ZWEIG TOTAL RETURN FUND INC, N-2, 1998-03-05

ZWEIG TOTAL RETURN FUND INC
N-2, 1998-03-05

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<PAGE> 1
Investment Company Act File No. 811-5620
Securities Act File No. 333-
As filed with the Securities and Exchange Commission on March 5, 1998

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------

FORM N-2
[x] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-effective Amendment No.
[ ] Post-Effective Amendment No.

and/or

[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[x] Amendment No. 7

THE ZWEIG TOTAL RETURN FUND, INC.
(Exact Name of Registrant as Specified in Charter)

900 Third Avenue
New York, New York 10022
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code:
212-451-1100

STUART B. PANISH, ESQ.
Vice President and Secretary
The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
(Name and Address of Agent for Service)
--------------------------

With Copies to:

ROBERT E. SMITH, ESQ. LEONARD B. MACKEY, JR., ESQ.
Rosenman & Colin LLP Rogers & Wells LLP
575 Madison Avenue 200 Park Avenue
New York, NY 10022 New York, NY 10166
-------------------- ---------------------

Approximate date of proposed public offering:

As soon as practicable after the effective date of this Registration Statement.

1
<PAGE> 2
If the securities being registered on this form are to be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]

<TABLE>
<CAPTION>
Title of Securities
Amount of Amount Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Aggregate Offering Registration Fee
Share (1) Price
- ---------------- ---------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.001 per share 14,087,119
Shares $8.97 $126,361,458 $37,277
</TABLE>

(1) Estimated solely for the purposes of calculating the registration fee
in accordance with rule 457(c) under the Securities Act of 1933. Based
on the average of the high and low prices for the Fund's Common Stock
reported on the New York Stock Exchange on March 3, 1998.

----------------------------

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

2
<PAGE> 3
THE ZWEIG TOTAL RETURN FUND, INC.
FORM N-2

CROSS REFERENCE SHEET
Pursuant to Rule 481(a)

<TABLE>
<CAPTION>
Item Number, Form N-2 Location in Prospectus
---------------------- ----------------------
Part A
<S> <C>
1. Outside Front Cover.......................................................... Outside Front Cover Page
of Prospectus

2. Inside Front and Outside Back
Cover Page.................................................................. Outside Front Cover
of Prospectus

3. Fee Table and Synopsis...................................................... Fund Expenses

4. Financial Highlights........................................................ Financial Highlights

5. Plan of Distribution........................................................ The Offer;
Distribution
Arrangements

6. Selling Shareholders........................................................ Not Applicable

7. Use of Proceeds............................................................. The Offer; Use of
Proceeds

8. General Description of the Registrant....................................... The Fund; Market
Price and Net Asset Value Information;
Investment Objective and Policies; Risk
Factors and Special Considerations

9. Management................................................................. Management of the
Fund; Custodian, Dividend Paying Agent,
Transfer Agent and Registrar

10. Capital Stock, Long-Term Debt and Other
Securities................................................................... Distributions;
Distribution Reinvestment and Cash
Purchase Plan; Taxation; Description of
Common Stock
</TABLE>

3
<PAGE> 4
<TABLE>
<CAPTION>
Item Number, Form N-2 Location in Prospectus
---------------------- ----------------------
<S> <C>

11. Defaults and Arrears on Senior Securities. ................................ Not Applicable

12. Legal Proceedings.......................................................... Legal Matters

13. Table of Contents of the Statement of
Additional Information....................................................... Table of Contents of
the Statement of Additional Information

Part B

14. Cover Page................................................................. Cover Page

15. Table of Contents.......................................................... Table of Contents

16. General Information and History............................................ The Fund (in Part A)

17. Investment Objectives and Policies......................................... Investment Objectives
and Policies; Investment Restrictions

18. Management................................................................. Management

19. Control Persons and Principal Holders
of Securities................................................................ Management of the
Fund (in Part A);
Principal Shareholders

20. Investment Advisory and Other Services..................................... Management of the
Fund (in Part A); Custodian,
Dividend Paying Agent, Transfer
Agent and Registrar (in Part A)

21. Brokerage Allocation and Other Practice.................................... Portfolio
Transactions
and Brokerage

22. Tax Status................................................................. Taxation

23. Financial Statements....................................................... Financial Statements;
Report of Independent Accountants
</TABLE>

4
<PAGE> 5
SHARES OF COMMON STOCK
THE ZWEIG TOTAL RETURN FUND, INC.
ISSUABLE UPON EXERCISE OF NON-TRANSFERABLE
RIGHTS TO SUBSCRIBE FOR SUCH SHARES OF COMMON STOCK

The Zweig Total Return Fund, Inc. (the "Fund") is issuing to its shareholders of
record ("Record Date Shareholders") as of the close of business on , 1998
(the "Record Date") non-transferable rights (the "Rights"). These rights entitle
their holders to subscribe for up to an aggregate of shares (the
"Shares") of the Fund's Common Stock, par value $0.001 per share (the "Common
Stock") at the rate of one Share of Common Stock for every seven Rights held
(the "Offer"). Record Date Shareholders will receive one non-transferable Right
for each whole share of Common Stock held on the Record Date. Record Date
Shareholders who fully exercise their Rights will be entitled to subscribe for
additional shares of Common Stock pursuant to an over-subscription privilege
described in this Prospectus (the "Over-Subscription Privilege"). The Fund may
increase the number of shares of Common Stock subject to subscription by up to
25% of the Shares, or up to an additional shares of Common Stock, for an
aggregate total of Shares. Fractional Shares will not be issued upon the
exercise of Rights. The Rights are non-transferable and, therefore, may not be
purchased or sold. The Rights will not be admitted for trading on the New York
Stock Exchange (the "NYSE"), the Pacific Stock Exchange (the "PSE") or any other
exchange. See "The Offer." THE SUBSCRIPTION PRICE PER SHARE (THE "SUBSCRIPTION
PRICE") WILL BE 95% OF THE AVERAGE OF THE LAST REPORTED SALES PRICE OF A SHARE
OF THE FUND'S COMMON STOCK ON THE NYSE ON , 1998 (THE "PRICING DATE")
AND THE FOUR PRECEDING BUSINESS DAYS.

THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998
UNLESS EXTENDED AS DESCRIBED HEREIN (THE "EXPIRATION DATE").

The Fund announced the Offer after the close of trading on the NYSE on ,
1998. The Fund's Common Stock trades on the NYSE and PSE under the symbol "ZTR."
Shares issued upon the exercise of Rights and the Over-Subscription Privilege
will be listed for trading on the NYSE and PSE, subject to notice of issuance.
The net asset value per share of the Fund's Common Stock at the close of
business on , 1998, the date the Fund announced the Offer, and ,
1998, the Record Date, were $ and $ , respectively, and the last
reported sales price of a share of the Fund's Common Stock on the NYSE on those
dates were $ and $ , respectively.

The Fund is a diversified, closed-end management investment company. Its
investment objective is to seek the highest total return, consisting of capital
appreciation and current income, consistent with the preservation of capital.
The Fund will invest up to 65% of its total assets in U.S. Government
Securities, non-convertible debt securities of domestic issuers rated among the
two highest rating categories of either Moody's Investors Services, Inc. or
Standard & Poor's Corporation (or of comparable quality), and certain Foreign
Government Securities, and up to 35% of its total assets in equity securities.
The Fund may, however, under certain circumstances, invest up to 75% of its
total assets in equity securities. The extent of the Fund's investment in debt
and equity securities will be determined primarily on the basis of market timing
techniques developed by Dr. Martin E. Zweig, the President of the Fund's
investment adviser, Zweig Total Return Advisors, Inc. (the "Investment
Adviser"), and his staff. Dr. Zweig is the majority shareholder of the
Investment Adviser and has been engaged in the business of providing investment
advisory services for over 25 years. While the Investment Adviser seeks to
reduce the risks associated with investing in debt and equity securities by
using these techniques, the risk of investment in debt and equity securities
cannot be eliminated. See "Investment Objective and Policies." No assurance can
be given that the Fund's investment objective will be realized. The Fund's
administrator is Zweig/Glaser Advisers (the "Administrator"). The Fund's
Investment Adviser as well as the Administrator will benefit from the Offer. See
"Management of the Fund."
(Continued on the following page)

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Estimated Estimated Sales Estimated Proceeds
Subscription Price (1) Load (2) to Fund (3) (4)
<S> <C> <C> <C>
Per Share $ $ $
Total Maximum (5) $ $ $
</TABLE>

(Footnotes on the following page)
MERRILL LYNCH & CO.

----------------------
The date of this Prospectus is , 1998.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

<PAGE> 6
Upon the completion of the Offer, Record Date Shareholders who do not fully
exercise their Rights will own a smaller proportional interest in the Fund than
they owned prior to the Offer. In addition, because the Subscription Price may
be less than the then current net asset value per share as of the Pricing Date,
the Offer may result in an immediate dilution of the net asset value per share
for all shareholders. Although it is not possible to state precisely the amount
of such decrease in net asset value per share, if any, because it is not known
how many Shares will be subscribed for, what the net asset value or market price
of the Common Stock will be on the Pricing Date or what the Subscription Price
will be, such dilution could be minimal or substantial. Any such dilution will
disproportionately affect non-exercising shareholders. See "The Offer" and "Risk
Factors and Special Considerations." Except as described in this Prospectus,
Record Date Shareholders will have no right to rescind their subscriptions after
receipt of their payment for Shares by the Subscription Agent.

This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors are advised to
read this Prospectus and retain it for future reference. A Statement of
Additional Information, dated , 1998 (the "SAI"), containing additional
information about the Fund, has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated by reference in its entirety
into this Prospectus.

Shareholders may obtain a copy of the SAI from, and should direct all questions
and inquires relating to the Offer to, the Fund's Information Agent, Georgeson &
Company Inc. Banks and Brokers should call (212) 440-9800 collect and all other
shareholders should call (800) 223-2064. The address of the Fund is 900 Third
Avenue, New York, New York 10022, and its telephone number is (212) 451-1100.
The Commission maintains a world wide web site at http://www.sec.gov.
that contains the SAI and other information regarding the Fund.

(Footnotes from the previous page)

(1) Estimated on the basis of 95% of the average of the last reported sales
price of a share of the Fund's Common Stock on the NYSE on , 1998 and the
four preceding business days.

(2) In connection with the Offer, the Fund has agreed to pay Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Dealer Manager"), and other
broker-dealers (including Zweig Securities Corp.) soliciting the exercise of
Rights, solicitation fees equal to 2.50% of the Subscription Price per Share for
each Share issued pursuant to the exercise of the Rights and the
Over-Subscription Privilege. The Fund has also agreed to pay the Dealer Manager
a fee for financial advisory and marketing services in connection with the Offer
equal to 1.25% of the aggregate Subscription Price for the Shares issued
pursuant to the exercise of the Rights and the Over-Subscription Privilege, and
reimburse the Dealer Manager for out-of-pocket expenses up to $ . See
"Distribution Arrangements." These fees and expense reimbursement will be borne
by the Fund and indirectly by all of the Fund's shareholders, including those
who do not exercise their Rights. The Fund and the Investment Adviser have
agreed to indemnify the Dealer Manager against certain liabilities including
liabilities under the Securities Act of 1933, as amended.

(3) Before deduction of offering expenses incurred by the Fund, estimated at
approximately $ , including $ to be paid to the Dealer Manager
in reimbursement of its expenses.

(4) The funds received by check prior to the final due date of this Offer will
be deposited into a segregated interest-bearing account (which interest will be
paid to the Fund) pending proration and distribution of the Shares.

(5) Assumes all Shares are purchased at the Estimated Subscription Price.
Pursuant to the Over-Subscription Privilege, the Fund may at the discretion of
the Board of Directors increase the number of Shares subject to subscription by
up to 25% of the Shares offered hereby. If the Fund increases the number of
Shares subject to subscription by 25%, the Total Maximum Estimated Subscription
Price, Estimated Sales Load and Estimated Proceeds to the Fund will be $ ,
$ and $ , respectively.

Certain numbers in this Prospectus have been rounded for ease of
presentation and, as a result, may not total precisely.

2
<PAGE> 7
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information included elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus assumes that the
allowable increase of 25% of the Shares offered hereby pursuant to the
Over-Subscription Privilege will not occur.

THE FUND

The Zweig Total Return Fund, Inc. (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Fund commenced operations in
September 1988. The Fund's investment objective is to seek the highest total
return, consisting of capital appreciation and current income, consistent with
the preservation of capital. The Fund will invest up to 65% of its total assets
in U.S. Government Securities, non-convertible debt securities of domestic
issuers rated among the two highest rating categories of either Moody's
Investors Services, Inc. or Standard & Poor's Corporation (or of comparable
quality), and certain Foreign Government Securities, and up to 35% of its total
assets in equity securities. The Fund may, however, under certain circumstances,
invest up to 75% of its total assets in equity securities. The extent of the
Fund's investment in debt and equity securities will be determined primarily on
the basis of market timing techniques developed by Dr. Martin E. Zweig, the
President of the Fund's investment adviser, Zweig Total Return Advisors, Inc.
(the "Investment Adviser"), and his staff. While the Investment Adviser seeks to
reduce the risks associated with investing in debt and equity securities by
using these techniques, the risk of investment in debt and equity securities
cannot be eliminated. The Fund's outstanding Common Stock, par value $.001 per
share (the "Common Stock") is listed and traded on the New York Stock Exchange
(the "NYSE") and the Pacific Stock Exchange ("PSE"). The average weekly trading
volume of the Common Stock on the NYSE during the year ended December 31, 1997
was shares. As of , 1998, the net assets of the Fund were
approximately $ .

The President and majority shareholder of the Investment Adviser is Dr.
Martin E. Zweig, who has been engaged in the business of providing investment
advisory services for over 25 years. Zweig/Glaser Advisers (the "Administrator")
serves as the Fund's administrator. The Fund pays the Investment Adviser an
investment advisory fee computed at the annual rate of 0.70% of the Fund's
average daily net assets. The Fund pays the Administrator an administrative fee
computed at the annual rate of 0.13% of the Fund's average daily net assets. See
"Management of the Fund."

TERMS OF THE OFFER

The Fund is issuing to its shareholders of record ("Record Date
Shareholders") as of the close of business on , 1998 (the "Record Date")
non-transferable rights (the "Rights") to subscribe for up to an aggregate of
shares of Common Stock (the "Shares") of the Fund. The Fund may increase the
number of shares of Common Stock subject to subscription by up to 25% of the
Shares, or up to an additional shares of Common Stock, for an aggregate
total of shares. Each Record Date Shareholder is being issued one Right for
each whole share of Common Stock owned on the Record Date. The Rights entitle
the holders thereof to subscribe for one Share for every seven Rights held (the
"Offer"). Fractional shares will not be issued upon the

<PAGE> 8
exercise of Rights.

Rights may be exercised at any time during the Subscription Period,
which commences on , 1998 and ends at 5:00 p.m. New York City time, on
, 1998, unless extended by the Fund until 5:00 p.m., New York City
time to a date not later than , 1998 (such date, as it may be extended, is
referred to in this Prospectus as the "Expiration Date"). A Record Date
Shareholder's right to acquire during the Subscription Period at the
Subscription Price (as described below) one additional Share for every seven
Rights held is hereinafter referred to as the "Primary Subscription." The Rights
are evidenced by subscription certificates (the "Subscription Certificates"),
which will be mailed to Record Date Shareholders, except as discussed in "The
Offer - Foreign Restrictions."

The Subscription Price per share (the "Subscription Price") will be
95% of the average of the last reported sales prices of a share of the Fund's
Common Stock on the NYSE on , 1998 (the "Pricing Date") and the four
preceding business days. Since the Expiration Date and the Pricing Date are each
, 1998, Record Date Shareholders who choose to exercise their Rights
will not know at the time of exercise the Subscription Price for Shares acquired
pursuant to such exercise. Record Date Shareholders will have no right to
rescind a purchase after receipt of their payment for Shares by the Fund's
subscription agent, State Street Bank & Trust Co. (the "Subscription Agent").
There is no minimum number of Rights that must be exercised in order for the
Offer to close.

Pursuant to the over-subscription privilege (the "Over-Subscription
Privilege"), any Record Date Shareholder who fully exercises all Rights issued
to such Record Date Shareholder in the Primary Subscription (other than those
Rights that cannot be exercised because they represent the right to acquire less
than one Share) will be entitled to subscribe for additional Shares at the
Subscription Price. Shares available, if any, pursuant to the Over-Subscription
Privilege are subject to allotment and may be subject to increase, as is more
fully discussed under "The Offer - Over-Subscription Privilege." For purposes of
determining the maximum number of Shares a Record Date Shareholder may acquire
pursuant to the Offer, Record Date Shareholders whose Shares are held of record
by Cede & Co. Inc. ("Cede") or by any other depository or nominee will be deemed
to be the holders of the Rights that are issued to Cede or such other depository
or nominee on their behalf.

The Rights are non-transferable. Therefore, only the underlying Shares
will be listed for trading on the NYSE, PSE or any other exchange.

PURPOSE OF THE OFFER

The Board of Directors of the Fund has determined that it would be in
the best interests of the Fund and its shareholders to increase the assets of
the Fund available for investment, thereby enabling the Fund to more fully take
advantage of investment opportunities consistent with the Fund's investment
objective. The Fund's Board of Directors has voted unanimously to approve the
terms of the Offer as set forth in this Prospectus.

In reaching its decision, the Board of Directors considered, among
other things, advice by the Investment Adviser that new funds would allow the
Fund additional flexibility to capitalize on

4
<PAGE> 9
available investment opportunities without the necessity of having to sell
existing portfolio securities that the Investment Adviser believes should be
held. Proceeds from the Offer will allow the Investment Adviser to better take
advantage of such existing and future investment opportunities.

The Board of Directors also considered that the Offer would provide
shareholders with an opportunity to purchase additional shares of the Fund below
its market price. The Board of Directors also believes that a well-subscribed
rights offering may result in certain economies of scale which could reduce the
Fund's expense ratio in future years. Finally, the Board of Directors considered
that, because the Subscription Price per Share may be less than the net asset
value per share on the Pricing Date, the Offer may result in dilution of the net
asset value per share. The Board of Directors believes that the factors in favor
of the Offer outweigh this possible dilution. See "Risk Factors and Special
Considerations - Dilution and Effect of Non-Participation in the Offer."

The Fund's Investment Adviser and Administrator will benefit from the
Offer because their fees are based on the average net assets of the Fund. It is
not possible to state precisely the amount of additional compensation the
Investment Adviser or Administrator will receive as a result of the Offer
because it is not known how many Shares will be subscribed for and because the
proceeds of the Offer will be invested in additional portfolio securities, which
will fluctuate in value. See "Management of the Fund."

The information agent (the "Information Agent") for the Offer is:

GEORGESON & COMPANY INC.

Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064

Shareholders may also contact their brokers or nominees for information
with respect to the Offer.

IMPORTANT DATES TO REMEMBER

EVENT DATE
- ----- ----
Record Date , 1998
Subscription Period , 1998 - , 1998*
Expiration Date and Pricing Date , 1998*
Subscription Certificates and Payment for Shares Due+ , 1998*
Notice of Guaranteed Delivery Due+ , 1998*
Subscription Certificates and Payment for
Guarantees of Delivery Due , 1998*
Confirmation to Participants , 1998*
Final Payment for Shares , 1998*

5
<PAGE> 10
* Unless the Offer is extended to a date not later than , 1998.

+ A shareholder exercising Rights must deliver by the Expiration Date either (i)
the Subscription Certificate together with payment or (ii) a Notice of
Guaranteed Delivery.

RISK FACTORS AND SPECIAL CONSIDERATIONS

The following summarizes certain matters that should be considered,
among others, in connection with the Offer. This Prospectus contains certain
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of certain uncertainties
set forth below and elsewhere in this Prospectus.
<TABLE>
<S> <C>
Dilution - Net Asset Value and
Non-Participation in the Offer Record Date Shareholders who do not fully exercise their Rights will,
upon the completion of the Offer, own a smaller proportional
interest in the Fund than they owned prior to the Offer. In addition,
an immediate dilution of the net asset value per share may be
experienced by all shareholders as a result of the Offer because the
Subscription Price may be less than the then current net asset value per
share, and the number of shares outstanding after the Offer may increase
in greater percentage than the increase in the size of the Fund's
assets. Although it is not possible to state precisely the amount of
such decrease in net asset value per share, if any, because it is not
known at this time what the Subscription Price will be, what the net
asset value per share will be on the Expiration Date, or what proportion
of the Shares will be subscribed for, such dilution could be minimal or
substantial. For example, assuming (i) all Rights are exercised, (ii)
the Fund's net asset value on the Expiration Date is $ per
share (the net asset value per share on , 1998), and (iii)
the Subscription Price is $ per share (95% of the last
reported sale price per share on the NYSE on , 1998),
then the Fund's net asset value per share would be reduced by
approximately $ per share or %.

Certain Investment Strategies The extent of the Fund's investment in debt and equity securities will
be determined primarily on the basis of market timing techniques
developed by Dr. Martin E. Zweig, the President of the Fund's Investment
Adviser, and his staff. While the Investment Adviser seeks to reduce
the risks associated with investing in debt and equity securities by
using these techniques, the risk of investment in debt and equity
securities cannot be
</TABLE>

6
<PAGE> 11
<TABLE>
<S> <C>
eliminated. There is no assurance that these
market timing techniques will provide protection from the risks of debt
or equity investment, enable the Fund to be invested consistent with the
major trends of the markets or enable the Fund to achieve its investment
objective. See "Investment Objective and Policies - Investment
Objective." In addition, although the Investment Adviser believes that
the special investment methods discussed in this Prospectus under
"Special Investment Methods" (including purchasing and selling interest
rate, stock index and other futures contracts and purchasing options on
such futures; purchasing and writing listed put and call security
options and options on stock indexes; short sales of securities;
borrowing from banks to purchase securities; investing in securities of
closed-end investment companies and foreign issuers; lending portfolio
securities to brokers, dealers, banks or other recognized institutional
borrowers of securities; entering into repurchase or reverse repurchase
agreements; and purchasing when-issued and delayed-delivery securities)
will further the Fund's investment objective and reduce losses that
might otherwise occur during a time of general decline in debt or equity
security prices, no assurance can be given that these investment methods
will achieve this result. These methods may subject an investor in the
Fund to greater than average risks and costs.

Unrealized Appreciation As of December 31, 1997, there was $50,238,438 or approximately $0.64
per share of net unrealized appreciation in the Fund's net assets of
$677,133,054; if realized and distributed, or deemed distributed, such
gains would, in general, be taxable to shareholders, including holders
at that time of Shares acquired upon the exercise of Rights. See
"Taxation."

Discount From Net Asset Value The Fund's shares of Common Stock have traded in the market above,
at and below net asset value since the commencement of the
Fund's operations in September 1988. During the past seven years, the
Fund's shares have generally traded in the market at a premium above net
asset value; however, the Fund cannot predict whether the Fund's Common
Stock will in the future trade at a premium to or discount from net
asset value. The risk of the Common Stock trading at a discount is a
risk separate from a decline in the Fund's net asset value. See "Market
Price and Net Asset Value Information" in this Prospectus
</TABLE>

7
<PAGE> 12
<TABLE>
<S> <C>
and "Net Asset Value" in the Statement of Additional Information (the "SAI").

Distributions The Fund's policy is to make monthly distributions equal to 0.83% of its
net asset value (10% on an annualized basis). If, for any monthly
distribution, net investment income and net realized short-term capital
gains are less than the amount of the distribution, the difference will
be distributed from the Fund's assets. The Fund's final distribution
for each calendar year will include any remaining net investment income
and net realized short-term capital gains deemed, for Federal income tax
purposes, undistributed during the year, as well as all net long-term
capital gains realized during the year. If, for any calendar year, the
total distributions exceed net investment income and net realized
capital gains, the excess, distributed from the Fund's assets, will
generally be treated as a tax-free return of capital (up to the amount
of the shareholder's tax basis in his or her shares). The amount
treated as a tax-free return of capital will reduce a shareholder's
adjusted basis in his or her shares, thereby increasing his or her
potential gain or reducing his or her potential loss on the sale of his
or her shares. Such excess, however, will be treated as ordinary
dividend income up to the amount of the Fund's current and accumulated
earnings and profits. Pursuant to the requirements of the 1940 Act and
other applicable laws, a notice will accompany each monthly distribution
with respect to the estimated source of the distribution made. Such
distribution policy may, under certain circumstances, have certain
adverse consequences to the Fund and its shareholders. In the event the
Fund distributes amounts in excess of its net investment income and net
realized capital gains, such distributions will decrease the Fund's
total assets and, therefore, have the likely effect of increasing the
Fund's expense ratio. In addition, in order to make such distributions,
the Fund may have to sell a portion of its investment portfolio at a
time when independent investment judgment might not dictate such action.

Anti-takeover Provisions The Fund has provisions in its Articles of Incorporation and By-Laws
that may have the effect of limiting the ability of other entities or
persons to acquire control of the Fund, to cause it to engage in certain
transactions or to modify its structure. The Board of Directors is
divided
</TABLE>

8
<PAGE> 13
<TABLE>
<S> <C>
into three classes. At the annual meeting of shareholders each
year, the term of one class will expire and directors will be elected to
serve in that class for terms of three years. This provision could
delay for up to two years the replacement of a majority of the Board of
Directors.
</TABLE>

9
<PAGE> 14
FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of the Subscription Price per Share) (1) 3.75%
ANNUAL EXPENSES (as a percentage of the Fund's net assets)(2)
Advisory Fees 0.70%
Administration Fees 0.13%
Other Expenses 0.18%
----

Total Annual Expenses (3) 1.01%
----
</TABLE>

(1) The Fund has agreed to pay the Dealer Manager, and other broker-dealers
(including Zweig Securities Corp.) soliciting the exercise of Rights,
solicitation fees equal to 2.50% of the Subscription Price per Share for each
Share issued pursuant to the exercise of the Rights and the Over-Subscription
Privilege. The Fund has also agreed to pay the Dealer Manager a fee for
financial advisory and marketing services in connection with the Offer equal to
1.25% of the aggregate Subscription Price for the Shares issued pursuant to the
exercise of the Rights and the Over-Subscription Privilege, and reimburse the
Dealer Manager for out-of-pocket expenses up to $ . In addition, the Fund
has agreed to pay a fee to each of the Subscription Agent (as defined in this
Prospectus) and Information Agent (as defined in this Prospectus) estimated to
be $ and $ , respectively, which includes reimbursement for their
out-of-pocket expenses related to the Offer. These fees and expenses will be
borne by the Fund and indirectly by all of the Fund's shareholders, including
those who do not exercise their Rights. See "Distribution Arrangements."

(2) Fees payable under the Investment Advisory Agreement and Administration
Agreement (as defined in this Prospectus) are calculated on the basis of the
Fund's average net assets. "Other Expenses" have been estimated for the current
fiscal year. See "Management of the Fund - Investment Adviser; - Investment
Advisory Agreement; and - Administrator."

(3) The indicated 1.01% expense ratio assumes that the Offer (including the
Over-Subscription Privilege) is fully subscribed and assumes estimated net
proceeds from the Offer of approximately $ million (assuming an estimated
Subscription Price of $ per share). Other expenses for the fiscal year ended
December 31, 1997 were 0.21% as a percentage of average net assets.

THE FOREGOING FEE TABLE IS INTENDED TO ASSIST FUND INVESTORS IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL
BEAR DIRECTLY OR INDIRECTLY.

EXAMPLE

An investor would directly or indirectly pay the following expense on a
$1,000 investment in the Fund, assuming a 5% annual return throughout the
periods:

<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
<S> <C> <C> <C>
$47 $68 $91 $156
</TABLE>

This hypothetical example assumes that all dividends and other
distributions are reinvested at net asset value and that the 1.01% expense ratio
listed under Total Annual Expenses remains the same in the years shown. The
example also reflects payment of the 3.75% Sales Load on the entire $1,000
investment. The above

10
<PAGE> 15
tables and the assumption in the Example of a 5% annual return are required by
regulations of the Securities and Exchange Commission (the "Commission")
applicable to all investment companies; the assumed 5% annual return is not a
prediction of, and does not represent, the projected or actual performance of
the Fund's Shares. For a more complete description of certain of the Fund's
costs and expenses, see "Management of the Fund - Investment Management; -
Investment Advisory Agreement; and - Administrator" in this Prospectus and
"Expenses" and "Portfolio Transactions and Brokerage" in the SAI.

This example should not be considered a representation of future
expenses, and the Fund's actual expenses may be greater or less than those
shown.

11
<PAGE> 16
FINANCIAL HIGHLIGHTS

The table below sets forth certain specified information for a share of
the Fund's Common Stock outstanding throughout each period presented. This
information is derived from the financial and accounting records of the Fund.
The financial highlights for the five fiscal years ended December 31, 1997 have
been audited by Coopers & Lybrand L.L.P., independent accountants, whose reports
thereon were unqualified. The report of independent accountants has been
included in the SAI. This information should be read in conjunction with the
financial statements and notes thereto included in the SAI.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of $8.29 $8.63 $8.11 $9.11 $9.06 $9.79 $9.02
year ..........................
-----------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income......................... 0.36 0.36 0.39 0.29 0.26 0.32 0.44
Net realized and unrealized
gains (losses) on investments.. 0.80 0.14 0.97 (0.43) 0.75 (0.09) 1.29
-----------------------------------------------------------------------------
Total from investment 1.16 0.50 1.36 (0.14) 1.01 0.23 1.73
operations.....................
-----------------------------------------------------------------------------
Dividends and Distributions:
Dividends from net investment (0.36) (0.36) (0.39) (0.29) (0.26) (0.32) (0.43)
income ........................
Distributions from net realized
gains on investments........... (0.48) (0.24) (0.45) - (0.70) (0.30) (0.53)
Distributions from capital - (0.24) - (0.57) - (0.34) -
paid-in .......................
-----------------------------------------------------------------------------
Total Dividends and (0.84) (0.84) (0.84) (0.86) (0.96) (0.96) (0.96)
Distributions
-----------------------------------------------------------------------------
Net asset value, end of $8.61 $8.29 $8.63 $8.11 $9.11 $9.06 $9.79
year
=============================================================================
Market value, end of year** $9.4375 $8.00 $8.625 $8.00 $10.75 $10.00 $10.625

=============================================================================
Total investment return 30.22% 2.62% 19.19% (17.08)% 18.37% 2.60% 37.90%
=============================================================================
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in $677,133 $638,768 $647,523 $591,659 $648,516 $624,097 $648,118
thousands)....................
Ratio of expenses to average 1.04% 1.03% 1.10% 1.12% 1.11% 1.13% 1.11%
net assets ...................
Ratio of net investment income
to average net assets......... 4.30% 4.31% 4.59% 3.35% 2.85% 3.43% 4.74%
Portfolio turnover rate....... 104.7% 147.2% 179.8% 281.0% 293.0% 123.2% 148.6%
Average commission rate per
share on portfolio
transactions.................. $0.0587 $ 0.0591 $ 0.0606 N/A N/A N/A N/A
</TABLE>

<TABLE>
1990 1989(+) 1988*(+)
---- ----- -------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of $9.59 $9.24 $9.27
year ..........................
---------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income......................... 0.56 0.68 0.25
Net realized and unrealized
gains (losses) on investments.. 0.20) 0.63 (0.12)
---------------------------
Total from investment 0.36 1.31 0.13
operations.....................
---------------------------
Dividends and Distributions:
Dividends from net investment (0.60) (0.73) (0.16)
income ........................
Distributions from net realized
gains on investments........... (0.04) (0.23) -
Distributions from capital (0.29) - -
paid-in .......................
----------------------------
Total Dividends and (0.93) (0.96) (0.16)
Distributions
----------------------------
Net asset value, end of $9.02 $9.59 $9.24
year
============================
Market value, end of year** $8.625 $9.75 $9.125

============================
Total investment return (1.99)% 18.24% (7.17)%
============================
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in $573,782 $596,508 $564,330
thousands).....................
Ratio of expenses to average 1.09% 1.14% 1.19%***
net assets.....................
Ratio of net investment income
to average net assets.......... 6.14% 7.18% 11.19%***
Portfolio turnover rate........ 145.2% 192.7% 112.6%
Average commission rate per
share on portfolio
transactions................... N/A N/A N/A
</TABLE>

* Commenced operations on September 30, 1988.
** Closing Price - New York Stock Exchange.
*** Annualized.
(+) Not audited by Coopers & Lybrand.

