ZWEIG TOTAL RETURN FUND INC, N-2/A, 1998-04-14

ZWEIG TOTAL RETURN FUND INC
N-2/A, 1998-04-14

Previous: NOVELLUS SYSTEMS INC, DEF 14A, 1998-04-14

Next: PUTNAM DIVERSIFIED INCOME TRUST, 497, 1998-04-14

<PAGE> 1
Investment Company Act File No. 811-5620
Securities Act File No. 333-47371

As filed with the Securities and Exchange Commission on April 14, 1998

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-2

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

and/or

[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[x] Amendment No. 9

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 Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Aggregate Offering Registration Fee
Share (1) Price (2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.001 14,111,875
per share Shares $8.8765 $125,264,940 $36,953
</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 April 13, 1998.

(2) Previously paid.

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

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)

Item Number, Form N-2 Location in Prospectus

Part A
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

3
<PAGE> 4
Item Number, Form N-2 Location in Prospectus

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 Objective
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

4
<PAGE> 5

PROSPECTUS

11,289,500 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 April 15, 1998 (the "Record Date") non-transferable rights (the "Rights").
These rights entitle their holders to subscribe for up to an aggregate of
11,289,500 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
2,822,375 shares of Common Stock, for an aggregate total of 14,111,875 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 Exchange (the "PCX") 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 MAY 8, 1998 (THE "PRICING DATE") AND THE FOUR PRECEDING BUSINESS
DAYS.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MAY 8, 1998
UNLESS EXTENDED AS DESCRIBED HEREIN (THE "EXPIRATION DATE").

The Fund announced the Offer after the close of trading on the NYSE on
March 5, 1998. The Fund's Common Stock trades on the NYSE and PCX 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 PCX,
subject to notice of issuance. The net asset value per share of the Fund's
Common Stock at the close of business on March 5, 1998 and April 13, 1998 were
$8.64 and $8.75, respectively, and the last reported sales price of a share of
the Fund's Common Stock on the NYSE on those dates were $9.4375 and $9.3125,
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......................... $8.85 $.33 $8.52
- -------------------------------------------------------------------------------------------------------------
Total Maximum(5).................. $99,912,075 $3,725,535 $96,186,540
=============================================================================================================
</TABLE>

(Footnotes on the following page)
------------------------

MERRILL LYNCH & CO.
------------------------

The date of this Prospectus is April 14, 1998.

<PAGE> 6

(Continued from cover)

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 April 14, 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 April 13, 1998.

(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. See "Distribution Arrangements." These fees
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 $720,000, including $82,500 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 11,289,500 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 $124,890,094, $4,656,919 and $120,233,175,
respectively. The Sales Load and other offering expenses will be charged
against paid-in capital of the Fund.

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 Exchange ("PCX"). The average weekly trading volume
of the Common Stock on the NYSE during the year ended December 31, 1997 was
673,446 shares. As of April 13, 1998, the net assets of the Fund were
approximately $691,600,000.

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 April 15, 1998 (the "Record Date")
non-transferable rights (the "Rights") to subscribe for up to an aggregate of
11,289,500 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 2,822,375 shares of Common Stock, for
an aggregate total of 14,111,875 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 exercise of Rights. If a
Record Date Shareholder's total ownership is fewer than seven shares, such
Record Date Shareholder may subscribe for one Share.

Rights may be exercised at any time during the Subscription Period, which
commences on April 15, 1998 and ends at 5:00 p.m. New York City time, on May 8,
1998, unless extended by the Fund until 5:00 p.m., New York City time to a date
not later than May 15, 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."

3
<PAGE> 8

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 May 8, 1998 (the "Pricing Date") and the four preceding
business days. Since the Expiration Date and the Pricing Date are each May 8,
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, PCX 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 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."

