smallest annual move since 1970. The technology heavy Nasdaq Composite gained 7.8%/(1)/ in the fourth quarter but closed at 2,605.16, down 1.80%/(1)/ for the year. The lack-luster domestic stock markets still outperformed the major international markets. The Dow Jones Global Index, excluding the U.S., tumbled 16.3%/(1)/ in 2011 while the STOXX Europe 600 Index fell 11.34%/(1)/. U.K.'s FTSE 100 Index dipped 5.6%/(1)/; Germany's DAX Index lost 15%/(1)/, its first annual decline since 2008. France's CAC 40 dropped 17%/(1)/ and Italy's FTSE MIB Index, down 26%/(1)/, was the biggest loser. Back home, the Federal Reserve ("Fed") reduced its forecasts for U.S. economic growth. It predicted that the economy would grow 2.7% in 2012, well below its June projections of 3.3% to 3.7%. For 2013, the Fed now expects expansion of 3.2% down from its previous estimates of 3.5% to 4.2%. The Fed projected a gain of up to 4% in 2014. /(1)/ Return excludes reinvested dividends. For information regarding the indexes cited and key investment terms used in this report see page 6. 2 The Central Bank also predicts that the U.S. unemployment rate will still be at least 8.5% at the end of this year, at least 7.8% at the end of 2013 and at least 6.7% to 7.6% by the fourth quarter of 2014. There were several bright spots on the economic horizon. For one thing, the Labor Department reported that the private sector added 200,000 jobs in December, marking the sixth consecutive month of gains topping 100,000. As a result, the unemployment rate dipped to 8.5% from November's 8.7%, to its lowest level in nearly three years. Another positive note was the report by the Institute of Supply Management ("ISM") that U.S. manufacturing expanded in December at its fastest pace in six months. ISM's closely watched gauge of factory activity climbed to 53.9 in December, up from 52.7 in November and its best reading since last June. Scores over 50 indicate expansion. The trade group also reported that its index of non-manufacturing or service industries rose to 52.6 in December from 52 in November, which was the lowest reading in nearly two years. Housing, a vital factor in the economy, is showing signs of recovery. The Commerce Department reported that housing starts in November reached 685,000 units, up 9.3% from October and the highest level since April 2010. Building permits increased 5.7% to an annual rate of 681,000. The agency also reported that sales of new single-family homes rose 1.8% in November to a seasonally-adjusted 315,000 units, the highest total in seven months. The Conference Board reported that its consumer confidence index spurted 10 points in December to just above the level of a year ago. Consumer spending, however, which accounts for about 70% of U.S. economic activity, inched up only 0.1% in November compared with October, according to the Commerce Department. Spending was restrained because disposable personal income was flat in November after increasing 0.3% in October. Indications that inflation is slowing came from the Labor Department report that its consumer price index was unchanged in November from October. Deleting volatile food and energy prices, the index was up 2.7% in November. For the year to date, the rise was 2.2%, slightly above the Fed's preferred range of 2%. The agency also reported that its producer price index grew at a seasonally-adjusted 0.3% in November. Removing energy and food prices, the index was up by just 0.1%. With U.S. imports declining more than exports, the trade deficit narrowed to $43.5 billion in October against $44.2 billion in September, according to the Commerce Department. Exports of goods totaled $127 billion in October against $129.3 billion in September. Service exports of $51.4 billion were unchanged from the prior month. Imports of goods came to $186.6 billion for October against $188.8 billion in September. Imports for services inched up to $36.1 billion from $36.0 billion. U.S. import prices, which had fallen 0.5% in October, grew 0.7% in November, the highest increase since April 2011. Compared with most major market currencies, the dollar ended 2011 within roughly 3% of where it began the year. The ICE U.S. Dollar Index, which measures the greenback against a basket of other currencies, increased 1.5% in the year. Hitting a new low in the final days of the year, the euro closed at $1.2960. The chief exception to the strong dollar was the yen. Despite a year of deep trouble in Japan, the yen ended more than 5% higher against the dollar. Climbing from 81.25 yen at the start of the year, the dollar fell to a record low near 75.8 yen in April and completed the year at 76.92 yen. Last year was a disappointment for deal makers, with mergers and acquisitions declining For information regarding the indexes cited and key investment terms used in this report see page 6. 3 after a strong start, according to Thomson Reuters. In the first six months of 2011, announced global deals came to $1.3 trillion, the highest level since the financial crisis. However, deals slumped 14% in the second half, bringing the 2011 dollar volume to $2.6 trillion, slightly below the 2010 figure of $2.66 trillion. The number of initial public offerings ("IPOs") and dollars raised was the lowest since 2009, according to Dealogic. Globally, there were 240 deals, raising $25.3 billion, in the fourth quarter, the lowest deal volume since the third quarter of 2009 and the lowest dollar volume since the second quarter of 2009. For all of 2011, there were 1,243 IPOs, raising $160 billion, again the lowest figures since 2009. For the third consecutive year, the world's leading exchange for IPOs was Hong Kong, with $31 billion in deals. The volume of deals on the Chinese mainland slightly topped the combined total of Nasdaq and the New York Stock Exchange. Based on current earnings estimates, Bloomberg News reported that stocks on the S&P 500 were trading at a price/earnings ratio of 13.24 on December 30, 2011. This compares with 11.94 on September 30 and 14.88 on December 30 last year. The P/Es for trailing twelve - month earnings were reported by S&P at 12.96 on December 30, 13.01 on September 30 and 15.01 on December 30, 2010. As we see it, the P/E's are neither terribly high nor terribly low. Given present market conditions, they appear to be in the normal range as far as valuations are concerned. The current consensus among Wall Street research analysts is that S&P fourth-quarter earnings will climb 8.3% in 2011 to $24.40, according to Thomson Reuters. In October the analysts were expecting 15% gains in the quarter. For all of 2012, the S&P earnings are projected to increase 10% to $107.20. Looking to the future, both analysts and investors were more bullish at the year's end, with analysts the most optimistic. Surveyed by Investors Intelligence, analysts stood at 50% bulls and 29% bears on December 30, a reversal of their position on September 30, which saw 37% bulls and 41% bears. At the end of 2011, analysts came to 56% bulls and 20% bears. Reported by the American Institute of Investors, their members totaled 41% bulls and 31% bears on December 30, 32% bulls and 47% bears on September 30, and 52% bulls and 20% bears at the end of 2010. Since the market had risen since early October, the increased optimism is no surprise. They may be right. From August to October, our sentiment indicators registered a lot of pessimism. While some of our current indicators still include some pretty bad numbers, our sentiment model reading overall is now neutral. Among our other models, the monetary reading is bullish. That's because the Fed has driven interest rates to zero and is buying securities. However, we wonder how bullish it can really be when rates are at zero. As far as the tape is concerned, we consider the current action quite positive. It's difficult to know the tape's actual performance because of the distortions caused by the computer traders who account for more than half of the volume. There are far more unusual up and down days than we have seen in the past. Taking a long view, the tape is acting reasonably well. Our stance on the market at this writing is somewhat bullish and we are about 82% to 83% long. For our Fund any investment figure over 80% is bullish. Sincerely, /s/Martin E. Zweig, Ph.D. Martin E. Zweig, Ph.D. President Zweig Consulting LLC The preceding information is the opinion of portfolio management. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized. For information regarding the indexes cited and key investment terms used in this report see page 6. 4 PORTFOLIO COMPOSITION The Fund's leading equity sectors on December 31, 2011 included Energy, Information Technology, Materials, Industrials, and Consumer Discretionary. Although the percentages varied, all of the above were in our previous listing. During the quarter we increased our weighting in Health Care, Information Technology, and Energy and decreased our weighting in Consumer Discretionary and Consumer Staples. The Fund's leading individual equity positions on December 31, 2011 included Amazon.Com, Apple, Biogen Idec, Gilead and Visa, all of which were in our previous listing. New to this category are the following, where there were no changes to shares held: CF Industries, QUALCOMM, Union Pacific and UntiedHealth. Also new is Williams, where we trimmed our holdings. No longer among our top positions are the following, where we trimmed our holdings: Abbott Labs, Alaska Air, Autozone, Comcast and Intel. Sincerely, /s/ Carlton Neel Carlton Neel Executive Vice President Zweig Advisers, LLC ASSET ALLOCATION AS OF DECEMBER 31, 2011 The following graph illustrates asset allocations within certain sectors and as a percentage of total investments as of December 31, 2011. [CHART] Energy 15% Information Technology 12% Materials 12% Consumer Discretionary 11% Industrials 11% Health Care 8% Financials 5% Other (includes short-term investments) 26% 5 KEY INVESTMENT TERMS AMERICAN DEPOSITARY RECEIPT (ADR): Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares. AMERICAN INSTITUTION OF INVESTORS: A nonprofit organization with about 150,000 members whose purpose is to educate individual investors regarding stock market portfolios, financial planning, and retirement accounts. BLOOMBERG NEWS: A major global provider of 24 hour financial news and information including real-time and historic price data, financial data, trading news and analyst coverage, as well as general news; and sports. CAC 40: The French stock market index that tracks the 40 Largest French stocks based on market capitalization on the Paris Bourse (stock exchange). COMMERCE DEPARTMENT: The cabinet department in the U.S. Government that deals with business, trade and commerce. Its objective is to foment higher standards of living for Americans through the creations of jobs. It aims to achieve this by promoting an infrastructure of monetary and economic growth, competitive technology and favorable international trade. CONFERENCE BOARD REPORT: Widely followed economic indicators, particularly the Consumer Confidence Index ("CCI"). The Conference Board also connects some 2,000 companies via forums and peer-to-peer meetings to discuss what matters to companies today: issues such as top-line growth in a shifting economic environment and corporate governance standards. CONSUMER PRICE INDEX: Measures the pace of inflation by measuring the change in consumer prices of goods and services, including housing, electricity, food, and transportation, as determined by a monthly survey of the U.S. Bureau of Labor Statistics. Also called the cost-of-living index. DAX INDEX: A total return index of 30 selected German blue chip companies traded on the Frankfurt Stock exchange. It is a free float weighted index. DEALOGIC: Provides technology, data analytics, and consulting services platform to Investment Bank and Capital Markets professionals. DOW JONES GLOBAL EX. U.S. INDEX/SM/: A market capitalization-weighted index which covers approximately 95% of the market capitalization of the represented countries of Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland, Italy, Japan, Latvia, Lithuania, Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand and the United Kingdom. DOW JONES INDUSTRIAL AVERAGE/SM/: A price-weighted average of 30 blue chip stocks. The index is calculated on total return basis with dividends reinvested. FEDERAL RESERVE (FED): The central bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven- member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system. FTSE 100 INDEX: A capitalization weighted index of the 100 most capitalized companies traded on the London Stock Exchange. 6 FTSE MIB INDEX: A benchmark stock market index for the Borsa Italiana, the Italian national stock exchange. The index consists of the 40 most traded stock classes on the exchange. ICE U.S. DOLLAR INDEX (USDX): A leading benchmark for the international value of the U.S. dollar and the world's most widely-recognized traded currency index. INFLATION: Rise in the prices of goods and services resulting from increased spending relative to the supply of goods on the market. INITIAL PUBLIC OFFERING: A company's first sale of stock to the public. INSTITUTE FOR SUPPLY MANAGEMENT (ISM) REPORT ON BUSINESS/(R)/: An economic forecast, released monthly, that measures U.S. manufacturing conditions and is arrived at by surveying 300 purchasing professionals in the manufacturing sector representing 20 industries in all 50 states. INVESTORS INTELLIGENCE SURVEY: A weekly survey published by Chartcraft, an investment services company, of the current sentiment of approximately 150 market newsletter writers. Participants are classified into three categories: bullish, bearish or waiting for a correction. LABOR DEPARTMENT: A U.S. government cabinet body responsible for standards in occupational safety, wages and number of hours worked, unemployment insurance benefits, re-employment services and a portion of the country's economic statistics. NASDAQ COMPOSITE/(R)/ INDEX: A market capitalization-weighted index of all issues listed in the NASDAQ (National Association Of Securities Dealers Automated Quotation System) Stock Market, except for closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities. The index is calculated on a total return basis with dividends reinvested. PRICE-TO-EARNINGS RATIO (P/E): A valuation measure calculated by dividing a stock's price by its current or projected earnings per share. The P/E ratio gives an idea of how much an investor is paying for current or future earnings power. S&P 500/(R)/ INDEX: A free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. STOXX EUROPE 600 INDEX: A broad based capitalization weighted index of European based stocks. It is a free float weighted index. THOMSON REUTERS: An information company that supplies news services to newspapers, news agencies, broadcasters and other media subscribers as well as to businesses governments, institutions, and individuals. Indexes cited are unmanaged and not available for direct investment; therefore their performance does not reflect the expenses associated with the active management of an actual portfolio. 7 THE ZWEIG FUND, INC. SCHEDULE OF INVESTMENTS DECEMBER 31, 2011 ($ REPORTED IN THOUSANDS)
PAR VALUE --------- ------- INVESTMENTS FOREIGN GOVERNMENT SECURITIES 4.8% Commonwealth of Australia 5.500%, 12/15/13............................. $ 9,000 $ 9,610 6.500%, 5/15/13.............................. 5,000 5,332 ------- TOTAL FOREIGN GOVERNMENT SECURITIES (Identified Cost $14,717).............. 14,942 ------- NUMBER OF SHARES --------- COMMON STOCKS 79.0% CONSUMER DISCRETIONARY -- 10.6% Amazon.com, Inc./(2)/............................ 42,000 7,270 AutoZone, Inc./(2)/.............................. 15,000 4,875 Comcast Corp. Class A............................ 224,000 5,311 Darden Restaurants, Inc.......................... 117,000 5,333 Lululemon Athletica, Inc./(2)/................... 111,000 5,179 McDonald's Corp.................................. 50,000 5,016 ------- 32,984 ------- CONSUMER STAPLES -- 3.3% Altria Group, Inc................................ 169,000 5,011 PepsiCo, Inc..................................... 76,000 5,043 ------- 10,054 ------- ENERGY -- 14.8% Chesapeake Energy Corp........................... 224,000 4,993 Chevron Corp..................................... 51,000 5,426 ConocoPhillips................................... 73,000 5,320 Continental Resources, Inc./(2)/................. 38,000 2,535 Halliburton Co................................... 158,000 5,453 Occidental Petroleum Corp........................ 55,000 5,153 Petroleo Brasileiro S.A. ADR..................... 118,000 2,932 Schlumberger Ltd................................. 78,000 5,328 Whiting Petroleum Corp./(2)/..................... 57,000 2,661 Williams Cos., Inc. (The)........................ 179,000 5,911 ------- 45,712 -------
See notes to financial statements 8
