UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-05620
The Zweig Total Return Fund, Inc.
(Exact name of registrant as specified in charter)
900 Third Ave, 31st Floor
New York, NY 10022-4728
(Address of principal executive offices) (Zip code)
Kevin J. Carr, Esq.
Vice President, Chief Legal Officer,
Counsel and Secretary for Registrant
100 Pearl Street
Hartford, CT 06103-4506
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-272-2700
Date of fiscal year end: December 31
Date of reporting period: September 30, 2009
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 ((S)(S) 239.24 and 274.5
of this chapter), to file reports with the Commission, not later than 60 days
after the close of the first and third fiscal quarters, pursuant to rule 30b1-5
under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission
may use the information provided on Form N-Q in its regulatory, disclosure
review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. (S) 3507.
Item 1. Schedule of Investments.
The Schedule of Investments is attached herewith.
Key Investment Terms
American Depositary Receipt (ADR): Represents shares of foreign companies
traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or a
trust. Foreign companies use ADRs in order to make it easier for Americans to
buy their shares.
Treasury-Inflation Protected Securities (TIPS): U.S. Treasury bonds and notes
whose value is adjusted according to changes to the inflation rate every six
months, as measured by the consumer price index. As inflation occurs, the value
of TIPS increases.
Sponsored ADR (American Depositary Receipt) An ADR which is issued with the
cooperation of the company whose stock will underlie the ADR. Sponsored ADRs
generally carry the same rights normally given to stockholders, such as voting
rights. ADRs must be sponsored to be able to trade on a major U.S. exchange
such as the NYSE.
1
THE ZWEIG TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS
September 30, 2009
(Unaudited)
Par Value
($ reported in thousands) --------- --------
INVESTMENTS
U.S. GOVERNMENT SECURITIES 35.5%
U.S. Treasury Bond 7.500%, 11/15/16.............. $ 20,000 $ 25,783
U.S. Treasury Inflation Indexed Note
1.625%, 1/15/15.............................. 28,000 32,173
2.000%, 1/15/16.............................. 25,000 28,144
2.375%, 1/15/17.............................. 31,000 35,226
U.S. Treasury Note
2.000%, 9/30/10.............................. 26,000 26,403
4.000%, 11/15/12............................. 18,500 19,947
--------
Total U.S. Government Securities (Identified Cost
$155,301)......................................... 167,676
--------
CORPORATE BONDS 4.0%
ENERGY -- 1.0%
Nabors Industries, Inc. 9.250%, 1/15/19.......... 4,000 4,753
--------
4,753
--------
INDUSTRIALS -- 2.0%
CSX Corp. 6.250%, 3/15/18........................ 4,000 4,338
Ingersoll-Rand Global Holding Co. Ltd. 6.875%,
8/15/18........................................ 4,814 5,165
--------
9,503
--------
UTILITIES -- 1.0%
Duke Energy Corp. 6.300%, 2/1/14................. 4,000 4,425
--------
4,425
--------
Total Corporate Bonds (Identified Cost $16,221)..... 18,681
--------
Number
of Shares
---------
COMMON STOCKS 37.7%
CONSUMER DISCRETIONARY -- 2.7%
McDonald's Corp.................................. 90,000 5,136
NIKE, Inc. Class B............................... 73,000 4,723
Under Armour, Inc. Class A/(2)/.................. 107,000 2,978
--------
12,837
--------
See Notes to Schedule of Investments
2
Number of
Shares Value
--------- -------
CONSUMER STAPLES -- 5.2%
Altria Group, Inc............................... 314,000 $ 5,592
Bunge Ltd....................................... 61,000 3,819
Costco Wholesale Corp........................... 71,000 4,009
PepsiCo, Inc.................................... 76,000 4,458
Philip Morris International, Inc................ 132,000 6,434
-------
24,312
-------
ENERGY -- 5.2%
ConocoPhillips.................................. 102,000 4,606
Halliburton Co.................................. 168,000 4,556
Massey Energy Co................................ 89,000 2,482
Occidental Petroleum Corp....................... 56,000 4,391