4
<PAGE> 9

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

[GEORGESON & COMPANY INC. LOGO]
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

<TABLE>
<CAPTION>
EVENT DATE
----- ----
<S> <C>
Record Date................................................. April 15, 1998
Subscription Period......................................... April 15, 1998 - May 8, 1998*
Expiration Date and Pricing Date............................ May 8, 1998*
Subscription Certificates and Payment for Shares Due+....... May 8, 1998*
Notice of Guaranteed Delivery Due+.......................... May 8, 1998*
Subscription Certificates and Payment for Guarantees of
Delivery Due.............................................. May 13, 1998*
Confirmation to Participants................................ May 20, 1998*
Final Payment for Shares.................................... June 4, 1998*
</TABLE>

- ---------------
* Unless the Offer is extended to a date not later than May 15, 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.

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 $8.75 per
share (the net asset value per share on

5
<PAGE> 10

April 13, 1998), and (iii) the Subscription Price
is $8.85 per share (95% of the last reported sale
price per share on the NYSE on April 13, 1998),
then the Fund's net asset value per share would be
reduced by approximately $0.04 per share or 0.46%.

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
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 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

6
<PAGE> 11

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. Shares purchased
pursuant to the Offer will be issued after the
record date for the monthly distribution declared
in May, and, accordingly, the Fund will not pay a
monthly distribution with respect to such Shares
until the distribution to be declared and paid in
June.

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.

Year 2000 Preparedness..... Because computers were designed only using two
fields to indicate the year, at midnight December
31, 1999, computers will be unable to recognize
that January 1 is the year 2000. The major systems
that would impact the Fund with respect to the year
2000 are those of the transfer agent and custodian.
The Fund has been advised in writing by both the
transfer agent and custodian that they are working
to fix, and expect to have fixed in time, all of
the issues relating to the year 2000. While
management of the Fund will continue to monitor the
progress of the transfer agent and custodian in
solving the year 2000 problem, no assurance can be
given that their systems will be fixed on time, or
what the magnitude of the problems would be if such
systems are not fixed.

7
<PAGE> 12

FUND EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
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%
Other Expenses............................................ 0.31%
----
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. In addition to these fees, the offering
expenses to be incurred by the Fund in connection with the Offer are
estimated at approximately $720,000, which includes the Fund's reimbursement
to the Dealer Manager for out-of-pocket expenses up to $82,500, and the
Fund's payment of a fee to each of the Subscription Agent (as defined in
this Prospectus) and Information Agent (as defined in this Prospectus)
estimated to be $245,000 and $42,500, respectively (which includes
reimbursement for their out-of-pocket expenses related to the Offer). These
fees and expenses will be charged against paid-in capital of the Fund and
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 $95,466,540 million (assuming an
estimated Subscription Price of $8.85 per share). Other expenses for the
fiscal year ended December 31, 1997 were 0.34% of the Fund's average net
assets and include administration fees computed at the annual rate of 0.13%
of the Fund's 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 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.
THE FUND'S ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

8
<PAGE> 13

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
year......................... $ 8.29 $ 8.63 $ 8.11 $ 9.11 $ 9.06 $ 9.79 $ 9.02
-------- -------- -------- -------- -------- -------- --------
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
operations................... 1.16 0.50 1.36 (0.14) 1.01 0.23 1.73
-------- -------- -------- -------- -------- -------- --------
Dividends and Distributions:
Dividends from net investment
income....................... (0.36) (0.36) (0.39) (0.29) (0.26) (0.32) (0.43)
Distributions from net
realized gains on
investments.................. (0.48) (0.24) (0.45) -- (0.70) (0.30) (0.53)
Distributions from capital
paid-in...................... -- (0.24) -- (0.57) -- (0.34) --
-------- -------- -------- -------- -------- -------- --------
Total Dividends and
Distributions................ (0.84) (0.84) (0.84) (0.86) (0.96) (0.96) (0.96)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year....................... $ 8.61 $ 8.29 $ 8.63 $ 8.11 $ 9.11 $ 9.06 $ 9.79
======== ======== ======== ======== ======== ======== ========
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%
======== ======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)................... $677,133 $638,768 $647,523 $591,659 $648,516 $624,097 $648,118
Ratio of expenses to average
net assets................... 1.04% 1.03% 1.10% 1.12% 1.11% 1.13% 1.11%
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