NUMBER OF SHARES VALUE --------- ------- FINANCIALS -- 5.1% Bank of America Corp...................... 635,000 $ 3,531 Citigroup, Inc............................ 127,000 3,341 Goldman Sachs Group, Inc. (The)........... 44,000 3,979 Lincoln National Corp..................... 260,000 5,049 ------- 15,900 ------- HEALTH CARE -- 8.3% Abbott Laboratories....................... 90,000 5,061 Biogen Idec, Inc./(2)/.................... 50,000 5,502 Express Scripts, Inc./(2)/................ 88,000 3,933 Gilead Sciences, Inc./(2)/................ 139,000 5,689 UnitedHealth Group, Inc................... 112,000 5,676 ------- 25,861 ------- INDUSTRIALS -- 11.4% Alaska Air Group, Inc./(2)/............... 68,000 5,106 Caterpillar, Inc.......................... 54,000 4,892 Cummins, Inc.............................. 56,000 4,929 Deere & Co................................ 67,000 5,183 Foster Wheeler AG/(2)/.................... 202,000 3,866 Union Pacific Corp........................ 57,000 6,039 United Continental Holdings, Inc./(2)/.... 276,000 5,208 ------- 35,223 ------- INFORMATION TECHNOLOGY -- 12.3% Apple, Inc./(2)/.......................... 28,000 11,340 Intel Corp................................ 218,000 5,286 International Business Machines Corp...... 29,000 5,333 QUALCOMM, Inc............................. 101,000 5,525 SanDisk Corp./(2)/........................ 104,000 5,118 Visa, Inc. Class A........................ 55,000 5,584 ------- 38,186 ------- MATERIALS -- 11.5% CF Industries Holdings, Inc............... 38,000 5,509 Cliffs Natural Resources, Inc............. 79,000 4,926 Du Pont (E.I.) de Nemours & Co............ 112,000 5,127 Freeport-McMoRan Copper & Gold, Inc....... 141,000 5,188 Monsanto Co............................... 73,000 5,115 Nucor Corp................................ 116,000 4,590 Potash Corp. of Saskatchewan, Inc......... 129,000 5,325 ------- 35,780 -------
See notes to financial statements 9
NUMBER OF SHARES VALUE ---------- -------- TELECOMMUNICATION SERVICES -- 1.7% Verizon Communications, Inc..................... 128,000 $ 5,136 -------- 5,136 -------- TOTAL COMMON STOCKS (Identified Cost $231,423)...... 244,836 -------- EXCHANGE-TRADED FUNDS 4.9% Consumer Staples Select Sector SPDR Fund........ 124,000 4,029 Health Care Select Sector SPDR Fund............. 117,000 4,059 Templeton Dragon Fund, Inc...................... 175,000 4,454 Utilities Select Sector SPDR Fund............... 70,000 2,518 -------- TOTAL EXCHANGE-TRADED FUNDS (Identified Cost $13,605) 15,060 -------- SHARES ---------- TOTAL LONG TERM INVESTMENTS -- 88.7% (Identified cost $259,745).................................... 274,838 -------- SHORT-TERM INVESTMENTS 10.9% MONEY MARKET MUTUAL FUNDS -- 2.2% Dreyfus Cash Management Fund -- Institutional Shares (seven-day effective yield 0.050%)..... 6,918,511 6,919 -------- PAR ---------- U.S. TREASURY BILLS/(3) /-- 8.7% U.S. Treasury Bill 0.140%, 6/28/12/(4)/........................ $ 20,000 19,994 0.160%, 7/26/12/(4)/........................ 7,000 6,998 -------- 26,992 -------- TOTAL SHORT-TERM INVESTMENTS (Identified Cost $33,900) 33,911 -------- CONTRACTS ---------- PURCHASED OPTIONS 0.3% CALL OPTIONS -- 0.3% eBay Inc. expiring 4/21/12 at strike price $29.. 3,125 1,000 -------- TOTAL OPTIONS PURCHASED (Identified Cost $975)...... 1,000 -------- TOTAL INVESTMENTS, BEFORE WRITTEN OPTIONS (Identified Cost $294,620) -- 99.9%....... 309,749 --------
See notes to financial statements 10
CONTRACTS VALUE --------- -------- WRITTEN OPTIONS (0.3)% CALL OPTIONS -- (0.2)% eBay Inc. expiring 4/21/12 at strike price $34.... 5,000 $ (440) PUT OPTIONS -- (0.1)% eBay Inc. expiring 4/21/12 at strike price $25.... 5,000 (375) -------- TOTAL WRITTEN OPTIONS (Premiums Received $870)....... (815) -------- TOTAL INVESTMENTS NET OF WRITTEN OPTIONS (Identified Cost $293,750) -- 99.6%............................ 308,934/(1)/ OTHER ASSETS AND LIABILITIES, NET -- 0.4%............ 1,094 -------- NET ASSETS -- 100.0%................................. $310,028 ========
-------- (1) Federal Income Tax Information : For tax information at December 31, 2011, see Note 10 Federal Income Tax Information in the Notes to Financial Statements. (2) Non-income producing. (3) The rate shown is the discount rate. (4) All or a portion segregated as collateral for written options. See notes to financial statements 11 COUNTRY WEIGHTINGS (UNAUDITED)+ United States................... 88% Australia....................... 5% Canada.......................... 3% China........................... 2% Brazil.......................... 1% Switzerland..................... 1% --- Total........................... 100% ===
-------- + % of total investments as of December 31, 2011 The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2011. (See Security Valuation Note 2A in the Notes to Financial Statements):
LEVEL 2 SIGNIFICANT TOTAL VALUE AT LEVEL 1 OBSERVABLE DECEMBER 31, 2011 QUOTED PRICES INPUTS ----------------- ------------- ----------- Equity Securities: Common Stocks........................................ $244,836 $244,836 $ -- Exchange-Traded Funds................................ 15,060 15,060 -- Short-Term Investments............................... 6,919 6,919 -- Debt Securities: Foreign Government Securities........................ 14,942 -- 14,942 U.S. Government Securities (includes short-term investments)........................................ 26,992 -- 26,992 Other Financial Instruments: Purchased Options.................................... 1,000 1,000 -- Written Options...................................... (815) (815) -- -------- -------- ------- Total................................................... $308,934 $267,000 $41,934 ======== ======== =======
There are no Level 3 (significant unobservable input) priced securities. See notes to financial statements 12 THE ZWEIG FUND, INC. STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2011 (REPORTED IN THOUSANDS EXCEPT SHARES AND PER SHARE AMOUNTS) ASSETS Investment securities at value before written options (Identified Cost $294,620). $309,749 Foreign currency at value (Identified Cost $420)................................. 420 Cash held with prime broker...................................................... 482 Receivables: Investment securities sold................................................... 1,478 Dividends and interest....................................................... 362 Prepaid expenses................................................................. 33 -------- Total Assets.............................................................. 312,524 -------- LIABILITIES Written options outstanding, at value (Premium Received $870).................... 815 Payables: Investment securities purchased.............................................. 1,367 Investment advisory fee...................................................... 178 Administration fee........................................................... 17 Professional fees............................................................ 66 Transfer agent fee........................................................... 7 Other accrued expenses........................................................... 46 -------- Total Liabilities............................................................ 2,496 -------- NET ASSETS.......................................................................... $310,028 ======== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest................................. $319,552 Accumulated undistributed net investment income (loss)........................... 205 Accumulated net realized gain (loss)............................................. (24,914) Net unrealized appreciation (depreciation) on investments........................ 15,185 -------- NET ASSETS.......................................................................... $310,028 ======== NET ASSET VALUE PER SHARE (Net assets/shares outstanding) Shares outstanding -- 91,955,558)................ $ 3.37 ========
See notes to financial statements 13 THE ZWEIG FUND, INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2011 ($ REPORTED IN THOUSANDS) INVESTMENT INCOME Income Dividends (net of foreign taxes withheld of $19)................................ $ 4,196 Interest........................................................................ 367 Security lending................................................................ 2 -------- Total Investment Income.................................................. 4,565 -------- Expenses Investment advisory fees........................................................ 2,810 Administration fees............................................................. 215 Directors' fees................................................................. 179 Printing fees and expenses...................................................... 170 Professional fees............................................................... 146 Transfer agent fees and expenses................................................ 105 Custodian fees.................................................................. 9 Miscellaneous expenses.......................................................... 218 -------- Expenses before dividends and interest expense on short sales............ 3,852 Dividends and interest expense on short sales............................ 4 -------- Total Expenses........................................................... 3,856 Less expenses waived by investment adviser...................................... (351) -------- Net Expenses............................................................. 3,505 -------- Net Investment Income................................................. 1,060 -------- NET REALIZED AND UNREALIZED GAIN (LOSSES) Net realized gain (loss) on: Investments..................................................................... 7,308 Written options................................................................. 943 Foreign currency transactions................................................... (42) Short sales..................................................................... 296 Net change in unrealized appreciation (depreciation) on: Investments..................................................................... (15,240) Written options................................................................. 55 Foreign currency translations................................................... 1 -------- Net realized and unrealized gain (loss)...................................... (6,679) -------- Net increase (decrease) in net assets resulting from operations.............. $ (5,619) ========
See notes to financial statements 14 THE ZWEIG FUND, INC. STATEMENT OF CHANGES IN NET ASSETS ($ REPORTED IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, 2011 DECEMBER 31, 2010 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net investment income........................................... $ 1,060 $ 1,226 Net realized gain (loss)........................................ 8,505 14,436 Net change in unrealized appreciation (depreciation)............ (15,184) 13,968 -------- -------- Net increase (decrease) in net assets resulting from operations................................................. (5,619) 29,630 -------- -------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income........................................... (1,131) (1,463) Net realized short-term gains................................... (7,816) (7,745) Tax return of capital........................................... (24,618) (24,264) -------- -------- Total dividends and distributions to shareholders............ (33,565) (33,472) -------- -------- Net increase (decrease) in net assets........................ (39,184) (3,842) NET ASSETS Beginning of period................................................. 349,212 353,054 -------- -------- End of period....................................................... $310,028 $349,212 ======== ======== Accumulated undistributed net investment income (loss) at end of period..................................................... $ 205 $ 315
See notes to financial statements 15 THE ZWEIG FUND, INC. FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2011 2010 2009 2008 2007 -------- -------- -------- -------- -------- PER SHARE DATA Net asset value, beginning of period............................... $ 3.80 $ 3.84 $ 3.50 $ 5.65 $ 5.99 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)/(3)/.................................. 0.01 0.01 0.02 0.04 0.05 Net realized and unrealized gains (losses)......................... (0.07) 0.31 0.66 (1.67) 0.39 -------- -------- -------- -------- -------- Total from investment operations................................... (0.06) 0.32 0.68 (1.63) 0.44 -------- -------- -------- -------- -------- DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income............................... (0.01) (0.02) (0.02) (0.04) (0.05) Distributions from net realized gains.............................. (0.09) (0.08) -- (0.10) (0.34) Tax return of capital.............................................. (0.27) (0.26) (0.32) (0.38) (0.20) -------- -------- -------- -------- -------- Total dividends and distributions.................................. (0.37) (0.36) (0.34) (0.52) (0.59) -------- -------- -------- -------- -------- Dilutive effect on net asset values as a result of rights offering. -- -- -- -- /(4)/ (0.19)/(6)/ -------- -------- -------- -------- -------- Net asset value, end of period.................................. $ 3.37 $ 3.80 $ 3.84 $ 3.50 $ 5.65 ======== ======== ======== ======== ======== Market value, end of period/(1)/................................ $ 2.90 $ 3.35 $ 3.31 $ 2.88 $ 5.05 ======== ======== ======== ======== ======== Total investment return/(2)/....................................... (3.54)% 12.87% 29.08% (35.32)% (5.12)%/(7)/ ======== ======== ======== ======== ======== Total return on net asset value/(5)/............................... (1.18)% 10.36% 23.22% (29.75)% 8.75% ======== ======== ======== ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................... $310,028 $349,212 $353,054 $322,293 $519,104 Ratio of expenses to average net assets (excluding dividends and interest expense on short sales after expense waivers).................................................. 1.06% 1.23% 1.22% 1.18% 1.13% Ratio of expenses to average net assets (including dividends and interest expense on short sales after expense waivers).................................................. 1.06% 1.23% 1.22% 1.18% 1.13% Ratio of expenses to average net assets (including dividends and interest expense on short sales before expense waivers)........................................... 1.17% 1.23% 1.22% 1.18% 1.13% Ratio of net investment income (loss) to average net assets........ 0.32% 0.37% 0.66% 0.83% 0.82% Portfolio turnover rate............................................ 78% 42% 35% 39% 58%
