<PAGE>
May 1, 2000
[PHOTO]
Dear Shareholder:
The Zweig Total Return Fund, Inc.'s net asset value gained 2.5% during the
quarter ended March 31, 2000, including $0.19 in reinvested distributions.
Consistent with our policy of seeking to minimize risk while earning
reasonable returns, the Fund's average overall exposure during the period was
53%.
DISTRIBUTION DECLARED
In accordance with our policy of distributing 10% of net asset value per
year, which equals 0.83% per month, the Fund recently announced a distribution
of $0.06 payable on May 24, 2000, to shareholders of record on May 11, 2000.
The value of a distribution depends on the exact net asset value at the time
of declaration. For the May distribution, 0.83% of the Fund's net asset value
was equivalent to $0.06 per share. Including this distribution, the Fund's
payout since its inception totals $10.29.
MARKET OUTLOOK
Our bond exposure at the end of the first quarter was 44% compared with 22%
at year-end. If we were fully invested, the Fund would be 62.5% invested in
bonds and 37.5% invested in stocks. Consequently, at 44% we are at about 70%
of a full position (44%/62.5%) for bonds.
Treasury bond prices rounded out the best first quarter in more than a
decade. Longer duration bonds--especially the 30-year Treasury bond--rallied
to lower yields. The prices of U.S. Treasury bonds move in the opposite
direction from yields. The 30-year Treasury began the year at just over 6.60%
yield and ended the quarter at 5.80%.
Yields on shorter-term bonds--especially less than two years--did not fare
as well as the Federal Reserve Bank tightened monetary conditions by raising
the Fed funds rate to 6.00%. As measured from two-year to 30-year bonds, the
yield curve has inverted. In other words, yields of shorter-term bonds exceed
yields on longer-term bonds. This is not generally a positive indicator for
the economy or the stock market.
Another factor in the strengthening long-term bond market was the Treasury's
announcement that it will issue the 30-year bond only once annually instead of
twice a year. Also, the anticipation that the Fed's raising of rates will help
bring about an economic slowdown has pushed bond prices higher and yields low-
er.
Our equity exposure as of March 31, 2000, was 23%, little changed from our
25% position at the close of the year. At 23% we are at about 61% of a full
position (23%/37.5%) for equities.
The Nasdaq Index made headlines last month. After significantly
outperforming the S&P 500 Index and the Dow Jones Industrial Average, the
Nasdaq started to fall by its own weight. I think it just got too far ahead of
itself. In some instances, price/earnings ratios ranged from ultra-high to in-
finite as the Nasdaq soared 255% in 18 months. It's hard to know what trig-
gered the fall. Perhaps it was excessive speculation or the temporary bad news
on bio-tech stocks.
<PAGE>
We have seen two markets lately--the Nasdaq technology-type and the old-
economy stocks. Aside from Nasdaq, the rest of the market did not perform very
well in the first quarter until March when it somewhat rallied. The average
stock has done poorly for two years. However, the Nasdaq technology stocks had
very strong performance until March and have been pounded for the last month
or so.
In March, money began to flow out of the technology, or new-economy, stocks
into the old-economy stocks. Some of the older more mundane companies just
reached fairly reasonable price levels. Some investors started to think that
these stocks had become so cheap that there could be leveraged buyouts or cash
takeovers. Also, some of the tech stocks, especially the Internet-related
ones, had achieved extremely high price/earnings ratios. Investors may have
decided to become more defensive, and money shifted from one group to another.
The market could just as easily shift back again. It may or may not indicate
the end of the "Wild West" style of investing. That is why we have to keep
monitoring the indicators.
As of this writing, the market is wondering what the Fed will do at its next
meeting. My guess is that it will raise rates another 25 basis points. I think
a 50 basis-point boost would shock the market, and I don't believe the Fed
really wants to do that. But, it is worried about inflation, which did
accelerate recently.
We had a very poor report on the Consumer Price Index, which is now running
at an increase of about 3.7% annually. This is up from a low of perhaps 1.4%.
Other indicators, such as the purchasing managers' price index, are also mov-
ing up. Rightly or wrongly, the Fed is concerned about the danger of inflation
and has been increasing interest rates.
