EUCLID MUTUAL FUNDS, N-1A, 1998-02-05

EUCLID MUTUAL FUNDS
N-1A, 1998-02-05

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As filed with the Securities and Exchange Commission on February 5, 1998
Registration Nos. 2-________ and 811-_______

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. ___ [ ]

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X ]
Amendment No. ___ [ ]

EUCLID MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
900 Third Avenue - 31st Floor
New York, New York 10022
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code: (212) 635-9800

EUGENE J. GLASER, President
Euclid Advisors LLC
900 Third Avenue - 31st Floor
New York, New York 10022
(Name and Address of Agent for Service)

Copy to:
PAUL S. SCHREIBER, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.

Title of Securities Being Registered: Shares of Beneficial Interest of the
Euclid Market Neutral Fund.

The Registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.

DECLARATION PURSUANT TO RULE 24f-2

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended, the Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933, as amended.

<PAGE>

EUCLID MUTUAL FUNDS
CONTENTS

This Registration Statement on Form N-1A consists of the following:

1. Facing Sheet

2. Contents

3. Cross-Reference Sheet

4. Part A - Prospectus for all shares of Euclid Market Neutral Fund

5. Part B - Statement of Additional Information for all shares of Euclid
Market Neutral Fund

6. Part C - Other Information

7. Signature Sheet

8. Exhibits

<PAGE>

EUCLID MUTUAL FUNDS

Cross-Reference Sheet pursuant to Rule 495(a) for all shares of
Euclid Market Neutral Fund

<TABLE>
<CAPTION>
<S> <C>
Form N-1A
=============================================== ===============================================
Item No. Location
- ------- --------
- ---------------------------------------------- -----------------------------------------------

Part A Prospectus
- ---------------------------------------------- -----------------------------------------------
1. Cover Page Cover
- ---------------------------------------------- -----------------------------------------------
2. Synopsis Cover
Fee Table
- ---------------------------------------------- -----------------------------------------------
3. Condensed Financial Information Not Applicable
- ---------------------------------------------- -----------------------------------------------
4. General Description of Registrant Cover
Our General Investment Philosophy and Strategy;
Investment Objective;
Organization of the Fund;
Other Investment Policies;
Risk Factors
- ---------------------------------------------- -----------------------------------------------
5. Management of the Registrant Organization of the Fund
The Manager and Management Fee;
Cover;
The Portfolio Manager;
How to Invest in the Fund;
How to Sell Your Fund Shares
- ---------------------------------------------- -----------------------------------------------
5A. Management's Discussion of Fund Performance Information
Performance
- ---------------------------------------------- -----------------------------------------------
6. Capital Stock and Other Securities Some Things You Should Know About Euclid
Market Neutral Fund;
Organization of the Fund;
Choosing Among Classes When Purchasing
Shares;
Cover;
Distributions and Taxes
- ---------------------------------------------- -----------------------------------------------
7. Purchase of Securities Being Fee Table;

<PAGE>

- ---------------------------------------------- -----------------------------------------------
8. Redemption or Repurchase How to Sell Your Fund Shares;
Exchange Privilege;
Choosing Among Classes When Purchasing
Shares;
Fee Table
- ---------------------------------------------- -----------------------------------------------
9. Legal Proceedings Not Applicable
- ---------------------------------------------- -----------------------------------------------

Part B - Statement of Additional Information
- ---------------------------------------------- -----------------------------------------------
10. Cover Page Cover
- ---------------------------------------------- -----------------------------------------------
11. Table of Contents Table of Contents
- ---------------------------------------------- -----------------------------------------------
12. General Information and History Not Applicable
- ---------------------------------------------- -----------------------------------------------
13. Investment Objectives and Policies Investment Objectives and Policies;
Investment Restrictions;
Other Investment Policies
- ---------------------------------------------- -----------------------------------------------
14. Management of the Fund Trustees and Officers of the Trust
- ---------------------------------------------- -----------------------------------------------
15. Control Persons and Principal Holders Control Persons and Principal Holders of
of Securities Securities
16. Investment Advisory and Other Services Investment Management and Other Services;
Trustees and Officers of the Trust
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
- ---------------------------------------------- -----------------------------------------------
18. Capital Stock and Other Securities Purchase and Redemption of Shares
- ---------------------------------------------- -----------------------------------------------
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Reinstatement Privilege;

<PAGE>

=============================================== ===============================================
Item No. Location
- -------- -----------
- ---------------------------------------------- -----------------------------------------------
Offered Involuntary Redemptions;
Exchange Privilege;
Retirement Plans;
Net Asset Value and Taxes
- ---------------------------------------------- -----------------------------------------------
20. Tax Status Net Asset Value and Taxes
21. Underwriters Investment Management and Other Services
22. Calculation of Performance Data Yield and Performance Information
23. Financial Statements Financial Statements

Part C - Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration
Statement on Form N-1A.
===============================================================================================
</TABLE>

<PAGE>

EUCLID MUTUAL FUNDS (LOGO)

EUCLID MARKET NEUTRAL FUND APRIL , 1998

PROSPECTUS

Euclid Market Neutral Fund (the "fund") seeks to increase the value of your
investment (capital appreciation) in bull markets AND in bear markets while
maintaining minimal exposure to general market risk by always having long and
short positions in equity securities. The fund seeks a total return greater than
the return on 3-month U.S. Treasury Bills. For a description of the risks of an
investment in the fund and the differences between an investment in the fund and
in 3-month Treasury Bills, see "Investment Objective" and "Risk Factors."

The fund utilizes proprietary stock selection models that are designed to
predict relative performance of stocks. The Euclid Market Neutral Fund strives
to profit by buying stocks that are ranked favorably (and therefore deemed
likely to outperform) and by selling short stocks that are ranked poorly (and
therefore deemed likely to underperform). It is expected that the fund's
performance will have little correlation with the direction of the stock market.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED
OR INSURED BY, ANY ENTITY OR PERSON, INCLUDING THE U.S. GOVERNMENT AND THE
FEDERAL DEPOSIT INSURANCE CORPORATION.

The fund is the first of a series of Euclid Mutual Funds, a Delaware business
trust (the "Trust). The Trust is an open-end, diversified management investment
company. Call your financial advisor or write us at 900 Third Avenue, New York,
NY 10022-4728, or call 1-800-272-2700 for more information.

This prospectus will help you learn more about the fund. Please read it
carefully before you invest, and keep it for future reference.

Our Statement of Additional Information (SAI) dated April __, 1998, as may be
amended from time to time, includes more information about the fund's policies
and procedures. You can obtain a free copy by calling 1-800-272-2700. It has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The Commission maintains a World Wide Web site
at http://www.sec.gov that contains the SAI and other information regarding the
Trust.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

This Prospectus and the information contained herein are subject to
completion or amendment. These securities may not be sold nor may offers to buy
be accepted prior to the time this Prospectus is delivered in final form. Under
no circumstances shall this Prospectus constitute an offer to sell or
solicitation of any offer to buy, nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws or
any such jurisdiction.

<PAGE>

SOME THINGS YOU SHOULD KNOW ABOUT EUCLID MARKET NEUTRAL FUND

The fund is designed for investors who intend to invest for the long term, not
for investors who intend to liquidate their investment after a short period of
time.

There are risks associated with investing in the fund, including the possible
loss of capital. See "Risk Factors."

The fund offers four classes of shares. Before purchasing, you should determine
which class is right for you. More information about the classes of shares
appears under the heading "Choosing Among Classes When Purchasing Shares."

Euclid Advisors LLC, a subsidiary of Zweig/Glaser Advisers, is the investment
manager of the fund. Zweig Securities Corp. is the principal distributor of the
fund's shares.

TABLE OF CONTENTS
About the Fund
Fee Table
Investment Objective
Our General Investment Philosophy and Strategy
Other Investment Policies
The Portfolio Manager
Risk Factors
Performance Information
About Your Account
Choosing Among Classes When Purchasing Shares
How to Invest in the Fund
How To Sell Your Shares
Exchange Privilege
Net Asset Value
Distributions and Taxes
Other Information
The Distributor
The Manager and the Management Fee
Organization of the Fund

<PAGE>

FEE TABLE
Mutual fund investors bear two types of expenses: transaction expenses and
operating expenses. You pay transaction expenses when you buy shares in the
fund. The fund as a whole pays operating expenses, which reduce the fund's
annual return to you.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Charge on purchases
(as % of Offering Price)........................... 5.50% None None None
Maximum Contingent Deferred Sales Charge (CDSC)...... None* 5.00%** 1.25%*** None
- ---------------
</TABLE>
* A 1% CDSC is imposed on redemptions within 18 months of purchases of $1
million or more originally purchased without an initial sales charge as
described in Quantity Discounts on Class A Shares.

** The maximum CDSC is imposed on Class B Shares redeemed in the first
year; thereafter, the CDSC declines (See "Class B Shares").

*** The CDSC on Class C Shares applies only if redemption occurs in the
first year.

EXAMPLES -- The table below is designed to assist you in understanding the
various costs and expenses you will bear. Because the fund has not yet commenced
operations, the amount for "Other Expenses" is based on estimated expenses for
the first year. Federal regulations require the examples to assume a 5% annual
return, but actual annual returns may vary.

<TABLE>
<CAPTION>
<S> <C> <C> <C
EXAMPLE: You would pay the EXAMPLE: You would pay
following expenses on a $1,000 the following expenses on
investment assuming (a) 5% annual a $1,000 investment
ANNUAL FUND return and (b) redemption at the assuming (a) 5% annual
OPERATING EXPENSES end of each time period: return and (b) no
(As a percentage of average net assets) redemption:

</TABLE>

<TABLE>
<CAPTION>
Total Fund
Management 12b-1 Other Operating 1 3 1 3
EUCLID MARKET NEUTRAL FUND Fees Fees(1) Expenses Expenses(2) Year Years Year Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES.............. 1.50% 0.30% 0.50% 2.30% 72 109 72 109

CLASS B SHARES.............. 1.50% 1.00% 0.50% 3.00% 75 108 25 78

CLASS C SHARES.............. 1.50% 1.00% 0.50% 3.00% 38 78 25 78

CLASS I SHARES.............. 1.50% - 0.50% 2.00% 15 47 15 47
</TABLE>

(1) The 12b-1 Fees include a 0.25% Service Fee, which is paid to financial
services firms, including National Association of Securities Dealers,
Inc. ("NASD") member firms (commencing one year after purchase with
respect to Class B and Class C Shares) for continuous personal service
by such firms to investors in the fund, such as responding to
shareholder inquiries, quoting net asset values, providing current
marketing materials and attending to other shareholder matters. The
distributor retains all or a portion of the asset-based sales charge
also included in the 12b-1 Fees; the remainder is paid to brokers for
promoting sales of the fund's shares. The NASD limits asset based sales
charges to 6.25% of new sales, plus interest. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end
sales charges permitted by the NASD.

(2) The Manager has voluntarily undertaken to limit the expenses of the
fund (exclusive of taxes, interest, brokerage commissions, 12b-1 fees
and extraordinary expenses) until April 30, 1999 to 2.00% of its
average net assets effective upon its commencement of operations. The
Manager reserves the right to discontinue this policy at any time after
April 30, 999. The Total Fund Operating Expenses listed in the table do
not reflect this limitation on expenses.

<PAGE>

INVESTMENT OBJECTIVE
Euclid Market Neutral Fund (the "fund") seeks to increase the value of your
investment over the long-term (capital appreciation) while maintaining minimal
portfolio exposure to general equity market risk by taking both long and short
positions in equity securities. The fund seeks a total return greater than the
return on 3-month U.S. Treasury Bills.

By taking long and short positions in different stocks, the fund attempts to
neutralize the effect of general stock market movements on the fund's
performance. Although the fund's investment strategy seeks to minimize the risk
associated with investing in the equity market, an investment in the fund will
be subject to the risk of poor stock selection by the Manager. In other words,
the Manager may not be successful in executing its strategy of taking long
positions in stocks that outperform the market and short positions in stocks
that underperform the market (see "Risk Factors"). An investment in 3-month U.S.
Treasury Bills is different from an investment in the fund because Treasury
Bills are backed by the full faith and credit of the United States, have a fixed
rate of return and a short duration, and have no risk of losing capital.

Except as explicitly set forth in this prospectus or in the SAI, the investment
objectives and policies of the Fund may be changed without shareholder approval.

OUR GENERAL INVESTMENT PHILOSOPHY AND STRATEGY
We believe that stocks of companies with improving fundamentals will, over time,
outperform stocks of companies with deteriorating fundamentals, though this
relationship may not hold over the short term for various reasons. We also
believe that stocks with low valuations relative to their historical norm will
outperform stocks with high valuations relative to their historical norm. We
seek to identify stocks at the extremes using a variety of proprietary stock
selection models. These models analyze fundamental trends and data on companies,
as well as the price histories of their stocks. Fundamental data includes
earnings, dividends, cash flow, revenues, and book value. Some examples of
valuation measures are price-to-earnings ratio, price-to-cash flow ratio,
price-to-book value ratio, and dividend yield.

Certain stock selection models used are designed to predict relative performance
of stocks comprising broad universes of stocks. Others are designed to perform
favorably within more specific areas of the market, such as growth stocks or
value stocks. Though different models may emphasize different variables, the
models have certain similarities. Generally speaking, they all rank stocks on
the underlying company's fundamentals and how the trend in such fundamentals
compares to the stock's current valuation. A model's output is a best-to-worst
ranking of stocks in the particular universe being examined. Stocks with the
highest scores tend to outperform the average stock in the universe; stocks with
the lowest scores tend to underperform the average stock in the universe.

The fund strives to profit from the models' predictive power by buying stocks
that are ranked favorably (and therefore deemed likely to outperform) and by
selling short stocks that are ranked poorly (and therefore deemed likely to
underperform). Under normal circumstances, certain of the Fund's investments
will be profitable during a general rise in stock prices and certain of the
Fund's investments will be profitable during a general stock market decline. The
Fund will, under normal circumstances, strive to maintain a balance between
investments that are expected to be profitable during a general rise in stock
prices and investments that are expected to be profitable during a general stock
market decline. If the stocks held long outperform the stocks sold short, the
fund will profit, regardless of whether the stocks held long appreciate in value
or whether the stocks sold short depreciate in value. Conversely, if the stocks
held long underperform the stocks sold short, the Fund will incur a loss. The
Fund may also invest in equity derivatives, such as futures and options, when it
deems appropriate. Please read the "Other Investment Policies" and "Risk
Factors" sections of this prospectus for more detailed information about the
investment practices of the fund. The SAI has further details.

We designed Euclid Market Neutral Fund for investors who seek to balance the
need for a total return greater than the return on 3-month U.S. Treasury Bills
in bull markets AND in bear markets with the need to limit the risks associated
with investing in stocks. As with any mutual fund, there is no assurance that
the fund's objectives will be achieved. An investor desiring capital
appreciation with minimal exposure to general equity market risk may wish to
consider the fund.

OTHER INVESTMENT POLICIES
MONEY MARKET INSTRUMENTS. To meet margin requirements, redemptions or pending
investment, the fund may temporarily hold a portion of its assets in full faith
and credit obligations of the United States (e.g., U.S. Treasury Bills) and in
high quality short-term notes, commercial paper or other money market
instruments. To be considered "high quality" such obligations must be rated at
least "A-2" or "AA" by Standard & Poor's ("S&P") or Prime 2 or "Aa" by Moody's
Investors Service, Inc. ("Moody's"), issued by companies having an outstanding
debt issue rated at least "AA" by S&P or at least "Aa" by Moody's, or determined
by the Manager to be of comparable quality to any of the foregoing.

REPURCHASE AGREEMENTS. The fund may buy a security issued by the U. S.
Government (including its agencies) at one price and at the same time agree to
sell the security back to the seller at a higher price, usually on the next
business day (a "repurchase agreement"). Repurchase agreements offer a means of
generating income from excess cash that the fund might otherwise hold
uninvested. Delays in payment or losses could result if the other party to the
agreement defaults or becomes bankrupt. The fund's repurchase agreements must be
fully backed by collateral that is marked to market, or priced, each day; and it
will enter into repurchase agreements only with member banks of the Federal
Reserve System or primary dealers in U.S. Government securities.

SECURITIES OF FOREIGN ISSUERS. The Fund does not intend to invest in securities
that are principally traded outside the United States. The fund's long and short
positions may, however, include equity securities of foreign issuers if they are
principally traded in the markets of the United States. Such foreign issuers may
be subject to different, and often less comprehensive, accounting, reporting and
disclosure standards than comparable U.S. companies and may be subject to risks
related to economic and political conditions in foreign countries, including
possible nationalization or expropriation of their assets. Securities of foreign
issuers may be less liquid and at times more volatile than securities of
comparable U.S. companies.

4
<PAGE>

ILLIQUID SECURITIES. Illiquid securities may be difficult to sell promptly at an
acceptable price, or may be sold only pursuant to certain legal restrictions.
Difficulty in selling securities may result in a loss or entail expenses not
normally associated with the sale of a portfolio security. No more than 15% of
the fund's net assets may be invested in illiquid securities.

PORTFOLIO TURNOVER RATE. We do not usually consider the length of time the fund
has held a position when making investment decisions. The fund's turnover rate
may be higher than that of other mutual funds (a portfolio turnover rate in
excess of 100% may be deemed to be high) and may vary significantly from time to
time depending on the volatility of economic and market conditions. Although the
rate of portfolio turnover is difficult to predict, it is not anticipated that
under normal circumstances the annual portfolio turnover rate of each of the
long and short portfolios of the fund will exceed 200%. It is, however,
impossible to predict portfolio turnover in future years. Portfolio turnover may
result in realization of taxable capital gains, and generally involves some
expense, including brokerage costs. To the extent portfolio turnover results in
the realization of net short-term capital gains, such gains ordinarily are taxed
to shareholders at ordinary income tax rates. (The SAI contains a detailed
explanation of certain relevant tax considerations).

LENDING SECURITIES. The fund may lend securities to broker/dealers and
institutions as a means of earning income. Delays or losses could result if a
borrower becomes bankrupt or defaults on its obligation to return the loaned
security. The fund will lend securities only (a) pursuant to agreements
requiring that the loan be fully backed by collateral at all times, and (b) if
the value of all loaned securities is less than one-third of the fund's total
assets.

BORROWING. The fund may make temporary borrowings from banks to cover
redemptions. If the performance of the fund's investments fails to cover
interest and other costs of borrowing, the net asset value of its shares will
decrease faster than if the fund had no borrowings outstanding.

THE PORTFOLIO MANAGER
David Katzen is the fund's portfolio manager. He has been with the Manager since
its inception and has worked for affiliates of the Manager since 1986. Mr.
Katzen is also the portfolio manager, and has been since their inceptions, for
three funds in the Zweig Series Trust, a registered investment company managed
by an affiliate. Mr. Katzen received his B.A. in Mathematics from City
University of New York and an M.A. in Mathematics from Dartmouth College, where
he was admitted to the Ph.D. program.

RISK FACTORS

INVESTMENT RISK. There is a trade-off that successful investors are keenly aware
of -- the stock market's long-term upward trend comes at the price of volatility
(share prices go up and down) and the risk of losing your money (your investment
may be worth less when you sell). The chart below illustrates how often the Dow
Jones Industrial Average (DJIA) has suffered double-digit declines from one
year's high to the next year's low from January 1, 1900, through December 31,
1997. Some declines end relatively quickly. For example, the major market
declines of 1987 (the DJIA declined 36.1% in 55 days, excluding dividends) and
1990 (the DJIA declined 21.2% in 87 days) were among the shortest bear markets
on record; and the 13.2% correction in 1997 lasted only 62 days.

DJIA NUMBER OF TIMES IN THE AVERAGE TIME SINCE LAST
LOSS PAST 97 YEARS OCCURRENCE OCCURRENCE
- ---- ------------- ---------- ----------
- -10% 66 EVERY 1.5 YEARS LAST YEAR
- -20% 39 EVERY 2.5 YEARS 7 YEARS
- -30% 21 EVERY 4.6 YEARS 10 YEARS
- -40% 11 EVERY 8.7 YEARS 23 YEARS
SOURCE: INVESTECH RESEARCH

Other market declines have been more prolonged. In the bear market of 1973-1974,
the DJIA declined 45.1% over 23 months. In 1981-1982, the DJIA declined 24.1%
over a period of nearly 16 months.

Once you've incurred a loss, it can take many months (and sometimes years) to
return to break-even. For example, if you exclude dividends it took about 10
months to break-even from the market top in July 1990. In 1987, it took about 18
months to get back to the prior market top. By comparison, it took almost 10
years to return to break-even from the market top in 1973, and 24 years from the
1929 market top to break-even!

It is impossible to predict the timing and extent of corrections and bear
markets, but it should be noted that periods of unusually high returns have
historically increased the risk of stock investing for subsequent periods. The
current bull market, which began in 1982, has been the best 16 year period ever
for the DJIA, producing an average annual return of 13.8%, excluding dividends.

Successful investors recognize the risks associated with investing in stocks and
stock mutual funds. It is important that you try to understand your "financial
personality". What is your tolerance for loss? How patient will you be during
the break-even period? What is your financial staying power?

It is also important to note that the impact of a bear market depends not only
upon the extent of the decline, but also when in your investing lifecycle it
happens. For many people, the closer they are to retirement - or the deeper they
are into retirement - the harder it is to calmly view a bear market as a
temporary decline.

Since the fund will have both a long equity portfolio and a short equity
portfolio, it will involve different risks from those normally associated with a
mutual fund. While we seek to minimize the fund's exposure to general market
risk with a short portfolio to offset the fund's long portfolio, we cannot
eliminate risk.

MANAGEMENT RISK. Despite the intent to reduce risk, it is possible that the
fund's long positions will decline in value at the same time that the value of
the securities sold short increases, thereby increasing the potential for loss.
It is also possible

<PAGE>

that we will misjudge the effect a particular security will have on exposure to
market risk or that the particular combination of securities held long and those
sold short will fail to insulate the fund from general equity market risk as
anticipated. Though our models have been used successfully in the past (see
"Performance Information" below), there is no guarantee that they will continue
to accurately predict relative stock performance, assess risk, or contribute to
performance in any way in the future. It is also possible that the fund will not
be able to implement the strategy dictated by the models.

