As filed with the Securities and Exchange Commission on August 20, 1997
Registration Nos. 2-93538 and 811-4116
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. 45 [X]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 46 [X]
ZWEIG SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
900 Third Avenue, New York, New York 10022
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code: (212) 451-1100
EUGENE J. GLASER, President
Zweig/Glaser Advisers
900 Third Avenue
New York, New York 10022
(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 3,
1997, 75 days after filing pursuant to paragraph (a)(2) 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, 1996 was filed on February 27,
1997.
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2
ZWEIG SERIES TRUST
CONTENTS
This Post-Effective Amendment No. 45 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 Foreign Equity Fund
5. Part B - Statement of Additional Information for all shares of Zweig
Foreign Equity Fund
6. Part C - Other Information
7. Signature Sheet
8. Exhibits
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3
ZWEIG SERIES TRUST
Cross-Reference Sheet pursuant to Rule 495(a) for all shares of
Zweig Foreign Equity Fund
<TABLE>
<CAPTION>
Form N-1A
<S> <C>
Item No. Location
Part A - Prospectus
1. Cover Page Cover Page
2. Synopsis Fee Table;
Annual Fund Operating Expense
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Our Investment Style;
Investment Objective;
Organization of the Funds;
How We Select Countries and Stocks;
Other Securities;
Other Investment Policies;
Risk Factors
5. Management of the Registrant The Manager and Management Fee;
Outside Cover;
Dr. Martin E. Zweig;
The Portfolio Manager;
Brokerage Transactions
5A. Management's Discussion of Fund Performance Information
Performance
6. Capital Stock and Other Securities Organization of the Funds;
Choosing Among Classes When Purchasing Shares;
How to Invest in the Fund;
How to Sell Your Fund Shares;
Application; Cover;
Distributions and Taxes
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4
Item No. Location
7. Purchase of Securities Being Offered The Distributor;
Cover;
Net Asset Value;
Choosing Among Classes When Purchasing Shares;
How to Invest in the Fund;
Operating Expenses
8. Redemption or Repurchase How to Sell Your Fund Shares;
Exchange Privilege;
Choosing Among Classes When Purchasing Shares
9. Legal Proceedings Not Applicable
Part B - Statement of Additional Information
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 Objective and Policies;
Investment Restrictions
14. Management of the Fund Trustees and Officers of the Trust
15. Control Persons and Principal Holders Trustees and Officers of the Trust
of Securities
16. Investment Advisory and Other Services Investment Management and Other Services;
Trustees and Officers of the Trust
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
18. Capital Stock and Other Securities Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Reinstatement Privilege;
Exchange Privilege;
Retirement Plans;
Net Asset Value and Taxes
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5
Item No. Location
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. 45
to the Registration Statement on Form N-1A.
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6
ZWEIG NOVEMBER 3, 1997
FOREIGN EQUITY FUND
PROSPECTUS
Zweig Foreign Equity Fund (the "fund") is a new series of Zweig Series Trust
(the "Trust"), an open-end, diversified management investment company. The fund
seeks to increase the value of your investment over the long-term (capital
appreciation) by investing primarily in foreign stocks, consistent with
preserving capital and reducing portfolio exposure to market risk.
The Zweig approach is based on the belief that successful investing requires
skill both in making money during bull markets and in limiting losses during
major market declines. We designed Zweig Foreign Equity Fund for investors who
seek to balance the need for long-term capital appreciation with the need to
limit the risks associated with investing in foreign stocks.
This prospectus will help you learn more about the fund. Please read it
carefully before you invest, and keep it for future reference.
Call your financial advisor or write us at 900 Third Avenue, New York, NY
10022-4728, or call 1-800-272-2700 for more information.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED
OR INSURED BY, ANY ENTITY OR PERSON, INCLUDING THE U.S. GOVERNMENT AND THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
Our Statement of Additional Information (SAI) dated November 3, 1997, as may be
amended from time to time, includes more information about the fund's policies
and procedures. It has been filed with the Securities and Exchange Commission
and is incorporated by reference into this Prospectus. You can obtain a free
copy by calling 1-800-272-2700.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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7
SOME THINGS YOU SHOULD KNOW ABOUT ZWEIG FOREIGN EQUITY FUND
The fund is designed for investors who intend to invest for the long term, not
for investors who intend to liquidate their investment after a short period of
time.
The fund offers four classes of shares. Before purchasing, you should determine
which class is right for you. More information about the classes of shares
appears under the heading "Choosing Among Classes When Purchasing Shares".
The fund is a new series of Zweig Series Trust (the "Trust"). The other Series
of the Trust are: Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Managed
Assets, Zweig Growth & Income Fund, Zweig Government Fund, and Zweig Cash Fund.
You may obtain a copy of the Trust's prospectus by calling 1-800-272-2700.
Zweig/Glaser Advisers is the investment manager of the fund. Zweig Securities
Corp. is the principal distributor of the fund's shares.
TABLE OF CONTENTS
About the Fund
Fee Table
Our Investment Style
Investment Objective
Dr. Martin E. Zweig
The Portfolio Manager
How We Select Countries and Stocks
Other Securities
Other Investment Policies
Risk Factors
About Your Account
Choosing Among Classes When Purchasing Shares
How to Invest in the fund
How To Sell Your Shares
Exchange Privilege
Net Asset Value
Distributions and Taxes
The Distributor
The Manager and Management Fee
Organization of the fund
Performance Information
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8
FEE TABLE
Mutual fund investors bear two types of expenses: transaction expenses and
operating expenses. You pay transaction expenses when you buy shares in the
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
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Charge on purchases
(as % of Offering Price)..................................... 5.50% None None None
Maximum Contingent Deferred Sales Charge (CDSC)................ None* 5.00%** 1.25%*** None
- - - ---------------
</TABLE>
* A 1% CDSC is imposed on redemptions within 18 months of purchases of $1
million or more originally purchased without an initial sales charge as
described in Quantity Discounts on Class A Shares.
** The maximum CDSC is imposed on Class B Shares redeemed in the first
year; thereafter, the CDSC declines (See "Class B Shares").
*** The CDSC on Class C Shares applies only if redemption occurs in the
first year.
EXAMPLES -- The table below is designed to assist you in understanding the
various costs and expenses you will bear. Because the fund has not yet commenced
operations, the amount for "Other Expenses" is based on estimated expenses for
the first year. Federal regulations require the examples to assume a 5% annual
return, but actual annual returns may vary.
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9
<TABLE>
<CAPTION>
EXAMPLE: You EXAMPLE: You
ANNUAL FUND would pay the following expenses would pay the following
OPERATING EXPENSES on a $1,000 investment assuming expenses on a $1,000
(As % of average net assets) (a) 5% annual return and investment assuming (a) 5%
(b) redemption at the end of each annual return and (b) no
time period: redemption:
Total fund
ZWEIG FOREIGN Management 12b-1 Other Operating 1 3 1 3
EQUITY FUND Fees Fees(1) Expenses Expenses(2) Year Year Year Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES..... 1.00% 0.30% 0.50% 1.80% 72 109 72 109
CLASS B SHARES..... 1.00% 1.00% 0.50% 2.50% 75 108 25 78
CLASS C SHARES..... 1.00% 1.00% 0.50% 2.50% 38 78 25 78
CLASS I SHARES..... 1.00% - 0.50% 1.50% 15 47 15 47
</TABLE>
(1) The 12b-1 Fees include a 0.25% Service Fee, which is paid to financial
services firms, including 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 firms to investors in the fund, 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 fund'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.
(2) The Manager has voluntarily undertaken to limit the expenses of the
fund (exclusive of taxes, interest, brokerage commissions, 12b-1 fees
and extraordinary expenses) until April 30, 1998 to 1.50% of its
average net assets effective upon its commencement of operations. The
Manager reserves the right to discontinue this policy at any time after
April 30, 1998.
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10
OUR INVESTMENT STYLE
Dr. Martin E. Zweig is the President of the Trust and Chairman of its investment
manager. He has created and refined a risk-averse style of money management over
a 26-year career providing investment advisory and portfolio management services
(the Zweig approach).
The Zweig approach is based on the belief that successful investing requires
skill both in making money during bull markets and in limiting losses during
major market declines. We designed Zweig Foreign Equity Fund for investors who
seek to balance the need for long-term capital appreciation with the need to
limit the risks associated with investing in foreign stocks.
While we can offer no assurances that the Zweig approach will meet its
investment objectives, our long-term goal - measured over bull and bear markets
- - - - is to achieve superior returns with less risk and volatility. We seek to
achieve this goal by participating solidly during rising markets and protecting
the bulk of those gains during major market declines. We define major market
declines as declines in the major indices of a foreign country of at least 20%.
Unlike most other mutual funds and stock market indexes, our risk-averse fund
will NOT remain fully invested throughout bull and bear markets.
Thus, it is unlikely that the fund will keep pace with all-equity benchmarks
like major foreign stock indices or the average international equity fund (which
typically has 90% or more of its assets invested in stocks) DURING BULL MARKETS.
We view leaving some profits "on the table" during bull markets as a price we're
willing to pay in exchange for our loss limitation strategies.
Conversely, we do not expect these all-equity benchmarks to keep pace with the
loss limitation of the fund during major market declines. That doesn't mean
we'll be able to offer loss limitation during each phase of a decline. While we
do our best to reduce risk, WE CANNOT ELIMINATE RISK.
In summary, while our goal is the same as most other mutual funds - to generate
superior long-term returns for our shareholders - the path we take is quite
different.
Dr. Zweig and his associates rely on fundamental and technical data to measure
the risk and reward characteristics of each country's stock market. These
indicators are constantly monitored and continuously refined. There are three
main groups of indicators: monetary indicators (e.g. the trend of interest
rates, central bank policy, commodity prices and industrial production),
sentiment indicators (e.g. mutual funds' cash-to-assets ratio, put-call ratios,
and investment adviser sentiment) and momentum indicators (e.g. new highs and
lows, advance-decline ratios and long- and short-term market trends).
As the indicators point to increasing levels of market risk, Dr. Zweig directs
the portfolio manager to reduce the fund's exposure to stocks by gradually
selling securities and buying money market instruments, or by selling stock
index futures. As long as the indicators continue to show high levels of risk in
the securities markets, the fund will continue to maintain its exposure to
market risk at lower-than-normal levels. As the indicators point to decreasing
levels of market risk, the portfolio manager increases the market exposure of
the fund. Index futures, options or short sales may be used to adjust the fund's
exposure to market risk, but not for the purpose of leverage (see Risk Factors).
The Zweig approach is NOT an all-in or all-out "market-timing" approach that
attempts to predict market tops and bottoms. Instead, it is a gradual and
disciplined approach that reacts to changes in risk levels as determined by our
indicators. Typically, our investment models will not reallocate more than 10%
of the fund's assets at any one time. The goal is to remain in gear with the
major trends of the foreign market.
INVESTMENT OBJECTIVE
ZWEIG FOREIGN EQUITY FUND seeks to increase the value of your investment over
the long-term (capital appreciation) by investing primarily in foreign stocks
consistent with preserving capital and reducing portfolio exposure to market
risk (see "How We Select Stocks" and the additional details in our SAI).
Please read the "Risk Factors" and "How We Select Stocks" sections of this
prospectus for more detailed information about the investment practices of the
fund. The SAI has further details. As with any mutual fund, there is no
assurance that the fund's objectives will be achieved.
DR. MARTIN E. ZWEIG
Dr. Martin E. Zweig is President or Chairman of investment advisory firms that
presently manage over $6.5 billion of assets. This $6.5 billion includes
approximately $1.3 billion in publicly traded closed-end investment companies
and $2.6 billion in open-end mutual funds, as well as other accounts.
Dr. Zweig has been a regular panelist on PBS television's WALL $TREET WEEK WITH
LOUIS RUKEYSER for 24 years and, in 1992, was inducted into 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 and his associates determine the asset allocation strategy for the
fund. Dr. Zweig does not select the individual securities to implement the
strategy. The portfolio manager selects the specific securities for the fund.
THE PORTFOLIO MANAGER
Carlton Neel will be the portfolio manager of the fund. Mr. Neel has been the
portfolio manager for Zweig Managed Assets and Zweig Government Fund since July
5, 1995. He is a First Vice President of the Trust. He received a dual B.A. in
Economics and Political Science from Brown University. Prior to joining the
Zweig Companies, he was a Vice President with J.P. Morgan & Co., Inc.
<PAGE>
11
HOW WE SELECT COUNTRIES AND STOCKS
At the present time, we can invest in 22 countries using proprietary models to
determine the fund's level of exposure to each country. If each country's model
called for the fund to be fully invested in that country, the assets would be
allocated as follows:
Europe 64%
Pacific Rim 27%
North America 6%
Africa 3%
The level of stocks and money market instruments, as well as the total level of
investment in any particular country, will vary over time depending on the level
of risk the model determines. As a model points to increasing levels of market
risk in a particular country, we will reduce our exposure to that country by
selling stocks, by hedging market exposure with foreign stock index futures or
options or by selling short.
We plan to develop models for additional countries, which could result in
changes to the above geographic allocations. The geographic allocations could
also change given changes in various countries market capitalization or economic
growth.
Stocks represent an ownership interest in a company. They include common stocks,
fixed rate preferred stocks, bonds convertible into equity securities, warrants,
rights, depositary receipts and other equity securities.
In selecting stocks, our models rank industry groups when available. From the
higher ranked industry groups, we select stocks by evaluating and ranking them
based on technical and fundamental factors. Additionally, we may invest in
investment vehicles or groups of foreign stocks that, in the aggregate, are
expected to perform similarly to a particular major foreign stock market index
or foreign stock industry group, and in investment companies that invest in the
securities of a particular country.
OTHER SECURITIES
MONEY MARKET INSTRUMENTS are short-term, high quality debt securities that
present minimal risk of loss. We use these securities to reduce fluctuations in
the fund's net asset value - and often refer to them as "cash" or "cash
equivalents". Money market securities include: short-term U.S. Government or
other foreign 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. Money market
instruments may be purchased in any country or currency, including the United
States.
REPURCHASE AGREEMENTS are arrangements by which the fund buys a security at one
price and at the same time agrees to sell the security back to the seller at a
higher price, usually on the next business day (or within seven days for foreign
repurchase agreements). Repurchase agreements offer a means of generating income
from excess cash that the fund might otherwise hold. Delays in payment or losses
may result if the other party to the agreement defaults or becomes bankrupt. The
fund's repurchase agreements must be fully backed by collateral that is marked
to market, or priced, each day.
DEPOSITARY RECEIPTS are typically issued by foreign banks or trust companies,
although they may also be issued by U.S. banks or trust companies, and evidence
ownership of underlying securities issued by either a foreign or a U.S.
corporation. Depositary receipts may be issued pursuant to a sponsored program,
where an issuer has made arrangements to have its securities traded in the form
of depositary receipts, or in unsponsored programs, where the issuer may not be
directly involved in the creation of the program.
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 2% to 10% of the position size) to simulate a much larger
invested position. Transaction costs normally will be lower than purchasing or
selling the underlying securities. The 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.)
OTHER INVESTMENT COMPANIES. From time to time the fund may invest in another
investment company. A direct investment in securities, financial instruments,
currencies, futures and forward contracts, and related options involves risks
described elsewhere in this prospectus. An investment in them made through
another investment company will normally also involve an investment manager and
service providers (e.g., custodians) over which the fund 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 fund will invest in another investment company only if the portfolio manager
believes that the fund's investment objective will be furthered by doing so. No
more than 10% of the fund's assets will be invested in other investment
companies. No more than 5% will be invested in any one investment company.
OTHER INVESTMENT POLICIES
PORTFOLIO TURNOVER RATE. We do not usually consider the length of time the fund
has held a stock when making investment decisions. As a result of the Zweig
style of money management, the 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 some expense, including brokerage costs. (The SAI
contains a detailed explanation of certain relevant tax considerations.) The
portfolio manager considers the cost of making portfolio adjustments when
deciding whether to implement a strategy by selling stocks and investing the
proceeds in money market securities, or by using futures or options to reduce
exposure to market risk.
LENDING SECURITIES. The 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 on its obligation to return the loaned
security. The fund 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. The fund may make temporary borrowings from banks to cover
redemptions. If the performance of the fund's investments fails to cover
interest and other costs of borrowing, the net asset value of its shares will
decrease faster than if the fund had no borrowings outstanding.
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12
RISK FACTORS
International stock fund investing offers rewards that are potentially superior
to the rewards of U.S. stock investing. While the U.S. economy is the largest
and most fully developed in the world, foreign countries have further to go.
Thus, proponents of international investing argue, international stocks offer
more potential growth. There is a trade-off for this growth, however - greater
volatility. The lack of political and economic stability in certain foreign
countries increases the risk of severe losses. Foreign currencies have been
known to suffer sharp declines in value, and certain foreign companies and
industries have lost some or all of their value.
The following chart illustrates the declines suffered by various categories of
mutual funds investing in foreign securities during the last two worldwide bear
markets -- in 1987 and in 1990. It shows that even the diversification and
professional management inherent in a mutual fund cannot insulate investors from
loss.
Foreign/Global
Equity fund Styles 8/25/87-12/4/87 7/16/90-10/11/90
- - - ------------------ --------------- ----------------
Large-cap growth -26.9% -16.3%
Large-cap value -25.1% -15.4%
Mid-cap growth -27.3% -17.0%
Mid-cap value -16.9% -14.0%
Small-cap growth N/A -20.4%
Small-cap value N/A -16.6%
SOURCE: STRATEGIC INSIGHT. RETURNS DO NOT INCLUDE SALES CHARGES. THE PERFORMANCE
DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
It is also important to recognize that, once you've incurred a significant loss,
it can take many months (and sometimes years) to break even.
It is impossible to predict the timing and extent of bear markets or
corrections, but it should be noted that periods of unusually high returns and
low volatility have historically increased the risk of stock investing for
subsequent periods.
Successful investors recognize the risks associated with investing in stocks and
stock mutual funds. It is important that you try and understand your "financial
personality". What is your tolerance for loss? How patient will you be during
the break-even period? What is your financial staying power?
It is also important to note that the impact of a bear market depends not only
upon the extent of the decline, but also WHEN in your investing lifecycle it
happens. For many people, the closer they are to retirement or the deeper they
are into retirement - the harder it is to calmly view a bear market as a
temporary decline.