-------- (1)Closing Price -- New York Stock Exchange. (2)Total investment return is calculated assuming a purchase of a share of the Fund's common stock at the opening NYSE share price on the first business day and a sale at the closing NYSE share price on the last business day of each period reported. Dividends and distributions, if any, are assumed for the purpose of this calculation, to be reinvested at prices obtained under the Fund's Automatic 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 the end of such periods. (3)Computed using average shares outstanding See notes to financial statements 16 (4)Amount is less than $0.005 (5)NAV return is calculated using the opening Net Asset Value price of the Fund's common stock on the first business day and the closing Net Asset Value price of the Fund's common stock on the last business day of each period reported. Dividends and distributions, if any, are assumed for the purpose of this calculation, to be reinvested at prices obtained under the Fund's Automatic Reinvestment and Cash Purchase Plan. (6)Shares were sold at a 5% discount from a 5-day average market price from 8/29/07 to 9/5/07. (7)Total investment return includes the dilutive effect of the 2007 rights offering. Without this effect, the total investment return would have been (3.83)%. See notes to financial statements 17 THE ZWEIG FUND, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1 -- 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. The Fund's investment objective is capital appreciation, primarily through investment in equity securities, consistent with the preservation of capital and reduction of risk. NOTE 2 -- 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 preparation of financial statements in conformity with accounting principals generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. A. SECURITY VALUATION: Security Valuation procedures for the funds have been approved by the Board of Trustees. All internally fair valued securities referred to below are approved by a valuation committee appointed under the direction of the Board of Trustees. The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. . Level 1 -- quoted prices in active markets for identical securities . Level 2 -- prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) . Level 3 -- prices determined using significant unobservable inputs (including the valuation committee's own assumptions in determining the fair value of investments) A description of the valuation techniques applied to the Fund's major categories of assets and liabilities measured at fair value on a recurring basis is as follows: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid or are internally fair valued by the valuation committee, are generally categorized as Level 3 in the hierarchy. 18 Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in these foreign markets. In such cases the Fund fair values foreign securities using an external pricing service which considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds, and certain indexes as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured debt instruments such as mortgage-backed and asset-backed securities may also incorporate collateral analysis and utilize cash flow models for valuation and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities and therefore dealer supplied prices are utilized representing indicative bids based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued by the valuation committee are generally categorized as Level 3 in the hierarchy. Listed derivatives, such as options, that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over the counter (OTC) derivative contracts, which include forward currency contracts and equity linked instruments, are valued based on inputs observed from actively quoted markets and are categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing net asset value determined as of the close of business of the New York Stock Exchange (generally 4:00 p.m. Eastern time) each business day and are categorized as Level 1 in the hierarchy. Short-term notes having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market and are generally categorized as Level 2 in the hierarchy. A summary of the inputs used to value the Fund's major categories of assets and liabilities, which primarily include investments of the Fund, by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. 19 C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the Fund's intention to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Fund is subject to examination by federal, state and local jurisdictions, where applicable. As of December 31, 2011, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2008 forward (with limited exceptions). D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. The Fund has a Managed Distribution Plan to pay 10 percent of the Fund's net asset value ("NAV") on an annualized basis. Distributions may represent earnings from net investment income, realized capital gains, or, if necessary, return of capital. Shareholders should not draw any conclusions about the Fund's investment performance from the terms of the Fund's Managed Distribution Plan. E. FOREIGN CURRENCY TRANSLATION: Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement dates of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Fund does not isolate that portion of the results of operations arising from changes in exchange rates and that portion arising from changes in the market prices of securities. 20 F. DERIVATIVE FINANCIAL INSTRUMENTS: Disclosures on derivatives instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables the investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Summarized below is a specific type of derivative instrument used by the Fund. OPTIONS CONTRACTS An options contract provides the purchaser with the right, but not the obligation, to buy (call option) or sell (put option) a financial instrument at an agreed upon price. The Fund may purchase or write listed covered and uncovered put and call options on portfolio securities for hedging purposes or to facilitate the rapid implementation of investment strategies if the Fund anticipates a significant market or market sector advance. The Fund is subject to equity price risk in the normal course of pursuing its investment objectives. The Fund may use options contracts to hedge against changes in the values of equities. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. Holdings of the Fund designated to cover outstanding written options are noted in the Schedules of Investments. Purchased options are reported as an asset within "Investment securities at value before written options" on the Statement of Assets and Liabilities. Options written are reported as a liability within "Written options outstanding at value". Changes in value of the purchased option is included in unrealized appreciation/(depreciation) on investments on the Statement of Investments. Changes in value of written options is included in unrealized appreciation/(depreciation) on written options. If an option expires unexercised, the Portfolio realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost basis of the purchase. The difference between the premium and the amount received or paid on effecting a closing purchase or sale transaction is also treated as a realized gain or loss. Gain or loss on purchased options is included in net realized gain/(loss) on investment transactions on the Statement of Operations. Gain or loss on written options is presented separately as net realized gain/(loss) on written options transactions. The risk in writing call options is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing put options is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying options is that the Fund pays a premium whether or not the option is exercised. The use of such instruments may involve certain additional risks as a result of unanticipated movements in the market. Writers (sellers) of options are subject to unlimited risk of loss, as the seller will be obligated to deliver or take delivery of the security at a predetermined price which may, upon exercise of the option, be significantly different from the then-market value. G. SECURITY LENDING ($ REPORTED IN THOUSANDS): The Fund may loan securities to qualified brokers through an agreement with The Bank of New York Mellon ("BNY Mellon"). Under the terms of the agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is ad- 21 justed daily in connection with changes in the market value of securities on loan. Collateral may consist of cash and U.S. Government Securities. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by BNY Mellon for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At December 31, 2011, the Fund had no securities on loan. NOTE 3 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES ($ REPORTED IN THOUSANDS UNLESS OTHERWISE NOTED) Zweig Advisers LLC, an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is the adviser to the Fund. 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 of 0.85% of the Fund's average daily net assets. During the period ended December 31, 2011, the Fund incurred advisory fees of $2,810. Effective May 10, 2011, the Adviser has voluntarily agreed to waive 20% of the advisory fee until further notice. Zweig Consulting LLC (the "Sub-Adviser"), which serves as the Sub-Adviser for the Fund, performs certain asset allocation research and analysis and provides such advice to the Adviser. The Sub-Adviser's fees are paid by the Adviser. B) ADMINISTRATION SERVICES: VP Distributors, Inc., an indirect wholly-owned subsidiary of Virtus, serves as the Fund's Administrator (the "Administrator") pursuant to an Administration Agreement. During the period ended December 31, 2011, the Fund incurred Administration fees of $215. C) DIRECTORS FEE ($ NOT REPORTED IN THOUSANDS): During the period the Fund paid each Director who is not an interested person of the Fund or the Adviser, a fee of $11,000 per year plus $1,500 per Director for each committee meeting attended, together with the out-of-pocket costs relating to attendance at such meetings. The co-lead Directors are paid an additional $10,000 retainer each per year in lieu of compensation for executive committee meetings. The Audit Committee chairperson is paid an additional fee of $5,000 per year. Any Director of the Fund who is an interested person of the Fund or the Adviser receives no remuneration from the Fund. NOTE 4 -- PURCHASES AND SALES OF SECURITIES: ($ REPORTED IN THOUSANDS) Purchases and sales of securities (excluding U.S. Government and agency securities and short-term securities) for the period ended December 31, 2011, were as follows: Purchases. $224,528 Sales..... 208,835
22 There were no purchases and sales of long-term U.S. Government and agency securities for the period ended December 31, 2011. NOTE 5 -- DERIVATIVE TRANSACTIONS ($ REPORTED IN THOUSANDS) The Fund invested in derivative instruments during the reporting period through the form of purchased and written options. The primary type of risk associated with these derivative instruments are equity risk. The Fund invests in uncovered options contracts to gain exposure to securities not held in the portfolio, and to realize a greater return than investing in the underlying security alone. For additional information on the options in which the Fund was invested during the reporting period, refer to the Schedule of Investments and Note 2F. Written options transactions, during the year ended December 31, 2011, were as follows:
CALL OPTIONS # OF CONTRACTS PREMIUM REC'D ------------ -------------- ------------- Options outstanding at beginning of year. -- $ -- Written options.......................... 15,500 1,396 Options repurchased...................... (10,500) (981) ------- ------ Options outstanding at December 31, 2011. 5,000 $ 415 ======= ====== PUT OPTIONS # OF CONTRACTS PREMIUM PAID ----------- -------------- ------------- Options outstanding at beginning of year. -- $ -- Written options.......................... 12,000 1,203 Options repurchased...................... (7,000) (748) ------- ------ Options outstanding at December 31, 2011. 5,000 $ 455 ======= ======
The average daily notional amount of purchased options during the year ended December 31, 2011 was $144. The average daily notional amount of written options during the year was $(130). Purchased options, as presented in the Statement of Assets and Liabilities, is located under "Investment securities at value before written options" at a fair value of $1,000. Written options as of December 31, 2011 are located under "Written options outstanding at value" at a fair value of $815. For the period ended December 31, 2011, gains/(losses) related to purchased and written options are disclosed in the "Net realized appreciation (depreciation) on investments" on the Statement of Assets and Liabilities in the amount of $80. For the period ended December 31, 2011, changes in the value of purchased options is included in "Net change in unrealized appreciation (depreciation) on investments" in the Statement of Operations in the amount of $25. Written options are included in "Net change in unrealized appreciation/(depreciation) on written options" in the amount of $55. Realized gains/loss related to purchased options are disclosed in the "Net realized gain (loss) on investments" in the amount of $(648). Written options are disclosed in the "Net realized gain (loss) on written options" in the amount of $943. 23 NOTE 6 -- INDEMNIFICATIONS Under the Fund's organizational documents and related agreements, its directors and officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. NOTE 7 -- CAPITAL STOCK AND REINVESTMENT PLAN At December 31, 2011, the Fund had one class of common stock, par value $.10 per share, of which 200,000,000 shares are authorized and 91,955,558 shares are outstanding. Registered shareholders may elect to have all distributions paid by check mailed directly to the shareholder by Computershare 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 Computershare, as the Plan agent, in whole or fractional shares of the Fund, as the case may be. During the periods ended December 31, 2011 and December 31, 2010, there were no shares issued pursuant to the Plan. On January 3, 2012, the Fund announced a distribution of $0.082 per share to shareholders of record on December 30, 2011. This distribution has an ex-dividend date of January 5, 2012, and is payable on January 9, 2012. Please see inside front cover for more information on fund distributions. NOTE 8 -- CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as the Fund's ability to repatriate such amounts. The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. NOTE 9 -- REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 24 NOTE 10 -- FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At December 31, 2011, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows:
NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) - -------- ------------ ------------ -------------- Investments..... $296,536 $31,258 $(18,045) $13,213 Written Options. (870) 80 (25) 55
The Fund has capital loss carryover, which may be used to offset future capital gains as follows: EXPIRATION YEAR -------------------------------------------- 2016 2017 TOTAL ------------- ------------- ------------- $2,219 $20,780 $22,999 Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized for tax years beginning after December 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. The Fund may not realize the benefit of these losses to the extent it does not realize gains on investments prior to the expiration of the capital loss carryovers. In addition, under certain conditions, the Fund may lose the benefit of these losses to the extent that distributions to shareholders exceed required distribution amounts as defined under the Internal Revenue Code. Shareholders may also pay additional taxes on these excess distributions. For the period ended December 31, 2011, the Fund utilized losses of $6,615 deferred in prior years against current year capital gains. The Fund had capital loss carryovers of $20,187 which expired in 2011. Capital losses realized after October 31 and certain late year losses (e.g. foreign currency) may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended December 31, 2011, the Fund deferred ordinary losses of $41. The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the table above) consist of undistributed ordinary income of $0 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statement of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. 25 NOTE 11 -- RECLASSIFICATION OF CAPITAL ACCOUNTS As of December 31, 2011, the Fund decreased undistributed net investment income by $39, decreased the accumulated net realized loss by $28,042, and decreased capital paid in on shares of beneficial interest by $28,003. NOTE 12 -- RECENT ACCOUNTING PRONOUNCEMENT In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs". ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-04 and its impact on the financial statements has not been determined. NOTE 13 -- SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that the following events require recognition or disclosure in these financial statements. On March 1, 2012, the current investment services agreement with Zweig Consulting expired and was replaced with a new consulting agreement wherein Zweig Consulting would provide consulting services to the Adviser including the provision of general market and economic research, the provision of additional information based on Zweig Consulting's proprietary models and continued interaction with, and access to, Dr. Zweig and Zweig Consulting personnel. 26 [LOGO] pwc REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders 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, 2011, 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 accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 24, 2012 27 KEY INFORMATION ZWEIG SHAREHOLDER RELATIONS: 1-800-272-2700 For general information and literature, as well as 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. REPURCHASE OF SECURITIES 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. PROXY VOTING INFORMATION (FORM N-PX) The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Fund's Board of Directors. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2011, free of charge, by calling toll-free 800-272-2700. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the "SEC") for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the SEC's Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330. INVESTMENT GUIDELINES CHANGES The following changes to the Investment Guidelines have been approved by Fund's Board of Directors: The non-convertible debt securities that the fund invests in are primarily rated investment grade, or determined by the adviser to be of comparable quality, however the fund may invest a portion of its assets in securities rated below investment grade or determined to be of comparable quality. The extent of the fund's investments in equity securities and other asset classes is determined based entirely on the judgment of the fund's portfolio managers and not on a sub-adviser. 28 CERTIFICATION (UNAUDITED) In accordance with the requirements of the Sarbanes-Oxley Act, the Fund's CEO (the President of the Fund) and CFO (the Treasurer of the Fund) have filed the required "Section 302" certifications with the SEC on Form N-CSR. In accordance with Section 303A of the NYSE listed company manual, the CEO certification has been filed with the NYSE. TAX INFORMATION (UNAUDITED) For the fiscal year ended December 31, 2011, for federal income tax purposes, 52% of the ordinary income dividends earned by the Fund qualify for the dividends received deduction ("DRD") for corporate shareholders. For the fiscal year ended December 31, 2011, the Fund hereby designates 54%, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders. For the fiscal year ended December 31, 2011, the Fund hereby designates $0, or if subsequently different, as long-term capital gains dividends. The actual percentages for the calendar year will be designated in the year-end tax statements. 29 FUND MANAGEMENT Information pertaining to the Directors and officers of the Fund as of December 31, 2011 is set forth below. The address of each individual, unless otherwise noted, is c/o Zweig Advisers LLC, 900 Third Avenue, New York, NY 10022. DISINTERESTED DIRECTORS
