SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant |_|
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|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
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|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
The Zweig Total Return Fund, Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
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The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
April __, 2000
DEAR SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders of
The Zweig Total Return Fund, Inc. (the "Fund") to be held on Monday, May 22,
2000, at 1:30 P.M. at The St. Regis Hotel, located at 2 East 55th Street
(between Fifth and Madison Avenues), New York, New York.
The accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement present proposals to be considered at the Annual Meeting.
The Board of Directors recommends that you vote FOR the election to the
Board of the two current Directors who are standing for re-election (Proposal
1), vote FOR the ratification of the Board's selection of PricewaterhouseCoopers
LLP as the Fund's independent accountants for its 2000 fiscal year (Proposal 2),
and vote AGAINST the proposal pursuant to the Fund's Articles of Incorporation
to convert the Fund to an open-end fund and to adopt an amendment and
restatement of the Articles of Incorporation to effectuate the proposal
(Proposal 3).
This meeting will also give you an opportunity to hear a report on the
Fund and to discuss other matters of interest to you as a shareholder.
We hope that you will be able to attend the meeting. Whether or not you
plan to attend, please complete, date, sign and mail the enclosed proxy card to
assure that your shares are represented at the meeting.
MARTIN E. ZWEIG,
Chairman of the Board
and President
<PAGE>
The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 22, 2000
--------------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders (the "Meeting") of The Zweig Total
Return Fund, Inc., a Maryland corporation (the "Fund"), will be held Monday, May
22, 2000, at 1:30 P.M. at The St. Regis Hotel, located at 2 East 55th Street
(between Fifth and Madison Avenues), New York, New York for the following
purposes, all of which are more fully described in the accompanying Proxy
Statement:
1. ELECT DIRECTORS:
To vote upon the election of two Directors to serve until the Annual
Meeting of Shareholders in 2003;
2. INDEPENDENT ACCOUNTANTS:
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Fund for the year ending December 31, 2000;
3. CONVERSION TO OPEN-END INVESTMENT COMPANY:
To vote on a proposal pursuant to the Fund's Articles of
Incorporation to convert the Fund to an open-end investment company
and to adopt an amendment and restatement of the Articles of
Incorporation to effectuate the proposal; and
4. OTHER BUSINESS:
To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February 28,
2000 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Meeting or any postponement or adjournment thereof. The
enclosed proxy is being solicited on behalf of the Board of Directors.
By Order of the Board of Directors of
The Zweig Total Return Fund, Inc.
MARTIN E. ZWEIG,
Chairman of the Board
New York, New York
April __, 2000
- --------------------------------------------------------------------------------
IMPORTANT:
You are invited to attend the Meeting. Whether or not you plan to attend the
Meeting in person, you are requested to complete, date and sign the enclosed
proxy card and return it promptly in the envelope provided, which is addressed
for your convenience and requires no postage if mailed in the United States.
Your prompt return of the enclosed proxy card may save the Fund the necessity
and expense of further solicitations to assure a quorum at the Meeting. A Proxy
will not be required for admission to the Meeting.
- --------------------------------------------------------------------------------
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The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
--------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 22, 2000
--------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The Zweig Total Return Fund,
Inc., a Maryland corporation (the "Fund"), for use at the Annual Meeting of
Shareholders to be held at The St. Regis Hotel, located at 2 East 55th Street,
New York, New York on Monday, May 22, 2000, at 1:30 P.M., and at any and all
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting dated April __, 2000.
If the accompanying form of proxy is properly executed and returned in
time to be voted at the Meeting, the shares will be voted in accordance with the
instructions marked by the shareholder. Executed proxies that are unmarked will
be voted (1) "for" the election of the two nominees of the Board of Directors as
Directors of the Fund, (2) "for" the proposal to ratify the Board of Directors'
selection of PricewaterhouseCoopers LLP as independent accountants of the Fund
for the year ending December 31, 2000, and (3) "against" the proposal submitted
for consideration pursuant to the Fund's Articles of Incorporation to convert
the Fund to an open-end investment company and to adopt amendments to the
Articles of Incorporation necessary or desirable to effectuate the proposal. A
shareholder can revoke the proxy prior to its use by appearing at the Meeting
and voting in person, by giving written notice of such revocation to the
Secretary of the Fund, or by returning a subsequently dated proxy.
The election of Directors (Proposal 1) requires a plurality of the votes
cast at the Meeting. The ratification of the selection of the independent
accountants (Proposal 2) requires the affirmative vote of a majority of the
votes cast at the Meeting. The adoption of the proposal to convert the Fund to
an open-end investment company (Proposal 3) requires the affirmative vote of a
majority of the outstanding shares of the Fund entitled to vote on such
proposal. The presence in person or by proxy of shareholders entitled to vote a
majority of the outstanding shares will constitute a quorum. Shares represented
by proxy or in person at the Meeting, including shares represented by proxies
that reflect abstentions and broker non-votes (hereinafter defined), will be
counted as present in the determination of a quorum. With respect to Proposals 1
and 2, an abstention does not constitute a vote "for" or "against" and will be
disregarded in calculating the votes cast as to such matter, and "broker
non-votes" (i.e., where a broker or nominee submits a proxy specifically
indicating the lack of discretionary authority to vote on a matter) will be
treated in the same manner as abstentions. With respect to Proposal 3, the
adoption of which requires the affirmative vote of a majority of the Fund's
outstanding shares, an abstention or broker non-vote will have the effect of a
vote "against" the matter.
The Board of Directors of the Fund has fixed the close of business on
February 28, 2000 as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting. As of the record date,
90,600,166 shares of the Fund's common stock were
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outstanding. To the best of the Fund's knowledge, no person beneficially owns
more than five percent of the outstanding shares of the Fund's common stock.
The Annual Report of the Fund for the year ended December 31, 1999,
including financial statements, has been mailed to shareholders of record at the
close of business on that date, and to persons who became shareholders of record
between that time and the close of business on February 28, 2000.
The Fund will furnish, without charge, another copy of the Fund's December
31, 1999 Annual Report to any shareholder who requests it by contacting the
Fund's Administrator, Phoenix Equity Planning Corp., 100 Bright Meadows Blvd.,
P.O. Box 2020, Enfield, Connecticut 06083-2200, Attention: Shareholder Services;
Toll-free telephone number 1-800-272-2700.
This Proxy Statement and the accompanying form of proxy will be first sent
to shareholders on or about April __, 2000.
PROPOSAL 1
ELECTION OF DIRECTORS
The members of the Board of Directors of the Fund are divided into three
classes with the term of office of one class expiring each year. At the
forthcoming Annual Meeting, two Directors will be elected to serve a three-year
term (until the third succeeding Annual Meeting in 2003). Unless authority to
vote for the election of Directors is withheld, the enclosed proxy will be voted
for the election of the nominees named below. While management has no reason to
believe that the nominees will not be available as candidates, should such a
situation arise, proxies may be voted for the election of such other persons as
a Director, as the holders of the proxies may, in their discretion, determine.
The Fund's Board of Directors has appointed a Nominating Committee which
makes annual recommendations as to the individuals to be nominated by the Fund's
Board of Directors for election as Directors at the forthcoming Annual Meeting
and selects candidates for election by the Board of Directors to fill any
vacancies in the Board of Directors, including those resulting from an increase
in the number of Directors. The Fund's Nominating Committee consists of at least
two Directors who are not "interested persons" (as defined in the Investment
Company of 1940, as amended (the "1940 Act")) of the Fund or its investment
adviser.
Based on the recommendations made by the Fund's Nominating Committee at
its meeting held in February 2000, the Board of Directors of the Fund has
nominated Charles H. Brunie and James B. Rogers, Jr., who are presently
Directors of the Fund, for re-election to the Board of the Fund, to each serve
until the third succeeding Annual Meeting in 2003.
Background information with respect to the current Directors appears
below.