The prices of individual stocks, as well as 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 stocks also are affected by
results of the issuer's operations and factors peculiar to its industry and
country. In international investing, political conditions also can affect
markets and individual stocks.
Like most foreign equity funds, Zweig Foreign Equity Fund uses diversification
to minimize the effect of a loss in any one investment. By investing across
countries and industry groups, we attempt to increase returns while lowering
risk.
Unlike most foreign funds, the Zweig Foreign Equity Fund will not remain full
invested throughout bull and bear markets. The fund manages exposure to market
risk by gradually selling securities and buying money market instruments, or by
selling stock index futures. While the fund manages exposure to risk, WE CANNOT
ELIMINATE RISK.
The Zweig Foreign Equity Fund is designed for those investors who want to
balance their need for growth with their need to limit risk. However, there can
be no assurances that we will meet our investment objective.
In addition to increasing or decreasing the proportion of the fund's investment
in money market instruments, the portfolio manager may buy or sell futures
contracts and options to increase or reduce market exposure. He also may sell
short and enter into currency exchange contracts. These strategies allow us to
increase or decrease the fund's exposure to changes in stock prices or currency
exchange rates. Used cautiously, they may be effective tools that lend greater
stability to fund assets. They may also help to reduce the cost of administering
the portfolio, and allow us to buy and sell relatively large positions without
distorting prices. We use these techniques to adjust the risk and return
characteristics of the fund. We do not use these practices to leverage the fund.
There may also be times when we decide to acquire or maintain a futures position
rather than sell or buy the underlying portfolio because the index futures, in
our judgment, reflect a price, and therefore value, which is more attractive
than the stocks comprising the index. If our judgment is right, this should
result in smaller losses or bigger gains than would otherwise be the case.
Conversely, if we are wrong, losses could be increased or gains reduced. If we
misjudge market conditions or employ a strategy that does not correlate well
with the fund's primary investments, use of these techniques may result in a
loss, regardless of our 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 accept
the potential risks inherent in their use before investing.
FOREIGN STOCKS involve risks such as 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 the fund's
ability to liquidate its investment. Brokerage commissions, custodial services,
and other costs relating to investment in foreign countries are generally more
expensive than in the United States. Clearance and settlement procedures on
foreign markets are different and problems with settling security transactions
could result in temporary periods when assets of the fund are uninvested and no
return is earned on such amounts.
DEPOSITARY RECEIPTS may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. In addition, the
issuers of the securities underlying unsponsored depositary receipts are not
obligated to disclose material information in the U.S. and, therefore, there may
be less information available regarding such issuers and there may not be a
correlation between such information and the market value of the depositary
receipts. Depositary receipts also involve the risks of other investments in
foreign stocks, as discussed above.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures contracts and options to
manage its exposure to changing stock prices or to alter its asset mix. The fund
may use any type of future or option related to its investments. These include:
foreign stock index futures and options, and foreign currency futures and
<PAGE>
13
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.
The fund will not purchase puts if more than 10% of its assets would be invested
in premiums on puts. The fund will write calls only if they are covered
throughout the life of the call. The fund will write puts only if: (a) the
aggregate value of the obligations underlying the puts does not exceed 50% of
the fund's assets, and (b) the puts are fully secured by cash or liquid
securities in a segregated account with the fund's custodian. Call options on
futures must be similarly secured. Where applicable, the assets in the
segregated account will be valued on a daily basis.
Futures and options involve, to varying degrees, market risk in excess of their
value. Futures and options may be used or combined with each other, or with
forward contracts, in order to adjust the risk and return characteristics of an
overall strategy; however, there may be an imperfect correlation between the
prices of options and futures contracts and the price movements of the
securities being hedged. Another risk associated with options and futures is a
potential lack of liquidity. The fund may be unable to close out, or sell, its
futures or options positions at all times.
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, the fund 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. We may also engage in cross-hedging by using
forward contracts in a currency different from that in which the hedged security
is denominated or quoted.
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. Some price spread on currency exchange (to cover
service charges) will be incurred when the fund converts assets from one
currency to another.
SELLING SHORT. The fund sells a security, group of securities, future or
currency short when we believe their price will decline. We may sell a stock
index future short to offset a potential decline in a group of stocks a fund
owns. We may make such a short sale if we believe reducing portfolio exposure to
changing securities prices can be accomplished better through this method than
if the securities themselves were sold. This is intended to be another way of
managing the fund's exposure to changing stock prices or to alter its asset mix.
To sell a security short, the fund must borrow the security. The fund's
obligation to replace the security borrowed and sold short will be fully secured
at all times by the proceeds from the short sale retained by the broker and by
cash or liquid securities deposited in a segregated account with the fund's
custodian. The 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. Selling securities short involves potential risks greater that
the value of the security sold short since the price could appreciate (causing a
loss) in an amount greater than the value of the security. Also, there is a risk
that the market could cause losses simultaneously in securities a fund owns and
in other securities sold short.
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 THE FUND'S NET ASSETS MAY BE INVESTED IN ILLIQUID SECURITIES.
CHOOSING AMONG CLASSES WHEN PURCHASING SHARES
The fund offers investors four classes of shares which are described below. All
except Class I Shares bear sales charges in different forms and amounts and all
bear different levels of expenses (see Fee Table). 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 expenses than Class A 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 distributor.
Institutional investors include: (1) unaffiliated benefit plans, such as
qualified retirement plans (other than individual retirement accounts and
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. The CDSC is imposed on the lesser of
the current market value or the initial cost of the shares being redeemed. No
CDSC is imposed upon shares acquired by reinvesting distributions. In
determining whether a CDSC applies, the order of redemption is first of shares
purchased through reinvestment and then of shares held the longest. Any CDSC
imposed on a redemption is paid to the distributor or directly to a third party
at the direction of the distributor.
We may waive the CDSC on redemption(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 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 Fund
(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
fund or any other Zweig Mutual Fund, then the CDSC will not be waived; (d) from
certain retirement plans; (e) under the systematic withdrawal program if the
amount being withdrawn per month is no more than 1% of the value of the account
at the time the program was established; and (f) effected pursuant to the fund's
right to liquidate a shareholder's account if it is less than the then effective
minimum account size.
The Distributor has sold, and expects to sell in the future, the right to
receive all or substantially all of the 12b-1 distribution fees on Class B
Shares together with the related CDSC in the event the Shares are redeemed prior
to conversion to Class A Shares. The holder of the right to receive such
<PAGE>
14
payments, in its sole discretion, may elect to establish its own waiver
criteria, which may differ from those set forth above.
CLASS A SHARES. Class A Shares 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, 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.
As a Percentage of
-------------------------
Offering Net Asset
Price of Value of Dealer's
the Shares the Shares Sales
Amount Invested Purchased Purchased Concession
- - - ---------------------------------- ---------- ---------- ----------
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)
- - - ---------------
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.
Dealer's Commission
Amount Purchased (as % of purchase)
- - - ---------------- -------------------
$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%
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 above, or
agrees to receive such commissions ratably over an 18 month period.
Class A Shares of the fund are made available to 401(k) participants in the
Merrill Lynch Daily K Plan (the "Plan") at NAV without an initial sales charge
if the Plan has at least $3 million in assets or 500 or more eligible employees.
Class B Shares of the fund are made available to Plan participants at NAV
without a CDSC if the Plan has less than $3 million in assets or fewer than 500
eligible employees. On such sales, the distributor doesn't make the dealer
payment described under Class B Shares. For further information see "Retirement
Plans" in the fund's SAI.
Class A Shares also may be purchased at net asset value by any officer, trustee,
director or 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 of the fund and any other Zweig Mutual Fund you already own
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 fund and any other Zweig Mutual
Fund indicated within the 13-month period specified to qualify for a reduced
sales charge. Purchases under the Letter are made at the sales charge applicable
to the entire amount to be purchased under the Letter, as if purchased in a
single transaction. A Letter of Intention can be amended during the 13-month
period by filing an amended Letter with the same expiration date as the
original.
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. After the end of the period, a price adjustment based upon the actual
amount invested will be made (by redeeming escrowed shares if the purchase is
not completed or by investing the difference in sales charges if the total
purchases under the Letter qualify for a lower sales charge).
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:
The CDSC
Year Since Purchase Was Made is equal to
- - - ---------------------------- -----------
Year One 5%
Year Two 4%
<PAGE>
15
Year Three 3%
Year Four 3%
Year Five 2%
Year Six 1%
Year Seven None*
- - - ---------------
* Class B Shares convert to Class A Shares as described below.
CLASS B SHARE CONVERSION FEATURE. After a holding period of seven years from the
initial date of purchase, Class B Shares automatically convert to Class A Shares
of the fund at respective net asset values on the 10th business day of the month
following the anniversary date. At the time of conversion, Class B Shares of the
fund acquired through reinvestment of distributions will convert to the
corresponding Class A Shares of the fund pro-rata with Class B Shares of the
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 up to 1% of
the purchase amount in a manner agreed in advance. 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. In addition, Class I Shares are currently
available only in New York.
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. With respect to certain retirement
plans the distributor may not make dealer payments as described above.
HOW TO INVEST IN THE FUND
INITIAL OFFERING PERIOD
Shares of the fund are being offered during a period scheduled to end on
November 24, 1997 (the "Closing Date"). Securities dealers may obtain
non-binding indications of interest prior to actually confirming any orders. The
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 through your investment professional, directly from the
fund's transfer agent, or automatically through a regular investment plan.
- - - ------------ --------------------- ----------------------- -------------------
Minimum Initial Minimum Initial Minimum Subsequent
Class Investment IRA Investment* Investment
- - - ------------ --------------------- ----------------------- -------------------
A, B and C $1,000 $250 None
I $1,000,000 $1,000,000 None
- - - ------------ --------------------- ----------------------- -------------------
*or other retirement accounts, pension and profit sharing plans,
custodial accounts under the Uniform Gift to Minors Act, trusts and
estates or qualifying group plans.
Purchases of the fund 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. We reserve the right to
change or waive minimums or to reject any order.
How to BUY Shares Through your investment professional
*To open your account, contact your investment professional.
If you invest through an investment professional, the 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. The fund may be unable to provide
account information or other services for shares held in the name of, or
controlled by, an investment dealer.
How to BUY Shares THROUGH THE TRANSFER AGENT
*COMPLETE the attached application or send a letter specifying the name
of the fund and the class of shares you wish to buy. If you do not
specify a class, your purchase will be automatically invested in Class
A Shares.
*ENCLOSE a check made payable to State Street Bank and Trust Company or
to Zweig Foreign Equity Fund. (We will not accept third party checks,
i.e. any checks which are not payable to the order of State Street Bank
and Trust Company or Zweig Foreign Equity Fund.) MAIL to State Street
Bank and Trust Company:
<PAGE>
16
By regular mail: By courier or overnight mail:
2 Heritage Drive
P.O. Box 8505 Third Floor
Boston, MA 02266-8505 Quincy, MA 02171
Att: Zweig Mutual Funds Att: Zweig Mutual Funds
* For WIRE instructions (Federal funds) please call 1-800-628-0441.
* AUTOMATIC INVESTMENT PLAN PURCHASES. Move money from your bank account
or via payroll deduction into the fund on any day of each month or
quarter. Please refer to the application form in this prospectus or
call 1-800-272-2700 for assistance.
HOW TO SELL YOUR FUND SHARES.
You can sell your shares on any day the New York Stock Exchange (NYSE) is open.
The price you receive will be the net asset value less any applicable contingent
deferred sales charge. The net asset value you will receive is calculated at the
close of business on the day your sell order is received at the transfer agent.
Proceeds of your sale will generally be mailed to you within seven days after
your request is received. If shares are bought with an uncertified check and
sold within 15 days after purchase, the proceeds may not be paid until 15 days
after the purchase. If the fund has evidence of cleared funds, money may be
released earlier.
Selling Your Shares THROUGH YOUR INVESTMENT PROFESSIONAL.
*Contact your investment professional if you bought your shares at
your brokerage firm. If you sell your shares through your investment
professional, the price you will receive will be the price of shares at
the close of business on the day the order is transmitted to the
transfer agent by your brokerage firm.
Selling Your Shares BY MAIL Through the Transfer Agent
*SEND A LETTER to sell your shares to: State Street Bank and Trust
Company
By regular mail: By courier or overnight mail:
2 Heritage Drive
P.O. Box 8505 Third Floor
Boston, MA 02266-8505 Quincy, MA 02171
Att: Zweig Mutual Funds Att: Zweig Mutual Funds
*ENCLOSE your stock certificates.
*Remember to SIGN both the stock certificates and the letter
exactly as the stock certificates are registered.
*Sales over $10,000 require a SIGNATURE GUARANTEE of the
registered owners or your legal representative. 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 assistance.
*CORPORATE AND FIDUCIARY shareholders selling shares must include the
appropriate documentation establishing the authority of the person
seeking to act on behalf of the account.
Selling your shares BY TELEPHONE though the Transfer Agent
You may sell your shares by telephone (unless your address of record has been
changed within the preceding 15 days).
*CALL 1-800-272-2700 if your account is registered for telephone
redemption privileges and your shares are held at the transfer agent
without certificates.
Proceeds will be mailed to the address on the account. If you designated a
domestic bank on the application form when you opened your account, you may have
redemption proceeds of $1,000 or more wired to the bank. Any change in wire
redemption directions requires a signature guarantee from an appropriate
guarantor. In order to sell shares on the day you place the order, the transfer
agent must receive your instructions to sell before the close of regular trading
on the NYSE.
The maximum amount that may be redeemed for joint accounts by telephone is
$25,000. Neither the fund, the distributor, nor the transfer agent will be
liable for any loss in acting on telephone instructions reasonably believed to
be authentic. In the event of a fraudulent telephone redemption, the investor
will bear the risk of loss. Because the fund may otherwise be liable for any
losses due to unauthorized or fraudulent instructions, reasonable procedures are
employed to confirm that instructions given by phone are genuine. These include:
requiring a form of personal identification from the caller and recording
telephone instructions.
For identification purposes, the transfer agent may require such information as
it deems necessary before accepting redemption instructions.
During periods of extremely drastic economic or market changes, it may become
difficult to implement a telephone redemption. In the event that you have
difficulty reaching the transfer agent at its toll-free number, you should
consider sending written redemption instructions in the manner explained above.
We reserve the right to refuse telephone redemption requests and to limit their
amount or frequency. If, however, we determine not to accept a telephone
redemption request, we will seek to advise you promptly of that decision and, to
the extent feasible, will communicate that decision by telephone.
Redemptions normally will be made in cash. Redemptions also 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.
REINSTATEMENT PRIVILEGE. If you have made a partial or complete redemption of
shares, you 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. You may exercise this
privilege only once a year.
SYSTEMATIC CASH WITHDRAWAL PROGRAMS. If your account has $5,000 or more, you may
set up a program to receive a specific amount in 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.
<PAGE>
17
EXCHANGE PRIVILEGE
You can exchange shares of the 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 professional 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
the application form in this Prospectus).
Each exchange is a sale of shares of the 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.
NET ASSET VALUE
The fund determines the net asset value of each class of its shares on each day
that the NYSE is open. Net asset values are calculated as of the close of
regular trading on the NYSE.
We value portfolio securities at market value when quotations are readily
available. We value securities for which market quotations are not readily
available at fair value as determined using procedures determined by the Board
of Trustees. We value foreign forward currency contracts using forward currency
exchange rates supplied by a quotation service. We value short-term obligations
having a remaining maturity of 60 days or less at amortized cost (which
approximates market value).
DISTRIBUTIONS AND TAXES
Dividends from net investment income and distributions from net realized capital
gains will be paid at least annually.
Distributions are declared separately for each class of shares of the 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 had two consecutive mailings returned as
"undeliverable", will automatically have their future distributions reinvested
at net asset value.
Because Class B and Class C Shares have higher 12b-1 fees, dividends on Class A
Shares will be higher than dividends on Class B and Class C Shares. Because
Class I Shares have no 12b-1 fees, dividends on Class I Shares will be higher
than dividends on Class A Shares.
The fund intends to qualify as a regulated investment company for federal income
tax purposes so long as, in management's view, such qualification is in the
shareholders' interest. We intend to distribute all of the fund's net investment
income and net capital gains so as to be relieved of federal taxes.
Distributions of net investment 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.
You should receive by January 31 of each year, a statement showing the tax
status of your distributions for the prior year and the proceeds of your
redemptions (including exchanges), if any. 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. To assist you in
determining your tax basis, please keep your year-end account statements with
your other tax records.
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
investment in the fund on your particular tax situation, and any state and local
tax consequences.
THE DISTRIBUTOR
Zweig Securities Corp. serves as principal distributor of shares of the fund. At
any given time, the distributor may incur expenses in distributing shares of the
fund that are in excess of the total payments made by the fund 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 fund. Although there is no legal obligation for
the fund 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, the difference could be viewed as profit to the distributor for that
year. Accordingly, the fund's Class A, B, and C Rule 12b-1 Plans are classified
as compensation plans.
A service fee equal to 0.25% may be paid to financial services firms, including
NASD member firms that have signed agreements for continuous personal service by
such firms to investors in the fund. NASD member firms may also be paid a
portion of the asset-based sales charges on Class C Shares, 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%
commencing one year after purchase for the Class C Shares.
THE MANAGER AND MANAGEMENT FEE
The investments of the fund are managed by Zweig/Glaser Advisers. 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.
The manager's fee is based on the average daily net assets of the fund at the
annual rate of 1.00%. The rate is constant and does not diminish with an
increase in the net assets of the fund. The management fee is higher than that
paid by most funds, but is comparable to the fees paid by mutual funds with
similar investment policies.
In addition to managing the fund's investments, Zweig/Glaser Advisers also:
makes recommendations with respect to the fund's business affairs; furnishes
certain administrative services, office space and equipment; and permits its
employees to serve as the officers of the Trust without additional compensation
from the fund. All other expenses incurred in the operation of the fund, a
detailed list of which appears in the SAI, are borne by the fund.
BROKERAGE TRANSACTIONS. To buy and sell securities for the fund, Zweig/Glaser
Advisers may use its broker/dealer affiliates or other firms that sell shares of
the fund, provided they have the execution capability and that their commission
rates are comparable to those of other unaffiliated broker/dealers.