RISKS OF SHORT SALES. Under normal circumstances, the short positions of the
fund will be substantial so as to neutralize the long positions and thereby
minimize the fund's exposure to general equity market risk. The short positions
will be in securities we judge to be relatively overvalued. In order to
establish a short position, the fund must first borrow the security from a
broker or other institution to complete the sale. The fund may not always be
able to borrow a security, in which event it will lose the opportunity to
benefit from that short sale even if our models correctly identify an overvalued
security. The fund will incur a loss as a result of a short sale if the price of
the borrowed security increases between the date of the short sale and the date
on which the fund replaces such security. The fund will realize a gain if the
security declines in price between those dates. There is also a risk that the
fund will be unable to close out a short position at any particular time or at
an acceptable price. During the time the fund is short a security it is subject
to the risk that the lender will terminate the loan at a time when the fund is
unable to borrow the same security from another lender, in which event the fund
may be "bought in" at the price required to purchase the security to close out
the short position. Although the fund's gain is limited to the amount at which
it sold a security short, its potential loss is limited only by the maximum
attainable price of the security less the price at which the security was sold
short. Until the fund replaces a borrowed security, it will maintain daily a
segregated account containing cash, U.S. Government securities, or other liquid
securities such that the amount deposited in the account plus any amount
deposited with the broker or other custodian as collateral will at least equal
the current market value of the security sold short. The fund also is required
to repay the lender any dividends or interest that accrue during the period of
the loan. Depending on arrangements made with such broker or custodian, the fund
may not receive any payments (including interest) on collateral deposited with
the broker or custodian. The fund will not make a short sale if the market value
of all short positions would exceed 100% of the value of the fund's net assets
after giving effect to such sale.

RISKS OF FUTURES AND OPTIONS. In addition to purchasing or selling short
individual securities, the fund may purchase or sell short any type of future or
option related to its investments. These may include options not traded on
exchanges and futures or options tied to individual securities or to stock
indexes or averages. Futures and options also may be used or combined with each
other in order to adjust the risk and return characteristics of an overall
strategy. Some futures and option contracts are customized financial contracts
between two parties. Such contracts are subject to the additional risk that the
counterparty will not meet its obligations under the contract. They also may be
less liquid and more difficult to value than standardized contracts traded on a
regulated exchange

Futures and options tied to a securities index utilizing standardized contracts
that are traded on an exchange have been used by mutual funds for many years to
manage their portfolios more efficiently. Although the value of futures and
options depends on the price of the security, index or other asset to which it
is tied, futures and options involve market risk in excess of their value. For
example, futures on securities indexes currently require a margin deposit of
only 2% to 5% of the position size represented by the futures contract. An
advantage of using futures and options is that transaction costs normally will
be lower than purchasing or selling a related security or index. However, the
use of futures may result in larger losses or smaller gains than would otherwise
be the case. The prices of options or futures and the price movements of the
securities that the future or option is intended to simulate may not correlate
well. The liquidity of the market in futures contracts also could be adversely
affected by "daily price fluctuation limits." These limits, established by the
relevant futures exchange, limit the price fluctuation of an index future during
a single trading day. Once the contract's daily limit has been reached, no
trades may be entered into at a price beyond that limit. In such event, it may
not be possible for the fund to close out its futures position. This may compel
the fund to continue to make daily cash payments to the broker to meet margin
requirements. The futures markets also may attract more speculators than do the
securities markets, because deposit requirements in the futures markets are less
onerous than margin requirements in the securities markets. Increased
participation by speculators in the futures markets may cause price distortions.

RISKS OF EQUITY SWAP CONTRACTS. In an equity swap contract, one party generally
agrees to pay the other party: (i) the theoretical amount by which a stock or
basket of stocks comprising an agreed upon securities index or average (the
"notional amount") increases in value during the time the contract is in effect,
plus (ii) the dividends that would have been received on those stocks over that
period. The other party agrees to pay to the first party (i) a floating rate of
interest (typically tied to the London Inter Bank Offered Rate) on the notional
amount plus (ii) the amount by which the notional amount would have decreased in
value had it been invested in such stocks. Accordingly, if the fund is long an
equity swap contract it will generally realize a loss if the value of the agreed
upon stock or stocks declines and will generally realize a gain if the value of
the stock or stocks rises. Conversely, if the fund is short an equity swap
contract it will generally realize a loss if the stock or stocks rises and will
generally realize a gain if the value of the stock or stocks declines. The fund
only will enter into equity swap contracts that require each party's obligations
to be netted out daily, with the fund paying or receiving each day the net
amount necessary to mark the contract to MARKET.

Equity swap contracts may provide a less costly alternative for implementing our
strategy than maintaining long and short positions. If there is a default by the
counterparty to an equity swap contract, however, the fund will be limited to
contractual remedies pursuant to the agreements related to the transaction. In
the event of default, there can be no assurance that the fund will succeed in
pursuing its contractual remedies. The fund thus assumes the risk that it may be
delayed in or prevented from obtaining payments owed to it pursuant to the
contract. Pursuing its contractual remedies may also entail expense. The fund
will not enter into an equity swap contract unless the unsecured senior debt of
the counterparty is rated at least A by Moody's or S&P at the time of entering
into such transaction, and will monitor the credit of equity swap contract
counterparties in order to minimize these risks.

<PAGE>

The staff of the Securities and Exchange Commission considers equity swap
contracts to be illiquid securities. Consequently, while the staff maintains
this position, the fund will not invest in equity swap contracts if, as a result
of the investment, the total value of such investments together with that of all
other illiquid securities which the fund owns would exceed 15% of the fund's net
assets.

The net amount of the excess, if any, of the fund's obligations over its
entitlement with respect to each equity swap contract will be accrued on a daily
basis, and an amount of cash, U.S. Government Securities or other liquid
securities having an aggregate market value at least equal to the accrued excess
will be maintained in a segregated account by the fund's Custodian. The fund
does not believe that its obligations under equity swap contracts are senior
securities, so long as such a segregated account is maintained, and accordingly,
the fund will not treat them as being subject to its borrowing restrictions.

PERFORMANCE INFORMATION.
Euclid Advisors LLC also serves as the manager of other accounts with investment
objectives, policies and strategies that are substantially similar to those of
the fund. The performance information shown below is based on a composite of all
accounts managed by Euclid Advisors LLC or by Euclid Advisors, Inc., the
manager's predecessor, and Zweig/Katzen Investors, L.P. (collectively, the
"Accounts"). David Katzen was the portfolio manager for each of the Accounts
since inception. The performance information shown in the table below has been
adjusted to give effect to the estimated annualized expenses (without giving
effect to any expense waivers or reimbursements) of the different classes of
shares during the fund's first year of operations. The information below should
not be considered a prediction of future performance of the fund. The
performance of the fund may be higher or lower than the performance of the
Accounts. The Accounts were not registered under the 1940 Act and therefore were
not subject to certain investment restrictions imposed by the 1940 Act. If the
Accounts had been registered under the 1940 Act, their performance might have
been different. In addition, the Accounts were not subject to Subchapter M of
the Internal Revenue Code. The following table also shows the average annual
total return on 3-month U.S. Treasury bills for the same periods.

<TABLE>
<CAPTION>
One-Year Period Three-Year Period Five-Year Period Eight-Year Period
Ending Ending Ending January 1, 1990
PERFORMANCE OF ACCOUNTS: Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997 to Dec. 31, 1997
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Class A with no sales charge 9.17% 11.18% 8.71% 11.93%
Class A with maximum sales charge 3.17% 9.11% 7.48% 11.14%
Class B with no CDSC 8.42% 10.41% 7.95% 11.25%
Class B with CDSC 3.00% 9.30% 7.52% 11.25%
Class C with no CDSC 8.42% 10.41% 7.95% 11.15%
Class C with CDSC 7.06% 10.41% 7.95% 11.15%
Class I 9.50% 11.51% 9.03% 12.26%

Performance of 3-month U.S. Treasury 5.31% 5.45% 4.78% 5.14%
Bills.
</TABLE>

Giving effect to the expense limitation set forth in the "Fee Table"
section, the average annual total return for the one-year, three-year, five-year
and eight-year (since-inception) periods ended December 31, 1997 for the
Accounts would have been approximately 0.16% higher for all classes of shares.

An investment in 3-month U.S. Treasury Bills is different from an
investment in the fund or in the Accounts because Treasury Bills are backed by
the full faith and credit of the United States, have a fixed rate of return and
a short duration, and investors in Treasury Bills do not risk losing capital.

CHOOSING AMONG CLASSES WHEN PURCHASING SHARES
The fund offers investors four classes of shares which are described below. All
except Class I Shares bear sales charges in different forms and amounts and all
bear different levels of expenses (see Fee Table). YOU SHOULD CHOOSE THE CLASS
OF SHARES THAT IS MOST BENEFICIAL GIVEN THE AMOUNT OF YOUR PURCHASE, THE LENGTH
OF TIME YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT CIRCUMSTANCES.

Class A shares are sold with an initial sales charge that varies based upon the
amount invested as shown in the table below. Class B Shares have no initial
sales charge, but are subject to a declining contingent deferred sales charge
(CDSC) if sold within six years of purchase. Class C Shares have no initial
sales charge, but are subject to a CDSC if sold within one year of purchase.
Class B and Class C Shares have higher annual expenses than Class A Shares.
Class B Shares convert to Class A Shares after a holding period of seven years
from the initial purchase. Class C Shares have a shorter CDSC period than Class
B Shares, but they do not convert to Class A Shares. Class I Shares are offered
at net asset value without an initial sales charge and are not subject to a
contingent deferred sales charge or a Rule 12b-1 distribution fee. Class I
Shares are only available to tax-exempt retirement plans of Zweig Securities
Corp. and its affiliates, and certain institutional investors that invest at
least $1 million directly with Zweig Securities Corp., the distributor.
Institutional investors include: (1) unaffiliated benefit plans, such as
qualified retirement plans (other than individual retirement accounts and
certain other self-directed retirement plans); (2) unaffiliated banks and
insurance companies purchasing for their own accounts; and (3) endowment funds
of unaffiliated non-profit organizations.

CONTINGENT DEFERRED SALES CHARGE (CDSC). The applicable CDSC rate for each class
of shares is set forth in the Fee Table. The CDSC is imposed on the lesser of
the current market value or the initial cost of the shares being redeemed. No
CDSC is imposed upon shares acquired by reinvesting distributions. In
determining whether a CDSC applies, the order of redemption is first of shares
purchased through reinvestment and then of shares held the longest. Any CDSC
imposed on a redemption is paid to the distributor or directly to a third party
at the direction of the distributor.

We may waive the CDSC on redemption(s): (a) following the death of a
shareholder; (b) if a shareholder becomes unable to engage in any substantial
gainful activity because of a medically determinable physical or mental
impairment which can be expected to result in death or be of long-continued and
indefinite duration; (c) when a total or partial redemption is made in

<PAGE>

connection with a distribution from retirement plans after reaching age 59 1/2,
except that if, immediately prior to the redemption, the aggregate amount
invested by the retirement plan in Class B Shares of the fund (excluding the
reinvestment of distributions) during the prior four year period equals 50% or
more of the total value of the retirement plan's assets in the fund or any other
fund distributed by Zweig Securities Corp., then the CDSC will not be waived;
(d) from certain retirement plans; (e) under the systematic withdrawal program
if the amount being withdrawn per month is no more than 1% of the value of the
account at the time the program was established; and (f) effected pursuant to
the fund's right to liquidate a shareholder's account if it is less than the
then effective minimum account size.

The Distributor has sold, and expects to sell in the future, the right to
receive all or substantially all of the 12b-1 distribution fees on Class B
Shares together with the related CDSC in the event the Shares are redeemed prior
to conversion to Class A Shares. The holder of the right to receive such
payments, in its sole discretion, may elect to establish its own waiver
criteria, which may differ from those set forth above.

CLASS A SHARES. Class A Shares are sold at net asset value plus the applicable
sales charge. The offering price applies to purchases made by a single purchaser
or by a single trust account. An individual, his or her spouse, and children
under 21 are considered to be a single purchaser. The sales charge on Class A
Shares is allocated between your investment dealer and Zweig Securities Corp.,
the distributor, as shown below.

QUANTITY DISCOUNTS ON CLASS A SHARES. When you invest in Class A Shares, you may
receive quantity discounts at certain dollar levels, or breakpoints. The more
you invest, the smaller percentage you pay in sales charges, as shown below.

<TABLE>
<CAPTION>
As a Percentage of
-----------------------
Offering Net Asset Dealer's
Amount Invested Price of Value of Sales
- --------------- the Shares the Shares Concession
Purchased Purchased ------------------
--------- ---------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 4.75%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 1.75% 1.78% 1.50%
$1,000,000 or more 0.00% 0.00% (see below)
- ---------------
</TABLE>
Commissions (as set forth below) will be paid to dealers who initiate and are
responsible for purchases of $1 million or more and for purchases at net asset
value made by unallocated accounts held by third party administrators,
registered investment advisers, trust companies, and bank trust departments
which exercise discretionary authority or hold accounts in fiduciary, agency,
custodial or similar capacity if in the aggregate such accounts equal or exceed
$1,000,000 and by retirement plans with assets of $1,000,000 or more or at least
50 eligible employees.

Dealer's Commission
Amount Purchased (as % of purchase)
- ---------------- ------------------
$1,000,000 to $2,000,000 0.75%
$2,000,000 to $5,000,000 0.50%
Amount over $5,000,000 0.25%

No initial sales charge applies on these investments; however, a 1% CDSC will
apply on redemptions within 18 months of purchase, except for redemptions of
shares purchased by an investor in amounts of $1,000,000 or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies the distributor prior to the time of the investment that the dealer
waives the commission otherwise payable to the dealer as described above, or
agrees to receive such commissions ratably over an 18 month period.

Class A Shares of the fund are made available to 401(k) participants in the
Merrill Lynch Daily K Plan (the "Plan") at NAV without an initial sales charge
if the Plan has at least $3 million in assets or 500 or more eligible employees.
Class B Shares of the fund are made available to Plan participants at NAV
without a CDSC if the Plan has less than $3 million in assets or fewer than 500
eligible employees. On such sales, the distributor does not make the dealer
payment described under Class B Shares. For further information see "Retirement
Plans" in the fund's SAI.

Class A Shares also may be purchased at net asset value by current or retired,
trustees, directors, officers or employees, and their families, of the fund,
Zweig Mutual Funds, Euclid Advisors LLC, Zweig Securities Corp. and any company
affiliated with these companies, or by current or retired registered
representatives or full-time employees, and their families, of securities
dealers that are members of the NASD. Class A Shares also may be sold at net
asset value through certain investment dealers registered under the Investment
Advisers Act of 1940 and other financial services firms that adhere to certain
standards established by the principal distributor, including a requirement that
such shares be sold for the benefit of their clients participating in a "wrap
account" or similar program under which such clients pay an ongoing fee to the
investment adviser or other firm. Such shares are sold for investment purposes
and on the condition that they will not be resold except through redemption or
repurchase by the fund. Class A Shares also may be purchased at net asset value
for shareholders by dealers where the amount invested represents redemption
proceeds from funds distributed other than by the distributor and where the
shareholder has paid a sales charge in connection with the purchase of such
other fund's shares; provided that (i) such Class A Shares are purchased within
30 days after redemption of such other fund's shares, and (ii) sufficient
documentation of such redemption as the distributor may require shall be
provided at the time the Class A Shares are purchased. This provision is not
available where the shares of a fund being redeemed were subject to a deferred
sales load or redemption fee.

CUMULATIVE QUANTITY DISCOUNTS ON CLASS A SHARES. A new purchase may be combined
with Class A Shares you already own of the fund and any other mutual fund that
is distributed by Zweig Securities Corp. to qualify for a discount. The sales
charge on the shares being purchased will be at the rate shown in the table
above applicable to the net asset value of the shares then owned plus the amount
of the new purchase. To receive this discount, you or your investment dealer
must request it when placing the order and give the transfer agent or
distributor sufficient information to confirm that your purchase qualifies for
the discount. We reserve the right to change or terminate quantity discounts at
any time.

<PAGE>

QUANTITY DISCOUNTS THROUGH A LETTER OF INTENTION. You may pay a reduced sales
charge on Class A Shares if you sign a Letter of Intention at the time of your
purchase. The Letter also may be back-dated to include purchases made within 90
days prior to signing the Letter of Intention. The Letter, included on the
application form in this Prospectus, states your intention to purchase a
sufficient quantity of Class A Shares of the fund and any other mutual fund
distributed by Zweig Securities Corp. indicated within the 13-month period
specified to qualify for a reduced sales charge. Purchases under the Letter are
made at the sales charge applicable to the entire amount to be purchased under
the Letter, as if purchased in a single transaction. A Letter of Intention can
be amended during the 13-month period by filing an amended Letter with the same
expiration date as the original.

The Letter of Intention is not binding. During the period covered by the Letter,
the transfer agent will hold shares in escrow representing 5% of the intended
purchase. After the end of the period, a price adjustment based upon the actual
amount invested will be made (by redeeming escrowed shares if the purchase is
not completed or by investing the difference in sales charges if the total
purchases under the Letter qualify for a lower sales charge).

CLASS B SHARES. Class B Shares are sold without an initial sales charge. For
sales of Class B Shares, your dealer will receive 4% of the purchase amount from
the distributor. Although you pay no sales charge at the time of purchase, if
you redeem within six years, you are charged a declining CDSC as follows:

The CDSC
Year Since Purchase Was Made is equal to
- ---------------------------- -----------
Year One 5%
Year Two 4%
Year Three 3%
Year Four 3%
Year Five 2%
Year Six 1%
Year Seven None*
- ---------------
* Class B Shares convert to Class A Shares as described below.

CLASS B SHARE CONVERSION FEATURE. After a holding period of seven years from the
initial date of purchase, Class B Shares automatically convert to Class A Shares
of the fund at respective net asset values on the 10th business day of the month
following the anniversary date. At the time of conversion, Class B Shares of the
fund acquired through reinvestment of distributions will convert to the
corresponding Class A Shares of the fund pro-rata with Class B Shares of the
fund not acquired through reinvestment. Conversion of Class B Shares to Class A
Shares will not be deemed a purchase or sale of the shares for federal income
tax purposes. The conversion of Class B Shares will relieve the Class B Shares
that have been held for at least seven years from the higher ongoing
distribution fees. Only Class B Shares have this conversion feature.

CLASS C SHARES. Class C Shares are sold without an initial sales charge. For
sales of Class C Shares, your dealer will receive up to 1% of the purchase
amount in a manner agreed in advance from the distributor. If you redeem within
one year of your purchase, you will be charged a CDSC equal to 1.25%.

CLASS B AND CLASS C SHARES OFFER THE BENEFIT OF PUTTING ALL OF YOUR DOLLARS TO
WORK IMMEDIATELY; HOWEVER, THEY HAVE HIGHER ANNUAL EXPENSES AND PAY LOWER
DIVIDENDS THAN CLASS A SHARES. CLASS C SHARES HAVE A SHORTER CDSC PERIOD THAN
CLASS B SHARES; HOWEVER, THEY DO NOT CONVERT TO CLASS A SHARES.

CLASS I SHARES. Class I Shares, which have no initial sales charge and no Rule
12b-1 fee, are currently available for purchase only from Zweig Securities Corp.
to tax-exempt retirement plans of Zweig Securities Corp. and its affiliates and
certain institutional investors; and Class I Shares are not avalable in all
states.

The Distributor will reallow up to 0.15% to any dealer with sales of shares of
Euclid Mutual Funds and the other mutual funds distributed by Zweig Securities
Corp. (Zweig Funds) at an annual rate of $4 million or more or who can
reasonably be expected to achieve sales at that rate, provided that the dealer
has agreed to supply special assistance in marketing shares of the funds,
including providing access to the dealer's sales personnel and information
dissemination systems such as computer screens, internal publications,
publications sent to clients and mailing lists. These reallowances are in
addition to the sales concessions shown in the above tables, and may be subject
to chargeback for redemptions within one year. An alternative arrangement,
available to any dealer that has agreed to provide marketing, record keeping and
related administrative services to tax-qualified employee benefit plans,
including the processing of orders for investment and reinvestment of plan
assets in shares of the funds at net asset value, provides for compensation at
an annual rate of up to 0.20% of plan participant holdings of Zweig Funds. In
addition, Zweig Securities Corp. also may pay dealers a fee at the annual rate
of up to 0.10% of the average daily net assets that have been continually
invested in the funds for at least four years. Zweig Securities Corp. also may
pay dealers a fee of up to 0.10% of the average daily net assets invested
through such dealers in Zweig Funds by participants in programs sponsored by
such dealers. Zweig Securities Corp. reserves the right to alter or discontinue
paying any of the foregoing fees at any time. These fees will be paid from Zweig
Securities Corp.'s or the manager's own funds, including past profits or any
other source available to them. With respect to certain retirement plans the
distributor may not make dealer payments as described above.

The Distributor , at its expense, may also provide dealers who have sold shares
of the fund with financial assistance in connection with conferences, sales
training or promotional programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the funds it distributes or other
dealer-sponsored special events. Such financial assistance may include payment
for travel expenses and lodging incurred in connection with trips taken by
invited registered representatives and members of their families for meetings
and seminars of a business nature.

The above arrangements relate to purchases effected through dealers in the
United States. Purchases outside the United States may be subject to local rules
and customs, and different sales charges, fees and dealer compensation may
apply. Certain dealers may not sell all classes of shares.

<PAGE>

HOW TO INVEST IN THE FUND
Shares of the fund are being initially offered during a period scheduled to end
on April __, 1998 (the "Closing Date"). Securities dealers may obtain
non-binding indications of interest prior to actually confirming any orders. The
fund will commence investment operations and the continuous offering of its
shares on the first business day after the Closing Date. Orders to purchase
shares of the fund received during the Initial Offering Period will be held
uninvested until the close of business on April __, 1998.

You can buy shares through your investment professional, directly from the
fund's transfer agent, or automatically through a regular investment plan.

<TABLE>
<CAPTION>
------------------ --------------------- ----------------------- ------------------------
Minimum Initial Minimum Initial Minimum Subsequent
Class C Investment IRA Investment* Investment
------------------ --------------------- ----------------------- ------------------------
<S> <C> <C> <C>
A, B and C $1,000 $250 None

I $1,000,000 $1,000,000 None

------------------ --------------------- ----------------------- ------------------------
</TABLE>
*or other retirement accounts, pension and profit sharing plans, custodial
accounts under the Uniform Gift to Minors Act, trusts and estates or qualifying
group plans.

Purchases of the fund will be at the offering price next determined after the
transfer or sub-transfer agent or investment dealer receives the order, provided
the dealer transmits the order to the fund's transfer or subtransfer agent that
day. We reserve the right to change or waive minimums or to reject any order.

HOW TO BUY SHARES THROUGH YOUR INVESTMENT PROFESSIONAL

o To open your account, contact your investment professional.

If you invest through an investment professional, the firm may have its own
service features, transaction charges and fees. This prospectus should be read
in conjunction with such firms' material regarding their fees and services. If
you wish us to refer you to an investment professional, call us at
1-800-272-2700. Investment professionals receive compensation for providing
investment advice, and such compensation may differ for selling shares of
different classes of Euclid Mutual Funds. The fund may be unable to provide
account information or other services for shares held in the name of, or
controlled by, an investment dealer.