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Shares
Business Experience of Fund
Name, Address and Age(1) During the Past Five Years Owned(2)
------------------------ -------------------------- --------
Martin E. Zweig* ........... Chairman of the Board and President 85,364(3)
900 Third Avenue of the Fund since 1988; President
New York, New York 10022 of Zweig Consulting LLC (the
57 "Sub-Adviser") and Phoenix-Zweig
Trust; Chairman of the Board and
President of The Zweig Fund, Inc.
since 1986; Managing Director of
Zweig-DiMenna Associates LLC;
President of Zweig-DiMenna
International Managers, Inc.,
Zweig-DiMenna Associates, Inc. and
Gotham Advisors, Inc.; Shareholder,
Watermark Securities, Inc.;
formerly President and Director of
Zweig Total Return Advisors, Inc.
and of Zweig Advisors Inc.;
formerly Chairman of Zweig/Glaser
Advisers and Euclid Advisors LLC;
Member of the Undergraduate
Executive Board of The Wharton
School, University of Pennsylvania;
Trustee of the Manhattan Institute.
Charles H. Brunie .......... Director of the Fund since 1988; 14,346
21 Elm Rock Road Director of The Zweig Fund, Inc.
Bronxville, NY 10708 since 1998; Chairman Emeritus of
69 Oppenheimer Capital; and Chairman
Emeritus, Board of Trustees of the
Manhattan Institute.
Elliot S. Jaffe ............ Director of the Fund since 1988; 1,000
30 Dunnigan Drive Director of The Zweig Fund, Inc.
Suffern, NY 10901 since 1988; Chairman and Chief
73 Executive Officer of The Dress
Barn, Inc.; Director of National
Retail Federation; Director of
Shearson Appreciation Fund;
Director of Shearson Managed
Governments, Inc.; Director of
Shearson Income Trust; Director of
Shearson Lehman Small
Capitalization Fund; Director of
Stamford Hospital Foundation;
Member of the Board of Overseers of
The School of Arts and Sciences,
University of Pennsylvania; Trustee
Teachers College, Columbia
University.
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Shares
Business Experience of Fund
Name, Address and Age(1) During the Past Five Years Owned(2)
------------------------ -------------------------- --------
Alden C. Olson ............. Director of the Fund since 1996; 2,000
2711 Ramparte Path Director of The Zweig Fund, Inc.
Holt, Michigan 48842 since 1996; Chartered Financial
71 Analyst; formerly Director of First
National Bank of Michigan; formerly
Professor of Financial Management,
Investments at Michigan State
University.
James B. Rogers, Jr. ....... Director of the Fund since 1988; 1,563
352 Riverside Drive Director of The Zweig Fund, Inc.
New York, NY 10025 since 1986; Private Investor;
57 Chairman of Beeland Interests;
Regular Commentator on CNBC; Author
of "Investment Biker: On the Road
with Jim Rogers"; Director of
Emerging Markets Brewery Fund;
Director of Levco Series Trust;
Sometimes Visiting Professor at
Columbia University; Columnist for
WORTH Magazine.
Anthony M. Santomero ....... Director of the Fund since 1988; 2,000
Steinberg-Dietrich Hall Director of The Zweig Fund, Inc.
Wharton School since 1986; Richard K. Mellon
University of Pennsylvania Professor of Finance, The Wharton
Philadelphia, PA 19104 School, University of Pennsylvania;
53 Director of Wharton Financial
Institution Center; Trustee of
Blackrock Funds; formerly Director
of Municipal Fund for New York
Investors; formerly Director of
Municipal Fund for California
Investors; formerly Trustee of
Compass Capital Funds.
- ----------
* Director considered to be an "Interested Person," as that term is
defined in the 1940 Act. Dr. Zweig is considered an interested person of the
Fund because, among other things, he is an officer of the Fund. On March 1,
1999, the shareholders of Zweig Total Return Advisors, Inc. sold their shares of
common stock in such adviser to Phoenix Investment Partners, Ltd. ("Phoenix"), a
large, diversified financial services organization which is a 60%-owned indirect
subsidiary of Phoenix Home Life Mutual Insurance Company. In such transaction,
Dr. Zweig sold 50.853 shares of the common stock of Zweig Total Return Advisors,
Inc., representing 50.853% of such adviser's outstanding common stock, to
Phoenix for the aggregate sum of $10,143,036.00 (without giving effect to
certain contingent payments).
(1) The terms of the Directors who are not nominees at the current annual
meeting are: Professors Olson and Santomero and Dr. Zweig who will continue in
office until the annual meeting in 2001 and Mr. Jaffe who will continue in
office until the annual meeting in 2002.
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(2) The information as to beneficial ownership is based on statements
furnished to the Fund by the Directors and reflects ownership as of January 1,
2000. Except as otherwise indicated, each person has sole voting and investment
power with respect to the shares listed as owned by him. Fractional shares are
rounded off to the nearest whole share. The Directors and officers of the Fund,
as a group, beneficially own less than 1% of the outstanding shares of each
Fund.
(3) Includes 914 shares owned by Dr. Zweig's individual retirement
account, as to which he has sole voting and investment power.
Compensation of Directors and Officers
During the year ended December 31, 1999, the Fund paid Directors' fees,
aggregating $92,000 to the Directors who were not interested persons of the Fund
or its investment adviser. The Fund pays each Director who is not an interested
person of the Fund or its investment adviser an annual fee of $10,000 and a fee
of $1,500 for attendance at each meeting of the Board of Directors or a
committee of the Board. The Fund also reimburses its Directors for their actual
out-of-pocket expenses relating to attendance at such meetings.
Set forth below is the compensation paid by the Fund and The Zweig Fund,
Inc. to current Directors for the year ended December 31, 1999. The Fund does
not pay any pension or retirement benefits to its Directors.
Aggregate Total Compensation
Compensation From the Fund and The
Directors From the Fund Zweig Fund, Inc.
--------- ------------- ----------------
Charles H. Brunie .................. $16,000 $32,000
Elliot S. Jaffe .................... $19,000 $38,000
Alden C. Olson ..................... $19,000 $38,000
James B. Rogers, Jr. ............... $17,500 $35,000
Anthony M. Santomero ............... $20,500 $41,000
Jeffrey Lazar, Executive Vice President and Treasurer of the Fund, and
Christopher Capano, Vice President and Assistant Treasurer of the Fund, are the
only executive officers of the Fund not disclosed in the above listing of
Directors. Mr. Lazar has been an officer of the Fund since its inception in
1988. Mr. Lazar is 40 years old and was, on January 1, 2000, the beneficial
owner of 3,173 shares of the common stock of the Fund, of which 502 shares are
owned through his individual retirement account. Mr. Lazar is Senior Vice
President of Zweig/Glaser Advisers LLC (the "Adviser"). Mr. Capano has worked
for the Adviser and its affiliates since 1994 and has been an officer of the
Fund since 1996. Mr. Capano is 32 years old and was, on January 1, 2000, the
beneficial owner of 58 shares of the common stock of the Fund.
Committees and Board of Directors' Meetings
The Fund's Board of Directors has a standing Audit Committee, which
consists of Messrs. Jaffe, Olson and Santomero, each of whom is not an
interested person of the Fund. The Audit Committee's primary functions include
recommending the Fund's independent accountants for selection by the Board and
ratification by the shareholders and reviewing the scope of the annual audit
conducted by such accountants.
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Messrs. Brunie, Rogers and Santomero, each of whom is not an interested
person of the Fund, are members of the Nominating Committee of the Board of
Directors of the Fund. The Fund's Nominating Committee considers candidates for
election to fill vacancies on the Board of Directors, and will consider
recommendations from shareholders for possible nominees. Such recommendations
should be accompanied by a biography of the recommended candidate and should be
submitted to the Secretary of the Fund. The Fund has no standing compensation
committee.
