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. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|_| 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):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
4. Proposed maximum aggregate value transaction:
--------------------------------------------------------------------
5. Total fee paid:
--------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
--------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
3. Filing Party:
--------------------------------------------------------------------
4. Date Filed:
--------------------------------------------------------------------
DRAFT 2/16/01
The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
March 1, 2001
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 Tuesday, May 8,
2001, 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 three current Directors who are standing for re-election (Proposal
1), 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 2).
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
The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 8, 2001
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 Tuesday,
May 8, 2001, 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 elect two Directors to serve until the Annual Meeting of
Shareholders in 2004, and to elect one Director to serve until the
Annual Meeting of Shareholders in 2002;
2. 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
3. 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 14,
2001 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
March 1, 2001
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
The Zweig Total Return Fund, Inc.
900 Third Avenue, New York, New York 10022
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 8, 2001
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 8, 2001, 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 March 1, 2001.
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 three nominees of the Board of Directors
as Directors of the Fund, and (2) "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 adoption of the proposal to convert the Fund to an
open-end investment company (Proposal 2) 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 Proposal 1,
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 2, 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 14, 2001 as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting. As of the record date,
89,732,966 shares of the Fund's common stock were outstanding. To the best of
the Fund's knowledge, no person beneficially owns more than five
1
percent of the outstanding shares of the Fund's common stock.
The Annual Report of the Fund for the year ended December 31, 2000,
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 14, 2001.
The Fund will furnish, without charge, another copy of the Fund's December
31, 2000 Annual Report to any shareholder who requests it by contacting the
Fund's Administrator, Phoenix Equity Planning Corp., 56 Prospect Street, P.O.
Box 150480, Hartford, Connecticut 06115-0480, 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 March 1, 2001.
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 2004), and one Director will
be elected to serve a one-year term (until the first succeeding Annual Meeting
in 2002). 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 2001, the Board of Directors of the Fund has
nominated Alden C. Olson and Martin E. Zweig, 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 2004, and Wendy Luscombe, whom the Board of
Directors elected as a Director of the Fund at its meeting held in February
2001, to serve until the first succeeding Annual Meeting in 2002.
Background information with respect to the current Directors appears
below.
2
Name, Address and Age(1) Business Experience Shares
------------------------ During the Past Five Years of Fund
-------------------------- Owned(2)
--------
Martin E. Zweig* .................... Chairman of the Board and President of the Fund since 97,087(3)
900 Third Avenue 1988; President of Zweig Consulting LLC (the
New York, New York 10022 "Sub-Adviser") and Phoenix-Zweig Trust; Chairman
58 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; Director of The Zweig 68,422
21 Elm Rock Road Fund, Inc. since 1998; Chairman Emeritus, Board of
Bronxville, NY 10708 Trustees of the Manhattan Institute; Chartered
70 Financial Analyst; and formerly Chairman Emeritus
of Oppenheimer Capital.
3
Elliot S. Jaffe ..................... Director of the Fund since 1988; Director of The Zweig 1,000
30 Dunnigan Drive Fund, Inc. since 1988; Chairman and Chief
Suffern, NY 10901 Executive Officer of The Dress Barn, Inc.;
74 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.
Wendy Luscombe ...................... Director of the Fund since 2001; Director of The Zweig [to be
480 Churchtown Road Fund, Inc. since 2001; Principal of WLK supplied]
Craryville, NY 12521 Associates, Inc. since 1994; Fellow of the Royal
49 Institution of Chartered Surveyors; Member of the
Chartered Institute of Arbitrators; Director of
Amadeus Vision Capital, plc; Director of Endeavour
Real Estate Securities, Ltd.; Director of PXRE
Corp.; Chairman of Investment Committee of PXRE
Corp.
Alden C. Olson ...................... Director of the Fund since 1996; Director of The Zweig 2,000
2711 Ramparte Path Fund, Inc. since 1996; Chartered Financial
Holt, Michigan 48842 Analyst; formerly Director of First National Bank
72 of Michigan; formerly Professor of Financial
Management, Investments at Michigan State
University.
4
James B. Rogers, Jr ................. Director of the Fund since 1988; Director of The Zweig 1,563
352 Riverside Drive Fund, Inc. since 1986; Private Investor; Chairman
New York, NY 10025 of Beeland Interests; Regular Commentator on CNBC;
58 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.
----------
* 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.
(1) The terms of the Directors who are not nominees at the current Annual
Meeting are: Mr. Jaffe who will continue in office until the annual meeting in
2002 and Mr. Brunie and Mr. Rogers who will continue in office until the annual
meeting in 2003.