12
<PAGE> 17
THE OFFER

TERMS OF THE OFFER

The Fund is issuing to the Record Date Shareholders the Rights to
subscribe for up to an aggregate of Shares. The Fund may increase the
number of Shares subject to subscription by up to 25% of the Shares, or up to an
additional shares, for an aggregate total of shares. Each Record Date
Shareholder is being issued one Right for each whole share of Common Stock owned
on the Record Date. The Rights entitle the holders thereof to subscribe for one
Share for every seven Rights held (1 for 7). Fractional shares will not be
issued upon the exercise of Rights. Record Date Shareholders who receive or have
remaining fewer than seven Rights will not be able to purchase a Share upon the
exercise of such Rights and will not be entitled to receive any cash in lieu
thereof, although such Record Date Shareholders may subscribe for additional
Shares pursuant to the Over-Subscription Privilege.

Rights may be exercised at any time during the Subscription Period,
which commences on , 1998 and ends at 5:00 p.m. New York City time,
on , 1998, unless extended by the Fund until 5:00 p.m., New York City
time to a date not later than , 1998. See " - Expiration of the Offer." The
Rights are evidenced by Subscription Certificates, which will be mailed to
Record Date Shareholders, except as discussed below under "Foreign
Restrictions."

Any Record Date Shareholder who fully exercises all Rights issued to
such shareholder in the Primary Subscription will be entitled to subscribe for
additional Shares at the Subscription Price pursuant to the terms of the
Over-Subscription Privilege, as described below. Shares available, if any,
pursuant to the Over-Subscription Privilege are subject to allotment and may be
subject to increase, as is more fully discussed below under "Over-Subscription
Privilege." For purposes of determining the maximum number of Shares a
shareholder may acquire pursuant to the Offer, Record Date Shareholders whose
Shares are held of record by Cede or by any other depository or nominee will be
deemed to be the holders of the Rights that are issued to Cede or such other
depository or nominee on their behalf.

PURPOSE OF THE OFFER

In reaching its decision, the Board of Directors considered, among
other things, advice by the Investment Adviser that new funds would allow the
Fund additional flexibility to capitalize on available investment opportunities
without the necessity of having to sell existing portfolio securities that the
Investment Adviser believes should be held. Proceeds from the Offer will allow
the Investment Adviser to better take advantage of such existing and future
investment opportunities.

13
<PAGE> 18
The Board of Directors also considered that the Offer would provide
shareholders with an opportunity to purchase additional shares of the Fund below
its market price. The Board of Directors also believes that a well-subscribed
rights offering may result in certain economies of scale which could reduce the
Fund's expense ratio in future years. Finally, the Board of Directors considered
that, because the Subscription Price per Share may be less than the net asset
value per share on the Pricing Date, the Offer may result in dilution of the net
asset value per share. The Board of Directors believes that the factors in favor
of the Offer outweigh this possible dilution. See "Risk Factors and Special
Considerations - Dilution-Net Asset Value and Non-Participation in the Offer."

The Fund may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms that may or may not be similar to the Offer. Any such future rights
offerings will be made in accordance with the then applicable requirements of
the 1940 Act.

OVER-SUBSCRIPTION PRIVILEGE

To the extent Record Date Shareholders do not exercise all of the
Rights issued to them, any underlying Shares represented by such Rights will be
offered by means of the Over-Subscription Privilege to the Record Date
Shareholders who have exercised all of the Rights issued to them and who wish to
acquire more than the number of Shares to which they are entitled. Only Record
Date Shareholders who exercise all the Rights issued to them may indicate, on
the Subscription Certificate, which they submit with respect to the exercise of
the Rights issued to them, how many Shares they desire to purchase pursuant to
the Over-Subscription Privilege. If sufficient Shares remain after completion of
the Primary Subscription, all over-subscription requests will be honored in
full. If sufficient Shares are not available to honor all over-subscription
requests, the Fund may, at the discretion of the Board of Directors, issue
shares of Common Stock up to an additional 25% of the Shares available pursuant
to the Offer, or additional shares of Common Stock in order to cover
such over-subscription requests. Regardless of whether the Fund issues
additional shares pursuant to the Offer and to the extent Shares are not
available to honor all over-subscription requests, the available Shares will be
allocated among those who over-subscribe based on the number of Shares owned by
them in the Fund on the Record Date. The allocation process may involve a series
of allocations in order to assure that the total number of Shares available for
over-subscription is distributed on a pro rata basis. The Fund will not offer to
sell in connection with the Offer any Shares that are not subscribed for
pursuant to the Primary Subscription or the Over-Subscription Privilege.

14
<PAGE> 19
SUBSCRIPTION PRICE

The Subscription Price for the Shares to be issued pursuant to the
Offer will be 95% of the average of the last reported sales price of a share of
the Fund's Common Stock on the NYSE on , 1998 (the "Pricing Date")
and the four preceding business days. For example, if the average of the last
reported sales price on the NYSE on the Pricing Date and the four preceding
business days of a share of the Fund's Common Stock is $10.00, the Subscription
Price will be $9.50 (95% of $10.00). The Subscription Price may be higher or
lower than the net asset value per share.

The Fund announced the Offer after the close of trading on the NYSE on
, 1998 and announced the terms of the Offer after the close of
trading on , 1998. The net asset value per share of Common Stock
at the close of business on , 1998, the date the Fund announced
the Offer, , 1998, the date the Fund announced the terms of the Offer
and , 1998, the Record Date, was $ , $ and $ ,
respectively, and the last reported sales prices of a share of the Fund's Common
Stock on the NYSE on those dates was $ , $ and $ , respectively.

EXPIRATION OF THE OFFER

The Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless extended by the Fund until 5:00 p.m., New York City time to a date
or dates not later than , 1998. The Rights will expire on
the Expiration Date and thereafter may not be exercised. Since the Expiration
Date and the Pricing Date will be the same date, Record Date Shareholders who
decide to acquire Shares in the Primary Subscription or pursuant to the
Over-Subscription Privilege will not know when they make such decision the
purchase price of such Shares. Any extension of the Offer will be followed as
promptly as practicable by announcement thereof. Such announcement shall be
issued no later than 9:00 a.m., New York City time, on the next business day
following the previously scheduled Expiration Date. Without limiting the manner
in which the Fund may choose to make such announcement, the Fund will not,
unless otherwise required by law, have any obligation to publish, advertise or
otherwise communicate any such announcement other than by making a release to
the Dow Jones News Service or such other means of announcement as the Fund deems
appropriate.

METHOD OF EXERCISE OF RIGHTS

The Subscription Certificates, which evidence the Rights, will be
mailed to Record Date Shareholders or, if a Record Date Shareholder's shares of
Common Stock are held by Cede or any other depository or nominee on their
behalf, to Cede or such depository or nominee. Rights may be exercised by
filling in completely and signing the Subscription Certificate which accompanies
this Prospectus and mailing it in the envelope provided, or otherwise delivering
the completed and signed Subscription Certificate to the Subscription Agent,
together with payment in full for the Shares at the estimated Subscription Price
(the "Estimated Subscription Price") as described below under "Payment for
Shares." Rights may also be exercised by a Record Date Shareholder contacting
his or her broker, banker or trust company, which can arrange, on his or her
behalf, to guarantee delivery of payment (using a "Notice of Guaranteed
Delivery") and of a properly

15
<PAGE> 20
completed and executed Subscription Certificate. The broker, banker or trust
company may charge a fee for this service. Fractional Shares will not be issued,
and Record Date Shareholders who receive, or who have remaining, fewer than
seven Rights will not be entitled to purchase a Share upon the exercise of such
Rights but will be able to request additional Shares pursuant to the terms of
the Offer applicable to the Over-Subscription Privilege. Completed Subscription
Certificates must be received by the Subscription Agent prior to 5:00 p.m., New
York City time, on the Expiration Date (unless the guaranteed delivery
procedures are complied with as described below under "Payment for Shares") at
the offices of the Subscription Agent at the address set forth below.

Shareholders who Are Record Owners. Shareholders who are record owners
can choose between either option set forth under "Payment for Shares" below. If
time is of the essence, option (2), under "Payment for Shares" below, will
permit delivery of the Subscription Certificate and payment after the Expiration
Date.

Shareholders whose Shares Are Held By A Nominee. Shareholders whose
shares are held by a nominee, such as a broker or trustee, must contact such
nominee to exercise their Rights. In that case, the nominee will complete the
Subscription Certificate on behalf of the investor and arrange for proper
payment by one of the methods set forth under "Payment for Shares" below.

Nominees. Nominees who hold shares of Common Stock for the account of
others must (to the extent required by applicable law) notify the beneficial
owners of such shares as soon as possible to ascertain such beneficial owners'
intentions and to obtain instructions with respect to the Rights. If the
beneficial owner so instructs, the nominee should complete the Subscription
Certificate and submit it to the Subscription Agent with the proper payment
described under "Payment for Shares" below.

INFORMATION AGENT

Any questions or requests for assistance may be directed to the
Information Agent at its telephone number and address listed below:

The Information Agent for the Offer is:

GEORGESON & COMPANY INC.

Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064

Shareholders may also contact their brokers or nominees for information
with respect to the Offer.

16
<PAGE> 21
The Information Agent will receive a fee estimated to be approximately
$ including reimbursement for all out-of-pocket expenses related to the
Offer.

SUBSCRIPTION AGENT

The Subscription Agent is State Street Bank & Trust Co., which will
receive for its administrative, processing, invoicing and other services as
subscription agent, a fee estimated to be approximately $ including
reimbursement for all out-of-pocket expenses related to the Offer. Signed
Subscription Certificates must be sent, together with payment at the Estimated
Subscription Price for all Shares subscribed in the Primary Subscription and
Over-Subscription Privilege by one of the methods described below, prior to 5:00
p.m., New York City time, on the Expiration Date. Alternatively, if using a
Notice of Guaranteed Delivery, the Notice of Guaranteed Delivery (see "Method of
Exercise of Rights" above) may also be sent by facsimile to (781) 794-6333, with
the originals to be sent promptly thereafter by one of the methods described
below. Facsimiles should be confirmed by telephone to (781) 794-6388.

(1) BY FIRST CLASS MAIL ONLY:

State Street Bank & Trust Company
Corporate Reorganization
P.O. Box 9573
Boston, MA 02205-9573

(2) BY HAND:

Securities Transfer & Reporting Services, Inc.
c/o State Street Bank & Trust Co.
55 Broadway, Third Floor
New York, NY 10006

(3) BY OVERNIGHT COURIER:

State Street Bank & Trust Co.
Corporate Reorganization
70 Campanelli Drive
Braintree, MA 02184

(4) GUARANTEE OF DELIVERY: FOR ELIGIBLE INSTITUTIONS ONLY:

The Notice of Guaranteed Delivery may also be sent by facsimile to
(781) 794-6333, with the originals to be sent promptly thereafter by one of the
methods described above. Facsimiles should be confirmed by telephone to (781)
794-6388.

DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE
WILL NOT CONSTITUTE VALID DELIVERY.

17
<PAGE> 22
PAYMENT FOR SHARES

Record Date Shareholders who acquire Shares in the Primary Subscription
and pursuant to the Over-Subscription Privilege may choose between the following
methods of payment:

(1) A Record Date Shareholder can send the Subscription Certificate
together with payment for the Shares acquired in the Primary Subscription and
for additional Shares subscribed for pursuant to the Over-Subscription Privilege
to the Subscription Agent. Payment should be calculated on the basis of the
Estimated Subscription Price of $ per Share for all Shares requested. To
be accepted, such payment, together with the executed Subscription Certificate,
must be received by the Subscription Agent at one of the Subscription Agent's
offices at the addresses set forth above prior to 5:00 p.m., New York City time,
on the Expiration Date. The Subscription Agent will deposit all checks and money
orders received by it prior to the final payment date into a segregated
interest-bearing account (which interest will be paid to the Fund) pending
proration and distribution of the Shares. A PAYMENT PURSUANT TO THIS METHOD MUST
BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN
THE UNITED STATES, MUST BE PAYABLE TO THE ZWEIG TOTAL RETURN FUND, INC. AND MUST
ACCOMPANY A PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH
SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.

(2) Alternatively, a subscription will be accepted by the Subscription
Agent if, prior to 5:00 p.m., New York City time, on the Expiration Date, the
Subscription Agent has received a Notice of Guaranteed Delivery by facsimile
(telecopy) or otherwise from a bank, a trust company, or a NYSE member firm
guaranteeing delivery of (i) payment of the Estimated Subscription Price of $
per share for the Shares subscribed for in the Primary Subscription and for any
additional Shares subscribed for pursuant to the Over-Subscription Privilege,
and (ii) a properly completed and executed Subscription Certificate. The
Subscription Agent will not honor a Notice of Guaranteed Delivery unless a
properly completed and executed Subscription Certificate together with full
payment is received by the Subscription Agent by the close of business on the
third business day after the Expiration Date ( , 1998, unless the
Offer is extended).

Within eight business days following the Expiration Date ( ,
1998, unless the Offer is extended, the "Confirmation Date"), a confirmation
will be sent by the Subscription Agent to each subscribing Record Date
Shareholder (or, if the Record Date Shareholder's shares of Common Stock are
held by Cede or any other depository or nominee, to Cede or such depository or
nominee), showing (i) the number of Shares acquired pursuant to the Primary
Subscription, (ii) the number of Shares, if any, acquired pursuant to the
Over-Subscription Privilege, (iii) the per Share and total purchase price of the
Shares, and (iv) any additional amount payable by such Record Date Shareholder
to the Fund or any excess to be refunded by the Fund to such Record Date
Shareholder, in each case based on the Subscription Price as determined on the
Pricing Date. If any Record Date Shareholder exercises his or her right to
acquire Shares pursuant to the Over-Subscription Privilege, any such excess
payment which would otherwise be refunded to the Record Date Shareholder will be
applied by the Fund toward payment for additional Shares acquired pursuant to
exercise of the Over-Subscription Privilege. Any additional payment required
from a Record Date Shareholder must be received by the Subscription Agent within
ten business days after the Confirmation Date. Any excess payment to be refunded
by the Fund to a Record Date Shareholder will be mailed by the

18
<PAGE> 23
Subscription Agent to such Record Date Shareholder as promptly as possible. All
payments by a Record Date Shareholder must be in United States dollars by money
order or check drawn on a bank located in the United States of America and
payable to THE ZWEIG TOTAL RETURN FUND, INC.

Whichever of the two methods described above is used, issuance and
delivery of certificates for the Shares purchased are subject to collection of
checks and actual payment pursuant to any Notice of Guaranteed Delivery.

RECORD DATE SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR
SUBSCRIPTION AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION
AGENT, EXCEPT AS PROVIDED BELOW UNDER "NOTICE OF NET ASSET VALUE DECLINE."

If a Record Date Shareholder who acquires Shares pursuant to the
Primary Subscription or Over-Subscription Privilege does not make payment of any
additional amounts due by the tenth Business Day after the Confirmation Date,
the Fund reserves the right to take any or all of the following actions: (i)
sell such subscribed and unpaid-for Shares to other Record Date Shareholders,
(ii) apply any payment actually received by it toward the purchase of the
greatest whole number of Shares which could be acquired by such holder upon
exercise of the Primary Subscription or Over-Subscription Privilege, or (iii)
exercise any and all other rights or remedies to which it may be entitled.

THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE ELECTION AND RISK OF THE RIGHTS
HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND
PAYMENT BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE FUND AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR AND, MAY AT THE DISCRETION OF THE FUND, NOT BE ACCEPTED
IF NOT CLEARED PRIOR TO THE EXPIRATION DATE, YOU ARE STRONGLY ENCOURAGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.

All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Fund, whose determinations
will be final and binding. The Fund in its sole discretion may waive any defect
or irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Fund determines
in its sole discretion. The Fund will not be under any duty to give notification
of any defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.

19
<PAGE> 24
NOTICE OF NET ASSET VALUE DECLINE

The Fund has, pursuant to the Commission's regulatory requirements,
undertaken to suspend the Offer until it amends this Prospectus if, subsequent
to , 1998, the effective date of the Fund's Registration
Statement, the Fund's net asset value declines more than 10% from its net asset
value as of that date. Accordingly, the Expiration Date would be extended and
the Fund would notify Record Date Shareholders of any such decline and permit
them to cancel their exercise of the Rights.

NON-TRANSFERABILITY OF RIGHTS

The Rights are non-transferable and, therefore, may not be purchased or
sold. The Rights will not be listed for trading on the NYSE, PSE or any other
exchange. However, the additional Shares of Common Stock to be issued upon the
exercise of the Rights and the Over-Subscription Privilege will be listed for
trading on the NYSE and PSE, subject to notice of issuance.

DELIVERY OF SHARE CERTIFICATES

Stock certificates for all Shares acquired in the Primary Subscription
will be mailed promptly after the expiration of the Offer and full payment for
the subscribed Shares has been received and cleared. Certificates representing
Shares acquired pursuant to the Over-Subscription Privilege will be mailed as
soon as practicable after full payment has been received and cleared and all
allocations have been effected. Participants in the Fund's Distribution
Reinvestment and Cash Purchase Plan (the "Plan") will have any Shares acquired
in the Primary Subscription and pursuant to the Over-Subscription Privilege
credited to their shareholder distribution reinvestment accounts in the Plan.
Participants in the Plan wishing to exercise Rights for the shares of Common
Stock held in their accounts in the Plan must exercise them in accordance with
the procedures set forth above. Record Date Shareholders whose shares of Common
Stock are held of record by Cede or by any other depository or nominee on their
behalf or their broker-dealers' behalf will have any Shares acquired in the
Primary Subscription credited to the account of Cede or such other depository or
nominee. Shares acquired pursuant to the Over-Subscription Privilege will be
certificated and stock certificates representing such Shares will be sent
directly to Cede or such other depository or nominee.

FOREIGN RESTRICTIONS

Record Date Shareholders whose record addresses are outside the United
States (for these purposes, the United States includes its territories and
possessions and the District of Columbia) will receive written notice of the
Offer; however, Subscription Certificates will not be mailed to such
shareholders. The Rights to which those Subscription Certificates relate will be
held by the Subscription Agent for such foreign Record Date Shareholders'
accounts until instructions are received to exercise the Rights. If no such
instructions are received by the Expiration Date, such Rights will expire.

20
<PAGE> 25
FEDERAL INCOME TAX CONSEQUENCES

The U.S. Federal income tax consequences to holders of Common Stock
with respect to the Offer will be as follows:

For Federal income tax purposes, the distribution of Rights will not
result in taxable income to a shareholder nor will the shareholder recognize
gain or loss as a result of the exercise of the Rights. No loss will be
recognized by a shareholder if the Rights expire without exercise.

The tax basis of a U.S. shareholder's Common Stock will remain
unchanged and the shareholder's basis in the Rights will be zero, unless such
U.S. shareholder affirmatively and irrevocably elects (in a statement attached
to such shareholder's U.S. Federal income tax return for the year in which the
Rights are received) to allocate the basis in the Common Stock between such
Common Stock and the Rights in proportion to their respective fair market values
on the date of distribution.

If Rights are exercised by the holder of Common Stock, the basis of the
Common Stock received will equal the Subscription Price (plus any basis
allocated to the Rights in the manner described in the preceding paragraph). For
purposes of determining whether capital gain or loss recognized upon a
subsequent sale of the Common Stock acquired upon exercise of a Right (assuming
the Common Stock is held as a capital asset) is short-term, mid-term or
long-term, the holding period of the Common Stock so acquired will begin on the
date the Right is exercised.

The foregoing is only a general summary of the applicable U.S. Federal
income tax law and does not include any state, local or foreign tax consequences
of the Offer. Such applicable U.S. Federal income tax law is subject to change
by legislative or administrative action. Shareholders should consult their tax
advisers concerning the tax consequences of the Offer. See "Taxation" in this
Prospectus and in the SAI.

EMPLOYEE PLAN CONSIDERATIONS

Shareholders that are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including
corporate savings and 401(k) plans), Keogh or H.R. 10 plans of self-employed
individuals and Individual Retirement Accounts ("IRAs") (collectively, "Plans")
should be aware of the complexity of the rules and regulations governing Plans
and the penalties for noncompliance, and Plans should consult with their counsel
regarding the consequences of their exercise of Rights under ERISA and the
Internal Revenue Code of 1986, as amended (the "Code").

USE OF PROCEEDS

If all of the Rights are exercised in full and assuming a Subscription
Price of $ per share (95% of the last reported sales price per share on
the NYSE on , 1998), the net proceeds to the Fund would be
approximately $ , after deducting expenses payable by the Fund, including
the fees and expenses of the Dealer Manager and soliciting broker-dealers and
other offering expenses estimated to total $ . If the Fund increases the

21
<PAGE> 26
number of Shares subject to subscription by up to Shares, in order to
satisfy over-subscription requests, the additional net proceeds will be
approximately $ . However, there can be no assurance that all Rights
will be exercised in full, and the Subscription Price will not be determined
until the close of business on the Expiration Date. The Investment Adviser has
advised the Fund that it anticipates that the net proceeds of the Offer will be
invested in investments conforming to the Fund's investment objective and
policies within a week from their receipt by the Fund, but in no event will such
investment take longer than six months from the Expiration Date. Pending such
investment, the proceeds will be invested in cash or cash equivalent short-term
obligations including, but not limited to, U.S. Government obligations,
certificates of deposit, commercial paper and short-term notes. See "The Offer -
Purpose of the Offer."

THE FUND

The Fund, incorporated in Maryland on July 21, 1988, is a diversified,
closed-end management investment company registered under the 1940 Act. The
Fund's investment objective is to seek the highest total return, consisting of
capital appreciation and current income, consistent with the preservation of
capital. The Fund will invest up to 65% of its total assets in U.S. Government
Securities, non-convertible debt securities of domestic issuers rated among the
two highest rating categories of either Moody's Investors Services, Inc. or
Standard & Poor's Corporation (or of comparable quality), and certain Foreign
Government Securities, and up to 35% of its total assets in equity securities.
The Fund may, however, under certain circumstances, invest up to 75% of its
total assets in equity securities. The extent of the Fund's investment in debt
and equity securities will be determined primarily on the basis of market timing
techniques developed by Dr. Martin E. Zweig, the President of the Fund's
Investment Adviser, and his staff. While the Investment Adviser seeks to reduce
the risks associated with investing in debt and equity securities by using these
techniques, the risk of investment in debt and equity securities cannot be
eliminated. See "Investment Objective and Policies." No assurance can be given
that the Fund's investment objective will be realized.

The Fund's Investment Adviser, Zweig Total Return Advisors, Inc., is a
Delaware corporation. The President and majority shareholder of the Investment
Adviser is Dr. Zweig, who has been engaged in the business of providing
investment advisory services for over 25 years. The Investment Adviser is
registered with the Commission under the Investment Advisers Act of 1940, as
amended. Such registration does not involve supervision or approval by the
Commission of investment advice rendered by the Investment Adviser. See
"Management of the Fund."

The Fund completed an initial public offering of 60,375,000 shares of
its Common Stock in September and October 1988. The net proceeds to the Fund
from such offering were approximately $559,912,503. As of ,
1998, the net assets of the Fund were $ , and since inception, the Fund has
paid or declared distributions (including dividends and capital gains
distributions) aggregating $ . The increase in the Fund's net assets since
inception is attributable primarily to appreciation in the value of its
portfolio securities.

The Fund's principal office is located at 900 Third Avenue, New York,
New York 10022, and its telephone number is (212) 451-1100.

22
<PAGE> 27
MARKET PRICE AND NET ASSET VALUE INFORMATION

Shares of the Fund's Common Stock are listed on the NYSE and the PSE
under the symbol "ZTR." The following table sets forth for the Common Stock for
the calendar quarters indicated: (i) the high and low net asset value per share
of the Common Stock of the Fund, (ii) the high and low closing prices on the
NYSE per share of Common Stock of the Fund, and (iii) the percentage by which
the shares of Common Stock of the Fund traded at a premium over, or discount
from, the Fund's high and low net asset values per share.

<TABLE>
<CAPTION>
High Low
Sales Net Asset Premium Sales Net Asset Premium
Quarter Ended Price* Value (Discount) Price* Value (Discount)
- ------------- ------- --------- ---------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
3/31/96 $9.000 $8.45 6.51% $8.500 $8.56 (0.70)%
6/30/96 8.750 8.29 5.55 8.375 8.14 2.89
9/30/96 8.625 8.11 6.35 8.250 8.04 2.61
12/31/96 8.500 8.14 4.42 8.000 8.29 (3.50)
3/31/97 8.625 8.15 5.83 8.125 8.26 (1.63)
6/30/97 8.875 8.37 6.03 8.375 7.98 4.95
9/30/97 9.250 8.58 7.81 8.875 8.45 5.03
12/31/97 9.563 8.59 11.33 9.125 8.41 8.50
3/31/98
</TABLE>

* As reported by the NYSE.

The Fund's Shares of Common Stock have traded in the market above, at
and below net asset value since the commencement of the Fund's operations in
September 1988. During the past seven years, the Fund's shares have generally
traded in the market at a premium above net asset value; however, the Fund's
officers cannot predict whether the Subscription Price will be above, at or
below the Fund's net asset value per Share on the Pricing Date. Since the Fund's
inception in 1988, the Fund has maintained a policy of making monthly
distributions equal to 0.83% of its net asset value (10% on an annualized
basis). The Fund's officers believe that such policy may be partly responsible
for the Fund's shares generally trading in the market at a premium above net
asset value in recent years; however, the Fund's officers cannot predict whether
the Fund's shares in the future will generally trade in the market at a premium
above net asset value. See "Distributions; Distribution Reinvestment and Cash
Purchase Plan." The Fund is authorized to repurchase its shares on the open
market when the shares are trading at a discount from net asset value. The Fund
has not engaged in any such repurchases. See "Description of Common Stock -
Repurchase of Shares." Since the Fund's inception, the Board of Directors has
maintained a policy pursuant to which the Board of Directors considers the
making of tender offers of the Fund each quarter during periods when the Fund's
shares are trading at a discount from net asset value. The Fund has not made any
such tender offers. See "Description of Common Stock - Tender Offers." The
Fund's Articles of Incorporation provide that if during any fiscal quarter
beginning on or after January 1,

23
<PAGE> 28
1990, the Fund's shares trade, on the principal securities exchange on which
they are traded, at an average discount from net asset value of 10% or more, the
Fund generally is required to submit to shareholders within 60 days after the
end of such quarter, a proposal to convert the Fund to an open-end investment
company (the "Conversion Proposal"). Approval of the Conversion Proposal would
require the affirmative vote of a majority of the outstanding shares of the Fund
entitled to be voted thereon. The Fund's shares have not traded at an average
discount from net asset value of 10% or more during any quarter since the Fund's
inception. Thus, the Fund has not submitted any Conversion Proposals to its
shareholders. See "Description of Common Stock - Provision for Conversion to
Open-End Fund."

On , 1998, the net asset value per share of Common
Stock was $ and the last reported sales price was $ ,
representing a from net asset value per share of %.

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek the highest total return,
consisting of capital appreciation and current income, consistent with the
preservation of capital. The Fund will invest up to 65% of its total assets in
U.S. Government Securities, non-convertible debt securities of domestic issuers
rated among the two highest rating categories of either Moody's Investors
Services, Inc. or Standard & Poor's Corporation (or of comparable quality), and
certain Foreign Government Securities, and up to 35% of its total assets in
equity securities. If the Investment Adviser believes that there is very low
risk in the stock market, then the Fund may invest up to 40% of its total assets
in equity securities. If, however, the Investment Adviser perceives a
fundamental change in the relationship between the debt and equity markets (such
as a significant change in the spread between the yields of debt and equity
securities from that experienced during the past decade), then, depending on the
nature of such change, the Fund may substantially increase the percentage of its
total assets invested in debt securities (including money market instruments) or
equity securities. The Fund will not, under any circumstances, invest more than
75% of its total assets in equity securities.

The extent of the Fund's investment in debt and equity securities will
be determined primarily on the basis of market timing techniques developed by
Dr. Martin E. Zweig, the President of the Fund's Investment Adviser, and his
staff. In an effort to meet the Fund's investment objective, the Fund may use
the following investment methods when such use is deemed appropriate: purchasing
and selling interest rate, stock index and other futures contracts and
purchasing options on such futures; purchasing and writing listed put and call
security options and options on stock indexes; short sales of securities;
borrowing from banks to purchase securities; investing in securities of
closed-end investment companies and foreign issuers; lending portfolio
securities to brokers, dealers, banks or other recognized institutional
borrowers of securities; entering into repurchase or reverse repurchase
agreements; and purchasing when-issued and delayed-delivery securities. See
"Special Investment Methods." During periods when the Investment Adviser
believes an overall defensive position is advisable, greater than 50% (and under
certain circumstances perhaps all) of the Fund's total assets may be invested in
money market

24
<PAGE> 29
instruments and cash. There is no assurance that the Fund will achieve its
investment objective. The Fund's investment objective may not be changed without
the approval of a majority of the Fund's outstanding securities. As used in this
Prospectus, the term "majority of the Fund's outstanding voting securities"
means the lesser of either (i) 67% of the shares represented at a shareholders
meeting at which the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding shares.

INVESTMENT POLICIES

In determining the extent of the Fund's investment in debt and equity
securities, the Investment Adviser will rely primarily on market timing
techniques developed by Dr. Zweig and his staff. It is expected that the
Investment Adviser will make most of the decisions with respect to the extent of
the Fund's investment in debt and equity securities based on these techniques.
The debt market timing techniques, which seek to identify the risks and trends
in the debt markets at any given time, will incorporate various indicators,
including the momentum of bond prices, short-term interest rate trends,
inflation indicators and general economic and liquidity indicators, as well as
other market indicators and statistics which the Investment Adviser believes
tend to point to significant trends in the overall performance and the risk of
the debt markets. The equity market timing techniques, which seek to identify
the risks and trends in the equity markets at any given time, include general
market indicators, including interest rate and monetary analysis, market
sentiment indicators, price and trading volume statistics, and measures of
valuation, as well as other market indicators and statistics which the
Investment Adviser believes tend to point to significant trends in the overall
performance and the risk of the stock market. These techniques are not an all-in
or all-out approach that attempts to predict market tops and bottoms. Instead,
they are intended to be a gradual and disciplined approach that reacts to
changes in risk levels as determined by the indicators. The goal is to be
invested consistent with the major trends of the markets. There is no assurance
that these market timing techniques will provide protection from the risks of
debt or equity investment, enable the Fund to be invested consistent with the
major trends of the markets or enable the Fund to achieve its investment
objective.

The maturities of the debt securities in the Fund's portfolio will vary
based in large part on the Investment Adviser's expectations of future changes
in interest rates using the Investment Adviser's own internal research and debt
market timing techniques. The primary consideration in choosing among bonds is
managing risk related to changes in interest rate levels. A bond's duration
measures its sensitivity to changes in interest rates (interest rate risk). The
longer the duration, the greater the bond's price movement will be as interest
rates change. The Investment Adviser manages the duration of the Fund's
portfolio, or interest rate risk, by altering the Funds' mix of short, medium,
and long term bonds, or by buying or selling interest rate futures contracts,
and also by actively using money market and cash instruments. Over time, the
duration will vary depending on the Investment Adviser's interest rate outlook.

The U.S. government securities ("U.S. Government Securities") in which
the Fund may invest are securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities (including repurchase agreements secured by
such instruments). Certain of these securities, including U.S. Treasury bills,
notes and bonds, mortgage participation certificates guaranteed by GNMA, and
Federal Housing Administration debentures, are supported by the full

25
<PAGE> 30
faith and credit of the United States. Other U.S. Government Securities issued
or guaranteed by federal agencies or government-sponsored enterprises are not
supported by the full faith and credit of the United States. These securities
include obligations supported by the right of the issuer to borrow from the U.S.
Treasury, such as obligations of Federal Home Loan Banks, and obligations
supported only by the credit of the instrumentality, such as Federal National
Mortgage Association bonds. Debt securities of domestic issuers, other than U.S.
Government Securities, will be limited to those that are rated, as of the date
of purchase, among the two highest rating categories (Aaa and Aa) of Moody's
Investors Service, Inc. ("Moody's") or the two highest rating categories (AAA
and AA) of Standard & Poor's Corporation ("S&P").