The Board of Directors of the Fund held four meetings during the year
ended December 31, 1999, and also held one meeting in February 2000. The Fund's
Nominating Committee held one meeting during the year ended December 31, 1999
and met in advance of the February 2000 Board meeting, at which time the
Nominating Committee recommended the nominees for re-election to the Board. The
Fund's Audit Committee held two meetings during the year ended December 31, 1999
and one meeting in February 2000. Each of the nominees and each of the Directors
whose terms will continue after the forthcoming annual meeting attended at least
75% of the total number of Board meetings and his respective committee meetings
held during the 1999 year.
The Board of Directors of the Fund recommends that shareholders vote FOR
the re-election of the nominees.
PROPOSAL 2
RATIFICATION OR REJECTION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
At the recommendation of the Audit Committee of the Fund, the Board of
Directors of the Fund, including a majority of the Directors who are not
interested persons of the Fund, has selected the firm of PricewaterhouseCoopers
LLP to serve as independent accountants of the Fund for the year ending December
31, 2000. Pursuant to the provisions of the 1940 Act, this selection is subject
to the right of the Fund's shareholders, by vote of a majority of the
outstanding voting securities of such Fund (which is defined in the 1940 Act to
mean the lesser of either (a) the vote of 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
are present or represented by proxy, or (b) the vote of more than 50% of the
outstanding shares of the Fund) at any meeting called for the purpose of voting
on such action, to terminate such employment immediately without penalty. The
Board's selection is submitted to the shareholders for ratification or
rejection.
Services performed by PricewaterhouseCoopers LLP during the most recent
year included audit of the financial statements of the Fund and services related
to filings with the Securities and Exchange Commission. The Fund knows of no
direct or indirect financial interest of such firm in the Fund.
A representative of PricewaterhouseCoopers LLP is expected to be present
at the Meeting and will have the opportunity to make a statement if he or she so
desires and to respond to questions from shareholders. Ratification of the
selection of PricewaterhouseCoopers LLP requires the affirmative vote of a
majority of the votes cast at the Meeting.
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The Board of Directors recommends that shareholders vote FOR the
ratification of the selection of PricewaterhouseCoopers LLP as independent
accountants for the year ending December 31, 2000.
PROPOSAL 3
PROPOSAL PURSUANT TO THE FUND'S ARTICLES OF INCORPORATION TO CONVERT THE FUND
FROM A CLOSED-END INVESTMENT COMPANY TO AN OPEN-END INVESTMENT COMPANY AND TO
ADOPT AN AMENDMENT AND RESTATEMENT OF THE ARTICLES OF INCORPORATION TO
EFFECTUATE THE CONVERSION PROPOSAL
I. Background of the Proposal
The Fund has operated as a closed-end management investment company since
it began operations in September 1988. As a closed-end fund, the Fund's shares
are bought and sold in the securities markets at prevailing prices, which may be
equal to, less than, or greater than its net asset value. 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 (determined on the basis of the discount as of the end of the last trading
day in each week during such quarter), 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")
and amendments to the Fund's Articles of Incorporation required to effectuate
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
vote on the proposal. During the fiscal quarter ended March 31, 2000, the Fund's
shares traded at an average discount from net asset value of ___%, determined in
accordance with the provisions of the Fund's Articles of Incorporation.
Accordingly, the Fund is required to submit the Conversion Proposal and
amendments to the Fund's Articles of Incorporation required to effectuate such
proposal for shareholders' consideration.
For the reasons discussed below, the Board of Directors unanimously
recommends that shareholders vote AGAINST the Conversion Proposal and adoption
of the amendment and restatement of the Articles of Incorporation to effectuate
the Conversion Proposal.
At a meeting held on March 22, 2000, the Fund's Board of Directors
considered whether or not to recommend to shareholders that the Conversion
Proposal be approved. At the meeting, the Board reviewed information respecting
the potential advantages and disadvantages of operating as an open-end fund, the
Fund's performance to date as a closed-end fund, the historical relationship
between the market price of its shares and their net asset value, and the
possible effects of conversion on the Fund.
The Board believes that conversion to an open-end investment company could
expose the Fund to the risk of a possible loss of economies of scale and an
increase in the Fund's expenses as a percentage of net asset value if there is a
substantial reduction in its size, as described in "Potential Open-End Fund
Disadvantages and/or Closed-End Fund Advantages" below. The Board believes that
conversion also presents the possibility that the functioning of the Fund's
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portfolio management and its investment performance, as described under "Impact
on Portfolio Management" below, could be adversely affected.
The Board took into account the fact that conversion would eliminate the
possibility of the Fund's shares ever trading at a discount to net asset value
and the likelihood that, if the Fund were open-ended, shareholders could realize
a short-term gain. The Board also took note, however, that from the Fund's
commencement of operations through February 29, 2000, the Fund's shares have
typically traded at a premium, and, notwithstanding the more recent discounts,
the shares have, during that period, traded at an average premium of 4.5%. This
premium compares favorably to the average discount of 5.9% and 1.9%,
respectively, of closed-end equity funds and closed-end fixed income funds. The
graph below reflects the changes in premiums and discounts at which the Fund's
shares traded from the Fund's commencement of operations through February 29,
2000.
[INSERT CHART ATTACHED AS ATTACHMENT I]
In addition, the Adviser furnished information to the Board demonstrating
that during the last three months of 1999 and the first two months of this year,
the Fund and all but a few other U.S. exchange-traded closed-end equity and
fixed income funds experienced substantial erosion of their market premiums
and/or a widening of their market discounts. In the Adviser's view, this
phenomenon is attributable in large part to the current shift in investor
sentiment away from value stocks in favor of technology stocks and a prolonged
period of falling prices in the bond market. A reversal in these trends could,
in the Adviser's view, result in a diminution of the market discount at which
the Fund's shares currently trade.
At this time the Board does not believe that eliminating the possibility
of a discount justifies the risk of reduced size, increases in the Fund's
expense ratio and potential adverse effect on its investment performance that
conversion would entail. Accordingly, the Board, including all of the
independent directors, does not believe that conversion of the Fund to an
open-end investment company is in the best interests of the Fund and its
shareholders.
If the Conversion Proposal is not approved by shareholders, the Fund would
continue as a closed-end investment company, and the Board will continue to
monitor the market discount from net asset value, if any, at which the Fund's
shares trade and will consider whether any other action should be taken with
respect to such discount. The Board will continue to have the right to consider,
as it has in the past, repurchases of the Fund's shares on the open market or
tender offers to the Fund's shareholders when the shares are trading at a
discount from net asset value. 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 because of open market repurchases or tender offer purchases
or otherwise, the average discount from net asset value is decreased 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.
If the Fund's shares continue to trade at an average discount of 10% or
more from net asset value during a subsequent quarter as determined in
accordance with the Fund's Articles of Incorporation, the Board of Directors and
the Fund's shareholders will again have an opportunity to consider converting
the Fund to an open-end fund. Pursuant to the Articles of Incorporation, a
subsequent Conversion Proposal, with respect to such quarter, and related
charter amendments that can be approved by the affirmative vote of a majority of
the outstanding shares of the Fund
10
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would be required to be submitted to shareholders. The 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.
Certain of the factors considered by the Board in making its
recommendation are discussed in more detail below.
II. Advantages and Disadvantages of Conversion Proposal
The Fund is currently a closed-end fund. As such, it neither redeems its
outstanding shares of stock nor continuously offers new stock for sale; thus, it
operates with a relatively fixed capitalization. The Fund's shares of stock are
traded on the New York Stock Exchange (the "NYSE"). Open-end funds (also known
as "mutual funds") issue redeemable shares entitling stockholders to tender for
their proportionate share of a fund's net asset value. Also, open-end funds
generally issue new shares at the fund's net asset value.
Potential Open-End Fund Advantages and/or Closed-End Fund Disadvantages
(1) Redeemability of Shares; Elimination of Discount. Shareholders of an
open-end fund have the right to redeem their shares at any time (except in
certain circumstances as authorized by the 1940 Act) at the net asset value of
such shares (less any applicable redemption charges), and such redemption
payment must be made within 7 days. The ability to obtain net asset value for
their shares will constitute an immediate significant benefit to shareholders of
the Fund to the extent that shares are trading at a discount to net asset value.
