<PAGE> 1
As filed with the Securities and Exchange Commission on July 3, 1995
Registration No. 2-93538
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. ___ / /
Post-Effective Amendment No. 40 /x/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 41 /x/
----------------------
ZWEIG SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
5 Hanover Square, New York, New York 10004
----------------------------------------------------
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code: (212) 635-9800
EUGENE J. GLASER
President
Zweig/Glaser Advisers
5 Hanover Square
New York, New York 10004
---------------------------------------
(Name and Address of Agent for Service)
Copy to:
PAUL S. SCHREIBER, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Approximate Date of Proposed Public Offering: Effective date of this
Post-Effective Amendment.
It is proposed that this filing will become effective on September 1,
1995, pursuant to paragraph (a) of Rule 485 under the Securities Act of 1933,
as amended.
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended, the Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933, as amended. A Rule 24f-2 Notice
for the Registrant's fiscal year ended December 31, 1994 was filed on February
24, 1995.
<PAGE> 2
ZWEIG SERIES TRUST
CONTENTS
This Post-Effective Amendment No. 40 to the Registration Statement on Form N-1A
consists of the following:
1. Facing Sheet
2. Contents
3. Cross-Reference Sheet
4. Part A - Prospectus for all shares other than Class M
Shares of Zweig Cash Fund
- Prospectus for Class M
Shares of Zweig Cash Fund
5. Part B - Statement of Additional Information for all shares
other than Class M Shares of Zweig Cash Fund
- Statement of Additional Information for Class M
Shares of Zweig Cash Fund
6. Part C - Other Information
7. Signature Sheet
8. Exhibits
<PAGE> 3
ZWEIG SERIES TRUST
Cross-Reference Sheet pursuant to Rule 495(a)
for all shares other than Class M Shares of the Zweig Cash Fund
<TABLE>
<CAPTION>
Form N-1A
Item No. Location
- - ----------- --------
Part A - Prospectus
- - -------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Condensed Financial Information Financial Highlights; Performance Information
4. General Description of Registrant Zweig Series Trust; Organization of the Funds; Portfolio Securities;
Investment Objectives of the Zweig Mutual Funds; Risk Factors and
Managing Exposure to Market Risk; Stock Selection and Bond Duration;
Other Investment Policies
5. Management of the Registrant Risk Factors and Managing Exposure to Market Risk; Dr. Martin E. Zweig;
The Portfolio Managers; The Manager and Management Fee
5A. Management's Discussion of Fund Performance Performance Information
6. Capital Stock and Other Securities Organization of the Funds; Net Asset Value; Distributions and Taxes;
Choosing Among Classes of Shares
7. Purchase of Securities Being Offered How to Invest in the Zweig Mutual Funds; Choosing Among Classes of
Shares; Net Asset Value; Distributions and Taxes
8. Redemption or Repurchase Choosing Among Classes of Shares; How to Redeem your Shares; Exchange
Privilege
9. Legal Proceedings Not Applicable
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Part B - Statement of Additional Information
--------------------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and Policies; Investment
Restrictions
14. Management of the Fund Trustees and Officers of the Trust
15. Control Persons and Principal Holders of Trustees and Officers of the Trust
Securities
16. Investment Advisory and Other Services Investment Management and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares; Net Asset Value
Securities Being Offered and Taxes
20. Tax Status Net Asset Value and Taxes
21. Underwriters Investment Management and Other Services
22. Calculation of Performance Data Yield; Performance Information
23. Financial Statements Financial Statements
</TABLE>
-ii-
<PAGE> 5
ZWEIG SERIES TRUST
Cross-Reference Sheet pursuant to Rule 495(a)
for Class M Shares of the Zweig Cash Fund
<TABLE>
<CAPTION>
Form N-1A
Item No. Location
----------- --------
Part A - Prospectus for Class M Shares of
-----------------------------------------
Zweig Cash Fund
---------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Condensed Financial Information Financial Highlights; Performance Information
4. General Description of Registrant Organization and Management; The Fund's Investments
and Risk Factors
5. Management of the Registrant Organization and Management; How to Buy Shares
6. Capital Stock and Other Securities Organization and Capitalization of the Trust; Net
Asset Value, Distributions and Taxes; How to Buy
Shares
7. Purchase of Securities Being Offered How to Buy Shares; Net Asset Value, Distributions
and Taxes
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
Part B - Statement of Additional Information for
------------------------------------------------
Class M Shares of Zweig Cash Fund
---------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<S> <C> <C>
13. Investment Objectives and Policies Investment Objective and Policies; Investment
Restrictions
14. Management of the Fund Trustees and Officers of the Trust
15. Control Persons and Principal Holders of Trustees and Officers of the Trust
Securities
16. Investment Advisory and Other Services Investment Management and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities How to Purchase and Redeem Shares
19. Purchase, Redemption and Pricing of How to Purchase and Redeem Shares; Net Asset Value
Securities Being Offered and Taxes
20. Tax Status Net Asset Value and Taxes
21. Underwriters Investment Management and Other Services
22. Calculation of Performance Data Yield and Performance Information
23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No.
40 to the Registration Statement on Form N-1A.
-iv-
<PAGE> 7
Zweig
Series Trust
PROSPECTUS
ZWEIG STRATEGY FUND
ZWEIG APPRECIATION FUND
ZWEIG MANAGED ASSETS
GOVERNMENT SECURITIES SERIES
ZWEIG CASH FUND
September 1, 1995
Zweig Series Trust offers investors the opportunity to invest in one or more of
five mutual funds. The five funds, or series, of the Trust, are:
* Zweig Strategy Fund
* Zweig Appreciation Fund
* Zweig Managed Assets
* Government Securities Series
* Zweig Cash Fund
Each fund has its own investment objectives and policies. A shareholder's
interest is limited to the fund in which she or he owns shares.
The funds are designed for investors who intend to invest for the long term,
including those who wish to purchase shares for tax-qualified retirement plans
and Individual Retirement Accounts (IRAs). The funds are not appropriate for
investors who intend to liquidate their investment after a short period of
time.
Each fund offers three classes of shares: Class A, Class B and Class C
Shares. Investors in Class A Shares pay an initial sales charge. Investors in
Class B Shares pay no initial sales charge, but are subject to a declining
contingent deferred sales charge (CDSC) if they sell their Shares within six
years of purchase. Investors in Class C Shares pay no initial sales charge, but
are subject to CDSC if they sell their shares
within one year of purchase. Class B and Class C Shares have higher annual
operating expenses than Class A Shares. When choosing among classes of Shares,
you should consider the amount of the purchase, the planned length of time for
the investment and other relevant circumstances. Zweig Cash Fund, a money
market fund, also offers Class M Shares, which are described in a separate
prospectus.
Zweig/Glaser Advisers is the investment manager of the funds. Zweig Securities
Corp. is the principal distributor of the funds' shares.
Shares of the Zweig Mutual Funds are not deposits or obligations of, or
guaranteed, endorsed or insured by, the U.S. Government, any bank, the Federal
Deposit Insurance Corp., the Federal Reserve Board, or any other agency, entity
or person. The Zweig Cash Fund seeks to maintain a stable share price of $1.00.
There can be no assurance that the fund will meet this goal.
This Prospectus contains important information that you should know before
investing. Please keep it for future reference. A Statement of Additional
Information (SAI) dated September 1, 1995, has been filed with the Securities
and Exchange Commission. The SAI is incorporated by reference into this
Prospectus. You can obtain a copy without charge by calling 1-800-272-2700.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE EXCHANGE COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Zweig Series Trust
5 Hanover Square-17th Floor
New York, NY 10004
1-800-272-2700
<PAGE> 8
FEE TABLE
We've provided the following table to help you understand the expenses of
investing in the Zweig Mutual Funds. Mutual fund investors bear two types of
expenses: transaction expenses and operating expenses. You pay transaction
expenses when you buy shares in a fund. The fund as a whole pays operating
expenses, which reduce the fund's annual return to you.
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
SHARES SHARES SHARES
---- ---- ----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Charge on purchases
(as % of Offering Price)
Zweig Strategy Fund, Zweig Appreciation Fund and
Zweig Managed Assets............................ 5.50% None None
Government Securities Series....................... 4.75% None None
Zweig Cash Fund.................................... None* None None
Maximum Contingent Deferred Sales Charge (CDSC)......... None** 5.00%*** 1.25 ****
</TABLE>
- - ---------------
* Sales charges apply on exchanges of Class A Shares of Zweig Cash Fund (on
which no initial sales charge was paid) for Class A Shares of any other
fund.
** A 1% CDSC may apply on redemptions within 18 months of purchases not subject
to an initial sales charge.
*** The maximum CDSC is imposed on Class B Shares redeemed in the first year.
For shares held longer than one year, the CDSC declines according to the
schedules set forth under "Class B Shares" in this Prospectus.
**** The CDSC on Class C Shares applies only if redemption occurs in the first
year.
EXAMPLES -- The table below is based on operating expenses for the last fiscal
year for Class A Shares and Class C Shares. The Class B Shares expenses are
based on estimated expenses that would have been incurred if Class B Shares had
been in existence for such fiscal year. The table does not represent future
expense levels, which may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return, but actual annual
returns have varied.
<TABLE>
<CAPTION>
EXAMPLE: You would pay the
following
expenses on a $1,000
investment
ANNUAL FUND assuming (1) 5% annual return
OPERATING EXPENSES and (2) redemption at the end
(As % of average net assets) of each time period:
<S> <C> <C> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total Fund
Management 12b-1 Other Operating 1 3 5
FUND Fees Fees(2) Expenses Expenses Year Years Years
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Zweig Strategy Fund................. .75% .30% .35% 1.40% $ 68 $ 97 $ 127
Zweig Appreciation Fund............. 1.00 .30 .40 1.70 71 106 142
Zweig Managed Assets................ 1.00 .30 .38 1.68 71 105 141
Government Securities Series........ .60 .30 .38 1.28 60 86 114
Zweig Cash Fund..................... .50 .30 .10 .90(1) 9 29 50
CLASS B SHARES
Zweig Strategy Fund................. .75 1.00 .35 2.10 71 96 133
Zweig Appreciation Fund............. 1.00 1.00 .40 2.40 74 105 148
Zweig Managed Assets................ 1.00 1.00 .38 2.38 74 104 147
Government Securities Series........ .60 1.00 .38 1.98 70 92 127
Zweig Cash Fund..................... .50 1.00 .10 1.60(1) 66 80 107
CLASS C SHARES
Zweig Strategy Fund................. .75 1.00 .35 2.10 34 66 113
Zweig Appreciation Fund............. 1.00 1.00 .40 2.40 37 75 128
Zweig Managed Assets................ 1.00 1.00 .38 2.38 37 74 127
Government Securities Series........ .60 .75 .38 1.73 30 54 94
Zweig Cash Fund..................... .50 .30 .10 .90(1) 22 29 50
<CAPTION>
EXAMPLE: You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return
and (2) no redemption:
<S> <C> <C> <C> <C> <C>
- - ------------------------------------
10 1 3 5 10
FUND Years Year Years Years Years
--------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Zweig Strategy Fund................. $214 $ 68 $ 97 $ 127 $214
Zweig Appreciation Fund............. 245 71 106 142 245
Zweig Managed Assets................ 243 71 105 141 243
Government Securities Series........ 195 60 86 114 195
Zweig Cash Fund..................... 111 9 29 50 111
CLASS B SHARES
Zweig Strategy Fund................. 217(3) 21 66 113 217(3)
Zweig Appreciation Fund............. 248(3) 24 75 128 248(3)
Zweig Managed Assets................ 246(3) 24 74 127 246(3)
Government Securities Series........ 204(3) 20 62 107 204(3)
Zweig Cash Fund..................... 162(3) 16 50 87 162(3)
CLASS C SHARES
Zweig Strategy Fund................. 243 21 66 113 243
Zweig Appreciation Fund............. 274 24 75 128 274
Zweig Managed Assets................ 272 24 74 127 272
Government Securities Series........ 204 18 54 94 204
Zweig Cash Fund..................... 111 9 29 50 111
</TABLE>
- - --------------------------------------------------------------------------------
(1) The Manager has voluntarily undertaken to limit the expenses of Zweig Cash
Fund (exclusive of taxes, interest, brokerage commissions, certain
distribution fees and extraordinary expenses) to .60% of its average net
assets effective September 1, 1994. The Manager reserves the right to
discontinue this policy at any time after October 31, 1995.
(2) The Rule 12b-1 Fees include a 0.25% Service Fee, 100% of which is
reallocated to National Association of Securities Dealers, Inc. ("NASD")
member firms for continuous personal service by such members to investors in
the Trust, such as responding to shareholder inquiries, quoting net asset
values, providing current marketing materials and attending to other
shareholder matters. The Distributor retains a portion of the asset based
sales charge also included in the Rule 12b-1 Fees; the remainder is paid to
brokers for promoting sales of the Trust's shares. The NASD limits asset
based sales charges to 6.25% of new sales, plus interest. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
(3) Class B Shares automatically convert to Class A Shares after seven years
(see Class B Shares Conversion Feature). Years eight through ten reflect
expenses of the Class A Shares.
2
<PAGE> 9
FINANCIAL HIGHLIGHTS
The following table sets forth financial history for a Class A Share and
Class C Share of each of the Zweig Mutual Funds. The distribution of Class B
Shares commenced on the effective date of this Prospectus.
Coopers & Lybrand L.L.P., the funds' independent accountants, has audited
this information. Their report for each of the last five years is included in
the 1994 Annual Report of the Trust. The report is available upon request and is
incorporated by reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
NET DISTRIBU-
REALIZED TIONS DISTRIBU-
NET ASSET AND DIVIDENDS FROM TIONS
VALUE NET UNREALIZED TOTAL FROM FROM NET REALIZED FROM TOTAL
YEAR BEGINNING INVESTMENT GAINS INVESTMENT INVESTMENT CAPITAL CAPITAL DISTRIBU-
ENDED OF YEAR INCOME (LOSSES) OPERATIONS INCOME GAINS PAID-IN TIONS
-------- --------- ---------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ZWEIG STRATEGY FUND CLASS A
1994 $ 12.52 $ 0.24 $(0.10) $ 0.14 $(0.20) $ (0.10) $ -- $ (0.30)
1993 13.60 0.13 1.72 1.85 (0.12) (2.81) -- (2.93)
1992 13.03 0.17 0.80 0.97 (0.21) (0.19) -- (0.40)
1991 10.81 0.21 2.27 2.48 (0.26) -- -- (0.26)
1990 11.36 0.42 (0.67) (0.25) (0.30) -- -- (0.30)
1989(1) 11.34 -- 0.02 0.02 -- -- -- --
ZWEIG STRATEGY FUND CLASS C
1994 12.51 0.15 (0.10) 0.05 (0.11) (0.10) -- (0.21)
1993 13.61 0.05 1.71 1.76 (0.05) (2.81) -- (2.86)
1992(2) 12.89 0.08 0.69 0.77 (0.05) -- -- (0.05)
ZWEIG APPRECIATION FUND CLASS A
1994 14.33 0.16 (0.43) (0.27) (0.06) (0.46) -- (0.52)
1993 13.10 0.07 1.83 1.90 (0.06) (0.61) -- (0.67)
1992 12.03 0.06 1.07 1.13 (0.03) (0.03) -- (0.06)
1991(3) 11.34 0.03 0.66 0.69 -- -- -- --
ZWEIG APPRECIATION FUND CLASS C
1994 14.19 0.06 (0.43) (0.37) -- (0.46) -- (0.46)
1993 13.01 (0.01) 1.80 1.79 -- (0.61) -- (0.61)
1992(2) 12.33 (0.02) 0.70 0.68 -- -- -- --
ZWEIG MANAGED ASSETS CLASS A
1994 12.38 0.33 (0.69) (0.36) (0.26) -- -- (0.26)
1993(4) 11.34 0.22 1.13 1.35 (0.14) (0.17) -- (0.31)
ZWEIG MANAGED ASSETS CLASS C
1994 12.36 0.23 (0.68) (0.45) (0.18) -- -- (0.18)
1993(4) 11.34 0.15 1.13 1.28 (0.09) (0.17) -- (0.26)
GOVERNMENT SECURITIES SERIES CLASS A
1994 10.43 0.50 (0.79) (0.29) (0.51) -- -- (0.51)
1993 10.01 0.55 0.46 1.01 (0.59) -- -- (0.59)
1992 10.21 0.65 (0.22) 0.43 (0.63) -- -- (0.63)
1991 9.60 0.68 0.62 1.30 (0.69) -- -- (0.69)
1990 9.75 0.70 (0.15) 0.55 (0.70) -- -- (0.70)
1989 9.29 0.66 0.46 1.12 (0.66) -- -- (0.66)
1988 9.54 0.68 (0.25) 0.43 (0.68) -- -- (0.68)
1987 10.70 0.70 (0.92) (0.22) (0.70) (0.11) (0.13) (0.94)
1986 10.87 0.76 0.28 1.04 (0.92) (0.29) -- (1.21)
1985(5) 10.00 0.63 0.85 1.48 (0.42) (0.19) -- (0.61)
GOVERNMENT SECURITIES SERIES CLASS C
1994 10.40 0.46 (0.79) (0.33) (0.45) -- -- (0.45)
1993 10.02 0.52 0.41 0.93 (0.55) -- -- (0.55)
1992(2) 9.86 0.52 0.09 0.61 (0.45) -- -- (0.45)
ZWEIG CASH FUND CLASS A
1994(6) 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
ZWEIG CASH FUND CLASS C
1994(6) 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
<CAPTION>
RATIOS TO AVERAGE
NET ASSETS
-----------------------
NET ASSET NET PORTFOLIO END OF YEAR
VALUE END TOTAL INVESTMENT TURNOVER NET ASSETS
OF YEAR RETURN EXPENSES INCOME RATE (IN THOUSANDS)
--------- ------ -------- ---------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
ZWEI
$ 12.36 1.14% 1.40% 1.90% 70% $424,805
12.52 14.97 1.43 1.00 359 405,884
13.60 7.61 1.63 1.32 249 358,318
13.03 23.34 1.58 1.79 179 367,343
10.81 (2.16) 1.67 3.89 105 298,734
11.36 0.18 N/A N/A N/A 333,391
ZWEI
12.35 0.41 2.10 1.20 70 307,011
12.51 14.18 2.13 0.30 359 188,631
13.61 6.00 2.43* 0.40* 249 64,697
ZWEI
13.54 (1.83) 1.70 1.09 97 213,400
14.33 14.65 1.73 0.52 69 230,230
13.10 9.52 1.96 0.49 61 200,656
12.03 6.08 2.19* 1.27* 8 157,948
ZWEI
13.36 (2.55) 2.40 0.39 97 139,397
14.19 13.84 2.43 (0.18) 69 105,957
13.01 5.52 2.80* (0.32)* 61 42,089
ZWEI
11.76 (2.93) 1.68 2.70 299 154,441
12.38 11.98 1.67* 1.93* 196 121,620
ZWEI
11.73 (3.66) 2.38 2.00 299 570,710
12.36 11.34 2.37* 1.23* 196 429,088
GOVE
9.63 (2.83) 1.28 5.07 191 47,622
10.43 10.35 1.30 5.46 256 60,207
10.01 4.51 1.30 6.58 200 70,062
10.21 14.35 1.42 7.10 361 83,859
9.60 6.09 1.44 7.44 263 102,209
9.75 12.46 1.88 7.04 445 119,742
9.29 4.63 1.91 7.27 24 203,999
9.54 (2.02) 1.81 7.09 58 350,614
10.70 10.23 1.87 6.93 169 421,837
10.87 15.07 2.03* 8.27* 407 138,734
GOVE
9.62 (3.18) 1.73 4.62 191 22,599
10.40 9.48 1.75 5.01 256 21,301
10.02 6.31 1.81* 5.93* 200 9,210
ZWEI
1.00 2.55%** 0.62%** 2.52%** N/A 4,303
ZWEI
1.00 2.55** 0.61** 2.52** N/A 5,040
</TABLE>
- - ---------------
(1) Commenced operations December 29, 1989.
(2) Commenced operations February 4, 1992.
(3) Commenced operations October 7, 1991.
(4) Commenced operations February 8, 1993.
(5) Commenced operations March 25, 1985.
(6) Commenced operations May 1, 1994.
* Annualized.
** Not annualized.
3
<PAGE> 10
ZWEIG SERIES TRUST
Zweig Series Trust offers investors the opportunity to pool their money to
achieve the benefits of a mutual fund: economies of scale, diversification and
professional money management. Economies of scale result in lower costs per
investor, due to the large number of investors sharing the expenses of the
funds. Investors can achieve greater diversification in a mutual fund than they
could by investing in individual securities. The Trust offers investors access
to the professional investment expertise of Zweig/Glaser Advisers, the manager.
Dr. Martin E. Zweig, Ph.D., is Chairman of the manager and President of the
Trust.
INVESTMENT OBJECTIVES OF THE ZWEIG MUTUAL FUNDS
ZWEIG STRATEGY FUND seeks long-term capital appreciation through investment
primarily in "Blue Chip Stocks" (see Portfolio Securities), consistent with
preservation of capital and reduction of portfolio exposure to market risk. The
fund is managed using risk management strategies and a stock selection model
developed by Dr. Zweig and his staff.
Dr. Zweig's risk management strategies rely on a series of monetary, sentiment
and market indicators. The indicators measure risk levels in the stock and bond
markets. As the indicators point to increasing levels of market risk, the
portfolio manager reduces, or can off-set entirely, the fund's market exposure
by gradually selling portions of the fund's stock holdings and buying cash
equivalents, such as money market securities. Stock index futures or options
also may be used as a means of adjusting the fund's exposure to market risk, but
not for the purpose of leverage (see Risk Factors and Managing Exposure to
Market Risk). Under normal conditions, Dr. Zweig's investment models will not
reallocate more than 10% of a fund's assets among asset classes at any one time.
ZWEIG APPRECIATION FUND seeks long-term capital appreciation through investment
primarily in "Small Company Stocks" (see Portfolio Securities), consistent with
preservation of capital and reduction of portfolio exposure to market risk.
Current income is not an objective. Under normal circumstances, the fund will
have between 50% and 65% of its invested assets in Small Company Stocks and may
invest up to 35% in large company stocks. The risk management strategies
described in the preceding paragraph also are used in managing this fund.
ZWEIG MANAGED ASSETS seeks a high level of total return over the long-term from
capital appreciation, dividends and interest, with a reduction of portfolio
exposure to market risk by allocating its assets among domestic and foreign
stocks, bonds and short-term debt instruments. Up to 50% of the fund's assets
may be invested in foreign securities, as conditions warrant (see Portfolio
Securities).
The asset allocation mix will be determined using risk management strategies and
investment models developed by Dr. Zweig and his staff. The fund's assets will
normally be allocated within the following parameters: 0-60% in stocks, 0-60% in
bonds and 0-100% in short-term debt instruments. A neutral mix will consist of
35% stocks, 35% bonds and 30% cash equivalents. This will occur when the
research indicates that conditions do not favor one asset class over another.
The fund may use futures and forward currency contracts and options to increase
or decrease its exposure to changing securities prices, interest rates or
currency exchange rates.
GOVERNMENT SECURITIES SERIES seeks a high current return by investing primarily
in U.S. Government and agency securities, including Government National Mortgage
Association mortgage-backed certificates, and repurchase agreements
collateralized by such securities. The fund may use futures contracts and
options as a means of hedging against changes in interest rates.
ZWEIG CASH FUND seeks high current income consistent with maintaining liquidity
and preserving capital. The goal of the fund is to maintain a stable share price
of $1.00. The fund invests exclusively in short-term securities issued or
guaranteed as to the payment of principal and interest by the U.S. Government,
its agencies or instrumentalities and repurchase agreements collateralized by
such obligations. Zweig Cash Fund also offers Class M Shares which are described
in a separate Prospectus. Class M Shares have different sales charges and
expenses, which may affect performance. You may obtain more information about
Class M Shares by calling 1-800-272-2700. Class M Shares of Zweig Cash Fund have
no exchange privileges with other funds in the Trust.
The investment objectives described above, except for those of Zweig Managed
Assets, are fundamental. They can be changed only by vote of a majority of the
outstanding shares of a fund. A majority for this purpose is defined as the
lesser of either: (a) 67% of the shares represented at a meeting if more than
50% of all shares are represented, or (b) more than 50% of all outstand-
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<PAGE> 11
ing shares. We do not anticipate that Zweig Managed Assets will change its
objectives or alter its "neutral" asset mix. If the fund should change its
investment objective, we will notify shareholders 30 days prior to making the
change.
Please read the Risk Factors and Managing Exposure to Market Risk, Stock
Selection and Bond Duration and Portfolio Securities sections of this prospectus
for more detailed information about the investment practices of each fund. The
Statement of Additional Information has further details. As with any mutual
fund, there is no assurance that a fund's objectives will be achieved.
DR. MARTIN E. ZWEIG
Dr. Martin E. Zweig has created and refined a risk-averse style of money
management over a 24-year career providing investment advisory and portfolio
management services. Investment advisers affiliated with Dr. Zweig presently
manage over $9 billion of assets. This $9 billion includes approximately $4.1
billion in institutional accounts, $1.1 billion in publicly traded closed-end
investment companies and $2.2 billion in open-end mutual funds, as well as other
accounts.
Dr. Zweig is the Chairman of the manager and President of the Trust. He has been
a regular panelist on PBS television's Wall Street Week with Louis Rukeyser for
19 years and, in 1992, became the ninth person selected for the program's Hall
of Fame. Dr. Zweig is the author of various investment advisory newsletters,
including The Zweig Forecast. He is also the author of the books Winning on Wall
Street, The ABCs of Market Forecasting and Winning with New IRAs.
Dr. Zweig determines the asset allocation strategy for each of the Zweig Mutual
Funds; he does not select the individual securities to implement the strategy.
The portfolio manager of each individual fund selects the specific securities
for that fund (see Stock Selection and Bond Duration).
THE PORTFOLIO MANAGERS
David Katzen has been the portfolio manager for Zweig Strategy Fund and Zweig
Appreciation Fund since their inceptions. Mr. Katzen is a Senior Vice President
of the funds. He has been with the Zweig Organization since 1986. Mr. Katzen
received his B.A. in Mathematics from City University of New York and an M.A. in
Mathematics from Dartmouth College, where he was admitted to the Ph.D. program.
Carlton Neel became the portfolio manager for Zweig Managed Assets and
Government Securities Series on July 5, 1995. Mr. Neel is a First Vice President
of the funds. Mr. Neel received a dual B.A. in Economics and Political Science
from Brown University. Prior to joining the Zweig Organization, he was a Vice
President with J.P. Morgan & Co., Inc.
STOCK SELECTION AND BOND DURATION
The portfolio managers of the Zweig Mutual Funds use a proprietary
computer-driven model developed by Dr. Zweig and his staff to choose stocks for
the funds. The model evaluates and ranks 3,000 stocks based primarily upon
earnings momentum, relative valuation, changes in analysts' earnings estimates
and price momentum. The stock selection model may evolve or be replaced by other
techniques intended to select stocks with the potential for growth. We will
notify shareholders of any material change to the stock selection model.
Out of the 1,400 most liquid stocks, the portfolio manager selects up to 300
stocks for the Zweig Strategy Fund. The manager of the Zweig Appreciation Fund
selects a larger number of stocks (presently more than 600) primarily from the
2,500 stocks immediately after the 500 largest stocks ranked by market
capitalization or trading volume. The Appreciation Fund also may invest up to
35% of its assets in large-company stocks.
Government Securities Series invests in U.S. Government securities. These
obligations of the United States Government and its agencies and
instrumentalities are considered to have minimal risk of default. Therefore, the
primary consideration in choosing bonds is managing risks related to changes in
interest rate levels. A bond's duration measures its sensitivity to changes in
interest rates (interest rate risk). In concept, duration is the weighted
average "maturity" of all cash flows of a bond (the interest payments as well as
the principal repayment). The longer the duration, the greater the bond's price
movement will be as rates change. The portfolio manager adjusts duration by
altering the mix of short, medium and long-term bonds, and by buying or selling
Treasury futures contracts.
Investments for the Government Securities Series are chosen primarily by
utilizing a model that incorporates various indicators, such as: momentum of
bond prices,
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<PAGE> 12
short-term interest rate trends, inflation indicators, general economic and
liquidity indicators, and other market indicators and statistics.
Each foreign country in which Zweig Managed Assets intends to invest has a
currency model, as well as stock and bond models similar to those used for
domestic analyses. Zweig Managed Assets presently invests only in groups of
foreign stocks that, in the aggregate, are expected to perform similarly to the
major stock market index of the country in which the stocks are located.
PORTFOLIO SECURITIES
The securities described below may be used in pursuit of a fund's investment
objectives. Percentage limitations on investments are considered at the time of
purchase; the sale of portfolio securities is not required in the event of a
subsequent change in circumstances.
STOCKS and other equity securities represent an ownership interest in a company.
Securities in this category include common stocks, fixed-rate preferred stocks,
bonds convertible into equity securities, warrants, rights, depository receipts
and other equity securities. Common stocks have a history of long-term growth in
value. However, stock prices fluctuate in response to general market and
economic conditions, as well as to factors affecting individual companies.
Government Securities Series and Zweig Cash Fund may not invest in stocks.
"BLUE CHIP STOCKS" (the primary investments of Zweig Strategy Fund) are
stocks with a minimum market capitalization (the total value of their
shares) of $400 million, average daily trading volume of 50,000 shares or
$425 million of total assets, that the portfolio manager considers to be
comparable to the stocks included in the Standard & Poor's 500 Index. Blue
Chip Stocks are traded on the New York Stock Exchange (NYSE), the American
Stock Exchange (AMEX), over the counter (OTC) or on foreign exchanges.
"SMALL COMPANY STOCKS" (the primary investments of Zweig Appreciation Fund)
are the 2,500 stocks traded on the NYSE, AMEX or OTC that are positioned
immediately after the 500 largest stocks ranked in terms of market
capitalization and/or trading volume. Presently, the market capitalization
of the 2,500 stocks ranges between approximately $100 million and $2.5
billion. Their average daily trading volume is approximately $2.3 million.
Small Company Stocks historically have presented greater potential for
capital appreciation and greater risk, and they tend to be more volatile,
than stocks of larger, more established companies.
BONDS and other debt instruments represent a loan from the investor to the
issuer of the security. The issuer pays the investor a fixed or variable rate of
interest and must repay the amount borrowed when the bond matures. The value of
bonds and other debt instruments fluctuates primarily based on the maturity and
coupon (interest rate), changes in the general level of interest rates, and the
credit quality of the issuer. Zweig Strategy Fund may not invest in bonds. Zweig
Appreciation Fund may invest only in U.S. Government securities with remaining
maturities of five years or less. Zweig Managed Assets may invest in foreign and
domestic bonds rated "A" or higher by Moody's Investors Service, Inc. or
Standard & Poor's Corporation, or if unrated, the bonds must be judged by the
portfolio manager to be of comparable quality.
U.S. GOVERNMENT SECURITIES are debt instruments issued or guaranteed by the
U.S. Treasury or by a U.S. Government agency or instrumentality. Not all
U.S. Government securities are backed by the full faith and credit of the
United States. Some are supported only by the credit of the agency or
instrumentality that issued them. Agencies and instrumentalities include:
Bank for Cooperatives, Export-Import Bank of the U.S., Farmers Home
Administration, Federal Financing Bank, Federal Home Loan Banks, Federal
Home Loan Mortgage Corp., Federal Housing Administration, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, Government National Mortgage Association, Resolution Funding
Corp., Student Loan Marketing Association, Tennessee Valley Authority and
U.S. Postal Service.
MORTGAGE SECURITIES are debt instruments that include mortgage-backed
securities (for example, GNMA certificates) and collateralized mortgage
obligations. The value of these securities fluctuates based upon interest
rates, the market's perception of the issuer, and regulatory or tax
changes. Mortgage securities also are subject to prepayment risk which can
result in the proceeds being reinvested at a lower rate of interest and
loss of any premium. This typically occurs when large numbers of
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<PAGE> 13
homeowners refinance their mortgages at lower rates.
CONSTANT MATURITY TREASURY FLOATING RATE NOTES have a maturity longer than
one year but the interest rate is reset periodically, e.g. quarterly or
semi-annually. Because of changes in the relationship of short-term
interest rates to intermediate-term interest rates, the value of these
notes will fluctuate. Zweig Cash Fund presently holds two adjustable rate
notes issued by the Federal National Mortgage Association. The interest
rate on these notes is determined quarterly according to a formula based on
the Federal Reserve 10 year Treasury Note rate. Should short-term interest
rates approach the 10 year Treasury Note rate, the notes could be worth
less than par. Accordingly, the Manager has arranged, at no cost to the
fund, for an irrevocable Letter of Credit in the amount of $1 million that
the fund could draw on if for any reason the notes had to be sold and the
proceeds were less than the fund's cost.
REPURCHASE AGREEMENTS are arrangements by which a fund buys a security at one
price and at the same time agrees to sell the security back to the seller at a
higher price, usually on the next business day (or within seven days for foreign
repurchase agreements). Repurchase agreements offer a means of generating income
from excess cash that a fund might otherwise hold. Delays in payment or losses
may result if the other party to the agreement defaults or becomes bankrupt. A
fund will enter into repurchase agreements only with member banks of the Federal
Reserve System or primary dealers in U.S. Government securities. The fund's
repurchase agreements must be fully backed by collateral (U.S. Government
securities in the case of the Government Securities Series and Zweig Cash Fund)
that is marked to market, or priced, each day.
MONEY MARKET INSTRUMENTS are short-term, high quality debt securities that
present minimal risk of loss. We use these securities for defensive
purposes -- to reduce fluctuations in a fund's net asset value -- and often
refer to them as "cash" or "cash equivalents". Money market securities include:
short-term U.S. Government obligations, commercial paper, other short-term
corporate obligations, bank deposits (including time deposits with a maturity of
less than 1 year) and other financial institution obligations.
FOREIGN STOCKS AND BONDS may involve additional risks. These include currency
fluctuations and risks related to political and economic conditions in foreign
countries. These factors could make foreign investments less liquid and more
volatile. Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. Foreign investments also may be
subject to possible nationalization of issuers or expropriation of their assets,
which would adversely affect a fund's ability to liquidate its investment.
Government Securities Series and Zweig Cash Fund may not invest in foreign
securities. The other Zweig Mutual Funds may invest in foreign securities and
American depository receipts that are publicly traded in the U.S. In addition,
Zweig Strategy Fund and Zweig Appreciation Fund may invest up to 15% of their
assets in foreign securities not publicly traded in the U.S. Zweig Managed
Assets may invest up to 50% of its assets in foreign securities not publicly
traded in the U.S., but not more than 15% of its assets in any one country.
ILLIQUID AND RESTRICTED SECURITIES may be difficult to sell promptly at an
acceptable price, or may be sold only pursuant to certain legal restrictions.
Difficulty in selling securities may result in a loss or entail expenses not
normally associated with the sale of a portfolio security. Not more than 15% of
a fund's net assets (10% for Zweig Cash Fund and 5% of total assets for Zweig
Managed Assets) may be invested in illiquid securities. Illiquid securities
include securities not listed on a recognized foreign securities exchange and
repurchase agreements having more than seven days remaining to maturity.