<PAGE>
18
ORGANIZATION OF THE FUND
The Trust was established as a Massachusetts business trust on September 24,
1984, and reorganized as a Delaware business trust on April 30, 1996. 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, an open-end, diversified, management investment company, has an
unlimited number of shares of beneficial interest which, without shareholder
approval, may be divided by the Trustees into an unlimited number of funds and
classes. 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 the fund will fluctuate 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 our skill in managing the fund's portfolio,
the period of time you hold your investment, 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.
Advertisements for the fund may include:
MAXIMUM NAV DECLINE since the fund's inception, or for shorter periods.
TOTAL RETURN for the most recent one-, five- and ten-year periods, and
since the inception of a class of shares through the most recent
calendar quarter. 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 the
fund's share price. We calculate yield according to accounting methods
that are standardized for all stock and bond mutual funds. We express
yield 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. YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
We also may include in advertising or marketing materials data from
financial and other publications and reference surveys that deal with industry
or investment statistics. The SAI lists the principal industry publications.
<PAGE>
19
APPLICATION (DO NOT USE FOR ZWEIG RETIREMENT PLANS OR FOR CLASS I SHARES) FOR
APPLICATION ASSISTANCE CALL 1-800-272-2700.
Zweig Foreign Equity Fund
MAIL ALL FORMS AND CHECKS TO:
Zweig Mutual Funds
c/o State Street Bank and
Trust Company
P.O. Box 8505
Boston, MA 02266-8505
BY COURIER TO:
Zweig Mutual Funds
c/o State Street Bank and
Trust Company
2 Heritage Drive, 3rd Floor
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
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.
<PAGE>
20
3. INVESTMENT INFORMATION
Minimum initial investment: $1,000; $250 for IRA and other Retirement Plans,
pension and profit sharing plans, custodial accounts under the Uniform Gifts to
Minors Act, trust and estate or qualifying group plans. There is no minimum
amount for subsequent investments.
ZWEIG FOREIGN EQUITY FUND
_ 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 Zweig Foreign Equity 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
ABA Number (Federal Routing Number)
Bank Account Number
Name(s) on Bank Account
IN THE EVENT OF A FRAUDULENT TELEPHONE REDEMPTION, THE INVESTOR WILL BEAR THE
RISK OF LOSS, SINCE THE TRUST AND ITS AGENTS DISCLAIM LIABILITY FOR ACTING UPON
TELEPHONE INSTRUCTIONS REASONABLY BELIEVED TO BE AUTHENTIC. REASONABLE
PROCEDURES ARE EMPLOYED TO CONFIRM THAT INSTRUCTIONS GIVEN BY TELEPHONE ARE
GENUINE, SUCH AS REQUIRING A FORM OF PERSONAL IDENTIFICATION FROM THE CALLER,
PROVIDING WRITTEN CONFIRMATION OF THESE TRANSACTIONS AND RECORDING TELEPHONE
INSTRUCTIONS.
<PAGE>
21
SYSTEMATIC CASH WITHDRAWAL PROGRAM You may receive a check monthly or quarterly
(minimum $25). There must be a minimum of $5,000 in the fund 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
Zweig Foreign Equity Fund
_ Class A _ Class B _ Class C beginning with the
month of________________
on a _ monthly _ quarterly basis.
Please complete "Bank Information" below if you wish to have your
withdrawal wired to your bank.
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
-------------------------------------------------------------------------
Zip Code City State
-------------------------------------------------------------------------
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 your fund account 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 Zweig Foreign Equity
Fund _ 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
BANK INFORMATION:
NOTE: YOUR BANK MUST BE A MEMBER OF THE AUTOMATED CLEARING HOUSE (ACH). PLEASE
CALL YOUR BANK IF YOU ARE UNSURE.
- - - ----------------------------------------------------------------------
Name of Bank
- - - ----------------------------------------------------------------------
ACH ROUTING NUMBER*
*THIS NINE-DIGIT NUMBER USED TO IDENTIFY YOUR BANK TO THE ACH CAN BE FOUND IN
THE LOWER LEFT-HAND CORNER OF YOUR BANK CHECK. IF YOUR ACCOUNT IS WITH A SAVINGS
BANK OR CREDIT UNION, YOU MUST CONTACT THE INSTITUTION TO OBTAIN ITS ACH ROUTING
NUMBER.
- - - ---------------------------------------------------------------------
Name(s) on Bank Account
- - - ---------------------------------------------------------------------
Bank Account Number
Check one:
Checking Account (You must attach a voided check for the above referenced
account.)
Savings Account (Please obtain proper ACH routing information from your
bank.)
Passbook savings and money market mutual fund accounts are NOT eligible.
ACTIVATION OF AUTOMATIC INVESTMENT PLAN The Zweig Automatic Investment Plan
normally becomes active 15 business days after we receive your application. Your
investment may be credited for purchase in Zweig Foreign Equity Fund up to three
business days after the date you selected on the application. Establishment of
the Automatic Investment Plan may be delayed if proper information is not
provided.
<PAGE>
22
ZWEIG SAVINGS PLAN The Trust will send you an invoice each month or quarter in
order to make regular investments into the Zweig Foreign Equity Fund. 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
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 Zweig Foreign Equity
Fund. I (we) affirm that I (we) have received the current prospectus of the
Zweig Foreign Equity 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.
<PAGE>
23
INVESTMENT MANAGER
Zweig/Glaser Advisers
900 Third Avenue
New York, New York 10022-4728
PRINCIPAL DISTRIBUTOR
Zweig Securities Corp.
900 Third Avenue
New York, New York 10022-4728
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.
<PAGE>
ZWEIG FOREIGN EQUITY FUND
A Series of
ZWEIG SERIES TRUST
900 Third Avenue, New York, N.Y. 10022-4728
STATEMENT OF ADDITIONAL INFORMATION
Zweig Foreign Equity Fund (the "Fund"), is a diversified, open-end
management investment company organized as a new series of Zweig Series Trust, a
Delaware business trust (the "Trust"). The Fund seeks to increase the value of
your investment over the long-term (capital appreciation) by investing primarily
in foreign stocks, consistent with preserving capital and reducing portfolio
exposure to market risk.
The other Series of the Trust are: Zweig Strategy Fund, Zweig
Appreciation Fund, Zweig Growth & Income Fund, Zweig Managed Assets, Zweig
Government Fund and Zweig Cash Fund. For a copy of the Statement of Additional
Information dated May 1, 1997 for these other Series' call or write the Trust at
the telephone number and address printed on this cover page.
The Fund has a distribution system that allows it 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 ("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. by tax-exempt retirement
plans of Zweig Securities Corp. and its affiliates and certain institutional
investors. The Fund's distribution system is described more fully in the
Prospectus under the headings "Choosing Among Classes When Purchasing Shares",
"How to Invest in the Fund" and "How to Redeem Your Shares".
The Fund is designed for long-term investors, including those who wish to
use shares of the Fund or another Series of the Trust 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 the Fund
and Zweig Securities Corp. (the "Distributor" ), an affiliate of the Manager, is
the principal distributor of the Fund's shares.
This Statement of Additional Information, which should be kept for future
reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Fund (the "Prospectus" ), dated November 3, 1997, which can be
obtained without cost by contacting your financial professional 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 Fund.
Zweig Series Trust
(Toll Free 1-800-272-2700)
November 3, 1997
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES..................................................... 3
INVESTMENT RESTRICTIONS............................................................... 7
PURCHASE AND REDEMPTION OF SHARES..................................................... 9
REINSTATEMENT PRIVILEGE .............................................................. 9
EXCHANGE PRIVILEGE ................................................................... 10
INVOLUNTARY REDEMPTIONS............................................................... 10
RETIREMENT PLANS...................................................................... 10
NET ASSET VALUE AND TAXES............................................................. 10
TRUSTEES AND OFFICERS OF THE TRUST.................................................... 12
INVESTMENT MANAGEMENT AND OTHER SERVICES.............................................. 15
Manager ........................................................................ 15
Distributor..................................................................... 15
Distribution Plans.............................................................. 16
Custodian, Fund Accounting Agent, Transfer Agent and Dividend Paying Agent...... 17
Independent Accountants......................................................... 17
Counsel......................................................................... 17
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................................. 17
YIELD AND PERFORMANCE INFORMATION..................................................... 18
REGISTRATION STATEMENT................................................................ 19
</TABLE>
<PAGE>
2
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective and policies and permitted investments
are described in the prospectus under the headings "Investment Objective", "How
We Select Countries and Stocks", and "Risk Factors". The investment restrictions
that are fundamental policies (see "Investment Restrictions" on page 7) can be
changed only by vote of a majority of the outstanding shares of the Fund. A
majority for the purpose of changing a fundamental policy 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. If the Fund should change its investment objective, we will notify
shareholders 30 days prior to making the change. As stated in the Prospectus, a
shareholder's voting rights are based on the shareholder's total dollar interest
in a Series and are thus allocated in proportion to the value of each
shareholder's investment.
There can be no assurance that the Fund's investment objective will be
achieved. Set forth below is additional information with respect to the
investment objective and policies of the Fund and a description of certain
financial instruments and techniques utilized by the Fund. The Board of
Trustees, which has the primary responsibility for the overall management of the
Fund, has determined that, while there are certain risks inherent in some of
these, including futures, options, currency exchange contracts and short sales,
the Manager 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.
FOREIGN SECURITIES
The Fund may invest in securities of foreign issuers, including equities
and non-U.S. dollar-denominated money market securities, and sponsored and
unsponsored ADRs, ADSs, EDRs, EDSs, GDRs, and GDSs. Shareholders should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the usual
risks inherent in domestic investments.
Although the Fund intends to invest only in nations that the Manager
considers to have relatively stable and friendly governments, there is the
possibility of expropriation, nationalization, repatriation or confiscatory
taxation, taxation of income earned in a foreign country and other foreign
taxes, foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability or diplomatic developments which
could affect investments in securities of issuers in those nations. In addition,
in many countries there is less publicly available information about issuers
than is available for U.S. companies. For example, ownership of unsponsored ADRs
may not entitle the owner to financial or other reports from the issuer to which
it might otherwise be entitled as the owner of a sponsored ADR. Moreover,
foreign companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to U.S. companies. In many foreign countries,
there is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. Foreign securities transactions may also be subject to higher brokerage
costs than domestic securities transactions. The foreign securities markets of
many of the countries in which the Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, the Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign stock markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Further, the inability to dispose of portfolio securities due to
settlement problems could result either in losses because of subsequent declines
in the value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. Fixed
commissions on some foreign securities exchanges are generally higher than
negotiated commissions on U.S. exchanges, although the Manager will endeavor to
achieve the most favorable net results on the Fund's portfolio transactions. It
may be more difficult for the Fund's agents to keep currently informed about
corporate actions such as stock dividends or other matters that may affect the
prices of portfolio securities. Communications between the United States and
foreign countries may be less reliable than within the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Moreover, individual foreign economies
may differ favorably or unfavorably from the United States economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. The
Manager seeks to mitigate the risks to the Fund associated with the foregoing
considerations through diversification and continuous professional management.
3
<PAGE>
REPURCHASE AGREEMENTS
Repurchase agreements involve purchases of securities by the Fund. In such
a transaction, at the time the Fund purchases the security, it simultaneously
agrees to resell and redeliver the security to the seller who also
simultaneously agrees to buy back the security at a fixed price and time. This
assumes a predetermined yield for the Fund during its holding period, since the
resale price is always greater than the purchase price and reflects an
agreed-upon market rate. Such transactions afford an opportunity for the Fund to
invest temporarily available cash. Repurchase agreements may be considered loans
to the seller collateralized by the underlying securities. The risk to the Fund
is limited to the ability of the seller to pay the agreed-upon sum on the
repurchase date; in the event of default, the repurchase agreement provides that
the Fund is entitled to sell the underlying collateral. If the value of the
collateral declines after the agreement is entered into, however, and if the
seller defaults under a repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss of
both principal and interest. The manager monitors the value of the collateral at
the time the transaction is entered into and at all times subsequent during the
term of the repurchase agreement in an effort to determine that the value of the
collateral always equals or exceeds the agreed-upon repurchase price to be paid
to the Fund. If the seller were to default or be subject to a bankruptcy
proceeding, the ability of the Fund to liquidate the collateral could be delayed
or impaired because of certain provisions of the bankruptcy laws.
OPTIONS
The Fund may write, sell and purchase put and call options listed on one or
more U.S. or foreign securities exchanges, including options on market indices.
When the Fund writes an option, an amount equal to the premium received by
the Fund 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 the Fund expires, or the Fund
enters into a closing purchase transaction, the Fund 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 the Fund 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 the Fund 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 the Fund 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 Fund 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 the Fund, 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.
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In addition, there is no assurance that higher-than-anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of the OCC inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders.
The amount of the premiums which the Fund 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.
An option on a securities index is similar to an option on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the chosen index is greater than (in the case of a call option) or less than (in
the case of a put option) the exercise price of the option.
FUTURES CONTRACTS
Upon entering into a futures contract, the Fund will initially be required
to deposit with the custodian an amount of initial margin using cash or U.S.
Treasury bills. 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
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. In addition to initial margin, the Fund 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
Fund's 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
Fund has purchased a futures contract and the price of the underlying security
has risen, that position will have increased in value and the Fund will receive
from the broker a maintenance margin payment equal to that increase in value.
Conversely, when the Fund has purchased a futures contract and the price of the
underlying security has declined, the position would be less valuable and the
Fund would be required to make a maintenance margin payment to the broker. At
any time prior to expiration of the futures contract, the Fund may elect to
close the position by taking an opposite position which will operate to
terminate the Fund's 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 Fund, and the Fund 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 Fund 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 Fund
immediately is paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sales price, the Fund pays the difference and
realizes a loss. Similarly, the closing out of a futures contract purchase is
effected by the Fund entering into a futures contract sale. If the offsetting
sale price exceeds the purchase price, the Fund realizes a gain, and if the
purchase price exceeds the offsetting price, the Fund 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 Fund 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 Fund 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.
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To compensate for the imperfect correlation of such movements in price, the
Fund 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 Fund 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 the Fund 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 Fund's portfolio may decline. If this occurred, the
Fund would lose money on the futures contracts and also experience a decline in
value in its portfolio securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a diversified
portfolio will tend to move in the same direction as the futures contracts.
Where futures are purchased to hedge against a possible increase in the cost
of securities before the Fund is able to invest its cash (or cash equivalents)
in an orderly fashion, it is possible that the market may decline instead; if
the Fund 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 Fund 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
Fund 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 Fund 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 Fund 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 the
Fund 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 Fund 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 Fund 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 Fund
may have to sell securities at a time when it may be disadvantageous to do so.
INVESTMENT COMPANIES
Investments by the Fund in investment companies will be effected by
independent investment managers, and the Fund 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 the Fund 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 the Fund invests may or may not have the same
fundamental investment limitations as those of the Fund 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 Fund, a
shareholder of the Fund will bear not only a proportionate share of the expenses
of the Fund (including operating costs and investment advisory and
administrative fees) but also, indirectly, similar expenses of the investment
companies in which the Fund invests.
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A shareholder may also indirectly bear expenses paid by investment companies in
which the Fund invests related to the distribution of such investment companies'
shares. Some of the open-end investment companies in which the Fund may invest
may limit the ability of shareholders (including the Fund) to redeem their
shares.
Current law prohibits the Fund 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. The Fund 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 the Fund,
these restrictions would not apply to the Fund. The Fund may also invest in
other investment companies to facilitate the implementation of a master-feeder
structure.
OPTIONS ON FUTURES CONTRACTS
The Fund 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
Fund 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 Fund 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 Fund when the use of a futures
contract would not. 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 Fund 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
Fund 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 Fund 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 Fund not enter into futures and related
options for which the aggregate initial margin and premiums exceed 5% of the
fair market value of the Fund's total assets. There is no other limitation on
the percentage of the Fund's 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 Fund can engage
in futures transactions.
New financial products and risk management techniques continue to be developed
and the Fund may use these new investments and techniques to the extent
consistent with its investment objective and policies.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of the
Fund, which cannot be changed without the approval of the holders of a majority
of the outstanding voting securities of the Fund as defined in the Investment
Company Act of 1940, as amended (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 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 the Fund (I.E., a
structure under which the Fund 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
the Fund 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, the Fund may not:
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 Fund (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);
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2. With respect to 75% of the Fund's 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 the Fund would be invested in such issuer or (ii) the Fund
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
Fund), 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 the Fund 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 the
Fund from purchasing and selling options and futures contracts; and
8. 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 Fund's total assets, the Fund will make no further investments
until such borrowing is repaid. It is the current intention of the Fund not to
borrow money in excess of 5% of its assets. The Fund 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 the Fund's assets.
NON-FUNDAMENTAL RESTRICTIONS
The investment restrictions set forth below are other investment policies
of the Fund that are non-fundamental that can be changed by the Board of
Trustees without a shareholder vote. Pursuant to such restrictions and policies,
the Fund may not:
9. Borrow money, except from banks for temporary purposes in an amount up
to 10% of the value of the Fund's total assets. The Fund may only pledge its
assets in an amount up to 10% of the value of its total assets, and then only to
secure such borrowings. The Fund will borrow money only to accommodate requests
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 Fund 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;
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 of Zweig
Series Trust, or one or more Series of Zweig Series Trust 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. Sell securities short, except as described in the Prospectus and in
accordance with the following:
When the Fund makes a short sale, the proceeds will be retained by the
broker until the Fund replaces the borrowed security. The Fund may, but will not
necessarily, receive interest on such proceeds. In order to deliver the security
to the buyer, the Fund must arrange through a broker to borrow the security and,
in so doing, the Fund will become obligated to replace the security borrowed at
its market price at the time of replacement, whatever that price may be. The
Fund may have to pay a premium to borrow the security. The Fund must pay to the
broker any dividends or interest payable on the security until the Fund replaces
the security.
The Fund's obligation to replace the security borrowed in connection
with a short sale will be secured by the proceeds from the short sale retained
by the broker. In addition, the Fund will be required to deposit cash or liquid
securities as collateral in a segregated account with a custodian in an amount
such that the value of the proceeds and the collateral deposit is at all times
equal to at least 100% of the current market value of the securities sold short.