The money market instruments in which the Fund may invest include U.S.
Government Securities or obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities ("Foreign Government Securities") having a maturity of less
than one year, commercial paper rated A-1 or higher by S&P or Prime-1 or higher
by Moody's, or if such commercial paper is not rated, issued by companies which
have an outstanding debt issue rated Aa or higher by Moody's or AA or higher by
S&P, repurchase agreements secured by collateral at least equal to the
repurchase price, and certificates of deposit, bankers' acceptances and other
short-term obligations issued by domestic branches of U.S. banks that are
insured by the Federal Deposit Insurance Corporation and have assets in excess
of $500 million.

The Fund may invest up to 10% of its total assets in Foreign Government
Securities that, in the opinion of the Investment Adviser, do not subject the
Fund to unreasonable credit risks. The percentage of the Fund's assets invested
in Foreign Government Securities will vary depending on the relative yields of
such securities, the economic and financial markets of the countries in which
the investments are made, the interest rate climate of such countries and the
relationship of such countries' currencies to the U.S. dollar. During the past
year, the Fund has not owned any Foreign Government Securities.

The Fund's investments in equity securities provide the opportunity for
enhanced returns through capital appreciation. The Investment Adviser expects
that the stocks in the Fund's portfolio will be widely diversified by both
industry and the number of issuers. The Investment Adviser expects that a
majority of the stocks in the Fund's portfolio will be selected on the basis of
a proprietary stock selection model that evaluates and ranks higher dividend
yield stocks. The Investment Adviser will consider, from a list of approximately
1,500 of the most liquid stocks, approximately 750 stocks with the highest
dividend yields. The Investment Adviser will then use, for the selection of
stocks, a proprietary stock selection model that evaluates and ranks such higher
dividend yield stocks on the basis of various factors, which may include
earnings momentum, earnings growth, price-to-book value, price-to-earnings,
price-to-cash flow, cash flow trend, payout ratio trend and other market
measurements. This stock selection model may evolve or be replaced by other
stock selection models intended to achieve the Fund's investment objective.

SPECIAL INVESTMENT METHODS

The Fund may make frequent use of some or all of the following special
investment methods where their use appears appropriate to the Investment
Adviser. The investment methods described below are subject to, and should be
read in conjunction with, the discussion under "Investment

26
<PAGE> 31
Restrictions" and "Investment Objective and Policies" in the SAI. The
restrictions set forth under "Investment Restrictions" are fundamental, and thus
may be changed only with the approval of a majority of the Fund's outstanding
voting securities.

Futures Contracts and Related Options. The Fund may purchase and sell interest
rate futures contracts, stock index futures contracts and futures contracts
based upon other financial instruments, and purchase options on such contracts.
The Fund will not write options on any futures contracts. Such investments will
generally be made by the Fund only for the purpose of hedging against the effect
that changes in general market conditions and conditions affecting particular
industries may have on the values of securities held in the Fund's portfolio, or
which the Fund intends to purchase.

In general, the Fund will establish short positions in (sell) futures
contracts to hedge against anticipated or potential declines in the market value
of the Fund's portfolio of securities. For example, when the Fund anticipates a
general market or market sector decline that may adversely affect the market
value of the Fund's portfolio securities, it may establish short positions in
interest rate or stock index futures contracts.

Where the Fund anticipates a significant market or market sector
advance, establishing long positions in (purchasing) interest rate or stock
index futures contracts ("long hedge") affords a hedge against not participating
in such advance at a time when the Fund is not fully invested. For example, if
the Fund anticipates a significant stock market or market sector advance, such
long hedges would serve as a temporary substitute for the purchase of individual
stocks, which may then be purchased in an orderly fashion. As purchases of stock
are made, an amount of stock index futures contracts which is comparable to the
amount of stock purchased may be terminated by offsetting closing sales
transactions.

There are certain risks associated with the use of futures contracts
and related options. The low margin normally required in such trading provides a
large amount of leverage. Thus, a relatively small change in the price of a
contract can produce a disproportionately large profit or loss, and the Fund may
gain or lose substantially more than the initial margin on a trade. Although the
Fund intends to purchase or sell futures which appear to have an active market,
there is no assurance that a liquid market will exist for any particular
contract at any particular time. Thus, it may not be possible to close a futures
position in anticipation of adverse price movements. In addition, there may be
an imperfect correlation between the price movements of the futures contracts
and price movements of the portfolio securities being hedged.

Security and Stock Index Options. The Fund may purchase and write listed put and
call options on securities and on stock indexes that are traded on U.S.
securities exchanges at such times as the Investment Adviser deems appropriate
and consistent with the Fund's investment objective. In general, the Fund will
purchase or write such options to hedge against anticipated or potential
declines in the market value of the Fund's portfolio of securities, or to
facilitate the rapid implementation of investment strategies if the Fund
anticipates a significant market or market sector advance.

Borrowing. Although the Fund has not done so in the past, the Fund may from time
to time increase its ownership of securities above the amounts otherwise
possible by borrowings from banks on an unsecured basis and investing the
borrowed funds. In addition, the Fund may borrow

27
<PAGE> 32
to finance share repurchase or tender offer transactions when the shares are
trading at a discount from net asset value. See "Description of Common Stock -
Repurchase of Shares," and "-Tender Offers." Any such borrowing will be made
only from banks, and pursuant to the requirements of the 1940 Act, will only be
made to the extent that the value of the Fund's total assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings
including the proposed borrowing.

Borrowing for investment and to finance share repurchase or tender
offer transactions increases both investment opportunity and investment risk.
Since substantially all of the Fund's assets will fluctuate in value, but the
obligation resulting from the borrowing is relatively fixed, the Fund's shares
will increase in value more when the Fund's assets increase in value and
decrease more when the Fund's assets decrease in value than would otherwise be
the case.

Closed-end Investment Companies. The Fund may also invest in closed-end
investment companies if the Investment Adviser believes that such investments
will further the Fund's investment objective. If the Fund purchases shares of
another investment company at a discount which subsequently declines, the
performance of such investment generally would be better than if the Fund had
purchased the underlying portfolio investments of such other investment company.
Such investments in other investment companies will constitute less than 10% of
the Fund's net assets.

Foreign Securities. The Fund may invest up to 10% of its total assets in Foreign
Government Securities and up to 10% of its total assets in equity securities of
foreign issuers. Investments in foreign securities offer potential benefits not
available through investment solely in securities of domestic issuers. Foreign
securities offer the opportunity to invest in foreign issuers that appear to
have growth potential, or in foreign countries with economic policies or
business cycles different from those of the United States, or to reduce
fluctuations in portfolio value by taking advantage of foreign markets that do
not move in a manner parallel to United States markets. The Fund may also enter
into foreign currency transactions in connection with its investment activity in
foreign securities.

Short Sales. The Fund may from time to time make short sales of securities. 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. The Fund may make short sales to
offset a potential decline in a long position or a group of long positions, or
if the Investment Adviser believes that a decline in the price of a particular
security or group of securities is likely. The Fund may also make short sales in
an attempt to maintain portfolio flexibility and facilitate the rapid
implementation of investment strategies if the

28
<PAGE> 33
Investment Adviser believes that the price of a particular security or group of
securities is likely to decline.

The Fund may make a short sale only if, at the time the short sale is
made and after giving effect thereto, the market value of all securities sold
short is 25% or less of the value of its net assets and the market value of
securities sold short which are not listed on a national securities exchange
does not exceed 10% of the Fund's net assets.

Lending Portfolio Securities. Although the Fund has not done so in the past, the
Fund may lend portfolio securities, generally on a short-term basis, to brokers
or dealers in corporate or governmental securities, banks or other institutional
borrowers of securities, and financial institutions as a means of earning
income. A borrower of securities from the Fund must maintain with the Fund cash
or U.S. Government Securities equal to at least 100% of the market value of the
securities borrowed. The Fund may not lend portfolio securities if such loan
would cause the aggregate amount of all outstanding securities loans to exceed
20% of the current market value of the Fund's net assets. If a borrower becomes
bankrupt or defaults on its obligation to return the loaned security, delays or
losses could result.

Repurchase Agreements. Although the Fund has not done so in the past, the Fund
may from time to time acquire U.S. Government Securities and concurrently enter
into so-called "repurchase agreements" with the seller, a member bank of the
Federal Reserve System or primary dealers in U.S. Government Securities, whereby
the seller agrees to repurchase such securities at the Fund's cost plus interest
within a specified time (usually on the next business day). Repurchase
agreements offer a means of generating income from excess cash that the Fund
might otherwise hold. Delays in payment or losses may result if the other party
to the agreement defaults or becomes bankrupt. The Fund's repurchase agreements
must be fully backed by collateral that is marked to market, or priced, each
day.

Reverse Repurchase Agreements. Although the Fund has not done so in the past,
the Fund may enter from time to time into reverse repurchase agreements whereby
the Fund sells an underlying debt instrument and simultaneously obtains the
commitment of the purchaser, a commercial bank or a broker or dealer, to sell
the security back to the Fund at an agreed upon price on an agreed upon date.
The value of the underlying securities will be required to be maintained at a
level at least equal at all times to the total amount of the resale obligation,
including the interest factor. The Fund receives payment for such securities
only upon physical delivery or evidence of book entry transfer by its custodian.
The Fund will establish a segregated account with the Fund's custodian, in which
the Fund will maintain cash and U.S. Government Securities or other high grade
debt obligations at least equal in value to the total amount of the repurchase
obligation, including accrued interest. The value of the segregated securities
will be marked-to-market on a daily basis to ensure that such value is
maintained. Reverse repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities. An
additional risk is that the market value of

29
<PAGE> 34
securities sold by the Fund under a reverse repurchase agreement could decline
below the price at which the Fund is obligated to repurchase them. Reverse
repurchase agreements will be considered borrowings by the Fund and as such will
be subject to the restrictions on borrowing described in the SAI under
"Investment Restrictions." The value of all the Fund's reverse repurchase
agreements will not exceed 5% of the Fund's total assets.

When-Issued and Delayed-Delivery Securities. The Fund may enter from time to
time purchase securities on a "when-issued" or "delayed-delivery" basis whereby
the Fund purchases a bond or stock with delivery of the security and payment
deferred to a future date. The money to purchase such securities will be
invested in other securities until the Fund receives delivery. This could
increase the possibility that the Fund's net asset value would increase or
decrease faster than would otherwise be the case. There is no restriction on the
percentage of the Fund's assets that may be invested in when-issued or
delay-delivery securities, and such securities are not considered to be short
sales for purposes of the Fund's Investment Restrictions on short sales.

RISK FACTORS AND SPECIAL CONSIDERATIONS

The following discusses certain matters that should be considered,
among others, in connection with the Offer.

DILUTION-NET ASSET VALUE AND NON-PARTICIPATION IN THE OFFER

Record Date Shareholders who do not fully exercise their Rights will,
upon the completion of the Offer, own a smaller proportional interest in the
Fund than they owned prior to the Offer. In addition, an immediate dilution of
the net asset value per share may be experienced by all shareholders as a result
of the Offer because the Subscription Price may be less than the then current
net asset value per share, and the number of shares outstanding after the Offer
may increase in greater percentage than the increase in the size of the Fund's
assets. Although it is not possible to state precisely the amount of such
decrease in net asset value per share, if any, because it is not known at this
time what the Subscription Price will be, what the net asset value per share
will be on the Expiration Date, or what proportion of the Shares will be
subscribed for, such dilution could be minimal or substantial. For example,
assuming (i) all Rights are exercised, (ii) the Fund's net asset value on the
Expiration Date is $ per share (the net asset value per share on ,
1998), and (iii) the Subscription Price is $ per share (95% of the last
reported sale price per share on the NYSE on , 1998), then the Fund's net
asset value per share would be reduced by approximately $ per share or %.

LEVERAGE AND BORROWING

As discussed above under "Special Investment Methods", the Fund is
authorized to borrow. The Fund has not borrowed money in the past, and does not
have any intention at this time to borrow money in the future. Borrowings create
an opportunity for greater capital appreciation with respect to the Fund's
investment portfolio, but at the same time such borrowing is speculative in that
it will increase the Fund's exposure to capital risk. In addition, borrowed
funds are subject to interest costs that may offset or exceed the return earned
on the borrowed funds.

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<PAGE> 35
CERTAIN INVESTMENT STRATEGIES

The extent of the Fund's investment in debt and equity securities will
be determined primarily on the basis of market timing techniques developed by
Dr. Zweig and his staff. While the Investment Adviser seeks to reduce the risks
associated with investing in debt and equity securities by using these
techniques, the risk of investment in equity securities cannot be eliminated.
There is no assurance that these market timing techniques will provide
protection from the risks of debt and equity investment, enable the Fund to be
invested consistent with the major trends of the markets or enable the Fund to
achieve its investment objective.

In addition, although the Investment Adviser believes that the special
investment methods discussed above under "Special Investment Methods" (including
purchasing and selling interest rate, stock index and other futures contracts
and purchasing options on such futures; purchasing and writing listed put and
call security options and options on stock indexes; short sales of securities;
borrowing from banks to purchase securities; investing in securities of
closed-end investment companies and foreign issuers; lending portfolio
securities to brokers, dealers, banks or other recognized institutional
borrowers of securities; entering into repurchase or reverse repurchase
agreements; and purchasing when-issued and delayed-delivery securities) will
further the Fund's investment objective and reduce losses that might otherwise
occur during a time of general decline in debt or equity security prices, no
assurance can be given that these investment methods will achieve this result.
These methods may subject an investor in the Fund to greater than average risks
and costs.

UNREALIZED APPRECIATION

As of December 31, 1997, there was $50,238,438 or approximately $0.64
per share of net unrealized appreciation in the Fund's net assets of
$677,133054, if realized and distributed, or deemed distributed, such gains
would, in general, be taxable to shareholders, including holders at that time of
Shares acquired upon the exercise of Rights. See "Taxation."

DISCOUNT FROM NET ASSET VALUE

DISTRIBUTIONS

The Fund's policy is to make monthly distributions equal to 0.83% of
its net asset value (10% on an annualized basis). If, for any monthly
distribution, net investment income and net realized short-term capital gains
are less than the amount of the distribution, the difference will be distributed
from the Fund's assets. The Fund's final distribution for each calendar year
will include any remaining net investment income and net realized short-term
capital gains deemed, for Federal

31
<PAGE> 36
income tax purposes, undistributed during the year, as well as all net long-term
capital gains realized during the year. If, for any calendar year, the total
distributions exceed net investment income and net realized capital gains, the
excess, distributed from the Fund's assets, will generally be treated as a
tax-free return of capital (up to the amount of the shareholder's tax basis in
his or her shares). The amount treated as a tax-free return of capital will
reduce a shareholder's adjusted basis in his or her shares, thereby increasing
his or her potential gain or reducing his or her potential loss on the sale of
his or her shares. Such excess, however, will be treated as ordinary dividend
income, and will not reduce a shareholder's adjusted basis in his or her shares,
up to the amount of the Fund's current and accumulated earnings and profits.
Pursuant to the requirements of the 1940 Act and other applicable laws, a notice
will accompany each monthly distribution with respect to the estimated source of
the distribution made. Such distribution policy may, under certain
circumstances, have certain adverse consequences to the Fund and its
shareholders. In the event the Fund distributes amounts in excess of its net
investment income and net realized capital gains, such distributions will
decrease the Fund's total assets and, therefore, have the likely effect of
increasing the Fund's expense ratio. In addition, in order to make such
distributions, the Fund may have to sell a portion of its investment portfolio
at a time when independent investment judgment might not dictate such action.
See "Distributions; Distribution Reinvestment and Cash Purchase Plan" for a
discussion of the Fund's distribution policy.

ANTI-TAKEOVER PROVISIONS

The Fund has provisions in its Articles of Incorporation and By-Laws
that may have the effect of limiting the ability of other entities or persons to
acquire control of the Fund, to cause it to engage in certain transactions or to
modify its structure. The Board of Directors is divided into three classes. At
the annual meeting of shareholders each year, the term of one class will expire
and directors will be elected to serve in that class for terms of three years.
This provision could delay for up to two years the replacement of a majority of
the Board of Directors.

These provisions could have the effect of limiting shareholders'
opportunity to sell their shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction. See "Description of Common Stock - Special
Voting Provisions."

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The management of the Fund, including general supervision of the duties
performed by the Investment Adviser under the Investment Advisory Agreement (as
described below), is the responsibility of the Fund's Board of Directors. For
certain information regarding the Directors and officers of the Fund, see
"Management - Directors and Officers" in the SAI.

INVESTMENT ADVISER

The Fund's Investment Adviser, Zweig Total Return Advisors, Inc., is a
Delaware corporation, with offices at 900 Third Avenue, New York, New York
10022. The Investment

32
<PAGE> 37
Adviser was organized in June 1988 for the purpose of acting as investment
adviser to the Fund. Dr. Zweig owns a majority of the outstanding shares of the
Investment Adviser.

Pursuant to an investment advisory agreement between the Investment
Adviser and the Fund, dated September 22, 1988 ("the Investment Advisory
Agreement"), the Investment Adviser is responsible for the actual management of
the Fund's portfolio. The responsibility for making decisions to buy, sell or
hold a particular investment rests with the Investment Adviser, subject to
review by the Board of Directors and the applicable provisions of the 1940 Act.
The Investment Adviser is not dependent on any other party in providing the
investment advisory services required for the management of the Fund. The
Investment Adviser may, however, consider analyses from various sources,
including broker-dealers with which the Fund does business and affiliates of the
Investment Adviser. The Investment Adviser is also obligated to provide the Fund
with such executive, data processing, clerical, accounting and bookkeeping
services and statistical and research data as are deemed advisable by the Fund's
Board of Directors, except to the extent these services are provided by an
administrator hired by the Fund.

For the services provided by the Investment Adviser under the Investment
Advisory Agreement, the Fund will pay the Investment Adviser a monthly fee
computed at the annual rate of 0.70% of the Fund's average daily net assets
during the previous month. For the fiscal years ended December 31, 1997, 1996
and 1995, the Fund accrued investment advisory fees of $4,571,606, $4,415,349,
and $4,330,481.

Zweig Securities Corp. or any other brokerage affiliate (the "Brokerage
Affiliate") may act as a broker for the Fund. In order for the Brokerage
Affiliate to effect any portfolio transactions for the Fund, the commissions,
fees or other remuneration received by the Brokerage Affiliate must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. The Fund will not deal with a Brokerage Affiliate in any portfolio
transaction in which the Brokerage Affiliate would act as principal.

DR. MARTIN E. ZWEIG

Dr. Zweig, the President of the Fund and the Investment Adviser, has
been in the business of providing investment advisory services for over 25 years
and is the President and/or Chairman of investment advisory firms which, as of
December 31, 1997, managed in excess of $7 billion in assets. Dr. Zweig and his
associates determine the asset allocation strategy for the Fund. Dr. Zweig does
not select the individual securities to implement the strategy. The portfolio
managers select the specific securities for the Fund.

PORTFOLIO MANAGERS

The day-to-day bond selections for the Fund are made by Mr. Carlton
Neel, and the day-to-day stock selections for the Fund are made by Mr. Jeffrey
Lazar. Mr. Neel has been making the day-to-day bond selections for the Fund and
The Zweig Fund, Inc. since July 1995. He is also the portfolio manager for the
following series of Zweig Series Trust: Zweig Managed Assets, Zweig Government
Fund and Zweig Foreign Equity Fund. Prior to joining the Investment Adviser in
1995, Mr. Neel was a Vice President with J.P. Morgan & Co., Inc. Mr. Lazar has
been Vice

33
<PAGE> 38
President of the Fund since 1988, and is also a Director of the Fund.
He has been making the day-to-day stock selections for the Fund and The Zweig
Fund, Inc. since January 1995. Mr. Lazar, who is a Vice President of the
Investment Adviser, has been with the Investment Adviser since 1988.

INVESTMENT ADVISORY AGREEMENT

The Investment Advisory Agreement sets forth the services to be
provided by and the fees to be paid to each party, as described above. The
Investment Advisory Agreement provides that the Investment Adviser's liability
to the Fund and its shareholders is limited to situations involving its own
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its duties and obligations
under the Investment Advisory Agreement.

The services of the Investment Adviser to the Fund are not deemed to be
exclusive, and the Investment Adviser or any affiliate thereof may provide
similar services to other investment companies and other clients or engage in
other activities.

The Investment Advisory Agreement obligates the Investment Adviser to
provide advisory services and to pay all expenses arising from the performance
of its obligations under the Investment Advisory Agreement, as well as the fees
of all Directors of the Fund who are employees of the Investment Adviser or any
of its affiliates. The Fund pays all other expenses incurred in the operation of
the Fund including, but not limited to, direct charges relating to the purchase
and sale of portfolio securities, interest charges, fees and expenses of
attorneys and auditors, taxes and governmental fees, cost of stock certificates
and any other expenses (including clerical expenses) of issuance, sale or
repurchase of the Fund's common stock, expenses in connection with the Fund's
Distribution Reinvestment and Cash Purchase Plan, membership fees in trade
associations, expenses of registering and qualifying shares of the Fund's common
stock for sale under Federal and state securities laws, expenses of obtaining
and maintaining any stock exchange listings of the Fund's common stock, expenses
of printing and distributing reports, prospectuses, notices and proxy materials,
expenses of corporate data processing and related services, shareholder record
keeping and shareholder account services (including salaries of shareholder
relations personnel), expenses of auditors and escrow agents, expenses of
printing and filing reports and other documents filed with governmental
agencies, expenses of annual and special shareholders' meetings, fees and
disbursements of the Fund's administrator, transfer agent, custodian and
subcustodians (if any), expenses of disbursing dividends and distributions,
fees, expenses and out-of-pocket costs of Directors of the Fund who are not
interested persons of the Fund or the Investment Adviser, insurance premiums and
litigation, indemnification and other expenses not expressly provided for in the
Investment Advisory Agreement or the Administration Agreement.

The Investment Advisory Agreement will remain in effect from year to
year if approved annually (i) by the Board of Directors of the Fund or by the
holders of a majority of the Fund's outstanding voting securities, and (ii) by a
majority of the Directors who are not parties to the Investment Advisory
Agreement or interested persons of any such party. The Investment Advisory
Agreement terminates on its assignment by either party, and may be terminated
without penalty on not more than 60 days' prior written notice at the option of
either party thereto, or by the affirmative vote of the holders of a majority of
the Fund's outstanding voting securities.

The Investment Advisory Agreement provides that the Fund may use
"Zweig" as part of its

34
<PAGE> 39
name for so long as the Investment Adviser serves as investment adviser to the
Fund. The Fund has agreed that, in the event the Investment Advisory Agreement
is terminated, the Fund will promptly take such actions as may be necessary to
change its corporate name to one not containing the word "Zweig", and the Fund
will thereafter not transact business in a corporate name using the word "Zweig"
in any form or combination whatsoever. The Fund has also acknowledged that the
word "Zweig" is a property right of Dr. Martin E. Zweig and that Dr. Martin E.
Zweig or, pursuant to his consent, the Investment Adviser may at any time permit
others to use the word "Zweig."

ADMINISTRATOR

Zweig/Glaser Advisers (the "Administrator") serves as the Fund's
administrator pursuant to an administration agreement dated August 1, 1995 (the
"Administration Agreement"). Martin E. Zweig (the President and Chairman of the
Board of the Fund) and Eugene J. Glaser (a Director of The Zweig Fund, Inc.) are
the Chairman and President, respectively, and the principal owners of the
Administrator. The Administrator generally assists in all aspects of the Fund's
operations, other than providing investment advice, subject to the overall
authority of the Fund's Board of Directors. The Administrator determines the
Fund's net asset value daily, prepares such figures for publication on a weekly
basis, maintains certain of the Fund's books and records that are not maintained
by the Investment Adviser, custodian or transfer agent, assists in the
preparation of financial information for the Fund's income tax returns, proxy
statement, quarterly and annual shareholder reports, and responds to shareholder
inquiries.

The Fund pays the Administrator a monthly fee computed at an annual
rate of 0.13% of the Fund's average daily net assets during the previous month.
For the fiscal years ended December 31, 1997 and 1996 and the period August 1,
1995 to December 31, 1995, the Fund accrued administrative fees of $849,013,
$819,993, and $345,212. During the period May 6, 1994 to July 31, 1995, The
Shareholder Services Group, Inc. ("TSSG") served as the Fund's Administrator and
received fees equal, on an annual basis, to 0.18% of the Fund's average daily
net assets during the previous month. During the period January 1, 1995 to July
31, 1995, the Fund paid TSSG administrative fees of $635,566.

DISTRIBUTIONS; DISTRIBUTION REINVESTMENT AND CASH PURCHASE PLAN

The Fund's policy is to distribute to shareholders on a monthly basis
0.83% of its net asset value (10% on an annualized basis). If, for any monthly
distribution, net investment income and net realized short-term capital gains
are less than the amount of the distribution, the difference will be distributed
from the Fund's assets. The Fund's final distribution for each calendar year
will include any remaining net investment income and net realized short-term
capital gains deemed, for Federal income tax purposes, undistributed during the
year, as well as all net long-term capital gains realized during the year. If,
for any calendar year, the total distributions exceed net investment income and
net realized capital gains, the excess, distributed from the Fund's assets, will
generally be treated as a tax-free return of capital (up to the amount of the
shareholder's tax basis in his or her shares). The amount treated as a tax-free
return of capital will reduce a shareholder's adjusted basis in his or her
shares, thereby increasing his or her potential gain or reducing his or her
potential loss on the sale of his or her shares. Such excess, however, will be
treated as ordinary dividend income up to the amount of the Fund's current and
accumulated earnings and profits. In calculating the

35
<PAGE> 40
amount of each monthly distribution, the Fund's net asset value will be measured
as of the business day immediately preceding the declaration date of such
distribution. Pursuant to the requirements of the 1940 Act and other applicable
laws, a notice will accompany each monthly distribution with respect to the
estimated source of the distribution made.

In the event the Fund distributes amounts in excess of its net
investment income and net realized capital gains, such distributions will
decrease the Fund's total assets and, therefore, have the likely effect of
increasing the Fund's expense ratio. In addition, in order to make such
distributions, the Fund may have to sell a portion of its investment portfolio
at a time when independent investment judgment might not dictate such action.

Shareholders may elect to receive all distributions in cash paid by
check mailed directly to the shareholder by State Street Bank & Trust Co.
("State Street"), as dividend paying agent. Pursuant to the Distribution
Reinvestment and Cash Purchase Plan (the "Plan"), shareholders not making such
election will have all such amounts automatically reinvested by State Street, as
the Plan agent, in whole or fractional shares of the Fund, as the case may be.

If the Directors of the Fund declare a distribution payable either in
shares or in cash, as shareholders may have elected, then nonparticipants in the
Plan will receive cash and participants in the Plan will receive the equivalent
in shares determined as follows: Whenever the market price of the shares on the
record date for the distribution is equal to or exceeds their net asset value,
participants will be issued shares at the higher of net asset value or 95% of
the closing market price of the shares on the NYSE on the previous trading day.
If the net asset value of shares at such time exceeds the market price of
shares, or if the Fund should declare a distribution payable only in cash, State
Street will, as agent for the participants, buy shares in the open market, on
the NYSE or elsewhere, for the participants' account. If, before State Street
has completed its purchases, the market price exceeds the net asset value of the
shares, State Street is permitted to cease purchasing the shares in the open
market and the Fund may issue the remaining shares at a price equal to the
higher of net asset value or 95% of the then market price. State Street will
apply all cash received as a distribution to purchase shares on the open market
as soon as practicable after the payment date of such distribution, but in no
event later than 30 days after such date, except where necessary to comply with
applicable provisions of the Federal securities laws.

Participants in the Plan have the option of making additional cash
payments monthly to State Street for investment in the shares. Such payments may
be made in any amount from $100 to $3,000. State Street will use all such
payments received from participants to purchase shares on the open market on or
about the fifteenth day of each month (or the closest business day thereto, if a
weekend or holiday). To avoid unnecessary cash accumulations, and also to allow
ample time for receipt and processing by State Street, it is suggested that
participants send voluntary cash payments to State Street by the fifth day of
the month for which a voluntary purchase is desired. A participant may withdraw
a voluntary cash payment by written notice, if the notice is received by State
Street at least 48 hours before such payment is to be invested.

State Street maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the account, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant will be held by State Street in
non-certificated form in the name of the participant, and each shareholder's
proxy will include

36
<PAGE> 41
those shares purchased pursuant to the Plan.

There is no charge to participants for reinvesting distributions or
voluntary cash payments. State Street's fees for the handling of the
reinvestment of distributions will be paid by the Fund. There will be no
brokerage charges with respect to shares issued directly by the Fund as a result
of distributions payable either in stock or in cash. However, each participant
will pay a pro-rata share of brokerage commissions incurred with respect to
State Street's open market purchases in connection with the reinvestment of
distributions as well as from voluntary cash payments. With respect to purchases
from voluntary cash payments, State Street will charge each participant a
pro-rata share of the brokerage commissions. Brokerage charges for purchasing
small amounts of stock for individual accounts through the Plan are expected to
be less than the usual brokerage charges for such transactions, as State Street
will be purchasing shares for all participants in blocks and prorating the lower
commission thus attainable. State Street may use its affiliates and/or
affiliates of the Investment Adviser for all trading activity relative to the
Plan on behalf of Plan participants. Such affiliates will receive a commission
in connection with such trading transactions.

If a shareholder desires to discontinue his or her participation in the
Plan, the shareholder may either (i) request State Street to sell part or all of
the shares in the account and remit the proceeds to the shareholder, net of any
brokerage commissions, or (ii) the shareholder may receive a certificate for the
appropriate number of full shares in the account, along with a check in payment
for any fractional shares.

Although many brokers do participate in the Plan on behalf of their
customers, a participant in the Plan who does change his or her broker may not
be able to transfer the shares to another broker and continue to participate in
the Plan.

The automatic reinvestment of distributions will not relieve
participants of any income tax that may be payable on such distributions.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such distribution. The Plan also may
be amended or terminated by State Street, with the Fund's prior written consent,
on at least 90 days' written notice to participants in the Plan. All
correspondence concerning the Plan should be directed to State Street at P.O.
Box 8040, Boston, MA 02266-8040.

DESCRIPTION OF COMMON STOCK

The authorized capital stock of the Fund consists of 500,000,000 shares
of Common Stock, par value $0.001 per share, of which shares were
outstanding as of , 1998. The Shares when issued, will be fully paid and
nonassessable. All shares of Common Stock are equal as to dividends, assets and
voting privileges and have no conversion, preemptive or exchange rights. In the
event of liquidation, each share of Common Stock is entitled to its proportion
of the Fund's assets after payment of debts and expenses. Shareholders are
entitled to one vote per share. All voting rights for directors are
non-cumulative, which means that the holders of more than 50%

37
<PAGE> 42
of the shares of common stock can elect 100% of the directors if they choose to
do so, and, in such event, the holders of the remaining shares of common stock
will not be able to elect any directors. The Fund's outstanding shares of Common
Stock are, and the Shares offered hereby will be, listed on the NYSE and PSE
under the symbol "ZTR."

The Fund has no present intention of offering additional shares beyond
this Offering, except that additional shares may be issued under the
Distribution Reinvestment and Cash Purchase Plan. See "Distributions;
Distribution Reinvestment and Cash Purchase Plan." Other offerings of its Common
Stock, if made, will require approval of the Fund's Board of Directors. Any
additional offering will be subject to the requirements of the 1940 Act that
shares may not be sold at a price below the then current net asset value
(exclusive of underwriting discounts and commissions) except in certain
circumstances, including in connection with an offering to existing shareholders
or with the consent of a majority of the Fund's outstanding shares.

REPURCHASE OF SHARES

The Fund is authorized to repurchase its shares on the open market when
the shares are trading at a discount from net asset value, and the Fund may
incur debt to refinance share repurchase transactions. In addition, pursuant to
the 1940 Act, the Fund retains the right to repurchase its shares under other
circumstances on a securities exchange or such other open market designated by
the Commission (provided that the Fund has informed shareholders within the
preceding six months of its intention to repurchase such shares), by a tender
offer open to all the Fund's shareholders, or as otherwise permitted by the
Commission. When a repurchase of Fund shares is to be made that is not to be
effected on a securities exchange or such an open market or by the making of a
tender offer, the 1940 Act provides that certain conditions must be met
regarding, among other things, distribution of net income, identity of the
seller, price paid, brokerage commissions, prior notice to shareholders of an
intention to purchase shares and purchasing in a manner on a basis which does
not discriminate unfairly against the other shareholders indirectly through
their interest in the Fund. The Fund may incur debt to finance share repurchase
transactions (see "Investment Restrictions" in the SAI).

