<PAGE> 1
As filed with the Securities and Exchange Commission on August 16, 1996
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. 43 [x]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 44 [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 November 1, 1996,
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, 1995 was filed on February 23,
1996.
<PAGE> 2
ZWEIG SERIES TRUST
CONTENTS
This Post-Effective Amendment No. 43 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 of Zweig Series Trust other
than Class M Shares of Zweig Cash Fund
5. Part B - Statement of Additional Information for all shares of
Zweig Series Trust other than 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
----------- --------
<S> <C>
Part A - Prospectus
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
7. Purchase of Securities Being Offered How to Invest in the Zweig Mutual Funds; Choosing
among Classes when Purchasing Shares; Net Asset
Value; Distributions and Taxes
8. Redemption or Repurchase How to Redeem your Shares; Exchange Privilege
9. Legal Proceedings Not Applicable
</TABLE>
ii
<PAGE> 4
Part B - Statement of Additional Information
<TABLE>
<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; Control Persons
Securities and Principal Holders of 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; Reinstatement
Securities Being Offered Privilege; Exchange Privilege; Involuntary
Redemptions; Retirement Plans; Net Asset Value 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.
43 to the Registration Statement on Form N-1A.
iii
<PAGE> 5
ZWEIG
SERIES TRUST
PROSPECTUS
ZWEIG STRATEGY FUND
ZWEIG APPRECIATION FUND
ZWEIG GROWTH AND INCOME FUND
ZWEIG MANAGED ASSETS
ZWEIG GOVERNMENT FUND
ZWEIG CASH FUND
NOVEMBER 1,1996
Zweig Series Trust offers investors the opportunity to invest in one or more of
SIX mutual funds. The SIX funds, or series, of the Trust, are:
-Zweig Strategy Fund
-Zweig Appreciation Fund
-Zweig Growth and Income Fund
-Zweig Managed Assets
-Zweig Government Fund
-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 four classes of shares: Class A, Class B, Class C and Class I
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 a CDSC if they sell their shares within one year of purchase.
Investors in Class I Shares pay no initial sales charge nor are they subject to
any CDSC, but they are available for purchase only from Zweig Securities Corp.
to tax-exempt retirement plans of Zweig Securities Corp. and its affiliates and
certain institutional investors. The different classes of shares have different
annual operating expenses, Class I Shares having the lowest and Class B and
Class C Shares the highest. Class B Shares convert to Class A Shares after a
holding period of seven years from the initial purchase. Class C Shares have a
shorter CDSC period than Class B Shares, but they do not convert to 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. There can be no assurance that the Zweig Cash Fund will be able to
maintain a stable net asset value of $1.00 a share.
This Prospectus contains important information that you should know before
investing. Please keep it for future reference. A Statement of Additional
Information (SAI) dated November 1, 1996, 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
<PAGE> 6
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 A CLASS B CLASS C CLASS I
SHARES SHARES SHARES SHARES
------ ------ ------- ------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Charge on purchases
(as % of Offering Price)
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig
Growth and Income Fund and Zweig Managed Assets . . . . 5.50% None None None
Zweig Government Fund . . . . . . . . . . . . . . . . . 4.75% None None None
Zweig Cash Fund . . . . . . . . . . . . . . . . . . . . None* None None None
Maximum Contingent Deferred Sales Charge (CDSC)
None** 5.00%*** 1.25%**** None
- ---------------
</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 is imposed on redemptions within 18 months of purchases of
$1 million or more as described in "Quantity discounts on Class A
Shares," except for shares of Zweig Cash Fund originally purchased
without 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 expenses for Class B and Class
I Shares and for Zweig Growth and Income Fund are based on estimated expenses
that would have been incurred if Class B and Class I Shares and Zweig Growth
and Income Fund 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 as shown in the column headed "Total Return"
in the table on the following page.
2
<PAGE> 7
<TABLE>
<CAPTION>
ANNUAL FUND EXAMPLE: You would pay the EXAMPLE: You would pay the
OPERATING EXPENSES following expenses on a following expenses on a
(As % of average net assets) $1,000 investment assuming $1,000 investment assuming
(1) 5% annual return and (1) 5% annual return and
(2) redemption at the end of (2) no redemption:
each time period:
Fund Management 12b-1 Other Total 1 3 5 10 1 3 5 10
Fees Fees(2) Expenses Fund Year Years Years Years Year Years Years Years
Operating
Expenses
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Zweig Strategy Fund 0.75% 0.30% 0.22% 1.27% $67 $ 93 $121 $200 $67 $ 93 $121 $200
Zweig Appreciation Fund 1.00 0.30 0.33 1.63 71 104 139 238 71 104 139 298
Zweig Growth and Income Fund (5) 0.75 0.30 0.25 1.30 68 94 122 203 68 94 122 203
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Managed Assets 1.00 0.30 0.29 1.59 70 102 137 234 70 102 137 234
Zweig Government Fund(4) 0.39* 0.30 0.36 1.05* 60 86 113 193 60 86 113 193
Zweig Cash Fund(1) --* 0.30 0.35* 0.65* 7 21 36 81 7 21 36 81
CLASS B SHARES
Zweig Strategy Fund 0.75 1.00 0.22 1.97 70 92 126 203(3) 20 62 106 203(3)
Zweig Appreciation Fund 1.00 1.00 0.33 2.33 74 103 145 244(3) 24 73 125 241(3)
Zweig Growth and Income Fund (5) 0.75 1.00 0.25 2.00 70 93 128 206(3) 20 63 108 206(3)
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Managed Assets 1.00 1.00 0.29 2.29 73 102 143 237(3) 23 72 123 233(3)
Zweig Government Fund(4) 0.39* 1.00 0.36 1.75* 70 92 126 202(3) 20 62 106 202(3)
Zweig Cash Fund(1) --* 1.00 0.35 1.35* 64 73 94 134(3) 14 43 74 134(3)
CLASS C SHARES
Zweig Strategy Fund 0.75 1.00 0.22 1.97 33 62 106 230 20 62 106 230
Zweig Appreciation Fund 1.00 1.00 0.33 2.33 36 73 125 267 24 73 125 267
Zweig Growth and Income Fund(5) 0.75 1.00 0.25 2.00 33 63 108 233 20 63 108 233
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Managed Assets 1.00 1.00 0.29 2.29 36 72 123 263 23 72 123 263
Zweig Government Fund(4) 0.39* 0.75 0.36 1.50* 30 54 93 202 17 54 93 202
Zweig Cash Fund(1) --* 0.30 0.35 0.65* 19 21 36 81 7 21 36 81
CLASS I SHARES
- --------------
Zweig Strategy Fund 0.75 -- 0.22 0.97 10 31 54 119 10 31 54 119
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Appreciation Fund 1.00 -- 0.33 1.33 14 42 73 160 14 42 73 160
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Growth and Income Fund (5) 0.75 -- 0.25 1.00* 10 32 55 122 10 32 55 122
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Managed Assets 1.00 -- 0.29 1.29 13 41 71 156 13 41 71 156
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Goverment Fund(4) 0.39* -- 0.36 0.75* 8 24 42 93 8 24 42 93
- -------------------------------------------------------------------------------------------------------------------------------
Zweig Cash Fund(1) --* -- 0.35 0.35* 4 11 20 44 4 11 20 44
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* After expense reimbursement
<PAGE> 8
(1) The manager has voluntarily undertaken to limit the expenses of Zweig
Cash Fund (exclusive of taxes, interest, brokerage commissions, 12b-1
fees and extraordinary expenses) until December 31, 1996 to 0.35% of
its average net assets. The manager reserves the right to discontinue
this policy at any time after December 31, 1996. The Management Fees
noted above, without reimbursement, would be 0.50% for each Class,
Other Expenses would be as shown above except for Class A Shares which
would be 0.54%, and Total Fund Operating Expenses would be 1.34% for
Class A Shares,1.85% for Class B Shares, 1.15% for Class C Shares and
0.85% for Class I Shares assuming Other Expenses for Class B and Class
I Shares (as a percent of average net asets) are the same as for Class
C Shares.
(2) The 12b-1 Fees include a 0.25% Service Fee, 100% of which is
reallocated to National Association of Securities Dealers, Inc.
("NASD") member firms (commencing one year after purchase with respect
to Class B and Class C Shares) 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 all or a portion of the asset-based sales charge also included
in the 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 Share Conversion Feature), accordingly, years eight
through ten reflect expenses of the Class A Shares.
(4) The manager has voluntarily undertaken to limit the expenses of Zweig
Government Fund (exclusive of taxes, interest, brokerage commissions,
12b-1 fees and extraordinary expenses) until December 31, 1996 to
0.75% of its average net assets effective May 1, 1996. The manager
reserves the right to discontinue this policy at any time after
December 31, 1996. The Management Fees noted above, without
reimbursement, would be 0.60% for each Class and Total Fund Operating
Expenses would be 1.26% for Class A Shares, 1.96% for Class B Shares,
1.71% for Class C Shares and 0.95% for Class I Shares.
(5) The manager has voluntarily undertaken to limit the expenses of Zweig
Growth and Income Fund (exclusive of taxes, interest, brokerage
commissions, 12b-1 fees and extraordinary expenses) until April 30,
1997 to 1.00% of its average daily net assets effective upon its
commencement of operations. The manager reserves the right to
discontine this policy at any time after April 30, 1997.
FINANCIAL HIGHLIGHTS
The information presented below is for the six months ended June 30,
1996 and the fiscal year or period ended December 31 for each of the years
indicated.
Except for the six months ended June 30, 1996, Coopers & Lybrand
L.L.P., the funds independent accountants, has audited this information. Their
report for each of the last five years is includeded in the 1995 Annual Report
of the Trust which is available upon request and is incorporated by reference
into the Statement of Additional Information (SAI).
The distribution of Zweig Growth and Income Fund and Class I Shares
commenced on the effective date of this Prospectus.
