<PAGE>
OFFICERS AND DIRECTORS
Martin E. Zweig, Ph.D.
Chairman of the Board and President
Jeffrey Lazar
Vice President and Treasurer
Stuart B. Panish
Vice President and Secretary
Edward S. Babbitt, Jr.
Director
Charles H. Brunie
Director
Elliot S. Jaffe
Director
Alden C. Olson, Ph.D.
Director
James B. Rogers, Jr.
Director
Anthony M. Santomero, Ph.D.
Director
Robert E. Smith
Director
INVESTMENT ADVISER
Zweig Total Return Advisors, Inc.
900 Third Avenue
New York, New York 10022
FUND ADMINISTRATOR
Zweig/Glaser Advisers
5 Hanover Square
New York, New York 10004
CUSTODIAN
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02109
TRANSFER AGENT
First Data Investor Services Group, Inc.
P.O. Box 1376
Boston, MA 02104
LEGAL COUNSEL
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
- --------------------------------------------------------------------------------
This report is transmitted to the shareholders of The Zweig Total Return
Fund, Inc. for their information. This is not a prospectus, circular or repre-
sentation intended for use in the purchase of shares of the Fund or any securi-
ties mentioned in this report.
[LOGO OF THE ZWEIG TOTAL RETURN FUND, INC.]
QUARTERLY REPORT
SEPTEMBER 30, 1996
<PAGE>
November 1, 1996
Dear Shareholder:
The Zweig Total Return Fund's net asset value increased 1.6% during the
quarter ended September 30, 1996, including $0.21 per share in reinvested
distributions.
For the nine months ended September 30, 1996, the Fund"s net asset value
rose 2.0% including $0.63 per share in reinvested distributions. Maintaining
our risk-averse policy, the Fund's average overall exposure during the period
was 73%.
We underperformed the market because our basic mandate is to protect capital
in declining markets while earning reasonable returns in rising markets. Our
exposure levels were based on my indicators which were reading neutral or low
neutral. This worked in our favor in July when the market went down. As my
indicators improved, we then raised our exposure somewhat. In retrospect, I
wish we had increased it more but our move was in line with my indicators. As
we pass through bull, bear, and stagnant markets over the long run, I believe
our Fund will continue to provide risk-averse investors with above-average
returns.
DISTRIBUTION DECLARED
In accordance with our policy of distributing 10% of net asset value per
year, which equals 0.83% per month (10% divided by 12 months), the Fund
announced a distribution of $0.07 per share payable on November 25, 1996 to
shareholders of record on November 12, 1996. The amount of the distribution
depends on the exact net asset value at the time of declaration. For the
November distribution, 0.83% of the Fund's net asset value was equivalent to
$0.07 per share. Including this distribution, the Fund's payout since its
inception is now $7.40.
MARKET OUTLOOK
At the close of the third quarter our bond exposure was at 36% compared with
44% on June 30. However we have increased our holdings in the long end and
decreased our intermediate term holdings. Consequently, the actual duration of
our bonds remains at the four-year level. Since our fully invested portion for
bonds would be 62 1/2%, we are at about 58% of a full position (36%/62 1/2%).
This is in line with my neutral stance for bonds.
Low inflation continues to be the major positive factor for the bond market.
With the glaring exception of crude oil, commodity prices have been relatively
weak. That would include everything from copper to lumber as reflected in
indices compiled by the Commodity Research Bureau and the Journal of Commerce.
Bond market momentum is also on the positive side. Bond yields went up by
more than 1.2 percentage points or 120 basis points from January to mid-year.
Yields then backtracked 30 to 35 basis points to about 6.8% at this writing.
Short-term rates have also declined somewhat.
On the other hand, we have indicators that measure what the economy is
doing. These include such factors as employment data, industrial production,
capacity utilization, retail sales, home sales, and consumer confidence.
Basically, these indicators are pointing to economic strength and this could
be a negative for bonds.