HOW TO BUY SHARES THROUGH THE TRANSFER AGENT

o COMPLETE the attached application or send a letter specifying the
class of shares you wish to buy. If you do not specify a class, your
purchase will be automatically invested in Class A Shares.

o ENCLOSE a check made payable to State Street Bank and Trust Company
or to Euclid Market Neutral Fund. (We will not accept third party
checks, i.e. any checks which are not payable to the order of State
Street Bank and Trust Company or Euclid Market Neutral Fund.)

o MAIL to State Street Bank and Trust Company:
By regular mail: By courier or overnight mail:
2 Heritage Drive
P.O. Box 8505 Third Floor
Boston, MA 02266-8505 Quincy, MA 02171
Att: Euclid Mutual Funds Att: Euclid Mutual Funds

o For WIRE instructions (Federal funds) please call 1-800-628-0441.

o AUTOMATIC INVESTMENT PLAN PURCHASES. Move money from your bank
account or via payroll deduction into the fund on any day of each
month or quarter. Please refer to the application form in this
prospectus or call 1-800-272-2700 for assistance. If an account
registration is changed, this feature will be terminated unless its
continuance is specifically requested.

HOW TO SELL YOUR FUND SHARES.
You can sell your shares on any day the New York Stock Exchange (NYSE) is open.
The price you receive will be the net asset value less any applicable contingent
deferred sales charge. The net asset value you will receive is calculated as of
the close of regular trading on the NYSE on the day your sell order is received
at the transfer or subtransfer agent. Proceeds of your sale will generally be
mailed to you within seven days after your request is received. If shares are
bought with an uncertified check and sold within 15 days after purchase, the
proceeds may not be paid until 15 days after the purchase. If the fund has
evidence of cleared funds, money may be released earlier.

Selling Your Shares THROUGH YOUR INVESTMENT PROFESSIONAL.

o Contact your investment professional if you bought your shares at
your brokerage firm. If you sell your shares through your investment
professional, the price you will receive will be the price of shares
as of the close of regular trading on the NYSE on the day the order
is transmitted to the transfer or subtransfer agent by your
brokerage firm, less any applicable contingent deferred sales
charge.

Selling Your Shares BY MAIL THROUGH THE TRANSFER AGENT

o SEND A LETTER to sell your shares to: State Street Bank and Trust
Company

By regular mail: By courier or overnight mail:
2 Heritage Drive
P.O. Box 8505 Third Floor
Boston, MA 02266-8505 Quincy, MA 02171
Att: Euclid Mutual Funds Att: Euclid Mutual Funds

o Remember to SIGN the letter exactly as your account is registered.

o Sales over $10,000 for individual accounts (over $25,000 for joint
accounts) require a SIGNATURE GUARANTEE of the registered owner(s)
or legal representative. Appropriate signature guarantors include:
banks and savings

<PAGE>

associations, credit unions, member firms of a national securities
exchange, municipal securities dealers and government securities
dealers. See the SAI or call 1-800-272-2700 for assistance.

o CORPORATE AND FIDUCIARY shareholders selling shares must include the
appropriate documentation establishing the authority of the person
seeking to act on behalf of the account.

Selling your shares BY TELEPHONE THROUGH THE TRANSFER AGENT

You may sell your shares by telephone (unless your address of record has been
changed within the preceding 15 days).

o CALL 1-800-272-2700 if your account is registered for telephone
redemption privileges.

Proceeds will be mailed to the address on the account. If you designated a
domestic bank on the application form when you opened your account, you may have
redemption proceeds of $1,000 or more wired to the bank. Any change in wire
redemption directions requires a signature guarantee from an appropriate
guarantor. In order to sell shares on the day you place the order, the transfer
agent must receive your instructions to sell before the close of regular trading
on the NYSE.

The maximum amount that may be redeemed by telephone is $10,000 for individual
accounts ($25,000 for joint accounts). Neither the fund, the distributor, nor
the transfer agent will be liable for any loss in acting on telephone
instructions reasonably believed to be authentic, and the investor will bear the
risk of loss in the event of a fraudulent telephone redemption, provided that
the fund and/or its transfer agent has established and employed procedures
reasonably designed to confirm that instructions given by phone are genuine.
Such procedures would include requiring a form of personal identification from
the caller and recording telephone instructions. For identification purposes,
the fund's transfer agent may require such information as it deems necessary
before accepting redemption instructions. Without such reasonable procedures,
the fund may otherwise be liable for any losses due to unauthorized or
fraudulent instructions.

During periods of extremely drastic economic or market changes, it may become
difficult to implement a telephone redemption. In the event that you have
difficulty reaching the transfer agent at its toll-free number, you should
consider sending written redemption instructions in the manner explained above.
We reserve the right to refuse telephone redemption requests and to limit their
amount or frequency. If, however, we determine not to accept a telephone
redemption request, we will seek to advise you promptly of that decision and, to
the extent feasible, will communicate that decision by telephone.

Redemptions normally will be made in cash. Redemptions also may be made in kind
pursuant to an election under Rule 18f-1 of the Investment Company Act of 1940
(the 1940 Act), as discussed more fully in the SAI. Rights of redemption may be
suspended if the NYSE is closed, other than customary weekend or holiday
closings, or for such other periods as the Securities and Exchange Commission
has permitted.

REINSTATEMENT PRIVILEGE. If you have made a partial or complete redemption of
shares, you may reinvest all or part of the redemption proceeds and receive a
pro rata credit for any CDSC or initial sales charge paid, provided the
reinvestment is made within 30 days after the redemption. You may exercise this
privilege only once a year.

SYSTEMATIC CASH WITHDRAWAL PROGRAMS. If your account has $5,000 or more, you may
set up a program to receive a specific amount in cash either monthly or
quarterly. Contact your investment professional or complete the application form
in this prospectus. Under these programs, all distributions must be reinvested.
Purchasing additional shares while receiving payments under these programs
ordinarily will be disadvantageous because of sales charges. Shares redeemed may
be subject to a CDSC. We may modify or terminate these programs at any time. If
an account registration is changed, this feature will be terminated unless its
continuance is specifically requested.

MINIMUM ACCOUNT SIZE. If your account balance falls below $1,000 as a result of
redeeming shares, you may be given 60 days' notice to reestablish the minimum
balance. If you do not increase your balance, we reserve the right to close your
account and send the proceeds to you. Your shares will be redeemed at the net
asset value on the day your account is closed. We normally will not close an
account maintained in connection with a tax-deferred retirement plan.

EXCHANGE PRIVILEGE
You can exchange shares of the fund for shares of the same class of another fund
distributed by Zweig Securities Corp. at their respective net asset values. All
exchanges are effected as of the close of regular trading on the NYSE. You can
exchange shares either through your investment professional or, if the shares
are registered in your name, through the transfer agent. You may exchange shares
through the transfer agent by mail or by telephone, or you may instruct the
transfer agent to make systemic exchanges of fund shares on the 15th day of each
month or quarter (see the application form in this Prospectus).

Each exchange is a sale of shares of the fund and a purchase of the same class
of shares of another fund. An exchange may produce a gain or a loss for tax
purposes, and is subject to the terms and conditions applicable to telephone
redemptions and the minimum investment requirement of each fund. We reserve the
right to reject any exchange request, or to modify or terminate exchange
privileges upon 60 days' written notice to shareholders.

NET ASSET VALUE
The fund determines the net asset value of each class of its shares on each day
that the NYSE is open. Net asset values are calculated as of the close of
regular trading on the NYSE.

We value portfolio securities at market value when quotations are readily
available. We value securities for which market quotations are not readily
available at fair value as determined using procedures determined by the Board
of Trustees. We value short-term obligations having a remaining maturity of 60
days or less at amortized cost (which approximates market value).

DISTRIBUTIONS AND TAXES
Dividends from net investment income and distributions from net realized capital
gains will be paid at least annually.

<PAGE>

Distributions are declared separately for each class of shares of the fund.
Distributions will be reinvested at net asset value unless you elect to receive
distributions in cash. If an account registration is changed, the cash election
will be terminated unless its continuance is specifically requested.
Shareholders who have elected to receive distributions in cash but whose
accounts had two consecutive mailings returned as "undeliverable", will
automatically have their future distributions reinvested at net asset value.

Because Class B and Class C Shares have higher 12b-1 fees, dividends on Class A
Shares will be higher than dividends on Class B and Class C Shares. Because
Class I Shares have no 12b-1 fees, dividends on Class I Shares will be higher
than dividends on Class A Shares.

The fund intends to qualify as a regulated investment company for federal income
tax purposes so long as, in management's view, such qualification is in the
shareholders' interest. We intend to distribute all of the fund's net investment
income and net capital gains so as to be relieved of federal taxes.
Distributions of net investment income and short-term capital gains are taxed as
dividends. For noncorporate taxpayers, long-term capital gains (defined as gains
realized upon the sale of assets held more than 18 months) are subject to a
maximum tax rate of 20% (10% for individuals in the 15% tax bracket). Gains
realized upon the sale of assets held more than 12 months but not more than 18
months (formerly considered long-term gains) are now considered medium-term
gains subject to a maximum tax rate of 28% (15% for individuals in the 15% tax
bracket). Distributions are taxable when paid, whether taken in cash or
reinvested, except that distributions declared in November and December and paid
in January are taxable as if paid on December 31st. You should receive by
January 31 of each year, a statement showing the tax status of your
distributions for the prior year and the proceeds of your redemptions (including
exchanges), if any. When you sell your shares, their tax basis is the total of
your cash investments plus all distributions that have been reinvested, less any
return of capital distributions. To assist you in determining your tax basis,
please keep your year-end account statements with your other tax records. The
foregoing is a summary of certain federal income tax consequences. Be sure to
consult your own tax adviser to determine the precise effect of your investment
in the fund on your particular tax situation, and any state and local tax
consequences.

THE DISTRIBUTOR
Zweig Securities Corp. serves as principal distributor of shares of the fund. At
any given time, the distributor may incur expenses in distributing shares of the
fund that are in excess of the total payments made by the fund under the Rule
12b-1 Plans for distribution (Class I Shares do not have a Rule 12b-1 Plan).
Because there is no requirement that the distributor be reimbursed for all its
expenses, or that a plan be continued from year to year, this excess does not
constitute a liability of the fund. Although there is no legal obligation for
the fund to pay expenses in excess of payments made to the distributor under the
plans, if for any reason a plan is terminated, the Board of Trustees will
consider the manner in which to treat such expenses. Any cumulative unreimbursed
expenses may or may not be recovered through future distribution fees. If the
distributor receives any Rule 12b-1 payments in excess of actual distribution
expenses, the difference could be viewed as profit to the distributor for that
year. Accordingly, the fund's Class A, B, and C Rule 12b-1 Plans are classified
as compensation plans.

A service fee equal to 0.25% may be paid to financial services firms, including
NASD member firms that have signed agreements for continuous personal service by
such firms to investors in the fund. NASD member firms may also be paid a
portion of the asset-based sales charges on Class C Shares, so that these
dealers receive such reallowances at the following aggregate annual rates: (i)
0.25% commencing from date of purchase for the Class A Shares, (ii) 0.25%
commencing one year after purchase for the Class B Shares, and (iii) 0.95%
commencing one year after purchase for the Class C Shares.

THE MANAGER AND MANAGEMENT FEE
The investments of the fund are managed by Euclid Advisors LLC, a wholly-owned
subsidiary of Zweig/Glaser Advisers. In addition to managing the fund's
investments, Euclid Advisors LLC also: makes recommendations with respect to the
fund's business affairs; furnishes certain administrative services, office space
and equipment; and permits its employees or arranges for employees of affiliates
to serve as the officers of the Trust without additional compensation from the
fund. The manager's fee is based on the average daily net assets of the fund at
the annual rate of 1.50%. The rate is constant and does not diminish with an
increase in the net assets of the fund. The management fee is higher than that
paid by most funds. All other expenses incurred in the operation of the fund, a
detailed list of which appears in the SAI, are borne by the fund.

BROKERAGE TRANSACTIONS. To buy and sell securities for the fund, Euclid Advisors
LLC may use its broker/dealer affiliates or other firms that sell shares of the
fund, provided they have the execution capability and that their commission
rates are comparable to those of other unaffiliated broker/dealers.

ORGANIZATION OF THE FUND
The Trust was established as a Delaware business trust on February 3, 1998. The
Board of Trustees directs the management of the business of the Trust. The Board
has duties and responsibilities comparable to those of the boards of directors
of corporations, not to those of trustees under customary trust principles. The
Trustees oversee the Trust's activities, elect the officers of the Trust who are
responsible for its day-to-day operations, review contractual arrangements with
the companies that provide services to the Trust, and review investment
performance.

The Trust, an open-end, diversified, management investment company, has an
unlimited number of shares of beneficial interest which, without shareholder
approval, may be divided by the Trustees into an unlimited number of funds and
classes. Voting rights are based on a shareholder's total dollar interest in a
Series and are thus allocated in proportion to the value of each shareholder's
investment. Shares vote together on matters that concern the entire Trust, or by
individual fund or class when the Board of Trustees determines that the matter
affects only the interests of a particular fund or class.

<PAGE>

INVESTMENT MANAGER
Euclid Advisors LLC
900 Third Avenue
New York, New York 10022-4728

PRINCIPAL DISTRIBUTOR
Zweig Securities Corp.
900 Third Avenue
New York, New York 10022-4728

CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286

TRANSFER AGENT AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

COUNSEL
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST, THE INVESTMENT MANAGER OR THE
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

<PAGE>

EUCLID MARKET NEUTRAL FUND
A Series of
EUCLID MUTUAL FUNDS
900 Third Avenue, New York, N.Y. 10022-4728

STATEMENT OF ADDITIONAL INFORMATION
April , 1998

Euclid Market Neutral Fund (the "Fund"), is a diversified, open-end
management investment company organized as a series of Euclid Mutual Funds, a
Delaware business trust (the "Trust").

This Statement of Additional Information, which should be kept for
future reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Fund (the "Prospectus" ), dated April , 1998, which can be
obtained without cost by contacting your financial professional or by calling or
writing the Fund at the telephone number and address printed on this cover page.
This Statement of Additional Information is intended to provide you with further
information about the Fund.

Euclid Mutual Funds
(Toll Free 1-800-272-2700)

<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS Page
INVESTMENT OBJECTIVES AND POLICIES 2
INVESTMENT RESTRICTIONS 2
OTHER INVESTMENT POLICIES 3
PURCHASE AND REDEMPTION OF SHARES 6
REINSTATEMENT PRIVILEGE 6
EXCHANGE PRIVILEGE 6
INVOLUNTARY REDEMPTIONS 7
RETIREMENT PLANS 7
NET ASSET VALUE AND TAXES 7
TRUSTEES AND OFFICERS OF THE TRUST 9
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 11
INVESTMENT MANAGEMENT AND OTHER SERVICES 11
Manager 11
Distributor 11
Distribution Plans 12
Custodian, Fund Accounting Agent, Transfer Agent and Dividend Paying Agent 13
Independent Accountants 13
Counsel 13
PORTFOLIO TRANSACTIONS AND BROKERAGE 13
YIELD AND PERFORMANCE INFORMATION 14
REGISTRATION STATEMENT 15
FINANCIAL STATEMENTS 15

</TABLE>

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives and policies and permitted investments
are described in the Prospectus under the headings "Investment Objectives", "Our
General Investment Philosophy and Strategy", "Other Investment Policies" and
"Risk Factors". Set forth below is additional information with respect to the
investment policies and a description of certain financial instruments and
techniques utilized by the Fund. Except as explicitly set forth in this
Statement of Additional Information, the investment objectives and policies of
the Fund may be changed without shareholder approval.

INVESTMENT RESTRICTIONS
The first eight investment restrictions set forth below are fundamental
policies of the Fund. These restrictions cannot be changed without a vote of a
majority of the outstanding voting securities of the Fund. However, these
policies may be modified by the Trustees without shareholder approval to the
extent necessary to facilitate the implementation of a master-feeder structure
for the Fund ( I.E., a structure under which the Fund acts as a feeder and
invests all of its assets in a single pooled master fund with substantially the
same investment objectives and policies).

FUNDAMENTAL POLICIES. Except as stated above with respect to a
master-feeder structure, the Fund may not:
1. Purchase the securities of issuers conducting their principal
business activities in the same industry if immediately after such purchase the
value of the Fund's investments in such industry would be 25% or more of the
value of its total assets (there is no such limitation with respect to
obligations of the U.S. Government, its agencies or instrumentalities or with
respect to investments in other investment companies complying with such
policy).
2. With respect to 75% of the Fund's assets, purchase the securities of
any one issuer if immediately after such purchase (i) more than 5% of the value
of the Fund's total assets would be invested in such issuer or (ii) the Fund
would own more than 10% of the outstanding voting securities of such issuer.
(Such limitations do not apply to securities issued by the U.S. Government, its
agencies or instrumentalities or with respect to investments in other investment
companies complying with such policy).
3. Invest in real estate, provided that this limitation shall not
prohibit the purchase of securities issued by companies that invest in real
estate or interests therein, including real estate investment trusts.
4. Make loans, except that this restriction shall not prohibit the
purchase and holding of a portion of an issue of publicly distributed debt
securities, the lending of portfolio securities (if the aggregate value of the
loaned securities does not at any time exceed one-third of the total assets of
the Fund), or the entry into repurchase agreements.
5. Issue "senior securities," except as permitted under the Investment
Company Act of 1940.
6. Act as an underwriter, except that the Fund technically may be
deemed to be an underwriter in a registration under the Securities Act of 1933
to resell restricted securities.
7. Invest in physical commodities or commodity contracts; provided that
this limitation shall not prevent the fund from purchasing and selling futures
contracts and options.
8. Borrow money in excess of 20% of its total assets taken at cost or
at market value, whichever is lower, and then only from banks as a temporary
measure for extraordinary or emergency purposes. If such borrowings exceed 5% of
the Fund's total assets, the Fund will make no further investments until such
borrowing is repaid. (Short sales and related borrowings of securities are not
subject to these restrictions.)
NON-FUNDAMENTAL RESTRICTIONS. The following investment restrictions and
policies are non-fundamental and can be changed by the Board of Trustees without
shareholder approval. Currently, the Fund may not:
9. Maintain a short position, or sell securities short if, when added
together, more than 100% of the value of the Fund's net assets would be (I)
deposited as collateral for the obligation to replace securities borrowed to
effect short sales, and (ii) allocated to segregated accounts in connection with
short sales. Short sales "against the box" are not considered in applying this
limitation.
10. Pledge its assets in an amount greater than 10% of the value of its
total assets, and then only to secure borrowings permitted by Restriction 8
(collateral or deposit arrangements with respect to short sales, swaps and other
derivatives, or the deposit of initial or maintenance margin in connection with
futures contracts, will not be deemed to be a pledge of the Fund's assets).
11. Purchase securities on margin, except for such short-term credits
as are necessary for the clearance of transactions and initial and variation
margin payments in connection with transactions in futures and options
contracts. (Short sales may be made in a margin account).

<PAGE>

12. Purchase securities which are not readily marketable, such as
securities subject to legal or contractual restrictions on resale or securities
which are otherwise illiquid including repurchase agreements having more than
seven days remaining to maturity, if, as a result, more than 15% of the Fund's
net assets would consist of such securities.
13. Purchase securities of any other investment company, except (i) by
purchase in the open market involving only customary brokers' commissions, (ii)
in connection with a merger, consolidation, reorganization or acquisition of
assets, or (iii) as otherwise permitted by applicable law.
14. Participate on a joint or a joint and several basis in any trading
account in securities. (The bunching of orders for the sale or purchase of
portfolio securities of two or more accounts managed by the Manager or its
affiliates, shall not be considered participation in a joint securities trading
account).

LIMITATIONS APPLY AT THE TIME AN INVESTMENT IS MADE; A SUBSEQUENT INCREASE OR
DECREASE IN PERCENTAGE RESULTING FROM CHANGES IN VALUES OR NET ASSETS WILL NOT
BE DEEMED TO BE AN INVESTMENT THAT IS CONTRARY TO THESE RESTRICTIONS.

The phrases "shareholder approval" and "vote of a majority of the
outstanding voting securities", as used in the Prospectus or in this Statement
of Additional Information means the affirmative vote of (i) 67% or more of the
Fund's voting securities present at a meeting of shareholders if the holders of
more than 50% of the Fund's outstanding voting securities are present in person
or by proxy, or (ii) more than 50% of the Fund's outstanding voting securities,
whichever is less. Shares of the fund have voting power based on dollar value
and are thus allocated in proportion to the value of each shareholder's
investment on the record date.

The Board of Trustees, which has the primary responsibility for the
overall management of the Fund, has determined that, while there are certain
risks inherent in using short sales, futures and options, the Manager has
demonstrated its expertise and ability to use these financial instruments and
investment techniques effectively. The flexibility and potential for enhanced
long-term performance and risk reduction warrant their use, in the opinion of
the Board of Trustees.

OTHER INVESTMENT POLICIES
SHORT SALES. The Fund will seek to neutralize the exposure of its long
equity positions to general equity market risk and to realize additional gains
through the use of short sales (selling a security it does not own) in
anticipation of a decline in the value of the security sold short relative to
the long positions held by the Fund. To complete such a transaction, the Fund
must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to repay the lender any dividends or interest
that accrue during the period of the loan. To borrow the security, the Fund also
may be required to pay a premium, which would increase the cost of the security
sold. The net proceeds of the short sale will be retained by the broker (or by
the Fund's custodian in a special custody account) until the short position is
closed out, to the extent necessary to meet margin requirements. The Fund also
will incur transaction costs in effecting short sales. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of the
premium, dividends, interest or expenses a Fund may be required to pay in
connection with a short sale. An increase in the value of a security sold short
by the Fund over the price at which it was sold short will result in a loss to
the Fund, and there can be no assurance that the Fund will be able to close out
the position at any particular time or at an acceptable price.

INDEX FUTURES, AND INDEX AND EQUITY OPTIONS. In addition to purchasing
or selling short individual securities, the fund may purchase or sell short any
type of future or option related to its investments. These may include options
not traded on exchanges, futures or options tied to stock indexes or averages
and options on individual securities. Futures and options also may be used or
combined with each other in order to implement the Fund's overall strategy.
Futures and options tied to a securities index such as the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500") have been used by mutual
funds for many years to manage their portfolios more efficiently. An S&P 500
futures contract is a contract to buy or sell units of the S&P 500 at a
specified future date at a price agreed upon when the contract is made. A unit
is the value of the S&P 500 from time to time. Entering into a contract to buy
units is commonly referred to as buying or purchasing a contract, or holding a
long position in the S&P 500. Entering into a contract to sell units is commonly
referred to as selling a contract, or holding a short position in the S&P 500.