<PAGE> 9
<TABLE>
<CAPTION>
PERIOD Net Asset Net Net Total from Dividends Distribu- Distribu- Total
ENDED Value Invest- Realized Investment from Net tions tions Distribu-
----- Beginning ment and Operations Investment from from tions
of Period Income Unrealized ---------- Income Realized Capital -----
--------- ------ Gains ------ Capital Paid-In
(Losses) Gains -------
-------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ZWEIG STRATEGY FUND CLASS A
1996 $14.51 $0.10 $0.51 $0.61 $(0.09) $ -- $ -- $(0.09)
- --------------------------------------------------------------------------------------------------------------------
1995 12.36 0.27 2.80 3.07 (0.37) (0.55) -- (0.92)
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 B
- ---------------------------
1996(7) 15.12 0.02 (0.05) (0.03) (0.02) -- -- (0.02)
- --------------------------------------------------------------------------------------------------------------------
ZWEIG STRATEGY FUND CLASS C
1996 14.56 0.05 0.50 0.55 (0.06) -- -- (0.06)
- --------------------------------------------------------------------------------------------------------------------
1995 12.35 0.16 2.82 2.98 (0.22) (0.55) -- (0.77)
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
1996 15.91 0.09 0.90 0.99 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
1995 13.54 0.16 3.05 3.21 (0.33) (0.51) -- (0.84)
1994 14.33 0.16 (0.43) (0.27) (0.06) (0.46) -- (0.46)
1993 13.10 0.07 1.83 1.90 (0.06) (0.61) -- (0.61)
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 B
- -------------------------------
1996(7) 16.34 0.01 0.40 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
ZWEIG APPRECIATION FUND CLASS C
1996 15.83 0.03 0.92 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios to Average
Net Assets
-----------------
PERIOD Net Asset *** EXPENSES Net Port- AVERAGE End of
ENDED Value End Total -------- Invest- folio COMMISS- Period Net
----- of Period Return ment Turn- ION PER Assets (in
--------- ------ Income over SHARE ON thous-
------ Rate PORTFOLIO ands)
---- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
ZWEIG STRATEGY FUND CLASS A
1996 $15.03 4.20% 1.24%* 1.24%* 21%* $.03 $598,066
- --------------------------------------------------------------------------------------------------------------------
1995 14.51 25.12 1.27 1.92 95 .03 558,286
1994 12.36 1.14 1.40 1.90 70 N/A 424,805
1993 12.52 14.97 1.43 1.00 359 N/A 405,884
1992 13.60 7.61 1.63 1.32 249 N/A 358,318
1991 13.03 23.34 1.58 1.79 179 N/A 367,343
1990 10.81 (2.16) 1.67 3.89 105 N/A 298,734
1989(1) 11.36 0.18 N/A N/A N/A N/A 333,391
ZWEIG STRATEGY FUND CLASS B
- ---------------------------
1996(7) 15.07 (0.20) 1.94* 0.54* 213* .03 19,327
- --------------------------------------------------------------------------------------------------------------------
ZWEIG STRATEGY FUND CLASS C
1996 15.05 3.78 1.94* 0.54* 213* .03 627,744
- --------------------------------------------------------------------------------------------------------------------
1995 14,56 14.26 1.97 1.22 95 .03 530,300
1994 12.35 0.41 2.10 1.20 70 N/A 307,011
1993 12.51 14.18 2.13 0.30 359 N/A 188,631
1992(2) 13.61 6.00 2.43* 0.40* 249 N/A 64,697
ZWEIG APPRECIATION FUND CLASS A
1996 16.90 6.22 1.59* 1.02* 110* .03 276,694
- --------------------------------------------------------------------------------------------------------------------
1995 15.91 24.00 1.63 1.10 68 .03 272,590
1994 13.54 (1.83) 1.70 1.09 97 N/A 213,400
1993 14.33 14.65 1.73 0.52 69 N/A 230,230
1992 13.10 9.52 1.96 0.49 61 N/A 200,656
1991(3) 12.03 6.08 2.19* 1.27* 8 N/A 157,948
ZWEIG APPRECIATION FUND CLASS B
- -------------------------------
1996(7) 16.74 2.45 2.29* 0.32* 110* .03 3,442
- --------------------------------------------------------------------------------------------------------------------
ZWEIG APPRECIATION FUND CLASS C
1996 16.75 5.81 2.29* 0.32* 110* .03 216,342
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
PERIOD Net Asset Net Net Total from Dividends Distribu- Distribu- Total
ENDED Value Invest- Realized Investment from Net tions tions Distribu-
----- Beginning ment and Operations Investment from from tions
of Period Income Unrealized ---------- Income Realized Capital -----
--------- ------ Gains ------ Capital Paid-In
(Losses) Gains -------
-------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 13.36 0.06 3.03 3.09 (0.11) (0.51) -- (0.62)
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
1996 12.48 0.24 0.03 0.27 (0.17) -- -- (0.17)
- --------------------------------------------------------------------------------------------------------------------
1995 11.76 0.47 1.40 1.87 (0.75) (0.40) -- (1.15)
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 B
- ----------------------------
1996(7) 12.43 0.09 0.09 0.23 (0.04) -- -- (0.04)
- --------------------------------------------------------------------------------------------------------------------
ZWEIG MANAGED ASSETS CLASS C
1996 12.49 0.20 0.02 0.22 (0.13) -- -- (0.13)
- --------------------------------------------------------------------------------------------------------------------
1995 11.73 0.38 1.40 1.78 (0.62) (0.40) -- (1.02)
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)
ZWEIG GOVERNMENT FUND CLASS A(8)
1996 10.39 0.26 (0.64) (0.38) (0.25) -- -- (0.25)
- --------------------------------------------------------------------------------------------------------------------
1995 9.63 0.52 0.77 1.29 (0.53) -- -- (0.53)
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)
ZWEIG GOVERNMENT FUND CLASS B(8)
- --------------------------------
1996(7) 9.76 0.08 0.02 0.10 (0.08) -- -- (0.08)
- --------------------------------------------------------------------------------------------------------------------
ZWEIG GOVERNMENT FUND CLASS C(8)
1996 10.38 0.24 (0.65) (0.41) (0.22) -- -- (0.22)
- --------------------------------------------------------------------------------------------------------------------
1995 9.62 0.48 0.76 1.24 (0.48) -- -- (0.48)
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(5)
1996 1.00 0.02 -- 0.02 (0.02) -- -- (0.02)
- --------------------------------------------------------------------------------------------------------------------
1995 1.00 0.05 -- 0.05 (0.05) -- -- (0.05)
1994(6) 1.00 0.03 -- 0.03 (0.03) -- -- (0.03)
</TABLE>
<TABLE>
<CAPTION>
Ratios to Average
Net Assets
-----------------
PERIOD Net Asset *** EXPENSES Net Port- AVERAGE End of
ENDED Value End Total -------- Invest- folio COMMISS- Period Net
----- of Period Return ment Turn- ION PER Assets (in
--------- ------ Income over SHARE ON thous-
------ Rate PORTFOLIO ands)
---- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1995 15.83 23.20 2.33 0.40 68 .03 195,204
1994 13.36 (2.55) 2.40 0.39 97 N/A 139,397
1993 14.19 13.84 2.43 (0.18) 69 N/A 105,957
1992(2) 13.01 5.52 2.80* (0.32)* 61 N/A 42,089
ZWEIG MANAGED ASSETS CLASS A
1996 12.58 2.18 1.62* 2.76* 228* .02 129,424
- --------------------------------------------------------------------------------------------------------------------
1995 12.48 16.26 1.59 3.69 239 .03 141,110
1994 11.76 (2.93) 1.68 2.70 299 N/A 154,441
1993(4) 12.38 11.98 1.67* 1.93* 196 N/A 121,620
ZWEIG MANAGED ASSETS CLASS B
- ----------------------------
1996(7) 12.62 1.85 2.32* 2.06* 228* .02 3,443
- --------------------------------------------------------------------------------------------------------------------
ZWEIG MANAGED ASSETS CLASS C
1996 12.58 1.77 2.32* 2.06* 228* .02 478,898
- --------------------------------------------------------------------------------------------------------------------
1995 12.49 15.44 2.29 2.99 239 .03 527,432
1994 11.73 (3.66) 2.38 2.00 299 N/A 570,710
1993(4) 12.36 11.34 2.37* 1.23* 196 N/A 429,088
ZWEIG GOVERNMENT FUND CLASS A(8)
1996 9.76 (3.71) 1.22* 5.17* 306* N/A 36,108
- --------------------------------------------------------------------------------------------------------------------
1995 10.39 13.84 1.26 5.22 195 N/A 42,207
1994 9.63 (2.83) 1.28 5.07 191 N/A 47,622
1993 10.43 10.35 1.30 5.46 256 N/A 60,207
1992 10.01 4.51 1.30 6.58 200 N/A 70,062
1991 10.21 14.35 1.42 7.10 361 N/A 83,859
1990 9.60 6.09 1.44 7.44 263 N/A 102,209
1989 9.75 12.46 1.88 7.04 445 N/A 119,742
1988 9.29 4.63 1.91 7.27 24 N/A 203,999
1987 9.54 (2.02) 1.81 7.09 58 N/A 350,614
1986 10.70 10.23 1.87 6.93 169 N/A 421,837
ZWEIG GOVERNMENT FUND CLASS B(8)
- --------------------------------
1996(7) 9.78 0.99 1.92* 4.47* 306* N/A 85
- --------------------------------------------------------------------------------------------------------------------
ZWEIG GOVERNMENT FUND CLASS C(8)
1996 9.75 (3.96) 1.67* 4.72* 306* N/A 16,116
1995 10.38 13.27 1.71 4.77 195 N/A 19,778
1994 9.62 (3.18) 1.73 4.62 191 N/A 22,599
1993 10.40 9.48 1.75 5.01 256 N/A 21,301
1992(2) 10.02 6.31 1.81* 5.93* 200 N/A 9,210
ZWEIG CASH FUND CLASS A(5)
1996 1.00 2.37 0.65* 4.71* N/A N/A 3,366
- --------------------------------------------------------------------------------------------------------------------
1995 1.00 5.08 0.87 4.97 N/A N/A 3,661
1994(6) 1.00 2.55** 0.62** 2.52** N/A N/A 4,303
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ZWEIG CASH FUND CLASS B(5)
1996(7) 1.00 0.01 -- 0.01 (0.01) -- -- (0.01) 1.00 0.97 1.35* 4.01* N/A N/A 58
ZWEIG CASH FUND CLASS C(5)
1996 1.00 0.02 -- 0.02 (0.02) -- -- (0.02) 1.00 2.37 0.65* 4.72* N/A N/A 3,415
1995 1.00 0.05 -- 0.05 (0.05) -- -- (0.05) 1.00 5.08 0.87 4.97 N/A N/A 4,458
1994(6) 1.00 0.03 -- 0.03 (0.03) -- -- (0.03) 1.00 2.55** 0.61** 2.52** N/A 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) During 1996 and 1995, the manager voluntarily reimbursed Zweig Cash
Fund Class A, Class B and Class C $.003, $.001 and $.003 per share
(0.60%, 0.39% and 0.57% ratio of expenses to average net assets) and
$.005, $0 and $.003 per share (0.47%, 0% and 0.28% ratio of expenses
to average net assets), respectively.
(6) Commenced operations May 1, 1994.
(7) Commenced operations April 8, 1996.
(8) During 1996, the manager voluntarily reimbursed Zweig Government Fund
Class A, Class B and Class C $.005, $.008 and $.005 per share (0.11%,
0.34% and 0.10% ratio of expenses to average net assets),
respectively.
* Annualized.
** Not annualized.
*** Total Return does not consider the effect of any initial or contingent
deferred sales charge.
<PAGE> 12
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 offset 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). As long as the indicators continue to show high levels of risk in
the securities markets, Zweig Strategy Fund will continue to maintain its
exposure to market risk at lower than normal levels. 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. As
long as the indicators continue to show high levels of risk in the securities
markets, Zweig Appreciation Fund will continue to maintain its exposure to
market risk at lower than normal levels.
ZWEIG GROWTH AND INCOME FUND seeks long-term capital appreciation, with
dividend income a secondary consideration, consistent with preservation of
capital and reduction of portfolio exposure to market risk. The risk management
strategies described above under Zweig Strategy Fund also are used in managing
this fund. As long as the indicators continue to show high levels of risk in
the securities markets, Zweig Growth and Income Fund will continue to maintain
its exposure to market risk at lower than normal levels.
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, short-term debt instruments, currencies and currency-related
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 normally will 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, forward currency contracts,
and options to increase or decrease its exposure to changing securities prices,
interest rates or currency exchange rates.
ZWEIG GOVERNMENT FUND seeks a high total return from current income and capital
appreciation consistent with preservation of capital over the long term 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 distribution
fees 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 in the first sentence under the name of
each fund 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 outstanding 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 SAI has further details. As with any mutual fund, there is no
assurance that a fund's objectives will be achieved.
8
<PAGE> 13
DR. MARTIN E. ZWEIG
Dr. Martin E. Zweig has created and refined a risk-averse style of money
management over a 25-year career providing investment advisory and portfolio
management services. Dr. Zweig is President and/or Chairman of investment
advisory firms that presently manage over $6.6 billion of assets. This $6.6
billion includes approximately $1.2 billion in publicly traded closed-end
investment companies and $2.4 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 22 years and, in 1992, became the ninth person selected for the
program's Hall of Fame. Dr. Zweig is the publisher 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, Zweig
Appreciation Fund and Zweig Growth and Income 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 has been the portfolio manager for Zweig Managed Assets and Zweig
Government Fund since 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 manager of Zweig Strategy Fund, Zweig Appreciation Fund and
Zweig Growth and Income Fund uses proprietary computer-driven models developed
by Dr. Zweig and his staff to choose stocks for the funds. The models evaluate
and rank 3,000 stocks based primarily on earnings momentum, relative valuation,
changes in analysts' earnings estimates, earnings growth, price momentum, cash
flow trend, payout ratio trend and other market measurements. The stock
selection models 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 models.