<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1990 1989(+) 1988(+)
-------- -------- --------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year......................... $ 9.59 $ 9.24 $ 9.27
-------- -------- --------
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
operations................... 0.36 1.31 0.13
-------- -------- --------
Dividends and Distributions:
Dividends from net investment
income....................... (0.60) (0.73) (0.16)
Distributions from net
realized gains on
investments.................. (0.04) (0.23) --
Distributions from capital
paid-in...................... (0.29) -- --
-------- -------- --------
Total Dividends and
Distributions................ (0.93) (0.96) (0.16)
-------- -------- --------
Net asset value, end of
year....................... $ 9.02 $ 9.59 $ 9.24
======== ======== ========
Market value, end of
year**..................... $ 8.625 $ 9.75 $ 9.125
======== ======== ========
Total investment return....... (1.99)% 18.24% (7.17)%
======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)................... $573,782 $596,508 $564,330
Ratio of expenses to average
net assets................... 1.09% 1.14% 1.19%***
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.

9
<PAGE> 14

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 11,289,500 Shares. The Fund may increase the number of
Shares subject to subscription by up to 25% of the Shares, or up to an
additional 2,822,375 shares, for an aggregate total of 14,11,875 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. A Record Date Shareholder whose
total ownership is fewer than seven shares of Common Stock and, accordingly,
receives fewer than seven Rights will be able to subscribe for one Share upon
the exercise of all of such Rights received and, if he or she subscribes for one
Share, may subscribe for additional Shares pursuant to the Over-Subscription
Privilege. Record Date Shareholders who, after exercising their Rights, 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 April 15, 1998 and ends at 5:00 p.m. New York City time, on May 8,
1998, unless extended by the Fund until 5:00 p.m., New York City time to a date
not later than May 15, 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

10
<PAGE> 15

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
2,822,375 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.

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 May 8, 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 $9.3125, the Subscription Price will be
$8.85 (95% of $9.3125). 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
March 5, 1998. The net asset value per share of Common Stock at the close of
business on March 5, 1998 and April 13, 1998 was $8.64 and $8.75, respectively,
and the last reported sales prices of a share of the Fund's Common Stock on the
NYSE on those dates was $9.4375 and $9.3125, respectively.

EXPIRATION OF THE OFFER

The Offer will expire at 5:00 p.m., New York City time, on May 8, 1998,
unless extended by the Fund until 5:00 p.m., New York City time to a date or
dates not later than May 15, 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

11
<PAGE> 16

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 payment price (the
"Estimated Payment 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
completed and executed Subscription Certificate. The broker, banker or trust
company may charge a fee for this service. Fractional Shares will not be issued.
A Record Date Shareholder whose total ownership is fewer than seven shares of
Common Stock and, accordingly, receives fewer than seven Rights will be able to
subscribe for one Share upon the exercise of all of such Rights received and, if
he or she subscribes for one Share, will be able to request additional Shares
pursuant to the terms of the Offer applicable to the Over-Subscription
Privilege. Record Date Shareholders who, after exercising their Rights, 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. LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064

12
<PAGE> 17

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

The Information Agent will receive a fee estimated to be approximately
$42,500 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 $245,000 including reimbursement for
all out-of-pocket expenses related to the Offer. Signed Subscription
Certificates must be sent, together with payment at the Estimated Payment 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 9049
Boston, MA 02205-9838

(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 EXPRESS MAIL OR 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, OR
TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT
CONSTITUTE VALID DELIVERY.

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 Payment Price of $9.00 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

13
<PAGE> 18

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 Payment
Price of $9.00 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 (May 13, 1998, unless the Offer is extended).

Within eight business days following the Expiration Date (May 20, 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 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
14
<PAGE> 19

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.

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 April 14, 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, PCX 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 PCX, 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
credited 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 in writing with payment to exercise the
Rights. If no such instructions are received by the Expiration Date, such Rights
will expire.

15
<PAGE> 20

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 $8.85 per share (95% of the last reported sales price per share on the
NYSE on April 13, 1998), the net proceeds to the Fund would be approximately
$95,466,540, 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 $720,000. If the Fund increases the number
of Shares subject to subscription by up to 2,822,375 Shares, in order to satisfy
over-subscription requests, the additional net proceeds will be approximately
$24,046,635. 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."

