Zweig
Series Trust
WE MANAGE YOUR MONEY WITH AS MUCH
EMPHASIS ON RISK CONTROL AS ON
SEEKING SUPERIOR RETURNS.
==================
EACH OF THE
===================================================== ZWEIG MUTUAL
FUNDS POSTED
SOLID GAINS
THE KEY FOR IN 1997.
US HAS ALWAYS
BEEN TO REMAIN
IN GEAR WITH
THE MAJOR
TREND OF
THE MARKET.
============================
1997 ANNUAL REPORT
============================
<PAGE>
TABLE OF CONTENTS
Shareholder Letter 1
The little boy who didn't grow up
to be 13 feet tall 2
Zweig Strategy Fund 4
Zweig Appreciation Fund 6
Zweig Managed Assets 8
Zweig Growth & Income Fund 10
Zweig Foreign Equity Fund 12
Zweig Government Fund 13
Zweig Cash Fund 13
Standardized Performance 14
Statement of Net Assets 15
Statement of Operations 39
Statement of Changes in Net Assets 40
Notes to Financial Statements 42
Financial Highlights 46
Report of Independent Accountants 48
================================================================================
This report has been prepared for the information of shareholders of Zweig
Series Trust and is not authorized for use unless preceded or accompanied by a
current prospectus. The prospectus includes information regarding the Trust's
sales charges, expenses, objectives, policies, management, performance and other
information. Please read it carefully before you invest or send money. Call
Zweig at 1-800-272-2700 to obtain additional copies of the prospectus.
The performance data quoted represent past performance, which is no guarantee of
future results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The shorter the time period of your investment, the greater the
possibility of loss. Fund shares are not deposits or obligations of, or insured
or guaranteed by, the U.S. government, any financial institution, the Federal
Deposit Insurance Corporation, or any other agency, entity or person.
Dear Fellow Shareholder:
I am pleased to report that each of the Zweig Mutual Funds posted solid gains
for 1997:
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Zweig Strategy Fund
A Shares .............................................................. 18.1%
Domestic mid-sized and large-company stocks
- --------------------------------------------------------------------------------
Zweig Appreciation Fund
A Shares .............................................................. 23.8%
Domestic small-company stocks
- --------------------------------------------------------------------------------
Zweig Managed Assets
A Shares .............................................................. 15.5%
Global stocks and bonds
- --------------------------------------------------------------------------------
Zweig Growth & Income
Fund A Shares ......................................................... 23.1%
Domestic high-dividend and high-growth stocks
- --------------------------------------------------------------------------------
Returns do not include any initial or contingent deferred sales charges.
================================================================================
The performance of each of these funds, of Zweig Government Fund, and of the new
Zweig Foreign Equity Fund is discussed in greater detail on the following pages.
We entered 1997 cautiously postured due largely to poor readings in our monetary
research and very bullish investor sentiment--something we regard as bearish. At
the outset of 1997, there were signs that the economy was heating up and that
inflationary pressures were building. In an effort to cool the economy down, the
Federal Reserve hiked interest rates in February. This had a negative impact on
bond prices; (when interest rates go up, bond prices decline). The yield on the
30-year Treasury bond rose from 6.64% at the beginning of the year to 7.17% in
April. While the stock market shrugged off these events and kept rising,
monetary conditions--which receive the major weighting in our research--still
dictated caution. This left us somewhat underinvested, waiting for the monetary
tide to turn.
By mid-year, it was becoming more apparent that we were in an economic "sweet
spot," with low and declining inflation and solid corporate profits. The Fed
decided not to raise rates at its meetings in May and July, and the bond market
greeted the news warmly. With the bond market rallying, interest rates declining
and market momentum strong, our research got more positive. We began to
gradually increase our market exposure. By September 30, our domestic equity
funds were 85% invested.
The currency and economic crisis in Southeast Asia that began in the summer
eventually took its toll on our stock market, as many investors grew concerned
that
<PAGE>
U.S. exports and corporate earnings would suffer. By the end of October, the S&P
500 Index and the Dow Jones Industrial Average experienced their first
double-digit correction on a closing basis since the bull market started back in
1990.
We entered the decline 85% invested, and stood pat because our monetary research
actually improved through the decline. Our sentiment research was helped by the
correction, as many investors turned bearish almost overnight. We increased our
market exposure to a fully invested posture following the correction. With a
slower economy and a flight to quality, the bond market rallied while the stock
market dropped--and interest rates declined to their lowest levels in more than
10 years. Our fully invested position combined with strong stock selection
served us well, and each of our domestic funds did better in the second half of
the year than in the first.
While in retrospect it would have been great had we been more bullish sooner,
our research did not give us room to take on the incremental risk. Instead, we
maintained the disciplined, flexible and risk-averse approach for which you
hired us.
We enter 1998 fully invested and open-minded about what's in store for the new
year. The key for us has always been to be in gear with the major trend of the
market. If our indicators continue to show low risk, we will remain bullishly
postured. If conditions deteriorate, we'll take steps to reduce our exposure to
the market. Most importantly, we will manage your money with as much emphasis on
risk control as on seeking superior returns.
Our portfolio managers comment on the performance of each of the Zweig Mutual
Funds beginning on page four. Please visit us on the internet at www.zweig.com.
Everyone here at Zweig Mutual Funds joins me in wishing you a happy and
prosperous new year.
Sincerely,
==========================
/s/ Martin E. Zweig. Ph.D. [PHOTOGRAPH]
==========================
MARTIN E. ZWEIG, Ph.D.
President
January 16, 1998
BY MID-YEAR, IT WAS BECOMING MORE APPARENT THAT WE WERE IN AN ECONOMIC "SWEET
SPOT," WITH LOW AND DECLINING INFLATION AND SOLID CORPORATE PROFITS.
Watch Marty Zweig on PBS's
Wall $treet Week With Louis Rukeyser.
1
<PAGE>
THE LITTLE BOY WHO DIDN'T GROW
================================================================================
Once upon a time, there was a little boy who, on his eighth birthday, was
delighted to find that he'd grown six inches in the past year.
Using his newly acquired third-grade arithmetic skills, the lad was able to
calculate that at his present rate of growth he would be 13 feet tall by the
time he was 24! He foresaw a brilliant future for himself in the NBA.
Alas, the boy had fallen victim to the fallacy of extrapolation. His arithmetic
was fine, as far as it went, but his premise was fundamentally flawed. He
assumed he could go on growing at the same rate, and of course he couldn't.
Neither, if history is any guide, can the stock market.
In the three calendar years that ended December 31, 1997, the Standard & Poor's
500 Index--comprised of stocks that make up about 70% of total U.S. stock market
capitalization--posted an average annual gain of 31.0%, including reinvested
dividends. This return was nearly three times that of the long-term average for
stocks. This is a stunning accomplishment, made even more so by the length of
time that has elapsed without a single bear market--more than seven years!
Given the unprecedented length and strength of the current bull market, even
grown-ups can fall victim to the fallacy of extrapolation. So at Zweig, we think
this is a perfect time for investors to give their expectations a reality check.
Successful investors know that mutual fund investing is a marathon, not a
sprint. There's a lot more to success than making a lot of money in a bull
market. Protecting the greater part of those gains--that is, limiting losses in
major market downturns--is the indispensable other side of the equation.
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
AVERAGE ANNUAL TOTAL RETURN 1926-1997 .................................. 10.9%
S&P 500 Index 1995-1997 ................................................ 31.0%
Source: Ned Davis Research
================================================================================
2
<PAGE>
UP TO BE 13 FEET TALL A CAUTIONARY
FABLE
================================================================================
That's where Zweig Mutual Funds come in.
We can't predict what the market will do in 1998--and neither can anyone else.
Perhaps this year will be just as terrific as the historic last three. But the
eternal truth of the market cycle is that bull markets are always followed at
some point by bear markets--and vice versa. Our approach is designed for
conservative investors who have no desire to ride the markets all the way down,
in order to earn the privilege of riding them all the way up again.
Zweig Mutual Funds are intended for long-term investors--people who plan to hold
their mutual funds through bull markets and through bear markets.
We believe that the more spectacular the market's gains, the more valuable our
approach becomes. As our long-term returns illustrate, we have been able to make
money for our shareholders in rising markets. But as the risk profile of our
funds reveals, we seek to earn our keep by managing risk in times of trouble.
Many so-called experts are calling this a "new era" and claiming that the law of
market cycles has been repealed. We would love for that to be the case, but
we're not willing to make a major bet with your hard-earned money that it is.
That's why we remain prepared for good markets--and bad.
[GRAPHIC OMITTED]
<PAGE>
ZWEIG STRATEGY FUND
================================================================================
For 1997, the fund's Class A Shares returned 18.1% with an average market
exposure of 68%. The fund captured 72% of the return of the Lipper Growth Fund
Average, which gained 25.3%. The S&P 500 Index, which beat 90% of all active
money managers in `97, was up 33.4%. The fund's Class B and C Shares (which have
no initial sales charge but bear higher expenses) both returned 17.3% for the
year. For the fourth quarter, the fund surpassed its peers. The fund's Class A,
B and C Shares were up 1.5%, 1.4% and 1.4%, respectively, while the Lipper
Growth Fund Average was down 1.1%. The S&P 500 gained 2.8% for the quarter.
Bigger was better in early 1997 and the S&P 500, which is dominated by
large-company stocks, beat most active managers by a wide margin. Our
performance reflects the fact that we held more medium-sized companies. The S&P
Midcap 400 Index lagged the S&P 500 by 7.6 percentage points during the first
six months. Our gain was also limited by our market exposure, which was below
60% for most of the first half as the risk of an overheating economy and Federal
Reserve tightening kept our research cautious.
But fundamentals and relative value came to the fore in the second half of
1997, and the performance of our stock selection model picked up, greatly
improving our results. Our stock picking, which focuses on stocks selling at low
prices relative to their growth characteristics, benefited in the second half
from exposure to utilities, airlines, and brokerage stocks. Energy stocks,
however, continued to lag the market and our position in the group restrained
results. We took full advantage of the improvement in stock selection as we
raised market exposure consistently through the second half of the year. During
this period, the S&P Midcap 400 and the Strategy Fund outperformed the S&P 500
and the Lipper Growth Fund Average.
We've just closed the books on the fourth straight year in which the
average stock fund failed to beat the S&P 500. As difficult a time as active
money managers have had recently, there have been periods such as the late
1970s, when managers beat the S&P 500. We feel confident that the pendulum will
ultimately swing back in that direction, though perhaps not right away. For one
thing, valuations do not currently argue for smaller-company investing. For
another, a flat yield curve (i.e. a narrow spread between short-term interest
rates and long-term interest rates), which is currently in force, generally has
the effect of slowing the economy. A slower economy, in turn, tends to affect
larger companies less than smaller companies.
Please see page 14 for additional performance information.
/s/ David Katzen
DAVID KATZEN
Senior Vice President
January 16, 1998
================================================================================
A risk-averse approach to the
growth potential of mid-sized
and large-company stocks
================================================================================
Quotron Symbols:
ZSTAX / ZSTBX / ZSTCX
Assets as of 12/31/97:
$ 1.23 Billion
Portfolio Manager:
David Katzen
[PHOTOGRAPH]====================================================================
Our stock picking, which focuses on stocks selling at low prices relative to
their growth characteristics, benefited in the second half from exposure to
utilities, airlines, and brokerage stocks.
4
<PAGE>
THE BOTTOM LINE Since its inception, the fund has captured 83% of the
returns of its peers with one of the lowest risk profiles in
its category.
================================================================================
PERFORMANCE for the year ended 12/31/97*
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Zweig Strategy Fund A Shares ........................................... 18.1%
- --------------------------------------------------------------------------------
Lipper Growth Fund Average ............................................. 25.3%
- --------------------------------------------------------------------------------
S&P 500 Index .......................................................... 33.4%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 68%
============================
================================================================================
PERFORMANCE annualized since inception (12/29/89)*
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Zweig Strategy Fund A Shares ........................................... 12.3%
- --------------------------------------------------------------------------------
Lipper Growth Fund Average++ ........................................... 14.8%
- --------------------------------------------------------------------------------
S&P 500 Index .......................................................... 16.6%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 67%
============================
================================================================================
ASSET MIXES for 1997o
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
January 1
Stocks ................................................................. 59%
Cash ................................................................... 41%
June 30
Stocks ................................................................. 62%
Cash ................................................................... 38%
December 31
Stocks ................................................................. 100%
================================================================================
PORTFOLIO STATISTICS as of 12/31/97+
Zweig Strategy Fund Average Growth Fund
=================== ===================
Price/Earnings Ratio 15.8 27.6
- --------------------------------------------------------------------------------
Price/Book Ratio 2.7 5.5
- --------------------------------------------------------------------------------
3-Year Earnings Growth 22.4 23.7
- --------------------------------------------------------------------------------
3-Year Beta 0.51 0.91
- --------------------------------------------------------------------------------
3-Year Standard Deviation 9.13 15.67
- --------------------------------------------------------------------------------
5-Year Standard Deviation 8.57 13.90
- --------------------------------------------------------------------------------
================================================================================
================================================================================
TOP INDUSTRY GROUPS as of 12/31/97**
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Energy .............................................................. 17.0%
Non-Bank Financial .................................................. 16.6%
Consumer Cyclical ................................................... 13.6%
Transportation ...................................................... 10.6%
Utilities ........................................................... 10.2%
Basic Materials ..................................................... 9.3%
Capital Goods ....................................................... 9.2%
Technology .......................................................... 5.8%
Consumer Staples .................................................... 4.6%
Health Care ......................................................... 1.3%
================================================================================
* Returns do not include any initial or contingent deferred sales charges.
The Lipper Growth Fund Average is based on the total return of 202 funds
since inception and 827 funds for the one-year period--the number of funds
in existence for the respective periods. The annualized return for the
Class B Shares since their inception on 4/8/96 is 14.6%. The annualized
return for the Class C Shares since their inception on 2/4/92 is 12.3%.
++ The period measured is from 12/31/89 due to Lipper's weekly data.
o For purposes of determining asset mix, the fund's stock futures position is
treated as reducing or increasing stock exposure and increasing or reducing
cash.
** Percentage of the stock portion of the fund only; does not take into
account the fund's cash or futures position.
+ Source: Morningstar Principia. Three-year earnings growth is historical,
and pertains to the stocks in the fund, not the fund as a whole. P/E ratio
is the average for the fund's equity component. Beta measures a fund's
volatility relative to the market. Standard deviation is a measure of how
much a fund's monthly returns vary from its average return over time.
5
<PAGE>
ZWEIG APPRECIATION FUND
================================================================================
For 1997, the fund's Class A Shares returned 23.8% with an average market
exposure of 68%. The fund surpassed the 20.7% return of the Lipper Small-Company
Fund Average and the 22.4% gain of the Russell 2000 Index. The fund's Class B
and C Shares (which have no initial sales charge but bear higher expenses) both
returned 23.0% for the year. For the fourth quarter the fund's Class A, B, and C
Shares were up 1.2%, 1.0% and 1.0%, respectively, while the Lipper Small-Company
Fund Average was down 4.9% and the Russell 2000 fell 3.4%.
We are pleased with our 1997 results. We were able to beat our benchmarks
and our peer group average with only two-thirds of our assets in stocks. Most
small-cap funds remain virtually fully invested in bull and bear markets. We
outperformed them while exposing you to less risk.
Though our market exposure remained below 60% for almost the entire first
half, we lost only minimal ground to our benchmarks and our fully invested
brethren. That's because of strong stock selection and the fact that the minor
March-April market pullback hit many small-company managers hard, as technology
stocks were devastated. (This is a group in which we were, and continue to be,
underweighted.) Our stock selection remained strong in the second half as we
increased investment exposure, ultimately to 100%. Our most rewarding holdings
during the year were in the financial and capital goods sectors.
The last two years have given a good glimpse of the value of our
risk-averse approach to small-company investing. Over the period, our A Shares
were up an average annual 19.5%. This compares to annual rates of return of
19.3% and 20.4%, respectively, for the Russell 2000 and the Lipper Small-Company
Fund Average. That we were able to achieve these results while staying true to
our risk-averse philosophy, in a period without a single bear market, puts us in
excellent position to reach our goal: above-average returns with less volatility
over a full market cycle.
Though our asset allocation research presently calls for a fully invested
posture, our long-term results place us among the leaders in risk control among
small-company funds. Our stock selection contributes to our low risk profile.
The price/earnings ratio of the stocks in our portfolio is among the lowest 1%
of all small-company funds. (The average price/earnings ratio for these funds is
an alarming 26.9, while ours is 16.8.) Our standard deviation and beta are
similarly lower than 96% of our peers. But most importantly, as with all Zweig
funds, our approach to small-company investing comes equipped with an exit
strategy should risk conditions change.
Please see page 14 for additional performance information.
/s/ David Katzen
DAVID KATZEN
Senior Vice President
January 16, 1998
================================================================================
A risk-averse approach to
the growth potential of
small-company stocks
================================================================================
Quotron Symbols:
ZAPAX/ZAPBX/ZAPCX
Assets as of 12/31/97:
$ 567 Million
Portfolio Manager:
David Katzen
[PHOTOGRAPH]====================================================================
Our stock selection remained strong in the second half as we increased
investment exposure, ultimately to 100%. Our most rewarding holdings during the
year were in the financial and capital goods sectors.
6
<PAGE>
THE BOTTOM LINE Since its inception, the fund has captured 82% of the
returns of its peers with one of the lowest risk profiles in
its category.
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE for the year ended 12/31/97*
Zweig Appreciation Fund - A Shares .................................... 23.8%
- --------------------------------------------------------------------------------
Lipper Small Company - Fund Average ................................... 20.7%
- --------------------------------------------------------------------------------
Russell 2000 - Index .................................................. 22.4%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 68%
============================
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE annualized since inception (10/7/91)*
Zweig Appreciation Fund - A Shares .................................... 14.4%
- --------------------------------------------------------------------------------
Lipper Small Company - Fund Average++ ................................. 17.5%
- --------------------------------------------------------------------------------
Russell 2000 - Index .................................................. 17.3%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 66%
============================
================================================================================
[THE FOLLOWING WAS RESPRESENTED BY PIE CHARTS IN THE PRINTED MATERIAL.]
ASSET MIXES for 1997o
January 1
Stocks ................................................................ 60%
Cash .................................................................. 40%
June 30
Stocks ................................................................ 62%
Cash .................................................................. 38%
December 31
Stocks ................................................................ 100%
================================================================================
PORTFOLIO STATISTICS as of 12/31/97+
Zweig Appreciation Fund Average Small-Company Fund
======================= ==========================
Price/Earnings Ratio 16.8 26.9
- --------------------------------------------------------------------------------
Price/Book Ratio 2.5 4.2
- --------------------------------------------------------------------------------
3-Year Earnings Growth 28.0 24.7
- --------------------------------------------------------------------------------
3-Year Beta 0.44 0.75
- --------------------------------------------------------------------------------
3-Year Standard Deviation 9.02 19.18
- --------------------------------------------------------------------------------
5-Year Standard Deviation 8.26 16.23
- --------------------------------------------------------------------------------
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
TOP INDUSTRY GROUPS as of 12/31/97**
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Non-Bank Financial .................................................. 19.1%
Capital Goods ....................................................... 14.9%
Consumer Cyclical ................................................... 14.9%
Basic Materials ..................................................... 11.2%
Utilities ........................................................... 11.0%
Energy .............................................................. 8.3%
Technology .......................................................... 6.0%
Transportation ...................................................... 5.8%
Banking ............................................................. 3.3%
Consumer Staples .................................................... 3.1%
================================================================================
* Returns do not include any initial or contingent deferred sales charges.
The Lipper Small-Company Fund Average is based on the total return of 94
funds since inception and 460 funds for the one-year period--the number of
funds in existence for the respective periods. The annualized return for
the Class B Shares since their inception on 4/8/96 is 19.7%. The annualized
return for the Class C Shares since their inception on 2/4/92 is 12.7%.
++ The period measured is from 10/10/91 due to Lipper's weekly data.
o For purposes of determining asset mix, the fund's stock futures position is
treated as reducing or increasing stock exposure and increasing or reducing
cash.
** Percentage of the stock portion of the fund only; does not take into
account the fund's cash or futures position.
+ Source: Morningstar Principia. Three-year earnings growth is historical,
and pertains to the stocks in the fund, not the fund as a whole. P/E ratio
is the average for the fund's equity component. Beta measures a fund's
volatility relative to the market. Standard deviation is a measure of how
much a fund's monthly returns vary from its average return over time.
7
<PAGE>
ZWEIG MANAGED ASSETS
================================================================================
We are pleased to report that the fund surpassed its peer-group average in 1997.
The fund's Class A Shares returned 15.5% for the 12 months, while the Lipper
Global Flexible Fund Average gained 11.6%. The fund's average asset mix for the
year was 47% stocks, 27% bonds and 26% cash. The fund's Class B and C Shares
(which have no initial sales charge but bear higher expenses) both returned
14.7%. Even more striking, in the difficult fourth quarter, the fund's Class A,
B and C Shares posted slight gains of 0.2%, 0.02% and 0.09%, respectively. The
Lipper Global Flexible Fund Average, in contrast, was down 3.0%.
Early in the fourth quarter of 1997, stocks declined around the world, and
the fund was able to illustrate vividly the value of risk control. Our foreign
country models picked up rising interest rates in Europe and Asia, as well as
deteriorating market momentum. We reduced our exposure to many countries before
much of the damage occurred, and therefore had almost no exposure to the Far
East going into that region's currency and market crises.
The flexibility of our approach helped us again once the foreign markets
started to recover. Our models in several European countries improved to the
point that we increased our positions as those markets rallied. Italy and Spain,
especially, shook off the crisis of October and went on to perform well. Italy
is benefiting from a strong economy, low inflation, and a rapidly falling budget
deficit-to-GDP ratio. We increased our positions in Germany and France as
interest rates began to decline in those countries. However, we are still in a
wait-and-see mode when it comes to Asia. Interest rates will need to fall,
currencies stabilize and momentum turn positive before we can make a significant
commitment to Asian stocks.
In the U.S., we have been bullish all quarter on stocks and bonds. After
the U.S. market declined, we bought stocks at lower prices and were slightly
positive for the quarter, while many other funds suffered losses. Our U.S. bond
model is at its most bullish reading. The equity and currency market turbulence
led to something of a flight to quality, as investors bought bonds, driving
prices up and yields down to their lowest level in nearly two years. The
duration--sensitivity to changes in interest rates--of our U.S. bonds is
presently 6.7 years--its highest reading in 1997.
We were hedged against currency risk nearly everywhere this quarter, which
helped insulate us from most currency crises. This active currency management is
one more means by which we seek to manage risk. It helps distinguish us from
many similar funds that don't hedge currencies.
Please see page 14 for additional performance information.
/s/ Carlton B. Neel
CARLTON B. NEEL
First Vice President
January 16, 1998
================================================================================
A risk-averse approach to
domestic and foreign
stocks and bonds
================================================================================
Quotron Symbols:
ZMAAX / ZMABX / ZMACX
Assets as of 12/31/97:
$ 539 Million
Portfolio Manager:
Carlton Neel
[PHOTOGRAPH]====================================================================
We reduced our exposure to many countries before much of the damage occurred,
and therefore had almost no exposure to the Far East going into that region's
currency and market crises.
8
<PAGE>
THE BOTTOM LINE Since its inception, the fund has captured 91% of the
returns of its peers with one of the lowest risk profiles in
its category.
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE for the year ended 12/31/97*
Zweig Managed Assets A Shares ....................................... 15.5%
- --------------------------------------------------------------------------------
Lipper Global Flexible Fund Average ................................. 11.6%
- --------------------------------------------------------------------------------
==============================================
AVERAGE MARKET EXPOSURE: 47% Stocks, 27% Bonds
==============================================
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE annualized since inception (2/8/93)*
Zweig Managed Assets A Shares ......................................... 10.1%
- --------------------------------------------------------------------------------
Lipper Global Flexible Fund Average++ ................................. 11.1%
- --------------------------------------------------------------------------------
==============================================
AVERAGE MARKET EXPOSURE: 35% Stocks, 32% Bonds
==============================================
================================================================================
[THE FOLLOWING WAS RESPRESENTED BY PIE CHARTS IN THE PRINTED MATERIAL.]
ASSET MIXES for 1997o
January 1
Stocks ................................................................ 45%
Cash .................................................................. 32%
Bonds ................................................................. 23%
June 30
Stocks ................................................................ 54%
Cash .................................................................. 14%
Bonds ................................................................. 32%
December 31
Stocks ................................................................ 51%
Cash .................................................................. 12%
Bonds ................................................................. 37%
================================================================================
COUNTRY ALLOCATIONS as of 12/31/97
Stocks Bonds
====== =====
United States 28.2% 19.2%
- --------------------------------------------------------------------------------
Belgium 1.0 0.0
- --------------------------------------------------------------------------------
Denmark 1.1 1.0
- --------------------------------------------------------------------------------
Finland 0.9 1.0
- --------------------------------------------------------------------------------
France 3.1 2.9
- --------------------------------------------------------------------------------
Germany 3.8 2.9
- --------------------------------------------------------------------------------
Italy 2.5 2.1
- --------------------------------------------------------------------------------
Mexico 1.0% 0.0%
- --------------------------------------------------------------------------------
Netherlands 1.0 0.9
- --------------------------------------------------------------------------------
Norway 1.0 1.0
- --------------------------------------------------------------------------------
Spain 3.3 2.0
- --------------------------------------------------------------------------------
Sweden 0.0 2.0
- --------------------------------------------------------------------------------
Switzerland 1.1 0.0
- --------------------------------------------------------------------------------
United Kingdom 2.6 2.3
====== =====
TOTAL 50.6% 37.3%
====== =====
================================================================================
* Returns do not include any initial or contingent deferred sales charges.
The Lipper Global Flexible Fund Average is based on the total return of 17
funds since inception and 84 funds for the one-year period--the number of
funds in existence for the respective periods. The annualized return for
the Class B Shares since their inception on 4/8/96 is 13.8%. The annualized
return for the Class C Shares since their inception on 2/8/93 is 9.3%.
++ The period measured is from 2/11/93 due to Lipper's weekly data.
o For purposes of determining asset mix, the fund's stock futures position is
treated as reducing or increasing stock exposure and increasing or reducing
cash.
9
<PAGE>
ZWEIG GROWTH & INCOME FUND
================================================================================
For 1997, the fund's Class A Shares returned 23.1% despite an average market
exposure of only 68%. That is, the fund captured 86% of the return of the Lipper
Growth & Income Fund Average (which gained 27.0%) with an average of only
two-thirds of its assets in stocks. The S&P 500 Index, which beat 90% of all
active money managers in `97, was up 33.4%.
The fund's Class B and C Shares (which have no initial sales charge but
bear higher expenses) returned 22.3% and 22.2%, respectively, for the year. For
the fourth quarter, the fund surpassed its peer group average. The fund's Class
A, B and C Shares were up 2.3%, 2.1% and 2.1%, respectively, while the Lipper
Growth & Income Fund Average gained 0.8%. The S&P 500 gained 2.8% for the
quarter.
The portfolio is approximately evenly divided between growth stocks (stocks
with above- average earnings growth) and high dividend-yield stocks (companies
with above-average payouts and favorable dividend growth). Our goal is to
construct a portfolio that should appeal to investors who are as concerned with
managing risk as they are interested in growth. We use two separate models to
help us pick stocks for the fund. One model searches for growth stocks, the
other for high-yield stocks. We believe this approach offers us an advantage.
When growth stocks, for example, are in favor, the growth portion of our
portfolio can contribute more strongly to the fund's overall return than would a
portfolio made up only of stocks with both growth and income characteristics.
Our approach was quite successful in the fund's first full year. The
outperformance of growth stocks in general--and the ones we own in
particular--during the second and third quarters of 1997 boosted our returns.
Although we had a low market exposure for the first half of the year, we were
able to capture the bulk of the gains of the average fund for the full year,
giving us a good start toward accomplishing our long-term goal of superior
risk-adjusted returns.
Our portfolio's largest holdings are presently in the capital goods,
consumer cyclical, financial and utility sectors. These holdings are allowing us
to achieve the growth exposure that we need--the annual earnings growth of the
stocks we own is 23%, while the earnings growth of the average growth & income
fund is less than 21%. The portfolio also demonstrates a price-to-book value
ratio of about half that of the average growth & income fund. And we've been
able to achieve a growth/value balance while keeping half our portfolio in
stocks with above-average dividend yields.