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 Zweig Appreciation Fund also may invest
up to 35% of its assets in large-company stocks.
The Zweig Growth and Income Fund will consist of up to 300 stocks divided
approximately equally between those selected by the portfolio manager for their
growth characteristics (including positive earnings momentum and above average
earnings growth rates) and those for their income characteristics (including
above average dividend yields and favorable dividend growth).
U.S. stocks in Zweig Managed Assets are selected using a model that is
comprised of industry specific background indicators and momentum components.
These indicators determine the optimal weighting in each major industry group.
The selection of the individual securities is determined by ranking
approximately 750 stocks that the portfolio manager considers to be comparable
in market capitalization and liquidity to the stocks in the Standard & Poor's
500 Index. Up to 200 stocks are selected in accordance with the weightings of
the industry groups.
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
determining the domestic asset allocation strategy. Zweig Managed Assets may
invest 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, in investment vehicles structured to track a particular
major foreign stock market index, and in investment companies, commonly refered
to as "Country Funds", that invest in the securities of a particular country.
Zweig Government Fund invests in U.S. Government securities. These obligations
of the United States Government and its agencies and instrumentalities are
considered to have the lowest risk of default. Therefore, the primary
consideration in choosing U.S. Government 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 interest 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 Zweig Government Fund are chosen primarily by utilizing a model
that incorporates various indicators, such as: momentum of bond prices,
short-term interest rate trends, inflation indicators, general economic and
liquidity indicators, and other market indicators and statistics.
9
<PAGE> 14
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 value or in a fund's net assets.
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. Zweig Government Fund 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. These 2,500 stocks have a
market capitalization ranging from approximately $177 million to $3.9
billion. Their average daily trading volume is approximately $4.5
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 and Zweig Growth and Income 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 (GNMA), Resolution Funding Corp., Student Loan
Marketing Association, Tennessee Valley Authority and the U.S. Postal
Service.
MORTGAGE SECURITIES are debt instruments that include mortgage-backed
securities (for example, GNMA certificates) and collateralized
mortgage obligations. In addition to price fluctuations based on
changes in interest rates and the market's perception of the issuer,
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
homeowners refinance their mortgages at lower rates.
MONEY MARKET INSTRUMENTS are short-term, high quality debt securities that
present minimal risk of loss. We use these securities 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 one year) and
other financial institution obligations.
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 Zweig Government Fund and Zweig
Cash Fund) that is marked to market, or priced, each day.
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
information available 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. Zweig Government Fund 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, Zweig Appreciation Fund and Zweig Growth and Income 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.
10
<PAGE> 15
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. Illiquid securities
include securities not listed on a recognized foreign securities exchange and
repurchase agreements having more than seven days remaining to maturity. No
more than 15% of a fund's net assets (10% for Zweig Cash Fund) may be invested
in illiquid securities.
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.)
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 money market and savings accounts
and CDs. 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 Zweig Government Fund 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 indicates 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, a fund will not adjust
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 SAI 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 liquid debt obligations
and/or equity securities in a segregated account with the fund's custodian, The
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
11
<PAGE> 16
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 of
securities denominated in foreign currencies or used for investment purposes.
These contracts 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 additional
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. 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, liquid debt
obligations and/or equity 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.
OTHER INVESTMENT COMPANIES. A direct investment by a fund in securities,
financial instruments, currencies, futures and forward contracts, and related
options involves risks described elsewhere in this propectus. An investment in
them made through another investment company will also involve an investment
manager and service providers (e.g., custodians) over which the Trust will have
no direct control; and there will be an additional layer of expenses, including
the fee of such investment manager. Closed-end investment companies frequently
trade at a discount from net asset value. Only if the discount is sufficiently
large will the additional income earned by a portfolio purchased at a discount
offset the additional layer of expense. If shares of another investment
company are purchased at a discount which subsequently declines, performance
will be better than it would have been had the underlying instruments been
purchased directly. The risks of investing in funds are discussed more fully
in the SAI. A fund will invest in another investment company only if the
portfolio manager believes that a fund's investment objective will be furthered
thereby. No more than 10% of a fund's assets will be invested in other
investment companies, or more than 5% in any one. Zweig Cash Fund will not
normally invest in any other investment companies.
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
the end of the month of inception through December 31, 1995, computed by
Micropal Inc., are shown below for the Zweig Mutual Funds and for the average
fund with a comparable investment objective (distribution of the Class B Shares
commenced on April 8,1996 and distribution of Class I Shares and Zweig Growth
and Income Fund will commence 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 NAV
declines do not reflect sales charges. Please remember that past performance
does not predict future results; any fund can decline more in the future than
it has in the past.
12
<PAGE> 17
<TABLE>
<CAPTION>
Class A Shares Class C Shares*
-------------- --------------
<S> <C> <C>
Max NAV Decline of ZWEIG STRATEGY FUND -7.13% (3rd lowest of -4.30% (9th lowest of
from inception in December 1989 246 growth funds) 309 growth funds)
Max NAV Decline of Average Growth Fund for period+ -18.46% -8.59%
Max Decline of S&P 500 for period -14.69% -6.95%
Max NAV Decline of ZWEIG APPRECIATION FUND -6.04% (8th lowest of -6.20% (11th lowest of
from inception in October 1991 109 small cap funds) 119 small cap funds)
Max NAV Decline of Average Small-Cap Fund for -13.68% -11.78%
period+
Max Decline of Value Line Geometric Index for period -9.87% -9.87%
Max NAV Decline of ZWEIG MANAGED ASSETS -4.88% (4th lowest of -5.44% (7th lowest of
from inception in February 1993 30 multi-asset global funds) 30 multi-asset global funds)
Max NAV Decline of Average Multi-Asset Global Fund -9.50 -9.50%
for period**
Max NAV Decline of ZWEIG GOVERNMENT FUND -4.79% (10th lowest of -5.18% (17th lowest of
from September 1989*** 80 U.S.Gov't Securities funds) 104 U.S. Gov't Securities funds)
Max NAV Decline of Average U.S. Govt. Fund for -8.00% -6.88%
period+
Max NAV Decline of Lehman Composite Government -5.41% -5.41%
Bond Index
</TABLE>
13
<PAGE> 18
- -----------------------
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 Multi-Asset Global Fund category was recently created by
Morningstar. It consists of mutual funds with investment objectives
too broad and flexible to allow them to fit comfortably into any other
objective. The information is based on 30 funds, and Micropal Inc.
calculated the maximum NAV decline.
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 in February 1992 (February 1993 for Zweig Managed
Assets).
** Sources: Morningstar and Micropal inc.
*** Zweig/Glaser Advisers assumed responsibility for managing the fund in
September 1989. Under the prior manager, from inception in March 1985,
the maximum NAV decline was -10.87% for the fund, -7.50% for the
Average U.S. Government Fund and -5.41% for the Lehman Composite
Government Bond Index.
+ The maximum NAV decline for funds with a comparable investment
objective is an unweighted average of all such funds tracked by
Micropal Inc.
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
SAI 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
the fund 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.
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 Mutual 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
Zweig Mutual Funds determine the net asset value of each class of shares on
each day that the New York Stock Exchange (NYSE) is open. Net asset values are
calculated as of 2:00 p.m. New York time for Zweig Cash Fund shares and as of
the close of regular trading on the NYSE for Zweig Cash Fund and the other
funds.
We subtract the non-class specific liabilities of a fund from the fund's assets
to determine its total net assets. We then determine each class's proportionate
interest in the fund's net assets. The liabilities attributable to 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.
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.
14
<PAGE> 19
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 so long
as, in management's view, such qualification is in the shareholders' interest.
Distributions are declared separately for each class of shares of a fund.
Distributions will be reinvested at net asset value unless you elect to receive
distributions in cash. Shareholders who have elected to receive distributions
in cash but whose accounts have been classified as "stop mail" accounts
because two consecutive mailings have been returned as "undeliverable", will
automatically have their future distributions reinvested at net asset value.
The Zweig Cash Fund declares a dividend at 2:00 p.m. New York time on each day
the NYSE is open. Zweig Cash Fund's dividends include all accrued interest,
earned discounts and realized gains and losses, less amortized premiums and
accrued expenses. The fund pays or reinvests these dividends on the last
business day of each month.
Zweig Government Fund declares and pays net investment income dividends
monthly. Zweig Strategy Fund, Zweig Growth and Income Fund and Zweig Managed
Assets declare and pay net investment income dividends semi-annually. 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 Class B and Class C Shares have higher distribution fees, dividends on
Class A Shares will be higher than dividends on Class B and Class C Shares of
the same fund. Because Class I Shares have no distribution fees, dividends on
Class I Shares will be higher than dividends on Class A 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 31 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. 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, less
any return of capital distributions.
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
investments 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 their respective net asset values (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). All
exchanges are effected as of the close of regular trading on the NYSE. 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 15th day of
each month or quarter (see Application Form in this Prospectus).
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 WHEN PURCHASING SHARES
Zweig Mutual Funds offer investors four classes of shares (Class A Shares,
Class B Shares, Class C Shares and Class I Shares). All except Class I Shares
bear sales charges in different forms and amounts and bear different levels of
expenses (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. Class A shares are
sold with an initial sales charge that varies based upon the amount invested as
shown in the table below. Class B Shares have no initial sales charge, but are
subject to a declining contingent deferred sales charge (CDSC) if sold within
six years of purchase. Class C Shares have no initial sales charge, but are
subject to a CDSC if sold within one year of purchase. Class B and Class C
Shares have higher annual operating expenses than Class A Shares. Class B
Shares of Zweig Government Fund and Zweig Cash Fund have higher annual
operating expenses (and lower dividends) than their corresponding Class C
Shares. Class B Shares convert to Class A Shares after a holding period of
seven years from the initial purchase. Class C Shares have a shorter CDSC
period than Class B Shares, but they do not convert to Class A Shares. Class I
Shares are offered at net asset value without an initial sales charge and are
not subject to a contingent deferred sales charge or a Rule 12b-1 distribution
fee. Class I Shares are only available to tax-exempt retirement plans of Zweig
Securities Corp. and its affiliates, and certain institutional investors that
invest at least $1 million directly with Zweig Securities Corp., the principal
distributor of Zweig Mutual Funds. Institutional investors include: (1)
unaffiliated benefit plans, such as qualified retirement plans (other than
individual retirement accounts amd certain other self-directed retirement
plans); (2) unaffiliated banks and insurance companies purchasing for their own
accounts; and (3) endowment funds of unaffiliated non-profit organizations.
CONTINGENT DEFERRED SALES CHARGE (CDSC). The applicable CDSC rate for each
class of shares is set forth in the Fee Table on page 2. The CDSC is imposed on
the lesser of: (a) the current market value, or (b) the initial cost of the
shares being redeemed. No CDSC is imposed upon shares
15
<PAGE> 20
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(s): (a) following the death of a
shareholder; (b) 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; (c) when a total or partial redemption is made in
connection with a distribution from (i) retirement plans after reaching age 59
1/2, except that if, immediately prior to the redemption, the aggregate amount
invested by the retirement plan in Class B Shares of the Zweig Mutual Funds
(excluding the reinvestment of distributions) during the prior four year period
equals 50% or more of the total value of the retirement plan's assets in the
Zweig Mutual Funds, then the CDSC will not be waived, or (ii) certain other
Class A Share retirement plans; (d) under the systematic withdrawal program if
the amount being withdrawn is no more than 1% per month of the value of the
account at the time the program was established; and (e) effected pursuant to
the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then effective
minimum account size.
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
------------------
Amount Invested
---------------
Offering Net Asset
Price of Value of Dealer's
the Shares the Shares Sales
Purchased Purchased Concession
--------- --------- ----------
<S> <C> <C> <C>
Zweig Strategy Fund, Zweig Appreciation
Fund, Zweig Growth and Income 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)
ZWEIG GOVERNMENT FUND:
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 set forth 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 50 eligible employees. No initial sales charge applies on these
investments; however, a 1% CDSC will apply on redemptions within 18 months of
purchase, except for redemptions of shares purchased by an investor in amounts
of $1,000,000 or more where such investor's dealer of record, due to the nature
of the investor's account, notifies the distributor prior to the time of the
investment that the dealer waives the commission otherwise payable to the
dealer as described below or agrees to receive such commissions ratably over an
18 month period.