The September decision by the Fed not to tighten probably helped bonds in
the short run. However, if the economy picks up steam because of the Fed's
decision, it could hurt bonds.
Our equity holdings were at 24% at the end of the third quarter, unchanged
from the level on
<PAGE>
June 30. With full investment in stocks at 37 1/2% for stocks in our Fund, we
are at about 64% of a full position (24%/37 1/2%). This is roughly in
accordance with my neutral position on stocks.
PORTFOLIO COMPOSITION
In accordance with our investment policy guidelines, all of our bonds are
U.S. Government obligations. As mentioned earlier, the average duration of the
bond portion of our Fund is four years. These bonds are liquid and provide us
with the flexibility to respond quickly to changes in market conditions.
As has been the case since the beginning of 1995, the majority of our stocks
are bought or sold on the basis of a proprietary computer-driven model that
uses various value and growth criteria to evaluate and rank the most liquid
stocks with the highest dividend yields.
There was little change in the composition of our leading industry groups
during the third quarter. However our exposure declined in paper and forest
products and increased in the oil and retail groups.
The retail section is new to our leading categories. Here we have expanded
our positions in the following: American Stores, which owns and operates food
and drug stores nationwide; TJX Companies, whose chains include T.J. Maxx,
Winners Apparel, Ltd., HomeGoods, and Marshalls; and Dayton-Hudson, whose
holdings include the Target and Mervyn's chains, as well as many other
department stores.
At September 30, 1996, oils represented our largest industry group, followed
closely by utilities. Other prominent categoriesinclude telecommunications,
financial services, technology and retail.
Our leading individual company positions include Sprint, BankAmerica,
Telefonica de Espana, TJX, United Technologies, Texaco, CSX, Salomon, General
Motors, Class H and DuPont.
Sincerely,
/s/ Martin E. Zweig
Martin E. Zweig, Ph.D.
Chairman
2
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C> <C>
Common Stocks 28.49%
Aerospace & Defense 1.40%
General Motors Corp., Class H.......................... 47,400 $ 2,737,350
Rockwell International Corp. .......................... 33,000 1,860,375
Textron, Inc. ......................................... 11,400 969,000
United Technologies Corp. ............................. 26,600 3,195,325
-----------
8,762,050
-----------
Automotive 0.92%
Chrysler Corp. ........................................ 82,200 2,325,975
Ford Motor Company..................................... 50,200 1,568,750
General Motors Corp. .................................. 38,300 1,838,400
-----------
5,760,125
-----------
Banks 0.86%
BankAmerica Corp. ..................................... 45,400 3,728,475
Chase Manhattan Corp. ................................. 14,000 1,121,750
City National Corp. ................................... 13,700 248,312
Washington Mutual, Inc. ............................... 6,900 257,025
-----------
5,355,562
-----------
Chemicals 1.62%
du Pont (E.I.) de Nemours & Co. ....................... 31,000 2,735,750
Goodrich (B.F.) & Co. ................................. 43,500 1,962,937
Hanna (M.A.) Co. ...................................... 30,000 686,250
Olin Corp. ............................................ 20,900 1,755,600
Rhone-Poulenc Co., S.A., ADR........................... 21,100 590,800
Rohm & Haas Co. ....................................... 36,100 2,364,550
-----------
10,095,887
-----------
Construction & Farm Equipment 0.61%
Caterpillar Inc. ...................................... 24,500 1,846,688
Deere & Co. ........................................... 47,600 1,999,200
-----------
3,845,888
-----------
Consumer Durables 0.42%
Goodyear Tire & Rubber Co. ............................ 39,500 1,821,938
Maytag Corp. .......................................... 35,700 696,150
SPX Corp. ............................................. 3,200 95,600
-----------
