================================================================================
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 811-05620
The Zweig Total Return Fund, Inc
-------------------------------------------------------
(Exact name of registrant as specified in charter)
900 Third Avenue
New York, NY 10022
------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Bank of New York.
101 Barclay St., 13E
New York, NY 10286
--------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 298-1635
Date of fiscal year end: December 31, 2003
Date of reporting period: December 31, 2003
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, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
================================================================================
Item 1. Reports to Stockholders.
February 1, 2004
Dear Shareholder:
When we think about 2003, we'll remember a year in which financial services
underwent significant change. National news events reflected regulatory concern
regarding the business conduct of a few mutual fund companies. As a result,
certain industry-wide practices came under increased scrutiny. Your fund's
Board of Trustees recognizes the seriousness of these issues. As a result, it
has expanded its review of policies and procedures to insure compliance with
applicable rules and regulations. Additionally, the Board has undertaken a
review of its own structure and governance protocols to insure that our
practices are not only compliant with regulatory standards, but, whenever
practical, also conform to best practices that value your interests and help
you invest wisely.
The Zweig Total Return Fund announced new management effective April 1,
2003. Carlton Neel and David Dickerson have managed the Fund since that time in
conjunction with the asset allocation strategies provided by Dr. Martin Zweig
and his advisory firm Zweig Consulting LLC. Mr. Neel and Mr. Dickerson
currently manage several other funds in the Phoenix open-end mutual fund
complex, including the Phoenix-Market Neutral fund, and several small-cap value
portfolios. The Fund's investment objectives have remained the same under the
new management.
I hope that you'll take time to review the activities and performance
information included in this Zweig Total Return Fund Annual Report.
The Zweig Total Return Fund's net asset value increased 3.18% for the three
months ended December 31, 2003, including the $0.067 in reinvested
distributions. Consistent with our policy of seeking to minimize risks, while
earning reasonable returns, the Fund's average overall exposure during the
quarter was approximately 80%.
For the year ended December 3l, 2003 the Fund's net asset value gained
7.08%, including the $0.477 in reinvested distributions. During the same
period, the S&P 500 Index increased 28.71% and the Lehman Brothers Government
Bond Index increased 2.35%. Our average overall exposure to the bond and equity
markets for the year was approximately 68%.
The Fund recently announced a distribution of $0.010 payable on January 12,
2004, to holders of record on December 3l, 2003. Including this distribution,
the Fund's total payout since its inception is now $12.523.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
Chairman
MARKET OUTLOOK
Our bond exposure at year-end was 62% with average duration (a measure of
sensitivity to interest rates) of 2.8 years. On September 30 our bond exposure
was 34% with average duration of 2.9 years. If we were fully invested, we would
be at 62.5% in bonds and 37.5% in stocks. Consequently, at 62% we are at 99% of
a full investment (62 divided by 62.5%).
The resurgent economy and strong stock market drove investors away from
Treasury securities and pushed interest rates generally higher during the year.
The yield on the bellwether 10-year Treasury note began the year at 3.82% and
rose to 4.5% by year-end. Despite the advance in yields, the coupon yield of
roughly 4% on the Treasury note was sufficient to eke out a slight gain for the
year.
Treasury prices rallied in the first and second quarters as yields fell to a
45-year low of
3.1% in early June. Much of the year's first-half rally was fueled by the
Federal Reserve's pledge to fight deflationary forces in the economy, including
possible buy-backs of longer maturity bonds. For the first half of the year
10-year notes returned 4.6%.
Bonds did not react well to the Fed's cut of 25 basis points on June 23 that
took the overnight rate to 1.00%. Many investors were hoping for, or even
counting on, a half-point cut. Their fears that the prospect for lower interest
rates had come to the end of the road were confirmed by much stronger economic
data in July and August. The 10-year note lost 7.08% in July, the worst monthly
return for Treasuries in over twenty years. August saw a rebound with more than
half of the losses erased. Generally speaking, the third quarter was one of the
most volatile and difficult quarters the bond market has ever experienced. By
September 30 the 10-year note had lost 1.87% and the yield had risen to 3.93%.
Things settled down for the bond market in the fourth quarter and the
10-year note traded in a range between 4% and 4.5%. Most analysts believe the
Fed will tighten monetary policy this year and increase its overnight rate from
1.00%. Consequently, most investors are cautious on the bond outlook for 2004.
We held a high duration and committed to bonds for most of the first half of
2003 and trimmed our exposure in a timely way at mid-year. While we generally
share the prevailing cautious outlook for the bond market, we are perhaps a bit
more sanguine for the near term. We believe it is unlikely that the Fed will
raise rates before the November elections. As always, we will remain flexible
and stick to the dictates of our research.
Our exposure in U.S. common stocks at the year-end was 23% against 19% on
September 30, 2003. At 23% we are at about 61% of a full position (23% divided
by 37.5%).
After slipping for three consecutive years, the stock market surged in 2003.
The Dow Jones Industrial Average gained 25.3%, the Standard & Poor's 500 Index
climbed 28.67%, and the NASDAQ Composite Index jumped 50%.
Several factors were responsible for the market's strong performance. First,
there was the outcome of the Iraq war. When it started, many people worried
about its duration and sold stock. When the war went well, the market started
to bounce back from an oversold position. Secondly, investors awoke to the fact
that the economy was actually improving and that earnings were coming in nicely.
I believe the rally in the last three or four months of the year was spurred
by economic news exceeding even the most bullish expectations. The Gross
Domestic Product soared 8.2% in the third quarter and the fourth quarter
appeared quite strong. Also, earnings were extremely good, rising 11.6% for the
third quarter, the biggest quarterly increase since 1992.
Traditionally, the market does not do well when the GDP is extraordinarily
high or when earnings are really great. That's usually when inflation begins to
pick up and the Federal Reserve starts to tighten. But that hasn't happened
this time. Instead, the Fed held its interest rate at one percent despite the
rising economy. With interest rates low and the economy advancing, all the
speculative money went into the stock market.
When the Fed held interest rates steady at its December meeting, it
reiterated that its cheap money policy could be maintained for "a considerable
period." It also said that the risk of a fall in inflation was almost equal to
a rise. In addition, the Fed saw equal upside and downside risks for achieving
sustainable economic growth over the next few quarters.
I think that the Fed is right about the diverse pressures on prices but
that's about the only thing I agree with. There are some deflationary
2
threats in the world, especially from the constant lowering of prices on
imported goods stemming from low foreign labor costs. However commodity prices
around the world have leaped. China, whose economy is booming, is possibly the
biggest buyer of oil, copper, and a host of other commodities. This translates
into some inflationary pressures.
Right now I think we are heading into bubble number two. It's not like
bubble number one but the market is extremely overvalued and there's an awful
lot of optimism, as measured by my sentiment model. I believe many people
rationalize the high price/earnings ratios because short term interest rates
are so low. Rates have nowhere to go on the downside but in my opinion, there's
plenty of room on the upside and we are getting inflationary pressures. Should
rates rise, it will be impossible to justify the current price to earnings
ratios. However if earnings continue to be strong, then who knows? Maybe the
market can continue to rise.