(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,
2001, except for Ms. Luscombe's ownership, which is as of March 1, 2001. Except
as otherwise indicated, each person has sole voting and investment power with
respect to the shares listed as owned by him or her. 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 the Fund.
(3) Includes 1,009 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, 2000, the Fund paid Directors' fees,
aggregating $76,000 to its current Directors who are 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, 2000. The Fund does
not pay any pension or retirement benefits to its Directors.
5
Aggregate Total Compensation
Directors Compensation From the Fund and The
--------- From the Fund Zweig Fund, Inc.
------------- ----------------
Charles H. Brunie ................ $17,500 $33,500
Elliot S. Jaffe .................. $19,000 $36,500
Alden C. Olson ................... $20,500 $39,500
James B. Rogers, Jr. ............. $19,000 $36,500
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 41 years old and was, on January 1, 2001, the beneficial
owner of 3,510 shares of the common stock of the Fund, of which 549 shares are
owned through his individual retirement account. Mr. Lazar is Vice President of
Phoenix/Zweig Advisers LLC, the Fund's investment adviser (the "Adviser"). Mr.
Capano has worked for the Adviser since 1994 and has been an officer of the Fund
since 1996. Mr. Capano is 33 years old and was, on January 1, 2001, the
beneficial owner of 249 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. The Audit
Committee's primary functions include recommending the Fund's independent
auditors for selection by the Board and reviewing the scope of the annual audit
conducted by such auditors. At a meeting held in February 2001, the Audit
Committee reviewed and discussed the Fund's audited financial statements for the
year ending December 31, 2000 with the Fund's management, and discussed with the
Fund's independent auditors the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU 380). The Audit Committee
has also received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees),
and has discussed with the independent auditors the independent auditors'
independence. Based on this review and these discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the annual report to shareholders required by Section 30(e) of the
1940 Act and Rule 30d-1 under the 1940 Act for the last fiscal year for filing
with the Securities and Exchange Commission. The members of the Audit Committee,
Messrs. Jaffe and Olson and Ms. Luscombe, are "independent" within the meaning
of the 1940 Act and the New York Stock Exchange corporate governance standards
for audit committees.
The Fund's Board of Directors has adopted a written charter for the Audit
Committee. A copy of this charter is included as Exhibit A to this Proxy
Statement.
Messrs. Brunie, Rogers and Olson, 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
6
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 five meetings during the year
ended December 31, 2000, and also held one meeting in February 2001. The Fund's
Nominating Committee held one meeting during the year ended December 31, 2000
and met in advance of the February 2001 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, 2000
and one meeting in February 2001. Each of the nominees (except Ms. Luscombe whom
the Board elected as a Director at its meeting in February 2001) 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 2000 year.
The Board of Directors of the Fund recommends that shareholders vote FOR
the re-election of the nominees.
PROPOSAL 2
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 December 31, 2000, the
Fund's shares traded at an average discount from net asset value of 10.3%,
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 to effectuate
such proposal for shareholders' consideration.
7
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 February 15, 2001, 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
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 during at least forty
consecutive quarters until the quarter ended March 31, 2000, when the Fund's
shares traded at an average discount from net asset value of 15%, the Fund's
shares had not traded at an average discount from net asset value in excess of
10% (determined in accordance with the provisions of the Fund's Articles of
Incorporation). The Board noted that the Fund's average discount to net asset
value for the quarter ended December 31, 2000 was only slightly in excess of the
10% threshold, and substantially less than it was for the quarter ended March
31, 2000, and that the shareholders vote against the prior Conversion Proposal
with respect to the more significant market discount for the quarter ended March
31, 2000 was nevertheless substantial.
The Board further noted that, notwithstanding the more recent discounts,
the shares have, from the Fund's commencement of operations through January 31,
2001, traded at an average premium (based on an averaging of month-end premiums
and discounts) of 3.3%. This premium compares favorably to the average discount
during the same period of 6.5% and 4.1%, respectively, of closed-end equity
funds (excluding international equity funds) and closed-end fixed income funds
(excluding municipal 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 January 31, 2001.