16
<PAGE> 21
<TABLE>
<CAPTION>
Dealer's
Amount Purchased Commission
- ---------------- ----------
(as % of
purchase)
<S> <C>
ZWEIG STRATEGY FUND, ZWEIG
APPRECIATION FUND, ZWEIG
GROWTH AND INCOME FUND
AND ZWEIG MANAGED ASSETS:
$1,000,000 to $2,000,000 0.75%
$2,000,000 to $5,000,000 0.50%
Amount over $5,000,000 0.25%
ZWEIG GOVERNMENT FUND:
$1,000,000 to $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
that are members of the NASD. Class A Shares 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. Class A Shares also may be purchased at
net asset value for shareholders by dealers where the amount invested
represents redemption proceeds from funds distributed other than by the
distributor, and where the shareholder has paid a sales charge in connection
with the purchase of such other fund's shares; provided that (i) such Class A
Shares are purchased within 30 days after redemption of such other fund's
shares; and (ii) sufficient documentation of such redemption as the distributor
may require shall be provided at the time the Class A Shares are purchased.
This provision is not available where the shares of a fund being redeemed were
subject to a deferred sales load or redemption fee.
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
dealer 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 funds 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 expiration 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
Year Since Purchase Was Made is equal to
- ---------------------------- -----------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh None*
- ---------------
</TABLE>
* Class B Shares convert to Class A Shares as described below.
17
<PAGE> 22
CLASS B SHARE 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 following
the anniversary date, 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.
The conversion of Class B Shares 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 Zweig Government Fund 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 than
Class B Shares; however, they do not convert to Class A Shares.
CLASS I SHARES. Class I Shares, which have no initial sales charge and no Rule
12b-1 fee, are currently available for purchase only from Zweig Securities
Corp. to tax-exempt retirement plans of Zweig Securities Corp.and its
affiliates and certain institutional investors.
Zweig Securities Corp. will reallow up to 0.15% to any dealer with sales of
Zweig Mutual Fund shares at an annual rate of $4 million or more or who can
reasonably be expected to achieve sales at that rate, 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 up to 0.20% of plan participant holdings
of Zweig Mutual Funds. In addition, Zweig Securities Corp. also may pay dealers
a fee at the annual rate of up to 0.10% of the average daily net assets that
have been continually invested in Zweig Mutual Funds for at least four years.
Zweig Securities Corp. also may pay dealers a fee of up to 0.10% of the average
daily net assets 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,
and 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
Initial Offering Period for Zweig Growth and Income Fund
Shares of the Zweig Growth and Income Fund are being offered during a period
scheduled to end on November 25, 1996 ("the Closing Date"). Securities dealers
may obtain non-binding indications of interest prior to actually confirming any
orders. The Zweig Growth and Income Fund will commence investment operations
and the continuous offering of its shares on the first business day after the
Closing Date.
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. Class I Shares currently are available for purchase only from
Zweig Securities Corp. The minimum initial investment is $1,000 for a regular
account and $250 for IRA and other retirement accounts, pension and profit
sharing plans, custodial accounts under the Uniform Gifts to Minors Act, trust
and estate or qualifying group plans. The minimum initial investment for
institutional investors in Class I Shares is $1 million. There is no minimum
amount for additional investments. We reserve the right to change or waive
minimums or to reject 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 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 Company
P.O. Box 8505
Boston, MA 02266-8505
Make your check payable to State Street Bank & Trust Company or to a Zweig
Fund. Third party checks (i.e., any checks which are not made payable to the
order of State Street Bank & Trust
18
<PAGE> 23
Company or a Zweig Fund) will not be acepted. 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 or via payroll deduction into any of your Zweig accounts
on any day of each month or quarter. For further details, see the Application
Form or call 1-800-272-2700.
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. Payment for your redemption generally will be
mailed to you within seven days after your request is received. If shares are
purchased with an uncertified check and are being redeemed within 15 days
following purchase, the redemption proceeds may not be paid until 15 days
following purchase (or earlier if the Trust has evidence of cleared funds).
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,
together with any certificates that represent the shares you wish to redeem. If
the shares you redeem have a value of $10,000 or more, the signatures of
registered owners or their legal representatives must be guaranteed by an
appropriate guarantor. Mail your redemption request to:
Zweig Series Trust
c/o State Street Bank & Trust Company
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 dealers and government securities dealers. See the SAI 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 (unless you have notified Zweig Mutual Funds of an address change
within the preceding 15 days) 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
2:00 p.m. New York time for Zweig Cash Fund in order to wire the redemption
proceeds to you that day. For the other funds, the transfer agent must receive
your order before the close of regular trading on the NYSE (presently 4:00 p.m.
New York time) 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 SAI. 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.
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<PAGE> 24
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 normally will not close
an account maintained in connection with a tax-deferred retirement plan.
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 Plans for distribution (Class I Shares do not
have a Rule 12b-1 Plan). Because there is no requirement that the distributor
be reimbursed for all its expenses, or that a 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 plans, if for any reason a 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 Trust's Rule 12b-1 Plans are classified as compensation
plans.
The distributor reallows the 0.25% service fee to dealer firms that are members
of the National Association of Securities Dealers, Inc. who have signed a
dealer agreement and for continuous personal service by such members to
investors in the Trust, plus a portion of the asset based sales charges so that
these dealers receive such reallowances at the following aggregate annual
rates: (i) 0.25% commencing from date of purchase for the Class A Shares, (ii)
0.25% commencing one year after purchase for the Class B Shares, and (iii)
0.95% (0.70% and 0.25% for the Zweig Government Fund and Zweig Cash Fund,
respectively) commencing one year after purchase for the Class C Shares.
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 J. Glaser, 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, 0.75%; Zweig
Appreciation Fund, 1.00%; Zweig Growth and Income Fund, 0.75%; Zweig Managed
Assets, 1.00%; Zweig Government Fund, 0.60%; Zweig Cash Fund, 0.50%. 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, Zweig Growth and Income Fund and Zweig Managed Assets,
however, are higher than the fees paid by most mutual funds.
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, pricing services,
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
Trust's 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.
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<PAGE> 25
ORGANIZATION OF THE FUNDS
The Trust was established as a Massachusetts business trust on September 24,
1984, and reorganized as a Delaware business trust on April 30, 1996. A copy of
the Agreement and Declaration of Trust is on file with the Secretary of State
of the State of Delaware. 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 four classes of
shares in five funds, and five classes of shares in Zweig Cash Fund. Voting
rights are based on a shareholder's total dollar interest in a Series and are
thus allocated in proportion to the value of each shareholder's investment.
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 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 13 for the maximum NAV declines of Zweig Mutual
Funds compared to declines for the same period of the average
comparable fund and a benchmark index. 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 yield
or seven-day 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 SAI lists the
principal industry publications.
Strategic Equity Series ("SES"), whose shares may be sold only to separate
accounts of insurance companies, is managed using the same investment policies
and investment personnel as Zweig Growth and Income Fund ("ZGIF"). The total
return from inception on October 2, 1995 to June 30, 1996 for SES was 11.56%.
This figure assumes the deduction of annual expenses of 1.00% which coincides
with the expense limitation for ZGIF but does not reflect any distribution fees
which range from 0.30% to 1.00%, depending on which class of shares of ZGIF is
purchased. For the first year of its operations, ZGIF may utilize the
performance results of SES in its advertising material.
21
<PAGE> 26
The following is an assessment of the 1995 performance of Class A and Class C
Shares of each of the Zweig Mutual Funds in existence during 1995 (other than
Zweig Cash Fund). Class B Shares were not offered in 1995. We've included a
graph comparing each fund's performance since inception with benchmarks.
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, 1995.
Zweig Strategy S&P 500 Index Consumer Price Index
Dec. 29, 1989 $9,450 $10,000 $10,000
1989 9,466 10,078 $10,010
1990 9,261 9,690 $10,636
1991 11,431 12,660 $10,953
1992 12,301 13,623 $11,278
1993 14,134 15,003 $11,587
1994 14,295 15,198 $11,895
1995 17,885 20,903 $12,164
AVERAGE ANNUAL TOTAL RETURN - CLASS A SHARES
<TABLE>
<CAPTION>
1 year 5 year from inception on 12/29/89
<S> <C> <C>
25.1% 14.1% 11.2%
</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>
<CAPTION>
1 year from inception on 2/4/92
<S> <C>
24.3% 11.1%
</TABLE>
Zweig Strategy Fund solidly participated in the stock market gains of 1995.
The Class A and Class C Shares were up 25.1% and 24.3%, respectively. We
achieved our returns while taking considerably less risk than the average fund.
Our average cash position during the year was 37%.
We entered 1995 cautiously with an invested exposure of 30%, but we became more
heavily invested along the way as the results of our research became more
positive. Our stock selection process, which focuses on identifying companies
with above-average earnings growth and below-average valuations, made a strong
contribution to the fund's return. Overweightings in the technology and banking
stocks, two of the top-performing sectors, proved beneficial. The fourth
quarter saw a sharp rotation away from technology stocks, but the favorable
value characteristics cushioned our results, although we still lagged the
Standard & Poors 500 Index during the quarter.
22
<PAGE> 27
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 and the
Consumer Price Index for the period ended December 31, 1995.
Zweig Managed Zweig Managed
Assets Assets Consumer Price
Class A Class C Index S&P 500 Index
Feb. 8, 1993 $9,450 10,000 $10,000 $10,000
Dec. 31, 1993 10,582 11,009 $10,252 $10,675
Dec. 31, 1994 10,272 10,606 $10,526 $10,813
Dec. 31, 1995 11,942 12,244 $10,764 $14,872
AVERAGE ANNUAL TOTAL RETURN - CLASS A SHARES
<TABLE>
<CAPTION>
1 year from inception on 2/8/93
<S> <C>
16.3% 8.4%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN - CLASS C SHARES
<TABLE>
<CAPTION>
1 year from inception on 2/8/93
<S> <C>
15.4% 7.7%
</TABLE>
Foreign stock markets were laggards in 1995, however, U.S. stocks and bonds
posted banner years, which helped propel the Fund to returns of 16.3% and 15.4%
for the Class A and Class C Shares, respectively. Zweig Managed Assets
participated solidly in the gains of foreign and domestic stocks and bonds
during 1995, capturing nearly 95% of the 17.4% return of the Lipper Global
Flexible Fund Average.
Throughout 1995, central banks in Europe responded to weaker economic
conditions by lowering key short-term interest rates. Expectations of
continued central bank measures, combined with low inflation, helped bond
markets across Europe rally to new highs late in 1995. After declining more
than 25% in the first six months of 1995, Japanese stocks recovered, ending
December above where they had begun the year. We concentrated our investments
in Japanese bonds as interests rates fell during the early part of the year,
and then moved into Japanese stocks as the market rallied.
23
<PAGE> 28
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, 1995.
Zweig Value Line
Appreciation Geometric
Fund Index Consumer Price Index
Oct. 7, 1991 $9,450 $10,000 $10,000
1991 10,025 10,457 $10,088
1992 10,980 11,260 $10,388
1993 12,589 12,549 $10,673
1994 12,360 12,047 $10,958
1995 15,326 14,673 $11,206
AVERAGE ANNUAL TOTAL RETURN -- CLASS A SHARES
<TABLE>
<CAPTION>
1 year from inception on 10/7/91
<S> <C>
24.0% 12.1%
</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>
<CAPTION>
1 year from inception on 2/4/92
<S> <C>
23.2% 9.8%
</TABLE>
We've delivered on our goal of generating attractive returns during this
unusually kind phase in the market. Zweig Appreciation Fund Class A and C
Shares were up 24.0% and 23.2%, respectively, in 1995. These returns surpassed
the 21.8% earned by the Value Line Geometric Index. The average small-company
stock fund, meanwhile, was up 31.5%.