The stock market was much less volatile last year. There were only 15 days
in which the Dow gained or declined 2% compared with 48 in 2002, 25 in 2001,
and 31 in 2000. Ironically, the market historically does best coming off a
period of very high volatility. Although this indicator doesn't work all the
time, the lack of volatility frequently is a sign of complacency.
Meanwhile, money is pouring into stock mutual funds. The public invested
more than $150 billion in the funds since the market began to rally last March,
the fastest inflow since the market peak in 2000. November's inflow of $15
billion was the eighth consecutive month of positive inflows. Despite three
years of losses, mutual fund assets are up 13% since the end of 2002. So far
inflows have helped the market but at some point they will be overdone. If this
is a bubble, it is very possible that the high inflows could continue for a
year or two or even longer. The last bubble began in 1996 and didn't end until
2000.
There is nothing wrong with the stock market rising but, at these
valuations, I just don't know. Because these valuations are totally out of
whack with previous market bottoms, I still don't believe the bottoms we have
seen will be the final market bottom. Last year the price/earnings ratio of the
S&P 500 fell to about 27 from 32. However this is still substantially above the
historical average of 16. Meanwhile the NASDAQ 100 is selling at 40 times
estimated 2004 earnings. Incidentally, I still believe that many earnings are
overstated. I believe we still have many of the accounting problems and, for
the most part, there is no recognition of the expense of stock options.
One of the reasons I don't think the major trend bear market is over is the
low level of cash at mutual funds. In November, the last month for which
figures are available, the average stock mutual fund had only 4.6% of its
assets in cash.* Normally at a stock market bottom you would see something like
9% or 10% in cash. I believe one reason for the present figure is that index
funds are not holding any cash. I believe another reason is that many portfolio
managers are afraid to carry cash because they think the real risk is lagging
the market and not of the market crashing while they are 100% invested. Until I
see higher levels of cash, I will remain skeptical.
As analysts are getting more bullish, insiders are selling more stock.
During November insiders sold $43 in stock for every dollar's worth they
bought. It was the seventh consecutive month in which the sell-buy ratio topped
twenty to one.* We have tested the insider numbers extensively. Because some
insider sales involve the exercise of options, we just look at the amount
they're buying. We have found that their purchases, relative to market
capitalization, are very, very low. It doesn't mean that insiders are always
right -- they sometimes are not -- but it is one of the negative signs for the
market in my sentiment model.
Another negative in the model is margin debt. Although it is down roughly
half from its
3
2000 peak, it hasn't dropped nearly enough relative to what has occurred
historically after major bear markets. It does not mean that the market can't
go higher but I would not be wild about any further increases in margin debt.
Short-selling indicators, on the other hand, are decent. The short interest
ratio, which is the short position divided by the average daily volume, isn't
bad, especially on NASDAQ. It is one of my few sentiment indicators that is
okay, in my opinion.
One market positive last year was the tax bill that lowered the tax on
dividends. That has helped the market. Companies in the S&P 500 are estimated
to have paid a record of $160.6 billion to shareholders in 2003, up from $147.8
billion in 2002. More companies are initiating disbursements and others are
increasing theirs. Unfortunately, dividend yields are very low. The S&P yield
now is 1.6% and the Dow is 2%. Although yields look good relative to short-term
rates, I think they don't offer much protection on the downside.
In a market where the dividend yield is, say, 6%, which we get at major
market bottoms, investors have real protection if the market declines. Many
investors seeking value would come into the market. Should the market dip
moderately or mark time, the 6% figure would look good. If short-term interest
rates rise, the current dividend yields would not look nearly as attractive as
they are today.
Although consumer confidence has climbed quite a bit from its lows, with the
Conference Board reporting a 91.3 figure for December, I see danger on the
horizon. The Fed reported that total consumer debt hit a record of $1.98
trillion in October. Since consumer spending accounts for about 75% of the GDP,
the extremely high debt presents a troubling question: Where will the juice
come to keep this economy going? Consumers have carried the economy but I don't
know how they can keep increasing their debt at a fast enough rate. The problem
might ease if more people get jobs or real income rises but with all the
foreign competition, I believe that will be difficult.
Even more troublesome is the growing federal deficit that some analysts say
could hit $500 billion this year. As the late Senator Everett Dirksen once
said, you take a billion here and a billion there, and pretty soon it adds up
to real money. This number is staggering. I can't even comprehend $500 billion
in deficits. I believe it's fine to run a deficit to stimulate the economy
during a recession, but when the economy is growing the deficit should be
narrowing. If it keeps widening, at some point it would put upward pressure on
interest rates that could hurt the economy.
Indicating a strong economy, the Institute for Supply Management's index of
manufacturing activity surged to 66.2 in December from 62.8 in November and was
the highest in twenty years. But, historically, this figure has a downside.
When it has been in the bottom 20% of all readings, anything below 47, the
market has gone up at a 16.9% annual rate. In the top 20% of all readings, any
number above 59, the market has gone up only three-tenths of a percent.
That's because the stock market is a forward looking, discounting mechanism.
So when the economy is limp and the ISM index is weak, I think it is usually a
good time to buy stocks. Turn back the clock a year or so, and that's the
period we were going through. Now with the economy booming, we've had several
great quarters in a row and the ISM index is off the charts. Historically, when
we get these kinds of readings, the Fed would be tightening. If the Fed
continues to sit on its hands, it is possible that the stock market momentum
will continue and we will get further into bubble number two.
These are very unusual times. We have a political situation the likes of
which we have never seen. If there is a major terrorist attack on our country,
the whole stock market could fall apart. We are running a budget deficit, which
is okay in a recession, but we are not in a recession anymore. A lot of the
spending is mandated for homeland security and we have to support our
4
troops overseas. But if we don't narrow our deficit, it is likely the dollar
will get weaker. It is already down 20% against the euro and 10% against the
Japanese yen.
Worse to me than the budget deficit is the massive trade deficit. Some
believe that the weak dollar is great for our economy because it helps our
exports. But if we buy more expensive Japanese television sets or German cars
or Italian shoes, or other foreign products are we really better off
economically? What's more, if the weak dollar causes foreigners to sell their
U.S. assets it could put upward pressure on bond yields and downward pressure
on stocks. If we don't do something to strengthen the dollar we could wind up
with a real economic headache.
Summing up, in my opinion the positives include the tape action with its
very favorable ratio of advances versus declines. The strong earnings are also
a positive, although they have a negative potential. As long as earnings are
good, people feel confident about the market. The problem is that the expanding
economy usually leads to higher interest rates. We haven't seen them yet. So
another positive for the time being is the Fed keeping its gas pedal to the
metal but eventually that will create difficulties down the road.
On the negative side are my sentiment indicators that are terrible on
balance, the horrible valuations and the weak dollar. So far the weak dollar
has helped to stimulate the economy but, if it slides further, it could be
nasty.
If nothing disastrous happens to the world and the Fed keeps cheap money, I
could see the market going up 20% to 30% but it would be kind of a bubble
period. If bad things occur in the world, I could see the market dropping 20%
to 30%.