INDEXED SECURITIES are securities whose value depends on the price of securities
indexes, other securities, foreign currencies or other assets. Among the more
traditional indexed securities are futures and options. Futures and options are
standardized contracts that have been used by mutual funds for many years to
manage their portfolios more efficiently. Index futures, for example, enable the
manager to position assets in the market immediately, with a modest margin
deposit (roughly 5% to 10% of the position size) to simulate a much larger
invested position. Transaction costs also may be lower than purchasing or
selling the underlying securities. A fund will purchase or sell indexed
securities for hedging purposes only, including increasing or decreasing
exposure to changing securities prices, but not to leverage assets. (See Risk
Factors and Managing Exposure to Market Risk.)
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<PAGE> 14
RISK FACTORS AND MANAGING EXPOSURE TO MARKET RISK
Investing in stocks and bonds, directly or through a mutual fund, involves risks
that are not found in federally insured CDs, money market and savings accounts.
The most significant is the risk of losing your principal. The prices of
individual stocks and bonds, and markets as a whole, move up and down. Markets
move based on economic factors such as interest rates and market conditions such
as investor sentiment. Individual stock or bond prices also are affected by
results of the issuer's operations and factors peculiar to its industry.
Diversification can reduce the risks of investing. Diversifying includes
limiting the amount invested in any one company or, on a broader scale, limiting
the amount invested in any one industry, any one class of assets (e.g. stocks)
or any one country. The funds' Annual and Semi-annual Reports to Shareholders
detail the holdings of each fund. Call 1-800-272-2700 to obtain the most recent
Report.
Like most mutual funds, the Zweig Mutual Funds use diversification to minimize
the effect of a loss in any one investment. U.S. Government securities (the
primary investments of Government Securities Series and Zweig Cash Fund) avoid
the risks related to factors affecting a particular company or industry, but
they do not eliminate market (interest rate) risk.
Unlike most mutual funds, the Zweig Mutual Funds also manage exposure to market
risk by significantly adjusting the amount of a fund's assets that are invested
in stocks or bonds and the duration (risk) of a bond portfolio. While the Zweig
Funds manage exposure to risk, we cannot eliminate risk.
We manage the Zweig Mutual Funds by diversifying portfolios very broadly (other
than funds comprised of U.S. Government securities) and by increasing or
reducing the amount of the fund's assets that are invested in stocks or bonds,
using the strategies developed by Dr. Zweig and his associates. As the research
indicates that risk levels are rising in the stock and/or bond markets, the
portfolio manager gradually sells a portion of each fund's stocks and/or bonds
and buys money market securities. As the research shows decreasing levels of
risk in stocks and/or bonds, the portfolio manager sells some of the money
market securities and buys stocks and/or bonds. The shifts in the asset mix of a
fund are made incrementally. Under normal conditions, no fund adjusts its asset
mix by more than 10% at any one time.
In addition to buying and selling money market securities, the portfolio manager
may use other methods to increase or reduce market exposure. The portfolio
manager may buy or sell futures contracts and options. He also may sell short
and enter into currency exchange contracts. These strategies allow the fund to
increase or decrease its exposure to changes in interest rates, exchange rates
and movements in stock prices. Used cautiously, they may be effective tools that
lend greater stability to fund assets. They may also help to reduce the cost of
administering a portfolio and allow managers to buy and sell relatively large
positions without distorting prices.
The portfolio managers use these techniques to adjust the risk and return
characteristics of a fund. They do not use these practices to leverage the fund.
If a manager misjudges market conditions or employs a strategy that does not
correlate well with the fund's primary investments, use of these techniques may
result in a loss, regardless of the manager's original intent to reduce risk.
Descriptions of these strategies follow, and the Statement of Additional
Information contains more detailed explanations. You should understand these
investment practices and be sure that you are able to withstand the potential
risks inherent in their use.
FUTURES CONTRACTS AND OPTIONS. Each of the Zweig Mutual Funds except Zweig Cash
Fund may use futures contracts and options to manage its exposure to changing
stock and bond prices or to alter its asset mix. A fund may use any type of
future or option related to its investments. These include: stock index futures
and options, foreign stock index futures and options, interest rate futures and
options, and foreign currency futures and options, including those traded on
foreign exchanges and options not traded on exchanges. Some futures and options
strategies hedge against price fluctuations. These include: selling futures as a
portfolio hedge, buying puts and writing covered calls. Other strategies
increase market exposure. These include buying futures, writing puts and buying
calls.
A fund will not purchase puts if more than 10% of its assets would be invested
in premiums on puts. A fund will write calls only if they are covered throughout
the life of the call. A fund will write puts only if: (a) the aggregate value of
the obligations underlying the puts does not exceed 50% of a fund's assets, and
(b) the puts are fully secured by high-quality debt obligations in a segregated
account with the fund's custodian, The
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<PAGE> 15
Bank of New York. Call options on futures must be similarly secured.
Futures and options involve, to varying degrees, market risk in excess of their
value. Futures and options may be used or combined with each other, or with
forward contracts, in order to adjust the risk and return characteristics of an
overall strategy; however, there may be an imperfect correlation between the
prices of options and futures contracts and the price movements of the
securities being hedged. Another risk associated with options and futures is a
potential lack of liquidity. A fund may be unable to close out, or sell, its
futures or options positions at all times. Each fund seeks to limit losses from
all options transactions to 5% of its average net assets per year. If necessary,
a fund will cease options transactions in order to comply with the 5%
limitation.
CURRENCY EXCHANGE CONTRACTS. Only Zweig Managed Assets may enter into forward
currency exchange contracts. Currency exchange contracts are agreements to
exchange one currency for another at a set rate on a future date. Currency
exchange contracts may be used to lock in an exchange rate for purchases and
sales of securities denominated in foreign currencies. These contracts, however,
involve the risk that currency movements will be inaccurately predicted, in
which case, the fund's return would be adversely affected. To manage its
exposure to fluctuations in currency exchange rates, Zweig Managed Assets may
enter into forward currency exchange contracts, may buy and sell options and
futures contracts relating to foreign currencies or may purchase securities
indexed to foreign currencies.
Some futures and forward foreign currency contracts are customized financial
contracts between two parties. Such contracts are subject to the risk that the
counterparty will not meet its obligations under the contract. They also may be
less liquid and more difficult to value than standardized contracts traded on a
regulated exchange.
SELLING SHORT. Government Securities Series and Zweig Cash Fund may not sell
short. A fund sells a security, future or currency short when the manager
believes the price of the security, future or currency will decline. A fund may
sell a stock index future short to offset a potential decline in a group of
stocks the fund owns. A fund may make such short sales if the manager believes
reducing portfolio exposure to changing securities prices can be accomplished at
a lower cost than if the securities themselves were sold. A fund also may sell a
security short to protect against a decline in the price of a security it
already owns, but wishes to defer the realization of a capital gain. To sell a
security short, the fund must borrow the security. A fund's obligation to
replace the security borrowed and sold short will be fully secured at all times
by cash or U.S. Government securities deposited with the lender of the security
or in a segregated account with the fund's custodian. A fund may not sell
securities short if: (a) the market value of all securities sold short will be
more than 25% of the fund's assets, or (b) the market value of unlisted
securities sold short will be more than 10% of the fund's assets.
The Board of Trustees, which has the primary responsibility for the overall
management of the Zweig Mutual Funds, has determined that, while there are
certain risks inherent in futures, options, currency exchange contracts and
short sales, Zweig/Glaser Advisers has demonstrated its expertise and ability to
use these hedging techniques effectively. The flexibility and potential for
enhanced long-term performance and risk reduction provided by such investment
techniques warrant their use, in the opinion of the Board of Trustees.
MEASURING RISK. In choosing an investment that is right for you, it is important
to consider the level of risk that you can withstand. There are many ways to
measure risk when comparing mutual funds. One that is easily understood is
maximum decline in net asset value (NAV). Many national newspapers measure the
extent to which a fund's net asset value has changed from day to day. Micropal
Inc, an independent fund rating service, takes this concept one step further by
measuring the largest high-to-low drop in the month-end to month-end net asset
value of a fund during any given period, and expressing it as a percentage
decline. When comparing the maximum NAV declines of different funds, ask
yourself if you could have experienced each particular drop without selling the
fund. The maximum NAV declines for Class A Shares and Class C Shares from
inception through December 31, 1994, computed by Micropal Inc, are shown below
for the Zweig Mutual Funds and for the average fund with a comparable investment
objective (the distribution of the Class B Shares commenced on the effective
date of this prospectus). Also shown are the maximum declines for a relevant
standard measure of securities prices. In all cases, distributions have been
reinvested and maximum
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NAV declines do not reflect sales charges. Please remember that past performance
does not predict future results.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C SHARES*
------------------------- -------------------------
<S> <C> <C>
Max NAV Decline of ZWEIG STRATEGY FUND from -7.13% (3rd lowest of 268 -4.30% (9th lowest of 341
inception on 12/29/89 growth funds) growth funds)
Max NAV Decline of Average Growth Fund for period -18.65% -10.05%
Max Decline of S&P 500 for period -14.69% -6.96%
Max NAV Decline of ZWEIG APPRECIATION FUND from -6.04% (8th lowest of 114 -6.20% (10th lowest of
inception on 10/8/91 small cap funds) 121 small cap funds)
Max NAV Decline of Average Small-Cap Fund for period -13.72% -13.65%
Max Decline of Value Line Geometric Index for period -9.87% -9.87%
Max NAV Decline of ZWEIG MANAGED ASSETS from -4.88% (3rd lowest of 19 -5.44% (6th lowest of 19
inception on 2/8/93 global flexible funds) global flexible funds)
Max NAV Decline of Average Global Flexible Fund for -8.41% -8.41%
period
Max Decline of 40/60 Index for period -5.88% -5.88%
-4.79% (11th lowest of 85 -5.18% (20th lowest of
Max NAV Decline of GOVERNMENT SECURITIES SERIES from Gov't Securities funds) 109 Gov't Securities
9/1/89** funds)
Max NAV Decline of Average U.S. Govt. Fund for -7.84% -7.83%
period
Max NAV Decline of Lehman Composite Government Bond -5.41% -5.41%
Index
</TABLE>
- - ---------------
Definitions of Indices used for comparison:
The Standard & Poor's 500 Index is a broad-based measurement of changes in
stock market conditions based on the average performance of 500 widely held
common stocks.
The 40/60 index is a representative index consisting of 40% S&P 500 stocks
and 60% Lehman Composite Government Bond Index.
The Lehman Composite Government Bond Index measures the return of government
bonds ranging in maturity from one to 30 years.
The Value Line Geometric Index measures the returns of 1,700 stocks ranging
from large-cap to small-cap on an unweighted basis.
* From inception on 2/4/92 (2/8/93 for Zweig Managed Assets).
** Zweig/Glaser Advisers assumed responsibility for managing the fund on
September 1, 1989. Under the prior manager, from inception on March 25, 1985,
the Maximum NAV Decline was -10.87% for the fund, -7.5% for the Average U.S.
Government Fund and -5.41% for the Lehman Composite Government Bond Index.
Comparable information for other mutual funds, prepared by Micropal Inc, is
available by calling 1-800-444-2706.
OTHER INVESTMENT POLICIES
PORTFOLIO TURNOVER RATE. The length of time a fund has held a stock or bond is
not usually considered when making investment decisions. As a result of the
Zweig style of money management, a fund's turnover rate may be higher than that
of other mutual funds. (A portfolio turnover rate in excess of 100% may be
deemed to be high.) Portfolio turnover may result in realization of taxable
capital gains and generally involves expense, including brokerage costs. (The
Statement of Additional Information contains a detailed explanation of certain
relevant tax considerations.) The portfolio managers consider the cost of making
portfolio adjustments when deciding whether to implement a strategy by selling
stocks or bonds and investing the proceeds in money market securities, or by
using futures or options to reduce exposure to market risk. See the table under
Financial Highlights for portfolio turnover rates.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. A fund may purchase a bond or
stock with delivery of the security and payment deferred to a future date. The
money to purchase such securities will be invested in other securities until it
receives delivery. This could increase the possibility that the fund's net asset
value would increase or decrease faster than would otherwise be the case.
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<PAGE> 17
LENDING SECURITIES. A fund may lend securities to broker/dealers and
institutions as a means of earning income. Delays or losses could result if a
borrower becomes bankrupt or defaults in its obligation to return the loaned
security. The Zweig Mutual Funds may lend securities only if: (a) the loan is
fully backed by collateral at all times, and (b) the value of all loaned
securities is less than one-third of the fund's total assets.
BORROWING. All Zweig funds may make temporary borrowings from banks to cover
redemptions. Although they have not done so in the past, Zweig Strategy Fund and
Zweig Appreciation Fund also may borrow from banks for investment if all
borrowings would not exceed 20% of the fund's assets. Thereafter, the amount
borrowed must never exceed one-third of the fund's assets. If the performance of
the fund's investments fails to cover the cost of borrowing, including interest,
the net asset value of its shares will decrease faster than if the fund had no
borrowings outstanding.
NET ASSET VALUE
The Zweig Mutual Funds determine the net asset value of each class of shares on
each day that the NYSE is open. Net asset values are calculated as of 12:00 noon
New York time for Zweig Cash Fund shares and as of the close of regular trading
on the NYSE for the other funds.
We subtract the liabilities of a fund from its assets to determine its total net
assets. We then determine each class's proportionate interest in the fund's net
assets. The liabilities of that class, including its distribution fees, are then
deducted and the resulting amount is divided by the number of shares of that
class outstanding to produce the net asset value per share.
Portfolio securities for which market quotations are readily available are
stated at market value. Securities for which market quotations are not readily
available are valued at fair value as determined using procedures determined by
the Board of Trustees. Foreign forward currency contracts are valued using
forward currency exchange rates supplied by a quotation service. Short-term
obligations having a remaining maturity of 60 days or less are valued at
amortized cost (which approximates market value). Zweig Cash Fund attempts to
stabilize the net asset value of its shares at $1.00 and uses the amortized cost
method to value all its securities.
DISTRIBUTIONS AND TAXES
Each of the Zweig Mutual Funds intends to qualify as a regulated investment
company for federal income tax purposes and to distribute to its shareholders
all income and net capital gains so as to be relieved of federal taxes.
Distributions are declared separately for each class of shares of a fund.
Distributions will be reinvested at net asset value unless a shareholder elects
to receive distributions in cash. You should keep your account statements with
your other tax records. When you sell your shares, their tax basis is the total
of your cash investments plus all distributions that have been reinvested.
Zweig Cash Fund declares a dividend of all its net investment income, including:
accrued interest, earned discounts and realized gains and losses, less amortized
premiums and accrued expenses. It declares this dividend at 12:00 noon New York
time on each day the NYSE is open for trading. The fund pays or reinvests these
dividends on the last business day of each month.
Government Securities Series declares and pays net investment income dividends
monthly. Zweig Strategy Fund and Zweig Managed Assets declare and pay net
investment income dividends quarterly. Zweig Appreciation Fund declares and pays
net investment income, if any, at least annually. Any net realized capital gains
will be paid at least annually, except that net short-term capital gains may be
paid more frequently, together with the dividends from net investment income.
Because of, among other things, Class B and Class C Shares' higher distribution
fees, dividends on Class A Shares will be higher than dividends on Class B and
Class C Shares of the same fund.
Distributions of income and short-term capital gains are taxed as dividends.
Long-term capital gain distributions are taxed as long-term capital gains.
Distributions are taxable when paid, whether taken in cash or reinvested, except
that distributions declared in November and December and paid in January are
taxable as if paid on December 31st.
By January 31st of each year, we will send you a statement showing the tax
status of your distributions for the prior year and the proceeds of your
redemptions (including exchanges), if any.
The foregoing is a summary of certain federal income tax consequences. Be sure
to consult your own tax adviser to determine the precise effect of your invest-
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<PAGE> 18
ments in the Zweig Mutual Funds on your particular tax situation, and any state
and local tax consequences.
EXCHANGE PRIVILEGE
You can exchange shares of one Zweig Mutual Fund for shares of the same class of
another Zweig Mutual Fund at net asset value (except that Class A Shares of
Zweig Cash Fund purchased without a sales charge are exchangeable at net asset
value plus the applicable sales charge). You can exchange shares either through
your investment dealer or, if the shares are registered in your name, through
the transfer agent.
You may exchange through the transfer agent by mail, telephone, or
systematically on the 20th day of each month or quarter (see application). Each
exchange is a sale of shares of one fund and a purchase of the same class of
shares of another fund. An exchange may produce a gain or a loss for tax
purposes and is subject to the terms and conditions applicable to telephone
redemptions and the minimum investment requirement of each fund. We reserve the
right to reject any exchange request or to modify or terminate exchange
privileges upon 60 days' written notice to shareholders.
CHOOSING AMONG CLASSES OF SHARES
Zweig Mutual Funds offer investors three classes of shares (Class A, Class B and
Class C) which bear sales charges in different forms and amounts and which bear
different levels of expenses b (see Fee Table on page 2).
You should choose the class of shares that is most beneficial given the amount
of your purchase, the length of time you expect to hold the shares and other
relevant circumstances.
CONTINGENT DEFERRED SALES CHARGE (CDSC). Each class of shares' respective CDSC
rate is set forth under Fee Table on page 2. The CDSC is imposed on the lower
of: (a) the current market value, or (b) the initial cost of the shares being
redeemed. No CDSC will be imposed upon shares acquired by reinvesting
distributions. In determining whether a CDSC applies, the order of redemption is
first of shares purchased through reinvestment and then of shares held the
longest. Any CDSC imposed on a redemption is paid to the Distributor or directly
to a third party at the direction of the Distributor.
We may waive the CDSC on redemption following the death of a shareholder, or if
a shareholder becomes unable to engage in any substantial gainful activity
because of a medically determinable physical or mental impairment which can be
expected to result in death or be of long-continued and indefinite duration. We
may waive the CDSC when a total or partial redemption is made in connection with
a distribution from IRAs or other qualified retirement plans after reaching age
59 1/2. See the Statement of Additional Information.
CLASS A SHARES. Class A Shares of all funds except Zweig Cash Fund are sold at
net asset value plus the applicable sales charge. The offering price applies to
purchases made by a single purchaser or by a single trust account. An
individual, his or her spouse, and children under 21 are considered to be a
single purchaser. The sales charge on Class A Shares is allocated between your
investment dealer and Zweig Securities Corp., the distributor, as shown below.
QUANTITY DISCOUNTS ON CLASS A SHARES. When you invest in Class A Shares of the
Zweig Mutual Funds, you may receive quantity discounts at certain dollar levels,
or breakpoints. The more you invest, the smaller percentage you pay in sales
charges, as shown below.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF
-------------------
NET
OFFERING ASSET
PRICE VALUE
OF OF
THE THE DEALER'S
SHARES SHARES SALES
AMOUNT INVESTED PURCHASED PURCHASED CONCESSION
- - ------------------------------------------------------------ ---- ---- -----------
<S> <C> <C> <C>
ZWEIG STRATEGY FUND, ZWEIG APPRECIATION FUND
AND ZWEIG MANAGED ASSETS:
Less than $50,000........................................... 5.50% 5.82% 4.75%
$50,000 but less than $100,000.............................. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............................. 3.75% 3.90% 3.25%
$250,000 but less than $500,000............................. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........................... 1.75% 1.78% 1.50%
$1,000,000 or more.......................................... 0.00% 0.00% (see below)
</TABLE>
12
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
GOVERNMENT SECURITIES SERIES:
Less than $50,000........................................... 4.75% 4.99% 4.00%
$50,000 but less than $100,000.............................. 4.00% 4.17% 3.50%
$100,000 but less than $250,000............................. 3.00% 3.09% 2.50%
$250,000 but less than $500,000............................. 2.25% 2.30% 1.75%
$500,000 but less than $1,000,000........................... 1.75% 1.78% 1.50%
$1,000,000 or more.......................................... 0.00% 0.00% (see below)
</TABLE>
Commissions (as detailed below) will be paid to dealers who initiate and are
responsible for purchases of $1 million or more and for purchases at net asset
value made by unallocated accounts held by third party administrators,
registered investment advisers, trust companies, and bank trust departments
which exercise discretionary authority or hold accounts in fiduciary, agency,
custodial or similar capacity if in the aggregate such accounts equal or exceed
$1,000,000 and by retirement plans with assets of $1,000,000 or more or at least
200 eligible employees. No initial sales charge applies on these investments;
however, a 1% CDSC may apply on redemptions within 18 months of purchase.
<TABLE>
<CAPTION>
DEALER'S
AMOUNT OF PURCHASE COMMISSION
- - ------------------------------- ------
<S> <C>
(AS %
OF
AMOUNT
PURCHASED)
<CAPTION>
<S> <C>
ZWEIG STRATEGY FUND, ZWEIG
APPRECIATION FUND
AND ZWEIG MANAGED ASSETS:
First $2,000,000.......... 0.75%
Next $3,000,000 up to
$5,000,000.............. 0.50%
Amount over $5,000,000.... 0.25%
GOVERNMENT SECURITIES SERIES:
First $2,000,000.......... 0.50%
Amount over $2,000,000.... 0.25%
</TABLE>
Class A Shares also may be purchased at net asset value by any officer, trustee,
director or full-time employee, and their families, of Zweig Mutual Funds,
Zweig/ Glaser Advisers, Zweig Securities Corp. and any company affiliated with
these companies, or by employees and their families of securities dealers who
are members of the NASD. Class A Shares of the Trust also may be sold at net
asset value through certain investment dealers registered under the Investment
Advisers Act of 1940 and other financial services firms that adhere to certain
standards established by the principal distributor, including a requirement that
such shares be sold for the benefit of their clients participating in a "wrap
account" or similar program under which such clients pay an ongoing fee to the
investment adviser or other firm. Such shares are sold for investment purposes
and on the condition that they will not be resold except through redemption or
repurchase by the fund.
CUMULATIVE QUANTITY DISCOUNTS ON CLASS A SHARES. A new purchase may be combined
with Class A Shares already in your account to qualify for a discount. The sales
charge on the shares being purchased will be at the rate shown in the table
above applicable to the net asset value of the shares then owned plus the amount
of the new purchase. To receive this discount, you or your investment
professional must request it when placing the order and give the transfer agent
or distributor sufficient information to confirm that your purchase qualifies
for the discount. We reserve the right to change or terminate quantity discounts
at any time.
QUANTITY DISCOUNTS THROUGH A LETTER OF INTENTION. You may pay a reduced sales
charge on Class A Shares if you sign a Letter of Intention at the time of your
purchase. The Letter also may be back-dated to include purchases made within 90
days prior to signing the Letter of Intention. The Letter, included on the
Application Form in this prospectus, states your intention to purchase a
sufficient quantity of Class A Shares of the fund indicated within the 13-month
period specified to qualify for a reduced sales charge. Purchases under the
Letter are made at the sales charge applicable to the entire amount to be
purchased under the Letter, as if purchased in a single transaction.
The Letter of Intention is not binding. During the period covered by the Letter,
the transfer agent will hold shares in escrow representing 5% of the intended
purchase. A price adjustment based upon the actual amount invested will be made
if the purchase is not completed, by redeeming escrowed shares. A Letter of
Intention can be amended: (a) during the 13-month period by filing an amended
Letter with the same expi-
13
<PAGE> 20
ration date as the original, and (b) automatically after the end of the period,
if the total purchases credited to the Letter qualify for an additional
reduction in sales charges.
CLASS B SHARES. Class B Shares are sold without an initial sales charge. For
sales of Class B Shares, dealers will receive from the Distributor 4% of the
purchase amount. Although you pay no sales charge at the time of purchase, if
you redeem within six years, you are charged a declining CDSC as follows:
<TABLE>
<CAPTION>
THE
CDSC
IS
YEAR SINCE PURCHASE EQUAL
PAYMENT WAS MADE TO
- - ----------------------------------- -----
<S> <C>
First......................... 5%
Second........................ 4%
Third......................... 3%
Fourth........................ 3%
Fifth......................... 2%
Sixth......................... 1%
Seventh....................... None
Eighth........................ *
</TABLE>
- - ---------------
* Class B Shares convert into Class A Shares as described below.
CLASS B SHARES CONVERSION FEATURE. After a holding period of seven years from
the initial date of purchase, Class B Shares automatically convert, at
respective net asset values, on the 10th business day of the month, to Class A
Shares of the same fund. At the time of conversion, Class B Shares of a fund
acquired through reinvestment of distributions will convert to the corresponding
Class A Shares of that fund pro-rata with Class B Shares of that fund not
acquired through reinvestment. Class B Shares conversion will relieve the Class
B Shares that have been held for at least seven years from the higher ongoing
distribution fees. Only Class B Shares have this conversion feature.
CLASS C SHARES. Class C Shares are sold without an initial sales charge. For
sales of Class C Shares, dealers will receive from the Distributor 1% (0.75% for
Government Securities Series and 0.30% for Zweig Cash Fund) of the purchase
amount. If you redeem within one year of your purchase, you will be charged a
CDSC equal to 1.25%.
Class B and Class C Shares offer the benefit of putting all of your dollars to
work immediately; however, they have higher annual expenses and pay lower
dividends than Class A Shares. Class C Shares have a shorter CDSC period;
however, they do not convert to Class A Shares.
Zweig Securities Corp. will reallow 0.15% to any dealer with sales of Zweig
Mutual Fund shares at an annual rate of $2 million or more, provided that the
dealer has agreed to supply special assistance in marketing shares of the Zweig
Mutual Funds, including providing access to the dealer's sales personnel and
information dissemination systems such as computer screens, internal
publications, publications sent to clients and mailing lists. These reallowances
are in addition to the sales concessions shown in the above tables and may be
subject to chargeback for redemptions within one year. An alternative
arrangement, available to any dealer that has agreed to provide marketing,
record keeping and related administrative services to tax-qualified employee
benefit plans, including the processing of orders for investment and
reinvestment of plan assets in shares of the funds at net asset value, provides
for compensation at an annual rate of 0.20% of plan participant holdings of
Zweig Mutual Funds. Zweig Securities Corp. may also pay dealers a fee of up to
0.10% of the amount invested through such dealers in Zweig Mutual Fund shares by
participants in programs sponsored by such dealers. Zweig Securities Corp.
reserves the right to alter or discontinue paying any of the foregoing fees at
any time. These fees will be paid from Zweig Securities Corp.'s or the Manager's
own funds, including past profits or any other source available to them.
The above arrangements relate to purchases effected in the United States.
Purchases outside the United States may be subject to local rules and customs.
Accordingly, different sales charges, fees and dealer compensation may apply.
Certain dealers may not sell all classes of shares.
HOW TO INVEST IN THE ZWEIG MUTUAL FUNDS
You can buy shares in the Zweig Mutual Funds directly from the funds' transfer
agent, through an investment professional, or automatically through a regular
investment plan. The minimum initial investment is $1,000 for a regular account
and $250 for a retirement account. Each additional investment must be at least
$100 for a regular account and for investment plans. Retirement accounts have no
minimum amount for additional investments. We reserve the right to change or
waive minimums or to refuse any order.
Purchases of Zweig Cash Fund become effective after receipt of Federal funds by
the transfer agent. Purchases for all other Zweig Mutual Funds will be at
14
<PAGE> 21
the offering price next determined after the transfer agent or investment dealer
receives the order, provided the dealer transmits the order to the transfer
agent that day.
BUYING SHARES FROM AN INVESTMENT DEALER. If you invest through an investment
dealer or agent, that firm may have its own service features, transaction
charges and fees. This Prospectus should be read in conjunction with such firms'
material regarding their fees and services. If you wish us to refer you to an
investment professional, call us at 1-800-272-2700. Investment professionals
receive compensation for providing investment advice, and such compensation may
differ for selling shares of different classes of the Zweig Mutual Funds.
BUYING SHARES THROUGH THE TRANSFER AGENT. Send the Application Form in this
Prospectus or a letter with your check to the transfer agent. The address is:
Zweig Series Trust
c/o State Street Bank & Trust Co.
P.O. Box 8505
Boston, MA 02266-8505
Make your check payable to State Street Bank & Trust Co. If you send a letter,
please specify the fund(s) and the class of shares you wish to buy. You may
deliver your order by courier or overnight mail to State Street's offices at:
2 Heritage Drive (3rd floor)
North Quincy, MA 02171
Attention: Zweig Mutual Funds
Purchases of Zweig Cash Fund shares made directly through the transfer agent by
check or money order do not earn dividends until converted into Federal funds,
which can take up to two business days. You also may wire Federal funds with
your order to avoid this delay. For wiring instructions, call 1-800-628-0441.
BUYING SHARES THROUGH AN INVESTMENT PLAN. You can invest in the Zweig Mutual
Funds through an automatic investment plan. You can automatically move money
from your bank account into any of your Zweig accounts on or about the 15th of
each month or quarter. For further details, see the Application Form or call
1-800-272-2700.
THE DISTRIBUTOR. Zweig Securities Corp. serves as principal distributor of
shares of the Zweig Mutual Funds. At any given time, the distributor may incur
expenses in distributing shares of the funds that are in excess of the total
payments made by the funds under the Rule 12b-1 Plan for distribution. Because
there is no requirement that the distributor be reimbursed for all its expenses,
or that the plan be continued from year to year, this excess does not constitute
a liability of the funds. Although there is no legal obligation for the funds to
pay expenses in excess of payments made to the distributor under the plan, if
for any reason the plan is terminated, the Board of Trustees will consider the
manner in which to treat such expenses. Any cumulative unreimbursed expenses may
or may not be recovered through future distribution fees. If the distributor
receives any Rule 12b-1 payments in excess of actual distribution expenses (a
situation which has not occurred to date), the difference could be viewed as
profit to the distributor for that year. Accordingly, the Rule 12b-1 Plan is
classified as a compensation plan.
HOW TO REDEEM YOUR SHARES
You can redeem your shares on any day the NYSE is open through the transfer
agent if the shares are registered in your name, or through your investment
dealer. The price you receive will be the net asset value next determined after
the transfer agent or investment dealer receives your request in proper form
(described below), less any CDSC, provided the dealer transmits the order to the
transfer agent that day. We will only redeem shares for which we have received
payment, and redemption proceeds may not be paid for up to 15 days following
purchase if the shares were purchased with a check.
THROUGH AN INVESTMENT DEALER. If your account has been established by your
investment dealer, contact your investment professional, who will assist you
with your redemption.
THROUGH THE TRANSFER AGENT BY MAIL. If the shares are registered in your name,
send a letter of instruction signed exactly as the shares are registered, with
signature guarantees from an appropriate guarantor, and any certificates that
represent the shares you wish to redeem. A signature guarantee is required
whether or not certificates are involved. Mail your redemption request to:
Zweig Series Trust
c/o State Street Bank & Trust Co.
P.O. Box 8505
Boston, MA 02266-8505
Appropriate signature guarantors include: banks and savings associations, credit
unions, member firms of a national securities exchange, municipal securities
deal-
15
<PAGE> 22
ers and government securities dealers. See the Statement of Additional
Information or call 1-800-272-2700 for more information.
Redemption instructions by corporate and fiduciary shareholders also must be
accompanied by appropriate documentation establishing the authority of the
person seeking to act on behalf of the account.
THROUGH THE TRANSFER AGENT BY TELEPHONE. You may issue a telephone redemption
request directly to the transfer agent at 1-800-628-0441 if: (a) your account is
registered for telephone/expedited redemption privileges and (b) your shares are
held at the transfer agent without certificates. The proceeds must be mailed to
the address of record. If you have designated a domestic bank on the Application
Form when you opened your account, you may have redemption proceeds of $1,000 or
more wired to the bank. Subsequent directions for wiring proceeds require a
signature guarantee from an appropriate guarantor. The transfer agent must
receive your instructions before noon New York time for Zweig Cash Fund or
before the close of regular trading on the NYSE (presently 4 P.M.) for the other
funds in order to redeem shares that day.
The maximum amount that may be redeemed for joint accounts by telephone is
$25,000. Neither the Zweig Mutual Funds, the distributor, nor the transfer agent
will be liable for any loss in acting on telephone instructions reasonably
believed to be authentic. In the event of a fraudulent telephone redemption, the
investor will bear the risk of loss. Because the funds may otherwise be liable
for any losses due to unauthorized or fraudulent instructions, reasonable
procedures are employed to confirm that instructions given by phone are genuine.
These include: requiring a form of personal identification from the caller and
recording telephone instructions. For identification purposes, the transfer
agent may require such information as it deems necessary before accepting
redemption instructions.
During periods of extremely drastic economic or market changes, it may become
difficult to implement a telephone redemption. In the event that you have
difficulty reaching the transfer agent at its toll-free number, you should
consider sending written redemption instructions in the manner explained above.
We reserve the right to refuse telephone redemption requests and to limit their
amount or frequency. If, however, we determine not to accept a telephone
redemption request, we will seek to advise you promptly of that decision and, to
the extent feasible, will communicate that decision by telephone.
Redemptions normally will be made in cash, but redemptions may be made in kind
pursuant to an election under Rule 18f-1 of the Investment Company Act of 1940
(the 1940 Act), as discussed more fully in the Statement of Additional
Information. Payment for your redemption generally will be mailed to you within
seven days after your request is received. Rights of redemption may be suspended
if the NYSE is closed, other than customary weekend or holiday closings, or for
such other periods as the Securities and Exchange Commission has permitted.
REINSTATEMENT PRIVILEGE. A shareholder who has made a partial or complete
redemption of shares may reinvest all or part of the redemption proceeds and
receive a pro rata credit for any CDSC or initial sales charge paid, provided
the reinvestment is made within 30 days after the redemption. This privilege may
be exercised only once a year by a shareholder.
SYSTEMATIC CASH WITHDRAWAL PROGRAMS are available for shareholders with accounts
of $5,000 or more who wish to receive a specific amount of cash either monthly
or quarterly. Contact your investment professional or complete the Application
Form in this prospectus. Under these programs, all distributions must be
reinvested. Purchasing additional shares while receiving payments under these
programs ordinarily will be disadvantageous because of sales charges. Shares
redeemed may be subject to a CDSC. We may modify or terminate these programs at
any time.
MINIMUM ACCOUNT SIZE. If your account balance falls below $1,000 as a result of
redeeming shares, you may be given 60 days' notice to reestablish the minimum
balance. If you do not increase your balance, we reserve the right to close your
account and send the proceeds to you. Your shares will be redeemed at the net
asset value on the day your account is closed. We will not normally close an
account maintained in connection with a tax-deferred retirement plan.
THE MANAGER AND MANAGEMENT FEE
The investments of the Zweig Mutual Funds are managed by Zweig/Glaser Advisers,
5 Hanover Square, 17th Floor, New York, NY 10004. The general partners of
Zweig/Glaser Advisers are: Glaser Corp., a Delaware corporation controlled by
Eugene Glaser,
16
<PAGE> 23
and Zweig Management Corp., a Delaware corporation controlled by Dr. Zweig.
Zweig/Glaser Advisers receives a fee based on the average daily net assets of
each fund at the following annual rates: Zweig Strategy Fund, .75%; Zweig
Appreciation Fund, 1.00%; Zweig Managed Assets, 1.00%; Government Securities
Series, .60%; Zweig Cash Fund, .50%. These rates are constant and do not
diminish with an increase in the net assets of a fund. The management fees are
comparable to the fees paid by mutual funds with similar investment policies.
The fees of Zweig Strategy Fund, Zweig Appreciation Fund and Zweig Managed
Assets, however, are higher than the fees paid by most mutual funds. The manager
has voluntarily undertaken to limit expenses of Zweig Cash Fund (exclusive of
taxes, interest, brokerage commissions and transaction costs, the distribution
fees described above and extraordinary expenses) to 0.60% of its average net
assets and reserves the right to discontinue this policy at any time after
October 31, 1995.