We also delivered on our goal of controlling risk. Our average cash position
during the year was 35%. Thus, we captured 75% of the gains of our peers with
a market exposure of only 65% - a superior risk-adjusted return. Beyond
holding cash, we also kept risk low through prudent industry diversification.
We participated in the gains of the technology sector, although the amount
invested in this sector never exceeded 20%. The Fund's risk control is
evidenced in a number of ways, from its much broader diversification among
stocks and sectors, to the substantially lower price-to-earnings ratios of its
stocks.
24
<PAGE> 29
ZWEIG GOVERNMENT FUND
Comparison of change in value of a $10,000 investment in Zweig Government Fund
Class A shares, the Lehman Composite Government Bond Index and the Consumer
Price Index for the period ended December 31, 1995.
Zweig Lehman Composite
Government Government
Fund Index Consumer Price Index
Mar. 25, 1985 $9,525 $10,000 $10,000
1985 10,960 11,792 $10,253
1986 12,080 13,598 $10,375
1987 11,860 13,896 $10,834
1988 12,462 14,874 $11,311
1989 14,073 16,991 $11,836
1990 14,966 18,475 $12,576
1991 17,157 21,307 $12,951
1992 17,932 22,847 $13,335
1993 19,487 25,282 $13,701
1994 18,936 24,427 $14,067
1995 21,556 28,906 $14,385
AVERAGE ANNUAL TOTAL RETURN -- CLASS A SHARES
<TABLE>
<CAPTION>
1 year 5 year from inception on 3/25/85
<S> <C> <C>
13.8% 7.8% 7.9%
</TABLE>
CLASS C SHARES -- Zweig Government 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>
<CAPTION>
1 year from inception on 2/4/92
<S> <C>
13.3% 6.4%
</TABLE>
What a difference a year makes! In stark contrast to a dismal 1994, 1995 was a
banner year for bonds. In 1994, the Lehman Brothers Bond Index fell 3.4%, its
worst annual performance in over a decade. But 1995 more than made up for it,
as the Index rallied 18.3% for the year.
Since the Federal Reserve embarked on a series of six interest rate hikes
commencing in February 1994, and was still tightening in early 1995, we elected
to maintain a low exposure to interest rate fluctuations. However, the economy
cooled rapidly, and bonds began to rally to new highs. Beginning in the second
quarter, we gradually increased the Fund's duration to 5.4 years, where it
remained at year-end. Zweig Government Fund captured nearly 80% of the gains
of the average government bond fund last year, with an average duration for
1995 of 4.1 years, which was lower than that of the average fund.
25
<PAGE> 30
APPLICATION (DO NOT USE FOR ZWEIG RETIREMENT PLANS OR FOR CLASS I SHARES)
FOR APPLICATION ASSISTANCE CALL 1-800-272-2700.
Zweig
Mutual Funds
MAIL ALL FORMS AND CHECKS TO:
The Zweig Mutual Funds
c/o State Street Bank and
Trust Company
P.O. Box 8505
Boston, MA 02266-8505
BY COURIER TO:
The Zweig Mutual Funds
c/o State Street Bank and
Trust Company
2 Heritage Drive, 3rd Floor
North Quincy, MA 02171
IF YOUR ACCOUNT IS ALREADY ESTABLISHED ENTER THE ACCOUNT NUMBER HERE:
______________________________________________________________________
1. ACCOUNT NAME (Check only one box)
INDIVIDUAL OR JOINT OWNERS*
______________________________________________________________________
Your Name (first, middle, last)
______________________________________________________________________
Joint Owner Name (first, middle, last)
______________________________________________________________________
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 (first, middle, last)
______________________________________________________________________
Minor Name (first, middle, last)
______________________________________________________________________
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.
______________________________________________________________________
Trust Title Date of Trust Agreement
______________________________________________________________________
Trustee Name Trust Tax ID Number
______________________________________________________________________
Additional Trustee Name
CORPORATION OR OTHER ENTITY
______________________________________________________________________
Name
______________________________________________________________________
Tax ID Number Type of entity
______________________________________________________________________
Officer or Partner authorized to act on the account
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
26
<PAGE> 31
________________________________________________________________________________
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 for each fund: $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.
There is no minimum amount for subsequent investments.
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 or to a Zweig Fund. No other check will be accepted
$______________________________________________________________________
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 $________________________
from _________________________________to ______________________________________
Fund Name Fund Name
Class A Class B Class C
beginning with the month of ___________________________________________________
on a monthly quarterly basis.
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
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<PAGE> 32
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 and Trust Company, 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 Section 2, 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 _
Savings _ Checking into any of your fund accounts on any day of the month.
Please attach a voided check or deposit slip 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 the __ day (choose any day from the 1st to the 31st) of each
month ___ quarter
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
($25 for retirement plans). 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
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<PAGE> 33
ALL REGISTRANTS MUST SIGN. UNTIL A PROPERLY COMPLETED SIGNED APPLICATION HAS
BEEN RECEIVED BY STATE STREET BANK AND TRUST COMPANY, 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 and Trust Company, 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 and Trust Company, 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 and Trust Company. 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.
29
<PAGE> 34
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fee table 2
Financial highlights 4
Zweig Series Trust 7
Investment objectives of the Zweig Mutual Funds 7
Dr. Martin E. Zweig 8
The portfolio managers 8
Stock selection and bond duration 9
Portfolio securities 10
Risk factors and managing exposure to market risk 12
Other investment policies 16
Net asset value 17
Distributions and taxes 17
Exchange privilege 18
Choosing among classes when purchasing shares 18
How to invest in the Zweig Mutual Funds 22
How to redeem your shares 23
The distributor 24
The manager and management fee 25
Organization of the funds 26
Performance information 26
</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 and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
COUNSEL
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
NO DEALER, SALESPERSON 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 GROWTH AND INCOME FUND
ZWEIG MANAGED ASSETS
ZWEIG GOVERNMENT FUND
ZWEIG CASH FUND
NOVEMBER 1,1996
30
<PAGE> 35
ZWEIG SERIES TRUST
5 Hanover Square, New York, N.Y. 10004
STATEMENT OF ADDITIONAL INFORMATION
ZWEIG SERIES TRUST (the "Trust" ), a Delaware business trust, is a
professionally managed, open-end, diversified, investment company which offers
investors the opportunity to invest in six Series. Each Series has distinct
investment objectives and policies, and a shareholders interest is limited to
the Series and to the Class in which he or she owns shares. The six Series are:
Zweig Strategy Fund; Zweig Appreciation Fund; Zweig Growth and Income Fund,
Zweig Managed Assets; Zweig Government Fund; 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 and service fee (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 ).
In addition, Class I Shares, which are not subject to a front-end sales charge,
CDSC, Rule 12b-1 Distribution Plan or service fee, are currently available for
purchase only from Zweig Securities Corp. to tax-exempt retirement plans of
Zweig Securities Corp. and its affiliates and certain institutional
investors.Zweig Cash Fund also issues a fifth class of shares (Class M Shares),
which is described in a separate Statement of Additional Information. The
Trusts distribution system is described more fully in the Prospectus under the
headings Choosing Among Classes When Purchasing 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 Trusts 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 November 1, 1996, 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)
November 1, 1996
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<PAGE> 36
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
REINSTATEMENT PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INVOLUNTARY REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
NET ASSET VALUE AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Custodian, Fund Accounting Agent, Transfer Agent and Dividend Paying Agent . . . . . . . . . . . . . . 20
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
YIELD AND PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<PAGE> 37
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. There can be no assurance that a Series' investment objectives will be
achieved. Set forth below is additional information with respect to the
investment objectives and policies of certain Series and a description of
certain financial instruments and techniques utilized by certain Series.
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.
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, 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.
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<PAGE> 38
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.
Futures Contracts (All Series except Zweig Cash Fund)
Upon entering into a futures contract, a Series will initially be required
to deposit with the 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. In
addition to initial margin, the Series is required to deposit cash, liquid debt
obligations, liquid equity securities or cash equivalents in an amount equal to
the notional value of all long futures contracts, less the initial margin
amount, in a segregated account with the custodian to ensure that the use of
such futures contracts is not leveraged. If the value of the securities placed
in the segregated account declines, additional securities, cash or cash
equivalents must be placed in the segregated account so that the value of the
account will at least equal the amount of the Series' commitments with respect
to such futures contracts.
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
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, the Series
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.
4
<PAGE> 39
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.
The hours of trading for futures contracts may not conform to the hours
during which the underlying securities are traded. To the extent that the
futures contracts markets close after the markets for the underlying
securities, significant price movements can take place in the futures contracts
markets that cannot be reflected in the markets of the underlying securities.
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 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.
Investment Companies (All Series except Zweig Cash Fund)
Investments by the Trust in investment companies will be effected by
independent investment managers, and the Trust will have no control over the
investment management, custodial arrangements or operations of any investments
made by such investment managers. Some of the funds in which a Series may
invest could also incur more risks than would be the case for direct
investments. For example, they may engage in investment practices that entail
greater risks or invest in companies whose securities and other investments are
more volatile. In addition, the funds in which a Series of the Trust invests
may or may not have the same fundamental investment limitations as those of the
Series itself. While a potential benefit of investing in closed-end investment
companies would be to realize value from a decrease in the discount from net
asset value at which some closed-end funds trade, there is also the potential
that such discount could grow, rather than decrease.
By investing in investment companies indirectly through the Trust, a
shareholder of the investing Series will bear not only a proportionate share of
the expenses of that Series (including operating costs and investment advisory
and administrative fees) but also, indirectly, similar expenses of the
investment companies in which the Series invests. A shareholder may also
indirectly bear expenses paid by investment companies in which the Series
invest related to the distribution of such investment companies' shares. Some
of the open-end investment companies in which the Series may invest may limit
the ability of shareholders (including a Series of the Trust) to redeem their
shares.
Zweig Cash Fund may not invest in securities of investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets. The other Zweig Mutual Funds may not invest in
investment companies except by purchase in the open market involving only
customary brokers' commissions, in
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connection with a merger, consolidation, reorganization, or acquisition of
assets, or as otherwise permitted by applicable law. Current law prohibits any
Series from (i) owning more than 3% of the voting securities of any one
investment company; (ii) investing more than 5% of its assets in the securities
of any one investment company; or (iii) investing more than 10% of its assets
in securities issued by investment companies. Any Series is also prohibited
from owning more than 10% of the voting securities of a registered closed-end
investment company. If the investment securities of another investment company
were the only investment securities held by a Series, these restrictions would
not apply to that Series. All Series may also invest in other investment
companies to facilitate the implementation of a master-feeder structure.
Zweig Government Fund
Zweig Government Fund seeks a high total return from current income and
capital appreciation consistent with preservation of capital over the long term
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. For temporary defensive purposes, the Series may hold
cash or invest in money market instruments without limit.
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.
Options on Government Securities
(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.
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Futures Contracts on Government Securities
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
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 profits on 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.
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.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of
each Series (other than Zweig Cash Fund, the investment restrictions of which
are set forth separately below), 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 voting securities are present in person or by
proxy, or (2) more than 50% of a Series'
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outstanding voting securities. However, these policies may be modified by the
Trustees, in their discretion, without shareholder approval, to the extent
necessary to facilitate the implementation of a master-feeder structure for any
or all of the Series (i.e., a structure under which a particular Series acts as
a feeder and invests all of its assets in a single pooled master fund with
substantially the same investment objectives and policies). 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, except as stated above with respect to a
master-feeder structure, no Series may:
1. 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 be 25% or more of the value of
the total assets of the Series (there is no such limitation with respect to
obligations of the U.S. Government, its agencies and instrumentalities or with
respect to investments in other investment companies complying with such
policy);
2. 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 (such limitations do not apply to securities issued by the U.S.