16
<PAGE> 21

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 60,385,753 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 April 13, 1998, the net
assets of the Fund were $691,600,000, and since inception, the Fund has paid
distributions (including dividends and capital gains distributions) aggregating
$591,344,008. 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.

MARKET PRICE AND NET ASSET VALUE INFORMATION

Shares of the Fund's Common Stock are listed on the NYSE and the PCX 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 NET ASSET PREMIUM LOW NET ASSET PREMIUM
QUARTER ENDED SALES PRICE* VALUE (DISCOUNT) SALES 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...................... 9.683 8.52 13.64 9.375 8.46 10.82
</TABLE>

- ---------------
* As reported by the NYSE.

17
<PAGE> 22

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, 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 April 13, 1998, the net asset value per share of Common Stock was $8.75
and the last reported sales price was $9.3125, representing a premium from net
asset value per share of 6.43%.

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.
18
<PAGE> 23

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 temporarily
invested in money market 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).
Duration is the approximate percentage change in the price of a bond or bond
portfolio in response to a 100 basis point (one percent) change in the general
level of interest rates in the market. For example, if a bond portfolio has an
average duration of five years, the value of such bond portfolio would increase
by 5% if interest rates declined by 1% and conversely would decrease by 5% if
interest rates rose by 1%. 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 Fund's
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 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

19
<PAGE> 24

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 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

20
<PAGE> 25

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 and does not
expect to do so during the next year, 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 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. In addition, the cost of borrowing may exceed the income or gain on
any securities purchased with the funds borrowed, in which case the Fund's net
asset value will decline.

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.

21
<PAGE> 26

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. The foreign
markets also have different clearance and settlement procedures. 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, legal remedies for defaults and
disputes may have to be pursued in foreign courts whose procedures differ
substantially from those of U.S. courts. In the event of a default in payment on
foreign securities, the Fund may incur increased costs to obtain and/or to
enforce a judgment against the foreign issuer (or the other parties to the
transaction) in the United States or abroad, and no assurance can be given that
the Fund will be able to collect on any such judgment.

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 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.

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 above.

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.

22
<PAGE> 27

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 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 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
delayed-delivery securities, and such securities are not considered to be short
sales for purposes of the Fund's Investment Restrictions on short sales.
Securities purchased on a when-issued or delayed-delivery basis may expose the
Fund to risk, since such securities may experience fluctuations in value (based
upon, in the case of bonds, the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest rates)
prior to their time of delivery. In addition, the yield available in the market
when the delivery takes place actually may be higher than that obtained in the
transaction itself.

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 $8.75 per share (the net asset value per share on April 13,
1998), and (iii) the Subscription Price is $8.85 per share (95% of the last
reported sale price per share on the NYSE on April 13, 1998), then the Fund's
net asset value per share would be reduced by approximately $0.04 per share or
0.46%.

23
<PAGE> 28

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.

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 $677,133,054,
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

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
24
<PAGE> 29

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. Shares purchased pursuant to the Offer
will be issued after the record date for the monthly distribution declared in
May, and, accordingly, the Fund will not pay a monthly distribution with respect
to such Shares until the distribution to be declared and paid in June. 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."

YEAR 2000 PREPAREDNESS

Because computers were designed only using two fields to indicate the year,
at midnight December 31, 1999, computers will be unable to recognize that
January 1 is the year 2000. The major systems that would impact the Fund with
respect to the year 2000 are those of the transfer agent and custodian. The Fund
has been advised in writing by both the transfer agent and custodian that they
are working to fix, and expect to have fixed in time, all of the issues relating
to the year 2000. While management of the Fund will continue to monitor the
progress of the transfer agent and custodian in solving the year 2000 problem,
no assurance can be given that their systems will be fixed on time, or what the
magnitude of the problems would be if such systems are not fixed.

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 Adviser was organized in June

25
<PAGE> 30

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 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.

26
<PAGE> 31

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 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

27
<PAGE> 32

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 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.

Shares purchased pursuant to the Offer will be issued after the record date
for the monthly distribution declared in May, and, accordingly, the Fund will
not pay a monthly distribution with respect to such Shares until the
distribution to be declared and paid in June.

