File Nos. 33-61810
811-7674
As filed with the Securities and Exchange Commission on ______________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 / /
POST EFFECTIVE AMENDMENT NO. 13 /X/
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
POST EFFECTIVE AMENDMENT NO. 14 /X/
THE DIVERSIFIED INVESTORS
FUNDS GROUP*
(Exact Name of Registrant as Specified in Charter)
Four Manhattanville Road, Purchase, New York 10577
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 914-697-8000
Robert F. Colby, Esq.
Diversified Investment Advisors, Inc.
Four Manhattanville Road
Purchase, New York 10577
(Name and Address of Agent for Service)
Copy to:
Roger P. Joseph, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[ ] on (date) pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(1).
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485.
[X] 75 days after filing pursuant to paragraph (a)(2).
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Master Investment Portfolio has also executed this registration
statement.
* Relates only to Diversified Investors Stock Index Fund
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THE DIVERSIFIED INVESTORS FUNDS GROUP
DIVERSIFIED INVESTOR STOCK INDEX FUND
FORM N1A
CROSS REFERENCE SHEET
PART A
ITEM NO. PROSPECTUS HEADINGS
<S> <C>
1. Cover Page Cover Page
2. Synopsis Expenses
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; Management
5. Management of the Fund Management; General Information
5A. Management's Discussion of Fund Performance Not applicable
6. Capital Stock and other Securities Cover Page; Shareholder Services; General
Information
7. Purchase of Securities Being Offered Shareholder Services; General Information
8. Redemption or Repurchase Shareholder Services
9. Pending Legal Proceedings Not applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION HEADINGS
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objective,
Policies and Associated Risk Factors
14. Management of the Fund Management
15. Control Persons and Principal Holders of
Securities Principal Holders of Securities
16. Investment Advisory and Other Services Investment Advisory Services; see
Prospectus--"Management"
17. Brokerage Allocation and Other Practices Investment Objective,
Policies and Associated Risk Factors
<PAGE>
18. Capital Stock and Other Securities Taxation; Description of the Trusts;
Fund Shares; see Prospectus--
"Management" and "General
Information"
19. Purchase, Redemption and Pricing of
Securities Being Offered Determination of Net Asset Value;
Valuation of Securities; see Prospectus--
"Shareholder Services"
20. Tax Status Taxation; see Prospectus--
"General Information"
21. Underwriters Distribution Plan; see Prospectus--
"Management" and "Shareholder
Services"
22. Calculations of Yield Quotations of Money
Market Funds Performance Information
23. Financial Statements Financial Statements; Independent Accountants
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this registration statement.
<PAGE>
Prospectus
DIVERSIFIED INVESTORS STOCK INDEX FUND
a series of
The Diversified Investors Funds Group
This Prospectus describes the Diversified Investors Stock Index Fund, a
no-load diversified stock index mutual fund. Diversified Investment Advisors,
Inc. is the Fund's investment adviser.
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES, THE FUND SEEKS ITS INVESTMENT OBJECTIVE BY INVESTING
IN AN UNDERLYING PORTFOLIO WITH A SIMILAR INVESTMENT OBJECTIVE AND SIMILAR
INVESTMENT POLICIES AS THE FUND. SEE "SPECIAL INFORMATION CONCERNING InVESTMENT
STRUCTURE" ON PAGE ___.
Please read this Prospectus before investing, and keep it on file for
future reference. It contains important information, including how the Fund
invests and services available to shareholders.
To learn more about the Fund and its investments, you can obtain a copy of
the Fund's most recent financial report and portfolio listing or a copy of the
Statement of Additional Information dated the date of this Prospectus. The
Statement of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. For
a free copy of either document call (914) 697-8000. You can also obtain copies
of either document from the Securities and Exchange Commission's web site at
http://www.sec.gov.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
February 7, 1999
<PAGE>
CONTENTS
Page
Fund Summary...........................................................
Expenses...............................................................
Investment Information.................................................