Government, its agencies or instrumentalities or with respect to investments in
other investment companies complying with such policy);
3. 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,
that invest in real estate or interests therein, including real estate
investment trusts;
4. 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;
5. Issue "senior securities," except as permitted under the Investment
Company Act of 1940;
6. Act as an underwriter, except that a Series may technically be
deemed an underwriter under the Securities Act of 1933, as amended (the 1933
Act ), in a registration under such Act necessary to resell certain restricted
securities;
7. 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; and
8. Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Growth and
Income Fund, and Zweig Government Fund may not 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 the Series' total assets, the Series
will make no further investments until such borrowing is repaid. It is the
current intention of the Series not to borrow money in excess of 5% of their
assets. Each such 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 such Series' 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 Zweig Managed Assets less liabilities (other than borrowings).
Any borrowings that come to exceed 1/3 of the value of Zweig Managed Assets'
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. Zweig Managed
Assets does not intend to purchase any security while borrowings representing
more than 5% of its total assets are outstanding. This 5% limitation is not a
fundamental policy of Zweig Managed Assets.
Non-Fundamental Restrictions
The investment restrictions set forth below are other investment policies
of each Series (except Zweig Cash Fund) that are non-fundamental that can be
changed by the Board of Trustees without a shareholder vote. Pursuant to such
restrictions and policies, no Series may:
9. 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.
10. Purchase securities of any other investment company, except (i) by
purchase in the open market involving only customary brokers' commissions, (ii)
in connection with a merger, consolidation, reorganization or acquisition of
assets, or (iii) as otherwise permitted by applicable law;
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11. Make investments in securities for the purpose of exercising control
over or management of the issuer;
12. 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 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);
13. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions and initial and variation
margin payments in connection with transactions in futures contracts and
options contracts;
14. 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;
15. 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, liquid debt obligations and/or equity securities acceptable to the
broker. In addition, a Series will be required to deposit cash, liquid debt
obligations and/or equity 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 and/or dividends
accruing on any liquid debt obligations and/or equity 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;
16. 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;
17. Purchase securities which are not readily marketable, such as certain
securities which are subject to legal or contractual restrictions on resale or
securities which are 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 would consist of such
securities;
18. 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. Zweig Government Fund and Zweig Cash Fund may not
invest in warrants; and
19. 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. Restrictions Applicable to Zweig Cash Fund
Zweig Cash Fund concentrates its investments in U.S. Government securities
and issues of U.S. Government agencies and instrumentalities as set forth in
its investment objective and has adopted certain restrictions and fundamental
policies which cannot be changed without approval by the holders of a majority
of the outstanding voting securities of Zweig Cash Fund as defined in the 1940
Act as the lesser of: (1) 67% or more of the Fund's voting securities present
at a meeting of shareholders, if the holders of more than 50% of the Fund's
outstanding voting securities are present in person or by proxy, or (2) more
than 50% of the Fund's voting securities.
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However, these policies may also be modified by the Trustees, in their
discretion, without shareholder approval, to the extent necessary to facilitate
the implementation of a master-feeder structure for Zweig Cash Fund. Pursuant
to such restrictions and policies, except as stated above with respect to a
master-feeder structure, 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;
- Borrow money, except from banks for temporary purposes in an amount up
to 10% of the value of its total assets. Zweig Cash 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. Zweig Cash 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. Zweig Cash Fund currently does not
intend to borrow money to an extent exceeding 5% of its total assets. Zweig
Cash 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 Zweig Cash 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 Risk Factors and Managing
Exposure to Market Risk and in this Statement of Additional Information under
the headings Investment Objectives and Policies and Investment Restrictions
shall not be viewed as loans for this purpose;
- Invest more than an aggregate of 10% of Zweig Cash 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 Zweig Cash Fund's net assets but will not be deemed to result in an
investment which is contrary to these restrictions.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to the materials in the Prospectus under the headings
Choosing Among Classes When Purchasing 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.
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 is advisable in the
interest of the remaining shareholders of a Series or Class 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 reinstatement 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.
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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
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.
NET ASSET VALUE AND TAXES
For all Series except Zweig Cash Fund, the net asset value per share of
each class of shares is determined as of the close of regular trading on the
NYSE, on each day that the NYSE is open. 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.
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.
Stocks, futures and options are valued at the closing prices reported on
recognized securities exchanges or if no sale was reported, and for unlisted
securities, at the mean between the last-reported bid and asked prices. Bonds
and other fixed-income securities are valued at prices obtained from an
established bond-pricing service when such prices are available. Forward
foreign currency contracts are valued using forward currency exchange rates
supplied by a quotation service. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees. Short-term obligations having a
remaining maturity of 60 days or less are valued at amortized cost (which
approximates market value). Zweig Cash Fund values all short-term investments
using the amortized cost method pursuant to Rule 2a-7 under the Investment
Company Act of 1940.
Zweig Cash Fund. The net asset value per share of each class of shares is
determined at 2:00 p.m. New York time and as of the close of regular trading on
the NYSE, on each day the NYSE is open. 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 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
11
<PAGE> 46
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.
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 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 Zweig Government Fund 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
12
<PAGE> 47
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 respect to
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.
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.
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<PAGE> 48
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 Chairman,
New York, NY 10017 Department of Business and Financial Affairs, The New School for
Social Research, President of the Money Marketeers of New York
University and Trustee of Simms Global Fund and Former Director
of 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 Cash Fund
Inc.
S. LELAND DILL Trustee Retired; Director of Coutts & Co. Trust Holdings Limited, Coutts
5070 North Ocean Dr. & Co. Group, Coutts & Co. (USA), Trustee of BT Portfolios and BT
Singer Island, FL 33404 Investment Funds. Former partner of Peat Marwick Mitchell & Co.
and Director of Zweig Cash Fund Inc. and Vintners International
Company, Inc.
EUGENE J. GLASER* Chairman, President of the Manager and President and Director of the
5 Hanover Square Chief Executive Distributor; Director of The Zweig Fund, Inc. Former Director of
New York, NY 10004 Officer and Trustee 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 Consultant
Chicago, IL 60601 to and Executive Vice President and Chief Financial Officer of
Bally Manufacturing Corporation, and Director of Zweig Cash
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, Inc.;
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.; Co-Chairman of
Research of Avatar Investors Associates Corp.(until December 31,
1996); Managing Director of the Managing General Partner of
Zweig-DiMenna Partners, L.P. and Zweig-DiMenna Special
Opportunities, L.P.; President and Director of Gotham Advisors,
Inc.and Euclid Advisors, Inc.; Member of the Undergraduate
Executive Board of the Wharton School, University of
Pennsylvania. Former President of Zweig Cash Fund Inc.; General
Partner of Zweig Katzen Investors, L.P.; and Director of
Zweig/Avatar Capital Management, Inc.
</TABLE>
14
<PAGE> 49
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
DAVID KATZEN Senior Vice President Senior Vice President of the Manager; Vice President of Zweig
900 Third Avenue Advisors Inc.; Executive Vice President of Euclid Advisors,
New York, NY 10022 Inc.; Director of Quantitative Research at Avatar Investors
Associates Corp. Former Vice President of The Zweig Fund,
Inc. and ZZK Management, Inc.; Director of Equity Research
for Zweig Total Return Advisors, Inc.; and Research Director
of Zweig Advisors 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
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
CHARLES I. LEONE First Vice President Chief Financial Officer and First Vice President of the Manager
5 Hanover Square and 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. Former
5 Hanover Square Vice President of Concord Financial Group and Executive Vice
New York, NY 10004 President and Chief Operating Officer of The Gabelli Equity
Trust, Inc.
JEFFREY LAZAR Vice President Vice President and Treasurer of The Zweig Fund, Inc. and The
900 Third Avenue Zweig Total Return Fund, Inc.; Vice President, Treasurer and
New York, NY 10022 Secretary of Zweig Advisors Inc. and Zweig Total Return
Advisors, Inc.
BETH ABRAHAM Assistant Vice Assistant Vice President of the Manager. Former self-employed
900 Third Avenue President consultant to the mutual fund industry and Senior Compliance
New York, NY 10022 Examiner in the New York Regional Office of the U.S. Securities
and Exchange Commission.
TOM DISBROW Assistant Treasurer Assistant Vice President of the Manager
5 Hanover Square
New York, NY 10004
</TABLE>
15
<PAGE> 50
<TABLE>
<CAPTION>
Name and Address Position With the Trust Principal Occupation During Past 5 Years
---------------- ----------------------- ----------------------------------------
<S> <C> <C>
Marc Baltuch Secretary First Vice President of the Manager; First Vice President,
900 Third Avenue Director, Chief Compliance Officer and Secretary of the
New York, NY 10022 Distributor.; Director and Vice President of Watermark
Securities, Inc.; Assistant Secretary of Gotham Advisors, Inc.,
Zweig Total Return Advisors, Inc. and Zweig Advisors Inc. Former
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.
Set forth below is a table showing the compensation of the Board of
Trustees:
<TABLE>
<CAPTION>
Total Compensation from
Aggregate Compensation from the Trust Paid to the
Name of Person, Position the Trust Trustees
------------------------ --------------------------- -----------------------
<S> <C> <C>
Claire B. Benenson, Trustee $13,250 $13,250
Richard E. Deems, Trustee 13,250 13,250
S. Leland Dill, Trustee 13,250 13,250
Eugene J. Glaser, Chairman, Chief 0 0
Executive Officer and Trustee
Donald B. Romans, Trustee 13,250 13,250
</TABLE>
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 in-person. The Trust currently pays each of
its disinterested trustees a fee of $5,000 per year, plus $1,500 per meeting
attended ($500 per phone meeting) and reimburses their expenses for attendance
at meetings, all of which is prorated on the basis of the assets of each
Series. In addition, each such trustee receives a fee of $1,000 per year from
each Series. For the fiscal year ended December 31, 1995, the fees and expenses
of disinterested trustees, as a group, were $59,397. As of December 31, 1995,
except for Dr. Zweig, 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 at any meeting of shareholders by a
vote of two-thirds of the outstanding shares of the Trust. Except as set forth
above, the trustees shall continue to hold office and may appoint their
successors.
16
<PAGE> 51
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 26, 1996, to the Trust's knowledge, except for Dr. Martin E.
Zweig (900 Third Avenue, New York, NY 10022) and members of his immediate
family, who own 5.02% of Zweig Cash Fund Class M Shares (of which he has shared
voting and investment power as to 1.51%, and disclaims beneficial ownership as
to 0.15%), Gotham Advisors Inc. (900 Third Avenue, 30th Floor, New York, NY
10022-4728), who owns 7.33% of Zweig Cash Fund Class M Shares (sole dispositive
and voting power), Prudential Securities f/b/o Roger Markle (100 Gold Street,
New York, NY 10292-0001), who owns 5.15% of Zweig Cash Fund Class A Shares
(sole dispositive and voting power), State Street Bank and Trust Company f/b/o
Edwin H. Updike (P.O. Box 789, 125 Hart Road, Pisgah Forest, North Carolina
28768-0789), who owns 7.38% of Zweig Cash Fund Class A Shares (sole dispositive
and voting power) and Prudential Securities f/b/o Stanley E. Coleby and Sharon
E. Coleby (100 Gold Street, New York, NY 10292-001), who own 7.69% of Zweig
Cash Fund Class C Shares (sole dispositive and voting power), no person is the
beneficial owner of 5% or more of the outstanding voting shares of any class of
shares of any Series of the Trust.
INVESTMENT MANAGEMENT AND OTHER SERVICES
MANAGER
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 continuance of the Management Agreement was last approved by the Trustees
on June 27, 1996.