In addition to managing the funds' investments, Zweig/Glaser Advisers also:
makes recommendations with respect to the funds' business affairs; furnishes
certain administrative services, office space and equipment; and permits its
employees to serve as the officers of the Trust without additional compensation
from the funds. All other expenses incurred in the operation of the funds are
borne by the funds, including: interest, taxes, fees and commissions of every
kind; expenses of issue, repurchase or redemption of shares; costs of
registering or qualifying shares for sale (including printing costs, legal fees
and other expenses relating to the preparation and filing of the funds'
registration statement with the appropriate regulatory authorities and the
production and filing of the funds' prospectus); costs of insurance; association
membership dues; all charges of custodians, including fees as custodian, escrow
agent, and fees for keeping books and performing portfolio valuations; all
charges of transfer agents, registrars, independent accountants and legal
counsel; expenses of preparing, printing and distributing prospectuses and all
proxy materials, reports and notices to shareholders; expenses of distribution
of shares pursuant to Rule 12b-1 Plans; out-of-pocket expenses of trustees; fees
of trustees who are not "affiliated persons" as defined in the 1940 Act; and all
other costs incident to the funds' existence as a business trust. The
distributor purchases copies of the fund's prospectus and shareholder reports
used for sales purposes at printer's overrun cost.
BROKERAGE TRANSACTIONS. To buy and sell securities for the Zweig Mutual Funds,
Zweig/Glaser Advisers may use its broker/dealer affiliates or other firms that
sell shares of the funds, provided they have the execution capability and that
their commission rates are comparable to those of other unaffiliated
broker/dealers.
ORGANIZATION OF THE FUNDS
The Trust was established as a Massachusetts business trust on September 24,
1984. A copy of the Amended and Restated Agreement and Declaration of Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Board of
Trustees directs the management of the business of the Trust. The Board has
duties and responsibilities comparable to those of the boards of directors of
corporations, not to those of trustees under customary trust principles. The
Trustees oversee the Trust's activities, elect the officers of the Trust who are
responsible for its day-to-day operations, review contractual arrangements with
the companies that provide services to the Trust, and review investment
performance.
The Trust is a mutual fund, or, in the technical terms of the 1940 Act under
which it is regulated, an open-end, diversified management investment company.
It has an unlimited number of shares of beneficial interest which, without
shareholder approval, may be divided by the Trustees into an unlimited number of
classes and funds. The shares presently are divided into three classes of shares
in four funds and four classes of shares in Zweig Cash Fund. Each share is
entitled to one vote (with proportional voting for fractional shares). Shares
vote together on matters that concern the entire Trust, or by individual fund or
class when the Board of Trustees determines that the matter affects only the
interests of a particular fund or class.
PERFORMANCE INFORMATION
The net asset value of a fund (other than Zweig Cash Fund) and the income it
generates will vary from day to day. This fluctuation reflects the composition
of the fund's portfolio, as well as changes in market conditions, company and
economic developments, interest rates, and other factors. Performance will
reflect Zweig/Glaser Advisers' skill in managing each fund's portfolio, the
period of time during which the investment is held, and the class of shares and
its annual
17
<PAGE> 24
operating expenses. When you sell your shares, they may be worth more or less
than what you paid for them.
Occasionally, advertisements for the Zweig Mutual Funds may include:
MAXIMUM NAV DECLINE since a fund's inception, or for shorter periods.
Micropal Inc, an independent fund rating service, measures the largest
high-to-low drop in a fund's month-end net asset value over a particular
period. The decline is expressed as a percentage of the fund's NAV per
share at the high point during the period measured. See Measuring Risk on
page 9 for the maximum NAV declines of the Zweig Mutual Funds compared to
declines for the same period of the average comparable fund and a benchmark
index for each type of fund. Maximum NAV declines are historical and are
not intended to indicate future performance; and they do not reflect any
sales charges.
TOTAL RETURN for the most recent one-, three-, five- and ten-year periods,
and since the inception of a class of shares through the most recent
calendar quarter. Total return represents the average annual compounded
rate of return on an investment of $1,000 at the maximum public offering
price (in the case of Class A Shares) or reflecting the deduction of any
applicable CDSC. All data are based on past investment results. Total
return also may be presented for other periods, or be based on an
investment at reduced sales charge levels. Total return does not include
the effect of taxes and does not predict future performance.
YIELD, or the rate of income earned, expressed as a percentage of a fund's
share price. We calculate yield according to accounting methods that are
standardized for all stock and bond mutual funds by taking the interest and
dividend income a fund earns in a 30-day period, net of expenses, and
dividing that amount by the average number of shares entitled to receive
dividends. We express the result as an annualized percentage rate based on
the share price at the end of the 30-day period. This yield does not
reflect gains or losses from selling securities or from transactions in
options and futures contracts. Yield accounting methods differ from methods
used for other accounting purposes. Therefore, yield may not be the same as
the distribution rate or the income reported in the funds' financial
statements. Yield figures are based on historical earnings and are not
intended to indicate future performance.
SEVEN-DAY CURRENT YIELD for the Zweig Cash Fund refers to the income
generated by an investment in the fund over a seven-day period specified in
the advertisement. This income is assumed to be generated each week for 52
weeks. This 52-week income is then shown as a percentage of the investment.
EFFECTIVE YIELD is calculated similarly to yield or seven-day current yield
but, when annualized, the income earned is assumed to be reinvested. The
effective yield will be slightly higher than the current yield because of
the compounding effect of the assumed reinvestment.
The Zweig Mutual Funds also may include in advertising or marketing materials
for their shares data from financial and other publications and reference
surveys that deal with industry or investment statistics. The Statement of
Additional Information lists the principal industry publications.
The following is an assessment of the 1994 performance of Class A and Class C
Shares of each of the Zweig Mutual Funds (other than Zweig Cash Fund). We've
included a graph comparing each fund's performance since inception with the
appropriate benchmarks.
18
<PAGE> 25
ZWEIG STRATEGY FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN ZWEIG STRATEGY FUND
CLASS A SHARES, THE STANDARD & POOR'S 500 INDEX AND THE
CONSUMER PRICE INDEX FOR THE PERIOD ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ZWEIG CONSUMER
(FISCAL YEAR COVERED) STRATEGY FUND S&P 500 INDEX PRICE INDEX
<S> <C> <C> <C>
12/29/89 9450.00 10000.00 10000.00
1989 9466.66 10078.00 10010.00
1990 9261.99 9690.27 10636.00
1991 11431.47 12660.45 10953.00
1992 12301.46 13623.49 11278.00
1993 14134.00 15003.84 11587.00
1994 14295.00 15198.00 11896.00
</TABLE>
Past performance is not predictive of future results.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS A SHARES
<TABLE>
<S> <C> <C>
1 YEAR 5 YEAR FROM INCEPTION ON 12/29/89
1.14% 8.59% 8.61%
</TABLE>
CLASS C SHARES -- ZWEIG STRATEGY FUND ALSO OFFERS CLASS C SHARES. THE
PERFORMANCE OF CLASS C SHARES WILL BE GREATER OR LESS THAN CLASS A SHARES
DEPENDING ON SALES CHARGES, FEES AND THE LENGTH OF TIME THE SHARES ARE HELD.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS C SHARES
<TABLE>
<S> <C>
1 YEAR FROM INCEPTION ON 2/4/92
0.41% 6.93%
</TABLE>
While two-thirds of all stock funds lost money in 1994 and the average growth
fund fell 2.2%, Zweig Strategy Fund posted a gain of 1.1% for Class A Shares and
0.4% for Class C Shares. These returns were achieved within our risk-averse
standards. The fund maintained an average of 60% of its assets in the safety of
cash equivalents.
Our stock selection process, which focuses on identifying companies with
attractive earnings growth at low relative valuations, made a strong
contribution to the fund's return. Overweightings in the aerospace,
semiconductor and computer system sectors proved beneficial. Underweightings in
the energy, transportation and retail sectors also helped as those sectors
rotated out of favor.
As 1994 came to a close, our indicators continued to show a high level of risk
in the market. As a result, the fund ended the year with an invested exposure of
only 30%.
ZWEIG MANAGED ASSETS
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN ZWEIG MANAGED ASSETS
CLASS A SHARES AND CLASS C SHARES, THE STANDARD & POOR'S 500 INDEX, A BLENDED
INDEX COMPRISED OF 40% OF THE STANDARD & POOR'S 500 INDEX AND 60% OF THE LEHMAN
COMPOSITE GOVERNMENT BOND INDEX, AND THE CONSUMER PRICE INDEX FOR THE PERIOD
ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
ZWEIG MANAGED ZWEIG MANAGED
MEASUREMENT PERIOD ASSETS ASSETS CONSUMER
(FISCAL YEAR COVERED) CLASS A CLASS C PRICE INDEX 40/60* S&P 500 INDEX
<S> <C> <C> <C> <C> <C>
2/8/93 9450.00 10000.00 10000.00 10000.00 10000.00
12/31/93 10582.00 11009.00 10252.00 10744.00 10675.00
12/31/94 10272.00 10606.00 10526.00 10604.00 10813.00
12/31/94 00000.00 00000.00 00000.00 00000.00 00000.00
</TABLE>
Past performance is not predictive of future results.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS A SHARES
<TABLE>
<S> <C>
1 YEAR FROM INCEPTION ON 2/8/93
- - -2.93% 4.50%
</TABLE>
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS C SHARES
<TABLE>
<S> <C>
1 YEAR FROM INCEPTION ON 2/8/93
- - -3.66% 3.77%
</TABLE>
* A blended index comprised of 40% Standard & Poor's 500 Index and 60% Lehman
Composite Government Bond Index.
1994's market environment for both bonds and stocks posed problems for Zweig
Managed Assets. The fund's A Shares were down 2.9% and its C Shares declined by
3.7% versus a loss of 1.4% for the 40/60 Index.
The fund faced two particularly difficult challenges during the year. First,
nearly every world stock market (except Japan) and bond market experienced
declines in response to rising interest rates in the U.S. and abroad. With most
world economies strengthening in tandem and their markets experiencing
inflationary jitters much like our own, there simply were few opportunities to
profit. Second, after declining during the first
19
<PAGE> 26
half of the year, many markets spent the remainder of the year zig-zagging, that
is, posting small gains only to fall back again. This action was also true for
the U.S. dollar, which resulted in currency losses on some of the fund's foreign
investments. Our style of money management is geared towards identifying and
remaining in harmony with the major trends of the market, rather than trying to
chase every short-term upward move. With few, if any, identifiable long-term
trends in place, our risk-averse approach had difficulty adding value.
ZWEIG APPRECIATION FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN ZWEIG APPRECIATION FUND
CLASS A SHARES, THE VALUE LINE GEOMETRIC INDEX AND THE CONSUMER PRICE INDEX FOR
THE PERIOD ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
ZWEIG VALUE LINE
MEASUREMENT PERIOD APPRECIATION GEOMETRIC CONSUMER
(FISCAL YEAR COVERED) FUND INDEX PRICE INDEX
<S> <C> <C> <C>
10/7/91 9450.00 10000.00 10000.00
1991 10025.00 10457.00 10088.00
1992 10980.83 11260.10 10388.00
1993 12589.66 12549.38 10673.00
1994 12360.00 12047.00 10958.00
</TABLE>
Past performance is not predictive of future results.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS A SHARES
<TABLE>
<S> <C>
1 YEAR FROM INCEPTION ON 10/7/91
- - -1.83% 8.64%
</TABLE>
CLASS C SHARES -- ZWEIG APPRECIATION FUND ALSO OFFERS CLASS C SHARES. THE
PERFORMANCE OF CLASS C SHARES WILL BE GREATER OR LESS THAN CLASS A SHARES
DEPENDING ON SALES CHARGES, FEES AND THE LENGTH OF TIME THE SHARES ARE HELD.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS C SHARES
<TABLE>
<S> <C>
1 YEAR FROM INCEPTION ON 2/4/92
- - -2.55% 5.55%
</TABLE>
In 1994, for the first time in four years, large company stocks outperformed
small company stocks. Zweig Appreciation Fund performed reasonably well given
this environment. The fund's A Shares were down 1.8% and the C Shares declined
by 2.6% versus a loss of 4.0% for the Value Line Geometric Index.
Our strategy of reducing market exposure in response to rising risk levels paid
off during the first half of 1994. While the average small company fund was down
over 8% during this time, the fund declined only 1%. While other funds gained
ground during market rallies later in the year, the risks they took were more
than we considered prudent. We still saw a need for caution and remained
defensively postured with an invested exposure of just 30% at year end.
GOVERNMENT SECURITIES SERIES
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN GOVERNMENT SECURITIES
SERIES CLASS A SHARES, THE LEHMAN COMPOSITE GOVERNMENT BOND INDEX AND THE
CONSUMER PRICE INDEX FOR THE PERIOD ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
LEHMAN
GOVERNMENT COMPOSITE
MEASUREMENT PERIOD SECURITIES GOVERNMENT CONSUMER PRICE
(FISCAL YEAR COVERED) SERIES INDEX INDEX
<S> <C> <C> <C>
3/25/85 9525.00 10000.00 10000.00
1985 10960.06 11792.79 10253.00
1986 12080.96 13698.41 10375.00
1987 11860.60 13896.54 10834.00
1988 12462.37 14874.32 11311.00
1989 14073.63 16991.45 11836.00
1990 14966.67 18475.50 12576.00
1991 17157.84 21307.97 12951.00
1992 17932.25 22847.56 13335.00
1993 19487.00 25282.15 13701.00
1994 18936.00 24427.00 14067.00
</TABLE>
Past performance is not predictive of future results.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS A SHARES
<TABLE>
<S> <C> <C>
1 YEAR 5 YEAR FROM INCEPTION ON 3/25/85
- - -2.83% 6.33% 7.28%
</TABLE>
CLASS C SHARES -- GOVERNMENT SECURITIES SERIES ALSO OFFERS CLASS C SHARES. THE
PERFORMANCE OF CLASS C SHARES WILL BE GREATER OR LESS THAN CLASS A SHARES
DEPENDING ON SALES CHARGES, FEES AND THE LENGTH OF TIME THE SHARES ARE HELD.
- - ----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- CLASS C SHARES
<TABLE>
<S> <C>
1 YEAR FROM INCEPTION ON 2/4/92
- - -3.18% 4.19%
</TABLE>
In 1994, the bond market suffered its worst year since 1927. The fund's flexible
approach to changing bond market conditions showed its value during this trying
period. The fund's Class A and C Shares were down
20
<PAGE> 27
2.8% and 3.2% respectively, which ranked them in the top 15% and top 23%
respectively, of the 145 general government bond funds tracked by Lipper
Analytical Services.
With our research pointing to higher risk levels as far back as late 1993 and
the Federal Reserve embarking on a series of six interest rates hikes commencing
in February 1994, we kept the fund positioned defensively for the bulk of the
year. We sold longer term bonds and retreated to the safety of U.S. Treasury
bills and shorter duration bonds effectively reducing the fund's duration from
its peak of 5.6 years at the end of the third quarter of 1993 to 2.6 years at
the end of the third quarter of 1994.
Late in 1994, we began to increase the fund's duration as our research indicated
that economic growth was moderating.
21
<PAGE> 28
APPLICATION (DO NOT USE FOR ZWEIG RETIREMENT PLANS)
FOR APPLICATION ASSISTANCE CALL 1-800-272-2700.
................................................................................
Zweig
Mutual Funds
<TABLE>
<S> <C>
MAIL ALL FORMS AND CHECKS BY COURIER TO:
TO:
The Zweig Mutual Funds The Zweig Mutual Funds
c/o State Street Bank and c/o State Street Bank and
Trust Company Trust Company
P.O. Box 8505 2 Heritage Drive, 3rd Floor
Boston, MA 02266-8505 North Quincy, MA 02171
</TABLE>
IF YOUR ACCOUNT IS ALREADY ESTABLISHED
ENTER THE ACCOUNT NUMBER HERE:
- - ------------------------------------------
1. ACCOUNT NAME (Check only one box)
/ / INDIVIDUAL OR JOINT OWNERS*
-------------------------------------------------------------------
Your Name (last, first, middle)
-------------------------------------------------------------------
Joint Owner Name (last, first, middle)
-------------------------------------------------------------------
Social Security Number (to be used for tax reporting)
/ / GIFT TO MINOR A minor is the beneficial owner of the account with an adult
Custodian managing the account until the minor becomes of age, as specified
in the Uniform Gifts/Transfers to Minors Act (UGMA/UTMA). The Custodian's
signature is required for all transactions.
-------------------------------------------------------------------
Custodian Name (last, first, middle)
-------------------------------------------------------------------
Minor Name (last, fist, middle)
-------------------------------------------------------------------
Minor Social Security Number Minor State of Residence
/ / TRUST Account is established in accordance with provisions of a trust
agreement. The Trustee's or designated agent's signature is required for all
transactions.
<TABLE>
<S> <C>
---------------------------------------------------------------
Trust Title Date of Trust Agreement
---------------------------------------------------------------
Trustee Name Trust Tax ID Number
</TABLE>
/ / CORPORATION OR OTHER ENTITY
<TABLE>
<S> <C>
---------------------------------------------------------------
Name
---------------------------------------------------------------
Tax ID Number Type of entity
---------------------------------------------------------------
Officer or Partner authorized to act on the account
</TABLE>
2. ADDRESS AND CITIZENSHIP
- - -------------------------------------------------------------------
Street or P.O. Box
- - -------------------------------------------------------------------
City State Zip Code
- - -------------------------------------------------------------------
Daytime Phone
- - -------------------------------------------------------------------
Evening Phone
Citizenship: / / U.S. Citizen
/ / Resident Alien
/ / Non-Resident Alien:
-----------------------------------------
Country
- - -------------------------------------------------------------------
Name of Employer
- - -------------------------------------------------------------------
Address
* Joint tenancy with right of survivorship unless you reside in a community
property state or prefer otherwise. NOTE: Both signatures will be required for
changes to an account with joint ownership.
3. INVESTMENT INFORMATION
Minimum initial investment: $1,000. $250 for IRA and other Retirement Plans,
pension and profit sharing plans, custodial accounts under the Uniform Gifts to
Minors Act, trust and estate or qualifying group plans. The minimum subsequent
investment is $100. There is no subsequent minimum investment in the case of IRA
and plans described above.
<TABLE>
<S> <C>
A. Fund
Name: ------------------------------------------------
/ / Class A / / Class B / / Class C
Investment Amount:
$ ----------------------------------------------------
B. Fund
Name: ------------------------------------------------
/ / Class A / / Class B / / Class C
Investment Amount:
$ ----------------------------------------------------
C. Fund
Name: ------------------------------------------------
/ / Class A / / Class B / / Class C
Investment Amount:
$ ----------------------------------------------------
4. INVESTMENT SOURCE
/ / BY CHECK Please make check payable to State Street
Bank and Trust Company.
$ ----------------------------------------------------
/ / BY WIRE Call 1-800-628-0441 for instructions.
$ ----------------------------------------------------
Account
No. --------------------------------------------------
5. DISTRIBUTION OPTION
See Prospectus for details. If box is not checked, all
distributions will be reinvested. (Check only one box)
/ / All dividends and capital gains reinvested
/ / Income dividends in cash, capital gains reinvested
/ / All dividends and capital gains paid in cash
/ / Income dividends reinvested, capital gains in cash
6. SHAREHOLDER PRIVILEGES
TELEPHONE EXCHANGE You may use the telephone to make
exchanges among any series in the Trust with the same
registration. Unless the box below is checked, the telephone
service WILL be established. In the event of a fraudulent
telephone redemption, the investor will bear the risk of
loss. See Prospectus. (Exchanges are processed only in the
same class of shares). The minimum exchange is $1,000 if
establishing a new account.
/ / I do NOT want to make exchanges by telephone.
SYSTEMATIC EXCHANGES You can automatically exchange $100 or
more on the same day each month or quarter from one fund
account to any other fund accounts on or about the 15th of
the month.
/ / I/We authorize Zweig Series Trust to exchange
$ ----------------------------------------------------
</TABLE>
from
------------------------------ to ------------------------------
Fund Name Fund Name
/ / Class A / / Class B / / Class C
beginning with the month of
-----------------------------------
on a / / monthly / / quarterly basis.
<PAGE> 29
TELEPHONE/EXPEDITED REDEMPTION You may redeem shares by telephone. Proceeds will
be sent by check to the address of record. If the redemption is by wire ($1,000
minimum for wire redemption), please provide us with bank account information
below or attach a voided check to establish this service. Unless the box is
checked the telephone service WILL be established.
/ / I do NOT want to redeem my shares by telephone or wire.
WIRE INSTRUCTIONS:
- - -----------------------------------------------------
Name of Bank (Savings, Savings & Loan and Credit Union;
provide Correspondent Bank information)
-------------------------------------------------------------------
Bank Account Title
-------------------------------------------------------------------
Bank Account Number (include branch # and ABA #)
In the event of a fraudulent telephone redemption, the investor will bear the
risk of loss, since the Trust and its agents disclaim liability for acting upon
telephone instructions reasonably believed to be authentic. Reasonable
procedures are employed to confirm that instructions given by telephone are
genuine, such as requiring a form of personal identification from the caller,
providing written confirmation of these transactions and recording telephone
instructions.
SYSTEMATIC CASH WITHDRAWAL PROGRAM You may receive a check monthly or quarterly
(minimum $25). There must be a minimum of $5,000 in the selected Series to
initiate this plan. Under this plan dividends and distributions must be
reinvested regardless of the option chosen in Section 5 and all shares must be
on deposit with State Street Bank, not in certificate form. (Shares redeemed may
be subject to a CDSC.) The amount you state will be redeemed or exchanged on or
about the 20th of the month.
/ / I/We authorize Zweig Series Trust to withdraw $
- - ---------
from
-------------------------------- / / Class A / / Class B
Fund Name / / Class C
beginning with the month of
-----------------------------------
on a / / monthly / / quarterly basis.
If you wish to have your check mailed to an address other than the address
named in Item 1, complete the next section and sign where indicated.
------------------------------------------------------------------
Name (first, middle, last)
------------------------------------------------------------------
Address
------------------------------------------------------------------
City State Zip Code
PLEASE SIGN:
------------------------------------------------------------------
Signature Signature
AUTOMATIC INVESTMENT PLAN You can automatically move $100 or more (No minimum
for IRA and other plans as described in Section 3) from your bank account into
any of your fund accounts on or about the 15th of the month. Please attach a
voided check from your bank account. If your investment is by wire please
provide bank information below.
/ / I authorize Zweig to make regular investments of $
- - --------
into my account in
---------------------------------------------
Fund Name
/ / Class A / / Class B / / Class C
beginning with the month of
-----------------------------------
on a / / monthly / / quarterly basis.
WIRE INSTRUCTIONS:
- - -----------------------------------------------------
Name of Bank (Savings, Savings & Loan and Credit Union;
provide Correspondent Bank information)
-------------------------------------------------------------------
Bank Account Title
-------------------------------------------------------------------
Bank Account Number (include branch # and ABA #)
ZWEIG SAVINGS PLAN The Trust will send you an invoice each month or quarter in
order to make regular investments into the Trust. The minimum amount is $100.
You are under no obligation to make these payments.
/ / YES, I want to join the Savings Plan and make regular
investments of $
------------ into my account.
Please send me an invoice each / / month / / quarter.
7. LETTER OF INTENTION
You may qualify for a reduced sales charge by electing this item. I agree to the
Letter of Intention provisions outlined in the prospectus, and intend to invest
over a 13-month period beginning
- - ------------- , 19
- - ---- (purchase date not more than 90 days prior to this Letter):
/ / $50,000 / / $100,000 / / $250,000 / / $500,000 / / $1,000,000
8. DEALERS AND ADVISERS ONLY
If certification below is executed, duplicate statements will be sent to the
address indicated below. Please be sure to enter the correct Financial
Professional Number and Branch Number.
- - -------------------------------------------------------------------
Financial Professional's Name Financial Professional's Number
- - -------------------------------------------------------------------
Dealer/Adviser's Name Telephone
- - -------------------------------------------------------------------
Dealer/Adviser's Address Branch Number
9. YOUR ACCEPTANCE
ALL REGISTRANTS MUST SIGN. UNTIL A PROPERLY COMPLETED SIGNED APPLICATION HAS
BEEN RECEIVED BY STATE STREET BANK, NO REDEMPTIONS OR EXCHANGES FROM THE ACCOUNT
WILL BE PROCESSED.
I (we) have full right, authority, and legal capacity and am (are) of legal
age in state of residence to purchase shares of the designated Series.
I (we) affirm that I (we) have received the current prospectus of the designated
Series and agree to its terms.
I (we) agree that State Street Bank, Zweig Series Trust, Zweig Securities
Corp., or their officers or employees, will not be liable for any loss, expense
or cost for acting upon any instructions or inquiries believed to be genuine.
I (we) acknowledge that unless I (we) have elected not to have telephone
privileges in Section 6 above, the account will be subject to the telephone
exchange and redemption privileges described in the current prospectus and agree
that the Trust, the Distributor and Transfer Agent will not be liable for any
loss in acting on written or telephone instructions reasonably believed by them
to be authentic.
Under penalties of perjury, each undersigned certifies that the social
security or taxpayer identification number given above is correct and that I
(we) am (are) not subject to backup withholding because I (we) have not been
notified that I (we) am (are) subject to backup withholding or that the IRS has
notified me (us) that I (we) am (are) no longer subject. Sign below exactly as
the account is to be registered (corporations, etc., indicate titles):
- - -------------------------------------------------------------------
Individual or Custodian Name Date
- - -------------------------------------------------------------------
Joint Registrant, if any
- - -------------------------------------------------------------------
Officer, Partner, Trustee, etc. Date Title
- - -------------------------------------------------------------------
Officer, Partner, Trustee, etc. Date Title
IMPORTANT:
No investment can be redeemed from an account within 15 days following purchase
if an investor purchases shares with a check which has not cleared. This
limitation does not apply to investments made by wire transfer. The Internal
Revenue Service requires that all taxpayers provide their Taxpayer
Identification Number (Social Security Number) in the space provided in Section
1 of the Application and certify to its correctness. Failure by non-exempt
taxpayers to furnish State Street Bank with their correct Taxpayer
Identification Number WILL result in withholding 31% of all taxable dividends
paid to the account and/or withholding on certain other payments to the account
(this is referred to as "backup withholding").
CONFIRMATION OF ACCOUNT ESTABLISHMENT--Within a few days after the Application
is received by State Street Bank, a confirmation statement(s) showing the
account number(s), amount received, shares purchased and price paid per share
should be received by the registered shareholder for each Series selected.
SUBSEQUENT PAYMENTS--A new application need not be submitted with additional
payments to an existing account if a current Application is on file with State
Street Bank. Subsequent purchases should be identified by account number and
account registration. This can be accomplished by using the payment stub
attached to the statement which you will receive shortly after making an
investment.
FOR APPLICATION ASSISTANCE OR RETIREMENT PLAN INFORMATION CALL 1-800-272-2700.
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fee table 2
Financial highlights 3
Zweig Series Trust 4
Investment objectives of the Zweig Mutual Funds 4
Dr. Martin E. Zweig 5
The portfolio managers 5
Stock selection and bond duration 5
Portfolio securities 6
Risk factors and managing exposure to market risk 8
Other investment policies 10
Net asset value 11
Distributions and taxes 11
Exchange privilege 12
Choosing among classes of shares 12
How to invest in the Zweig Mutual Funds 14
How to redeem your shares 15
The manager and management fee 16
Organization of the funds 17
Performance information 17
</TABLE>
INVESTMENT MANAGER
Zweig/Glaser Advisers
5 Hanover Square-17th Floor
New York, New York 10004
PRINCIPAL DISTRIBUTOR
Zweig Securities Corp.
5 Hanover Square-17th Floor
New York, New York 10004
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND PAYING AGENT
State Street Bank & Trust Co.
225 Franklin Street
Boston, Massachusetts 02110
COUNSEL
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand LLP
1301 Avenue of the Americas
New York, New York 10019
No dealer, salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
in connection with the offer contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Trust, the Investment Manager or the Distributor.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
Zweig
Series Trust
PROSPECTUS
ZWEIG STRATEGY FUND
ZWEIG APPRECIATION FUND
ZWEIG MANAGED ASSETS
GOVERNMENT SECURITIES SERIES
ZWEIG CASH FUND
September 1, 1995
<PAGE> 31
[Zweig Cash Fund Prospectus]
ARTWORK
ZWEIG CASH FUND is a professionally managed money market fund that seeks
high current income consistent with liquidity and preservation of capital. The
fund invests in short-term securities issued or guaranteed as to the payment of
principal and interest by the United States Government, its agencies or
instrumentalities, and repurchase agreements with respect to such securities.
Shares of the fund are sold at net asset value.
The fund is one of five different funds, or series, of Zweig Series Trust.
Each fund has its own investment objectives and policies and each offers
different classes of shares. This prospectus describes Class M Shares of Zweig
Cash Fund. Class A Shares, Class B Shares and Class C Shares of the fund are
described in a separate prospectus, which includes a description of the other
series of the Trust.
Zweig/Glaser Advisers selects and manages the fund's investments. Zweig
Securities Corp. is the principal distributor of the fund's shares.
Shares of the fund are not deposits or obligations of, or guaranteed,
endorsed or insured by, the U.S. Government, any bank, the Federal Deposit
Insurance Corp., the Federal Reserve Board, or any other agency, entity, or
person. The Zweig Cash Fund seeks to maintain a stable share price of $1.00.
There can be no assurance that the fund will meet this goal.
This prospectus contains important information that you should know before
investing. Please keep it for future reference. A Statement of Additional
Information (SAI) dated September 1, 1995, has been filed with the Securities
and Exchange Commission. The SAI is incorporated by reference into this
prospectus. You can obtain a copy without charge by calling 1-800-272-2700.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ZWEIG SERIES TRUST
5 HANOVER SQUARE, 17TH FLOOR
NEW YORK, NY 10004
1-800-272-2700
-----------------------------
P R O S P E C T U S
September 1, 1995
----------------------------
<PAGE> 32
FEE TABLE
We've provided the following table to help you understand the expenses of
investing in the Zweig Cash Fund. Mutual fund investors bear two types of
expenses: transaction expenses and operating expenses. You pay transaction
expenses when you buy shares in a fund. The fund as a whole pays operating
expenses, which reduce the fund's annual return to you.
<TABLE>
<CAPTION>
ZWEIG CASH FUND
-------------------------------------
CLASS M CLASS A CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (as % of Offering Price) 0% 0% 0%
Contingent Deferred Sales Charge(1) 0% 0% 1.25%
ANNUAL OPERATING EXPENSES (as % of average net assets)
Management Fees 0.50% 0.50% 0.50%
Rule 12b-1 Fees (Asset Based Sales Charge and Service Fees)(2) 0.10% 0.30% 0.30%
Other Expenses 0.10% 0.10% 0.10%
------- ------- -------
Total Operating Expenses (after reimbursement) 0.70%* 0.90%* 0.90%*
======= ======= =======
</TABLE>
- - ---------------
* The Manager has voluntarily undertaken to limit the expenses of Zweig Cash
Fund (exclusive of taxes, interest, brokerage commissions, certain
distribution fees and extraordinary expenses) to .60% of its average net
assets effective September 1, 1994. The Manager reserves the right to
discontinue this policy at any time after October 31, 1995.
(1) A deferred sales charge on Class C Shares applies only if redemption occurs
within one year from purchase.
(2) The Rule 12b-1 distribution plan for Class M shares is described on page 7
under "The distributor". A separate Rule 12b-1 plan for Class A and Class C
shares provides for a 0.25% Service Fee, 100% of which is reallocated to
National Association of Securities Dealers, Inc. ("NASD") member firms for
continuous personal service by such members to investors in the Trust, such
as responding to shareholder inquiries, quoting net asset values, providing
current marketing materials and attending to other shareholder matters. The
Distributor retains 0.05% of the asset based sales charge also included in
the Rule 12b-1 Fees.
EXAMPLES -- The table below is based on operating expenses for the last fiscal
year. It does not represent future expense levels, which may be greater or less
than those shown. Federal regulations require the examples to assume a 5% annual
return, but actual annual returns have varied.
Your investment of $1,000 would incur the following expenses:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS
------------------------------------- ------------------------------------- ------------------------
CLASS M CLASS A CLASS C CLASS M CLASS A CLASS C CLASS M CLASS A
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assuming 5% annual
return and
redemption at the
end of each
period: $7.15 $9.18 $21.68 $22.39 $28.70 $28.70 $38.96 $49.85
Assuming 5% annual
return but no
redemption: $7.15 $9.18 $9.18 $22.39 $28.70 $28.70 $38.96 $49.85
</TABLE>
<TABLE>
<CAPTION>
5 YEARS 10 YEARS
----------- --------------------------------
CLASS C CLASS M CLASS A CLASS C
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Assuming 5% annual
return and
redemption at the
end of each
period: $49.85 $87.05 $110.78 $110.78
Assuming 5% annual
return but no
redemption: $49.85 $87.05 $110.78 $110.78
</TABLE>
- - ---------------------------------
ZWEIG CASH FUND is a convenient way to invest idle cash in a money market
fund that invests in short-term securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements with respect to such obligations.
The fund is a series of Zweig Series Trust.
The fund seeks high current income consistent with maintaining liquidity
and preserving capital. The goal of the fund is to maintain a stable share price
of $1.00.
2
<PAGE> 33
FINANCIAL HIGHLIGHTS
The following table sets forth financial history for a share of each class
of Zweig Cash Fund. Data for Class M Shares of Zweig Cash Fund prior to May 1,
1994, is from Zweig Cash Fund Inc., its predecessor by merger.
Coopers & Lybrand L.L.P., the fund's independent accountants, has audited
this information. Their report for each of the last five years is included in
the 1994 Annual Report of Zweig Series Trust. The report is available upon
request and is incoporated by reference into the Statement of Additional
Information.