(2) Shareholder Services. Open-end funds typically provide more services
to stockholders than closed-end funds. One service that is frequently offered by
open-end funds is an exchange privilege which enables shareholders to transfer
their investment from one fund into another fund which is part of a family of
open-end funds, at little or no cost to the shareholders. This permits the
exchange of shares at relative net asset value when the holder's investment
objectives change. Other services that could be offered include use of the Fund
for retirement plans and permitting purchases and sales of shares in convenient
amounts. There are, of course, additional costs for these services which must be
weighed against the anticipated benefit of the particular service. There can be
no assurance that any such services would be made available if the Conversion
Proposal were approved.
(3) Raising Capital. A closed-end fund trading at a discount may not be
able to raise capital through share sales (other than through a rights offering)
when it believes further investment would be advantageous, because the 1940 Act
restricts the ability of a closed-end fund to sell its shares at a price below
net asset value. Open-end funds, on the other hand, are priced at net asset
value and therefore can sell additional shares at any time. This ability to
raise new money can achieve greater economies of scale and improve investment
management although, as noted below, this may not occur at the most opportune
times.
(4) Elimination of Annual Shareholder Meetings. As a closed-end fund
listed on the NYSE, the Fund is subject to NYSE rules requiring annual meetings
of stockholders. Unlike the Fund, open-end funds are not required to hold annual
shareholder meetings, except in special circumstances where shareholder approval
is required under the 1940 Act. However, pursuant to the Fund's charter, as
discussed under "Measures to be Adopted in the Event the Fund Becomes an
Open-End Fund" below, if the Conversion Proposal were approved, the Fund may
operate as
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an open-end fund with a classified board, and, notwithstanding the conversion to
open-end status, annual shareholder meetings may, therefore, continue to be held
because declassifying the Board requires an affirmative vote of 75% of the
outstanding shares of the Fund.
Potential Open-End Fund Disadvantages and/or Closed End Fund Advantages
(1) Impact on Portfolio Management. While closed-end funds can be fully
invested, open-end funds are subject to periodic inflows and outflows of cash
that can complicate portfolio management. In particular, open-end funds may be
subject to pressure to sell portfolio securities at disadvantageous times in
order to satisfy redemption requests. In addition, open-end funds may be limited
in their ability to invest 100% of the fund's assets in portfolio securities
because of the need to maintain cash reserves to provide for shareholder
redemptions in uncertain amounts. The level of redemptions may be particularly
high immediately following conversion to open-end status and therefore,
initially, the cash reserves may have to be substantial. It is not expected,
however, that the inability of an open-end fund to be fully invested would
necessarily hinder the Adviser's ability to manage the Fund in the future
because the Fund has, from time to time, maintained substantial cash positions.
Also, although open-end funds generally maintain that their ability to
sell shares at any time (resulting from their being priced at net asset value)
produces efficiencies, others have suggested that large net purchases often
occur around market highs and net redemptions around market lows, inopportune
times to invest or liquidate portfolio positions, respectively. In a falling
market situation, for example, redemptions increase and liquidations in the
open-end fund portfolio must increase to meet those redemptions. In the event
temporary investments and borrowings are exhausted, the result may be that the
more liquid blue chip securities will be sold, leaving the open-end fund with
the less-liquid securities in the fund's portfolio which are not as well suited
to meeting future redemptions or changes in investment strategy. If the Fund
were to convert to an open-end fund, the Fund could be impacted accordingly.
(2) Effect of Redemptions. Substantial redemptions could result in an
increase in the Fund's expense ratio. In particular, a reduction in size of the
Fund would result in the fixed expenses of the Fund being spread over a smaller
asset base, thereby increasing the per-share effect of those expenses.
Significant redemptions could also increase the Fund's portfolio turnover rate
above its normal levels, thereby increasing Fund expenses. Net redemptions are
probable immediately after open-ending the Fund, although the redemption fee
mentioned below may reduce the number of redemptions that would otherwise occur.
While the Fund's portfolio securities are sufficiently liquid to satisfy
anticipated levels of redemption upon conversion without impeding the Adviser's
management of the Fund in the long term as an open-end fund, continuous
redemptions could potentially restrict the Adviser's ability to choose
investments purely in accordance with the Fund's investment strategy. Redemption
requests could, for example, require the Fund's liquidation of a portion of its
investment portfolio at a time when independent investment judgment might not
dictate such action.
Additionally, redemptions would result in increased brokerage expense and
increased recognition of taxable gains and losses. These redemptions could
reduce the Fund to a smaller size than is economically viable. If the Fund
decreased in size, the expense ratio may increase because the cost of many
services may remain the same although the size of the Fund will have decreased.
Of course, if the size of the Fund increases, the Fund's expense ratio may be
reduced.
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(3) Distribution Costs. If the Fund converts to open-end status, it will
need to have an effective distribution system in place in order to avoid erosion
in its asset base through redemptions. The distribution and marketing of
open-end funds involve additional costs. These costs may be paid either by
purchasers (in the case of a front-end sales charge) or by current shareholders
(in the case of a plan of distribution adopted under Rule 12b-1 (a "12b-1
Plan"), which would require approval by shareholders). In the event that the
Conversion Proposal is approved by shareholders, it is expected that the Board
would consider the implementation of a 12b-1 Plan providing for payments by the
Fund at an annual rate of .25% of the Fund's average net assets. Redemption fees
and contingent deferred sales charges may also be employed.
(4) Additional Costs of Operating an Open-End Fund. Open-end funds are
generally more expensive to operate and administer than closed-end funds. The
Fund's per-share expense ratio would substantially increase for the reasons
mentioned above under "Effect of Redemptions" and "Distribution Costs" and the
fact that transfer agency expenses are generally higher for an open-end fund. In
the event the Fund's assets remain unchanged, and assuming a Rule 12b-1 fee of
.25% and transfer agent expenses commensurate with those of other Phoenix funds,
it is estimated that the Fund's per-share expense ratio would increase from its
current level of .97% to 1.44% and, assuming the same distribution and transfer
agent expenses, in the event of a 30%, 50% or 60% decrease in average net
assets, the Fund's per-share expense ratio would increase to 1.46%, 1.49% and
1.51%, respectively.
(5) Taxes. If the Fund were to experience substantial redemptions of its
shares following the conversion to an open-end investment company, it would
likely be required to sell portfolio securities and incur increased transaction
costs in order to raise cash to meet such redemptions. Any sale of portfolio
securities effected to fund redemption obligations would be a taxable
transaction.
(6) Automatic Dividend Reinvestment and Cash Purchase Plan. Open-end fund
dividend reinvestment plans typically provide for the reinvestment of income,
dividends and capital gains distributions in shares of the fund at net asset
value. In contrast, as a closed-end investment company, the Fund's current Plan
permits shareholders to elect to reinvest their distributions on a different
basis than would be the case if the Fund was an open-end investment company.
Currently, if the Directors declare a distribution payable either in shares or
in cash, as shareholders may have elected, then participants in the Plan will
receive the equivalent of shares determined as follows: when Fund shares are
trading at or above net asset value on the record date for the distribution,
participants will be issued shares at the higher of their net asset value or 95%
of their market value. If Fund shares are trading at a discount from net asset
value at such time, or if the Fund should declare a distribution payable only in
cash, the agent for the participants will buy shares of the Fund in the open
market, on the NYSE or elsewhere, for the participants' account. This permits a
reinvesting shareholder to benefit from the agent's purchase of additional
shares at a discount. However, if before the agent for the participants
completes its purchases, the market price exceeds the net asset value of the
shares, the agent 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. Thus, reinvesting shareholders
are issued shares at the higher of net asset value or 95% of the market price.