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 0.50% of the average daily net
assets of Zweig Cash Fund, 0.60% of the average daily net assets of Zweig
Government Fund, 0.75% of the average daily net assets of Zweig Strategy Fund
and Zweig Growth and Income Fund, and 1.00% of the average daily net assets of
Zweig Appreciation Fund and Zweig Managed Assets. For the fiscal year ended
December 31, 1995, the management fees paid to the Manager by each Series were
as follows: Zweig Strategy Fund: $6,702,163; Zweig Appreciation Fund:
$4,141,179; Zweig Government Fund: $393,803; Zweig Managed Assets: $6,994,435;
Zweig Cash Fund: $358,589. For the years ended December 31, 1994 and 1993, the
fees paid to the Manager for each Series were as follows: Zweig Strategy Fund:
$5,172,202 and $3,753,277; Zweig Appreciation Fund: $3,612,972 and $2,928,819;
Zweig Government Fund: $460,359 and $474,955; Zweig Managed Assets: $7,161,203
and $2,744,103; and Zweig Cash Fund: $485,384 and $0.
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 has voluntarily undertaken to limit the expenses of Zweig Cash
Fund (exclusive of taxes, interest, brokerage commissions, Rule 12b-1 fees and
extraordinary expenses) until December 31, 1996 to 0.35% of its average daily
net assets. During the years ended December 31, 1995 and 1994, the manager's
reimbursements to Zweig Cash Fund aggregated $94,925 and $161,853,
respectively, under the prior voluntary expense limitations. The Manager
reserves the right to discontinue this policy at any
17
<PAGE> 52
time after December 31, 1996. In addition, the Manager has voluntarily
undertaken to limit the expenses of Zweig Government Fund (exclusive of taxes,
interest, brokerage commissions, 12b-1 fees and extraordinary expenses) to
0.75% of its average daily net assets effective May 1, 1996. The Manager
reserves the right to discontinue this policy at any time after December 31,
1996. The Manager has also voluntarily undertaken to limit the expenses of
Zweig Growth and Income Fund (exclusive of taxes, interest, brokerage
commissions, 12b-1 fees and extraordinary expenses) to 1.00% of its average
daily net assets effective upon its commencement of operations. The Manager
reserves the right to discontinue this policy at any time after April 30, 1997.
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 that 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) that 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 When Purchasing
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 continuance and amendment of the Distribution
Agreement was last approved by the Trustees on June 22, 1995.
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 8 to 15 basis
points.
DISTRIBUTION PLANS
The Trust has adopted a distribution plan for each class of shares of each
Series except Class I Shares (i.e., a plan for the Class A and C Shares, a plan
for the Class B Shares, and a plan for the Class M Shares; collectively the
Plans) 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 and Class I Shares) pays a service fee at a
rate of 0.25% per annum of the average daily net assets of such class of the
Series and a distribution fee based on average daily net assets at the
following rates: for Class A Shares of all Series -0.05% per annum; for Class B
Shares of all Series - 0.75% per annum; for Class C Shares - 0.75% per annum
for Zweig Appreciation Fund, Zweig Strategy Fund, Zweig Managed Assets and
Zweig Growth and Income Fund, 0.50% per annum for Zweig Government Fund and
0.05% per annum for Zweig Cash Fund.
For the fiscal year ended December 31, 1995, $305,671 in CDSCs was
collected on Class C Shares. The CDSC will be waived under certain
circumstances described in the Prospectus. In addition, 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 Rule 12b-1 Plan for the Class M Shares issued by Zweig Cash Fund (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 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.
18
<PAGE> 53
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
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 not been renewed).
For the fiscal year ended December 31, 1995, the Class A Shares of the
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Government Fund, Zweig
Managed Assets and Zweig Cash Fund paid a total of $1,466,005, $745,906,
$134,454, $453,720 and $12,009, pursuant to the Trust's distribution plan, in
connection with expenses incurred by the Distributor for compensation to
broker/dealers ($2,312,225), marketing ($1,302,647) and firm overhead
allocation ($40,732).
For the fiscal year ended December 31, 1995, the Class C Shares of the
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Government Fund, Zweig
Managed Assets and Zweig Cash Fund paid a total of $4,049,535, $1,654,829,
$156,113, $5,482,036 and $15,103, respectively, pursuant to the Trust's
distribution plan, in connection with expenses incurred by the Distributor for
compensation to broker/dealers ($9,882,936), marketing ($3,696,716) and firm
overhead allocation ($108,471).
For the fiscal year ended December 31, 1995, the Class M Shares of the
Zweig Cash Fund and the Distributor each paid $44,714 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 and C Shares and the Plan for Class
M Shares and the adoption of a 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 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 Board of Trustees has the right to terminate the Rule 12b-1 Plan for
the Class B Shares, and in the event of such termination, no further payments
would be made thereunder. However, in the event the Board of Trustees were to
terminate the Rule 12b-1 Plan for the Class B Shares for any Series, the Trust
may not thereafter adopt a new Rule 12b-1 Plan for a class of that Series
having, in the good faith determination of the Board of Trustees, substantially
similar economic characteristics to the Class B Shares. Termination of the Rule
12b-1 Plan for the Class B Shares or the Distribution Agreement does not affect
the obligation of the Class B shareholders to pay CDSCs. The Distributor has
sold its right to receive certain payments under the Distribution Agreement to
a financial institution in order to finance the distribution of the Class B
Shares.
The Board of Trustees has also adopted a Rule 18f-3 Multi-Class Share Plan
permitting the issuance of shares in multiple classes.
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
19
<PAGE> 54
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, FUND ACCOUNTING AGENT, TRANSFER AGENT AND DIVIDEND PAYING AGENT
The Bank of New York, 48 Wall Street, New York, New York 10286 serves as
custodian and fund accounting agent, 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.
For the convenience of shareholders, the transfer agent maintains in book
account form the records of shares owned by Trust shareholders. Shareholders
may request in writing 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, 1995,
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Managed Assets and the
Zweig Government Fund paid total brokerage commissions of $1,335,463, $819,613,
$1,980,954 and $0, respectively. The amount paid by Zweig Managed Assets for
the year ended December 31, 1994 and for the period February 8, 1993
(commencement of operations) to December 31, 1993 was $1,232,085 and $423,239,
respectively. For the years ended December 31, 1994 and 1993, respectively,
Zweig Strategy Fund, Zweig Appreciation Fund, and the Zweig Government Fund
paid total brokerage commissions of $525,987, $782,620 and $7,938,
respectively, and $2,341,216, $495,058 and $20,007, respectively.
For the year ended December 31, 1995, the Trust paid Zweig Securities Corp.
$468,501 in brokerage commissions or 11.33% of total brokerage commissions for
the year ended December 31, 1995. For the years ended December 31, 1994 and
1993, $431,060 and $288,556, 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 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
20
<PAGE> 55
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 Zweig Strategy Fund, Zweig Appreciation Fund,
Zweig Growth and Income Fund,Zweig Managed Assets and Zweig Government 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, 1995, the portfolio turnover rates
for Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Managed Assets and
Zweig Government Fund were 95%, 68%, 239% and 195%, 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 determines 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
21
<PAGE> 56
For the seven days ended December 31, 1995, the Zweig Cash Fund's effective
(compounded) and current yields were 5.18% and 5.06%, respectively, for Class A
Shares, 5.18% and 5.06%, respectively, for Class C Shares and 5.45% and 5.32%,
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 both 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 Zweig Government
Fund at December 31, 1995 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, 1995 and for
the periods from commencement of operations to December 31, 1995 (including the
effect of the maximum sales charge) is as follows:
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Yr Ended Five Yrs Ended Commencement of Operations
Class A Shares 12/31/95 12/31/95 to 12/31/95
-------------- ------------------------------------------------------------------
<S> <C> <C> <C>
Zweig Appreciation Fund +17.2% N/A +10.6%*
Zweig Strategy Fund +18.2% +12.8% +10.2%**
Zweig Government Fund +8.4% +6.8% +6.5%***
Zweig Managed Assets +9.9% N/A +6.3%****
</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>
Year Ended Five Years Ended Commencement to
Class C Shares 12/31/95 12/31/95 12/31/95
-------------- ------------------------------------------------------------
<S> <C> <C> <C>
Zweig Appreciation Fund +21.7% N/A +9.8%*
Zweig Strategy Fund +22.7% N/A +11.1%*
Zweig Government Fund +11.9% N/A +6.4%*
Zweig Managed Assets +14.0% N/A +7.7%**
</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.
22
<PAGE> 57
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.
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, 1995 and the report of the Trust's independent accountants in connection
therewith, are included in the 1995 Annual Report to Shareholders of the Trust,
which is incorporated by reference into this Statement of Additional
Information. THE UNAUDITED FINANCIAL STATEMENTS OF THE TRUST FOR THE SIX MONTHS
ENDED JUNE 30, 1996 ARE INCLUDED IN THE JUNE 30, 1996 SEMI-ANNUAL REPORT TO
SHAREHOLDERS OF THE TRUST, WHICH IS ALSO INCORPORATED BY REFERENCE INTO THIS
STATEMENT OF ADDITIONAL INFORMATION. COPIES OF THE 1995 ANNUAL REPORT AND THE
JUNE 30, 1996 SEMI-ANNUAL REPORT ARE AVAILABLE UPON REQUEST, WITHOUT CHARGE, BY
CALLING 1-800-272-2700.
23
<PAGE> 58
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. 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.
24
<PAGE> 59
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.
25
<PAGE> 60
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, 1995; Report of Coopers & Lybrand L.L.P.,
Independent Accountants; Statement of Operations for the year
ended December 31, 1995; Statement of Changes in Net Assets
for each of the two years in the period ended December 31,
1995; Statement of Net Assets for each Series dated December
31, 1995; Notes to Financial Statements dated December 31,
1995; Statements of Operations for the six-month period ended
June 30, 1996; Statement of Changes in Net Assets for the
six-month period ended June 30, 1996; Statement of Net Assets
for each Series, dated June 30, 1996; and Notes to Financial
Statements, dated June 30, 1996.
[continued on next page]
<PAGE> 61
(b) Exhibits
(1) *(a) Amended and Restated Agreement and Declaration of
Trust (predecessor Massachusetts Trust).
**(b) Further Amendment to the Amended and Restated
Agreement and Declaration of Trust (predecessor
Massachusetts Trust).
***(c) Additional Amendment to the Amended and Restated
Agreement and Declaration of Trust (predecessor
Massachusetts Trust).
+++(d) Additional Amendment to the Amended and Restated
Agreement and Declaration of Trust (predecessor
Massachusetts Trust).
*****(e) Agreement and Declaration of Trust (Delaware
Trust).
(2)****(a) Amended By-Laws of the Trust (predecessor
Massachusetts Trust).
(b) Bylaws of the Trust (Delaware 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 (predecessor
Massachusetts Trust).
+++(b) Forms of specimen stock certificates for Class A
and C (f/k/a B Shares) Shares of beneficial
interest of the Trust (predecessor Massachusetts
Trust).
++(c) Forms of specimen stock certificate for shares of
beneficial interest of Zweig Appreciation Fund
(predecessor Massachusetts Trust).
++++(d) Form of specimen stock certificate for shares of
beneficial interest of Zweig Managed Assets
(predecessor Massachusetts Trust).
- ----------------
* 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. 42 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 30, 1996.
+ 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> 62
*(e)Forms of specimen stock certificates for shares of beneficial interest of
Zweig Cash Fund (predecessor Massachusetts Trust).
+++++(f) Forms of specimen stock certificates for
Class B Shares of beneficial interest of the
Trust (predecessor Massachusetts Trust).
*****(g) Forms of specimen stock certificates for
shares of beneficial interest of the Trust
(Delaware 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) +(a) Transfer Agency Agreement.
******(b) Amended and Restated Agreement and Plan of
Conversion and Termination.
******(c) Assignment and Assumption Agreement.
(10) 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. 42 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 30, 1996.
+ 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.
+++++ Incorporated by reference to Post-Effective Amendment No. 40 to the
Registration Statement of the Trust on Form N-1A, filed previously on
July 5, 1995.
C-3
<PAGE> 63
(11) Inapplicable.
(12) ++ (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.
(13) + (a) Individual Retirement Account.
+ (b) Paired Defined Contribution Prototype Plan.
+ (c) 401(k) Prototype Plan.
+ (d) 403(b)(7) Custodial Account.
******(14) Amended Rule 12b-1 Distribution Plan.
**(15) Schedule for Computation of Performance Quotations.
- ----------------
* 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.