Please see page 14 for additional performance information.
/s/ David Katzen
DAVID KATZEN
Senior Vice President
January 16, 1998
================================================================================
A risk-averse approach
to growth stocks and
high dividend-yield stocks
================================================================================
Quotron Symbols:
ZGIAX / ZGIBX / ZGICX
Assets as of 12/31/97:
$ 34 Million
Portfolio Manager:
David Katzen
[PHOTOGRAPH]====================================================================
Our goal is to construct a portfolio that should appeal to investors who are as
concerned with managing risk as they are interested in growth.
10
<PAGE>
THE BOTTOM LINE Since its inception, the fund has captured 82% of the
returns of its peers with one of the lowest risk profiles in
its category.
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE for the year ended 12/31/97*
Zweig Growth & Income Fund - A Shares ................................. 23.1%
- --------------------------------------------------------------------------------
Lipper Growth & Income - Fund Average ................................. 27.0%
- --------------------------------------------------------------------------------
S&P 500 - Index ....................................................... 33.4%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 68%
============================
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE annualized since inception (11/26/96)*
Zweig Growth & Income Fund - A Shares ................................. 21.3%
- --------------------------------------------------------------------------------
Lipper Growth & Income - Fund Average++ ............................... 26.1%
- --------------------------------------------------------------------------------
S&P 500 - Index ....................................................... 27.7%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 72%
============================
================================================================================
[THE FOLLOWING WAS RESPRESENTED BY PIE CHARTS IN THE PRINTED MATERIAL.]
ASSET MIXES for 1997o
January 1
Stocks ................................................................ 60%
Cash .................................................................. 40%
June 30
Stocks ................................................................ 62%
Cash .................................................................. 38%
December 31
Stocks ................................................................ 99%
Cash .................................................................. 1%
================================================================================
PORTFOLIO STATISTICS as of 12/31/97+
Zweig Growth & Income Fund Avg. Growth & Income Fund
========================== =========================
Price/Earnings Ratio 18.4 24.9
- --------------------------------------------------------------------------------
Price/Book Ratio 2.7 5.0
- --------------------------------------------------------------------------------
3-Year Earnings Growth 23.2 20.7
- --------------------------------------------------------------------------------
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
TOP INDUSTRY GROUPS as of 12/31/97**
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Utilities ........................................................... 18.9%
Consumer Cyclical ................................................... 18.8%
Non-Bank Financial .................................................. 13.2%
Capital Goods ....................................................... 13.0%
Energy .............................................................. 12.7%
Basic Materials ..................................................... 8.6%
Consumer Staples .................................................... 6.0%
Transportation ...................................................... 5.0%
Technology .......................................................... 1.5%
Health Care ......................................................... 1.2%
================================================================================
* Returns do not include any initial or contingent deferred sales charges.
The Lipper Growth & Income Fund Average is based on the total return of 592
funds since inception and 615 funds for the one-year period--the number of
funds in existence for the respective periods. The annualized return for
the Class B Shares and the Class C Shares since their inception on 11/26/96
is 20.5% and 20.4%, respectively.
++ The period measured is from 11/27/96 due to Lipper's weekly data.
o For purposes of determining asset mix, the fund's stock futures position is
treated as reducing or increasing stock exposure and increasing or reducing
cash.
** Percentage of the stock portion of the fund only; does not take into
account the fund's cash or futures position.
+ Source: Morningstar Principia. Three-year earnings growth is historical,
and pertains to the stocks in the fund, not the fund as a whole. P/E ratio
is the average for the fund's equity component.
11
<PAGE>
ZWEIG FOREIGN EQUITY FUND
================================================================================
Our newest fund began operating in the midst of a worldwide stock market crisis.
Our low market exposure and risk-averse approach helped us avoid most of the
losses. From its inception on November 24 through year-end, the fund's Class A
Shares posted a gain of 1.1% with an average market exposure of 53%. The fund's
Class B and C Shares (which have no initial sales charge but bear higher
expenses) both returned 1.0%. For the same period, the Lipper International Fund
Average returned 1.5%.
The fund applies the risk-averse Zweig approach to investing in non-U.S.
stocks. We have the flexibility to adjust our market exposure and currency
exposure in the more than 20 countries in which the fund invests. If each
country's model were completely bullish or positive, the bulk of the fund's
assets would be invested in Europe, with slightly less than a third in the
Asia-Pacific region. The fund also may invest in Canada, Mexico and South
Africa. We expect to remain hedged against currency risk about two-thirds of the
time, on average.
At the time of the fund's inception, most of our foreign country models
were calling for caution. Since we saw risk all around the globe, we launched
the fund with a market exposure of only 21%. December brought recovery in
several European countries, and that is where we are now buying stocks. Our
market exposure at year-end was up to 66%, reflecting our improving outlook on
Europe. We will continue to steer clear of most of Asia until conditions improve
there.
Please see page 14 for additional performance information.
/s/ Carlton B. Neel
CARLTON B. NEEL
First Vice President
January 16, 1998
================================================================================
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PERFORMANCE cumulative return since inception 11/24/97*
Zweig Foreign Equity Fund - A Shares ................................. 1.1%
- --------------------------------------------------------------------------------
Lipper International - Fund Average++ ................................ 1.5%
- --------------------------------------------------------------------------------
============================
AVERAGE MARKET EXPOSURE: 53%
============================
================================================================================
[THE FOLLOWING WAS RESPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
ASSET MIXES for 1997o
December 31
Stocks ................................................................ 66%
Cash .................................................................. 34%
================================================================================
A risk-averse approach to
international (non-U.S.)
equity markets
================================================================================
Quotron Symbols:
ZFEAX / ZFEBX / ZFECX
Assets as of 12/31/97:
$ 3 Million
Portfolio Manager:
Carlton Neel
[PHOTOGRAPH]====================================================================
COUNTRY ALLOCATIONS
as of 12/31/97
Stocks
======
Australia 2.3%
- --------------------------------------------------------------------------------
Austria 2.4
- --------------------------------------------------------------------------------
Belgium 2.8
- --------------------------------------------------------------------------------
France 6.5
- --------------------------------------------------------------------------------
Germany 6.7
- --------------------------------------------------------------------------------
Italy 5.5
- --------------------------------------------------------------------------------
Mexico 2.6
- --------------------------------------------------------------------------------
Netherlands 4.7
- --------------------------------------------------------------------------------
Spain 6.7
- --------------------------------------------------------------------------------
Sweden 4.3
- --------------------------------------------------------------------------------
Switzerland 5.4
- --------------------------------------------------------------------------------
U.K. 6.3
- --------------------------------------------------------------------------------
Other 10.3
- --------------------------------------------------------------------------------
TOTAL 66.5%
====
================================================================================
* Returns do not include any initial or contingent deferred sales charges.
The Lipper International Fund Average is based on the total return of 491
funds. The cumulative return for both the Class B Shares and the Class C
Shares since their inception on 11/24/97 is 1.0%.
++ The period measured is from 11/26/97 due to Lipper's weekly data.
o For purposes of determining asset mix, the fund's stock futures position is
treated as reducing or increasing stock exposure and increasing or reducing
cash.
12
<PAGE>
ZWEIG GOVERNMENT FUND
================================================================================
The fund benefited from a bull market in bonds, with which we were in gear in
the second half of 1997. For the 12 months, the fund's Class A Shares returned
8.4%, versus 8.8% for the Lipper U.S. Government Fund Average. The fund's Class
B and C Shares (which have no initial sales charge but bear higher expenses)
returned 7.6% and 7.9%, respectively. During the bond market's strong fourth
quarter, the fund's Class A, B and C Shares returned 3.4%, 3.1% and 3.3%,
respectively, surpassing the 3.0% returned by the Lipper U.S. Government Fund
Average.
Bonds enjoyed a flight to quality--money moving from stocks into
bonds--during the second half of 1997. As the turmoil of foreign markets spread
to the U.S., many investors bought bonds in an attempt to protect their
investments. This buying resulted in the lowest yields for long-term bonds since
January of 1996.
Our bond model responded to the bull market early, causing us to increase
our duration to 6.1 years, a fairly high reading for us. Although the fund
lagged the market for the first six months, we enjoyed the gains of the second
half and almost kept pace with our peers for the full year.
Please see page 16 for additional performance information.
/s/ Carlton B. Neel
CARLTON B. NEEL
First Vice President
January 16, 1998
================================================================================
Monthly income from
U.S. Government securities
================================================================================
Quotron Symbols:
ZGVAX / ZGVBX / ZGVCX
Assets as of 12/31/97:
$ 41 Million
Portfolio Manager:
Carlton Neel
[PHOTOGRAPH]====================================================================
PERFORMANCE through 12/31/97*
<TABLE>
<CAPTION>
Zweig Government Fund Lipper U.S. Government
A Shares Bond Fund Average
===================== ======================
<S> <C> <C>
One Year 8.4% 8.8%
- ------------------------------------------------------------------------------------------
Annualized since inception (3/25/85)** 7.2% 8.4%
- ------------------------------------------------------------------------------------------
</TABLE>
================================================================================
===============
ZWEIG CASH FUND
===============
The net yield of Zweig Cash Fund for the 12 months ended December 31, 1997, was:
4.86% for Class A and C Shares
4.16% for Class B Shares, and
5.10% for Class M Shares.
================================================================================
* Returns do not include any initial or contingent deferred sales charges.
The Lipper U.S. Government Bond Fund Average is based on the total return
of 20 funds since inception and 179 funds for the one-year period--the
number of funds in existence for the respective periods. The annualized
return for the Class B Shares since their inception on 4/8/96 is 6.8%. The
annualized return for the Class C Shares since their inception on 2/4/92 is
5.4%.
++ The period measured is from 3/31/85 due to Lipper's weekly data.
** Zweig/Glaser Advisers assumed responsibility for managing the fund on
September 1, 1989.
13
<PAGE>
ZWEIG SERIES TRUST
================================================================================
Average annual returns through 12/31/97
<TABLE>
====================================================================================================================================
<CAPTION>
ZWEIG STRATEGY FUND
===================
Class A Shares (ZSTAX) Class B Shares (ZSTBX) Class C Shares (ZSTCX)
---------------------- ---------------------- ----------------------
from inception from inception from inception
(12/29/89) five year one year (4/8/96) one year (2/4/92) five year one year
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Before
sales charges 12.3% 14.2% 18.1% 14.6% 17.3% 12.3% 13.4% 17.3%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
After all charges
and expenses 11.5% 12.9% 11.6% 11.9% 11.5% 12.3% 13.4% 15.8%
====================================================================================================================================
<CAPTION>
ZWEIG APPRECIATION FUND
=======================
Class A Shares (ZAPAX) Class B Shares (ZAPBX) Class C Shares (ZAPCX)
---------------------- ---------------------- ----------------------
from inception from inception from inception
(10/7/91) five year one year (4/8/96) one year (2/4/92) five year one year
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Before
sales charges 14.4% 14.8% 23.8% 19.7% 23.0% 12.7% 14.0% 23.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
After all charges
and expenses 13.4% 13.5% 17.0% 16.9% 16.8% 12.7% 14.0% 21.5%
====================================================================================================================================
<CAPTION>
ZWEIG MANAGED ASSETS
====================
Class A Shares (ZMAAX) Class B Shares (ZMABX) Class C Shares (ZMACX)
---------------------- ---------------------- ----------------------
from inception from inception from inception
(2/8/93) one year (4/8/96) one year (2/8/93) one year
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Before
sales charges 10.1% 15.5% 13.8% 14.7% 9.3% 14.7%
- ----------------- ---- ---- ---- ---- ---- ----
After all charges
and expenses 8.8% 9.1% 11.2% 8.9% 9.3% 13.2%
====================================================================================================================================
<CAPTION>
ZWEIG GROWTH & INCOME FUND
==========================
Class A Shares (ZGIAX) Class B Shares (ZGIBX) Class C Shares (ZGICX)
---------------------- ---------------------- ----------------------
from inception from inception from inception
(11/26/96) one year (11/26/96) one year (11/26/96) one year
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Before
sales charges 21.3% 23.1% 20.5% 22.3% 20.4% 22.2%
- ----------------- ---- ---- ---- ---- ---- ----
After all charges
and expenses 15.2% 16.4% 16.1% 16.2% 20.4% 20.6%
====================================================================================================================================
<CAPTION>
ZWEIG GOVERNMENT FUND
======================
Class A Shares (ZGVAX) Class B Shares (ZGVBX) Class C Shares (ZGVCX)
---------------------- ---------------------- ----------------------
from inception from inception
ten year five year one year (4/8/96) one year (2/4/92) five year one year
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Before
sales charges 7.0% 5.7% 8.4% 6.8% 7.6% 5.4% 5.1% 7.9%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
After all charges
and expenses 6.5% 4.7% 3.3% 4.3% 2.2% 5.4% 5.1% 6.5%
</TABLE>
Returns assume that all dividends and capital gains are reinvested. Class A
Share returns reported above include the effect of the 5.5% maximum initial
sales charge (4.75% for Zweig Government Fund). Class B Share returns include
the maximum contingent deferred sales charge (CDSC) of 5.0% for redemptions made
one year or less from date of purchase. Class C Shares, sold with no initial
sales charge, are subject to a 1.25% CDSC if sold within 12 months of purchase.
Class C Share one-year returns reported above assume that a 1.25% CDSC was paid.
Aggregate annual service and distribution fees are 0.30% for Class A Shares,
1.0% for Class B Shares, and 1.0% for Class C Shares (0.75% for Zweig Government
Fund).
14
<PAGE>
ZWEIG STRATEGY FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS: 92.22%
Aerospace: 0.21%
Precision Castparts Corp. .................. 3,400 $ 205,063
Thiokol Corp. .............................. 29,600 2,405,000
--------------
2,610,063
--------------
Air Freight: 1.95%
Airborne Freight Corp. ..................... 227,500 14,133,438
*Federal Express Corp. ...................... 162,400 9,916,550
--------------
24,049,988
--------------
Airlines: 6.47%
*AMR Corp. .................................. 237,600 30,531,600
*Continental Airlines Inc., Class B ......... 42,800 2,059,750
Delta Air Lines, Inc. ...................... 33,400 3,974,600
KLM Royal Dutch Airlines N.V., ADR ......... 84,620 3,194,405
Southwest Airlines Co. ..................... 251,700 6,198,112
*UAL Corp. .................................. 24,900 2,303,250
*US Airways Group Inc. ...................... 507,300(a) 31,706,250
--------------
79,967,967
--------------
Apparel and Textiles: 0.02%
VF Corp. ................................... 6,200 284,812
--------------
Automobiles: 3.08%
Chrysler Corp. ............................. 30,000 1,055,625
Ford Motor Co. ............................. 644,800 31,393,700
General Motors Corp. ....................... 46,800 2,837,250
Volvo AB, ADR .............................. 100,325 2,708,775
--------------
37,995,350
--------------
Automotive Parts and Equipment: 1.33%
Borg-Warner Automotive, Inc. ............... 51,900 2,698,800
Desc S.A., ADR ............................. 167,000 6,262,500
ITT Industries Inc. ........................ 207,000 6,494,625
*Lear Corp. ................................. 15,400 731,500
Mark IV Industries, Inc. ................... 12,900 282,188
--------------
16,469,613
--------------
Banks: 0.76%
Bankers Trust New York Corp. ............... 48,100 5,408,244
Imperial Bancorp ........................... 38,530 1,900,011
Republic New York Corp. .................... 18,400 2,101,050
--------------
9,409,305
--------------
Building Materials and Products: 1.73%
Lafarge Corp. .............................. 82,600 2,441,862
*Lone Star Industries, Inc. ................. 40,100 2,130,312
Martin Marietta Materials Co. .............. 93,400 3,414,937
Southdown, Inc. ............................ 123,800 7,304,200
*USG Corp. .................................. 124,000 6,076,000
--------------
21,367,311
--------------
Chemicals: 1.59%
Albemarle Corp. ............................ 120,600(a) 2,879,325
Dexter Corp. ............................... 64,500 2,785,594
Dow Chemical Co. ........................... 72,300 7,338,450
*International Specialty Products Inc. ...... 61,100 912,681
Lyondell Petrochemical Corp. ............... 164,400 4,356,600
*Methanex Corp. ............................. 89,000 706,437
Millennium Chemicals Inc. .................. 29,000 683,313
--------------
19,662,400
--------------
Computers and Software: 4.50%
*Creative Technology Ltd. ................... 533,500 11,737,000
*Data General Corp. ......................... 557,400 9,719,663
*Digital Equipment Corp. .................... 48,700 1,801,900
*Storage Technology Corp., Class A .......... 400,500 24,805,969
*Stratus Computer, Inc. ..................... 170,200 6,435,687
*Wang Laboratories, Inc. .................... 49,100(a) 1,086,337
--------------
55,586,556
--------------
Construction Equipment: 1.39%
Case Corp. ................................. 250,800 15,157,725
Caterpillar Inc. ........................... 40,100 1,947,356
--------------
17,105,081
--------------
Containers and Packaging: 0.45%
Ball Corp. ................................. 8,800 310,750
Vitro Sociedad Anonima, ADR ................ 405,200(a) 5,292,925
--------------
5,603,675
--------------
Electronics: 1.03%
Innovex Inc. ............................... 128,200 2,940,588
*Jabil Circuit Inc. ......................... 137,500 5,465,625
*Litton Industries Inc. ..................... 23,200 1,334,000
Philips Electronics, N.V ................... 25,900 1,566,950
Raytheon Co., Class A ...................... 2,984 147,149
Sony Corp., ADR ............................ 11,000 998,250
*VLSI Technology Inc. ....................... 10,800 255,150
--------------
12,707,712
--------------
Farm Equipment: 0.54%
AGCO Corp. ................................. 228,200(a) 6,674,850
--------------
Finance: 2.45%
AMBAC Financial Group Inc. ................. 137,000 6,302,000
*Americredit Corp. .......................... 42,800 1,185,025
Equitable Companies Inc. ................... 274,040 13,633,490
Liberty Financial Companies, Inc. .......... 112,710(a) 4,254,802
LNR Property Corp. ......................... 75,200 1,776,600
Morgan Stanley, Dean Witter,
Discover & Co. ........................... 51,700 3,056,763
--------------
30,208,680
--------------
Food and Beverages: 0.69%
Adolph Coors Co., Class B .................. 143,400 4,768,050
Earthgrains Co. ............................ 67,000 3,149,000
Pepsi-Gemex S.A.de C.V., ADR ............... 43,600 629,475
--------------
8,546,525
--------------
Forest and Paper Products: 0.64%
Asia Pulp & Paper Co. Ltd., ADR ............ 21,600 217,350
Fort James Corp. ........................... 153,200 5,859,900
Rayonier Inc. .............................. 41,800 1,779,113
--------------
7,856,363
--------------
Healthcare Facilities and
Products: 1.20%
*FPA Medical Management Inc. ................ 169,900 3,164,387
Integrated Health Services, Inc. ........... 148,200 4,621,987
*Pharmerica Inc. ............................ 10,512 109,062
*Sun Healthcare Group Inc. .................. 299,400 5,800,875
*Universal Health Services, Inc., Class B ... 22,800 1,148,550
--------------
14,844,861
--------------
Homebuilding and Land
Development: 0.98%
Centex Corp. ............................... 145,700 9,169,994
Lennar Corp. ............................... 87,500 1,886,719
Pulte Corp. ................................ 25,300 1,057,856
--------------
12,114,569
--------------
Hotels: 0.42%
*Prime Hospitality Corp. .................... 253,340 5,161,802
--------------
Household Furnishings and
Products: 0.17%
* Furniture Brands International Inc. ....... 58,000 1,189,000
Shaw Industries Inc. ....................... 76,800 892,800
--------------
2,081,800
--------------
15
<PAGE>
ZWEIG STRATEGY FUND
================================================================================
Statement of Net Assets as of December 31, 1997 (continued)
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Industrial Products, Services and
Machinery: 0.11%
Cincinnati Milacron Inc. ................... 35,000 $ 907,812
Ingersoll-Rand Co. ......................... 10,600 429,300
--------------
1,337,112
--------------
Insurance: 6.66%
ACE Ltd. ................................... 115,400 11,136,100
Allmerica Financial Corp. .................. 111,400 5,563,038
Allstate Corp. ............................. 28,100 2,553,588
Capital Re Corp. ........................... 19,400 1,204,013
CIGNA Corp. ................................ 15,400 2,665,162
Everest Reinsurance Holdings Inc. .......... 127,400 5,255,250
EXEL Limited ............................... 60,200 3,815,175
Fremont General Corp. ...................... 103,900 5,688,525
Horace Mann Educators Corp. ................ 165,000 4,692,187
NAC Re Corp. ............................... 9,000 439,312
Old Republic International Corp. ........... 218,200 8,114,313
PartnerRe Ltd. ............................. 3,700 171,587
Presidential Life Corp. .................... 11,100 224,775
Travelers Group Inc. ....................... 570,546 30,738,166
--------------
82,261,191
--------------
Investment Banking and
Brokerage: 4.61%
A.G.Edwards, Inc. .......................... 168,150(a) 6,683,963
Bear, Stearns & Co.Inc ..................... 397,498 18,881,155
Donaldson, Lufkin & Jenrette, Inc. ......... 7,100 564,450
Lehman Brothers Holdings Inc. .............. 300,500(a) 15,325,500
Merrill Lynch & Co., Inc. .................. 50,500 3,683,344
PaineWebber Group Inc. ..................... 339,900 11,747,794
--------------
56,886,206
--------------
Manufacturing: 3.55%
Aeroquip-Vickers Inc. ...................... 121,300(a) 5,951,281
Canadian Pacific Ltd ....................... 267,400 7,286,650
Eaton Corp. ................................ 52,380 4,674,915
Koor Industries Ltd., ADR .................. 41,400 908,212
NOVA Corp. ................................. 8,800 84,150
Parker-Hannifin Corp. ...................... 254,040 11,654,085
Premark International Inc. ................. 139,800 4,054,200
Trinity Industries, Inc. ................... 207,600(a) 9,264,150
--------------
43,877,643
--------------
Metal Fabrication: 1.21%
Kaydon Corp. ............................... 47,100 1,536,638
Kennametal Inc. ............................ 4,800 248,700
*Mueller Industries, Inc. ................... 40,825 2,408,675
Timken Co. ................................. 311,200 10,697,500
--------------
14,891,513
--------------
Metals and Mining: 1.39%
*Alumax Inc. ................................ 182,200 6,194,800
ASARCO Inc. ................................ 252,000 5,654,250
Phelps Dodge Corp. ......................... 86,400 5,378,400
--------------
17,227,450
--------------
Oil and Gas: 18.98%
Ashland Inc. ............................... 204,600 10,984,463
Atlantic Richfield Co. ..................... 167,400 13,412,925
Chevron Corp. .............................. 84,500 6,506,500
Coastal Corp. .............................. 287,500(a) 17,807,031
Columbia Gas System, Inc. .................. 208,700 16,395,998
*EEX Corp. .................................. 45,138 409,063
Elf Aquitaine S.A.., ADR ................... 209,800 12,299,525
Equitable Resources Inc. ................... 3,300 116,738
Helmerich & Payne, Inc. .................... 96,300 6,536,363
MCN Energy Group Inc. ...................... 20,600 831,725
Mobil Corp. ................................ 48,500 3,501,094
Murphy Oil Corp. ........................... 7,600 411,825
National Fuel Gas Co. ...................... 11,900 579,381
NICOR Inc. ................................. 61,200 $ 2,581,875
Occidental Petroleum Corp. ................. 432,200 12,668,862
* ONEOK Inc. ................................ 24,000 969,000
Pacific Enterprises ........................ 5,200 195,650
Pennzoil Co. ............................... 90,500 6,046,531
Peoples Energy Corp. ....................... 17,000 669,375
Phillips Petroleum Co. ..................... 178,400 8,674,700
Questar Corp. .............................. 4,400 196,350
*SEACOR Smit Inc. ........................... 89,100 5,368,275
Sun Company, Inc. .......................... 378,700 15,929,069
Texaco Inc. ................................ 241,400 13,126,125
Tidewater Inc. ............................. 120,600 6,648,075
Total S.A., ADR ............................ 101,600 5,638,800
USX-Marathon Group ......................... 932,300 31,465,125
*Veritas DGC Inc. ........................... 63,100 2,492,450
Vintage Petroleum Inc. ..................... 135,280 2,570,320
Washington Gas Light Co. ................... 3,200 99,000
Weatherford Enterra, Inc. .................. 95,500 4,178,125
YPF Sociedad Anonima, ADR .................. 734,300 25,103,881
--------------
234,414,219
--------------
Railroads: 0.51%
Canadian National Railway Co. .............. 134,000 6,331,500
--------------
Restaurants: 0.08%
Darden Restaurants Inc. .................... 80,000 1,000,000
--------------
Retail Trade: 6.49%
Burlington Coat Factory
Warehouse Corp. .......................... 181,080 2,976,503
Dayton Hudson Corp. ........................ 355,000 23,962,500
*Federated Department Stores, Inc. .......... 560,000 24,115,000
Fingerhut Companies, Inc. .................. 217,000 4,638,375
*Footstar Inc. .............................. 18,300 491,812
*Fred Meyer, Inc. ........................... 136,100 4,950,637
*K Mart Corp. ............................... 412,600 4,770,687
*Officemax Inc. ............................. 175,000 2,493,750
Ross Stores Inc. ........................... 324,400 11,800,050
--------------
80,199,314
--------------
Savings and Loan Associations: 1.61%
*Golden State Bancorp Inc. .................. 7,500 280,312
Golden West Financial Corp. ................ 17,000 1,662,812
H.F. Ahmanson & Co. ........................ 237,700(a) 15,911,044
TR Financial Corp. ......................... 62,000 2,061,500
--------------
19,915,668
--------------
Steel: 3.20%
AK Steel Holding Corp. ..................... 221,440 3,916,720
*Bethlehem Steel Corp. ...................... 803,700 6,931,913
British Steel Plc, ADR ..................... 50,000 1,071,875
Inland Steel Industries, Inc. .............. 288,800 4,945,700
Lone Star Technologies, Inc. ............... 7,200 204,300
LTV Corp. .................................. 404,100 3,939,975
*National Steel Corp., Class B .............. 126,400 1,461,500
*Pohang Iron & Steel Co., ADR ............... 206,400 3,599,100
Texas Industries, Inc. ..................... 5,900 265,500
USX-U.S.Steel Group ........................ 420,600 13,143,750
--------------
39,480,333
--------------
Supermarket Chains: 0.54%
Great Atlantic & Pacific Tea
Company, Inc. ............................ 75,700 2,247,344
Supervalu Inc. ............................. 106,700 4,468,062
--------------
6,715,406
--------------
Telecommunications: 0.92%
Philippine Long Distance
Telephone Co., ADR ....................... 117,700 2,648,250
Portugal Telecommunications S.A., ADR ...... 10,500 493,500
Tele Danmark A.S., ADR ..................... 249,300 7,681,556
Telefonica de Espana, SA, ADR .............. 5,500 500,844
--------------
11,324,150
--------------
16
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Tobacco: 2.47%
Dimon Inc. ................................. 10,100 $ 265,125
RJR Nabisco Holdings Corp. ................. 801,600 30,060,000
Universal Corp. ............................ 5,100 209,737
--------------
30,534,862
--------------
Trucking: 2.09%
Caliber Systems Inc. ....................... 113,800 5,540,637
Cummins Engine Co. ......................... 87,500 5,167,969
*Navistar Internationl Corp. ................ 227,400 5,642,362
PACCAR Inc. ................................ 81,800 4,294,500
Ryder System, Inc. ......................... 25,000 818,750
USFreightways Corp. ........................ 103,700 3,370,250
*Werner Enterprises Inc. .................... 50,300 1,031,150
--------------
25,865,618
--------------
Utilities: 6.11%
Allegheny Energy Inc. ...................... 5,500 178,750
Atlantic Energy Inc. ....................... 119,000 2,521,312
Baltimore Gas & Electric Co. ............... 12,500 425,781
Boston Edison Co. .......................... 158,000 5,984,250
Chilgener S.A. ADR ......................... 30,000 735,000
DQE Inc. ................................... 45,800 1,608,725
Edison International ....................... 244,700 6,652,781
FPL Group Inc. ............................. 89,800(a) 5,315,038
GPU Inc. ................................... 292,500 12,321,562
IES Industries, Inc. ....................... 5,000 184,062
IPALCO Enterprises Inc. .................... 12,000 503,250
Long Island Lighting Co. ................... 271,900 8,190,987
MidAmerican Energy Holdings Inc. ........... 96,400 2,120,800
Minnesota Power & Light Co. ................ 15,600 679,575
Montana Power Co. .......................... 163,900 5,214,069
New England Electric System ................ 102,700 4,390,425
New York State Electric & Gas Corp. ........ 4,100 145,550
Pinnacle West Capital Corp. ................ 228,400 9,678,450
PP&L Resources, Inc. ....................... 18,600 445,237
Sierra Pacific Resources Inc. .............. 29,300 1,098,750
UtiliCorp United Inc. ...................... 138,700 5,383,294
Westcoast Energy Inc. ...................... 70,800 1,628,400
--------------
75,406,048
--------------
Waste Management: 0.09%
Browning-Ferris Industries Inc. ............ 28,800 1,065,600
--------------
Total Common Stocks
(Cost $941,027,336) ...................... 1,139,043,116
--------------
Principal
Amount
-------
SHORT-TERM OBLIGATIONS: 0.81%
United States Treasury Bills: 0.81%
4.87%, 1/8/98 ............................. $ 1,000,000(a) 998,893
5.14%, 1/22/98 ............................ 5,000,000(a) 4,984,897
5.16%, 1/22/98 ............................ 1,000,000(a) 996,847
5.18%, 1/22/98 ............................ 1,000,000(a) 996,834
5.26%, 1/22/98 ............................ 2,000,000(a) 1,993,959
--------------
Total Short-Term Obligations
(Cost $9,971,771) ......................................... 9,971,430
--------------
REPURCHASE AGREEMENTS: 5.71 %
With Morgan Stanley & Co., Inc.,
(dated 12/31/97), 6.76%, due 1/2/98
(Repurchase proceeds $36,499,703) ;
collateralized by: $35,773,485 Federal
National Mortgage Association Bonds,
6.00% - 8.189%, 10/1/2023 - 7/1/2026
(Market value $37,246,577) .............. 36,486,000 36,486,000
With Prudential Securities Inc.,
(dated 12/31/97), 6.65%, due 1/2/98
(Repurchase proceeds $34,012,561);
collateralized by: $32,225,728 of
various United States Government
and Agency Obligations,
5.235% - 8.625%, 2/3/98 - 3/18/2011
(Market value $34,680,446) ............... 34,000,000 34,000,000
--------------
Total Repurchase Agreements
(Cost $70,486,000) ....................................... 70,486,000
--------------
Total Investments in Securities
(Cost $1,021,485,107) .................................... 1,219,500,546
--------------
Net Unrealized Appreciation on
Futures Contracts: 0.09%
Standard & Poor's 500
March 1998 long futures (b) ............... 393 1,140,788
--------------
Total Investments
(Cost $1,021,485,107) ..................... 98.83% 1,220,641,334
Other Assets ................................ 1.39 17,164,591
----------- --------------
Total Assets .............................. 100.22% 1,237,805,925
Total Liabilities (Note 5) ................ (0.22) (2,682,889)
----------- --------------
Net Assets (Note 6) ......................... 100.00% $1,235,123,036
=========== ==============
Class A Shares
Net asset value ("NAV") and redemption price per share
($565,720,730/35,865,317 shares) ........................... $ 15.77
=========
Maximum public offering price per share -
NAV/(1 - maximum sales charge) ($15.77/.945) .............. $ 16.69
=========
Class B Shares
Net asset value and offering price per share
($76,819,772/4,844,755 shares) ............................ $ 15.86
=========
Redemption price per share .................................. **
=========
Class C Shares
Net asset value and offering price per share
($591,512,425/37,424,420 shares) .......................... $ 15.81
=========
Redemption price per share .................................. **
=========
Class I Shares
Net asset value, offering and redemption price per share
($1,070,109/67,441 shares) ................................ $ 15.87
=========
- --------------------------------------------------------------------------------
* Non-income producing security.