The Fund will receive the interest and/or dividends accruing on any liquid
securities held as collateral in the segregated account with the custodian. The
proceeds and the collateral deposit do not
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necessarily limit the Fund's potential loss on a short sale, which may exceed
the entire amount of the proceeds and collateral deposit.
If the price of the security sold short increases between the time of
the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss, and if the price declines during this period, the Fund 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 Fund may have to pay in
connection with such short sale;
15. 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;
16. 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 Fund's net assets would consist of such
securities;
17. Invest more than 2% 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); and
18. The Fund may lend its portfolio securities to a limited extent. Such
loans entitle the Fund to cash collateral, and the extra cash thus obtained may
be invested in short-term, interest-bearing securities. The Fund 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 Fund 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 Fund 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 Fund's management).
It is the current intention of the Fund not to engage in such activities to an
extent in excess of 5% of the value of the Fund's total assets.
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 Fund" and
"How to Redeem Your Shares", which describe the methods of purchase and
redemption of Fund shares.
If you invest through an investment dealer or agent, that firm may have
its own service features, transaction charges and fees. This SAI and the
accompanying 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 differs for
selling shares of different classes of the Fund.
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 Fund and
credited to such account.
If the Board of Trustees should determine that it is advisable in the
interest of the remaining shareholders of the Fund or Class to make payment
wholly or partly in cash, the Fund may pay redemption proceeds in whole or in
part by a distribution in kind of securities from the portfolio of the Fund, 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 Fund 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 Fund 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 in the Fund with other
Series' of the Trust by telephone.
The minimum value of any class of shares that may be exchanged into
another Series in which shares are not already held is $1,000 and no exchange
out of another 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.
Class A Shares of the Fund are made available to Merrill Lynch Daily K
Plan (the "Plan") participants at NAV without an initial sales charge if: (i)
the Plan is recordkept on a daily valuation basis by Merrill Lynch and, on the
date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement,
the Plan has $3 million or more in assets invested in broker/dealer funds not
advised or managed by Merrill Lynch Asset Management, L.P. ("MLAM") that are
made available pursuant to a Service Agreement between Merrill Lynch and the
fund's principal underwriter or distributor and in funds advised or managed by
MLAM (collectively, the "Applicable Investments"); (ii) the Plan is recordkept
on a daily valuation basis by an independent recordkeeper whose services are
provided through a contract or alliance arrangement with Merrill Lynch, and on
the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement, the Plan has $3 million or more in assets, excluding money market
funds, invested in Applicable Investments; or (iii) the Plan has 500 or more
eligible employees, as determined by Merrill Lynch plan conversion manager, on
the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement. Alternatively, Class B Shares of the Fund are made available to Plan
participants at NAV without a CDSC if the Plan conforms with the requirements
for eligibility set forth in (I) through (iii) above but either does not meet
the $3 million asset threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B Shares of the Fund convert to Class A Shares once the Plan has reached
$5 million invested in Applicable Investments, or after the normal holding
period of seven years from the initial date of purchase.
NET ASSET VALUE AND TAXES
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 the Fund, are entitled to receive their share of the net assets
of the Fund. Shareholders have no preemptive rights. The Trust's fiscal year
ends on December 31.
We subtract the non-class specific liabilities of the 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.
10
<PAGE>
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. 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).
TAX STATUS
The Fund will be treated as a separate corporation for purposes of the
Internal Revenue Code of 1986, as amended (the Code ) (except for purposes of
the definitional requirements for regulated investment companies under Code
Section 851(a)). By paying dividends representing its investment company taxable
income within the time periods specified in the Code and by meeting certain
other requirements, the Fund intends to qualify as a regulated investment
company under the Code. Since the Fund will distribute annually its investment
company taxable income, net capital gains, and capital gain net income, it will
not be subject to income or excise taxes otherwise applicable to undistributed
income of a regulated investment company. If the Fund 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 net short-term
capital gains are taxable to shareholders as ordinary income. Distributions from
net long-term capital gains that are properly designated as such 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. Any
loss realized by a shareholder upon the disposition of Fund shares held for six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.
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
Fund, as well as on the proceeds of redemptions of the Fund, if the Fund is not
provided with the shareholder's correct taxpayer identification number and
certification that the shareholder is not subject to such backup withholding, or
if the Internal Revenue Service notifies the Fund 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 Fund 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 the Fund
will be as follows: Gain or loss from a closing transaction with respect to
options written by the Fund, 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 the Fund 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 the Fund
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 Fund's 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. The Fund
11
<PAGE>
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 Fund 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
the Fund's 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 Fund, 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.
Dividends and interest received by the Fund on foreign securities as well
as capital gains realized upon the sale of such securities, may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the U.S. may reduce or eliminate taxes. Foreign
taxes paid by the Fund will reduce its dividends. If more than 50% of the value
of the Fund's total assets at the end of each quarter of any fiscal year
consists of stock or other securities of foreign corporations, the Fund may
elect to treat certain foreign taxes paid by it, including withholding taxes, as
paid by its shareholder. If the Fund makes this election, the amount of foreign
taxes paid by the Fund will be included in the shareholders' pro rata (in
addition to taxable distributions actually received by them), and the
shareholders would be entitled (a) to credit their share of such taxes against
their U.S. federal income taxes (subject to generally applicable limitations),
or (b) if they itemize their deductions, to deduct their share of such taxes
form their gross income.
To the extent attributable to fluctuations in foreign currency exchange
rates, gains or losses arising from the (i)
acquiring or incurring debt denominated in foreign currencies, (ii) accruing
receivables or payables denominated in foreign currency prior to receipt or
payment, and (iii) disposing of certain options, futures or forward contracts,
will be treated as ordinary income or loss rather than capital gain or loss.
If the Fund purchases the stock of "passive foreign investment companies"
("PFICs"), the Fund will be subject to tax under one of three regimes. Under the
default regime, gain on the sale of PFIC stock and certain "excess
distributions" are treated as ordinary income and subject to an interest charge.
If the PFIC provides certain information and the Fund makes an election, the
Fund may elect to include its pro rata share of the PFIC's capital gains and
ordinary income currently even if not distributed. In taxable years beginning
after December 31, 1997, if the Fund so elects it may mark to market its PFIC
shares; any resulting gain will be ordinary income and losses will be ordinary
losses to the extent of prior ordinary income.
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>
<S> <C> <C>
Name,Address and Age Position With the Trust Principal Occupation During Past 5 Years
JAMES BALOG Trustee Retired; Director and Member of the Audit, Investment, Stock
2205 N. Southwinds Blvd. Option and Compensation Committees of Transatlantic Holdings,
Vero Beach, FL 32963 (68) Inc.(reinsurance); Director and Member of the Executive Committee
of Elan, Plc (pharmaceuticals); Director and Member of the
Executive and Investment & Credit Committees of Great West Life
and Annuity Insurance Company; and Member of the Technical
Advisory Board of Galen Partners (health care). Former Director,
Chairman of the Audit Committee and Member of the Executive
Committee of A.L. Pharma, Inc. (health care); Chairman of 1838
Investment Advisors, L.P. and Chairman of Lambert Brussels Capital
Corporation (investments).
12
<PAGE>
CLAIRE B. BENENSON Trustee Consultant on Financial Conferences, The New School for Social
870 U.N. Plaza Research and Director of The Burnham Fund Inc. Former Director of
New York, NY 10017 Financial Conferences and Chairman, Department of Business and
(78) Financial Affairs, The New School for Social Research, President
of the Money Marketeers of New York University, Trustee of Simms
Global Fund and 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) (private banking), Trustee of BT
Singer Island, FL 33404 Portfolios and BT Investment Funds. Former partner of Peat
(66) Marwick Mitchell & Co., and Director of Zweig Cash Fund Inc. and
Vintners International Company, Inc.(winery).
EUGENE J. GLASER* Chairman, President of the Manager and President and Director of the
900 Third Avenue Chief Executive Distributor; President of Euclid Advisors, L.L.C.; Director of The
New York, NY 10022 Officer and Trustee Zweig Fund, Inc. Former Director of Zweig Cash Fund Inc.
(57)
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
(66) 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
(55) Advisors Inc., Zweig-DiMenna International Managers, Inc., and
Zweig Securities Advisory Service, Inc.; Consultant to (former
Co-Chairman of Research of) Avatar Investors Associates Corp.;
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 Chairman of
Euclid Advisors, L.L.C.; Member of the Undergraduate Executive
Board of the Wharton School, University of Pennsylvania. Former
President of Zweig Cash Fund Inc. and General Partner of Zweig
Katzen Investors, L.P.
DAVID KATZEN Senior Vice President Senior Vice President of the Manager; Vice President of Zweig
900 Third Avenue Advisors Inc. and Executive Vice President of Euclid Advisors,
New York, NY 10022 Inc. Former Director of Quantitative Research at Avatar
(39) Investors Associates Corp.; Director of Equity Research for
Zweig Total Return Advisors, Inc.; Research Director of Zweig
Advisors Inc. and Vice President of the Zweig Fund, Inc. and ZZK
Management, Inc.
BARRY MANDINACH First Vice President Executive Vice President of the Distributor and Senior Vice
900 Third Avenue President of the Manager.
New York, NY 10022
(41)
13
<PAGE>
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
(29)
ALFRED J. RATCLIFFE First Vice President, First Vice President of the Manager. Former Vice President of The
900 Third Avenue Treasurer, Principal Bank of New York.
New York, NY 10022 Accounting Officer
(50) and Assistant Secretary
CHARLES I. LEONE First Vice President First Vice President and Chief Financial Officer of the Manager and
900 Third Avenue and Assistant Secretary First Vice President, Chief Financial Officer and Assistant
New York, NY 10022 Secretary of the Distributor. Former Assistant Treasurer of Zweig
(36) Cash Fund Inc.
ANNEMARIE GILLY Vice President First Vice President of the Manager and the Distributor. Former
900 Third Avenue Vice President of Concord Financial Group and Executive Vice
New York, NY 10022 President and Chief Operating Officer of The Gabelli Equity Trust,
(46) Inc.
JEFFREY LAZAR Vice President Vice President and Treasurer of The Zweig Fund, Inc. and The Zweig
900 Third Avenue Total Return Fund, Inc.; Vice President, Treasurer and Secretary of
New York, NY 10022 Zweig Advisors Inc. and Zweig Total Return Advisors, Inc.
(38)
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,
(52) Inc. and Assistant Secretary of Gotham Advisors, Inc., Zweig Total
Return Advisors, Inc. and Zweig Advisors Inc. Former Secretary of
Zweig Cash Fund Inc.
TOM DISBROW Assistant Vice Assistant Vice President of the Manager
900 Third Avenue President and
New York, NY 10022 Assistant Treasurer
(31)
BETH ABRAHAM Assistant Vice Assistant Vice President of the Manager. Former self-employed
900 Third Avenue President consultant to the mutual fund industry.
New York, NY 10022
(41)
RHONDA LEE BERZNER Assistant Vice Senior Research Analyst for the Manager.
900 Third Avenue President
New York, NY 10022
(32)
</TABLE>
*DESIGNATES A TRUSTEE WHO IS AN INTERESTED PERSON OF THE TRUST WITHIN THE
MEANING OF THE 1940 ACT.
14
<PAGE>
Set forth below is a table showing the compensation of the Board of
Trustees:
<TABLE>
<CAPTION>
Total Compensation from the
Aggregate Compensation from the Trust paid to the Trustees
Name of Person, Position Trust
<S> <C> <C>
James Balog, Trustee** $ 8,500 $ 8,500
Claire B. Benenson, Trustee 17,000 17,000
S. Leland Dill, Trustee 17,000 17,000
Eugene J. Glaser, Chairman, Chief 0 0
Executive Officer and Trustee
Donald B. Romans, Trustee 17,000 17,000
**Effective May 1, 1997.
</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. 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, 1996, the fees and expenses of
disinterested trustees, as a group, were $69,749. As of July 7, 1997, except for
Dr. Zweig, Eugene J. Glaser and David Katzen, the trustees and officers of the
Trust, as a group, owned less than 1% of any Class 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.
INVESTMENT MANAGEMENT AND OTHER SERVICES MANAGER
The Fund and the Manager entered into a management agreement, dated
October 9, 1997 (the "Management Agreement" ), pursuant to which the Manager
reviews the portfolio of securities and investments of Fund and advises and
assists the Fund with respect to the selection, acquisition, holding or disposal
of securities. In addition to managing the investments, the Manager also makes
recommendations with respect to other aspects and affairs of the Fund. 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 without additional compensation from the Trust. All other expenses
incurred in the operation of the Fund are borne by the Fund, including:
interest, taxes, fees and commissions of every kind; expenses of issue,
repurchase or redemption of shares; costs of registering or qualifying shares
for sale (including printing costs, legal fees and other expenses relating to
the preparation and filing of the Fund's registration statement with the
appropriate regulatory authorities and the production and filing of the Fund's
prospectus); costs of insurance; association membership dues; all charges of
custodians, including fees as custodian, escrow agent, and fees for keeping
books and performing portfolio valuations; all charges of transfer agents,
registrars, 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.
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.
15
<PAGE>
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 Fund pays the Manager for its services pursuant to the Management
Agreement a monthly fee at the annual rate of 1.00% of the average daily net
assets of the Fund.
Until April 30, 1998 the fee of the Fund will be reduced, or the Manager
will reimburse the Fund (up to the amount of its fee), by an amount necessary to
prevent the total expenses of the Fund (excluding taxes, interest, brokerage
commissions or transaction costs, certain distribution fees, certain custodial
expenses and extraordinary expenses) from exceeding 1.5% of the Fund's average
net assets.
The Manager may draw upon the resources of the Distributor and its
qualified affiliates in rendering its services to the Fund. The Distributor or
its affiliates may provide the Manager (without charge to the Fund) with
investment information and recommendations that may serve as the principal basis
for investment decisions with respect to the Fund or 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 26, 1997.
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 result in payments that currently
amount to 15 basis points.
DISTRIBUTION PLANS
The Trust has adopted a distribution plan for each class of shares of each
Series, including the Fund, except Class I Shares (i.e., a plan for the Class A
and C Shares and a plan for the Class B 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 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, Zweig Growth & Income Fund and Zweig Foreign Equity Fund; 0.50% per
annum for Zweig Government Fund and 0.05% per annum for Zweig Cash Fund.
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.
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.
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.
16
<PAGE>
If the Plans are terminated (or not renewed) with respect to the Fund or
any Class of the Fund, 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).
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 Fund and its shareholders from
the growth in assets due to sales of shares to the public pursuant to the Plans.
Increases in the Fund's net assets from sales pursuant to its Plan may benefit
shareholders by reducing per share expenses, permitting increased investment
flexibility and diversification of the Fund's assets, and facilitating economies
of scale (e.g., block purchases) in the Fund's 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
B Shares was approved by the Board of Trustees, including a majority of the
Qualified Trustees, at a meeting held on June 26, 1997. Prior to approving the
continuance of the Plans, 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 Plans, 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 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 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 Fund shareholders. Shareholders may
request in writing that the transfer agent issue to them certificates
representing their ownership of Fund 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.
17
<PAGE>
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
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 Fund as a result of its usual and customary brokerage
commissions which the Distributor or its affiliates may receive for acting as
broker to the Fund 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 Fund
which the Distributor may receive. 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 Fund. Information so received will
enable the Manager to supplement its own research and analysis with the views
and information of other securities firms. Such information may be useful and of
value to the Manager and its affiliates in servicing other clients as well as
the Fund; 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 Fund. No principal transactions are effected with Zweig Securities Corp. or
any of its affiliated companies.
The Fund 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 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 Fund, 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 Fund.
There are no fixed limitations regarding the Fund'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 the Fund for the fiscal year by (B) the monthly average of the
value of portfolio securities owned by the Fund during the fiscal year.
The options activities of the Fund may affect its turnover rate, the amount
of brokerage commissions paid by the Fund 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 Fund's portfolio turnover. Securities satisfying the basic
policies and objectives of the 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 the Fund may cause the Fund 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 Fund's control, holding a protective put might cause the
Fund to sell the underlying securities for reasons which would not exist in the
absence of the put. The Fund 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.
18
<PAGE>
YIELD AND PERFORMANCE INFORMATION
The Fund will include performance data for Class A, Class B and Class C
Shares of the Fund in its advertisements, sales literature and other information
distributed to the public that includes performance data of the Fund. Such
performance information will be based on investment yields or total returns for
the Fund.
YIELD. Yield may not be the same as the distribution rate or the income
reported in the Fund's financial statements. We compute yield by taking the
interest and dividend income the Fund earns in a 30-day period, net of expenses,
and dividing that amount by the average number of shares entitled to receive
dividends. 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.
AVERAGE ANNUAL TOTAL RETURN. 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.
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 Fund 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 investment results of the Class A, Class B and Class C Shares of the
Fund 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 the Fund's expenses, realized or unrealized investment gains and
losses, and the results of the Fund's investment policies. Thus, at any point in
time, investment yields, current distributions or total returns may be either
higher or lower than past results, and there is no assurance that any historical
performance record will continue.
The Fund also may include in its advertisements data from Age Wave, Inc.;
the American Association of Retired Persons; BARRON'S; BUSINESS WEEK;
CDA/Wiesenberger Investment Companies Service; Dalbar Surveys; FINANCIAL
PLANNING; FINANCIAL WORLD; FORBES; FORTUNE; FUNDSCOPE, 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.
19
<PAGE>
6
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 31,1996;
Report of Coopers & Lybrand L.L.P., Independent Accountants; Statement
of Operations for the year ended December 31, 1996; Statement of
Changes in Net Assets for each of the two years in the period ended
December 31, 1996; Statement of Net Assets for each Series dated
December 31, 1996; and the Statement of Assets and Liabilities for
Zweig Strategy Fund dated December 31, 1996; and the Notes to the
Financial Statements dated December 31, 1996.
(b) Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
(1) * Agreement and Declaration of Trust.
(2) ** By-laws of the Trust.
(3) Inapplicable.
(4) Forms of specimen stock certificates for shares of beneficial
interest of the Trust.
(5) Amended Management Agreement between the Trust and Zweig/Glaser
Advisers.
(6) Amended Distribution Agreement.
(7) Inapplicable.
(8) *** Custodian Agreement.
(9) ****(a) Transfer Agency Agreement.
*(b) Assignment and Assumption Agreement.
<PAGE>
7
(10) Inapplicable.