2,613,688
-----------
</TABLE>
3
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ----------
<S> <C> <C>
Containers & Packaging 0.42%
Sea Containers Ltd., Class A.................................... 12,100 $ 237,463
----------
Finance & Financial Services 1.80%
Alex Brown Inc. ................................................ 10,000 578,750
American Bankers Insurance Group, Inc. ......................... 11,500 575,000
Bear Stearns & Co., Inc. ....................................... 74,840 1,740,030
Edwards, (A.G.) Inc. ........................................... 50,100 1,459,163
Fremont General Corp. .......................................... 19,600 578,200
Merrill Lynch & Co., Inc. ...................................... 33,000 2,165,625
PaineWebber Group, Inc. ........................................ 31,400 659,400
PHH Corp. ...................................................... 22,600 672,350
Salomon Inc. ................................................... 62,500 2,851,562
----------
11,280,080
----------
Food & Beverage 0.11%
Adolph Coors Co., Class B....................................... 29,900 655,931
----------
Home Builders & Materials 0.19%
Apogee Enterprises, Inc. ....................................... 11,900 416,500
Armstrong World Industries, Inc. ............................... 9,800 611,275
Ryland Group Inc. .............................................. 12,200 181,475
----------
1,209,250
----------
Investment Companies 1.65%
Blackrock 2001 Term Trust, Inc. .............................. 29,000 224,750
Blackrock Strategic Term Trust, Inc. ......................... 29,000 224,750
Central European Equity Fund.................................. 6,900 133,688
Clemente Global Growth Fund, Inc. ............................ 13,100 108,075
Emerging Germany Fund, Inc. .................................. 48,700 389,600
Emerging Markets Infrastructure, Inc. ........................ 20,800 226,200
Emerging Markets Telecommunications Fund, Inc. ............... 11,400 200,925
Emerging Mexico Fund, Inc. ................................... 13,500 97,875
Europe Fund, Inc. ............................................ 17,000 265,625
First Iberian Fund, Inc. ..................................... 13,500 119,812
First Israel Fund, Inc. ...................................... 12,000 135,000
France Growth Fund, Inc. ..................................... 24,500 254,187
G.T. Global Developing Markets Fund........................... 6,600 72,600
G.T. Global Eastern Europe Fund............................... 36,400 505,050
Gabelli Equity Trust, Inc. ................................... 25,700 237,725
Gabelli Global Multimedia Trust Fund, Inc. ................... 50,600 347,875
Global Health Sciences Fund, Inc. ............................ 54,600 975,975
John Hancock Bank & Thrift Opportunity Fund................... 21,400 564,425
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ----------
<S> <C> <C>
Investment Companies (Continued)
Liberty All-Star Growth Fund, Inc. ........................... 33,400 $ 325,650
Morgan Grenfell Small Cap Fund, Inc. ......................... 31,033 333,605
New Age Media Fund, Inc. ..................................... 17,300 263,825
New Germany Fund, Inc. ....................................... 68,800 946,000
Pilgrim America Bank & Thrift Fund, Inc....................... 20,100 278,887
Royce Value Trust, Inc. ...................................... 55,960 706,495
Schroder Asian Growth Fund.................................... 6,700 81,237
Scudder New Asia Fund......................................... 8,400 110,250
Scudder New Europe Fund, Inc. ................................ 26,900 369,875
Spain Fund, Inc. ............................................. 21,000 207,375
Swiss Helvetia Fund, Inc. .................................... 36,200 769,250
Templeton China World Fund, Inc. ............................. 18,400 213,900
Templeton Dragon Fund, Inc. .................................. 6,900 94,013
Templeton Vietnam Fund, Inc. ................................. 6,600 75,075