** Varies by length of time shares are held. (Note 3b)
(a) Pledged as collateral for futures transactions.
(b) The market value of the long futures was $96,196,575 (repesenting 7.79% of
the Fund's net assets) with a cost of $95,055,787.
For Federal income tax purposes, the tax basis of investments owned at December
31, 1997 was $1,022,256,663 and net unrealized appreciation on investments
consisted of :
Gross unrealized appreciation ......................... $ 230,149,471
Gross unrealized depreciation ......................... (31,764,800)
-------------
Net unrealized appreciation ........................... $ 198,384,671
=============
See notes to financial statements.
17
<PAGE>
ZWEIG APPRECIATION FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS: 95.86%
Aerospace: 0.92%
AAR Corp. ................................. 20,000 $ 775,000
*Alliant Techsystems Inc. .................. 3,200 178,400
*Aviall Inc. ............................... 33,800 504,887
*Moog Inc., Class A ........................ 21,600 754,650
*Sequa Corp., Class A ...................... 24,890 1,619,406
Thiokol Corp. ............................. 4,000 325,000
*Triumph Group Inc. ........................ 3,300 109,725
*Wyman-Gordon Co. .......................... 48,300(a) 947,887
-----------
5,214,955
-----------
Air Freight: 0.87%
Airborne Freight Corp. .................... 27,700 1,720,863
CNF Transportation Inc. ................... 19,600 752,150
*Federal Express Corp. ..................... 40,200 2,454,713
-----------
4,927,726
-----------
Airlines: 3.48%
*Alaska Air Group Inc. ..................... 44,700 1,732,125
*America West Holdings Corp., Class B ...... 14,100 262,612
*AMR Corp. ................................. 29,100 3,739,350
*Continental Airlines, Inc., Class B ....... 19,600 943,250
Delta Air Lines, Inc. ..................... 14,400 1,713,600
KLM Royal Dutch Airlines N.V., ADR ........ 59,162 2,233,365
*Mesaba Holdings Inc. ...................... 10,100 262,600
Southwest Airlines Co ..................... 67,700 1,667,113
*UAL Corp. ................................. 37,200 3,441,000
*US Airways Group Inc. ..................... 59,700(a) 3,731,250
-----------
19,726,265
-----------
Apparel and Textiles: 0.61%
Guilford Mills, Inc. ...................... 31,600 865,050
Interface Inc., Class A ................... 38,800 1,125,200
Kellwood Co. .............................. 5,500 165,000
VF Corp. .................................. 28,800 1,323,000
-----------
3,478,250
-----------
Automobiles: 2.01%
Chrysler Corp. ............................ 31,304 1,101,510
Daimler-Benz AG, ADR ...................... 23,600 1,705,100
Ford Motor Co. ............................ 69,600 3,388,650
General Motors Corp. ...................... 54,362 3,295,696
Honda Motor Co., Ltd., ADR ................ 11,800 871,725
Volvo AB, ADR ............................. 39,660(a) 1,070,820
-----------
11,433,501
-----------
Automotive Parts and Equipment: 2.08%
Arvin Industries, Inc. .................... 20,200 672,912
Barnes Group Inc. ......................... 70,300 1,599,325
Borg-Warner Automotive, Inc. .............. 23,300 1,211,600
Dana Corp. ................................ 47,200 2,242,000
Desc S.A., ADR ............................ 6,600 247,500
Intermet Corp. ............................ 138,900 2,430,750
ITT Industries Inc. ....................... 27,600 865,950
Mark IV Industries, Inc. .................. 7,500 164,063
Standard Products Co. ..................... 30,300 776,437
Wynn's International Inc. ................. 49,500(a) 1,577,812
-----------
11,788,349
-----------
Banks: 3.12%
Banco de A Edwards, ADR ................... 45,300 770,100
Banco Frances del Rio, ADR ................ 8,800 240,900
Banco Wiese Limitado, ADR ................. 128,600 643,000
Corporacion Bancaria de Espana, ADR ....... 1,400 42,787
CVB Financial Corp. ....................... 1,519 56,393
FNB Corp. ................................. 8,025 301,941
Firstbank Puerto Rico ..................... 25,212 858,784
GBC Bancorp ............................... 7,200 459,000
*Imperial Bancorp .......................... 36,065 1,778,455
North Fork Bancorporation, Inc. ........... 132,512 4,447,434
Popular Inc. .............................. 9,100 450,450
Reliance Bancorp Inc. ..................... 7,200 263,700
Royal Bank of Canada ...................... 4,300 227,900
Santa Monica Bank ......................... 24,180 672,506
*Silicon Valley Bancshares ................. 31,600 1,777,500
Sterling Bancorp .......................... 33,730 809,520
Toronto-Dominion Bank ..................... 3,800 143,213
Trust Company of New Jersey ............... 34,900 872,500
UMB Financial Corp. ....................... 31 1,689
UnionBancal Corp. ......................... 16,100 1,730,750
USBancorp, Inc. ........................... 13,900 1,014,700
Westpac Banking Corp., ADR ................ 4,300 136,525
-----------
17,699,747
-----------
Building Materials and Products: 4.25%
Ameron International Corp. ................ 15,200 961,400
Apogee Enterprises, Inc. .................. 5,400 64,125
Centex Construction Products Inc. ......... 64,344 1,938,363
Florida Rock Industries, Inc. ............. 64,200 1,460,550
Johns Manville Corp. ...................... 14,000 140,875
Lafarge Corp. ............................. 78,500 2,320,656
Lone Star Industries, Inc. ................ 70,400(a) 3,740,000
Martin Marietta Materials Co. ............. 6,900 252,281
Medusa Corp. .............................. 29,400 1,229,288
*Mestek, Inc. .............................. 44,200 828,750
*NCI Building Systems, Inc. ................ 30,000 1,065,000
*Nortek Inc. ............................... 42,500 1,128,906
Puerto Rican Cement Co., Inc. ............. 6,300 316,181
*Simpson Manufacturing Inc. ................ 11,500 383,094
Southdown, Inc. ........................... 65,500(a) 3,864,500
TJ International Inc. ..................... 50,800 1,257,300
*Triangle Pacific Corp. .................... 12,200 413,275
Universal Forest Products Inc. ............ 11,100 151,237
*USG Corp. ................................. 31,300(a) 1,533,700
Vulcan Materials Co. ...................... 10,300(a) 1,051,887
-----------
24,101,368
-----------
Chemicals: 2.49%
Albemarle Corp. ........................... 15,000 358,125
B.F.Goodrich Co. .......................... 13,860 574,324
Cambrex Corp. ............................. 15,400 708,400
Courtaulds, Plc., ADR ..................... 52,900 244,663
Dexter Corp. .............................. 10,500 453,469
Dow Chemical Co. .......................... 17,200 1,745,800
Furon Co. ................................. 32,400 676,350
*International Specialty Products Inc. ..... 48,500 724,469
Lyondell Petrochemical Corp. .............. 21,600 572,400
MacDermid, Inc. ........................... 71,100 6,034,612
*Methanex Corp. ............................ 35,200 279,400
Millennium Chemicals Inc. ................. 18,200 428,838
Mine Safety Appliances Co. ................ 2,900 189,950
Spartech Corp. ............................ 22,500 340,312
Stepan Co. ................................ 8,200 242,925
Terra Industries Inc. ..................... 44,400 579,975
-----------
14,154,012
-----------
Commercial Services: 0.27%
Laidlaw Inc. .............................. 11,100 151,238
Ogden Corp. ............................... 2,700 76,106
World Fuel Services Corp. ................. 61,725(a) 1,296,225
-----------
1,523,569
-----------
Communication Equipment: 1.07%
Alcatel Alsthom.Compagnie, ADR ............ 28,400 718,875
*Cable Design Technology Corp., Class A .... 6,300 244,912
Harris Corp. .............................. 42,800 1,963,450
Nokia Corp., ADR .......................... 23,500 1,645,000
Tadiran Ltd., ADR ......................... 33,000 1,167,375
*Teledata Communication Ltd. ............... 19,700 359,525
-----------
6,099,137
-----------
18
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Computers and Software: 2.67%
*Borland International, Inc. ............... 29,500 $ 215,719
Comdisco Inc. ............................. 138,675 4,636,945
*Creative Technology Ltd. .................. 47,400 1,042,800
*Data General Corp. ........................ 65,700 1,145,644
*Digital Equipment Corp. ................... 67,500 2,497,500
Innovex Inc. .............................. 55,400 1,270,738
*Lexmark International, Inc., Class A ...... 5,300 201,400
*MTI Technology Corp. ...................... 15,700 208,025
*Storage Technology Corp., Class A ......... 43,100(a) 2,669,506
*Stratus Computer, Inc. .................... 26,500 1,002,031
*Wang Laboratories, Inc. ................... 12,400 274,350
-----------
15,164,658
-----------
Conglomerates: 0.18%
Katy Industries, Inc. ..................... 50,500 1,028,937
-----------
Construction Equipment: 0.99%
Case Corp. ................................ 27,400 1,655,988
Caterpillar Inc. .......................... 68,300 3,316,819
*Global Industrial Technology Inc. ......... 9,600 162,600
Manitowoc Company, Inc. ................... 15,450 502,125
-----------
5,637,532
-----------
Consumer Products and
Services: 0.15%
*Gibson Greetings, Inc. .................... 16,100 352,187
Russ Berrie & Co., Inc. ................... 18,800 493,500
-----------
845,687
-----------
Containers and Packaging: 0.12%
Ball Corp. ................................ 2,800 98,875
Vitro Sociedad Anonima, ADR ............... 42,800 559,075
-----------
657,950
-----------
Electrical Products: 1.15%
*AFC Cable Systems ......................... 5,900 175,525
*Genlyte Group Inc. ........................ 57,900 1,027,725
Kollmorgen Corp. .......................... 32,640 597,720
Kuhlman Corp. ............................. 27,300 1,068,112
*Plexus Corp. .............................. 45,800 681,275
*Powell Industries Inc. .................... 3,300 50,325
*Superior Telecom Inc. ..................... 21,600 746,550
Technitrol Inc. ........................... 39,900 1,197,000
Tecumseh Products Co., Class A ............ 20,100 979,875
-----------
6,524,107
-----------
Electronics: 2.70%
*Bel Fuse Inc. ............................. 28,700 548,887
*CHS Electronics Inc. ...................... 15,400 263,725
Cohu Inc. ................................. 7,800 238,875
CTS Corp. ................................. 86,400 2,759,400
Elron Electronic Industries Ltd. .......... 24,100 385,600
*Esterline Technologies Corp. .............. 43,200 1,555,200
*Hadco Corp. ............................... 53,400 2,416,350
*Inacom Inc. ............................... 16,700 468,644
MTS Systems Corp. ......................... 43,400 1,627,500
*Orbotech Ltd. ............................. 35,100 1,118,812
Philips Electronics N.V ................... 27,300 1,651,650
Raytheon Co., Class A ..................... 1,626 80,182
*Siliconix Inc. ............................ 18,300 786,900
Sony Corp., ADR ........................... 11,600 1,052,700
*VLSI Technology Inc. ...................... 13,000 307,125
*Zygo Corp. ................................ 1,700 31,875
-----------
15,293,425
-----------
Engineering: 0.21%
*Layne Christensen Co. ..................... 18,400 239,200
*Morrison Knudsen Corp. .................... 68,300 665,925
Stone & Webster Inc. ...................... 6,700 314,063
-----------
1,219,188
-----------
Entertainment: 0.05%
*Anchor Gaming Co. ......................... 4,600 256,450
-----------
Farm Equipment: 0.47%
AGCO Corp. ................................ 25,100 734,175
Deere & Co. ............................... 33,400 1,947,638
-----------
2,681,813
-----------
Finance: 4.19%
AMBAC Financial Group Inc. ................ 44,800 2,060,800
*Americredit Corp. ......................... 33,900 938,606
Apartment Investment & Management,
Class A ................................. 5,200 191,100
Cash America International Inc. ........... 33,600 434,700
*Contifinancial Corp. ...................... 9,900 249,356
Criimi Mae Inc. ........................... 16,500 247,500
Doral Financial Corp. ..................... 50,000 1,268,750
Dynex Capital Inc. ........................ 11,800 157,087
*Electro Rent Corp. ........................ 88,875 3,177,281
Equitable Companies Inc. .................. 65,600 3,263,600
Equity Inns Inc. .......................... 12,900 190,275
*Firstplus Financial Group ................. 26,400 1,013,100
HRE Properties Co. ........................ 695 13,683
*IMC Mortgage Co. .......................... 21,200 251,750
Imperial Credit Mortgage Holdings Inc. .... 27,300 487,988
Koger Equity Inc. ......................... 13,400 293,963
Liberty Financial Companies, Inc. ......... 40,500 1,528,875
LNR Property Corp. ........................ 9,700 229,162
McGrath Rentcorp .......................... 46,100 1,129,450
Money Store Inc. .......................... 12,300 258,300
Morgan Stanley, Dean Witter,
Discover & Co. .......................... 61,300 3,624,362
Parkway Properties Inc. ................... 6,000 205,875
Price Enterprises Inc. .................... 11,700 213,525
*PS Group Holdings Inc. .................... 38,075 475,937
Resource Bancshares Mortgage Group ........ 7,700 125,606
RFS Hotel Investors Inc. .................. 28,000 558,250
Thornburg Mortgage Asset Corp. ............ 49,400 815,100
United Companies Financial Corp. .......... 17,200 266,600
Urban Shopping Centers Inc. ............... 2,800 97,650
-----------
23,768,231
-----------
Food and Beverages: 0.63%
Adolph Coors Co., Class B ................. 41,100 1,366,575
Earthgrains Co. ........................... 13,000 611,000
Pepsi-Gemex S.A. de C.V., ADR ............. 28,700 414,356
Pilgrim's Pride Corp. ..................... 62,400 971,100
*Seaboard Corp. ............................ 300 132,000
*Seneca Foods Corp., Class B ............... 3,000 50,625
-----------
3,545,656
-----------
Forest and Paper Products: 0.33%
Asia Pulp & Paper Co. Ltd., ADR ........... 31,700 318,981
Rayonier Inc. ............................. 6,000 255,375
Wausau-Mosinee Paper Corp. ................ 64,008 1,288,161
-----------
1,862,517
-----------
Healthcare Facilities and
Products: 1.28%
*American Homepatient Inc. ................. 12,700 298,450
Beverly Enterprises, Inc. ................. 53,600 696,800
*Cooper Companies Inc. ..................... 85,700 3,502,988
*FPA Medical Management Inc. ............... 12,400 230,950
Integrated Health Services, Inc. .......... 52,317 1,631,636
*Pharmerica Inc. ........................... 24,393 253,077
*Universal Health Services, Inc., Class B .. 11,700 589,387
West Companies Inc. ....................... 1,500 44,625
-----------
7,247,913
-----------
19
<PAGE>
ZWEIG APPRECIATION FUND
================================================================================
Statement of Net Assets as of December 31, 1997 (continued)
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Homebuilding and Land
Development: 1.16%
Centex Corp. .............................. 34,300 $ 2,158,756
Continental Homes Holding Corp. ........... 36,600 1,473,150
*Crossmann Communities Inc. ................ 9,100 251,387
Del Webb Corp. ............................ 14,400 374,400
Kaufman & Broad Home Co. .................. 5,400 121,163
Lennar Corp. .............................. 30,603 659,877
Pulte Corp. ............................... 2,300 96,169
Ryland Group Inc. ......................... 6,000 141,000
Standard Pacific Corp. .................... 43,500 685,125
*Toll Brothers Inc. ........................ 18,100 484,175
*U.S. Home Corp. ........................... 7,529 145,874
-----------
6,591,076
-----------
Household Furnishings
and Products: 1.13%
Bush Industries Inc., Class A ............. 4,300 111,800
Ethan Allen Interiors Inc. ................ 60,000 2,313,750
*Furniture Brands International Inc. ....... 48,600 996,300
L.S. Starrett Co., Class A ................ 24,800 906,750
*Mohawk Industries Inc. .................... 7,500 164,531
Oneida Ltd. ............................... 64,050 1,709,334
*O'Sullivan Industries Holdings, Inc. ...... 21,400 214,000
-----------
6,416,465
-----------
Industrial Products, Services
and Machinery: 1.37%
Applied Power Inc., Class A ............... 17,600 1,214,400
Chart Industries Inc. ..................... 5,400 123,188
Cincinnati Milacron Inc. .................. 9,400 243,812
DT Industries, Inc. ....................... 7,400 251,600
Gleason Corp. ............................. 78,000 2,101,125
Ingersoll-Rand Co. ........................ 41,200 1,668,600
*Motivepower Industries Inc. ............... 63,600 1,478,700
NACCO Industries, Inc., Class A ........... 2,500 267,969
*Specialty Equipment Companies Inc. ........ 26,300 440,525
-----------
7,789,919
-----------
Insurance: 6.84%
ACE Ltd. .................................. 900 86,850
Alfa Corp. ................................ 500 8,625
*Alleghany Corp. ........................... 3,200 911,200
Allmerica Financial Corp. ................. 25,300 1,263,419
Allstate Corp. ............................ 18,700 1,699,362
American Annuity Group, Inc. .............. 75,500 1,661,000
American Bankers Insurance Group, Inc. .... 48,000 2,205,000
Capital Re Corp. .......................... 13,500 837,844
Chartwell Re Corp. ........................ 22,800 769,500
CIGNA Corp. ............................... 12,600 2,180,588
CMAC Investment Corp. ..................... 1,400 84,525
*CNA Financial Corp. ....................... 7,900 1,009,225
Conseco Inc. .............................. 76,948 3,496,325
*Delphi Financial Group, Inc., Class A ..... 28,458 1,280,610
Enhance Financial Services Group Inc. ..... 7,300 434,350
Everest Reinsurance Holdings Inc. ......... 2,500 103,125
EXEL Limited .............................. 12,000 760,500
FBL Financial Group Inc., Class A ......... 900 36,113
Fidelity National Financial, Inc. ......... 8,800 273,900
Financial Security Assurance Holdings Ltd.11,200 540,400
First American Financial Corp. ............ 1,500 110,813
Fremont General Corp. ..................... 39,700 2,173,575
Life Re Corp. ............................. 11,800 769,212
*Life USA Holding, Inc. .................... 37,900 639,562
Loews Corp. ............................... 16,400 1,740,450
*Markel Corp. .............................. 1,300 202,963
Medical Assurance Inc. .................... 12,508 351,787
NAC Re Corp. .............................. 9,500 463,719
*National Western Life
Insurance Co., Class A .................. 4,100 416,150
NYMAGIC, Inc. ............................. 25,926 714,585
Old Republic International Corp. .......... 110,750 4,118,516
Orion Capital Corp. ....................... 20,800 965,900
PartnerRe Ltd. ............................ 1,500 69,562
Presidential Life Corp. ................... 79,400 1,607,850
Reliance Group Holdings, Inc. ............. 46,400 655,400
RLI Corp. ................................. 24,000 1,195,500
Selective Insurance Group, Inc. ........... 36,200 977,400
State Auto Financial Corp. ................ 5,500 177,375
TIG Holdings Inc. ......................... 1,600 53,100
Tokio Marine & Fire
Insurance Ltd., ADR ..................... 4,400 254,100
Transatlantic Holdings Inc. ............... 17,850 1,276,275
USF&G Corp. ............................... 10,900 240,481
-----------
38,816,736
-----------
Investment Banking
and Brokerage: 3.73%
A.G. Edwards, Inc. ........................ 46,350 1,842,413
Bear, Stearns & Co. Inc. .................. 85,923 4,081,343
Donaldson, Lufkin & Jenrette, Inc. ........ 12,200 969,900
Interra Financial Inc. .................... 18,216 1,256,904
Investors Financial Group Inc. ............ 387 17,802
Jefferies Group, Inc. ..................... 94,800(a) 3,880,875
Lehman Brothers Holdings Inc. ............. 82,800 4,222,800
Merrill Lynch & Co., Inc. ................. 23,600 1,721,325
Morgan Keegan Inc. ........................ 3,800 96,187
PaineWebber Group Inc. .................... 52,500 1,814,531
Raymond James Financial Corp. ............. 22,545 894,755
Southwest Securities Group Inc. ........... 13,970 359,727
-----------
21,158,562
-----------
Investment Management: 0.00%
*Atalanta/Sosnoff Capital Corp. ............ 804 9,648
-----------
Manufacturing: 4.50%
*ACX Technologies, Inc. .................... 2,600 63,537
Aeroquip-Vickers Inc. ..................... 18,800 922,375
AptarGroup Inc. ........................... 4,200 233,100
Canadian Pacific Ltd. ..................... 126,200 3,438,950
Carlisle Companies Inc. ................... 6,300 269,325
Eaton Corp. ............................... 18,300 1,633,275
Hanson Plc., ADR .......................... 4,100 94,556
Johnson Controls Inc. ..................... 30,200 1,442,050
Koor Industries Ltd., ADR ................. 3,900 85,556
Lincoln Electric Co. ...................... 8,000 312,000
NOVA Corp. ................................ 15,500 148,219
Parker-Hannifin Corp. ..................... 39,500 1,812,063
Premark International Inc. ................ 25,800 748,200
Robbins & Myers Inc. ...................... 87,500 3,467,188
*SPS Technologies Inc. ..................... 53,600(a) 2,338,300
Thomas Industries Inc. .................... 49,590 979,403
Transtechnology Corp. ..................... 33,700 954,131
Tredegar Industries Inc. .................. 48,200(a) 3,175,175
Trinity Industries, Inc. .................. 34,500 1,539,562
United Technologies Corp. ................. 23,000 1,674,687
Valmont Industries Inc. ................... 6,600 128,700
Zurn Industries Inc. ...................... 2,100 66,019
-----------
25,526,371
-----------
Metal Fabrication: 2.57%
Ampco-Pittsburgh Corp. .................... 60,900 1,191,356
*Avondale Industries, Inc. ................. 71,300 2,116,719
Brush Wellman Inc. ........................ 6,500 159,250
*Encore Wire Corp. ......................... 26,500 813,219
Kaydon Corp. .............................. 18,200 593,775
*Maverick Tube Corp. ....................... 9,300 235,406
*Mueller Industries, Inc. .................. 55,300 3,262,700
Reliance Steel & Aluminum Co. ............. 26,700 794,325
RMI Titanium Co. .......................... 96,200 1,924,000
20
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Metal Fabrication: (continued)
*Shiloh Industries, Inc. ................... 40,500 $ 769,500
Timken Co. ................................ 79,400 2,729,375
-----------
14,589,625
-----------
Metals and Mining: 1.60%
Alcan Aluminium Ltd. ...................... 52,000 1,436,500
*Alumax Inc. ............................... 40,500 1,377,000
Aluminum Company of America ............... 23,400 1,646,775
Arch Coal Inc. ............................ 3,900 106,763
ASARCO Inc. ............................... 39,400 884,037
Cominco Ltd. .............................. 17,200 265,525
De Beers Consolidated
Mines Ltd., ADR ......................... 81,000 1,655,438
*MAXXAM Inc. ............................... 900 39,262
Minorco, ADR .............................. 19,700 329,975
Phelps Dodge Corp. ........................ 17,900 1,114,275
*Tremont Corp. ............................. 900 47,025
Vaal Reefs Exploring &
Mining Co., ADR ......................... 41,000 157,594
-----------
9,060,169
-----------
Oil and Gas: 10.15%
Ashland Inc. .............................. 22,900 1,229,444
BP Prudhoe Bay Royalty Trust Co. .......... 49,100 788,669
Cabot Oil & Gas Corp., Class A ............ 20,300 394,581
*Cliffs Drilling Co. ....................... 76,000 3,790,500
Coastal Corp. ............................. 56,000 3,468,500
Columbia Gas System, Inc. ................. 58,700 4,611,619
Devon Energy Corp. ........................ 29,400 1,131,900
Elf Aquitaine S.A., ADR ................... 51,300 3,007,463
Energen Corp. ............................. 4,700 186,825
Equitable Resources Inc. .................. 5,700 201,638
FINA, Inc, Class A ........................ 8,500 544,000
*Forest Oil Corp. .......................... 9,800 161,700
Helmerich & Payne, Inc. ................... 11,400 773,775
Imperial Oil Ltd. ......................... 21,500 1,374,656
Indiana Energy Inc. ....................... 5,900 194,331
Keyspan Energy Corp. ...................... 14,100 519,056
*Louis Dreyfus Natural Gas Corp. ........... 16,800 313,950
Lufkin Industries, Inc. ................... 26,800 958,100
*Marine Drilling Companies, Inc. ........... 18,300 379,725
Murphy Oil Corp ........................... 4,200 227,587
National Fuel Gas Co. ..................... 19,700 959,144
NICOR Inc. ................................ 9,600 405,000
NUI Corp. ................................. 19,400 556,538
Occidental Petroleum Corp. ................ 99,700 2,922,456
*Oceaneering International Co. ............. 7,600 150,100
*ONEOK Inc. ................................ 12,600 508,725
Pennzoil Co. .............................. 10,300 688,169
Peoples Energy Corp. ...................... 15,900 626,063
Petro-Canada Inc. ......................... 9,600 176,400
Phillips Petroleum Co. .................... 70,600 3,432,925
Piedmont Natural Gas Co. .................. 2,100 75,469
*Pool Energy Services Co. .................. 51,600 1,148,100
RPC Inc. .................................. 145,720 1,721,317
San Juan Basin Royalty Trust Co. .......... 9,300 86,025
*Santa Fe Energy Resources, Inc. ........... 23,100 259,875