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.

28
<PAGE> 33

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 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 79,017,765 shares were
outstanding as of April 13, 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.

29
<PAGE> 34

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% 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 PCX 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; TENDER OFFERS

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. The Fund
has not repurchased any shares of its Common Stock.

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.

It should be recognized that any acquisition of shares by the Fund (whether
through a share repurchase or a tender offer) will decrease the total assets of
the Fund and therefore have the 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 and, accordingly,
may increase the Fund's portfolio turnover and make it more difficult for the
Fund to achieve its investment objective.

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
30
<PAGE> 35

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, and such redemption payment must be made
within seven days. This may require changes in the Fund's portfolio management,
since such redemption requests could require the Fund's liquidation of a portion
of its investment portfolio at a time when independent investment judgment might
not dictate such action and, accordingly, may increase the Fund's portfolio
turnover and make it more difficult for the Fund to achieve its investment
objective. 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 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

31
<PAGE> 36

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."

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
32
<PAGE> 37

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.

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.

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

33
<PAGE> 38

Agreement between the Fund and the Dealer Manager, dated April 14, 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 $82,500 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 $245,000 and $42,500, 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.

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.

34
<PAGE> 39

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

<TABLE>
<S> <C>
Investment Objective and Policies........................... 3
Investment Restrictions..................................... 10
Management.................................................. 12
Expenses.................................................... 15
Portfolio Transactions and Brokerage........................ 15
Net Asset Value............................................. 17
Taxation.................................................... 17
Independent Accountants..................................... 21
Principal Shareholders...................................... 22
Financial Statements........................................ F-1
Report of Independent Accountants........................... F-14
</TABLE>

35
<PAGE> 40

======================================================

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>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 3
FUND EXPENSES......................... 8
FINANCIAL HIGHLIGHTS.................. 9
THE OFFER............................. 10
USE OF PROCEEDS....................... 16
THE FUND.............................. 17
MARKET PRICE AND NET ASSET VALUE
INFORMATION......................... 17
INVESTMENT OBJECTIVE AND POLICIES..... 18
RISK FACTORS AND SPECIAL
CONSIDERATIONS...................... 23
MANAGEMENT OF THE FUND................ 25
DISTRIBUTIONS; DISTRIBUTION
REINVESTMENT AND CASH PURCHASE
PLAN................................ 28
DESCRIPTION OF COMMON STOCK........... 29
TAXATION.............................. 32
DISTRIBUTION ARRANGEMENTS............. 33
CUSTODIAN, DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR........ 34
EXPERTS............................... 34
LEGAL MATTERS......................... 34
FURTHER INFORMATION................... 34
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION.............. 35
</TABLE>

======================================================

11,289,500 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
----------------

PROSPECTUS
----------------
MERRILL LYNCH & CO.

APRIL 14, 1998

======================================================
<PAGE> 41
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 April 14, 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 April 14, 1998.

1
<PAGE> 42
TABLE OF CONTENTS

Investment Objective and Policies 1
Investment Restrictions 7
Management 9
Expenses 12
Portfolio Transactions and Brokerage 12
Net Asset Value 14
Taxation 14
Independent Accountants 18
Principal Shareholders 18
Financial Statements F-1
Report of Independent Accountants F-14

2
<PAGE> 43
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's 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.

1
<PAGE> 44
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> 45
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. The Fund
does not intend to devote more than 5% of its net assets as initial margin or
option premiums for futures transactions.

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

3
<PAGE> 46
exchange will exist for any particular option, or at any particular time, and
for some options no secondary 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

4
<PAGE> 47
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.

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. Furthermore, legal
remedies for defaults and disputes may have to be pursued in foreign courts
whose procedures differ substantially from those of U.S. courts. In the event of
a default in payment on foreign securities, the Fund may incur increased costs
to obtain and/or to enforce a judgment against the foreign issuer (or the other
parties to the transaction) in the United States or abroad, and no assurance can
be given that the Fund will be able to collect on any such judgment.

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

<PAGE> 48
net income available for distribution to shareholders.