When the Fund repurchases its shares for a price below their net asset
value, the net asset value of the shares that remain outstanding will be
enhanced, but this does not necessarily mean that the market price of those
outstanding shares will be affected, either positively or negatively. Interest
on any borrowings to finance share repurchase transactions will reduce the
Fund's net income, but not necessarily its net income per share. The Fund has
not repurchased any shares of its Common Stock.

TENDER OFFERS

Since the Fund's inception in 1988, the Board of Directors has
maintained a policy pursuant to which the Board of Directors considers the
making of tender offers of the Fund each quarter during periods when the Fund's
shares are trading at a discount from net asset value. The Board may at any
time, however, decide that the Fund should not make tender offers. The net asset
value at which shares may be tendered will be established at the close of
business on the last day the tender offer is open. Since the Fund's inception,
however, the Fund has not made any tender offers for the shares of its Common
Stock.

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<PAGE> 43
It should be recognized that the acquisition of shares by the Fund will
decrease the total assets of the Fund and therefore have the likely effect of
increasing the Fund's expense ratio. Furthermore, if the Fund borrows to finance
share repurchases or tender offers, interest on such borrowing will reduce the
Fund's net investment income. If the Fund must liquidate a portion of its
investment portfolio in connection with a share repurchase or tender offer, such
liquidation might be at a time when independent investment judgment might not
dictate such action.

Each person tendering shares will pay to the Fund a reasonable service
charge to help defray certain costs, including the processing of tender forms,
effecting payment, postage and handling. Any such service charge will be paid
directly by the tendering shareholder and will not be deducted from the proceeds
of the purchase. The Fund's transfer agent will receive the fee as an offset to
these costs. The Fund expects the cost to the Fund of effecting a tender offer
will exceed the aggregate of all service charges received from those who tender
their shares. Costs associated with the tender will be charged against capital.
During the pendency of any tender offer, shareholders may ascertain the net
asset value of the Fund's shares by calling a telephone number as provided in
any tender offer materials.

PROVISION FOR CONVERSION TO OPEN-END FUND

If during any fiscal quarter beginning on or after January 1, 1990, the
Fund's shares trade, on the principal securities exchange on which they are
traded, at an average discount from net asset value of 10% or more (determined
on the basis of the discount as of the end of the last trading day in each week
during such quarter), the Fund's Articles of Incorporation require the Board of
Directors to submit to shareholders a proposal to convert the Fund to an
open-end investment company (the "Conversion Proposal"). The Fund's shares have
not traded at an average discount from net asset value of 10% or more during any
quarter since the Fund's inception. Thus, the Fund has not submitted any
Conversion Proposal to its shareholders. Approval of a Conversion Proposal would
require the affirmative vote of a majority of the outstanding shares of the Fund
entitled to be voted thereon. The Fund's Articles of Incorporation provide,
however, that a Conversion Proposal need not be submitted to shareholders with
respect to a quarter if a Conversion Proposal was submitted to shareholders with
respect to the immediately preceding quarter.

If the Fund converted to an open-end investment company, its
shareholders could require the company to redeem their shares at any time
(except in certain circumstances as authorized by the 1940 Act) at the next
determined net asset value of such shares, less such redemption charges, if any,
as might be in effect at the time of redemption. In such event, the Fund could
be required to liquidate portfolio securities to meet requests for redemption.
In addition, if the Fund converted to an open-end investment company, its shares
would no longer be listed on any stock exchange, and certain of the Fund's
expenses (including transfer agency and shareholder services expenses) would be
greater than those that would be incurred by a closed-end investment company.

In the event the Fund's shareholders did not approve a proposal to
convert the Fund to an open-end investment company, the Fund would continue as a
closed-end investment company, but pursuant to the Fund's Articles of
Incorporation, the Board of Directors would be required to submit to the Fund's
shareholders a subsequent Conversion Proposal with respect to any subsequent
quarter during which there was an average discount of 10% or more from net asset
value, unless the

39
<PAGE> 44
Conversion Proposal had been submitted to shareholders with respect to the
immediately preceding quarter. The Fund cannot predict whether any open market
repurchases or tender offer purchases of its shares made while the Fund is a
closed-end investment company would decrease the discount from net asset value.
To the extent that any such open market repurchases or tender offer purchases
decreased the average discount from net asset value to below 10% for a fiscal
quarter, the Fund would not be required to submit to its shareholders the
Conversion Proposal with respect to such quarter.

SPECIAL VOTING PROVISIONS

The Fund has provisions in its Articles of Incorporation and By-Laws
(collectively, the "Charter Documents") that could have the effect of limiting
the ability of other entities or persons to acquire control of the Fund, to
cause it to engage in certain transactions or to modify its structure. The Board
of Directors is divided into three classes. At the annual meeting of
shareholders each year, the term of one class will expire and directors will be
elected to serve in that class for terms of three years. This provision could
delay for up to two years the replacement of a majority of the Board of
Directors.

The maximum number of Directors (twelve) may be increased, or a
Director may be removed from office, only by the affirmative vote of the holders
of at least 75% of the shares of the Fund entitled to be voted for the election
of Directors. In addition, the affirmative vote of the holders of 75% of the
outstanding shares of the Fund is required to authorize the conversion of the
Fund from a closed-end to an open-end investment company (except pursuant to the
Conversion Proposal described above), to amend certain of the provisions of the
Articles of Incorporation or generally to authorize any of the following
transactions:

(i) merger or consolidation or statutory share exchange of the Fund
with or into any other corporation;

(ii) a sale of all or substantially all of the Fund's assets (other
than in the regular course of the Fund's investment activities); or

(iii) a liquidation or dissolution of the Fund,

unless such action has been approved, adopted or authorized by the affirmative
vote of two-thirds of the total number of Directors fixed in accordance with the
By-Laws, in which case the affirmative vote of a majority of the Fund's
outstanding shares is required. Such 75% voting requirements described above,
which are greater than the minimum requirements under Maryland law or the Act,
can only be changed by a similar 75% vote. Reference is made to the Charter
Documents of the Fund, on file with the Commission, for the full text of these
provisions. See "Further Information."

The provisions of the Charter Documents described above and the Fund's
right to repurchase or make a tender offer for shares of its common stock could
have the effect of depriving the owners of shares of opportunities to sell their
shares at a premium over prevailing market prices, by discouraging a third party
from seeking to obtain control of the Fund in a tender offer or similar
transaction. See "Repurchase of Shares" and "Tender Offers."

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<PAGE> 45
TAXATION

FEDERAL TAXATION OF THE FUND AND ITS DISTRIBUTIONS

The Fund has qualified and elected to be treated, and intends to
continue to qualify and be treated, as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). The Fund currently
intends to distribute all or substantially all its investment company taxable
income (all taxable income and net short-term capital gains) and its net capital
gain each year, thereby avoiding the imposition on the Fund of Federal income
and excise taxes on such distributed income and gain. Such distributions from
investment company taxable income will be taxable as ordinary income to
shareholders of the Fund who are subject to tax, and the Fund's capital gain
distributions will be taxable as capital gain to such shareholders. For
non-corporate U.S. shareholders, the Fund's capital gains distributions will be
taxable at maximum marginal Federal income tax rates of 28% as to the portion of
such distributions designated as a 28% rate gain distribution, and 20% as to the
portion of such distributions designated as a 20% rate gain distribution,
respectively. Shareholders that are not subject to tax on their income generally
will not be required to pay tax on amounts distributed to them. Notwithstanding
the above, the Fund may decide to retain all or part of any net capital gain for
reinvestment. After the end of each taxable year, the Fund will notify
shareholders of the Federal income tax status of any distributions, or deemed
distributions, made by the Fund during such year. For a discussion of certain
income tax consequences to shareholders of the Fund, see "Taxation" in the SAI.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OFFER

The following discussion describes certain United States Federal income
tax consequences of the Offer generally applicable to citizens or residents of
the United States and U.S. trusts, estates, corporations and any other person
who would be subject to U.S. Federal income tax upon the sale or exchange of
Common Stock acquired upon the exercise of Rights ("U.S. Shareholders"). This
summary is intended to be descriptive only and does not purport to be a complete
analysis or listing of all potential tax effects relevant to the ownership of
Rights or Common Stock. Additionally, this summary does not specifically address
the U.S. Federal income tax consequences that might be relevant to holders of
Rights or Common Stock entitled to special treatment under the U.S. Federal
income tax laws, such as individual retirement accounts and other tax deferred
accounts, financial institutions, life insurance companies and tax-exempt
organizations, and does not discuss the effect of state, local and other tax
laws. Further, this summary is based on interpretations of existing law as of
the date of this Prospectus as contained in the Code, applicable current and
proposed Treasury Regulations, judicial decisions and published administrative
positions of the Internal Revenue Service, all of which are subject to change
either prospectively or retroactively.

U.S. Shareholders who receive Rights pursuant to the Offer will not
recognize taxable income for U.S. Federal income tax purposes upon their receipt
of the Rights. If Rights issued to a U.S. Shareholder expire without being sold
or exercised, no basis will be allocated to such Rights, and such Shareholder
will not recognize any gain or loss for U.S. Federal income tax purposes upon
such expiration.

41
<PAGE> 46
The tax basis of a U.S. Shareholder's Common Stock will remain
unchanged and the shareholder's basis in the Rights will be zero, unless such
U.S. Shareholder affirmatively and irrevocably elects (in a statement attached
to such shareholder's U.S. Federal income tax return for the year in which the
Rights are received) to allocate the basis in the Common Stock between such
Common Stock and the Rights in proportion to their respective fair market values
on the date of distribution.

A U.S. Shareholder who exercises Rights will not recognize any gain or
loss for U.S. Federal income tax purposes upon the exercise. The basis of the
newly acquired Common Stock will equal the Subscription Price paid for the
Common Stock (plus the basis, if any, allocated to the Rights in the manner
described in the immediately preceding paragraph). Upon a sale or exchange of
the Common Stock so acquired, the Shareholder will recognize gain or loss
measured by the difference between the proceeds of the sale or exchange and the
cost basis of such Common Stock. Assuming the U.S. Shareholder holds the Common
Stock as a capital asset, any gain or loss realized upon its sale will generally
be treated as a capital gain or loss, which gain or loss will be short-term,
mid-term or long-term, depending on the length of the U.S. Shareholder's holding
period for such Common Stock. However, it currently appears that any loss
recognized upon the sale of shares of Common Stock with a tax holding period of
6 months or less will be treated as a long-term capital loss to the extent of
any capital gain distribution previously received by the U.S. Shareholder with
respect to such shares, and a loss may be disallowed under wash sale rules to
the extent that the U.S. Shareholder purchases additional Common Stock
(including by reinvestment of distributions) within 30 days before or after the
sale date. The holding period for Common Stock acquired upon the exercise of
Rights will begin on the date of exercise of the Rights.

A U.S. Shareholder may be subject to backup withholding at the rate of
31% with respect to Fund distributions and gross proceeds from the sale or
exchange of Common Stock (if the Fund is the payor) unless such U.S. Shareholder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates and/or certifies this fact, or (b) provides a correct
taxpayer identification number, along with certain required certifications, and
otherwise complies with applicable requirements of the backup withholding rules.
U.S. Shareholders who choose to transfer their Common Stock and who do not
provide the appropriate withholding agent with their correct taxpayer
identification number in the manner required may be subject to penalties imposed
by the Internal Revenue Service. Any amount withheld under these rules is not an
additional tax; it will be creditable against the U.S. Shareholder's U.S.
Federal income tax liability.

This summary is not intended to be, nor should it be, construed as
legal or tax advice to any current holder of Common Stock. Further, because the
U.S. Federal income tax consequences of the Offer may vary depending upon the
particular circumstances of each shareholder of the Fund and other facts, and
because this summary is not exhaustive of all possible U.S. Federal income tax
considerations (such as situations involving taxpayers who are dealers in
securities or whose functional currency is not the U.S. dollar), the Fund's
shareholders are urged to consult their own tax advisors to determine the U.S.
Federal income tax consequences to them of the Offer and their ownership of
Rights and Common Stock. In addition, such shareholders are urged to consult
their own tax advisors in determining the U.S. state and local tax consequences
to them of the Offer and such ownership. See "Taxation" in the SAI.

42
<PAGE> 47
DISTRIBUTION ARRANGEMENTS

Merrill Lynch, Pierce, Fenner & Smith Incorporated, New York, New York,
will act as the Dealer Manager for the Offer. Under the terms and subject to the
conditions contained in a Dealer Manager Agreement between the Fund and the
Dealer Manager, dated , 1998 (the "Dealer Manager Agreement"), the Dealer
Manager will provide financial advisory, marketing and soliciting services in
connection with the Offer. The Fund has agreed to pay the Dealer Manager a fee
for financial advisory and marketing services in connection with the Offer equal
to 1.25% of the aggregate Subscription Price for the Shares issued pursuant to
the exercise of the Rights and the Over-Subscription Privilege (the "Dealer
Manager Fee"). The Fund has also agreed to pay the Dealer Manager, and other
broker-dealers soliciting the exercise of Rights, solicitation fees equal to
2.50% of the Subscription Price per Share for each Share issued pursuant to the
exercise of the Rights and the Over-Subscription Privilege (the "Solicitation
Fees"). Solicitation Fees will be paid to the broker-dealer designated on the
related Subscription Certificate, provided that such designated broker-dealer
has executed a confirmation accepting the terms of the soliciting dealer
agreement relating to the Offer or, in the absence of such designation or
confirmation, to the Dealer Manager. Zweig Securities Corp. will be such
designated broker-dealer with respect to Shares issued to participants in the
Fund's Distribution Reinvestment and Cash Purchase Plan, unless the participant
designates otherwise on the related Subscription Certificate.

The Fund has also agreed to reimburse the Dealer Manager for its
out-of-pocket expenses up to $ incurred in connection with the Offer. In
addition, the Fund has agreed to pay a fee to each of the Subscription Agent and
Information Agent estimated to be $ and $ , respectively, which includes
reimbursement for their out-of-pocket expenses related to the Offer. The Fund
and the Investment Adviser have agreed to indemnify the Dealer Manager against
certain liabilities, including liabilities under the Securities Act.

The Fund has agreed not to offer or sell, or enter into any agreement
to sell, any equity or equity related securities of the Fund for a period of 180
days after the date of the Dealer Manager Agreement without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, except for the
Shares and Common Stock issued in reinvestment of distributions.

CUSTODIAN, DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR

The Bank of New York, 48 Wall Street, New York, New York 10015, serves
as the Fund's custodian. State Street Bank & Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, serves as the Fund's dividend paying agent,
transfer agent and registrar.

EXPERTS

The financial statements at December 31, 1997, and the financial
highlights included in this Prospectus, have been so included in reliance on the
report of Coopers & Lybrand L.L.P., New York, New York, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

43
<PAGE> 48
LEGAL MATTERS

The validity of the Shares will be passed on for the Fund by Venable,
Baetjer & Howard, LLP, Baltimore, Maryland. Certain legal matters will be passed
on for the Fund by Rosenman & Colin LLP, New York, New York and for the Dealer
Manager by Rogers & Wells LLP. Rosenman & Colin LLP serves as counsel to the
Fund and the Investment Adviser. Robert E. Smith, Esq., who is Counsel to
Rosenman & Colin LLP, is a Director of the Fund.

FURTHER INFORMATION

Further information concerning these securities and the Fund may be
found in the Registration Statement on file with the Commission, of which this
Prospectus and the SAI incorporated by reference herein constitute a part.
Financial statements of the Fund for fiscal years ended December 31, 1996 and
December 31, 1997 are included in the Fund's annual reports to shareholders for
such years, copies of which are on file with and may be inspected at the
Commission as indicated below.

The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the 1940 Act, and in
accordance with such requirements, the Fund files reports and other information
with the Commission. Such reports and other information can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, Washington, D.C. 20549 and the Commission's regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, Washington, D.C. 20549 at prescribed rates. The Commission
maintains a world wide web site at http://www.sec.gov. that contains the SAI and
other information regarding the Fund. Such reports and other information
concerning the Fund may also be inspected at the offices of the NYSE.

TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION

Investment Objective and Policies 1
Investment Restrictions 6
Management 8
Expenses 11
Portfolio Transactions and Brokerage 11
Net Asset Value 12
Taxation 13
Principal Shareholders 17
Financial Statements F-1
Report of Independent Accountants F-14

44
<PAGE> 49
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Fund, the Investment Adviser or the Dealer Manager. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any security other than the Shares of Common Stock offered by this
Prospectus, nor does it constitute an offer to sell or the solicitation of any
offer to buy the Shares of Common Stock by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any such person to whom
it is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information contained herein is correct as of any time
subsequent to the date hereof. However, if any material change occurs while this
Prospectus is required by law to be delivered, this Prospectus will be amended
or supplemented accordingly.
================================================================================

TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary 3
Fund Expenses 10
Financial Highlights 12
The Offer 13
Use of Proceeds 21
The Fund 22
Market Price and Net Asset Value Information 23
Investment Objective and Policies 24
Risk Factors and Special Considerations 30
Management of the Fund 32
Distributions; Distribution Reinvestment
and Cash Purchase Plan 35
Description of Common Stock 37
Taxation 41
Distribution Arrangements 43
Custodian, Dividend Paying Agent,
Transfer Agent and Registrar 43
Experts 43
Legal Matters 44
Further Information 44
Table of Contents of Statement of
Additional Information 44
</TABLE>

______SHARES OF COMMON STOCK

THE ZWEIG TOTAL RETURN FUND, INC.

ISSUABLE UPON EXERCISE OF
NON-TRANSFERABLE RIGHTS TO
SUBSCRIBE FOR SUCH
SHARES OF COMMON STOCK

P R O S P E C T U S

MERRILL LYNCH & CO.

, 1998

45
<PAGE> 50
PART B

THE ZWEIG TOTAL RETURN FUND, INC.
900 THIRD AVENUE, NEW YORK, N.Y. 10022

---------------------

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus, dated , 1998 (the
"Prospectus"). This SAI does not include all information that a prospective
investor should consider before purchasing shares of the Fund and investors
should obtain and read the Prospectus prior to purchasing shares. A copy of the
Prospectus may be obtained without charge by calling the Fund's Information
Agent, Georgeson & Company Inc. Banks and Brokers should call (212) 440-9800
collect and all other shareholders should call (800) 223-2064. The address of
the Fund is 900 Third Avenue, New York, New York 10022, and its telephone number
is (212) 451-1100. This SAI incorporates by reference the entire Prospectus.
Defined terms used herein shall have the same meaning as provided in the
Prospectus. The date of this SAI is , 1998.

1
<PAGE> 51
TABLE OF CONTENTS

<PAGE> 52
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek the highest total return,
consisting of capital appreciation and current income, consistent with the
preservation of capital. The Fund will invest up to 65% of its total assets in
U.S. Government Securities, non-convertible debt securities of domestic issuers
rated among the two highest rating categories of either Moody's Investors
Services, Inc. or Standard & Poor's Corporation (or of comparable quality), and
certain Foreign Government Securities, and up to 35% of its total assets in
equity securities. The Fund may, however, under certain circumstances, invest up
to 75% of its total assets in equity securities. The extent of the Fund's
investment in debt and equity securities will be determined primarily on the
basis of market timing techniques developed by Dr. Martin E. Zweig, the
President of the Fund's Investment Adviser, and his staff. While the Investment
Adviser seeks to reduce the risks associated with investing in debt and equity
securities by using these techniques, the risk of investment in debt and equity
securities cannot be eliminated. There is no assurance that the Fund will
achieve its investment objective. See "Investment Objective and Policies" in the
Prospectus.

The following describes certain investment strategies in which the
Investment Adviser may engage, on behalf of the Fund, each of which may involve
certain special risks.

FUTURES CONTRACTS AND RELATED OPTIONS

Upon entering into a futures contract, the Fund will initially be
required to deposit with the custodian an amount of initial margin using cash or
U.S. Treasury bills equal to approximately 2% to 5% of the contract amount. The
nature of initial margin in futures transactions is different from that of
margin in securities transactions in that the futures contract initial margin
does not involve the borrowing of funds by customers to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied. In addition to initial margin, the Fund is required to deposit
cash, liquid debt obligations, liquid equity securities or cash equivalents in
an amount equal to the notional value of all long futures contracts, less the
initial margin amount, in a segregated account with the custodian to ensure that
the use of such futures contracts is not leveraged. If the value of the
securities placed in the segregated account declines, additional securities,
cash or cash equivalents must be placed in the segregated account so that the
value of the account will at least equal the amount of the Fund's commitments
with respect to such futures contracts.

Subsequent payments, called maintenance margin, to and from the broker,
will be made on a daily basis as the price of the underlying security
fluctuates, making the long and short positions in the futures contract more or
less valuable, a process known as "marking to the market." For example, when the
Fund has purchased a futures contract and the price of the underlying security
has risen, that position will have increased in value and the Fund will receive
from the broker a maintenance margin payment equal to that increase in value.
Conversely, when the Fund has purchased a futures contract and the price of the
underlying security has declined, the position would be less valuable and the
Fund would be required to make a maintenance margin payment to the broker. At
any time prior to expiration of the futures contract, the Fund may elect to
close the position by taking an opposite position which will operate to
terminate the Fund' position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.

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<PAGE> 53
While futures contracts based on securities provide for the delivery
and acceptance of securities, such deliveries and acceptances are very seldom
made. Generally, the futures contract is terminated by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale is
effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument with the same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund immediately is paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sales price, the Fund pays the
difference and realizes a loss. Similarly, the closing out of a futures contract
purchase is effected by the Fund entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the Fund realizes a gain, and
if the purchase price exceeds the offsetting price, the Fund realizes a loss.

There are several risks in connection with the use of futures contracts
as a hedging device. One risk arises due to the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the subject of the hedge. The price of the futures contract may move more than
or less than the price of the securities being hedged.

If the price of the futures contracts moves less than the price of the
securities hedged, the hedge will not be fully effective, but, if the price of
the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the securities being hedged has moved in a favorable direction, this advantage
will be partially offset by the movement in the price of the futures contract.
If the price of the futures contract moves more than the price of the security ,
the Fund will experience either a loss or gain on the futures which will not be
completely offset by movements in the prices of the securities which are the
subject of the hedge.

To compensate for the imperfect correlation of such movements in price,
the Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of the securities being hedged if the historical volatility of the
prices of such securities have been greater than the historical volatility of
the futures contracts. Conversely, the Fund may buy or sell fewer futures
contracts if the historical volatility of the prices of the securities being
hedged is less than the historical volatility of the futures contracts.

It is also possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance and the value
of securities held in the Fund's portfolio may decline. If this occurred, the
Fund would lose money on the futures contracts and also experience a decline in
value in its portfolio securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a diversified
portfolio will tend to move in the same direction as the futures contracts.

Where futures are purchased to hedge against a possible increase in the
cost of securities before the Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest in the relevant securities at
that time because of concern as to possible further market decline or for other
reasons, the Fund will realize a loss on the futures contract that is not offset
by a reduction in the price of securities purchased.

Another risk arises because the market prices of futures contracts may
be affected by certain factors. First, all participants in the futures market
are subject to initial margin and maintenance margin requirements. Rather than
meeting maintenance margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the securities and futures markets. Second, from the point of view of
speculators, the margin requirements in the futures market are less onerous than

2
<PAGE> 54
margin requirements in the securities market. Therefore, increased participation
by speculators in the futures market may also cause temporary price distortions.

Due to the possibility of price distortion in the futures market and
because of the imperfect correlation between movements in securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the Investment Adviser may still not result in a successful hedging
transaction over a very short period of time.

The hours of trading for futures contracts may not conform to the hours
during which the underlying securities are traded. To the extent that the
futures contracts markets close after the markets for the underlying securities,
significant price movements can take place in the futures contracts markets that
cannot be reflected in the markets of the underlying securities.

Positions in futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Fund intends to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
maintenance margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contracts can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will, in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures contract.

SECURITY AND STOCK INDEX OPTIONS

When the Fund writes an option, an amount equal to the premium received
by the Fund is recorded as an asset and as an offsetting liability. The amount
of the liability is "marked-to-market" daily to reflect the current market value
of the option, which is the last sale price on the principal exchange on which
such option is traded or, in the absence of a sale, the mean between the latest
bid and offering prices. If an option written by the Fund expires, or the Fund
enters into a closing purchase transaction, the Fund will realize a gain (or, in
the latter case, a loss, if the cost of a closing transaction exceeds the
premium received) and the liability related to such option will be extinguished.

The premium paid by the Fund for the purchase of a put option (its
cost) is recorded initially as an investment, the value of which is subsequently
adjusted to the current market value of the option. If the current market value
of a put option exceeds its premium, the excess represents unrealized
appreciation; conversely, if the premium exceeds the current market value, the
excess represents unrealized depreciation. The current market value of an option
purchased by the Fund equals the option's last sale price on the principal
exchange on which it is traded or, in the absence of a sale, the mean between
the latest bid and offering prices.

An option position may be closed out only on an exchange which provides
a secondary market for an option of the same series. Although the Fund generally
will purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary

3
<PAGE> 55
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that the Fund
would have to exercise its options in order to realize any profit and would
incur transaction costs on the sale of underlying securities pursuant to the
exercise of put options. If the Fund, as a covered call option writer, is unable
to effect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange
include the following: (a) there may be insufficient interest in trading certain
options; (b) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (c) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (d) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (e) the facilities of an exchange or
the Options Clearing Corporation (the "OCC" ) may not at all times be adequate
to handle current trading volume; or (f) one or more exchanges might, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.

In addition, there is no assurance that higher-than-anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of the OCC inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders.

The amount of the premiums which the Fund may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing activities.

In the event of a shortage of the underlying securities deliverable on
exercise of a listed option, the OCC has the authority to permit other,
generally comparable securities to be delivered in fulfillment of option
exercise obligations. If the OCC exercises its discretionary authority to allow
such other securities to be delivered, it may also adjust the exercise prices of
the affected options by setting different prices at which otherwise ineligible
securities may be delivered. As an alternative to permitting such substitute
deliveries, the OCC may impose special exercise settlement procedures.

CLOSED-END INVESTMENT COMPANIES

When the Fund invests in other closed-end investment companies, the
investments made by such other investment companies will be effected by
independent investment managers, and the Fund will have no control over the
investment management, custodial arrangements or operations of any investments
made by such investment managers. Some of the funds in which the Fund may invest
could also incur more risks than would be the case for direct investments made
by the Fund. For example, they may engage in investment practices that entail
greater risks or invest in companies whose securities and other investments are
more volatile. In addition, the funds in which the Fund invests may or may not
have the same fundamental investment limitations as those of the Fund itself.
While a potential benefit of investing in closed-end investment companies would
be to realize value from a decrease in the discount from net asset value at
which some closed-end funds trade, there is also the potential that such
discount could grow, rather than decrease.

4
<PAGE> 56
By investing in investment companies indirectly through the Fund, a
shareholder of the Fund will bear not only a proportionate share of the expenses
of the Fund (including operating costs and investment advisory and
administrative fees) but also, indirectly, similar expenses of the investment
companies in which the Fund invests. Pursuant to the Fund's investment
restrictions and current law, the Fund will not (i) own more than 3% of the
voting securities of any one investment company; (ii) invest more than 5% of its
assets in the securities of any one investment company; or (iii) invest more
than 10% of its assets in securities issued by investment companies.

FOREIGN SECURITIES

The Fund may invest up to 10% of its total assets in Foreign Government
Securities and up to 10% of its total assets in equity securities of foreign
issuers. Investments in foreign securities offer potential benefits not
available through investment solely in securities of domestic issuers. Foreign
securities offer the opportunity to invest in foreign issuers that appear to
have growth potential, or in foreign countries with economic policies or
business cycles different from those of the United States, or to reduce
fluctuations in portfolio value by taking advantage of foreign markets that do
not move in a manner parallel to United States markets. The Fund may also enter
into foreign currency transactions in connection with its investment activity in
foreign securities.

Investments in foreign securities present special additional risks and
considerations not typically associated with investments in domestic securities.
Foreign investments may be affected by changes in foreign currency rates and
exchange control regulations. There may be less information available about a
foreign company than a domestic company, and foreign companies may not be
subject to accounting, auditing and reporting standards and requirements
comparable to those applicable to domestic companies. Foreign securities may be
less liquid and subject to greater price volatility than domestic securities.
Foreign brokerage commissions and custodial fees are generally higher than those
in the United States. The foreign markets also have different clearance and
settlement procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays or
problems with settlements might affect the liquidity of the Fund's portfolio and
might adversely affect the Fund's performance. Foreign investments may also be
subject to local economic or political risks, political instability and possible
nationalization of issuers or expropriation of their assets which might
adversely affect the Fund's ability to realize or liquidate its investment in
such securities. Furthermore, some foreign securities are subject to brokerage
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale.

Income earned or received by the Fund from sources within foreign
countries may be reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States,
however, may reduce or eliminate such taxes. Any such taxes paid by the Fund
will reduce its net income available for distribution to shareholders.

SHORT SALES

The Fund may from time to time make short sales of securities. 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. The Fund may make short sales to
offset a potential decline in a long position or a group of long positions, or
if the Investment Adviser

5
<PAGE> 57
believes that a decline in the price of a particular security or group of
securities is likely. The Fund may also make short sales in an attempt to
maintain portfolio flexibility and facilitate the rapid implementation of
investment strategies if the Investment Adviser believes that the price of a
particular security or group of securities is likely to decline.

When the Fund determines to make a short sale of a security, it must
borrow the security. The Fund's obligation to replace the security borrowed in
connection with the short sale will be fully secured by the proceeds from the
short sale retained by the broker and by cash or liquid securities deposited in
a segregated account with the Fund's custodian. The Fund may have to pay a
premium to borrow the security. The Fund must also pay any dividends or interest
payable on the security until the Fund replaces the security.

If the price of the security sold short increases between the time of
the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss, and if the price declines during this period, the Fund will
realize a capital gain. Any realized capital gain will be decreased, and any
incurred loss increased, by the amount of transaction costs and any premium,
dividend or interest which the Fund may have to pay in connection with such
short sale.

In addition to the short sales described above, the Fund may make short
sales "against the box." A short sale "against the box" is a short sale where,
at the time of the short sale, the Fund owns or has the immediate and
unconditional right, at no added cost, to obtain the identical security. The
Fund would enter into such a transaction to defer a gain or loss for Federal
income tax purposes on the security owned by the Fund. Short sales against the
box are not subject to the collateral requirements described above or the
percentage limitations on short sales described below.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental policies which cannot be
changed without the approval of the holders of a majority of its outstanding
voting securities (as defined under "Investment Objective and Policies" in the
Prospectus). Except as otherwise noted, all percentage limitations set forth
below apply immediately after a purchase or initial investment, and any
subsequent change in any applicable percentage resulting from market
fluctuations does not require elimination of any security or other investment
from the portfolio. The Fund may not:

1. With respect to 75% of its total assets, invest in securities of any
one issuer if immediately after and as a result of such investment more than 5%
of the total assets of the Fund, taken at market value, would be invested in the
securities of such issuer. This investment restriction does not apply to
investments in U.S. Government Securities.

2. Purchase more than 10% of the outstanding voting securities, or any
class of securities, of any one issuer. This investment restriction does not
apply to investments in U.S. Government Securities.

6
<PAGE> 58
3. Purchase securities which would cause 25% or more of its total
assets at the time of such purchase to be concentrated in the securities of
issuers engaged in any one particular industry or group of related industries.
This investment restriction does not apply to investments in U.S. Government
Securities.

4. Purchase or sell real estate; provided that the Fund may invest in
securities secured by real estate or real estate interests or issued by
companies which invest in real estate or real estate interests.

5. Purchase any securities on margin. For purposes of this investment
restriction, the following do not constitute margin purchases: (i) effecting
short sales, to the extent permitted by 9. below, (ii) making margin deposits in
connection with any futures contracts or any options the Fund may purchase, sell
or write, or (iii) entering into any currency transactions.

6. Lend any funds or other assets, except that the Fund may purchase
publicly distributed debt obligations (including repurchase agreements)
consistent with its investment objective and policies, and the Fund may make
loans of portfolio securities if such loans do not cause the aggregate amount of
all outstanding securities loans to exceed 33 1/3% of the Fund's total assets,
provided that the loan is collateralized by cash or cash equivalents or U.S.
Government Securities in an amount equal, on a daily basis, to the market value
of the securities loaned.