*SEACOR Smit Inc. .......................... 13,000 783,250
*Seagull Energy Corp. ...................... 26,200 540,375
Snyder Oil Corp. .......................... 18,000 328,500
St. Mary Land & Exploration Co. ........... 17,900 626,500
Sun Company, Inc. ......................... 36,400(a) 1,531,075
Tidewater Inc. ............................ 16,300 898,538
Total S.A., ADR ........................... 46,400 2,575,200
*Tuboscope Vetco International Corp. ....... 39,000 938,438
USX-Marathon Group ........................ 100,700(a) 3,398,625
*Veritas DGC Inc. .......................... 83,255 3,288,573
Vintage Petroleum Inc. .................... 20,600 391,400
Washington Gas Light Co. .................. 11,600 358,875
*Weatherford Enterra, Inc. ................. 10,500 459,375
YPF Sociedad Anonima, ADR ................. 102,600(a) 3,507,638
-----------
57,600,687
-----------
Polution Control Equipment: 0.06%
Met-Pro Corp. ............................. 21,420 353,430
-----------
Printing and Forms: 0.75%
Bowne & Co., Inc. ......................... 33,500 1,335,813
*CSS Industries Inc. ....................... 900 28,687
*Mail-Well, Inc. ........................... 21,000 850,500
Merrill Corp. ............................. 51,200 1,190,400
Quebecor Inc., Class A .................... 46,800 839,475
-----------
4,244,875
-----------
Publishing: 0.14%
Value Line Inc. ........................... 19,900(a) 786,050
-----------
Railroads: 0.20%
Canadian National Railway Co. ............. 20,600 973,350
GATX Corp. ................................ 1,800 130,613
-----------
1,103,963
-----------
Recreational Products: 0.15%
Brunswick Corp. ........................... 24,600 745,688
Coachmen Industries, Inc. ................. 5,300 114,281
Score Board Inc. .......................... 786 589
-----------
860,558
-----------
Restaurants: 0.74%
Darden Restaurants Inc. ................... 19,600 245,000
*Foodmaker, Inc. ........................... 132,200 1,991,263
*Ryan's Family Steak Houses Inc. ........... 114,000 976,125
*Showbiz Pizza Time, Inc. .................. 42,000 966,000
-----------
4,178,388
-----------
Retail Trade: 4.78%
*Ames Department Stores Inc. ............... 60,200 1,053,500
Buckle Inc. ............................... 32,600 1,116,550
Burlington Coat Factory Warehouse Corp. ... 32,400 532,575
*Carson Pirie Scott & Co. .................. 13,900 696,738
*Central Garden & Pet Co. .................. 13,300 349,125
Dayton Hudson Corp. ....................... 45,400 3,064,500
*Dress Barn, Inc. .......................... 42,200 1,197,425
*Eagle Hardware & Garden Inc. .............. 41,700 807,938
*Fabri-Centers of America, Inc., Class A ... 41,000 914,813
*Federated Department Stores, Inc. ......... 75,900 3,268,444
Fingerhut Companies, Inc. ................. 40,000 855,000
*Footstar Inc. ............................. 8,800 236,500
*Fred Meyer Inc. ........................... 59,000 2,146,125
*Genesco Inc. .............................. 55,000 701,250
*Goody's Family Clothing Inc. .............. 33,900 921,656
Hughes Supply, Inc. ....................... 55,650 1,944,273
*K Mart Corp. .............................. 199,900 2,311,344
*Microage Inc. ............................. 24,500 369,031
*Officemax Inc. ............................ 18,800 267,900
*Renters Choice Inc. ....................... 9,400 192,700
Ross Stores Inc. .......................... 78,000 2,837,250
*Shopko Stores Inc. ........................ 36,500 793,875
*Trans World Entertainment Corp. ........... 13,700 265,437
*Wet Seal Inc., Class A .................... 8,500 250,750
*Zale Corp. ................................ 1,800 41,400
-----------
27,136,099
-----------
Savings and Loan
Associations: 3.59%
Albank Financial Corp. .................... 32,300 1,661,431
Astoria Financial Corp. ................... 7,100 395,825
Citfed Bancorp, Inc. ...................... 12,900 503,100
*Coast Savings Financial, Inc. ............. 14,900 1,021,581
Dime Bancorp, Inc. ........................ 45,600 1,379,400
21
<PAGE>
ZWEIG APPRECIATION FUND
================================================================================
Statement of Net Assets as of December 31, 1997 (continued)
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Savings and Loan
Associations (continued)
Downey Financial Corp. .................... 33,600 $ 955,500
*Firstfed Financial Corp. .................. 35,900 1,391,125
*Golden State Bancorp Inc. ................. 6,200 231,725
Golden West Financial Corp. ............... 24,300 2,376,844
H.F. Ahmanson & Co. ....................... 39,800 2,664,112
MAF Bancorp Inc. .......................... 31,550 1,116,081
New York Bancorp Inc. ..................... 22,400 889,000
Onbancorp Inc. ............................ 20,000 1,410,000
*PFF Bancorp Inc. .......................... 12,400 246,450
St. Paul Bancorp Inc. ..................... 2,650 69,563
TR Financial Corp. ........................ 89,100(a) 2,962,575
Trans Financial Inc. ...................... 28,200 1,096,275
-----------
20,370,587
-----------
Shipping: 0.40%
Alexander & Baldwin Inc. .................. 8,400 229,425
Oglebay Norton Co. ........................ 7,400 303,400
*OMI Corp. ................................. 48,600 446,513
Sea Containers Ltd., Class A .............. 2,400 76,800
Stolt-Nielsen Co. ......................... 58,400 1,237,350
-----------
2,293,488
-----------
Shoes: 0.07%
*Timberland Co., Class A ................... 4,200 243,862
*Vans, Inc. ................................ 5,000 75,625
Weyco Group Inc. .......................... 2,400 54,300
-----------
373,787
-----------
Steel: 2.51%
AK Steel Holding Corp. .................... 116,200 2,055,287
*ARMCO Inc. ................................ 82,800 408,825
*Bethlehem Steel Corp. ..................... 82,300 709,837
British Steel Plc, ADR .................... 87,800 1,882,213
Chaparral Steel Co. ....................... 28,800 444,600
Cleveland-Cliffs Inc. ..................... 13,900 636,794
Inland Steel Industries, Inc. ............. 28,200 482,925
*Lone Star Technologies, Inc. .............. 72,300 2,051,513
LTV Corp. ................................. 25,400 247,650
*National Steel Corp., Class B ............. 16,500 190,781
Oregon Steel Mills, Inc. .................. 28,700 611,669
*Pohang Iron & Steel Co., ADR .............. 94,200 1,642,613
Quanex Corp. .............................. 1,300 36,563
Roanoke Electric Steel Corp. .............. 43,800 1,166,175
Texas Industries, Inc. .................... 7,800 351,000
USX-U.S. Steel Group ...................... 42,700(a) 1,334,375
-----------
14,252,820
-----------
Supermarket Chains: 0.22%
Great Atlantic & Pacific Tea
Company, Inc. ........................... 36,000 1,068,750
Supervalu Inc. ............................ 3,800 159,125
-----------
1,227,875
-----------
Telecommunications: 1.08%
*Atlantic Tele-Network, Inc. ............... 41,800 454,575
Compania de Telecom Chile., ADR ........... 35,600 1,063,550
Philippine Long Distance Tele. Co., ADR ... 10,100 227,250
Portugal Telecommunications S.A., ADR ..... 14,900 700,300
Tele Danmark A.S., ADR .................... 88,900 2,739,231
Telefonica De Argentina, ADR .............. 7,100 264,475
Telefonica de Espana, SA, ADR ............. 7,200 655,650
-----------
6,105,031
-----------
Tobacco: 0.97%
Dimon Inc. ................................ 11,800 309,750
RJR Nabisco Holdings Corp. ................ 92,100 3,453,750
Universal Corp. ........................... 41,900 1,723,137
-----------
5,486,637
-----------
Transportation: 0.04%
*Greyhound Lines Inc. ...................... 58,200 214,612
-----------
Trucking: 1.85%
Cummins Engine Co. ........................ 14,400 850,500
*Gardner Denver Machinery Inc. ............. 145,800(a) 3,690,563
*Navistar Internationl Corp. ............... 14,800 367,225
New Holland N. V .......................... 9,500 251,156
PACCAR Inc. ............................... 16,900 887,250
Roadway Express, Inc. ..................... 44,800 991,200
*Terex Corp. ............................... 53,700 1,261,950
USFreightways Corp. ....................... 27,800 903,500
Werner Enterprises Inc. ................... 2,400 49,200
*Yellow Corp. .............................. 49,800 1,251,225
-----------
10,503,769
-----------
Utilities: 8.34%
Atlantic Energy Inc. ...................... 54,100 1,146,244
Baltimore Gas & Electric Co. .............. 8,000 272,500
Black Hills Corp. ......................... 600 21,150
Boston Edison Co. ......................... 54,500 2,064,188
California Water Service Co. .............. 15,400 909,562
Carolina Power & Light Co. ................ 32,000 1,358,000
Chilgener S.A., ADR ....................... 9,900 242,550
CMS Energy Corp. .......................... 38,600 1,700,813
Consolidated Edison Co.
of New York, Inc. ....................... 41,900 1,717,900
Dominion Resources Inc. ................... 41,200 1,753,575
DQE Inc. .................................. 10,200 358,275
Edison International ...................... 127,700 3,471,844
Empresa Nacional de
Electricidad (Chile)., ADR .............. 95,300 1,685,619
Enersis S.A., ADR ......................... 6,000 174,000
FPL Group Inc. ............................ 58,700 3,474,306
GPU, Inc. ................................. 45,800 1,929,325
IES Industries Inc. ....................... 4,500 165,656
IPALCO Enterprises, Inc. .................. 37,400 1,568,462
Long Island Lighting Co. .................. 26,600 801,325
MidAmerican Energy Holdings Inc. .......... 34,600 761,200
Minnesota Power & Light Co. ............... 13,000 566,312
Montana Power Co. ......................... 33,200 1,056,175
New England Electric System ............... 26,700 1,141,425
New York State Electric & Gas Corp. ....... 61,700 2,190,350
PECO Energy Co. ........................... 68,400 1,658,700
Pinnacle West Capital Corp. ............... 84,700 3,589,163
Powergen Plc, ADR ......................... 2,900 154,063
PP&L Resources, Inc. ...................... 20,000 478,750
Public Service Co.of New Mexico ........... 23,100 547,181
Public Service Enterprise Group Inc. ...... 52,000 1,647,750
Rochester Gas & Electric Co. .............. 38,400 1,305,600
Sierra Pacific Resources Inc. ............. 17,900 671,250
Sigcorp Inc. .............................. 2,100 61,687
Texas Utilities Co. ....................... 83,100 3,453,844
TNP Enterprises Inc. ...................... 5,100 169,575
UtiliCorp United Inc. ..................... 46,000(a) 1,785,375
Westcoast Energy Inc. ..................... 53,300 1,225,900
-----------
47,279,594
-----------
Waste Management: 0.01%
*Thermo Ecotek Corp. ....................... 4,200 76,650
-----------
Wholesale Distributors: 0.62%
*PEC Israel Economic Corp. ................. 44,100 953,662
*United Stationers Inc. .................... 50,300 2,420,688
*VWR Scientific Products Corp. ............. 4,400 124,300
-----------
3,498,650
-----------
Total Common Stocks
(Cost $394,716,871) ..................... 543,787,064
-----------
22
<PAGE>
================================================================================
Principal Amount
or Number Value
of Contracts (Note 2)
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS: 2.29%
Federal Home Loan Mortgage Corp.,
Discount Notes: 0.88%
5.54%, 1/23/98 ........................ $ 5,000,000 $ 4,982,561
-----------
United States Treasury Bills: 1.41%
4.87%, 1/8/98 .......................... 1,000,000(a) 998,893
5.13%, 1/22/98 ......................... 1,000,000(a) 996,980
5.18%, 1/22/98 ......................... 2,000,000(a) 1,993,814
5.1925%, 1/22/98 ....................... 1,000,000(a) 996,980
5.20%, 1/22/98 ......................... 2,000,000(a) 1,993,959
5.26%, 1/22/98 ......................... 1,000,000(a) 996,979
-----------
7,977,605
-----------
Total Short-Term Obligations
(Cost $12,960,926) ....................... 12,960,166
-----------
REPURCHASE AGREEMENTS: 1.32 %
With Morgan Stanley & Co., Inc.,
(dated 12/31/97), 6.76%, due 1/2/98
(Repurchase proceeds $5,490,061) ;
collateralized by: $5,586,395
Federal National Mortgage
Association Bonds, 6.493%, 11/1/2027
(Market value $5,637,342) ................ 5,488,000 5,488,000
With Prudential Securities Inc.,
(dated 12/31/97), 6.65%, due 1/2/98
(Repurchase proceeds $2,000,739);
collateralized by: $2,040,490
Federal Home Loan Mortgage Corp. .........
Bonds, 6.191%, 10/1/2024
(Market value $2,040,000) ................ 2,000,000 2,000,000
-----------
Total Repurchase Agreements
(Cost $7,488,000) ......................................... 7,488,000
-----------
Total Investments in Securities
(Cost $415,165,797) ....................................... 564,235,230
-----------
Net Unrealized Appreciation on
Futures Contracts: 0.03 %
Standard & Poor's 500 March 1998
long futures (b) ......................... 96 158,844
------------
Total Investments
(Cost $415,165,797) ...................... 99.50% 564,394,074
Other Assets ............................... 0.71 4,054,225
----------- ------------
Total Assets ............................. 100.21% 568,448,299
Total Liabilities (Note 5) ............... (0.21) (1,198,070)
----------- ------------
Net Assets (Note 6) ........................ 100.00% $567,250,229
=========== ============
Class A Shares
Net asset value ("NAV") and redemption price per share
($293,808,883/16,080,523 shares) .......................... $18.27
======
Maximum public offering price per share -
NAV/(1- maximum sales charge) ($18.27/.945) .............. $19.33
======
Class B Shares
Net asset value and offering price per share
($22,122,386/1,220,305 shares) ............................ $18.13
======
Redemption price per share .................................. **
======
Class C Shares
Net asset value and offering price per share
($248,583,963/13,735,466 shares) .......................... $18.10
======
Redemption price per share .................................. **
======
Class I Shares
Net asset value, offering and redemption price per share
($2,734,997/148,153 shares) ............................... $18.46
======
- --------------------------------------------------------------------------------
* Non-income producing security.
** Varies by length of time shares are held. (Note 3b)
(a) Pledged as collateral for futures transactions.
(b) The market value of the long futures was $23,498,400 (representing 4.14% of
the Fund's net assets) with a cost of $23,339,556.
For Federal income tax purposes, the tax basis of investments owned at December
31, 1997 was $415,521,756 and net unrealized appreciation on investments
consisted of:
Gross unrealized appreciation ......................... $ 156,108,434
Gross unrealized depreciation ......................... (7,236,116)
-------------
Net unrealized appreciation ........................... $ 148,872,318
=============
See notes to financial statements.
23
<PAGE>
ZWEIG MANAGED ASSETS
================================================================================
Statement of Net Assets as of December 31, 1997
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS: 50.57%
UNITED STATES: 28.18%
Airfreight: 0.15%
CNF Transportation Inc. ....................... 21,000 $ 805,875
------------
Airlines: 0.09%
*AMR Corp. ..................................... 4,000 514,000
------------
Aparrel and Textiles: 0.10%
Spring Industries Inc., Class A ............... 10,000 520,000
------------
Automobiles: 1.36%
Chrysler Corp. ................................ 102,000 3,589,125
Ford Motor Co. ................................ 27,000 1,314,563
General Motors Corp. .......................... 40,000 2,425,000
------------
7,328,688
------------
Banks: 2.30%
Bankers Trust New York Corp. .................. 42,000 4,722,375
Fleet Financial Group Inc. .................... 34,000 2,547,875
PNC Bank Corp. ................................ 90,000 5,135,625
------------
12,405,875
------------
Biotechnology: 0.09%
*Biogen Inc. ................................... 13,000 472,875
------------
Broadcasting: 0.68%
CBS Corp. ..................................... 73,326 2,158,534
*Viacom Inc., Class B .......................... 36,000 1,491,750
------------
3,650,284
------------
Building Materials and
Products: 0.72%
Armstrong World Industries, Inc. .............. 32,000 2,392,000
Lafarge Corp. ................................. 50,000 1,478,125
------------
3,870,125
------------
Chemicals: 1.19%
Dow Chemical Co. .............................. 22,000 2,233,000
Ethyl Corp. ................................... 140,000 1,076,250
Olin Corp. .................................... 66,000 3,093,750
------------
6,403,000
------------
Computers and Software: 1.21%
Adobe Systems Inc. ............................ 49,000 2,021,250
Compaq Computer Corp. ......................... 42,000 2,370,375
*Gateway 2000 Inc. ............................. 20,000 652,500
International Business Machines Corp. ......... 14,000 1,463,875
------------
6,508,000
------------
Conglomerates: 0.55%
ITT Industries Inc. ........................... 29,000 909,875
National Service Industries, Inc. ............. 42,000 2,081,625
------------
2,991,500
------------
Consumer Products and
Services: 0.97%
Colgate-Palmolive Co. ......................... 51,000 3,748,500
Kimberly-Clark Corp. .......................... 13,000 641,063
Ralston Purina Co. ............................ 9,000 836,437
------------
5,226,000
------------
Electrical Equipment: 0.29%
Cooper Industries Inc. ........................ 32,000 1,568,000
------------
Electronics: 1.45%
*Atmel Corp. ................................... 55,000 1,020,938
*Computer Sciences Corp. ....................... 9,000 751,500
General Motors Corp., Class H ................. 24,000 886,500
Harris Corp. .................................. 36,000 1,651,500
Intel Corp. ................................... 10,000 702,500
*Litton Industries Inc. ........................ 13,000 747,500
Raytheon Co., Class A ......................... 16,047 791,318
*SGS Thomson Microelectronics Corp. ............ 21,000 1,282,312
------------
7,834,068
------------
Engineering: 0.15%
Harnischfeger Industries Inc. ................. 23,000 812,188
------------
Entertainment: 0.67%
Gaylord Entertainment Inc., Class A ........... 40,333 1,288,135
*King World Productions Inc. ................... 40,000 2,310,000
------------
3,598,135
------------
Finance: 1.38%
Beneficial Corp. .............................. 19,000 1,579,375
Federal National Mortgage Association ......... 66,000 3,766,125
Green Tree Financial Corp. .................... 11,500 301,156
Transamerica Corp. ............................ 17,000 1,810,500
------------
7,457,156
------------
Food and Beverages: 0.32%
Adolph Coors Co., Class B ..................... 15,000 498,750
IBP Inc. ...................................... 60,000 1,256,250
------------
1,755,000
------------
Hospitals and Healthcare: 0.22%
Manor Care Inc. ............................... 34,000 1,190,000
------------
Household Products: 0.21%
Black & Decker Corp. .......................... 9,000 351,563
Newell Co. .................................... 12,900 548,250
Tupperware Corp. .............................. 8,000 223,000
------------
1,122,813
------------
Industrial Products, Services and
Machinery: 0.16%
NACCO Industries Inc., Class A ................ 8,000 857,500
------------
Insurance: 1.30%
AFLAC Inc. .................................... 26,000 1,329,250
*Alleghany Corp. ............................... 1,600 455,600
CIGNA Corp. ................................... 13,700 2,370,956
*CNA Financial Corp. ........................... 10,000 1,277,500
EXEL Limited .................................. 25,000 1,584,375
------------
7,017,681
------------
Investment Banking and
Brokerage: 0.27%
PaineWebber Group Inc. ........................ 42,000 1,451,625
------------
Manufacturing: 0.10%
Trinity Industries, Inc. ...................... 12,000 535,500
------------
Medical Technology: 0.27%
Bausch & Lomb Inc. ............................ 20,000 792,500
*Boston Scientific Corp. ....................... 15,000 688,125
------------
1,480,625
------------
Metals and Mining: 0.22%
Aluminum Company of America ................... 6,000 422,250
ASARCO Inc. ................................... 19,000 426,312
Homestake Mining Co. .......................... 36,000 319,500
------------
1,168,062
------------
Natural Gas: 0.26%
Consolidated Natural Gas Co. .................. 17,000 1,028,500
Peoples Energy Corp. .......................... 9,000 354,375
------------
1,382,875
------------
Office Automation and
Equipment: 0.12%
Xerox Corp. ................................... 9,000 664,312
------------
Oil and Gas: 2.19%
Amerada Hess Corp. ............................ 55,000 3,018,125
Ashland Inc. .................................. 66,000 3,543,375
Coastal Corp. ................................. 13,000 805,188
Dresser Industries Inc. ....................... 23,000 964,562
Phillips Petroleum Co. ........................ 52,000 2,528,500
Texaco Inc. ................................... 10,000 543,750
Union Texas Petroleum Holdings Inc. ........... 19,000 395,437
------------
11,798,937
------------
24
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Pharmaceuticals: 1.29%
Allergan Inc. ................................. 66,000 $ 2,215,125
Merck & Co., Inc. ............................. 15,000 1,593,750
Pfizer Inc. ................................... 23,000 1,714,938
Schering-Plough Inc. .......................... 22,600 1,404,025
------------
6,927,838
------------
Printing and Publishing: 0.54%
Knight-Ridder Inc. ............................ 6,000 312,000
McGraw-Hill Cos ............................... 35,000 2,590,000
------------
2,902,000
------------
Railroads: 0.17%
Burlington Northern Santa Fe Inc. ............. 10,000 929,375
------------
Restaurants: 0.52%
*Brinker International Inc. .................... 23,000 368,000
Darden Restaurants Inc. ....................... 150,000 1,875,000
Host Marriot Corp. ............................ 30,000 588,750
------------
2,831,750
------------
Retail Trade: 1.47%
*Federated Department Stores Inc. .............. 34,000 1,464,125
*K Mart Corp. .................................. 133,000 1,537,813
Sears Roebuck & Co. ........................... 37,000 1,674,250
Supervalu Inc. ................................ 27,000 1,130,625
TJX Companies Inc. ............................ 33,000 1,134,375
*Toys "R" Us Inc. .............................. 32,000 1,006,000
------------
7,947,188
------------
Steel: 0.13%
USX-U.S. Steel Group Inc. ..................... 22,000 687,500
------------
Telecommunications: 3.10%
*Airtouch Communications Corp. ................. 17,000 706,562
AT&T Corp. .................................... 70,000 4,287,500
Bell Atlantic Corp. ........................... 15,360 1,397,760
Frontier Corp. ................................ 38,000 914,375
Lucent Technologies Inc. ...................... 13,000 1,038,375
MCI Communications Corp. ...................... 82,000 3,510,625
*Tele Communications Inc., Class A ............. 83,000 2,318,812
*United States Cellular Corp. .................. 38,100 1,181,100
U S West Communications Group Inc. ............ 30,000 1,353,750
------------
16,708,859
------------
Tobacco: 0.28%
RJR Nabisco Holdings Corp. .................... 41,000 1,537,500
------------
Utilities: 1.69%
Cinergy Corp. ................................. 32,000 1,226,000
*FirstEnergy Corp. ............................. 122,000 3,538,000
Unicom Corp. .................................. 73,000 2,244,750
UtiliCorp United Inc. ......................... 54,000 2,095,875
------------
9,104,625
------------
Total United States
(Cost $130,144,264) ......................................... 151,967,334
------------
FOREIGN STOCKS: 22.39%
Belgium: 1.02%
Banks: 0.23%
Generale de Banque ............................. 1,700 739,881
KredietBank NV ................................. 1,200 503,645
------------
1,243,526
------------
Chemicals: 0.09%
Solvay SA, Class A ............................. 7,500 471,661
------------
Conglomerates: 0.09%
Groupe Bruxelles Lambert ....................... 3,400 491,877
------------
Energy: 0.15%
Petrofina SA ................................... 2,200 812,013
------------
Insurance: 0.24%
Fortis AG ...................................... 4,200 876,278
Royale Belge ................................... 1,500 427,127
------------
1,303,405
------------
Utilities: 0.22%
Electrabel SA .................................. 5,100 1,179,679
------------
Total Belgium .................................................. 5,502,161
------------
Denmark: 1.10%
Banks: 0.26%
Den Danske Bank ................................ 8,300 1,106,714
Unidanmark AS, Class A ......................... 3,900 286,496
------------
1,393,210
------------
Conglomerates: 0.12%
Sophus Berendsen, Class B ...................... 3,800 627,117
------------
Food and Beverages: 0.05%
Carlsberg, Class A ............................. 5,000 268,723
------------
Hospital and Healthcare: 0.23%
Novo-Nordisk AS, Class B ....................... 8,600 1,230,866
------------
Telecommunications: 0.14%