<TABLE>
<CAPTION>
NET
NET REALIZED DISTRIBUTIONS
ASSET AND DIVIDENDS FROM DISTRIBUTIONS
VALUE NET UNREALIZED TOTAL FROM FROM NET REALIZED FROM
YEAR BEGINNING INVESTMENT GAINS INVESTMENT INVESTMENT CAPITAL CAPITAL TOTAL
ENDED OF YEAR INCOME (LOSSES) OPERATIONS INCOME GAINS PAID-IN DISTRIBUTIONS
- - --------- ----------- ----------- ------------- ----------- ----------- --------------- --------------- -------------
ZWEIG CASH FUND CLASS M(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $1.00 $0.04 -- $0.04 $(0.04) -- -- $(0.04)
1993 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
1992 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
1991 1.00 0.06 -- 0.06 (0.06) -- -- (0.06)
1990 1.00 0.07 -- 0.07 (0.07) -- -- (0.07)
1989 1.00 0.08 -- 0.08 (0.08) -- -- (0.08)
1988 1.00 0.07 -- 0.07 (0.07) -- -- (0.07)
1987 1.00 0.06 -- 0.06 (0.06) -- -- (0.06)
1986 1.00 0.06 -- 0.06 (0.06) -- -- (0.06)
1985 1.00 0.08 -- 0.08 (0.08) -- -- (0.08)
<CAPTION>
ZWEIG CASH FUND CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994(2) 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
<CAPTION>
ZWEIG CASH FUND CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994(2) 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
</TABLE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE
NET ASSET NET ASSETS END OF YEAR
VALUE ------------------------ NET ASSETS
YEAR END TOTAL INVESTMENT (IN
ENDED OF YEAR RETURN EXPENSES INCOME THOUSANDS)
- - --------- ----------- ----------- ----------- ----------- -----------
ZWEIG CASH FUND CLASS M(1)
<S> <C> <C> <C> <C> <C>
1994 $1.00 3.67% 0.70% 3.58% $ 78,149
1993 1.00 2.86 0.70 2.83 92,471
1992 1.00 3.40 0.70 3.35 145,169
1991 1.00 5.63 0.66 5.63 126,019
1990 1.00 7.53 0.72 7.27 189,943
1989 1.00 8.53 0.77 8.24 163,288
1988 1.00 7.16 0.63 6.93 291,836
1987 1.00 6.08 0.65 5.89 332,773
1986 1.00 6.52 0.68 6.25 318,962
1985 1.00 7.91 0.69 7.66 220,175
<CAPTION>
ZWEIG CASH FUND CLASS A
<S> <C> <C> <C> <C> <C>
1994(2) 1.00 2.55* 0.62* 2.52* 4,303
<CAPTION>
ZWEIG CASH FUND CLASS C
<S> <C> <C> <C> <C> <C>
1994(2) 1.00 2.55* 0.61* 2.52* 5,0
- - ---------------
</TABLE>
(1) During 1994, 1993, 1992 and 1991, the Manager voluntarily reimbursed Zweig
Cash Fund Class M $.002 per share (.15% ratio of operating expenses to
average net assets) $.001 per share (.08% ratio of operating expenses to
average net assets) $.002 per share (.15% ratio of operating expenses to
average net assets) and $.001 per share (.15% ratio of operating expenses to
average net assets), respectively.
(2) Commenced operations May 1, 1994.
* Not Annualized
- - ------------------------------------------------------
INVESTMENTS AND RISK FACTORS
The fund invests in short-term securities issued or guaranteed as to the
payment of principal and interest by the United States Government, its agencies
or instrumentalities and repurchase agreements with respect to such securities.
Not all U.S. Government securities are backed by the full faith and credit of
the United States. Some are supported only by the credit of the agency or
instrumentality that issued them. Obligations of the U.S. Government and its
agencies and instrumentalities are considered to have minimal risk of default,
but they are not free from risks related to changes in interest rate
levels. The value of debt securities, including those held by the fund, varies
inversely with changes in interest rate levels.
U.S. Government agencies and instrumentalities include: Bank for
Cooperatives, Export-Import Bank of the U.S., Farmers Home Administration,
Federal Financing Bank, Federal Home Loan Banks, Federal Home Loan Mortgage
Corp., Federal Housing Administration, Federal Intermediate Credit Banks,
Federal Land Banks, Federal National Mortgage Association, Government National
Mortgage Association, Resolution Funding Corp., Student Loan Marketing
Association, Tennessee Valley Authority and U.S. Postal Service.
3
<PAGE> 34
Repurchase agreements are arrangements by which the fund buys a security at
one price and at the same time agrees to sell the security back to the seller at
a higher price, usually on the next business day. Repurchase agreements offer a
means of generating income from excess cash that the fund might otherwise hold.
Delays in payment or losses may result if the other party to the agreement
defaults or becomes bankrupt. The fund will enter into repurchase agreements
only with member banks of the Federal Reserve System or primary dealers in U.S.
Government securities. The fund's repurchase agreements must be fully backed by
collateral (U.S. Government securities) that is marked to market, or priced,
each day.
Constant maturity Treasury floating rate notes have a maturity longer than
one year, but an interest rate that is reset periodically, e.g. quarterly or
semi-annually. Because of changes in the relationship of short-term interest
rates to longer-term interest rates, the value of these notes will fluctuate.
The fund presently holds two adjustable rate notes issued by the Federal
National Mortgage Association. The interest rate on these notes is determined
quarterly according to a formula based on the Federal Reserve 10 year Treasury
Note rate. Should short-term interest rates approach the 10 year Treasury Note
rate, the notes could be worth less than par. Accordingly, the manager has
arranged, at no cost to the fund, for an irrevocable Letter of Credit in the
amount of $1 million that the fund could draw on if for any reason the notes had
to be sold and the proceeds were less than the fund's cost.
The fund may purchase a security on a when-issued or delayed-delivery
basis, i.e., with delivery and payment deferred to a future date. The money to
purchase such securities will be invested in other securities until the fund
receives delivery. This could increase the possibility that the fund's net asset
value might be affected by changes in interest rates.
Although it has not used these practices in the past, the fund may: lend
its securities to other financial institutions to earn income; borrow money for
temporary purposes; and invest up to 10% of its net assets in illiquid
securities, such as repurchase agreements maturing in more than seven days. The
investment objective and these practices can be changed only by vote of a
majority of the outstanding shares of the fund. A majority for this purpose is
defined as the lesser of either: (a) 67% of the shares represented at a meeting
if at least 50% of all shares are represented, or (b) more than 50% of all
outstanding shares.
The Statement of Additional Information has further details about the
investments and policies of the fund. As with any mutual fund, there is no
assurance that the fund's objective will be achieved.
NET ASSET VALUE, DISTRIBUTIONS AND TAXES
NET ASSET VALUE. The net asset value of each class of shares is determined
on each day that the New York Stock Exchange ("NYSE") is open. Net asset values
are calculated as of 12:00 noon New York time. The liabilities of the fund are
subtracted from its assets to determine total net assets. Each class's
proportionate interest in the fund's net assets is determined. The liabilities
of that class, including its distribution fees, are then deducted and the
resulting amount is divided by the number of shares of that class outstanding to
produce its net asset value per share. The fund attempts to stabilize its share
price at $1.00 and uses the amortized cost method of valuing its investments.
DISTRIBUTIONS AND TAXES. The fund intends to qualify as a regulated
investment company for federal income tax purposes and to distribute to its
shareholders all income and net capital gains so as to be relieved of federal
taxes. The fund declares dividends at 12:00 noon New York time on each day the
NYSE is open for trading of all its net income, including: accrued interest,
earned discounts, and realized gains and losses, less amortized premiums and
accrued expenses. Dividends are declared separately for each class of shares.
The fund pays or reinvests these dividends at net asset value on the last
business day of each month unless a shareholder elects to receive distributions
in cash. Distributions of income and short-term capital gains are taxed as
dividends (the fund does not expect to realize any
4
<PAGE> 35
long-term capital gains). Distributions are taxable when paid, whether taken in
cash or reinvested. By January 31st of each year, we will send you a statement
showing the tax status of your distributions for the prior year. The foregoing
is a summary of certain federal income tax consequences. Be sure to consult your
own tax adviser to determine the precise effect on your particular tax
situation, as well as any state and local tax consequences.
HOW TO BUY SHARES
Class M Shares of the fund are sold at net asset value without the
imposition of a sales charge. You can buy shares directly from the fund's
transfer agent, through an investment professional, or automatically through a
regular investment plan. Purchase orders become effective after receipt of
Federal funds by the transfer agent. The minimum initial investment is $1,000
for a regular account and $250 for a retirement account. Each additional
investment must be at least $100 for a regular account and for investment plans.
Retirement accounts have no minimum amount for additional investments. We
reserve the right to change or waive minimums or to refuse any order.
BUYING SHARES FROM AN INVESTMENT DEALER. If you invest through a broker,
bank or other institution, that firm or institution may have its own service
features and/or fees. If you wish us to refer you to an investment professional,
call us at 1-800-272-2700. Investment professionals receive compensation for
providing investment advice, and such compensation differs for selling shares of
different classes of the Zweig Mutual Funds.
AUTOMATICALLY THROUGH SWEEP PROGRAMS. Customers of participating securities
dealers and banks may participate in sweep programs by which an account with the
dealer or bank is coordinated with an account in the fund. Purchases and sales
are made by the participating securities dealer or bank as agent of their
customer. For further information about the sweep program, see the Statement of
Additional Information or call 1-800-272-2700.
BUYING SHARES THROUGH THE TRANSFER AGENT. Send a letter to the transfer
agent directing that Zweig Cash Fund Class M Shares are to be purchased with
your check. The address is: Zweig Cash Fund c/o State Street Bank & Trust Co.,
P.O. Box 8505, Boston, MA 02266-8505. Make your check payable to State Street
Bank & Trust Co. You may deliver your order by courier or overnight mail to
State Street's offices at: 2 Heritage Drive (3rd floor), North Quincy, MA 02171,
Attention: Premier Group/Zweig Mutual Funds. You also may wire your order with
Federal funds. For wiring instructions, call 1-800-628-0441.
BUYING SHARES THROUGH AN INVESTMENT PLAN. You can invest in the fund
through an automatic investment plan. For further details, call 1-800-272-2700.
HOW TO REDEEM SHARES
You can redeem your shares at net asset value on any day the NYSE is open
through the transfer agent if the shares are registered in your name, or through
the investment dealer or institution through which you purchased your shares.
THROUGH YOUR INVESTMENT DEALER. If your account has been established by
your investment dealer or other institution, contact your investment
professional, who will assist you with your redemption.
THROUGH THE TRANSFER AGENT BY MAIL. If the shares are registered in your
name, send a letter of instruction signed exactly as the shares are registered,
with signature guarantees from an appropriate guarantor, and any certificates
that represent the shares you wish to redeem. A signature guarantee is required
whether or not certificates are involved. Mail the information to: Zweig Cash
Fund c/o State Street Bank & Trust Co., P.O. Box 8505, Boston, MA 02266-8505.
Appropriate signature guarantors include: banks, savings associations, credit
unions, member firms of a national securities exchange, municipal securities
dealers and government securities dealers. See the Statement of Additional
Information or call 1-800-272-2700 for more information. Redemption instructions
by corporate and fiduciary shareholders also must be accompanied by appropriate
documentation establishing the authority of the person seeking to act on behalf
of the account.
THROUGH THE TRANSFER AGENT BY TELEPHONE. The transfer agent must receive
your
5
<PAGE> 36
instructions before noon in order to redeem shares that day. You may issue a
telephone redemption request directly to the transfer agent at 1-800-628-0441
if: (a) your account is registered for telephone/expedited redemption
privileges, and (b) your shares are held at the transfer agent without
certificates. If you designated a domestic bank on the Application Form when you
opened your account, you may have redemption proceeds of $1,000 or more wired to
that bank. Subsequent directions for wiring proceeds require a signature
guarantee from an appropriate guarantor. The maximum amount that may be redeemed
for joint accounts by telephone is $25,000. Neither the fund, the distributor,
nor the transfer agent will be liable for any loss in acting on telephone
instructions reasonably believed to be authentic. In the event of a fraudulent
telephone redemption, the investor will bear the risk of loss. Because the fund
may otherwise be liable for any losses due to unauthorized or fraudulent
instructions, reasonable procedures are employed to confirm that instructions
given by phone are genuine. These include: requiring a form of personal
identification from the caller and recording telephone instructions. For
identification purposes, the transfer agent may require such information as it
deems necessary before accepting redemption instructions.
During periods of extremely drastic economic or market changes, it may
become difficult to implement a telephone redemption. In the event that you have
difficulty reaching the transfer agent at its toll-free number, you should
consider sending written redemption instructions in the manner explained above.
We reserve the right to refuse telephone redemption requests and to limit their
amount or frequency. If, however, we determine not to accept a telephone
redemption request, we will seek to advise you promptly of that decision and, to
the extent feasible, will communicate that decision by telephone.
THROUGH THE TRANSFER AGENT BY CHECK. You may establish a Check Service with
State Street Bank and Trust Company. Checks must be in amounts of $500 or more.
To obtain redemption checks, complete an application form which can be obtained
by calling 1-800-272-2700. When a check is presented for payment, State Street
will redeem full and fractional shares in your account to cover the amount of
the check. State Street will not honor a check for less than $500 or for an
amount exceeding the value of your account at the time the check is presented.
We reserve the right to impose a service charge for check redemptions, stop
payment orders and returned checks.
AUTOMATICALLY THROUGH SWEEP PROGRAMS. See Purchase of Shares above.
MINIMUM ACCOUNT SIZE. If your account balance falls below $1,000 as a
result of redeeming shares, you may be given 60 days' notice to reestablish the
minimum balance. If you do not increase your balance, we reserve the right to
close your account and send the proceeds to you. We normally will not close an
account maintained in connection with a tax-deferred retirement plan.
ORGANIZATION AND MANAGEMENT
The Trust was established as a Massachusetts business trust on September
24, 1984. The Trust is a mutual fund, or, in the technical terms of the
Investment Company Act of 1940 (the 1940 Act) under which it is regulated, an
open-end, diversified management investment company. It has an unlimited number
of shares of beneficial interest which, without shareholder approval, may be
divided by the trustees into an unlimited number of classes and funds. The
shares presently are divided into four classes of shares in the fund and three
classes of shares in the four other funds. Each share is entitled to one vote
(with proportional voting for fractional shares). Shares vote together on
matters that concern the entire Trust, or by individual fund or class when the
Board of Trustees determines that the matter affects only the interests of a
particular fund or class.
The Board of Trustees directs the management of the business of the Trust.
The Board has duties and responsibilities comparable to those of the boards of
directors of corporations, not to those of trustees under customary trust
principles. The trustees oversee the Trust's activities, elect the officers of
the Trust who are responsible for its day-to-day operations, review contractual
arrangements with the companies that provide services to the Trust, and review
investment performance.
6
<PAGE> 37
THE MANAGER AND MANAGEMENT FEE. The fund's investments are managed by
Zweig/Glaser Advisers, 5 Hanover Square, 17th floor, New York, NY 10004. The
general partners of Zweig/Glaser Advisers are: Glaser Corp., a Delaware
corporation controlled by Eugene J. Glaser, and Zweig Management Corp., a
Delaware corporation controlled by Dr. Martin E. Zweig. The manager also: makes
recommendations with respect to the fund's business affairs; furnishes certain
administrative services, office space and equipment; and permits its employees
to serve as the officers of the Trust without additional compensation from the
fund. All other expenses incurred in the operation of the fund are borne by the
fund, including: interest, taxes, fees and commissions of every kind; expenses
of issue, repurchase or redemption of shares; costs of registering or qualifying
shares for sale (including printing costs, legal fees and other expenses
relating to the preparation and filing the Trust's registration statement with
the appropriate regulatory authorities and the production and filing of the
Trust's prospectus); costs of insurance; association membership dues; all
charges of custodians, including fees as custodian, escrow agent, and fees for
keeping books and performing portfolio valuations; all charges of transfer
agents, registrars, independent accountants and legal counsel; expenses of
preparing, printing and distributing prospectuses and all proxy materials,
reports and notices to shareholders; expenses of distribution of shares pursuant
to the Rule 12b-1 Plan described below; out-of-pocket expenses of trustees; fees
of trustees who are not "independent persons" as defined in the 1940 Act; and
all other costs incident to the Trust's existence as a business trust.
Zweig/Glaser Advisers receives a fee equal to .50% of its average daily net
assets for managing the fund. The manager has voluntarily undertaken to limit
expenses of the fund (exclusive of taxes, interest, brokerage commissions and
transaction costs, the distribution fees described below and extraordinary
expenses) to 0.60% of its average net assets and reserves the right to
discontinue this policy at any time after October 31, 1995.
THE DISTRIBUTOR. Zweig Securities Corp. serves as principal distributor of
shares of the Zweig Mutual Funds. Class M Shares have a distribution sharing
plan pursuant to Rule 12b-1 under the Investment Company Act of 1940. The plan
provides that the distributor may enter into service agreements with securities
dealers, financial institutions, banks, and other industry professionals for
distribution, promotion and administration and servicing investors in the fund's
Class M Shares. Under the plan, the fund and the manager reimburse the
distributor in equal shares for service payments to service organizations of up
to 0.30% of the average daily net assets of the fund's Class M Shares. The plan
also provides that the fund will pay up to an additional $100,000 per annum for
marketing costs. In the past, the fund has never paid the full $100,000 per
annum, and it is not anticipated that the fund will pay the full $100,000 during
the present year.
PERFORMANCE INFORMATION
Occasionally, the fund may advertise current yield or effective yield.
Yield figures are based on historical earnings and are not intended to indicate
future performance. Current yield refers to the income generated by an
investment in the fund over a seven-day period specified in the advertisement.
This income is assumed to be generated each week for 52 weeks. This 52-week
income is then shown as a percentage of the investment. Effective yield is
calculated similarly but, when annualized, the income earned is assumed to be
reinvested. The effective yield will be slightly higher than the current yield
because of the compounding effect of the assumed reinvestment. The fund also may
include in advertising or marketing materials data from financial and other
publications or from surveys that deal with mutual fund or investment
statistics. The Statement of Additional Information lists some of such
publications and sources of data.
7
<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----------
<S> <C>
Fee Table...................................... 2
Financial Highlights........................... 3
Investments and risk factors................... 3
Net asset value, distributions and taxes....... 4
How to buy shares.............................. 5
How to redeem shares........................... 5
Organization and management.................... 6
Performance information........................ 7
</TABLE>
INVESTMENT MANAGER
Zweig/Glaser Advisers
5 Hanover Square--17th Floor
New York, New York 10004
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
1301 Avenue of the Americas
New York, New York 10022
COUNSEL
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
PRINCIPAL DISTRIBUTOR
Zweig Securities Corp.
5 Hanover Square--17th Floor
New York, New York 10004
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST, THE INVESTMENT MANAGER OR THE DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
[ZWEIG CASH FUND LOGO]
A
Money
Market
Fund
- - --------------------------------------
P R O S P E C T U S
September 1, 1995
- - --------------------------------------
<PAGE> 39
ZWEIG SERIES TRUST
5 Hanover Square, New York, N.Y. 10004
STATEMENT OF ADDITIONAL INFORMATION
ZWEIG SERIES TRUST (the "Trust"), a Massachusetts business trust, is a
professionally managed, open-end, diversified, investment company which offers
investors the opportunity to invest in five Series. Each Series has distinct
investment objectives and policies, and a shareholder's interest is limited to
the Series and to the Class in which he or she owns shares. The five Series
are: Zweig Strategy Fund; Zweig Appreciation Fund; Zweig Managed Assets;
Government Securities Series; and Zweig Cash Fund (each a "Series").
The Trust has a distribution system that allows each Series to offer
investors the option of purchasing shares either subject to a front-end sales
charge coupled with a Rule 12b-1 Distribution Plan (except that Zweig Cash Fund
is offered without a sales charge) ("Class A Shares"); subject to a declining
contingent deferred sales charge ("CDSC"), a Rule 12b-1 Distribution Plan and a
service fee ("Class B Shares"); or subject to a one year CDSC, a Rule 12b-1
Distribution Plan and a service fee ("Class C Shares"). Zweig Cash Fund also
issues a fourth class of shares (Class M Shares), which is described in a
separate Statement of Additional Information. The Trust's distribution system
is described more fully in the Prospectus under the headings "Choosing Among
Classes of Shares," "How to Invest in the Zweig Mutual Funds" and "How to
Redeem your Shares".
The Trust is designed for long-term investors, including those who wish to
use shares of one or more Series as a funding vehicle for tax-deferred
retirement plans (including tax-qualified retirement plans and Individual
Retirement Account (IRA) plans), and not for investors who intend to liquidate
their investments after a short period of time.
Zweig/Glaser Advisers (the "Manager"), manages the investments of each
Series and Zweig Securities Corp. (the "Distributor"), an affiliate of the
Manager, is the principal distributor of the Trust's shares.
This Statement of Additional Information, which should be kept for future
reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Trust (the "Prospectus"), dated September 1, 1995, which can
be obtained without cost by contacting your financial consultant or by calling
or writing the Trust at the telephone number and address printed on this cover
page. This Statement of Additional Information is intended to provide you with
further information about the Trust.
Zweig Series Trust
(Toll Free--1-800-272-2700)
September 1, 1995
<PAGE> 40
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
REINSTATEMENT PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INVOLUNTARY REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
NET ASSET VALUE AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . 16
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Custodian, Transfer Agent and Dividend Paying Agent . . . . . . . . . . . . . . . . 18
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
YIELD AND PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
2
<PAGE> 41
INVESTMENT OBJECTIVES AND POLICIES
The Trust's investment objectives and policies and permitted investments are
described briefly in the Prospectus under the headings "Investment Objectives
of the Zweig Mutual Funds," "Portfolio Securities" "Stock Selection and Bond
Duration"and "Risk Factors and Managing Exposure to Market Risk." Set forth
below is additional information with respect to the investment objectives and
policies of certain Series. There can be no assurance that a Series' investment
objectives will be achieved.
Government Securities Series
Government Securities Series seeks a high current return by investing
primarily in U.S. Government and agency securities, including Government
National Mortgage Association ("GNMA") mortgage-backed certificates, and
repurchase agreements collateralized by such securities.
It is the Series' policy that at least 65% of its total assets will be
invested in U.S. Government securities (including GNMA certificates), except
during times when the Manager believes that adoption of a temporary defensive
position is desirable due to prevailing market or economic conditions. For
temporary defensive purposes, the Series may hold cash or invest in money
market instruments.
The Series may write covered call options and secured put options, and
purchase put options on U.S. Government securities which are traded on an
exchange or over-the-counter. The Series also may purchase and sell interest
rate futures contracts and purchase and write put and call options on such
futures contracts as a means of hedging against changes in interest rates.
Zweig Cash Fund
Zweig Cash Fund may invest in U.S. Treasury issues, such as bills,
certificates of indebtedness, notes and bonds, and issues of U.S. Government
agencies and instrumentalities which are established under the authority of an
act of Congress, such as the Government National Mortgage Association,
Tennessee Valley Authority, Bank for Cooperatives, Farmers Home Administration,
Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks,
Export-Import Bank of the U.S., Federal Housing Administration ("FHA"), Federal
Home Loan Mortgage Corporation, U.S. Postal Service, Federal Financial Bank,
Federal National Mortgage Association and Student Loan Marketing Association.
Some of these securities, such as Federal Housing Administration debenture
obligations, are supported by the full faith and credit of the U.S. Treasury;
others, such as obligations of Federal Home Loan Banks, are supported by the
right of the issuer to borrow from the U.S. Treasury; others, such as those of
the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and
still others, such as those of the Student Loan Marketing Association, are
supported only by the credit of the instrumentality. The Series will not invest
in obligations of the International Bank for Reconstruction and Development
(the "World Bank"), the Asian Development Bank, or the Inter-American
Development Bank, or in FHA or VA pooled mortgages.
The following is a description of certain financial instruments and
techniques utilized by certain Series.
Options (All Series except Zweig Cash Fund)
When a Series writes an option, an amount equal to the premium received by
the Series is recorded as an asset and as an offsetting liability. The amount
of the liability is "marked-to-market" daily to reflect the current market
value of the option, which is the last sale price on the principal exchange on
which such option is traded or, in the absence of a sale, the mean between the
latest bid and offering prices. If an option written by Series expires, or a
Series enters into a closing purchase transaction, such Series will realize a
gain (or, in the latter case, a loss, if the cost of a closing transaction
exceeds the premium received) and the liability related to such option will be
extinguished.
The premium paid by a Series for the purchase of a put option (its cost) is
recorded initially as an investment, the value of which is subsequently
adjusted to the current market value of the option. If the current market value
of a put option exceeds its premium, the excess represents unrealized
appreciation; conversely, if the premium exceeds the current market value, the
excess represents unrealized depreciation. The current market value of an
option purchased by a Series equals the option's last sale price on the
principal exchange on which it is traded or, in the absence of a sale, the mean
between the latest bid and offering prices.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although a Series generally
will purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market
on an exchange will exist for any particular option, or at any particular time,
and for some options no secondary market on an exchange may exist. In such
event, it might not be possible to effect closing transactions in particular
options, with the result that the Series would have to exercise its options in
order to realize any profit and would incur transaction costs on the sale of
underlying securities pursuant to the exercise of put options. If a Series, as
a covered call option writer, is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (a) there may be insufficient interest in trading certain
options; (b) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (c) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (d) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (e) the facilities of an exchange
or the Options Clearing Corporation (the "OCC") may not at all times be
adequate to handle current trading volume; or (f) one or more exchanges might,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist,
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although outstanding options on that exchange that had been issued by the OCC
as a result of trades on that exchange would continue to be exercisable in
accordance with their terms.
In addition, there is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of the OCC inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders.
The amount of the premiums which a Series may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing
activities.
In the event of a shortage of the underlying securities deliverable on
exercise of a listed option, the OCC has the authority to permit other,
generally comparable securities to be delivered in fulfillment of option
exercise obligations. If the OCC exercises its discretionary authority to allow
such other securities to be delivered, it may also adjust the exercise prices
of the affected options by setting different prices at which otherwise
ineligible securities may be delivered. As an alternative to permitting such
substitute deliveries, the OCC may impose special exercise settlement
procedures. Options on Government Securities (Government Securities Series
only)
(i) On Treasury Bonds and Notes. Because the trading interest in Treasury
bonds and notes tends to center on the most recently auctioned issues, the
exchanges will not continue indefinitely to introduce new expirations with
respect to such options to replace expiring options on particular issues. The
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run, with the possible addition of a limited number of
new expirations, as the original expirations expire. Options trading on each
issue of bonds or notes will thus be phased out as new options are listed on
more recent issues, and a full range of expirations will not ordinarily be
available on the exchange for every issue on which options are traded.
(ii) On Treasury Bills. Because the deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for
their potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Series holds a long position in Treasury
bills with a principal amount corresponding to the contract size of the option,
it may be hedged from a risk standpoint. In addition, the Series will maintain
Treasury bills, maturing no later than those which would be deliverable in the
event of exercise of a call option it has written, in a segregated account with
its custodian so that it will be treated as being covered for margin purposes.
(iii) On GNMA Certificates. Options on GNMA certificates are not currently
traded on any national securities exchange, although the Securities and
Exchange Commission (the "Commission") has approved such options for trading on
the Chicago Board Options Exchange. Since the remaining principal balance of
GNMA certificates declines each month as mortgage payments are made, the Series
as a writer of a GNMA call may find that the GNMA certificates it holds no
longer have a sufficient remaining principal balance to satisfy its delivery
obligation in the event of exercise of the call option it has written. Should
this occur, additional GNMA certificates from the same pool (if obtainable), or
replacement GNMA certificates, will have to be purchased in the cash market to
meet delivery obligations. The Series will either replace GNMA certificates
representing cover for call options it has written, or maintain in a segregated
account with its custodian cash or U.S. Government securities or other
appropriate high grade debt obligations having an aggregate value equal to the
market value of the GNMA certificates underlying the call options it has
written.
The hours of trading for options on U.S. Government securities may not
conform to the hours during which the underlying securities are traded. To the
extent that the options markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the options markets.
Options are traded on exchanges on only a limited number of U.S. Government
securities and exchange regulations limit the maximum number of options which
may be written or purchased by a single investor or a group of investors acting
in concert. The Trust and other clients advised by the Manager may be deemed to
constitute a group for these purposes. In light of these limits, the Trust's
Board of Trustees (the "Board of Trustees" or the "Board") may determine at any
time to restrict or terminate the public offering of the Series' shares
(including through exchanges from the other Series).
Exchange markets in options on U.S. Government securities are a relatively
new and untested concept and it is impossible to predict the amount of trading
interest that may exist in such options. There can be no assurance that viable
exchange markets will develop or continue.
Futures Contracts (All Series except Zweig Cash Fund)
Upon entering into a futures contract, a Series will initially be required
to deposit with a custodian an amount of "initial margin" of cash or U.S.
Treasury bills equal to approximately 1 1/2% of the contract amount. The nature
of initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract initial margin does not
involve the borrowing of funds by customers to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Series upon termination of the
futures contract, assuming all contractual obligations have been satisfied.
Subsequent payments, called maintenance margin, to and from the broker, will
be made on a daily basis as the price of the underlying security fluctuates,
making the long and short positions in the futures contract more or less
valuable, a process known as "marking to the market." For example, when the
Series has purchased a futures contract and the price of the underlying
security has risen, that position will have increased in value and the Series
will receive from the broker a maintenance margin payment equal to that
increase in value. Conversely, when the Series has purchased a futures contract
and the price of the underlying security has declined, the position would be
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less valuable and the Series would be required to make a maintenance margin
payment to the broker. At any time prior to expiration of the futures contract,
the Series may elect to close the position by taking an opposite position which
will operate to terminate the Series' position in the futures contract. A final
determination of maintenance margin is then made, additional cash is required
to be paid by or released to the Series, and the Series realizes a loss or a
gain.
While futures contracts based on securities do provide for the delivery and
acceptance of securities, such deliveries and acceptances are very seldom made.
Generally, the futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale is effected
by the Series entering into a futures contract purchase for the same aggregate
amount of the specific type of financial instrument with the same delivery
date. If the price in the sale exceeds the price in the offsetting purchase,
the Series immediately is paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sales price, the Series pays the
difference and realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the Series entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price, theSeries
realizes a gain, and if the purchase price exceeds the offsetting price, the
Series realizes a loss.
There are several risks in connection with the use of futures contracts as a
hedging device. One risk arises due to the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the subject of the hedge. The price of the futures contract may move more than
or less than the price of the securities or currency being hedged.
If the price of the futures contracts moves less than the price of the
securities or currency hedged, the hedge will not be fully effective, but, if
the price of the securities or currency being hedged has moved in an
unfavorable direction, the Series would be in a better position than if it had
not hedged at all. If the price of the securities or currency being hedged has
moved in a favorable direction, this advantage will be partially offset by the
movement in the price of the futures contract. If the price of the futures
contract moves more than the price of the security or currency, the Series will
experience either a loss or gain on the futures which will not be completely
offset by movements in the prices of the securities or currency which is the
subject of the hedge.
To compensate for the imperfect correlation of such movements in price, the
Series may buy or sell futures contracts in a greater dollar amount than the
dollar amount of the securities or currency being hedged if the historical
volatility of the prices of such securities or currency has been greater than
the historical volatility of the futures contracts. Conversely, the Series may
buy or sell fewer futures contracts if the historical volatility of the price
of the securities or currency being hedged is less than the historical
volatility of the futures contracts.
It is also possible that, where a Series has sold futures to hedge its
portfolio against a decline in the market, the market may advance and the value
of securities held in the Series' portfolio may decline. If this occurred, the
Series would lose money on the futures contracts and also experience a decline
in value in its portfolio securities. However, while this could occur for a
very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
Where futures are purchased to hedge against a possible increase in the cost
of securities before a Series is able to invest its cash (or cash equivalents)
in an orderly fashion, it is possible that the market may decline instead; if
the Series then concludes not to invest in the relevant securities at that time
because of concern as to possible further market decline or for other reasons,
the Series will realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
Another risk arises because the market prices of futures contracts may be
affected by certain factors. First, all participants in the futures market are
subject to initial margin and maintenance margin requirements. Rather than
meeting maintenance margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the debt securities and futures markets. Second, from the point of view
of speculators, the margin requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions.
Due to the possibility of price distortion in the futures market and because
of the imperfect correlation between movements in securities and movements in
the prices of futures contracts, a correct forecast of interest rate trends by
the Manager may still not result in a successful hedging transaction over a
very short period of time.
Positions in futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Trust intends to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange or board of trade will exist for
any particular contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse price
movements, the Series would continue to be required to make daily cash payments
of maintenance margin. However, in the event futures contracts have been used
to hedge portfolio securities, such securities will not be sold until the
futures contracts can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will, in fact, correlate with the price movements
in the futures contract and thus provide an offset to losses on a futures
contract.
Successful use of futures contracts by the Trust is also subject to the
Manager's ability to correctly predict movements in the direction of interest
rates and other factors affecting markets for securities. For example, if a
Series has hedged against the possibility of an increase in interest rates
which would adversely affect securities held in its portfolio and prices of
such securities increase instead, the Series will lose part or all of the
benefit of the increased value of its securities which it has hedged because it
will have offsetting losses in its futures
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positions. In addition, in such situations, if the Series has insufficient
cash, it may have to sell securities to meet maintenance margin requirements.
Such sales of securities may be, but will not necessarily be, at increased
prices which reflect the rising market. The Series may have to sell securities
at a time when it may be disadvantageous to do so.
Futures Contracts on Government Securities (Government Securities Series)
Currently futures contracts can be purchased and sold with respect to U.S.
Treasury bonds, U.S. Treasury notes and GNMA certificates on the Chicago Board
of Trade, and with respect to U.S. Treasury bills on the International Monetary
Market at the Chicago Mercantile Exchange.
Options on Futures Contracts (Government Securities Series)
Currently, options can be purchased or sold with respect to futures
contracts on U.S. Treasury bonds on the Chicago Board of Trade.
The Series is required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those applicable to interest rate futures
contracts described above, and, in addition, net option premiums are included
as initial margin deposits. As with options on debt securities, the writer of
an option on a futures contract may terminate his position by selling or
purchasing an option of the same series. The ability to establish and close out
positions on such options is subject to the existence of a liquid secondary
market. The Series will not purchase options on futures contracts on any
exchange unless and until, in the Manager's opinion, the market for such
options is sufficiently liquid that the risks in connection with options on
futures contracts are not greater than the risks in connection with futures
contracts.
Compared to the purchase or sale of futures contracts, the purchase of
options on futures contracts involves less potential risk to the Series because
the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the use of an
option on a futures contract would result in a loss to the Series when the use
of a futures contract would not, such as when there is no movement in the
prices of debt securities. Writing an option on a futures contract involves
risks similar to those arising in the sale of futures contracts, as described
above.
In purchasing and selling futures contracts and in purchasing options on
futures contracts, the Series will comply with rules and interpretations of the
Commodity Futures Trading Commission ("CFTC") under which it is exempted from
regulation as a commodity pool operator. The CFTC regulations which exempt the
Series from regulation as a commodity pool operator require, among other
things, (i) that futures and related options be used solely for "bona fide
hedging" purposes, as defined in CFTC regulations or, alternatively, with
respect to each long futures or options position, the Series will ensure that
the underlying commodity value of such contract does not exceed the sum of
segregated cash or money market instruments, margin deposits on such contracts,
cash proceeds from investments due in 30 days and accrued profitson such
contracts held by the commodity broker, and (ii) that the Series not enter into
futures and related options for which the aggregate initial margin and premiums
exceed 5% of the fair market value of the Series' total assets. There is no
other limitation on the percentage of the Series' assets that may be invested
in futures and related options. The Internal Revenue Code's requirements for
qualification as a regulated investment company may limit the extent to which
the Series can engage in futures transactions.
