UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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the Securities Exchange Act of 1934. (Amendment No. )
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14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
THE ZWEIG TOTAL RETURN FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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LAST CALL
- PROTECT YOUR INVESTMENT IN THE ZWEIG TOTAL RETURN FUND -
- RETURN YOUR WHITE PROXY CARD IMMEDIATELY-
May 7, 2004
Dear Fellow ZTR Shareholder:
THIS COMING WEDNESDAY, MAY 12, 2004, SHAREHOLDERS OF THE ZWEIG TOTAL RETURN
FUND WILL MAKE DECISIONS THAT WILL SIGNIFICANTLY INFLUENCE THE FUTURE VALUE
OF THEIR INVESTMENTS. Your options are simple:
- To support a Board of Directors that is eminently qualified
to lead the Fund, and has recently taken important steps to
improve fund performance and your personal tax situation. TO DO
THAT, PLEASE SIGN, DATE AND PROMPTLY RETURN YOUR WHITE PROXY
CARD. OR, IF YOUR SHARES ARE HELD IN STREET NAME WITH A
BROKERAGE FIRM, BANK NOMINEE OR OTHER INSTITUTION, YOU CAN ALSO
VOTE BY TELEPHONE AT 1-800-454-8683 OR AT WWW.PROXYVOTE.COM.
OR
- To vote for the self-serving proposals of an acknowledged
dissident shareholder who has an extensive record of seeking to
destroy the long-term value of closed-end funds through costly
and disruptive proxy battles. His primary tactic: the
dissemination of misleading and inaccurate information designed
to make shareholders believe that he is serving their financial
interests.
With your mailbox cluttered with a number of Goldstein's misguided and
defamatory letters, your Board wants to set the record straight to
demonstrate exactly how Goldstein is attempting to confuse and deceive you.
Please consider the following from his April 23 and May 4 letters:
INACCURATE GOLDSTEIN STATEMENT #1: "The discount first appeared after
the Board announced its decision to abandon our Fund's longstanding cash
10% distribution policy."
THE TRUTH: The discount did not first appear after the decision to
change the cash distribution policy. Since the inception of the Fund in
1988, shares have traded at a discount or a premium at various times and
the largest discount was reached in March 2000, a year in which the 10%
cash distribution was in effect. As you know, closed-end funds, by their
very nature, trade from time to time at discounts or premiums in
response to market conditions and other variables.
The Board's April 8, 2004 decision to adopt a new fixed distribution
policy, consisting of 7% cash and 3% stock, has had a positive effect.
Since the announcement, the discount narrowed from 9.7% to 6.9% (as of
April 23). More recently, the discount was 8.1% (as of May 5). In our
opinion, the Fund's discount would have been
significantly lower if not for an approximately 6.5% decline on the
average discount of closed-end bond funds over the past four weeks (from
a 0.3% premium to a 6.2% discount), resulting from the recent rise in
interest rates. During that time, the average discount of closed-end
stock funds also widened by 2.1% to 6.0%.
INACCURATE GOLDSTEIN STATEMENT(S) #2: "Our accountants have advised us
that as long as the dividend is supported by income, there will be no
adverse tax consequences." ..."Recently, in response to complaints from
several shareholders, the Board announced a phony 10% dividend policy
whereby only 7% will be paid in cash and 3% in stock. That is simply a
bookkeeping gimmick designed to fool shareholders into thinking they
will be getting the equivalent of 10% cash in their pockets."
THE TRUTH: These statements are unfounded and inaccurate. There
certainly would be adverse tax consequences if the Fund makes 10% cash
distributions consisting of realized capital gains -- in whole or in part
-- in the current year. Those capital gain distributions would be fully
taxable as ordinary income and, at the same time, the Fund's existing
capital loss carryover would be reduced by the amount of the capital
gain. Accordingly, shareholders would lose the tax benefits attributable
to the amount of that lost capital loss carryover. The recent policy
allows shareholders to receive 7% cash and 3% in stock, and the Board
believes that, on balance, it will be more beneficial to shareholders.