Because of the risks involved on all sides, I am currently on the fence. We
are about 57% invested in U.S. common stocks. Could I go to 60%? Yes, but I
don't want to increase too much because of the downside risk. My mandate is to
mitigate risk. If we are lagging the market a bit, fine. But, if there's a
sharp downturn, I would kick myself for being heavily invested because I know
about all the previously mentioned important negatives.
If everything stays comfortably stable for the next three or six months,
this market could go a lot higher. However it just doesn't have a good feel to
me because I still don't think we have touched the final bottom yet. The
current situation reminds me of when the Japanese market peaked at the end of
1989. For the next thirteen years or so they had a long-term bear market.
Within that span they had three or four really big upward moves that were
small bull markets. Of course a small bull market could be up 50% and that's
what we have already seen in the NASDAQ. While NASDAQ is nowhere near its high,
some averages have actually made new highs. However the whole picture just
doesn't make me feel comfortable and I don't want to roll the dice with other
people's money. I am not straddling the fence because I think the market will
go sideways. I believe it could be volatile on the upside or the downside.
Sincerely,
/s/ Martin E. Zweig, Ph.D.
Martin E. Zweig, Ph.D.
President
Zweig Consulting LLC
--------
* Source: Zweig Consulting LLC
5
PORTFOLIO COMPOSITION
In accordance with our investment policy guidelines, all our bonds are U.S.
Government obligations. Since these bonds are highly liquid, they provide the
flexibility to respond promptly to changing market conditions.
Our leading equity groups at year-end included financials, health care,
technology, consumer discretionary, and energy. We added to our holdings of
consumer discretionary during the quarter.
Our leading individual positions in U.S. equities included Citigroup,
Occidental Petroleum, Pfizer, ConocoPhillips, Wells Fargo, Alcoa, Cisco
Systems, Altria Group, Proctor & Gamble, and Excelon Corp. During the quarter
we added to our positions in Occidental Petroleum, Conoco Phillips, and Proctor
& Gamble. We trimmed our positions in Dell, Bank of America, Microsoft, Amgen,
and Mylan Laboratories, all of which had appeared in our previous listing.
Sincerely,
[SIGNATURE]
/s/ Carlton Neel
Carlton Neel
Executive Vice President
Phoenix/Zweig Advisers LLC
6
THE ZWEIG TOTAL RETURN FUND, INC.
INVESTMENTS AND SECURITIES SOLD SHORT
December 31, 2003
Number of
Shares Value
--------- ------------
INVESTMENTS
DOMESTIC COMMON STOCKS 23.57%
CONSUMER DISCRETIONARY 3.26%
AutoZone, Inc................................. 17,000(a) $ 1,448,570
Best Buy Co., Inc............................. 30,000(a) 1,567,200
Delphi Corp................................... 158,000 1,613,180
GAP (The), Inc................................ 121,000 2,808,410
Home Depot, Inc............................... 70,000(b) 2,484,300
Liz Claiborne, Inc............................ 44,000 1,560,240
Lowe's Cos., Inc.............................. 35,000(b) 1,938,650
Tribune Co.................................... 34,500 1,780,200
Visteon Corp.................................. 186,000 1,936,260
============
17,137,010
============
CONSUMER STAPLES 2.35%
Altria Group, Inc............................. 60,000(b) 3,265,200
Coca-Cola Enterprises, Inc.................... 70,000 1,530,900
Kimberly-Clark Corp........................... 30,000 1,772,700
PepsiCo, Inc.................................. 26,100 1,216,782
Procter & Gamble Co........................... 32,000 3,196,160
Wal-Mart Stores, Inc.......................... 26,000 1,379,300
============
12,361,042
============
ENERGY 1.82%
ConocoPhillips................................ 54,000 3,540,780
Halliburton Co................................ 64,000 1,664,000
Occidental Petroleum Corp..................... 103,000 4,350,720
============
9,555,500
============
FINANCIALS 4.77%
AFLAC, Inc.................................... 46,000(b) 1,664,280
Allstate Corp................................. 30,600 1,316,412
Aon Corp...................................... 92,000 2,202,480
Bank of America Corp.......................... 32,000 2,573,760
Capital One Financial Corp.................... 31,000(b)(c) 1,899,990
Citigroup, Inc................................ 94,000 4,562,760
First Tennessee National Corp................. 43,000 1,896,300
Morgan Stanley................................ 28,000 1,620,360
National City Corp............................ 47,000 1,595,180
See notes to financial statements
7
Number of
Shares Value
--------- ------------
FINANCIALS (CONTINUED)
Wachovia Corp................................ 48,000 $ 2,236,320
Wells Fargo & Co............................. 59,800 3,521,622
============
25,089,464
============
HEALTH CARE 4.07%
Amgen, Inc................................... 22,000(a) 1,359,600
Angiotech Pharmaceuticals, Inc............... 38,000(a) 1,748,000
Bristol-Myers Squibb Co...................... 90,000 2,574,000
C. R. Bard, Inc.............................. 22,000 1,787,500
Caremark RX, Inc............................. 66,000(a) 1,671,780
Guidant Corp................................. 22,000 1,324,400
McKesson Corp................................ 44,000 1,415,040
Merck & Co., Inc............................. 43,000 1,986,600
Mylan Laboratories, Inc...................... 75,000 1,894,500
Pfizer, Inc.................................. 109,000 3,850,970
UnitedHealth Group, Inc...................... 30,400 1,768,672
============
21,381,062
============
INDUSTRIALS 2.18%
Boeing Co.................................... 22,900 965,006
Deere & Co................................... 28,000 1,821,400
L-3 Communications Holdings, Inc............. 38,000(a) 1,951,680
Lockheed Martin Corp......................... 33,000 1,696,200
Norfolk Southern Corp........................ 81,000 1,915,650
Northrop Grumman Corp........................ 15,000 1,434,000
PACCAR, Inc.................................. 19,000 1,617,280
Quality Distribution, Inc.................... 2,500(a) 48,875
============
11,450,091
============
INFORMATION TECHNOLOGY 2.33%
Amdocs Ltd................................... 79,000(a) 1,775,920
Cisco Systems, Inc........................... 135,000(a) 3,279,150
Dell, Inc.................................... 55,000(a) 1,867,800
First Data Corp.............................. 30,700 1,261,463
Internet Security Systems, Inc............... 100,000(a) 1,883,000
Microsoft Corp............................... 79,000 2,175,660
============
12,242,993
============
MATERIALS 1.17%
Alcoa, Inc................................... 91,000 3,458,000
Georgia-Pacific Corp......................... 88,000 2,698,960
============
6,156,960
============
See notes to financial statements
8
Number of
Shares Value
--------- ------------
TELECOMMUNICATION SERVICES 0.28%
CenturyTel, Inc.............................. 45,000 $ 1,467,900
============
UTILITIES 1.34%
Entergy Corp................................. 39,000 2,228,070
Exelon Corp.................................. 48,000(b) 3,185,280
PPL Corporation.............................. 38,000 1,662,500
============
7,075,850
============
Total Domestic Common Stocks (cost $106,580,630). 123,917,872
============
FOREIGN COMMON STOCKS 4.96%
CONSUMER DISCRETIONARY 0.27%
Honda Motor Co., Ltd. ADR (Japan)............ 63,000(b) 1,417,500
------------
ENERGY 0.54%
Talisman Energy, Inc. (Canada)............... 23,800 1,347,080
Total S.A., ADR (France)..................... 16,000 1,480,160
------------
2,827,240
------------
INFORMATION TECHNOLOGY 0.41%
Nokia Corp., ADR (Finland)................... 126,000 2,142,000
------------
MATERIALS 3.74%
BHP Billiton Ltd. (Australia)................ 536,905 4,931,227
Freeport-McMoRan Copper & Gold, Inc., Class B
(Indonesia)................................ 68,000(b) 2,864,840
Newcrest Mining Ltd. (Australia)............. 353,352 3,447,713
Rio Tinto Ltd. (Australia)................... 169,789 4,758,897
WMC Resources Ltd. (Australia)............... 862,083(a) 3,656,885
------------
19,659,562
------------
Total Foreign Common Stocks (cost $21,113,225)... 26,046,302
------------
PREFERRED STOCKS 4.92%
FINANCIALS 4.92%
ABN Amro North America, 144A, 8.75% Pfd...... 13,500(d) 14,027,351
Citibank NA Series A, 6.34% Pfd.............. 42,000(a) 4,252,500