Tele Danmark AS, Class B ....................... 12,600 782,070
------------
Transportation: 0.30%
D/S 1912, Class B .............................. 18 830,703
D/S Svendborg, Class B ......................... 12 788,642
------------
1,619,345
------------
Total Denmark .................................................. 5,921,331
------------
Finland: 0.88%
Banks: 0.10%
*Merita Ltd., Class A .......................... 98,200 537,392
------------
Conglomerates: 0.04%
Metra OY, Class B ............................. 10,200 239,758
------------
Electronics: 0.44%
Nokia AB, Class A ............................. 33,500 2,380,780
------------
Food and Beverages: 0.05%
Cultor OY 1 ................................... 4,700 255,478
------------
Forest and Paper Products: 0.15%
*UPM-Kymmen OY ................................. 39,100 782,649
------------
Insurance: 0.06%
Sampo Insurance Co., Class A .................. 9,300 302,287
------------
Metals and Mining: 0.04%
Outokumpu OY, Class A ......................... 18,800 229,585
------------
Total Finland ................................................. 4,727,929
------------
France: 3.12%
Banks: 0.29%
Banque Nationale De Paris ..................... 15,300 813,594
Societe Generale Paris ........................ 5,550 756,500
------------
1,570,094
------------
Chemicals: 0.15%
Air Liquide Co. ............................... 5,250 822,077
------------
Consumer Products and
Services: 0.81%
Cie Generale Des Eaux ......................... 10,100 1,410,272
L'oreal Co. ................................... 6,650 2,603,243
*Promodes ...................................... 800 332,055
------------
4,345,570
------------
Electronics: 0.24%
Alcatel Alsthom ............................... 7,500 953,729
*Schneider SA .................................. 6,250 339,519
------------
1,293,248
------------
25
<PAGE>
ZWEIG MANAGED ASSETS
================================================================================
Statement of Net Assets as of December 31, 1997 (continued)
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Food and Beverages: 0.11%
LVMH Moet Hennessy ............................ 3,550 $ 589,517
------------
Insurance: 0.36%
AXA UAP ....................................... 24,650 1,908,206
------------
Oil and Gas: 0.24%
Societe Nationale Elf Aquitaine ............... 11,300 1,314,857
------------
Real Estate: 0.08%
Simco ......................................... 6,600 444,325
------------
Retail Trade: 0.42%
Carrefour ..................................... 2,650 1,383,177
Cie De St. Gobain ............................. 6,150 874,064
------------
2,257,241
------------
Telecommunications: 0.29%
*France Telecom SA ............................. 43,400 1,574,873
------------
Utilities: 0.13%
Total SA, Class B ............................. 6,650 724,044
------------
Total France .................................................. 16,844,052
------------
Germany: 3.81%
Automobiles: 0.51%
Daimler-Benz AG ............................... 22,000 1,544,123
Volkswagen AG ................................. 2,200 1,238,235
------------
2,782,358
------------
Banks: 0.86%
*Bayerische Hypotheken ......................... 26,800 1,308,667
Deutsche Bank AG .............................. 26,200 1,850,568
Dresdner Bank AG .............................. 32,400 1,495,626
------------
4,654,861
------------
Chemicals: 0.62%
Bayer AG ...................................... 48,650 1,818,244
Hoechst AG .................................... 43,900 1,538,172
------------
3,356,416
------------
Conglomerates: 0.13%
Viag AG ....................................... 1,300 700,595
------------
Consumer Products and
Services: 0.05%
Karstadt AG ................................... 750 256,154
------------
Electronics: 0.35%
Siemens AG .................................... 32,100 1,901,317
------------
Insurance: 0.53%
Allianz AG Holding ............................ 11,000 2,838,642
------------
Machinery and Equipment: 0.43%
Mannesmann AG ................................. 4,550 2,300,251
------------
Telecommunications: 0.05%
Deutsche Telekom AG ........................... 15,000 277,802
------------
Utilities: 0.28%
RWE AG ........................................ 27,700 1,486,644
------------
Total Germany ................................................. 20,555,040
------------
Italy: 2.46%
Apparel and Textiles: 0.05%
Benetton Group SPA ............................. 17,160 280,986
------------
Automobiles: 0.19%
Fiat SPA ....................................... 273,900 797,069
Fiat SPA Priv .................................. 161,700 246,941
------------
1,044,010
------------
Banks: 0.36%
Credito Italiano SPA ........................... 345,000 1,064,468
Istituto Banc San Paolo SPA .................... 55,500 530,516
Mediobanca SPA ................................. 45,500 357,464
------------
1,952,448
------------
Broadcasting: 0.09%
Mediaset SPA ................................... 93,500 459,568
------------
Building Materials and
Products: 0.05%
Sirti SPA ...................................... 39,500 239,056
------------
Conglomerates: 0.03%
Snia BPD ....................................... 170,000 175,000
------------
Energy: 0.56%
Eni SPA ........................................ 534,000 3,029,429
------------
Industrial Products, Services and
Machinery: 0.10%
Pirelli SPA .................................... 205,000 548,446
------------
Insurance: 0.35%
Assicurazioni Generali SPA ..................... 68,000 1,671,157
Ras Riun Adriat Di Sicurt SPA .................. 23,000 225,708
------------
1,896,865
------------
Telecommunications: 0.63%
Telecom Italia Mobile SPA ...................... 397,500 1,835,743
Telecom Italia SPA ............................. 238,888 1,526,833
------------
3,362,576
------------
Utilities: 0.05%
Edison SPA ..................................... 45,000 272,342
------------
Total Italy .................................................... 13,260,726
------------
Mexico: 1.00%
Broadcasting: 0.08%
*Grupo Televisa SA ............................. 21,000 408,705
------------
Building Materials and
Products: 0.08%
Cemex SA, Class A ............................. 93,000 421,636
------------
Conglomerates: 0.19%
Alfa SA, Class A .............................. 53,000 358,952
Fomento Economico De Mexico SA,
Class B ..................................... 33,000 263,613
Grupo Carso SA ................................ 61,000 406,323
------------
1,028,888
------------
Consumer Products and Services: 0.08%
Kimberly Clark De Mexico SA ................... 93,000 440,671
------------
Food and Beverages: 0.15%
Grupo Industrial Bimbo SA ..................... 32,000 303,654
Grupo Modelo SA ............................... 58,000 488,501
------------
792,155
------------
Metals and Mining: 0.04%
Grupo Mexico SA ............................... 61,000 223,970
------------
Retail Trade: 0.13%
*Cifra SA, Class V ............................. 295,000 724,527
------------
Telecommunications: 0.25%
Telefonos De Mexico SA ........................ 67,000 188,655
Telefonos De Mexico SA, Class L ............... 413,000 1,165,464
------------
1,354,119
------------
Total Mexico .................................................. 5,394,671
------------
Netherlands: 1.01%
Banks: 0.08%
ABN Amro Holding NV ............................ 23,200 452,046
------------
Broadcasting: 0.06%
Elsevier NV .................................... 20,400 330,067
------------
Chemicals: 0.06%
Akzo NV ........................................ 2,000 344,905
------------
Electronics: 0.07%
Philips Electronics NV ......................... 5,900 353,902
------------
26
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Energy: 0.38%
Royal Dutch Petroleum NV ....................... 36,900 $ 2,025,905
------------
Finance: 0.11%
ING Groep NV ................................... 14,100 593,984
------------
Food and Beverages: 0.12%
Unilever NV .................................... 10,900 672,100
------------
Retail Trade: 0.05%
Ahold NV ....................................... 9,500 247,900
------------
Telecommunications: 0.07%
Kon. Ptt. Nederland NV ......................... 9,200 383,933
------------
Transportation: 0.01%
IHC Caland NV .................................. 1,000 51,894
------------
Total Netherlands .............................................. 5,456,636
------------
Norway: 0.98%
Banks: 0.10%
Christiana Bank Kreditkasse ASA ............... 129,700 524,276
------------
Conglomerates: 0.16%
Aker RGI ASA .................................. 11,800 212,881
Orkla ASA, Class A ............................ 7,600 654,622
------------
867,503
------------
Energy: 0.47%
Norsk Hydro ASA ............................... 43,600 2,126,126
*Petroleum GEO Services ASA .................... 6,100 384,757
------------
2,510,883
------------
Engineering: 0.07%
Kvearner ASA .................................. 7,900 402,920
------------
Insurance: 0.07%
*Storebrand ASA ................................ 55,800 393,587
------------
Transportation: 0.11%
Bergesen DY ASA, Class A ...................... 25,000 590,055
------------
Total Norway .................................................. 5,289,224
------------
Spain: 3.32%
Banks: 1.28%
*Argentaria SA ................................. 18,600 1,131,264
Banco Bilbao Vizcaya SA ....................... 71,100 2,299,787
Banco Central Hispano SA ...................... 37,600 915,236
Banco De Santander SA ......................... 51,300 1,713,193
*Banco Espanol Credito SA ...................... 85,100 837,514
------------
6,896,994
------------
Business Services: 0.07%
Autopistas Cesa Co. SA ........................ 28,400 381,051
------------
Energy: 0.25%
Repsol Petroleo SA ............................ 31,300 1,334,839
------------
Engineering: 0.06%
Dragados & Construcciones SA .................. 15,100 321,487
------------
Finance: 0.06%
Corporacion Financiera SA ..................... 2,900 305,383
------------
Homebuilders: 0.07%
Fomento De Construcion SA ..................... 10,400 395,760
------------
Insurance: 0.04%
Mapfre SA ..................................... 8,400 222,655
------------
Retail Trade: 0.06%
*Centros Com. Pryca SA ......................... 23,100 344,040
------------
Steel: 0.06%
Acerinox SA ................................... 2,000 296,164
------------
Telecommunications: 0.48%
Telefonica De Espana SA ....................... 90,800 2,591,470
------------
Tobacco: 0.06%
Tabacalera SA, Class A ........................ 4,100 332,217
------------
Utilities: 0.83%
Empresa Nacionale de Electricidad SA .......... 108,000 1,916,735
General De Aguas de Barcelona SA .............. 6,800 280,182
Iberdrola SA .................................. 130,300 1,714,075
Sevillana De Electricidad SA .................. 28,300 264,589
Union Electrica Fenosa SA ..................... 30,000 287,373
------------
4,462,954
------------
Total Spain ................................................... 17,885,014
------------
Switzerland: 1.08%
Banks: 0.23%
Credit Suisse Group ............................ 3,300 511,329
Swiss Bank Corp. ............................... 1,070 333,057
Union Bank of Switzerland, Class B ............. 280 405,444
------------
1,249,830
------------
Business Services: 0.02%
Adecco SA ...................................... 370 107,432
------------
Food and Beverages: 0.15%
Nestle SA ...................................... 520 780,418
------------
Hospital and Healthcare: 0.51%
Novartis AG .................................... 850 1,381,165
Roche Holding AG ............................... 100 994,480
Roche Holding AG-Bearer ........................ 23 354,804
------------
2,730,449
------------
Insurance: 0.13%
Schweiz Ruckversiche ........................... 200 374,618
Zurich Insurance Vers .......................... 710 338,802
------------
713,420
------------
Machinery and Equipment: 0.04%
ABB AG Baden ................................... 190 239,039
------------
Total Switzerland .............................................. 5,820,588
------------
United Kingdom: 2.61%
Banks: 0.49%
Abbey National Plc ............................. 33,500 578,219
HSBC Holdings .................................. 26,200 649,230
HSBC Holdings, Class A ......................... 17,500 452,362
National Westminster Bank Plc .................. 46,800 777,364
Royal Bank of Scotland ......................... 12,772 163,497
------------
2,620,672
------------
Broadcasting: 0.08%
Reed International Corp. ....................... 43,600 425,057
------------
Building Materials and
Products: 0.06%
RMC Group Inc. ................................. 8,500 119,999
Williams Holdings Co. .......................... 37,514 207,398
------------
327,397
------------
Chemicals: 0.08%
BOC Group ...................................... 16,077 266,251
Imperial Chemical Industries Inc. .............. 11,200 173,228
------------
439,479
------------
Conglomerates: 0.07%
Hanson Plc ..................................... 10,121 45,380
Siebe Plc ...................................... 11,300 211,961
TI Group ....................................... 17,900 137,250
------------
394,591
------------
27
<PAGE>
ZWEIG MANAGED ASSETS
================================================================================
Statement of Net Assets as of December 31, 1997 (continued)
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Consumer Products and
Services: 0.32%
BAA Plc ........................................ 13,400 $ 107,486
Caradon Plc .................................... 11,340 33,493
De La Rue Plc .................................. 4,600 29,973
Glaxo Holdings Plc ............................. 40,600 960,632
SmithKline Beecham, Class A .................... 42,422 436,607
Tomkins Corp. .................................. 31,400 146,730
------------
1,714,921
------------
Finance: 0.02%
Mercury Asset Management ....................... 3,600 100,580
------------
Food and Beverages: 0.46%
Allied Domecq Plc .............................. 24,500 221,718
Bass Plc ....................................... 21,408 329,704
BAT Industries Inc. ............................ 47,500 433,378
Cadbury Schweppes Inc. ......................... 86,200 858,094
Unilever Plc ................................... 62,800 538,873
United Biscuits Corp. .......................... 33,200 122,365
------------
2,504,132
------------
Insurance: 0.16%
Prudential Corp. ............................... 41,700 484,753
Royal & Sun Alliance Insurance Co. ............. 37,900 380,401
------------
865,154
------------
Oil and Gas: 0.31%
British Petroleum Plc .......................... 61,600 811,361
Shell Transport ................................ 120,000 871,734
------------
1,683,095
------------
Retail Trade: 0.29%
Boots Co. ...................................... 26,764 388,852
Great Universal Stores Inc. .................... 15,800 194,980
Marks & Spencer Corp. .......................... 57,500 566,718
Sears Plc ...................................... 52,700 45,524
Tesco Corp. .................................... 47,600 383,774
------------
1,579,848
------------
Telecommunications: 0.19%
British Telecommunications Corp. ............... 94,100 742,808
Cable & Wireless Plc ........................... 30,200 265,599
------------
1,008,407
------------
Tobacco: 0.01%
Imperial Tobacco Group Plc ..................... 8,097 51,160
------------
Tourism: 0.03%
Ladbroke Group ................................. 18,800 81,665
Rank Group Plc ................................. 10,000 57,383
------------
139,048
------------
Utilities: 0.04%
Energy Group Plc ............................... 8,097 89,862
National Power Corp. ........................... 13,500 133,833
------------
223,695
------------
Total United Kingdom ........................................... 14,077,236
------------
Total Foreign Stocks
(Cost $101,569,516) .......................................... 120,734,608
------------
Total Common Stocks
(Cost $231,713,780) .......................................... 272,701,942
------------
Principal
Amount
--------
BONDS: 37.31%
UNITED STATES GOVERNMENT OBLIGATIONS: 19.20%
United States Treasury Bonds: 6.10%
10.75%, 5/15/2003 .......................... $ 7,000,000 8,596,882
7.25%, 8/15/2022 ........................... 13,500,000 15,596,726
7.50%, 11/15/2024 .......................... 7,300,000 8,732,632
------------
32,926,240
------------
United States Treasury
Notes: 13.10%
6.25%, 8/31/2000 ........................... 10,400,000 10,539,755
7.50%, 2/15/2005 ........................... 7,100,000 7,803,347
6.50%, 5/15/2005 ........................... 5,400,000 5,631,190
6.875%, 5/15/2006 .......................... 19,900,000 21,305,458
6.50%, 10/15/2006 .......................... 24,200,000 25,349,524
------------
70,629,274
------------
Total United States Government Obligations
(Cost $100,107,563) .......................................... 103,555,514
------------
FOREIGN GOVERNMENT
OBLIGATIONS: 18.11%
Denmark Bullet
Government Bonds: 0.98%
7.00%, 11/15/2007 ........... DKr 33,000,000 5,290,827
------------
Deutschland Republic
Government Bonds: 2.91%
6.00%, 7/4/2007 ............. DM 26,850,000 15,685,520
------------
Finnish Government
Bonds: 0.99%
7.25%, 4/18/2006 ............ Fim 26,000,000 5,346,724
------------
France O.A.T. Bonds: 2.94%
5.50%, 10/25/2007 ........... ff 94,300,000 15,866,464
------------
Italian Government
Bonds: 2.13%
6.75%, 7/1/2007 ............. Lira 18,700,000,000 11,502,428
------------
Netherlands Government
Bonds: 0.93%
5.75%, 2/15/2007 ............ NLG 9,900,000 5,030,024
------------
Norwegian Government
Bonds: 1.00%
6.75%, 1/15/2007 ............ NOK 36,500,000 5,386,731
------------
Spanish Government
Bonds: 2.03%
7.35%, 3/31/2007 ............ Pta 1,474,000,000 10,940,733
------------
Swedish Government
Bonds: 1.95%
8.00%, 8/15/2007 ............ Skr 72,700,000 10,511,882
------------
United Kingdom
Treasury Bonds: 2.25%
8.50%, 7/16/2007 ............ (pound) 6,400,000 12,113,454
------------
Total Foreign Government Obligations
(Cost $96,942,940) .......................................... 97,674,787
------------
Total Bonds
(Cost $197,050,503) ......................................... 201,230,301
------------
UNITED STATES SHORT-TERM
OBLIGATIONS: 3.14%
Federal Home Loan Mortgage Corp.,
Discount Notes: 0.92%
5.54%, 1/23/98 ............................. $ 5,000,000 4,982,562
------------
Federal National Mortgage Assn.,
Discount Notes: 1.85%
5.52%, 1/29/98 ............................. 10,000,000 9,956,989
------------
United States Treasury Bills: 0.37%
5.17%, 1/22/98 ............................. 1,000,000 996,979
5.1925%, 1/22/98 ........................... 1,000,000 996,980
------------
1,993,959
------------
Total United States Short-Term Obligations
(Cost $16,934,094) ........................................... 16,933,510
------------
28
<PAGE>
================================================================================
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
UNITED STATES REPURCHASE
AGREEMENTS: 7.69%
With Morgan Stanley & Co., Inc.
(dated 12/31/97), 6.76%, due 1/2/98
(Repurchase proceeds $21,473,061);
collateralized by: $21,882,762 various
United States Government Agency
Obligations, 6.133% - 6.524%,
9/1/2019 - 9/1/2026
(Market value $22,139,812) ................... $ 21,465,000 $ 21,465,000
------------
With Prudential Securities Inc.,
(dated 12/31/97), 6.65%, due 1/2/98
(Repurchase proceeds $20,007,389);
collateralized by: $20,190,000
Federal Farm Credit Systemwide
Bonds 6.05%, due 5/1/98
(Market value $20,403,562) ................... 20,000,000 20,000,000
------------
Total United States Repurchase Agreements
(Cost $41,465,000) ........................................... 41,465,000
------------
Total Investments in Securities
(Cost $487,163,377) .......................................... 532,330,753
------------
Net Unrealized Appreciation on Foreign Forward
Currency Contracts (Note 4): 0.55% .......................... 2,948,801
------------
Total Investments
(Cost $487,163,377) .......................... 99.26% 535,279,554
Other Assets ................................... 1.11 6,003,637
----------- ------------
Total Assets ................................. 100.37% 541,283,191
Total Liabilities (Note 5) ................... (0.37) (1,987,582)
----------- ------------
Net Assets (Note 6) ............................ 100.00% $539,295,609
=========== ============
Class A Shares
Net asset value ("NAV") and redemption price per share
($110,908,328/8,719,361 shares) .............................. $12.72
======
Maximum public offering price per share -
NAV/(1- maximum sales charge) ($12.72/.945) .................. $13.46
======
Class B Shares
Net asset value and offering price per share
($18,117,351/1,416,739 shares) ............................... $12.79
======
Redemption price per share ..................................... **
======
Class C Shares
Net asset value and offering price per share
($407,624,690/32,280,994 shares) ............................. $12.63
======
Redemption price per share ..................................... **
======
Class I Shares
Net asset value, offering and redemption price per share
($2,645,240/202,755 shares) .................................. $13.05
======
- --------------------------------------------------------------------------------
* Non-income producing security.
** Varies by length of time shares are held (Note 3b).
%Net
Industry Breakdown - Common Stock Value Assets
- --------------------------------------------------------------------------------
Airfreight ..................................... $ 805,875 0.15%
Airlines ....................................... 514,000 0.10%
Apparel and Textiles ........................... 800,986 0.15%
Automobiles .................................... 11,155,056 2.07%
Banks .......................................... 35,501,224 6.58%
Biotechnology .................................. 472,875 0.09%
Broadcasting ................................... 5,273,681 0.98%
Building Materials and Products ................ 4,858,214 0.90%
Business Services .............................. 488,483 0.09%
Chemicals ...................................... 11,837,538 2.19%
Computers and Software ......................... 6,508,000 1.21%
Conglomerates .................................. 7,516,829 1.39%
Consumer Products and Services ................. 11,983,316 2.22%
Electrical Equipment ........................... 1,568,000 0.29%
Electronics .................................... 13,763,315 2.55%
Energy ......................................... 9,713,069 1.80%
Engineering .................................... 1,536,595 0.28%
Entertainment .................................. 3,598,135 0.67%
Finance ........................................ 8,457,103 1.57%
Food and Beverages ............................. 7,617,523 1.41%
Forest and Paper Products ...................... 782,649 0.15%
Homebuilders ................................... 395,760 0.07%
Hospital and Healthcare ........................ 5,151,315 0.96%
Household Products ............................. 1,122,813 0.21%
Industrial Products, Services
and Machinery ................................ 1,405,946 0.26%
Insurance ...................................... 17,461,902 3.24%
Investment Banking and Brokerage ............... 1,451,625 0.27%
Machinery and Equipment ........................ 2,539,290 0.47%
Manufacturing .................................. 535,500 0.10%
Medical Technology ............................. 1,480,625 0.27%
Metals and Mining .............................. 1,621,617 0.30%
Natural Gas .................................... 1,382,875 0.26%
Office Automation and Equipment ................ 664,312 0.12%
Oil and Gas .................................... 14,796,889 2.74%
Pharmaceuticals ................................ 6,927,838 1.28%
Printing and Publishing ........................ 2,902,000 0.54%
Railroads ...................................... 929,375 0.17%
Real Estate .................................... 444,325 0.08%
Restaurants .................................... 2,831,750 0.53%
Retail Trade ................................... 13,100,744 2.43%
Steel .......................................... 983,664 0.18%
Telecommunications ............................. 28,044,109 5.20%
Tobacco ........................................ 1,920,877 0.36%
Tourism ........................................ 139,048 0.03%
Transportation ................................. 2,261,294 0.42%
Utilities ...................................... 17,453,983 3.24%
------------ -----------
$272,701,942 50.57%
============ ===========
- --------------------------------------------------------------------------------
For Federal income tax purposes, the tax basis of investments owned at December
31, 1997 was $487,551,175 and net unrealized appreciation on investments
consisted of:
Gross unrealized appreciation .......................... $ 54,097,951
Gross unrealized depreciation .......................... (6,369,572)
------------
Net unrealized appreciation ............................ $ 47,728,379
============
See notes to financial statements.