Repurchase Agreements (All Series)
Repurchase agreements involve purchases of securities by a Series. In such a
transaction, at the time the Series purchases the security, it simultaneously
agrees to resell and redeliver the security to the seller who also
simultaneously agrees to buy back the security at a fixed price and time. This
assumes a predetermined yield for the Series during its holding period, since
the resale price is always greater than the purchase price and reflects an
agreed-upon market rate. Such transactions afford an opportunity for the Series
to invest temporarily available cash. Repurchase agreements may be considered
loans to the seller collateralized by the underlying securities. The risk to
the Series is limited to the ability of the seller to pay the agreed-upon sum
on the repurchase date; in the event of default, the repurchase agreement
provides that the Series is entitled to sell the underlying collateral. If the
value of the collateral declines after the agreement is entered into, however,
and if the seller defaults under a repurchase agreement when the value of the
underlying collateral is less than the repurchase price, the Series could incur
a loss of both principal and interest. The manager monitors the value of the
collateral at the time the transaction is entered into and at all times
subsequent during the term of the repurchase agreement in an effort to
determine that the value of the collateral always equals or exceeds the
agreed-upon repurchase price to be paid to the Series. If the seller were to be
subject to a Federal bankruptcy proceeding, the ability of the Series to
liquidate the collateral could be delayed or impaired because of certain
provisions of the bankruptcy laws.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of each
Series (except where indicated otherwise), which cannot be changed with respect
to a Series without the approval of the holders of a majority of the
outstanding voting securities of that Series as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") as the lesser of: (1) 67% or
more of a Series' voting securities present at a meeting of shareholders, if
the holders of more than 50% of a Series' outstanding shares are present in
person or by proxy, or (2) more than 50% of a Series' outstanding shares.
Unless otherwise indicated, all percentage limitations apply to each Series on
an individual basis, and apply only at the time an investment is made; a later
increase or decrease in percentage resulting from changes in values or net
assets will not be deemed to be an investment that is contrary to these
restrictions. Pursuant to such restrictions and policies, no Series may:
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- Purchase the securities of issuers conducting their principal business
activities in the same industry if immediately after such purchase the value of
its investments in such industry would exceed 25% of the value of the total
assets of the Series, provided that there is no such limitation with respect to
obligations of the U.S. Government, its agencies and instrumentalities, and,
since Zweig Cash Fund invests exclusively in short-term securities issued or
guaranteed as to the payment of principal and interest by the U.S. Government,
its agencies or instrumentalities or repurchase agreements collateralized by
such obligations, there is no such limitation applicable to the Zweig Cash
Fund;
- With respect to 75% of a Series' assets, purchase the securities of any
one issuer, if immediately after such purchase (i) more than 5% of the value of
the total assets of any Series would be invested in such issuer or (ii) the
Series would own more than 10% of the outstanding voting securities of such
issuer, provided that such limitations do not apply to securities issued by the
U.S. Government, its agencies or instrumentalities (the limitation set forth
in clause (ii) does not apply to the Zweig Cash Fund);
- Invest in real estate or real estate mortgage loans, interests in oil, gas
and/or mineral exploration or development programs, provided that this
limitation shall not prohibit the purchase of securities issued by companies,
which invest in real estate or interests therein, including real estate
investment trusts;
- Purchase securities of any other investment company, except in connection
with a merger, consolidation, reorganization or acquisition of assets, except
that certain foreign banks and their agencies or subsidiaries are not
considered "investment companies," for purposes of this limitation;
- Make investments in securities for the purpose of exercising control over
or management of the issuer;
- Participate on a joint or a joint and several basis in any trading account
in securities. The "bunching" of orders of two or more Series, or of one or
more Series and of other accounts under the investment management of the
Manager or its affiliates, for the sale or purchase of portfolio securities
shall not be considered participation in a joint securities trading account;
- Purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions and provided that a Series may make
initial and variation margin payments in connection with transactions in
futures contracts and options contracts. For purposes of this restriction, the
deposit of initial or maintenance margin in connection with futures contracts
will not be deemed a purchase of securities on margin by any Series;
- Make loans, except that this restriction shall not prohibit the purchase
and holding of a portion of an issue of publicly distributed debt securities,
the lending of portfolio securities (if the aggregate value of the loaned
securities does not at any time exceed one-third of the total assets of the
Series), or the entry into repurchase agreements;
- Invest in securities of an issuer which, together with any predecessor,
has been in continuous operation for less than three years if, as a result,
more than 5% of the total assets of the Series would then be invested in such
securities (this restriction is not a fundamental policy of Zweig Managed
Assets);
- Sell securities short, except as described in the Prospectus and in
accordance with the following:
When a Series makes a short sale, the proceeds it receives will be
retained by the broker until the Series replaces the borrowed security. The
Series may, but will not necessarily, receive interest on such proceeds. In
order to deliver the security to the buyer, the Series must arrange through a
broker to borrow the security and, in so doing, the Series will become
obligated to replace the security borrowed at its market price at the time of
replacement, whatever that price may be. The Series may have to pay a premium
to borrow the security. The Series must pay to the broker any dividends or
interest payable on the security until the Series replaces the security;
A Series' obligation to replace the security borrowed in connection
with a short sale will be secured by collateral deposited with the broker,
consisting of cash or U.S. Government securities or other securities acceptable
to the broker. In addition, a Series will be required to deposit cash or U.S.
Government securities as collateral in a segregated account with a custodian in
an amount such that the value of both collateral deposits is at all times equal
to at least 100% of the current market value of the securities sold short. The
Series will receive the interest accruing on any U.S. Government securities
held as collateral in the segregated account with the custodian. The deposits
do not necessarily limit the Series' potential loss on a short sale, which may
exceed the entire amount of the collateral deposits;
If the price of the security sold short increases between the time of
the short sale and the time the Series replaces the borrowed security, the
Series will incur a loss, and if the price declines during this period, the
Series will realize a short-term capital gain. Any realized short-term capital
gain will be decreased, and any incurred loss increased, by the amount of
transaction costs and any premium, dividend or interest which the Series may
have to pay in connection with such short sale; (this restriction is not a
fundamental policy of Zweig Managed Assets);
- Borrow amounts in excess of 20% of its total assets taken at cost or at
market value, whichever is lower, and then only from banks as a temporary
measure for extraordinary or emergency purposes. If such borrowings exceed 5%
of a Series' total assets, the Series will make no further investments until
such borrowing is repaid. It is the current intention of each Series not to
borrow money in excess of 5% of its assets. A Series may pledge up to 10% of
its total assets as security for such borrowing. For purposes of these
restrictions, the deposit of initial or maintenance margin in connection with
futures contracts will not be deemed to be a pledge of a Series' assets. (see
"Restrictions Applicable to Zweig Managed Assets" and "Restrictions Applicable
to Zweig Cash Fund" regarding their policies on borrowing);
- Issue "senior securities," except insofar as the borrowing from banks may
be considered senior securities;
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- Purchase the securities of an issuer if, to the Manager's knowledge, one
or more of the trustees or officers of the Trust or the officers of the Manager
individually own beneficially more than 1/2 of 1% of the outstanding securities
of such issuer and together such trustees and officers owning more than 1/2 of
1% own beneficially more than 5% of such securities;
- Purchase a security which is not readily marketable, which is subject to
legal or contractual restrictions or which is otherwise illiquid, including
"non-marketable" securities and repurchase agreements having more than seven
days remaining to maturity, if, as a result, more than 15% of the Series' net
assets (5% for Zweig Managed Assets and 10% for Zweig Cash Fund) would consist
of such securities; or invest more than 15% of its assets in over-the-counter
options in combination with other illiquid assets that are not purchased from
government securities dealers (this restriction is not a fundamental policy of
Zweig Managed Assets);
- Act as an underwriter, except that a Series may technically be deemed an
underwriter under the Securities Act of 1933, as amended ("1933 Act"), in a
registration under such Act necessary to resell certain restricted securities;
- Invest in commodities or commodity contracts, except as described in the
Prospectus or purchase or sell physical commodities unless acquired as a result
of ownership of securities, provided that this limitation shall not prevent a
Series from purchasing and selling options and futures contracts.
- Invest more than 5% of its net assets in warrants valued at the lower of
cost or market (other than those that have been acquired in units or attached
to other securities). Included within that amount, no more than 2% of a Series'
net assets may be invested in warrants not traded on the NYSE or American Stock
Exchange (this restriction is not a fundamental policy of Zweig Managed
Assets). Government Securities Series and Zweig Cash Fund may not invest in
warrants.
Restrictions Applicable to Zweig Managed Assets
- Zweig Managed Assets may not borrow money, unless from a bank, for
temporary or emergency purposes (not for leveraging or investment) in an amount
not exceeding 1/3 of the value of the total assets of the Series less
liabilities (other than borrowings). Any borrowings that come to exceed 1/3 of
the value of the Series' total assets by reason of a decline in net assets will
be reduced within three days to the extent necessary to comply with the 1/3
limitations. The Series does not intend to purchase any security while
borrowingsrepresenting more than 5% of its total assets are outstanding. This
5% limitation is not a fundamental policy of Zweig Managed Assets.
Restrictions Applicable to Zweig Cash Fund
- Zweig Cash Fund may not purchase common stocks, preferred stocks,
warrants, other equity securities, state bonds, municipal bonds, industrial
revenue bonds or corporate bonds or debentures; or
- Borrow money, except from banks for temporary purposes in an amount
up to 10% of the value of the Series' total assets. The Series may only pledge
its assets in an amount up to 10% of the value of its total assets, and then
only to secure such borrowings. The Series will borrow money only to
accommodate requests for the redemption of shares to effect an orderly
liquidation of portfolio securities or to clear securities transactions and not
for leveraging purposes; accordingly, it is anticipated that any such borrowing
will be repaid before additional investments are made. The Series currently
does not intend to borrow money to an extent exceeding 5% of its total assets.
Lending Securities.
- A Series may lend its portfolio securities to a limited extent. Such
loans entitle the Series to cash collateral, and the extra cash thus obtained
may be invested in short-term, interest-bearing securities. The Series may make
such loans only to brokers or dealers who are members of the New York Stock
Exchange ("NYSE"), or who have net capital, under the rules and regulations
applicable to such broker or dealer, of at least $10,000,000. Such loans will
not be made against less than 100% cash collateral, and the borrower will be
required to maintain the collateral at 100% of the market value
(marked-to-market daily) of the securities on loan. Loans will be made only if:
(1) the Series retains the right to obtain any dividend, interest or other
distribution benefits on the securities and any increase in their market value;
and (2) the Series is able to terminate the loan at any time (such right of
termination will be exercised, among other things, to obtain the return
of the securities on loan for the purpose of voting on any matters considered
material by the Series' management). It is the current intention of each Series
not to engage in such activities to an extent in excess of 5% of the value of
the Series' total assets. This restriction is not a fundamental policy of the
Series.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to the materials in the Prospectus under the headings
"Choosing Among Classes of Shares," "How to Invest in the Zweig Mutual Funds"
and "How to Redeem Your Shares," which describe the methods of purchase and
redemption of Trust shares.
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<PAGE> 47
No stock certificates will be issued unless specifically requested in
writing by an investor. Instead, an account will be established for each
investor and all shares purchased or received, including those obtained through
reinvestment of distributions, will be registered on the books of the Trust and
credited to such account.
If the Board of Trustees should determine that it would be detrimental to
the best interests of the remaining shareholders of a Series to make payment
wholly or partly in cash, the Series may pay redemption proceeds in whole or in
part by a distribution in kind of securities from the portfolio of a Series, in
lieu of cash, in conformity with the applicable rules of the Commission. If
shares are redeemed in kind, the redeeming shareholder might incur brokerage
costs in converting the assets into cash. Where the Trust makes a redemption in
kind, such redemption will be made in readily marketable securities whose value
is easily ascertainable. The method of valuing portfolio securities for this
purpose is as described under "Net Asset Value and Taxes." The Trust has,
however, elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which it is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of its net assets during any 90-day period for any one
shareholder.
REINSTATEMENT PRIVILEGE
Reinvestment of redemption proceeds under the reinstatement privilege
described in the prospectus will be made at the net asset value next determined
after receipt of the reinstatetment order.
If the shareholder has realized a gain on the redemption, the transaction is
taxable and reinvestment will not alter any capital gains tax payable. If there
has been a loss on the redemption, some or all of the loss may not be allowed
as a tax deduction depending on the amount reinvested.
For purposes of determining the amount of CDSC payable on any subsequent
redemptions, the purchase payment made through exercise of the reinvestment
privilege will be deemed to have been made at the time of the initial purchase
(rather than at the time the reinvestment was effected).
EXCHANGE PRIVILEGE
Participating securities dealers who have signed a Selling Agreement with
the Distributor may exchange their clients' shares by telephone.
The minimum value of any class of shares that may be exchanged into a Series
in which shares are not already held is $1,000 and no exchange out of a Series
(other than by a complete exchange of all the shares of that Series) may be
made if it would reduce the shareholder's interest in that Series to less than
$1,000.
The Trust reserves the right at any time to modify or terminate the exchange
privilege with respect to one or more Series or classes of shares, if the Board
of Trustees determines that continuing the privilege may be detrimental to
shareholders.
INVOLUNTARY REDEMPTIONS
No CDSC will be imposed on any involuntary redemption. As with voluntary
redemptions, an involuntary redemption may result in the payment of a tax by
the shareholder. (See "Distributions and Taxes" in the Prospectus.)
RETIREMENT PLANS
Shares may be purchased in connection with all types of tax-deferred
retirement plans. Shares of one or more Series may be purchased in a single
application establishing a single plan account.
The minimum initial investment in connection with tax-deferred retirement
plans is $250 and the minimum may be waived on payments made directly to the
Transfer Agent. There is no minimum for additional purchase payments for
tax-deferred retirement plans. The CDSC is waived on redemptions in connection
with certain post-retirement withdrawals from a tax-deferred retirement plan.
(See "Contingent Deferred Sales Charge.")
NET ASSET VALUE AND TAXES
Net asset value per share is determined once daily Monday through Friday
(excluding days on which the NYSE is closed). The NYSE is closed on the
following holidays (or the weekdays on which these holidays are celebrated when
they fall on a weekend): New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
For all Series except Zweig Cash Fund, securities listed on a U.S. exchange
and NASDAQ are valued on the basis of the last sale prior to the time of
valuation. If there has been no sale since the immediately preceding valuation,
then the mean between the current bid and asked prices is used. Quotations are
taken from the market in which the security is primarily traded.
Over-the-counter securities for which market quotations are readily available
are valued at the mean between the current bid and asked prices. Securities for
which market quotations are not readily available are valued at fair value as
determined by the Manager pursuant to procedures adopted by the Board of
Trustees. Notwithstanding the above, bond and other fixed-income securities may
be valued on the basis of prices provided by an established pricing service
when the Board believes that such prices reflect market values. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded and are translated from local currency into U.S. dollars
using current exchange rates.
Zweig Cash Fund. The Board of Trustees of the Trust (the "Board" or "Board
of Trustees") has determined that it is in the best interests of Zweig Cash
Fund and its shareholders to seek to maintain a stable net asset value per
share, and that the appropriate method for valuing portfolio securities is the
amortized cost method, provided that such method continues to fairly reflect
the market-based net
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<PAGE> 48
asset value per share. The Board shall continuously review this method of
valuation and make changes that may be necessary to assure that Zweig Cash
Fund's instruments are valued at their fair value as determined by the Board in
good faith.
The Board has determined that Zweig Cash Fund will comply with the
conditions of Rule 2a-7 under the Act regarding the amortized cost method of
valuing portfolio securities. Under Rule 2a-7, the Board is obligated, as a
particular responsibility within the overall duty of care owed to the Series'
shareholders, to establish procedures reasonably designed, taking into account
current market conditions and the Series' investment objectives, to stabilize
the net asset value per share of the Series for purposes of distribution and
redemption, at $1.00 per share. These procedures include periodically
monitoring, as the Board deems appropriate, at such intervals as are reasonable
in light of current market conditions, the relationship between the net asset
value per share based upon the amortized cost method of valuation and the net
asset value per share based upon available indications of market value. The
Board will consider what steps should be taken, if any, in the event of a
difference of more than 1/2 of 1% between the amortized cost value and the
market value per share. The Board will take such steps as it considers
appropriate (e.g., redemption in kind, selling portfolio instruments prior to
maturity to realize capital gains or losses, shortening the average portfolio
maturity, withholding dividends, or utilizing a net asset value per share
determined by using market quotations) to minimize any material dilution or
other unfair results that might arise from differences between the net asset
value per share based upon the amortized cost method of valuation and the net
asset value per share based upon market value.
Rule 2a-7 requires that a dollar-weighted average portfolio maturity of not
more than 90 days, appropriate to the objective of maintaining a stable net
asset value of $1.00 per share, be maintained, and precludes the purchase of
any instrument with a remaining time to maturity of more than 397 calendar
days. However, the underlying securities used as collateral for repurchase
agreements are not subject to these restrictions, because a repurchase
agreement is deemed to have a maturity equal to the period remaining until the
date on which the repurchase of the underlying securities is deemed to occur.
Should the disposition of a portfolio security result in a dollar-weighted
average portfolio maturity of more than 90 days, Zweig Cash Fund will invest
its available cash in a manner that will reduce such average maturity to 90
days or less as soon as reasonably practicable. Rule 2a-7 also requires Zweig
Cash Fund to limit its investments to instruments that the Board determines
present minimal credit risks and that have been given one of the two highest
rating categories by nationally recognized statistical rating organizations,
or, in the case of instruments that are not so rated, are of comparable quality
as determined under procedures established by the Board.
It is the normal practice of Zweig Cash Fund to hold portfolio securities
to maturity and realize their par values, unless a prior sale or other
disposition thereof is mandated by redemption requirements or other
extraordinary circumstances. A debt security held to maturity is redeemable by
its issuer at its principal amount plus accrued interest. Under the amortized
cost method of valuation traditionally employed by institutions for valuation
of money market instruments, neither the amount of daily income nor the net
asset value is affected by any unrealized appreciation or depreciation of the
portfolio. In periods of declining interest rates, the indicated daily yield on
shares of Zweig Cash Fund (computed by dividing the annualized daily income on
the Series' portfolio by the net asset value computed as above) may tend to be
higher than a similar computation made by utilizing a method of valuation based
upon market prices and estimates. Zweig Cash Fund may, to a limited extent,
engage in short-term trading to attempt to take advantage of short-term market
variations, or may dispose of a portfolio security prior to its maturity if the
Manager believes such disposition advisable, or necessary to generate cash to
satisfy redemptions. In such cases, Zweig Cash Fund may realize a gain or
loss.
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<PAGE> 49
Tax Status
Each Series of the Trust will be treated as a separate corporation for
purposes of the Internal Revenue Code of 1986, as amended (the "Code") (except
for purposes of the definitional requirements for regulated investment
companies under Code Section 851(a)). By paying dividends representing its
investment company taxable income within the time periods specified in the Code
and by meeting certain other requirements, each Series intends to qualify as a
regulated investment company under the Code. Since each Series will distribute
annually its investment company taxable income, net capital gains, and capital
gain net income, it will not be subject to income or a excise taxes otherwise
applicable to undistributed income of a regulated investment company. If a
Series were to fail to distribute all its income and gains, it would be subject
to income tax and, in certain circumstances, a 4% excise tax.
Taxation of Shareholders
Dividends from net investment income and distributions from short-term
capital gains are taxable to shareholders as ordinary income. Distributions
from net capital gains that are properly designated as capital gains dividends
are taxable to shareholders as long-term capital gains regardless of the length
of time the shares in respect of which such distributions are received have
been held.
Dividends from Zweig Cash Fund and the Government Securities Series are not
expected to qualify for the 70% dividends received deduction available to
corporate shareholders. Distributions by other Series out of their dividend
income from domestic corporations may qualify in whole or in part for the
deduction if the distributing Series does not sell the stock in respect of
which it received such dividends before satisfying a 46-day holding period
requirement (91 days for certain preferred stock), and the shareholder holds
his Trust shares in the distributing Series for at least 46 days. For this
purpose, the distributing Series holding period in such stock may be reduced
for periods during which the Series reduces its risk of loss from holding the
stock (e.g., by entering into option contracts).
Investors who purchase shares shortly before the record date for a
distribution will pay a share price that includes the value of the anticipated
distribution and will be taxed on the distribution when it is received even
though with respect to them the distribution represents in effect a return of a
portion of their purchase price. Any loss realized on a sale or exchange of
shares will be disallowed if the shares disposed of are replaced within a
period of 61 days beginning 30 days before the shares are sold or exchanged. If
disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
Individuals and certain other non-exempt payees will be subject to a 31%
backup Federal withholding tax on dividends and other distributions from the
Series, as well as on the proceeds of redemptions of Series other than Zweig
Cash Fund, if the affected Series is not provided with the shareholder's
correct taxpayer identification number and certification that the shareholder
is not subject to such backup withholding, or if the Internal Revenue Service
notifies such Series that the shareholder has failed to report proper interest
or dividends. For most individuals, the taxpayer identification number is the
taxpayer's social security number.
Tax Treatment of Certain Transactions
In general, and as explained more fully below, if the Trust enters into
combinations of investment positions by virtue of which its risk of loss from
holding an investment position is reduced on account of one (or more) other
positions (i) losses realized on one position may be deferred to the extent of
any unrecognized gain on another position and (ii) long-term capital gains or
short-term capital losses may be recharacterized, respectively, as short-term
gains and long-term losses. Investments in foreign currency denominated
instruments or securities may generate, in whole or in part, ordinary income or
loss. The Federal income tax treatment of gains and losses realized from
transactions involving options on stock or securities entered into by a Series
will be as follows: Gain or loss from a closing transaction with respect to
options written by a Series, or gain from the lapse of any such option, will be
treated as short-term capital gain or loss. Gain or loss from the sale of put
and call options that a Series purchases, and loss attributable to the lapse of
such options, will be treated as capital gain or loss. The capital gain or loss
will be long- or short-term depending on whether or not the affected option has
been held for more than one year. For this purpose, an unexercised option will
be deemed to have been sold on the date it expired. It should be noted,
however, that if a put is acquired at a time when the underlying stock or
security has been held for not more than one year, or if shares of the
underlying stock or security are acquired while such put is held, any gain on
the subsequent exercise, sale or expiration of the put will generally be
short-term gain.
Any regulated futures contract or listed non-equity option held by a Series
at the close of its taxable year will be treated as sold for its fair market
value on the last business day of such taxable year. Sixty percent of any gain
or loss with respect to such deemed sales, as well as the gain or loss from the
termination during the taxable year of the Series' obligation (or rights) with
respect to such contracts by offsetting, by taking or making delivery, by
exercise or being exercised, by assignment or being assigned, by lapse, or
otherwise, will be treated as long-term capital gain or loss and the remaining
forty percent will be treated as short-term capital gain or loss. A Series may
make certain elections that modify the above tax treatment with respectto
regulated futures contracts or listed non-equity options that are part of a
"mixed straddle," as defined by the Code.
The Trust may invest in certain investments that may cause it to realize
income prior to the receipt of cash distributions, including securities bearing
original issue discount. The level of such investments is not expected to
affect a Series' ability to distribute adequate income to qualify as a
regulated investment company.
Treasury Regulations pursuant to Section 1092 provide for the coordination
of the "wash sale" rules and the "short sale" rules with the "straddle rules."
Generally, the "wash sale" rules prevent the recognition of loss where a
position is sold at a loss and a substantially identical position is acquired
within a prescribed period. The "short sale" rules generally prevent the use of
short sales to convert short-term capital gain to long-term capital gain and
long-term capital loss to short-term capital loss.
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<PAGE> 50
In addition to the Federal income tax consequences described above relating
to an investment in the Trust, there may be other Federal, state, local or
foreign tax considerations that depend upon the circumstances of each
particular investor. Prospective shareholders are therefore urged to consult
their tax advisers with respect to the effects of this investment on their
specific situations.
TRUSTEES AND OFFICERS OF THE TRUST
The trustees and officers of the Trust and their business affiliations for the
past five years are as follows:
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
CLAIRE B. BENENSON Trustee Consultant on Financial Conferences; Director of The
870 U.N. Plaza Burnham Fund Inc. Former Director of Financial
New York, NY 10017 Conferences and Chairman, Department of Business and
Financial Affairs, The New School for Social
Research and President of the Money Marketeers of
New York University, Trustee of Simms Global Fund
and Former Director of Zweig Tax-Free Fund Inc. and
Zweig Cash Fund Inc.
RICHARD E. DEEMS Trustee Director and Member of the Executive and Finance
959 Eighth Avenue Committees of The Hearst Corporation; Publishing
New York, NY 10019 Consultant to the Hearst Magazines Division of The
Hearst Corporation; Director of The Burnham Fund
Inc., ISS International Service System, Inc. and
Oriole Homes Corporation. Former Director of Zweig
Tax-Free Fund Inc. and Zweig Cash Fund Inc.
S. LELAND DILL Trustee Retired; Director of Coutts & Co. Trust Holdings
5070 North Ocean Dr. Limited, Coutts & Co. (USA) and Trustee of BT
Singer Island, FL 33404 Portfolios. Former partner of Peat Marwick Mitchell
& Co. and Director of Zweig Tax-Free Fund Inc.,
Zweig Cash Fund Inc. and Vintners International
Company, Inc.
EUGENE J. GLASER* Chairman, President of the Manager and President and Director
5 Hanover Square Chief Executive Officer of the Distributor; Director of The Zweig Fund, Inc.
New York, NY 10004 and Trustee Former Director of Zweig Tax-Free Fund Inc. and
Zweig Cash Fund Inc.
</TABLE>
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<PAGE> 51
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
DONALD B. ROMANS Trustee President of Romans & Company, Private Investors and Financial
233 East Wacker Dr. Consultants; Director of the Burnham Fund Inc. Former
Chicago, IL 60601 Consultant to and Executive Vice President and Chief Financial
Officer of Bally Manufacturing Corporation, and Director of
Zweig Tax-Free Fund Inc.
MARTIN E. ZWEIG President Chairman of the Manager; Chairman of the Board and President
900 Third Avenue of The Zweig Total Return Fund, Inc. and The Zweig Fund.;
New York, NY 10022 President and Director of Zweig Total Return Advisors, Inc.,
Zweig Advisors Inc., Zweig-DiMenna International Managers,
Inc., and Zweig Securities Advisory Service Inc.; Director of
Research of Avatar Investors Associates Corp.; Managing
General Partner of Zweig-DiMenna Partners, L.P. and Zweig-Di Menna
Special Opportunities, L.P.; President and Director of
Gotham Advisors, Inc., Euclid Advisors, Inc. and Zanoba Asset
Management, Inc.; Member of the Undergraduate Executive Board
of the Wharton School, University of Pennsylvania. Former
President of Zweig Tax-Free Fund Inc. and Zweig Cash Fund,
Inc.; General Partner of Zweig Katzen Investors, L.P.;
President and Director of Davis/Zweig Futures, Inc., and
Director of Zweig/Avatar Capital Management, Inc.
BARRY MANDINACH First Vice President Executive Vice President of the Distributor and Senior Vice
5 Hanover Square President of the Manager.
New York, NY 10004
DAVID KATZEN Senior Vice President First Vice President of the Manager; Executive Vice President
900 Third Avenue of Zanoba Asset Management, Inc. and Euclid Advisors, Inc.;
New York, NY 10022 Director of Quantitative Research at Avatar Investors
Associates, Inc. Former Assistant Vice President of Zweig
Fund Inc.; Vice President of ZZK Management, Inc.; Director of
Equity Research for Zweig Total Return Advisors, Inc.; and
Research Director of Zweig Advisors, Inc.
CARLTON NEEL First Vice President First Vice President of the Manager. Former Vice President of
900 Third Avenue J.P. Morgan & Co., Inc.
New York, NY 10022
ALFRED J. RATCLIFFE First Vice President, First Vice President of the Manager. Former Vice President of
5 Hanover Square Treasurer, Principal The Bank of New York.
New York, NY 10004 Accounting Officer
and Assistant Secretary
</TABLE>
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<PAGE> 52
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
CHARLES I. LEONE Vice President and Chief Financial Officer and First Vice President of the
5 Hanover Square Assistant Secretary Manager and the Distributor. Former Assistant Treasurer of
New York, NY 10004 Zweig Cash Fund Inc.
ANNEMARIE GILLY Vice President First Vice President of the Manager and the Distributor.
5 Hanover Square Former Vice President of Concord Financial Group. Former
New York, NY 10004 Executive Vice President and Chief Operating Officer of The
Gabelli Equity Trust, Inc.
JEFFREY LAZAR Vice President Vice President, Treasurer and Secretary of The Zweig Fund,
900 Third Avenue Inc. and The Zweig Total Return Fund, Inc.; Vice President,
New York, NY 10022 Treasurer and Secretary of Zweig Advisors, Inc. and Zweig
Total Return Advisors, Inc.
BETH ABRAHAM Assistant Vice President Former self-employed consultant to the mutual fund industry;
900 Third Avenue former Senior Compliance Examiner in the New York Regional
New York, NY 10022 Office of the U.S. Securities and Exchange Commission.
MAUREEN MCQUAID Assistant Vice President Portfolio Assistant for Zweig Managed Assets; former Research
900 Third Avenue Assistant for the Zweig Organization. Former commercial
New York, NY 10022 insurance underwriter for American International Group.
TOM DISBROW Assistant Treasurer Assistant Vice President of the Manager
5 Hanover Square
New York, NY 10004
MARC BALTUCH Secretary First Vice President of the Manager; First
900 Third Avenue Vice President, Director, Chief Compliance Officer and
New York, NY 10022 Secretary of the Distributor.; Director and Vice President of
Watermark Securities, Inc. And Assistant Secretary of Gotham
Advisors, Inc., Zweig Total Return Advisors, Inc. And Zweig
Advisors. Former Chief of the Branch of Investment Adviser
Examiners and Chief Regional Securities Examiner in the New
York Regional Office of the Securities and Exchange
Commission and Secretary of Zweig Cash Fund, Inc..
</TABLE>
*Designates a Trustee who is an "interested person" of the Trust within the
meaning of the 1940 Act.
Those trustees and officers of the Trust who are affiliated with the
Distributor or the Manager are not separately compensated for their services as
trustees or officers of the Trust per year. The Trust pays each of its
"disinterested" trustees a fee of $4,000 per year, plus $1,000 per meeting
attended and reimburses their expenses for attendance at meetings, all of which
is prorated on the basis of the assets of each Series, plus $1,000 for each
Series per year. For the fiscal year ended December 31, 1994, the fees and
expenses of disinterested trustees, as a group, were $64,383. As of December
31, 1994, the trustees and officers of the Trust, as a group, owned less than
1% of any Series of the Trust.
Trustees may be removed from office by a written consent filed with the
Trust's custodian, the Bank of New York (the "Custodian") signed by the holders
of two-thirds of the outstanding shares of the Trust, or by a vote of the
holders of two-thirds of the outstanding shares of the Trust, at a meeting duly
called for that purpose, which meeting shall be held upon written request of
the holders of not less than 10% of the outstanding shares of the Trust. Upon
written request by ten or more shareholders of the Trust (who have been such
for at least six months and who hold shares constituting 1% of the outstanding
shares of the Trust) stating that such shareholders wish to communicate with
the other shareholders of the Trust for the purpose of obtaining the signatures
necessary to demand a meeting to consider removal of a trustee, the Trust will
provide a list of shareholders of the Trust or disseminate appropriate
materials (at the expense of the requesting shareholders). Except as set forth
above, the trustees shall continue to hold office and may appoint their
successors.
INVESTMENT MANAGEMENT AND OTHER SERVICES
MANAGER
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<PAGE> 53
The Trust and the Manager entered into an amended management agreement,
dated April 29, 1994, which the Board had previously approved on December 14,
1993 (the "Management Agreement"), pursuant to which the Manager reviews the
portfolio of securities and investments of each Series, and advises and assists
each Series with respect to the selection, acquisition, holding or disposal of
securities and makes recommendations with respect to other aspects and affairs
of each Series. The Manager also furnishes the Trust with certain
administrative services, office space and equipment, and permits its officers
and employees who may be elected trustees or officers of the Trust to serve in
the capacities to which they are elected.
The Management Agreement will continue in effect from year to year if
specifically approved annually by a majority of the Board of Trustees who are
not parties to such contract or "interested persons" of any such party. The
Management Agreement may be terminated without penalty by either of the parties
on 60 days' written notice and must terminate in the event of its assignment.
The Management Agreement provides that the Manager is liable only for its
acts or omissions caused by its willful misfeasance, bad faith, or gross
negligence in the performance of its duties or reckless disregard of its
obligations under the Management Agreement. The Management Agreement permits
the Manager to render services to others and to engage in other activities.
The Trust pays the Manager for its services pursuant to the Management
Agreement a monthly fee at the annual rate of .50% of the average daily net
assets of Zweig Cash Fund, .60% of the average daily net assets of the
Government Securities Series, .75% of the average daily net assets of Zweig
Strategy Fund and, prior to March 31, 1995, Priority Selection List Series and
1.00% of the average daily net assets of Zweig Appreciation Fund and Zweig
Managed Assets. For the fiscal year ended 1994, the management fees paid to the
Manager by each Series were as follows: Zweig Strategy Fund: $5,172,202; Zweig
Appreciation Fund: $3,612,972; Priority Selection List Series: $436,686;
Government Securities Series: $460,359; Zweig Managed Assets: $7,161,203; Zweig
Cash Fund: $485,384. For the years ended December 31, 1993 and 1992, the fees
paid to the Manager for each Series were as follows: Zweig Strategy Fund:
$3,753,277 and $2,931,817; Zweig Appreciation Fund: $2,928,819 and $2,065,650;
Zweig Managed Assets $2,744,103 in 1993); Priority Selection List Series:
$568,389 and $468,702; and Government Securities Series: $474,955 and $295,729.
The fee of a Series will be reduced, or the Manager will reimburse the
Series (up to the amount of its fee), by an amount necessary to prevent the
total expenses of the Series (excluding taxes, interest, brokerage commissions
or transaction costs, certain distribution fees, certain custodial expenses and
extraordinary expenses) from exceeding limits applicable to the Series in any
state in which its shares then are qualified for sale. Currently, the most
restrictive expense limitation is 2.5% of the first $30 million of a Series'
net assets, 2% of the next $70 million of a Series' net assets and 1.5% of the
remaining net assets. The expense limitation provision applies separately to
each Series. From time to time, the Manager may make certain commitments which
are more restrictive than any state-imposed limitation. In such a case, the
Manager will reserve the right to discontinue any such commitment. These
expense reimbursements, if any, are estimated, reconciled and paid on a monthly
basis to the Trust.
The Manager may draw upon the resources of the Distributor and its qualified
affiliates in rendering its services to the Trust. The Distributor or its
affiliates may provide the Manager (without charge to the Trust) with
investment information and recommendations which may serve as the principal
basis for investment decisions with respect to certain Series of the Trust.
The Manager has adopted a Code of Ethics (the "Code") which requires all
persons subject to the Code to pre-clear any proposed non-exempt personal
securities transaction. Permission for any proposed transaction will be
granted provided it is determined that such would not negatively impact
activity in client accounts. In the event that a client of Manager's
affiliates also owns such security, or it is proposed that such client purchase
such security, available investments or opportunities for sales will be
allocated in a manner deemed to be equitable by the Manager.
DISTRIBUTOR
Pursuant to its Distribution Agreement with the Trust (the "Distribution
Agreement"), Zweig Securities Corp. acts as distributor of the Trust's shares
and receives, with respect to Class A Shares, a front-end sales commission, as
described in the Prospectus under "Choosing Among Classes of Shares",
and a 1% CDSC which may apply on redemptions within 18 months of purchases
not subject to a sales charge; with respect to Class B Shares, the Distributor
receives a declining CDSC ranging from 5% to 1% of the gross proceeds of a
redemption of shares held for less than six years; and, with respect to Class C
Shares, the Distributor receives a CDSC of 1.25% of the gross proceeds of a
redemption of shares held for less than one year. The Distributor also is
compensated under the Rule 12b-1 distribution plans as described more fully
below.