The Fed has already had an impact on the stock market, but it has affected
the new- and old-economy stocks differently. It adversely affected the old-
economy stocks first and only belatedly hurt the technology stocks. No indica-
tor is perfect. Following the Fed is not a foolproof way to play the market,
but it does give you some odds. If the Fed keeps on raising rates, it is prob-
ably not a great thing for the stock market.
Another problem facing the market is the huge amount of margin debt, which
has soared to a record $278 billion in the last 12 months. A big part of that
increase came within the last five months--almost $100 billion in five months!
I don't think that's at all healthy.
The good news is that undoubtedly some of the margin debt was taken off the
books when the Nasdaq slumped recently. It's too soon to know what the current
numbers are. During the 1998 market slide, approximately 16% of the debt was
wiped out. Even if that much was taken off here, the figure would still be way
above where it was even a few months ago.
Also overhanging the market are the hundreds of billion dollars worth of
shares held by insiders that will reach their so-called lockup limits in the
months ahead and be eligible for sale. These are options held by early invest-
ors or management, primarily in companies with initial public offerings in the
last year or so, that cannot be exercised before a certain date. This is defi-
nitely a threat. Some of these stocks were already sold in the marketplace in
record numbers and hurt the companies involved.
One thing I am not particularly concerned about is our trade deficit that
jumped to a record $29.2 billion in February. Some analysts have voiced
concern that a weaker dollar, which could raise the prices of imported
products, could be inflationary and ultimately cause a recession. I don't put
much stock in the reasoning. Look at Japan--despite an enormous trade surplus,
it is in a depression.
Meanwhile, the U.S. economy grew at a 7.3% annual rate in the fourth
quarter, the fastest rate in almost 16 years. However, there are potential
2
<PAGE>
factors that could bring our longest economic expansion to an end. The Fed
could do it by raising rates high enough to put a monkey wrench into the econo-
my. The drop in Nasdaq might already have had a somewhat negative wealth ef-
fect. Further declines might lop a point or more from our gross national prod-
uct.
It is always hard to say in advance what might slow down an economy. The
yield curve, which I mentioned earlier, is inverted or close to it. That has
been a reasonably reliable indicator for forecasting a recession. We have not
always had a recession after an inverted yield curve, but the odds are better
than even. It is possible that we could experience one, maybe next year. I
don't really have an opinion whether there will be a recession; however, I do
know that the law of business cycles has not been repealed. We will still have
cycles, but I don't think they will be as violent as they were in the past.
Summing up, the market positives include the fact that the bond market has
acted fairly well, and a few of our sentiment indicators got better when the
Nasdaq recently broke down. The negatives include the uptick in inflation, the
five interest rate hikes by the Fed, and our overall package of sentiment
indicator numbers that still aren't very good.
Valuations, or price/earnings ratios, appear on both sides of the ledger.
They are still very high on a number of new-economy stocks but are modest and,
in some cases, cheap on some of the old-economy stocks. This indicator seems
neutral to me.
In view of the above, we are in a conservative position right now. I am not
bearish, and I am not bullish. I would be glad to raise our exposure, espe-
cially if there is more pessimism on the market. As always, we will be defen-
sive, a posture that has helped us so far this year.
PORTFOLIO COMPOSITION
Conforming to our investment policy guidelines, all of our bonds are U.S.
government obligations. The average duration of the bond portion of our portfo-
lio (sensitivity to interest rates) was 4.1 years as of March 31, 2000. This
compares with 2.2 years at year-end. Since these bonds are liquid, they give us
the flexibility to respond quickly to changing market conditions.
At the end of the first quarter, our leading industry groups included tech-
nology, telecommunications, financial services, energy, and health care. During
the quarter, we added to our holdings in technology, energy, and health care.
Our positions in telecommunications and financial services were little changed.
We trimmed our holdings in media and retail, both of which had appeared among
our largest sector weightings at year-end.
Our leading individual holdings on March 31, 2000, included General Electric,
Microsoft, Cisco, EMC, Intel, Nokia, America Online, Dell, Morgan Stanley Dean
Witter and American International Group. The only company on this list new to
our portfolio is American International Group. We added to our positions in
Microsoft, Dell and America Online, while Intel gained through appreciation. We
trimmed our holding in Wal-Mart, Grupo Televisa, Tribune Co., Amgen and
Georgia-Pacific, all of which had been included among our top individual
positions at year-end.