<PAGE>

FUTURES CONTRACTS. In contrast to purchases of a common stock, no price
is paid or received by the Fund upon the purchase of a futures contract. Upon
entering into a futures contract, the Fund will be required to deposit in an
account for the futures broker a specified amount of cash or liquid securities,
currently 2% to 5% of the contract amount. This is known as "initial margin".
The type of instruments that may be deposited as initial margin, and the
required amount of initial margin, are determined by the futures exchange(s) on
which the futures are traded. The nature of initial margin in futures
transactions is different from that of margin in securities transactions in that
futures contract margin does not involve the borrowing of funds by the customer
to finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments to and from the broker,
called "variation margin," will be made on a daily basis as the price of the
future fluctuates, a process known as "marking to the market". For example, if
the Fund purchases an S&P 500 future and the S&P 500 has risen, the Fund's
corresponding futures position will increase in value and the Fund will receive
from the broker a variation margin payment equal to that increase in value.
Conversely, when the S&P 500 declines, the Fund's futures position will be less
valuable and the Fund will be required to make a variation margin payment to the
broker. When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid to or by the
Fund, and the Fund realizes a gain or a loss.
The price of index futures may not correlate perfectly with movement in
the underlying index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
Secondly, the deposit requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result the futures market
may attract more speculators than does the securities market which also may
cause temporary price distortions.
Positions in futures contracts may be closed out only if there is a
secondary market for such futures. Although the Fund intends to purchase or sell
futures only where there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular contract
or at any particular time. In such event, it may not be possible to close a
futures position and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of maintenance margin
Generally, a futures contract is terminated by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale is
effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument with the same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund immediately is paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the price in the sale, the Fund pays
the difference and realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the Fund entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the Fund realizes a
gain, and if the purchase price exceeds the offsetting price, the Fund realizes
a loss.
The hours of trading for futures contracts may not conform to the hours
during which the underlying securities are traded. To the extent that the
futures contracts markets close after the markets for the underlying securities,
significant price movements can take place in the futures contracts markets that
cannot be reflected in the markets of the underlying securities.
Successful use of futures contracts by the Fund is also subject to the
Manager's ability to correctly predict movements in the direction of prices for
securities. Due to the possibility of price distortion in the futures market and
because of the imperfect correlation between movements in securities prices and
movements in the prices of futures contracts, a correct forecast of securities
prices by the Manager may still not result in a successful hedging transaction
over a short period of time.

OPTIONS. When the Fund purchases an option, an amount equal to the
premium paid by the Fund for the option (its cost) is recorded initially as an
investment. The amount of the investment is "marked-to-the-market" daily to
reflect the current market value of the option. If the current market value of
an option exceeds the premium paid, the excess represents unrealized
appreciation; conversely, if the premium paid exceeds the current market value,
the excess represents unrealized depreciation.
When the Fund writes an option, an amount equal to the premium received
by the Fund is recorded as an asset and as an offsetting liability. The amount
of the liability is "marked-to-the-market" daily to reflect the current market
value of the option. If an option written by the Fund expires, or the Fund
enters into a closing purchase

<PAGE>

transaction, the Fund will realize a gain (or a loss if the cost of a closing
transaction exceeds the premium received) and the liability related to such
option will be extinguished.
If the Fund writes a covered call option and is unable to effect a
closing purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires and may be required to deliver
the underlying security upon exercise. Although the Fund generally will purchase
or write only those options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that the Fund
would have to exercise the option in order to realize any profit or would incur
transaction costs on the sale of underlying securities pursuant to the exercise
of put options it had written.
Reasons for the absence of a liquid secondary market include the
following: (a) there may be insufficient interest in trading certain options;
(b) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (c) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (d) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (e) the facilities of an exchange or
the Options Clearing Corporation (the "OCC" ) may not at all times be adequate
to handle current trading volume; or (f) one or more exchanges might, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
In addition, there is no assurance that higher-than-anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of the OCC inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. In the event of a shortage of the underlying securities
deliverable on exercise of a listed option, the OCC has the authority to permit
other, generally comparable securities to be delivered in fulfillment of option
exercise obligations. If the OCC exercises its discretionary authority to allow
such other securities to be delivered, it may also adjust the exercise prices of
the affected options by setting different prices at which otherwise ineligible
securities may be delivered. As an alternative to permitting such substitute
deliveries, the OCC may impose special exercise settlement procedures.
OPTIONS ON FUTURES CONTRACTS. Options on index futures contracts give
the purchaser the right, in return for the premium paid, to assume a position in
an index futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the holder of the long
position would assume the underlying futures position and would receive a
variation margin payment of cash or securities approximating the increase in the
value of the holder's option position. If an option is exercised on the last
trading day prior to the expiration date of the futures contract, the settlement
will be made entirely in cash based on the difference between the exercise price
of the option and the final settlement price of the futures contract on the
expiration date.
The ability to establish and close out positions in options on futures
contracts will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop. Although
the Fund generally will purchase only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option or at any particular
time. In the event no such market exists for particular options, it might not be
possible to effect closing transactions in such options, with the result that
the Fund would have to exercise the options in order to realize any profit.
Compared to the purchase or sale of futures contracts, the purchase of
options on futures contracts may involve less potential risk to the Fund because
the maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the prices of debt
securities. Purchasers of options who fail to exercise their options prior to
the exercise date suffer a loss of the premium paid.
Writing an option on a futures contract involves risks similar to those
arising in the sale of futures contracts.
In purchasing and selling futures contracts and in purchasing options
on futures contracts, the Fund presently intends to comply with rules and
interpretations of the Commodity Futures Trading Commission

<PAGE>

("CFTC") under which it is exempted from regulation as a commodity pool
operator. The CFTC regulations which exempt the Fund from regulation as a
commodity pool operator require, among other things, (i) that futures and
related options be used solely for bona fide hedging purposes, as defined in
CFTC regulations or, alternatively, with respect to each long futures or options
position, the Fund will ensure that the underlying commodity value of such
contract does not exceed the sum of segregated cash or money market instruments,
margin deposits on such contracts, cash proceeds from investments due in 30 days
and accrued profits on such contracts held by the commodity broker, and (ii)
that the Fund not enter into futures and related options for which the aggregate
initial margin and premiums exceed 5% of the fair market value of the Fund's
total assets. There is no other limitation on the percentage of the Fund's
assets that may be invested in futures and related options.

REPURCHASE AGREEMENTS. In a repurchase agreement transaction, the Fund
agrees to purchase and resell, and the seller also agrees to buy back, usually
on the next business day, a security at a fixed time and price which reflects an
agreed-upon market rate. Repurchase agreements may be thought of as loans to the
seller collateralized by the security to be repurchased. The risk to the Fund is
the ability of the seller to pay the agreed-upon sum on the repurchase date. In
the event of default, the repurchase agreement provides that the Fund is
entitled to sell the collateral. If the seller defaults when the value of the
underlying collateral is less than the repurchase price, the Fund could incur a
loss of both principal and interest. The manager monitors the value of the
collateral daily during the term of the repurchase agreement to determine that
the value of the collateral equals or exceeds the agreed-upon repurchase price.
If a defaulting seller were to be subject to a Federal bankruptcy proceeding,
the ability of the Fund to liquidate the collateral could be delayed or impaired
because of certain provisions of the bankruptcy laws.

PURCHASE AND REDEMPTION OF SHARES
The Fund does not issue share certificates. Instead, an account is
established for each investor and all shares purchased or received, including
those obtained through reinvestment of distributions, are credited to such
account on the books of the Fund.
Reference is made to the materials in the Prospectus under the headings
"Choosing Among Classes When Purchasing Shares," "How to Invest in the Fund" and
"How to Redeem Your Fund Shares," which describe the methods of purchase and
redemption of the Fund's shares. If you invest through an investment dealer or
agent, that firm may have its own service features, transaction charges and
fees. This SAI and the accompanying Prospectus should be read in conjunction
with such firms' material regarding their fees and services. If you wish us to
refer you to an investment professional, call us at 1-800-272-2700. Investment
professionals receive compensation for providing investment advice, and such
compensation may differ for selling shares of different classes of the Fund.
If the Board of Trustees should determine that it is advisable in the
interest of the remaining shareholders of the Fund or Class to make payment
wholly or partly in cash, the Fund may pay redemption proceeds in whole or in
part by a distribution in kind of securities from the portfolio of the fund, in
lieu of cash, in conformity with the applicable rules of the Commission. If
shares are redeemed in kind, the redeeming shareholder might incur brokerage
costs in converting the assets into cash. Where the Fund makes a redemption in
kind, such redemption will be made in readily marketable securities whose value
is easily ascertainable. The method of valuing portfolio securities for this
purpose is as described under Net Asset Value and Taxes. The Fund has, however,
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which it is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
its net assets during any 90-day period for any one shareholder.

REINSTATEMENT PRIVILEGE
Reinvestment of redemption proceeds under the reinstatement privilege
described in the prospectus will be made at the net asset value next determined
after receipt of the reinstatement order. If the shareholder has realized a gain
on the redemption, the transaction is taxable and reinvestment will not alter
any capital gains tax payable. If there has been a loss on the redemption, some
or all of the loss may not be allowed as a tax deduction depending on the amount
reinvested.
For purposes of determining the amount of CDSC payable on any
subsequent redemptions, the purchase payment made through exercise of the
reinvestment privilege will be deemed to have been made at the time of the
initial purchase (rather than at the time the reinvestment was effected).

EXCHANGE PRIVILEGE
The minimum value of any class of shares that may be exchanged into the
fund in which shares are not

6
<PAGE>

already held is $1,000 and no exchange out of the fund (other than by a complete
exchange of all the shares of that fund) may be made if it would reduce the
shareholder's interest in that fund to less than $1,000. Participating
securities dealers who have signed a Selling Agreement with the Distributor may
exchange by telephone their clients' shares for the same class of another fund
distributed by the Distributor. The Fund reserves the right at any time to
modify or terminate the exchange privilege with respect to one or more classes
of shares, if the Board of Trustees determines that continuing the privilege may
be detrimental to shareholders.

INVOLUNTARY REDEMPTIONS
As with voluntary redemptions, an involuntary redemption may result in
the payment of a tax by the shareholder. (See "Distributions and Taxes" in the
Prospectus.)

RETIREMENT PLANS
Shares may be purchased in connection with all types of tax-deferred
retirement plans. The minimum initial investment in connection with tax-deferred
retirement plans is $250 and the minimum may be waived on payments made directly
to the Transfer Agent. There is no minimum for additional purchase payments for
tax-deferred retirement plans.

NET ASSET VALUE AND TAXES
The net asset value per share of each class of shares is determined as
of the close of regular trading on the NYSE, on each day that the NYSE is open.
The NYSE is closed on the following holidays (or the weekdays on which these
holidays are celebrated when they fall on a weekend): New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
We subtract the non-class specific liabilities of a fund from the
Fund's assets to determine its total net assets. We then determine each class's
proportionate interest in the Fund's net assets. The liabilities attributable to
that class, including its distribution fees, are then deducted and the resulting
amount is divided by the number of shares of that class outstanding to produce
its net asset value per share.
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.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Trustees. Short-term obligations having a remaining maturity of 60 days or less
are valued at amortized cost (which approximates market value).

TAX STATUS. By paying dividends representing its investment company
taxable income within the time periods specified in the Internal Revenue Code of
1986, as amended (the Code ) and by meeting certain other requirements, the Fund
intends to qualify as a regulated investment company under the Code. Since the
Fund will distribute annually its investment company taxable income, net capital
gains, and capital gain net income, it will not be subject to income or excise
taxes otherwise applicable to undistributed income of a regulated investment
company. If the Fund were to fail to distribute all its income and gains, it
would be subject to income tax and, in certain circumstances, a 4% excise tax.

TAXATION OF SHAREHOLDERS. Dividends from net investment income and
distributions from short-term capital gains are taxable to shareholders as
ordinary income. Regardless of how long the Fund shares have been held,
distributions of long-term gains realized upon the sale of capital assets are
subject to a maximum tax rate for noncorporate taxpayers: if held for more than
18 months - 20% (10% for individuals in the 15% tax bracket); if held more than
12 months but not more than 18 months - 28% (15% for individuals in the 15% tax
bracket). Any loss realized by a shareholder upon the disposition of Fund shares
held for six months or less will be treated as long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain held
for more than one year during such six-month period.
Distributions by the Fund out of dividend income from domestic
corporations may qualify in whole or in part for the deduction if the
distributing Fund does not sell the stock in respect of which it received such
dividends before satisfying a 46-day holding period requirement (91 days for
certain preferred stock), and the shareholder holds Fund shares for at least 46
days. For this purpose, the distributing Fund holding period in such stock may
be reduced for periods during which the Fund reduces its risk of loss from
holding the stock (e.g., by entering into option contracts).
Investors who purchase shares shortly before the record date for a
distribution will pay a share price that

<PAGE>

includes the value of the anticipated distribution and will be taxed on the
distribution when it is received even though with respect to them the
distribution in effect represents a return of a portion of their purchase price.
Any loss realized on a sale or exchange of shares will be disallowed if the
shares disposed of are replaced within a period of 61 days beginning 30 days
before being acquired.
Individuals and certain other non-exempt payees will be subject to a
31% backup Federal withholding tax on dividends and other distributions from the
Fund, as well as on the proceeds of redemptions if the Fund is not provided with
the shareholder's correct taxpayer identification number and certification that
the shareholder is not subject to such backup withholding, or if the Internal
Revenue Service notifies the Fund that the shareholder has failed to report
proper interest or dividends. For most individuals, the taxpayer identification
number is the taxpayer's social security number.

TAX TREATMENT OF CERTAIN TRANSACTIONS. In general, and as explained
more fully below, if the Fund enters into combinations of investment positions
by virtue of which its risk of loss from holding an investment position is
reduced on account of one (or more) other positions (i) losses realized on one
position may be deferred to the extent of any unrecognized gain on another
position and (ii) long-term capital gains or short-term capital losses may be
recharacterized, respectively, as short-term gains and long-term losses.
Investments in foreign currency denominated instruments or securities may
generate, in whole or in part, ordinary income or loss. The Federal income tax
treatment of gains and losses realized from transactions involving options on
stock or securities entered into by the Fund will be as follows: Gain or loss
from a closing transaction with respect to options written by the fund, or gain
from the lapse of any such option, will be treated as short-term capital gain or
loss. Gain or loss from the sale of put and call options that the Fund
purchases, and loss attributable to the lapse of such options, will be treated
as capital gain or loss. Whether, in the case of individual shareholders,
distributions of such gain or loss is subject to the 20% rate (10% for
individuals in the 15% tax bracket), 28% rate, or 39.6% rate depends upon
whether the affected option has been held for more than 18 months, more than 12
months but not more than 18 months, or not more than 12 months, respectively.
For this purpose, an unexercised option will be deemed to have been sold on the
date it expired. It should be noted, however, that if a put is acquired at a
time when the underlying stock or security has been held for not more than one
year, or if shares of the underlying stock or security are acquired while such
put is held, any gain on the subsequent exercise, sale or expiration of the put
will generally be short-term gain.
Any regulated futures contract or listed non-equity option held by the
Fund at the close of its taxable year will be treated as sold for its fair
market value on the last business day of such taxable year. Sixty percent of any
gain or loss with respect to such deemed sales, as well as the gain or loss from
the termination during the taxable year of the Fund's obligation (or rights)
with respect to such contracts by offsetting, by taking or making delivery, by
exercise or being exercised, by assignment or being assigned, by lapse, or
otherwise, will be treated as long-term capital gain or loss and the remaining
forty percent will be treated as short term capital gain or loss. The Fund may
make certain elections that modify the above tax treatment with respect to
regulated futures contracts or listed non-equity options that are part of a
mixed straddle, as defined by the Code.
The Fund may invest in certain investments that may cause it to realize
income prior to the receipt of cash distributions, including securities bearing
original issue discount. The level of such investments is not expected to affect
the Fund's ability to distribute adequate income to qualify as a regulated
investment company.
Treasury Regulations pursuant to Section 1092 provide for the
coordination of the wash sale rules and the short sale rules with the straddle
rules. Generally, the wash sale rules prevent the recognition of loss where a
position is sold at a loss and a substantially identical position is acquired
within a prescribed period. The short sale rules generally prevent the use of
short sales to convert short-term capital gain to long-term capital gain and
long-term capital loss to short-term capital loss.
In addition to the Federal income tax consequences described above
relating to an investment in the Fund, there may be other Federal, state, local
or foreign tax considerations that depend upon the circumstances of each
particular investor. Prospective shareholders are therefore urged to consult
their tax advisers with respect to the effects of this investment on their
specific situations.

<PAGE>

TRUSTEES AND OFFICERS OF THE TRUST
The trustees and officers of the Trust and their business affiliations
for the past five years are as follows:

<TABLE>
<CAPTION>
Name,Address and Age Position With the Trust Principal Occupation During Past 5 Years
-------------------- ----------------------- ----------------------------------------
<S> <C> <C>
James Balog Trustee Retired; Director and member of the Audit, Investment, Stock
2205 N. South Wind Blvd. Option and Compensation Committees of Transatlantic Holdings, Inc.
Vero Beach, FL 32963 (reinsurance); Director and Member of the Executive Committee of
(69) Elan, Plc (pharmaceuticals); Director and Member of the Executive
and Investment & Credit Committees of Great West Life and Annuity
Insurance Company; Member of the Technical Advisory Board of Galen
Partners (health care); and Trustee of Zweig Series Trust. Former
Director, Chairman of the Audit Committee and Member of the
Executive Committee of A.L. Pharma, Inc. (health care); Chairman
of 1838 Investment Advisors, L.P. and Chairman of Lambert Brussels
Capital Corporation (investments);

Claire B. Benenson Trustee Consultant on Financial Conferences and Former Director of
870 U.N. Plaza Financial Conferences and Chairman, Department of Business and
New York, NY 10017 (78) Financial Affairs, The New School for Social Research. President
of the Money Marketeers of New York University; Trustee Zweig
Series Trust and of Simms Global Fund; and Director of The Burnham
Fund Inc.; Former Director of Zweig Cash Fund Inc.

S. Leland Dill Trustee Retired; Director of Coutts & Co. Trust Holdings Limited, Coutts &
5070 North Ocean Dr. Co. Group, Coutts & Co. (USA) (private banking); Trustee of BT
Singer Island, FL 33404 Portfolios, BT Investment Funds and Zweig Series Trust. Former
(67) partner of Peat Marwick Mitchell & Co. and Director of Zweig Cash
Fund Inc. and Vintners International Company, Inc.(winery).

Eugene J. Glaser* Chairman, President Chairman, President, President of the Manager and of
900 Third Avenue Chief Executive Zweig/Glaser Advisers; President and Director of the Distributor;
New York, NY 10022 Officer and Trustee Chairman and Trustee of Zweig Trustee Series Trust; Director of The
(57) Zweig Fund, Inc.; and former Director of Zweig Cash Fund Inc.

David Katzen* Executive Vice President Executive Vice President of the Manager; Senior Vice President
900 Third Avenue and Trustee Principal Occupation During Past 5 Years
New York, NY 10022 of Zweig/Glaser Advisors and Zweig Series Trust, and Vice
(39) President of Zweig Advisors Inc. Former Director of
Quantitative Research at Avatar Investors Associates Corp.
Director of Equity Research for Zweig Total Return Advisors,
Inc.; Research Director of Zweig Advisors Inc.; and Vice
President of the Zweig Fund, Inc. and ZZK Management, Inc.

Donald B. Romans Trustee President of Romans & Company (private investors and financial
233 East Wacker Dr. consultants); Director of Zweig Series Trust and Burnham Fund
Chicago, IL 60601 Inc.; Former Consultant to and Executive Vice President and Chief
(66) Financial Officer of Bally Manufacturing Corporation and Director
of Zweig Cash Fund Inc.

9
<PAGE>

Name,Address and Age Position With the Trust Principal Occupation During Past 5 Years
- ----------------------- ------------------------ ------------------------------------------
Barry Mandinach First Vice President Executive Vice President of the Distributor; Senior Vice President
900 Third Avenue of the Manager and Zweig/Glaser Advisers. First Vice President of
New York, NY 10022 Zweig Series Trust.
(41)

Alfred J. Ratcliffe First Vice President, First Vice President of the Manager and of Zweig/Glaser Advisers;
900 Third Avenue Treasurer, Principal Principal First Vice President, Principal Accounting Officer,
New York, NY 10022 Accounting Officer Treasurer and Assistant Secretary of Zweig Series Trust;
(50) and Assistant Secretary Former Vice President of the The Bank of New York.

Charles I. Leone First Vice President First Vice President and Chief Financial Officer of the Manager
900 Third Avenue and Assistant Secretary and of Zweig/Glaser Advisers; First Vice President, Chief
New York, NY 10022 Financial Officer and Assistant Secretary of the Distributor;
(36) First Vice President and Assistant Secretary of Zweig Series
Trust; Former Assistant Treasurer of Zweig Cash Fund Inc.

Annemarie Gilly First Vice President First Vice President of the Manager and the Distributor; Vice President
900 Third Avenue of Zweig Series Trust; Former Vice President of Concord Financial
New York, NY 10022 Group and Executive Vice President and Chief Operating Officer
(32) of The Gabelli Equity Trust, Inc.

Rhonda Lee Berzner Assistant Vice Senior Research Analyst for the Manager and Zweig/Glaser Advisers;
900 Third Avenue President and Assistant Vice President of Zweig Series Trust.
New York, NY 10022
(33)

Tom Disbrow Assistant Vice Vice President of the Manager and Zweig Series Trust; and Vice
900 Third Avenue President and President of Zweig/Glaser Advisers.
New York, NY 10022 Assistant Treasurer
(32)

Tom Farrell Assistant Vice Assistant Vice President of the Manager and of Zweig/Glaser
900 Third Avenue President and Advisers.
New York, NY 10022 Assistant Treasurer
(34)

Marc Baltuch Secretary First Vice President of the Manager and of Zweig/Glaser Advisers;
900 Third Avenue Director, First Vice President, Chief Compliance Officer and
New York, NY 10022 Secretary of the Distributor.; Director and President of Watermark
(52) Securities, Inc. Secretary of Zweig Series Trust; Assistant
Secretary of Gotham Advisors, Inc., Zweig Total Return Advisors,
Inc. and of Zweig Advisors Inc.; Former Secretary of Zweig Cash
Fund Inc.
</TABLE>

*DESIGNATES A TRUSTEE WHO IS AN INTERESTED PERSON OF THE TRUST WITHIN THE
MEANING OF THE 1940 ACT.
Those trustees and officers of the Trust who are affiliated with the
Distributor or the Manager are not separately compensated for their services as
trustees or officers of the Trust. The Fund currently pays each of its

<PAGE>

"disinterested" trustees a fee of $ per year, plus $ per meeting attended ($ per
phone meeting) and reimburses their expenses for attendance at meetings. The
trustees and officers of the Trust, as a group, owned less than 1% of any Class
of the Fund.
Trustees may be removed from office at any meeting of shareholders by a
vote of two-thirds of the outstanding shares of the Trust. Except as set forth
above, the trustees shall continue to hold office and may appoint their
successors.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Until its initial public offering, all shares of the fund will be held
by Zweig/Glaser Advisers, the parent of the Manager.