7. Borrow money (through reverse repurchase agreements or otherwise),
except (i) for temporary emergency purposes in amounts not in excess of 5% of
the value of the Fund's total assets at the time the loan is made; or (ii) in an
amount not greater than 33 1/3% of the Fund's total assets.

8. Issue senior securities, as defined in the 1940 Act, or mortgage,
pledge, hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund except as may be necessary in connection
with borrowings mentioned in 7. above. For the purposes of this investment
restriction and 7. above, collateral or escrow arrangements with respect to the
making of short sales, writing of stock options, purchase of securities on a
forward commitment or delayed-delivery basis, and purchase of foreign currency
forward contracts and collateral arrangements with respect to margin for futures
contracts and foreign currency forward contracts or related options are not
deemed to be a pledge of assets and neither such arrangements nor the purchase
or sale of futures contracts, foreign currency forward contracts or related
options are deemed to be the issuance of a senior security.

9. Make any short sales of securities, unless at the time the short
sale is made and after giving effect thereto, (i) the market value of all
securities sold short is 25% or less of the value of the Fund's total assets,
(ii) the market value of such securities sold short which are not listed on a
national securities exchange does not exceed 10% of the Fund's total assets,
(iii) the market value of all securities of any one issuer sold short does not
exceed 2% of the Fund's total assets, (iv) short sales are not made of more than
2% of the outstanding securities of one class of any issuer, and (v) the Fund
maintains collateral deposits consisting of cash or U.S. Government Securities
in a segregated account which, together with collateral deposited with the
broker-dealer, are at all times equal to 100% of the current market value of the
securities sold short. This investment restriction does not apply to short sales
"against the box." For the purposes of this investment restriction, sales of
securities on a when-issued or delayed-delivery basis are not considered to be
short sales.

10. Underwrite securities of other issuers except insofar as it might
be deemed to be an underwriter for

7
<PAGE> 59
purposes of the Securities Act of 1933, as amended, in the resale of any
securities held in its own portfolio.

11. Invest more than 10% of the Fund's total assets in securities that
at the time of purchase are subject to restrictions on disposition under the
Securities Act of 1933, as amended.

12. Purchase or sell commodities or commodity or futures contracts or
options on commodity or futures contracts except in compliance with such rules
and interpretations of the Commodity Futures Trading Commission which exempt the
Fund from regulation as a commodity pool operator.

MANAGEMENT

DIRECTORS AND OFFICERS

The names and addresses of the directors and officers of the Fund are
set forth below, together with their positions and their principal occupations
during the past five years and, in the case of the directors, their positions
with certain other organizations and companies.

<TABLE>
<CAPTION>
Name and Address Age Position with the Principal Occupations and Other
- ---------------- --- ----------------- -------------------------------
Fund Affiliations
---- ------------
<S> <C> <C> <C>
Martin E. Zweig* 55 Director, Chairman President and Director of the Investment
900 Third Avenue of the Board and Adviser; Chairman of the Board and
New York, NY 10022 President (Chief President of The Zweig Fund, Inc.;
Executive Officer) President and Director of Zweig Advisors
Inc.; Consultant to Avatar Investors
Associates Corp.; Managing Director of
the Managing General Partner of Zweig-
DiMenna Partners, L.P. and Zweig-
DiMenna Special Opportunities, L.P.;
President and Director of Zweig-DiMenna
International Managers, Inc.; Chairman of
Zweig/Glaser Advisers; President of Zweig
Series Trust; President and Director of
Gotham Advisors, Inc.; Chairman of
Euclid Advisors LLC; formerly General
Partner of Zweig-Katzen Investors, L.P.;
Member of the Undergraduate Executive
Board of The Wharton School, University
of Pennsylvania.

Charles H. Brunie 67 Director Chairman Emeritus of Oppenheimer
21 Elm Rock Road Capital; Chairman Emeritus, Board of
Bronxville, NY 10708 Trustees of the Manhattan Institute for
Policy Research.
</TABLE>

8
<PAGE> 60
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Annemarie Gilly* 46 Director First Vice President of Zweig/Glaser
900 Third Avenue Advisers; First Vice President of Euclid
New York, NY 10022 Mutual Funds; First Vice President of
Zweig Securities Corp.; First Vice President
of Zweig Series Trust; Director of The
Zweig Fund, Inc.; formerly Vice President
of Concord Financial Group Inc.

Elliot S. Jaffe 71 Director Chairman and Chief Executive Officer of
30 Dunnigan Drive The Dress Barn, Inc.; Director of The
Suffern, NY 1091 Zweig Fund, Inc.; Director of National
Retail Federation; Director of Shearson
Appreciation Fund; Director of Shearson
Managed Governments, Inc.; Director of
Shearson Income Trust; Director of Shearson
Lehman Small Capitalization Fund; Director
of Stamford Hospital Foundation; Member
of the Board of Overseers of The School
of Arts and Sciences, University of
Pennsylvania; Trustee Teachers College,
Columbia University.

Jeffrey Lazar* 38 Director, Vice Vice President, Treasurer and Secretary
900 Third Avenue President, Treasurer of the Investment Adviser; Vice President,
New York, NY 10022 and Assistant Treasurer and Director of The Zweig Fund,
Secretary Inc; Vice President, Treasurer and
Secretary of Zweig Advisors Inc.; Vice
President of Zweig Series Trust.

Alden C. Olson 69 Director Director of The Zweig Fund, Inc;
2711 Ramparte Path Director of First National Bank of
Holt, Michigan 48842 Michigan; formerly, Professor of Financial
Management, Investments at Michigan
State University.

James B. Rogers, Jr. 55 Director Private Investor; Director of The Zweig
352 Riverside Drive Fund, Inc.; Chairman of Beeland Interests;
New York, NY 10025 Regular Commentator on CNBC; Author
of "Investment Biker: On the Road with
Jim Rogers"; Director of Emerging
Markets Brewery Fund; Director of Levco
Series Trust; Sometimes Visiting Professor
at Columbia University; Columnist for
</TABLE>

9
<PAGE> 61
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WORTH Magazine.

Anthony M. Santomero 51 Director Richard K. Mellon Professor of Finance,
Steinberg-Dietrich Hall The Wharton School, University of
Wharton School Pennsylvania; Director of The Zweig
University of Fund, Inc.; Director of Municipal Fund for
Pennsylvania New York investors; Director of Municipal
Philadelphia, PA 19104 Fund for California Investors; Trustee of
Compass Capital Funds.

Robert E. Smith* 62 Director Counsel of Rosenman & Colin LLP;
575 Madison Avenue Director of The Zweig Fund, Inc.; Director
New York, NY 10022 of Ogden Corporation; formerly Secretary
of the Fund and The Zweig Fund, Inc.

Stuart B. Panish* 41 Vice President and Vice President and Secretary of The
900 Third Avenue Secretary Zweig Fund, Inc.; Counsel to the Adviser
New York, NY 10022 and Zweig Advisors Inc.; General Counsel
to Zweig-DiMenna Partners, L.P., Zweig-
DiMenna Special Opportunities, L.P. and
Zweig-DiMenna International Managers, Inc.;
formerly Special Counsel-Securities at
Rosenman & Colin LLP.
</TABLE>

* Indicates a person who is an "interested person" of the Fund, as defined in
the 1940 Act. All the interested persons of the Fund (other than Robert E.
Smith) are also owners of the Investment Adviser and Administrator.

The following table sets forth the compensation paid by the Fund and
The Zweig Total Return Fund, Inc. to the Directors for the fiscal year ended
December 31, 1997. The Fund does not pay any pension or retirement benefits to
its Directors.

<TABLE>
<CAPTION>
Aggregate Compensation Aggregate Compensation from the Fund and
Director from the Fund The Zweig Fund, Inc.
- -------- ---------------------- --------------------
<S> <C> <C>
Elliot S. Jaffe $19,000 $38,000
Alden C. Olson $19,000 $38,000
James B. Rogers, Jr. $16,000 $32,000
Anthony M. Santomero $20,500 $41,000
</TABLE>

EXECUTIVE COMPENSATION

No current or former employees, officers or directors received
remuneration from the Fund in excess of $60,000 in the last fiscal year for
service in all their respective capacities.

LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY

The Fund's Articles of Incorporation limit the personal liability of
its Officers and Directors to the Fund

10
<PAGE> 62
and its shareholders for money damages to the maximum extent permitted by the
Maryland General Corporation Law. Accordingly, a shareholder will be able to
recover money damages against a Director or Officer of the Fund only if he is
able to prove that (a) the action, or failure to act, by the Director or Officer
was the result of active and deliberate dishonesty which was material to the
cause of action adjudicated in the proceeding, (b) the Director or Officer
actually received an improper benefit or profit in money, property or services
(in which case recovery is limited to the actual amount of such improper benefit
or profit), or (c) the Director or Officer acted with willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office. The limitation also does not apply to claims
against Directors or Officers arising out of their responsibilities under the
Federal securities laws. The Fund's Articles of Incorporation do not limit the
right of the Fund or any shareholder to sue for an injunction or any other
nonmonetary relief in the event of a breach of a Director's or Officer's duty of
care or other breach of duty or responsibility.

EXPENSES

For the fiscal years ended December 31, 1997, 1996 and 1995, the Fund's
expenses amounted to $6,761,578 $6,473,138 and $6,807,315, respectively.

Expenses of the Offer will be charged to capital. The Fund's annual
expense ratio was 1.04%%, 1.03% and 1.10% of the Fund's net assets for the
fiscal years ended December 31, 1997, 1996 and 1995, respectively.

PORTFOLIO TRANSACTIONS AND BROKERAGE

In the purchase and sale of portfolio securities for the Fund, the
Investment Adviser will seek the best combination of price (inclusive of
brokerage commissions) and execution, and, consistent with that policy, may give
consideration to the research, statistical and other services furnished by
brokers or dealers to the Investment Adviser for its use. The Investment Adviser
is also authorized to place orders with brokers who provide supplemental
investment, market research and security and economic analysis, although the use
of such brokers may result in a higher brokerage charge to the Fund than the use
of brokers selected on the basis of seeking the best combination of price
(inclusive of brokerage commissions) and execution for the same order. Brokerage
may be allocated entirely on the basis of net results to the Fund, including the
difficulty of the order and the reputation of the broker-dealer. Research and
analysis received by the Investment Adviser may benefit the Investment Adviser
and its affiliates in connection with their services to other clients, as well
as the Fund. Subject to the foregoing, the Fund may effect a portion of its
securities transactions through affiliated broker-dealers of the Investment
Adviser, including Zweig Securities Corp., a broker-dealer of which Eugene J.
Glaser, President of the Administrator and a Director of The Zweig Fund, Inc.,
is President, and Martin E. Zweig and Eugene J. Glaser are the shareholders. In
accordance with the provisions of Rule 17e-1 of the 1940 Act, the Fund's Board
of Directors has adopted certain procedures which are designed to provide that
brokerage commissions paid to Zweig Securities Corp. and any other affiliated
broker-dealer are reasonable and fair as compared to the brokerage commissions
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on securities exchanges during a
comparable period of time. The Fund, however, has no obligation to deal with
Zweig Securities Corp. or any other broker-dealer in effecting portfolio
transactions.

11
<PAGE> 63
The Fund paid brokerage commissions of $567,917 to brokers for the year
ended December 31, 1997, of which $80,824 was paid to Zweig Securities Corp.,
representing 14.23% of the aggregate brokerage commissions paid by the Fund and
15.17% of the aggregate amount of transactions involving the payment of
commissions for such year. The Fund paid brokerage commissions of $744,349 to
brokers for the year ended December 31, 1996, of which $60,371 was paid to Zweig
Securities Corp , representing 8.11% of the aggregate brokerage commissions paid
by the Fund and 7.65% of the aggregate amount of transactions involving the
payment of commissions for such year The Fund paid brokerage commissions of
$609,524 to brokers for the year ended December 31, 1995, of which $77,864 was
paid to Watermark Securities, Inc., representing 12.77% of the aggregate
brokerage commissions paid by the Fund and 12.17% of the aggregate amount of
transactions involving the payment of commissions for such year. Martin E. Zweig
is a principal shareholder of Watermark Securities, Inc.

A portion of the securities in which the Fund will invest may be traded
in the over-the-counter markets, and the Fund intends to deal directly with the
dealers who make markets in the securities involved, except in those
circumstances where better prices and execution are available elsewhere. Fixed
income securities purchased or sold on behalf of the Fund normally will be
traded in the over-the-counter market on a net basis (i.e. without a commission)
through dealers acting for their own account and not as brokers or otherwise
through transactions directly with the issuer of the instrument. Some fixed
income securities may be purchased and sold on an exchange or in
over-the-counter transactions conducted on an agency basis involving a
commission. Futures transactions generally will be effected through those
futures commission merchants the Fund believes will obtain the most favorable
results for the Fund.

When the Fund and one or more accounts managed by the Investment
Adviser or its affiliates propose to purchase or sell the same security, the
available opportunities will be allocated in a manner the Investment Adviser
believes to be equitable. In some cases, this procedure may affect adversely the
price paid or received by the Fund or the size of the position purchased or sold
by the Fund. In other cases, coordination with transactions for other accounts
and the ability to participate in volume transactions could benefit the Fund.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rates for the fiscal years ended December
31, 1997, December 31, 1996 and December 31, 1995 were 104.7%, 147.2% and
179.8%, respectively. Portfolio turnover rate is calculated by dividing the
lesser of the Fund's annual sales or purchases of portfolio securities by the
monthly average value of securities in the portfolio during the year, excluding
portfolio securities the maturities of which at the time of acquisition were one
year or less. Portfolio turnover will not be a limiting factor in making
investment decisions, and the Fund's investment policies may result in portfolio
turnover substantially greater than that of other investment companies. A high
rate of portfolio turnover (over 100%) involves greater brokerage commission
expense, which must be borne by the Fund and its shareholders.

NET ASSET VALUE

The net asset value of the Fund's shares will be determined by the
Administrator as of the close of regular trading on the New York Stock Exchange,
on each day the Exchange is open for trading, by dividing the Fund's total
assets, less the Fund's total liabilities, by the total number of Shares
outstanding. Net asset value

12
<PAGE> 64
will be published weekly in a financial newspaper of general circulation.

Portfolio securities (including stock options) which are traded only on
stock exchanges will be valued at the last sale price. Securities traded in the
over-the-counter market which are National Market Systems securities will be
valued at the last sale price. Other over-the-counter securities will be valued
on the basis of the mean between the current bid and asked prices obtained from
market makers in such securities. Debt securities that mature in 60 days or less
will be valued at amortized cost, unless the Board of Directors determines that
such valuation does not constitute fair value. Debt securities that have an
original maturity of less than 61 days will be valued at their cost, plus or
minus amortized discount or premium, unless the Board of Directors determines
that such valuation does not constitute fair value. Futures and options thereon
which are traded on commodities exchanges will be valued at their closing
settlement price on such exchange. Securities and assets for which market
quotations are not readily available, and other assets, if any, will be valued
at fair value as determined in good faith and pursuant to procedures established
by the Board of Directors of the Fund.

The outstanding shares of Common Stock are, and the Shares will be,
listed on the New York Stock Exchange Incorporated and the Pacific Stock
Exchange. The Fund's Shares of Common Stock have traded in the market above, at
and below net asset value since the commencement of the Fund's operations in
September 1988. During the past seven years, the Fund's shares have generally
traded in the market at a premium above net asset value; however, the Fund's
officers cannot predict whether the Fund's Common Stock will trade in the future
at a premium or a discount to net asset value, and if so, the level of such
premium or discount.

TAXATION

The following is a summary of the principal U.S. Federal income, and
certain state and local, tax considerations regarding the purchase, ownership
and disposition of shares of the Fund. The summary does not address special tax
rules applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Each prospective shareholder is
urged to consult his or her own tax adviser with respect to the specific
Federal, state, local and foreign tax consequences of investing in the Fund. The
summary is based on the laws in effect on the date of this SAI, which are
subject to change.

GENERAL

The Fund has elected to be treated, has qualified and intends to
continue to qualify for each taxable year, as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). To so qualify, the Fund must comply with certain requirements of the
Code relating to, among other things, the source of its income and the
diversification of its assets.

If the Fund complies with such requirements, then in any taxable year
for which the Fund distributes, in accordance with the Code's timing
requirements, ordinary income dividends of at least 90% of its investment
company taxable income, the Fund (but not its shareholders) will be relieved of
Federal income tax on any income of the Fund, including capital gains, that is
distributed to shareholders in accordance with the Code's requirements. However,
if the Fund retains any investment company taxable income or net capital gain,
it will be subject to a tax at regular corporate rates on the amount retained.

13
<PAGE> 65
In order to avoid a 4% Federal excise tax, the Fund must distribute (or
be deemed to have distributed) by December 31 of each calendar year at least 98%
of its taxable ordinary income for such year, at least 98% of the excess of its
capital gains over its capital losses (generally computed on the basis of the
one-year period ending on October 31 of such year), and all taxable ordinary
income and the excess of capital gains over capital losses for the previous year
that were not distributed for such year and on which the Fund did not pay
Federal income tax. The Fund intends to distribute at least annually to its
shareholders all or substantially all of its investment company taxable income
and its net capital gain, but reserves the right to retain and designate as
described in the above paragraph, its net capital gain.

The Fund's investments, if any, in securities issued at a discount or
providing for deferred interest payments or payments of interest in kind will
generally cause the Fund to realize income prior to the receipt of cash payments
with respect to these securities. Mark to market rules applicable to certain
options and futures contracts may also require that net gains be recognized
without a concurrent receipt of cash. In order to obtain cash to distribute its
income or gains, maintain its qualification as a regulated investment company
and avoid Federal income or excise taxes, the Fund may be required to liquidate
portfolio securities that it might otherwise have continued to hold.

TAXABLE U.S. SHAREHOLDERS - DISTRIBUTIONS

For U.S. Federal income tax purposes, distributions by the Fund,
whether reinvested in additional shares or paid in cash, generally will be
taxable to shareholders who are subject to tax.

Distributions from the Fund's investment company taxable income will be
taxable as ordinary income, and generally cannot be offset by capital losses.
For corporate shareholders, distributions designated as derived from the Fund's
dividend income that would be eligible for the dividends received deduction if
the Fund were not a regulated investment company will be eligible, subject to
certain holding period and debt-financing restrictions, for the 70% dividends
received deduction. (However, the entire dividend, including the deducted
amount, is includable in determining a corporate shareholder's alternative
minimum taxable income.) So long as the Fund qualifies as a regulated investment
company and satisfies the 90% distribution requirement, capital gain dividends
if properly designated as such in a written notice to shareholders mailed not
later than 60 days after the Fund's taxable year closes, will be taxed to
shareholders as capital gain which, as to non-corporate shareholders, will be
taxable at maximum marginal Federal income tax rates of (i) 28% for the portion
of such dividends designated by the Fund as a 28% rate gain distribution, and
(ii) 20% for the portion of such dividends designated by the Fund as a 20% rate
gain distribution, respectively, regardless of how long the shareholder has held
his or her Fund shares. Distributions, if any, that are in excess of the Fund's
current and accumulated earnings and profits, as computed for Federal income tax
purposes, will first reduce a shareholder's tax basis in his or her shares and,
after such basis is reduced to zero, will constitute capital gains to a
shareholder who holds his or her shares as capital assets.

All distributions, whether received in shares or in cash, as well as
sales and exchanges of Fund shares, must be reported by each shareholder who is
required to file a U.S. Federal income tax return. For Federal income tax
purposes, dividends declared by the Fund in October, November or December to
shareholders on a specified date in such a month and paid during January of the
following year are treated as if they were paid by the Fund and received by such
shareholders on December 31 of the year declared. In addition, certain other
distributions made after the close of a taxable year may be "spilled back" and
treated as paid by the Fund (other

14
<PAGE> 66
than for purposes of avoiding the 4% excise tax) during such year. Such
dividends would be taxable to the shareholders in the taxable year in which the
distribution was actually made by the Fund.

The Fund will send written notices to shareholders regarding the amount
and Federal income tax status of all distributions made during each calendar
year.

With respect to distributions paid in cash or, for shareholders
participating in the Distribution Reinvestment and Cash Purchase Plan (the
"Plan"), reinvested in shares purchased in the open market, the amount of the
distribution for tax purposes is the amount of cash distributed or allocated to
the shareholder. With respect to distributions issued in shares of the Fund, the
amount of the distribution for tax purposes is the fair market value of the
issued shares on the payment date.

Distributions by the Fund result in a reduction in the net asset value of the
Fund's shares and may also reduce their market value. Should a distribution
reduce the net asset value or market value below a shareholder's cost basis,
such distribution (to the extent paid from the Fund's current or accumulated
earnings and profits) would nevertheless be taxable to the shareholder as
ordinary income or capital gain as described above even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. Since the market price of shares
purchased at that time may include the amount of any forthcoming distribution,
investors purchasing shares just prior to a distribution will in effect receive
a return of a portion of their investment in the form of a distribution which
nevertheless will be taxable to them.

TAXABLE U.S. SHAREHOLDERS - SALE OF SHARES

When a shareholder's shares are sold, exchanged or otherwise disposed
of, the shareholder will generally recognize gain or loss equal to the
difference between the shareholder's adjusted tax basis in the shares and the
cash, or fair market value of any property, received. Assuming the shareholder
holds the shares as a capital asset at the time of such sale or other
disposition, such gain or loss should be capital gain or loss which will be
long-term if the shares were held for more than 18 months, mid-term if the
shares were held between 12 and 18 months, and short-term if the shares were
held for 12 months or less. For non-corporate shareholders, short-term gain is
taxable at a maximum marginal Federal income tax rate of 39.6%, whereas mid-term
and long-term capital gains qualify for lower maximum marginal Federal income
tax rates (i.e., 28% and 20%, respectively). However, it currently appears that
any loss realized on the sale, exchange or other disposition of Fund shares with
a tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividend received by the selling
shareholder with respect to such shares, even if part or all of such dividend
was taxed at the 28% rate applicable to mid-term capital gains as discussed
under the preceding subheading. Additionally, any loss realized on a sale or
other disposition of shares of the Fund may be disallowed under "wash sale"
rules to the extent the shares disposed of are replaced with other shares of the
Fund within a period of 61 days beginning 30 days before and ending 30 days
after the shares are disposed of, such as pursuant to a dividend reinvestment in
shares of the Fund under the Plan. If disallowed, the loss will be reflected in
an adjustment to the basis of the shares acquired.

BACKUP WITHHOLDING

The Fund will be required to report to the Internal Revenue Service all
distributions, as well as gross proceeds from the sale or exchange of Fund
shares with respect to which the Fund is a payor (such as pursuant

15
<PAGE> 67
to a tender offer), except in the case of certain exempt recipients, i.e.,
corporations and certain other investors to which distributions are exempt from
the information reporting provisions of the Code. Under the backup withholding
provisions of Code Section 3406 and applicable Treasury regulations, all such
reportable distributions and proceeds may be subject to backup withholding of
Federal income tax at the rate of 31% in the case of nonexempt shareholders who
fail to furnish the Fund with their correct taxpayer identification number and
with certain required certifications or if the Internal Revenue Service or a
broker notifies the Fund that the number furnished by the shareholder is
incorrect or that the shareholder is subject to backup withholding as a result
of failure to report interest or dividend income. The Fund may refuse to accept
any subscription that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld would be credited against a
shareholder's U.S. Federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.

NON-U.S. SHAREHOLDERS

The foregoing discussion relates solely to U.S. Federal income tax law
as it applies to "U.S. persons" (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. Dividends of investment company taxable income distributed by the Fund
to a shareholder who is not a U.S. person will be subject to U.S. withholding
tax at the rate of 30% (or a lower rate provided by an applicable tax treaty)
unless the dividends are effectively connected with a U.S. trade or business of
the shareholder, in which case the dividends will be subject to tax on a net
income basis at the graduated rates applicable to U.S. individuals or domestic
corporations and, in the case of a shareholder that is a foreign corporation,
may be subject to U.S. "branch profit tax." Capital gain distributions to a
non-U.S. shareholder will not be subject to U.S. income or withholding tax
unless the distributions are effectively connected with the shareholder's trade
or business in the U.S. or, in the case of a shareholder who is a nonresident
alien individual, the shareholder is present in the U.S. for 183 days or more
during the taxable year and certain other conditions are met.

Any gain realized by a shareholder who is not a U.S. person upon a sale
or other disposition of shares of the Fund will not be subject to U.S. Federal
income or withholding tax unless the gain is effectively connected with the
shareholder's trade or business in the U.S., or in the case of a shareholder who
is a nonresident alien individual, the shareholder is present in the U.S. for
183 days or more during the taxable year and certain other conditions are met.
Non-U.S. persons who fail to furnish the Fund with an IRS Form W-8 or acceptable
substitute Form W-8 may be subject to backup withholding at the rate of 31% on
capital gain dividends and the proceeds of certain sales of their shares with
respect to which the Fund is a payor (such as pursuant to a tender offer).
Investors who are not U.S. persons should consult their tax advisers about the
U.S. and non-U.S. tax consequences of ownership of shares of, and receipt of
distributions from, the Fund.

STATE AND LOCAL TAXES

The Fund may be subject to state or local taxes in jurisdictions in
which the Fund may be deemed to be doing business. In addition, in those states
or localities which have income tax laws, the treatment of the Fund and its
shareholders under such laws may differ from their treatment under Federal
income tax laws, and an investment in the Fund may have tax consequences for
shareholders different from those of a direct investment in the Fund's portfolio
securities. Shareholders should consult their own tax advisers concerning these
matters.

16
<PAGE> 68
PRINCIPAL SHAREHOLDERS

There are no persons known to the Fund to be control persons of the
Fund, as such term is defined in Section 2(a)(9) of the 1940 Act. There is no
person known to the Fund to hold beneficially more than 5% of the outstanding
shares of the Fund. The following person is the only person holding of record
more than 5% of the outstanding shares of the Fund as of , 1998:

<TABLE>
<CAPTION>
AMOUNT OF PERCENT
NAME AND ADDRESS OF RECORD OF
RECORD OWNER OWNERSHIP CLASS
------------ --------- -----
<S> <C> <C> <C>
Cede & Co. %
P.O. Box 20
Bowling Green Station
New York, New York 10004
</TABLE>

As of , 1998, the current Directors and Officers of the Fund,
as a group, beneficially owned less than 1% of the Fund's outstanding shares.

17
<PAGE> 69
THE ZWEIG TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1997

<TABLE>
<CAPTION>
Number of Value
Shares (Note 1)
------------- -------------
<S> <C> <C> <C>
COMMON STOCKS 36.82%
AEROSPACE & DEFENSE 0.20%
Raytheon Co., Class A ................................................ 27,673 $ 1,364,625
-------------
AUTOMOTIVE 2.04%
Chrysler Corp. ....................................................... 62,800 2,209,775
Ford Motor Co. ....................................................... 112,800 5,491,950
General Motors Corp. ................................................. 71,500 4,334,687
Volvo AB, ADR ........................................................ 64,900 1,752,300
-------------
13,788,712
-------------
CHEMICALS 1.45%
Albemarle Corp. ...................................................... 36,300 866,663
B.F. Goodrich Co. .................................................... 34,100 1,413,018
Dow Chemical Co. ..................................................... 36,500 3,704,750
Millennium Chemicals, Inc. ........................................... 35,100 827,044
Rohm and Haas Co. .................................................... 24,100 2,307,575
Wellman, Inc. ........................................................ 35,600 694,200
-------------
9,813,250
-------------
CONSUMER DURABLES 0.79%
Cooper Tire & Rubber Co. ............................................. 97,400 2,374,125
Huffy Corp. .......................................................... 13,200 178,200
Whirlpool Corp. ...................................................... 50,600 2,783,000
-------------
5,335,325
-------------
CONTAINERS & PACKAGING 0.06%
Sea Containers Ltd., Class A ......................................... 12,100 387,200
-------------
ELECTRONICS 0.53%
General Motors Corp., Class H ........................................ 41,100 1,518,131
Hitachi Ltd., ADR .................................................... 5,000 345,938
Philips Electronics N.V., ADR ........................................ 28,000 1,694,000
-------------
3,558,069
-------------
FINANCIAL SERVICES 4.50%
A.G. Edwards & Sons, Inc. ............................................ 82,600 3,283,350
Bear, Stearns & Co., Inc. ............................................ 94,882 4,506,895
Charter One Financial, Inc. .......................................... 23,545 1,486,278
Fremont General Corp. ................................................ 29,500 1,615,125
H.F. Ahmanson & Co. .................................................. 54,600 3,654,788
Lincoln National Corp. ............................................... 21,900 1,710,937
Old Republic International Corp. ..................................... 38,500 1,431,719
Orion Capital Corp. .................................................. 25,400 1,179,512
</TABLE>

F-1
<PAGE> 70
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
<S> <C> <C> <C>
FINANCIAL SERVICES--(CONTINUED)
PaineWebber Group Inc. ............................................... 102,100 $ 3,528,831
PIMCO Advisors L.P., Class A ......................................... 18,600 561,488
Providian Corp. ...................................................... 80,600 3,642,112
Selective Insurance Group, Inc. ...................................... 19,600 529,200
St. Paul Bancorp Inc. ................................................ 12,100 317,625
Travelers Group Inc. ................................................. 56,300 3,033,163
-------------
30,481,023
-------------
FOOD & BEVERAGE 0.25%
Adolph Coors Co., Class B ............................................ 50,600 1,682,450
-------------
HOME BUILDERS & MATERIALS 0.19%
Kaufman & Broad Home Corp. ........................................... 29,500 661,906
Lafarge Corp. ........................................................ 20,800 614,900
-------------
1,276,806
-------------
INDUSTRIAL SERVICES 0.69%
Browning-Ferris Industries Inc. ...................................... 97,100 3,592,700
Ogden Corp. .......................................................... 38,400 1,082,400
-------------
4,675,100
-------------
INVESTMENT COMPANIES 2.06%
Argentina Fund, Inc. ................................................. 23,700 309,581
Blackrock 2001 Term Trust, Inc. ...................................... 29,000 250,125
Blackrock Strategic Term Trust, Inc. ................................. 29,000 246,500
Brazil Fund, Inc. .................................................... 25,800 541,800
Central European Equity Fund ......................................... 18,600 340,613
Chile Fund, Inc. ..................................................... 24,600 438,187
Clemente Global Growth Fund, Inc. .................................... 13,100 123,631
Emerging Markets Infrastructure Fund, Inc. ........................... 67,500 793,125
Emerging Markets Telecommunications Fund, Inc. ....................... 24,600 329,025
Emerging Mexico Fund, Inc. ........................................... 16,400 174,250
G. T. Global Eastern Europe Fund ..................................... 17,200 217,150
Gabelli Equity Trust, Inc. ........................................... 37,700 440,618
Gabelli Global Multimedia Trust Fund, Inc. ........................... 51,700 452,375
India Fund, Inc. ..................................................... 19,200 141,600
Italy Fund, Inc. ..................................................... 16,100 173,075
Latin American Discovery Fund ........................................ 22,600 405,388
Mexico Equity & Income Fund, Inc. .................................... 17,100 182,756
Mexico Fund, Inc. .................................................... 74,400 1,529,850
Morgan Stanley Asia-Pacific Fund, Inc. ............................... 49,400 367,412
Morgan Stanley Emerging Markets Fund, Inc. ........................... 64,300 839,919
Morgan Stanley India Investment Fund, Inc. ........................... 15,900 133,163
New Germany Fund, Inc. ............................................... 61,100 824,850
Portugal Fund, Inc. .................................................. 16,700 264,069
Royce Value Trust, Inc. .............................................. 70,160 1,056,785
</TABLE>

F-2
<PAGE> 71
THE ZWEIG TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 1997