Sincerely,
/s/ Martin E. Zweig, Ph.D.
Martin E. Zweig, Ph.D.
Chairman
3
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
STATEMENT OF NET ASSETS
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ----------
<S> <C> <C>
Common Stocks 23.17%
Aerospace & Air Transport 0.16%
Boeing Co. ............................................ 30,100 $1,141,919
----------
Automotive 0.47%
Delphi Automotive Systems Corp. ....................... 90,000 1,440,000
General Motors Corp. .................................. 22,800 1,888,125
----------
3,328,125
----------
Building & Forest Products 0.40%
Cemex S.A. de CV, ADR.................................. 60,000(a) 1,357,500
Georgia-Pacific Group.................................. 37,500 1,483,594
----------
2,841,094
----------
Chemicals 0.15%
Air Products & Chemicals, Inc. ........................ 37,500 1,066,406
----------
Commercial Services 0.13%
Modis Professional Services, Inc. ..................... 75,100(a) 929,363
----------
Consumer Products 0.60%
Adolph Coors Co., Class B.............................. 35,400 1,692,563
PepsiCo, Inc. ......................................... 75,000 2,592,187
----------
4,284,750
----------
Electronics -- Electrical 0.93%
General Electric Co. .................................. 27,000 4,190,062
SCI Systems, Inc. ..................................... 45,100(a) 2,426,944
----------
6,617,006
----------
Engineering & Machinery 0.37%
Ingersoll-Rand Co. .................................... 60,000 2,655,000
----------
Financial Services 2.72%
Allstate Corp. ........................................ 72,700 1,731,169
American International Group, Inc. .................... 30,000 3,285,000
Chase Manhattan Corp. ................................. 30,000 2,615,625
Fannie Mae............................................. 45,000 2,539,688
H & R Block, Inc. ..................................... 28,400 1,270,900
Lehman Brothers Holdings, Inc. ........................ 27,000 2,619,000
Merrill Lynch & Co., Inc. ............................. 19,500 2,047,500
Morgan Stanley Dean Witter & Co. ...................... 39,800 3,246,187
----------
19,355,069
----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ----------
<S> <C> <C>
Health Care 1.52%
Amgen, Inc. ........................................... 36,200(a) $2,221,775
Baxter International, Inc. ............................ 52,500 3,291,094
Bristol-Myers Squibb Co. .............................. 22,600(a) 1,305,150
Schering-Plough Corp. ................................. 60,000 2,205,000
United HealthCare Corp. ............................... 30,000 1,788,750
----------
10,811,769
----------
Investment Companies 0.63%
Asia Tigers Fund, Inc. ................................ 30,000 311,250
Emerging Markets Infrastructure Fund, Inc. ............ 57,284 744,692
Gabelli Global Multimedia Trust, Inc. ................. 32,300 569,288
INVESCO Global Health Sciences Fund, Inc. ............. 56,600 965,737
Korea Fund, Inc. ...................................... 45,000 672,187
Morgan Stanley Dean Witter Asia Pacific Fund, Inc. .... 30,000 326,250
Morgan Stanley Dean Witter Emerging Markets Fund,
Inc. ................................................. 50,400 875,700
----------
4,465,104
----------
Manufacturing 0.32%
Tyco International Ltd. ............................... 45,000 2,244,375
----------
Media 1.47%
Comcast Corp., Class A................................. 49,900 2,164,413
Grupo Televisa S.A., GDR............................... 30,000 2,040,000
Infinity Broadcasting Corp. ........................... 60,000(a) 1,942,500
New York Times Co. (The), Class A...................... 28,200 1,210,837
Tribune Co. ........................................... 30,000 1,096,875
Viacom, Inc., Class B.................................. 37,700(a) 1,988,675
----------
10,443,300
----------
Oil & Oil Services 1.93%
AES Corp. ............................................. 22,500 1,771,875
Apache Corp. .......................................... 45,000 2,238,750
BJ Services Co. ....................................... 22,500(a) 1,662,188
Enron Corp. ........................................... 30,000 2,246,250
Exxon Mobil Corp. ..................................... 30,000 2,334,375
Transocean Sedco Forex, Inc. .......................... 30,000 1,544,506