The Distributor may reallow amounts in excess of the sales concessions
listed in the Prospectus, and pay certain costs, to dealers who provide
additional services and special assistance in selling shares of the Trust.
These additional services and special assistance vary significantly from dealer
to dealer, resulting in payments that currently range from 12 to 20 basis
points.
DISTRIBUTION PLANS
The Trust has adopted a distribution plan for each class of shares of each
Series (the "Plan") in accordance with Rule 12b-1 under the Act, to compensate
the Distributor for the services it provides and for the expenses it bears
under the Distribution Agreement. Each class of shares of each Series (other
than Class M Shares of Zweig Cash Fund) pay a service fee at a rate of .25% per
annum of the daily average net assets of each of the Series and a distribution
fee based on average daily net assets at the following rates: for Class A
Shares of all Series - .05% per annum; for Class B Shares of all Series - .75%
per annum; for Class C Shares - .75% per annum for Zweig Appreciation Fund,
Zweig Strategy Fund, Zweig Managed Assets and, prior to March 31, 1995,
Priority Selection List Series,.50% per annum for Government Securities Series
and .05% per annum for Zweig Cash Fund.
Dealer firms that are members of the National Association of Securities
Dealers, Inc. (the "NASD") who have signed a dealer agreement receive from the
Distributor a fee equal to 4% and 1% of the gross proceeds upon settlement of
Class B and Class C Share sales, respectively, and, commencing
15
<PAGE> 54
one year after each such purchase, the amounts of the distribution fee based on
the average daily net assets of the Class B and Class C Shares set forth above
less .00% and .05%, respectively, the Distributor retains.
For the fiscal year ended December 31, 1994, $489,053 in CDSCs was collected
on Class C Shares. The CDSC will be waived on redemptions of shares in
connection with certain post-retirement withdrawals from an IRA or other
retirement plans, following the death or disability of a shareholder. The CDSC
will be waived on redemptions of shares by employee benefit plans for the
benefit of employees of the Distributor and its affiliates.
The Trust has also adopted a Rule 12b-1 Plan for the Class M Shares issued
by Zweig Cash Fund (the "Class M Plan"). The Class M Plan provides that the
Distributor may enter into Service Agreements with securities dealers,
financial institutions, banks, and other industry professionals for
distribution, promotion and administration of and/or servicing investors in
Class M Shares. Such service organizations are paid directly or indirectly by
Zweig Cash Fund and the Manager. Service payments under the Class M Plan are
paid in equal amounts by Zweig Cash Fund and the Manager, or Zweig Cash Fund
and the Manager reimburse the Distributor equally for service payments to a
service organization, in an amount not exceeding 0.30% per annum of the average
daily net asset value of the Class M Shares. The Class M Plan also provides
that Zweig Cash Fund will pay the costs and expenses connected with the
printing and distribution of Zweig Cash Fund's prospectuses, shareholder
reports, and any promotional material for other than current Fund shareholders,
in an amount not to exceed $100,000 per annum.
A report of the amounts expended under the Plan and the Class M Plan
(collectively, the "Plans") must be made to the Board of Trustees and reviewed
by the Board at least quarterly. In addition, the Plans provide that they may
not be amended to increase materially the costs which the Trust may bear for
distribution pursuant to the Plans without shareholder approval and that other
material amendments to the Plans must be approved by a majority of the Board,
including a majority of the Board who are neither "interested persons" of the
Trust (as defined in the 1940 Act) nor have any direct or indirect financial
interest in the operation of the Plans (the "Qualified Trustees"), by vote cast
in person at a meeting called for the purpose of considering such amendments.
The Plans are subject to annual approval by a majority of the Board of
Trustees, including a majority of the Qualified Trustees, by vote cast in
person at a meeting called for the purpose of voting on the Plans. The Plans
may not be amended to increase materially the amount to be spent for the
services described therein without the requisite approval of shareholders, and
all material amendments of the Plans must also be approved by the Board in the
manner described above. The Plans are terminable at any time by vote of a
majority of the Qualified Trustees or, with respect to any Class or Series, by
vote of a majority of the shares of such Class or Series. Pursuant to the
Plans, any new trustees who are not "interested persons" must be nominated by
existing trustees who are not "interested persons."
If the Plans are terminated (or not renewed) with respect to one or more
Classes or Series, they may continue in effect with respect to any Class or
Series as to which they have not been terminated (or have been renewed).
For the fiscal year ended December 31, 1994, the Class A Shares of the Zweig
Strategy Fund, Zweig Appreciation Fund, Priority Selection List Series,
Government Securities Series, Zweig Managed Assets and Zweig Cash Fund paid a
total of $1,278,240, $682,953, $154,174, $160,641, $449,266 and $19,733
pursuant to the Trust's distribution plan, in connection with expenses incurred
by the Distributor for compensation to broker/dealers ($1,934,,000), marketing
($1,303,000) and firm overhead allocation ($41,000).
For the fiscal year ended December 31, 1994, the Class C Shares of the Zweig
Strategy Fund, Zweig Appreciation Fund, Priority Selection List Series,
Government Securities Series, Zweig Managed Assets and Zweig Cash Fund paid a
total of $2,635,557, $1,336,398, $193,478, $173,718, $5,663,651 and $7,407,
respectively, pursuant to the Trust's distribution plan, in connection with
expenses incurred by the Distributor for compensation to broker/dealers
($9,883,000), marketing ($3,697,000) and firm overhead allocation ($108,000).
For the the fiscal year ended December 31, 1994, the Class M Shares of the
Zweig Cash Fund and the distributor each paid $42,670 pursuant to the Trust's
Class M distribution and service plan to service organizations.
Because all amounts paid pursuant to the Plans are paid to the Distributor,
the Distributor and its officers, directors and employees, all may be deemed to
have a direct or indirect financial interest in the operation of the Plans.
None of the Trustees who is not an interested person of the Trust has a direct
or indirect financial interest in the operation of the Plans.
Benefits from the Plans may accrue to the Trust and its shareholders from
the growth in assets due to sales of shares to the public pursuant to the
Plans. Increases in a Series' net assets from sales pursuant to its Plan may
benefit shareholders by reducing per share expenses, permitting increased
investment flexibility and diversification of the Series' assets, and
facilitating economies of scale (e.g., block purchases) in the Series'
securities transactions. Under their terms, the Plans will continue from year
to year, provided that such continuance is approved annually by a vote of the
Trustees in the manner described above.
The continuance of the Plan for Class A , Class C and Class M Shares and the
adoption of the Plan for Class B Shares was approved by the Board of Trustees,
including a majority of the Qualified Trustees, at a meeting held on June 22,
1995. Prior to approving the continuance of the Plan and the adoption of the
Class B Plan, the Board requested and received from the Distributor all the
information which it deemed necessary to arrive at an informed determination as
to such continuance and adoption of the Plans. In making its determination to
continue the Plan and adopt the Class B Plan, the Board considered, among other
factors: (1) the Trust's experience under the Plan's and the previous Rule
12b-1 Plan's of the Trust, and whether such experience indicates that the Plans
would operate as anticipated; (2) the benefits the Trust had obtained under the
Plans and would be likely to obtain under the Plans; (3) what services would be
provided under the Plans by the Distributor to the Trust and its
16
<PAGE> 55
shareholders; and (4) the reasonableness of the fees to be paid to the
Distributor for its services under the Plans. Based upon their review, the
Board, including each of the Qualified Trustees, determined that the
continuance of the Plans and the adoption of the Class B Plan would be in the
best interest of the Trust, and that there was a reasonable likelihood that the
Plans would benefit the Trust and its shareholders. In the Board's quarterly
review of the Plans, they will consider their continued appropriateness and the
level of compensation provided therein.
The Trust has acknowledged that it has obtained its name by consent of Dr.
Martin E. Zweig and agreed that if (i) the Manager should cease to be the
Trust's investment manager or (ii) if Dr. Zweig should no longer be affiliated
with the Manager, the Trust, upon request of Zweig Securities Corp. or Dr.
Zweig, shall submit to the Trustees for their vote a proposal to delete the
word "Zweig" from its name and cease to use the name "Zweig Series Trust" or
any component or combination thereof or any name deceptively similar thereto,
and indicate on all letterheads and other promotional material that the Manager
is no longer the Trust's investment manager or Dr. Zweig is no longer
affiliated with the Manager, as the case may be. The Trust has agreed that Dr.
Zweig or Zweig Securities Corp. or any of its successors or assigns may use or
permit the use of the word "Zweig," alone or with any other words, for, by or
in connection with any other entity or business, other than the Trust and its
business, whether or not the same directly or indirectly competes or conflicts
with the Trust or its business in any manner.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT
The Bank of New York, 48 Wall Street, New York, New York 10286 serves as
custodian and State Street Bank and Trust Company, P.O. Box 8505, Boston,
Massachusetts 02260-8505, serves as the transfer agent and dividend paying
agent for the Trust. Compensation for such services is based on schedules of
charges agreed on by the Trust and the custodian and the Trust and the transfer
agent.
For the convenience of shareholders, the Transfer Agent maintains in book
account form the records of shares owned by Trust shareholders. Shareholders
may request that the Transfer Agent issue to them certificates representing
their ownership of Trust shares.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New York
10019, serves as independent accountants for the Trust. In addition to
reporting annually on the financial statements of the Trust, the Trust's
accountants also review certain filings of the Trust with the Securities and
Exchange Commission.
COUNSEL
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, is
counsel to the Trust. The firm also acts as counsel to the Manager and the
Distributor.
PORTFOLIO TRANSACTIONS AND BROKERAGE
All Series Other Than Zweig Cash Fund
Officers and Trustees of the Trust and officers of the Manager who are also
officers or directors of the Distributor or its affiliates receive indirect
benefits from the Trust as a result of its usual and customary brokerage
commissions which the Distributor or its affiliates may receive for acting as
broker to the Trust in the purchase and sale of portfolio securities. The
Management Agreement does not provide for a reduction of the advisory fee by
any portion of the brokerage fees generated by portfolio transactions of the
Trust which the Distributor may receive. For the year ended December 31, 1994,
Zweig Strategy Fund, Zweig Appreciation Fund, Priority Selection List Series,
Zweig Managed Assets and the Government Securities Series paid total brokerage
commissions of $525,987, $782,620, $238,703, $1,232,085 and $7,938,
respectively. The amount paid by Zweig Managed Assets for the period February
8, 1993 (commencement of operations) to December 31, 1993 was $423,239. For the
years ended December 31, 1993 and 1992, respectively, Zweig Strategy Fund,
Zweig Appreciation Fund, Priority Selection List Series and the Government
Securities Series paid total brokerage commissions of $2,341,216, $495,058,
$425,472 and $195,158, respectively, and $1,493,246, $516,138, $408,920 and
$102,835, respectively.
For the year ended December 31, 1994, the Trust paid Zweig Securities Corp.
$431,060 in brokerage commissions. For the years ended December 31, 1993 and
1992, $288,556 and $44,761, respectively, was paid to Zweig Securities Corp.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed fair and
reasonable to shareholders. The primary consideration is prompt and efficient
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research,
statistical or other services to the Manager may receive orders for
transactions by the Trust. Information so received will enable the Manager to
supplement its own research and analysis with the views and information of
other securities firms. Such information may be useful and of value to the
Manager and its affiliates in servicing other clients as well as the Trust; in
addition, information obtained by the Manager and its affiliates in servicing
other clients may be useful and of value to the Manager in servicing the Trust.
No principal transactions are effected with Zweig Securities Corp. or any of
its affiliated companies.
The Trust may from time to time allocate brokerage commissions to firms that
furnish research and statistical information to the Manager. The supplementary
research supplied by such firms is useful in varying degrees and is of
indeterminable value. Such research may, among other things, include advice
regarding economic factors and trends, advice as to occasional transactions in
specific securities and similar information relating to securities. No formula
has been established for the allocation of business to such brokers.
Consideration may be given to research provided and payment may be made of a
fee higher than that charged by another broker-dealer which does not furnish
research services or which furnishes research services deemed to be of lesser
value, so long as the criteria of Section 28(e) of the
17
<PAGE> 56
Securities Exchange Act of 1934, as amended (the "1934 Act") are met. Section
28(e) of the 1934 Act specifies that a person with investment discretion shall
not be "deemed to have acted unlawfully or to have breached a fiduciary duty"
solely because such person has caused the account to pay a higher commission
than the lowest available under certain circumstances. To obtain the benefit of
Section 28(e), the person so exercising investment discretion must make a good
faith determination that the commissions paid are reasonable in relation to the
value of the brokerage and research services provided viewed in terms of either
that particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion.
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services might exceed commissions
that would be payable for execution series alone, nor generally can the value
of research services be measured. Research services furnished might be useful
and of value to the Manager and its affiliates in serving other clients as well
as the Trust, but on the other hand any research service obtained by the
Manager or the Distributor from the placement of portfolio brokerage of other
clients might be useful and of value to the Manager in carrying out its
obligation to the Trust.
There are no fixed limitations regarding the Trust's portfolio turnover
rate. In computing the portfolio turnover rate, all securities, including
options, the maturities or expiration dates of which at the time of acquisition
are one year or less, are excluded. Subject to this exclusion, the turnover
rate is calculated by dividing (A) the lesser of purchases or sales of
portfolio securities of a particular Series for the fiscal year by (B) the
monthly average of the value of portfolio securities owned by the particular
Series during the fiscal year.
The options activities of the Government Securities Series, Zweig
Appreciation Fund and Zweig Strategy Fund may affect their respective turnover
rates, the amount of brokerage commissions paid by each Series and the
realization of net short-term capital gains which, when distributed, are taxed
to shareholders (other than retirement plans) at ordinary income tax rates.
There are no fixed limitations regarding the Zweig Strategy Fund's portfolio
turnover. Securities satisfying the basic policies and objectives of the Zweig
Strategy Fund may be disposed of when they are no longer deemed to be suitable.
High portfolio turnover involves correspondingly greater brokerage commissions,
other transaction costs, and a possible increase in short-term capital gains or
losses. See "Net Asset Value and Taxes."
The exercise of calls written by a Series may cause the Series to sell
portfolio securities, thus increasing its turnover rate. The exercise of puts
also may cause a sale of securities and increase turnover; although such
exercise is within the Series' control, holding a protective put might cause
the Series to sell the underlying securities for reasons which would not exist
in the absence of the put. A Series will pay a brokerage commission each time
it buys or sells a security in connection with the exercise of a put or call.
Some commissions may be higher than those which would apply to direct purchases
or sales of portfolio securities.
For the fiscal year ended December 31, 1994, the portfolio turnover rate for
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Managed Assets and the
Government Securities Series were 70%, 97%, 299% and 191%, respectively.
Zweig Cash Fund
The Manager places orders for the purchase and sale of securities for Zweig
Cash Fund. All of Zweig Cash Fund's portfolio transactions are principal
transactions with major dealers in money market instruments, on which no
brokerage commission is paid. Purchases from or sales to dealers serving as
market-makers include the spread between the bid and asked prices. Transactions
are allocated to various dealers according to the best judgment of the Manager
and in a manner deemed fair and reasonable to shareholders. The primary
consideration is prompt and effective execution of orders at the most favorable
price. Subject to this consideration, dealers who provide supplemental
investment research, statistical or other services to the Manager may receive
orders for transactions by Zweig Cash Fund.
YIELD AND PERFORMANCE INFORMATION
Zweig Cash Fund
From time to time, the Trust issues a "current yield" and "effective yield"
for each class of shares of Zweig Cash Fund. For a further discussion of how
the Trust calculates yield, see "Performance Information" in the Prospectus.
The effective yield is an annualized yield based on a compounding of the
unannualized base period return. These yields are each computed in accordance
with a standard method prescribed by the rules of the Commission, by first
determining the "net change in account value" for a hypothetical account having
a share balance of one share at the beginning of a seven-day period (the
"beginning account value"). The net change in account value equals the value of
additional shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional shares.
The unannualized "base period return" equals the net change in account value
divided by the beginning account value. Realized gains or losses or changes in
unrealized appreciation or depreciation are not taken into account in
determining the net change in account value.
The yields are then calculated as follows:
Current Yield = Net Change in Account Value X 365
---------------------------- ---
Beginning Account Value 7
Effective Yield = [(1 + Base Period Return) 365/7 ] - 1
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<PAGE> 57
For the seven days ended December 31, 1994, the Zweig Cash Funds' effective
(compounded) and current yields were 4.85% and 4.75%, respectively, for Class A
Shares, 4.85% and 4.75%, respectively, for Class C Shares and 5.06% and 4.95%,
respectively, for Class M Shares.
Yield is a function of portfolio quality and composition, portfolio maturity
and operating expenses. Yields fluctuate and do not necessarily indicate future
results. While yield information may be useful in reviewing the performance of
the Series, it may not provide a basis for comparison with bank deposits, other
fixed rate investments or other investment companies that may use a different
method of calculating yield.
Other Series
The Trust will include performance data for Class A, Class B and Class C
Shares of each Series in its advertisements, sales literature and other
information distributed to the public that includes performance data of a
Series. Such performance information will be based on investment yields or
total returns for the Series.
YIELD. Yield will be calculated, using a one-month base period, according to
the following formula:
Yield = 2 X [(a-b/cd) + 1]6 - 1
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period.
The annualized yield for the Class A and Class C Shares of Government
Securities Series at December 31, 1994 was 4.27% and 4.03%, respectively.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return for a given period
is computed by finding the average annual compounded rate of return over the
period that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment in the Series of $1,000
T = average annual total return
n = number of years in period
ERV = ending redeemable value, at the end of the period, of a hypothetical
$1,000 investment in the Series made at the beginning of the period.
The average annual total return for the Class A and Class C Shares of each
of the Series for the one and five year periods ended December 31, 1994 and for
the periods from commencement of operations to December 31, 1994 (including the
effect of the maximum sales charge) is as follows:
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Class A Shares Yr Ended Five Yrs Ended Commencement of Operations
--------------
12/31/94 12/31/94 to 12/31/94
-------- -------- -----------
<S> <C> <C> <C>
Zweig Appreciation Fund -7.23% N/A +6.76%*
Zweig Strategy Fund -4.42% +7.37% +7.40%**
Government Securities Series -7.45% +5.30% +6.75%***
Zweig Managed Assets -8.26% N/A +1.43%****
</TABLE>
*For the period beginning October 7, 1991
**For the period beginning December 29, 1989
***For the period beginning March 25, 1985
****For the period beginning February 8, 1993
<TABLE>
<CAPTION>
Class C Shares Year Ended Five Years Ended Commencement to
--------------
12/31/94 12/31/94 12/31/94
-------- -------- --------
<S> <C> <C> <C>
Zweig Appreciation Fund -3.80% N/A +5.55%*
Zweig Strategy Fund -0.84% N/A +6.93%*
</TABLE>
19
<PAGE> 58
<TABLE>
<S> <C> <C> <C>
Government Securities Series -4.43% N/A +4.19%*
Zweig Managed Assets -4.91% N/A +3.77%**
</TABLE>
*For the period beginning February 3, 1992 (commencement of offering of
Class C shares).
**For the period beginning February 8, 1993 (commencement of operations).
The investment results of the Class A, Class B and Class C Shares of a
Series will tend to fluctuate over time, so that historical yields,
current distributions and total returns should not be considered
representations of what an investment may earn in any future period. Actual
dividends will tend to reflect changes in market yields, and will also depend
upon the level of a Class' or Series' expenses, realized or unrealized
investment gains and losses, and the results of such Series' investment
policies. Thus, at any point in time, investment yields, current distributions
or total returns may be either higher or lower than past results, and there is
no assurance that any historical performance record will continue.
The Fund also may include in its advertisements data from Age Wave, Inc.; the
American Association of Retired Persons; Barron's; Business Week;
CDA/Wiesenberger Investment Companies Service; Dalbar Surveys; Donoghue's Money
Fund Report; Financial Planning; Financial World; Forbes; Fortune; Hulbert
Financial Digest; Ibbotson Associates; Individual Investor; Investment Advisor;
Investors Business Daily; The Liscio Report; Lipper Analytical Services, Inc.;
Micropal Inc.; Money; Morningstar Mutual Funds; Mutual Fund Forecaster; Mutual
Funds Magazine; The National Center for Education Statistics; The New York
Times; The Philatelic Foundation; Smart Money; USA Today; U.S. News & World
Report; The Wall Street Journal; Worth and other industry publications.
SHAREHOLDER LIABILITY
Shares are entitled to dividends as declared by the Board and, on
liquidation of a Series, are entitled to receive their share of the net assets
of the Series. Shareholders have no preemptive rights. The Trust's fiscal year
ends on December 31.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. However, the Amended and
Restated Agreement and Declaration of Trust disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the trustees. The Amended and Restated Agreement and Declaration
of Trust provides for indemnification out of a Series' property for all losses
and expenses of any shareholder of that Series held liable on account of being
or having been a shareholder. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Series of which he was a shareholder would be unable to meet its
obligations.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all the information included in the Registration Statement filed with the
Commission under the 1933 Act with respect to the securities offered by the
Prospectus. The Registration Statement, including the exhibits filed therewith,
may be examined at the office of the Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and the
Prospectus as to the contents of any contract or other document are not
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information and the Prospectus form a part, each
such statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements of the Trust for the year ended December
31, 1994, and the report of the Trust's independent accountants in connection
therewith, are included in the 1994 Annual Report to Shareholders of the Trust,
which is incorporated by reference into this Statement of Additional
Information.
APPENDIX I
CORPORATE BOND RATINGS
Description of Moody's Corporate Bond Ratings:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure.
20
<PAGE> 59
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Description of S&P Corporate Bond Ratings:
AAA--Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA--Bonds rated AA have a strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degrees.
A--Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC--Bonds rated "BB," "B" or "CCC" are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CCC" a higher degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Bonds rated BBB or lower by S&P and Bonds rated Baa or less by Moody's
("non-investment grade securities") are considered to be speculative in nature.
Non-investment grade securities will generally be less sensitive to interest
rate changes than investment grade securities (those rated A or higher by S&P
and BBB or higher by Moody's) but will be more sensitive to adverse economic
changes or specific corporate developments. The liquidity risk of
non-investment grade securities will be higher than investment grade securities
and their value will be more difficult to ascertain due to the lack of an
established secondary market. These securities may also be adversely affected
by new laws or proposed new laws on the high yield market (e.g., tax
proposals).
COMMERCIAL PAPER RATINGS
Description of Moody's Commercial Paper Ratings:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet obligations.
DESCRIPTION OF S&P'S COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P has the following characteristics:
Liquidity ratios are adequate to meet cash requirements: long-term senior debt
is rated "A" or better, the issuer has access to at least two additional
channels of borrowing; and basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's industry
is well established and the issuer has a strong position in the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determines whether the issuer's commercial paper
is rated A-1, A-2 or A-3.
21
<PAGE> 60
ZWEIG SERIES TRUST
ZWEIG CASH FUND--Class M Shares
5 Hanover Square, New York, N.Y. 10004
STATEMENT OF ADDITIONAL INFORMATION
ZWEIG CASH FUND (the "Fund"), a Series of Zweig Series Trust (the "Trust"),
is a professionally managed money market fund which seeks high current income
consistent with liquidity and preservation of capital. The Fund invests
exclusively in short-term securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and repurchase agreements with
respect to such securities. The Fund issues its shares in four classes. This
Statement of Additional Information describes Class M Shares of the Fund only
and relates to the Prospectus describing such Class M Shares dated September 1,
1995.
Zweig/Glaser Advisers (the "Manager") selects and manages the investments of
the Fund and Zweig Securities Corp. (the "Distributor"), an affiliate of the
Manager, is the principal distributor of the Fund.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus relating to the Class M Shares of the
Fund, dated September 1, 1995, which can be obtained without cost by
contacting your financial consultant or by calling or writing the Fund at the
telephone numbers and address printed on this page. This Statement of
Additional Information is intended to provide you with additional information
regarding the activities and operations of the Fund.
Toll Free--1-800-272-2700
In 212 area 635-9800
September 1, 1995
<PAGE> 61
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Description of Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Sweep" Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Check Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
NET ASSET VALUE AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Taxation of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Distributor and Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Custodian, Transfer Agent and Dividend Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
YIELD AND PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CLASS M SHARES AND SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<PAGE> 62
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective and policies and permitted investments are
described in the Prospectus under the headings "Zweig Cash Fund" and
"Investments and Risk Factors." There can be no assurance that the Fund's
investment objective will be achieved.
As a general matter, the current value of debt securities held in the Fund
varies inversely with changes in prevailing interest rates. If prevailing
interest rates increase after a security is purchased, the value of the
security will normally decline. Conversely, should prevailing interest rates
decrease after a security is purchased, its market price will normally rise.
However, these market fluctuations generally will not result in any significant
permanent change in value (or realized gains or losses) to the Fund because it
invests primarily in short-term obligations and does not intend to dispose of
the securities it purchases prior to their maturity unless, in the opinion of
the Manager, it is in the best interest of the Fund to do so.
The Fund may, from time to time, loan its securities to brokers, dealers and
financial institutions and receive collateral from the borrower in the form of
U.S. Government obligations, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
The Fund, which retains the incidents of ownership of the loaned securities,
continues to be entitled to the interest payable on the loaned securities and,
in addition, receives interest on the amount of the loan at a rate negotiated
with the borrower. The loans will be terminable by the Fund at any time and
will not be made to the Manager or to any of its affiliates. The Fund may pay
reasonable finder's fees to persons unaffiliated with it responsible for
arranging the loans. In determining whether to loan securities to a particular
broker/dealer or financial institution, the Manager will consider all relevant
facts and circumstances, including the creditworthiness of the broker/ dealer
or institution. The Fund will not enter into any securities lending agreement
having a duration exceeding one year, and any security with a maturity longer
than one year received as collateral for a particular loan will not become part
of the Fund at the time of the loan or in the event the borrower defaults. The
Fund has never loaned securities and the Fund has no current intention of doing
so during the current year.
Description of Permitted Investments
The following are descriptions of instruments in which the Fund may invest.
(i) U.S. Government Obligations--include U.S. Treasury issues, such as
bills, certificates of indebtedness, notes and bonds, and issues of U.S.
Government agencies and instrumentalities which are established under the
authority of an act of Congress, such as the Government National Mortgage
Association, Tennessee Valley Authority, Bank for Cooperatives, Farmers Home
Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks, Export-Import Bank of the U.S., Federal Housing
Administration ("FHA"), Federal Home Loan Mortgage Corporation, U.S. Postal
Service, Federal Financial Bank, Federal National Mortgage Association and
Student Loan Marketing Association. Some of these securities, such as FHA
debenture obligations, are supported by the full faith and credit of the U.S.
Treasury; others, such as obligations of Federal Home Loan Banks, are supported
by the right of the issuer to borrow from the U.S. Treasury; others, such as
those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. The Fund
will not invest in obligations of the International Bank for Reconstruction and
Development (the "World Bank"), the Asian Development Bank, or the
Inter-American Development Bank, or in FHA or VA pooled mortgages; and
(ii) Repurchase Agreements--involve purchases of debt securities. In such a
transaction, at the time the Series purchases the security, it simultaneously
agrees to resell and redeliver the security to the seller who also
simultaneously agrees to buy back the security at a fixed price and time. This
assumes a predetermined yield for the Fund during its holding period, since the
resale price is always greater than the purchase price and reflects an
agreed-upon market rate. Such transactions afford an opportunity for the Fund
to invest temporarily available cash. The Fund may enter into repurchase
agreements with respect to obligations of the U.S. Government, its agencies or
instrumentalities. Repurchase agreements may be considered loans to the seller
collateralized by the underlying securities. The risk to the Fund is limited to
the ability of the seller to pay the agreed-upon sum on the repurchase date; in
the event of default, the repurchase agreement provides that the Series is
entitled to sell the underlying collateral. If the value of the collateral
declines after the agreement is entered into, however, and if the seller
defaults under a repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss of
both principal and interest. The Manager monitors the value of the collateral
at the time the transaction is entered into and at all times subsequent during
the term of the repurchase agreement in an effort to determine that the value
of the collateral always equals or exceeds the agreed-upon repurchase price to
be paid to the Fund. If the seller were to be subject to a Federal bankruptcy
proceeding, the ability of the Fund to liquidate the collateral could be
delayed or impaired because of certain provisions of the bankruptcy laws. The
Fund
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<PAGE> 63
enters into repurchase agreements only with members of the Federal Reserve
System or primary dealers in U.S. Government securities.
INVESTMENT RESTRICTIONS
The Fund has adopted certain restrictions and fundamental policies which,
pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"),
cannot be changed without approval by the holders of a majority of the
outstanding voting securities of the Fund (as defined in the Prospectus).
Pursuant to such restrictions and policies, the Fund may not:
- Purchase common stocks, preferred stocks, warrants, other equity
securities, state bonds, municipal bonds, industrial revenue bonds or corporate
bonds or debentures;
- Borrow money, except from banks for temporary purposes in an amount up to
10% of the value of its total assets. The Fund may only pledge its assets in an
amount up to 10% of the value of its total assets, and then only to secure such
borrowings. The Fund will borrow money only to accommodate requests to redeem
shares to effect an orderly liquidation of portfolio securities or to clear
securities transactions and not for leveraging purposes; accordingly, it is
anticipated that any such borrowing will be repaid before additional
investments are made. The Fund currently does not intend to borrow money to an
extent exceeding 5% of its total assets. The Fund may not issue any securities
which would be deemed to be "senior securities" in contravention of the 1940
Act;
- With respect to 75% of the value of the Fund's total assets, invest more
than 5% of the value of its total assets in the securities of any one issuer,
except securities issued or guaranteed as to the payment of principal and
interest by the U.S. Government, its agencies or instrumentalities;
- Sell securities short;
- Write or purchase put or call options;
- Underwrite the securities of other issuers;
- Purchase or sell real estate, real estate investment trust securities,
commodities or oil and gas interests;
- Make loans to others, except that engaging in permissible activities
specified in the Prospectus under the heading "Investments and Risk Factors"
and in this Statement of Additional Information under the headings "Investment
Objective and Policies" and "Description of Permitted Investments" shall not be
viewed as loans for this purpose;
- Invest more than an aggregate of 10% of the Fund's net assets (taken at
current value) in repurchase agreements maturing in more than seven days and
other "illiquid investments" (such as non-negotiable certificates of deposit,
non-negotiable time deposits or other "non-marketable" securities);
- Invest in companies for the purpose of exercising control; or
- Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.
The foregoing percentage restrictions apply at the time an investment is
made; a later increase or decrease in percentage may result from changes in
values or net assets but will not be deemed to result in an investment which is
contrary to these restrictions.
HOW TO PURCHASE AND REDEEM SHARES
Reference is made to the materials in the Prospectus under the headings "How
to buy shares" and "How to redeem shares," which describe the methods of
purchase and redemption of Fund shares. The following is additional information
related to certain of those methods.
"Sweep" Programs
Class M Shares of the Fund may be purchased through certain participating
securities dealers and/or banks ("Institutions") which have established "sweep"
programs under which a portion of their customers' accounts may be
automatically invested in the Fund. The customers' rights under these programs
are governed by the provisions of the particular Institution's program and the
details of the programs vary. The description below, while generally followed,
should be considered as illustrative of how such programs work, but may not be
true of a particular program.
Typically, in these programs each participating customer, pursuant to an
agreement executed with a particular Institution, becomes the beneficial owner
of specific shares of the Fund which may be purchased, redeemed and held by the
Institution in accordance with the customer's instructions and may fully
exercise all rights as a shareholder. The participating Institution holds
shares registered in its name, as agent for the customer, on the books of the
Fund. A statement regarding the customer's shares is generally supplied to the
customer monthly, and confirmations of all transactions for the account of the
customer normally are available to the customer promptly upon request. In
addition, each customer is sent proxies, periodic reports and other information
from the Trust with
4
<PAGE> 64
regard to the shares. The customer's shares are fully assignable and may be
encumbered by the customer. The "sweep" agreement can be terminated by the
customer at any time, without affecting its beneficial ownership of the shares.
In order to obtain the benefits of this service, a customer typically is
required to maintain a minimum balance subject to a monthly maintenance fee, or
a higher minimum balance for which no monthly fee would be imposed. In either
case, a penalty fee is imposed if the minimum is not maintained. In general,
the automatic investment in shares of the Fund occurs on the same day that
withdrawals are made from the customer's account by the participating
Institution, but there may be a greater time lag between the removal of funds
from an account and their investment in shares of the Fund. Depending on the
particular program of the participating Institution, the customer may or may
not earn interest on the funds being swept during this lag.
All agreements which relate to the service are with the participating
Institution. Neither the Distributor nor the Trust is a party to any of those
agreements and no part of the compensation received by the participating
Institution flows to the Trust or to the Distributor or to any of their
affiliates either directly or indirectly. Information concerning those programs
and any related charges or fees is provided by the particular Institution prior
to purchases of the Class M Shares. Any fees charged by a participating
Institution effectively reduces the Fund's yield for those customers.
If a participating bank were prohibited from offering the "sweep" program,
it is expected that customers of the participating bank who seek to invest in
the Fund would have to purchase and redeem shares directly through the Trust's
transfer agent, State Street Bank and Trust Company ("State Street," or the
"transfer agent").
Check Service
An investor may request in writing that the Trust establish a check service
("Check Service") with State Street as agent to draw against the investor's
Fund account. Upon receipt of such request, the Trust will provide checks
("Checks"). Checks may be made payable to the order of anyone in an amount of
$500 or more. Class M Shares held under retirement plans or IRAs are not
eligible for the Check Service. The Check Service is subject to State Street's
customary rules and regulations governing checking accounts, and the Trust and
State Street each reserve the right to change or suspend the Check Service. The
Check Service may be discontinued at any time or for any investor. The Check
Service does not create a checking or other bank account relationship between
the shareholder and State Street, the Trust or the Distributor.
When a Check is presented to State Street for payment, through normal
banking channels, State Street, as your agent, causes the Trust to redeem at
the net asset value a sufficient number of full and fractional Class M Shares
to cover the amount of the Check. If there is an insufficient number of shares
in your account, the Check is marked "insufficient funds" and is returned
unpaid to the presenting bank. Checks will only clear State Street if drawn
against funds which have been invested for at least 15 days, except for wire
investments. Cancelled (paid) Checks are returned to you; however, this
practice may be discontinued in the future or a charge for such service may be
imposed. By requesting the Check Service, you agree to indemnify and hold
harmless State Street, the Trust, the Distributor and any of their agents from
any liability for honoring Checks or for effecting or facilitating redemptions
pursuant to the Check Service or for returning Checks which have not been
accepted. The Check Service enables you to receive the daily dividends declared
on the shares to be redeemed until the day that the Check is presented to State
Street for payment. Since the aggregate amount in your account changes each day
because of the daily dividend, you should not attempt to withdraw the full
amount in your account by using the Check Service.
The Trust reserves the right in its sole discretion to reject any purchase
order in whole or in part for any reason that it deems sufficient and to change
the minimum investment and subsequent purchases in the Trust.
No stock certificates will be issued unless specifically requested in
writing by an investor. Instead, an account will be established for each
investor and all shares purchased or received, including those obtained through
reinvestment of distributions, will be registered on the books of the Trust and
credited to such account.
Exchange of Shares
Class M Shares currently have no exchange feature, and may not be exchanged
for Class A, Class B or C Shares of the Fund, or shares of any other Series
of the Trust.
RETIREMENT PLANS
Shares may be purchased in connection with all types of tax-deferred
retirement plans. Shares of one or more Series of the Trust may be purchased in
a single application establishing a single plan account.