(11) Inapplicable.
(12) Inapplicable.
(13)*****(a) Subscription Agreement for Shares of the Government Securities.
#(b) Subscription Agreement for Shares of the Zweig Strategy Fund.
##(c) Subscription Agreement for Class C
(f/k/a B Shares) Shares of the
Trust.
###(d) Subscription Agreement for Shares of Zweig Managed Assets.
####(e) Subscription Agreement for Shares of the Zweig Appreciation Fund.
(14) #(a) Individual Retirement Account.
#(b) Paired Defined Contribution Prototype Plan.
#(c) 401(k) Prototype Plan.
#(d) 403(b)(7) Custodial Account.
(15) Amended Rule 12b-1 Distribution Plan.
(16) Inapplicable.
(17) Inapplicable.
(18) ##### Rule 18f-3 Plan.
</TABLE>
- - - ----------------
Notes to Item 24 (b).
<PAGE>
8
* 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. 43
to the Registration Statement to the Trust on Form N-1A, filed
previously on August 16, 1996.
*** 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 the Registration Statement of the
Trust on Form N-14, filed previously on January 18, 1994.
***** 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. 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. 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 Post-Effective Amendment No. 29
to the Registration Statement of the Trust on Form N-1A, filed
previously on August 19,1991.
##### 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.
<PAGE>
9
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
Number of Record
Shares of Beneficial Interest of: Holders as of June 30, 1997
-------------------------------- ---------------------------
Zweig Appreciation Fund
Class A 17,274
Class B 872
Class C 11,105
Class I 5
Zweig Strategy Fund
Class A 29,336
Class B 3,061
Class C 25,138
Class I 5
Zweig Government Fund
Class A 2,645
Class B 30
Class C 538
Class I ---
Zweig Managed Assets
Class A 5,716
Class B 570
Class C 17,825
Class I 5
Zweig Cash Fund
Class A 355
Class B 16
Class C 196
Class I 5
Class M 897
<PAGE>
10
Zweig Growth & Income Fund
Class A 269
Class B 308
Class C 326
Class I 5
Zweig Foreign Equity Fund
Class A ---
Class B ---
Class C ---
Class I ---
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.
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
<PAGE>
11
ZGA and their relationship with Zweig Securities Corp. (the
"Distributor") are as follows:
<TABLE>
<CAPTION>
Position With
Name ZGA Distributor Trust
Eugene J. Glaser President President and Director Chairman, Chief Executive
Officer and Treasurer
<S> <C> <C> <C>
Dr. Martin E. Zweig Chairman None President
Barry Mandinach Senior Vice President Executive Vice President First Vice President
David J. Malat First Vice Pressident None None
David Katzen Senior Vice President None Senior Vice President
Carlton Neel First Vice President None First Vice President
Alfred J. Ratcliffe First Vice President None First Vice President,
Treasurer, Principal
Accounting Officer and
Assistant Secretary
Charles I. Leone First Vice President and First Vice President, First Vice President and
Chief Financial Officer Chief Financial Officer Assistant Secretary
and Assistant Secretary
Annemarie Gilly First Vice President First Vice President Vice President
Jeffrey Lazar None None Vice President
Beth Abraham Assistant Vice President None Assistant Vice President
Tom Disbrow Assistant Vice President None Assistant Vice President
Rhonda Berzner None None Assistant Vice President
<PAGE>
12
Position With
Name ZGA Distributor Trust
Marc Baltuch First Vice President First Vice President, Secretary
Complaince Officer,
Secretary and Director
Mona Lee Assistant Vice President None None
Toni Ann Stapleton Controller and Vice None None
President
Gavin M. Whitmore Vice President None None
Thomas Farrell Assistant Vice President None None
Jeffrey Torres Assistant Vice President None 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 900 Third Avenue, New York, New
York 10022. 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.
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:
<PAGE>
13
<TABLE>
<CAPTION>
NAME POSITION WITH POSITION WITH
THE DISTRIBUTOR 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, First Vice First Vice President and Assistant
President and Assistant Secretary Secretary
</TABLE>
The principal business address of all such persons is 900
Third Avenue, New York, New York 10022.
(c) None.
Item 30. Location of Accounts and Records
Zweig Series Trust
900 Third Avenue
New York, New York 10022
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02266
Item 31. Management Services
The Trust has not entered into any management-related service
contracts.
Item 32. Not Applicable.
<PAGE>
14
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. 45 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 19th day of August, 1997.
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. 45 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 Officer August 19, 1997
_______________________ and Trustee
Eugene J. Glaser
* First Vice President, Treasurer, August 19, 1997
_______________________ Principal Accounting Officer and
Alfred J. Ratcliffe Assistant Secretary
* Trustee August 19, 1997
- - - -----------------------
Claire B. Benenson
* Trustee August 19, 1997
- - - -----------------------
James Balog
* Trustee August 19, 1997
- - - -----------------------
Donald B. Romans
<PAGE>
15
* Trustee August 19, 1997
- - - -----------------------
S. Leland Dill
*By /s/ Eugene J. Glaser
- - - -----------------------
Eugene J. Glaser
Attorney-in-fact
</TABLE>
<PAGE>
16
EXHIBIT INDEX TO
POST-EFFECTIVE AMENDMENT NO. 45
TO THE REGISTRATION STATEMENT
ON FORM N-1A
<TABLE>
<CAPTION>
<S> <C> <C>
(1) * Agreement and Declaration of Trust.
(2) ** By-laws of the Trust.
(3) Inapplicable.
(4) Forms of specimen stock certificates for shares of beneficial interest of the
Trust.
(5) Amended Management Agreement between the Trust and Zweig/Glaser Advisers.
(6) Amended Distribution Agreement.
(7) Inapplicable.
(8) *** Custodian Agreement.
(9) ****(a) Transfer Agency Agreement.
*(b) Assignment and Assumption Agreement.
(10) Inapplicable.
(11) Inapplicable.
(12) Inapplicable.
(13)*****(a) Subscription Agreement for Shares of the Government Securities Fund.
#(b) Subscription Agreement for Shares of the Zweig Strategy Fund.
<PAGE>
17
##(c) Subscription Agreement for Class C (f/k/a B
Shares) Shares of the Trust.
###(d) Subscription Agreement for Shares of Zweig Managed Assets.
####(e) Subscription Agreement for Shares of the Zweig Appreciation Fund.
(14) #(a) Individual Retirement Account.
#(b) Paired Defined Contribution Prototype Plan.
#(c) 401(k) Prototype Plan.
#(d) 403(b)(7) Custodial Account.
(15) Amended Rule 12b-1 Distribution Plan.
(16) Inapplicable.
(17) Inapplicable.
(18) ##### Rule 18f-3 Plan.
</TABLE>
- - - -------------------------
NOTES TO EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <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. 43 to the Registration
Statement to the Trust on Form N-1A, filed previously on August 16, 1996.
*** 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 the Registration
Statement of the Trust on Form N-14, filed
previously on January 18, 1994.
<PAGE>
18
***** 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. 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. 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 Post-Effective Amendment No. 29 to the Registration
Statement of the Trust on Form N-1A, filed previously on August 19, 1991.
##### 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.
</TABLE>
<PAGE>
EXHIBIT 4
SPECIMEN STOCK CERTIFICATES
[Various stock certificates appear here]
20
EXHIBIT 5
MANAGEMENT AGREEMENT
ZWEIG SERIES TRUST
MANAGEMENT AGREEMENT
September 1, 1989 as restated and amended
through November 1, 1997
ZWEIG/GLASER ADVISERS
900 Third Avenue
New York, New York 10022-4728
Gentlemen:
The undersigned, Zweig Series Trust, a Delaware business trust (the
"Trust"), is an investment company registered under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Trust currently offers shares of seven
series, the Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Growth & Income
Fund, Zweig Managed Assets, Zweig Government Fund, Zweig Foreign Equity Fund and
Zweig Cash Fund. Each series issues four classes of shares, currently designated
as Class A, Class B, Class C and Class I shares (the "Class A, Class B, Class C
and Class I shares"), and Zweig Cash Fund also issues a class of shares
designated as Class M Shares. In the future, the Trust may authorize and issue
other series and other classes of shares.
Each series of the Trust invests and reinvests its assets in a
portfolio of securities and investments. The Trust hereby engages you to act as
its investment manager for shares of each class of each series of the Trust
authorized now or in the future subject to the terms and conditions herein set
forth.
SECTION 1. Investment Management Services.
You shall use your staff and other facilities to conduct and maintain a
continuous review of each series' portfolio of securities and investments, and
shall advise and assist each series of the Trust with respect to the selection,
acquisition, holding and disposal of securities. In so doing, you shall be
guided by the investment objectives and policies of each series as delineated
and limited by the statements contained in documents filed with the SEC, as
amended from time to time, by policies adopted by the Board of Trustees of the
Trust (the "Board") and by the provisions of the 1940 Act and the rules
promulgated thereunder, so that at all times the Trust shall be in compliance
with its policies and the provisions of the 1940 Act. The Trust agrees to supply
you with copies of all such documents and to notify you of any changes in its
investment objectives, policies and restrictions.
In rendering such investment management services to the Trust pursuant
to this Agreement, you may employ, retain or otherwise avail yourself of the
services or facilities of other persons or organizations, for the purpose of
providing you or the Trust with such statistical and other factual information,
such advice regarding economic factors and trends, such advice as to occasional
transactions in specific securities or such other information, advice or
assistance as you may deem necessary, appropriate or convenient for the
discharge of your obligations hereunder or otherwise helpful to the Trust or in
the discharge of
<PAGE>
21
your overall responsibilities with respect to the other
accounts which you or your affiliates serve as investment manager.
You and any person performing executive, administrative or trading
functions for the Trust, whose services were made available to the Trust by you,
are specifically authorized to allocate brokerage and principal business to
firms that provide such services or facilities or to cause the Trust to pay a
member of a securities exchange or any other securities broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if you or such person determine in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services (as such services are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"))
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or your or such person's over-all responsibilities with
respect to the accounts as to which you or such person exercise investment
discretion (as that term is defined in Section 3(a)(35) of the 1934 Act).
In acting under this Agreement, you shall be an independent contractor
and shall not be an agent of the Trust.
SECTION 2. Resumes and Reports, etc.
You shall maintain a continuous record of all the investments and
securities which comprise the portfolios of each series of the Trust and shall
furnish to the Board, at its regularly scheduled meetings and at such other
times as the Board may reasonably request, a resume of the portfolios and report
on all matters pertaining to your services as investment manager. In addition,
you shall furnish the Trust with such statistical information reasonably
available to you as the Board shall reasonably request.
SECTION 3. Additional Services to be Furnished.
You shall keep the books and financial records of the Trust and shall
perform such other services as are reasonably incidental to the foregoing
duties. You shall assist in the computation of the net asset value of the shares
of each series of the Trust (in accordance with the Amended and Restated
Agreement and Declaration of Trust and the Trust's Prospectuses and Statements
of Additional Information, each as amended from time to time, and the
instructions of the Board pursuant thereto), and shall furnish to the Trust and
its distributor any statements with respect to the net asset value of the shares
of each series of the Trust and the net asset value per share of each series of
the Trust, at such times, and in such forms, as the Trust may prescribe. You
shall also furnish the Trust with office space reasonably suited to its
operations and with bookkeeping, internal accounting and administrative
services, and shall permit such of your directors, officers and employees as may
be elected as directors or officers of the Trust to serve in the capacities to
which they are elected.
All services to be furnished by you under this Agreement may be
furnished through your, or your affiliates', directors, officers or employees.
However, the investment policies, the administration of its business and affairs
and all other acts of the Trust are and shall at all times be subject to the
approval and direction of the Board.
SECTION 4. Multiple Capacities.
Nothing contained in this Agreement shall be deemed to prohibit you
from acting, and being separately compensated for acting, in one or more
capacities on behalf of the Trust, including, but not limited to, the capacities
of broker or distributor. The Trust understands that you and your affiliates may
act as investment manager or in other capacities as aforesaid on behalf of other
investment companies and customers. While
<PAGE>
22
information and recommendations you supply to the Trust shall in your judgment
be appropriate under the circumstances and in light of the investment objectives
and policies of the Trust, they may be different from the information and
recommendations you supply to other investment companies and customers. You
shall give the Trust equitable treatment under the circumstances in supplying
information, recommendations and any other services requested of you, but you
shall not be required to give preferential treatment to the Trust as compared
with the treatment given to any other investment company or customer. Whenever
you shall act in multiple capacities on behalf of the Trust, you shall maintain
the appropriate separate accounts and records for each such capacity. All
information and advice supplied by you to the Trust hereunder shall be for its
own use exclusively.
SECTION 5. Payment of Expenses.
You shall assume and pay all of your own costs and expenses under this
Agreement. The Trust shall assume and pay, or reimburse you for, all expenses
incurred in the operation of the Trust (to the extent not specifically allocated
to you hereunder) and, in particular but without limitation, the Trust shall
bear the cost of and pay all interest, taxes, fees and commissions of every
kind, expenses of issue, repurchase or redemption of shares, expenses of
registering or qualifying shares for sale, insurance, association membership
dues, all charges of custodians (including fees as custodian, escrow agent, for
keeping books and performing portfolio valuations) , transfer agents,
registrars, dividend disbursing agents, independent auditors and legal counsel,
expenses of preparing, printing and distributing prospectuses and all proxy
materials, reports and notices to shareholders, expenses of distribution of
shares in accordance with a plan adopted pursuant to Rule 12b-1 under the 1940
Act, out-of-pocket expenses of trustees and fees of trustees who are not
"interested persons", and all other costs incident to the Trust's existence. The
preceding sentence shall govern the allocation of expenses between the parties
in all respects.
SECTION 6. Compensation for Services
The Trust will pay to you, with respect to the Class A, Class B, Class
C and Class I shares of each series, a monthly management fee based on the daily
average net asset value of each class of the series of the Trust at the
following annual rates:
Zweig Strategy Fund .75%
Zweig Appreciation Fund 1.00%
Zweig Growth & Income Fund .75%
Zweig Managed Assets 1.00%
Zweig Government Fund .60%
Zweig Foreign Equity Fund 1.00%
Zweig Cash Fund .50%
The net asset value on each such day shall be the net asset value used in
determining the price at which shares of a series of the Trust are sold,
repurchased or redeemed on such day.
Notwithstanding the foregoing, nothing shall preclude you or your
affiliates from executing brokerage transactions for the Trust, charging the
Trust brokerage commissions therefor and deriving profit therefrom, provided
such payments to you by the Trust are reviewed at each annual continuation
hereof required by the 1940 Act and Section 9 below.
SECTION 7. Liability of the Investment Manager, etc.
<PAGE>
23
You shall be liable for your own acts and omissions caused by your
willful misfeasance, bad faith or gross negligence in the performance of your
duties or by your reckless disregard of your obligations under this Agreement,
and nothing herein shall protect you against any such liability to the Trust or
its security holders. You shall not be liable for the acts and omissions of any
agent employed by you, nor for those of any bank, trust company, broker or other
person with whom, or into whose hands, any monies, shares of the Trust or
securities and investments may be deposited or come, pursuant to the provisions
of this Agreement. You shall not be liable for any defect in title of any
property acquired, nor for any loss unless it shall occur through your own
willful default. Subject to the first sentence of this section, you shall not be
liable for any action taken or omitted on advice, obtained in good faith, of
counsel, provided such counsel is satisfactory to the Trust.
SECTION 8. Termination of Agreement, Assignment, etc.
This Agreement may be terminated at any time, without the payment of
any penalty, upon sixty (60) days' written notice by the terminating party to
the other party, by you or by the Trust, acting pursuant to a resolution adopted
by its Board, or by a vote of the holders of the lesser of (1) 67% of the
Trust's voting shares present if the holders of more than 50% of the outstanding
shares are present in person or in proxy, or (2) more than 50% of the
outstanding shares of the Trust.
This Agreement shall automatically terminate in the event of its
assignment. Termination shall not affect rights of the parties which have
accrued prior thereto.
SECTION 9. Duration of Agreement.
Unless sooner terminated, this Agreement shall continue in effect for
two years, and thereafter until terminated, provided that the continuation of
this Agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Trustees,
including a majority of the Trustees who are not "interested persons" of you or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval.
SECTION 10. Definition.
The terms "assignment" and "interested person" when used in this
Agreement shall have the meanings given such terms in the 1940 Act and the rules
and regulations thereunder.
SECTION 11. Obligation of the Trust.
The Trust's Amended and Restated Agreement and Declaration of Trust, as
amended, is on file with the Secretary of the State of Delaware and notice is
hereby given that this Agreement is made and executed on behalf of the Trust,
and not by the Trustees or officers of the Trust individually, and the
obligations of or arising out of this Agreement are not binding upon the
Trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property of the Trust.
SECTION 12. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940 Act, and to
the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
<PAGE>
24
SECTION 13. Change in the Partnership.
You shall notify the Trust in writing of any change in the membership
of partners of the Zweig/Glaser Advisers general partnership within fifteen (15)
days after such change.
SECTION 14. Counterparts.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
SECTION 15. Effective Date.
This Agreement is effective upon such date on or after its initial
approval in accordance with the 1940 Act as may be agreed by the parties hereto
consistent with the 1940 Act.
Very truly yours,
ZWEIG SERIES TRUST
By:
Name:
Title:
Attest:
Accepted and agreed to this
_______ day of ______________, 1997
ZWEIG/GLASER ADVISERS
By:
Name:
Title:
Attest:
By:
Name:
Title:
Attest:
EXHIBIT 6
DISTRIBUTION AGREEMENT
ZWEIG SERIES TRUST
DISTRIBUTION AGREEMENT
September 1, 1989 as restated and amended through
November 1, 1997
ZWEIG SECURITIES CORP.
900 Third Avenue
New York, New York 10022-4728
Gentlemen:
The undersigned, Zweig Series Trust, a Delaware business trust (the
"Trust"), is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently
offers its shares in seven series, Zweig Strategy Fund, Zweig Appreciation Fund,
Zweig Growth & Income Fund, Zweig Managed Assets, Zweig Government Fund, Zweig
Foreign Equity Fund and Zweig Cash Fund, and each series currently issues four
classes of shares designated as Class A, Class B, Class C and Class I shares
(the "Class A, Class B, Class C and Class I Shares"). Zweig Cash Fund also
currently issues a class of shares designated as Class M Shares. In the future,
the Trust may authorize and issue other series and other classes of shares. The
prospectus(es) will always reflect the current series and classes of shares
within each series. The Trust may sell its shares to and redeem its shares from
the public. It may also repurchase its shares from the public.