NAME, YEAR OF BIRTH (YOB) AND POSITION(S) WITH FUNDS NUMBER OF PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OVERSEEN AND LENGTH OF PRINCIPAL OCCUPATION(S) BY DIRECTOR TIME SERVED DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD ----------------------- ------------------ --------------------------------------------------------------------------------- Charles H. Brunie...... Term: Until 2012. Chairman, Brunie Associates (investments) (since April 2001); Oppenheimer YOB: 1930 Served since: Capital (1969-2000), Chairman (1980-1990), Chairman Emeritus (1990-2000); Director 1998 Chairman Emeritus, Board of Trustees, Manhattan Institute (since 1990); 2 Trustee, Milton and Rose D. Friedman Foundation for Vouchers (since 1996); Trustee, Hudson Institute (2002-2008); Chairman of the Board, American Spectator (since 2002); Chartered Financial Analyst (since 1969). Wendy Luscombe......... Term: Until 2014. Co-lead Independent Director of The Zweig Total Return Fund, Inc. and of The YOB: 1951 Served since: Zweig Fund, Inc. (since 2006); Principal, WKL Associates, Inc. (independent Director 2002 fiduciary and consultant) (since 1994); Fellow, Royal Institution of Chartered 2 Surveyors; Member, Chartered Institute of Arbitrators; Director, Endeavour Real Estate Securities, Ltd. REIT Mutual Fund (2000-2005); Director, PXRE Corp. (reinsurance) (1994-2007); Member and Chairman of Management Oversight Committee, Deutsche Bank Real Estate Opportunity Fund 1A and 1B (since 2003); Trustee, Acadia Realty Trust (since 2004); Member of National Association of Corporate Directors Teaching Facility (since 2007); Independent Director of Feldman Mall Properties, a private REIT (since 2010). Alden C. Olson......... Term: Until 2013. Chairman of the Audit Committee of The Zweig Total Return Fund, Inc. and of YOB: 1928 Served since: The Zweig Fund, Inc. (since 2004); Currently retired; Chartered Financial Director 1996 Analyst (since 1964); Professor of Financial Management, Investments at 2 Michigan State University (1959 to 1990). James B. Rogers, Jr.... Term: Until 2012. Director, Genagro Services, Ltd. (since 2011); Private investor (since 1980); YOB: 1942 Served since: Chairman, Beeland Interests (Media and Investments) (since 1980); Regular Director 1986 Commentator on Fox News (2002-2007); Author of "Investment Biker: On the 2 Road with Jim Rogers" (1994), "Adventure Capitalist" (2003), "Hot Commodities" (2004), "A BULL IN CHINA" (2007) and "A Gift to My Children" (2009). R. Keith Walton........ Term: Until 2014. Co-lead Independent Director of The Zweig Total Return Fund, Inc. and of The YOB: 1964 Served since: Zweig Fund, Inc. (since 2006); Global Head of Government Affairs for Alcoa Director 2004 (since 2011); Senior Managing Director, BSE Management LLC (2010); Principal 2 and Chief Administrative Officer, Global Infrastructure Partners (2007- 2009); Director, Blue Crest Capital Management Funds (since 2006); Executive Vice President and Secretary (1996-2007) of the University at Columbia University; Director, Orchestra of St. Luke's (since 2000); Member (since 1997), Nominating and Governance Committee Board of Directors (since 2004), Council on Foreign Relations; Member of the Trilateral Commission (since 2009); Director of the Association for the Benefit of Children (since 2009); Director (2002-2009), Member, Executive Committee (2002-2009), Chair, Audit Committee ( 2003-2009), Apollo Theater Foundation, Inc.; Vice President and Trustee, The Trinity Episcopal School Corporation (2003-2009); Member, The Gillen Brewer School Board (2007-2009).
30 INTERESTED DIRECTOR*
TERM OF OFFICE NAME, ADDRESS, AGE AND AND LENGTH OF PRINCIPAL OCCUPATION(S) POSITION(S) WITH FUNDS TIME SERVED DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD ---------------------- ------------------ -------------------------------------------------------------------------------- George R. Aylward......... Term: Until 2013. Director, President and Chief Executive Officer (since 2008), Director and 100 Pearl Street Served since: President (2006-2008), Chief Operating Officer (2004-2006), Vice President, Hartford, CT 06103 2006 Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its YOB: 1964 subsidiaries; Senior Executive Vice President and President, Asset Management Director, Chairman of the (2007-2008), Senior Vice President and Chief Operating Officer, Asset Board and President Management (2004-2007), Vice President and Chief of Staff (2001-2004), The 48 Phoenix Companies, Inc.; Various senior officer and directorship positions with Phoenix affiliates (2005-2008); President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc. (2006-present).
OFFICERS WHO ARE NOT DIRECTORS** NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION(S) POSITION(S) WITH FUNDS DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD ---------------------- ---------------------------------------------------------------------------------------------------- Carlton Neel............. Senior Vice President and Portfolio Manager, Zweig Advisers LLC (since 2003); Managing Director YOB: 1967 and Co-Founder, Shelter Rock Capital Partners, LP (2002-2003); Senior Vice President and Portfolio Executive Vice President Manager, Zweig Advisers LLC (1995-2002); Vice President, JP Morgan & Co. (1990-1995). David Dickerson.......... Senior Vice President and Portfolio Manager, Zweig Advisers LLC (since 2003); Managing Director YOB: 1967 and Co-Founder, Shelter Rock Capital Partners, LP (2002-2003); Vice President and Portfolio Senior Vice President Manager, Phoenix/Zweig Advisers LLC (1993-2002). Marc Baltuch............. Chief Compliance Officer of Zweig Advisers LLC (since 2004); President and Director of Watermark YOB: 1945 Securities, Inc. (since 1991); Secretary of Phoenix-Zweig Trust (1989-2003); Secretary of Phoenix- Vice President and Chief Euclid Market Neutral Fund (1998-2002); Assistant Secretary of Gotham Advisors, Inc. (1990-2005); Compliance Officer Chief Compliance Officer of the Zweig Companies (since 1989) and of the Virtus, formerly Phoenix, Funds Complex (2004-2010); Chief Compliance Officer of Virtus Variable Insurance Trust, formerly The Phoenix Edge Series Fund (2004-February, 2011). Kevin J. Carr............ Senior Vice President, Legal and Secretary, Virtus Investment Partners, Inc. and/or certain of its 100 Pearl Street subsidiaries (since 2008); Vice President and Counsel, Phoenix Life Insurance Company (2005- Hartford, CT 06103 2008); Compliance Officer of Investments and Counsel, Travelers Life & Annuity Company (January YOB: 1954 2005-May 2005); Assistant General Counsel and certain other positions, The Hartford Financial Secretary and Chief Services Group (1995-2005). Legal Officer Moshe Luchins............ Associate Counsel (1996-2005), Associate General Counsel (since 2006) of the Zweig Companies. YOB: 1971 Vice President W. Patrick Bradley....... Senior Vice President, Fund Services (since 2010); Senior Vice President, Fund Administration 100 Pearl Street (since 2009), Vice President, Fund Administration (2007-2009) Second Vice President, Fund Control Hartford, CT 06103 & Tax (2004-2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries (formerly YOB: 1972 Phoenix) Vice President, Chief Financial Officer, Treasurer and Principal Accounting Officer (2006- Treasurer, Chief present), Assistant Treasurer (2004-2006), Virtus Variable Insurance Trust. Chief Financial Officer Financial Officer and Treasurer (2005-present), Assistant Treasurer (2004-2006), certain funds within the Virtus Mutual Funds Family (formerly Phoenix). Jacqueline Porter........ Vice President, Fund Administration and Tax, Virtus Investment Partners (since 2008); Phoenix 100 Pearl Street Equity Planning Corporation (1995-2008); Vice President and Assistant Treasurer, multiple funds in Hartford, CT 06103 the Virtus Mutual Fund Complex and Virtus Variable Insurance Trust (formerly Phoenix Edge YOB: 1958 Series Fund) (since 1995). Vice President and Assistant Treasurer
-------- * Director considered to be an "interested person," as that term is defined in the Act. George R. Aylward is considered an interested person because, among other things, he is an officer of the Adviser. ** The Term of each Officer expires immediately following the 2012 Annual Meeting of Shareholders. Each Board considers reappointments annually. 31 AUTOMATIC REINVESTMENT AND CASH PURCHASE PLAN The Zweig Fund, Inc. (the "Fund") allows you to conveniently reinvest distributions quarterly in additional Fund shares thereby enabling you to compound your returns from the Fund. By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow. It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market. ENROLLMENT IN THE REINVESTMENT PLAN It is the policy of the Fund to automatically reinvest distributions payable to shareholders. A "registered" shareholder automatically becomes a participant in the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan (the "Plan"). The Plan authorizes the Fund to credit all shares of common stock to participants upon a distribution regardless of whether the shares are trading at a discount or premium to the net asset value. Registered shareholders may terminate their participation and receive distributions in cash by contacting Computershare Trust Company, N.A. (the "Plan Administrator"). The termination will become effective with the next distribution if the Plan Administrator is notified at least 7 business days prior to the distribution payment date. Registered shareholders that wish to change their distribution option from cash payment to reinvest may do so by contacting the Plan Administrator at 1-800-272-2700. In the case of banks, brokers, or other nominees which hold your shares for you as the beneficial owner, the Plan Administrator will administer the Plan based on the information provided by the bank, broker or nominee. To the extent that you wish to participate in the Plan, you should contact the broker, bank or nominee holding your shares to ensure that your account is properly represented. If necessary, you may have your shares taken out of the name of the broker, bank or nominee and register them in your own name. HOW SHARES ARE PURCHASED THROUGH THE REINVESTMENT PLAN When a distribution is declared, nonparticipants in the plan will receive cash. Participants in the plan will receive shares of the Fund valued as described below: If on the payable date of the distribution, the market price of the Fund's common stock is less than the net asset value, the Plan Administrator will buy Fund shares on behalf of the Participant in the open market, on the New York Stock Exchange (NYSE) or elsewhere. The price per share will be equal to the weighted average price of all shares purchased, including commissions. Commission rates are currently $0.02 per share, although the rate is subject to change and may vary. If, following the commencement of purchases and before the Plan Administrator has completed its purchases, the trading price equals or exceeds the most recent net asset value of the common shares, the Plan Administrator may cease purchasing shares on the open market and the Fund may issue the remaining shares at a price equal to the greater of (a) the net asset value on the last day the Plan Administrator purchased shares or (b) 95% of the market price on such day. In the case where the Plan Administrator has terminated open market purchases and the Fund has issued the remaining shares, the number of shares received by the Participant in respect of the cash distribution will be based on the weighted average of prices paid for shares purchased in the open market and the price at which the Fund issued the remaining shares. Under certain circumstances, the rules and regulations of the Securities and Exchange Commission may require 32 limitation or temporary suspension of market purchases of shares under the Plan. The Plan Administrator will not be accountable for its inability to make a purchase during such a period. If on the payable date of the distribution, the market price is equal to or exceeds the net asset value, Participants will be issued new shares by the Fund at the greater of the (a) the net asset value on the payable date or (b) 95% of the market price on such date. The automatic reinvestment of distributions will not relieve Participants of any income tax which may be payable on such distributions. A Participant in the Plan will be treated for federal income tax purposes, as having received on a payment date, a distribution in an amount equal to the cash the participant could have received instead of shares. If you participate in the Plan, you will receive a Form 1099-DIV concerning the Federal tax status of distributions paid during the year. VOLUNTARY CASH PURCHASE PLAN Participants in the Plan have the option of making additional cash payments for investment in shares of the Fund. Such payments can be made in any amount from $100 per payment to $3,000 per month. The Plan Administrator will use the funds received to purchase Fund shares in the open market on the 15/th/ of each month or the next business day if the 15/th/ falls on a weekend or holiday (the "Investment Date"). The purchase price per share will be equal to the weighted average price of all shares purchased on the Investment Date, including commissions. There is no charge to shareholders for Cash Purchases. The plan administrator's fee will be paid by the Fund. However, each participating shareholder will pay pro rata share of brokerage commissions incurred (currently $0.02 per share, but may vary and is subject to change) with respect to the Plan Administrator's open market purchases in connection with all cash investments. Voluntary cash payments should be sent to Computershare Trust Company, N.A., PO Box 43078, Providence, RI 02940-3078. Participants have an unconditional right to obtain the return of any cash payment if the Plan Administrator receives written notice at least 5 business days before such payment is to be invested. AUTOMATIC MONTHLY INVESTMENT Participants in the Plan may purchase additional shares by means of an Automatic Monthly Investment of not less than $100 nor more than $3,000 per month by electronic funds transfer from a predesignated U.S. bank account. If a Participant has already established a Plan account and wishes to initiate Automatic Monthly Investments, the Participant must complete and sign an automatic monthly investment form and return it to the Plan Administrator together with a voided check or deposit slip for the account from which funds are to be withdrawn. Automatic monthly investment forms may be obtained from the Plan Administrator by calling 1-800-272-2700. TERMINATION OF SHARES Shareholders wishing to liquidate shares held with the Plan Administrator must do so in writing or by calling 1-800-272-2700. The Plan Administrator does not charge a fee for liquidating your shares; however, currently a brokerage commission of $0.02 will be charged. This charge may vary and is subject to change. Once terminated, you may re-enroll in the Plan (provided you still have shares registered in your name) by contacting the Plan Administrator at 1-800-272-2700. 33 ADDITIONAL INFORMATION For more information regarding the Automatic Reinvestment and Cash Purchase Plan, please contact the Plan Administrator at 1-800-272-2700 or visit our website at Virtus.com. The Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any distribution paid subsequent to written notice of the change sent to the members of the Plan at least 90 days before the record date for such distribution. The Plan also may be amended or terminated by the Plan Administrator with at least 90 days written notice to participants in the Plan. 34 ITEM 2. CODE OF ETHICS. (a)The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c)There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics described in Item 2(b) of the instructions for completion of Form N-CSR. (d)The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of the instructions for completion of this Item. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant's Board of Trustees has determined that the Registrant has an "audit committee financial expert" serving on its Audit Committee. (a)(2) Wendy Luscombe has been determined by the Registrant to possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert" effective December 12, 2007. Ms. Luscombe is an "independent" trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. (a)(3) Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees (a)The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $28,800 for 2011 and $32,000 for 2010. Audit-Related Fees (b)The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $2,740 for 2011 and $3,042 for 2010. This represents the review of the semi-annual financial statements, and out of pocket expenses. Tax Fees (c)The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $4,600 for 2011 and $4,600 for 2010. "Tax Fees" are those primarily associated with review of the Trust's tax provision and qualification as a regulated investment company (RIC) in connection with audits of the Trust's financial statement, review of year-end distributions by the Fund to avoid excise tax for the Trust, periodic discussion with management on tax issues affecting the Trust, and reviewing and signing the Fund's federal income tax returns. All Other Fees (d)The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2011 and $0 for 2010. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Zweig Fund, Inc. (the "Fund") Board has adopted policies and procedures with regard to the pre-approval of services provided by PwC. The Audit Committee pre-approves: (i) all audit and non-audit services to be rendered to the Fund by PwC; and (ii) all non-audit services to be rendered to the Fund, financial reporting of the Fund provided by PwC to the Adviser or any affiliate thereof that provides ongoing services to the Fund (collectively, "Covered Services"). The Audit Committee has adopted pre-approval procedures authorizing a member of the Audit Committee to pre-approve from time to time, on behalf of the Audit Committee, all Covered Services to be provided by PwC which are not otherwise pre-approved at a meeting of the Audit committee, provided that such delegate reports to the full Audit Committee at its next meeting. The pre-approval procedures do not include delegation of the Audit committee's responsibilities to management. Pre-approval has not been waived with respect to any of the services described above since the date on which the Audit Committee adopted its current pre-approval procedures. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b)0% for 2011 and 2010 (c)0% for 2011 and 2010 (d)Not applicable (f)The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g)The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $327,554 for 2011 and $398,818 for 2010. (h)The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant has a separately designated audit committee consisting of all the independent directors of the registrant. Audit Committee Members are: Charles H. Brunie, Wendy Luscombe, Prof. Alden C. Olson, James B. Rogers and R. Keith Walton. ITEM 6. INVESTMENTS. (a)Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b)Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Proxy Voting Policies are attached herewith. THE ZWEIG FUND, INC THE ZWEIG TOTAL RETURN FUND, INC STATEMENT OF POLICY WITH RESPECT TO PROXY VOTING I Definitions. As used in this Statement of Policy, the following terms shall have the meanings ascribed below: A. "Adviser" refers to Zweig Advisers LLC. B. "Corporate Governance Matters" refers to changes involving the corporate ownership or structure of an issuer whose securities are within a Portfolio Holding, including changes in the state of incorporation, changes in capital structure, including increases and decreases of capital and preferred stock issuance, mergers and other corporate restructurings, and anti-takeover provisions such as staggered boards, poison pills, and supermajority voting provisions. C. "Delegate" refers to the Adviser or Subadviser to whom responsibility has been delegated to vote proxies for the applicable Portfolio Holding, including any qualified, independent organization engaged by the Adviser to vote proxies on behalf of such delegated entity. D. "Fund" shall individually and collectively mean and refer to The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc., and each of them. E. "Management Matters" refers to stock option plans and other management compensation issues. F. "Portfolio Holding" refers to any company or entity whose securities is held within the investment portfolio(s) of one or more of the Fund as of the date a proxy is solicited. G. "Proxy Contests" refer to any meeting of shareholders of an issuer for which there are at least two sets of proxy statements and proxy cards, one solicited by management and the others by a dissident or group of dissidents. H. "Social Issues" refers to social and environmental issues. I. "Takeover" refers to "hostile" or "friendly" efforts to effect radical change in the voting control of the board of directors of a company. II.General Policy. It is the intention of the Fund to exercise stock ownership rights in Portfolio Holdings in a manner that is reasonably anticipated to further the best economic interests of shareholders of the Fund. Accordingly, the Fund or its Delegate(s) shall endeavor to analyze and vote all proxies that are considered likely to have financial implications, and, where appropriate, to participate in corporate governance, shareholder proposals, management communications and legal proceedings. The Fund and its Delegate(s) must also identify potential or actual conflicts of interests in voting proxies and address any such conflict of interest in accordance with this Statement of Policy. III Factors to consider when voting. A. A Delegate may abstain from voting when it concludes that the effect on shareholders' economic interests or the value of the Portfolio Holding is indeterminable or insignificant. B. In analyzing ANTI-TAKEOVER MEASURES, the Delegate shall vote on a case-by-case basis taking into consideration such factors as overall long-term financial performance of the target company relative to its industry competition. Key measures which shall be considered include, without limitation, five-year annual compound growth rates for sales, operating income, net income, and total shareholder returns (share price appreciation plus dividends). Other financial indicators that will be considered include margin analysis, cash flow, and debit levels. C. In analyzing CONTESTED ELECTIONS, the Delegate shall vote on a case-by-case basis taking into consideration such factors as the qualifications of all director nominees. The Delegate shall also consider the independence and attendance record of board and key committee members. A review of the corporate governance profile shall be completed highlighting entrenchment devices that may reduce accountability. D. In analyzing CORPORATE GOVERNANCE MATTERS, the Delegate shall vote on a case-by-case basis taking into consideration such factors as tax and economic benefits associated with amending an issuer's state of incorporation, dilution or improved accountability associated with changes in capital structure, management proposals to require a supermajority shareholder vote to amend charters and bylaws and bundled or "conditioned" proxy proposals. E. In analyzing EXECUTIVE COMPENSATION PROPOSALS and MANAGEMENT MATTERS, the Adviser shall vote on a case-by-case basis taking into consideration such factors as executive pay and spending on perquisites, particularly in conjunction with sub-par performance and employee layoffs. F. In analyzing PROXY CONTESTS FOR CONTROL, the Delegate shall vote on a case-by-case basis taking into consideration such factors as long-term financial performance of the target company relative to its industry; management's track record; background to the proxy contest; qualifications of director nominees (both slates); evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and stock ownership positions. G. A Delegate shall generally vote against shareholder SOCIAL MATTERS proposals. IV Delegation. A. In the absence of a specific direction to the contrary from the Board of Trustees of the Fund, the Adviser will be responsible for voting proxies for all Portfolio Holdings in accordance with this Statement of Policy, or for delegating such responsibility as described below. B. The Adviser delegated with authority to vote proxies for Portfolio Holdings shall be deemed to assume a duty of care to safeguard the best interests of the Fund and its shareholders. No Delegate shall accept direction or inappropriate influence from any other client, director or employee of any affiliated company and shall not cast any vote inconsistent with this Statement of Policy without obtaining the prior approval of the Fund or its duly authorized representative(s). C. With regard to each Series for which there is a duly appointed Subadviser acting pursuant to an investment advisory agreement satisfying the requirements of Section 15(a) of the Investment Company Act of 1940, as amended, and the rules thereunder, the Subadviser may, pursuant to delegated authority from the Adviser, vote proxies for Portfolio Holdings with regard to the Series or portion of the assets thereof for which the Subadviser is responsible. In such case, the Subadviser shall vote proxies for the Portfolio Holdings in accordance with Sections II, III and V of this Statement of Policy, provided, however, that the Subadviser may vote proxies in accordance with its own proxy voting policy/procedures ("Subadviser Procedures") if the following two conditions are satisfied: (1) the Adviser must have approved the Subadviser Procedures based upon the Adviser's determination that the Subadviser Procedures are reasonably designed to further the best economic interests of the affected Fund shareholders, and (2) the Subadviser Procedures are reviewed and approved annually by the Board of Trustees. The Subadviser will promptly notify the Adviser of any material changes to the Subadviser Procedures. The Adviser will periodically review the votes by the Subadviser for consistency with this Statement of Policy. V. Conflicts of Interest A. The Fund and its Delegate(s) seek to avoid actual or perceived conflicts of interest in the voting of proxies for Portfolio Holdings between the interests of Fund shareholders, on one hand, and those of the Adviser, Delegate, principal underwriter, or any affiliated person of the Fund, on the other hand. The Board of Trustees may take into account a wide array of factors in determining whether such a conflict exists, whether such conflict is material in nature, and how to properly address or resolve the same. B. While each conflict situation varies based on the particular facts presented and the requirements of governing law, the Board of Trustees or its delegate(s) may take the following actions, among others, or otherwise give weight to the following factors, in addressing material conflicts of interest in voting (or directing Delegates to vote) proxies pertaining to Portfolio Holdings: (i) rely on the recommendations of an established, independent third party with qualifications to vote proxies such as Institutional Shareholder Services; (ii) vote pursuant to the recommendation of the proposing Delegate; (iii) abstaining; or (iv) where two or more Delegates provide conflicting requests, vote shares in proportion to the assets under management of the each proposing Delegate. C. The Adviser shall promptly notify the President of the Fund once any actual or potential conflict of interest exists and their recommendations for protecting the best interests of Fund's shareholders. No Adviser shall waive any conflict of interest or vote any conflicted proxies without the prior written approval of the Board of Trustees or the President of the Fund pursuant to section D of this Article. D. In the event that a determination, authorization or waiver under this Statement of Policy is requested at a time other than a regularly scheduled meeting of the Board of Trustees, the President of the Fund shall be empowered with the power and responsibility to interpret and apply this Statement of Policy and provide a report of his or her determinations at the next following meeting of the Board of Trustees. VI.Miscellaneous. A. A copy of the current Statement of Policy with Respect to Proxy Voting and the voting records for the Fund reconciling proxies with Portfolio Holdings and recording proxy voting guideline compliance and justification, shall be kept in an easily accessible place and available upon request. B. The Adviser shall present a report of any material deviations from this Statement of Policy at every regularly scheduled meeting of the Board of Trustees and shall provide such other reports as the Board of Trustees may request from time to time. The Adviser shall provide to the Fund or any shareholder a record of its effectuation of proxy voting pursuant to this Statement of Policy at such times and in such format or medium as the Fund shall reasonably request. The Adviser shall be solely responsible for complying with the disclosure and reporting requirements under applicable laws and regulations, including, without limitation, Rule 206(4)-6 under the Investment Advisers Act of 1940. The Adviser shall gather, collate and present information relating to the its proxy voting activities of those of each Delegate in such format and medium as the Fund shall determine from time to time in order for the Fund to discharge its disclosure and reporting obligations pursuant to Rule 30b1-4 under the Investment Company Act of 1940, as amended. C. The Adviser shall pay all costs associated with proxy voting for Portfolio Holdings pursuant to this Statement of Policy and assisting the Fund in providing public notice of the manner in which such proxies were voted. D. The Adviser may delegate its responsibilities hereunder to a proxy committee established from time to time by the Adviser, as the case may be. In performing its duties hereunder, the Adviser, or any duly authorized committee, may engage the services of a research and/or voting adviser or agent, the cost of which shall be borne by such entity. This Statement of Policy shall be presented to the Board of Trustees annually for their amendment and/or approval. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (A)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS Following are the names, titles and length of service of the person or persons employed by or associated with the registrant or an investment adviser of the registrant who are primarily responsible for the day-to-day management of the registrant's portfolio ("Portfolio Manager") and each Portfolio Manager's business experience during the past 5 years as of the date of filing of this report: Carlton Neel and David Dickerson have served as Co-Portfolio Managers of the Zweig Fund, Inc. (the "Fund"), a closed end fund managed by Zweig Advisers LLC ("ZA") since April 1, 2003. Mr. Neel and Mr. Dickerson are Senior Vice Presidents of ZA and Mr. Neel is Senior Managing Director and Mr. Dickerson is Managing Director of Euclid Advisors, LLC ("Euclid"), an affiliate of Virtus Investment Advisers. Since April 1, 2003, they have also served as Co-Portfolio Managers for The Zweig Total Return Fund, Inc., a closed-end fund managed by ZA. From April 1, 2003 to June 9, 2008, Messrs. Neel and Dickerson were portfolio managers of the Virtus Market Neutral Fund. From 2008 through September, 2009 Messrs. Neel and Dickerson also assumed responsibility for asset allocation activities for three Virtus mutual fund of funds. Since 2008, Messrs. Neel and Dickerson have been portfolio managers of the Virtus Alternatives Diversifier Fund, which is subadvised by Euclid. During March 2009, Messrs. Neel and Dickerson became Portfolio Managers for the Virtus Growth & Income Fund, Virtus Balanced Fund (equity portion), Virtus Tactical Allocation Fund (equity portion), Virtus Growth & Income Series and Virtus Strategic Allocation Series (equity portion), which are all subadvised by Euclid. Mr. Neel and Mr. Dickerson began their investment career at the Zweig Companies in 1995 and 1993, respectively. (A)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER AND POTENTIAL CONFLICTS OF INTEREST OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER The following information is provided as of the fiscal year ended December 31, 2011. Mr. Neel and Mr. Dickerson are responsible for the day-to-day management of other portfolios of other accounts, namely The Zweig Total Return Fund, Inc., the Virtus Alternatives Diversifier, Virtus Growth & Income Fund, Virtus Balanced Fund (equity portion), Virtus Tactical Allocation Fund (equity portion), Virtus Growth & Income Series and Virtus Strategic Allocation Series (equity portion). For both Mr. Neel and Mr. Dickerson, the following are tables which provide the number of other accounts managed within the Type of Accounts and the Total Assets for each Type of Account. Also provided for each Type of Account is the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on the performance of the account.