<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
<S> <C> <C> <C>
INVESTMENT COMPANIES--(Continued)
Southern Africa Fund, Inc. ........................................... 14,900 $ 188,113
Spain Fund, Inc. ..................................................... 11,600 168,200
Swiss Helvetia Fund, Inc. ............................................ 40,800 1,119,450
Taiwan Fund, Inc. .................................................... 39,500 651,750
Templeton China World Fund, Inc. ..................................... 20,400 170,850
Templeton Dragon Fund, Inc. .......................................... 68,800 739,600
Tri-Continental Corp. ................................................ 12,400 330,925
-------------
13,944,735
-------------
LODGING 0.04%
Marcus Corp. ......................................................... 16,500 304,219
-------------
MANUFACTURING 2.27%
Aeroquip-Vickers, Inc. ............................................... 27,100 1,329,593
Borg-Warner Automotive, Inc. ......................................... 23,600 1,227,200
Brown Group, Inc. .................................................... 26,000 346,125
Cummins Engine Company, Inc. ......................................... 51,900 3,065,344
Dexter Corp. ......................................................... 14,900 643,494
Excel Industries, Inc. ............................................... 18,000 325,125
Herman Miller, Inc. .................................................. 19,200 1,047,600
Johnson Controls, Inc. ............................................... 26,000 1,241,500
PACCAR, Inc. ......................................................... 13,400 703,500
Simpson Industries, Inc. ............................................. 20,300 238,525
Standard Products Co. ................................................ 22,200 568,875
Timken Co. ........................................................... 76,300 2,622,813
Trinity Industries, Inc. ............................................. 44,600 1,990,275
-------------
15,349,969
-------------
METALS & MINING 2.50%
AK Steel Holding Corp. ............................................... 85,200 1,506,975
Alcan Aluminium Ltd. ................................................. 71,200 1,966,900
ASARCO, Inc. ......................................................... 95,500 2,142,781
Birmingham Steel Corp. ............................................... 25,000 393,750
British Steel Plc, ADR ............................................... 80,700 1,730,006
Cleveland-Cliffs, Inc. ............................................... 6,400 293,200
Cyprus Amax Minerals Co. ............................................. 92,800 1,426,800
Oregon Steel Mills, Inc. ............................................. 52,800 1,125,300
Phelps Dodge Corp. ................................................... 41,300 2,570,925
Quanex Corp. ......................................................... 13,800 388,125
USX-U.S. Steel Group ................................................. 107,400 3,356,250
-------------
16,901,012
-------------
</TABLE>

F-3
<PAGE> 72
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
<S> <C> <C> <C>
OIL & OIL SERVICES 5.09%
Ashland Inc. ......................................................... 67,600 $ 3,629,275
Atlantic Richfield Co. ............................................... 44,600 3,573,575
Elf Aquitaine S.A., ADR .............................................. 42,500 2,491,563
Equitable Resources, Inc. ............................................ 27,700 979,888
Helmerich & Payne, Inc. .............................................. 11,400 773,775
Mobil Corp. .......................................................... 28,900 2,086,218
Murphy Oil Corp. ..................................................... 34,000 1,842,375
Occidental Petroleum Corp. ........................................... 98,100 2,875,556
Pennzoil Co. ......................................................... 51,200 3,420,800
Phillips Petroleum Co. ............................................... 24,700 1,201,038
Sun Company, Inc. .................................................... 104,300 4,387,118
USX-Marathon Group ................................................... 104,700 3,533,625
YPF Sociedad Anonima, ADR ............................................ 108,100 3,695,669
-------------
34,490,475
-------------
PAPER & FOREST PRODUCTS 0.79%
Bowater Inc. ......................................................... 62,900 2,795,119
Fort James Corp. ..................................................... 61,400 2,348,550
Pope & Talbot, Inc. .................................................. 15,900 239,494
-------------
5,383,163
-------------
RETAIL TRADE & SERVICES 0.80%
Dayton Hudson Corp. .................................................. 28,800 1,944,000
Ross Stores, Inc. .................................................... 17,000 618,375
Shopko Stores Inc. ................................................... 30,700 667,725
Supervalu Inc. ....................................................... 52,100 2,181,687
-------------
5,411,787
-------------
TECHNOLOGY 1.42%
Applied Materials Inc. ............................................... 23,200(a) 698,900
Dell Computer Corp. .................................................. 30,800(a)(b) 2,587,200
Digital Equipment Corp. .............................................. 32,300(a) 1,195,100
Harris Corp. ......................................................... 32,800 1,504,700
Intel Corp. .......................................................... 20,600 1,447,150
Microsoft Corp. ...................................................... 16,900(a) 2,184,325
-------------
9,617,375
-------------
TELECOMMUNICATIONS 1.77%
BCE Inc. ............................................................. 26,800 892,775
Comsat Corp. ......................................................... 94,300 2,286,775
Telecomunicacoes Brasileiras, S.A., ADR. ............................. 22,300 2,596,556
Telefonica de Espana, S.A., ADR ...................................... 35,100 3,196,294
Telefonos de Mexico, S.A., ADR ....................................... 53,400 2,993,738
-------------
11,966,138
-------------
</TABLE>

F-4
<PAGE> 73
THE ZWEIG TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 1997

<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
------------- -------------
<S> <C> <C> <C>
TOBACCO 0.72%
RJR Nabisco Holdings Corp. ........................................... 116,100 $ 4,353,750
Universal Corp. ...................................................... 13,000 534,625
-------------
4,888,375
-------------
TRANSPORTATION 2.09%
British Airways Plc, ADR ............................................. 8,100 758,869
Caliber Systems, Inc. ................................................ 63,100 3,072,181
Canadian Pacific Ltd. ................................................ 125,400 3,417,150
CNF Transportation, Inc. ............................................. 46,200 1,772,925
GATX Corp. ........................................................... 13,300 965,081
KLM Royal Dutch Airlines N.V., ADR ................................... 30,145 1,137,974
Rollins Truck Leasing Corp. .......................................... 21,000 375,375
Ryder System, Inc. ................................................... 82,000 2,685,500
-------------
14,185,055
-------------
UTILITIES--ELECTRIC & NATURAL GAS 6.57%
Allegheny Energy, Inc. ............................................... 25,900 841,750
American Electric Power Co., Inc. .................................... 31,400 1,621,025
CMS Energy Corp. ..................................................... 87,200 3,842,250
Columbia Gas System, Inc. ............................................ 50,300 3,951,694
DQE Inc. ............................................................. 37,250 1,308,406
DTE Energy Co. ....................................................... 46,100 1,599,093
Edison International ................................................. 140,200 3,811,688
FPL Group, Inc. ...................................................... 60,200 3,563,087
FirstEnergy Co. ...................................................... 28,800 835,200
GPU, Inc. ............................................................ 106,300 4,477,888
IPALCO Enterprises, Inc. ............................................. 6,600 276,787
New York State Electric & Gas Corp. .................................. 108,000 3,834,000
Pacific Enterprises .................................................. 34,800 1,309,350
PacifiCorp. .......................................................... 33,600 917,700
PECO Energy Co. ...................................................... 21,900 531,075
PG&E Corp. ........................................................... 96,800 2,946,350
Pinnacle West Capital Corp. .......................................... 57,400 2,432,325
PP&L Resources, Inc. ................................................. 36,600 876,113
Public Service Co. of New Mexico ..................................... 41,600 985,400
Sierra Pacific Resources ............................................. 9,300 348,750
Transcanada Pipelines Ltd. ........................................... 46,700 1,044,912
United Illuminating Co. .............................................. 6,500 298,594
UtiliCorp United Inc. ................................................ 36,200 1,405,013
Valero Energy Corp. .................................................. 45,800 1,439,838
-------------
44,498,288
-------------
Total Common Stocks ($212,906,716) ............................ 249,303,151
-------------
</TABLE>

F-5
<PAGE> 74
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- -------------
<S> <C> <C> <C>
UNITED STATES GOVERNMENT & AGENCY OBLIGATIONS 51.41%
Federal National Mortgage Association, 6.85%, 4/5/2004 ............... $10,385,000 $ 10,849,095
United States Treasury Bonds, 10.750%, 5/15/2003 ..................... 15,000,000 18,421,875
United States Treasury Bonds, 7.25%, 8/15/2022 ....................... 45,500,000 52,566,696
United States Treasury Bonds, 7.50%, 11/15/2024 ...................... 36,500,000 43,663,125
United States Treasury Notes, 6.25%, 8/31/2000 ....................... 13,500,000 13,681,400
United States Treasury Notes, 5.625%, 11/30/2000 ..................... 19,745,000 19,714,139
United States Treasury Notes, 7.50%, 2/15/2005 ....................... 16,300,000 17,914,710
United States Treasury Notes, 6.50%, 5/15/2005 ....................... 7,600,000 7,925,371
United States Treasury Notes, 6.875%, 5/15/2006 ...................... 71,600,000 76,656,750
United States Treasury Notes, 6.50%, 10/15/2006 ...................... 82,800,000 86,733,000
-------------
Total United States Government & Agency Obligations
(Cost $334,581,993) ........................................... 348,126,161
-------------
SHORT-TERM INVESTMENTS 10.78%
Baker Hughes, Inc., 6.70%, 1/02/98 ................................... 26,500,000 26,495,068
TRW, Inc., 6.60%, 1/02/98 ............................................ 21,500,000 21,496,058
Volkswagen of America Inc., 6.60%, 1/02/98 ........................... 25,000,000 24,995,417
-------------
Total Short-Term Investments (Cost $72,986,543) ............... 72,986,543
-------------
Total Investments (Cost $620,475,252) -99.01% ................. $ 670,415,855
Other Assets less liabilities - 0.99% ......................... 6,717,199
-------------
Net Assets - 100.00% .......................................... $ 677,133,054
=============
<CAPTION>
NUMBER OF
SHARES
-----------
<S> <C> <C>
SECURITIES SOLD SHORT (NOTE 1D)
W.E.B.S. Index Fund, Inc. - Hong Kong Series
(Proceeds $1,128,685) ............................................. 76,400 $ 830,850
=============
</TABLE>

- ------------
(a) Non-income producing security.
(b) Used as collateral on short sales.

For Federal income tax purposes, the tax basis of investments owned at
December 31, 1997 was $620,547,016 and net unrealized appreciation on
investments consisted of:

<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation ................... $57,589,077
Gross unrealized depreciation ................... (7,720,238)
-----------
Net unrealized appreciation ..................... $49,868,839
===========
</TABLE>

See notes to financial statements.

F-6
<PAGE> 75
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997

<TABLE>
<S> <C>
ASSETS:
Investments, at value (identified cost $620,475,252) ............... $ 670,415,855
Cash ............................................................... 821,753
Dividends and interest receivable .................................. 6,155,074
Deposits with broker for securities sold short ..................... 1,193,557
Prepaid expenses ................................................... 44,772
-------------
Total Assets .................................................. 678,631,011
-------------
LIABILITIES:
Accrued advisory fees (Note 3) ..................................... 398,272
Accrued administration fees (Note 3) ............................... 2,402
Other accrued expenses ............................................. 266,433
Securities sold short, at value (proceeds $1,128,685) .............. 830,850
-------------
Total Liabilities ............................................. 1,497,957
-------------
NET ASSETS ............................................................... $ 677,133,054
=============
NET ASSET VALUE, PER SHARE:
($677,133,054/78,622,476 shares outstanding--Note 4) .................. $ 8.61
=============
Net Assets consist of:
Capital paid-in .................................................... $ 626,959,479
Accumulated net realized losses .................................... (64,863)
Net unrealized appreciation on investments and securities sold short 50,238,438
-------------
$ 677,133,054
=============
</TABLE>

See notes to financial statements.

F-7
<PAGE> 76
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS
For the Year ended December 31, 1997

<TABLE>
<S> <C>
Investment Income:
Income:
Dividends ................................................................ $ 6,227,857
Interest ................................................................. 28,630,008
-----------
Total Income ........................................................ 34,857,865
-----------
Expenses:
Investment advisory fees (Note 3) ........................................ 4,571,606
Administration fees (Note 3) ............................................. 849,013
Transfer agent fees ...................................................... 482,331
Printing and postage expenses ............................................ 384,550
Professional fees (Note 3) ............................................... 99,306
Custodian fees ........................................................... 97,963
Directors' fees and expenses (Note 3) .................................... 76,404
Miscellaneous ............................................................ 200,405
-----------
Total Expenses ...................................................... 6,761,578
-----------
Net Investment Income ........................................... 28,096,287
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments (Note 2):
Security transactions .................................................... 34,508,803
Short sales transactions ................................................. 72,199
Futures transactions ..................................................... 2,623,873
-----------
Net realized gain on investments ................................ 37,204,875
Increase in unrealized appreciation on investments and securities sold short.. 24,851,047
-----------
Net realized and unrealized gain on investments .......................... 62,055,922
-----------
Net increase in net assets resulting from operations ..................... $90,152,209
===========
</TABLE>
See notes to financial statements.

F-8
<PAGE> 77
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
For the Years ended
December 31
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ....................................... $ 28,096,287 $ 27,214,555
Net realized gain on investments ............................ 37,204,875 18,362,961
Increase (decrease) in unrealized appreciation on investments
and securities sold short .............................. 24,851,047 (6,902,204)
------------- -------------
Net increase in net assets resulting from operations ... 90,152,209 38,675,312
------------- -------------
Dividends and distributions to shareholders from:
Net investment income ....................................... (28,076,250) (27,214,555)
Net realized gains on investments ........................... (37,204,875) (18,739,823)
Capital paid-in ............................................. -- (17,854,497)
------------- -------------
Total dividends and distributions to shareholders ...... (65,281,125) (63,808,875)
------------- -------------
Capital share transactions:
Net asset value of shares issued to shareholders in
reinvestment of dividends from net investment
income and distributions from net realized gains
and capital paid-in .................................... 13,494,402 16,377,716
------------- -------------
Net increase (decrease) in net assets ........................... 38,365,486 (8,755,847)
Net Assets:
Beginning of year ............................................... 638,767,568 647,523,415
------------- -------------
End of year ..................................................... $ 677,133,054 $ 638,767,568
============= =============
</TABLE>

See notes to financial statements.

F-9
<PAGE> 78
THE ZWEIG TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

NOTE 1--Significant Accounting Policies

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 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 generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.

A. Portfolio Valuation

Portfolio securities which are traded only on stock exchanges are valued at
the last sale price. Securities traded in the over-the-counter market which are
National Market System securities are valued at the last sale price. Other
over-the-counter securities are valued at the most recently quoted bid price
provided by the principal market makers. Portfolio securities which are traded
both in the over-the-counter market and on a stock exchange are valued according
to the broadest and most representative market, as determined by the Investment
Adviser. Debt securities may be valued on the basis of prices provided by an
independent pricing service when such prices are believed by the Investment
Adviser to reflect the fair market value of such securities. Short-term
investments having a remaining maturity of 60 days or less when purchased are
valued at amortized cost (which approximates market value). Futures which are
traded on commodities exchanges are valued at their closing settlement price on
such exchange. Securities for which market quotations are not readily available
(of which there were none at December 31, 1997) 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.

Realized gains and losses on sales of investments are determined on the
identified cost basis for financial reporting and tax purposes.

C. Futures Contracts

Initial margin deposits made upon entering into futures contracts are
recorded as assets. During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
marking the contract to market on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets or liabilities, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. Therefore, anticipated gains may not
result and anticipated losses may not be offset. In addition, as no secondary
market exists for futures contracts, there is no assurance that there will be an
active market at any particular time.

F-10
<PAGE> 79
D. Short Sales

A short sale is a transaction in which the Fund sells a security it does
not own in anticipation of a decline in market price. To sell a security short,
the Fund must borrow the security. The Fund's obligation to replace the security
borrowed and sold short will be fully collateralized at all times by the
proceeds from the short sale retained by the broker and by cash and securities
deposited in a segregated account with the Fund's custodian. In addition to the
short sales described above, the Fund may make short sales "against the box". A
short sale "against the box" is a short sale whereby at the time of the short
sale, the Fund owns or has the immediate and unconditional right, at no added
cost, to obtain the identical security. If the price of the security sold short
increases between the time of the short sale and the time the Fund replaces the
borrowed security, the Fund will incur a loss, and if the price declines during
the period, the Fund will realize a gain. Any realized gain will be decreased,
and any incurred loss increased, by the amount of transaction costs. Dividends
or interest the Fund pays in connection with such short sales are recorded as
expenses.

E. Federal Income Tax

The Fund has elected to qualify and intends to remain qualified as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. The principal tax benefits of qualifying as a regulated
investment company as compared to an ordinary taxable corporation, are that a
regulated investment company is not itself subject to Federal income tax on
ordinary investment income and net capital gains that are currently distributed
(or deemed distributed) to its shareholders and that the tax character of
long-term capital gains recognized by a regulated investment company flows
through to its shareholders who receive distributions of such gains.

F. Dividends and Distributions to Shareholders

Dividends and distributions to shareholders are recorded on the ex-dividend
date. In the event that amounts distributed are in excess of accumulated net
investment income and net realized gains on investments (as determined for
financial statement purposes), such amounts would be reported as a distribution
from paid-in capital during the fiscal year in which such a distribution is
made. Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to timing differences
and differing characterization of distributions made by the Fund as a whole.
During the year ended December 31, 1997, the Fund reclassified $84,900 from
undistributed net realized gains to capital paid-in and $20,037 from
undistributed net investment income to undistributed net realized gains.

NOTE 2--Portfolio Transactions

During the year ended December 31, 1997, the Fund entered into purchase and
sale transactions, excluding short term instruments and futures transactions, as
follows:

<TABLE>
<CAPTION>
United States
Government
Common and Agency
Stocks Obligations
------------ ------------
<S> <C> <C>
Cost of Purchases ............... $191,637,696 $444,225,648
============ ============
Proceeds from Sales ............. $160,919,530 $341,801,914
============ ============
</TABLE>

F-11
<PAGE> 80
NOTE 3--Investment Advisory Fees and Other Transactions with Affiliates

a) Investment Advisory Fee: The Investment Advisory Agreement (the
"Advisory Agreement") between the Investment Adviser, Zweig Total Return
Advisors, Inc., and the Fund provides that, subject to the direction of the
Board of Directors of the Fund and the applicable provisions of the Act, the
Investment Adviser is responsible for the actual management of the Fund's
portfolio. The responsibility for making decisions to buy, sell or hold a
particular investment rests with the Investment Adviser, subject to review by
the Board of Directors and the applicable provisions of the Act. For the
services provided by the Investment Adviser under the Advisory Agreement, the
Fund pays the Investment 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,
1997, the Fund accrued advisory fees of $4,571,606.

b) Administration Fee: Zweig/Glaser Advisers serves as the Fund's
Administrator pursuant to an Administration Agreement with the Fund. Under such
Agreement, the Administrator generally assists in all aspects of the Fund's
operations, other than providing investment advice, subject to the overall
authority of the Fund's Board of Directors. The Administrator determines the
Fund's net asset value daily, prepares such figures for publication on a weekly
basis, maintains certain of the Fund's books and records that are not maintained
by the Investment Adviser, custodian or transfer agent, assists in the
preparation of financial information for the Fund's income tax returns, proxy
statements, quarterly and annual shareholder reports, and responds to
shareholder inquiries. Under the terms of the Agreement, the Fund pays the
Administrator a monthly fee equal, on an annual basis, to 0.13% of the Fund's
average daily net assets. For the year ended December 31, 1997, the Fund accrued
administration fees of $849,013.

c) Directors' Fees: The Fund pays each Director who is not an interested
person of the Fund or the Investment Adviser a fee of $10,000 per year plus
$1,500 per Directors' or committee meeting attended, together with out-of-pocket
costs relating to attendance at such meetings. The Directors of the Fund who are
interested persons of the Fund or the Investment Adviser receive no remuneration
from the Fund.

d) Legal Fees: The Fund incurred legal fees of $16,161 during the year
ended December 31, 1997, for the services of Rosenman & Colin LLP, of which
Robert E. Smith, a Director of the Fund, is a partner.

e) Brokerage Commissions: During the year ended December 31, 1997, the Fund
paid Zweig Securities Corp. brokerage commissions of $80,824 in connection with
portfolio transactions effected through them. In addition, Zweig Securities
Corp. charged $6,529 in commissions for transactions effected on behalf of the
participants in the Fund's Automatic Reinvestment and Cash Purchase Plan.

Certain directors and officers of the Fund are also directors and/or
officers of the Investment Adviser and the Administrator.

NOTE 4--Capital Stock and Reinvestment Plan

At December 31, 1997, the Fund had one class of common stock, par value
$.001 per share, of which 500,000,000 shares are authorized and 78,622,476
shares are outstanding.

Registered shareholders may elect to receive all distributions in cash paid
by check mailed directly to the shareholder by State Street Bank & Trust Co. as
dividend paying agent. Pursuant to the Automatic Reinvestment and Cash Purchase
Plan (the "Plan"), shareholders not making such election

F-12
<PAGE> 81
will have all such amounts automatically reinvested by State Street, as the Plan
agent in whole or fractional shares of the Fund, as the case may be. For the
years ended December 31, 1997 and December 31, 1996, 1,590,261 and 1,979,527
shares, respectively, were issued pursuant to the Plan.

On January 2, 1998 the Fund declared a distribution of $0.07 per share to
shareholders of record December 31, 1997. This distribution has an ex-dividend
date of January 5, 1998 and is payable January 9, 1998.

NOTE 5--Financial Highlights

Selected data for a share outstanding throughout each year:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning of year .. $ 8.29 $ 8.63 $ 8.11 $ 9.11 $ 9.06
------------- ------------- ------------- ------------- -------------
Income From Investment Operations:
Net investment income ............... 0.36 0.36 0.39 0.29 0.26
Net realized and unrealized
gains (losses) on investments .... 0.80 0.14 0.97 (0.43) 0.75
------------- ------------- ------------- ------------- -------------
Total from investment operations .... 1.16 0.50 1.36 (0.14) 1.01
------------- ------------- ------------- ------------- -------------
Dividends and Distributions:
Dividends from net investment income (0.36) (0.36) (0.39) (0.29) (0.26)
Distributions from net realized gains
on investments ................... (0.48) (0.24) (0.45) -- (0.70)
Distributions from capital paid-in .. -- (0.24) -- (0.57) --
------------- ------------- ------------- ------------- -------------
Total Dividends and Distributions ... (0.84) (0.84) (0.84) (0.86) (0.96)
------------- ------------- ------------- ------------- -------------
Net asset value, end of year .. $ 8.61 $ 8.29 $ 8.63 $ 8.11 $ 9.11
============= ============= ============= ============= =============
Market value, end of year* .... $ 9.4375 $ 8.00 $ 8.625 $ 8.00 $ 10.75
============= ============= ============= ============= =============
Total investment return ............. 30.22% 2.62% 19.19% (17.08)% 18.37%
============= ============= ============= ============= =============
Ratios/Supplemental Data:
Net assets, end of year
(in thousands) ................... $ 677,133 $ 638,768 $ 647,523 $ 591,659 $ 648,516
Ratio of expenses to average
net assets ....................... 1.04% 1.03% 1.10% 1.12% 1.11%
Ratio of net investment income to
average net assets ............... 4.30% 4.31% 4.59% 3.35% 2.85%
Portfolio turnover rate ............. 104.7% 147.2% 179.8% 281.0% 293.0%
Average commission rate per share on
portfolio transactions ........... $ 0.0587 $ 0.0591 $ 0.0606 N/A N/A
</TABLE>

- ------------

*Closing Price -- New York Stock Exchange.

F-13
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of
The Zweig Fund, Inc.

We have audited the accompanying statement of assets and liabilities of The
Zweig Total Return Fund, Inc., including the schedule of investments, as of
December 31, 1997, and the related statement of operations for the year
then ended, the statement of changes in 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. These financial statements and financial
highlights are the responsibility of the management of the Fund. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Zweig Total Return Fund, Inc. as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
February 4, 1998

F-14
<PAGE> 83
PART C
OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

(1) Financial Statements: The following financial statements and
schedules of the Registrant included in the Prospectus and/or the Statement of
Additional Information are filed with and made a part of this Registration
Statement: Statement of Assets and Liabilities, December 31, 1997; Statement of
Operations for the fiscal year ended December 31, 1997; Statement of Changes in
Net Assets for the fiscal years ended December 31, 1997 and 1996; Schedule of
Investments, December 31, 1997; Notes to Financial Statements at December 31,
1997; Financial Highlights for the ten fiscal years ended December 31, 1997; all
other schedules are omitted because the information is included elsewhere in the
Prospectus or SAI or is not required.

(2) Exhibits

(a) - Amended and Restated Articles of Incorporation*

(b) - Amended and Restated By-Laws*

(d)(1) - Form of Subscription Certificate**

(d)(2) - Form of Notice of Guaranteed Delivery**

(d)(3) - Form of Nominee Holder Over-Subscription Exercise Form**

(d)(4) - Form of Subscription Agent Agreement between the Registrant and State
Street Bank & Trust Company.**

(d)(5) - Form of Information Agent Agreement between the Registrant and
Georgeson & Company.**

(e) - Distribution Reinvestment and Cash Purchase Plan

(f) - Not applicable

(g) - Investment Advisory Agreement between the Registrant and Zweig Total
Return Advisors, Inc. dated September 22,1988.*

(h) - Form of Dealer Manager Agreement**

(i) - Not applicable

(j) - Custodian Agreement between the Registrant and The Bank of New York
dated as of August 1, 1997.

(k)(1) - Administration Agreement between the Registrant and Zweig/Glaser
Advisers dated as of August 1, 1995.

1
<PAGE> 84
(k)(2) - Stock Transfer Agent Service Agreement between the Registrant and the
State Street Bank & Trust Company dated as of September 1, 1997.

(l) - Opinion and Consent of Rosenman & Colin LLP**

(m) - Not applicable

(n) - Consent of Coopers & Lybrand L.L.P.**

(o) - Not applicable

(p) - Not applicable

(q) - Not applicable

(r) - Financial Data Schedule

(s) - Powers of Attorney

* Incorporated by reference to the Registrant's Pre-effective Amendment
No. 2 to the Registrant's Registration Statement (Securities Act File No.
33-23252; Investment Company Act File No. 811-5620).

** To be filed by amendment.

ITEM 25. Marketing Arrangements

See Exhibit 2(h) of this Registration Statement.

ITEM 26. Other Expenses of Issuance and Distribution

The following table sets forth the estimated expenses expected to be incurred in
connection with the offering described in this Registration Statement:

<TABLE>
<CAPTION>
.....CATEGORY ESTIMATED EXPENSES*
- ------------- -------------------
<S> <C>
Printing Fees
Dealer Manager Expense
Reimbursement
Legal Fees
Registration Fees
Information Agent Fees
Subscription Agent Fees
Miscellaneous
New York Stock Exchange
and Pacific Stock Exchange Fees
--------
</TABLE>

*This information will be given by amendment, and may be subject to future
contingencies.

ITEM 27. Persons Controlled by or Under Common Control with Registrant

None.

2
<PAGE> 85
ITEM 28. Number of Holders of Securities as of ,1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -----------------------------------------------------------------------------------
<S> <C>
Common Stock, par value $0.001 per share
- -----------------------------------------------------------------------------------
</TABLE>

ITEM 29. Indemnification

Under Article VII of the Registrant' Articles of Incorporation and
Article V, Section 1, of the Registrant's By-Laws, any past or present director
or officer of the Registrant will be indemnified, and will be advanced expenses,
to the fullest extent permitted by Maryland law, but not in violation of section
17(h) or 17(i) of the Investment Company Act of 1940, as amended.

As permitted by Section 2-418(k) of the Maryland General Corporation
Law, Article V, Section 3, of the Registrant's By-Laws provides that the
Registrant shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Registrant or who, while a director, officer, employee or agent of the
Registrant, is or was serving at the request of the Registrant as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, against
any liability asserted against and incurred by him or her in any such capacity,
or arising out of his or her status as such, provided that no insurance may be
obtained by the Registrant for liabilities against which it would not have the
power to indemnify him or her under the Section of the By-Laws regarding
indemnification or applicable law.

ITEM 30. Business and Other Connections of Investment Adviser

The Registrant is fulfilling the requirement of this Item 30 to
describe briefly any other business, vocation or employment of a substantial
nature in which the Investment Adviser of the Registrant, and each director,
executive officer, or partner of the Investment Adviser, is, or has been, at any
time during the past two fiscal years, engaged for his or her own account or in
the capacity of director, officer, employee, partner or trustee by incorporating
by reference the information contained in the Form ADV of Zweig Total Return
Advisors, Inc. filed with the SEC pursuant to the Investment Advisers Act of
1940 (SEC File No. 801-32672).

ITEM 31 Location of Accounts and Records

A. Zweig Total Return Advisors, Inc.
900 Third Avenue
New York, N.Y. 10022
(corporate records of the Registrant and records relating to the
function of Zweig Total Return Advisors, Inc. as Investment Adviser to
the Registrant).

B. Zweig/Glaser Advisers
900 Third Avenue
New York, N.Y. 10022
(records relating to its function as Administrator to the Registrant).

C. State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its function as the Registrant's Dividend Paying
Agent, Distribution Reinvestment and Cash Purchase Plan Agent, Transfer
Agent and Registrar).

3
<PAGE> 86
D. The Bank of New York
48 Wall Street
New York, N.Y. 10015
(records relating to its function as Custodian of the Registrant)

ITEM 32. Management Services

Not applicable

ITEM 33. Undertakings

(a) Registrant undertakes to suspend offering of the shares covered hereby until
it amends its Prospectus contained herein if (1) subsequent to the effective
date of this Registration Statement, its net asset value per share declines more
than ten percent from its net asset value per share as of the effective date of
this Registration Statement, or (2) its net asset value per share increases to
an amount greater than its net proceeds as stated in the Prospectus contained
herein.

(b) Registrant undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in form of
prospectus filed by the Registrant pursuant to 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(c) The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of receipt
of a written or oral request, any Statement of Additional Information.

4
<PAGE> 87
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the 5th day of
March, 1998.

THE ZWEIG TOTAL RETURN FUND, INC.

By: /s/ Martin E. Zweig
------------------------------------------
Martin E. Zweig
Chairman of the Board and President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Martin E. Zweig Director, Chairman of the Board and March 5, 1998
- ----------------------------- President (Chief Executive Officer)
Martin E. Zweig

Charles H. Brunie* Director March 5, 1998
- -----------------------------
Charles H. Brunie

Annemarie Gilly*
- -----------------------------
Annemarie Gilly Director March 5, 1998

Elliot S. Jaffe* Director March 5, 1998
- -----------------------------
Elliot S. Jaffe

/s/ Jeffrey Lazar Director, Vice President, Treasurer March 5, 1998
- ----------------------------- and Assistant Secretary
Jeffrey Lazar

Alden C. Olson* Director March 5, 1998
- -----------------------------
Alden C. Olson

James B. Rogers, Jr.* Director March 5, 1998
- -----------------------------
James B. Rogers, Jr.

Anthony M. Santomero* Director March 5, 1998
- -----------------------------
Anthony M. Santomero

Robert E. Smith* Director March 5, 1998
- -----------------------------
Robert E. Smith

* By: /s/ Martin E. Zweig March 5, 1998
-----------------------
Martin E. Zweig
Attorney-in-fact
</TABLE>

5
<PAGE> 88
EXHIBIT INDEX

(e) - Distribution Reinvestment and Cash Purchase Plan

(j) - Custodian Agreement between the Registrant and The Bank of New York
dated as of August 1, 1997.

(k)(1) - Administration Agreement between the Registrant and Zweig/Glaser
Advisers dated as of August 1, 1995.

(k)(2) - Stock Transfer Agent Service Agreement between the Registrant and
between the Registrant and the State Street Bank & Trust Company dated as of
September 1, 1997.

(r) - Financial Data Schedule

(s) - Powers of Attorney

<PAGE> 1
EXHIBIT (e)

1
<PAGE> 2
RESTATED AGREEMENT
FOR
DISTRIBUTION REINVESTMENT PLAN AND
CASH PURCHASE PLAN
FOR SHAREHOLDERS OF COMMON STOCK
OF
THE ZWEIG FUND, INC.
AND
THE ZWEIG TOTAL RETURN FUND, INC.

AGREEMENT dated as of September 1, 1997, by and among THE ZWEIG FUND, INC. and
THE ZWEIG TOTAL RETURN FUND, INC., each of which is a Maryland corporation
(hereinafter singularly or collectively referred to as the "Fund"), State Street
Bank & Trust Company (the "Agent" or "Plan Agent"), and shareholders of the Fund
(the "Participants") in the Distribution Reinvestment Plan and Cash Purchase
Plan (the "Plan") provided hereunder.

WHEREAS, each Fund wishes to provide the Plan for the benefit of its
shareholders; and

WHEREAS, the Agent wishes to act as agent for the Plan;

NOW, THEREFORE, the parties agree that the terms and conditions of the
Plan shall be as set forth on Exhibit A hereto.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first set forth above.

THE ZWEIG FUND, INC.

By: /s/ Martin E. Zweig
----------------------------------
President

THE ZWEIG TOTAL RETURN FUND, INC.