This is an advantage that is not offered by open-end investment companies where
distributions are reinvested at net asset value. Consequently, participants in
the Plan would lose the compounding benefit of reinvesting their distributions
at a price below net asset value (when Fund shares are
13
<PAGE>
trading at a discount) and, thereby, the opportunity to realize a profit (to the
extent that Fund shares subsequently trade at a premium.). The positive result
of reinvesting at a price below net asset value can be significant, particularly
given the compounding effect over time.
(7) Capital Gains. The treatment of capital gains required under U.S. tax
law could be very onerous to non-redeeming shareholders in the event of the
Fund's conversion to an open-end fund. To raise cash to satisfy redeeming
shareholders, the Fund may be required to sell portfolio securities to satisfy
redemption requests. If the Fund's basis in the portfolio securities sold is
less than the sale price obtained, net capital gain may be realized. U.S. tax
law imposes both an income tax and an excise tax on net capital gain realized by
closed-end and open-end funds unless the fund distributes net capital gain to
all shareholders, in which case the shareholders would be subject to tax on such
gain. In the event of the Fund's conversion to an open-end fund, two negative
results may occur: first, because the Fund would sell securities, non-redeeming
shareholders would recognize a greater amount of capital gain than would be the
case if the Fund held such securities; and, second, to make the capital gains
distribution necessary to avoid capital gain recognition by the Fund, the Fund
may need to sell additional portfolio securities, thereby reducing further the
size of the Fund and, possibly, creating additional capital gain.
(8) Conversion Costs. The process of converting the Fund to an open-end
fund would involve substantial printing, legal, other professional costs and
other expenses of establishing a new structure. These costs, many of which would
be non-recurring, include costs associated with the preparation of a
registration statement and prospectus as required by federal securities laws and
the payment of fees in connection with notice filings under state securities
laws. The Fund estimates that these costs, which would be paid by the Fund,
would be at least $300,000, representing approximately .04% of the Fund's
current net asset value.
(9) Delisting from New York Stock Exchange. The Fund's shares are
currently listed on the NYSE. It is believed in some investment circles that a
fund listing on a U.S. stock exchange, and in particular the NYSE, is an asset,
especially in terms of attracting non-U.S. investors. In addition, certain
investors, such as pension funds, have internal restrictions on the amount of
their portfolio which can be invested in non-listed securities. Due to their
redemption features, open-end funds are not traded on exchanges. Conversion to
an open-end fund would require immediate de-listing of the Fund from the NYSE,
and thus the advantage of being a closed-end fund would be lost.
The Fund is currently exempt from state securities regulation because of
its NYSE listing. Upon delisting, the Fund would be required to make state
registration filings and pay state fees. The Fund will thus save the annual NYSE
fee of $78,000, but will as a result of de-listing have to pay the state blue
sky fees, which could range from $30,000 to $50,000 annually, depending on the
channel of distribution of the Fund's shares.
III. Measures to be Adopted in the Event the Fund Becomes an Open-End Fund
If Proposal Three is approved by the shareholders, the Board of Directors
will convene and consider the method and time period for the conversion of the
Fund into an open-end investment company. It is contemplated that among the
matters the Board of Directors would proceed to consider would be fixing the
rate and period of application of any redemption fee as authorized by the
Articles of Amendment and Restatement and referred to in the description of
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<PAGE>
Proposal Three. This redemption fee would be similar to that imposed by other
funds which have converted into open-end funds and is a method of reducing the
number of immediate redemptions and offsetting the cost of liquidations. The
Board would also consider whether to pay for redeemed shares partly or entirely
in securities. In addition, the Board would need to consider the details of the
system for the classification and distribution of the Fund's shares, including
the approval of an appropriate distribution contract for the distribution of the
Fund's shares to become effective upon the Fund's conversion to an open-end
investment company.
Certain aspects of the operation of the Fund subsequent to its conversion
to open-end form would have to be approved by the Fund' shareholders, and it is
expected that a special meeting of shareholders would be scheduled for that
purpose as soon as practicable. These matters would include considering making
any changes in the Fund's investment management agreement considered appropriate
for an open-end fund, and considering the adoption of a Rule 12b-1 Plan
consistent with the system selected by the Board of Directors for future
distribution of the Fund's shares. Additionally, the Fund's Charter would be
proposed to be amended to declassify the Board of Directors. Currently, the
Fund's Articles of Incorporation provide that the Board of Directors be divided
into three classes of Directors. Each Director serves for three years with one
class being elected each year (each such election requiring a meeting of
shareholders.) The classified Board is considered an "anti-takeover" measure
which would not be typical of an open-end fund. Unlike the vote required to
approve Proposal Three, which is a majority of the outstanding shares of the
Fund, the affirmative vote of at least 75% of the outstanding shares of the Fund
is required to declassify the Fund's Board. Consequently, if Proposal Three is
approved, the Fund would operate as an open-end Fund with a classified Board and
annual shareholder meetings would be required to be held, unless the Fund's
Charter is subsequently amended to declassify the Board.
Furthermore, in order to reduce administrative burdens incurred in
monitoring numerous small accounts, it is expected that the Fund would adopt
requirements that an initial investment in Fund shares be in a minimum amount.
If Proposal Three is approved by the shareholders, the Fund will file, at
the time described below, Articles of Amendment and Restatement with the State
Department of Assessments and Taxation of Maryland, which are in the form
approved by the Board of Directors at their meeting on March 22, 2000, and
change the Fund's subclassification under the 1940 Act from a closed-end
investment company to an open end investment company. A copy of the Articles of
Amendment and Restatement (marked to reflect changes from the current Articles
of Incorporation) is attached hereto as Exhibit A.
Under Maryland law and the Articles of Amendment and Restatement, the
Board of Directors would have the authority to increase the number of shares of
any class, to reclassify issued and unissued shares and to authorize the
issuance of additional classes of stock, in each case without the consent of
shareholders. The Articles of Amendment and Restatement would amend the current
Articles of Incorporation to: provide for class voting provisions (shareholders
will generally continue to have one vote on each matter submitted for their vote
if the Fund converts to open-end form); provide that the Fund's outstanding
common stock will be redeemable at the option of the shareholders; give the
Board the right to set standards for redemption (including the ability to impose
redemption or other charges, and to apply such charges to redemptions of shares
existing at the time the Articles of Amendment and Restatement become effective
without applying similar charges to other shares of the same class
15
<PAGE>
or other classes); permit the Board to redeem the shares of a shareholder under
various circumstances (including if the net asset value of the shares held by
any shareholder is less than a minimum amount); and permit the Board to
accomplish the automatic conversion of one class of shares into another class of
shares in the context of a multiple class structure. Furthermore, under the
Articles of Amendment and Restatement, the provision requiring submission to
shareholders of the Conversion Proposal in the event the Fund's shares trade at
an average discount from their net asset value of 10% or more for any fiscal
quarter, would be deleted (since that provision would be superfluous once the
Fund becomes open-ended). Another provision relating to open-ending (Article
VIII(1)), which would also become superfluous upon approval of the Conversion
Proposal, and various other provisions of the Fund's Articles of Incorporation
that may be described as "anti-takeover" provisions are not submitted for
amendment because the Board has determined that such submission is not necessary
at this time and because such amendments would require approval by the
affirmative vote of 75% of the outstanding shares of the Fund. The
"anti-takeover" provisions, the retention of which would not be particularly
desirable for an open-end fund, include provisions with respect to (i) a
classified Board of Directors, (ii) limiting the number of directors and their
removal, and (iii) mergers, major asset sales and dissolution.
The Articles of Amendment and Restatement would not be filed until the
Fund's registration statement under the Securities Act of 1933, as amended,
covering the offering of shares of the Fund and appropriate state securities law
qualifications had become effective. Preparation of the registration statement
would commence shortly after the adoption of the Conversion Proposal, and the
registration statement would be filed as soon as practicable, which should be
before the date of the special shareholders meeting. The Articles of Amendment
and Restatement would become effective at the time the conversion is
implemented.