[THE FOLLOWING WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
Zweig Total Return Fund Premium/ Discount History
-------------------------------------------------
Exhibit A-1
Premium /
NAV Market (Discount)
--- ------ ----------
8/31/1988
09/30/1988 9.224 9.918 7.5%
10/31/1988 9.303 10.042 7.9%
11/30/1988 9.165 9.298 1.5%
12/31/1988 9.165 9.05 -1.3%
01/31/1989 9.284 9.546 2.8%
02/28/1989 9.145 9.05 -1.0%
03/31/1989 9.165 8.803 -3.9%
04/30/1989 9.274 9.05 -2.4%
05/31/1989 9.403 9.298 -1.1%
06/30/1989 9.482 9.422 -0.6%
07/31/1989 9.73 9.546 -1.9%
08/31/1989 9.621 9.67 0.5%
09/30/1989 9.581 9.174 -4.2%
10/31/1989 9.492 9.67 1.9%
11/30/1989 9.522 9.794 2.9%
12/31/1989 9.512 9.67 1.7%
01/31/1990 9.115 9.546 4.7%
02/28/1990 9.075 9.546 5.2%
03/31/1990 9.085 9.298 2.3%
04/30/1990 8.966 9.298 3.7%
05/31/1990 9.204 9.174 -0.3%
06/30/1990 9.204 9.174 -0.3%
07/31/1990 9.194 9.174 -0.2%
08/31/1990 8.936 8.803 -1.5%
09/30/1990 8.847 8.431 -4.7%
10/31/1990 8.847 8.307 -6.1%
11/30/1990 8.927 8.555 -4.2%
12/31/1990 8.946 8.555 -4.4%
01/31/1991 9.145 9.05 -1.0%
02/28/1991 9.343 9.422 0.8%
03/31/1991 9.452 9.422 -0.3%
04/30/1991 9.284 9.67 4.2%
05/31/1991 9.333 9.67 3.6%
06/30/1991 9.085 9.794 7.8%
07/31/1991 9.264 9.67 4.4%
08/31/1991 9.353 10.042 7.4%
09/30/1991 9.353 10.166 8.7%
10/31/1991 9.472 10.29 8.6%
11/30/1991 9.264 10.29 11.1%
12/31/1991 9.71 10.538 8.5%
01/31/1992 9.452 10.662 12.8%
02/29/1992 9.333 10.042 7.6%
03/31/1992 9.115 10.29 12.9%
04/30/1992 9.055 10.414 15.0%
05/31/1992 9.145 10.29 12.5%
06/30/1992 9.055 9.794 8.2%
07/31/1992 9.174 10.538 14.9%
08/31/1992 9.065 10.166 12.1%
09/30/1992 9.095 10.166 11.8%
10/31/1992 8.946 9.918 10.9%
11/30/1992 8.956 10.042 12.1%
12/31/1992 8.986 9.918 10.4%
01/31/1993 9.075 10.29 13.4%
02/28/1993 9.065 10.29 13.5%
03/31/1993 9.085 10.414 14.6%
04/30/1993 8.927 10.166 13.9%
05/31/1993 8.966 9.918 10.6%
06/30/1993 9.085 10.414 14.6%
07/31/1993 9.085 10.414 14.6%
08/31/1993 9.284 10.538 13.5%
09/30/1993 9.293 10.538 13.4%
10/31/1993 9.284 10.662 14.8%
11/30/1993 9.036 10.662 18.0%
12/31/1993 9.036 10.662 18.0%
01/31/1994 9.095 10.538 15.9%
02/28/1994 8.857 10.29 16.2%
03/31/1994 8.649 9.298 7.5%
04/30/1994 8.54 9.174 7.4%
05/31/1994 8.45 9.298 10.0%
06/30/1994 8.321 9.174 10.3%
07/31/1994 8.341 8.927 7.0%
08/31/1994 8.331 8.679 4.2%
09/30/1994 8.193 8.431 2.9%
10/31/1994 8.153 8.307 1.9%
11/30/1994 8.064 8.183 1.5%
12/31/1994 8.044 7.935 -1.4%
01/31/1995 8.044 8.307 3.3%
02/28/1995 8.133 8.555 5.2%
03/31/1995 8.143 8.431 3.5%
04/30/1995 8.163 8.431 3.3%
05/31/1995 8.381 8.431 0.6%
06/30/1995 8.411 8.555 1.7%
07/31/1995 8.401 8.803 4.8%
08/31/1995 8.411 8.555 1.7%
09/30/1995 8.431 8.555 1.5%
10/31/1995 8.381 8.555 2.1%
11/30/1995 8.47 8.679 2.5%
12/31/1995 8.56 8.431 -1.5%
01/31/1996 8.5 8.741 2.8%
02/29/1996 8.381 8.803 5.0%
03/31/1996 8.341 8.679 4.1%
04/30/1996 8.282 8.555 3.3%
05/31/1996 8.202 8.555 4.3%
06/30/1996 8.173 8.431 3.2%
07/31/1996 8.044 8.307 3.3%
08/31/1996 8.044 8.431 4.8%
09/30/1996 8.093 8.431 4.2%
10/31/1996 8.163 8.431 3.3%
11/30/1996 8.321 8.431 1.3%
12/31/1996 8.222 7.935 -3.5%
01/31/1997 8.242 8.183 -0.7%
02/28/1997 8.193 8.431 2.9%
03/31/1997 8.024 8.307 3.5%
04/30/1997 8.083 8.555 5.8%
05/31/1997 8.222 8.679 5.6%
06/30/1997 8.302 8.803 6.0%
07/31/1997 8.639 8.927 3.3%
08/31/1997 8.411 8.988 6.9%
09/30/1997 8.619 9.05 5.0%
10/31/1997 8.45 9.236 9.3%
11/30/1997 8.47 9.422 11.2%
12/31/1997 8.54 9.36 9.6%
01/31/1998 8.5 9.422 10.8%
02/28/1998 8.609 9.36 8.7%
03/31/1998 8.718 9.484 8.8%
04/30/1998 8.679 8.555 -1.4%
05/31/1998 8.6 8.493 -1.2%
06/30/1998 8.57 8.75 2.1%
07/31/1998 8.39 8.875 5.8%
08/31/1998 8.05 8.25 2.5%
09/30/1998 8.29 8.688 4.8%
10/31/1998 8.34 8.69 4.2%