While the tax potential remains for the cash distribution, the stock
component will be received by shareholders on a tax-free basis. Should a
shareholder elect to sell the stock, the shareholder would obtain the
capital gains treatment on the sale.
INACCURATE GOLDSTEIN STATEMENT #3: "...our nominees will work to modify
ZTR's investment policy (subject to any required shareholder approvals)
so that it can earn more income and pay a 10% cash dividend without
incurring any additional tax liability."
THE TRUTH: This statement is misleading since it is unrealistic in the
current economic climate to believe that the Fund can generate income of
10%, exclusive of capital gains, without resorting to substantially
riskier investments not contemplated by the Fund's investment objective
and policies. There would be adverse tax consequences to shareholders on
the distribution of capital gain income, which would be taxable at
ordinary income tax rates.
INACCURATE GOLDSTEIN STATEMENT(S) #4: Various statements to the effect
that open-ending the Fund would solve the Fund's challenges.
THE TRUTH: Goldstein fails to mention the negative impact that
open-ending could have on the Fund, such as lower overall returns and
significantly increased expenses. In addition, if the Fund were
open-ended, the Fund may have to pay for redemptions by exiting
shareholders, by selling portfolio securities at inopportune times and
incurring increased transaction costs. Goldstein, who purchased all of
his shares since July 2003, wants to open-end the Fund so he has the
option of immediately redeeming his shares for a quick profit.
2
It is important to note that open-ending is always an option for the
Fund. However, we don't think it's wise at this time and we don't think
it should be done at the instigation of someone like Goldstein who is
acting on a short-term opportunity. The Board always has the power to
recommend open-ending the fund to shareholders as a structural solution
to a pervasive discount. But that is not our intention at this time.
INACCURATE GOLDSTEIN STATEMENT(S) #5: Slurs related to Carlton Neel's
performance, relying on an inaccurate article posted on a Web site.
THE TRUTH: The references to Carlton Neel's management of two separate
mutual funds are inaccurate; in fact, he did not manage those funds
during a majority of the time frames referred to in this article, which
was unbalanced and contained many inaccuracies.
The Board is independent, works diligently to oversee the Fund, and will
continue to serve the best interests of long-term shareholders. Goldstein is
seeking to put his own slate of less-qualified directors on the Board by
ignoring the established process for nominating new directors. That process
involves thorough consideration of a nominee's experience, background,
integrity, and ability to function on a board. Goldstein has demonstrated in
other situations his complete disdain for board process and function --
instead choosing to wage disruptive battles at an enormous cost and with
serious implications for shareholders' long-term interests.
GOLDSTEIN'S DISTORTED PERSPECTIVE ON HOW TO MANAGE THE ZWEIG TOTAL RETURN
FUND SERIOUSLY THREATENS THE ABILITY OF THE BOARD AND THE MANAGEMENT TEAM TO
CREATE LONG-TERM VALUE FOR YOU.
Therefore, your participation in this year's Annual Meeting of Shareholders,
scheduled for Wednesday, May 12, is essential. PLEASE VOTE TODAY BY SIGNING,
DATING AND MAILING PROMPTLY YOUR WHITE PROXY CARD. OR, IF YOUR SHARES ARE
HELD IN STREET NAME WITH A BROKERAGE FIRM, BANK NOMINEE OR OTHER INSTITUTION,
YOU CAN ALSO VOTE BY TELEPHONE AT 1-800-454-8683 OR AT WWW.PROXYVOTE.COM. AND
REMEMBER -- DO NOT SIGN ANY GREEN CARD YOU MAY RECEIVE.
If you have any questions, D.F. King & Co., Inc., your Fund's proxy
solicitor, will be pleased to assist. Please call them toll-free at
1-888-628-1041.
The Board of Directors thanks you for your consideration of this important
matter and appreciates the prompt return of your WHITE proxy card.
Sincerely,
Daniel T. Geraci
President, The Zweig Total Return Fund, Inc.