No. of Total Assets Name of Accounts in Accounts Portfolio Total where where Manager or No. of Advisory Fee Advisory Fee Team Type of Accounts is Based on is Based on Member Accounts Managed Total Assets Performance Performance ---------- ---------- -------- ------------ ------------ ------------ David Dickerson Registered Investment Companies: 7 $1,474 mil 0 0 Other Pooled Investment Vehicles: 0 $ 0 0 0 Other Accounts: 0 $ 0 0 0 Carlton Neel Registered Investment Companies: 7 $1,474 mil 0 0 Other Pooled Investment Vehicles: 0 $ 0 0 0 Other Accounts: 0 $ 0 0 0
POTENTIAL CONFLICTS OF INTERESTS There may be certain inherent conflicts of interest that arise in connection with the Mr. Neel's and Mr. Dickerson's management of each Fund's investments and the investments of any other accounts they manage individually or together. Such conflicts could arise from the aggregation of orders for all accounts managed by a particular portfolio manager, the allocation of purchases across all such accounts, the allocation of IPOs and any soft dollar arrangements that the Adviser may have in place that could benefit the Funds and/or such other accounts. The Board of Trustees/Directors has adopted on behalf of the Funds policies and procedures designed to address any such conflicts of interest to ensure that all transactions are executed in the best interest of the Funds' shareholders. The Advisers and Sub adviser are required to certify their compliance with these procedures to the Board of Trustees on a quarterly basis. There have been no material compliance issues with respect to any of these policies and procedures during the Funds' most recent fiscal year ended December 31, 2011. Additionally, there are no material conflicts of interest between the investment strategy of a Fund and the investment strategy of other accounts managed by Mr. Neel and Mr. Dickerson since portfolio managers generally manage funds and other accounts having similar investment strategies. (A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS For the most recently completed fiscal year ended December 31, 2011, following is a description of Mr. Neel's and Mr. Dickerson's compensation structure as portfolio managers of ZA. Virtus Investment Partners, Inc. and its affiliated investment management firms (collectively, "Virtus"), believe that the firm's compensation program is adequate and competitive to attract and retain high-caliber investment professionals. Investment professionals at Virtus receive a competitive base salary, an incentive bonus opportunity and a benefits package. Portfolio managers may also have the opportunity to participate in long-term equity programs, including potential awards of Virtus restricted stock units ("RSUs") with multi-year vesting, subject to Virtus board approval. Following is a more detailed description of the compensation structure of the Fund's portfolio managers. Base Salary. Each Portfolio Manager is paid a fixed base salary, which is designed to be competitive in light of the individual's experience and responsibilities. Base salary is determined using compensation survey results of investment industry compensation conducted by an independent third party in evaluating competitive market compensation for its investment management professionals. Incentive Bonus. Annual incentive payments are based on targeted compensation levels, adjusted based on profitability, investment performance factors and a subjective assessment of contribution to the team effort. The short-term incentive payment is generally paid in cash, but a portion may be made in Virtus RSUs. Individual payments are assessed using comparisons of actual investment performance with specific peer group or index measures. Performance of the funds managed is generally measured over one-, three- and five year periods and an individual manager's participation is based on the performance of each fund/account managed. While portfolio manager compensation contains a performance component, this component is further adjusted to reward investment personnel for managing within the stated framework and for not taking unnecessary risk. This approach ensures that investment management personnel remain focused on managing and acquiring securities that correspond to a Fund's mandate and risk profile and are discouraged from taking on more risk and unnecessary exposure to chase performance for personal gain. We believe we have appropriate controls in place to handle any potential conflicts that may result from a substantial portion of portfolio manager compensation being tied to performance Other Benefits. Portfolio managers are also eligible to participate in broad-based plans offered generally to employees of Virtus and its affiliates, including 401(k), health and other employee benefit plans. In summary, the Investment Manager believes that overall compensation is both fair and competitive while rewarding employees for not taking unnecessary risks to chase personal performance. (A)(4) DISCLOSURE OF SECURITIES OWNERSHIP For the most recently completed fiscal year ended December 31, 2011, beneficial ownership of shares of the Fund by Messrs. Dickerson and Neel are as follows. Beneficial ownership was determined in accordance with rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (17 CFR 240.161-1(a)(2)). DOLLAR ($) RANGE OF NAME OF PORTFOLIO MANAGER OR FUND SHARES TEAM MEMBER BENEFICIALLY OWNED David Dickerson $100,001- $ 500,000 Carlton Neel $100,001- $ 500,000 (B)Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11.CONTROLS AND PROCEDURES. (a)The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b)There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12.EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. (c) A copy of the Registrant's notice to shareholders pursuant to Rule 19(a) under the 1940 Act which accompanied distributions paid during the period ended December 31, 2011 pursuant to the Registrant's Managed Distribution Plan are filed herewith as required by the terms of the Registrant's exemptive order issued on November 17, 2008. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) The Zweig Fund, Inc. -------------------------- By (Signature and Title)* /s/ George R. Aylward ---------------------------- George R. Aylward, President (principal executive officer) Date March 8, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ George R. Aylward ---------------------------- George R. Aylward, President (principal executive officer) Date March 8, 2012 By (Signature and Title)* /s/ W. Patrick Bradley ----------------------------- W. Patrick Bradley, Treasurer (principal financial officer) Date March 8, 2012 /*/ Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 d279098dex99codeeth.txt CODE OF ETHICS EX-99.CODE ETH THE ZWEIG FUND, INC. THE ZWEIG TOTAL RETURN FUND, INC. SENIOR MANAGEMENT CODE OF ETHICS I Background Section 406 of the Sarbanes-Oxley Act of 2002 requires that each registered investment company disclose whether or not it has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the fund or a third party (collectively, "Senior Management"). If a fund has not adopted such a code of ethics, it must explain why it has not done so in certain regulatory filings. Pursuant to various management agreements between The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc. (the "Funds") and Phoenix subsidiaries, Phoenix employees currently serve as Senior Management to the Funds. As employees of Phoenix they are subject to the Phoenix Code of Ethics (the "PCE"). The PCE complies with the Sarbanes-Oxley Act of 2002 and other relevant requirements. The Boards of Directors of the Funds, on October 1, 2003, adopted the Phoenix Code of Ethics for the Senior Management of the Funds. II Board Resolution adopted on October 1, 2003 WHEREAS, that Section 406 of the Sarbanes-Oxley Act of 2002 requires that each registered investment company publicly disclose whether or not it has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the fund or a third party (collectively, "Senior Management"); and WHEREAS, the Board of Directors has reviewed the Phoenix Code of Conduct, as presented at this meeting, as the same may be amended from time to time (the "Senior Management Code") and has determined the same to provide written standards that are reasonably designed to deter wrongdoing and to promote the types of conduct by Senior Management that are contemplated by regulations promulgated pursuant to the Sarbanes-Oxley Act of 2002; now, therefore, be it RESOLVED, that the Fund does hereby approve and adopt the Senior Management Code as the written code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party; FURTHER RESOLVED, the Chairman of the Fund, with the advice of counsel and subject to the terms and conditions specified in the Phoenix Code of Conduct, shall be appointed and directed to oversee the consideration and granting of any waivers of the Senior Management Code with respect to Senior Management other than the Chairman provided however that the Chairman shall provide notice of any such waiver to the Board of Directors at the next succeeding regularly scheduled meeting of the Board of Directors and provided further that any requested waivers involving the Chairman shall be presented to the Board for approval; and FURTHER RESOLVED, that the Chief Compliance Officer of The Phoenix Companies, Inc. be, and she or he hereby is, authorized and directed to implement, and oversee compliance with, and administration of the Senior Management Code and to take such further action and deliver and execute any and all instruments, certificates and documents as she or he may deem necessary or appropriate, with the advice of counsel, to fully carry out the purposes and intent of the Senior Management Code. Commitment to Shareholders Phoenix is committed to providing shareholder value. One way we do this is by observing the highest standards of legal and ethical conduct in all of our business dealings. Conflicts of Interest Phoenix expects each of its employees and directors to maintain the highest moral and ethical standards and to avoid conflicts of interest in conducting business activities. A "conflict of interest" occurs when an individual's private interest interferes, or even appears to interfere, in any way with the interests of the Company as a whole. A conflict situation can arise when an employee or director takes actions or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest also arise when an employee or director, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. An employee requested by Phoenix to serve on the board of directors of another company owes a fiduciary duty to Phoenix as well as to the company on whose board of directors he or she serves. Where conflicts of interest arise between the interests of Phoenix and the other company, the employee should consult Phoenix's General Counsel for guidance. Moreover, no employee requested by Phoenix to serve on the board of directors of another company may accept fees or other compensation for board service. In the event the company for which an employee serves as a director requires directors to receive fees, any remuneration received by the employee must be donated to a charitable organization. The Company will offset any tax consequences incurred by the employee. All conflicts of interest must be disclosed in writing to the Chief Compliance Officer. Employees and directors are required to file a Conflict of Interest Statement annually. Any conflicts of interest that arise following completion of the Conflict of Interest Statement must be promptly reported to the Chief Compliance Officer in writing. Corporate Opportunities Employees and directors owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises. Consequently, employees and directors are prohibited from engaging in the following activities: .. taking for themselves personal opportunities that are discovered through the use of corporate property, information or position; .. using Company property, information or position for personal gain; and .. competing with the Company. Insider Trading and Personal Trading Federal securities laws and Company policy prohibit the purchase or sale of securities while in possession of material non-public information and prohibit passing such information on to others. No employee or director may buy or sell Phoenix securities if he or she has material non-public information. This restriction also applies to an employee's or director's spouse, other adults living in the employee's or director's household, minor children and persons for whom the employee exercises investment authority. Employees, directors and their family members also must avoid passing non-public information on to third parties. Information is "material" if a reasonable investor would probably consider the information important in deciding whether to buy, hold or sell securities of the company to which the information relates. Directors, officers and their family members1 are also subject to certain restrictions under New York Insurance Law governing acquisition of Phoenix shares. Until June 25, 2006, directors and officers, whether acting directly or indirectly, may only acquire, or offer to acquire, such shares: (i) through a Phoenix plan; or (ii) through a registered broker or dealer at quoted prices on the date of purchase. Family members may only acquire such shares through the latter method. All directors, all employees with a title of Vice President or higher, plus certain other employees whose positions place them in regular contact with non-public information, and certain family members of all of them are subject to a further restriction as well: these individuals may only buy or sell Phoenix securities during "window" periods. You have been or will be notified: (i) if these restrictions apply to you; and (ii) when periods begin and end. In addition, officers with a title of Executive Vice President or higher, certain other individuals who have been notified by the Corporate Secretary, and certain family members of each of them, must pre-clear all transactions in Phoenix securities through our Corporate Secretary. Further, they must promptly report such transactions to the Securities and Exchange Commission ("SEC"). No employee or director may buy or sell securities of another company with the knowledge that those securities are being considered for purchase or sale by Phoenix, any of its subsidiaries or any of the Company's advisory accounts. In the case of any company in which Phoenix owns 10 percent or more of the outstanding equity, no employee (nor certain family members) may make any personal investment without prior approval from the Law Department. Certain employees who are involved with the Company's investment adviser and broker-dealer operations may be required to secure pre-clearance of and/or report all personal securities transactions by these individuals. In addition, the Company reserves the right to require duplicate confirmations, quarterly transaction reports and prior clearance for any personal securities transactions by those individuals. If you have any question as to whether your position requires pre-clearance or reporting, you should contact the compliance officer for your business area (investment adviser or broker-dealer) or the Corporate Compliance Department. Footnote 1 An officer's or director's child, stepchild, grandchild, parent, step-parent, grandparent, spouse, or sibling, including in-laws and adoptive relationships. Market Timing Company policy prohibits employees from engaging in excessive trading or market timing activities with respect to any mutual fund, regardless of whether such mutual fund is affiliated with the Company. This prohibition does not apply to money market funds or other funds designed to permit short term investment or to non-volitional investment vehicles such as 401(k) plans, automatic reinvestment programs, or asset allocation programs. Confidentiality Directors and employees are required to maintain the confidentiality of information entrusted to them in the course of their work for the Company. Disclosure of confidential information is restricted to authorized persons or situations in which disclosure is legally mandated. Confidential information includes all non-public information about the Company or persons with which it conducts business (such as customers, vendors and potential investment targets) including, but not limited to: internal operating procedures; investment strategies; sales data and customer lists; financial plans; projections; and clients' personal information. (See also Privacy and Confidential Personal Information below). A director's or employee's obligation to protect confidential information continues even after termination of his or her position with the Company. Protection and Use of Company Property and Assets Employees have access to Company property to assist them in effectively carrying out their duties to the Company. Company property should only be used for legitimate purposes. All employees should protect the Company's property and ensure its efficient use. Theft, fraud, carelessness and waste have a direct impact on the Company's profitability. Examples of Company property include proprietary and non-public information, equipment, facilities, vehicles, funds and other assets. Improper use or abuse of Company property is prohibited. Expenses to be paid