Petroleo Brasileiro SA ADR...................... 89,000 4,085
Valero Energy Corp.............................. 238,000 4,615
-------
24,735
-------
FINANCIALS -- 2.8%
Allstate Corp. (The)............................ 87,000 2,664
Goldman Sachs Group, Inc. (The)................. 22,000 4,056
Hudson City Bancorp, Inc........................ 308,000 4,050
Reinsurance Group of America, Inc............... 55,000 2,453
-------
13,223
-------
HEALTH CARE -- 4.5%
Biogen Idec, Inc./(2)/.......................... 61,000 3,082
Gilead Sciences, Inc./(2)/...................... 62,000 2,888
Johnson & Johnson............................... 83,000 5,054
Merck & Co., Inc................................ 129,000 4,080
Shire plc ADR................................... 8,910 466
St. Jude Medical, Inc./(2)/..................... 76,000 2,965
UnitedHealth Group, Inc......................... 110,000 2,754
-------
21,289
-------
INDUSTRIALS -- 4.7%
Boeing Co. (The)................................ 90,000 4,874
Caterpillar, Inc................................ 58,000 2,977
Continental Airlines, Inc. Class B/(2)/......... 182,000 2,992
Foster Wheeler AG/(2)/.......................... 102,000 3,255
L-3 Communications Holdings, Inc................ 54,000 4,337
Union Pacific Corp.............................. 68,000 3,968
-------
22,403
-------
See Notes to Schedule of Investments
3
Number of
Shares Value
--------- --------
INFORMATION TECHNOLOGY -- 6.5%
Cisco Systems, Inc./(2)/........................ 134,000 $ 3,154
Corning, Inc.................................... 241,000 3,690
Hewlett-Packard Co.............................. 82,000 3,871
International Business Machines Corp............ 37,000 4,426
Microsoft Corp.................................. 163,000 4,220
Nokia Oyj Sponsored ADR......................... 297,000 4,342
QUALCOMM, Inc................................... 92,000 4,138
Research In Motion Ltd./(2)/.................... 45,000 3,040
--------
30,881
--------
MATERIALS -- 2.9%
Alcoa, Inc...................................... 210,000 2,755
Freeport-McMoRan Copper & Gold, Inc............. 48,000 3,293
NuCor Corp...................................... 92,000 4,325
Potash Corp. of Saskatchewan, Inc............... 35,000 3,162
--------
13,535
--------
TELECOMMUNICATION SERVICES -- 2.1%
AT&T, Inc....................................... 204,000 5,510
Verizon Communications, Inc..................... 146,000 4,419
--------
9,929
--------
UTILITIES -- 1.1%
Exelon Corp..................................... 100,000 4,962
--------
4,962
--------
Total Common Stocks (Identified Cost $175,268)..... 178,106
--------
EXCHANGE TRADED FUNDS 2.0%
PowerShares Deutsche Bank Agriculture
Fund/(2)/................................ 143,000 3,641
ProShares Ultrashort S&P 500............... 50,000 2,022
Templeton Dragon Fund, Inc................. 142,000 3,607
--------
Total Exchange Traded Funds (Identified Cost $9,043) 9,270
--------
Total Long Term Investments -- 79.2% (Identified cost
$355,833)........................................ 373,733
--------
See Notes to Schedule of Investments
4
Number of
Shares Value
----------- --------
SHORT-TERM INVESTMENTS 19.8%
MONEY MARKET MUTUAL FUNDS -- 5.0%
State Street Institutional Liquid Reserves Fund
-- Institutional Shares (seven-day effective
yield 0.260%)................................ 19,368,264 $ 19,368
State Street Institutional Treasury Money
Market Fund (seven-day effective yield 0.040%) 4,000,000 4,000
--------
23,368
--------
Par
-----------
U.S. TREASURY BILL/(3)/ -- 14.8%
U.S. Treasury Bill
0.254%, 2/11/10............................ $ 55,000 54,975
0.455%, 4/1/10............................. 15,000 14,987
--------
69,962
--------
Total Short-Term Investments (Identified Cost $93,283) 93,330
--------
Total Investments (Identified Cost $449,116) -- 99.0% 467,063/(1)/
Other assets and liabilities, net -- 1.0%.......... 4,754
--------
Net Assets -- 100.0%............................... $471,817
========
--------
(1) For Federal Income Tax Information see Note 2 in the Notes to Schedule of
Investments.
(2) Non-income producing.
(3) The rate shown is the discount rate.