JP Morgan Chase & Co., Inc. Pfd.............. 75,100(a) 7,585,100
============
Total Preferred Stocks (cost $26,117,269)........ 25,864,951
============
See notes to financial statements
9
Principal
Amount Value
----------- -------------
U.S. GOVERNMENT SECURITIES 42.11%
U.S TREASURY BONDS 2.54%
United States Treasury Bonds, 6.38%, 8/15/27...... $11,500,000 $ 13,359,769
=============
U.S. TREASURY NOTES 39.57%
United States Treasury Notes, 2.00%, 8/31/05...... 11,250,000 11,326,028
United States Treasury Notes, 3.50%, 11/15/06..... 40,000,000 41,357,840
United States Treasury Notes, 4.75%, 11/15/08..... 9,000,000 9,637,740
United States Treasury Notes, 5.00%, 8/15/11...... 20,000,000 21,409,380
United States Treasury Notes, 6.00%, 8/15/09...... 21,900,000 24,812,875
United States Treasury Notes, 12.75% 11/15/10..... 83,000,000 99,499,569
=============
208,043,432
=============
Total U.S. Government Securities (cost $219,892,304)... 221,403,201
=============
AGENCY NON-MORTGAGE BACKED SECURITIES 20.33%
Federal Home Loan Mortgage Corp., 2.70%, 5/28/08.. 24,900,000 25,001,891
Federal National Mortgage Association, 3.00%,
6/15/04......................................... 55,000,000 55,464,420
Federal National Mortgage Association, 3.15%,
5/28/08......................................... 26,570,000 26,411,430
=============
Total Agency Non-Mortgage Backed Securities (cost
$107,060,983)........................................ 106,877,741
=============
SHORT-TERM INVESTMENT 3.60%
Federal National Mortgage Association, 0.75%,
1/02/04 (cost $18,899,606)...................... 18,900,000 18,899,606
=============
Total Investments (cost $499,664,017) -- 99.49%........ 523,009,673
Securities Sold Short (proceeds $12,645,146) -- (2.68)% (14,078,390)
Other assets less liabilities -- 3.19%................. 16,755,862
=============
Net Assets -- 100%..................................... $ 525,687,145
=============
--------
(a) Non-income producing security.
(b) Position, or portion thereof, with an aggregate market value of
$16,259,910 has been segregated to collateralize securities sold short.
(c) Position is segregated as collateral for written options.
(d) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003 these securities amounted to a value of $14,027,351 or 2.66% of net
assets.
Glossary:
ADR -- American Depositary Receipt
For Federal income tax purposes, the tax basis of investments owned at
December 31, 2003 was $501,475,674 and net unrealized depreciation of
investments consisted of:
Gross unrealized appreciation........ $28,494,347
Gross unrealized depreciation........ (6,960,348)
- - -----------
Net unrealized appreciation.......... $21,533,999
= = ===========
See notes to financial statements
10
Number of
Shares Value
--------- -----------
SECURITIES SOLD SHORT 2.68%
DOMESTIC COMMON STOCKs 2.68%
CONSUMER DISCRETIONARY 1.05%
Circuit City Stores, Inc................. 200,000 $ 2,026,000
Ford Motor Co............................ 180,000 2,880,000
Tiffany & Co............................. 14,000 632,800
===========
5,538,800
===========
FINANCIALS 0.92%
Bank of New York Co., Inc. (The)......... 73,000 2,417,760
Marsh & McLennan Cos., Inc............... 51,000 2,442,390
===========
4,860,150
===========
HEALTH CARE 0.44%
Cephalon, Inc............................ 48,000 2,323,680
===========
INDUSTRIALS 0.27%
Expeditors International of Washington, Inc. 36,000 1,355,760
===========
Total Securities Sold Short (proceeds $12,645,146).. $14,078,390
===========
--------
For Federal income tax purposes, the tax basis of securities sold short at
December 31, 2003 was $12,645,146 and net unrealized depreciation of
investments consisted of:
Gross unrealized appreciation.. $ 66,397
Gross unrealized depreciation.. (1,499,641)
-----------
Net unrealized appreciation.... $(1,433,244)
===========
See notes to financial statements
11
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
ASSETS
Investments, at value (identified cost $499,664,017)..... $523,009,673
Foreign currency at value (identified cost $45,065)...... 46,162
Cash..................................................... 95,902
Deposits with broker for securities sold short........... 14,110,510
Interest receivable...................................... 3,051,845
Dividends receivable..................................... 198,709
Prepaid expenses......................................... 18,444
------------
Total Assets......................................... 540,531,245
------------
LIABILITIES
Securities sold short, at value (proceeds $12,645,146)... 14,078,390
Options written, at value (premiums received $50,218).... 58,900
Payable for investment securities purchased.............. 52,686
Accrued advisory fees (Note 4)........................... 309,515
Accrued administration fees (Note 4)..................... 57,481
Other accrued expenses................................... 287,128
------------
Total Liabilities.................................... 14,844,100
------------
NET ASSETS $525,687,145
============
NET ASSET VALUE, PER SHARE
($525,687,145 / 92,198,271 shares outstanding -- Note 5). $ 5.70
============
Net Assets consist of
Capital paid-in.......................................... $555,169,343
Undistributed net investment income...................... 241,103
Accumulated net realized loss on investments............. (51,628,128)
Net unrealized appreciation on investments............... 23,338,071
Net unrealized depreciation on securities sold short..... (1,433,244)
------------
$525,687,145
============
See notes to financial statements
12
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003
INVESTMENT INCOME
Income
Interest................................................................. $11,273,935
Dividends (net of foreign withholding taxes of $11,429).................. 2,927,100
-----------
Total Income.......................................................... 14,201,035
-----------
Expenses
Investment advisory fees................................................. 3,650,911
Administrative fees...................................................... 678,026
Transfer agent fees...................................................... 233,278
Printing and postage expenses............................................ 214,976
Professional fees........................................................ 164,428
Directors' fees and expenses............................................. 140,266
Custodian fees........................................................... 68,381
Miscellaneous............................................................ 236,506
-----------
Expenses before dividends on short sales.............................. 5,386,772
Dividends on short sales sales........................................ 145,288
-----------
Net Expenses.......................................................... 5,532,060
-----------
Net Investment Income............................................. 8,668,975
-----------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
Net realized gain (loss) on:
Investments.............................................................. 2,657,308
Foreign currency transactions............................................ (16,884)
Short sales.............................................................. (2,380,900)
Net change in unrealized appreciation (depreciation) on:
Investments.............................................................. 26,774,934
Options written.......................................................... (8,682)
Foreign currency and foreign currency transactions....................... 1,097
Short sales.............................................................. (1,433,244)
-----------
Net realized and unrealized gain...................................... 25,593,629
-----------
Net increase in net assets resulting from operations ............. $34,262,604
===========
See notes to financial statements
13
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended
December 31,
--------------------------
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income ............................................... $ 8,668,975 $ 13,274,132
Net realized gain (loss)............................................. 259,524 (46,196,296)
Net change in unrealized appreciation (depreciation) ................ 25,334,105 14,187,264
------------ ------------
Net increase (decrease) in net assets resulting from
operations...................................................... 34,262,604 (18,734,900)