USX-Marathon Group..................................... 75,000 1,954,687
----------
13,752,631
----------
Retailing 1.33%
Best Buy Co., Inc. .................................... 28,500(a) 2,451,000
Home Depot, Inc. ...................................... 29,800 1,922,100
Lowe's Companies, Inc. ................................ 30,000 1,751,250
Target Corp. .......................................... 22,500 1,681,875
Wal-Mart Stores, Inc. ................................. 29,800 1,653,900
----------
9,460,125
----------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----------
<S> <C> <C>
Steel & Heavy Machinery 0.06%
Bethlehem Steel Corp. ................................ 75,000(a) $ 450,000
-----------
Technology 6.73%
Adobe Systems, Inc. .................................. 15,100 1,680,819
America Online, Inc. ................................. 52,500(a) 3,530,625
Applied Materials, Inc. .............................. 34,000(a) 3,204,500
Atmel Corp. .......................................... 15,000(a) 774,375
Cisco Systems, Inc. .................................. 52,000(a) 4,035,712
Compuware Corp. ...................................... 60,000(a) 1,263,750
Cypress Semiconductor Corp. .......................... 33,000(a) 1,627,313
Dell Computer Corp. .................................. 64,400(a) 3,473,575
EarthLink, Inc. ...................................... 52,500(a) 1,020,469
EMC Corp. ............................................ 29,000(a) 3,625,000
Fiserv, Inc. ......................................... 30,000(a) 1,115,625
Intel Corp. .......................................... 27,500 3,628,281
Jabil Circuit, Inc. .................................. 45,200(a) 1,954,900
JDS Uniphase Corp. ................................... 15,000(a) 1,808,437
Lucent Technologies, Inc. ............................ 29,700 1,804,275
Microsoft Corp. ...................................... 40,500(a) 4,303,125
Motorola, Inc. ....................................... 18,100 2,576,988
Remedy Corp. ......................................... 22,500(a) 947,812
Sawtek, Inc. ......................................... 15,000(a) 788,438
Sun Microsystems, Inc. ............................... 22,500(a) 2,108,320
USinternetworking, Inc. .............................. 33,750(a) 1,307,812
Yahoo! Inc. .......................................... 7,500(a) 1,285,313
-----------
47,865,464
-----------
Telecommunications 2.85%
ADC Telecommunications, Inc. ......................... 22,500(a) 1,212,188
AT&T Corp. .......................................... 30,000 1,687,500
CenturyTel, Inc. ..................................... 30,100 1,117,462
MCI WorldCom, Inc. ................................... 55,850 2,530,703
Nokia Corp., ADR...................................... 16,800(a) 3,649,800
Nortel Networks Corp. ................................ 18,000 2,268,000
SBC Communications, Inc. ............................. 30,000 1,260,000
Tele Norte Leste Participacoes S.A., ADR.............. 72,100 1,919,663
Telefonos de Mexico S.A., Class L, ADR................ 44,600 2,988,200
Telephone & Data Systems, Inc. ....................... 15,000 1,665,000
Telocity, Inc. ....................................... 300(a) 3,712
-----------
20,302,228
-----------
Utilities--Electric 0.40%
Energy East Corp. .................................... 26,800 530,975
PECO Energy Co. ...................................... 45,000 1,659,375
Texas Utilities Co. .................................. 22,500 667,969
-----------
2,858,319
-----------
Total Common Stocks........................................... 164,872,047
-----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ------------
<S> <C> <C>
United States Government Obligations 44.05%
FHLMC, 5.125%,10/15/08.............................. $38,100,000 $ 33,159,230
United States Treasury Notes, 6.25%, 8/31/00........ 13,500,000 13,504,226
United States Treasury Bonds, 10.75%, 5/15/03....... 15,000,000 16,790,625
United States Treasury Notes, 7.50%, 2/15/05........ 16,300,000 17,079,352
United States Treasury Notes, 6.50%, 5/15/05........ 7,600,000 7,652,250
United States Treasury Notes, 6.125%, 8/15/07....... 107,300,000 106,327,647
United States Treasury Notes, 6.50%, 2/15/10........ 73,400,000 75,991,974