For the foregoing reasons, the Board of Directors believes that,
notwithstanding the benefit which those shareholders who would wish to redeem
their shares over the short term would derive from open-ending the Fund, on
balance it would be in the best interests of the Fund and its shareholders for
the Fund to remain a closed-end fund at this time.
The Board of Directors recommends that shareholders vote AGAINST the conversion
of the Fund to an open-end investment company and the amendment and restatement
of the Articles of Incorporation to effectuate the Conversion Proposal.
INVESTMENT ADVISER, ADMINISTRATOR AND SUB-ADVISER
Zweig/Glaser Advisers LLC (the "Adviser") serves as the Fund's investment
adviser. The Adviser's principal business office is located at 900 Third Avenue,
New York, New York 10022. All of the Adviser's outstanding equity interests are
directly owned by Phoenix Investment Partners, Ltd. ("Phoenix"), a large,
diversified financial services organization which is a 60%-owned indirect
subsidiary of Phoenix Home Life Mutual Insurance Company.
Phoenix Equity Planning Corp. (the "Administrator") serves as the Fund's
administrator. The Administrator's principal business office is located at 100
Bright Meadows Blvd., P.O. Box 2020, Enfield, Connecticut 06083-2200. All of the
Administrator's outstanding equity interests are owned by Phoenix.
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Zweig Consulting LLC, which serves as the Fund's sub-adviser, performs
certain asset allocation research and analysis and provides such advice to the
Adviser. The Sub-Adviser's principal business office is located at 900 Third
Avenue, New York, New York 10022. Dr. Zweig is the President and principal owner
of the Sub-Adviser. The Sub-Adviser's fees are paid by the Adviser.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires, among other
persons, the officers and Directors of the Fund and the Adviser to file reports
of ownership and changes in ownership of the shares of common stock of the Fund
with the Securities and Exchange Commission and the New York Stock Exchange. The
Securities and Exchange Commission's regulations also require such reporting
persons to furnish the Fund with copies of all Section 16(a) forms they file.
Based on its review of these reports and on written representations from the
reporting persons that no other reports were required, the Fund believes that,
during the year ended December 31, 1999, there was compliance with all Section
16(a) reporting requirements applicable to its reporting persons.
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ADDITIONAL INFORMATION
Other Matters
The Board of Directors knows of no matters to be presented at the Meeting
other than those specified in the accompanying Notice of Annual Meeting.
However, if any other matter is properly presented before the Meeting, it is the
intention of the persons named as proxies to vote in accordance with their best
judgment.
Expenses
The Fund will bear the expense of the Meeting, including preparation,
printing and mailing of the enclosed form of proxy and accompanying Notice of
Annual Meeting and this Proxy Statement. The Fund, upon request, will reimburse
banks, brokers and others for their reasonable expenses in forwarding proxy
solicitation material to the beneficial owners of the Fund's common stock. In
order to obtain the necessary quorum at the Meeting, supplementary solicitation
may be made by mail, telephone or personal interviews by officers or employees
of the Fund and/or Adviser.
Vote Required
The election of Directors (Proposal 1) requires a plurality of the votes
cast at the Meeting. The ratification of the selection of the independent
accountants (Proposal 2) requires the affirmative vote of a majority of the
votes cast at the Meeting. The adoption of the proposal to convert the Fund to
an open-end investment company (Proposal 3) requires the affirmative vote of a
majority of the outstanding shares of the Fund entitled to vote on the proposal.
The following principles of Maryland law apply to the voting of shares of common
stock at the Meeting. The presence in person or by proxy of shareholders
entitled to vote a majority of the outstanding shares will constitute a quorum.
Shares represented by proxy or in person at the Meeting, including shares
represented by proxies that reflect abstentions and broker non-votes
(hereinafter defined), will be counted as present in the determination of a
quorum. With respect to Proposals 1 and 2, an abstention does not constitute a
vote "for" or "against" and will be disregarded in calculating the votes cast as
to such matter, and "broker non-votes" (i.e., where a broker or nominee submits
a proxy specifically indicating the lack of discretionary authority to vote on a
matter) will be treated in the same manner as abstentions. With respect to
Proposal 3, the adoption of which requires the affirmative vote of a majority of
the Fund's outstanding shares, an abstention or broker non-vote will have the
effect of a vote "against" the matter. It is anticipated that votes will be
tabulated by State Street Bank & Trust Company, the Fund's transfer agent.
Proposals for 2001 Meeting
Any proposals of shareholders that are intended to be presented at the
Fund's 2001 Annual Meeting of Shareholders must be received at the Fund's
principal executive offices no later than December 23, 2000, and must comply
with all other legal requirements in order to be included in such Fund's proxy
statement and form of proxy for that meeting.
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New York, New York By Order of the Board of
April __, 2000 Directors of
The Zweig Total Return Fund, Inc.
MARTIN E. ZWEIG,
Chairman of the Board
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EXHIBIT A
[Marked to reflect changes from the Fund's Articles of Incorporation]
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
THE ZWEIG TOTAL RETURN FUND, INC.
The Zweig Total Return Fund, Inc., a Maryland corporation, having its
principal office in Maryland in Baltimore City (hereinafter called the
"Corporation") hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is amended and as so amended is
restated in its entirety by striking out Articles I through X and inserting in
lieu thereof the following:
"ARTICLE I
The undersigned, Stuart B. Panish, whose post office address is 575
Madison Avenue, New York, New York 10022, being at least eighteen (18) years of
age does hereby act as an incorporator and form a corporation under and by
virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the corporation (herein referred to as the "Corporation") is
The Zweig Total Return Fund, Inc.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct, operate and carry on the business of an investment
company.
(2) To hold, invest and reinvest its assets in securities, commodities and
other investments or to hold part of all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(4) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force, and the enumeration
of the foregoing shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
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ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Prentice-Hall Corporation System, 11E Chase Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
the State of Maryland is The Prentice -Hall Corporation System, Maryland, a
Maryland corporation. The post office address of the resident agent is 11E Chase
Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation shall
have authority to issue is Five Hundred Million (500,000,000) shares, of the par
value of one-tenth of one cent ($.001) per share and of the aggregate par value
of Five Hundred Thousand Dollars ($500,000), all of which Five Hundred Million
(500,000,000) shares are designated Common Stock.
(2) The Corporation may issue fractional shares. Any fractional share
shall carry proportionately the rights of a whole share including, without
limitation, the right to vote and the right to receive dividends. The holder of
a fractional share shall not, however, have the right to receive a certificate
evidencing it.
(3) All persons who shall acquire shares of capital stock in the
Corporation shall acquire the same subject to the provisions of the Charter and
the By-Laws of the Corporation.
(4) No holder of stock of the Corporation by virtue of being such a holder
shall have any right to purchase or subscribe for any shares of the
Corporation's capital stock or any other security that the Corporation may issue
or sell (whether out of the number of shares authorized by the Charter or out of
any shares of the Corporation's capital stock that the Corporation may acquire)
other than a right that the Board of Directors in its discretion may determine
to grant.
(5) The Board of Directors shall have authority by resolution to classify
and reclassify any authorized but unissued shares of capital stock from time to
time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of the capital
stock.
(6) Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of the holders of a greater proportion of
the votes of all classes or of any class of stock of the Corporation, such
action shall be effective and valid if taken or authorized by the affirmative
vote of a majority of the total number of votes entitled to be cast thereon,
except as otherwise provided in the Charter.