The minimum initial investment in connection with tax-deferred retirement
plans is $250, and the minimum may be waived on payments made directly to the
Trust's transfer agent, State Street Bank and Trust Company. There is no
minimum for additional purchase payments for tax-deferred retirement plans.
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<PAGE> 65
NET ASSET VALUE AND TAXES
The net asset value of the Class M Shares is computed once daily at 12:00
o'clock noon, New York City time, Monday through Friday, excluding days on
which the New York Stock Exchange ("NYSE") is closed. The NYSE is closed on the
following holidays (or the weekdays on which these holidays are celebrated when
they fall on a weekend): New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. The Board of
Trustees of the Trust (the "Board" or "Board of Trustees") has determined that
it is in the best interests of the Fund and its shareholders to seek to
maintain a stable net asset value per share, and that the appropriate method
for valuing portfolio securities of the Fund is the amortized cost method,
provided that such method continues to fairly reflect the market-based net
asset value per share. The Board shall continuously review this method of
valuation and make changes that may be necessary to assure that the Fund's
instruments are valued at their fair value as determined by the Board in good
faith.
The Board of Trustees has determined that the Fund will comply with the
conditions of Rule 2a-7 under the 1940 Act regarding the amortized cost method
of valuing portfolio securities. Under Rule 2a-7, the Board is obligated, as a
particular responsibility within the overall duty of care owed to the Fund's
shareholders, to establish procedures reasonably designed, taking into account
current market conditions and the Fund's investment objectives, to stabilize
the net asset value per share of the Fund for purposes of distribution and
redemption, at $1.00 per share. These procedures include periodically
monitoring, as the Board deems appropriate, at such intervals as are reasonable
in light of current market conditions, the relationship between the net asset
value per share based upon the amortized cost method of valuation and the net
asset value per share based upon available indications of market value. The
Board will consider what steps should be taken, if any, in the event of a
difference of more than 1/2 of 1% between the amortized cost value and the
market value per share. The Board will take such steps as it considers
appropriate (e.g., redemption in kind, selling portfolio instruments prior to
maturity to realize capital gains or losses, shortening the average portfolio
maturity, withholding dividends, or utilizing a net asset value per share
determined by using market quotations) to minimize any material dilution or
other unfair results that might arise from differences between the net asset
value per share based upon the amortized cost method of valuation and the net
asset value per share based upon market value.
Rule 2a-7 requires that a dollar-weighted average portfolio maturity of not
more than 90 days, appropriate to the objective of maintaining a stable net
asset value of $1.00 per share, be maintained, and precludes the purchase of
any instrument with a remaining time to maturity of more than 397 calendar
days. However, the underlying securities used as collateral for repurchase
agreements are not subject to these restrictions, because a repurchase
agreement is deemed to have a maturity equal to the period remaining until the
date on which the repurchase of the underlying securities is deemed to occur.
Should the disposition of a portfolio security result in a dollar-weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash in a manner that will reduce such average maturity to 90 days or
less as soon as reasonably practicable. Rule 2a-7 also requires the Fund to
limit its investments to instruments that the Board determines present minimal
credit risks and that have been given one of the two highest rating categories
by nationally recognized statistical rating organizations, or, in the case of
instruments that are not so rated, are of comparable quality as determined
under procedures established by the Board.
It is the normal practice of the Fund to hold portfolio securities to
maturity and realize their par values, unless a prior sale or other disposition
thereof is mandated by redemption requirements or other extraordinary
circumstances. A debt security held to maturity is redeemable by its issuer at
its principal amount plus accrued interest. Under the amortized cost method of
valuation traditionally employed by institutions for valuation of money market
instruments, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Fund (computed by dividing the annualized daily income on the Fund's portfolio
by the net asset value computed as above) may tend to be higher than a similar
computation made by utilizing a method of valuation based upon market prices
and estimates. The Fund may, to a limited extent, engage in short-term trading
to attempt to take advantage of short-term market variations, or may dispose of
a portfolio security prior to its maturity if the Manager believes such
disposition advisable, or necessary to generate cash to satisfy redemptions. In
such cases, the Fund may realize a gain or loss.
Tax Status
The Fund will be treated as a separate corporation for purposes of the
Internal Revenue Code of 1986, as amended (the "Code") (except for purposes of
the definitional requirements for regulated investment companies under Code
Section 851(a)). The Fund intends to pay dividends representing its investment
company taxable income within certain time periods specified in the Code and to
meet certain other requirements in order to qualify as a regulated investment
company under the Code. Since the Fund will distribute annually its investment
company taxable income, net capital gains, and capital gain net income, it will
not be subject to income or excise taxes
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<PAGE> 66
otherwise applicable to undistributed income of a regulated investment company.
If the Fund were to fail to distribute substantially all its income and gains,
it would be subject to income tax and, in certain circumstances, a 4% excise
tax.
Taxation of Shareholders
Dividends from net investment income and distributions from short-term
capital gains are taxable to shareholders as ordinary income. Dividends from
the Fund are not expected to qualify for the 70% dividends received deduction
available to corporate shareholders, nor is it expected that there will be any
long-term capital gains distributions.
Individuals and certain other non-exempt payees will be subject to a 31%
backup Federal withholding tax on dividends and other distributions from the
Fund, if the Trust is not provided with the shareholder's correct taxpayer
identification number and certification that the shareholder is not subject to
such backup withholding, or if the Internal Revenue Service notifies the Trust
that the shareholder has failed to report proper interest or dividends. For
most individuals, the taxpayer identification number is the taxpayer's social
security number.
TRUSTEES AND OFFICERS OF THE TRUST
The trustees and officers of the Trust and their business affiliations for the
past five years are as follows:
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
CLAIRE B. BENENSON Trustee Consultant on Financial Conferences; Director of The Burnham
870 U.N. Plaza Fund Inc. Former Director of Financial Conferences and
New York, NY 10017 Chairman, Department of Business and Financial Affairs, The
New School for Social Research and President of the Money
Marketeers of New York University, Trustee of Simms Global
Fund and Former Director of Zweig Tax-Free Fund Inc. and Zweig
Cash Fund Inc.
RICHARD E. DEEMS Trustee Director and Member of the Executive and Finance Committees of
959 Eighth Avenue The Hearst Corporation; Publishing Consultant to the Hearst
New York, NY 10019 Magazines Division of The Hearst Corporation; Director of The
Burnham Fund Inc., ISS International Service System, Inc. and
Oriole Homes Corporation. Former Director of Zweig Tax-Free
Fund Inc. and Zweig Cash Fund Inc.
S. LELAND DILL Trustee Retired; Director of Coutts & Co. Trust Holdings Limited,
5070 North Ocean Dr. Coutts & Co. (USA) and Trustee of BT Portfolios. Former
Singer Island, FL 33404 partner of Peat Marwick Mitchell & Co. and Director of Zweig
Tax-Free Fund Inc., Zweig Cash Fund Inc. and Vintners
International Company, Inc.
</TABLE>
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<PAGE> 67
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
EUGENE J. GLASER* Chairman, President of the Manager and President and Director of the
5 Hanover Square Chief Executive Officer Distributor; Director of The Zweig Fund, Inc. Former Director
New York, NY 10004 and Trustee of Zweig Tax-Free Fund Inc. and Zweig Cash Fund Inc.
DONALD B. ROMANS Trustee President of Romans & Company, Private Investors and Financial
233 East Wacker Dr. Consultants; Director of the Burnham Fund Inc. Former
Chicago, IL 60601 Consultant to and Executive Vice President and Chief Financial
Officer of Bally Manufacturing Corporation, and Director of
Zweig Tax-Free Fund Inc.
MARTIN E. ZWEIG President Chairman of the Manager; Chairman of the Board and President of
900 Third Avenue The Zweig Total Return Fund, Inc. and The Zweig Fund.;
New York, NY 10022 President and Director of Zweig Total Return Advisors, Inc.,
Zweig Advisors Inc., Zweig-DiMenna International Managers,
Inc., and Zweig Securities Advisory Service Inc.; Director of
Research of Avatar Investors Associates Corp.; Managing General
Partner of Zweig-DiMenna Partners, L.P. and Zweig-Di Menna
Special Opportunities, L.P.; President and Director of Gotham
Advisors, Inc., Euclid Advisors, Inc. and Zanoba Asset
Management, Inc.; Member of the Undergraduate Executive Board
of the Wharton School, University of Pennsylvania. Former
President of Zweig Tax-Free Fund Inc. and Zweig Cash Fund,
Inc.; General Partner of Zweig Katzen Investors, L.P.;
President and Director of Davis/Zweig Futures, Inc., and
Director of Zweig/Avatar Capital Management, Inc.
BARRY MANDINACH First Vice President Executive Vice President of the Distributor and Senior Vice
5 Hanover Square President of the Manager.
New York, NY 10004
DAVID KATZEN Senior Vice President First Vice President of the Manager; Executive Vice President
900 Third Avenue of Zanoba Asset Management, Inc. and Euclid Advisors, Inc.;
New York, NY 10022 Director of Quantitative Research at Avatar Investors
Associates, Inc. Former Assistant Vice President of Zweig Fund
Inc.; Vice President of ZZK Management, Inc.; Director of
Equity Research for Zweig Total Return Advisors, Inc.; and
Research Director of Zweig Advisors, Inc.
CARLTON NEEL First Vice President First Vice President of the Manager; Former Vice President of J.P.
900 Third Avenue Morgan & Co., Inc.
New York, NY 10022
ALFRED J. RATCLIFFE First Vice President, First Vice President of the Manager. Former Vice President of
5 Hanover Square Treasurer, Principal The Bank of New York.
New York, NY 10004 Accounting Officer
and Assistant Secretary
</TABLE>
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<PAGE> 68
<TABLE>
<S> <C> <C>
CHARLES I. LEONE Vice President and Chief Financial Officer and First Vice President of the Manager
5 Hanover Square Assistant Secretary and the Distributor. Former Assistant Treasurer of Zweig Cash
New York, NY 10004 Fund Inc.
ANNEMARIE GILLY Vice President First Vice President of the Manager and the Distributor.
5 Hanover Square Former Vice President of Concord Financial Group. Former
New York, NY 10004 Executive Vice President and Chief Operating Officer of The
Gabelli Equity Trust, Inc.
JEFFREY LAZAR Vice President Vice President, Treasurer and Secretary of The Zweig Fund, Inc.
900 Third Avenue and The Zweig Total Return Fund, Inc.; Vice President,
New York, NY 10022 Treasurer and Secretary of Zweig Advisors, Inc. and Zweig Total
Return Advisors, Inc.
BETH ABRAHAM Assistant Vice President Former self-employed consultant to the mutual fund industry;
900 Third Avenue former Senior Compliance Examiner in the New York Regional
New York, NY 10022 Office of the U.S. Securities and Exchange Commission.
MAUREEN MCQUAID Assistant Vice President Portfolio Assistant for Zweig Managed Assets; former Research
900 Third Avenue Assistant for the Zweig Organization. Former commercial
New York, NY 10022 insurance underwriter for American International Group.
TOM DISBROW Assistant Treasurer Assistant Vice President of the Manager
5 Hanover Square
New York, NY 10004
MARC BALTUCH Secretary First Vice President of the Manager; First
900 Third Avenue Vice President, Director, Chief Compliance Officer and
New York, NY 10022 Secretary of the Distributor.; Director and Vice President of
Watermark Securities, Inc. And Assistant Secretary of Gotham
Advisors, Inc., Zweig Total Return Advisors, Inc. And Zweig
Advisors. Former Chief of the Branch of Investment Adviser
Examiners and Chief Regional Securities Examiner in the New
York Regional Office of the Securities and Exchange Commission
and Secretary of Zweig Cash Fund, Inc..
</TABLE>
*Designates a Trustee who is an "interested person" of the Trust within the
meaning of the 1940 Act.
Those trustees and officers of the Trust who are affiliated with the
Distributor or the Manager are not separately compensated for their services as
trustees or officers of the Trust per year. The Trust pays each of its
"disinterested" trustees a fee of $4,000 per year, plus $1,000 per meeting
attended and reimburses their expenses for attendance at meetings, all of which
is prorated on the basis of the assets of each Series, plus $1,000 for each
Series per year. For the fiscal year ended December 31, 1994, the fees and
expenses of disinterested trustees, as a group, were $64,383. As of December
31, 1994, the trustees and officers of the Trust, as a group, owned less than
1% of any Series of the Trust.
Trustees may be removed from office by a written consent filed with the
Trust's custodian, the Bank of New York (the "Custodian") signed by the holders
of two-thirds of the outstanding shares of the Trust, or by a vote of the
holders of two-thirds of the outstanding shares of the Trust at a meeting duly
called for that purpose, which meeting shall be held upon written request of
the holders of not less than 10% of the outstanding shares of the Trust. Upon
written request by ten or more shareholders of the Trust (who have been such
for at least six months and who hold shares constituting 1% of the outstanding
shares of the Trust) stating that such shareholders wish to communicate with
the other shareholders of the Trust for the purpose of obtaining the signatures
necessary to demand a meeting to consider removal of a trustee, the Trust will
provide a list of shareholders of the Trust or disseminate appropriate
9
<PAGE> 69
materials (at the expense of the requesting shareholders). Except as set forth
above, the trustees shall continue to hold office and may appoint their
successors.
INVESTMENT MANAGEMENT AND OTHER SERVICES
The Management Agreement
The Trust and the Manager entered into an amended management agreement,
dated April 29, 1994 (the "Management Agreement"), pursuant to which the
Manager reviews the portfolio of securities and investments of each Series, and
advises and assists each Series with respect to the selection, acquisition,
holding or disposal of securities and makes recommendations with respect to
other aspects and affairs of each Series. The Board of Trustees considered and
approved the adoption of the Management Agreement with respect to the Fund at a
meeting held on December 14, 1993. The initial shareholders of the Fund
approved the Management Agreement on April 25, 1994. The Manager also furnishes
the Trust with certain administrative services, office space and equipment, and
permits its officers and employees who may be elected trustees or officers of
the Trust to serve in the capacities to which they are elected.
The Management Agreement will continue in effect with respect to the Fund
for an initial two year period, and from year to year thereafter if
specifically approved annually by a majority of the Board of Trustees who are
not parties to such contract or "interested persons" of any such party. The
Management Agreement may be terminated without penalty by either of the parties
on 60 days' written notice and must terminate in the event of its assignment.
The Management Agreement provides that the Manager is liable only for its
acts or omissions caused by its willful misfeasance, bad faith, or gross
negligence in the performance of its duties or reckless disregard of its
obligations under the Management Agreement. The Management Agreement permits
the Manager to render services to others and to engage in other activities.
The Manager is paid a management fee equal to 0.50% per annum of the average
daily net assets of the Fund. The Trust currently pays the Manager for its
services pursuant to the Management Agreement a monthly fee at the annual rate
of .60% of the average daily net assets of the Government Securities Series,
.75% of the average daily net assets of Zweig Strategy Fund and 1.00% of the
average daily net assets of Zweig Appreciation Fund and Zweig Managed Assets.
The Manager has voluntarily undertaken to limit expenses of the Fund
(exclusive of taxes, interest, brokerage commissions and transaction costs,
certain distribution fees described below and extraordinary expenses) to 0.60%
of its average net assets and reserves the right to discontinue this policy at
any time after November 1,1995.
Except as described above for the Fund, the fee of a Series will be reduced,
or the Manager will reimburse the Series (up to the amount of its fee), by an
amount necessary to prevent the total expenses of the Series (excluding taxes,
interest, brokerage commissions or transaction costs, certain distribution
fees, certain custodial expenses and extraordinary expenses) from exceeding
limits applicable to the Series in any state in which its shares then are
qualified for sale. Currently, the most restrictive expense limitation is 2.5%
of the first $30 million of a Series' net assets, 2% of the next $70 million of
a Series' net assets and 1.5% of the remaining net assets. The expense
limitation provision applies separately to each Series. From time to time, the
Manager may make certain commitments which are more restrictive than any
state-imposed limitation. In such a case, the Manager will reserve the right to
discontinue any such commitment. These expense reimbursements, if any, are
estimated, reconciled and paid on a monthly basis to the Trust.
The Manager may draw upon the resources of the Distributor and its qualified
affiliates in rendering its services to the Trust. The Distributor or its
affiliates may provide the Manager (without charge to the Trust) with
investment information and recommendations which may serve as the principal
basis for investment decisions with respect to certain Series of the Trust.
The Manager has adopted a Code of Ethics ("the Code") which requires all
persons subject to the Code to pre-clear any proposed non-exempt personal
securities transaction. Permission for any proposed transaction will be
granted provided it is determined that such would not negatively impact
activity in client accounts. In the event that a client of the Manager's
affiliates also owns such security, or its proposed that such client purchase
such security, available investments or opportunities for sales will be
allocated in a manner deemed to be equitable by the Manager.
The Distributor and Distribution Plans
Pursuant to its Distribution Agreement with the Trust (the "Distribution
Agreement"), Zweig Securities Corp. acts as distributor of the Trust's shares.
The Trust has adopted a Rule 12b-1 Plan for the Class M Shares (the "Class M
Plan"), which is described in the Prospectus under the heading "Organization
and management - The Distributor."
The Trust has also adopted a distribution plan for the Class A, Class B and
Class C Shares of each Series of the Trust (the "Plan"), including the Class A,
Class B and C Shares of the Fund, in accordance with Rule 12b-1 under the 1940
10
<PAGE> 70
Act, to compensate the Distributor for the services it provides and for the
expenses it bears under the Distribution Agreement. The Class A Shares,
pursuant to the Plan, are subject to a distribution fee at the rate of .30% per
annum of the average daily net asset value of the Fund. Under the Plan, the
Distributor, as the distributor of Class C Shares, receives a distribution fee
with respect to the Class C Shares at a rate of .05% per annum, and a service
fee at a rate of .25% per annum, of the average daily net asset value of the
Fund. The Distributor may use the distribution charge to compensate outside
brokers. With respect to the Class C Shares, the Distributor retains the .05%
distribution fee. The service fees payable by the Class C Shares are payments
to National Association of Securities Dealers, Inc. member firms for the
provision by such members of personal, continuing service to investors, similar
to an account maintenance fee.
A report of the amounts expended under the Class M Plan and the Plan
(collectively, the "Plans") must be made to the Board of Trustees and reviewed
by the Board at least quarterly. In addition, the Plans provide that they may
not be amended to increase materially the costs which the Trust may bear for
distribution pursuant to the Plans without shareholder approval and that other
material amendments to the Plans must be approved by a majority of the Board,
including a majority of the Board who are neither "interested persons" of the
Trust (as defined in the 1940 Act) nor have any direct or indirect financial
interest in the operation of the Plans (the "Qualified Trustees"), by vote cast
in person at a meeting called for the purpose of considering such amendments.
The Plans are subject to annual approval by a majority of the Board of
Trustees, including a majority of the Qualified Trustees, by vote cast in
person at a meeting called for the purpose of voting on the Plans. The Plans
may not be amended to increase materially the amount to be spent for the
services described therein without the requisite approval of shareholders, and
all material amendments of the Plans must also be approved by the Board in the
manner described above. The Plans are terminable at any time by vote of a
majority of the Qualified Trustees or, with respect to any Class of a Series,
by vote of a majority of the shares of such Class. Pursuant to the Plans, any
new trustees who are not "interested persons" must be nominated by existing
trustees who are not "interested persons." If the Plans are terminated (or not
renewed) with respect to one or more Classes of shares, they may continue in
effect with respect to any Class or Series as to which they have not been
terminated (or have been renewed).
Because all amounts paid pursuant to the Plans are paid to the Distributor,
the Distributor and its officers, directors and employees, all may be deemed to
have a direct or indirect financial interest in the operation of the Plans.
None of the Trustees who is not an interested person of the Trust has a direct
or indirect financial interest in the operation of the Plans.
Benefits from the Plans may accrue to the Trust and its shareholders from
the growth in assets due to sales of shares to the public pursuant to the
Plans. Increases in a Series' net assets from sales pursuant to its Plan may
benefit shareholders by reducing per share expenses, permitting increased
investment flexibility and diversification of the Series' assets, and
facilitating economies of scale (e.g., block purchases) in the Series'
securities transactions. Under their terms, the Plans will continue from year
to year, provided that such continuance is approved annually by a vote of the
Trustees in the manner described above.
The continuance of the Plan was last approved by the Board of Trustees,
including a majority of the Qualified Trustees, at a meeting held on June 22,
1995. The adoption of the Class M Plan was approved by the Board of Trustees at
a meeting held on December 14, 1993, and was approved by the initial
shareholders of the Class M Shares on April 25, 1994. Prior to approving the
continuance of the Plan and the adoption of the Class M Plan, the Board
requested and received from the Distributor all the information which it deemed
necessary to arrive at an informed determination as to such continuance and
adoption of the Plans. In making its determination to continue the Plan and
adopt the Class M Plan, the Board considered, among other factors: (1) the
Trust's experience under the Plan and the previous Rule 12b-1 Plan for the
Class A Shares of the Trust, and whether such experience indicates that the
Plans would operate as anticipated; (2) the benefits the Trust had obtained
under the Plan and the previous Class A Rule 12b-1 Plan and would be likely to
obtain under the Plans; (3) what services would be provided under the Plans by
the Distributor to the Trust and its shareholders; and (4) the reasonableness
of the fees to be paid to the Distributor for its services under the Plans.
Based upon its review, the Board, including each of the Qualified Trustees,
determined that the continuance of the Plan and the adoption of the Class M
Plan would be in the best interest of the Trust, and that there was a
reasonable likelihood that the Plans would benefit the Trust and its
shareholders. In the Board's quarterly review of the Plans, they will consider
their continued appropriateness and the level of compensation provided therein.
The Trust acknowledges that it has obtained its name by consent of Dr.
Martin E. Zweig and agrees that if (i) the Manager should cease to be the
Trust's investment Manager or (ii) if Dr. Zweig should no longer be affiliated
with the Manager, the Trust, upon request of Zweig Securities Corp. or Dr.
Zweig, shall submit to the Trustees for their vote a proposal to delete the
word "Zweig" from its name and cease to use the name "Zweig Series Trust" or
any component or combination thereof or any name deceptively similar thereto,
and indicate on all letterheads and
11
<PAGE> 71
other promotional material that the Manager is no longer the Trust's investment
Manager or Dr. Zweig is no longer affiliated with the Manager, as the case may
be. The Trust has agreed that Dr. Zweig or Zweig Securities Corp. or any of its
successors or assigns may use or permit the use of the word "Zweig," alone or
with any other words, for, by or in connection with any other entity or
business, other than the Trust and its business, whether or not the same
directly or indirectly competes or conflicts with the Trust or its business in
any manner.
Custodian, Transfer Agent and Dividend Paying Agent
The Bank of New York, 48 Wall Street, New York, New York 10286 serves as
custodian and State Street Bank and Trust Company, P.O. Box 8505, Boston,
Massachusetts 02260-8505, serves as the transfer agent and dividend paying
agent for the Trust. Compensation for such services is based on schedules of
charges agreed on by the Trust and the custodian and the Trust and the transfer
agent.
For the convenience of shareholders, the transfer agent maintains in book
account form the records of shares owned by Trust shareholders. Shareholders
may request that the transfer agent issue to them certificates representing
their ownership of Trust shares.
Independent Accountants
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New York
10019, serves as independent accountants for the Trust. In addition to
reporting annually on the financial statements of the Trust, the Trust's
accountants also review certain filings of the Trust with the Securities and
Exchange Commission.
Counsel
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, is
counsel to the Trust. The firm also acts as counsel to the Manager and the
Distributor.
PORTFOLIO TRANSACTIONS
The Manager places orders for the purchase and sale of securities for the
Zweig Cash Fund. All of the Zweig Cash Fund's portfolio transactions are
principal transactions with major dealers in money market instruments, on which
no brokerage commission is paid. Purchases from or sales to dealers serving as
market-makers include the spread between the bid and asked prices. Transactions
are allocated to various dealers according to the best judgment of the Manager
and in a manner deemed fair and reasonable to shareholders. The primary
consideration is prompt and effective execution of orders at the most favorable
price. Subject to this consideration, dealers who provide supplemental
investment research, statistical or other services to the Manager may receive
orders for transactions by the Fund. Information so received will enable the
Manager to supplement its own research and analysis with the views and
information of other securities firms. Such information may be useful and of
value to the Manager in servicing other clients as well as the Trust; however,
information obtained by the Manager in servicing other clients may be useful
and of value to the Manager in servicing the Trust.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Trust issues a "current yield" and "effective yield"
for the shares of the Fund. The Trust will include performance data for Class M
Shares, Class A Shares and Class C Shares of the Fund in its advertisements,
sales literature and other information distributed to the public that includes
performance data of the Fund. For a further discussion of how the Trust
calculates yield, see "Performance Information" in the Prospectus.
The effective yield is an annualized yield based on a compounding of the
unannualized base period return. These yields are each computed in accordance
with a standard method prescribed by the rules of the Commission, by first
determining the "net change in account value" for a hypothetical account having
a share balance of one share at the beginning of a seven-day period (the
"beginning account value"). The net change in account value equals the value of
additional shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional shares.
The unannualized "base period return" equals the net change in account value
divided by the beginning account value. Realized gains or losses or changes in
unrealized appreciation or depreciation are not taken into account in
determining the net change in account value.
The yields are then calculated as follows
Current Yield = Net Change in Account Value X 365
--------------------------- ---
Beginning Account Value 7
Effective Yield = [(1 + Base Period Return) 365/7 ] - 1
For the seven days ended December 31, 1994, the effective (compounded) and
current yields of the Class M Shares of the Fund, were 5.06% and 4.95%,
respectively.
12
<PAGE> 72
Yield is a function of portfolio quality and composition, portfolio maturity
and operating expenses. Yields fluctuate and do not necessarily indicate future
results. While yield information may be useful in reviewing the performance of
the Fund, it may not provide a basis for comparison with bank deposits, other
fixed rate investments or other investment companies that may use a different
method of calculating yield.
The Fund also may include in its advertisements data from Age Wave, Inc.; the
American Association of Retired Persons; Barron's; Business Week;
CDA/Wiesenberger Investment Companies Service; Dalbar Surveys; Donoghue's Money
Fund Report; Financial Planning; Financial World; Forbes; Fortune; Hulbert
Financial Digest; Ibbotson Associates; Individual Investor; Investment Advisor;
Investors Business Daily; The Liscio Report; Lipper Analytical Services, Inc.;
Micropal Inc.; Money; Morningstar Mutual Funds; Mutual Fund Forecaster; Mutual
Funds Magazine; The National Center for Education Statistics; The New York
Times; The Philatelic Foundation; Smart Money; USA Today; U.S. News & World
Report; The Wall Street Journal; Worth and other industry publications.
CLASS M SHARES AND SHAREHOLDER LIABILITY
Class M Shares are entitled to dividends as declared by the Board and, on
liquidation of the Fund, are entitled to receive their share of the net assets
of the Fund. Shareholders have no preemptive rights. The Trust's fiscal year
ends on December 31.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. However, the Amended and Restated
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Trust or the trustees. The Amended and Restated Agreement and Declaration of
Trust provides for indemnification out of a Series' property for all losses and
expenses of any shareholder of that Series held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Series of which he was a shareholder would be unable to meet its
obligations.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all the information included in the Registration Statement filed with the
Commission under the Securities Act of 1933 with respect to the securities
offered by the Prospectus. The Registration Statement, including the exhibits
filed therewith, may be examined at the office of the Commission in Washington,
D.C.
Statements contained in this Statement of Additional Information and the
Prospectus as to the contents of any contract or other document are not
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information and the Prospectus form a part, each
such statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements of Zweig Cash Fund for the year ended
December 31, 1994 and the report of the Trust's independent accountants in
connection therewith are included in the 1994 Annual Report to Shareholders of
the Trust, which is incorporated by reference into this Statement of
Additional Information.
13
<PAGE> 73
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The following report and financial statements for Zweig Series
Trust (the "Trust") are incorporated in Part B by reference to
the Trust's Annual Report to Shareholders for the year ended
December 31, 1994: Report of Coopers & Lybrand, Independent
Accountants; Statement of Assets and Liabilities, dated
December 31, 1994; Statement of Operations for the year ended
December 31, 1994; Statements of Changes in Net Assets for
each of the two years in the period ended December 31, 1994;
Statement of Net Assets for each Series dated December 31,
1994; and Notes to Financial Statements.
[continued on next page]
C-1
<PAGE> 74
(b) Exhibits:
(1) *(a) Amended and Restated Agreement and
Declaration of Trust.
**(b) Further Amendment to the Amended and Restated
Agreement and Declaration of Trust.
***(c) Additional Amendment to the Amended and
Restated Agreement and Declaration of Trust.
+++(d) Additional Amendment to the Amended and
Restated Agreement and Declaration of Trust.
****(2) Amended By-Laws of the Trust.
(3) Inapplicable.
(4) +(a) Specimen stock certificate for shares of
beneficial interest in Zweig Strategy Fund,
Zweig Managed Assets, Priority Selection List
Series and Government Securities Series.
+++(b) Forms of specimen stock certificates for
Class A and C (f/k/a B Shares) Shares of
beneficial interest of the Trust.
++(c) Forms of specimen stock certificate for
shares of beneficial interest of Zweig
Appreciation Fund.
++++(d) Form of specimen stock certificate for shares
of beneficial interest of Zweig Managed
Assets.
- - ---------------------
* Incorporated by reference to Post-Effective Amendment No. 8 to the
Registration Statement of the Trust on Form N-1A, filed previously on
July 20, 1987.
** Incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 20, 1989.
*** Incorporated by reference to Post-Effective Amendment No. 29 to the
Registration Statement on Form N-1A, filed previously on October 4,
1991.
**** Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement of the Trust on Form N-1A, filed previously on
March 1, 1990.
+ Incorporated by reference to Post-Effective Amendment No. 22 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 20, 1990.
++ Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement of the Trust on Form N-1A, filed previously on
June 20, 1991.
+++ Incorporated by reference to Post-Effective Amendment No. 34 to the
Registration Statement of the Trust on Form N-1A, filed previously on
March 2, 1992.
++++ Incorporated by reference to Post-Effective Amendment No. 36 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 8, 1992.
C-2
<PAGE> 75
*(e) Forms of specimen stock certificates for
shares of beneficial interest of Zweig Cash
Fund.
(f) Forms of specimen stock certificates for
Class B Shares of beneficial interest of the
Trust.
(5) **(a) Amended Management Agreement between the
Trust and Zweig/Glaser Advisers.
*(b) Form of Amended Management Agreement (to
include Zweig Cash Fund).
+++(c) Subadvisory Agreement between Zweig/Glaser
Advisers and Ned Davis Research, Inc.
(6) (a) *****(i) Amended Distribution Agreement.
***(ii) Purchase Agreement (Underwriting
Agreement) for Zweig Strategy Fund.
****(iii) Purchase Agreement (Underwriting
Agreement) for Zweig Appreciation
Fund.
**(iv) Purchase Agreement (Underwriting
Agreement) for Zweig Managed Assets.
++++(b) Selling Agreement.
(7) Inapplicable.
++(8) Custodian Agreement.
+(9) Transfer Agency Agreement.
(10) Opinion and consent of counsel.
(11) Consent of independent accountants.
- - --------------
* Incorporated by reference to the Registration Statement of the Trust
on Form N-14, filed previously on January 18, 1994.
** Incorporated by reference to Post-Effective Amendment No. 37 to the
Registration Statement of the Trust on Form N-1A, filed previously on
February 26, 1993.
*** Incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 20, 1989.
**** Incorporated by reference to Post-Effective Amendment No. 29 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 4, 1991.
***** To be filed.
+ Incorporated by reference to Post-Effective Amendment No. 22 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 20, 1990.
++ Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement of the Trust on Form N-1A, filed previously on
February 28, 1986.
+++ Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement of the Trust on Form N-1A, filed previously on
May 2, 1990.
++++ Incorporated by reference to Post-Effective Amendment No. 38 to the
Registration Statement of the Trust on Form N-1A, filed previously on
March 2, 1994.
C-3
<PAGE> 76
(12) Inapplicable.
(13) ++ (a) Subscription Agreement for Shares of the
Government Securities Series.
* (b) Subscription Agreement for Shares of the Priority
Selection List Series.
** (c) Subscription Agreement for Shares of the Zweig
Strategy Fund.
*** (d) Subscription Agreement for Shares of the Zweig
Global Bond Fund.
**** (e) Subscription Agreement for Shares of the Zweig
Appreciation Fund.
+++ (f) Subscription Agreement for Class C (f/k/a B
Shares) Shares of the Trust.
++++ (g) Subscription Agreement for Shares of Zweig
Managed Assets.
(14) + (a) Individual Retirement Account.
+ (b) Paired Defined Contribution Prototype Plan.
+ (c) 401(k) Prototype Plan.
+ (d) 403(b)(7) Custodial Account.
(15) ***** (a) Amended Rule 12b-1 Distribution Plan.
+++++ (b) Form of Rule 12b-1 Plan for the Class M Shares of
Zweig Cash Fund.
** (16) Schedule for Computation of Performance Quotations.
++++ (17) Powers of Attorney.
(18) Rule 18f-3 Plan.
(19) Financial Data Schedules
(19) (a) Zweig Strategy Fund - Class A
(19) (b) Zweig Strategy Fund - Class C
(19) (c) Zweig Appreciation Fund - Class A
(19) (d) Zweig Appreciation Fund - Class C
(19) (e) Zweig Managed Assets - Class A
(19) (f) Zweig Managed Assets - Class C
(19) (g) Government Securities Series - Class A
(19) (h) Government Securities Series - Class C
(19) (i) Zweig Cash Fund - Class A
(19) (j) Zweig Cash Fund - Class C
(19) (k) Zweig Cash Fund - Class M
- - ------------------------------
* Incorporated by reference to Post-Effective Amendment No. 8 to the
Registration Statement of the Trust on Form N-1A, filed previously
on July 20, 1987.
** Incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement of the Trust on Form N-1A, filed
previously on October 20, 1989.
*** Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement on Form 1-A, filed previously on
October 4, 1991.
**** Incorporated by reference to the Trust's Registration Statement on
Form N-1A, filed previously on September 28, 1984.
***** To be filed.
+ Incorporated by reference to Post-Effective Amendment No. 22 to
the Registration Statement of the Trust on Form N-1A, filed
previously on April 20, 1990.
++ Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement of the Trust on Form N-1A, filed previously
on November 27, 1985.
+++ Incorporated by reference to Post-Effective Amendment No. 34 to
the Registration Statement of the Trust on Form N-1A, filed
previously on March 2, 1992.
++++ Incorporated by reference to Post-Effective Amendment No. 37 to
the Registration Statement of the Trust on Form N-1A, filed
previously on February 26, 1993.
C-4
<PAGE> 77
+++++ Incorporated by reference to the Registration Statement of the
Trust on Form N-14, filed previously on January 18, 1994.
C-5
<PAGE> 78
Item 25. Persons Controlled by or Under Common Control with the Trust
The Trust does not control and is not under common control
with any other person.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders as of
Shares of Beneficial Interest of: May 31, 1995
-------------------------------- ------------
<S> <C>
Zweig Appreciation Fund
Class A 22,629
Class C 11,719
Zweig Strategy Fund
Class A 31,670
Class C 19,258
Government Securities Series
Class A 4,020
Class C 932
Zweig Managed Assets
Class A 8,852
Class C 26,202
Zweig Cash Fund
Class A 1,119
Class C 224
</TABLE>
Item 27. Indemnification
All officers, trustees, employees and agents of the Trust are
to be indemnified as set forth in Article XI of the Amended
and Restated Agreement and Declaration of Trust, previously
filed as an Exhibit to Post-Effective Amendment No. 8 to the
Registration Statement of the Trust, filed on July 20, 1987.