for by the Company, via reimbursement or direct payment, are limited to those expenses that are authorized and related to legitimate business activities. Contract Review The following contracts must be reviewed by the Law Department prior to being signed, amended or terminated early: .. Contracts that involve an expenditure or value of greater than $25,000; .. Contracts that pose significant legal obligations on Phoenix (such as an obligation not to solicit business, not to hire, or to provide indemnification); and .. Contracts that involve employment or consulting services. In addition, contracts that could have a significant impact on Phoenix's financial results or reports must be reviewed by Corporate Finance for business risks and financial implications. Corporate Disclosures As a public company, Phoenix is required to publicly disclose certain information on a regular basis. This includes financial information and other material information about the Company. It is imperative that such information be disseminated in a consistent manner and in accordance with SEC disclosure requirements and Company policy. In order to ensure that information released is accurate and properly disseminated, only certain individuals are authorized to speak on behalf of the Company. Employees are prohibited from speaking with rating agencies, analysts, investors or the press without obtaining prior authorization from the President and Chief Executive Officer. Employees receiving any such inquiries should refer such individuals to the appropriate area for response: .. Members of the Press - to the senior officer, Corporate Communications; .. Rating Agencies - to any officer in the Rating Agency Relations unit; and .. Securities Analysts and Investors - to any officer in the Investor Relations unit. In order to enable the Company to comply with applicable law, Company policy prohibits directors and employees from publicly disclosing any non-public information about the Company's financial performance, other than at times and through methods approved by the Company's President or Chief Financial Officer. Employees are also prohibited from commenting on the Company's stock performance. Accuracy and Retention of Company Records The integrity of Phoenix's records is vital to the Company's continued success. The falsification, misuse or inappropriate alteration of Company documents is strictly prohibited. Phoenix's business transactions must be accurately recorded on the Company's books and records in accordance with generally accepted accounting principles, any other required accounting basis and established Company policy. Financial information must fairly represent all relevant information. The retention and destruction of Company records must follow established Company policies and applicable legal and regulatory requirements. Commitment to Customers Phoenix upholds its commitment to our customers by conducting our business fairly and honestly and maintaining the highest ethical standards in all dealings with customers. Safeguarding Customer Assets Employees have an obligation to safeguard the assets of our customers at all times, and to protect them from all forms of misuse. Misappropriation of funds can include theft, fraud, embezzlement or unauthorized borrowing. Employees must not, under any circumstances, misappropriate funds, property or other assets, or assist another individual in doing so. Ethical Market Conduct The Company expects all who are involved in the sales and marketing of its products and services to abide by the following principles: .. conduct business according to high standards of honesty and fairness; .. provide competent and customer-focused sales and service; .. engage in active and fair competition; .. provide clear, honest and fair advertising and sales materials; .. handle customer complaints and disputes in an appropriate and timely manner; and .. monitor sales and service procedures to help ensure compliance with ethical market conduct. Privacy and Confidential Personal Information It is the responsibility of every employee to maintain the privacy of confidential personal information. Confidential personal information includes non-public financial and health information obtained from consumers and customers in connection with providing a financial product or service. Specific examples of confidential personal information include information concerning assets, income, businesses, estates, financial plans or health. The misuse of confidential personal information could subject the Company and its employees to civil liability or criminal penalties. Before releasing confidential information to anyone, employees must make certain that releasing it is permitted under the Company's policies or authorized in writing by the person to whom it relates. Customer Complaints The Company is committed to fairly and expeditiously handling all customer complaints. All complaints must be handled and reported in accordance with established corporate policies as well as procedures established for the applicable business unit or affiliate. To facilitate resolution of each customer complaint, as well as to facilitate any related regulatory inquiries, all customer complaints and related communications are centrally retained. Fraud The Company strongly supports all efforts to detect and prevent fraud. It believes that only through aggressive action to combat fraud can the Company continue to meet its fundamental obligations to its stockholders and customers. When there is reason to believe that the Company has been the target of fraud or attempted fraud, it will aggressively work with the appropriate law enforcement officials to seek prosecution and conviction of the responsible individual(s). Any employee who is aware or suspects that the Company has been the target of fraud or attempted fraud should report it to the Corporate Audit Department immediately. Insurance Anti-Fraud Plan In accordance with insurance regulatory requirements, the Company has a comprehensive insurance anti-fraud plan that is designed to: .. prevent insurance fraud, including internal fraud involving the Company's officers, employees or agents, fraud resulting from misrepresentations on applications for insurance, and claims fraud; .. report insurance fraud to appropriate law enforcement and regulatory authorities; .. encourage cooperation in the prosecution of insurance fraud cases; and .. aggressively pursue recovery of all sums improperly paid by the Company as a result of fraud. Commitment to Corporate Citizenship Phoenix is committed to being a responsible corporate citizen, which includes complying with applicable laws and regulations of the jurisdictions in which we operate as well as engaging in fair competition in the marketplace. Complying with Legal and Regulatory Requirements The Company expects all employees to conduct business in accordance with all applicable laws and regulations. The laws and regulations related to the financial services industry are complex, thus placing a duty on each employee to take all reasonable steps to ensure his or her actions are in compliance. Compliance with the law does not, however, comprise our entire ethical responsibility. Rather, it is a minimum standard for performance of our duties. (See also the provisions below on Commitment to Ethics and Compliance). Accounting, Internal Accounting Controls and Auditing Matters The Company treats complaints about accounting, internal accounting controls, or auditing matters seriously and expeditiously. Employees have the opportunity to submit confidential and anonymous complaints about accounting or auditing matters for review by representatives of Phoenix, and if appropriate, the Audit Committee of the Board of Directors. These complaints will be handled in a manner that protects the confidentiality and anonymity of the employee when so requested by the employee. (See the Toll-Free Help Line section of this Code, on page 11). No employee will be terminated or otherwise retaliated against for submitting a complaint under this procedure if he or she reasonably believes that the complaint may involve a violation of federal securities or anti-fraud laws. Fair Dealing Each employee must deal fairly with the Company's customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or other unfair-dealing practice. Antitrust The Company is committed to preserving a free and competitive marketplace and will not engage in any understandings or agreements with any competitor that could result in a restraint of trade. Employees must avoid engaging in any conduct that violates the antitrust laws, such as agreements with competitors regarding prices, terms of sale, division of markets and allocations of customers. Discussions with competitors related to market share, projected sales for any specific product or service, revenues and expenses, production schedules, unannounced products and services, pricing or marketing strategies are prohibited. The antitrust laws and, thus, the above prohibitions, also apply to informal contacts with competitors, such as encounters at trade shows or meetings of professional organizations. Every employee has an obligation to avoid situations that could result in a violation of the antitrust laws. Anti-Money Laundering It is the responsibility of every employee to protect the Company from exploitation by individuals engaged in money laundering activities. Accordingly, affected employees must: .. become familiar with the anti-money laundering laws and their requirements as applied to the Company; and .. learn and fully comply with the Company's anti-money laundering policies and procedures. Failure to comply with applicable laws or the Company's policies may result in significant criminal and civil penalties for the Company as well as for those individuals involved. Furthermore, even association with money laundering activity could subject both the Company and its employees to civil and criminal penalties. Lobbying and Political Contributions Lobbying is generally defined as communicating with a public official, or a member of his or her staff, in the legislative or executive branch of government, for the purpose of influencing legislative or administrative action. Lobbying is highly regulated and lobbyists are required to be registered and to report their activities. No employee may engage in lobbying on behalf of Phoenix without prior permission of the Law Department. The giving of gifts to local public officials and members of their staff, whether in the form of meals, tickets to events or otherwise, is strictly regulated by most states and by the federal government. Special restrictions also apply to employees who provide investment management services to public entities. Employees must be careful to distinguish between personal and corporate political activities. Unless specifically requested by the Company to communicate on its behalf on a particular issue, you should identify communications with legislators as expressing your own personal beliefs and not those of Phoenix. The use of Phoenix stationery for any personal political communication is prohibited. Any employee wishing to be a candidate for elective office should consult with his or her supervisor and department head in advance. Questions regarding the Company's position on proposed legislation or regulations should be directed to Government Relations or the Law Department. Foreign Corrupt Practices Act The Foreign Corrupt Practices Act prohibits the payment or authorization of the payment of any money, or the giving of value, directly or indirectly, to a foreign official for the purpose of: .. influencing any act or decision of the foreign official; or .. inducing the foreign official to use his influence to assist in obtaining business for or directing business to any person. A "foreign official" is any person acting in an official capacity on behalf of a foreign government, agency, department or instrumentality. Also included under the term "foreign official" are foreign political parties, officials of political parties and candidates for foreign political office. The Foreign Corrupt Practices Act applies to all directors, employees and agents of the Company. Violation of the act can result in both fines and imprisonment. Copyrights, Trademarks and Patents Employees must avoid infringing upon the intellectual property rights of others. Intellectual property includes copyrights, trademarks, service marks, patents and trade secrets. Improper use includes copying, distributing or modifying third party copyrighted materials without permission. Infringement may result in criminal as well as civil liabilities for Phoenix and its employees. The Company has an agreement with the Copyright Clearance Center that gives a license to Phoenix employees to make photocopies of many publications for business purposes. Questions about the types of copying that are covered by the agreement should be directed to the Corporate Compliance Department. Commitment to Employees Phoenix's employees are our most important asset and we are committed to fostering a work environment in which employees have the opportunity to grow, contribute and participate free from discrimination. Equal Opportunity The Company employs and promotes on the basis of merit and achievement without regard to age, race, gender, color, religion, national origin, ancestry, sexual orientation, marital status, or disability. This policy applies to every phase of the employment process and every aspect of the employment relationship: recruitment, hiring, training, promotions, transfers, terminations, benefits, compensation and participation in Company-sponsored educational, social and recreational programs. Sexual Harassment The Company prohibits sexual harassment in the workplace. Sexual harassment includes: unwelcome sexual advances, requests for sexual favors and other verbal, visual or physical conduct when: .. submission is made either explicitly or implicitly a term or condition of a person's employment; .. submission to or rejection of inappropriate conduct by an employee is used as the basis for employment decisions affecting the employee; or .. the conduct has the purpose or effect of unreasonably interfering with an individual's work performance or creating an intimidating, hostile or offensive working environment. Sexual harassment also includes: unwelcome sexual flirtations and advances; verbal abuse of a sexual nature; inappropriate touching; graphic or verbal comments about an individual's body; displaying in the workplace a sexually suggestive object or picture; and sexually explicit or offensive jokes. Employment of Relatives Except in the limited circumstances described in this section, the Company does not permit the employment of a director's or employee's "relative", which term includes a spouse, domestic partner, child, parent, sibling, step-parent, step-child, step-sibling, grandparent, grandchild, aunt, uncle, nephew, niece, or first cousin including in-laws. Specifically, the Company prohibits the hiring of a "relative" of any director or officer, or of any employee working in the Corporate Audit, Corporate Compliance, Human Resources or Law Departments. Although this policy does not require the termination of any employee who becomes related to a person described in the preceding sentence through a post-hiring event such as marriage or a promotion, any employee who becomes "related" through such an occurrence should promptly advise his or her supervisor. The Company will then take steps to assure that no employee reports to or supervises a relative and that related employees do not work in the same department or report to the same supervisor. The employment of a "relative" of any officer at the level of Executive Vice President or higher will not be permitted or accommodated even if the relationship results from a post-hiring event. Workplace Safety The Company is committed to maintaining a work environment that is safe and healthy for its employees and others. All job-related injuries or illnesses should be reported immediately to your supervisor or Human Resources representative. Questions concerning health and safety matters should also be referred to one of them. The Company does not tolerate acts of violence or threats of violence against employees or Company property. Possession of firearms or other weapons anywhere on Company property or while conducting Company business is prohibited. Any situation or concern involving violent behavior or the threat of violence should be immediately reported to Security or Human Resources. Drugs and Alcohol The sale, purchase, use, possession or transfer of narcotics or other legally controlled substances by employees while on Company premises or on Company business (other than use of prescription drugs in accordance with a physician's orders) is prohibited. Employees attending functions on behalf of the Company where alcohol is served are expected to use good judgment and avoid consuming excessive amounts of alcoholic beverages. Felony Convictions Federal law prohibits the employment by an insurance company, without the consent of the appropriate state insurance department, of any person convicted of a felony involving dishonesty or breach of trust. To assist the Company in fulfilling its responsibilities under this law, employees are required to disclose any felony conviction to the Company