------------ ------------
Dividends and distributions to shareholders from
Net investment income................................................ (11,504,964) (15,669,836)
Tax return of capital................................................ (32,358,803) (40,926,499)
------------ ------------
Total dividends and distributions to shareholders................. (43,863,767) (56,596,335)
------------ ------------
Capital share transactions
Net asset value of shares issued to shareholders in reinvestment
of distributions resulting in issuance of common stock............. 2,524,990 6,439,612
------------ ------------
Net increase in net assets derived from capital share
transactions....................................................... 2,524,990 6,439,612
------------ ------------
Net decrease in net assets........................................... (7,076,173) (68,891,623)
NET ASSETS
Beginning of year........................................................ 532,763,318 601,654,941
------------ ------------
End of year (including undistributed net investment income of
$241,103 and $4,404,654, respectively)................................. $525,687,145 $532,763,318
============ ============
See notes to financial statements
14
THE ZWEIG TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
NOTE 1 -- Organization
The Zweig Total Return 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 July 21, 1988. The Fund's objective is to seek the highest total
return, consisting of capital appreciation and current income, consistent with
the preservation of capital.
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 accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. Portfolio Valuation
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. Debt securities are valued
on the basis of broker quotations or valuations provided by a pricing service
which, in determining value, utilizes information with respect to recent sales,
market transactions in comparable securities, quotations from dealers and
various relationships between securities. Short-term investments having a
remaining maturity of 60 days or less are valued at amortized cost which
approximates market value. Securities for which market quotations are not
readily available, (of which there were none at December 31, 2003) and other
assets, if any, are valued at fair value as determined under procedures
approved by the Board of Directors of the Fund.
B. Security Transactions and Investment Income
Security transactions are recorded on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Discount and premium on securities purchased other than short-term
securities are accreted on the constant yield method over the life of the
respective securities.
Realized gains and losses on sales of investments are determined on the
identified cost basis for financial reporting and tax purposes.
15
C. Federal Income Tax Information
It is the policy of the Fund to comply with the requirements of the Internal
Revenue Code ("the Code"), applicable to regulated investment companies, and to
distribute all of its taxable income to its shareholders. In addition, the Fund
intends to distribute an amount sufficient to avoid the imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision for federal
income taxes or excise taxes has been made.
D. Dividends and Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. Income
and capital gain distributions are determined in accordance with tax
regulations that may differ from generally accepted accounting principles.
These differences include the treatment of premium amortization, losses
deferred due to wash sales, differing treatment of certain income and gain
transactions, and the timing of distributions. For financial reporting
purposes, book basis capital accounts are adjusted to reflect the tax character
of permanent book/tax differences. The reclassifications have no impact on the
net assets or net asset value of the Fund. As of December 31, 2003, the Fund
decreased undistributed net investment income by $1,327,562, increased
accumulated net realized loss by $4,574,891 and increased paid in capital by
$5,902,453.
The components of distributable earnings on a tax basis (excluding
unrealized appreciation (depreciation) which is disclosed in the schedule of
Investments and Securities Sold Short) consist of undistributed ordinary income
of $0 and undistributed long-term capital gains of $0. The Fund has $51,333,052
of capital loss carryovers, $46,558,126 expiring in 2010 and $4,774,926
expiring in 2011 which may be used to offset future capital gains. The Fund may
not realize the benefits 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.
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 separate that portion of the results of operations arising from
changes in exchange rates and that portion arising from changes in the market
prices of the securities.
F. Forward currency contracts
The Fund may enter into forward currency contracts in conjunction with the
planned purchase or sale of foreign denominated securities in order to hedge
the U.S. dollar cost or proceeds. Forward currency contracts involve, to
varying degrees, elements of market risk in excess of the amount recognized in
the Statement of Assets and Liabilities. Risks arise from the possible
movements in foreign exchange rates or if the counterparty does not perform
under the contract.
16
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in
market value is recorded by each Fund as an unrealized gain or loss. When the
contract is closed or offset with the same counterparty, the Fund records a
realized gain or loss equal to the change in the value of the contract when it
was opened and the value at the time it was closed or offset.
G. Options
The Fund may write covered options or purchase options contracts for the
purpose of hedging against changes in the market value of the underlying
securities of foreign currencies.
The Fund will realize a gain or loss upon the expiration or closing of the
option transaction. Gains and losses on written options are reported separately
in the Statement of Operations. When a written option is exercised, the
proceeds on sales or amounts paid are adjusted by the amount of premium
received. Options written are reported as a liability in the Statement of
Assets and Liabilities and subsequently marked-to-market to reflect the current
value of the option. The risk associated with written options is that the
change in value of options contracts may not correspond to the change in the
value of the hedged instruments.
The Fund may purchase options which are included in the Fund's schedule of
Investments and securities sold short and subsequently marked-to-market to
reflect the current value of the option. When a purchased option is exercised,
the cost of the security is adjusted by the amount of the premium paid.
H. Short Sales
A short sale is a transaction in which the Fund sells a security it does not
own in anticipation of a decline in market price. To sell a security short, the
Fund must borrow the security. The Fund's obligation to replace the security
borrowed and sold short will be fully collateralized at all times by the
proceeds from the short sale retained by the broker and by cash and securities
deposited in a segregated account with the Fund's custodian. If the price of
the security sold short increases between the time of the short sale and the
time the Fund replaces the borrowed security, the Fund will realize a loss, and
if the price declines during the period, the Fund will realize a gain. Any
realized gain will be decreased by, and any realized loss increased by, the
amount of transaction costs. Dividends on short sales are recorded as an
expense to the Fund on ex-dividend date. At December 31, 2003, the value of
securities sold short amounted to $14,078,390 against which collateral of
$16,259,910 was held. The collateral includes the deposits with broker for
securities held short and the value of the segregated investments held long, as
shown in the schedule of Investments and Securities Sold Short. Short selling
used in the management of the Fund may accelerate the velocity of potential
losses if the prices of securities sold short appreciate quickly. Stocks
purchased may decline in value at the same time stocks sold short appreciate in
value, thereby increasing potential losses.