SECTION 1. General Duties as Distributor of the Trust's Shares.
You are hereby engaged, as agent of the Trust, to sell and solicit the
sale of Class A, Class B, Class C, Class I and Class M Shares of each and any
series of the Trust established now or in the future, at the applicable Offering
Price as hereinafter defined. In the performance of these duties, you shall be
guided by the requirements of this agreement (the "Agreement"), the applicable
provisions of the Trust's Amended and Restated Agreement and Declaration of
Trust and its By-Laws and applicable federal and state law, all as amended from
time to time, and the Trust's then-current Prospectuses and Statements of
Additional Information, which are from time to time in effect under the Trust's
Registration Statement filed with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act. During the term of this Agreement, you will use your best efforts to
solicit or otherwise cause sales of the Trust's shares in jurisdictions in which
such shares are registered or qualified for sale. You shall have the right to
enter into Service Agreements, in an appropriate form and consistent with this
Agreement and the 1940 Act, with certain securities dealers, financial
institutions or other industry professionals (severally, a "Service
Organization") for distribution and promotion of, administration of, and
servicing investors in, the Trust's shares.
<PAGE>
26
SECTION 2. Dealers and Service Organizations.
You may solicit qualified dealers for orders to purchase shares of the
Trust and may enter into dealer agreements with any such dealers, the form
thereof to be as mutually agreed upon and approved by the Trust and you.
SECTION 3. Sales Literature and Advertisements.
All sales literature and advertisements used by you in connection with
the sale of the Trust's shares must be submitted to the Trust for its advance
approval. In connection with the sale or arranging for the sale of the Trust's
shares, you are authorized to give only such information and to make only such
statements or representations as are contained in the Trust's then-current
Prospectuses and Statements of Additional Information or in sales literature or
advertisements approved by the Trust.
SECTION 4. Minimum Initial and Subsequent Investments in the Trust by
Shareholders.
You shall not accept any initial investment in any series of the Trust
of less than $1,000, nor any subsequent investment in any of the series of less
than $100, except that in the case of fiduciary accounts or qualifying group
plans, as defined in the Trust's then-current Prospectuses and Statements of
Additional Information, the minimum initial investment is $250 and there is no
minimum subsequent investment. The Board of Trustees of the Trust (the "Board")
may modify or eliminate either or both of such investment limitations, on
written notice to you. Securities dealers who forward investments may establish
minimums in excess of these amounts.
SECTION 5. Offering Price; Net Asset Value Per Share.
All of the shares of the Trust sold under this agreement shall be sold
only at the price in effect at the time of such sale ("Offering Price"), as
described in the Trust's then-current Prospectuses and Statements of Additional
Information, and the Trust shall receive not less than the full net asset value
thereof. The difference between (i) the Offering Price and net asset value, if
any (the front-end sales charge), and (ii) any Contingent Deferred Sales Charge
("CDSC") payable on redemptions of shares of the Trust in accordance with its
then-current Prospectuses and Statements of Additional Information, shall be
retained by you or paid over to you by the Trust, as the case may be, it being
understood that such amounts will not exceed the maximum sales commission or
CDSC, as the case may be, as set forth in the Trust's then-current Prospectuses
or Statements of Additional Information. You may re-allow to dealers all or any
part of the discount you are allowed.
Shares of each series will be offered at their respective Offering
Prices. Any references herein to "net asset value per share" shall refer to the
net asset value per share computed separately for each series or separate class
of a series in accordance with the Amended and Restated Agreement and
Declaration of Trust, the Prospectuses and Statements of Additional Information
and the instructions of the Board, all as revised or amended from time to time.
The Trust or its investment manager, Zweig/Glaser Advisers (the "Manager"), will
advise you as promptly as practicable of the net asset value per share for each
series or class of such series on each day that it is determined.
<PAGE>
27
SECTION 6. Duties Upon Sale of Shares of the Trust.
You shall remit to the custodian of the Trust all proceeds from any
shares of the Trust sold by you. The Trust will, as promptly as practicable,
cause the unissued certificate account of the purchaser of such shares to be
credited with the number of shares purchased or, upon request, will cause
certificates for the shares so purchased to be delivered to you or the
purchaser, or the nominee of either, in such amounts and in such names as shall
be specified by you.
You shall reimburse the Trust for any loss caused to any series of the
Trust by the failure of a shareholder to confirm in writing any purchase
accepted by you. In the event that orders for the purchase of shares of the
Trust are placed and subsequently cancelled, you shall pay to the Trust, on at
least an annual basis, an amount equal to the losses (net of any gains) realized
by any series of the Trust as a result of such cancellations.
SECTION 7. Transactional Services.
In addition to your duties as Distributor, we understand that you may,
in your discretion, perform additional functions in connection with transactions
of Trust shares but without any additional charge by you to the Trust other than
as specified in this Agreement or the Trust's Rule 12b-1 Distribution Plan(s).
You may process or cause to be processed requests received from your
customers in connection with their purchase, redemption or submission for
repurchase of shares of any series, in the manner prescribed from time to time
by the Board, and shall arrange for payment for such shares to or from the
Trust's account with its custodian. Shares shall be redeemed at their net asset
value per share next computed after receipt of the redemption request by you,
and a CDSC, if applicable, as described above in Section 5, shall be imposed on
such redemptions, as set forth in the Trust's then-current Prospectuses and
Statements of Additional Information (and subject to the exceptions set forth
therein). Any share certificates delivered to you in proper form for redemption
or repurchase shall be deposited with the transfer agent for cancellation. You
shall reimburse the Trust for any loss caused by the failure of the shareholder
to confirm in writing any purchase, redemption or repurchase order accepted by
you. In the event that orders for the purchase, redemption or repurchase of
shares of the Trust are placed and subsequently cancelled, you shall pay to the
Trust, on at least an annual basis, an amount equal to the losses (net of any
gains) realized by any series of the Trust as a result of such cancellations.
The processing of Trust transactions may include, but is not limited
to: compilation of all share transactions from your office; communication with
your account executives in connection with the execution of transactions;
recording and reporting of these transactions as executed by the Trust's
transfer agent in your customer statements; rendering of periodic customer
statements; and the reporting of 1099 information at year end.
You may also provide other shareholder services, such as communicating
with Trust shareholders and other functions in administering customer accounts
for Trust shareholders. We understand that these services may result in cost
savings to the Trust or to the Manager, and the Manager may compensate you for
all or a portion of the costs incurred in performing such functions on behalf of
the Trust. Nothing herein is intended, nor shall be construed, as requiring you
to perform any of the foregoing functions and none of these functions performed
by you shall be deemed distribution services.
<PAGE>
28
SECTION 8. Information Relating to the Trust.
The Trust will keep you fully informed with regard to its affairs, and
will furnish you with a certified copy of all financial statements and a signed
copy of each report prepared by independent public accountants, and will
cooperate fully with you in your efforts to sell the Trust's shares, and in the
performance by you of all your duties under this agreement.
SECTION 9. Filing of Registration Statements, etc.
The Trust will from time to time file (and furnish you with copies of)
such registration statements, amendments thereto, and reports or other documents
as may be required under the 1933 Act, the 1940 Act, or the laws of the states
in which you desire to sell Trust shares.
SECTION 10. Multiple Capacities.
Nothing contained in this agreement shall be deemed to prohibit you
from acting, and being separately compensated for acting, in one or more
capacities on behalf of the Trust, including, but not limited to, the capacities
of investment manager, broker and distributor. The Trust understands that you
may act in one or more such capacities on behalf of other investment companies
and customers. You shall give the Trust equitable treatment under the
circumstances in supplying services in any capacity, but the Trust recognizes
that it is not entitled to receive preferential treatment from you as compared
with the treatment given to any other investment company or customer. Whenever
you shall act in multiple capacities on behalf of the Trust, you shall maintain
the appropriate separate accounts and records for each such capacity.
SECTION 11. Payment of Fees and Expenses.
(a) For your services as Distributor, you shall receive the fees in
accordance with the plans adopted by each series (or class of a series) of the
Trust pursuant to Rule 12b-1 under the 1940 Act, and the fees set forth herein
or in the Trust's Prospectuses and Statements of Additional Information. The
Trust will pay you in consideration of your services in connection with the
distribution of Class B Shares of any series your "Allocable Portion", as
hereinafter defined, of the distribution fee allowable under the Rules of
Conduct of NASD Regulation, Inc. (the "Rules of Conduct") in respect of such
Class B Shares of such series consisting of a distribution fee at the rate of
three quarters of one percent (0.75%) per annum of the average daily net asset
value of the Class B Shares of such series of the Trust (the "Distribution
Fee"). For purposes of applying the limitation set forth in the Rules of Conduct
on the maximum amount of the Distribution Fee payable in respect of the Class B
and Class C Shares of any series, the Trust hereby elects to add to six and one
quarter percent (6.25%) of the issue price of the Class B Shares or Class C
Shares, as the case may be, interest thereon at the rate of prime plus one
percent per annum. The Distribution Fee shall be calculated and accrued daily
and shall be paid to you, or at your direction, as soon as practicable after the
end of the calendar month in which it accrues, but in any event not later than
10 days after the end of each such month.
(b) For your services as Distributor of the Trust's shares, you shall
also receive the proceeds of any front-end sales charges or CDSCs referred to in
Section 5 hereof. The Trust shall withhold and pay over to you, or at your
direction, on the date redemption proceeds are paid to a Class B or Class C
Shareholder of the Trust, your Allocable Portion of the CDSC, if any, applicable
to such redemption.
(c) Furthermore, the Trust shall assume and pay, or reimburse you for,
expenses of preparing and printing quarterly, semi-annual and annual reports for
distribution to the Trust's then existing shareholders, of maintaining current
prospectuses and statements of additional information, of qualification of the
Trust's shares for sale in various jurisdictions and of preparing and printing
prospectuses and statements of additional
<PAGE>
29
information for distribution to the Trust's then existing shareholders. You
shall pay, directly or by reimbursing the Trust, the expenses of preparing,
printing and distributing all sales literature of the Trust, including printing
and distributing prospectuses required for your purposes, except to the extent
payable by the Trust in accordance with the terms of an effective plan pursuant
to Rule 12b-1 under the 1940 Act.
(d) You will be deemed to have fully earned your Allocable Portion of
the Distribution Fee and CDSC, if any (as the case may be), payable in respect
of Class B Shares of any series upon the sale of each "Initial Issue Commission
Share" (as hereinafter defined) of such Class B of such series taken into
account in determining your Allocable Portion of such Distribution Fee or CDSC,
if any, as the case may be.
(e) Except as provided in (f) below and notwithstanding anything to the
contrary set forth elsewhere is this Agreement, the Trust's obligation to pay
you your Allocable Portion of the Distribution Fee payable in respect of the
Class B Shares of each series shall be (to the extent you have assigned your
rights to your Allocable Portion) absolute and unconditional and shall not be
subject to dispute, offset, counterclaim or any defense whatsoever (it being
understood that such provision is not a waiver of the Trust's right to pursue
you and enforce such claims against your assets other than your right to the
Distribution Fees and CDSCs in respect of the Class B Shares of such series).
(f) The Trust's obligation to pay you your Allocable Portion of the
Distribution Fee payable in respect of the Class B Shares of each series shall
not be terminated or modified except to the extent required by a change in the
1940 Act or the Rules of Conduct enacted or promulgated after January 31, 1996
(a "Change-in-Applicable Law"), or in connection with a "Complete Termination"
(as hereinafter defined) of the Rule 12b-1 distribution plan in respect of the
Class B Shares of such series.
(g) The Trust will not waive or change any CDSC in respect of the Class
B Shares of any series, except as provided in the Trust's Prospectuses or
Statements of Additional Information without your consent (or consent of your
assigns).
(h) Except to the extent required by a Change-in-Applicable-Law,
neither the termination of your role as principal distributor of the Class B
Shares of any series, nor the termination of this Agreement nor the termination
(other than a "Complete Termination," as hereinafter defined) of the Rule 12b-1
distribution plan with respect to the Class B Shares will terminate your right
to your Allocable Portion of the CDSCs in respect of the Class B Shares of such
series that are sold prior to such termination.
(i) Except as provided in the Trust's Prospectuses and Statements of
Additional Information, until you have been paid your Allocable Portion of the
Distribution Fees in respect of the Class B Shares of each series, the Trust
will not adopt a plan of liquidation in respect of such series without your
consent (or the consent of your assigns), which consent will not be unreasonably
withheld.
(j) You may sell and assign your rights to your Allocable Portion of
the Distribution Fees and CDSCs (but not your obligations to the Trust under
this Distribution Agreement) in respect of the Class B Shares of any series to
raise funds to make the expenditures related to the distribution of Class B
Shares of such series and in connection therewith, upon receipt of notice of
such sale and assignment, the Trust shall pay to the purchaser or assignee such
portion of your Allocable Portion of the Distribution Fees and CDSCs in respect
of the Class B Shares of such series so sold or assigned.
(k) For purposes of this Agreement, the term "Allocable Portion" means,
in respect of Distribution Fees and CDSCs payable in respect of the Class B
Shares of any series as applied to you, the portion of such Distribution Fees
allocated to you in accordance with the Allocation Schedule attached hereto as
Exhibit A.
<PAGE>
30
(l) For purposes of this Agreement, the term "Complete Termination"
means, in respect of the Rule 12b-1 distribution plan in respect of the Class B
Shares of any series, a termination of such plan involving the cessation of
payments of Distribution Fees thereunder in respect of Class B Shares of such
series and the cessation in payments of distribution fees pursuant to every
other Rule 12b-1 plan of the Trust in respect of such series for every future
class of shares of such series which, in the good faith determination of the
Board of Trustees, has substantially similar economic characteristics to the
Class B Shares taking into account the total sales charge, contingent deferred
sales charge and other similar charges, it being understood that the existing
Class A, existing Class C, existing Class I and existing Class M Shares do not
have substantially similar economic characteristics to the Class B Shares.
(m) For purposes of paragraph (d) above, the term "Initial Issue
Commission Share" shall mean, in respect of any series, a Class B Share which is
a Commission Share issued by such series under circumstances other than in
connection with a permitted free exchange with another fund. For purposes of the
foregoing definition a "Commission Share" shall mean, in respect of any series,
each Class B Share of such series which is issued under circumstances which
would normally give rise to an obligation of the holder of such Class B Share to
pay a CDSC upon redemption of such Share, including, without limitation, any
Class B Share of such series issued in connection with a permitted free exchange
as set forth in the Trust's then current Prospectuses and Statements of
Additional Information ("Permitted Free Exchange"), and any such Class B Share
shall not cease to be a Commission Share prior to the redemption (including a
redemption in connection with a Permitted Free Exchange) or conversion even
though the obligation to pay the CDSC shall have expired or conditions for
waivers thereof shall exist.
SECTION 12. Liability of the Distributor, etc.
You shall be liable for your own acts and omissions caused by your
willful misfeasance, bad faith or gross negligence in the performance of your
duties or by your reckless disregard of your obligations under this agreement,
and nothing herein shall protect you against any such liability to the Trust or
its shareholders. Subject to the first sentence of this Section, you shall not
be liable for any action taken or omitted on advice, obtained in good faith, of
counsel, provided such counsel is satisfactory to the Trust.
SECTION 13. Use of Word "Zweig" in Name of Trust.
(a) The Trust and you each acknowledge that the name "Zweig" has become
distinctive in connection with investment advisory and related services provided
by Dr. Martin E. Zweig ("MEZ"), the word "Zweig" is a property right of MEZ and
the word "Zweig" (the "Name") in the name of the Trust is understood to be used
by the Trust with MEZ's consent, and MEZ hereby grants a non-exclusive license
to use the name "Zweig Series Trust" upon the conditions hereinafter set forth;
provided that, except as otherwise provided in Section 13(b), the Trust may use
the Name only so long as (i) the Manager shall continue to be retained by the
Trust as its investment manager pursuant to an investment management agreement
between the Trust and the Manager, as from time to time amended or supplemented,
and (ii) MEZ shall continue to be affiliated in a managerial capacity with the
Manager.
(b) In the event that MEZ ceases to be affiliated in a managerial
capacity with the Manager other than by reason of his death (the "Resignation"),
and if at the time of such Resignation, the Manager and/or the Distributor shall
be party to the Purchase and Sale Agreement dated as of March 15, 1996 among the
Distributor, Citibank, N.A. and Citicorp North America, Inc. (the "1996
Agreement"), as amended or otherwise modified from time to time, or any other
agreement entered into by the Manager and/or the Distributor in connection with
any financing with respect to any shares of the Trust or any successor agreement
containing provisions relating to the use of the Name substantially similar to
the provisions in the 1996 Agreement regarding the Name (the 1996 Agreement and
each such other agreement and successor agreement,
<PAGE>
31
as amended or otherwise modified from time to time, being called a "Share
Financing Agreement"), then in such event until (i) the expiration of ten years
following the Resignation, (ii) 180 days after the death of MEZ, or (iii) all
obligations of the Manager and/or the Distributor under any Share Financing
Agreement are extinguished, whichever date first occurs, MEZ hereby grants the
Trust a royalty-free, paid up non-exclusive license to use the Name in
connection with the activities of the Trust in the manner used immediately prior
to the Resignation, provided and on condition that:
(i) The quality and manner of the services rendered by the Trust to its
investors shall be substantially consistent with such services immediately prior
to the Resignation;
(ii) The Trust shall not use the Name in a manner substantially
different from the use of the Name immediately prior to the Resignation; and
(iii) Upon written request from MEZ, each use of the Name on any
document created thereafter shall be accompanied by the service mark of Zweig.