29
<PAGE>
ZWEIG GROWTH & INCOME FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS: 93.33%
Aerospace: 1.50%
AAR Corp. .................................. 3,400 $ 131,750
*Moog Inc., Class A ......................... 2,900 101,319
Precision Castparts Corp. .................. 2,100(a) 126,656
Sundstrand Corp. ........................... 900 45,337
Thiokol Corp. .............................. 1,300 105,625
-----------
510,687
-----------
Air Freight: 0.41%
Air Express International Corp. ............ 900 27,450
Airborne Freight Corp. ..................... 1,800 111,825
-----------
139,275
-----------
Airlines: 1.75%
*Alaska Airgroup Inc. ....................... 4,300 166,625
*AMR Corp. .................................. 1,000 128,500
British Airways Plc., ADR .................. 100 9,369
KLM Royal Dutch Airlines N. V., ADR ........ 4,730(a) 178,557
Southwest Airlines Co. ..................... 4,550 112,044
-----------
595,095
-----------
Apparel and Textiles: 2.22%
Guilford Mills Inc. ........................ 6,700(a) 183,412
Interface Inc., Class A .................... 3,900 113,100
*Jones Apparel Group Inc .................... 2,500 107,500
Kellwood Co. ............................... 3,200 96,000
Oxford Industries Inc. ..................... 1,700 55,250
Springs Industries., Class A ............... 2,400 124,800
*Tommy Hilfiger Corp. ....................... 2,100 73,762
-----------
753,824
-----------
Automobiles: 1.38%
Ford Motor Co. ............................. 5,200(a) 253,175
General Motors Corp. ....................... 1,300 78,812
Honda Motor Co. Ltd., ADR .................. 400 29,550
Volvo AB, ADR .............................. 4,000 108,000
-----------
469,537
-----------
Automotive Parts and
Equipment: 3.11%
Arvin Industries Inc. ...................... 7,200 239,850
Barnes Group Inc. .......................... 600 13,650
Borg-Warner Automotive, Inc. ............... 2,200 114,400
Excel Industries, Inc. ..................... 8,100 146,306
*Lear Corp. ................................. 1,700 80,750
Simpson Industries, Inc. ................... 9,800 115,150
Standard Motor Products, Inc. .............. 2,100 47,381
Standard Products Co. ...................... 5,300 135,813
Wynn's International Inc. .................. 5,200 165,750
-----------
1,059,050
-----------
Banks: 0.58%
City National Corp. ........................ 5,300 195,769
-----------
Building Materials and
Products: 2.23%
Ameron International Inc. .................. 2,100 132,825
Lafarge Corp. .............................. 5,000 147,813
Southdown, Inc. ............................ 6,900 407,100
TJ International Inc. ...................... 2,900 71,775
-----------
759,513
-----------
Casino Operators: 0.30%
*Rio Hotel & Casino Inc ..................... 4,900 102,900
-----------
Chemicals: 1.24%
Albemarle Corp. ............................ 4,800 114,600
B.F.Goodrich & Co. ......................... 3,360 139,230
Furon Co. .................................. 1,100 22,963
Quaker Chemical Corp. ...................... 3,100 58,706
*Rogers Corp. ............................... 300 12,262
Wellman Inc. ............................... 3,700 72,150
-----------
419,911
-----------
Commercial Services: 0.73%
*Cendant Corp. .............................. 24 825
CPI Corp. .................................. 3,000 67,875
Crawford & Co., Class B .................... 300 6,131
Laidlaw Inc. ............................... 5,600 76,300
Ogden Corp. ................................ 2,500 70,469
Unifirst Corp. ............................. 900 25,256
-----------
246,856
-----------
Computer Components and
Software: 0.83%
*Storage Technology Corp., Class A .......... 3,100 192,006
*Symantec Corp. ............................. 4,100 89,944
-----------
281,950
-----------
Construction Equipment: 0.33%
Caterpillar Inc. ........................... 2,300 111,694
-----------
111,694
-----------
Containers and Packaging: 0.29%
Ball Corp. ................................. 2,400 84,750
*Sealright Co Inc. .......................... 300 3,713
Zero Corp. ................................. 300 8,888
-----------
97,351
-----------
Electrical Products: 0.77%
*American Power Conversion Co ............... 3,200 75,600
Kuhlman Corp. .............................. 1,100 43,038
*Magnetek Inc. .............................. 2,600 50,700
Tecumseh Products Co., Class A ............. 1,900 92,625
-----------
261,963
-----------
Electronics: 1.12%
*Esterline Technologies Corp ................ 1,400 50,400
MTS Systems Corp. .......................... 2,800 105,000
Philips Electronics N.V .................... 1,200 72,600
Raytheon Co., Class A ...................... 70 3,453
*SCI Systems Inc. ........................... 2,500 108,906
*Unitrode Corp. ............................. 1,800 38,700
-----------
379,059
-----------
Engineering: 0.07%
*Jacobs Engineering Group Inc. .............. 900 22,838
-----------
Entertainment: 0.01%
*Playboy Enterprises Inc., Class A .......... 300 4,163
-----------
Finance: 3.56%
Equitable Companies Inc. ................... 5,100(a) 253,725
Green Tree Financial Corp. ................. 2,200 57,612
LNR Property Corp. ......................... 2,000 47,250
Money Store Inc. ........................... 4,500 94,500
Morgan Stanley, Dean Witter,
Discover & Co. ........................... 4,225(a) 249,803
Providian Financial Corp. .................. 1,900(a) 85,856
Sunamerica Inc. ............................ 9,050 386,887
Xtra Corp. ................................. 600 35,175
-----------
1,210,808
-----------
Food and Beverages: 1.56%
Adolph Coors Co., Class B .................. 3,900 129,675
Interstate Bakeries Corp. .................. 4,500(a) 168,188
*Smithfield Foods Inc. ...................... 2,300 75,900
*Suiza Foods Corp. .......................... 2,625 156,352
-----------
530,115
-----------
Forest and Paper Products: 0.94%
Pope & Talbot Inc. ......................... 7,500(a) 112,969
Rayonier Inc. .............................. 1,500 63,844
Wausau-Mosinee Paper Corp. ................. 7,000 140,875
-----------
317,688
-----------
30
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Healthcare Facilities and
Products: 1.14%
*Healthdyne Technologies Inc. ............... 5,500 $ 112,063
Integrated Health Services, Inc. ........... 3,306 103,106
*Phycor Inc. ................................ 2,900 78,300
West Co Inc. ............................... 3,100 92,225
-----------
385,694
-----------
Homebuilding and Land
Development: 1.98%
Centex Corp. ............................... 2,900 182,519
Del Webb Corp. ............................. 2,900 75,400
Lennar Corp. ............................... 2,000 43,125
Oakwood Homes Co. .......................... 2,500 82,969
Ryland Group Inc. .......................... 4,600 108,100
Standard Pacific Corp. ..................... 11,500 181,125
-----------
673,238
-----------
Household Furnishings and
Products: 0.86%
Ethan Allen Interiors Inc. ................. 7,100(a) 273,794
*Ladd Furniture Inc. ........................ 1,100 16,500
-----------
290,294
-----------
Industrial Products, Services and
Machinery: 2.69%
Applied Power Inc., Class A ................ 2,300 158,700
Cincinnati Milacron Inc. ................... 3,100 80,406
Gleason Corp. .............................. 1,000 26,938
Graco Inc. ................................. 2,100 78,356
Ingersoll-Rand Co .......................... 1,850 74,925
NACCO Industries., Class A ................. 1,400 150,063
Timken Co. ................................. 10,000 343,750
-----------
913,138
-----------
Insurance: 3.30%
20th Century Industries .................... 2,300 59,800
Allstate Corp. ............................. 1,200 109,050
American General Corp. ..................... 5 270
Conseco Inc. ............................... 3,500 159,031
Fremont General Corp. ...................... 2,500 136,875
Old Republic International Corp. ........... 6,700(a) 249,156
Orion Capital Corp. ........................ 100 4,644
Selective Insurance Group Inc. ............. 3,200 86,400
Torchmark Corp. ............................ 1,900 79,918
Travelers Group Inc. ....................... 4,386 236,296
-----------
1,121,440
-----------
Investment Banking and
Brokerage: 4.06%
A.G. Edwards, Inc. ......................... 7,300 290,175
Bear, Stearns & Co. Inc. ................... 14,185 673,788
Lehman Brothers Holdings Inc. .............. 3,100 158,100
Merrill Lynch & Co., Inc. .................. 1,300 94,819
PaineWebber Group Inc. ..................... 2,400 82,950
Raymond James Financial Corp. .............. 2,000 79,375
-----------
1,379,207
-----------
Manufacturing: 3.54%
A.O. Smith Corp. ........................... 3,200 135,200
Aeroquip-Vickers Inc. ...................... 2,800 137,375
Amcast Industrial Corp. .................... 4,500 103,219
Ametek Inc. ................................ 2,800 75,600
Canadian Pacific Ltd. ...................... 6,700 182,575
Carlisle Companies Inc. .................... 900 38,475
*Culligan Water Technology Inc. ............. 289 14,523
Kaman Corp., Class A ....................... 5,300 86,787
NOVA Corp. ................................. 1,500 14,344
Pentair Inc. ............................... 1,300 46,719
Premark International Inc. ................. 2,300(a) 66,700
*SPS Technologies Inc. ...................... 3,100 135,238
Trinity Industries Inc. .................... 2,600 116,025
Valmont Industries Inc. .................... 2,500 48,750
-----------
1,201,530
-----------
Metal Fabrication: 1.20%
Ampco-Pittsburgh Corp. ..................... 1,300 25,431
Brush Wellman Inc. ......................... 2,900 71,050
Commercial Metals Co. ...................... 2,500 78,906
Kaydon Corp. ............................... 5,200(a) 169,650
Varlen Corp. ............................... 2,550 62,515
-----------
407,552
-----------
Metals and Mining: 1.20%
Alcan Aluminium Ltd. ....................... 2,800 77,350
Arch Coal Inc. ............................. 1,500 41,062
ASARCO Inc. ................................ 3,400 76,288
Cyprus Amax Minerals Co. ................... 3,600 55,350
De Beers Consolidated Mines Ltd., ADR ...... 3,700 75,619
Phelps Dodge Corp. ......................... 1,300 80,925
-----------
406,594
-----------
Office Automation and
Equipment: 0.87%
Hon Industries ............................. 1,400 82,600
Herman Miller, Inc. ........................ 3,900 212,794
-----------
295,394
-----------
Oil and Gas: 13.55%
Ashland Inc. ............................... 2,700 144,956
*BJ Services Co. ............................ 2,100 151,069
Cabot Oil & Gas Corp., Class A ............. 2,300 44,706
Columbia Gas System, Inc. .................. 1,200 94,275
CTG Resources Inc. ......................... 3,000 78,188
Elf Aquitaine S.A., ADR .................... 2,300 134,837
Energen Corp. .............................. 1,200 47,700
Ensco International Inc. ................... 6,000 201,000
Equitable Resources Inc. ................... 2,600 91,975
*Global Marine Inc. ......................... 16,900(a) 414,050
Halliburton Co. ............................ 1,600 83,100
Helmerich & Payne, Inc. .................... 3,600(a) 244,350
Holly Corp. ................................ 300 8,287
Imperial Oil Ltd ........................... 900 57,544
Indiana Energy Inc. ........................ 400 13,175
MDU Resources Group Inc. ................... 1,800 56,925
Murphy Oil Corp. ........................... 1,700 92,119
*Nabors Industries .......................... 1,900 59,731
NUI Corp. .................................. 6,100(a) 174,994
*Parker Drilling Co ......................... 10,100 123,094
Pennzoil Co. ............................... 2,800(a) 187,075
Phillips Petroleum Co. ..................... 1,500 72,937
Pioneer Natural Resources Co. .............. 1,142 33,047
*Rowan Companies, Inc. ...................... 7,100 216,550
*Smith International Inc. ................... 2,500 153,437
Southwestern Energy Co. .................... 2,800 36,050
Sun Company, Inc. .......................... 3,300 138,806
Tidewater Inc. ............................. 4,800 264,600
Tosco Corp. ................................ 3,400 128,563
USX-Marathon Group ......................... 11,600(a) 391,500
Valero Energy Corp. ........................ 2,200 69,163
*Varco International, Inc. .................. 14,900 319,419
*Weatherford Enterra, Inc. .................. 2,800 122,500
YPF Sociedad Anonima, ADR .................. 4,500 153,844
-----------
4,603,566
-----------
Printing and Forms: 0.85%
Bowne & Co Inc. ............................ 7,200 287,100
-----------
Publishing: 0.27%
Meredith Corp. ............................. 2,600 92,787
-----------
31
<PAGE>
ZWEIG GROWTH & INCOME FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Railroads: 0.85%
GATX Corp. ................................. 2,800(a) $ 203,175
Kansas City Southern Industries, Inc. ...... 2,700 85,725
-----------
288,900
-----------
Recreational Products: 0.12%
Huffy Corp ................................. 2,900 39,150
-----------
Restaurants: 1.78%
CKE Restaurants Inc. ....................... 12,050 507,606
Piccadilly Cafeterias Inc. ................. 1,400 18,375
*Ryan's Family Steak Houses Inc. ............ 9,300 79,631
-----------
605,612
-----------
Retail Trade: 5.60%
*CompUSA Inc. ............................... 3,500 108,500
*Costco Companies Inc. ...................... 4,100(a) 182,962
Dayton Hudson Corp. ........................ 1,600 108,000
*Dress Barn Inc. ............................ 9,200(a) 261,050
*General Nutrition Companies., Class A ...... 2,500 85,000
Haverty Furniture Co., Inc. ................ 5,700 76,950
Hughes Supply Inc. ......................... 450 15,722
*Officemax Inc. ............................. 7,700 109,725
Pier 1 Imports, Inc. ....................... 11,450(a) 259,056
Ross Stores Inc. ........................... 6,700 243,712
*Shopko Stores Inc. ......................... 10,200 221,850
TJX Companies Inc. ......................... 6,700 230,312
-----------
1,902,839
-----------
Savings and Loan
Associations: 1.35%
Dime Bancorp Inc. .......................... 5,200 157,300
*Golden State Bancorp Inc. .................. 4,700 175,662
H.F. Ahmanson & Co. ........................ 1,900 127,181
-----------
460,143
-----------
Shipping: 0.57%
Alexander & Baldwin, Inc. .................. 1,100 30,044
Sea Containers Ltd., Class A ............... 2,900 92,800
Stolt-Nielsen Co. .......................... 3,300 69,919
-----------
192,763
-----------
Shoes: 0.19%
Justin Industries .......................... 4,700 64,038
-----------
Steel: 2.12%
AK Steel Holding Corp. ..................... 1,400 24,763
British Steel Plc., ADR .................... 6,500 139,344
Carpenter Technology Co. ................... 1,100 52,869
Cleveland-Cliffs Inc. ...................... 2,100 96,206
Oregon Steel Mills, Inc. ................... 8,000(a) 170,500
Texas Industries, Inc. ..................... 2,500 112,500
USX-U.S.Steel Group ........................ 4,000 125,000
-----------
721,182
-----------
Supermarket Chains: 0.75%
Fleming Companies Inc. ..................... 600 8,062
Great Atlantic & Pacific
Tea Company, Inc. ........................ 1,900 56,406
Marsh Supermarkets Inc., Class A ........... 1,500 22,687
Nash Finch Co. ............................. 4,700 89,300
Supervalu Inc. ............................. 1,900 79,562
-----------
256,017
-----------
Telecommunications: 0.48%
Comsat Corp. ............................... 3,400 82,450
Telefonica de Espana, S.A., ADR ............ 900 81,956
-----------
164,406
-----------
Tobacco: 1.32%
RJR Nabisco Holdings Corp. ................. 5,300 198,750
Universal Corp. ............................ 6,100 250,862
-----------
449,612
-----------
Trucking: 1.48%
Arnold Industries Inc. ..................... 100 1,725
Cummins Engine Co. ......................... 1,200 70,875
PACCAR Inc. ................................ 1,500 78,750
Roadway Express, Inc. ...................... 6,600 146,025
Rollins Truck Leasing Co. .................. 3,700 66,137
*Yellow Corp. ............................... 5,500 138,187
-----------
501,699
-----------
Utilities: 15.92%
Allegheny Energy Inc. ...................... 1,600 52,000
Aquarion Co. ............................... 1,400 48,387
Atlantic Energy Inc. ....................... 5,100 108,056
Baltimore Gas & Electric Co. ............... 2,900 98,781
Boston Edison Co. .......................... 5,200 196,950
Central Hudson Gas & Electric Co. .......... 4,900 214,988
Central Louisiana Electric Co. ............. 400 12,950
Central Maine Power Co. .................... 9,800 149,450
CMS Energy Corp. ........................... 1,800 79,312
Commonwealth Energy System ................. 6,100 202,825
Consolidated Edison Co.of
New York, Inc. ........................... 1,500 61,500
Delmarva Power & Light Co. ................. 3,700 85,331
Dominion Resources Inc. .................... 1,800 76,612
DQE Inc. ................................... 2,200 77,275
DTE Energy Co. ............................. 1,600 55,500
Eastern Utilities Associates ............... 2,800 73,500
Edison International ....................... 5,500(a) 149,531
Enova Corp. ................................ 2,700 73,069
Entergy Corp. .............................. 6,100 182,619
FPL Group Inc. ............................. 1,700 100,619
GPU Inc. ................................... 4,300(a) 181,138
Green Mountain Power Corp. ................. 3,200 58,600
Houston Industries Inc. .................... 4,248 113,368
Illinova Corp .............................. 2,400 64,650
IPALCO Enterprises Inc. .................... 600 25,162
Long Island Lighting Co. ................... 2,800 84,350
MidAmerican Energy Holdings Co. ............ 9,400(a) 206,800
Minnesota Power & Light Co. ................ 1,100 47,919
Montana Power Co. .......................... 5,500 174,969
New England Electric System ................ 1,900 81,225
New York State Electric & Gas Corp. ........ 6,800(a) 241,400
Northern States Power Co.(Minn.) ........... 1,500 87,375
PECO Energy Co. ............................ 3,500 84,875
PG&E Corp. ................................. 4,275 130,120
Pinnacle West Capital Corp. ................ 6,800(a) 288,150
PP&L Resources, Inc. ....................... 1,800 43,087
Public Service Co. of New Mexico ........... 7,400 175,288
Public Service Enterprises Group Inc. ...... 3,500 110,906
Rochester Gas & Electric Corp. ............. 7,100 241,400
Sigcorp Inc. ............................... 1,000 29,375
TNP Enterprises Inc. ....................... 6,900 229,425
Unicom Corp. ............................... 1,700 52,275
United Illuminating Co. .................... 4,100 188,344
UtiliCorp United Inc. ...................... 3,500 135,844
Westcoast Energy Inc. ...................... 8,000 184,000
WPS Resources Corp. ........................ 1,400 47,338
-----------
5,406,638
-----------
Wholesale Distributors: 0.36%
*VWR Scientific Products Corp. .............. 4,300 121,475
-----------
121,475
-----------
Total Common Stocks
(Cost $27,915,130) .......................................... 31,702,054
-----------
32
<PAGE>
================================================================================
Principal
Amount
or Number Value
of Contracts (Note 2)
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS: 1.03%
United States Treasury Bills: 1.03%
5.03%, 1/22/98 ........................... $ 50,000(a) $ 49,849
5.16%, 1/22/98 ........................... 100,000(a) 99,685
5.1925%, 1/22/98 ......................... 200,000(a) 199,396
-----------
348,930
-----------
Total Short-Term Obligations
(Cost $348,947) ............................................. 348,930
-----------
REPURCHASE AGREEMENT: 4.20 %
With Morgan Stanley & Co., Inc.,
(dated 12/31/97), 6.76%, due 1/2/98
(Repurchase proceeds $1,428,536);
collateralized by: $1,429,870
Federal National Mortgage Association
Bonds, 7.461%, 8/1/2021
(Market value $1,472,865) ................ 1,428,000 1,428,000
-----------
Total Repurchase Agreement
(Cost $1,428,000) ........................................ 1,428,000
-----------
Total Investments in Securities
(Cost $29,692,077) ....................................... 33,478,984
-----------
Net Unrealized Appreciation on
Futures Contracts: 0.14 %
Standard & Poor's 500 March 1998
long futures (b) .......................... 7 47,320
-----------
Total Investments
(Cost $29,692,077) ........................ 98.70% 33,526,304
Other Assets ................................ 1.51 514,019
----------- -----------
Total Assets .............................. 100.21% 34,040,323
Total Liabilities (Note 5) ................ (0.21) (73,215)
----------- -----------
Net Assets (Note 6) ......................... 100.00% $33,967,108
=========== ===========
Class A Shares
Net asset value ("NAV") and redemption price per share
($6,835,737/497,770 shares) ................................ $13.73
======
Maximum public offering price per share -
NAV/(1 - maximum sales charge) ($13.73/.945) .............. $14.53
======
Class B Shares
Net asset value and offering price per share
($11,919,836/868,133 shares) .............................. $13.73
======
Redemption price per share .................................. **
======
Class C Shares
Net asset value and offering price per share
($13,525,083/986,212 shares) .............................. $13.71
======
Redemption price per share .................................. **
======
Class I Shares
Net asset value, offering and redemption price per share
($1,686,452/122,445 shares) ............................... $13.77
======
- --------------------------------------------------------------------------------
* Non-income producing security.
** Varies by length of time shares are held. (Note 3b)
(a) Pledged as collateral for futures transactions.
(b) The market value of the long futures was $1,713,425 (representing 5.04% of
the Fund's net assets) with a cost of $1,666,105.
For Federal income tax purposes, the tax basis of investments owned at December
31, 1997 was $29,696,966 and net unrealized appreciation on investments
consisted of:
Gross unrealized appreciation .......................... $ 4,115,460
Gross unrealized depreciation .......................... (286,122)
-----------
Net unrealized appreciation ............................ $ 3,829,338
===========
See notes to financial statements.
33
<PAGE>
ZWEIG FOREIGN EQUITY FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS: 65.84%
Australia: 2.28%
Conglomerates: 0.70%
Broken Hill Proprietary Co. Ltd. ............... 2,500 $ 23,212
---------
Food and Beverages: 0.76%
Fosters Brewing Group Ltd. ..................... 13,200 25,114
---------
Newspapers: 0.82%
News Corp. Ltd., Preferred ..................... 5,500 27,214
---------
Total Australia ................................................ 75,540
---------
Austria: 2.36%
Conglomerates: 0.95%
Mayr-Melnhof Karton AG ......................... 585 31,449
---------
Homebuilders: 1.16%
Universale-Bau AG .............................. 1,095 38,517
---------
Machinery and Equipment: 0.25%
Steyr-Daimler-Puch AG .......................... 310 8,307
---------
Total Austria .................................................. 78,273
---------
Belgium: 2.74%
Chemicals: 0.98%
Solvay SA, Class A ............................ 517 32,513
---------
Metals and Mining: 0.90%
*Union Miniere SA .............................. 431 29,897
---------
Retail Trade: 0.86%
Delhaize le Lion SA ........................... 560 28,416
---------
Total Belgium ................................................. 90,826
---------
Denmark: 1.63%
Conglomerates: 0.48%
*Ostasiatiske Kompagni AS ...................... 1,750 15,846
---------
Food and Beverages: 0.59%
Danisco AS .................................... 350 19,424
---------
Telecommunications: 0.56%
Tele Danmark AS, Class B ...................... 300 18,621
---------
Total Denmark ................................................. 53,891
---------
Finland: 1.53%
Banks: 0.58%
*Merita Ltd., Class A .......................... 3,550 19,427
---------
Forest and Paper Products: 0.47%
*UPM-Kymmen OY ................................ 775 15,513
---------
Metals and Mining: 0.48%
Outokumpu OY, Class A ......................... 1,300 15,875
---------
Total Finland ................................................. 50,815
---------
France: 6.41%
Banks: 0.41%
Societe Generale Paris ........................ 100 13,631
---------
Consumer Products and
Services: 1.26%
Cie Generale Des Eaux ......................... 160 22,341
L'oreal Co. ................................... 50 19,573
---------
41,914
---------
Electronics: 0.27%
Alcatel Alsthom ............................... 50 6,358
*Schneider SA .................................. 50 2,716
---------
9,074
---------
Food and Beverages: 0.71%
LVMH Moet Hennessy ............................ 141 23,415
---------
Insurance: 0.76%
AXA UAP ....................................... 324 25,081
---------
Oil and Gas: 0.53%
Societe Nationale Elf Aquitaine ............... 150 17,454
---------
Retail Trade: 0.79%
Carrefour ..................................... 50 26,098
---------
Telecommunications: 0.97%
*France Telecom SA ............................. 888 32,223
---------
Utilities: 0.71%
Total SA, Class B ............................. 217 23,627
---------
Total France .................................................. 212,517
---------
Germany: 6.67%
Automobiles: 1.39%
Daimler-Benz AG ................................ 650 45,911
---------
Banks: 0.63%
Deutsche Bank AG ............................... 300 20,990
---------
Chemicals: 0.82%
BASF AG ........................................ 400 14,282
Bayer AG ....................................... 350 12,993
---------
27,275
---------
Electronics: 1.18%
Siemens AG ..................................... 650 39,223
---------
Insurance: 1.17%
Allianz AG Holding ............................. 150 38,709
---------
Oil and Gas: 0.62%
Veba AG ........................................ 300 20,439
---------
Pharmaceuticals: 0.58%
Schering AG .................................... 200 19,299
---------
Telecommunications: 0.28%
Deutsche Telekom AG ............................ 500 9,260
---------
Total Germany .................................................. 221,106
---------
Hong Kong: 1.57%
Banks: 0.26%
Hang Seng Bank ................................. 900 8,682
---------
Conglomerates: 0.38%
Hutchison Whampoa Ltd. ......................... 2,000 12,545
---------
Real Estate: 0.42%
Sun Hung Kai Properties Ltd. ................... 2,000 13,938
---------
Telecommunications: 0.35%
Hong Kong Telecommunications ................... 5,600 11,528
---------
Tourism: 0.16%
Shangri-La Asia Ltd. ........................... 6,300 5,326
---------
Total Hong Kong ................................................ 52,019
---------
Italy: 5.42%
Automobiles: 0.26%
Fiat SPA ....................................... 3,000 8,730
---------
Banks: 0.66%
Credito Italiano SPA ........................... 2,500 7,713
Istituto Banc San Paolo SPA .................... 1,500 14,338
---------
22,051
---------
34
<PAGE>
================================================================================
Number Value
of Shares (Note 2)
- --------------------------------------------------------------------------------
Energy: 1.20%
Eni SPA ........................................ 7,000 $ 39,712
---------
Insurance: 1.70%
Assicurazioni Generali SPA ..................... 1,500 36,864
Ras Riun Adriat Di Sicurt SPA .................. 2,000 19,627
---------
56,491
---------
Telecommunications: 1.05%
Telecom Italia Mobile SPA ...................... 7,500 34,637
---------
Utilities: 0.55%
Edison SPA ..................................... 3,000 18,156
---------
Total Italy .................................................... 179,777
---------
Japan: 1.98%
Chemicals: 0.08%
Dainippon Ink & Chemicals Ltd. ................. 1,000 2,538
---------
Electronics: 1.58%
Hitachi Ltd. ................................... 1,000 7,153
Nintendo Corp. Ltd. ............................ 300 29,534
Sharp Corp. .................................... 1,000 6,906
Sony Corp. ..................................... 100 8,922
---------
52,515
---------
Photographic Products: 0.32%
Fujitsu Ltd. ................................... 1,000 10,767
---------
Total Japan .................................................... 65,820
---------
Mexico: 2.59%
Retail Trade: 0.89%
*Cifra SA, Class V ............................. 12,000 29,472
---------
Telecommunications: 1.70%
Telefonos De Mexico SA, Class L ............... 20,000 56,439
---------
Total Mexico .................................................. 85,911
---------
Netherlands: 4.62%
Banks: 0.76%
ABN Amro Holding NV ............................ 1,289 25,116
---------
Energy: 1.63%
Royal Dutch Petroleum NV ....................... 984 54,024
---------
Finance: 0.70%
ING Groep NV ................................... 552 23,254
---------
Food and Beverages: 1.03%
Unilever NV .................................... 552 34,036
---------
Telecommunications: 0.50%
Kon. Ptt. Nederland NV ......................... 400 16,693
---------
Total Netherlands .............................................. 153,123
---------
Norway: 1.75%
Conglomerates: 0.37%
Aker RGI ASA ................................... 200 3,608
Orkla ASA, Class A ............................. 100 8,614
---------
12,222
---------
Energy: 1.03%
Norsk Hydro ASA ................................ 700 34,135
---------
Transportation: 0.35%
Bergesen DY ASA, Class A ....................... 500 11,801
---------
Total Norway ................................................... 58,158
---------
Singapore: 1.79%
Banks: 0.70%
Overseas Chinese Banking Corp. ................. 4,000 23,265
---------
Conglomerates: 0.09%
Singapore Technologies Inc. .................... 3,000 2,866
---------
Real Estate: 0.28%
DBS Land Ltd. .................................. 6,000 9,187
---------
Telecommunications: 0.39%
Singapore Telecom Inc. ......................... 7,000 13,045
---------
Tourism: 0.33%
Shangri-La Hotel Ltd. .......................... 6,000 10,968
---------
Total Singapore ................................................ 59,331
---------
Spain: 6.64%
Banks:2.51%
Banco Bilbao Vizcaya SA ........................ 1,825 59,031
Banco De Santander SA .......................... 725 24,212
---------
83,243
---------
Business Services: 0.20%
Autopistas Cesa Co. SA ......................... 500 6,709
---------
Energy: 0.64%
Repsol Petroleo SA ............................. 500 21,323
---------
Telecommunications: 1.34%
Telefonica De Espana SA ........................ 1,550 44,238
---------
Tobacco: 0.24%
Tabacalera SA, Class A ......................... 100 8,103
---------
Utilities: 1.71%
Empresa Nacionale de Electricidad SA ........... 1,925 34,164
Iberdrola SA ................................... 1,700 22,363
---------
56,527
---------
Total Spain .................................................... 220,143
---------
Sweden: 4.27%
Electronics: 2.49%
Ericsson LM, Class B ........................... 2,200 82,766
---------
Hospital and Healthcare: 1.78%
Astra AB, Class A .............................. 3,400 58,921
---------
Total Sweden ................................................... 141,687
---------
Switzerland: 5.37%
Banks: 0.90%
Credit Suisse Group ............................ 100 15,495
Union Bank of Switzerland, Class B ............. 10 14,480
---------
29,975
---------
Business Services: 0.18%
Adecco SA ...................................... 20 5,807
---------
Food and Beverages: 1.36%
Nestle SA ...................................... 30 45,024
---------
Hospital and Healthcare: 2.37%
Novartis AG .................................... 30 48,747
Roche Holding AG ............................... 3 29,835
---------
78,582
---------
Insurance: 0.56%
Schweiz Ruckversiche ........................... 10 18,731
---------
Total Switzerland .............................................. 178,119
---------
United Kingdom: 6.22%
Banks: 1.56%
Barclays Plc ................................... 500 13,286
HSBC Holdings .................................. 300 7,434
Lloyds Group Plc ............................... 2,400 31,039
---------
51,759
---------
35
<PAGE>
ZWEIG FOREIGN EQUITY FUND
================================================================================
Statement of Net Assets as of December 31, 1997 (continued)
Number
of Shares
or Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
Building Materials and Products: 0.19%
Wolseley Plc ................................... 800 $ 6,358
---------
Consumer Products and
Services: 0.88%
Glaxo Holdings Plc ............................. 800 18,929
SmithKline Beecham, Class A .................... 1,000 10,292
---------
29,221
---------
Engineering: 0.16%
Tarmac Plc ..................................... 1,000 1,884
Taylor Woodrow Plc ............................. 1,100 3,231
---------
5,115
---------
Food and Beverages: 0.47%
Unilever Plc ................................... 1,800 15,445
---------
Oil and Gas: 1.03%
British Petroleum Plc .......................... 2,600 34,246
---------
Railroads: 0.05%
Railtrack Group Plc ............................ 100 1,591
---------
Real Estate: 0.39%
Land Securities Plc ............................ 800 12,900
---------
Retail Trade: 0.74%
Marks & Spencer Corp. .......................... 2,500 24,640
---------
Telecommunications: 0.62%
British Telecommunications Corp. ............... 2,600 20,524
---------
Utilities: 0.13%
Scottish Power Plc ............................. 500 4,414
---------
Total United Kingdom ........................................... 206,213
---------
Total Common Stocks (Cost $2,177,847) .......................... 2,183,269
---------
UNITED STATES SHORT-TERM
OBLIGATIONS: 29.63%
Federal Home Loan Bank, Discount Notes:
5.75%, 1/2/98 (Cost $982,843) .............. $ 983,000 982,686
---------
Total Investments in Securities
(Cost $3,160,690) ............................................ 3,165,955
---------
Net Unrealized Appreciation on Foreign Forward
Currency Contracts (Note 4): 1.16% ........................... 38,310
---------
Total Investments
(Cost $3,160,690) ............................ 96.63% 3,204,265
Other Assets ................................... 3.69 122,324
--------- ---------
Total Assets ................................. 100.32% 3,326,589
Total Liabilities (Note 5) ................... (0.32) (10,646)
--------- ---------
Net Assets (Note 6) ............................ 100.00% $3,315,943
========= =========
- --------------------------------------------------------------------------------
* Non-income producing security.
** Varies by length of time shares are held (Note 3b).
For Federal income tax purposes, the tax basis of investments owned at December
31, 1997 was $3,160,690 and net unrealized appreciation on investments consisted
of:
Gross unrealized appreciation ............................. $ 92,333
Gross unrealized depreciation ............................. (48,758)
--------
Net unrealized appreciation ............................... $ 43,575
========
%Net
Industry Breakdown--Common Stock Value Assets
- --------------------------------------------------------------------------------
Automobiles .................................... $ 54,641 1.65%
Banks .......................................... 298,139 8.99%
Building Materials and Products ................ 6,358 0.19%
Business Services .............................. 12,516 0.38%
Chemicals ...................................... 62,326 1.88%
Conglomerates .................................. 98,140 2.96%
Consumer Products and Services ................. 71,135 2.14%
Electronics .................................... 183,578 5.54%
Energy ......................................... 149,194 4.50%
Engineering .................................... 5,115 0.15%
Finance ........................................ 23,254 0.70%
Food and Beverages ............................. 162,458 4.90%
Forest and Paper Products ...................... 15,513 0.47%
Homebuilders ................................... 38,517 1.16%
Hospital and Healthcare ........................ 137,503 4.15%
Insurance ...................................... 139,012 4.19%
Machinery and Equipment ........................ 8,307 0.25%
Metals and Mining .............................. 45,772 1.38%
Newspapers ..................................... 27,214 0.82%
Oil and Gas .................................... 72,139 2.17%
Pharmaceuticals ................................ 19,299 0.58%
Photographic Products .......................... 10,767 0.32%
Railroads ...................................... 1,591 0.05%
Real Estate .................................... 36,025 1.09%
Retail Trade ................................... 108,626 3.28%
Telecommunications ............................. 257,208 7.76%
Tobacco ........................................ 8,103 0.24%
Tourism ........................................ 16,294 0.49%
Transportation ................................. 11,801 0.36%
Utilities ...................................... 102,724 3.10%
--------- ---------
$2,183,269 65.84%
========= =========
- --------------------------------------------------------------------------------
Class A Shares
Net asset value ("NAV") and redemption price per share
($413,898/36,136 shares) ...................................... $11.45
======
Maximum public offering price per share -
NAV/(1- maximum sales charge) ($11.45/.945) ................... $12.12
======
Class B Shares
Net asset value and offering price per share
($713,408/62,281 shares) ...................................... $11.45
======
Redemption price per share ...................................... **
======
Class C Shares
Net asset value and offering price per share
($1,176,775/102,741 shares) ................................... $11.45
======
Redemption price per share ...................................... **
======
Class I Shares
Net asset value, offering and redemption price per share
($1,011,862/88,332 shares) .................................... $11.46
======
See notes to financial statements.