NOTE 3 -- Portfolio Transactions
During the year ended December 31, 2003, purchases and sales transactions
(excluding short-term instruments, securities sold short, written options and
forward currency contracts) were as follows:
Purchases Sales
------------ ------------
Investment securities..... $220,917,664 $334,496,031
U.S. government securities 215,000,206 11,500,227
17
Transactions in written options for the year ended December 31, 2003, were
as follows:
Number of Premiums
Contracts Received
--------- --------
Option contracts outstanding at December 31, 2002 -- $ --
Option contracts written......................... 310 50,218
Option contract sold............................. -- --
Option contracts exercised....................... -- --
Option contracts expired......................... -- --
--- -------
Option contracts outstanding at December 31, 2003 310 $50,218
=== =======
Par Par
Subject Subject Expiration Exercise Market
Call Option Written to Call to Put Date Price Value
------------------- ------- ------- ---------- -------- -------
Capital One Financial Corp. 310 n/a 03/20/2004 $65.00 $58,900
NOTE 4 -- Investment Advisory Fees and Other Transactions with Affiliates
a) Investment Advisory Fee: The Investment Advisory Agreement (the
"Agreement") between Phoenix/Zweig Advisers LLC (the "Adviser"), the Fund's
investment 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.
Phoenix/Zweig Advisers LLC is a wholly-owned subsidiary of Phoenix Investment
Partners, Ltd. ("PXP"). PXP is an indirect, wholly-owned subsidiary of The
Phoenix Companies, Inc. ("PNX"). The responsibility for making decisions to
buy, sell or hold a particular investment rests with the Adviser, subject to
review by the Board of Directors and the applicable provisions of the Act. For
the services provided by the Adviser under the Agreement, the Fund pays the
Adviser a monthly fee equal, on an annual basis, to 0.70% of the Fund's average
daily net assets. During the year ended December 31, 2003, the Fund accrued
advisory fees of $3,650,911.
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 Fee: Phoenix Equity Planning Corporation ("PEPCO"), an
indirect wholly-owned subsidiary of PNX, serves as the Fund's Administrator
(the "Administrator") pursuant to an Administration Agreement with the Fund.
Under the terms of the Agreement the Administrator receives a fee for financial
reporting, tax services and oversight of the subagent's performance at a rate
of 0.13% of the Fund's average daily net assets. During the year ended December
31, 2003, the Fund accrued administration fees of $678,026.
c) Directors' Fee: The Fund pays each Director who is not an interested
person of the Fund or the Adviser a fee of $10,000 per year plus $1,500 per
Directors' or committee meeting attended, together with the out-of-pocket costs
relating to attendance at such meetings. Any Director of the Fund who is an
interested person of the Fund or the Adviser receives no remuneration from the
Fund.
d) Brokerage Commissions: During the year ended December 31, 2003, the Fund
paid PXP Securities Corp., a wholly-owned subsidiary of PXP, brokerage
commissions of $0 in connection with portfolio
18
transactions effected through them. In addition, PXP Securities Corp. charged
$51,698 in commissions for transactions effected on behalf of the participants
in the Fund's Automatic Reinvestment and Cash Purchase Plan.
NOTE 5 -- Capital Stock and Reinvestment Plan
At December 31, 2003, the Fund had one class of common stock, par value
$.001 per share, of which 500,000,000 shares are authorized and 92,198,271
shares are outstanding.
Registered shareholders may elect to receive all distributions in cash paid
by check mailed directly to the shareholder by EquiServe as dividend paying
agent. Pursuant to the Automatic Reinvestment and Cash Purchase Plan (the
"Plan"), shareholders not making such election will have all such amounts
automatically reinvested by EquiServe, as the Plan agent, in whole or
fractional shares of the Fund, as the case may be. During the year ended
December 31, 2003 and the year ended December 31, 2002, 436,543 and 1,001,040
shares, respectively, were issued pursuant to the Plan.
On December 31, 2003, the Fund announced a distribution of $0.01 per share
to shareholders of record on December 31, 2003. This distribution has an
ex-dividend date of January 5, 2004 and is payable on January 12, 2004.
NOTE 6 -- Financial Highlights
Selected data for a share outstanding throughout each year:
Year Ended December 31,
-----------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Per Share Data
Net asset value, beginning of period.... $ 5.81 $ 6.63 $ 7.48 $ 7.89 $ 8.43
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .................. 0.09 0.15 0.18(a) 0.30 0.28
Net realized and unrealized gains
(losses) .............................. 0.27 (0.35) (0.32)(a) 0.02 (0.01)
-------- -------- -------- -------- --------
Total from investment operations ....... 0.36 (0.20) (0.14) 0.32 0.27
-------- -------- -------- -------- --------
Dividends and Distributions
Anti-dilutive effect of share
repurchase program..................... -- -- -- 0.01 0.01
-------- -------- -------- -------- --------
Dividends from net investment income.... (0.12) (0.17) (0.22) (0.30) (0.28)
Distributions from net realized gains... -- -- -- (0.25) (0.13)
Tax return of capital................... (0.35) (0.45) (0.49) (0.19) (0.41)
-------- -------- -------- -------- --------
Total dividends and distributions ...... (0.47) (0.62) (0.71) (0.74) (0.82)
-------- -------- -------- -------- --------
Net asset value, end of period....... $ 5.70 $ 5.81 $ 6.63 $ 7.48 $ 7.89
======== ======== ======== ======== ========
Market value, end of period **....... $ 5.01 $ 5.49 $ 7.05 $ 6.57 $ 6.50
======== ======== ======== ======== ========
Total investment return***.............. (0.40)% (14.06)% 18.73% 12.64% (18.72)%
======== ======== ======== ======== ========
Ratios/Supplemental Data
Net assets, end of period (in thousands) $525,687 $532,763 $601,655 $671,056 $714,637
Ratio of expenses to average net assets
(does not include the dividends on
short sales)........................... 1.03% 0.99% 1.04% 1.00% 0.97%
Ratio of expenses to average net assets
(includes the dividends on short sales) 1.06% 0.99% 1.04% 1.00% 0.97%
Ratio of net investment income to
average net assets..................... 1.66% 2.37% 2.51% 3.87% 3.50%
Portfolio turnover rate................. 94.1% 90.8% 86.3% 121.6% 172.3%
19
--------
**Closing Price -- New York Stock Exchange.
***Total investment return is calculated assuming a purchase of common stock on
the opening of the first business day and a sale on the closing of the last
business day of each period reported. Dividends and distributions, if any,
are assumed for the 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.
(a)As required, effective January 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of the change for the year
ended December 31, 2001 is shown below. Per share ratios and supplemental
data for periods prior to January 1, 2001, have not been restated to reflect
this change in presentation.