INVESTMENT MANAGEMENT AND OTHER SERVICES
MANAGER. The Trust and Euclid Advisors LLC, the Manager, entered into
an investment management agreement, dated April 16, 1998, (the "Management
Agreement" ) pursuant to which the Manager reviews the portfolio of securities
and investments of the Fund, and advises and assists the Fund with respect to
the selection, acquisition, holding or disposal of securities. In addition to
managing the investments, the Manager also makes recommendations with respect to
other aspects and affairs of each Fund. The Manager also furnishes the Trust
with certain administrative services, office space and equipment, and permits
its officers and employees who may be elected trustees or officers of the Trust
to serve in the capacities to which they are elected without additional
compensation from the Trust. All other expenses incurred in the operation of the
Fund are borne by the Fund, including: interest, taxes, fees and commissions of
every kind; expenses of issue, repurchase or redemption of shares; costs of
registering or qualifying shares for sale (including printing costs, legal fees
and other expenses relating to the preparation and filing of the Fund's
registration statement with the appropriate regulatory authorities and the
production and filing of the Fund's prospectus); costs of insurance; association
membership dues; all charges of custodians, including fees as custodian, escrow
agent, and fees for keeping books and performing portfolio valuations; all
charges of transfer agents, registrars, pricing services, independent
accountants and legal counsel; expenses of preparing, printing and distributing
prospectuses and all proxy materials, reports and notices to shareholders;
expenses of distribution of shares pursuant to Rule 12b-1 Plans; out-of-pocket
expenses of Trustees; fees of trustees who are not "affiliated persons" as
defined in the 1940 Act; and all other costs incident to the Trust's existence
as a business trust. The Distributor purchases copies of the Fund's prospectus
and shareholder reports used for sales purposes at printer's overrun cost.
The Fund pays the Manager for its services pursuant to the Management
Agreement a monthly fee at the annual rate of 1.50% of the average daily net
assets of the Fund. The Manager has voluntarily undertaken to limit the expenses
of the Fund (exclusive of taxes, interest, brokerage commissions, 12b-1 fees and
extraordinary expenses) until April 30, 1999 to 2.00% of its average daily net
assets. The Manager reserves the right to discontinue this policy at any time
after April 30, 1999
The Management Agreement will continue in effect from year to year if
specifically approved annually by a majority of the Board of Trustees who are
not parties to such contract or "interested persons" of any such party. The
Management Agreement may be terminated without penalty by either party on 60
days' written notice and must terminate in the event of its assignment.
The Management Agreement provides that the Manager is liable only for
its acts or omissions caused by its willful misfeasance, bad faith or gross
negligence in the performance of its duties or reckless disregard of its
obligations under the Management Agreement. The Management Agreement permits the
Manager to render services to others and to engage in other activities.
The Manager may draw upon the resources of the Distributor and its
qualified affiliates in rendering its services to the Fund. The Distributor or
its affiliates may provide the Manager (without charge to the Fund) with
investment information and recommendations that may serve as the principal basis
for investment decisions with respect to the Fund.
The Manager has adopted a Code of Ethics (the "Code") that requires all
persons subject to the Code to pre-clear any proposed non-exempt personal
securities transaction. Permission for any proposed transaction will be granted
provided it is determined that such would not negatively impact activity in
client accounts. In the event that a client of Manager's affiliates also owns
such security, or it is proposed that such client purchase such security,
available investments or opportunities for sales will be allocated in a manner
deemed to be equitable by the Manager.
DISTRIBUTOR. Pursuant to its Distribution Agreement with the Trust (the
"Distribution Agreement"), Zweig

<PAGE>

Securities Corp., the Distributor, acts as distributor of the Fund's shares. The
Distribution Agreement was approved by the Trustees on April 16,1998. The
compensation of the Distributor and selling dealer is described the Prospectus
under "Choosing Among Classes When Purchasing Shares." Normally, the Distributor
receives a front-end sales commission on sales of Class A Shares, a declining
CDSC ranging from 5% to 1% on Class B Shares held for less than seven years, and
a CDSC of 1.25% on Class C Shares held for less than one year. A 1% CDSC may
apply on redemptions within 18 months of purchases of Class A Shares not subject
to a sales charge. The Distributor also is compensated under the Rule 12b-1
distribution plans as described more fully below.

The Distributor may reallow amounts in excess of the sales concessions
listed in the Prospectus, and pay certain costs, to dealers who provide
additional services and special assistance in selling shares of the Fund.

DISTRIBUTION PLANS. The Fund has adopted a distribution plan for each
class of shares except Class I Shares in accordance with Rule 12b-1 under the
Act (the "Plan"), to compensate the Distributor for the services it provides and
for the expenses it bears under the Distribution Agreement. Each class of shares
(other than Class I Shares) pays a service fee at a rate of 0.25% per annum of
the average daily net assets of such class and a distribution fee based on
average daily net assets at the rate of 0.05% per annum for Class A Shares and
0.75% per annum for Class B Shares and Class C Shares.
A report of the amounts expended under the Plan must be made to, and
reviewed by, the Board of Trustees at least quarterly. In addition, the Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear for distribution pursuant to the Plan without shareholder approval
and that other material amendments to the Plan must be approved by a majority of
the Board, including a majority of the Board who are neither "interested
persons" of the Fund (as defined in the 1940 Act) nor have any direct or
indirect financial interest in the operation of the Plan (the "Qualified
Trustees"), by vote cast in person at a meeting called for the purpose of
considering such amendments.
The Plan is subject to annual approval by a majority of the Board of
Trustees, including a majority of the Qualified Trustees, by vote cast in person
at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Qualified Trustees or, with
respect to any class - by vote of a majority of the shares of such class. .If
the Plan is terminated (or not renewed) with respect to one or more classes, it
may continue in effect with respect to any class as to which it has not been
terminated (or has not been renewed). Pursuant to the Plan, any new trustees who
are not "interested persons" must be nominated by existing trustees who are not
"interested persons".
Because all amounts paid pursuant to the Plan is paid to the
Distributor, the Distributor, its officers, directors and employees, may all be
deemed to have a direct or indirect financial interest in the operation of the
Plan. None of the Trustees who is not an "interested person" of the Fund has a
direct or indirect financial interest in the operation of the Plan.
Benefits from the Plan may accrue to the Fund and its shareholders from
the growth in assets due to sales of shares to the public pursuant to the Plan.
Increases in the Fund's net assets from sales pursuant to its Plan may benefit
shareholders by reducing per share expenses, permitting increased investment
flexibility and diversification of the Fund's assets, and facilitating economies
of scale (e.g., block purchases) in the Fund's securities transactions. Under
its terms, the Plan will continue from year to year, provided that such
continuance is approved annually by a vote of the Trustees in the manner
described above.
The adoption of the Plan was approved by the Board of Trustees,
including a majority of the Qualified Trustees, at a meeting held on April 16,
1998. Prior to approving the adoption of the Plan, the Board requested and
received from the Distributor all the information which it deemed necessary to
arrive at an informed determination as to such continuance and adoption of the
Plans. In making its determination to adopt the Plan, the Board considered,
among other factors: (1) the experience under a substantially identical Plan and
previous Rule 12b-1 Plan's of Zweig Series Trust, and whether such experience
indicates that the Plan would operate as anticipated; (2) the benefits the Fund
would be likely to obtain under the Plan; including the fact that the Plan was
necessary to permit the Fund to offer exchangeability of its shares for shares
of the same Class of the funds that comprise Zweig Series Trust (3) what
services would be provided under the Plan by the Distributor to the Fund and its
shareholders; and (4) the reasonableness of the fees to be paid to the
Distributor for its services under the Plan. Based upon their review, the Board,
including each of the Qualified Trustees, determined that the adoption of the
Plan would be in the best interest of the Fund, and that there was a reasonable
likelihood that the Plan would benefit the Fund and its shareholders. In the
Board's quarterly review of the Plan, the Trustees will consider its continued
appropriateness and the level of compensation provided therein.
The Board of Trustees has the right to terminate the Rule 12b-1 Plan
for the Class B Shares, and in the

<PAGE>

event of such termination, no further payments would be made thereunder.
However, in the event the Board of Trustees were to terminate the Rule 12b-1
Plan for the Class B Shares for any Fund, the Fund may not thereafter adopt a
new Rule 12b-1 Plan for a class of that Fund having, in the good faith
determination of the Board of Trustees, substantially similar economic
characteristics to the Class B Shares. Termination of the Rule 12b-1 Plan for
the Class B Shares or the Distribution Agreement does not affect the obligation
of the Class B shareholders to pay CDSCs. The Distributor has sold its right to
receive certain payments under the Distribution Agreement to financial
institutions in order to finance the distribution of the Class B Shares.
The Board of Trustees has also adopted a Rule 18f-3 Multi-Class Share
Plan permitting the issuance of shares in multiple classes.

CUSTODIAN, FUND ACCOUNTING AGENT, TRANSFER AGENT AND DIVIDEND PAYING
AGENT. The Bank of New York, 48 Wall Street, New York, New York 10286 serves as
custodian and fund accounting agent, and State Street Bank and Trust Company,
P.O. Box 8505, Boston, Massachusetts 02260-8505, serves as the transfer agent
and dividend paying agent for the Fund.

INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 1301 Avenue of the
Americas, New York, New York 10019, serves as independent accountants for the
Fund. In addition to reporting annually on the financial statements of the Fund,
the Fund's accountants also review certain filings of the Fund with the
Securities and Exchange Commission.

COUNSEL. Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022, is counsel to the Fund. The firm also acts as counsel to the Manager and
the Distributor.

PORTFOLIO TRANSACTIONS AND BROKERAGE
Officers and Trustees of the Fund and officers of the Manager who are
also officers or directors of the Distributor or its affiliates receive indirect
benefits from the Fund as a result of its usual and customary brokerage
commissions which the Distributor or its affiliates may receive for acting as
broker to the Fund in the purchase and sale of portfolio securities. The
Management Agreement does not provide for a reduction of the advisory fee by any
portion of the brokerage fees generated by portfolio transactions of the Fund
which the Distributor may receive.
Allocation of transactions, including their frequency, to various
dealers is determined by the Manager in its best judgment and in a manner deemed
fair and reasonable to shareholders. The primary consideration is prompt and
efficient execution of orders in an effective manner at the most favorable
price. Subject to this consideration, dealers who provide supplemental
investment research, statistical or other services to the Manager may receive
orders for transactions by the Fund. Information so received will enable the
Manager to supplement its own research and analysis with the views and
information of other securities firms. Such information may be useful and of
value to the Manager and its affiliates in servicing other clients as well as
the Fund; in addition, information obtained by the Manager and its affiliates in
servicing other clients may be useful and of value to the Manager in servicing
the Fund. No principal transactions are effected with Zweig Securities Corp. or
any of its affiliated companies.
The Fund may from time to time allocate brokerage commissions to firms
that furnish research and statistical information to the Manager. The
supplementary research supplied by such firms is useful in varying degrees and
is of indeterminable value. Such research may, among other things, include
advice regarding economic factors and trends, advice as to occasional
transactions in specific securities and similar information relating to
securities. No formula has been established for the allocation of business to
such brokers. Consideration may be given to research provided and payment may be
made of a fee higher than that charged by another broker-dealer which does not
furnish research services or which furnishes research services deemed to be of
lesser value, so long as the criteria of Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") are met. Section 28(e) of the
1934 Act specifies that a person with investment discretion shall not be "deemed
to have acted unlawfully or to have breached a fiduciary duty" solely because
such person has caused the account to pay a higher commission than the lowest
available under certain circumstances. To obtain the benefit of Section 28(e),
the person so exercising investment discretion must make a good faith
determination that the commissions paid are reasonable in relation to the value
of the brokerage and research services provided viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion.
Currently, it is not possible to determine the extent to which
commissions that reflect an element of value

<PAGE>

for research services might exceed commissions that would be payable for
execution alone, nor generally can the value of research services be measured.
Research services furnished might be useful and of value to the Manager and its
affiliates in serving other clients as well as the Fund, but on the other hand,
any research service obtained by the Manager or the Distributor from the
placement of portfolio brokerage of other clients might be useful and of value
to the Manager in carrying out its obligation to the Fund.
There are no fixed limitations regarding the turnover rates of the
Fund's long and short portfolios. In computing the portfolio turnover rate, all
securities, including options, the maturities or expiration dates of which at
the time of acquisition are one year or less, are excluded. Subject to this
exclusion, the turnover rate is calculated by dividing (A) the lesser of
purchases or sales of securities in the Fund's long or short portfolio for the
fiscal year by (B) the monthly average of the value of portfolio securities
owned by such portfolio during the fiscal year.
The exercise of calls written by the fund may cause the Fund to sell
portfolio securities, thus increasing its turnover rate. The exercise of puts
also may cause a sale of securities and increase turnover; although such
exercise is within the Fund's control, holding a protective put might cause the
Fund to sell the underlying securities for reasons which would not exist in the
absence of the put. The fund will pay a brokerage commission each time it buys
or sells a security in connection with the exercise of a put or call. Some
commissions may be higher than those which would apply to direct purchases or
sales of portfolio securities.

YIELD AND PERFORMANCE INFORMATION
The Fund will include performance data for Class A, Class B and Class C
Shares of the Fund in its advertisements, sales literature and other information
distributed to the public that includes performance data of the Fund. Such
performance information will be based on investment yields or total returns for
the Fund.

Yield. Yield may not be the same as the distribution rate or the income
reported in the Funds' financial statements. We compute yield by taking the
interest and dividend income the fund earns in a 30-day period, net of expenses,
and dividing that amount by the average number of shares entitled to receive
dividends. Yield will be calculated, using a one-month base period, according to
the following formula:
Yield = 2 X [(a-b/cd) + 1]6 - 1
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive dividends
d = the maximum offering price per
share on the last day of the period.

Average Annual Total Return. Total return represents the average annual
compounded rate of return on an investment of $1,000 at the maximum public
offering price (in the case of Class A Shares) or reflecting the deduction of
any applicable CDSC. All data are based on past investment results. Average
annual total return for a given period is computed by finding the average annual
compounded rate of return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment in the Fund of $1,000
T = average annual total return
n = number of years in period
ERV = ending redeemable value, at the end of the period, of a hypothetical
$1,000 investment in the Fund made at the beginning of the period.
The investment results of Shares of the Fund will tend to fluctuate
over time, so that historical yields, current distributions and total returns
should not be considered representations of what an investment may earn in any
future period. Actual dividends will tend to reflect changes in market yields,
and will also depend upon the level of a Class's or the Fund's expenses,
realized or unrealized investment gains and losses, and the results of the
Fund's investment policies. Thus, at any point in time, investment yields,
current distributions or total returns may be either higher or lower than past
results, and there is no assurance that any historical performance record will
continue.
The Fund also may include in its advertisements data from Age Wave,
Inc.; the American Association of Retired Persons; BARRON'S; BUSINESS WEEK;
CDA/Wiesenberger Investment Companies Service; Dalbar Surveys; DONOGHUE'S MONEY
FUND REPORT; FINANCIAL PLANNING; FINANCIAL WORLD; FORBES; FORTUNE; FUNDSCOPE,
HULBERT FINANCIAL DIGEST; Ibbotson Associates; INDIVIDUAL INVESTOR; INVESTMENT
ADVISOR; INVESTORS BUSINESS DAILY; THE

<PAGE>

LISCIO REPORT; Lipper Analytical Services, Inc.; Micropal Inc.; MONEY;
MORNINGSTAR MUTUAL FUNDS; MUTUAL FUND FORECASTER; MUTUAL FUNDS MAGAZINE; The
National Center for Education Statistics; THE NEW YORK TIMES; The Philatelic
Foundation; SMART MONEY; USA TODAY; U.S. NEWS & WORLD REPORT; THE WALL STREET
JOURNAL; WORTH and other industry publications.

REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not
contain all the information included in the Registration Statement filed with
the Commission under the 1933 Act with respect to the securities offered by the
Prospectus. The Registration Statement, including the exhibits filed therewith,
may be examined at the office of the Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus as to the contents of any contract or other document are not
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information and the Prospectus form a part, each
such statement being qualified in all respects by such reference.

FINANCIAL STATEMENTS

EUCLID MARKET NEUTRAL FUND
STATEMENT OF NET ASSETS - _____________, 1998

ASSETS
Cash....................................................................$100,000
========

NET ASSETS

Net assets, applicable to shares of beneficial interest (unlimited number of
shares authorized, no par value) outstanding as follows:

Class A - 8,818.342
Class B - 0
Class C - 0
Class I - 0....................................................$100,000
========
THE PRICING OF SHARES

Net asset value and redemption price per share
Class A..........................................................$11.34
Class B*.........................................................$11.34
Class C*.........................................................$11.34
Class I..........................................................$11.34

Maximum offering price per share
Class A (net asset value/(1-maximum sales charge)($11.34/.945) ..$12.50
Class B (net asset value)....................................... $11.34
Class C (net asset value)....................................... $11.34
Class I (net asset value)....................................... $11.34
- ---------------------
* Redemption price subject to contingent deferred sales charge.

NOTES:

Euclid Mutual Funds (the "Trust"), doing business as Euclid Market Neutral Fund,
was organized as a business trust under the laws of the State of Delaware on
February 3, 1998; all Class A, Class B, Class C and Class I Shares of beneficial
interest of the Trust were issued to Zweig/Glaser Advisers on ________, 1998.
The Trust may establish multiple series; currently only one series has been
established.

The costs of organization of the Trust will be advanced by Euclid Advisors LLC.

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder
Euclid Market Neutral Fund

We have audited the accompanying statement of net assets of the Euclid Market
Neutral Fund which is the only series of Euclid Mutual Funds, a Delaware
business trust, as of ________, 1998. This statement of net assets is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this statement of net assets based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net asses is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.

In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Euclid Market Neutral Fund
at ________, 1998 in conformity with generally accepted accounting principles.

New York, New York
________, 1998

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

The following report and financial statements for the Euclid Mutual
Funds (the "Trust") included in Part B are the Report of Coopers & Lybrand
L.L.P., Independent Accountants, the Statement of Net Assets for Euclid Market
Neutral Fund and the Notes to the Financial Statements dated , 1998.

(b) Exhibits

(1) Agreement and Declaration of Trust.

(2) By-laws of the Trust.

(3) Inapplicable.

(4) Inapplicable.

(5) Management Agreement between the Trust and Euclid Advisors LLC.*

(6) Distribution Agreements.*

(7) Inapplicable.

(8) Custodian Agreement.*

(9) Transfer Agency Agreement.*

(10) Opinion and consent of counsel.*

(11) Consent of independent accountants.*

(12) Inapplicable.

(13) Subscription Agreement for Shares of the Euclid Market Neutral
Fund.*

<PAGE>

(14) (a) Individual Retirement Account.*

(b) Paired Defined Contribution Prototype Plan.*

(d) 403(b)(7) Custodial Account.*

(15) Rule 12b-1 Distribution Plan.*

(16) Inapplicable.

(17) Inapplicable.

(18) Rule 18f-3 Plan.*
- -------------------------
Notes to Item 24 (b).

* To be filed by amendment.

Item 25. Persons Controlled by or Under Common Control with the Trust

The Trust does not control and is not under common control with any
other person.

Item 26. Number of Holders of Securities

To date no shares have been issued.

Item 27. Indemnification

All officers, trustees, employees and agents of the Trust are to be
indemnified as set forth in Article VII of the Agreement and
Declaration of Trust filed herewith. To this end, the Trust intends to
obtain an Officers' and Trustees' Errors and Omissions Insurance
Policy.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act") may be permitted for trustees,
officers and controlling persons of the Trust pursuant to the foregoing
provisions, or otherwise, the Trust has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the

<PAGE>

Trust in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection
with the securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

Item 28. Business and Other Connections of Investment Manager

The investment manager of the Trust, Euclid Advisors LLC ("Euclid"),
which is a wholly owned subsidiary of Zweig/Glaser Advisers, a general
partnership ("ZGA"), engages in no business other than that of
investment counselling for clients, including the Zweig Series Trust
and the Trust, registered investment companies. The Officers and
Directors of Euclid and ZGA and their respective relationships with
Zweig Securities Corp. (the "Distributor") and with the Trust are as
follows:

<TABLE>
<CAPTION>
POSITION WITH
-----------
EUCLID and ZGA DISTRIBUTOR TRUST
-------------- ----------- -----
<S> <C> <C> <C>
Eugene J. Glaser Manager and President of President and Director Trustee, Chairman,
Euclid and President of ZGA President and Chief
Executive Officer
Martin E. Zweig, Ph.D. Chairman of Euclid and ZGA None None

Barry M. Mandinach Senior Vice President of
Euclid and ZGA Executive Vice President First Vice President
and Director
David Katzen Executive Vice President of None Trustee and Executive Vice
Euclid and Senior Vice President
President of ZGA
Alfred J. Ratcliffe First Vice President of None First Vice President,
Euclid and ZGA Treasurer, Principal
Accounting Officer and
Assistant Secretary
Charles I. Leone First Vice President and First Vice President, First Vice President and
Chief Financial Chief Financial Assistant

<PAGE>
Officer of Officer Secretary
Euclid and ZGA and Assistant Secretary

Rhonda Lee Berzner Senior Research Analyst for None Assistant Vice President
Euclid and ZGA
Tom Disbrow Assistant Vice President of None Assistant Vice President
Euclid and Vice President and Assistant Treasurer
of ZGA
Tom Farrell Assistant Vice President of None Assistant Vice President
Euclid and ZGA and Assistant Treasurer
</TABLE>

The principal occupation of all of such persons other than Dr. Zweig
and Mr. Baltuch is with Euclid and ZGA, and the business address of
such persons is 900 Third Avenue, New York, New York 10022. Dr. Zweig's
principal occupation is an investment advisor and analyst, and Mr.
Baltuch's principal occupation is Chief Compliance Officer of the
Distributor and Zweig Series Trust; their business address is 900 Third
Avenue, New York, New York 10022.

<PAGE>

Item 29. Principal Underwriters

(a) Zweig Securities Corp., the Distributor, acts as principal
distributor of the Trust's shares and for Zweig Series Trust.

(b) The officers and directors of the Distributor who also serve on
behalf of the Trust are as follows:

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
THE DISTRIBUTOR THE TRUST
--------------- ---------
<S> <C> <C>
Eugene J. Glaser President and Director Trustee, Chairman, President and
Chief Executive Officer

Barry M. Mandinach Executive Vice President and Director First Vice President

Marc Baltuch First Vice President, Chief Secretary
Compliance Officer, Secretary and
Director

Annemarie Gilly First Vice President Vice President

Charles I. Leone Chief Financial Officer, First Vice First Vice President and Assistant
President and Assistant Secretary Secretary
</TABLE>

The principal business address of all such persons is 900 Third Avenue,
New York, New York 10022.

Item 30. Location of Accounts and Records

Euclid Mutual Funds
900 Third Avenue
New York, New York 10022

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02266

Item 31. Management Services

<PAGE>

The Trust has not entered into any management-related service contracts
other than as described in Part A and B of this Registration Statement.

Item 32. Undertakings

(a) not applicable

(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not
be certified, within four to six months from the
effective date of this Registration Statement.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and State of New York on the
4th day of February, 1998.