11/30/1998 8.37 8.94 6.8%
12/31/1998 8.43 8.88 5.3%
01/31/1999 8.47 8.69 2.6%
02/28/1999 8.13 8.25 1.5%
03/31/1999 8.13 8.25 1.5%
04/30/1999 8.27 8.31 0.5%
05/31/1999 8.17 8.56 4.8%
06/30/1999 8.14 8.5 4.4%
07/31/1999 8.02 8.5 6.0%
08/31/1999 7.89 8.44 7.0%
09/30/1999 7.79 8.13 4.4%
10/31/1999 7.84 7.31 -6.8%
11/30/1999 7.79 7 -10.1%
12/31/1999 7.89 6.5 -17.6%
01/31/2000 7.65 6.44 -15.8%
02/29/2000 7.68 6.19 -19.4%
3/31/2000 7.86 6.94 -11.7%
4/30/2000 7.68 6.75 -12.1%
5/31/2000 7.53 6.5 -13.7%
6/30/2000 7.62 6.63 -13.0%
7/31/2000 7.6 6.81 -10.4%
8/31/2000 7.78 6.94 -10.8%
9/30/2000 7.6 6.88 -9.5%
10/31/2000 7.55 6.75 -10.6%
11/30/2000 7.38 6.5 -11.9%
12/31/2000 7.48 6.57 -12.2%
1/31/2001 7.54 7.12 -5.6%
Average 3.3%
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,
8
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 continue to 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 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
9
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, some of
which might need to be borne by the Fund, 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 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.
10
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.
(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
11
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 1.00% to 1.49% 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 1.51%, 1.53% and 1.54%, 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 trading at a discount)
and, thereby, the opportunity to realize a profit (to the extent that Fund
shares subsequently trade at a lower discount or 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
12
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 Two 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
Proposal Two. 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,
13
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 which could be viewed as an "anti-takeover"
measure, would not be typical of an open-end fund. Unlike the vote required to
approve Proposal Two, 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 Two 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 Two 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 February 15, 2001, 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 B.
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 or other
classes); permit the Board to redeem the shares of a shareholder under various
circumstances
14
(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
Phoenix/Zweig 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 100%-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 56
Prospect Street, P.O. Box 150480, Hartford, Connecticut 06115-0480. All of the
Administrator's outstanding equity interests are owned by Phoenix.
15
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, 2000, there was compliance with all Section
16(a) reporting requirements applicable to its reporting persons, except that
Charles H. Brunie, a director of the Fund, filed one late report with respect to
a purchase of the Fund's shares of common stock.
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 ("PwC") to serve as independent accountants of the Fund for the year ending
December 31, 2001. A representative of PwC 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.
The aggregate fees billed for services rendered by PwC during the year
ended December 31, 2000 are described below.
Audit Fees
The aggregate fees billed by PwC to the Fund in connection with the annual
audit of the Fund and the review of the Fund's financial statements for the
fiscal year ended December 31, 2000 were $53,000.