Pursuant to the provisions of Rule 17f-5 under the 1940 Act, the Fund's
Board of Directors has delegated to the Fund's Custodian, The Bank of New York,
as the Fund's Foreign Custody Manager the responsibilities for selecting and
monitoring any foreign custodians that may be used in connection with the Fund's
investments in foreign securities. Pursuant to and subject to the terms and
conditions of the Foreign Custody Manager Agreement between The Bank of New York
and the Fund, The Bank of New York will, among other things, (i) determine that
the assets held by foreign custodians are subject to reasonable care, based on
the standards applicable to custodians in the relevant market in which such
foreign custodian operates, (ii) determine that the foreign custodial
arrangements are governed by a written contract that provides reasonable care
for the Fund's assets based on such standards, (iii) establish a system to
monitor the appropriateness of maintaining the Fund's assets with a particular
foreign custodian and any material changes in such contract, and (iv) report to
the Fund's Board of Directors with respect to the Fund's foreign custodial
arrangements.

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 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.

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

6
<PAGE> 49
net assets.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES

The Fund may 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.
Securities purchased on a when-issued or delayed-delivery basis may expose the
Fund to risk, since such securities may experience fluctuations in value (based
upon, in the case of bonds, the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest rates)
prior to their time of delivery. In addition, the yield available in the market
when the delivery takes place actually may be higher than that obtained in the
transaction itself. At the time the Fund makes the commitment to purchase a
security on a when-issued or delayed-delivery basis, it will record the
transaction and reflect the value of the security less the liability to pay the
purchase price in determining the fund's net asset value. The value of the
security on the settlement date may be more or less than the price paid. No
interest accrues on the security between the time the Fund enters into the
commitment and the time the security is delivered. The Fund will establish a
segregated account with the Custodian in which it will maintain cash and
short-term high quality debt securities equal in value to commitments for
when-issued or delayed-delivery securities. Such segregated securities will be
"marked-to-market" daily. While when-issued or delayed-delivery securities may
be sold prior to the settlement date, it is intended that the Fund will purchase
such securities with the purpose of actually acquiring them unless a sale
appears desirable for investment reasons. The Fund is dependent on the other
party to successfully complete when-issued and delayed delivery transactions. If
such other party fails to complete its portion of the transaction, the Fund may
have lost a favorable investment opportunity. There is no limitation on the
percentage of the Fund's assets that may be invested in when-issued or
delayed-delivery securities.

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.

7
<PAGE> 50
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.

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

8
<PAGE> 51
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 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 Fund Principal Occupations and Other Affiliations
- ---------------- ---- ---------------------- --------------------------------------------
<S> <C> <C> <C>
Martin E. Zweig* 55 Director, Chairman of President and Director of the Investment Adviser;
900 Third Avenue the Board and President Chairman of the Board and President of The Zweig
New York, NY 10022 (Chief Executive Fund, Inc.; President and Director of Zweig
Officer) 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
</TABLE>

9
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
21 Elm Rock Road Capital; Chairman Emeritus, Board of Trustees of the
Bronxville, NY 10708 Manhattan Institute for Policy Research.

Annemarie Gilly* 46 Director First Vice President of Zweig/Glaser Advisers;
900 Third Avenue First Vice President of Euclid Mutual Funds; First
New York, NY 10022 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 The Dress
30 Dunnigan Drive Barn, Inc.; Director of The Zweig Fund, Inc.;
Suffern, NY 1091 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 of the
900 Third Avenue President, Treasurer Investment Adviser; Vice President, Treasurer and
New York, NY 10022 and Assistant Secretary Director of The Zweig Fund, 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; Director of
2711 Ramparte Path First National Bank of Michigan; formerly,
Holt, Michigan 48842 Professor of Financial Management, Investments at
Michigan State University.

James B. Rogers, Jr. 55 Director Private Investor; Director of The Zweig Fund,
352 Riverside Drive Inc.; Chairman of Beeland Interests; Regular
New York, NY 10025 Commentator on CNBC; Author of "Investment Biker:
On the Road with Jim Rogers"; Director of Emerging
</TABLE>

10
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
Markets Brewery Fund; Director of Levco Series Trust;
Sometimes Visiting Professor at Columbia University;
Columnist for WORTH Magazine.