Tri-Continental Corp. ........................................ 18,800 470,000
----------
10,329,574
----------
Leisure 0.33%
Brunswick Corp. .............................................. 51,700 1,240,800
Fleetwood Enterprises, Inc. .................................. 26,400 811,800
----------
2,052,600
----------
Manufacturing 0.86%
Duriron Co., Inc. ............................................ 8,900 235,850
Harsco Corp. ................................................. 8,400 529,200
Ingersoll Rand Co. ........................................... 9,400 446,500
Johnson Controls, Inc. ....................................... 10,400 780,000
Miller (Herman), Inc. ........................................ 29,500 1,194,750
Premark International Inc. ................................... 13,200 249,150
Simpson Industries Inc. ...................................... 15,900 160,987
TRW, Inc. .................................................... 19,000 1,767,000
----------
5,363,437
----------
Metals & Mining 0.38%
British Steel, Plc, ADR....................................... 50,700 1,546,350
Oregon Steel Mills Inc. ...................................... 55,500 853,312
----------
2,399,662
----------
</TABLE>
5
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<S> <C> <C>
Oil & Oil Services 4.73%
Ashland Oil Inc. ..................................... 54,400 $ 2,162,400
British Petroleum Co., Plc, ADR....................... 16,600 2,075,000
Chevron Corp. ........................................ 13,000 814,125
Elf Aquitaine, ADR.................................... 43,300 1,704,938
Helmerich & Payne, Inc. .............................. 21,400 933,575
Kerr-McGee Corp. ..................................... 31,000 1,887,125
Mobil Corp. .......................................... 19,700 2,280,275
Pennzoil Co. ......................................... 38,300 2,025,112
Phillips Petroleum Co. ............................... 60,300 2,577,825
Quaker State Corp. ................................... 31,400 541,650
Repsol S.A., ADR...................................... 51,700 1,712,563
Sun Co., Inc. ........................................ 14,500 333,500
Texaco Inc. .......................................... 34,400 3,164,800
Tosco Corp. .......................................... 41,300 2,266,337
Ultramar Corp. ....................................... 27,700 837,925
Unocal Corp. ......................................... 44,600 1,605,600
USX-Marathon Group, Inc. ............................. 121,500 2,627,438
------------
29,550,188
------------
Paper & Forest Products 0.62%
Boise Cascade Corp. .................................. 17,300 588,200
Bowater, Inc. ........................................ 35,400 1,345,200
International Paper Co. .............................. 23,800 1,011,500
Pope & Talbot, Inc. .................................. 10,800 166,050
Westvaco Corp. ....................................... 24,750 733,219
------------
3,844,169
------------
Retail Trade & Services 1.67%
American Stores Co.................................... 56,800 2,272,000
Dayton Hudson Inc. ................................... 67,400 2,224,200
Fay's Inc. ........................................... 10,600 135,150
Mercantile Stores Inc. ............................... 13,100 707,400
Ross Stores, Inc...................................... 18,500 666,000
Supervalue Inc........................................ 43,300 1,190,750
TJX Companies Inc..................................... 89,500 3,210,813
------------
10,406,313
------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C> <C>
Technology 1.70%
Applied Materials, Inc. ............................. 11,600(a) $ 320,450
Dell Computer Corp. ................................. 20,400(a) 1,586,100
Digital Equipment Corp. ............................. 32,300(a) 1,154,725
EG&G Inc. ........................................... 20,300 362,863
Harris Corp. ........................................ 36,700 2,390,087
Intel Corp. ......................................... 12,800 1,221,600
International Business Machines Corp. ............... 13,100 1,630,950