(7) On each matter submitted to a vote of the stockholders, each holder of
a share of stock shall be entitled to one vote for each such share standing in
such holder's name upon the books of the Corporation regardless of the class
thereof, and all shares of all classes shall vote together as a single class;
provided, however, that (i) when the Maryland
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General Corporation Law or the Investment Company Act of 1940, as amended,
requires that a class vote separately with respect to a given matter, the
separate voting requirements of the applicable law shall govern with respect to
the affected class or classes: (ii) in the event that the separate vote
requirement referred to in (i) above applies with respect to one or more
classes, then, subject to (iii) below, the shares of all other classes shall
vote as one single class; and (iii) as to any matter, which, in the judgment of
the Board of Directors (which shall be conclusive and binding for all purposes),
does not affect the interests of a particular class, such class shall not be
entitled to any vote and only the holders of shares of the affected class or
classes shall be entitled to vote.
(8) To the extent permitted by law, each holder of shares of the
Corporation's stock shall be entitled to require the Corporation to redeem all
or any part of the shares of stock of the Corporation standing in the name of
the holder on the books of the Corporation, and all shares of stock issued by
the Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article VI(5)(v), less the
amount of any applicable redemption charge, deferred sales charge or other
amount imposed by the Board of Directors (to the extent consistent with
applicable law), subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with provisions of applicable law. The
Board of Directors may impose a redemption charge, deferred sales charge or
other amount on the redemption of such shares of Common Stock issued and
outstanding immediately prior to these Articles of Amendment and Restatement
becoming effective even though the Board may choose not to impose a similar
redemption charge, deferred sales charge or other amount on the redemption of
other shares of the same class or other classes of Common Stock that are issued
after the effective date of these Articles of Amendment and Restatement. The
proceeds of the redemption of a share (including a fractional share) of any
class of stock of the Corporation shall be reduced by the amount of any
redemption charge, deferred sales charge or other amount payable on such
redemption pursuant to the terms of issuance of such shares or otherwise imposed
by the Board of Directors. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time, at the Corporation's option, to redeem, in whole or in part, the
shares owned by any holder of stock of the Corporation (i) if the value of the
shares in the account maintained by the Corporation or its transfer agent for
any class of stock for the stockholder is below an amount determined from time
to time by the Board of Directors of the Corporation (the "Minimum Account
Balance") and (a) the stockholder has been given notice of the redemption and
has failed to make additional purchases of shares in an amount sufficient to
bring the value in his account to at least the Minimum Account Balance before
the redemption is effected by the Corporation or (b) the redemption is with
respect to fees to be paid by the stockholder to the Corporation for failing to
maintain the Minimum Account Balance or (ii) the Board of Directors has
otherwise determined that it is in the best interests of the Corporation to
redeem the shares. Notwithstanding any other provision of this Article V(8), if
certificates representing the redeemed shares have been issued, the redemption
price need not be paid by the Corporation until such certificates are presented
in proper form for transfer to the Corporation or the agent of the Corporation
appointed for such purpose; however, the
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redemption shall be effective in accordance with the action of the Board of
Directors, regardless of whether or not such presentation has been made. Payment
of the redemption price shall be made in cash by the Corporation at the time and
in the manner as may be determined from time to time by the Board of Directors
of the Corporation unless, in the opinion of the Board of Directors, which shall
be conclusive, conditions exist that make payment wholly in cash unwise or
undesirable; in such event the Corporation may make payment wholly or partly by
securities or other property included in the assets allocable to the class of
the shares for which redemption is being sought, the value of which shall be
determined as provided by the Board of Directors in accordance with the
provisions of Article VI(5)(v).
(9) At such times as may be determined by the Board of Directors (or with
the authorization of the Board of Directors, by the officers of the Corporation)
in accordance with the Investment Company Act of 1940, as amended, applicable
rules and regulations thereunder and applicable rules and regulations of the
National Association of Securities Dealers, Inc. and from time to time reflected
in the registration statement of the Corporation (the "Corporation's
Registration Statement"), shares of a particular class of stock of the
Corporation may be automatically converted into shares of another class of stock
of the Corporation based on the relative net asset values of such classes at the
time of conversion, subject, however, to any conditions of conversion that may
be imposed by the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions of such
conversion may vary within and among the classes to the extent determined by the
Board of Directors (or with the authorization of the Board of Directors, by the
officers of the Corporation) and set forth in the Corporation's Registration
Statement.
ARTICLE VI
BOARD OF DIRECTORS
(1) The current number of Directors of the Corporation is six. This number
may be changed pursuant to the By-Laws of the Corporation, but shall at no time
be less than the minimum number required under the Maryland General Corporation
Law nor more than twelve (12). The names of the current directors who shall act
until their successors are duly chosen and qualify are:
Charles H. Brunie
Elliot S. Jaffe
Alden C. Olson
James B. Rogers, Jr.
Anthony M. Santomero
Martin E. Zweig
(2) Beginning with the first annual meeting of shareholders of the
Corporation held after the initial public offering of the shares of the
Corporation's capital stock (the "first annual
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meeting"), the Board of Directors of the Corporation shall be divided into three
classes: Class I, Class II, and Class III. The term of one class of directors
elected at the first annual meeting shall expire each year. At the first annual
meeting, directors of Class I shall be elected to the Board of Directors for a
term expiring at the next succeeding annual meeting of shareholders, directors
of Class II shall be elected to the Board of Directors for a term expiring at
the second succeeding annual meeting of shareholders and directors of Class III
shall be elected to the Board of Directors for a term expiring at the third
succeeding annual meeting of shareholders. At each subsequent annual meeting of
shareholders, the directors chosen to succeed those whose terms are expiring
shall be identified as being of the same class as the directors whom they
succeed and shall be elected for a term expiring at the time of the third
succeeding annual meeting of shareholders, or thereafter in each case when their
respective successors are elected and qualified. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes by
resolution of the Board of Directors so as to maintain the number of directors
in each class as nearly equal as possible, but in no case shall a decrease in
the number of directors shorten the term of any incumbent director.
(3) Any vacancy occurring in the Board of Directors may be filled by a
majority of the directors in office. A new directorship resulting from an
increase in the number of directors shall be filled by a majority of the entire
Board of Directors.
(4) A director of the Corporation may be removed from office only by vote
of the holders of at least seventy-five percent (75%) of the outstanding shares
of capital stock of the Corporation entitled to vote for the election of
directors.
(5) In furtherance, and not in limitation, of the powers conferred by the
laws of the State of Maryland, the Board of Directors is expressly authorized:
(i) To make, alter or repeal the By-Laws of the Corporation, except
where such power is reserved by the By-Laws to the shareholders, and
except as otherwise required by the Investment Company Act of 1940, as
amended.
(ii) From time to time to determine whether and to what extent and
at what times and places and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the shareholders. No
shareholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by law or authorized by
resolution of the Board of Directors or of the shareholders.
(iii) Without the assent or vote of the shareholders, to authorize
the issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities
convertible into shares of stock of the Corporation of any class or
classes, whether now or hereafter authorized, for such consideration as
the Board of Directors may deem advisable.
(iv) Without the assent or vote of the shareholders, to authorize
and issue obligations of the Corporation, secured and unsecured, as the
Board of Directors may determine, and to authorize and cause to be
executed mortgages and liens upon the real or personal property of the
Corporation.
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(v) To establish the basis or method for determining the value of
the assets and the amount of the liabilities of the Corporation and the
net asset value of each share of the Corporation's capital stock.
(vi) To determine what constitutes net profits, earnings, surplus or
net assets in excess of capital, and to determine what accounting periods
shall be used by the Corporation for any purpose; to set apart out of any
funds of the Corporation reserves for such purposes as it shall determine
and to abolish the same; to declare and pay any dividends and
distributions in cash, securities or other property from surplus or any
funds legally available therefor, at such intervals as it shall determine;
to declare dividends or distributions by means of a formula or other
method of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; to establish payment
dates for dividends or any other distributions on any basis, including
dates occurring less frequently than the effectiveness of declarations
thereof.
(vii) In addition to the powers and authorities granted herein and
by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all powers and do all acts that may be exercised or
done by the Corporation pursuant to the provisions of the laws of the
State of Maryland, these Articles of Incorporation and the By-Laws of the
Corporation.