United States Treasury Bonds, 6.50%, 11/15/26....... 40,700,000 42,951,239
------------
Total United States Government Obligations.................... 313,456,543
------------
Short-Term Investments 32.18%
Citibank Capital Market, 6.31%, 4/03/00............. 30,000,000 29,984,225
Emerson Electric Co., 6.07%, 4/04/00................ 11,500,000 11,492,244
Ford Motor Credit Corp., 6.08%, 4/06/00............. 30,000,000 29,969,600
General Electric Capital Corp., 6.05%, 4/04/00...... 25,000,000 24,983,194
Goldman Sachs Group L.P., 6.06%, 4/17/00............ 30,700,000 30,612,146
Honeywell Corp., 6.25%, 4/03/00..................... 22,000,000 21,988,541
Merrill Lynch & Co., 6.08%, 4/07/00................. 30,000,000 29,964,533
Pharmacia & Upjohn Co., 6.06%, 4/03/00.............. 30,000,000 29,984,850
UBS Financial Corp., 6.25%, 4/03/00................. 20,000,000 19,989,583
------------
Total Short-Term Investments.................................. 228,968,916
------------
Total Investments -- 99.40%................................... 707,297,506
Cash and Other Assets Less Liabilities -- 0.60%............... 4,266,088
------------
Net Assets (Equivalent to $7.85 per share based on
90,600,166 shares of capital stock outstanding) -- 100.00%... $711,563,594
============
</TABLE>
- --------
(a) Non-income producing security.
7
<PAGE>
THE ZWEIG TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Net Asset Value
Total Net Assets per share
-------------------------- ----------------
<S> <C> <C> <C> <C>
Beginning of period: December 31,
1999 ........................... $714,637,205 $ 7.89
Net investment income.......... $ 6,886,500 $ 0.08
Net realized and unrealized
gains on investments.......... 7,264,875 0.07
Dividends from net investment
income and distributions from
net long-term and short-term
capital gains................. (17,224,986) (0.19)
------------ -------
Net decrease in net assets/net
asset value................... $ (3,073,611) (0.04)
------------ -------
End of period: March 31, 2000.... $711,563,594 $ 7.85
============ =======
</TABLE>
- -------------------------------------------------------------------------------
1-800-272-2700 Zweig Shareholder Relations:
For general information and literature
1-800-272-2700 The Zweig Total Return Fund, Inc. Hot Line:
For updates on net asset value, share price, major industry
groups and other key information
REINVESTMENT PLAN
Many of you have questions
about our reinvestment plan. We
urge shareholders who want to
take advantage of this plan and
whose shares are held in "Street
Name," to consult your broker as
soon as possible to determine if
you must change registration
into your own name to
participate.
----------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may from time to time purchase its shares of
common stock in the open market when Fund shares are trading at a discount
from their net asset value.
8
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<PAGE>
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<PAGE>
OFFICERS AND DIRECTORS
Martin E. Zweig, Ph.D.
Chairman of the Board and President
Jeffrey Lazar
Executive Vice President and Treasurer
Christopher M. Capano
Vice President
Charles H. Brunie
Director
Nancy J. Engberg
Secretary
Elliot S. Jaffe
Director
Alden C. Olson, Ph.D.
Director
James B. Rogers, Jr.
Director
Anthony M. Santomero, Ph.D.
Director
Investment Adviser
Phoenix/Zweig Advisers LLC
900 Third Avenue
New York, NY 10022
Fund Administrator
Phoenix Equity Planning Corp.
100 Bright Meadow Boulevard
PO Box 2200
Enfield, CT 06083-2200
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer Agent
State Street Bank & Trust Co.
c/o EquiServe
PO Box 8040
Boston, MA 02266
Legal Counsel
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
- --------------------------------------------------------------------------------
This report is transmitted to the shareholders of The Zweig Total Return
Fund, Inc. for their information. This is not a prospectus, circular or repre-
sentation intended for use in the purchase of shares of the Fund or any securi-
ties mentioned in this report.
PXP 1376 3206-1Q-00
Quarterly Report
Zweig
The Zweig Total
Return Fund, Inc.
March 31, 2000
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INVESTMENT PARTNERS