To this end, the Trust maintains an Officers' and Trustees'
Errors and Omissions Insurance Policy.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be
permitted to trustees, officers and controlling persons of the
Trust pursuant to the foregoing provisions, or otherwise, the
Trust has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust
of expenses incurred or paid by a trustee, officer or
controlling person of the Trust in the successful defense of
any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the
securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the 1933 Act and will
be governed by the final adjudication of such issue.
C-6
<PAGE> 79
Item 28. Business and Other Connections of Investment Manager
The investment manager of the Trust, Zweig/Glaser Advisers, a
general partnership ("ZGA"), engages in no business other than
that of investment counselling for clients, including the
Trust. The Officers and Directors of ZGA and their
relationships with Zweig Securities Corp. (the "Distributor")
are as follows:
<TABLE>
<CAPTION>
POSITION WITH POSITION POSITIONS WITH THE
NAME ZGA WITH THE TRUST DISTRIBUTOR
- - ---- -------------------------- ------------------------- --------------------------
<S> <C> <C> <C>
Eugene J. Glaser President Chairman, Chief President and Director
Executive Officer
and Trustee
Dr. Martin E. Zweig Chairman President None
Barry Mandinach Senior Vice President First Vice President Executive Vice President
and Director
David J. Malat First Vice President None None
Marc Baltuch First Vice President Secretary First Vice President,
Chief Compliance Officer,
Secretary and Director
Carlton Neel First Vice President First Vice President None
David Katzen First Vice President Senior Vice President None
Annemarie Gilly First Vice President Vice President First Vice President
Charles I. Leone Chief Financial Officer Vice President and Chief Financial Officer
and First Vice President Assistant Secretary and First Vice President
Alfred J. Ratcliffe First Vice President First Vice President None
and Treasurer
Fran Renzi Assistant Vice President None None
Thomas Disbrow Assistant Vice President Assistant Treasurer None
Mona Lee Assistant Vice President None None
Toni Ann Stapleton Controller and None None
Vice President
</TABLE>
The principal occupation of all of such persons other than Dr. Zweig, Mr. Malat
and Mr. Baltuch is with Zweig/Glaser Advisers and the common business address
of such persons is 5 Hanover Square, New York, New York 10004. Dr. Zweig's
principal occupation is as an investment adviser and analyst, Mr. Malat's
principal occupation is Executive Financial Officer of various Zweig
affiliates, Mr. Katzen's principal occupation is portfolio manager and analyst
for ZGA and Mr. Baltuch's principal occupation is Chief Compliance Officer of
the Distributor and the Trust; their place of business is 900 Third Avenue, New
York, New York 10022.
C-7
<PAGE> 80
Item 29. Principal Underwriters
(a) Zweig Securities Corp., the Distributor, acts as
principal distributor of the Trust's shares.
(b) The officers and directors of the Distributor who
also serve on behalf of the Trust are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE DISTRIBUTOR POSITION WITH THE TRUST
- - ---- ----------------------------- -----------------------
<S> <C> <C>
Eugene J. Glaser President and Director Chairman, Chief Executive Officer and Trustee
Barry Mandinach Executive Vice President First Vice President
and Director
Marc Baltuch First Vice President, Secretary
Chief Compliance Officer,
Secretary and Director
Annemarie Gilly First Vice President Vice President
Charles I. Leone Chief Financial Officer Vice President and Assistant Secretary
and First Vice President
</TABLE>
The principal business address of all such persons is 5
Hanover Square, New York, New York 10004, except that Mr.
Baltuch's address is 900 Third Avenue, New York, New York
10022.
(c) Not applicable.
Item 30. Location of Accounts and Records
Zweig Series Trust
5 Hanover Square
New York, New York 10004
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02266
Item 31. Management Services
The Trust has not entered into any management-related service
contracts.
Item 32. Not Applicable.
C-8
<PAGE> 81
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 40
TO THE
REGISTRATION STATEMENT
ON
FORM N-1A
<PAGE> 82
Exhibits:
(1) *(a) Amended and Restated Agreement and
Declaration of Trust.
**(b) Further Amendment to the Amended and Restated
Agreement and Declaration of Trust.
***(c) Additional Amendment to the Amended and
Restated Agreement and Declaration of Trust.
+++(d) Additional Amendment to the Amended and
Restated Agreement and Declaration of Trust.
****(2) Amended By-Laws of the Trust.
(3) Inapplicable.
(4) +(a) Specimen stock certificate for shares of
beneficial interest in Zweig Strategy Fund,
Zweig Managed Assets, Priority Selection List
Series and Government Securities Series.
+++(b) Forms of specimen stock certificates for
Class A and C (f/k/a B Shares) Shares of
beneficial interest of the Trust.
++(c) Forms of specimen stock certificate for
shares of beneficial interest of Zweig
Appreciation Fund.
++++(d) Form of specimen stock certificate for shares
of beneficial interest of Zweig Managed
Assets.
- - ---------------------
* Incorporated by reference to Post-Effective Amendment No. 8 to the
Registration Statement of the Trust on Form N-1A, filed previously on
July 20, 1987.
** Incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 20, 1989.
*** Incorporated by reference to Post-Effective Amendment No. 29 to the
Registration Statement on Form N-1A, filed previously on October 4,
1991.
**** Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement of the Trust on Form N-1A, filed previously on
March 1, 1990.
+ Incorporated by reference to Post-Effective Amendment No. 22 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 20, 1990.
++ Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement of the Trust on Form N-1A, filed previously on
June 20, 1991.
+++ Incorporated by reference to Post-Effective Amendment No. 34 to the
Registration Statement of the Trust on Form N-1A, filed previously on
March 2, 1992.
++++ Incorporated by reference to Post-Effective Amendment No. 36 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 8, 1992.
<PAGE> 83
*(e) Forms of specimen stock certificates for
shares of beneficial interest of Zweig Cash
Fund.
(f) Forms of specimen stock certificates for
Class B Shares of beneficial interest of the
Trust.
(5) **(a) Amended Management Agreement between the
Trust and Zweig/Glaser Advisers.
*(b) Form of Amended Management Agreement (to
include Zweig Cash Fund).
+++(c) Subadvisory Agreement between Zweig/Glaser
Advisers and Ned Davis Research, Inc.
(6) (a) *****(i) Amended Distribution Agreement.
***(ii) Purchase Agreement (Underwriting
Agreement) for Zweig Strategy Fund.
****(iii) Purchase Agreement (Underwriting
Agreement) for Zweig Appreciation
Fund.
**(iv) Purchase Agreement (Underwriting
Agreement) for Zweig Managed Assets.
++++(b) Selling Agreement.
(7) Inapplicable.
++(8) Custodian Agreement.
+(9) Transfer Agency Agreement.
(10) Opinion and consent of counsel.
(11) Consent of independent accountants.
- - -------------
* Incorporated by reference to the Registration Statement of the Trust
on Form N-14, filed previously on January 18, 1994.
** Incorporated by reference to Post-Effective Amendment No. 37 to the
Registration Statement of the Trust on Form N-1A, filed previously on
February 26, 1993.
*** Incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 20, 1989.
**** Incorporated by reference to Post-Effective Amendment No. 29 to the
Registration Statement of the Trust on Form N-1A, filed previously on
October 4, 1991.
***** To be filed.
+ Incorporated by reference to Post-Effective Amendment No. 22 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 20, 1990.
++ Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement of the Trust on Form N-1A, filed previously on
February 28, 1986.
+++ Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement of the Trust on Form N-1A, filed previously on
May 2, 1990.
++++ Incorporated by reference to Post-Effective Amendment No. 38 to the
Registration Statement of the Trust on Form N-1A, filed previously on
March 2, 1994.
<PAGE> 84
(12) Inapplicable.
(13) ++ (a) Subscription Agreement for Shares of the
Government Securities Series.
* (b) Subscription Agreement for Shares of the Priority
Selection List Series.
** (c) Subscription Agreement for Shares of the Zweig
Strategy Fund.
*** (d) Subscription Agreement for Shares of the Zweig
Global Bond Fund.
**** (e) Subscription Agreement for Shares of the Zweig
Appreciation Fund.
+++ (f) Subscription Agreement for Class C (f/k/a B
Shares) Shares of the Trust.
++++ (g) Subscription Agreement for Shares of Zweig
Managed Assets.
(14) + (a) Individual Retirement Account.
+ (b) Paired Defined Contribution Prototype Plan.
+ (c) 401(k) Prototype Plan.
+ (d) 403(b)(7) Custodial Account.
(15) ***** (a) Amended Rule 12b-1 Distribution Plan.
+++++ (b) Form of Rule 12b-1 Plan for the Class M Shares of
Zweig Cash Fund.
** (16) Schedule for Computation of Performance Quotations.
++++ (17) Powers of Attorney.
(18) Rule 18f-3 Plan.
(19) Financial Data Schedules
(19) (a) Zweig Strategy Fund - Class A
(19) (b) Zweig Strategy Fund - Class C
(19) (c) Zweig Appreciation Fund - Class A
(19) (d) Zweig Appreciation Fund - Class C
(19) (e) Zweig Managed Assets - Class A
(19) (f) Zweig Managed Assets - Class C
(19) (g) Government Securities Series - Class A
(19) (h) Government Securities Series - Class C
(19) (i) Zweig Cash Fund - Class A
(19) (j) Zweig Cash Fund - Class C
(19) (k) Zweig Cash Fund - Class M
- - ------------------------------
* Incorporated by reference to Post-Effective Amendment No. 8 to the
Registration Statement of the Trust on Form N-1A, filed previously
on July 20, 1987.
** Incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement of the Trust on Form N-1A, filed
previously on October 20, 1989.
*** Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement on Form 1-A, filed previously on
October 4, 1991.
**** Incorporated by reference to the Trust's Registration Statement on
Form N-1A, filed previously on September 28, 1984.
***** To be filed.
+ Incorporated by reference to Post-Effective Amendment No. 22 to
the Registration Statement of the Trust on Form N-1A, filed
previously on April 20, 1990.
++ Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement of the Trust on Form N-1A, filed previously
on November 27, 1985.
+++ Incorporated by reference to Post-Effective Amendment No. 34 to
the Registration Statement of the Trust on Form N-1A, filed
previously on March 2, 1992.
++++ Incorporated by reference to Post-Effective Amendment No. 37 to
the Registration Statement of the Trust on Form N-1A, filed
previously on February 26, 1993.
+++++ Incorporated by reference to the Registration Statement of the
Trust on Form N-14, filed previously on January 18, 1994.
<PAGE> 1
<TABLE>
<S> <C> <C>
================== ==================
| NUMBER | ZWEIG SERIES TRUST | SHARES |
| | A BUSINESS TRUST | |
================== CREATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS ==================
ZWEIG APPRECIATION FUND
CLASS B
-----------------------------------
ACCOUNT NO. ALPHA CODE CUSIP 989835 86 3
-----------------------------------
SEE REVERSE FOR CERTAIN DEFINITIONS
</TABLE>
THIS IS TO CERTIFY that VOID
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES of beneficial interest of the ZWEIG
APPRECIATION FUND-CLASS B, without par value, of ZWEIG SERIES TRUST
(hereinafter called the "TRUST"), transferable on the books of the Trust by the
holder hereof in person or by duly authorized attorney, upon surrender of
this Certificate properly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of the
provisions of the Agreement and Declaration of Trust, as amended, and the
Bylaws, as amended, for inspection at the principal office of the Trust in
the Commonwealth of Massachusetts to all of which the holder by acceptance
hereby assents. The Certificate is not valid until countersigned by the Transfer
Agent.
The Trust is authorized to issue shares by beneficial interest of
any series, in existence or established in the future, as the Board of
Trustees may determine in its discretion. A full statement of the designation
and any preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the shares of each series in existence may be obtained from the
Trust by any shareholder upon request and without charge.
WITNESS the facsimile seal of the Trust and the signature of its duly
authorized officers.
[ZWEIG SERIES
TRUST SEAL]
Dated:
/s/ EUGENE J GLASU /s/MARTIN E. ZWEIG
Chairman of the Board President
COUNTERSIGNED:
STATE STREET BANK and TRUST COMPANY
(BOSTON)
TRANSFER AGENT
BY
Authorized Signature
<PAGE> 2
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN -as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- .............Custodian ............... Under Uniform Gifts
(Cust) (Minor)
to Minors Act.......................
(State)
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign and transfer into
-----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - --------------------------------------
| |
| |
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
Shares
- - -----------------------------------------------------------------------
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- - ---------------------------------------------------------------------
to transfer the said stock on the Books of the within name Corporation with
full power of substitution in the premises
Dated 19
----------------------------- ----------
-------------------------------------------
NOTICE: The Signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular,
without alteration or enlargement or any change whatever.
- - -------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
[SHEARMAN & STERLING LETTERHEAD]
June 30, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies/Gentlemen:
We have acted as counsel for Zweig Series Trust, a Massachusetts
business trust (the "Trust"). As counsel to the Trust, we are familiar with the
registration of the Trust under the Investment Company Act of 1940, as amended
(File No. 811-7777), and the registration of its shares of beneficial interest
designated as Zweig Cash Fund, Government Securities Series, Zweig Strategy
Fund, Zweig Appreciation Fund, and Zweig Managed Assets, each with no par value
(the "Shares"), under the Securities Act of 1933 (the "1933 Act"), pursuant to a
registration statement on Form N-1A (File No. 2-93538) (the "Registration
Statement"), including the prospectuses and statements of additional information
dated May 1, 1995, as supplemented from time to time, forming a part thereof.
We have examined and relied upon such corporate records of the Trust
and such other documents and certificates of public officials and officers and
representatives of the Trust as we have deemed necessary and appropriate to
render the opinion expressed herein. With respect to all matters concerning
Massachusetts law, we have relied upon the opinion of Messrs. Lane & Altman,
local counsel to the Trust, an executed copy of which is annexed hereto as
Exhibit A. We have assumed without independent verification the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity with originals of all documents submitted to us as copies.
On the basis of the foregoing, it is our opinion that:
1. The Trust has been duly organized and is validly existing in
accordance with the laws of the Commonwealth of Massachusetts.
2. The Shares which are the subject of the Registration Statement
will, when issued as described in the Registration Statement, be legally issued,
fully paid and non-
<PAGE> 2
Securities and Exchange Commission 2 June 28, 1995
assessable by the Trust. However, under certain circumstances, the shareholders
could be liable for obligations of the Trust, as disclosed in the statements of
additional information.
This opinion does not extend to the laws of any jurisdiction other
than the laws of the State of New York, the laws of the Commonwealth of
Massachusetts as they apply to business trusts (to the extent of and based upon
the enclosed opinion of Messrs. Lane & Altman) and the federal securities laws.
We consent to filing this opinion with the Securities and Exchange
Commission in connection with the filing of Post-Effective Amendment No. 40 to
the Trust's Registration Statement. In giving this consent, we do not hereby
admit that we are experts with respect to any part of the Registration Statement
within the meaning of the term "expert" as used in the 1933 Act or the rules and
regulations thereunder.
Very truly yours,
/s/ SHEARMAN & STERLING
-----------------------
Shearman & Sterling
<PAGE> 3
[LANE & ALTMAN LETTERHEAD]
June 30, 1995
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Ladies and Gentlemen:
We understand that the trustees (the "Trustees") of Zweig Series
Trust, a Massachusetts business trust (the "Trust") intend, on or about
June 30, 1995, to cause to be filed on behalf of the Trust a Post-Effective
Amendment No. 40 to Registration Statement on Form N-1A (File No. 2-93538) (the
"Registration Statement") with respect to the registration of shares of
beneficial interest designated as Zweig Cash Fund, Zweig Appreciation Fund,
Zweig Strategy Fund, Zweig Managed Assets, and the Government Securities
Series (collectively the "Series")
You have requested that we act as special counsel to the Trust with
respect to the laws of the Commonwealth of Massachusetts on certain specified
matters, and in such capacity we are furnishing you with this opinion.
The Trust, originally organized as Drexel Series Trust, is a
business trust created under an Amended and Restated Agreement and Declaration
of Trust finally executed and delivered in Boston, Massachusetts on April 29,
1986 (the "Declaration"), as amended by Amendments to the Amended and Restated
Declaration of Trust dated September 7, 1989, October 3, 1991 and December 18,
1991 and effective September 11, 1989, October 4, 1991 and February 12, 1992
(each an "Amendment" and collectively, with the Declaration, the "Trust
Agreement"). The Board of Trustees of the Trust (as defined in the Trust
Agreement) (the "Trustees") have the powers set forth in the Trust Agreement,
subject to the terms, provisions and conditions provided therein.
In connection with our opinions delivered herein, we have examined
the following items, some of which have been provided to us by, or on behalf of,
you: (i) a draft copy of Post-Effective Amendment No. 40 with respect to the
Registration Statement; (ii)
<PAGE> 4
[LANE & ALTMAN LETTERHEAD]
Shearman & Sterling
June 30, 1995
Page 2
a copy of the Trust Agreement; (iii) a copy of the By-laws of the Trust; (iv) a
Certificate of Legal Existence for the Trust provided by the Secretary of State
of the Commonwealth of Massachusetts dated June 29, 1995; (v) a certificate of
the Secretary of the Trust attesting, among other matters, to the due adoption
on June 22, 1995 by the Trustees of resolutions approving certain actions and
regarding certain factual matters regarding the Trust; and (vi) copies of the
Prospectus and Statement of Additional Information dated May 1, 1995 to be
included in the Registration Statement.
In rendering this opinion we have assumed, without independent
verification, (i) the due authority of all individuals signing in representative
capacities and the genuineness of signatures, (ii) the authenticity,
completeness and continued effectiveness of all documents or copies furnished
to us, (iii) that the resolutions provided have been duly adopted by the
Trustees, (iv) that no amendments, agreements, resolutions or actions
have been approved, executed or adopted which would limit, supersede or modify
the items described above, and (v) that the by-laws filed as an exhibit to the
Registration Statement have been duly adopted by the Trustees. We have also
examined such questions of law as we have concluded necessary or appropriate
for purposes of the opinions expressed below. Where documents are referred to
in resolutions approved by the Trustees, or in the Registration Statement, we
assume such documents are the same as in the most recent form provided to us,
whether as an exhibit to the Registration Statement, or otherwise. When any
opinion set forth below relates to the existence or standing of the Trust, such
opinion is based entirely upon and is limited by the items referred to above.
We understand that the foregoing assumptions, limitations and qualifications
are acceptable to you.
Based upon the foregoing, and with respect to Massachusetts law only
(except that no opinion is herein expressed with respect to compliance with the
Massachusetts Uniform Securities Act), to the extent that Massachusetts law may
be applicable, and without reference to the laws of any of the other several
states or of the United States of America, including State and Federal
securities laws, we are of the opinion that:
<PAGE> 5
[LANE & ALTMAN LETTERHEAD]
Shearman & Sterling
June 30, 1995
Page 3
1. The Trust is a business trust with transferable shares,
organized in compliance with the requirements of The Commonwealth of
Massachusetts, and the Trust Agreement is legal and valid.
2. The Shares of each Series to be issued as described in the
Registration Statement, including any Exhibits thereto, (the "Shares") have been
duly authorized and, assuming receipt of the consideration to be paid therefor,
upon delivery as provided in the Trust Agreement, will be validly issued, fully
paid and nonassessable (except for the potential liability of shareholders
described in the Statement of Additional Information under the
caption--"Shareholder Liability").
No opinion is expressed herewith respecting any matter or question
arising out of, or under, the Securities Act of 1933, as amended, the Investment
Company Act of 1940, as amended, the Securities Exchange Act of 1934, as
amended, or the securities laws of any state or other jurisdiction.
We understand that you will rely on this opinion solely in
connection with your opinion to be filed with the Securities and Exchange
Commission as an Exhibit to the Registration Statement. We hereby consent to
such use of this opinion and we also consent to the filing of said opinion with
the Securities and Exchange Commission. In so consenting, we do not thereby
admit to be within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ LANE & ALTMAN
-----------------
LANE & ALTMAN
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------------
We consent to the incorporation by reference in Post-Effective Amendment to
the Registration Statement of Zweig Series Trust on Form N-1A (File No.
2-93538) to be filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of
1940, as amended, of our report dated January 27, 1995 included in the
December 31, 1994 Annual Report to shareholders. We also consent to the
reference to our firm under the captions "Financial Highlights" and "Independent
Accountants".
Coopers & Lybrand L.L.P.
New York, New York
Jan 29, 1995
5 Alfred J. Ratcliffe
First Vice President & Treasurer
Zweig Series Trust
5 Hanover Square
<PAGE> 1
EXHIBIT 18
ZWEIG MUTUAL FUNDS
RULE 18f-3 MULTI-CLASS PLAN
I. INTRODUCTION.
In accordance with Rule 18f-3 under the Investment Company Act
of 1940 (the "1940 Act"), the following Multiple Class Plan (the "Plan")
specifies the differences among each individual class of shares of the series
of investment funds of Zweig Series Trust (the "Trust") and sets forth the
separate arrangements for allocating expenses among each class of shares that
may be issued under the Trust's multiple class distribution system.
The Trust is an open-end series investment company registered
under the 1940 Act and its shares are registered under the Securities Act of
1933. The Trust currently offers five series (each, a "Series"): Zweig
Strategy Fund, Zweig Appreciation Fund, Zweig Managed Assets, Government
Securities Series and Zweig Cash Fund.
As of the date hereof, the Trust hereby elects to offer
multiple classes of shares in each of its Series pursuant to the provisions of
Rule 18f-3 and this Plan. Each share in a Series will represent an equal pro
rata interest in the underlying assets of the respective Series.
II. GENERAL.
The Trust reserves the right to increase, decrease or waive
the contingent deferred sales charge ("CDSC") imposed on any existing or future
classes of shares within the ranges permissible under applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), and the
rules of the National Association of Securities Dealers, Inc. (the "NASD"), as
such rules and regulations may be amended, modified or adopted from time to
time. As described more fully herein, the Trust currently intends to issue
Class A Shares, Class B Shares and Class C Shares of each of its Series and, in
addition, intends to issue Class M Shares of Zweig Cash Fund. The Trust may in
the future alter the terms of existing classes or create new classes in
compliance with applicable rules and regulations of the SEC and the NASD.
III. ALLOCATION OF EXPENSES.
Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall
allocate to each class of shares in a Series (i) any fees and expenses incurred
by the Trust in connection with the distribution of such class of shares under
a distribution plan adopted for such class of shares pursuant to Rule 12b-1
under the 1940 Act, and (ii) any fees and expenses incurred by the Trust under
a shareholder servicing plan in connection with the provision of shareholder
<PAGE> 2
2
services to the holders of such class of shares. In addition, pursuant to Rule
18f-3, the Trust may allocate the following fees and expenses to a particular
class of shares (to the extent such expenses actually vary among each class of
shares or vary by types of services provided to each class of shares) in any
Series:
(i) transfer agent fees identified by the transfer agent
as being attributable to such class of shares;
(ii) printing and postage expenses related to preparing
and distributing materials such as shareholder reports, prospectuses,
reports, and proxies to current shareholders of such class of shares
or to regulatory agencies with respect to such class of shares;
(iii) blue sky and SEC registration or qualification fees
incurred by such class of shares;
(iv) the expenses of administrative personnel and services
as required to support the shareholders of such class of shares;
(v) litigation or other legal expenses relating solely to
such class of shares;
(vi) Trustees' fees incurred as a result of issues
relating to such class of shares; and
(vii) other expenses that are subsequently identified and
determined to be properly allocated to such class of shares.
IV. CLASS ARRANGEMENTS.
The following is a summary of the features applicable to each
class of shares for each Series. Additional details regarding such fees and
services are set forth in the Trust's current Prospectus.
A. CLASS A SHARES
1. Zweig Strategy Fund, Zweig Appreciation Fund and
Zweig Managed Assets:
a. Maximum Sales Charge: 5.50%, subject to
quantity discounts at certain dollar amounts,
or breakpoints, as described in the
Prospectus.
<PAGE> 3
3
b. Contingent Deferred Sales Charge: A 1%
CDSC may apply on redemptions within 18
months of purchases not subject to an
initial sales charge.
c. Rule 12b-1 Fees: 0.30%, which includes a
0.25% service fee.
d. Conversion Features: None.
e. Exchange Privileges: Subject to the
restrictions and conditions set forth in the
Prospectus, Class A Shares may be exchanged
for Class A Shares of any other Series
(except that Class A Shares of Zweig Cash
Fund purchased without a sales charge are
exchangeable at net asset value plus the
applicable sales charge).
2. Government Securities Series:
a. Maximum Sales Charge: 4.75%, subject to
quantity discounts at certain dollar amounts,
or breakpoints, as described in the
Prospectus.
b. Contingent Deferred Sales Charge: A 1%
CDSC may apply on redemptions within 18
months of purchases not subject to an
initial sales charge.
c. Rule 12b-1 Fees: 0.30%, which includes a
0.25% service fee.
d. Conversion Features: None.
e. Exchange Privileges: Subject to the
restrictions and conditions set forth in the
Prospectus, Class A Shares may be exchanged
for Class A Shares of any other Series
(except that Class A Shares of Zweig Cash
Fund purchased without a sales charge are
exchangeable at net asset value plus the
applicable sales charge).
3. Zweig Cash Fund:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: None.
c. Rule 12b-1 Fees: 0.30%.
d. Conversion Features: None.
<PAGE> 4
4
e. Exchange Privileges: Subject to the
restrictions and conditions set forth in the
Prospectus, Class A Shares may be exchanged
for Class A Shares of any other Series
(except that Class A Shares purchased without
a sales charge are exchangeable at net asset
value plus the applicable sales charge).
B. CLASS B SHARES
For each Series:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: 5%,
declines over time for shares held less than
six years.
c. Rule 12b-1 Fees: 1.00%, which includes a
0.25% service fee.
d. Conversion Features: Convert to Class A
Shares as described in the Prospectus.
e. Exchange Privileges: Subject to certain
restrictions and conditions, Class B Shares
may be exchanged for Class B Shares of any
other Series
C. CLASS C SHARES
1. Zweig Strategy Fund, Zweig Appreciation Fund and
Zweig Managed Assets:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: 1.25% for
shares redeemed within one year of purchase.
c. Rule 12b-1 Fees: 1.00%, which includes a
0.25% service fee.
d. Conversion Features: None.
<PAGE> 5
5
e. Exchange Privileges: Subject to the
restrictions and conditions set forth in the
Prospectus, Class C Shares of a Series are
only exchangeable at net asset value for
Class C Shares of another Series.
2. Government Securities Series:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: 1.25% for
shares redeemed within one year of purchase.
c. Rule 12b-1 Fees: 0.75%, which includes a
0.25% service fee.
d. Conversion Features: None.
e. Exchange Privileges: Subject to the
restrictions and conditions set forth in the
Prospectus, Class C Shares of a Series are
only exchangeable at net asset value for
Class C Shares of another Series.
3. Zweig Cash Fund:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: 1.25% for
shares redeemed within one year of purchase.
c. Rule 12b-1 Fees: 0.30%, which includes a
0.25% service fee.
d. Conversion Features: None.
e. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Class C Shares are only exchangeable at net
asset value for Class C Shares of another
Series.
D. CLASS M SHARES
Zweig Cash Fund:
a. Maximum Sales Charge: None
<PAGE> 6
6
b. Contingent Deferred Sales Charge: None.
c. Rule 12b-1 Fees: 0.10%.
d. Conversion Features: None.
e. Exchange Privileges: None. If the Trust offers and
sells Class M Shares of any other Series, such shares
may be exchangeable at net asset value for Class M
Shares of any such Series.
V. CONTINGENT DEFERRED SALES CHARGE WAIVER.
No CDSC will be imposed when a shareholder redeems under
certain circumstances described in the Trust's Prospectus and SAI.
VI. CONVERSION FEATURE.
A Series may issue one or more than one class of shares (each
a "Purchase Class") that may convert to another class ("Target Class") after a
specified period of time on the basis of the relative net asset value per share
of the two classes without the imposition of an additional sales load, fee, or
other charge. Shares of a Target Class will be subject to a lower distribution
expense and/or service expense, in the aggregate, than the shares of the
Purchase Class that converts to such Target Class.
The actual terms of a conversion feature would be determined
on a class by class basis. Any class of shares with a conversion feature will
convert into another class of shares on the basis of the relative net asset
values of the two classes, without the imposition of any sales load, fee, or
other charge. After a conversion, the converted shares will be subject to an
asset-based sales charge and/or service fee (as those terms are defined in
article III, section 26 of the NASD rules of fair practice), if any, that in
the aggregate are lower than the asset-based sales charge and service fee to
which they were subject prior to the conversion. Any conversion feature will
be subject to a determination that the conversion of shares does not constitute
a taxable event under federal tax law. Any conversion feature adopted by a
Series will be fully disclosed in the Trust's then-current prospectus.
<PAGE> 7
7
VII. NET ASSET VALUE.
Under the Plan, all expenses incurred by the Trust will
continue to be allocated among the various classes of shares based upon the net
assets of the Trust attributable to each class, except that shares of a
particular class will continue to bear the class expenses incurred by such
class. Consequently, the net income of, and the dividends payable with respect
to, each particular class would generally differ from the net income of, and
the dividends payable with respect to, the other classes of shares of a
particular Series. Therefore, the net asset value per share of the classes
will differ at times. Expenses of a Series allocated to a class of shares will
continue to be borne on a pro rata basis by each outstanding share of that
class.
VIII. ACCOUNTANTS' PROCEDURES.
The methodology and procedures for calculating the net asset
value, dividends and distributions of the classes of shares and the proper
allocation of income and expenses among the classes established by the Trust is
incorporated by reference to the application filed on February 16, 1994, and
amendments thereto, pursuant to which an exemptive order was granted on May 2,
1994 (Investment Company Act Release No. 20264).
IX. COMPENSATION FOR BROKER-DEALERS AND FINANCIAL PLANNERS.
As described more fully in the Trust's Prospectuses,
broker-dealers and financial planners that sell shares of any Series will
continue to be compensated differently depending on the class of shares an
investor chooses.
X. CONFLICTS OF INTEREST.
The Trust does not believe that the implementation of the Plan
will give rise to any conflicts of interest. The Board of Trustees will
continue to monitor, on an ongoing basis, the Trust for the existence of any
material conflicts among the interests of the holders of the various classes of
shares and will take any action reasonably necessary to eliminate any such
conflicts that may develop. The Trust also believes that the interests of the
various classes of shares as to the investment advisory fees of the Trust are
the same and not in conflict. These fees are used to compensate the Trust's
investment adviser for providing investment advisory services that are common
to all investors, regardless of the class of shares.
<PAGE> 8
8
XII. BOARD REVIEW.
The Board of Trustees of the Trust shall review this Plan as
frequently as it deems necessary. Prior to any material amendment(s) to this
Plan, the Trust's Board of Trustees, including a majority of the Trustees that
are not interested persons of the Trust, shall find that the Plan, as proposed
to be amended (including any proposed amendments to the method of allocating
class and/or Trust expenses), is in the best interest of each class of shares
of any Series individually and the Trust as a whole. In considering whether to
approve any proposed amendment(s) to the Plan, the Trustees shall request and
evaluate such information as they consider reasonably necessary to evaluate the
proposed amendment(s) to the Plan. Such information shall address, among other
issues, the issue of whether any waivers or reimbursements of advisory or
administrative fees could be considered a cross-subsidization of one class by
another.
In making its initial determination to approve this Plan, the
Board has focused on, among other things, the relationship between or among the
classes and has examined potential conflicts of interest among classes
(including those potentially involving a cross-subsidization between classes)
regarding the allocation of fees, services, waivers and reimbursements of
expenses, and voting rights. The Board has evaluated the level of services
provided to each class and the cost of those services to ensure that the
services are appropriate and the allocation of expenses is reasonable. In
approving any subsequent amendments to this Plan, the Board shall focus on and
evaluate such factors as well as any others deemed necessary by the Board.
* * *
This Plan is hereby approved by a majority of the Trustees of
the Trust, including a majority of the Trustees who are not interested persons
of the Trust (collectively, the "Trustees"). The Trustees have found that this
Plan, including the expense allocation, is in the best interests of each class
individually and the Trust as a whole. The Trustees have made this
determination after requesting and evaluating such information as may be
reasonably necessary to evaluate this Plan.
This Plan is intended to conform to Rule 18f-3 and Rule 6c-10
under the 1940 Act and any inconsistencies shall be read to conform with such
Rules.
Dated: June 22, 1995
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<NAME> ZWEIG STRATEGY FUND - CLASS A
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<TABLE> <S> <C>
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<NAME> ZWEIG APPRECIATION FUND - CLASS A
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<DISTRIBUTIONS-OF-INCOME> (8,472)
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<DISTRIBUTIONS-OTHER> 0
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<ACCUMULATED-NII-PRIOR> 853
<ACCUMULATED-GAINS-PRIOR> (2,140)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (7,161)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (15,909)
<AVERAGE-NET-ASSETS> 561,424
<PER-SHARE-NAV-BEGIN> 12.36
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> (.68)
<PER-SHARE-DIVIDEND> (.18)
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<SERIES>
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<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
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<INVESTMENTS-AT-COST> 70,791
<INVESTMENTS-AT-VALUE> 69,746
<RECEIVABLES> 890
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,636
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (414)
<TOTAL-LIABILITIES> (414)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123,561
<SHARES-COMMON-STOCK> 4,946
<SHARES-COMMON-PRIOR> 5,772
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (70)
<ACCUMULATED-NET-GAINS> (52,224)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,045)
<NET-ASSETS> 70,222
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,884
<OTHER-INCOME> 0
<EXPENSES-NET> (1,091)
<NET-INVESTMENT-INCOME> 3,793
<REALIZED-GAINS-CURRENT> (3,559)
<APPREC-INCREASE-CURRENT> (2,764)
<NET-CHANGE-FROM-OPS> (2,530)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,742)
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 403
<NAME> GOVERNMENT SECURITIES SERIES - CLASS C
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<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 501
<NAME> ZWEIG CASH FUND - CLASS A
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<S> <C>
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<PERIOD-START> JAN-01-1994
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<NET-ASSETS> 87,492
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 503
<NAME> ZWEIG CASH FUND - CLASS C
<MULTIPLIER> 1
<CURRENCY> US $
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (442)
<TOTAL-LIABILITIES> (442)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,492
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<DIVIDEND-INCOME> 0
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<EXPENSES-NET> (696)
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<DISTRIBUTIONS-OF-INCOME> (96)
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<GROSS-ADVISORY-FEES> (485)
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<PER-SHARE-NAV-BEGIN> 1.00
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<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 513
<NAME> ZWEIG CASH FUND - CLASS M
<MULTIPLIER> 1
<CURRENCY> US $
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
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<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 87,855
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<OTHER-ITEMS-LIABILITIES> (442)
<TOTAL-LIABILITIES> (442)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,492
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 87,492
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<EXPENSES-NET> (696)
<NET-INVESTMENT-INCOME> 3,495
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<NET-CHANGE-IN-ASSETS> (4,979)
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