Euclid Mutual Funds

By: /s/ Eugene J. Glaser
---------------------------------
Eugene J. Glaser, Initial Trustee

Pursuant to the requirements of the Securities Act of 1933, as amended, this to
the Registration Statement of the Trust on Form N-1A has been signed below by
the following persons in the capacities and on the dates indicated:

Signature Title Date
- --------- ----- ----

/s/ David Katzen Initial Trustee February 4, 1998
- ------------------------
David Katzen

/s/ Eugene J. Glaser Initial Trustee February 4, 1998
- ------------------------
Eugene J. Glaser

<PAGE>

EXHIBIT INDEX TO

TO THE REGISTRATION STATEMENT

ON FORM N-1A

(1) Agreement and Declaration of Trust.

(2) By-laws of the Trust.

(3) Inapplicable.

(4) Inapplicable.

(5) Management Agreement between the Trust and Euclid Advisors
LLC.*

(6) Distribution Agreements.*

(7) Inapplicable.

(8) Custodian Agreement.*

(9) Transfer Agency Agreement.*

(10) Opinion and consent of counsel.*

(11) Consent of independent accountants.*

(12) Inapplicable.

(13) Subscription Agreement for Shares of the Euclid Market
Neutral Fund.*

(14) (a) Individual Retirement Account.*

(b) Paired Defined Contribution Prototype Plan.*

(d) 403(b)(7) Custodial Account.*

<PAGE>

(15) Rule 12b-1 Distribution Plan.*

(16) Inapplicable.

(17) Inapplicable.

(18) Rule 18f-3 Plan.*

- -------------------------
NOTES TO EXHIBIT INDEX

* To be filed by amendment.

AGREEMENT AND DECLARATION OF TRUST
OF
EUCLID MUTUAL FUNDS

THIS AGREEMENT AND DECLARATION OF TRUST is made and entered
into as of the date set forth below by the Trustees named hereunder for the
purpose of forming a Delaware business trust in accordance with the provisions
hereinafter set forth,

NOW, THEREFORE, the Initial Trustees hereby direct that the
Certificate of Trust be filed with Office of the Secretary of State of the State
of Delaware, and the Initial Trustees do hereby declare that the Trustees will
hold in trust all cash, securities and other assets that the Trust now possesses
or may hereafter acquire from time to time in any manner and manage and dispose
of the same upon the following terms and conditions for the benefit of the
holders of Shares in the Trust.

ARTICLE I
Name and Definitions

Section 1. Name. This Trust shall be known as "Euclid Mutual
Funds" and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.

Section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time, which By-Laws are expressly herein incorporated by reference
as part of the "governing instrument" within the meaning of the Delaware Act;
(b) "Certificate of Trust" means the certificate of trust, as
amended or restated from time to time, filed by the Trustees in the Office of
the Secretary of State of the State of Delaware in accordance with the Delaware
Act;
(c) "Class" means a class of Shares of a Series of the Trust
established in accordance with the provisions of Article III hereof;
(d) "Commission" and "Principal Underwriter" shall have the
meanings given them in the 1940 Act;
(e) "Declaration of Trust" means this Agreement and
Declaration of Trust, as amended or restated from time to time;
(f) "Delaware Act" means the Delaware Business Trust Act, 12
Del. C.ss.ss. 3801 et seq., as amended from time to time;
(g) "Initial Trustees" means the person or persons who have
signed this Declaration of Trust;
(h) "Manager" means a party furnishing services to the Trust
pursuant to any contract described in Article IV, Section 8(a) hereof;
(i) "1940 Act" means the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as amended from time to time;
(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;

<PAGE>

(k) "Series" means each Series of Shares established and
designated under or in accordance with the provisions of Article III;
(l) "Shareholder" means a record owner of outstanding Shares;
(m) "Shares" means the Shares of beneficial interest into
which the beneficial interest in the Trust shall be divided from time to time
and includes fractions of Shares as well as whole Shares;
(n) "Trust" means the Delaware business trust established
under the Delaware Act by this Declaration of Trust and the filing of the
Certificate of Trust in the Office of the Secretary of State of the State of
Delaware;
(o) "Trust Property" means any and all property, real or
personal, tangible or intangible, that is from time to time owned or held by or
for the account of the Trust; and
(p) "Trustees" means the Initial Trustees, and all other
Persons who may from time to time be duly elected or appointed to serve as
Trustees in accordance with the provisions hereof, in each case so long as such
Person shall continue in office in accordance with the terms of this Declaration
of Trust, and reference herein to a Trustee or the Trustees shall refer to such
Person or Persons in her or his or their capacity as trustees hereunder.

ARTICLE II
Purpose of Trust

The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities, and to carry on
such other business as the Trustees may from time to time determine pursuant to
their authority under this Declaration of Trust.

ARTICLE III
Shares

Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust may be divided into one or more Series. Each Series may be divided
into one or more Classes. Subject to the further provisions of this Article III
and any applicable requirements of the 1940 Act, the Trustees shall have full
power and authority, in their sole discretion, and without obtaining any
authorization or vote of the Shareholders of any Series or Class thereof, (i) to
divide the beneficial interest in the Trust or in each Series or Class thereof
into Shares, with or without par value as the Trustees shall determine, (ii) to
issue Shares without limitation as to number (including fractional Shares), to
such Persons and for such amount and type of consideration, including cash or
securities, at such time or times and on such terms as the Trustees may deem
appropriate, (iii) to establish and designate and to change in any manner any
Series or Class thereof and to fix such preferences, voting powers, rights,
duties and privileges and business purpose of each Series or Class thereof as
the Trustees may from time to time determine, which preferences, voting powers,
rights, duties and privileges may be senior or subordinate to (or in the case of
business purpose, different from) any existing Series or Class thereof and may
be limited to specified property or obligations of the Trust or profits and
losses associated with specified property or obligations of the Trust, (iv) to
divide or combine the Shares of any Series or Class thereof into a greater or
lesser number, or issue dividends in Shares with respect to Shares of any Series
or Class, without thereby materially changing the proportionate beneficial
interest of the Shares of such Series or Class in the assets held with respect
to that Series or Class thereof, (v) to classify or reclassify any issued Shares
of any

<PAGE>

Series or Class thereof into Shares of one or more Series or Classes thereof and
(vi) to take such other action with respect to the Shares as the Trustees may
deem desirable.
Subject to the distinctions permitted among Classes or otherwise in
Shares of the same Series as established by the Trustees consistent with the
requirements of the 1940 Act, each Share of a Series of the Trust shall
represent an equal beneficial interest in the net assets of such Series, and
each holder of Shares of a Series shall be entitled to receive such holder's pro
rata share of distributions of income and capital gains, if any, made with
respect to such Series. Upon redemption of the Shares of any Series or Class
thereof, the applicable Shareholder shall be entitled to be paid solely out of,
the funds and property of such Series or Class thereof of the Trust.
All references to Shares in this Declaration of Trust shall be deemed
to be Shares of any or all Series or Classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally to each
Series of the Trust and each Class thereof, except as the context otherwise
requires.
All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend in Shares or a split or reverse split of
Shares, shall be fully paid and non-assessable. Except as otherwise provided by
the Trustees, Shareholders shall have no appraisal, preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.

Section 2. Ownership of Shares. The Ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series (or
Class). No certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time. The Trustees
may make such rules as they consider appropriate for the issuance of Share
certificates, the transfer of Shares of each Series (or Class) and similar
matters. The record books of the Trust as kept by the Trust or any transfer or
similar agent, as the case may be, shall be conclusive as to the identity of the
Shareholders of each Series (or Class) and as to the number of Shares of each
Series (or Class) held from time to time by each Shareholder.

Section 3. Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his duly authorized agent upon delivery to the
Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share certificate if one is outstanding, and such
evidence of the genuineness of the execution and authorization thereof as may be
required by the Trustees and of such other matters as may be required by the
Trustees. Upon such delivery, and subject to any further requirements specified
by the Trustees or contained in the By-Laws, the transfer shall be recorded on
the books of the Trust. Until a transfer is so recorded, the Shareholder of
record of Shares shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor the Trust, nor any transfer
agent, Shareholder servicing agent or similar agent, any officer, employee or
agent of the Trust, shall be affected by any notice of a proposed transfer.

Section 4. Investments in the Trust. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize.

Section 5. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof. The
death, incapacity, dissolution, termination or bankruptcy of a Shareholder
during the existence of the Trust shall not operate to terminate the Trust, nor
entitle the representative of any such Shareholder to an

<PAGE>

accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but entitles such representative only to the rights of such
Shareholder under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust Property or
right to call for a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders as partners. Neither
the Trust nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor, except as
specifically provided herein, to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay. Except as specifically provided herein, no
Shareholder shall be personally liable for the debts, liabilities, obligations
or expenses incurred by, contracted for, or otherwise existing with respect to,
the Trust or by or on behalf of any Series or Class. Every note, bond, contract
or other understanding issued by or on behalf of the Trust or Trustees relating
to the Trust or to a Series or Class may include a recitation limiting the
obligation represented thereby to the Trust or to one or more Series or Class
and its respective assets (but the omission of such a recitation shall not
operate to bind any Shareholder or Trustee of the Trust).

Section 6. Establishment and Designation of Series (or Class). Without
obtaining any authorization or vote of the Shareholders of any Series or Class
thereof (except as otherwise required by the 1940 Act), the establishment and
designation of any Series (or Class) of Shares shall be effective upon the
adoption by a majority of the then Trustees of a resolution that sets forth such
establishment and designation and the relative rights and preferences of such
Series (or Class), whether directly in such resolution or by reference to
another document including, without limitation, any registration statement of
the Trust, or as otherwise provided in such resolution.
Shares of each Series (or Class) established pursuant to this Article
III, unless otherwise provided in the resolution establishing such Series, shall
have the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series (or
Class). All consideration received by the Trust for the issue or sale of Shares
of a particular Series or Class thereof, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof from whatever source derived, including, without limitation,
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably be held with respect to that Series (or
Class) for all purposes, subject only to the rights of creditors of such Series
(or Class thereof to the extent provided below), and shall be so recorded upon
the books of account of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
held with respect to" that Series (or Class thereof). In the event that there
are any assets, income, earnings, profits and proceeds thereof, funds or
payments that are not readily identifiable as assets held with respect to any
particular Series (and the Classes thereof) (collectively "General Assets"), the
Trustees shall allocate such General Assets to, between or among any one or more
of the Series (and the Classes thereof) in such manner and on such basis as the
Trustees, in their sole discretion, deem fair and equitable, and any General
Assets so allocated to a particular Series (and the Classes thereof) shall be
assets held with respect to that Series and such Classes. Each such allocation
by the Trustees shall be conclusive and binding upon the Shareholders of all
Series and Classes for all purposes. Separate and distinct records shall be
maintained for each Series (and the Classes thereof) and the assets held with
respect to each Series (and the Classes thereof) shall be held and accounted for
separately from

<PAGE>

the assets held with respect to all other Series (and the Classes thereof) and
the General Assets of the Trust not allocated to such Series or Classes.
(b) Liabilities Attributable to a Particular Series (or
Class). The assets of the Trust held with respect to each particular Series (or
Class thereof) shall be charged exclusively with the liabilities of the Trust
attributable to that Series or Class and all expenses, costs, charges and
reserves attributable to that Series or Class. Any general liabilities of the
Trust that are not readily identifiable as being attributable to any particular
Series (and the Classes thereof) shall be allocated and charged by the Trustees
to and among any one or more of the Series (and the Classes thereof) in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. All liabilities, expenses, costs, charges, and reserves so charged to
a Series (and the Classes thereof) are herein referred to as "liabilities
attributable to" that Series (or Class thereof). Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Series and Classes for all purposes. All
liabilities attributable to a particular Series shall be enforceable against the
assets held with respect to such Series only and not against the assets of the
Trust generally or against the assets held with respect to any other Series.
Notice of this limitation on the liability of each Series shall be set forth in
the Certificate of Trust or in an amendment thereto prior to the issuance of any
Shares of a Series. To the extent that the Trustees, pursuant to Section 2 of
Article VII hereof, include a Class limitation on liability in any note, bond,
contract, instrument, certificate or undertaking made with respect to any Class,
the parties to such note, bond, contract, instrument, certificate or undertaking
shall look only to the assets of such Class in satisfaction of the liabilities
arising thereunder and not to the assets of any other Class of the applicable
Series.
(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provision of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution, including, without
limitation, any distribution paid upon termination of the Trust or of any Series
(or Class) thereof with respect to, nor any redemption or repurchase of, the
Shares of any Series (or Class thereof) shall be effected by the Trust other
than from the assets held with respect to such Series (or Class thereof), nor
shall any Shareholder of any particular Series (or Class thereof) otherwise have
any right or claim against the assets held with respect to any other Series or
Class except to the extent that such Shareholder has such a right or claim
hereunder as a Shareholder of such other Series or Class. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Equality. All the Shares of each particular Series (or
Class thereof) shall represent an equal proportionate interest in the assets
held with respect to that Series (or Class thereof), and each Share of any
particular Series shall be equal to each other Share of that Series (subject to
the liabilities attributable to that Series and such rights and preferences as
may have been established and designated with respect to Classes, or otherwise,
of Shares within such Series).
(e) Fractions. Any fractional Share of a Series (or Class
thereof) shall carry proportionately all the rights and obligations of a whole
Share of that Series or Class, including rights with respect to voting, receipt
of dividends and distributions, redemption of Shares and termination of the
Trust.
(f) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series (or Class
thereof), unless otherwise required by applicable law, to combine the assets and
liabilities attributable to any two or more Series (or Classes) into assets and
liabilities attributable to a single Series or Class.

5
<PAGE>

(g) Elimination of Series. At any time that there are no
Shares outstanding of any particular Series (or Class) previously established
and designated, the Trustees may by resolution of a majority of the Trustees
abolish that Series (or Class) and rescind the establishment and designation
thereof and may thereafter establish a new Series (or Class) with such
designation and otherwise as herein provided.

Section 7. Indemnification of Shareholders. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or demand
relating to such Person being or having been a Shareholder, and not because of
such Person's acts or omissions, the Shareholder or former Shareholder (or such
Person's heirs, executors, administrators, or other legal representatives or in
the case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified out of the
assets of the Trust against all cost and expense reasonably incurred in
connection with such claim or demand, but only out of the assets held with
respect to the particular Series (or Class thereof) of Shares of which such
Person is or was a Shareholder and from or in relation to which such liability
arose. The Series (or Class thereof) may, at its option and shall, upon request
by the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon.

ARTICLE IV
Trustees

Section 1. Election of Trustees. Upon the issuance of beneficial
interests of the Trust, Zweig/Glaser Advisers, as initial shareholder of the
Trust, shall elect the Trustees of the Trust; to the extent that persons so
elected are different from the Initial Trustees, such persons shall replace the
Initial Trustees as Trustees of the Trust.

Section 2. Number, Election and Tenure. The initial Trustees shall be
Eugene J. Glaser and David Katzen. After the initial election of Trustees, the
number of Trustees shall be six or such other number as shall, from time to
time, be determined by the Trustees pursuant to Section 5 of this Article IV.
Except as described above with respect to the Initial Trustees, each Trustee
shall serve during the continued term of the Trust until she or he dies,
resigns, is declared bankrupt or incompetent by a court of appropriate
jurisdiction, or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of her or his successor. In the event that less than the
majority of the Trustees holding office have been elected by the Shareholders,
to the extent required by the 1940 Act, the Trustees then in office shall call a
Shareholders' meeting for the election of Trustees. Any Trustee may resign at
any time by written instrument signed by her or him and delivered to any officer
of the Trust or to the Secretary of any meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee resigning and no Trustee removed shall have any right
to any compensation for any period following her or his resignation or removal,
or any right to damages on account of such removal. The Shareholders may elect
Trustees at any meeting of Shareholders called by the Trustees for that purpose.
Any Trustee may be removed at any meeting of Shareholders by a vote of
two-thirds of the outstanding Shares of the Trust.

Section 3. Effect of Death, Resignation, etc. of a Trustee. The death,
declination to serve, resignation, retirement, removal, or incapacity of one or
more Trustees, or all of them, shall not operate to

<PAGE>

annul the Trust or to revoke any existing agency created pursuant to the terms
of this Declaration of Trust. Whenever there shall be fewer than the designated
number of Trustees, until additional Trustees are elected or appointed as
provided herein to bring the total number of Trustees equal to the designated
number, the Trustees in office, regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all the duties imposed upon
the Trustees by this Declaration of Trust. As conclusive evidence of such
vacancy, a written instrument certifying the existence of such vacancy may be
executed by an officer of the Trust or by a majority of the Trustees then in
office. In the event of the death, declination, resignation, retirement,
removal, or incapacity of all the then Trustees within a short period of time
and without the opportunity for at least one Trustee being able to appoint
additional Trustees to replace those no longer serving, the Trust's Managers are
empowered to appoint new Trustees subject to the applicable provisions of the
1940 Act.

Section 4. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees; the Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust, including the
power to engage in securities transactions of all kinds on behalf of the Trust.
Without limiting the foregoing, the Trustees may: adopt By-Laws not inconsistent
with this Declaration of Trust providing for the regulation and management of
the affairs of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; enlarge or reduce their
number; remove any Trustee with or without cause at any time by written
instrument signed by at least two-thirds of the number of Trustees prior to such
removal, specifying the date when such removal shall become effective and fill
vacancies caused by enlargement of their number or by the death, resignation or
removal of a Trustee; elect and remove, with or without cause, such officers and
appoint and terminate such agents as they consider appropriate; appoint from
their own number and establish and terminate one or more committees consisting
of two or more Trustees which may exercise the powers and authority of the Board
of Trustees to the extent that the Board of Trustees determine; deposit all or
any part of such assets in a system or systems for the central handling of
securities or with a Federal Reserve Bank; provide for the issuance and
distribution of Shares by the Trust directly or through one or more Principal
Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to
applicable law; declare and pay dividends and distributions to Shareholders from
the assets available therefor; and in general exercise, or delegate to any
officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian, transfer or Shareholder
servicing agent, or Principal Underwriter, such authority as they consider
desirable. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration of Trust, the presumption shall be in favor of a grant of power
to the Trustees. Unless otherwise specified herein or in the By-Laws or required
by law, any action by the Trustees shall be deemed effective if approved or
taken by a majority of the Trustees present at a meeting of Trustees at which a
quorum of Trustees is present, within or without the State of Delaware.

Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):
(a) To operate as and carry out the business of an investment
company, and exercise all the powers necessary or appropriate to the conduct of
such operations;
(b) To invest and reinvest cash, to hold cash uninvested, and
to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own,
hold, pledge, sell, assign, transfer, exchange, distribute,

<PAGE>

purchase or write options on, lend, enter into contracts for the future
acquisition or delivery of, or otherwise deal in or dispose of, securities,
indices, currencies, commodities or other property of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities, commodities
or contracts of any kind, issued, created, guaranteed, or sponsored by any and
all Persons, including, without limitation, states, territories, and possessions
of the United States and the District of Columbia and any political subdivision,
agency, or instrumentality thereof, the U.S. Government or any foreign
government or any political subdivision of the U.S. Government or any foreign
government, or any domestic or international instrumentality, or by any bank or
savings institution, or by any corporation or organization organized under the
laws of the United States or of any state, territory, or possession thereof, or
by any corporation or organization organized under any foreign law, or in "when
issued" contracts for any such securities; to change the investments of the
assets of the Trust; and to exercise any and all rights, powers, and privileges
of ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more Persons
to exercise any of said rights, powers, and privileges in respect of any of said
instruments;
(c) To sell, exchange, lend, pledge, mortgage, hypothecate,
lease, or write options (including options on futures contracts) with respect to
or otherwise deal in any property rights relating to any or all of the assets of
the Trust or any Series or Class thereof;
(d) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to execute
and deliver proxies or powers of attorney to such Person or Persons as the
Trustees shall deem proper, granting to such Person or Persons such power and
discretion with relation to securities or property as the Trustees shall deem
proper;
(e) To set record dates for the determination of Shareholders
with respect to various matters, which, for purposes of determining the
Shareholders of any Series (or Class) who are entitled to receive payment of any
dividend or of any other distribution shall be on or before the date for the
payment of such dividend or such other payment, as the record date for
determining the Shareholders of such Series (or Class) having the right to
receive such dividend or distribution; without fixing a record date, the
Trustees may for distribution purposes close the register or transfer books for
one or more Series (or Classes) at any time prior to the payment of a
distribution; nothing in this subsection shall be construed as precluding the
Trustees from setting different record dates for different Series (or Classes);
(f) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities or other property;
(g) To hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form, or in its
own name or in the name of a custodian or a nominee or nominees or otherwise;
(h) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security or property which is held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer; and
to pay calls or subscriptions with respect to any security or property held in
the Trust;
(i) To join with other security or property holders in acting
through a committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security or property with, or transfer any security or
property to, any such committee, depositary or trustee, and to delegate to them
such power and authority with relation to any security or property (whether or
not so deposited or

<PAGE>

transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including, but not
limited to, claims for taxes;
(k) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(l) To borrow funds or other property in the name of the Trust
or any Series thereof exclusively for Trust or the relevant Series purposes and
in connection therewith issue notes or other evidences of indebtedness; and to
mortgage and pledge the Trust Property or any part thereof to secure any or all
of such indebtedness;
(m) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust Property or any part thereof to secure any of or all of such obligations;
(n) To purchase and pay for entirely out of Trust Property
such insurance as the Trustees may deem necessary or appropriate for the conduct
of the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding Shares, holding, being
in or having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such Person as Trustee, officer,
employee, agent, investment adviser, principal underwriter, or independent
contractor, including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such Person against liability;
(o) To adopt, establish and carry out pension, profit-sharing,
Share bonus, Share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;
(p) To enter into contracts of any kind and description;
(q) To interpret the investment policies, practices or
limitations of any Series or Class;
(r) To establish a registered office and have a registered
agent in the State of Delaware;
(s) To invest the assets of any Series in a single investment
company, including investment by means of transfer of such assets in exchange
for an interest or interests in such investment company;
(t) Subject to the 1940 Act, to engage in any other lawful act
or activity in which a business trust organized under the Delaware Act may
engage; and
(u) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment of
any object or the furtherance of any power hereinbefore set forth, either alone
or in association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general power of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.

<PAGE>

The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series or
Classes thereof. The Trust shall not in any way be bound or limited by any
present or future law or custom in regard to investment by fiduciaries. The
Trust shall not be required to obtain any court order to deal with any assets of
the Trust or take any other action hereunder.

Section 5. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees compensation and such expenses and
charges for the services of the Trust's officers, employees, investment adviser
or manager, Principal Underwriter, auditors, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur, which expenses, fees, charges, taxes and liabilities shall be
allocated in accordance with Article III, Section 6 hereof.

Section 6. Payment of Expenses by Shareholders. The Trustees shall have
the power to cause each Shareholder, or each Shareholder of any particular
Series or Class, to pay directly, at such intervals as the Trustees may
determine, in advance or arrears, for charges of the Trust's transfer agent,
Shareholder servicing or similar agent, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.