The following table provides a summary of the inputs used to value the
Fund's net assets as of September 30, 2009 (see Security Valuation Note 1A in
the Notes to Schedule of Investments:
Level 2
Total Level 1 Significant
Value at Quoted Observable
September 30, 2009 Price Input
------------------ -------- -----------
Investments in Securities:
Equity Securities:
Common Stocks................. $178,106 $178,106 $ --
Exchange Traded Funds......... 9,270 9,270 --
Money Market Mutual Funds..... 23,368 23,368 --
Debt Securities:
U.S. Treasury Obligations..... 237,638 -- 237,638
Corporate Debt................ 18,681 -- 18,681
-------- -------- --------
Total...................... $467,063 $210,744 $256,319
======== ======== ========
There were no Level 3 (significant unobservable input) priced securities.
See Notes to Schedule of Investments
5
THE ZWEIG TOTAL RETURN FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS
September 30, 2009
(Unaudited)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principals
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates and those differences could be significant.
A. Security Valuation:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service, which utilizes information with respect to
recent sales, market transactions in comparable securities, quotations from
dealers, and various relationships between securities in determining value. Due
to the continued volatility in the current market, valuations developed through
pricing techniques may materially vary from the actual amounts realized upon
sale of the securities.
As required, some securities and other assets may be valued at fair value as
determined in good faith by or under the direction of the Directors.
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement in
the U.S. securities market, or other regional and local developments) may occur
between the time that foreign markets close (where the security is principally
traded) and the time that the Fund calculates its net asset value (generally,
the close of the NYSE) that may impact the value of securities traded in these
foreign markets. In these cases, information from an external vendor may be
utilized to adjust closing market prices of certain foreign common stocks to
reflect their fair value. Because the frequency of significant events is not
predictable, fair valuation of certain foreign common stocks may occur on a
frequent basis.
Investments in underlying funds are valued at each fund's closing net asset
value determined as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern time).
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
6
The Fund utilizes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels:
. Level 1 -- quoted prices in active markets for identical securities
. Level 2 -- prices determined using other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, etc.)
. Level 3 -- prices determined using significant unobservable inputs
(including the Fund's own assumptions in determining the fair value of
investments)
A summary of the inputs used to value the Fund's net assets by each major
security type is disclosed at the end of the Schedule of Investments.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
7
NOTE 2 -- FEDERAL INCOME TAX INFORMATION
($ reported in thousands)
At September 30, 2009, federal tax cost and aggregate gross unrealized
appreciation (depreciation) of securities held by the Fund were as follows:
Net Unrealized
Federal Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
--------- ------------ -------------- --------------
$455,328 $29,074 $(17,339) $11,735
NOTE 3 -- SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Fund
through November 20, 2009, the date the financial statements were issued, and
is reporting that The Zweig Total Return Fund, Inc.'s Special Meeting of
Shareholders held on October 27, 2009 concluded with the Fund remaining
closed-end. The number of in-person and proxy votes represented at the special
meeting did not constitute a quorum and the chairman of the special meeting
closed the meeting without adjournment, as permitted by the Fund's bylaws. The
number of proxies received represented approximately 32% of the Fund's
outstanding shares, with less than 8% of outstanding shares in favor of the
conversion proposal. The affirmative vote of a majority of shares outstanding
as of the record date would have been required to pass the proposal. The Fund
was required to submit the conversion proposal to its shareholders in
accordance with its Articles of Incorporation because its shares traded on the
New York Stock Exchange during the quarter ended June 30, 2009 at an average
discount from their 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. As set forth in the Fund's definitive proxy statement filed with the
Securities and Exchange Commission on August 28, 2009, the Board of Directors,
including its independent directors, voted unanimously to recommend against
conversion to an open-end fund.
8
Item 2. Controls and Procedures.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
Item 3. Exhibits.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Zweig Total Return Fund, Inc.
By (Signature and Title)* /s/ George R. Aylward
-----------------------------
George R. Aylward, President
(principal executive officer)
Date November 24, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ George R. Aylward
-----------------------------
George R. Aylward, President
(principal executive officer)
Date November 24, 2009
By (Signature and Title)* /s/ Nancy G. Curtiss
-----------------------------
Nancy G. Curtiss, Treasurer
(principal financial officer)
Date November 23, 2009
* Print the name and title of each signing officer under his or her signature.