***** Incorporated by reference to Post-Effective Amendment No. 40 to
the Registration Statement of the Trust on Form N-1A, filed
previously on July 5, 1995.
****** Incorporated by reference to Post-Effective Amendment No. 42 to
the Registration Statement of the Trust on Form N-1A, filed
previously on April 30, 1996.
+ 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> 64
*(16) Powers of Attorney.
**(17) Rule 18f-3 Plan.
(18) Financial Data Schedules
(18) (a) Zweig Strategy Fund - Class A
(18) (b) Zweig Strategy Fund - Class B
(18) (c) Zweig Strategy Fund - Class C
(18) (d) Zweig Appreciation Fund - Class A
(18) (e) Zweig Appreciation Fund - Class B
(18) (f) Zweig Appreciation Fund - Class C
(18) (g) Zweig Managed Assets - Class A
(18) (h) Zweig Managed Assets - Class B
(18) (i) Zweig Managed Assets - Class C
(18) (j) Zweig Government Fund - Class A
(18) (k) Zweig Government Fund - Class B
(18) (l) Zweig Government Fund - Class C
(18) (m) Zweig Cash Fund - Class A
(18) (n) Zweig Cash Fund - Class B
(18) (o) Zweig Cash Fund - Class C
- ----------------
* Incorporated by reference to Post-Effective Amendment No. 42 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 30, 1996.
** Incorporated by reference to Post-Effective Amendment No. 40 to the
Registration Statement on Form N-1A, filed previously on July 5, 1995.
C-5
<PAGE> 65
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: July 31, 1996
--------------------------------- -------------
<S> <C>
Zweig Appreciation Fund
Class A 20,773
Class B 375
Class C 15,162
Zweig Strategy Fund
Class A 39,624
Class B 1,831
Class C 37,054
Zweig Government Fund
Class A 3,143
Class B 15
Class C 768
Zweig Managed Assets
Class A 8,102
Class B 276
Class C 29,768
Zweig Cash Fund
Class A 417
Class B 9
Class C 212
</TABLE>
Item 27. Indemnification
All officers, trustees, employees and agents of the Trust are
to be indemnified as set forth in Article VII of the Agreement
and Declaration of Trust filed herewith. 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> 66
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
relationship 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 Senior Vice President Senior Vice President None
Annemarie Gilly First Vice President Vice President First Vice President
Charles I. Leone Chief Financial Officer First Vice President and Chief Financial Officer and
and First Vice President Assistant Secretary First Vice President
Alfred J. Ratcliffe First Vice President First Vice President, None
Treasurer, Principal
Mona Lee Assistant Vice President None None
Toni Ann Stapleton Controller and Vice None None
President
Beth Abraham Assistant Vice President Assistant Vice President None
Tom Disbrow Assistant Vice President Assistant Treasurer None
</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 business address of such
persons is 5 Hanover Square, New York, New York 10004. Dr. Zweig's principal
occupation is as an investment advisor and analyst, Mr. Malat's principal
occupation is Executive Financial Officer of various Zweig affiliates and Mr.
Baltuch's principal occupation is Chief Compliance Officer of the Distributor
and the Trust; their business address is 900 Third Avenue, New York 10022.
C-7
<PAGE> 67
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>
POSITION
NAME POSITION WITH THE DISTRIBUTOR WITH THE TRUST
---- ----------------------------- --------------
<S> <C> <C>
Eugene J. Glaser President and Director Chairman, Chief Executive
Officer and Trustee
Barry Mandinach Executive Vice President and Director First Vice President
Marc Baltuch First Vice President, Chief Secretary
Compliance Officer, Secretary and
Director
Annemarie Gilly First Vice President Vice President
Charles I. Leone Chief Financial Officer and First First Vice President and
Vice President Assistant Secretary
</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 servide
contracts.
Item 32. Not Applicable.
C-8
<PAGE> 68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 43 on Form N-1A to be signed on
its behalf by the undersigned, thereunto duly authorized in the City and State
of New York on the __ day of August, 1996.
ZWEIG SERIES TRUST
By /s/ Eugene J. Glaser
-------------------------------
Eugene J. Glaser
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 43 to the Registration Statement of
the Trust on Form N-1A has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eugene J. Glaser Chairman, Chief Executive August __, 1996
---------------------------- Officer and Trustee
Eugene J. Glaser
/s/ Alfred J. Ratcliffe First Vice President, August __, 1996
---------------------------- Treasurer, Principal
Alfred J. Ratcliffe Accounting Officer and
Assistant Secretary
* Trustee August __, 1996
----------------------------
Claire B. Benenson
* Trustee August __, 1996
----------------------------
Richard E. Deems
* Trustee August __, 1996
----------------------------
Donald B. Romans
* Trustee August __, 1996
----------------------------
S. Leland Dill
</TABLE>
*By /s/ Eugene J. Glaser
--------------------------
Eugene J. Glaser
Attorney-in-fact
<PAGE> 69
EXHIBIT INDEX
TO
POST-EFFECTIVE AMENDMENT NO. 43
TO THE
REGISTRATION STATEMENT
ON
FORM N-1A
<PAGE> 70
Exhibits:
(1) *(a) Amended and Restated Agreement and
Declaration of Trust (predecessor
Massachusetts Trust).
**(b) Further Amendment to the Amended and Restated
Agreement and Declaration of Trust
(predecessor Massachusetts Trust).
***(c) Additional Amendment to the Amended and
Restated Agreement and Declaration of Trust
(predecessor Massachusetts Trust).
+++(d) Additional Amendment to the Amended and
Restated Agreement and Declaration of Trust
(predecessor Massachusetts Trust).
*****(e) Agreement and Declaration of Trust (Delaware
Trust).
(2) ****(a) Amended By-Laws of the Trust (predecessor
Massachusetts Trust).
(b) Bylaws of the Trust (Delaware 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
(predecessor Massachusetts Trust).
+++(b) Forms of specimen stock certificates for
Class A and C (f/k/a B Shares) Shares of
beneficial interest of the Trust (predecessor
Massachusetts Trust).
++(c) Forms of specimen stock certificate for
shares of beneficial interest of Zweig
Appreciation Fund (predecessor Massachusetts
Trust).
++++(d) Form of specimen stock certificate for shares
of beneficial interest of Zweig Managed
Assets (predecessor Massachusetts Trust).
- ----------------
* 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. 42 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 30, 1996.
+ 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.
1
<PAGE> 71
*(e) Forms of specimen stock certificates for
shares of beneficial interest of Zweig Cash
Fund (predecessor Massachusetts Trust).
+++++(f) Forms of specimen stock certificates for
Class B Shares of beneficial interest of the
Trust (predecessor Massachusetts Trust).
*****(g) Forms of specimen stock certificates for
shares of beneficial interest of the Trust
(Delaware 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) + (a) Transfer Agency Agreement.
*****(b) Amended and Restated Agreement and Plan of
Conversion and Termination.
*****(c) Assignment and Assumption Agreement.
(10) 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.
***** Incorporated by reference to Post-Effective Amendment No. 42 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 30, 1996.
+ 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.
+++++ Incorporated by reference to Post-Effective Amendment No. 40 to the
Registration Statement of the Trust on Form N-1A, filed previously on
July 5, 1995.
2
<PAGE> 72
(11) Inapplicable.
(12) ++ (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.
(13) + (a) Individual Retirement Account.
+ (b) Paired Defined Contribution Prototype Plan.
+ (c) 401(k) Prototype Plan.
+ (d) 403(b)(7) Custodial Account.
******(14) Amended Rule 12b-1 Distribution Plan.
** (15) Schedule for Computation of Performance Quotations.
- ----------------
* 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.
***** Incorporated by reference to Post-Effective Amendment No. 40 to
the Registration Statement of the Trust on Form N-1A, filed
previously on July 5, 1995.
****** Incorporated by reference to Post-Effective Amendment No. 42 to
the Registration Statement of the Trust on Form N-1A, filed
previously on April 30, 1996.
+ 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.
3
<PAGE> 73
*(16) Powers of Attorney.
**(17) Rule 18f-3 Plan.
(18) Financial Data Schedules
(18) (a) Zweig Strategy Fund - Class A
(b) Zweig Strategy Fund - Class B
(c) Zweig Strategy Fund - Class C
(d) Zweig Appreciation Fund - Class A
(e) Zweig Appreciation Fund - Class B
(f) Zweig Appreciation Fund - Class C
(g) Zweig Managed Assets - Class A
(h) Zweig Managed Assets - Class B
(i) Zweig Managed Assets - Class C
(j) Zweig Government Fund - Class A
(k) Zweig Government Fund - Class B
(l) Zweig Government Fund - Class C
(m) Zweig Cash Fund - Class A
(n) Zweig Cash Fund - Class B
(o) Zweig Cash Fund - Class C
- ----------------
* Incorporated by reference to Post-Effective Amendment No. 42 to the
Registration Statement of the Trust on Form N-1A, filed previously on
April 30, 1996.
** Incorporated by reference to Post-Effective Amendment No. 40 to the
Registration Statement of the Trust on Form N-1A, filed previously on
June 5, 1995.
4
<PAGE> 1
Exhibit 99.10
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 43
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 22, 1996 included in the December
31, 1995 Annual Report to Shareholders of Zweig Series Trust.
We also consent to the reference to our firm under the captions, "Financial
Highlights" in the prospectus and "Independent Accountants" in the Statement of
Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
August 15, 1996.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> ZSFA0696
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 1,167,170
<INVESTMENTS-AT-VALUE> 1,218,125
<RECEIVABLES> 32,938
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,251,080
<PAYABLE-FOR-SECURITIES> 726
<SENIOR-LONG-TERM-DEBT> 5,217
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 5,943
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,072,793
<SHARES-COMMON-STOCK> 39,802
<SHARES-COMMON-PRIOR> 38,468
<ACCUMULATED-NII-CURRENT> 79
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 121,310
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50,955
<NET-ASSETS> 1,245,137
<DIVIDEND-INCOME> 13,616
<INTEREST-INCOME> 1,974
<OTHER-INCOME> 0
<EXPENSES-NET> 9,444
<NET-INVESTMENT-INCOME> 6,146
<REALIZED-GAINS-CURRENT> 80,717
<APPREC-INCREASE-CURRENT> (43,398)
<NET-CHANGE-FROM-OPS> 43,465
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,524
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,929
<NUMBER-OF-SHARES-REDEEMED> 2,785
<SHARES-REINVESTED> 190
<NET-CHANGE-IN-ASSETS> 156,551
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 40,435
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,441
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,444
<AVERAGE-NET-ASSETS> 592,335
<PER-SHARE-NAV-BEGIN> 14.51
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> .51
<PER-SHARE-DIVIDEND> .09
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.03
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> ZSFB0696
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 1,167,170
<INVESTMENTS-AT-VALUE> 1,218,125
<RECEIVABLES> 32,938
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,251,080
<PAYABLE-FOR-SECURITIES> 726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,217
<TOTAL-LIABILITIES> 5,943
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,072,793
<SHARES-COMMON-STOCK> 1,282
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 79
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 121,310
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50,955
<NET-ASSETS> 1,245,137
<DIVIDEND-INCOME> 13,616
<INTEREST-INCOME> 1,974
<OTHER-INCOME> 0
<EXPENSES-NET> 9,444
<NET-INVESTMENT-INCOME> 6,146
<REALIZED-GAINS-CURRENT> 80,717
<APPREC-INCREASE-CURRENT> (43,398)
<NET-CHANGE-FROM-OPS> 43,465
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,283
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 156,551
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 40,435
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,441
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,444
<AVERAGE-NET-ASSETS> 10,122
<PER-SHARE-NAV-BEGIN> 15.12
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.05)
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.07
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> ZSFC0696
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 1,167,170
<INVESTMENTS-AT-VALUE> 1,218,125
<RECEIVABLES> 32,938
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,251,080
<PAYABLE-FOR-SECURITIES> 726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,217
<TOTAL-LIABILITIES> 5,943
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