Section 7. Ownership of Assets of the Trust. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in the
name of any other Person as nominee, on such terms as the Trustees may
determine. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee, she or he shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.

Section 8. Service Contracts.
(a) Subject to such requirements and restrictions as may be
set forth under federal and/or state law and in the By-Laws, including, without
limitation, at the date hereof the requirements of Section 15 of the 1940 Act,
or any successor provision, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory, management and/or
administrative services for the Trust or for any Series (or Class thereof) with
any corporation, trust, association or other organization; and any such contract
may contain such other terms as the Trustees may determine, including, without
limitation, authority for the Manager or administrator to delegate certain or
all of its duties under such contracts to qualified investment advisers and
administrators and to determine from time to time without prior consultation
with the Trustees what investments shall be purchased, held, sold or exchanged
and

<PAGE>

what portion, if any, of the assets of the Trust shall be held uninvested and to
make changes in the Trust's investments, or such other activities as may
specifically be delegated to such party.
(b) The Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or Principal Underwriter for
the Shares of one or more of the Series (or Classes) or other securities to be
issued by the Trust. Every such contract shall comply with such requirements and
restrictions as may be set forth under federal and/or state law and in the
By-Laws, including, without limitation, at the date hereof the requirements of
Section 15 of the 1940 Act, or any successor provision; and any such contract
may contain such other terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time
to time, to contract with any corporations, trusts, associations or other
organizations, appointing it or them the custodian, transfer agent and/or
Shareholder servicing agent for the Trust or one or more of its Series (or
Classes). Every such contract shall comply with such requirements and
restrictions as may be set forth under federal and/or state law and in the
By-Laws or stipulated by resolution of the Trustees. The Trustees are empowered,
at any time and from time to time, to retain subagents (foreign or domestic) in
connection with any service provider to the Trust or one or more of its Series
(or Classes).
(d) Subject to applicable law, the Trustees are further
empowered, at any time and from time to time, to contract with any entity to
provide such other services, including without limitation accounting and pricing
services, to the Trust or one or more of the Series (or Classes thereof), as the
Trustees determine to be in the best interests of the Trust and the applicable
Series (or Class).
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of
the Trust is a Shareholder, director, officer, partner,
trustee, employee, Manager, adviser, Principal Underwriter,
distributor, or affiliate or agent of or for any corporation,
trust, association, or other organization, or for any parent
or affiliate of any organization, with which an advisory,
management or administration contract, or principal
underwriter's or distributor's contract, or transfer,
Shareholder servicing or other type of service contract may
have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory, management or
administration contract or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or
other type of service contract may have been or may hereafter
be made also has an advisory, management or administration
contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other service
contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.

Section 9. Trustees and Officers as Shareholders. Any Trustee, officer
or agent of the Trust may acquire, own and dispose of Shares to the same extent
as if he were not a Trustee, officer or agent; and the Trustees may issue and
sell and cause to be issued and sold Shares to, and redeem such Shares from, any

<PAGE>

such Person or any firm or company in which such Person is interested, subject
only to the general limitations contained herein or in the By-Laws relating to
the sale and redemption of such Shares.

ARTICLE V
Shareholders' Voting Powers and Meetings

Section 1. Voting Powers, Meetings, Notice and Record Dates. The
Shareholders shall have power to vote only (i) for the election or removal of
Trustees to the extent and as provided in Article IV, Section 2, and (ii) with
respect to such additional matters relating to the Trust as may be required by
applicable law, this Declaration of Trust, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each Shareholder shall be entitled
to one vote for each dollar of net asset value (determined as of the applicable
record date) of each Share owned by such Shareholder (number of Shares owned
times net asset value per Share) on any matter on which such Shareholder is
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of the Shareholders, all
Shares of the Trust then entitled to vote shall be voted in aggregate, except
(i) when required by the 1940 Act, Shares shall be voted by individual Series or
Class; and (ii) when the matter involves the termination of a Series or Class or
any other action that the Trustees have determined will affect only the
interests of one or more Series or Classes, then only Shareholders of such
Series or Classes shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy may be given in writing. The By-Laws may provide that proxies
may also, or may instead, be given by any electronic or telecommunications
device or in any other manner. Notwithstanding anything else contained herein or
in the By-Laws, in the event a proposal by anyone other than the officers or
Trustees of the Trust is submitted to a vote of the Shareholders of one or more
Series or Classes thereof or of the Trust, or in the event of any proxy contest
or proxy solicitation or proposal in opposition to any proposal by the officers
or Trustees of the Trust, Shares may be voted only in person or by written proxy
at a meeting. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of Trust
or the By-Laws to be taken by the Shareholders. Meetings of the Shareholders
shall be called and notice thereof and record dates therefor shall be given and
set as provided in the By-Laws.

Section 2. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust, (i)
thirty-three and one-third percent (33-1/3%) of the Shares entitled to vote
shall constitute a quorum at a Shareholders' meeting and (ii) when any one or
more Series (or Classes) is to vote as a single class separate from any other
Shares, thirty-three and one-third percent (33-1/3%) of the Shares of each such
Series (or Class) entitled to vote shall constitute a quorum at a Shareholders'
meeting of that Series (or Class). Except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by applicable law, when
a quorum is present at any meeting, a majority of the Shares voted shall decide
any questions and a plurality of the Shares voted shall elect a Trustee,
provided that where any provision of law or of this Declaration of Trust
requires that the holders of any Series shall vote as a Series (or that holders
of a Class shall vote as a Class), then a majority of the Shares of that Series
(or Class) voted on the matter (or a plurality with respect to the election of a
Trustee) shall decide that matter insofar as that Series (or Class) is
concerned.

<PAGE>

Section 3. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.

ARTICLE VI
Net Asset Value, Distributions and Redemptions

Section 1. Determination of Net Asset Value, Net Income, and
Distributions. Subject to applicable law and Article III, Section 6 hereof, the
Trustees, in their absolute discretion, may prescribe and shall set forth in the
By-Laws or in a duly adopted resolution of the Trustees such bases and time or
times for determining the net asset value of the Shares of any Series or Class,
the net income attributable to the Shares of any Series or Class, or the
declaration and payment of dividends and distributions on the Shares of any
Series or Class, as they may deem necessary or desirable from time to time.

Section 2. Redemptions and Repurchases.
(a) The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a Person designated by
the Trust that the Trust purchase such Shares or in accordance with such other
procedures for redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof as determined by the
Trustees (or on their behalf), in accordance with any applicable provisions of
the By-Laws and applicable law. Unless extraordinary circumstances exist,
payment for said Shares shall be made by the Trust to the Shareholder within
seven (7) days after the date on which the request is made in proper form. The
obligation set forth in this Section 2 is subject to the provision that in the
event that any time the New York Stock Exchange (the "Exchange") is closed for
other than weekends or holidays, or if permitted by the rules and regulations or
an order of the Commission during periods when trading on the Exchange is
restricted or during any emergency which makes it impracticable for the Trust to
dispose of the investments of the applicable Series or Class or to determine
fairly the value of the net assets held with respect to such Series or Class or
during any other period permitted by order of the Commission for the protection
of investors, such obligations may be suspended or postponed by the Trustees. In
the case of a suspension of the right of redemption as provided herein, a
Shareholder may either withdraw the request for redemption or receive payment
based on the net asset value per Share next determined after the termination of
such suspension.
(b) The redemption price may in any case or cases be paid
wholly or partly in kind if the Trustees determine that such payment is
advisable in the interest of the remaining Shareholders of the Series or Class
for which the Shares are being redeemed. The fair value, selection and quantity
of securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other Person
in transferring securities selected for delivery as all or part of any payment
in kind.
(c) If the Trustees shall, at any time and in good faith,
determine that direct or indirect ownership of Shares of any Series or Class has
or may become concentrated in any Person to an extent that would disqualify any
Series as a regulated investment company under the Internal Revenue Code of
1986, as amended (or any successor statute thereto), then the Trustees shall
have the power (but not the obligation) by such means as they deem equitable (i)
to involuntarily redeem any number, or principal amount, of Shares of such
Person sufficient to maintain or bring the direct or indirect ownership of
Shares into conformity with the requirements for such qualification, and (ii) to
refuse to transfer or issue Shares to any Person whose acquisition of the Shares
in question would result in such disqualification. Any such redemption shall be
effected at the redemption price and in the manner provided in this Article VI.

<PAGE>

(d) The holders of Shares shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares as the Trustees deem necessary to comply with the provisions
of the Internal Revenue Code of 1986, as amended (or any successor statute
thereto), or to comply with the requirements of any other taxing or regulatory
authority.
(e) Subject to the requirements of the 1940 Act, the Board of
Trustees may cause the Trust to redeem, at the price and in the manner provided
in this Article VI, Shares of any Series or Class held by any Person (i) if such
Person is no longer qualified to hold such Shares in accordance with such
qualifications as may be established by the Trustees, (ii) if the net asset
value of such Shares is below the minimum investment amount which initially
shall be $1,000 or such other amount as determined by the Trustees or (iii) if
otherwise deemed by the Trustees to be in the best interest of the Trust or that
particular Series (or Class) as a whole.
(f) Shares redeemed shall, upon redemption, be deemed to be
retired and restored to the status of unissued shares.

ARTICLE VII
Compensation and Limitation of Liability of Trustees

Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.

Section 2. Indemnification and Limitation of Liability. A Trustee, when
acting in such capacity, shall not be personally liable to any Person, other
than the Trust or a Shareholder to the extent provided in this Article VII, for
any act, omission or obligation of the Trust, of such Trustee or of any other
Trustee. The Trustees shall not be responsible or liable in any event for any
neglect or wrongdoing of any officer, agent, employee, Manager or Principal
Underwriter of the Trust. The Trust (i) may indemnify an agent of the Trust or
any Person who is serving or has served at the Trust's request as an agent of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise and (ii) shall indemnify each Person who is, or has been,
a Trustee, officer or employee of the Trust and any Person who is serving or has
served at the Trust's request as a director, officer, trustee, or employee of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise, in the case of (i) and (ii), to the fullest extent
consistent with the 1940 Act and in the manner provided in the By-Laws; provided
that such indemnification shall not be available to any of the foregoing Persons
in connection with a claim, suit or other proceeding by any such Person against
the Trust or a Series (or Class) thereof.
All persons extending credit to, contracting with or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series (or Class thereof if the Trustees have included a Class
limitation on liability in the agreement with such person as provided below),
or, if the Trustees have yet to establish Series, of the Trust for payment under
such credit, contract or claim; and neither the Trustees nor the Shareholders,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees by any of them in connection with the Trust shall
conclusively be deemed to have been executed or done only in or with respect to
his or their capacity as Trustee or Trustees, and such Trustee or Trustees shall
not be personally liable thereon. At the Trustees' discretion, any note, bond,
contract, instrument, certificate or undertaking made or issued

<PAGE>

by the Trustees or by any officer or officers may give notice that the
Certificate of Trust is on file in the Office of the Secretary of State of the
State of Delaware and that a statutory limitation on liability of Series exists
and such note, bond, contract, instrument, certificate or undertaking may, if
the Trustees so determine, recite that the same was executed or made on behalf
of the Trust by a Trustee or Trustees in such capacity and not individually or
by an officer or officers in such capacity and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only on the assets and property of the
Trust or a Series thereof, and may contain such further recital as such Person
or Persons may deem appropriate including, without limitation, a requirement, in
any note, bond, contract, instrument, certificate or undertaking made with
respect to one or more Classes of any Series that the parties thereto look only
to the assets of such Class or Classes in satisfaction of the liabilities
arising thereunder. The omission of any such notice or recital shall in no way
operate to bind any Trustees, officers or Shareholders individually.

Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable to the
Trust and to any Shareholder solely for her or his own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in accordance with such
advice nor for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.

Section 4. Insurance. The Trustees shall be entitled and empowered to
the fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee, officer, employee or agent of the Trust in connection with
any claim, action, suit or proceeding in which she or he becomes involved by
virtue of her or his capacity or former capacity with the Trust.

ARTICLE VIII
Miscellaneous

Section 1. Liability of Third Persons Dealing with Trustees. No Person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.

Section 2. Termination of Trust or Series.
(a) Unless terminated as provided herein, the Trust shall
continue without limitation of time. The Trust may be terminated at any time by
vote of a majority of the Shares of each Series entitled to vote, voting
separately by Series, or by the Trustees by written notice to the Shareholders.
Any Series of Shares or Class thereof may be terminated at any time by vote of a
majority of the Shares of such Series or Class entitled to vote or by the
Trustees by written notice to the Shareholders of such Series or Class.
(b) Upon the requisite Shareholder vote or action by the
Trustees to terminate the Trust or any one or more Series of Shares or any Class
thereof, after paying or otherwise providing for all charges, taxes, expenses
and liabilities, whether due or accrued or anticipated, of the Trust or of the
particular Series or any Class thereof as may be determined by the Trustees, the
Trust shall in accordance

<PAGE>

with such procedures as the Trustees consider appropriate reduce the remaining
assets of the Trust or of the affected Series or Class to distributable form in
cash or Shares (if any Series remain) or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the Series or
Classes involved, ratably according to the number of Shares of such Series or
Class held by the several Shareholders of such Series or Class on the date of
distribution. Thereupon, the Trust or any affected Series or Class shall
terminate and the Trustees and the Trust shall be discharged of any and all
further liabilities and duties relating thereto or arising therefrom, and the
right, title and interest of all parties with respect to the Trust or such
Series or Class shall be canceled and discharged.
(c) Upon termination of the Trust, following completion of
winding up of its business, the Trustees shall cause a certificate of
cancellation of the Trust's Certificate of Trust to be filed in accordance with
the Delaware Act, which certificate of cancellation may be signed by any one
Trustee.

Section 3. Reorganization.
(a) Notwithstanding anything else herein, the Trustees may,
without any Shareholder approval or vote unless such approval or vote is
required by applicable law, in order to change the form or jurisdiction of
organization of the Trust or for any other purpose (i) cause the Trust to merge
or consolidate with or into one or more trusts (or series thereof to the extent
permitted by law), partnerships, associations, corporations or other business
entities (including trusts, partnerships, associations, corporations or other
business entities created by the Trustees to accomplish such merger or
consolidation), (ii) cause the Shares to be exchanged under or pursuant to any
state or federal statute to the extent permitted by law or (iii) cause the Trust
to reorganize under the laws of any state or other political subdivision of the
United States, if such action is determined by the Trustees to be in the best
interests of the Trust. Any agreement of merger or consolidation or exchange or
certificate of merger may be signed by a majority of the Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be valid.
(b) Pursuant to and in accordance with the provisions of
Section 3815(f) of the Delaware Act, and notwithstanding anything to the
contrary contained in this Declaration of Trust, an agreement of merger or
consolidation approved by the Trustees in accordance with this Section 3 may
effect any amendment to the governing instrument of the Trust or effect the
adoption of a new trust instrument of the Trust if the Trust is the surviving or
resulting trust in the merger or consolidation.
(c) The Trustees may, without any Shareholder approval or vote
unless such approval or vote is required by applicable law, create one or more
business trusts to which all or any part of the assets, liabilities, profits or
losses of the Trust or any Series or Class thereof may be transferred and may
provide for the conversion of Shares in the Trust or any Series or Class thereof
into beneficial interests in any such newly created trust or trusts or any
series or classes thereof.

Section 4. Amendments. Except as specifically provided in this section,
the Trustees may, without Shareholder vote, restate, amend or otherwise
supplement this Declaration of Trust. Shareholders shall have the right to vote
(i) on any amendment that would affect their right to vote granted in Article V,
Section 1 hereof, (ii) on any amendment to this Section 4 of Article VIII, (iii)
on any amendment that may be required to be approved by Shareholders by
applicable law or by the Trust's registration statement filed with the
Commission, and (iv) on any amendment submitted to them by the Trustees. Any
amendment required or permitted to be submitted to the Shareholders that, as the
Trustees determine, shall affect the Shareholders of one or more Series (or
Classes thereof) shall be authorized by a vote of the Shareholders of each
Series or Class affected and no vote of Shareholders of a Series or Class not
affected shall be required. Notwithstanding anything else herein, no amendment
hereof shall limit the rights to insurance provided by Article VII, Section 4
with respect to any acts or omissions of Persons covered thereby prior

<PAGE>

to such amendment nor shall any such amendment limit the rights to
indemnification referenced in Article VII, Section 2 hereof as provided in the
By-Laws with respect to any actions or omissions of Persons covered thereby
prior to such amendment. The Trustees may, without Shareholder vote, restate,
amend, or otherwise supplement the Certificate of Trust as they deem necessary
or desirable.

Section 5. Filing of Copies, References, Headings. The original or a
copy of this instrument and of each restatement and/or amendment hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such restatements and/or amendments have been
made and as to any matters in connection with the Trust hereunder; and, with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such restatements
and/or amendments. In this instrument and in any such restatements and/or
amendments, references to this instrument, and all expressions such as "herein",
"hereof" and "hereunder", shall be deemed to refer to this instrument as amended
or affected by any such restatements and/or amendments. Headings are placed
herein for convenience of reference only and shall not be taken as a part hereof
or control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.

Section 6. Applicable Law.
(a) The Trust is created under, and this Declaration of Trust
is to be governed by, and construed and enforced in accordance with, the laws of
the state of Delaware. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
business trusts or actions that may be engaged in by business trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
(b) Notwithstanding the first sentence of Section 6(a) of this
Article VIII, there shall not be applicable to the Trust, the Trustees or this
Declaration of Trust (x) the provisions of section 3540 of Title 12 of the
Delaware Code or (y) any provisions of the laws (statutory or common) of the
state of Delaware (other than the Delaware Act) pertaining to trusts that relate
to or regulate: (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining a court or other governmental approval
concerning the acquisition, holding or disposition of real or personal property,
(iv) fees or other sums applicable to trustees, officers, agents or employees of
a trust, (v) the allocation of receipts and expenditures to income or principal,
(vi) restrictions or limitations on the permissible nature, amount or
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding of trust assets, or (vii) the establishment
of fiduciary or other standards or responsibilities or limitations on the acts
or powers of trustees that are inconsistent with the limitations or liabilities
or authorities and powers of the Trustees set forth or referenced in this
Declaration of Trust.
Section 7. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration of Trust are severable,
and if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code of 1986, as amended (or any

<PAGE>

successor statute thereto), and the regulations thereunder, with the Delaware
Act or with other applicable laws and regulations, the conflicting provision
shall be deemed never to have constituted a part of the Declaration of Trust;
provided, however, that such determination shall not affect any of the remaining
provisions of the Declaration of Trust or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of the Declaration of Trust in any jurisdiction.

Section 8. Business Trust Only. It is the intention of the Trustees to
create a business trust pursuant to the Delaware Act. It is not the intention of
the Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other than
a business trust pursuant to the Delaware Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners or members of a joint stock association.

IN WITNESS WHEREOF, the Trustees named below do hereby make
and enter into this Declaration of Trust as of February 2, 1998.

- ----------------------------- ----------------------------------
Eugene J. Glaser, as Trustee David Katzen, as Trustee

18
<PAGE>

AGREEMENT AND DECLARATION OF TRUST
OF
EUCLID MUTUAL FUNDS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I Name and Definitions................................................. 1

Section 1. Name..................................................................1
Section 2. Definitions...........................................................1

ARTICLE II Purpose of Trust.......................................................2

ARTICLE III Shares.................................................................2

Section 1. Division of Beneficial Interest.......................................2
Section 2. Ownership of Shares...................................................3
Section 3. Transfer of Shares....................................................3
Section 4. Investments in the Trust..............................................3
Section 5. Status of Shares and Limitation of Personal Liability.................3
Section 6. Establishment and Designation of Series (or Class)....................4
Section 7. Indemnification of Shareholders.......................................6

ARTICLE IV Trustees...............................................................6

Section 1. Election of Trustees..................................................6
Section 2. Number, Election and Tenure...........................................6
Section 3. Effect of Death, Resignation, etc. of a Trustee.......................6
Section 4. Powers................................................................7
Section 5. Payment of Expenses by the Trust.....................................10
Section 6. Payment of Expenses by Shareholders..................................10
Section 7. Ownership of Assets of the Trust.....................................10
Section 8. Service Contracts....................................................10
Section 9. Trustees and Officers as Shareholders................................11

(i)

<PAGE>

ARTICLE V Shareholders' Voting Powers and Meetings..............................12

Section 1. Voting Powers, Meetings, Notice and Record Dates.....................12
Section 2. Quorum and Required Vote.............................................12
Section 3. Additional Provisions................................................13

ARTICLE VI Net Asset Value, Distributions and Redemptions........................13

Section 1. Determination of Net Asset Value, Net Income, and Distributions......13
Section 2. Redemptions and Repurchases..........................................13

ARTICLE VII Compensation and Limitation of Liability of Trustees..................14

Section 1. Compensation.........................................................14
Section 2. Indemnification and Limitation of Liability..........................14
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or Surety........15
Section 4. Insurance............................................................15

ARTICLE VIII Miscellaneous.........................................................15

Section 1. Liability of Third Persons Dealing with Trustees.....................15
Section 2. Termination of Trust or Series.......................................15
Section 3. Reorganization.......................................................16
Section 4. Amendments...........................................................16
Section 5. Filing of Copies, References, Headings...............................17
Section 6. Applicable Law.......................................................17
Section 7. Provisions in Conflict with Law or Regulations.......................17
Section 8. Business Trust Only..................................................18
</TABLE>

(ii)

BY-LAWS
OF
EUCLID MUTUAL FUNDS

A Delaware Business Trust

INTRODUCTION

A. Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Euclid Mutual Funds, a Delaware business trust (the
"Trust"). In the event of any inconsistency between the terms hereof and the
terms of the Declaration of Trust, the terms of the Declaration of Trust shall
control.

B. Definitions. Capitalized terms used herein and not herein defined
are used as defined in the Declaration of Trust.

ARTICLE I
Offices

Section 1. Principal Office. The Trustees shall fix and, from time to
time, may change the location of the principal executive office of the Trust at
any place within or outside the State of Delaware.

Section 2. Delaware Office. The Trustees shall establish a registered
office in the State of Delaware and shall appoint as the Trust's registered
agent for service of process in the State of Delaware an individual resident of
the State of Delaware or a Delaware corporation or a corporation authorized to
transact business in the State of Delaware; in each case the business office of
such registered agent for service of process shall be identical with the
registered Delaware office of the Trust.

Section 3. Other Offices. The Trustees may at any time establish branch
or subordinate offices at any place or places where the Trust intends to do
business.

ARTICLE II
Meetings of Shareholders

Section 1. Place of Meetings. Meetings of Shareholders shall be held at
any place designated by the Trustees. In the absence of any such designation,
Shareholders' meetings shall be held at the principal executive office of the
Trust.