at the time of application for employment. Any employee who is subsequently convicted of a felony must report this fact to the Company immediately. Employee Ownership of Phoenix Stock Employees and directors are subject to various requirements governing their ownership of Company stock, including federal securities law and New York insurance law. Please refer to the Insider Trading and Personal Trading section of this Code (at page 1) for more information. Commitment to Ethics and Compliance A strong commitment to business ethics and compliance is the foundation of a successful organization. Every employee is expected to carry out the Company's business activities in an ethical manner and in a fashion consistent with applicable laws, regulations, policies and guidelines. Ethical Decision Making Phoenix's success is dependent on each of us applying the highest ethical standards to whatever we do on behalf of the Company. Employees should consider the following questions before making decisions. .. Is my action consistent with approved Company practices? .. Is my action consistent with the Company's values? .. Does my action give the appearance of impropriety? .. Can I, in good conscience, defend my action to my supervisor, other employees and the general public? .. Does my action meet my personal code of ethical behavior? .. Does my action conform to the spirit of these and all other applicable guidelines? Monitoring Code Compliance The Corporate Compliance and the Corporate Audit Departments are responsible for monitoring the compliance activities of all areas of the Company and for ensuring that this Code of Conduct is being followed. Compliance will be monitored by periodic audits where appropriate. Additionally, the Company's Chief Compliance Officer must report annually to the Audit Committee of the Board of Directors on the level of compliance with our requirement that each employee and director complete the Code of Conduct Acknowledgement and the Conflict of Interest Declaration. Waivers of violations of the Code by directors or by officers with a title of Senior Vice President or higher may only be granted by the Audit Committee or the Board. Such waivers must be promptly reported to shareholders. All other waivers, which may be granted by the Chief Compliance Officer, the President or any Executive Vice President, shall be reported to the Audit Committee but need not be reported to the shareholders. Toll-Free Help Line Phoenix maintains a confidential, 24-hour, toll-free telephone help line for employees for the purpose of requesting assistance concerning, or reporting violations of, this Code or reporting complaints about accounting or auditing matters. The number is: 1-800-813-8180. Assistance is available during regular business hours. If you call outside of regular business hours, you may leave a confidential message and your call will be returned the following business day. Special security measures have been taken with this help line to ensure confidentiality. If you wish to remain anonymous, you may request a case identification number and refer to that number in subsequent phone calls. Obligation to Report Employees are obligated to report suspected violations of this Code to their department head, the Chief Compliance Officer or the Law Department. Whistleblower Protection No retaliation or retribution of any kind will be taken against an employee who, in good faith, reports a suspected violation of this Code. Investigation All allegations of suspected violations will be promptly investigated and appropriate action will be taken. Investigations will be conducted in an objective, professional manner. The specifics of an investigation, including the identity of the individual reporting the information, will be kept confidential except as such disclosure is necessary to fully investigate the allegations, facilitate resolution and/or report the results to appropriate authorities. Disclosure to Government Authorities Certain actions and omissions prohibited by this Code may also violate criminal laws and may subject violators to criminal prosecution. The Law Department will review the results of investigations that indicate potential violations of criminal law and recommend to the appropriate senior officers whether disclosure to appropriate enforcement authorities is warranted. Disciplinary Action for Violations Failure to adhere to this Code, other Company policies or applicable laws or government regulations may result in disciplinary action up to and including termination of employment. Situations in which disciplinary action may be appropriate include the following, insofar as they relate to conduct of the Company's business: .. authorization of or participation in activities that violate the law, government regulations, this Code or other Company policies; .. retaliation, direct or indirect, or encouragement of others to retaliate against a Company employee who reports a suspected violation; .. failure to cooperate with an investigation of suspected violations, including interfering with or obstructing an investigation; and .. failure to report a suspected violation of the law, government regulations, this Code or other Company policies. EX-99.CERT 3 d279098dex99cert.txt CERTIFICATIONS PURSUANT TO SECTION 302 CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, George R. Aylward, certify that: 1. I have reviewed this report on Form N-CSR of The Zweig Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 8, 2012 /s/ George R. Aylward ------------------------------ George R. Aylward, President (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, W. Patrick Bradley, certify that: 1. I have reviewed this report on Form N-CSR of The Zweig Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 8, 2012 /s/ W. Patrick Bradley ------------------------------ W. Patrick Bradley, Treasurer (principal financial officer) EX-99.906CERT 4 d279098dex99906cert.txt CERTIFICATIONS PURSUANT TO SECTION 906 CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, George R. Aylward, President of The Zweig Fund, Inc. (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: March 8, 2012 /s/ George R. Aylward ------------------------------ George R. Aylward, President (principal executive officer) I, W. Patrick Bradley, Treasurer of The Zweig Fund, Inc. (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: March 8, 2012 /s/ W. Patrick Bradley ------------------------------ W. Patrick Bradley, Treasurer (principal financial officer) EX-99.C 5 d279098dex99c.txt REGISTRANTS NOTICE TO SHAREHOLDERS PURSUANT TO RULE 19 (A) [LOGO OF ZWEIG FUND ] FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION: Zweig Funds Shareholder Services (800) 272-2700 zweig@virtus.com THE ZWEIG FUND, INC. DISCLOSES SOURCES OF DISTRIBUTION - SECTION 19A NOTICE NEW YORK, July 7, 2011 - The Board of Directors of The Zweig Fund, Inc. (NYSE: ZF) declared a distribution of $0.090 per share to shareholders of record on July 11, 2011, payable July 18, 2011. The Fund has a Managed Distribution Plan to pay 10 percent of the Fund's net asset value ("NAV") on an annualized basis. The Board believes that regular, fixed cash payouts will enhance shareholder value and serve the long-term interests of shareholders. The following is a required Section 19A notice: You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's Managed Distribution Plan. This notice discloses information on the sources of the distribution as required by SEC Rule 19(a) of the Investment Company Act of 1940 and the Fund's SEC Exemptive Order under Section 19(b) as follows: DISTRIBUTION ESTIMATES JUNE 2011 (QTD) YEAR-TO-DATE (YTD) /(1)/ ---------------------- --------------------- ----------------------- Percentage Percentage Per Share of Current Per Share of Current (Sources) Amount Distribution Amount Distribution --------- --------- ------------ --------- ------------ Net Investment Income $0.001 1.1% $0.001 0.5% Net Realized Short-Term Capital Gains -- 0.0% -- 0.0% Net Realized Long-Term Capital Gains -- 0.0% -- 0.0% Return of Capital (or other Capital Source) 0.089 98.9% 0.183 99.5% TOTAL DISTRIBUTION $0.090 100.0% $0.184 100.0% (1)YTD February 1, 2011 to January 9, 2012. (THE distribution paid on January 10, 2011 was reportable for tax on Form 1099 in 2010) The Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income." The amounts and sources of distributions reported in this Notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. Information regarding the Fund's performance and distribution rates is set forth below. Please note that all performance figures are based on the Fund's NAV and not the market price of the Fund's shares. Performance figures are not meant to represent individual shareholder performance. Average Annual Total Return on NAV for the 5-year period ended June 30, 2011 /(2)/ 3.47% Current Fiscal YTD Annualized Distribution Rate /(3)/ 10.03% YTD Cumulative Total Return on NAV /(4)/ 4.14% YTD Cumulative Distribution Rate /(5)/ 5.01% (2)Average Annual Total Return on NAV is the annual compound return for the five year period. It reflects the change in the Fund's NAV and reinvestment of all distributions. (3)Current Fiscal YTD Annualized Distribution Rate is the Cumulative Distribution Rate annualized as a percentage of the Fund's NAV as of June 30, 2011. (4)YTD Cumulative Total Return on NAV is the percentage change in the Fund's NAV from January 1, 2011 to June 30, 2011, including distributions paid and assuming reinvestment of those distributions. (5)YTD Cumulative Distribution Rate is the dollar value of distributions from January 1, 2011 to June 30, 2011 as a percentage of the Fund's NAV as of June 30, 2011. The Zweig Fund, Inc. is a closed-end fund with an investment objective of increasing capital primarily through investment in equity securities consistent with the preservation of capital and reduction of risk as determined by the fund's investment adviser. The Zweig closed-end funds are advised by Zweig Advisers LLC. For more information on the Fund, please contact Shareholder Services at 800.272.2700, by email at zweig@virtus.com, or visit us on the web at www.virtus.com. ZF Cusip: 989834106 07/11 [LOGO OF ZWEIG FUND] FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION: Zweig Funds Shareholder Services (800) 272-2700 zweig@virtus.com THE ZWEIG FUND, INC. DISCLOSES SOURCES OF DISTRIBUTION - SECTION 19A NOTICE NEW YORK, October 5, 2011 - The Board of Directors of The Zweig Fund, Inc. (NYSE: ZF) declared a distribution of $0.087 per share to shareholders of record on October 10, 2011, payable October 17, 2011. The Fund has a Managed Distribution Plan to pay 10 percent of the Fund's net asset value ("NAV") on an annualized basis. The Board believes that regular, fixed cash payouts will enhance shareholder value and serve the long-term interests of shareholders. The following is a required Section 19A notice: You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's Managed Distribution Plan. This notice discloses information on the sources of the distribution as required by SEC Rule 19(a) of the Investment Company Act of 1940 and the Fund's SEC Exemptive Order under Section 19(b) as follows: DISTRIBUTION ESTIMATES SEPTEMBER 2011(QTD) YEAR-TO-DATE (YTD) /(1)/ ---------------------- --------------------- ----------------------- Percentage Percentage Per Share of Current Per Share of Current (Sources) Amount Distribution Amount Distribution --------- --------- ------------ --------- ------------ Net Investment Income $0.004 5.0% $0.005 1.9% Net Realized Short-Term Capital Gains 0.019 21.7% 0.019 7.0% Net Realized Long-Term Capital Gains -- 0.0% -- 0.0% Return of Capital (or other Capital Source) 0.064 73.3% 0.247 91.1% TOTAL DISTRIBUTION $0.087 100.0% $0.271 100.0% (1)YTD February 1, 2011 to January 9, 2012. (The distribution paid on January 10, 2011 was reportable for tax on Form 1099 in 2010) The Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income." The amounts and sources of distributions reported in this Notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. Information regarding the Fund's performance and distribution rates is set forth below. Please note that all performance figures are based on the Fund's NAV and not the market price of the Fund's shares. Performance figures are not meant to represent individual shareholder performance. Average Annual Total Return on NAV for the 5-year period ended September 30, 2011 /(2)/ -0.36% Current Fiscal YTD Annualized Distribution Rate /(3)/ 11.80% YTD Cumulative Total Return on NAV /(4)/ -10.49% YTD Cumulative Distribution Rate /(5)/ 8.85% (2)Average Annual Total Return on NAV is the annual compound return for the five year period. It reflects the change in the Fund's NAV and reinvestment of all distributions. (3)Current Fiscal YTD Annualized Distribution Rate is the Cumulative Distribution Rate annualized as a percentage of the Fund's NAV as of September 30, 2011. (4)YTD Cumulative Total Return on NAV is the percentage change in the Fund's NAV from January 1, 2011 to September 30, 2011,including distributions paid and assuming reinvestment of those distributions. (5)YTD Cumulative Distribution Rate is the dollar value of distributions from January 1, 2011 to September 30, 2011 as a percentage of the Fund's NAV as of September 30, 2011. The Zweig Fund, Inc. is a closed-end fund with an investment objective of increasing capital primarily through investment in equity securities consistent with the preservation of capital and reduction of risk as determined by the fund's investment adviser. The Zweig closed-end funds are advised by Zweig Advisers LLC. For more information on the Fund, please contact Shareholder Services at 800.272.2700, by email at zweig@virtus.com, or visit us on the web at www.virtus.com. ZF Cusip: 989834106 10/11 [LOGO OF ZWEIG FUND] FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION: Zweig Funds Shareholder Services (800) 272-2700 zweig@virtus.com THE ZWEIG FUND, INC. DISCLOSES SOURCES OF DISTRIBUTION - SECTION 19A NOTICE NEW YORK, January 9, 2012 - The Board of Directors of The Zweig Fund, Inc. (NYSE: ZF) declared a distribution of $0.082 per share to shareholders of record on December 30, 2011, payable January 9, 2012. The Fund has a Managed Distribution Plan to pay 10 percent of the Fund's net asset value ("NAV") on an annualized basis. The Board believes that regular, fixed cash payouts will enhance shareholder value and serve the long-term interests of shareholders. The following is a required Section 19A notice: You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's Managed Distribution Plan. This notice discloses information on the sources of the distribution as required by SEC Rule 19(a) of the Investment Company Act of 1940 and the Fund's SEC Exemptive Order under Section 19(b) as follows: DISTRIBUTION ESTIMATES DECEMBER 2011(QTD) YEAR-TO-DATE (YTD) /(1)/ ---------------------- --------------------- ----------------------- Percentage Percentage Per Share of Current Per Share of Current (Sources) Amount Distribution Amount Distribution --------- --------- ------------ --------- ------------ Net Investment Income $0.006 7.0% $0.011 3.1% Net Realized Short-Term Capital Gains 0.053 64.7% 0.072 20.4% Net Realized Long-Term Capital Gains -- 0.0% -- 0.0% Return of Capital (or other Capital Source) 0.023 28.3% 0.270 76.5% TOTAL DISTRIBUTION $0.082 100.0% $0.353 100.0% (1)YTD February 1, 2011 to January 9, 2012. (The distribution paid on January 10, 2011 was reportable for tax on Form 1099 in 2010) The Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income." The amounts and sources of distributions reported in this Notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. Information regarding the Fund's performance and distribution rates is set forth below. Please note that all performance figures are based on the Fund's NAV and not the market price of the Fund's shares. Performance figures are not meant to represent individual shareholder performance. Average Annual Total Return on NAV for the 5-year period ended December 31, 2011 /(2)/ 0.53% Current Fiscal YTD Annualized Distribution Rate /(3)/ 10.83% YTD Cumulative Total Return on NAV /(4)/ -1.18% YTD Cumulative Distribution Rate /(5)/ 10.83% (2)Average Annual Total Return on NAV is the annual compound return for the five year period. It reflects the change in the Fund's NAV and reinvestment of all distributions. (3)Current Fiscal YTD Annualized Distribution Rate is the Cumulative Distribution Rate annualized as a percentage of the Fund's NAV as of December 30, 2011. (4)YTD Cumulative Total Return on NAV is the percentage change in the Fund's NAV from January 1, 2011 to December 31, 2011, including distributions paid and assuming reinvestment of those distributions. (5)YTD Cumulative Distribution Rate is the dollar value of distributions from January 1, 2011 to December 31, 2011 as a percentage of the Fund's NAV as of December 30, 2011. The Zweig Fund, Inc. is a closed-end fund with an investment objective of increasing capital primarily through investment in equity securities consistent with the preservation of capital and reduction of risk as determined by the fund's investment adviser. The Zweig closed-end funds are advised by Zweig Advisers LLC. For more information on the Fund, please contact Shareholder Services at 800.272.2700, by email at zweig@virtus.com, or visit us on the web at www.virtus.com. ZF Cusip: 989834106