Decrease net investment income.............................. $(.02)
Increase net realized and unrealized gains and losses....... $ .02
Decrease ratio of net investment income..................... (.23)%
UNAUDITED DISCLOSURES
Proxy Voting Procedures
The Adviser votes proxies relating to portfolio securities in accordance
with procedures that have been approved by the Fund's Board of Trustees. You
may obtain a description of these procedures, free of charge, by calling
"toll-free" 800-243-1574. This information is also available through the
Securities and Exchange Commission's website at http://www.sec.gov.
Tax Information Notice
For Federal income tax purposes, 17.2% of the current year net income
earned dividends paid by the Zweig Total Return Fund will qualify for the
dividends received deduction for corporate shareholders when paid.
Effective for the calendar year 2003, qualified dividends will be taxed at
a lower rate for individual shareholders. 17.4% of the ordinary income
dividends distributed by the Zweig Total Return Fund and applicable to
qualifying dividends received after January 1, 2003, will qualify for the
lower tax rate. This Fund plans to designate the maximum amount allowable
under the Jobs and Growth Tax Relief Reconciliation Act. The actual
percentage for the calendar year will be designated in the year-end tax
statements.
20
Report of Independent Auditors
To the Board of Directors and Shareholders of The Zweig Total Return Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and securities sold short, 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 Total Return Fund, Inc. (the "Fund") at December 31, 2003, the result
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 auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
New York, New York
February 18, 2004
21
FUND MANAGEMENT
Information pertaining to the Directors and officers of the Fund is set
forth below. The address of each individual, unless otherwise noted, is c/o
Phoenix/Zweig Advisers LLC, 900 Third Avenue, New York, NY 10022.
Number of
Portfolios
in Fund
Term of Office Complex
Name, (Age), Address and Length of Overseen by Principal Occupation(s)
and Position(s) with Fund Time Served Director During Past 5 Years and Other Directorships Held
------------------------- ----------------- ----------- ---------------------------------------------------------
DISINTERESTED DIRECTORS
Charles H. Brunie (73)...... Term: Until 2006. 2 Director of The Zweig Fund, Inc. (since 1998);
Brunie Associates Served since: Chairman, Brunie Associates (investments) (since April
600 Third Avenue, 17th Floor 1988. 2001); Chairman, Oppenheimer Capital (1969 to 2000);
New York, NY 10016 Chairman Emeritus, Board of Trustees, Manhattan
Institute (since 1990). Trustee, Milton and Rose D.
Director Friedman Foundation for Vouchers (1999-present).
Trustee, Hudson Institute (since 2002). Trustee,
American Spectator (since 2002).
Wendy Luscombe (52)......... Term: Until 2005. 2 Director of The Zweig Fund, Inc. (since 2002); Principal,
480 Churchtown Road Served since: WKL Associates, Inc. (investment management) (since
Craryville, NY 12521 2002. 1994). Fellow, Royal Institution of Chartered Surveyors.
Member, Chartered Institute of Arbitrators. Director,
Director Endeavour Real Estate Securities, Ltd. REIT Mutual
Fund (since 2000). Director, PXRE, Corp. (reinsurance)
(since 1994). Member and Chairman of Management
Oversight Committee, Deutsche Bank Real Estate
Opportunities Fund (since 2003)
Alden C. Olson (76)......... Term: Until 2004. 2 Director of The Zweig Fund, Inc. (since 1996); currently
2711 Ramparte Path Served since: retired. Chartered Financial Analyst (since 1964).
Holt, MI 48842 1996. Professor of Financial Management, Investments at
Michigan State University (1959 to 1990).
Director
James B. Rogers, Jr. (61)... Term: Until 2006. 2 Director of The Zweig Fund, Inc. (since 1986); private
352 Riverside Drive Served since: investor (since 1980). Chairman, Beeland Interests
New York, NY 10025 1988. (investments and media) (since 1980). Regular
Commentator on CNBC (1998). Author of "Investment
Director Biker: On the Road with Jim Rogers" (1994) and
"Adventure Capitalist" (2003). Visiting Professor,
Columbia University (1998). Columnist, WORTH
Magazine (since 1995). Director, Emerging Markets
Brewery Fund (1993-2002). Director, Levco Series Trust
(since 1996).
22
Number of
Portfolios
in Fund
Term of Office Complex
Name, (Age), Address and Length of Overseen by Principal Occupation(s)
and Position(s) with Fund Time Served Director During Past 5 Years and Other Directorships Held
------------------------- ---------------- ----------- ---------------------------------------------------------
INTERESTED DIRECTORS
Philip R. McLoughlin (57) Term: until 2004 78 Chairman of the Board and President of The Zweig
56 Prospect Street Served since: Fund, Inc. (since 2002); Consultant, Phoenix Investment
Hartford, CT 06115 2002. Partners, Ltd. (since 2002). Director, PXRE Corporation
(Delaware) (since 1985), World Trust Fund (since
Chairman of the Board and 1991). Chairman (1997-2002), Director (1995-2002), Vice
President Chairman (1995-1997) and Chief Executive Officer
(1995-2002), Phoenix Investment Partners, Ltd.
Director, Executive Vice President and Director Chief
Investment Officer, The Phoenix Companies, Inc. (2000-
2002). (1994-2002) and Executive Vice President,
Investments (1987-2002), Phoenix Life Insurance
Company. Director (1983-2002) and Chairman (1995-
2002), Phoenix Investment Counsel, Inc. Director (1982-
2002) and President (1990-2000), Phoenix Equity
Planning Corporation. Chairman and Chief Executive
Officer, Phoenix/Zweig Advisers LLC (2000-2002).
Director (2001-2002) and President (April 2002--
September 2002), Phoenix Investment Management
Company. Director and Executive Vice President,
Phoenix Life and Annuity Company (1996-2002).
Director (1995-2002) and Executive Vice President
(1994-2002), PHL Variable Insurance Company.
Director, Phoenix National Trust Company (1996-2002).
Director (1985-2002) and Vice President (1986-2002),
PM Holdings, Inc. Director, WS Griffith Associates, Inc.
(1995-2002). Director (1992-2002) and President (1993-
1994), WS Griffith Securities, Inc.
DIRECTOR NOMINEES
R. Keith Walton (39)..... 2 Secretary of the University at Columbia University
15 Claremont Avenue (since 1996). Director (since 2000); Chair, Nominating
No. 43 Committee (since 2002); Member, Executive Committee
New York, NY 10027 (since 2002); Chair, Audit Committee (since 2003),
Apollo Theater Foundation, Inc. Director, Orchestra of
St. Luke's (since 2000). Director, American Friends of
the Royal Court Theatre (since 2003). Member, Steering
Committee, Association for a Better New York (since
2001). Member, Education Committee of the Board,
Trinity School (since 2003). Vice President (since 2000),
Chair, Finance Committee (since 2000), Riverside
Church. Member, Advisory Board, North General
Hospital (since 2002). Member, NY Advisory Board,
Enterprise Foundation (since 1999). Member, Council
on Foreign Relations (since 1997). Member, The
American Law Institute (since 1999). Member, Council
for the United States and Italy (since 1999). Member,
Century Association (since 2000).