Financial Information Systems Design and Implementation Fees
There were no fees billed for financial information systems design and
implementation rendered by PwC to the Fund, the Adviser, or any entity
controlling, controlled by, or under common control with the Adviser that
provides services to the Fund for the fiscal year ended December 31, 2000.
All Other Fees
The aggregate fees billed for all other non-audit services, including fees
for tax-related services, rendered by PwC to the Fund, the Adviser, and any
entity controlling, controlled by, or under common control with the Adviser that
provides services to the Fund for the fiscal year ended December 31, 2000 were
$6,800. The Audit Committee has determined that the provision of non-audit
services is compatible with maintaining the independence of PwC.
16
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 adoption of the proposal to convert the Fund to an
open-end investment company (Proposal 2) 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 Proposal 1, 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 2, 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 2002 Meeting
Any proposals of shareholders that are intended to be presented at the
Fund's 2002 Annual Meeting of Shareholders must be received at the Fund's
principal executive offices no later than October 30, 2001, 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.
17
New York, New York By Order of the Board of Directors of
March 1, 2001 The Zweig Total Return Fund, Inc.
MARTIN E. ZWEIG,
Chairman of the Board
18
EXHIBIT A
THE ZWEIG TOTAL RETURN FUND, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the quality and objectivity of the financial statements of The
Zweig Total Return Fund, Inc. (the "Fund") and (2) the independence and
performance of the Fund's external auditor.
The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. None of the members of
the Audit Committee shall be an "interested person" of the Fund, as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended. The members
of the Audit Committee shall be appointed by the Board.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Fund or the Fund's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee's polices and procedures shall remain flexible to
facilitate the Audit Committee's ability to react to changing conditions and to
generally discharge its functions. The following listed committee
responsibilities describe areas of attention in broad terms.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding the accounting and auditing
principles and practices.
3. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and judgments made
in connection with the preparation of the Fund's financial
statements.
4. Review major changes to the Fund's auditing and accounting
principles and practices as suggested by the independent auditor or
management.
5. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
6. Approve the fees to be paid to the independent auditor.
A-1
7. Receive periodic written reports (on not less than an annual basis)
from the independent auditor regarding the auditor's independence,
discuss such reports with the auditor, and if so determined by the
Audit Committee, recommend that the Board take action to satisfy
itself of the independence of the auditor.
8. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that
the Board replace the independent auditor.
9. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
10. Discuss with the independent auditor the matters required by
Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
11. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by
the auditor and the Fund's response to that letter. Such review
should include any difficulties encountered in the course of the
audit work, including any restrictions on the scope of activities or
access to required information.
12. Prepare or cause to be prepared the report required by the rules of
the Securities and Exchange Commission to be included in the Fund's
annual proxy statement.
13. Review with the Fund's counsel legal matters that may have a
material impact on the financial statements, the Fund's compliance
policies and any material reports or inquiries received from
regulators or government agencies.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Fund's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and/or the Fund's Code of Ethics.
A-2
EXHIBIT B
[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
B-1
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.
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
B-2
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 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 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
B-3
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
Wendy Luscombe
Alden C. Olson
James B. Rogers, Jr.
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 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
B-4
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.
(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
B-5
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.
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
B-6
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)
B-7
[subsection deleted],
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.
ARTICLE X
AMENDMENTS
B-8
(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 _____________, 2001 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 __________, 2001. 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.
By:____________________________
Martin E. Zweig
B-9
President
Witness:
-----------------------------
Secretary
B-10
--------------------------------------------------------------------------------
THE ZWEIG TOTAL RETURN FUND, INC.
Annual Meeting of Shareholders
May 8, 2001
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 8, 2001, 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 WITH RESPECT TO A
PARTICULAR MATTER OR MATTERS, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES AS DIRECTORS (PROPOSAL 1), AGAINST THE ADOPTION OF THE
PROPOSAL TO CONVERT THE FUND TO AN OPEN-END INVESTMENT COMPANY (PROPOSAL
2), 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.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Please mark boxes |_| or |X| in blue or black ink.
1. GRANTING |_| WITHHOLDING |_| authority to vote for the election as
directors of all nominees listed below: Alden C. Olson, Martin E.
Zweig, and Wendy Luscombe.
(Instructions: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name.)
2. With respect to the proposal (Proposal 2) 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.
FOR |_| AGAINST |_| ABSTAIN |_|
3. 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 Proposal 1,
and against Proposal 2.
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: ___________________________________________, 2001
__________________________________________________
Signature
__________________________________________________
Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
--------------------------------------------------------------------------------