Microsoft Corp. ..................................... 14,600(a) 1,925,375
Platinum Software.................................... 53 590
-----------
10,592,740
-----------
Telecommunications 2.90%
BCE Inc. ............................................ 28,400 1,214,100
British Telecommunications Corp. Plc, ADR............ 4,500 251,438
Cincinnati Bell Inc. ................................ 18,700 991,100
GTE Corp. ........................................... 36,300 1,397,550
NYNEX Corp. ......................................... 60,500 2,631,750
Sprint Corp. ........................................ 101,300 3,938,037
Telefonica de Espana, S.A., ADS...................... 57,900 3,220,688
Telefonos de Mexico, S.A., ADS....................... 68,100 2,187,712
U.S. West Inc. ...................................... 76,900 2,287,775
-----------
18,120,150
-----------
Tobacco 0.29%
RJR Nabisco Holdings Corp. .......................... 70,700 1,838,200
-----------
Transportation 0.71%
Alexander & Baldwin.................................. 4,600 112,700
APL Ltd. ............................................ 6,600 141,900
British Airways Plc, ADR............................. 8,100 691,538
CSX Corp. ........................................... 62,600 3,161,300
KLM Royal Dutch Airlines, Inc. ...................... 12,700 334,962
-----------
4,442,400
-----------
Utilities--Electric & Natural Gas 4.68%
Allegheny Power Systems, Inc. ....................... 17,000 493,000
American Electric Power Co., Inc. ................... 55,100 2,238,438
Baltimore Gas & Electric Co. ........................ 13,700 357,912
Carolina Power & Light Co., Inc. .................... 23,600 814,200
CINergy Corp. ....................................... 25,800 796,575
</TABLE>
7
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF NET ASSETS--(CONTINUED)
SEPTEMBER 30,1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES/
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Utilities--Electric & Natural Gas (Continued)
CMS Energy Corp. ................................ 32,000 $ 964,000
Consolidated Natural Gas Co. .................... 10,600 568,425
DQE Inc. ........................................ 37,250 1,038,344
Dominion Resources Inc. ......................... 13,800 520,950
Eastern Enterprises.............................. 10,500 396,375
Edison International Inc. ....................... 75,900 1,356,712
El Paso Natural Gas Co. ......................... 18,400 809,600
Enova Corp. ..................................... 36,200 800,925
Entergy Corp. ................................... 32,400 874,800
GPU Inc. ........................................ 49,100 1,509,825
Illinova Corp. .................................. 48,400 1,282,600
MCN Corp. ....................................... 39,100 1,050,813
New York State Gas & Electric Co. ............... 12,600 277,200
NIPSCO Industries, Inc. ......................... 33,000 1,179,750
NorAm Energy Corp. .............................. 121,900 1,813,262
Pacificorp....................................... 28,600 589,875
PanEnergy Corp. ................................. 61,000 2,112,125
Pinnacle West Capital Corp. ..................... 36,100 1,069,463
Questar Corp. ................................... 13,200 466,950
Sonat, Inc. ..................................... 37,200 1,646,100
Texas Utilities Co. ............................. 55,700 2,207,112
Transcanada Pipeline Ltd. ....................... 46,700 753,038
United Illuminating Co. ......................... 6,500 223,437
Utilicorp United Inc. ........................... 5,300 146,413
Western Resources Inc. .......................... 29,500 859,187
------------
29,217,406
------------
Total Common Stocks............................ 177,972,763
------------
United States Government & Agency Obligations36.75%
Federal National Mortgage Association, 6.85%,
4/5/2004........................................ $10,385,000 10,396,444
United States Treasury Bills, 5.12%, 10/31/1996.. 2,000,000(b) 1,991,467
United States Treasury Bonds, 10.75%, 5/15/2003.. 15,000,000 18,281,250