(c) Any such use by the Trust pursuant to Section 13(a) or (b) shall in
no way prevent MEZ or you or any of his or your respective successors or assigns
from using or permitting the use of the Name or the name "Zweig Series Trust"
alone or with any other word or words, for, by or in connection with any other
entity or business, other than the Trust or its business, whether or not the
same directly or indirectly competes or conflicts with the Trust or its business
in any manner. The Trust and you each acknowledge that the Trust shall use the
Name, for the period set forth in this Section 13, in a manner not inconsistent
with MEZ's interests and that the Trust's rights in the Name are limited to the
use of the Name as a component of its corporate name and in connection with
accurately describing the services supplied by the Trust. The Trust and
Distributor acknowledge that the Name is the sole property of MEZ and neither
the Trust nor the Distributor shall directly or indirectly contest MEZ's rights
in the Name or his right, title and interest therein. To the extent permitted by
the 1940 Act and rules and regulations thereunder, and more particularly
Investment Company Act Release No. 5510, in the event that the Manager shall
cease to be the investment manager of the Trust or MEZ shall cease to be
affiliated in a managerial capacity with the Manager, the Trust, at its own
expense, upon MEZ's or your written request, (i) shall submit to the Board for
their vote a proposal to amend its Declaration of Trust to delete from its name
the Name and shall thereafter cease to use the Name or any combination thereof
as part of its name or for any other commercial purpose, provided that such
submission and cessation shall not be required to the extent and for the period
of time that the terms and conditions of Section 13(b) shall be applicable, (ii)
shall make it clear for such period and in such manner as may reasonably be
required by MEZ or you, on all letterheads and other material containing the
Name designed to be read or used by salesmen, distributors or investors, that
MEZ has ceased to be affiliated in a managerial capacity with the Manager or the
Manager has ceased to be the investment manager of the Trust, as the case may
be, and MEZ is no longer rendering services for or on behalf of the Trust, and
(iii) shall use its best efforts to cause the Trust's officers, trustees and
shareholders to take any and all actions which may be necessary or desirable to
effect the foregoing and to reconvey to MEZ all rights which the Trust may have
to the Name. The Distributor and Trust agree that they shall take any and all
actions as may be necessary or desirable to effect the foregoing.
SECTION 14. Termination of Agreement, Assignment, etc.
This agreement may be terminated with respect to the Trust at any time,
without the payment of any penalty, on sixty days' written notice (i) by you;
(ii) by the Trust, acting pursuant to a resolution adopted by the Board; or
(iii) by a vote of the holders of the lesser of (1) 67% of the Trust's
outstanding voting securities present at a meeting if the holders of more than
50% of the outstanding shares of the Trust are present or represented by proxy,
or (2) more than 50% of the outstanding shares of the Trust. This agreement
shall automatically terminate in the event of its assignment; provided, however,
that this agreement has been
<PAGE>
32
approved by the Board and the Disinterested Trustees of the Board in
anticipation of your transfer of the Allocable Portion in order for you to raise
funds to cover distribution expenses associated with Class B Shares and
therefore such transfer will not cause this agreement to terminate. Termination
shall not affect the rights of the parties which have accrued prior thereto,
including, without limitation, your right to be paid your Allocable Portion as
provided in Section 11 hereof (subject to the limitations therein set forth).
SECTION 15. Duration of Agreement.
Unless sooner terminated, this agreement shall continue in effect for
two years, and thereafter until terminated, provided that such continuation of
this agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Trustees,
including a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on such
approval.
SECTION 16. Definitions.
The terms "assignment" and "interested person" when used in this
agreement shall have the meanings given such terms in the 1940 Act and the rules
and regulations promulgated thereunder.
SECTION 17. Obligation of the Trust, etc.
The Trust's Amended and Restated Agreement and Declaration of Trust is
on file with the Secretary of the State of Delaware and notice is hereby given
that this agreement is made and executed on behalf of the Trust, and not by the
Trustees or officers of the Trust individually, and the obligations of or
arising out of this agreement are not binding upon the Trustees, officers or
shareholders of the Trust individually but are binding only upon the assets and
property of the Trust. Notice is hereby given that the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to a particular series of the Trust shall be enforceable against the
assets of such series only, and not against the assets of the Trust generally.
SECTION 18. Counterparts.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
SECTION 19. Concerning Applicable Provisions of Law, etc.
This Agreement is executed and delivered in New York, New York, and the
laws of the State of New York shall, except to the extent that any applicable
provisions of Federal law shall be controlling, govern the construction,
validity and effect of this Agreement.
<PAGE>
33
If the Agreement set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this agreement and returning the same
to the undersigned, whereupon this contract shall constitute a binding contract
between the parties hereto effective upon such date on or after its initial
approval in accordance with the 1940 Act as may be agreed by the Trust and
Distributor, consistent with the requirements of the 1940 Act.
Very truly yours,
ZWEIG SERIES TRUST
By:
Name:
Title:
Accepted and agreed this
____ day of ____________, 1997
ZWEIG SECURITIES CORP.
By:
Name:
Title:
Martin E. Zweig hereby agrees and consents to the use of the word "Zweig" upon
the terms and conditions set forth in Section 13 of the foregoing Distribution
Agreement.
Martin E. Zweig
Zweig/Glaser Advisers hereby agrees and consents to the use of the word "Zweig"
upon the terms and conditions set forth in Section 13 of the foregoing
Distribution Agreement.
ZWEIG/GLASER ADVISERS
By: By:
Name: Name:
Title: Title:
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34
EXHIBIT A
ALLOCATION SCHEDULE
So long as the Distributor (as hereinafter defined) remains the
principal distributor of a class of Shares (as hereinafter defined) of any Fund
(as hereinafter defined), his "Allocable Portion" of the Sales Charges (as
hereinafter defined) and Contingent Deferred Sales Charges (as hereinafter
defined) in respect of such class of Shares of such Fund shall be 100%. In the
event that the Distributor shall cease to be the exclusive distributor of any
class of Shares of any Fund, the Sales Charges and Contingent Deferred Sales
Charges thereafter accruing in respect of such class of Shares of such Fund
shall be allocated among the Distributor and subsequent exclusive distributors
("Other Distributors") in accordance with the rules set forth in clauses (A),
(B) and (C) below. Clause (A) attributes each Share of such class of Shares of
any Fund either to the Other Distributors or to the Distributor. Clauses (B) and
(C) allocate the Sales Charges and Contingent Deferred Sales Charges to the
Other Distributors and to the Distributor with reference to the Shares which
have been attributed to each in accordance with clause (A). For purposes of this
Exhibit A, the following terms shall have the following meanings:
"Amortized Maximum Aggregate Sales Charge Allowable" shall
mean, with respect to the Receivables relating to any Shares of any
Fund as of any date of determination, (i) an amount equal to the
Maximum Aggregate Sales Charge Allowable payable in respect of such
Receivables, minus (ii) the aggregate amounts previously paid by such
Fund and the holders of such Shares relating thereto.
"Asset Based Sales Charge" shall have the meaning set forth in
Rule 2830 of the Rules of Conduct of NASD Regulation, Inc. (the "NASD
Rules of Conduct").
"Business Day" shall mean any day on which banks and the New
York Stock Exchange are not authorized or required to close in New York
City.
"Contingent Deferred Sales Charge" or "CDSC" shall mean, with
respect to any class of Shares of any Fund, the contingent deferred
sales charges payable, either directly or by withholding from the
proceeds of the redemption of the Shares of such Fund, by the
Shareholders of such Fund in any redemption of Shares relating to such
Fund in accordance with the Prospectus relating to such Fund.
"Commission Share" shall mean, in respect of any Fund, each
Share of such Fund which is issued under circumstances which would
normally give rise to an obligation of the holder of such Share to pay
a Contingent Deferred Sales Charge upon redemption of such Share,
including, without limitation, any Share of such Fund issued in
connection with a Permitted Free Exchange, and any such Share shall not
cease to be a Commission Share prior to the redemption (including a
redemption in connection with a Permitted Free Exchange) or conversion,
even though the obligation to pay the Contingent Deferred Sales Charge
shall have expired or conditions for waivers thereof shall exist.
"Distributor" shall mean Zweig Securities Corp. together with
its successors and assigns.
"Distributor Sale Cutoff Date" means, in respect of any class
of Shares of any Fund, the date of the last sale of a Commission Share
of such class of Shares of such Fund during the term of this
Distribution Agreement in respect of such class of Shares of such Fund.
"Exchange Share" shall mean, in respect of any Fund, Shares of
such Fund that were issued in connection with a simultaneous redemption
of Shares of any other Fund where the proceeds of such
<PAGE>
35
redemption are reinvested in the Shares in question pursuant to an
exchange privilege given to the holder of the redeemed Shares of the
other Fund (whether in a Permitted Free Exchange or otherwise).
"Free Share" shall mean, in respect of any Fund, each Share of
such Fund other than a Commission Share, including, without limitation,
any Share issued in connection with the reinvestment of dividends.
"Fund" shall mean Zweig Strategy Fund, Zweig Appreciation
Fund, Zweig Groth & Income Fund, Zweig Managed Assets, Zweig Government
Fund and Zweig Cash Fund.
"Inception Date" shall mean, with respect to any Fund, the
first date upon which Shares of such Fund were issued.
"Maximum Aggregate Sales Charge Allowable" shall mean, in
respect of Sales Charges Payable by any Fund, the maximum aggregate
Sales Charges which may be paid by such Fund to the Distributor
pursuant to this Distribution Agreement, the 12b-1 Distribution Plan
and the Prospectus, together with interest thereon at the Maximum
Interest Allowable, relating to such Shares and pursuant to the
"maximum sales charge rule" set forth in Rule 2830 of the NASD Rules of
Conduct, assuming such Fund pays a separate Service Fee in connection
with such Shares, unreduced by payments previously made in respect
thereof by such Fund.
"Maximum Interest Allowable" shall mean the maximum interest
which may be taken into account under Rule 2830 of the NASD Rules of
Conduct in computing the Maximum Aggregate Sales Charge Allowable.
"Net Assets" means, as of any date any determination thereof
is made and with respect to any Fund, the product obtained by
multiplying (i) the Net Asset Value of a Share of such Fund as of such
date, times (ii) the total number of Shares of such Fund issued and
outstanding as of such date.
"Net Asset Value" shall mean, with respect to any Share of any
Fund as of any date, the net asset value of such Share computed in the
manner such value is required to be computed by such Fund in accordance
with its then current Prospectus and the Investment Company Act.
"Non-Omnibus Shares" shall mean, in respect of any Fund, all
Shares of such Fund other than the Omnibus Shares relating to such
Fund.
"Omnibus Account" shall mean, in respect of any Fund, any
Shareholder Account the record owner of which is a registered
broker-dealer which has agreed with the Transfer Agent or the
Distributor to provide sub-transfer agent functions relating to each
Sub-Shareholder Account within such account in respect of such Fund.
"Omnibus Shares" shall mean, in respect of any Fund, the
Shares of such Fund held in the name of a broker-dealer street account
on the records maintained by the Transfer Agent and for which account
such broker-dealer provides sub-transfer agency services for such Fund.
"Permitted Conversion Feature" shall mean a conversion feature
which may become effective: (A) in respect of any Share of any Fund
(other than an Exchange Share or a Share issued in connection with the
reinvestment of dividends (a "Reinvestment Share")), no earlier than
the seventh anniversary of the calendar month in which such Share was
issued by such Fund, and (B) in respect of any Exchange Share of any
Fund, no earlier than the seventh anniversary of the calendar month in
which
<PAGE>
36
was issued the first Share of any Fund exchanged in one or more
Permitted Free Exchanges giving rise to such Exchange Share, which was
itself issued by a Fund other than in connection with a Permitted Free
Exchange; and (C) in respect of Reinvestment Shares of any Fund held
for a shareholder account (other than an Omnibus Account), in
proportion to the conversion of Shares of such Fund in such account
which are not Reinvestment Shares.
"Permitted Free Exchange" shall mean any exchange of Shares of
one Fund (the "Redeeming Fund") for Exchange Shares of another Fund
(the "Issuing Fund"), where, pursuant to the applicable constituent
documents of the Issuing Fund: (i) Exchange Shares of the Issuing Fund
are deemed for all purposes (including the computation of the amount
and timing of payments of the related CDSC) to have been acquired at
the time the exchanged Shares of the Redeeming Fund were acquired (or
deemed to have been acquired) by the holder thereof; (ii) the
exchanging shareholder becomes obligated to pay the same CDSC in
respect of the Issuing Fund in respect of the Exchange Shares of the
Issuing Fund and on the same terms as such holder was obligated to pay
in respect of the Redeeming Fund in respect of the Shares of the
Redeeming Fund so exchanged; (iii) the date upon which such Exchange
Shares of the Issuing Fund received in the exchange are to be converted
pursuant to the Permitted Conversion Feature is the same as the date
the exchanged Shares of the Redeeming Fund were to be converted
pursuant to the Permitted Conversion Feature of the exchanged Shares;
(iv) (subject to reallocation, if any, as may be permitted by any
agreement by which the Distributor is bound) the Amortized Maximum
Aggregate Sales Charge Allowable in respect of the Shares of the
Issuing Fund to which such Exchange Shares belong and the Redeeming
Fund the Shares of which were so exchanged is increased or decreased,
depending upon whether the amount of the adjustment described below is
a positive or negative number, respectively, effective as of the
beginning of the calendar quarter immediately following the calendar
quarter in which such exchange occurred, by the product obtained by
multiplying (a) the "Net Asset Value Exchange Adjustment" (as
hereinafter defined, which may be a positive or negative number) for
Shares of such Fund for the calendar quarter in which such exchange
occurred by (b) a fraction the numerator of which is the Amortized
Maximum Aggregate Sales Charge Allowable in respect of Shares of such
Fund and the denominator of which is the Net Assets of such Fund, both
the numerator and denominator computed as of the end of the calendar
quarter immediately preceding the calendar quarter in which such
exchange occurred, it being understood that, for purposes of this
clause (iv), the term "Net Asset Value Exchange Adjustment" shall mean,
in respect of Shares of any Fund of any calendar quarter, the negative
or positive number obtained by adding (x) positive numbers equal to the
aggregate Net Asset Value of all Exchange Shares (determined in each
case as of the date of issuance of each such Share) issued by such Fund
during such calendar quarter in connection with such exchanges and (y)
negative numbers equal to the aggregate Net Asset Value of all Shares
(determined in each case as of the date of the redemption of each such
Share) redeemed by such Fund during such calendar quarter in connection
with such exchanges (the Fund may elect to perform this calculation
under this clause (iv) on a monthly basis); and (v) both the redemption
of the Shares of the Redeeming Fund so exchanged and the issuance of
the Shares of the Issuing Fund are effected at the Net Asset Value of
such Shares at the date of the exchange without any reduction for fees
or expenses attributable to such exchange.
"Person" shall mean an individual or a corporation (including
a business trust), partnership, trust, incorporated or unincorporated
association, cooperative, joint stock company, government (or an agency
or political subdivision thereof) or other entity of any kind.
"Receivables" shall mean, with respect to each Fund, all of
the Distributor's rights under this Distribution Agreement, the related
12b-1 Distribution Plan and the related Prospectus, subject to the
applicable NASD Rules of Conduct, to receive amounts paid or payable in
respect of Asset Based Sales Charges (including interest at the Maximum
Interest Allowable) and CDSCs, in each case in respect
<PAGE>
37
of any Shares issued by such Fund, including, without limitation, any
similar amount paid or payable under any replacement distribution
agreement, distribution plan, prospectus or the NASD Rules of Conduct,
and any continuation payments in respect thereof paid or payable by
such Fund in the event of a termination of the related Distribution
Plan or the related Distribution Agreement; it being understood that
such term does not include the Service Fee payable pursuant to the
related Distribution Agreement, the related 12b-1 Distribution Plan,
the Prospectus and the NASD Rules of Conduct or otherwise.
"Sales Charge" shall have the meaning set forth in Rule 2830
of the NASD Rules of Conduct.
"Service Fee" shall have the meaning set forth in Rule 2830 of
the NASD Rules of Conduct.
"Shareholder Account" shall mean, in respect of any Fund, a
separate account for each record owner of Shares of such Fund.
"Shares" shall mean, in respect of any Fund, the Class B
Shares of such Fund.
"Sub-Shareholder Account" shall mean, in respect of each
Omnibus Account, a separate account for each record owner of Shares
which are reflected in such Omnibus Account.
"Sub-Transfer Agent" shall mean, in respect of any Fund, the
record owner of any Omnibus Account.
"Transfer Agent" shall mean, in respect of any Fund, the
Person serving as the transfer agent and who maintains accounts for
each record holder of Shares of such Fund including record holders
which are record owners of Omnibus Accounts.
(A) Attribution of Shares: Shares of each class of Shares of
each Fund outstanding from time to time shall be attributed to either the
Distributor or the Other Distributors in accordance with the following rules:
(1) Commission Shares. Each Commission Share of each class of
Shares of each Fund is specifically tracked by the records maintained
by the Transfer Agent or Sub-Transfer Agents for such Fund with
reference to an "original issuance date" of the Commission Share in
question or of the Commission Share from which the Commission Share in
question derived through one or more Permitted Free Exchanges.
The following Commission Shares of each class of Shares of
each Fund outstanding from time to time shall be attributed to the
Distributor: (a) Commission Shares of such class of Shares of such Fund
issued other than in a Permitted Free Exchange, the issuance of which
occurs on or after the Inception Date for such
<PAGE>
38
class of Shares of such Fund and on or prior to the Distributor Sale
Cutoff Date for such class of Shares of such Fund, and (b) Commission
Shares of such class of Shares of such Fund issued in a Permitted Free
Exchange for Shares of another Fund which were attributed to the
Distributor in accordance with this paragraph (1) of this clause (A),
in each case determined in accordance with the records maintained by
the Transfer Agent or Sub-Transfer Agents for such Fund.
The following Commission Shares of each class of Shares of
each Fund outstanding from time to time shall be attributed to the
Other Distributors: (a) Commission Shares of such class of Shares of
such Fund issued other than in a Permitted Free Exchange, the issuance
of which occurs after the Distributor Sale Cutoff Date for such class
of Shares of such Fund, and (b) Commission Shares of such class of
Shares of such Fund issued in a Permitted Free Exchange for Shares of
another Fund which were attributed to the Other Distributors in
accordance with this paragraph (1) of this clause (A), in each case
determined in accordance with the records maintained by the Transfer
Agent or Sub-Transfer Agents for such Fund.
(2) Free Shares. Free Shares of each class of Shares of each
Fund are not specifically tracked by the Transfer Agent or Sub-Transfer
Agents for such Fund and accordingly, the number of Free Shares of each
class of Shares of each Fund outstanding from time to time shall be
attributed to the Distributor and the Other Distributors in accordance
with records maintained by the Distributor in accordance with this
paragraph (2) of this clause (A).