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

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

Stuart B. Panish* 41 Vice President and Vice President and Secretary of The Zweig Fund,
900 Third Avenue Secretary Inc.; Counsel to the Adviser and Zweig Advisors
New York, NY 10022 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.

11
<PAGE> 54
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY

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

12
<PAGE> 55
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.

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
$780,000 to brokers for the year ended December 31, 1995, of which $124,269 was
paid to Watermark Securities, Inc., representing 15.93% of the aggregate
brokerage commissions paid by the Fund and 15.72% 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. A high rate of
portfolio turnover may also result in the realization of capital gains, and to
the extent that portfolio turnover results in the realization of net short-term
capital gains, such gains generally are taxed to shareholders at ordinary income
tax rates.

13
<PAGE> 56
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 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 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.

14
<PAGE> 57
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.

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, 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.

15
<PAGE> 58
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 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,

16
<PAGE> 59
such as pursuant to a distribution 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 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.

17
<PAGE> 60
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.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New
York 10019, serves as the independent accountants for the Fund. In addition to
reporting annually on the financial statements of the Fund, the Fund's
accountants also review certain filings of the Fund with the Commission.

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 79,017,765 outstanding shares of the Fund as of March 31,
1998:

AMOUNT OF PERCENT
NAME AND ADDRESS OF RECORD OF
RECORD OWNER OWNERSHIP CLASS

Cede & Co. 65,583,928 83.0%
7 Hanover Square
New York, New York 10004

As of March 31, 1998, the current Directors and Officers of the Fund,
as a group, beneficially owned less than 1% of the Fund's outstanding shares.

18
<PAGE> 61

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> 62
<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> 63

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> 64

<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> 65
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> 66

<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> 67

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> 68
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> 69
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> 70
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> 71
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> 72
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> 73
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> 74
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> 75
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. (Incorporated by
reference to Exhibit (1) of the Registrant's Amendment No. 2 to the
Registrant's Registration Statement (Filed on September 22, 1988, Securities
Act File No. 33-23252; Investment Company Act File No. 811-5620) ("Amendment
No. 2")).

(b) - Amended and Restated By-Laws. (Incorporated by reference to Exhibit (b)
of the Registrant's Amendment No. 8 to the Registrant's Registration Statement
(Filed on April 9, 1998, Securities Act File No. 333-47371; Investment Company
Act No. 811-5620; Accession No. 0000950123-98-003611) ("Amendment No. 8")).

(d)(1) - Form of Subscription Certificate. (Incorporated by reference to
Exhibit (d)(1) of the Registrant's Amendment No. 8).

(d)(2) - Form of Notice of Guaranteed Delivery. (Incorporated by reference to
Exhibit (d)(2) of the Registrant's Amendment No. 8).

(d)(3) - Form of Nominee Holder Over-Subscription Exercise Form. (Incorporated
by reference to Exhibit (d)(3) of the Registrant's Amendment No. 8).

(e) - Distribution Reinvestment and Cash Purchase Plan. (Incorporated by
reference to Exhibit (e) of the Registrant's Amendment No. 7 to the Registrant's
Registration Statement (Filed on March 5, 1998, Securities Act File No.
333-47371; Investment Company Act File No. 811-5620; Accession No.
0000950123-98-002333) ("Amendment No. 7")).

(f) - Not applicable

(g) - Investment Advisory Agreement between the Registrant and Zweig Total
Return Advisors, Inc. dated September 22, 1988. (Incorporated by reference to
Exhibit (6) of the Registrant's Amendment No. 2)

<PAGE> 76
(h) - Form of Dealer Manager Agreement. (Incorporated by reference to Exhibit
(h) of the Registrant's Amendment No. 8).

(i) - Not applicable

(j)(1) - Custodian Agreement between the Registrant and The Bank of New York
dated as of August 1, 1997. (Incorporated by reference to Exhibit (j) of the
Registrant's Amendment No. 7)

(j)(2) - Foreign Custody Manager Agreement with The Bank of New York dated as of
December 18, 1997. (Incorporated by reference to Exhibit (j)(2) of the
Registrant's Amendment No. 8).