By: /s/ Martin E. Zweig
----------------------------------
President

STATE STREET BANK & TRUST COMPANY

By: /s/ David M. Elwood
----------------------------------
Vice President and Senior Counsel
<PAGE> 3
THE ZWEIG FUND, INC. AND
THE ZWEIG TOTAL RETURN FUND, INC.
TERMS AND CONDITIONS OF DISTRIBUTION REINVESTMENT PLAN
AND CASH PURCHASE PLAN

1. Each holder of shares (a "Shareholder") of common stock in The Zweig
Fund, Inc. and The Zweig Total Return Fund, Inc. (the "Fund") whose Fund shares
are registered in his or her own name will automatically be a participant
("Participant") in the Distribution Reinvestment Plan and Cash Purchase Plan
(the "Plan"), unless any such Shareholder specifically elects to receive all
distributions in cash paid by check mailed directly to the Shareholder. A
Shareholder whose shares are registered in the name of a broker-dealer or other
nominee (the "Nominee") will be a Participant if (a) such a service is provided
by the Nominee and (b) the Nominee makes such an election on behalf of the
Shareholder to participate in the Plan. State Street Bank & Trust Company (the
"Agent" or "Plan Agent") will act as agent for Participants and will open an
account under the Plan for each Participant in the same name as such
Participant's common stock is registered on the books and records of the
transfer agent for the common stock.

2. Whenever the Fund declares a distribution payable in shares of
common stock or cash, Participants will receive such distribution in the manner
described in paragraph 3 below as determined on the record date for such
distribution.

3. Whenever the market price of the Fund's common stock is equal to or
exceeds net asset value per share at the time shares of common stock are valued
for the purpose of determining the number of shares equivalent to the
distribution, Participants will be issued shares of common stock valued at the
greater of (i) net asset value per share or (ii) 95% of the then current market
price. Participants will receive any such distribution entirely in shares of
common stock, and the Agent shall automatically receive such shares of common
stock, including fractions, for all Participants' accounts. If net asset value
per share of the common stock at the time of valuation exceeds the market price
of the common stock at such time, or if the Fund should declare a distribution
payable only in cash, the Agent will, as purchasing agent for the Participants,
buy shares of common stock in the open market, on the New York Stock Exchange (
the "Exchange") or elsewhere, for each Participant's account. If, following the
commencement of such purchases and before the Plan Agent has completed its
purchases the market price exceeds the net asset value of the shares of common
stock, the Plan Agent is permitted to cease purchasing shares on the open market
and the Fund may issue the remaining shares at a price equal to the greater of
(a) net asset value or (b) 95% of the then current market price. In the case
where the Plan Agent has terminated open market purchases and the Fund has
issued the remaining shares, the number of shares received by the Participant in
respect of the cash dividend or distribution will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issued the remaining shares.

3
<PAGE> 4
If the record date for a distribution precedes the ex-date for such distribution
(which generally occurs in connection with the Fund's final distribution for the
calendar year), the determination of whether new Shares will be issued by the
Fund or whether the Agent will buy Fund shares in the open market will be made
on the basis of the closing market price for the shares of the Fund's common
stock on the ex-date for such distribution.

The Agent will apply all cash received as a distribution to purchase shares of
common stock on the open market as soon as practicable after the record date of
such distribution, but in no event later than 30 days after such date, except
where necessary to comply with the applicable provisions of the federal
securities law.

4. For all purposes of the plan: (a) the market price of the Fund's
common stock on a particular date shall be the last sale price on the Exchange
at the close of the previous trading day or, if there is no sale on the Exchange
on that date, then the mean between the closing bid and asked quotations for
such stock on the Exchange on such date and (b) net asset value per share of
common stock on a particular date shall be as determined by or on behalf of the
Fund.

5. Participants in the Plan may make additional cash payments on a
monthly basis of at least $100 but not more than $3000 for investment in the
Fund. Such voluntary cash payments received by the Agent will be applied by the
Agent to purchase additional Shares on the open market on or about the
investment date following the Agent's receipt of the voluntary cash payment. The
investment dates will be the fifteenth day of each month (or the closest
business day if a weekend or holiday). Such Shares will be purchased on the open
market. Participants have an unconditional right to obtain the return of any
voluntary cash payments if the Agent receives written notice at least 48 hours
prior to such investment date. In the event that any cash payment is received or
processed too late to be applied toward a purchase for the current month's
investment date, it will be applied to a purchase for the next month's
investment date. Participants will not receive interest on voluntary cash
payments held by the Agent pending investment.

6. The open market purchases provided for above may be made on any
securities exchange where the shares of common stock of the Fund are traded, in
the over-the-counter market or in negotiated transactions, and may be on such
terms as to price, delivery and otherwise as the Agent shall determine. Funds
held by the Agent uninvested will not bear interest, and it is understood that,
in any event, the Agent shall have no liability in connection with any inability
to purchase shares of common stock within 30 days after the initial date of such
purchase as herein provided, or with the timing of any purchases effected. The
Agent shall have no responsibility as to the value of the shares of common stock
of the Fund acquired for any Participant's account.

7. The Agent will hold shares of common stock acquired pursuant to the
Plan in noncertificated form in the Agent's name or that of its Nominee. The
Agent will forward to each Participant any proxy solicitation material and will
vote any shares of common stock so held for each Participant only in accordance
with the proxy returned by any such Participant

4
<PAGE> 5
to the Fund. Upon any Participant's written request, the Agent will deliver to
her or him, without charge, a certificate or certificates for the full shares of
common stock.

8. The Agent will confirm to each Participant acquisitions made for its
account as soon as practicable but not later than 60 days after the date
thereof. Although a Participant may from time to time have an undivided
fractional interest (computed to three decimal places) in a share of common
stock of the Fund, no certificates for a fractional share will be issued.
However, distributions on fractional shares of common stock will be credited to
Participants' accounts.

9. Any stock dividends or split shares distributed by the Fund on
shares of common stock held by the Agent for any Participant will be credited to
such Participant's account. In the event that the Fund makes available to
Participants rights to purchase additional shares of common stock or other
securities, then to the extent that such rights are transferable, the Agent will
sell such rights and apply the proceeds of the sale to the purchase of
additional shares of common stock of the Fund for the account of Participants.

10. The Agent's service fee for investing distributions will be paid by
the Fund. Participants will be charged a pro rata share of brokerage commissions
on all open market purchases.

11. Any Participant may terminate such Participant's account under the
Plan by notifying the Agent in writing. Such termination will be effective
immediately if notice is received by the Agent not less than 10 business days
prior to any distribution record date; otherwise, such termination will be
effective with respect to any subsequent distribution, no more than five trading
days after the distributions paid for such record date have been credited to the
Participant's account. The Plan may be terminated by the Fund or the Agent with
the Fund's prior written consent, upon notice in writing mailed to each
Participant at least 90 days prior to any record date for the payment of any
distribution by the Fund. Upon any termination, the Agent will cause to be
delivered to each Participant a certificate or certificates for the appropriate
number of full shares and a cash adjustment for any fractional share held for
each such Participant under the Plan. Anytime the Participant elects by notice
to the Agent in writing in advance of such termination to have the Agent sell
part or all shares and remit the proceeds to it, the Agent is authorized to
deduct brokerage commissions for this transaction from the proceeds.

12. These terms and conditions may be amended or supplemented by the
Fund or the Agent with the Fund's and Agent's prior written consent, at any time
or times but, except when necessary or appropriate to comply with applicable law
or the rules or policies of the Securities and Exchange Commission or any other
regulatory authority, only by mailing to each Participant appropriate written
notice at least 90 days prior to the effective date thereof. The amendment or
supplement shall be deemed to be accepted by each Participant unless, with
respect to any such Participant, prior to the effective date thereof, the Agent
receives written notice of the termination of the Participant's account under
the Plan. Any such amendment may include an appointment by the Agent in its
place and stead of a successor Agent under these terms and conditions, with full
power and authority to

5
<PAGE> 6
perform all or any of the acts to be performed by the Agent under these terms
and conditions. Upon any such appointment of a successor Agent for the purpose
of receiving distributions, the Fund will be authorized to pay to such successor
Agent, for Participants' accounts, all distributions payable on the shares of
common stock held in each Participant's name or under the Plan for retention or
application by such successor Agent as provided in these terms and conditions.

13. The Agent shall at all times act in good faith and agree to use its
best efforts within reasonable limits to ensure the accuracy of all services
performed under this Agreement to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its or its employees' negligence, bad faith or willful
misconduct.

14. The Participant shall have no right to draw checks or drafts
against such Participant's Account or to give instructions to the Plan Agent in
respect of any shares or cash held therein except as expressly provided herein.

15. The Participant agrees to notify the Plan Agent promptly in writing
of any change of address. Notices to the Participant may be given by the Agent
by letter addressed to the Participant as shown on the records of the Agent.

16. This Agreement and the account established hereunder for the
Participant shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the Rules and Regulations of the
Securities and Exchange Commission, as they may be changed or amended from time
to time.

17. The Plan Agent may use its affiliates and/or affiliates of the
Fund's investment adviser for all trading activity relative to the Plan on
behalf of Plan Participants. Such affiliates will receive a commission in
connection with such trading transactions.

<PAGE> 1
EXHIBIT (j)
<PAGE> 2
CUSTODY AGREEMENT

Agreement made as of the 1st day of August, 1997, between THE ZWEIG
TOTAL RETURN FUND, INC., a Maryland corporation organized and existing under the
laws of the State of Maryland, having its principal office and place of business
at 900 Third Avenue, New York, New York 10022 (hereinafter called the "Fund"),
and THE BANK OF NEW YORK, a New York corporation authorized to do a banking
business, having its principal office and place of business at 48 Wall Street,
New York, New York 10286 (hereinafter called the "Custodian").

W I T N E S S E T H :

that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:

ARTICLE I.

DEFINITIONS

Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

1. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.

2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.

3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Officers, and the term Certificate shall also include
Instructions.

4. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.

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<PAGE> 3
5. "Collateral Account" shall mean a segregated account so denominated
which is pledged to the Custodian as security for, and in consideration of, the
Custodian's issuance of (a) any Put Option guarantee letter or similar document
described in paragraph 8 of Article V herein, or (b) any receipt described in
Article V or VIII herein.

6. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.

7. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.

8. "Currency" shall mean moneys denominated in a lawful currency of any
country or the European Currency Unit.

9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Directors specifically approving deposits therein by the
Custodian.

10. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.

11. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.

12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.

13. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.

14. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Officer or unsigned) and tested telex.

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<PAGE> 4
15. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or moneys of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.

16. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.

17. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.

18. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer, and any other person or persons, whether or
not any such other person is an officer of the Fund, duly authorized by the
Board of Directors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.

19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.

20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably believed
by the Custodian to be an Officer.

21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.

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<PAGE> 5
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.

23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.

24. "Senior Security Account" shall mean an account maintained under
the terms of this Agreement as a segregated account, by recordation or
otherwise, within the custody account in which certain Securities and/or other
assets of the Fund shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.

25. "Shares" shall mean the shares of capital stock of the Fund.

26. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.

27. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.

ARTICLE II.

APPOINTMENT OF CUSTODIAN

1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and moneys at any time owned by the Fund during the period of
this Agreement.

2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.

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<PAGE> 6
3. The Custodian agrees on behalf of itself and its employees not to
use records and other information relative to the Fund for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Fund, provided, however,
that notwithstanding the foregoing, the Custodian reserves the right to exhibit
such records without prior notice or approval whenever the custodian may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge this information by duly constituted authorities, or when
so requested by the Fund.

4. Without limiting the foregoing, in case of any requests or demands
for the inspection of records or other information relative to the Fund, the
Custodian will endeavor to notify the Fund and to secure instructions from an
Officer as to such inspection. The Custodian reserves the right, however, to
exhibit the records or other information relative to the Fund to any person
without notice or consent whenever it receives an opinion from its counsel that
there is a reasonable likelihood that the Custodian will be held liable for the
failure to exhibit the records or other information relative to the Fund to such
person.

ARTICLE III.

CUSTODY OF CASH AND SECURITIES

1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement. The Custodian will not be responsible for any Securities and moneys
not actually received by it. The Custodian will be entitled to reverse any
credits made on the Fund's behalf where such credits have been previously made
and moneys are not finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund, substantially in the
form of Exhibit A hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis to deposit in the Book-Entry System all
Securities eligible for deposit therein and to utilize the Book- Entry System to
the extent possible in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities and deliveries and returns of Securities
collateral. Prior to a deposit of Securities in the Depository, the Fund shall
deliver to the Custodian a certified resolution of the Board of Directors of the
Fund, substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities eligible for deposit therein, and to utilize the
Depository to the extent possible with respect to such Securities in connection
with its performance hereunder, including, without limitation, in connection
with settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and moneys deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the

12
<PAGE> 7
Custodian's books to the separate account for the Fund. Prior to the Custodian's
accepting, utilizing and acting with respect to Clearing Member confirmations
for Options and transactions in Options as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board of
Directors, substantially in the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement.

2. The Custodian shall establish and maintain a separate account, in
the name of the Fund, and shall credit to the separate account all moneys
received by it for the account of the Fund. Moneys credited to the separate
account shall be disbursed by the Custodian only:

(a) As hereinafter provided;

(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made and the purpose for
which payment is to be made; or

3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary of all transfers to or
from the account of the Fund either hereunder or with any co-custodian or
sub-custodian appointed in accordance with this Agreement during said day. Where
Securities are transferred to the account of the Fund, the Custodian shall also
by book-entry or otherwise identify as belonging to the Fund a quantity of
Securities in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement of the Securities
and moneys held by the Custodian for the Fund.

4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities which are not held in the Book-Entry System or in the Depository in a
separate account in the name of the Fund physically segregated at all times from
those of any other person or persons.

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<PAGE> 8
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:

(a) Collect all income, dividends and distributions due or
payable;

(b) Give notice to the Fund and present payment and collect
the amount payable upon such Securities which are called, but only if either (i)
the Custodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix B annexed
hereto, which may be amended at any time by the Custodian without the prior
notification or consent of the Fund;

(d) Surrender Securities in temporary form for definitive
Securities;

(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;

(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, all rights and similar
securities issued with respect to any Securities held by the Custodian
hereunder; and

(g) Deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.

6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:

(a) Execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Custodian hereunder may be exercised;

(b) Deliver any Securities held by the Custodian hereunder
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with

14
<PAGE> 9
the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion privilege
and receive and hold hereunder any cash or other Securities received in
exchange;

(c) Deliver any Securities held by the Custodian hereunder to
any protective committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold hereunder such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;

(d) Make such transfers or exchanges of the assets specified
in such Certificate, and take such other steps as shall be stated in such
Certificate to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and

(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.

7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement, if any. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in this Agreement
to the contrary, make payment for any Futures Contract, Option, or Futures
Contract Option for which such instruments or such certificates are available
only against the delivery to the Custodian of such instrument or such
certificate, and deliver any Futures Contract, Option or Futures Contract Option
for which such instruments or such certificates are available only against
receipt by the Custodian of payment therefor. Any such instrument or certificate
delivered to the

15
<PAGE> 10
Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.

ARTICLE IV.

PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS

1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the name of the
issuer and the title of the Securities; (b) the number of shares or the
principal amount purchased and accrued interest, if any; (c) the date of
purchase and settlement; (d) the purchase price per unit; (e) the total amount
payable upon such purchase; (f) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (g) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the moneys held for the account of
the Fund the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.

2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the name of
the issuer and the title of the Security; (b) the number of shares or principal
amount sold, and accrued interest, if any; (c) the date of sale; (d) the sale
price per unit; (e) the total amount payable to the Fund upon such sale; (f) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (g) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities to
the broker specified in the Certificate against payment of the total amount
payable to the Fund upon such sale, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.

ARTICLE V.

OPTIONS

1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the type

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<PAGE> 11
of Option (put or call); (b) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options
purchased; (c) the expiration date; (d) the exercise price; (e) the dates of
purchase and settlement; (f) the total amount payable by the Fund in connection
with such purchase; (g) the name of the Clearing Member through whom such Option
was purchased; and (h) the name of the broker to whom payment is to be made. The
Custodian shall pay, upon receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the account of the Fund, the
total amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.

2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the type of Option (put or call);
(b) the name of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options sold; (c) the date of sale;
(d) the sale price; (e) the date of settlement; (f) the total amount payable to
the Fund upon such sale; and (g) the name of the Clearing Member through whom
the sale was made. The Custodian shall consent to the delivery of the Option
sold by the Clearing Member which previously supplied the confirmation described
in preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.

3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
name of the issuer and the title and number of shares subject to the Call
Option; (b) the expiration date; (c) the date of exercise and settlement; (d)
the exercise price per share; (e) the total amount to be paid by the Fund upon
such exercise; and (f) the name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, pay out of the moneys held for
the account of the Fund total amount payable to the Clearing Member through whom
the Call Option was exercised, provided that the same conforms to the total
amount payable as set forth in such Certificate.

4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the name
of the issuer and the title and number of shares subject to the Put Option; (b)
the expiration date; (c) the date of exercise and settlement; (d) the exercise
price per share; (e) the total amount to be paid to the Fund upon such exercise;
and (f) the name of the Clearing Member through whom such Put Option was
exercised. The Custodian shall, upon receipt of the amount payable upon the
exercise of the Put Option, deliver or direct the Depository to deliver the
Securities,

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<PAGE> 12
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.

5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the type of Stock Index Option (put or call); (b) the number of Options
being exercised; (c) the stock index to which such Option relates; (d) the
expiration date; (e) the exercise price; (f) the total amount to be received by
the Fund in connection with such exercise; and (g) the Clearing Member from whom
such payment is to be received.

6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the name of the issuer and the title and number of
shares for which the Covered Call Option was written and which underlie the
same; (b) the expiration date; (c) the exercise price; (d) the premium to be
received by the Fund; (e) the date such Covered Call Option was written; and (f)
the name of the Clearing Member through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to such Covered Call Option,
such receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.

7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the name of the issuer and the title and number of
shares subject to the Covered Call Option; (b) the Clearing Member to whom the
underlying Securities are to be delivered; and (c) the total amount payable to
the Fund upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities against payment
of the amount to be received as set forth in such Certificate.

8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the name of the issuer and the title and number of shares for which
the Put Option is written and which underlie the same; (b) the expiration date;
(c) the exercise price; (d) the premium to be received by the Fund; (e) the date
such Put Option is written; (f) the name of the Clearing Member through whom the
premium is to be received and to whom a Put Option guarantee letter is to be
delivered; (g) the amount of cash, and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account; and (h) the amount of cash
and/or the

18
<PAGE> 13
amount and kind of Securities to be deposited into the Collateral Account. The
Custodian shall, after making the deposits into the Collateral Account specified
in the Certificate, issue a Put Option guarantee letter substantially in the
form utilized by the Custodian on the date hereof, and deliver the same to the
Clearing Member specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing, the Custodian
shall be under no obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations contained therein.

9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the name of the issuer and title and
number of shares subject to the Put Option; (b) the Clearing Member from whom
the underlying Securities are to be received; (c) the total amount payable by
the Fund upon such delivery; (d) the amount of cash and/or the amount and kind
of Securities to be withdrawn from the Collateral Account; and (e) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Fund the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such Certificate.

10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) whether such Stock Index Option is a put or a call; (b)
the number of options written; (c) the stock index to which such Option relates;
(d) the expiration date; (e) the exercise price; (f) the Clearing Member through
whom such Option was written; (g) the premium to be received by the Fund; (h)
the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the Collateral
Account; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in a Margin Account, and the name in which such account is
to be or has been established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the Senior
Security Account specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed to issue, which
are in accordance with the customs prevailing among Clearing Members in Stock
Index Options and make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account specified in the
Certificate.

11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) such information as may be necessary to identify the Stock
Index Option being exercised; (b) the Clearing Member through whom such Stock
Index Option is being exercised; (c) the total amount payable upon such
exercise, and whether such amount is to be paid by or to the Fund; (d) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn

19
<PAGE> 14
from the Margin Account; and (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account; and the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account. Upon the return and/or cancellation of the receipt,
if any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Fund to the
Clearing Member specified in the Certificate the total amount payable, if any,
as specified therein.

12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
name of the issuer and the title and number of shares subject to the Option, or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (c) the exercise price; (d) the premium
to be paid by the Fund; (e) the expiration date; (f) the type of Option (put or
call); (g) the date of such purchase; (h) the name of the Clearing Member to
whom the premium is to be paid; and (i) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account. Upon the Custodian's
payment of the premium and the return and/or cancellation of any receipt issued
pursuant to paragraphs 6, 8 or 10 of this Article with respect to the Option
being liquidated through the Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the previously imposed restrictions
on the Securities underlying the Call Option.

13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.

ARTICLE VI.

FUTURES CONTRACTS

1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the category of Futures Contract (the name of the underlying
stock index or financial instrument); (b) the number of identical Futures
Contracts entered into; (c) the delivery or settlement date of the Futures
Contract(s); (d) the date the Futures Contract(s) was (were) entered into and
the maturity date; (e) whether the Fund is buying (going long) or selling (going
short) on such Futures

20
<PAGE> 15
Contract(s); (f) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account; (g) the name of the broker,
dealer, or futures commission merchant through whom the Futures Contract was
entered into; and (h) the amount of fee or commission, if any, to be paid and
the name of the broker, dealer, or futures commission merchant to whom such
amount is to be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the Margin Account
Agreement, if any. The Custodian shall make payment out of the money, held for
the Fund if any of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account the amount of cash and/or the amount
and kind of Securities specified in said Certificate.

2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement, if
any.

(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement, if
any.

3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account. The Custodian shall make the payment or delivery
specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.

4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the moneys held
for he Fund of the fee or commission, if any, specified in the Certificate and
delete the Futures Contract being offset from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein, and make such withdrawals
from the Senior Security Account as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement, if any.

5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a future commission
merchant upon receipt of

21
<PAGE> 16
a Certificate from the Fund specifying: (a) the name of the future commission
merchant; (b) the specific cash and Securities to be delivered; (c) the date of
such delivery; and (d) the date of the agreement between the Fund and such
future commission merchant entered pursuant to Rule 17f-6 under the Investment
Company Act 1940, as amended. Each delivery of such a Certificate by the Fund
shall constitute (x) a representation and warranty by the Fund that the Rule
17f-6 agreement has been duly authorized, executed and delivered by the Fund and
the future commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the acts or
omissions of any such future commission merchant.

ARTICLE VII.

FUTURES CONTRACT OPTIONS

1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the type of Futures Contract
Option (put or call); (b) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option purchased; (c) the expiration date; (d) the exercise
price; (e) the dates of purchase and settlement; (f) the amount of premium to be
paid by the Fund upon such purchase; (g) the name of the broker or futures
commission merchant through whom such option was purchased; and (h) the name of
the broker, or futures commission merchant, to whom payment is to be made. The
Custodian shall pay out of the moneys held for the Fund the total amount to be
paid upon such purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.

2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) the type
of Future Contract Option (put or call); (b) the type of Futures Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (c) the date of sale; (d) the sale
price; (e) the date of settlement; (f) the total amount payable to the Fund upon
such sale; and (g) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.

3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the particular Futures Contract Option
(put or call) being exercised; (b) the type of Futures Contract underlying the
Futures Contract Option; (c) the date of exercise; (d)the name of the broker or
futures commission merchant through whom the Futures Contract Option is
exercised; (e) the net total amount, if any, payable by the

22
<PAGE> 17
Fund; (f) the amount, if any, to be received by the Fund; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the Senior
Security Account. The Custodian shall make, out of the moneys and Securities,
the payments, if any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement, if any.

4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the type of Futures Contract Option (put or call);
(b) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the name of the broker or futures commission merchant through whom the
premium is to be received; and (g) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in the Senior Security Account. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
the deposits into the Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement, if any.

5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the particular Futures Contract Option exercised;
(b) the type of Futures Contract underlying the Futures Contract Option; (c) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (d) the net total amount, if any, payable to the
Fund upon such exercise; (e) the net total amount, if any, payable by the Fund
upon such exercise; and (f) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any, specified
in such Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The deposits, if
any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement, if
any.

6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the particular Futures Contract Option exercised;
(b) the type of Futures Contract underlying such Futures Contract Option; (c)
the name of the broker or futures commission merchant through whom such Futures
Contract Option is exercised; (d) the net total amount, if any, payable to the
Fund upon such exercise; (e) the net total amount, if any, payable by the Fund
upon such exercise; and (f) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement, if any.

23
<PAGE> 18
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) that the transaction is a
closing transaction; (b) the type of Future Contract and such other information
as may be necessary to identify the Futures Contract underlying the Futures
Option Contract; (c) the exercise price; (d) the premium to be paid by the Fund;
(e) the expiration date; (f) the name of the broker or futures commission
merchant to whom the premium is to be paid; and (g) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Senior
Security Account. The Custodian shall effect the withdrawals from the Senior
Security Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement, if any.

8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement, if any.

9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.

10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a future commission
merchant upon receipt of a Certificate from the Fund specifying: (a) the name of
the future commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such future commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the future commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such future commission merchant.

ARTICLE VIII.

SHORT SALES

1. Promptly after any short sales by the Fund, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the name of the issuer
and the title of the Security;

24
<PAGE> 19
(b) the number of shares or principal amount sold, and accrued interest or
dividends, if any; (c) the dates of the sale and settlement; (d) the sale price
per unit; (e) the total amount credited to the Fund upon such sale, if any, (f)
the amount of cash and/or the amount and kind of Securities, if any, which are
to be deposited in a Margin Account and the name in which such Margin Account
has been or is to be established; (g) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in a Senior Security Account, and
(h) the name of the broker through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such broker confirming such sale and
that the total amount credited to the Fund upon such sale, if any, as specified
in the Certificate is held by such broker for the account of the Custodian (or
any nominee of the Custodian) as custodian of the Fund, issue a receipt or make
the deposits into the Margin Account and the Senior Security Account specified
in the Certificate.

2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the name of the issuer and the title of the Security; (b)
the number of shares or the principal amount, and accrued interest or dividends,
if any, required to effect such closing-out to be delivered to the broker; (c)
the dates of closing-out and settlement; (d) the purchase price per unit; (e)
the net total amount payable to the Fund upon such closing-out; (f) the net
total amount payable to the broker upon such closing-out; (g) the amount of cash
and the amount and kind of Securities to be withdrawn, if any, from the Margin
Account; (h) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Senior Security Account; and (i) the name of the
broker through whom the Fund is effecting such closing-out. The Custodian shall,
upon receipt of the net total amount payable to the Fund upon such closing-out,
and the return and/or cancellation of the receipts, if any, issued by the
Custodian with respect to the short sale being closed-out, pay out of the moneys
held for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.

ARTICLE IX.

REVERSE REPURCHASE AGREEMENTS

1. Promptly after the Fund enters into a Reverse Repurchase Agreement
with respect to Securities and moneys held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement; (b) the broker or dealer through or with
whom the Reverse Repurchase Agreement is entered; (c) the amount and kind of
Securities to be delivered by the Fund to such broker or dealer; (d) the date of
such Reverse Repurchase Agreement; and (e) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in a Senior Security Account in
connection with such Reverse Repurchase Agreement. The Custodian shall, upon
receipt of the total amount payable to the Fund specified in the Certificate or
Oral Instructions make the delivery to the

25
<PAGE> 20
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.

2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated; (b) the total amount payable
by the Fund in connection with such termination; (c) the amount and kind of
Securities to be received by the Fund in connection with such termination; (d)
the date of termination; (e) the name of the broker or dealer with or through
whom the Reverse Repurchase Agreement is to be terminated; and (f) the amount of
cash and/or the amount and kind of Securities to be withdrawn from the Senior
Securities Account. The Custodian shall, upon receipt of the amount and kind of
Securities to be received by the Fund specified in the Certificate or Oral
Instructions, make the payment to the broker or dealer, and the withdrawals, if
any, from the Senior Security Account, specified in such Certificate or Oral
Instructions.

ARTICLE X.

LOAN OF PORTFOLIO SECURITIES OF THE FUND

1. Promptly after each loan of portfolio Securities held by the
Custodian hereunder, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such loan: (a) the name
of the issuer and the title of the Securities, (b) the number of shares or the
principal amount loaned, (c) the date of loan and delivery, (d) the total amount
to be delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately identified,
and (e) the name of the broker, dealer, or financial institution to which the
loan was made. The Custodian shall deliver the Securities thus designated to the
broker, dealer or financial institution to which the loan was made upon receipt
of the total amount designated as to be delivered against the loan of
Securities. The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds and may deliver Securities in
accordance with the customs prevailing among dealers in securities.

2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the name of the issuer and the title of the Securities to be
returned, (b) the number of shares or the principal amount to be returned, (c)
the date of termination, (d) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (e) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt

26
<PAGE> 21
thereof shall pay, out of the moneys held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the Certificate.

ARTICLE XI.

CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS

1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the amount of cash
and/or the amount and kind of Securities to be deposited in, or withdrawn from,
such Senior Security Account. In the event that the Fund fails to specify in a
Certificate, the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities to be deposited by the Custodian
into, or withdrawn from, a Senior Securities Account, the Custodian shall be
under no obligation to make any such deposit or withdrawal and shall so notify
the Fund.

2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.

3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.

4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.

5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which moneys or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of moneys held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.

6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account, the Custodian
shall furnish the

27
<PAGE> 22
Fund with a statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held therein. No later
than the close of business next succeeding the delivery to the Fund of such
statement, the Fund shall furnish to the Custodian a Certificate specifying the
then market value of the Securities described in such statement. In the event
such then market value is indicated to be less than the Custodian's obligation
with respect to any outstanding Put Option guarantee letter or similar document,
the Fund shall promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate such
deficiency.

ARTICLE XII.

PAYMENT OF DIVIDENDS OR DISTRIBUTIONS

1. The Fund shall furnish to the Custodian either (a) a copy of the
resolution of the Board of Directors of the Fund, certified by the Secretary or
any Assistant Secretary, or (b) a Certificate, setting forth the date of the
declaration of a dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share to the shareholders of record as of that date and
the total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date.

2. Upon the payment date specified in such resolution or Certificate,
as the case may be, the Custodian shall pay out of the moneys held for the
account of the Fund the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund.

ARTICLE XIII.

SALE AND REDEMPTION OF SHARES

1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:

(a) the number of Shares sold, trade date, and price; and

(b) the amount of moneys to be received by the Custodian for
the sale of such Shares.

2. Upon receipt of such moneys from the Transfer Agent, the Custodian
shall credit such moneys to the account of the Fund.

3. Upon issuance of any Shares described in the foregoing provisions of
this Article, the Custodian shall pay, out of the moneys held for the account of
the Fund, all

28
<PAGE> 23
original issue or other taxes required to be paid by the Fund in connection with
such issuance upon the receipt of a Certificate specifying the amount to be
paid.

4. Whenever the Fund desires the Custodian to make payment out of the
moneys held by the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian:

(a) a resolution by the Board of Directors of the Fund
directing the Transfer Agent to redeem the Shares; and

(b) a Certificate specifying the number of Shares redeemed;
and

5. Upon receipt from the Transfer Agent of an advice setting forth the
number of Shares received by the Transfer Agent for redemption and that such
Shares are in good form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in for the account of the Fund the total
amount specified in the Certificate issued pursuant to the foregoing paragraph 4
of this Article.

ARTICLE XIV.

OVERDRAFTS OR INDEBTEDNESS

1. If the Custodian, should in its sole discretion advance funds on
behalf of the Fund which results in an overdraft because the moneys held by the
Custodian for the Fund shall be insufficient to pay the total amount payable
upon a purchase of Securities, as set forth in a Certificate or Oral
Instructions, or which results in an overdraft for some other reason, or if the
Fund is for any other reason indebted to the Custodian including any
indebtedness to The Bank of New York under the Fund's Cash Management and
Related Services Agreement, (except a borrowing for investment or for temporary
or emergency purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a loan made by the Custodian to
the Fund payable on demand and shall bear interest from the date incurred at a
rate per annum (based on a 360-day year for the actual number of days involved)
equal to 1/2% over Custodian's prime commercial lending rate in effect from time
to time, such rate to be adjusted on the effective date of any change in such
prime commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Custodian shall have a continuing lien
and security interest in and to any property at any time held by it for the
benefit of the Fund or in which the Fund may have an interest which is then in
the Custodian's possession or control or in possession or control of any third
party acting in the Custodian's behalf, provided, however that such lien shall
be enforceable only to the extent permitted by law, including the Investment
Company Act of 1940, as amended. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account

29
<PAGE> 24
standing to the Fund's credit on the Custodian's books. In addition, the Fund
hereby covenants that on each Business Day on which either it intends to enter a
Reverse Repurchase Agreement and/or otherwise borrow from a third party, or
which next succeeds a Business Day on which at the close of business the Fund
had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall
prior to 9 a.m., New York City time, advise the Custodian, in writing, of each
such borrowing, and shall not incur any indebtedness not so specified other than
from the Custodian.