36
<PAGE>
ZWEIG GOVERNMENT FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT
& AGENCY OBLIGATIONS: 90.19%
Federal Home Loan Mortgage Corp.,
Modified Mtge. Pass-Through
Securities: 0.83%
10.50%, 1/1/2001 ........................... $ 14,357 $ 15,237
10.50%, 6/1/2011 ........................... 89,769 98,381
11.50%, 10/1/2015 .......................... 89,968 100,961
12.00%, 11/1/2015 .......................... 106,040 120,057
----------
334,636
----------
Federal National Mortgage Assn.,
Modified Mtge. Pass-Through
Securities: 0.10%
12.50%, 10/1/2014 .......................... 35,657 40,660
----------
Federal National Mortgage Assn.: 2.50%
Deb., 8.25%, 12/18/2000 .................... 950,000 1,011,339
----------
Government National Mortgage Assn.,
Modified Mtge. Pass-Through
Securities: 0.25%
12.50%, 11/20/2013 ......................... 20,853 23,760
12.00%, 9/15/2015 .......................... 52,195 59,551
8.00%, 8/15/2022 ........................... 17,912 18,594
----------
101,905
----------
Private Export Funding Corp.: 2.57%
7.90%, 3/31/2000 ........................... 1,000,000 1,043,434
----------
United States Treasury Bonds: 33.55%
10.75%, 2/15/2003 .......................... 1,000,000 1,219,376
10.75%, 5/15/2003 .......................... 2,000,000 2,456,252
12.00%, 8/15/2013 .......................... 1,025,000 1,512,196
7.25%, 8/15/2022 ........................... 5,000,000 5,776,565
7.50%, 11/15/2024 .......................... 2,200,000 2,631,752
----------
13,596,141
----------
United States Treasury Notes: 50.39%
6.25%, 8/31/2000 ........................... 3,800,000 3,851,064
6.375%, 8/15/2002 .......................... 1,200,000 1,231,501
7.25%, 5/15/2004 ........................... 1,036,000 1,118,557
6.875%, 5/15/2006 .......................... 7,900,000 8,457,945
6.50%, 10/15/2006 .......................... 5,500,000 5,761,256
----------
20,420,323
----------
Total United States Government &
Agency Obligations (Cost $35,377,120) ........................ 36,548,438
----------
REPURCHASE AGREEMENT: 8.59%
With Morgan Stanley & Co., Inc.,
(dated 12/31/97), 6.76%, due
1/2/98 (Repurchase proceeds
$3,483,308); collateralized by:
$3,518,897 Federal National Mortgage
Association Bonds, 6.676%, 7/1/2027
(Market value $3,564,993) .................... 3,482,000 3,482,000
----------
Total Repurchase Agreement
(Cost $3,482,000) ............................................ 3,482,000
----------
Total Investments
(Cost $38,859,120 ) .......................... 98.78% 40,030,438
Other Assets ................................... 1.55 629,427
---------- ----------
Total Assets ................................. 100.33% 40,659,865
Total Liabilities (Note 5) ................... (0.33) (133,889)
---------- ----------
Net Assets (Note 6) ............................ 100.00% $40,525,976
========== ==========
Weighted Average Duration ...................... 6.1 years
==========
Class A Shares
Net asset value ("NAV") and redemption price per share
($28,061,966/2,781,139 shares) ................................ $10.09
======
Maximum public offering price per share -
NAV / (1- maximum sales charge ) ($10.09/.9525) .............. $10.59
======
Class B Shares
Net asset value and offering price per share
($1,214,917/119,652 shares) .................................. $10.15
======
Redemption price per share ..................................... *
======
Class C Shares
Net asset value and offering price per share
($10,198,655/1,011,623 shares) ............................... $10.08
======
Redemption price per share ..................................... *
======
Class I Shares
Net asset value, offering and redemption price per share
($1,050,438/103,869 shares) .................................. $10.11
======
- --------------------------------------------------------------------------------
* Varies by length of time shares are held. (Note 3b)
For Federal income tax purposes, the tax basis of investments owned at December
31, 1997 was $38,859,120 and net unrealized appreciation on investments
consisted of:
Gross unrealized appreciation .......................... $ 1,398,711
Gross unrealized depreciation .......................... (227,393)
-----------
Net unrealized appreciation ............................ $ 1,171,318
===========
See notes to financial statements.
37
<PAGE>
ZWEIG CASH FUND
================================================================================
Statement of Net Assets as of December 31, 1997
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS: 83.13%
Federal Farm Credit Bank,
Discount Notes: 4.81%
5.59%, 1/26/98 ............................. $3,000,000 $2,988,354
----------
Federal Home Loan Bank,
Discount Notes: 8.02%
5.50%, 1/23/98 ............................. 3,000,000 2,989,917
5.79%, 1/23/98 ............................. 2,000,000 1,992,923
----------
4,982,840
----------
Federal Home Loan Mortgage Corp.,
Discount Notes: 28.78%
5.71%, 1/21/98 ............................. 2,000,000 1,993,656
5.68%, 1/30/98 ............................. 2,000,000 1,990,849
5.63%, 2/6/98 .............................. 3,000,000 2,983,110
5.50%, 2/11/98 ............................. 3,000,000 2,981,208
5.65%, 2/13/98 ............................. 3,000,000 2,979,754
5.50%, 2/17/98 ............................. 3,000,000 2,978,458
5.53%, 2/23/98 ............................. 2,000,000 1,983,717
----------
17,890,752
----------
Federal National Mortgage Assn.,
Discount Notes: 41.52%
5.48%, 1/15/98 ............................. 2,000,000 1,995,738
5.48%, 1/16/98 ............................. 2,000,000 1,995,433
5.76%, 1/21/98 ............................. 2,000,000 1,993,600
5.47%, 2/4/98 .............................. 4,000,000 3,979,336
5.47%, 2/5/98 .............................. 5,000,000 4,973,410
5.57%, 3/3/98 .............................. 3,000,000 2,971,686
5.60%, 3/6/98 .............................. 2,000,000 1,980,089
5.63%, 3/18/98 ............................. 2,000,000 1,976,229
5.50%, 3/20/98 ............................. 2,000,000 1,976,167
5.61%, 3/27/98 ............................. 2,000,000 1,973,508
----------
25,815,196
----------
Total United States Government
Agency Obligations (Cost $51,677,142) ........................ 51,677,142
----------
REPURCHASE
AGREEMENTS: 17.48%
With Morgan Stanley & Co., Inc.
(dated 12/31/97), 6.76%, due 1/2/98
(Repurchase proceeds $7,871,955);
collateralized by: $7,684,631 Federal
National Mortgage Association Bonds,
7.00% - 8.068%, 12/1/2012 - 2/1/2025
(Market value $8,039,439) .................... 7,869,000 7,869,000
With Prudential Securities, Inc.
(dated 12/31/97), 6.65%, due 1/2/98
(Repurchase proceeds $3,001,108);
collateralized by: $3,141,000,
United States Treasury Bills, 5.16%,
6/25/98 (Market value $3,060,380) ............ 3,000,000 3,000,000
----------
Total Repurchase Agreements
(Cost $10,869,000) ........................................... 10,869,000
----------
Total Investments
(Cost $62,546,142) ...................... 100.61% 62,546,142
Other Assets .............................. 2.01 1,250,313
------ -----------
Total Assets ............................ 102.62% 63,796,455
Total Liabilities (Note 5) .............. (2.62) (1,628,483)
------ -----------
Net Assets (Note 6) ....................... 100.00% $62,167,972
====== ===========
Net asset value, offering and redemption price per share
(2,472,232 Class A Shares, 336,252 Class B Shares,
2,660,634 Class C Shares, 99,562 Class I
Shares and 56,599,292 Class M Shares) .................... $1.00
=====
Weighted average days to maturity .......................... 34
=====
See notes to financial statements.
38
<PAGE>
ZWEIG SERIES TRUST
================================================================================
Statement of Operations for the Year Ended December 31, 1997 (In Thousands)
<TABLE>
<CAPTION>
Zweig
Zweig Zweig Zweig Zweig Growth Foreign Zweig Zweig
Strategy Appreciation Managed & Income Equity Government Cash
Fund Fund Assets Fund Fund*** Fund Fund
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Income:
Dividends * ........................ $ 21,678 $ 7,595 $ 5,569 $ 466 $ 1 $ -- $ --
Interest ........................... 8,079 3,483 16,204** 292 8 2,821 3,333
- -----------------------------------------------------------------------------------------------------------------------------------
Total income ................... 29,757 11,078 21,773 758 9 2,821 3,333
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses: (Note 2)
Advisory fees (Note 3) ............. 9,154 5,195 5,454 160 3 258 303
Distribution fees, Class A (Note 3) 1,692 827 341 14 -- 90 9
Distribution fees, Class B (Note 3) 610 138 117 65 1 8 4
Distribution fees, Class C (Note 3) 5,945 2,278 4,167 91 1 88 10
Distribution fees, Class M (Note 3) -- -- -- -- -- -- 31
Transfer agent fees ................ 1,322 617 574 43 -- 88 67
Amortization of organization
expenses ......................... -- -- 155 5 -- -- --
Custodian fees ..................... 162 84 364 34 2 14 18
Portfolio accounting fees .......... 233 169 219 22 1 35 6
Professional fees .................. 108 65 78 14 -- 6 8
Reports to shareholders ............ 286 122 116 5 -- 10 11
Registration fees .................. 63 48 38 74 7 34 40
Insurance .......................... 42 19 19 1 -- 1 2
Trustees' fees ..................... 28 14 15 4 1 5 5
Miscellaneous ...................... 32 15 15 1 -- 2 3
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses ................. 19,677 9,591 11,672 533 16 639 517
Less: Expenses reimbursed by
investment adviser (Note 3) ...... -- -- -- (149) (10) -- (251)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses ................... 19,677 9,591 11,672 384 6 639 266
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .......... 10,080 1,487 10,101 374 3 2,182 3,067
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments and
Foreign Currency:
Net realized gains (losses) :
Security transactions .............. 227,875 85,630 38,798 982 (5) 77 --
Futures and options transactions ... (92,838) (31,749) (6,380) (445) -- -- --
Short sales transactions ........... (3,355) -- -- -- -- --
Currency transactions .............. -- -- 17,864 -- (6) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) ........ 131,682 53,881 50,282 537 (11) 77 --
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in unrealized appreciation
of investments and foreign currency .. 56,468 54,154 15,151 3,781 44 987 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
on investments and foreign currency .... 188,150 108,035 65,433 4,318 33 1,064 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations ............ $ 198,230 $ 109,522 $ 75,534 $ 4,692 $ 36 $ 3,246 $ 3,067
===================================================================================================================================
*Net of taxes withheld on foreign
dividends ........................ $ 435 $ 135 $ 492 $ 3 $ -- $ -- $ --
===================================================================================================================================
</TABLE>
** Net of taxes withheld on foreign interest of $196.
*** Commenced operations on November 24, 1997.
See notes to financial statements.
39
<PAGE>
ZWEIG SERIES TRUST
================================================================================
Statement of Changes in Net Assets for the Years Ended December 31, 1997 and
1996 (in thousands)
<TABLE>
<CAPTION>
Zweig Zweig
Strategy Fund Appreciation Fund
---------------------------- ----------------------------
1997 1996 1997 1996
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ......................................... $ 10,080 $ 11,919 $ 1,487 $ 3,596
Net realized gains (losses) on investments .................... 131,682 80,859 53,881 59,098
Unrealized appreciation (depreciation) of investments
and foreign currency ........................................ 56,468 48,334 54,154 5,819
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ................................... 198,230 141,112 109,522 68,513
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A ....................................................... (6,761) (7,570) (1,474) (2,921)
Class B ....................................................... (297) (126) -- (16)
Class C ....................................................... (2,955) (4,367) -- (775)
Class I ....................................................... (14) (3) (19) (5)
Class M ....................................................... -- -- -- --
Distributions to shareholders from net realized
gains on investments:
Class A ....................................................... (56,611) (42,767) (19,748) (34,739)
Class B ....................................................... (7,516) (2,917) (1,403) (984)
Class C ....................................................... (59,242) (45,605) (16,881) (27,713)
Class I ....................................................... (105) (65) (180) (271)
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders ............. (133,501) (103,420) (39,705) (67,424)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 7):
Net proceeds from sale of shares .............................. 146,735 286,753 62,499 71,443
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions ................. 103,555 94,207 32,564 60,141
- -----------------------------------------------------------------------------------------------------------------------------------
250,290 380,960 95,063 131,584
Cost of shares redeemed ....................................... (325,599) (261,535) (102,831) (95,266)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived from capital
share transactions .......................................... (75,309) 119,425 (7,768) 36,318
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ......................... (10,580) 157,117 62,049 37,407
NET ASSETS:
Beginning of year ............................................. 1,245,703 1,088,586 505,201 467,794
- -----------------------------------------------------------------------------------------------------------------------------------
End of year ................................................... $ 1,235,123 $ 1,245,703 $ 567,250 $ 505,201
===================================================================================================================================
Undistributed (overdistributed)
net investment income ....................................... $ (119) $ (172) $ (341) $ (335)
===================================================================================================================================
</TABLE>
(1) Commenced operations on November 26, 1996.
(2) Commenced operations on November 24, 1997.
See notes to financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Zweig Zweig Growth & Zweig Foreign Zweig Zweig
Managed Assets Income Fund Equity Fund Government Fund Cash Fund
------------------------ ------------------ ----------- --------------------- ------------------------
1997 1996 1997 1996(1) 1997(2) 1997 1996 1997 1996
------------------------ ------------------ ----------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10,101 $ 12,744 $ 374 $ 8 $ 3 $ 2,182 $ 2,758 $ 3,067 $ 3,219
50,282 31,187 537 (5) (11) 77 (1,290) -- --
15,151 6,798 3,781 53 44 987 (2,075) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
75,534 50,729 4,692 56 36 3,246 (607) 3,067 3,219
- ------------------------------------------------------------------------------------------------------------------------------------
-- (4,262) (107) (3) (1) (1,566) (1,935) (140) (169)
-- (74) (98) (2) -- (35) (9) (16) (1)
-- (12,584) (145) (3) (1) (556) (784) (165) (188)
-- (9) (27) -- (2) (26) -- (55) (8)
-- -- -- -- -- -- -- (2,691) (2,853)
(15,307) (4,252) -- -- -- -- -- -- --
(2,356) (218) -- -- -- -- -- -- --
(56,348) (15,742) -- -- -- -- -- -- --
(349) (105) -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(74,360) (37,246) (377) (8) (4) (2,183) (2,728) (3,067) (3,219)
- ------------------------------------------------------------------------------------------------------------------------------------
56,900 60,565 22,306 10,511 3,336 3,744 3,408 360,029 314,285
56,413 31,988 310 6 3 1,275 1,609 1,727 1,962
- ------------------------------------------------------------------------------------------------------------------------------------
113,313 92,553 22,616 10,517 3,339 5,019 5,017 361,756 316,247
(125,455) (224,314) (2,775) (754) (55) (14,248) (14,976) (354,188) (318,281)
- ------------------------------------------------------------------------------------------------------------------------------------
(12,142) (131,761) 19,841 9,763 3,284 (9,229) (9,959) 7,568 (2,034)
- ------------------------------------------------------------------------------------------------------------------------------------
(10,968) (118,278) 24,156 9,811 3,316 (8,166) (13,294) 7,568 (2,034)
550,264 668,542 9,811 48,692 61,986 54,600 56,634
- ------------------------------------------------------------------------------------------------------------------------------------
$539,296 $550,264 $33,967 $9,811 $3,316 $40,526 $48,692 $ 62,168 $ 54,600
====================================================================================================================================
$ (94) $ (2,677) $ (3) $ -- $ (1) $ 29 $ 30 $ -- $ --
====================================================================================================================================
</TABLE>
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
December 31, 1997
Note 1--Organization
Zweig Series Trust (the "Trust"), organized as a Delaware business trust, is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. The Trust presently
consists of seven separate investment portfolios ("Series"): Zweig Strategy
Fund, Zweig Appreciation Fund, Zweig Managed Assets, Zweig Growth & Income Fund,
Zweig Foreign Equity Fund, Zweig Government Fund and Zweig Cash Fund. Each
Series offers Class A, Class B, Class C and Class I Shares and Zweig Cash Fund
also offers Class M Shares. The offering of Zweig Foreign Equity Fund commenced
on November 24, 1997.
Note 2--Significant Accounting Policies
(a) General: Securities transactions are recorded on trade date. Realized gains
and losses on sales of investments are determined on the identified cost basis
for both financial reporting and income tax purposes. Distributions to
shareholders and dividend income are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Direct expenses are charged to each
class or Series and general expenses are allocated in proportion to net assets.
Organization expenses are amortized on a straight-line basis over the first 60
months of operations of a Series. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
(b) Portfolio Valuation: Stocks, futures and options are valued at the closing
prices reported on recognized securities exchanges or if no sale was reported,
and for unlisted securities, at the mean between the last-reported bid and asked
prices. Bonds and other fixed-income securities are valued at prices obtained
from an established bond-pricing service. 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 (of which there
were none at December 31, 1997) are valued at fair value as determined under
procedures approved by the Board of Trustees. Short-term obligations having a
remaining maturity of 60 days or less are valued at amortized cost (which
approximates market value). Zweig Cash Fund values all short-term investments
using the amortized cost method pursuant to Rule 2a-7 under the Act.
(c) Futures Contracts and Option Accounting Principles: Initial margin deposits
on futures contracts are recorded as assets. The value of such contracts are
"marked to market" daily and changes are recognized as unrealized gains or
losses. Variation margin payments are recognized as assets or liabilities,
depending upon whether unrealized gains or losses are incurred. When a futures
contract is closed, the Series realizes a gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and its basis in
the contract. When a Series writes an option, an amount equal to the premium
received is recorded as an asset and a corresponding liability. The liability is
subsequently "marked to market" daily. When an option written is exercised, the
proceeds of sale of the underlying security are increased by the premium
originally received and the Series realizes a gain or loss. When an option
written expires or the Series enters into a closing purchase transaction, the
liability is extinguished and the Series realizes a gain or loss.
(d) Foreign Currency Translation: Assets and liabilities denominated in a
foreign currency are translated into U.S. dollars using exchange rates on the
valuation date. Purchases and sales of securities, expense payments and income
receipts are translated into U.S. dollars using the exchange rate on the
transaction date. The Trust does not segregate that portion of the results of
operations resulting from changes in foreign exchange rates from the portion
resulting from changes in market prices of securities held; both are included in
net realized and unrealized gains or losses.
(e) Short Sales: A short sale is a transaction in which a Series sells a
security it does not own in anticipation of a decline in market price. To sell a
security short, a Series must borrow the security. A Series' 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 and
securities deposited in a segregated account with the Series' custodian. If the
price of the security sold short increases between the time of the short sale
and the time the Series replaces the borrowed security, the Series will incur a
loss, and if the price declines during the period, the Series will realize a
gain. Any gain will be decreased, and any incurred loss increased, by the amount
of transaction costs. Dividends or interest that the Series pays in connection
with such short sales are recorded as expenses. At December 31, 1997, there were
no open short sales in any Series.
(f) Off-Balance-Sheet Risk, Repurchase Agreements and Derivatives: Foreign
securities and forward foreign currency contracts may involve risks relating to
the level of governmental supervision and regulation of foreign markets, and the
possibility of political or economic instability. With respect to forward
foreign currency contracts and repurchase agreements, losses may arise if the
counterparty does not perform under the contract or agreement. The Trust's
investment manager monitors the requirement that the market value of the
securities used to collateralize a repurchase agreement exceed the dollar amount
of the counterparty's obligation to repurchase. A Series' use of futures
contracts, forward foreign currency contracts, options and short sales involves,
to varying degrees, elements of market risk in excess of the amount recognized
in the statement of net assets. These derivative financial instruments
("derivatives") are used to adjust the risk and return characteristics of a
Series' portfolio. Derivatives are not used for the purpose of leverage. The
objective in buying or selling a derivative instrument is to increase or
decrease a Series' exposure to changing security prices, interest rates or
currency exchange rates. If the Manager misjudges market conditions or employs a
strategy that does not correlate well with the Series' other investments, use of
these derivatives could result in a loss, regardless of the Manager's original
intent to reduce risk.
42
<PAGE>
================================================================================
(g) Federal Income Taxes: It is the policy of each Series to continue to comply
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its net taxable income, including
any net realized gain on investments, to its shareholders; therefore, no
provision for federal income tax is required.
(h) Dividends and Distributions to Shareholders: Dividends and distributions are
declared separately for each class of shares of a Series. The character of
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes due to differences in the recognition of income and expense items for
financial statement and federal income tax purposes. During the year ended
December 31, 1997, Zweig Managed Assets reclassified $7,518,383 from accumulated
net realized losses to undistributed net investment income .
At October 31, 1997 (each Series' tax fiscal year-end), Zweig Government Fund
had capital loss carryforwards, including acquired loss carryforwards, of
$2,631,923, $249,274, $7,227,155 and $1,010,121 expiring October 31, 1998, 1999,
2002 and 2004, respectively; available to offset any net capital gains
subsequently realized, subject to certain limitations. During the year ended
December 31, 1997, Zweig Government Fund reclassified $13,447,819 from
accumulated net realized loss to capital paid-in due to the expiration of
capital loss carryforwards.
Note 3-Investment Advisory Fees and Other Transactions with Affiliates
(a) Investment Manager: The Trust's investments are managed by Zweig/Glaser
Advisers (the "Manager"). The Manager's investment advisory fee is based on the
average daily net assets of each Series at the following annual rates: Zweig
Strategy Fund and Zweig Growth & Income Fund - 0.75%; Zweig Appreciation Fund,
Zweig Managed Assets and Zweig Foreign Equity Fund - 1.00%; Zweig Government
Fund - 0.60%; and Zweig Cash Fund - 0.50%. The fees are accrued daily and paid
monthly. Investment advisory fees for the year ended December 31, 1997
aggregated $20,527,924 before expense reimbursements.
The Manager has voluntarily undertaken to limit the expenses of Zweig Cash Fund
(exclusive of taxes, interest, brokerage commissions, the distribution fees
described below and extraordinary expenses) until April 30, 1998 to 0.35% of its
average daily net assets. During the year ended December 31, 1997, the Manager's
reimbursements to Zweig Cash Fund aggregated $251,453. The Manager reserves the
right to discontinue this expense limitation at any time after April 30, 1998.
The Manager has voluntarily undertaken to limit the expenses of Zweig Growth &
Income Fund (exclusive of taxes, interest, brokerage commissions, the
distribution fees described below and extraordinary expenses) until April 30,
1998 to 1.00% of its average daily net assets. During the year ended December
31, 1997, the Manager's reimbursements to Zweig Growth & Income Fund aggregated
$148,968. The Manager reserves the right to discontinue this expense limitation
at any time after April 30, 1998.
The Manager has voluntarily undertaken to limit the expenses of Zweig Foreign
Equity Fund (exclusive of taxes, interest, brokerage commissions, the
distribution fees described below and extraordinary expenses) until April 30,
1998 to 1.50% of its average daily net assets. During the year ended December
31, 1997, the Manager's reimbursements to Zweig Foreign Equity Fund aggregated
$10,260. The Manager reserves the right to discontinue this expense limitation
at any time after April 30, 1998.
(b) Principal Distributor: Zweig Securities Corp. (the "Distributor") serves as
principal distributor of shares of the Trust. The Trust's Class A Shares
(excluding Zweig Cash Fund shares) are sold with an initial sales charge, Class
B Shares and Class C Shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge, and Class I Shares and Class M
Shares are sold without a sales charge. During the year ended December 31, 1997,
the Distributor's share of the initial and contingent deferred sales charges was
$290,545 and $567,868, respectively.
Pursuant to a Rule 12b-1 plan of distribution, the Trust pays the Distributor a
combined service and distribution fee equal to an annual rate of 0.30% of
average daily net assets for each Series of Class A Shares, 1.00% for each
Series of Class B Shares, and 1.00% for Class C Shares of Zweig Strategy Fund,
Zweig Appreciation Fund, Zweig Managed Assets, Zweig Growth & Income Fund and
Zweig Foreign Equity Fund, 0.75% for Class C Shares of Zweig Government Fund and
0.30% for Class C Shares of Zweig Cash Fund, respectively. A separate Rule 12b-1
distribution sharing plan for Class M Shares of Zweig Cash Fund provides that
service organizations may be paid up to 0.30% of average daily net assets
equally by the Class M Shares and the Manager. Class I Shares, which are
available for purchase by tax-exempt retirement plans of the Distributor and its
affiliates and certain institutional investors, do not have a Rule 12b-1 Plan.
During the year ended December 31, 1997, the Trust paid Zweig Securities Corp.
brokerage commissions of $420,251 in connection with portfolio transactions
effected by it.
One Trustee and all of the officers of the Trust are also officers of the
Manager and/or the Distributor.