(k)(1) - Administration Agreement between the Registrant and Zweig/Glaser
Advisers dated as of August 1, 1995. (Incorporated by reference to Exhibit
(k)(1) of the Registrant's Amendment No. 7)

(k)(2) - Stock Transfer Agent Service Agreement between the Registrant and the
State Street Bank & Trust Company dated as of September 1, 1997. (Incorporated
by reference to Exhibit (k)(2) of the Registrant's Amendment No. 7)

(k)(3) - Form of Subscription Agent Agreement between the Registrant and State
Street Bank & Trust Company. (Incorporated by reference to Exhibit (k)(3) of
the Registrant's Amendment No. 8).

(k)(4) - Form of Information Agent Agreement between the Registrant and
Georgeson & Company Inc. (Incorporated by reference to Exhibit (k)(4) of the
Registrant's Amendment No. 8).

(l) - Opinion and Consent of Rosenman & Colin LLP. (Incorporated by
reference to Exhibit (l) of the Registrant's Amendment No. 8).

(m) - Not applicable

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

(o) - Not applicable

(p) - Not applicable

(q) - Not applicable

(r) - Financial Data Schedule. (Incorporated by reference to Exhibit (r) of
the Registrant's Amendment No. 7)

(s) - Powers of Attorney. (Incorporated by reference to Exhibit (s) of the
Registrant's Amendment No. 7)

<PAGE> 77
ITEM 25. Marketing Arrangements

See Section 4 of Exhibit 2(h) of this Registration Statement.
<PAGE> 78
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 230,000
Dealer Manager Expense
Reimbursement 82,500
Legal Fees 40,000
Registration Fees 38,500
Information Agent Fees 42,500
Subscription Agent Fees 245,000
Miscellaneous 1,500
Stock Exchange Listing Fees 40,000
-------
720,000
</TABLE>

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

None.

ITEM 28. Number of Holders of Securities as of March 31,1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- --------------------------------------------------------------------------
<S> <C>
Common Stock, par value $0.001 per share 19,869
- --------------------------------------------------------------------------
</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
<PAGE> 79
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 about Martin
Zweig and Jeffrey Lazar contained in the SAI. See "Management - Directors and
Officers."

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).

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
<PAGE> 80
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.
<PAGE> 81

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 14th day of
April, 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 April 14, 1998
- ---------------------- Board and President (Chief
Martin E. Zweig Executive Officer)

Charles H. Brunie* Director April 14, 1998
- ------------------------
Charles H. Brunie

Annemarie Gilly* Director April 14, 1998
- -----------------------
Annemarie Gilly

Elliot S. Jaffe* Director April 14, 1998
- -----------------------
Elliot S. Jaffe

/s/ Jeffrey Lazar Director, Vice President, April 14, 1998
- ----------------------- Treasurer and Assistant
Jeffrey Lazar Secretary

Alden C. Olson* Director April 14, 1998
- -----------------------
Alden C. Olson

James B. Rogers, Jr.* Director April 14, 1998
- ------------------------
James B. Rogers, Jr.

Anthony M. Santomero* Director April 14, 1998
- ------------------------
Anthony M. Santomero

Robert E. Smith* Director April 14, 1998
- -----------------------
Robert E. Smith

* By: /s/ Martin E. Zweig April 14, 1998
- -----------------------
Martin E. Zweig
Attorney-in-fact
</TABLE>

<PAGE> 82
EXHIBIT INDEX

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

<PAGE> 1
EXHIBIT (n)

1
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Pre-Effective Amendment No. 2 to the
Registration Statement of The Zweig Total Return Fund, Inc. on Form N-2 (File
No. 333-47371) of our report dated February 4, 1998, on our audit of the
financial statements and financial highlights of The Zweig Total Return Fund,
Inc.

We also consent to the references to our firm under the captions "Financial
Highlights" and "Experts" in the Prospectus.

Coopers & Lybrand L.L.P.

New York, New York
April 13, 1998