2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows moneys for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the name of the bank, (b) the amount and terms of the borrowing, which may be
set forth by incorporating by reference an attached promissory note, duly
endorsed by the Fund, or other loan agreement,(c) the time and date, if known,
on which the loan is to be entered into, (d) the date on which the loan becomes
due and payable, (e) the total amount payable to the Fund on the borrowing date,
(f) the market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (g) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such collateral shall
be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the name of the issuer, the title and number of shares or the
principal amount of any particular Securities to be delivered as collateral by
the Custodian, the Custodian shall not be under any obligation to deliver any
Securities.

ARTICLE XV.

INSTRUCTIONS

1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to

30
<PAGE> 25
such Fund a personal, nontransferable and nonexclusive license to use the
Software solely for the purpose of transmitting Instructions to, and receiving
communications from, the Custodian in connection with its account(s). The Fund
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian.

2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.

3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties.

4. The Custodian reserves the right to modify the Software from time to
time upon reasonable prior notice and the Fund shall install new releases of the
Software as the Custodian may direct. The Fund agrees not to modify or attempt
to modify the Software without the Custodian's prior written consent. The Fund
acknowledges that any modifications to the Software, whether by the Fund or the
Custodian and whether with or without the Custodian's consent, shall become the
property of the Custodian.

5. THE CUSTODIAN MAKES NO WARRANTIES OR REPRESENTATIONS OF ANY KIND
WITH REGARD TO THE SOFTWARE OR THE METHOD(S) BY WHICH THE FUND MAY TRANSMIT
INSTRUCTIONS TO THE CUSTODIAN, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
ANY IMPLIED WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

6. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.

7. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly

31
<PAGE> 26
authorized by the Fund transmit such Instructions to the Custodian. The Fund
will cause all persons transmitting Instructions to the Custodian to treat
applicable user and authorization codes, passwords and authentication keys with
extreme care, and irrevocably authorizes the Custodian to act in accordance with
and rely upon Instructions received by it pursuant hereto.

(b) The Fund hereby represents, acknowledges and agrees that
it is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Custodian and that there may be more
secure methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.

8. The Fund hereby presents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Directors, and that its transmission of Instructions pursuant hereto shall at
all times comply with the Investment Company Act of 1940, as amended.

9. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.

ARTICLE XVI.

DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
HELD OUTSIDE OF THE UNITED STATES

1. The Custodian is authorized and instructed to employ, as
sub-custodian for Foreign Securities (as such term is defined in paragraph
(c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as amended) and
other assets, the foreign banking institutions and foreign securities
depositories and clearing agencies designated on Schedule I hereto ("Foreign
Sub-Custodians") to carry out their respective responsibilities in accordance
with the terms of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been previously delivered to
the Fund and receipt of which is hereby acknowledged (each such agreement, a
"Foreign Sub- Custodian Agreement"). Upon receipt of a Certificate, together
with a certified resolution substantially in the form attached as Exhibit E of
the Fund's Board of Directors, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an

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<PAGE> 27
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub- Custodian shall be deemed deleted from
Schedule I.

2. Each Foreign Sub-Custodian Agreement shall be substantially in the
form previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.

3. The Custodian shall identify on its books as belonging to the Fund
the Foreign Securities of the Fund held by each Foreign Sub-Custodian. At the
election of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims by the Fund against a Foreign Sub-Custodian
as a consequence of any loss, damage, cost, expense, liability or claim
sustained or incurred by the Fund if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or claim.

4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.

5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets held by
Foreign Sub- Custodians, including but not limited to, an identification of
entities having possession of Foreign Securities and other assets, and advices
or notifications of any transfers of Foreign Securities to or from each
custodial account maintained by a Foreign Sub-Custodian for the Custodian.

6. The Custodian shall furnish annually to the Fund, as mutually agreed
upon, information concerning the Foreign Sub-Custodians employed by the
Custodian. Such information shall be similar in kind and scope to that furnished
to the Fund in connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information pertaining to (i)
the Foreign Custodians' financial strength, general reputation and standing in
the countries in which they are located and their ability to provide the
custodial services required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of securities not
materially different from those prevailing in the United States. The Custodian
shall monitor the general operating performance of each Foreign Sub-Custodian.
The Custodian agrees that it will use reasonable care in monitoring compliance
by each Foreign Sub-Custodian with the terms of the relevant Foreign
Sub-Custodian Agreement and that if it learns of any breach of such Foreign
Sub-Custodian Agreement believed by the Custodian to have a material adverse
effect on the Fund it will promptly notify the Fund of such breach. The
Custodian also agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.

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<PAGE> 28
7. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.

8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of the Fund and
delivery of securities maintained for the account of the Fund may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.

9. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-Custodian. It is
expressly understood and agreed that the Custodian's sole responsibility and
liability shall be limited to amounts so recovered from the Foreign
Sub-Custodian.

ARTICLE XVII.

FX TRANSACTIONS

1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the type and amount of Currency to be
purchased by the Fund; (b) the type and amount of Currency to be sold by the
Fund; (c) the date on which the Currency to be purchased is to be delivered; (d)
the date on which the Currency to be sold is to be delivered; and (e) the name
of the person from whom or through whom such currencies are to be purchased and
sold. Unless otherwise instructed by a Certificate or Oral Instructions, the
Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to deliver,
the Currency to be sold on the date on which such delivery is to be made, as set
forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian
to receive, the Currency to be purchased on the date as set forth in the
Certificate.

2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such

34
<PAGE> 29
receipts and deliveries, which responsibility and liability shall continue until
the Currency to be received by the Fund has been received in full.

3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.

ARTICLE XVIII.

CONCERNING THE CUSTODIAN

1. Except as hereinafter provided, or as provided in Article XVI,
neither the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any third party for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion of counsel
to the Fund , at the expense of the Fund, or of its own counsel, at its own
expense (unless the Fund otherwise agrees) and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with such
advice or opinion. The Custodian shall be liable to the Fund for any loss or dam
age resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence or willful misconduct on the part of the Custodian or
any of its employees or agents.

2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:

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<PAGE> 30
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;

(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;

(d) The legality of any borrowing by the Fund using Securities
as collateral;

(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or

(f) The sufficiency or value of any amounts of moneys and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.

3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such moneys directly or by
the final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.

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<PAGE> 31
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.

5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.

6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.

7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub- Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.

8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund are such as properly may
be held by the Fund under the provisions of its then current prospectus, or (b)
to ascertain whether any transactions by the Fund, whether or not involving the
Custodian, are such transactions as may properly be engaged in by the Fund.

9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses incurred by the Custodian in the
performance of its duties

37
<PAGE> 32
pursuant to such agreement against any moneys. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall include, but are
not limited to, the expenses of sub-custodians and foreign branches of the
Custodian incurred in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.

10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Officer.

11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.

12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.

13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book- Entry
System, the

38
<PAGE> 33
Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.

14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct, provided that the Fund's obligation to indemnify shall be
enforceable only to the extent permitted by law, including the Investment
Company Act of 1940, as amended.

15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.

16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.

ARTICLE XIX.

TERMINATION

1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian

39
<PAGE> 34
shall upon receipt of a notice of acceptance by the successor custodian on that
date deliver directly to the successor custodian all Securities and moneys then
owned by the Fund and held by it as Custodian, after deducting all fees,
expenses and other amounts for the payment or reimbursement of which it shall
then be entitled.

2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.

ARTICLE XX.

MISCELLANEOUS

1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event that any such
present Officer ceases to be an Officer of the Fund, or in the event that other
or additional Officers are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement or Oral Instructions upon the signatures of the
Officers as set forth in the last delivered Certificate.

2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.

3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.

4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.

5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall

40
<PAGE> 35
not be assignable by the Fund without the written consent of the Custodian, or
by the Custodian without the written consent of the Fund, authorized or approved
by a resolution of the Fund's Board of Directors.

6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.

7. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.

THE ZWEIG TOTAL RETURN
FUND, INC.

[SEAL] By: /s/Jeffrey Lazar
-----------------
Vice President

Attest:

/s/ Stuart B. Panish
- --------------------
Secretary

THE BANK OF NEW YORK

[SEAL] By: /s/ Jorge E. Ramos
--------------
Name: Jorge E. Ramos

Attest:

/s/ Michael A. Cicero
- ----------------------

<PAGE> 1
EXHIBIT (k)(1)

1
<PAGE> 2
THE ZWEIG TOTAL RETURN FUND, INC.
ADMINISTRATION AGREEMENT

ADMINISTRATION AGREEMENT, dated as of the 1st day of August, 1995
between THE ZWEIG TOTAL RETURN FUND, INC., a Maryland corporation (the "Fund"),
and ZWEIG/GLASER ADVISERS, a New York general partnership (the "Administrator").

W I T N E S S E T H

WHEREAS, the Fund is a closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Fund has been organized for the purpose of investing its
assets, and has retained an investment adviser for this purpose, and also
desires to avail itself of the facilities available to the Administrator with
respect to the administration of the Fund's day to day corporate affairs, and
the Administrator is willing to furnish such administrative services to or for
the benefit of the Fund on the terms and conditions hereinafter set forth;

NOW, THEREFORE, the parties hereby agree as follows:

1. The Fund appoints the Administrator to administer its corporate
affairs, subject to the overall supervision of the Board of Directors of the
Fund, for the period and on the terms set forth in this Agreement. The
Administrator accepts such appointment and agrees during such period to render
the services herein described and to assume the obligations set forth herein,
for the compensation herein provided.

2. (a) Subject to the supervision of the Board of Directors of the
Fund, the Administrator shall provide office facilities and personnel adequate
to perform the following services at such office facilities for the Fund:

2
<PAGE> 3
(i) determine the net asset value per share of the Fund's
Common Stock ($.001 par value) (the "Shares") as of the close of
trading on the New York Stock Exchange on each day the exchange is open
for trading, and make such net asset value available for purposes of
publication in accordance with the Fund's policy, as adopted from time
to time by the Fund's Board of Directors;

(ii) maintain the books and records of the Fund required under
Rule 31a-1(b)(2) under the 1940 Act;

(iii) assist in preparing and providing to the Fund's
accountants information necessary for such accountants to prepare and
file the Fund's U.S. federal, state and local income tax returns;

(iv) assist in preparing the financial information for the
Fund's proxy statements and quarterly and annual reports to
shareholders;

(v) assist in preparing and providing to the Fund and its
counsel information necessary for the preparation of the Fund's reports
to the Securities and Exchange Commission;

(vi) respond to or refer to the Fund's officers or transfer
agent shareholder inquiries relating to the Fund; and

(vii) authorize and permit any of the Administrator's
directors, officers and employees who may be elected as directors or
officers of the Fund to serve in the capacities in which they are
elected.

The performance of services described in clauses (i), (ii), (iii), (iv) and (v)
is subject to the Fund's investment adviser furnishing, on behalf of the Fund,
the Administrator with information on a daily basis with respect to the Fund's
portfolio transactions and such other information as the Administrator may
reasonably request. All services to be furnished by the Administrator under this
Agreement may be furnished through any medium selected by the Administrator.

(b) In connection with services rendered by the Administrator under
this Agreement, the Administrator will bear all of the following expenses:

(i) the salaries and expenses of all personnel of the
Administrator, and

3
<PAGE> 4
(ii) all of the Administrator's own office expenses incurred
by the Administrator in connection with the services to be provided to
the Fund and set forth in paragraph 2(a) hereof.

The Fund assumes and will pay all expenses other than those
assumed by the Administrator pursuant to this Agreement, including but
not limited to the expenses described below:

(a) the fees and expenses of the Fund's investment adviser or
expenses otherwise incurred by the Fund in connection with the
management of the Fund's assets;

(b) the fees and expenses of Fund directors who are not
affiliated persons of the Administrator or the Fund's investment
adviser (including out-of-pocket expenses received for attendance of
board of directors' meetings);

(c) the fees and expenses of the Fund's custodian arising
under the custody agreement or any other agreement between the Fund and
its custodian;

(d) the fees and expenses of the Fund's transfer and dividend
disbursing agent and registrar (which may be the custodian) arising
under the transfer agency agreement or any other agreement with the
Fund;

(e) the charges and expenses of legal counsel and independent
accountants for the Fund;

(f) brokers' commissions and any issue or transfer taxes
chargeable to the Fund in connection with its securities transactions;

(g) all taxes and corporate fees payable by the Fund to
federal, state or other governmental agencies;

(h) the fees of any trade association of which the Fund may be
a member;

(i) the cost of stock certificates representing, and
non-negotiable share deposit receipts evidencing, the Fund's Shares;

(j) all of the fees and expenses involved in registering and
maintaining registrations of the Fund and of its Shares with the
Securities and Exchange Commission, and to the extent applicable under
state securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for filing under
federal and state securities laws for such purposes;

4
<PAGE> 5
(k) the fees and expenses involved in obtaining and
maintaining any stock exchange listings of the Fund's Shares;

(l) allocable communications expenses with respect to investor
services (including, without limitation, telephone, stationery and
postage) and all expenses of stockholders' and directors' meetings and
of preparing, printing and mailing reports to stockholders in the
amount necessary for distribution to the Fund's stockholders; and

(m) insurance premiums and litigation, indemnification and
other expenses not expressly provided for herein or in the Fund's
investment advisory agreement.

3. As full compensation for the services performed and the facilities
furnished by the Administrator, the Fund shall pay the Administrator a fee at
the annual rate of .13 of 1% of the average daily net assets of the Fund during
the previous month. This fee will be computed daily and paid monthly.

If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's investment advisory agreement,
but excluding interest, taxes, brokerage and, with the prior written consent of
the necessary state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the Fund, the Fund may
deduct from the fees to be paid hereunder, or the Administrator will bear, to
the extent required by state law, that portion of such excess which bears the
same relation to the total of such excess as the Administrator's fee hereunder
bears to the total fees otherwise payable for the fiscal year by the Fund,
pursuant to this Agreement and the investment advisory agreement between the
Fund and its investment adviser. The Administrator's reimbursement obligation
under this paragraph 3 is limited by the amount of fees received by it under
this Agreement. Such deduction or payment, if any, will be estimated weekly, and
reconciled and effected or paid, as the case may be, on a monthly basis.

4. The Administrator assumes no responsibility under this Agreement
other than to render the services called for hereunder, and specifically assumes
no responsibilities for investment advice or the investment or reinvestment of
the Fund's assets, or any other responsibilities not specifically assumed
herein.

5
<PAGE> 6
5. The Administrator shall not be liable for any error of judgment or
for any loss suffered by the Fund in connection with any matter to which this
Agreement relates, except a loss resulting from its own willful misfeasance, bad
faith or gross negligence in the performance of its duties or from its reckless
disregard of its obligations and duties under this Agreement.

6. The Administrator and the Fund each hereby represent and warrant,
but only as to themselves, that each has all requisite authority to enter into,
execute, deliver and perform its obligations under, this Agreement, and that
this Agreement is legal, valid and binding, and enforceable in accordance with
its terms.

7. The Fund hereby covenants and agrees that it will:

(a) promptly advise the Administrator of all portfolio
transactions made for the Fund on a daily basis;

(b) provide the Administrator with any information it requires
to furnish services pursuant to this Agreement, in a timely fashion,
and will provide any other information, in a timely fashion, as the
Administrator may reasonably request; and

(c) immediately notify the Administrator in the event of any
material change in the condition, operation or activities of the Fund.

8. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Administrator who may also be a director,
officer or employee of the Fund to engage in any other business or to devote his
time and attention in part to the management or other aspects of any business,
whether of a similar or a dissimilar nature, nor limit or restrict the right of
the Administrator to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.

9. This Agreement shall continue in effect for a period of two years
from the date hereof and thereafter shall continue in effect only so long as
such continuance is specifically approved at least annually by the Board of
Directors (including a majority of the directors who are not

6
<PAGE> 7
"interested persons" (as defined in the 1940 Act)) of the Fund or the
Administrator; provided, however, that this Agreement may be terminated by the
Fund at any time, without the payment of any penalty, by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities (as
such term is defined in the 1940 Act) of the Fund and may be terminated by the
Administrator at any time, without the payment of any penalty, in either case on
not more than 90 days' nor less than 60 days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment (as
such term is defined in the 1940 Act).

10. During the term of this Agreement, the Fund shall furnish the
Administrator, at its office at 5 Hanover Square, New York, New York, 10004, or
such other place as the Administrator may designate in writing, with all
prospectuses, proxy statements, reports to stockholders, sales literature, or
other material prepared for distribution to stockholders of the Fund or the
public, that refer in any way to the Administrator, prior to the public
dissemination or use thereof, and shall not use such material if the
Administrator reasonably objects in writing within five business days after the
receipt thereof or at such other time as may be mutually agreed upon. In the
event of termination of this Agreement, the Fund will continue to furnish to the
Administrator copies of any of the above-mentioned materials which refer in any
way to the Administrator. The Fund shall furnish or otherwise make available to
the Administrator such other information relating to the business affairs of the
Fund as the Administrator at any time, and from time to time, reasonably
requests in order to discharge its obligations hereunder.

11. This Agreement may be amended or modified, but only by mutual
written consent.

12. It is understood that the Administrator is an independent
contractor and not an employee or agent of the Fund and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.

13. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by certified or
registered mail, postage

7
<PAGE> 8
prepaid, (a) to the Administrator at 5 Hanover Square, New York, New York 10004,
Attention: Fund Services; or (b) to the Fund at 900 Third Avenue, New York, New
York 10022, Attention: President with a copy to Robert E. Smith, Esq. of
Rosenman & Colin, 575 Madison Avenue, New York, New York 10022.

14. This Agreement contains the entire agreement between the parties
hereto and supersedes all prior agreements, understandings and arrangement with
respect to the subject matter hereof.

15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.

THE ZWEIG TOTAL RETURN FUND, INC.

By: /s/ Martin E. Zweig
-------------------------------------
President

ZWEIG/GLASER ADVISERS

By: Zweig Management Corp., a partner

By: /s/ Martin E. Zweig
-------------------------------------
President

By: Glaser Corp., a partner

By: /s/ Rosalind Glaser
-------------------------------------
President

<PAGE> 1
EXHIBIT (k)(2)
<PAGE> 2
STATE STREET BANK & TRUST COMPANY

STOCK TRANSFER AGENT SERVICES AGREEMENT FOR:

THE ZWEIG TOTAL RETURN FUND, INC.

This Agreement sets forth the terms and conditions under which State Street Bank
& Trust Company (hereinafter referred to as "State Street") will serve as sole
Transfer Agent, Registrar, Dividend Disbursement and Dividend Reinvestment Agent
for the Common Stock of The Zweig Total Return Fund, Inc. closed end mutual fund
(hereinafter referred to as "Zweig").

A. TERM

The term of this Agreement shall be for a period of three (3) years,
commencing from the effective date of this Agreement, September 1,
1997.

B. FEE FOR STANDARD SERVICES

For the standard services as stated in Section C provided by State
Street under this Agreement, Zweig will be charged as follows:

$12,550 MONTHLY ADMINISTRATIVE FEE

ESCALATION: This Agreement shall be self renewing, and providing that
service mix and volumes remain constant, the final year's fees listed
under the Fee for Standard Services section shall be increased by the
accumulated change in the National Employment Cost Index for Service
Producing Industries (Finance, Insurance, Real Estate) for the
preceding years of the contract, as published by the Bureau of Labor
Statistics of the United States Department of Labor. Fees will be
increased on this basis on each successive contract anniversary
thereafter.

OPEN ACCOUNTS: the terms of this Agreement will cover up to 14,000 Open
Accounts per annum. Excess to be billed at $5.00 per Open Account.

C. STANDARD SERVICES

State Street agrees to provide the following services to Zweig in
accordance with the standard fee set forth in Section B.

ACCOUNT MAINTENANCE:

1. Annual services as Transfer Agent, Registrar, Dividend
Disbursement and Dividend Reinvestment Agent.

2. Maintaining shareholder accounts, including the processing of
new accounts, preparation and mailing W-9 certifications to
new accounts and closing accounts.

3. Posting and acknowledging address changes, tax ID number
changes and W-9 certification, and all other routine file
maintenance adjustments.

2
<PAGE> 3
4. On-line remote access to shareholder and Fund database.

5. Posting all transactions, including routine and non-routine
debit and credit certificates. To include all book or unissued
shareholder transfer activity.

6. Issuance and registration of stock certificates annually. *

7. Researching and responding to all written shareholder and
broker inquiries and phone inquiries.

8. Daily Transfer Activity Journals reflecting ownership changes
to be mailed to Zweig at the close of each week if required

9. Processing all New York Window items, mail items and legal
transfers.

10. Processing Indemnity Bonds, placing certificate stop transfer
orders and replacing lost certificates.

11. Coding multiple accounts at a single household to suppress
duplicate report mailings.

12. Maintaining closed accounts.

MAILING & REPORT PRODUCTION SERVICES:

1. Addressing and mailing four (4) registered shareholder reports
or letters via First Class Mail per annum.

2. Preparing two (2) full or partial shareholder reports
(including Statistical Reports) per annum.

3. Preparing twelve (12) sets of shareholder labels per annum.

4. Abandoned Property Reports provided at $1,000 per report and
$3.00 per respondent.

ANNUAL MEETING SERVICES:

1. Preparing one (1) full stockholder list as of the Annual
Meeting record date.

2. Addressing proxy cards for registered shareholders.

3. Enclosing and mailing proxy cards with proxy statement, annual
report and postage paid return envelope to all registered
shareholders.

4. Preparing one (1) set of registered broker labels and one (1)
list of registered brokers for the Broker Search.

5. Receiving, opening and examining returned proxies.

6. Writing in connection with unsigned or improperly executed
proxies.

3
<PAGE> 4
7. Tabulating returned proxies to include an unlimited number of
proposals.

8. Providing summary reports on the Proxy Vote Tabulation status
as requested.

9. Interface with Solicitor appointed by Zweig.

10. Preparing one (1) final Annual Meeting list reflecting how
each account has voted on each proposal.

11. Attending the Annual Meeting as Inspector of Election.

12. Respondent Bank Services to include:

- Processing each respondent bank omnibus proxy received.
- Mailing respondent bank search cards.

NOTE: all out-of-pocket expenses including overprinting proxy cards, card stock,
envelopes, postage and telecopy charges will be billed as incurred.

DIVIDEND DISBURSEMENT SERVICES:

As Dividend Disbursing and Paying Agent, State Street will perform the
dividend related services listed, pursuant to the following terms and
conditions:

* All funds must be received by 1:00 p.m. Eastern Time on Payable Date
or Mail Date via Federal Funds Wire or State Street Bank Demand Deposit
account debit.

1. Preparing and mailing monthly dividend checks with an
additional enclosure.

2. Providing Automated Clearinghouse Funds (ACH) services.

3. Replacing lost dividend checks.

4. Providing photo copies of cashed dividend checks if requested.

5. Processing and record keeping of accumulated uncashed
dividends.

6. Reconciling paid and outstanding dividend checks.

7. Coding RPO/SAUK accounts to suppress mailing dividend checks
to undeliverable addresses.

8. Effecting wire transfer of funds to Depository Trust Company
on payable date.

9. Preparing and filing Federal Information Returns (Form
1099-DIV) of dividends paid during the year and mailing Forms
1099-DIV to each shareholder.

10. Preparing and filing State Information Returns of dividends
paid during the year to shareholders resident within such
State in accordance with current State Filing regulations.

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<PAGE> 5
11. Preparing and filing annual withholding return (Form 1042) and
payments to the government of income taxes withheld from
Non-resident Aliens and mailing Forms 1042 to each foreign
shareholder.

12. Performing the following duties as required by the Interest
and Dividend Tax Compliance Act of 1983:

* Withholding tax from shareholder accounts not in compliance
with the provisions of the Act.

* Reconciling and reporting taxes withheld, including
additional 1099 reporting requirements, to the Internal
Revenue Service.

* Responding to shareholders regarding the regulations.

* Mailing to new accounts which have had taxes withheld, to
inform them of procedures to be followed to cease future
back-up withholding.

* Annual mailing to pre-1984 accounts for which Tax
Identification Numbers (TIN) have not yet been certified.

* Performing shareholder file adjustments to reflect TIN
certifications.

NOTE: Depository Wire charges required to fund dividend payments will be billed
to Zweig as an expense.

DIVIDEND REINVESTMENT SERVICES:

1. As Administrator for the Open Market and/or Original Issue
Dividend Reinvestment Plans ("DRP"), State Street will perform
the listed DRP related services:

2. Reinvestment and/or optional cash investment transactions of
DRP participants. *

3. Processing DTC monthly reinvestments at $250 per investment.

4. Preparing and mailing a year-to-date dividend reinvestment
statement with an additional enclosure to DRP participants
upon completion of each monthly reinvestment.

5. Preparing and mailing a year-to-date optional cash investment
statement to participants upon the completion of each
investment.

6. Maintaining DRP accounts and establishing new DRP accounts.

7. Processing sale/termination requests. *

8. Processing withdrawal requests.

9. Providing Zweig with a Dividend Reinvestment Investment
Summary Report for each reinvestment and/or optional cash
investment.
<PAGE> 6
10. Providing Safekeeping for DRP participant stock certificates.

11. Researching and responding to shareholder inquiries regarding
the Plan.

12. Preparing and mailing Forms 1099 and Forms 1042 to DRP
participants and completing related filings with the IRS.

13. Preparing, mailing and filing Form 1099B relating to DRP
sales.

D. LIMITATIONS

The fees as stated in Section B include:

* The issuance and registration of 4,000 stock certificates
per annum. Excess to be billed at $1.50 per stock certificate.

* A total of 142,000 DRP transactions (defined as a dividend
reinvestment and/or cash investment), per annum. Excess to be
billed at $1.25 each.

* A total of 3,500 DRP redemptions (sales or withdrawals) per
annum. Excess to be billed at $5.00 each.

E. SERVICES NOT COVERED

Items not included in the fees set forth in this Agreement for
"Standard Services" Section B such as payment of stock dividends or
splits or any other services associated with a special project will be
billed separately on an appraisal basis.

Services required by legislation or regulatory fiat which become
effective after the date of this Agreement shall not be a part of the
Standard Services and shall be billed by appraisal.

All out-of-pocket expenses such as telephone line charges associated
with toll free telephone calls, overprinting, insurance, stationary,
envelopes, telecopy charges, excess material storage and disposal will
be billed to Zweig as incurred.

F. OTHER TERMS & CONDITIONS

GOOD FUNDS TO COVER POSTAGE EXPENSES IN RELATION TO THE MAILING OF
ANNUAL MEETING MATERIALS BY STATE STREET BY 1:00 P.M. EASTERN TIME ON
THE SCHEDULED MAILING DATE.

Overtime charges will be assessed in the event material is delivered
late for shareholder mailings unless the mail date is rescheduled to a
later date. Such material includes, but is not limited to: proxy
statements, annual, semi and quarterly reports, dividend enclosures and
news releases. RECEIPT OF MATERIAL FOR MAILING TO SHAREHOLDERS MUST BE
RECEIVED THREE (3) FULL BUSINESS DAYS IN ADVANCE OF THE SCHEDULED MAIL
DATE.

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<PAGE> 7
G. BILLING DEFINITION OF ACCOUNT MAINTENANCE

For billing purposes, number of accounts will be based on open accounts
on file at the beginning of each billing period, plus any new accounts
added during the billing period.

H. TERMINATION

This Agreement may be terminated by either party upon sixty (60) days
written notice to the other. However, State Street may terminate this
Agreement upon written notice to Zweig if Zweig has breached its
obligation as described in Section I set forth below by failing to make
payment of invoices for a period of three (3) consecutive months and
Zweig has failed to cure such breach within five (5) business days of
receipt of such notice.

Should Zweig or State Street exercise its right to terminate this
Agreement, all out-of-pocket expenses associated with the transfer of
records and material will be borne by Zweig. Out-of-pocket expenses may
if required, include costs associated with any year-end Federal and/or
State tax reporting responsibilities.

I. PAYMENT FOR SERVICES

It is agreed that invoices will be rendered and payable on a monthly
basis. Each billing period will, therefore, be for a one (1) month
duration. Zweig agrees to pay all fees and reimbursable expenses within
thirty (30) days following the receipt of the respective billing
invoice. Interest charges may begin to accrue on unpaid balances for
more than forty-five (45) days.

J. NON-ASSIGNABILITY

This Agreement, and duties, obligations and services to be provided
herein, may not be assigned or otherwise transferred without prior
written consent of Zweig.

K. CONFIDENTIALITY

The information contained in this Agreement is confidential and
proprietary in nature. By receiving this Agreement, both parties agree
that none of its directors, officers, employees, or agents without the
prior written consent of the other party will divulge, furnish or make
accessible to any third party, except as permitted by the next
sentence, any part of this Agreement or information in connection
therewith which has been or may be made available to it. In this
regard, both parties agree that they will limit their access to the
Agreement and such information to only those officers and employees
with responsibilities for analyzing the Agreement and to such
independent consultants hired expressly for the purpose of assisting in
such analysis. In addition, both parties agree that any persons to whom
such information is properly disclosed shall be informed on the
confidential nature of the Agreement and the information relating
thereto, and shall be directed to treat the same appropriately.

7
<PAGE> 8
L. CONTRACT ACCEPTANCE

In witness whereof, the parties hereto have caused this Agreement to be
executed by their respective officers, hereunto duly agreed and
authorized, as of the effective date of this Agreement.

STATE STREET BANK THE ZWEIG TOTAL RETURN
& TRUST COMPANY FUND, INC.

By: /s/ David M. Elwood By: /s/ Jeffrey Lazar
-------------------------- -----------------------

Title : Vice President Title : Vice President
-------------------------- -----------------------

Date: June 19, 1997 Date : June 10, 1997
-------------------------- -----------------------

<PAGE> 1
EXHIBIT (r)

1
<PAGE> 2
[ARTICLE] 6
[CIK] 0000836412
[NAME] THE ZWEIG TOTAL RETURN FUND, INC.
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 620,475
[INVESTMENTS-AT-VALUE] 670,416
[RECEIVABLES] 7,349
[ASSETS-OTHER] 866
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 678,631
[PAYABLE-FOR-SECURITIES] 831
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 667
[TOTAL-LIABILITIES] 1,498
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 626,959
[SHARES-COMMON-STOCK] 78,622
[SHARES-COMMON-PRIOR] 77,032
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (65)
[ACCUM-APPREC-OR-DEPREC] 50,239
[NET-ASSETS] 677,133
[DIVIDEND-INCOME] 6,228
[INTEREST-INCOME] 28,630
[OTHER-INCOME] 0
[EXPENSES-NET] 6,762
[NET-INVESTMENT-INCOME] 28,096
[REALIZED-GAINS-CURRENT] 37,205
[APPREC-INCREASE-CURRENT] 24,851
[NET-CHANGE-FROM-OPS] 90,152
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 28,076
[DISTRIBUTIONS-OF-GAINS] 37,205
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 1,590
[NET-CHANGE-IN-ASSETS] 38,365
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,572
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,762
[AVERAGE-NET-ASSETS] 653,089
[PER-SHARE-NAV-BEGIN] 8.29
[PER-SHARE-NII] .36
[PER-SHARE-GAIN-APPREC] .80
[PER-SHARE-DIVIDEND] .36
[PER-SHARE-DISTRIBUTIONS] .48
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.61
[EXPENSE-RATIO] 1.04
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
EXHIBIT (s)

1
<PAGE> 2
POWER OF ATTORNEY

The undersigned director of The Zweig Total Return Fund, Inc. (the
"Fund") hereby constitutes and appoints Jeffrey Lazar his true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file any of the
documents referred to below relating to the Registration Statement on Form N-2
relating to the Common Stock of the Fund, as required to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, including any amendments thereto, with
all exhibits and any and all documents required to be filed with respect thereto
with any regulatory authority, granting unto said attorney-in-fact and agent
full authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he might or could do if personally
present, hereby ratifying and confirming all that said attorney-in-fact and
agent, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.