23
Number of
Portfolios
in Fund
Term of Office Complex
Name, (Age), Address and Length of Overseen by Principal Occupation(s)
and Position(s) with Fund Time Served Director During Past 5 Years and Other Directorships Held
------------------------- -------------- ----------- -------------------------------------------------------
OFFICERS WHO ARE NOT DIRECTORS
Carlton Neel (36)........ Served since: Executive Vice President of The Zweig Fund, Inc. (since
900 Third Ave. 2003. 2003); Senior Vice President and Portfolio Manager,
New York, NY 10022 Phoenix/Zweig Advisers LLC (since 2003). Managing
Director and Co-Founder, Shelter Rock Capital
Executive Vice President Partners, LP (2002-2003). Senior Vice President and
Portfolio Manager, Phoenix/Zweig Advisers LLC (1995-
2002). Vice President, JP Morgan & Co. (1990-1995).
David Dickerson (36)..... Served since: Senior Vice President of The Zweig Fund, Inc. (since
900 Third Ave. 2003. 2003); Senior Vice President and Portfolio Manager,
New York, NY 10022 Phoenix/Zweig Advisers LLC (since 2003). Managing
Director and Co-Founder, Shelter Rock Capital
Vice President Partners, LP (2002-2003). Vice President and Portfolio
Manager, Phoenix/Zweig Advisers LLC (1993-2002).
Nancy J. Engberg (47).... Served since: Secretary of The Zweig Fund, Inc. (since 2000); Vice
56 Prospect Street 2000. President and Chief Compliance Officer (since
Hartford, CT 06115 December 2003) and Vice President and Investment
Counsel (2002-2003), The Phoenix Companies, Inc. and
Secretary its insurance company subsidiaries; Vice President and
Counsel, Phoenix Investment Partners, Ltd. (since
1999). Counsel, Phoenix Home Life Mutual Insurance
Company (1994 to 1999).
Nancy Curtiss (51)....... Served since: Treasurer of The Zweig Fund, Inc. (since 2003); Vice
56 Prospect Street 2003. President, Operations (since 2003); Vice President,
Hartford, CT 06115 Fund Accounting (1994-2003) and Treasurer (1996-
2003), Phoenix Equity Planning Corporation. Treasurer,
Treasurer multiple funds in Phoenix Fund Complex (since 1994).
24
THE ZWEIG TOTAL RETURN FUND, INC.
YEAR END RESULTS
Total Return
on Net Asset Net Asset NYSE Premium
Value Value Share Price (Discount)
------------ --------- ----------- ----------
Year ended 12/31/2003........... 7.08% $5.70 $ 5.01 (12.11%)
Year ended 12/31/2002........... (3.3%) 5.81 5.4900 (5.5%)
Year ended 12/31/2001........... (1.9%) 6.63 7.0500 6.3%
Year ended 12/31/2000........... 5.7% 7.48 6.5700 (12.2%)
Year ended 12/31/1999........... 3.9% 7.89 6.5000 (17.6%)
Year ended 12/31/1998........... 8.8% 8.43 8.8750 5.3%
Year ended 12/31/1997........... 14.6% 8.61 9.4375 9.6%
Year ended 12/31/1996........... 6.3% 8.29 8.0000 (3.5%)
Year ended 12/31/1995........... 17.7% 8.63 8.6250 (0.1%)
Year ended 12/31/1994........... (1.9%) 8.11 8.0000 (1.4%)
Year ended 12/31/1993........... 10.7% 9.11 10.7500 18.0%
Year ended 12/31/1992........... 2.1% 9.06 10.0000 10.4%
Year ended 12/31/1991........... 20.1% 9.79 10.6250 8.5%
Year ended 12/31/1990........... 4.2% 9.02 8.6250 (4.4%)
Year ended 12/31/1989........... 14.9% 9.59 9.7500 1.7%
Inception 9/30/88-12/31/88...... 1.1% 9.24 9.1250 (1.2%)
--------------------------------------------------------------------------------
KEY INFORMATION
1-800-272-2700 Zweig Shareholder Relations:
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.
-----------------
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.
25
OFFICERS AND DIRECTORS
Philip R. McLoughlin
Chairman of the Board and President
Carlton Neel
Executive Vice President
David Dickerson
Senior Vice President
Nancy J. Engberg
Secretary
Nancy Curtiss
Treasurer
Charles H. Brunie
Director
Wendy Luscombe
Director
Alden C. Olson, Ph.D.
Director
James B. Rogers, Jr.
Director
Investment Adviser
Phoenix/Zweig Advisers LLC
900 Third Avenue
New York, NY 10022
Fund Administrator
Phoenix Equity Planning Corporation
56 Prospect St.
PO Box 150480
Hartford, CT 06115-0480
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer Agent
EquiServe Trust Co., NA
PO Box 43010
Providence, RI 02940-3010
Legal Counsel
Katten Muchin Zavis Rosenman
575 Madison Avenue
New York, NY 10022
Independent Auditors
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
--------------------------------------------------------------------------------
This report is transmitted to the shareholders of The Zweig Total Return
Fund, Inc. for their information. This is not a prospectus, circular or
representation intended for use in the purchase of shares of the Fund or any
securities mentioned in this report.
PXP 1336
3206-ANN (12/03)
Annual Report
Zweig
The Zweig Total
Return Fund, Inc.
December 31, 2003
[GRAPHIC]
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.
(b) 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 description.
(c) 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 this item's instructions.
Item 3. Audit Committee Financial Expert.
The registrant does not have an audit committee financial expert at this time
because none of the registrant's board of directors meets the technical
definition of such an expert in form N-CSR. The audit committee of the board is
in compliance with I) applicable rules of the listing requirements for
closed-end fund audit committees, including the requirement that all members of
the audit committee be "financially literate" and that at least one member of
the audit committee have "accounting or related financial management expertise",
as determined by the board."
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
$55,500 and $58,000.
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 $0 and $1,000.
These services are for a review of the semi annual report.
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 $7,000 and $5,700. "Tax Fees" are those
primarily associated with 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 and
excise 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.
(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 Total Return 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 no-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) 100%
(c) 100%
(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 $46,250 and $248,000 respectively.
(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.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
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 Phoenix/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
Total Return 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.
E. This Statement of Policy shall be presented to the Board of Trustees
annually for their amendment and/or approval.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. 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 last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 11. 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 Section 302 of the Sarbanes-Oxley Act of
2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are attached hereto.
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 Total Return Fund, Inc.
------------------------------------------------
By (Signature and Title)* /s/ Daniel T. Geraci
-----------------------------------
Daniel T. Geraci, President
(principal executive officer)
Date March 5, 2004
------------------------------------
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/ Daniel T. Geraci
-----------------------------------
Daniel T. Geraci, President
(principal executive officer)
Date March 5, 2004
------------------------------------
By (Signature and Title)* /s/ Nancy G. Curtiss
-----------------------------------
Nancy G. Curtiss, Treasurer
(principal financial officer)
Date March 5, 2004
------------------------------------
/*/ Print the name and title of each signing officer under his or her signature.