43
<PAGE>
================================================================================
Note 4--Purchases and Sales of Securities and Forward Currency Contracts
During the year ended Decenber 31, 1997, purchase and sale transactions of
the Trust, excluding repurchase transactions, short-term obligations held to
maturity, and futures contracts, were:
<TABLE>
<CAPTION>
Zweig Zweig Zweig Zweig Growth Zweig Zweig
Strategy Appreciation Managed & Income Foreign Equity Government
Fund Fund Assets Fund Fund Fund
----------- ---------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Securities purchases ........... $1,324,466,775 $350,152,690 $749,041,948 $40,630,946 $2,324,561 $44,341,946
Securities sales ............... 1,521,638,910 372,579,334 701,425,542 19,780,794 141,358 43,183,166
</TABLE>
Forward currency contracts outstanding at December 31, 1997, for Zweig
Managed Assets were:
<TABLE>
<CAPTION>
Net Unrealized
Settlement Appreciation
Contracts to Deliver In Exchange For Date Value (Depreciation)
----------------------- --------------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Sales
Australian Dollar .......... A$ 38,300,000 $ 25,210,975 3/18/98 $ (24,999,726) $ 211,249
Belgium Franc .............. BEF 200,000,000 5,494,505 3/18/98 (5,422,464) 72,041
Danish Krone ............... DKr 74,300,000 11,054,903 3/18/98 (10,893,420) 161,483
Finnish Markka ............. Fim 57,500,000 10,808,271 3/18/98 (10,608,623) 199,648
French Franc ............... ff 196,000,000 33,218,369 3/18/98 (32,724,047) 494,322
German Deutsche Mark ....... DM 62,500,000 35,488,459 3/18/98 (34,914,369) 574,090
Italian Lira ............... Lira 43,000,000,000 24,751,763 3/18/98 (24,312,415) 439,348
Netherlands Guilder ........ NLG 22,200,000 11,147,124 3/18/98 (11,002,289) 144,835
Norwegian Krona ............ NOK 77,800,000 10,745,953 3/18/98 (10,599,589) 146,364
Spanish Peseta ............. Pta 4,370,000,000 29,187,817 3/18/98 (28,729,372) 458,445
Swedish Krona .............. Skr 84,500,000 10,943,397 3/18/98 (10,671,765) 271,632
Swiss Franc ................ Sf 8,000,000 5,649,718 3/18/98 (5,533,713) 116,005
U.K. Pound Sterling ........ (pound) 16,000,000 26,028,800 3/18/98 (26,227,632) (198,832)
------------- ------------- -----------
$ 239,730,054 $(236,639,424) $ 3,090,630
============= ============= ===========
Purchases
Australian Dollar .......... $ 25,141,555 A$ 38,300,000 3/18/98 $ 24,999,726 $ (141,829)
======================= ============= ===========
Net Unrealized Appreciation on Foreign Forward Currency Contracts ................................................. $ 2,948,801
===========
</TABLE>
Forward currency contracts outstanding at December 31, 1997, for Zweig
Foreign Equity Fund were:
<TABLE>
<CAPTION>
Settlement Net Unrealized
Contracts to Deliver In Exchange For Date Value Appreciation
----------------------- --------------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Sales
Australian Dollar .......... A$ 108,310 $ 72,718 1/30/98 $ (70,624) $ 2,094
Austrian Schilling ......... AS 1,005,329 81,010 1/30/98 (79,600) 1,410
Belgium Franc .............. BEF 3,340,294 92,574 1/30/98 (90,317) 2,257
Canadian Dollar ............ Can$ 100,279 70,969 1/30/98 (70,147) 822
Danish Krone ............... DKr 363,850 54,912 1/30/98 (53,222) 1,690
Finnish Markka ............. Fim 285,016 54,392 1/30/98 (52,442) 1,950
French Franc ............... ff 1,265,889 214,043 1/30/98 (210,799) 3,244
German Deutsche Mark ....... DM 384,573 217,428 1/30/98 (214,268) 3,160
Italian Lira ............... Lira 287,630,784 166,006 1/30/98 (162,637) 3,369
Japanese Yen ............... (Y) 8,849,074 68,757 1/30/98 (68,370) 387
Netherlands Guilder ........ NLG 308,388 154,620 1/30/98 (152,414) 2,206
Norwegian Krona ............ NOK 440,473 61,007 1/30/98 (59,857) 1,150
Spanish Peseta ............. Pta 32,357,142 217,573 1/30/98 (212,443) 5,130
Swedish Krona .............. Skr 1,138,099 147,133 1/30/98 (143,561) 3,572
Swiss Franc ................ Sf 250,403 175,666 1/30/98 (172,323) 3,343
U.K. Pound Sterling ........ (pound) 126,287 209,981 1/30/98 (207,477) 2,504
------------- ------------- -----------
$ 2,058,789 $ (2,020,501) $ 38,288
============= ============= ===========
Purchases
Canadian Dollar ............ $ 70,125 Can$ 100,279 1/30/98 $ 70,147 $ 22
======================= ============= ===========
Net Unrealized Appreciation on Foreign Forward Currency Contracts ................................................. $ 38,310
===========
</TABLE>
Note 5--Liabilities--December 31, 1997 (in thousands)
<TABLE>
<CAPTION>
Zweig Zweig Zweig Zweig Growth Zweig Zweig Zweig
Strategy Appreciation Managed & Income Foreign Equity Government Cash
Fund Fund Assets Fund Fund Fund Fund
-------- ------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Advisory fee .................... $ 50 $ 31 $ 29 $ 1 $ -- $ 1 $ 2
Distribution and service fees ... 700 298 387 22 2 15 5
Capital shares redeemed ......... 1,431 453 1,071 20 -- 86 1,321
Dividends ....................... -- -- -- -- -- -- 278
Securities purchased ............ 28 169 199 -- -- -- --
Accrued expenses ................ 474 247 302 30 9 32 22
----------------------------------------------------------------------------------------------
Total Liabilities ........... $ 2,683 $ 1,198 $ 1,988 $ 73 $ 11 $ 134 $ 1,628
==============================================================================================
</TABLE>
44
<PAGE>
================================================================================
Note 6--Net Assets--December 31, 1997 (in thousands)
<TABLE>
<CAPTION>
Zweig Zweig
Zweig Zweig Zweig Growth Foreign Zweig Zweig
Strategy Appreciation Managed & Income Equity Government Cash
Fund Fund Assets Fund Fund Fund Fund
----------- --------- --------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets consist of:
Capital paid-in ...................... $ 997,938 $ 398,715 $ 496,653 $ 29,604 $ 3,284 $47,253 $62,168
Undistributed
(overdistributed)
net investment income .............. (119) (341) (94) (3) (1) 29 --
Accumulated net realized
gain (loss) ........................ 38,148 19,648 (5,282) 532 (11) (7,927) --
Net unrealized
appreciation
of investments ..................... 199,156 149,228 48,019 3,834 44 1,171 --
-----------------------------------------------------------------------------------------
$ 1,235,123 $ 567,250 $ 539,296 $ 33,967 $ 3,316 $40,526 $62,168
=========================================================================================
</TABLE>
Note 7--Capital Shares
The Trust has unlimited authorized shares of beneficial interest ($0.10 par
value), divided into Series and issued in classes (see Note 1). Capital share
transactions for the years ended December 31, 1997 and 1996 are set forth below.
<TABLE>
<CAPTION>
Class A Class B Class C Class I
---------------------- --------------------- ------------------------- --------------------
1997 1996 1997 1996(2) 1997 1996 1997 1996(3)
--------- ---------- --------- --------- ----------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Zweig Strategy Fund
Sold ......................... 2,807,598 5,310,565 2,096,572 2,674,142 4,383,171 11,001,933 10 55,405
Issued in reinvestment
of dividends and
distributions .............. 3,252,707 3,017,222 381,258 187,019 2,907,657 3,044,500 7,517 4,509
Redeemed ..................... (8,921,797) (8,068,624) (441,368) (52,868) (11,191,028) (9,152,149) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) ...... (2,861,492) 259,163 2,036,462 2,808,293 (3,900,200) 4,894,284 7,527 59,914
====================================================================================================================================
Zweig Appreciation Fund
Sold ......................... 1,060,202 1,366,791 734,181 478,983 1,773,391 2,349,161 10 119,892
Issued in reinvestment
of dividends and
distributions .............. 1,003,794 2,080,245 67,139 60,465 719,068 1,645,320 10,840 17,411
Redeemed ..................... (3,337,609) (3,223,564) (108,903) (11,560) (2,605,708) (2,475,552) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) ...... (1,273,613) 223,472 692,417 527,888 (113,249) 1,518,929 10,850 137,303
====================================================================================================================================
Zweig Managed Assets
Sold ......................... 742,760 935,264 877,242 488,970 2,570,807 3,156,176 20,576 213,961
Issued in reinvestment
of dividends and
distributions .............. 1,025,936 582,313 133,637 19,353 3,309,309 1,875,546 26,984 8,711
Redeemed ..................... (2,057,937) (3,815,288) (85,618) (16,845) (7,007,366) (13,854,155) (67,477) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) ...... (289,241) (2,297,711) 925,261 491,478 (1,127,250) (8,822,433) (19,917) 222,672
====================================================================================================================================
Zweig Growth & Income Fund (4)
Sold ......................... 342,607 222,285 665,724 239,579 692,913 458,447 111,492 8,843
Issued in reinvestment
of dividends ............... 7,885 265 5,498 112 9,040 177 2,097 13
Redeemed ..................... (73,249) (2,023) (39,965) (2,815) (112,060) (62,305) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase ................. 277,243 220,527 631,257 236,876 589,893 396,319 113,589 8,856
====================================================================================================================================
Zweig Foreign Equity Fund (5)
Sold ......................... 40,901 -- 62,246 -- 102,702 -- 88,192 --
Issued in reinvestment
of dividends ............... 40 -- 35 -- 39 -- 140 --
Redeemed ..................... (4,805) -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase ................. 36,136 -- 62,281 -- 102,741 -- 88,332 --
====================================================================================================================================
Zweig Government Fund
Sold ......................... 75,151 72,327 105,575 60,506 96,406 211,764 101,214 --
Issued in reinvestment
of dividends ............... 91,379 113,204 2,045 559 33,910 49,766 2,655 --
Redeemed ..................... (834,248) (799,865) (40,014) (9,019) (578,962) (706,323) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) ...... (667,718) (614,334) 67,606 52,046 (448,646) (444,793) 103,869 --
====================================================================================================================================
Zweig Cash Fund (1)
Sold ......................... 2,563,843 3,251,313 1,317,811 267,603 3,683,651 6,804,176 1,359,182 1,497,941
Issued in reinvestment
of dividends ............... 115,524 139,547 13,873 1,135 151,967 156,899 59,598 2,841
Redeemed ..................... (3,567,262) (3,691,361) (1,028,383) (235,787) (5,710,310) (6,884,138) (2,720,000) (100,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) ...... (887,895) (300,501) 303,301 32,951 (1,874,692) 76,937 (1,301,220) 1,400,782
====================================================================================================================================
</TABLE>
(1) For the years ended December 31, 1997 and 1996, respectively, shares of
Zweig Cash Fund Class M sold were 351,104,043 and 302,464,048; shares
issued in reinvestment of dividends were 1,386,181 and 1,661,513; and
shares redeemed were 341,161,977 and 307,369,088 for a net increase
(decrease) of 11,328,247 and (3,243,527) shares, respectively.
(2) Class B Shares commenced operations on April 8, 1996.
(3) Class I Shares commenced operations on November 1, 1996, except for Zweig
Government Fund which commenced operations on July 14, 1997.
(4) Zweig Growth & Income Fund commenced operations on November 26, 1996.
(5) Zweig Foreign Equity Fund commenced operations on November 24, 1997.
Note 8--Borrowings
The Trust has entered into a Liquidity Line of Credit with The Bank of New
York for $100,000,000. The Trust has not used the Line of Credit since it was
established on July 21, 1997. If a Series uses the Line of Credit, it will be
collateralized by that Series' portfolio.
45
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
Selected Data for each share of capital stock outstanding throughout the
years indicated
<TABLE>
<CAPTION>
Ratios Average
Net Divi- Distri- to Average Commission
Realized Total dends butions Total Net Assets Rate Per
Net and from from from Divi- Net --------------- Port- Share on Net
Asset Net Unreal Invest- Net Net dends Asset Net folio Port- Assets
Value Invest- ized ment Invest- Realized and Value Invest- Turn- folio End of
Year Beginning ment Gains Opera- ment Capital Distri- End of Total ment over Trans- Year (in
Ended of Year Income (Losses) tions Income Gains butions Year Return*** Expenses Income Rate actions thousands)
- ------ -------- -------- -------- -------- ------- ------- --------- ------ ------- ------ ------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zweig Strategy Fund Class A
1997 $15.01 $0.20 $2.49 $2.69 $(0.19) $(1.74) $(1.93) $15.77 18.07% 1.24% 1.20% 126% $0.0303 $565,721
1996 14.51 0.20 1.68 1.88 (0.20) (1.18) (1.38) 15.01 13.00 1.28 1.27 181 0.0302 581,149
1995 12.36 0.27 2.80 3.07 (0.37) (0.55) (0.92) 14.51 25.12 1.27 1.92 95 0.0290 558,286
1994 12.52 0.24 (0.10) 0.14 (0.20) (0.10) (0.30) 12.36 1.14 1.40 1.90 70 N/A 424,805
1993 13.60 0.13 1.72 1.85 (0.12) (2.81) (2.93) 12.52 14.97 1.43 1.00 359 N/A 405,884
Zweig Strategy Fund Class B (3)
1997 15.07 0.07 2.53 2.60 (0.07) (1.74) (1.81) 15.86 17.33 1.94 0.49 126 0.0303 76,820
1996 15.12 0.06 1.13 1.19 (0.06) (1.18) (1.24) 15.07 7.88** 1.98* 0.57* 181 0.0302 42,317
Zweig Strategy Fund Class C
1997 15.04 0.07 2.52 2.59 (0.08) (1.74) (1.82) 15.81 17.30 1.94 0.50 126 0.0303 591,512
1996 14.56 0.11 1.66 1.77 (0.11) (1.18) (1.29) 15.04 12.19 1.98 0.57 181 0.0302 621,334
1995 12.35 0.16 2.82 2.98 (0.22) (0.55) (0.77) 14.56 24.26 1.97 1.22 95 0.0290 530,300
1994 12.51 0.15 (0.10) 0.05 (0.11) (0.10) (0.21) 12.35 0.41 2.10 1.20 70 N/A 307,011
1993 13.61 0.05 1.71 1.76 (0.05) (2.81) (2.86) 12.51 14.18 2.13 0.30 359 N/A 188,631
Zweig Strategy Fund Class I (4)
1997 15.07 0.23 2.54 2.77 (0.23) (1.74) (1.97) 15.87 18.52 0.94 1.50 126 0.0303 1,070
1996 15.42 0.04 0.83 0.87 (0.04) (1.18) (1.22) 15.07 5.68** 0.98* 1.57* 181 0.0302 903
Zweig Appreciation Fund Class A
1997 15.90 0.10 3.67 3.77 (0.09) (1.31) (1.40) 18.27 23.83 1.52 0.61 77 0.0305 293,809
1996 15.91 0.17 2.25 2.42 (0.17) (2.26) (2.43) 15.90 15.39 1.62 1.03 88 0.0293 275,935
1995 13.54 0.16 3.05 3.21 (0.33) (0.51) (0.84) 15.91 24.00 1.63 1.10 68 0.0340 272,590
1994 14.33 0.16 (0.43) (0.27) (0.06) (0.46) (0.52) 13.54 (1.83) 1.70 1.09 97 N/A 213,400
1993 13.10 0.07 1.83 1.90 (0.06) (0.61) (0.67) 14.33 14.65 1.73 0.52 69 N/A 230,230
Zweig Appreciation Fund Class B (3)
1997 15.82 (0.02) 3.64 3.62 -- (1.31) (1.31) 18.13 22.97 2.22 (0.13) 77 0.0305 22,122
1996 16.34 0.03 1.74 1.77 (0.03) (2.26) (2.29) 15.82 11.01** 2.32* 0.33* 88 0.0293 8,350
Zweig Appreciation Fund Class C
1997 15.79 (0.02) 3.64 3.62 -- (1.31) (1.31) 18.10 23.01 2.22 (0.09) 77 0.0305 248,584
1996 15.83 0.06 2.22 2.28 (0.06) (2.26) (2.32) 15.79 14.54 2.32 0.33 88 0.0293 218,714
1995 13.36 0.06 3.03 3.09 (0.11) (0.51) (0.62) 15.83 23.20 2.33 0.40 68 0.0340 195,204
1994 14.19 0.06 (0.43) (0.37) -- (0.46) (0.46) 13.36 (2.55) 2.40 0.39 97 N/A 139,397
1993 13.01 (0.01) 1.80 1.79 -- (0.61) (0.61) 14.19 13.84 2.43 (0.18) 69 N/A 105,957
Zweig Appreciation Fund Class I (4)
1997 16.04 0.15 3.71 3.86 (0.13) (1.31) (1.44) 18.46 24.17 1.22 0.90 77 0.0305 2,735
1996 17.28 0.04 1.02 1.06 (0.04) (2.26) (2.30) 16.04 6.30** 1.32* 1.33* 88 0.0293 2,202
Zweig Managed Assets Class A (1)
1997 12.75 0.13 1.83 1.96 -- (1.99) (1.99) 12.72 15.47 1.59 2.40 168 0.0262 110,908
1996 12.48 0.35 0.86 1.21 (0.45) (0.49) (0.94) 12.75 9.80 1.64 2.64 187 0.0231 114,837
1995 11.76 0.47 1.40 1.87 (0.75) (0.40) (1.15) 12.48 16.26 1.59 3.69 239 0.0314 141,110
1994 12.38 0.33 (0.69) (0.36) (0.26) -- (0.26) 11.76 (2.93) 1.68 2.70 299 N/A 154,441
1993 11.34 0.22 1.13 1.35 (0.14) (0.17) (0.31) 12.38 11.98 1.67* 1.93* 196 N/A 121,620
Zweig Managed Assets Class B (3)
1997 12.90 0.04 1.84 1.88 -- (1.99) (1.99) 12.79 14.67 2.29 1.70 168 0.0262 18,117
1996 12.43 0.13 1.00 1.13 (0.17) (0.49) (0.66) 12.90 9.11** 2.34* 1.94* 187 0.0231 6,339
Zweig Managed Assets Class C (1)
1997 12.76 0.04 1.82 1.86 -- (1.99) (1.99) 12.63 14.67 2.29 1.70 168 0.0262 407,625
1996 12.49 0.27 0.85 1.12 (0.36) (0.49) (0.85) 12.76 9.03 2.34 1.94 187 0.0231 426,194
1995 11.73 0.38 1.40 1.78 (0.62) (0.40) (1.02) 12.49 15.44 2.29 2.99 239 0.0314 527,432
1994 12.36 0.23 (0.68) (0.45) (0.18) -- (0.18) 11.73 (3.66) 2.38 2.00 299 N/A 570,710
1993 11.34 0.15 1.13 1.28 (0.09) (0.17) (0.26) 12.36 11.34 2.37* 1.23* 196 N/A 429,088
Zweig Managed Assets Class I (4)
1997 12.99 0.09 1.96 2.05 -- (1.99) (1.99) 13.05 15.88 1.29 2.70 168 0.0262 2,645
1996 13.02 0.05 0.45 0.50 (0.04) (0.49) (0.53) 12.99 3.83** 1.34* 2.94* 187 0.0231 2,893
Zweig Growth & Income Fund Class A (5)
1997(14) 11.37 0.24 2.36 2.60 (0.24) -- (0.24) 13.73 23.12 1.30 2.26 120 0.0307 6,836
1996(13) 11.34 0.01 0.03 0.04 (0.01) -- (0.01) 11.37 0.39** 1.30* 1.47* 2 0.0260 2,508
Zweig Growth & Income Fund Class B (5)
1997(14) 11.37 0.16 2.36 2.52 (0.16) -- (0.16) 13.73 22.29 2.00 1.56 120 0.0307 11,920
1996(13) 11.34 0.01 0.03 0.04 (0.01) -- (0.01) 11.37 0.33** 2.00* 0.77* 2 0.0260 2,693
Zweig Growth & Income Fund Class C (5)
1997(14) 11.38 0.17 2.33 2.50 (0.17) -- (0.17) 13.71 22.15 2.00 1.56 120 0.0307 13,525
1996(13) 11.34 0.01 0.04 0.05 (0.01) -- (0.01) 11.38 0.42** 2.00* 0.77* 2 0.0260 4,509
Zweig Growth & Income Fund Class I (5)
1997(14) 11.37 0.24 2.40 2.64 (0.24) -- (0.24) 13.77 23.42 1.00 2.56 120 0.0307 1,686
1996(13) 11.34 0.02 0.03 0.05 (0.02) -- (0.02) 11.37 0.41** 1.00* 1.77* 2 0.0260 101
Zweig Foreign Equity Fund Class A (7)
1997(15) 11.34 0.01 0.11 0.12 (0.01) -- (0.01) 11.45 1.09** 1.80* 1.20* 64* 0.0336 414
Zweig Foreign Equity Fund Class B (7)
1997(15) 11.34 0.01 0.11 0.12 (0.01) -- (0.01) 11.45 1.03** 2.50* 0.50* 64* 0.0336 713
Zweig Foreign Equity Fund Class C (7)
1997(15) 11.34 0.01 0.11 0.12 (0.01) -- (0.01) 11.45 1.03** 2.50* 0.50* 64* 0.0336 1,177
</TABLE>
46
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Ratios Average
Net Divi- Distri- to Average Commission
Realized Total dends butions Total Net Assets Rate Per
Net and from from from Divi- Net --------------- Port- Share on Net
Asset Net Unreal Invest- Net Net dends Asset Net folio Port- Assets
Value Invest- ized ment Invest- Realized and Value Invest- Turn- folio End of
Year Beginning ment Gains Opera- ment Capital Distri- End of Total ment over Trans- Year (in
Ended of Year Income (Losses) tions Income Gains butions Year Return*** Expenses Income Rate actions thousands)
- ------ -------- -------- -------- -------- ------- ------- --------- ------ ------- ------ ------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zweig Foreign Equity Fund Class I (7)
1997(15) $11.34 $0.02 $0.12 $0.14 $(0.02) -- $(0.02) $11.46 1.22%** 1.50%* 1.50%* 64%*$0.0336 $ 1,012
Zweig Government Fund Class A
1997 9.81 0.52 0.28 0.80 (0.52) -- (0.52) 10.09 8.42 1.36 5.26 128 N/A 28,062
1996(12) 10.39 0.53 (0.58) (0.05) (0.53) -- (0.53) 9.81 (0.42) 1.14 5.25 170 N/A 33,848
1995 9.63 0.52 0.77 1.29 (0.53) -- (0.53) 10.39 13.84 1.26 5.22 195 N/A 42,207
1994 10.43 0.50 (0.79) (0.29) (0.51) -- (0.51) 9.63 (2.83) 1.28 5.07 191 N/A 47,622
1993 10.01 0.55 0.46 1.01 (0.59) -- (0.59) 10.43 10.35 1.30 5.46 256 N/A 60,207
Zweig Government Fund Class B(3)
1997 9.86 0.46 0.26 0.72 (0.43) -- (0.43) 10.15 7.55 2.06 4.56 128 N/A 1,215
1996(12) 9.76 0.29 0.11 0.40 (0.30) -- (0.30) 9.86 4.16** 1.84* 4.55* 170 N/A 513
Zweig Government Fund Class C
1997 9.81 0.48 0.27 0.75 (0.48) -- (0.48) 10.08 7.86 1.81 4.81 128 N/A 10,199
1996(12) 10.38 0.49 (0.58) (0.09) (0.48) -- (0.48) 9.81 (0.82) 1.59 4.80 170 N/A 14,330
1995 9.62 0.48 0.76 1.24 (0.48) -- (0.48) 10.38 13.27 1.71 4.77 195 N/A 19,778
1994 10.40 0.46 (0.79) (0.33) (0.45) -- (0.45) 9.62 (3.18) 1.73 4.62 191 N/A 22,599
1993 10.02 0.52 0.41 0.93 (0.55) -- (0.55) 10.40 9.48 1.75 5.01 256 N/A 21,301
Zweig Government Fund Class I (6)
1997 9.88 0.26 0.23 0.49 (0.26) -- (0.26) 10.11 5.01** 1.06* 5.56* 128 N/A 1,050
Zweig Cash Fund Class A (2)
1997(10) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 4.97 0.65 4.85 N/A N/A 2,472
1996(9) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 4.83 0.65 4.73 N/A N/A 3,360
1995(8) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 5.08 0.87 4.97 N/A N/A 3,661
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.55** 0.62** 2.52** N/A N/A 4,303
Zweig Cash Fund Class B (3)
1997(10) 1.00 0.04 -- 0.04 (0.04) -- (0.04) 1.00 4.24 1.35 4.21 N/A N/A 336
1996(9) 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 3.03** 1.35* 4.03* N/A N/A 33
Zweig Cash Fund Class C (2)
1997(10) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 4.97 0.65 4.84 N/A N/A 2,661
1996(9) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 4.83 0.65 4.73 N/A N/A 4,535
1995(8) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 5.08 0.87 4.97 N/A N/A 4,458
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.55** 0.61** 2.52** N/A N/A 5,040
Zweig Cash Fund Class I (4)
1997(10) 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 5.28 0.35 5.10 N/A N/A 100
1996(9) 1.00 0.01 -- 0.01 (0.01) -- (0.01) 1.00 0.80** 0.35* 5.03* N/A N/A 1,401
Zweig Cash Fund Class M (11)
1997 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 5.22 0.41 5.10 N/A N/A 56,599
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 5.09 0.40 4.98 N/A N/A 45,271
1995 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1.00 5.32 0.64 5.20 N/A N/A 48,515
1994 1.00 0.04 -- 0.04 (0.04) -- (0.04) 1.00 3.67 0.70 3.58 N/A N/A 78,149
1993 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.86 0.70 2.83 N/A N/A 92,471
</TABLE>
- ----------
(1) Commenced operations on February 8, 1993.
(2) Commenced operations on May 1, 1994.
(3) Commenced operations on April 8, 1996.
(4) Commenced operations on November 1, 1996.
(5) Commenced operations on November 26, 1996.
(6) Commenced operations on July 14, 1997.
(7) Commenced operations on November 24, 1997.
(8) During 1995, the Manager voluntarily reimbursed Zweig Cash Fund Class A and
Class C $.005 and $.003 per share (0.47% and 0.28% ratio of expenses to
average net assets), respectively.
(9) During 1996, the Manager voluntarily reimbursed Zweig Cash Fund Class A,
Class B, Class C and Class I $.007, $.007, $.006 and $.004 per share
(0.66%, 0.60%, 0.60% and 0.38% ratio of expenses to average net assets),
respectively.
(10) During 1997, the Manager voluntarily reimbursed Zweig Cash Fund Class A,
Class B, Class C and Class I $.011, $.058, $.01 and $.005 per share (1.09%,
6.14%, 1.00% and 0.47% ratio of expenses to average net assets),
respectively.
(11) During 1997, 1996, 1995, 1994 and 1993, the Manager voluntarily reimbursed
Zweig Cash Fund Class M $.003, $.003, $.001, $.002 and $.001 per share
(0.30%,0.32%, 0.10%, 0.15% and 0.08% ratio of expenses to average net
assets), respectively.
(12) During 1996, the Manager voluntarily reimbursed Zweig Government Fund Class
A, Class B and Class C $.002, $.003 and $.002 per share ( 0.22%, 0.26% and
0.22% ratio of expenses to average net assets), respectively.
(13) During 1996, the Manager voluntarily reimbursed Zweig Growth & Income Fund
Class A, Class B, Class C and Class I $.021, $.021, $.020 and $.021 per
share (2.07%, 2.07%, 2.07% and 2.07% ratio of expenses to average net
assets), respectively.
(14) During 1997, the Manager voluntarily reimbursed Zweig Growth & Income Fund
Class A, Class B, Class C and Class I $.08, $.08, $.08 and $.08 per share
(0.70%, 0.70%, 0.70% and 0.70% ratio of expenses to average net assets),
respectively.
(15) During 1997, the Manager voluntarily reimbursed Zweig Foreign Equity Fund
Class A, Class B, Class C and Class I $.03, $.03, $.03 and $.03 per share
(3.35%, 3.35%, 3.35% and 3.35% ratio of expenses to average net assets),
respectively.
* Annualized
** Not Annualized
*** Total Return does not consider the effect of any initial or contingent
deferred sales charge.
+ Based on the average of the number of shares outstanding during the year.
47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
The Shareholders and Board of Trustees of Zweig Series Trust:
We have audited the accompanying statements of net assets of Zweig Series
Trust (comprising the Zweig Strategy Fund, Zweig Appreciation Fund, Zweig
Managed Assets, Zweig Growth & Income Fund, Zweig Foreign Equity Fund, Zweig
Government Fund and Zweig Cash Fund) as of December 31, 1997 and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and financial
highlights for each of the five years in the period then ended with respect to
Zweig Strategy Fund, Zweig Appreciation Fund, Zweig Managed Assets, Zweig
Government Fund and Zweig Cash Fund; the related statements of operations and
changes in net assets and financial highlights for the year then ended, and the
statement of changes in net assets and financial highlights for the period
November 26, 1996 (commencement of operations) to December 31, 1996 with respect
to Zweig Growth & Income Fund; and the related statements of operations and
changes in net assets and financial highlights for the period November 24, 1997
(commencement of operations) to December 31, 1997 with respect to Zweig Foreign
Equity Fund. These financial statements and financial highlights are the
responsibility of the management of the Trust. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds comprising Zweig Series Trust as of December 31,
1997, the results of their operations, the changes in their net assets and
financial highlights for each of the periods referred to above, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
January 23, 1998
48
<PAGE>
ZWEIG SERIES TRUST
================================================================================
Trustees Officers
James Balog Eugene J. Glaser
Claire B. Benenson Chairman, Chief Executive Officer
S. Leland Dill and Trustee
Eugene J. Glaser
Donald B. Romans Martin E. Zweig
President
David Katzen
Senior Vice President
Barry M. Mandinach
First Vice President
Carlton B. Neel
First Vice President
Alfred J. Ratcliffe
First Vice President & Treasurer
Charles I. Leone
First Vice President
& Assistant Secretary
Annemarie Gilly
First Vice President
Jeffrey Lazar
Vice President
Marc Baltuch
Secretary
Thomas Disbrow
Assistant Vice President & Assistant Treasurer
Beth Abraham
Assistant Vice President
Rhonda Berzner
Assistant Vice President
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Investment Manager
Zweig/Glaser Advisers
900 Third Avenue--31st Floor
New York, NY 10022-4728
Principal Distributor
Zweig Securities Corp.
900 Third Avenue--31st Floor
New York, NY 10022-4728
Custodian
The Bank of New York
48 Wall Street
New York, New York 10015
Transfer Agent
State Street Bank & Trust Co.
225 Franklin Street
Boston, Massachusetts 02110
Servicing Agent
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
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
Design: The Blank Page, Inc. New York, NY
<PAGE>
Zweig
Mutual Funds
900 Third Avenue
New York, NY 10022-4728
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NEW
ROTH IRA KIT
NOW AVAILABLE. ==============================================================
PLEASE CALL VISIT OUR WEBSITE AT WWW.ZWEIG.COM
1-800-272-2700. ===============================================
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[LOGO] This annual report is printed on recycled paper.
(C) Zweig Securities Corp. Member NASD.
T974