Section 2. Call of Meetings. Meetings of the Shareholders may be called
at any time by the Trustees or by the President for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or provided in the Declaration of Trust or upon any other matter as to
which such vote or authority is deemed by the Trustees or the President to be
necessary or desirable. To the extent required by the 1940 Act, meetings of the
Shareholders for the purpose of voting on the removal of any Trustee shall be
called promptly by the Trustees upon the written request of Shareholders holding
at least ten percent (10%) of the outstanding Shares entitled to vote.

Section 3. Notice of Meetings of Shareholders. All notices of meetings
of Shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than ten (10) nor more than ninety (90) days before the
date of the meeting. The notice shall specify (i) the place, date and hour

<PAGE>

of the meeting, and (ii) the general nature of the business to be transacted.
The notice of any meeting at which Trustees are to be elected also shall include
the name of any nominee or nominees whom at the time of the notice are intended
to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a Trustee has a direct or indirect financial
interest, (ii) an amendment of the Agreement and Declaration of Trust of the
Trust, (iii) a reorganization of the Trust, or (iv) a voluntary dissolution of
the Trust, the notice shall also state the general nature of that proposal.

Section 4. Manner of Giving Notice; Affidavit of Notice. Notice of any
meeting of Shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
Shareholder at the address of that Shareholder appearing on the books of the
Trust or its transfer agent or given by the Shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that Shareholder by
first-class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication or, where
notice is given by publication, on the date of publication.
If any notice addressed to a Shareholder at the address of that
Shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the Shareholder at that address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the Shareholder on written demand of the
Shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
meeting of Shareholders shall be filed and maintained in the minute book of the
Trust.

Section 5. Adjourned Meeting; Notice. Any meeting of Shareholders,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the Shares represented at that meeting, either in person
or by proxy.
When any meeting of Shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Trustees shall set a new record date. Notice of any
such adjourned meeting shall be given to each Shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, the Trust may transact any
business which might have been transacted at the original meeting.

Section 6. Voting. The Shareholders entitled to vote at any meeting of
Shareholders shall be determined in accordance with the provisions of the
Declaration of Trust of the Trust, as in effect at such time. The Shareholders'
vote may be by voice vote or by ballot, provided, however, that any election for
Trustees must be by ballot if demanded by any Shareholder before the voting has
begun. On any matter other than elections of Trustees, any Shareholder may vote
part of the Shares in favor of the proposal and refrain from voting the
remaining Shares or vote them against the proposal, but if the Shareholder fails
to specify the number of Shares which the Shareholder is voting affirmatively,
it will be conclusively presumed that the Shareholder's approving vote is with
respect to the total Shares that the Shareholder is entitled to vote on such
proposal.

<PAGE>

Section 7. Waiver of Notice by Consent of Absent Shareholders. The
transactions of the meeting of Shareholders, however called and noticed and
wherever held, shall be as valid as though taken at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of Shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.

Section 8. Shareholder Action by Written Consent Without a Meeting.
Except as provided in the Declaration of Trust or the 1940 Act, any action that
may be taken at any meeting of Shareholders may be taken without a meeting and
without prior notice if a consent in writing setting forth the action so taken
is signed by Shareholders having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
Shareholders entitled to vote on that action were present and voted. All such
consents shall be filed with the Secretary of the Trust and shall be maintained
in the Trust's records. Any Shareholder giving a written consent or a transferee
of the Shares or a personal representative of the Shareholder or their
respective proxy holders may revoke the consent by a writing received by the
Secretary of the Trust before written consents of the number of votes required
to authorize the proposed action have been filed with the Secretary.
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the Shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II.

Section 9. Record Date for Shareholder Notice, Voting and Giving
Consents.
(a) For purposes of determining the Shareholders entitled to
vote or act at any meeting or adjournment thereof, the Trustees may fix in
advance a record date which shall not be more than ninety (90) days nor less
than ten (10) days before the date of any such meeting. Without fixing a record
date for a meeting, the Trustees may for voting and notice purposes close the
register or transfer books for one or more Series (or Classes) for all or any
part of the period between the earliest date on which a record date for such
meeting could be set in accordance herewith and the date of such meeting.
If the Trustees do not so fix a record date or close the register or
transfer books of the affected Series (or Classes), the record date for
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
(b) The record date for determining Shareholders entitled to
give consent to action in writing without a meeting, (a) when no prior action of
the Trustees has been taken, shall be the day on which the first written consent
is given, or (b) when prior action of the Trustees has been taken, shall be (x)
such date as determined for that purpose by the Trustees, which record date
shall not precede the date upon which the resolution fixing it is adopted by the
Trustees and shall not be more than 20 days after the date of such resolution,
or (y) if no record date is fixed by the Trustees the record date shall be the
close of business on the day on which the Trustees adopt the resolution relating
to that action. Nothing in this Section shall be construed as precluding the
Trustees from setting different record dates for different Series (or Classes).
Only Shareholders of record on the record date as herein determined shall have
any right to

<PAGE>

vote or to act at any meeting or give consent to any action relating to such
record date, notwithstanding any transfer of Shares on the books of the Trust
after such record date.

Section 10. Proxies. Subject to the provisions of the Declaration of
Trust, every Person entitled to vote for Trustees or on any other matter shall
have the right to do so either in person or by proxy, provided that either (i)
an instrument authorizing such a proxy to act is executed by the Shareholder in
writing and dated not more than eleven (11) months before the meeting, unless
the instrument specifically provides for a longer period or (ii) the Trustees
adopt an electronic, telephonic, computerized or other alternative to execution
of a written instrument authorizing the proxy to act which authorization is
received not more than eleven (11) months before the meeting. A proxy shall be
deemed executed by a Shareholder if the Shareholder's name is placed on the
proxy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the Shareholder or the Shareholder's attorney-in-fact or other
authorized agent. A valid proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the person
executing it before the vote pursuant to that proxy by a writing delivered to
the Trust stating that the proxy is revoked, by a subsequent proxy executed by
or attendance at the meeting and voting in person by the person executing that
proxy or revoked by such person using any electronic, telephonic, computerized
or other alternative means authorized by the Trustees for authorizing the proxy
to act; or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the Trust before the vote pursuant to that proxy is
counted. A proxy with respect to Shares held in the name of two or more Persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger.

Section 11. Inspectors of Election. Before any meeting of Shareholders,
the Trustees may appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the Chairman of the meeting may appoint inspectors of
election at the meeting. The number of inspectors shall be two (2). If any
person appointed as inspector fails to appear or fails or refuses to act, the
Chairman of the meeting may appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of Shares outstanding and the voting
power of each, the Shares represented at the meeting, the existence of
a quorum and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all Shareholders.

ARTICLE III
Trustees

Section 1. Powers. Subject to the applicable provisions of the 1940
Act, the Declaration of Trust and these By-Laws relating to action required to
be approved by the Shareholders, the business and

<PAGE>

affairs of the Trust shall be managed and all powers shall be exercised by or
under the direction of the Trustees.

Section 2. Number of Trustees. The exact number of Trustees within any
limits specified in the Declaration of Trust shall be fixed from time to time by
a resolution of the Trustees.

Section 3. Vacancies. Vacancies in the authorized number of Trustees
may be filled as provided in the Declaration of Trust.

Section 4. Place of Meetings and Meetings by Telephone. All meetings of
the Trustees may be held at any place that has been designated from time to time
by resolution of the Trustees. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the Trust. Any
meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all Trustees participating in the meeting
can hear one another and, except as provided under the 1940 Act, all such
Trustees shall be deemed to be present in person at the meeting.

Section 5. Regular Meetings. Regular meetings of the Trustees shall be
held without call at such time as shall from time to time be fixed by the
Trustees. Such regular meetings may be held without notice.

Section 6. Special Meetings. Special meetings of the Trustees for any
purpose or purposes may be called at any time by the President or any Vice
President or the Secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail, by
telegram or telecopy (or similar electronic means) or by nationally recognized
overnight courier, charges prepaid, addressed to each Trustee at that Trustee's
address as it is shown on the records of the Trust. In case the notice is
mailed, it shall be deposited in the United States mail at least seven (7)
calendar days before the time of the holding of the meeting. In case the notice
is delivered personally or by telephone or by telegram, telecopy (or similar
electronic means) or overnight courier, it shall be given at least forty-eight
(48) hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the Trustee or to a
person at the office of the Trustee who the person giving the notice has reason
to believe will promptly communicate it to the Trustee. The notice need not
specify the purpose of the meeting or the place if the meeting is to be held at
the principal executive office of the Trust.

Section 7. Quorum. A third of the authorized number of Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 9 of this Article III. Every act or decision done or made by
a majority of the Trustees present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Trustees, subject to the provisions
of the Declaration of Trust. A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of Trustees if
any action taken is approved by at least a majority of the required quorum for
that meeting.

Section 8. Waiver of Notice. Notice of any meeting need not be given to
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.

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Section 9. Adjournment. A majority of the Trustees present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.

Section 10. Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 6 of this Article III to the Trustees who were present at the time of
the adjournment.

Section 11. Action Without a Meeting. Unless the 1940 Act requires that
a particular action be taken only at a meeting at which the Trustees are present
in person, any action to be taken by the Trustees at a meeting may be taken
without such meeting by the written consent of a majority of the Trustees then
in office. Any such written consent may be executed and given by telecopy or
similar electronic means. Such written consents shall be filed with the minutes
of the proceedings of the Trustees. If any action is so taken by the Trustees by
the written consent of less than all of the Trustees, prompt notice of the
taking of such action shall be furnished to each Trustee who did not execute
such written consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.

Section 12. Fees and Compensation of Trustees. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Trustees. This Section 12 shall not be construed to preclude any Trustee from
serving the Trust in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation for those services.

Section 13. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his or her power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two (2) Trustees personally exercise the powers granted to
the Trustees, except as otherwise expressly provided herein or by resolution of
the Trustees. Except where applicable law may require a Trustee to be present in
person, a Trustee represented by another Trustee pursuant to such power of
attorney shall be deemed to be present for purposes of establishing a quorum and
satisfying the required vote of Trustees.

ARTICLE IV
Committees

Section 1. Committees of Trustees. The Trustees may by resolution
designate one or more committees, each consisting of two (2) or more Trustees,
to serve at the pleasure of the Trustees. The Trustees may designate one or more
Trustees as alternate members of any committee who may replace any absent member
at any meeting of the committee. Any committee to the extent provided in the
resolution of the Trustee, shall have the authority of the Trustees, except with
respect to:
(a) the approval of any action which under applicable law
requires approval by a majority of the entire authorized number of
Trustees or certain Trustees;
(b) the filling of vacancies of Trustees;
(c) the fixing of compensation of the Trustees for services
generally or as a member of any committee;
(d) the amendment or termination of the Declaration of Trust
or any Series or Class or amendment of the By-Laws or the adoption of
new By-Laws;
(e) the amendment or repeal of any resolution of the Trustees
which by its express terms is not so amendable or repealable;

<PAGE>

(f) a distribution to the Shareholders of the Trust, except at
a rate or in a periodic amount or within a designated range determined
by the Trustees; or
(g) the appointment of any other committees of the Trustees or
the members of such new committees.

Section 2. Meetings and Action of Committees. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Trustees generally, except that the time of regular meetings of committees may
be determined either by resolution of the Trustees or by resolution of the
committee. Special meetings of committees may also be called by resolution of
the Trustees. Alternate members shall be given notice of meetings of committees
and shall have the right to attend all meetings of committees. The Trustees may
adopt rules for the governance of any committee not inconsistent with the
provisions of these By-Laws.

ARTICLE V
Officers

Section 1. Officers. The officers of the Trust shall be a President, a
Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Trustees, a Chairman of the Board (Chairman), one or more Vice Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person. The
Chairman, if there be one, shall be a Trustee and may but need not be a
Shareholder; and any other officer may but need not be a Trustee or Shareholder.

Section 2. Election of Officers. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Trustees, and each shall
serve at the pleasure of the Trustees, subject to the rights, if any, of an
officer under any contract of employment.

Section 3. Subordinate Officers. The Trustees may appoint and may
empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Trustees may from time to time determine.

Section 4. Removal and Resignation of Officers. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Trustees at any regular or special
meeting of the Trustees or by the principal executive officer or by such other
officer upon whom such power of removal may be conferred by the Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.

Section 5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Trustees.

<PAGE>

Section 6. Chairman. The Chairman, if such an officer is elected, shall
if present preside at meetings of the Trustees, shall be the chief executive
officer of the Trust and shall, subject to the control of the Trustees, have
general supervision, direction and control of the business and the officers of
the Trust and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Trustees or prescribed by the Declaration of
Trust or these By-Laws.

Section 7. President. Subject to such supervisory powers, if any, as
may be given by the Trustees to the Chairman, if there be such an officer, the
President shall be the chief operating officer of the Trust and shall, subject
to the control of the Trustees and the Chairman, have general supervision,
direction and control of the business and the officers of the Trust. He or she
shall preside at all meetings of the Shareholders, and in the absence of the
Chairman or if there be none, at all meetings of the Trustees. He or she shall
have the general powers and duties of management usually vested in the office of
President of a corporation and shall have such other powers and duties as may be
prescribed by the Trustees, the Declaration of Trust or these By-Laws.

Section 8. Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Trustees or if not ranked, the Executive Vice President (who shall be considered
first ranked) and such other Vice Presidents as shall be designated by the
Trustees, shall perform all the duties of the President and when so acting shall
have all powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Trustees or
the President or the Chairman or by these By-Laws.

Section 9. Secretary. The Secretary shall keep or cause to be kept at
the principal executive office of the Trust or such other place as the Trustees
may direct a book of minutes of all meetings and actions of Trustees, committees
of Trustees and Shareholders with the time and place of holding, whether regular
or special, and if special, how authorized, the notice given, the names of those
present at Trustees' meetings or committee meetings, the number of Shares
present or represented at meetings of Shareholders and the proceedings.
The Secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a Share register or a duplicate Share register showing the names of all
Shareholders and their addresses, the number and classes of Shares held by each,
the number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of
the Shareholders and of the Trustees (or committees thereof) required to be
given by these By-Laws or by applicable law and shall have such other powers and
perform such other duties as may be prescribed by the Trustees or by these
By-Laws.

Section 10. Treasurer. The Treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust and each
Series and Class thereof, including accounts of the assets, liabilities,
receipts, disbursements, gains, losses, capital and retained earnings of all
Series and Classes thereof. The books of account shall at all reasonable times
be open to inspection by any Trustee.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositaries as may be designated by
the Board of Trustees. He or she shall disburse the funds of the Trust as may be
ordered by the Trustees, shall render to the President and Trustees, whenever

<PAGE>

they request it, an account of all of his or her transactions as chief financial
officer and of the financial condition of the Trust and shall have other powers
and perform such other duties as may be prescribed by the Trustees or these
By-Laws.

ARTICLE VI
Indemnification of Trustees, Officers,
Employees and Other Agents

Section 1. Agents, Proceedings, Expenses. For the purpose of this
Article, "agent" means any Person who is or was a Trustee, officer, employee or
other agent of the Trust or is or was serving at the request of the Trust as a
trustee, director, officer, employee or agent of another organization in which
the Trust has any interest as a Shareholder, creditor or otherwise: "proceeding"
means any threatened, pending or completed claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (including appeals);
and "expenses" includes, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and all other liabilities
whatsoever.

Section 2. Indemnification. Subject to the exceptions and limitations
contained in Section 3 below, every agent shall be indemnified by the Trust to
the fullest extent permitted by law against all liabilities and against all
expenses reasonably incurred or paid by him or her in connection with any
proceeding in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been an agent.

Section 3. Limitations, Settlements. No indemnification shall be
provided hereunder to an agent:
(a) who shall have been adjudicated by the court or other body before
which the proceeding was brought to be liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or
(b) with respect to any proceeding disposed of (whether by settlement,
pursuant to a consent decree or otherwise) without an adjudication by the court
or other body before which the proceeding was brought that such agent was liable
to the Trust or its Shareholders by reason of disabling conduct, unless there
has been a determination that such agent did not engage in disabling conduct:
(i) by the court or other body before which the proceeding was
brought;
(ii) by at least a majority of those Trustees who are neither
Interested Persons (within the meaning of the 1940 Act) of the Trust
nor are parties to the proceeding based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or
(iii) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full
trial-type inquiry); provided, however, that indemnification shall be
provided hereunder to an agent with respect to any proceeding in the
event of (1) a final decision on the merits by the court or other body
before which the proceeding was brought that the agent was not liable
by reason of disabling conduct, or (2) the dismissal of the proceeding
by the court or other body before which it was brought for
insufficiency of evidence of any disabling conduct with which such
agent has been charged.

Section 4. Insurance, Rights Not Exclusive. The rights of
indemnification herein provided may be insured against by policies maintained by
the Trust on behalf of any agent, shall be severable, shall not be exclusive of
or affect any other rights to which any agent may now or hereafter be entitled
and shall inure to the benefit of the heirs, executors and administrators of any
agent.

<PAGE>

Section 5. Advance of Expenses. Expenses incurred by an agent in
connection with the preparation and presentation of a defense to any proceeding
may be paid by the Trust from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such agent that such amount
will be paid over by him or her to the Trust if it is ultimately determined that
he or she is not entitled to indemnification under this Article VI; provided,
however, that (a) such agent shall have provided appropriate security for such
undertaking, (b) the Trust is insured against losses arising out of any such
advance payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the proceeding, or independent
legal counsel in a written opinion, shall have determined, based upon a review
of readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such agent will be found
entitled to indemnification under this Article VI.

Section 6. Fiduciaries of Employee Benefit Plan. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.

ARTICLE VII
Records and Reports

Section 1. Maintenance and Inspection of Share Registrar. The Trust
shall maintain at its principal executive office or at the office of its
transfer agent or registrar, if either be appointed and as determined by
resolution of the Trustees, a record of its Shareholders, giving the names and
addresses of all Shareholders and the number and Series (and, as applicable,
Class) of Shares held by each Shareholder. Subject to such reasonable standards
(including standards governing what information and documents are to be
furnished and at whose expense) as may be established by the Trustees from time
to time, the record of the Trust's Shareholders shall be open to inspection upon
the written request of any Shareholder at any reasonable time during usual
business hours for a purpose reasonably related to the holder's interests as a
Shareholder.

Section 2. Maintenance and Inspection of By-Laws. The Trust shall keep
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the Shareholders at all
reasonable times during office hours.

Section 3. Maintenance and Inspection of Other Records. The accounting
books and records and minutes of proceedings of the Shareholders and the
Trustees and any committee or committees of the Trustees shall be kept at such
place or places designated by the Trustees or in the absence of such
designation, at the principal executive office of the Trust. The minutes shall
be kept in written form and the accounting books and records shall be kept
either in written form or in any other form capable of being converted into
written form. Minutes and accounting books and records shall be open to
inspection upon the written request of any Shareholder at any reasonable time
during usual business hours for a purpose reasonably related to the holder's
interests as a Shareholder. Any such inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts.
Notwithstanding the foregoing, the Trustees shall have the right to keep
confidential from Shareholders for such period of time as the Trustees deem
reasonable, any information which the Trustees reasonably believe to be in the
nature of trade secrets or other information the disclosure of which the
Trustees in good faith believe is not in the

<PAGE>

best interests of the Trust or could damage the Trust or its business or which
the Trust is required by law or by agreement with a third party to keep
confidential.

Section 4. Inspection by Trustees. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.

Section 5. Financial Statements. A copy of any financial statements and
any income statement of the Trust for each semi-annual period of each fiscal
year and accompanying balance sheet of the Trust as of the end of each such
period that has been prepared by the Trust shall be kept on file in the
principal executive office of the Trust for at least twelve (12) months and each
such statement shall be exhibited at all reasonable times to any Shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such Shareholder.
The semi-annual income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.

ARTICLE VIII
General Matters

Section 1. Checks, Drafts, Evidence of Indebtedness. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.

Section 2. Contracts and Instruments; How Executed. The Trustees,
except as otherwise provided in these By-Laws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Trust and this authority may be general or
confined to specific instances; and unless so authorized or ratified by the
Trustees or within the agency power of an officer, no officer, agent, or
employee shall have any power or authority to bind the Trust by any contract or
engagement or to pledge its credit or to render it liable for any purpose or for
any amount.

Section 3. Certificates for Shares. The Trustees may at any time
authorize the issuance of Share certificates for any one or more Series or
Classes. In that event, each Shareholder of an affected Series or Class shall be
entitled upon request to receive a certificate evidencing such Shareholder's
ownership of Shares of the relevant Series or Class (in such form as shall be
prescribed from time to time by the Trustees). All certificates shall be signed
in the name of the Trust by the President or Vice President and by the Treasurer
or an Assistant Treasurer or the Secretary or any Assistant Secretary,
certifying the number of Shares and the Series of Shares owned by the
Shareholders. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on a certificate shall have ceased to be
that officer, transfer agent, or registrar before that certificate is issued, it
may be issued by the Trust with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue. Notwithstanding the
foregoing, the Trust may adopt and use a system of issuance, recordation and
transfer of its Shares by electronic or other means.

<PAGE>

Section 4. Lost Certificates. Except as provided in this Section 4, no
new certificates for Shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and canceled at the same time. The
Trustees may, in the event any Share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Trustees may require, including
a provision for indemnification of the Trust secured by a bond or other adequate
security sufficient to protect the Trust against any claim that may be made
against it, including any expense or liability on account of the alleged loss,
theft, or destruction of the certificate or the issuance of the replacement
certificate.

Section 5. Representation of Shares of Other Entities held by Trust.
The President or any Vice President or any other person authorized by the
Trustees or by any of the foregoing designated officers, is authorized to vote
or represent on behalf of the Trust any and all Shares of any corporation,
partnership, trusts, or other entities, foreign or domestic, standing in the
name of the Trust. The authority granted may be exercised in person or by a
proxy duly executed by such designated person.

Section 6. Fiscal Year. The fiscal year of the Trust shall be fixed and
refixed or changed from time to time by the Trustees. The fiscal year of the
Trust shall be the taxable year of each Series and Class of the Trust.

Section 7. Seal. The seal of the Trust shall consist of a flat-faced
dye with the words "Euclid Mutual Funds, Delaware Business Trust, 1998 cut or
engraved thereon. However, unless otherwise required by the Trustees, the seal
shall not be necessary to be placed on, and its absence shall not impair the
validity of, any document, instrument or other paper executed and delivered by
or on behalf of the Trust.

ARTICLE IX
Amendments

Section 1. Amendment. Except as otherwise provided by applicable law or
by the Declaration of Trust, these By-Laws may be restated, amended,
supplemented or repealed by the Trustees, provided that no restatement,
amendment, supplement or repeal hereof shall limit the rights to indemnification
or insurance provided in Article VI hereof with respect to any acts or omissions
of agents (as defined in Article VI) of the Trust prior to such amendment.

Section 2. Incorporation by Reference into Agreement and Declaration of
Trust by the Trust. These By-Laws and any amendments thereto shall be deemed
incorporated by reference in the Declaration of Trust.