(6) Any determination made in good faith, and in accordance with these
Articles of Incorporation, if applicable, by or pursuant to the direction of the
Board of Directors, with respect to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the proprietary thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which the reserves or
charges have been created has been paid or discharged or is then or thereafter
required to be paid or discharged), as to the value of any security owned by the
Corporation, the determination of the net asset value of shares of any class of
the Corporation's capital stock, or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities or
shares of capital stock of the Corporation, and any reasonable determination
made in good faith by the Board of Directors shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation are
issued and sold on the condition and understanding, evidenced by the purchase of
shares of capital stock or acceptance of share certificates, that any and all
such determinations shall be binding as aforesaid. No provision of these
Articles of Incorporation of the Corporation shall be effective to require a
waiver of compliance with any provision of the Securities Act of 1933, as
amended, or the Investment Company Act of 1940, as amended, or of any valid
rule, regulation or order of the Securities and Exchange Commission under those
Acts.
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ARTICLE VII
LIABILITY AND INDEMNIFICATION
(1) To the fullest extent that limitations on the liability of directors
and officers are permitted by the Maryland General Corporation Law, no director
or officer of the Corporation shall have any liability to the Corporation or its
shareholders for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at the time of
any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provisions for
indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law.
(3) No provision of these Articles of Incorporation shall be effective to
protect or purport to protect any director or officer of the Corporation against
any liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(4) References to the Maryland General Corporation Law in this Article VII
are to the law as from time to time amended. No amendment to the Articles of
Incorporation of the Corporation shall affect any right of any person under this
Article VII based on any event, omission or proceeding prior to such amendment.
ARTICLE VIII
CHANGE OF STRUCTURE
(1) Notwithstanding any other provision of these Articles of
Incorporation, but subject to the exceptions provided in Section (2) of this
Article VIII, the conversion of the Corporation from a "closed-end company" to
an "open-end company," as those terms are defined in Sections 5(a)(2) and
5(a)(1), respectively, of the Investment Company Act of 1940, as amended, shall
require the affirmative vote or consent of the holders of at least seventy-five
percent (75%) of the outstanding shares of capital stock of the Corporation;
provided, however, that if such action previously 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 such case the affirmative
vote of the holders of a majority of the outstanding shares of capital stock of
the Corporation entitled to vote thereon shall be required.
(2) [subsection deleted],
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ARTICLE IX
SHAREHOLDER VOTE
(1) The affirmative vote of the holders of at least seventy-five percent
(75%) of the outstanding shares of capital stock of the Corporation entitled to
vote thereon shall be required to approve, adopt or authorize any of the
following:
(i) A merger or consolidation or statutory share exchange of the
Corporation with or into another corporation;
(ii) A sale of all or substantially all of the assets of the
Corporation (other than in the regular course of the Corporation's
investment activities); or
(iii) A liquidation or dissolution of the Corporation;
unless such action previously 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 the holders
of a majority of the outstanding shares of capital stock of the Corporation
entitled to vote thereon shall be required.
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ARTICLE X
AMENDMENTS
(1) The Corporation reserves the right from time to time to make any
amendment to its Articles of Incorporation, now or hereafter authorized by law,
including any amendment that alters the contract rights, as expressly set forth
in its Articles of Incorporation, of any outstanding stock.
(2) In addition to the voting requirements imposed by law or by any other
provision of these Articles of Incorporation, the provisions set forth in this
Article X, the provisions of Sections (2) and (4) of Article VI, the provisions
of Article IX, the provisions of these Articles of Incorporation setting the
maximum number of directors at twelve (12), and the provisions of Section (1) of
Article VIII may not be amended, altered or repealed in any respect, nor may any
provision inconsistent with this Article X, the provisions of Sections (2) and
(4) of Article VI, the provisions of Article IX, the provision setting the
maximum number of directors, or the provisions of Section (1) of Article VIII be
adopted, unless such section is approved by the affirmative vote of at least
seventy-five (75%) of the outstanding shares of capital stock of the Corporation
entitled to vote thereon."
SECOND: The Corporation desires to amend and restate its Charter as
currently in effect. The provisions set forth in these Articles of Amendment and
Restatement are all of the provisions of the Charter currently in effect as
herein amended. The current address of the principal office of the Corporation,
and the name and address of the Corporation's current resident agent are as set
forth in Article IV. The number of directors is currently set at six and their
names are as set forth in Article VI(1).
THIRD: The amendment and restatement of the Charter of the Corporation as
hereinabove set forth has been duly approved by the stockholders pursuant to
Section 2-112 of the Maryland General Corporation Law.
FOURTH: These Articles of Amendment and Restatement shall become effective
on _____________, 2000 at ___ {a.m./p.m.} Eastern Time.
IN WITNESS WHEREOF, The Zweig Total Return Fund, Inc. has caused these
Articles of Amendment and Restatement to be signed in its name and on its behalf
by its President, Martin E. Zweig, and witnessed by its Secretary, Nancy J.
Engberg, as of __________, 2000. The President acknowledges these Articles of
Amendment and Restatement to be the corporate act of the Corporation and states
that to the best of his knowledge, information and belief, the matters and facts
set forth in these Articles with respect to the authorization and approval of
this amendment and restatement of the Corporation's Charter are true in all
material respects and that this statement is made under penalties of perjury.
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By:
------------------------------------
Martin E. Zweig
President
Witness:
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Secretary
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THE ZWEIG TOTAL RETURN FUND, INC.
Annual Meeting of Shareholders
May 22, 2000
Proxy Solicited on Behalf of Board of Directors
The undersigned shareholder of The Zweig Total Return Fund, Inc., a
Maryland corporation (the "Fund"), hereby appoints MARTIN E. ZWEIG and JEFFREY
LAZAR, and each of them, with full power of substitution and revocation, as
proxies to represent the undersigned at the Annual Meeting of Shareholders of
the Fund to be held at The St. Regis Hotel, located at 2 East 55th Street, New
York, New York, on May 22, 2000, at 1:30 P.M., and at any and all adjournments
thereof, and to vote at the Annual Meeting all shares of the Fund which the
undersigned would be entitled to vote, with all powers the undersigned would
possess if personally present in accordance with the instructions on the reverse
side of this proxy.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL
BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE AS REGARDS A PARTICULAR OR
OTHER MATTERS, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS
DIRECTORS (PROPOSAL 1), FOR THE RATIFICATION OF THE SELECTION OF THE INDEPENDENT
ACCOUNTANTS (PROPOSAL 2), AGAINST THE ADOPTION OF THE PROPOSAL TO CONVERT THE
FUND TO AN OPEN-END INVESTMENT COMPANY (PROPOSAL 3), AND IN THE DISCRETION OF
THE PROXIES WITH RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING AND ANY ADJOURNMENTS THEREOF. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF
THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY STATEMENT.
(Continued, and to be signed and dated on the reverse side.)
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Please mark boxes |_| or |X| in blue or black ink.
1. GRANTING |_| WITHHOLDING |_| authority to vote for the election as
directors of both nominees listed below:
Charles H. Brunie and James B. Rogers, Jr.
(Instructions: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name.)
2. With respect to the proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the Fund for the
year ending December 31, 2000. FOR |_| AGAINST |_| ABSTAIN |_|
3. With respect to the proposal (Proposal 3) pursuant to the Fund's Articles
of Incorporation to convert the Fund to an open-end and investment company
and to adopt an amendment and restatement of the Articles of Incorporation
to effectuate the proposal. FOR |_| AGAINST |_| ABSTAIN |_|
4. In their discretion, on such other matters as may properly come before the
meeting and any adjournments thereof.
Your Board of Directors recommends that you vote in favor of Proposals 1 and 2,
and against Proposal 3.
Please sign exactly as name or names
appear on this proxy. If stock is held
jointly, each holder should sign. If
signing as attorney, trustee, executor,
administrator, custodian, guardian or
corporate officer, please give full
title.
Dated: , 2000
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Signature
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Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
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