United States Treasury Bonds, 7.25%, 8/15/2022... 26,000,000 26,528,086
United States Treasury Bonds, 7.50%, 11/15/2024.. 10,400,000 10,985,000
United States Treasury Bonds, 7.625%, 2/15/2025.. 14,000,000 15,036,854
United States Treasury Bonds, 6.875%, 8/15/2025.. 9,500,000 9,354,517
United States Treasury Notes, 6.25%, 8/31/2000... 77,800,000 77,362,375
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/
NUMBER
OF
CONTRACTS VALUE
----------- ------------
<S> <C> <C>
United States Government &
Agency Obligations (Contin-
ued)
United States Treasury
Notes, 5.625%,
11/30/2000............... $19,745,000 $ 19,171,131
United States Treasury
Notes, 7.50%, 2/15/2005.. 31,300,000 32,913,859
United States Treasury
Notes, 6.50%, 5/15/2005.. 7,600,000 7,502,614
------------
Total United States
Government & Agency
Obligations............ 229,523,597
------------
Short-Term Investments33.03%
Bell Atlantic Network
Funding, 5.30%, 10/16/96. 10,000,000 9,977,917
Coca-Cola Co., 5.25%,
10/25/96................. 14,700,000 14,648,550
du Pont (E.I.) de Nemours
& Co., 5.33%, 10/2/96.... 9,300,000 9,298,623
Exxon Imperial Inc.,
5.33%, 10/15/96.......... 18,900,000 18,860,825
Ford Motor Credit Co.,
5.32%, 10/7/96........... 12,400,000 12,389,005
Lucent Technologies Corp.,
5.30%, 10/11/96.......... 15,000,000 14,977,917
Merck Co., 5.28%, 10/1/96. 7,700,000 7,700,000
Merrill Lynch & Co., Inc.,
5.35%, 10/4/96........... 18,700,000 18,691,663
Met Life Funding, Inc.,
5.33%, 10/3/96........... 9,600,000 9,597,157
Mobil Corp., 5.34%,
10/21/96................. 15,500,000 15,454,017
Philip Morris Capital
Corp., 5.32%, 10/17/96... 6,100,000 6,085,577
Smithkline Beecham Corp.,
5.32%, 10/7/96........... 8,700,000 8,692,286
U.S. West, Inc., 5.30%,
10/8/96.................. 19,400,000 19,380,007
Warner Lambert Co., 5.32%,
10/9/96.................. 15,700,000 15,681,439
Xerox Corp., 5.30%,
10/29/96................. 25,000,000 24,896,944
------------
Total Short-Term Invest-
ments.................. 206,331,927
------------
Net Unrealized Appreciation
on Futures Contracts 0.00%
Standard & Poor's 500 In-
dex, December 1996 Short 17,788
futures.................. (74)(c) ------------
Total Investments........... 98.28 % 613,846,075
Cash and Other Assets, Less 1.72 10,748,016
Liabilities................ ------ ------------
Net Assets (Equivalent to
$8.16 per share based on
76,548,498 shares of capi- 100.00 % $624,594,091
tal stock outstanding)..... ====== ============
</TABLE>
- --------
(a) Non-income producing security.
(b) This security has been pledged as collateral for futures transactions.
(c) The market value of the short futures was $25,586,212 (representing 4.10%
of the Fund's net assets) with a cost of $25,604,000.
9
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS PER SHARE
-------------------------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period: December
31, 1995...................... $647,523,415 $8.63
Net investment income......... $ 19,629,138 $ 0.26
Net realized and unrealized
losses on investments........ (7,263,903) (0.10)
Dividends from net investment
income and
distributions from net long-
term and short-term capital
gains........................ (47,699,460) (0.63)
Net asset value of shares is-
sued to shareholders for re-
investment of dividends and
distributions................ 12,404,901 0.00
------------ --------
Net decrease in net
assets/net asset value...... (22,929,324) (0.47)
------------ -------
End of period: September 30,
1996.......................... $624,594,091 $8.16
============ =======
</TABLE>
10
<PAGE>
KEY INFORMATION
1-800-331-1710 FIRST DATA INVESTOR SERVICES GROUP, INC.:
For questions regarding shareholder accounts P.O. Box 1376 Bos-
ton, MA 02104
(212) 486-3122 THE ZWEIG TOTAL RETURN FUND HOT LINE:
For updates on net asset value, share price, major industry
groups and other key information
1-800-272-2700 ZWEIG SHAREHOLDER RELATIONS: For general information and
literature
REINVESTMENT PLAN
Many of you have questions
about the 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.
11