(a) Free Shares of each class of Shares of each Fund
which are Non-Omnibus Shares issued during any calendar month
on or after the Inception Date for such class of Shares of
such Fund shall be attributed to the Distributor in a number
computed as follows:
FS X (PCS + PFS)
(TCS + TFS)
where:
FS= Total number of Non-Omnibus
Shares of such class of Shares of
such Fund that are Free Shares
issued during such calendar
month.
PCS + PFS = Total number of
Commission Shares and Free Shares
for such class of Shares of such
Fund which are Non-Omnibus Shares
attributed to the Distributor and
outstanding as of the close of
business on the last day of the
immediately preceding calendar
month.
TCS + TFS = Total number of
Commission Shares and Free Shares
for such class of Shares of such
Fund which are Non-Omnibus Shares
outstanding as of the close of
business on the last day of the
immediately preceding calendar
month.
The balance of such Non-Omnibus Shares for such class of
Shares of such Fund issued during such calendar month shall be
attributed to the Other Distributors.
(b) Free Shares of each class of Shares of each Fund
which are Omnibus Shares issued during any calendar month on
or after the Inception Date for such class of Shares of such
Fund shall be attributed to the Distributor in a number
computed as follows:
OFS X (POCS + POFS)
(TOCS + TOFS)
where:
OFS= Total number of Omnibus
Shares of such class of
Shares of such Fund which
are Free Shares issued
during any calendar month.
<PAGE>
39
POCS + POFS = Total number of
Commission Shares and Free
Shares of such class of
Shares of such Fund which
are Omnibus Shares
attributed to the
Distributor and outstanding
as of the close of business
on the last day of the
immediately preceding
calendar month.
TOCS + TOFS = Total number of
Commission Shares and Free
Shares of such class of
Shares of such Fund which
are Omnibus Shares
outstanding as of the close
of business on the last day
of the immediately
preceding calendar month.
The balance of such Free Shares of such class of Shares of
such Fund issued on such date shall be attributed to the Other
Distributors.
(c) Free Shares of each class of Shares of each Fund
which are Non-Omnibus Shares redeemed or converted during any
calendar month shall be attributed to the Distributor in a
number computed as follows:
FSR X PFS
TFS
where:
FSR= Total Number of Non-Omnibus Shares
of such class of Shares of such Fund
which are Free Shares redeemed or
converted during each calendar
month.
PFS= Total Number of Non-Omnibus Shares
of such class of Shares of such Fund
which are Free Shares attributed to
the Distributor and outstanding as
of the close of business on the last
day of the immediately preceding
calendar month.
TFS= Total number of Non-Omnibus Shares
of such class of Shares of such Fund
which are Free Shares outstanding as
of the close of business on the last
day of the immediately preceding
calendar month.
The balance of such Non-Omnibus Shares of such class of Shares
of such Fund which are Free Shares redeemed or converted
during such calendar month shall be attributed to the Other
Distributors.
(d) Free Shares of each class of Shares of each Fund
which are Omnibus Shares redeemed or converted during any
calendar month shall be attributed to the Distributor in a
number computed as follows:
OFSR X POFS
TOFS
where:
<PAGE>
40
OFSR= Total number of Free Shares of such
class of Shares of such Fund which
are Omnibus Shares redeemed or
converted during such calendar
month.
POFS= Total number of Free Shares of such
class of Shares of such Fund which
are Omnibus Shares attributed to the
Distributor and outstanding as of
the close of business on the last
day of the immediately preceding
calendar month.
TOFS= Total number of Free Shares of such
class of Shares of such Fund which
are Omnibus Shares outstanding as of
the close of business on the last
day of the immediately preceding
calendar month.
The balance of such Free Shares of such class of Shares of
such Fund which are Omnibus Shares redeemed or converted
during such calendar month shall be attributed to the Other
Distributors.
(3) Timing of Attributions. The attributions of all
Non-Omnibus Shares of each class of Shares of each Fund shall be made
on a daily basis. The attribution of all Omnibus Shares of each class
of Shares of each Fund shall be made on a calendar month basis (unless
under any agreement by which the Distributor is bound more frequent
allocations are required) on or prior to the Asset Based Sales Charge
distribution date for the Omnibus Account, but in no event later than
the tenth (10th) Business Day of the calendar month immediately
succeeding the calendar month in which they accrue.
(B) Receivables Constituting Contingent Deferred Sales
Charges: Receivables constituting Contingent Deferred Sales Charges will be
allocated to the Distributor and the Other Distributors depending upon whether
the related redeemed Shares were attributed to the Distributor or the Other
Distributors in accordance with clause (A) above. Contingent Deferred Sales
Charges relating to Non-Omnibus Shares shall be allocated between the
Distributor and the Other Distributors on or prior to the third Business Day of
the immediately succeeding calendar week in which they are remitted, unless more
frequent allocations are required. Continent Deferred Sales Charges relating to
Omnibus Shares shall be allocated between the Distributor and the Other
Distributors on or prior to the tenth (10th) Business Day of the calendar month
immediately succeeding the calendar month in which they are remitted, unless
under any agreement by which the Distributor is bound more frequent allocations
are required.
(C) Receivables Constituting Asset Based Sales Charges: The
Asset Based Sales Charges accruing in respect of each class of Shares of each
Fund to the Distributor during any calendar month shall be computed and
allocated as follows:
A X ( (B + C) / 2)
-----------
( (D + E) / 2)
where:
A = Total amount of Asset Based Sales Charge accrued in
respect of such class of Shares of such Fund during
such calendar month.
B = Shares of such class of Shares of such Fund
attributed to the Distributor and outstanding as of
the close of business on the last day of the
immediately preceding calendar month, times Net Asset
Value per Share as of such time.
<PAGE>
41
C = Shares of such class of Shares of such Fund
attributed to the Distributor and outstanding as of
the close of business on the last day of such
calendar month, times Net Asset Value per Share as of
such time.
D = Total Non-Omnibus Shares and Omnibus Shares of such
class of Shares of such Fund outstanding as of the
close of business on the last day of the immediately
preceding calendar month, times Net Asset Value per
Share as of such time.
E = Total Non-Omnibus Shares and Omnibus Shares of such
class of Shares of such Fund outstanding as of the
close of business on the last day of such calendar
month, times Net Asset Value per Share as of such
time.
The balance of the Asset Based Sales Charges in
respect of such class of Shares of such Fund accruing during such
calendar month shall be allocated to the Other Distributors. The
allocations contemplated by this paragraph shall be made on or prior to
the tenth (10th) Business Day of the immediately following calendar
month.
42
EXHIBIT 15
RULE 12B-1 DISTRIBUTION PLAN
ZWEIG SERIES TRUST
Class B Shares
RULE 12b-1 DISTRIBUTION PLAN
October 31, 1996 as restated and amended through
November 1, 1997
This distribution plan (the "Rule 12b-1 Distribution Plan" or
the "Plan") has been adopted by the sole shareholder of the Class B Shares of
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Growth & Income Fund, Zweig
Managed Assets, Zweig Government Fund and Zweig Cash Fund, each of which is a
series of Zweig Series Trust (the "Trust"), a Delaware business trust, on
October 31, 1996, pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), and has been adopted for Zweig Foreign Equity Fund
effective November 3, 1997.
W H E R E A S:
The Trust is an open-end management investment company and is
registered as such under the Act. The Trust has the above listed series which
are currently being offered, and the Board of Trustees may establish and offer
additional series in the future. Each series has a multi-class distribution
system that allows each series to offer investors the option of purchasing
shares either subject to a front-end sales charge (which may be reduced or
waived under certain circumstances as described in the Trust's Prospectus)
coupled with a Rule 12b-1 Plan distribution fee (except for the Zweig Cash Fund,
which is offered without the imposition of a front-end sales charge) (the "Class
A Shares"), subject to a contingent deferred sales charge, a Rule 12b-1 Plan
distribution fee and a service fee (the "Class B Shares") or subject to a
contingent deferred sales charge, a Rule 12b-1 Plan distribution fee and a
service fee (the "Class C Shares"). Zweig Cash Fund offers investors the option
of purchasing a fourth class of shares. This Plan, however, governs only the
Class B Shares of each series of the Trust. The Trust may, from time to time,
distribute shares of any class of any series through a contractual arrangement
(the "Distribution Agreement") with a principal distributor for such class of
shares of such series duly qualified to act on behalf of the Trust in such
capacity (any such principal distributor, the "Principal Distributor"), it being
understood that the Trust may change the Principal Distributor for any class of
shares of any series from time to time. The Board of Trustees, including a
majority of the Qualified Trustees (as defined in paragraph 5 herein), has
determined to adopt the Plan. In voting to approve the Plan, the Trustees have
determined, in the exercise of their reasonable business judgment and in light
of their fiduciary duty, that there is a reasonable likelihood that this Plan
will benefit the Class B Shares of each respective series of the Trust with
respect to which this Plan will be effective and its shareholders.
NOW, THEREFORE, in consideration of the foregoing, the Trust
hereby adopts this Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. The Trust shall pay to each Principal Distributor of Class
B Shares of any series its "Allocable Portion," as hereinafter defined, of the
distribution fee allowable under the Rules of Conduct of NASD Regulation, Inc.
(the "Rules of Conduct") in respect of such Class of Shares of such series,
consisting of
<PAGE>
43
a distribution fee at the rate of three quarters of one percent (0.75%) per
annum of the average daily net asset value of such Class of Shares (the
"Distribution Fee") and a service fee at a rate of one quarter of one percent
(0.25%) of the average daily net asset value of such Class of Shares of such
series of the Trust (as described in the Prospectus). For purposes of applying
the limitation set forth in the Rules of Conduct on the maximum amount of the
Distribution Fee payable in respect of the Class B Shares of any series, the
Trust hereby elects to add to six and one quarter percent (6.25%) of the issue
price of the Class B Shares interest thereon at the rate of prime plus one
percent per annum. A contingent deferred sales charge ("CDSC") also shall be
payable by the holders of Class B Shares in the case of early redemption of such
Class B Shares (as described in the Prospectus).
2. The amounts set forth in paragraph 1 of this Plan shall be
paid for the Principal Distributor's services and expenses as distributor of the
Class B Shares of the Trust and may be spent by the Principal Distributor, in
its discretion, on, among other things, compensation to and expenses (including
overhead and telephone expenses) of account executives or other employees of the
Principal Distributor or of other broker-dealers who engage in or support
distribution of shares; printing of prospectuses and reports for other than
existing shareholders; advertising; preparation, printing and distribution of
sales literature; and allowances to other broker-dealers. In addition, whether
or not required to be provided for in this Rule 12b-1 Distribution Plan, to the
extent approved by the shareholders of a particular series and the Board of
Trustees of the Trust, the Class B Shares or a series may pay or reimburse the
Principal Distributor and others for all of its organizational and initial
offering expenses. Such amounts are in addition to and not limited by the
amounts as set forth in paragraph 1 herein.
3. Any Distribution Agreement in respect of Class B Shares of
any series may provide that: (I) the Principal Distributor in respect of such
Distribution Agreement will be deemed to have fully earned its Allocable Portion
of the Distribution Fee payable in respect of Class B Shares of such series upon
the sale of each "Initial Issue Commission Share" (as hereinafter defined) of
such series taken into account in determining such Principal Distributor's
Allocable Portion of such Distribution Fee; (II) except as provided in (III)
below, the Trust's obligation to pay such Principal Distributor its Allocable
Portion of the Distribution Fee payable in respect of the Class B Shares of such
series shall be absolute and unconditional and shall not be subject to dispute,
offset, counterclaim or any defense whatsoever (it being understood that such
provision is not a waiver of the Trust's right to pursue such Principal
Distributor and enforce such claims against the assets of such Principal
Distributor other than its right to the Distribution Fees and CDSCs in respect
of the Class B Shares of such series); (III) the Trust's obligation to pay such
Principal Distributor its Allocable Portion of the Distribution Fee payable in
respect of the Class B Shares of such series shall not be terminated or modified
except to the extent required by a change in the Act or the Rules of Conduct
enacted or promulgated after September 15, 1995 (a "Change-in-Applicable-Law"),
or in connection with a "Complete Termination" (as hereinafter defined) of this
Plan in respect of the Class B Shares of such series; (IV) the Trust will not
waive or change any CDSC in respect of the Class B Shares of such series, except
as provided in the Trust's Prospectus or statement of additional information
without the consent of the Principal Distributor (or its assigns); (V) except to
the extent required by a Change-in-Applicable-Law, neither the termination of
such Principal Distributor's role as principal distributor of the Class B Shares
of such series, nor the termination of such Distribution Agreement nor the
termination of this Plan will terminate such Principal Distributor's right to
its Allocable Portion of the CDSCs in respect of Class B Shares of such series
sold prior to such termination; (VI) except as provided in the Trust's
Prospectus and statement of additional information, until such Principal
Distributor has been paid its Allocable Portion of the Distribution Fees in
respect of the Class B Shares of such series, the Trust will not adopt a plan of
liquidation in respect of such series without the consent of such Principal
Distributor (or its assigns); and (VII) such Principal Distributor may sell and
assign its rights to its Allocable Portion of the Distribution Fees and CDSCs
(but not such Principal Distributor's obligations to the Trust under the
Distribution Agreement) to raise funds to make the expenditures related to the
distribution of Class B Shares of such series and in connection therewith, upon
receipt of notice of such sale and assignment,
<PAGE>
44
the Trust shall pay to the purchaser or assignee such portion of the Principal
Distributor's Allocable Portion of the Distribution Fees in respect of the Class
B Shares of such series so sold or assigned. For purposes of this Plan, the term
"Allocable Portion" means, in respect of Distribution Fees payable in respect of
the Class B Shares of any series as applied to any Principal Distributor, the
portion of such Distribution Fees and CDSCs allocated to such Principal
Distributor in accordance with the Allocation Schedule (as hereinafter defined).
For purposes of this Plan, the term "Complete Termination" of this Plan means,
in respect of any series, a termination of this Plan involving the cessation of
payments of Distribution Fees hereunder in respect of Class B Shares of such
series and the cessation of payments of distribution fees pursuant to every
other rule 12b-1 plan of the Trust in respect of such series for every future
class of shares which, in the good faith determination of the Board of Trustees
of the Trust, has substantially similar economic characteristics to the Class B
Shares taking into account the total sales charge, contingent deferred sales
charge and other similar charges, it being understood that the existing Class A
Shares and the existing Class C Shares do not have substantially similar
economic characteristics to the Class B Shares. For purposes of this Plan, the
term "Allocation Schedule" means, in respect of the Class B Shares of any
series, a schedule which shall be approved in the same manner as this Plan as
contemplated by Section 5 hereof for assigning to each Principal Distributor of
Class B Shares of such series the portion of the total Distribution Fees payable
by the Trust in respect of the Class B Shares of such series which has been
earned by such Principal Distributor, which shall be attached to and become a
part of any Distribution Agreement in respect of Class B Shares. For purposes of
clause (I) of the first sentence of this Section 3, the term "Initial Issue
Commission Share" shall mean, in respect of any series, a Class B Share which is
a Commission Share issued by such series under circumstances other than in
connection with a permitted free exchange with another fund. For purposes of the
foregoing definition a "Commission Share" shall mean, in respect of any series,
each Class B Share of such series which is issued under circumstances which
would normally give rise to an obligation of the holder of such Class B Share to
pay a CDSC upon redemption of such Share, including, without limitation, any
Class B Share of such Fund issued in connection with a permitted free exchange,
and any such Class B Share shall not cease to be a Commission Share prior to the
redemption (including a redemption in connection with a permitted free exchange)
or conversion even though the obligation to pay the CDSC shall have expired or
conditions for thereof still exist.
4. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the Act) of the outstanding
voting securities of Class B Shares of the Series. With respect to the
submission of this Plan for such a vote, it shall have been effectively approved
with respect to Class B Shares of any series if a majority of the outstanding
voting securities of Class B Shares of that series votes for the approval of
this Plan, notwithstanding that: (1) this Plan has not been approved by a
majority of the outstanding voting securities of Class B Shares of any other
series, or (2) the matter has not been approved by a majority of the outstanding
voting securities of Class B Shares of the Trust.
5. This Plan shall become effective with respect to the Class
B Shares of a series upon approval, together with any related agreements, by a
majority vote of both (i) the Board of Trustees and (ii) those Trustees who are
not "interested persons" of the Trust (as defined in the Act) and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Qualified Trustees"), cast in person at a meeting called for
the purpose of voting on this Plan and such related agreements.
6. This Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 5 herein.
7. In each year that this Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to this Plan or any related agreement shall prepare and furnish to the
Board and the Board shall review, at least quarterly, written reports, complying
with the
<PAGE>
45
requirements of Rule 12b-1 under the Act, of the amounts expended under this
Plan and purposes for which such expenditures were made.
8. This Plan may be terminated at any time with respect to the
Class B Shares of any series by a majority vote of the Qualified Trustees or by
vote of a majority of the outstanding voting securities of Class B Shares of
that series. This Plan may remain in effect with respect to the Class B Shares
of a series even if it has been terminated in accordance with this paragraph
with respect to one or more other series of the Trust.
9. This Plan may not be amended in order to increase
materially the amount of distribution expenses provided for in paragraph 1
herein unless such amendment is approved by a majority (as defined in the Act)
of the outstanding voting securities of Class B Shares and no material amendment
to this Plan shall be made unless approved in the manner provided in paragraph 5
herein.
10. While this Plan shall be in effect, the selection and
nomination of Trustees who are not interested persons of the Trust (as defined
in the Act) shall be committed to the discretion of the Trustees then in office
who are not interested persons of the Trust.
The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 7 herein, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
The Amended and Restated Agreement and Declaration of Trust of
the Trust is on file with the Secretary of the State of Delaware and notice is
hereby given that this Plan is adopted on behalf of the Trust, and not by the
Trustees or officers of the Trust individually, and the obligations of or
arising out of this Plan are not binding upon the Trustees, officers or
shareholders of the Trust individually but are binding only upon the assets and
property of the Trust. Notice is hereby given that the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to a particular series of the Trust shall be enforceable against the
assets of such series only, and not against the assets of the Trust generally.
Date: October 31, 1996