Investment objective and principal investment policies.........
Additional investment policies.................................
Risk considerations............................................
Shareholder Services...................................................
How to purchase shares.........................................
How to sell shares.............................................
Shareholder services and policies..............................
Dividends and Distributions............................................
Management.............................................................
Taxes..................................................................
Performance Information................................................
General Information....................................................
Net asset value................................................
Organization...................................................
Voting and other rights........................................
Expenses.......................................................
Independent Accountants........................................
Year 2000......................................................
Appendix A - Permitted Investments and Investment Practices
Appendix B - Purchases and Redemptions
<PAGE>
FUND SUMMARY
This section lists the Fund's investment objective and who may want to
invest. See the rest of this Prospectus for more information, including risk
considerations.
The Fund invests all of its assets in the S&P 500 Index Master Portfolio
of Master Investment Portfolio, an openend, management investment company,
rather than in a portfolio of securities. The Fund has a similar investment
objective as the Portfolio and the Fund's investment experience corresponds
directly with the Portfolio's investment experience. Interests in the Portfolio
may be purchased only by other investment companies or other accredited
investors.
As with any mutual fund, there can be no assurance that the Fund will
achieve its investment objective. The Fund, by itself, is not intended to be a
complete investment program.
The Fund: Diversified Investors Stock Index Fund, a diversified mutual
fund.
Investment Objective: The Fund's investment objective is to match the
performance of the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).1
The Fund is an index fund that seeks its investment objective by
investing, through the Portfolio, in a representative sample of the stocks
found in the S&P 500 Index. The S&P 500 Index, a widely recognized benchmark
for U.S. stocks, currently represents about 75% of the value of all publicly
traded common stocks in the U.S. The Fund is broadly diversified since the S&P
500 Index includes 500 established companies representing different sectors of
the U.S. economy (industrial, utilities, financial, and transportation) and the
Fund invests in a representative sample of the Index.
Who May Want To Invest: The Fund is designed for investors who wish to
keep investment expenses low while seeking potentially high long-term returns
from investments in large companies. Investors should be willing to tolerate
stock market fluctuations.
The Fund, through its investment in S&P 500 Index Master Portfolio, seeks
to match, rather than outperform, the S&P 500 Index. Investors should not
expect the potentially greater results that could be obtained by a fund that
aggressively seeks growth.
_______________________
1 The Fund does not invest directly in securities. Instead, the Fund seeks its
objective by investing all of its investable assets in S&P 500 Index Master
Portfolio, a mutual fund with a similar investment objective and similar
investment policies as the Fund. The Portfolio invests in securities in
accordance with its investment objective and policies. Standard & Poor's does
not sponsor S&P 500 Index Master Portfolio, nor is it affiliated in any way
with Barclays Global Fund Advisors or S&P 500 Index Portfolio. "Standard &
Poor's(," "S&P 500(," and "Standard & Poor's 500(" are trademarks of The
McGraw-Hill Companies, Inc. The Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation or
warranty, express or implied, regarding the advisability of investing in S&P
500 Index Master Portfolio.
<PAGE>
EXPENSES
These tables show estimated shareholder transaction expenses and estimated
annual operating expenses for the Fund and its underlying Portfolio, and are
intended to assist investors in understanding the various costs and expenses
that shareholders in the Fund will bear, either directly or indirectly. For
more information, see "Management" on page ___ and "General Information -
Expenses" on page ___.
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL OPERATING EXPENSES1
(expressed as a percentage of average net assets)
Management Fee2 0.40%
12b-1 Fee3 0.25%
Other Expenses 0.00%
Total Fund Operating Expenses 0.65%
EXAMPLE1
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
the shares after the number of years indicated:
1 Year 3 Years
------ -------
$6 $23
________________________
1 Because the Fund is newly organized, the information in the expense table
and the example is estimated for the current fiscal year. The assumption in the
example of a 5% return is required by the Securities and Exchange Commission
for all mutual funds, and is not a prediction of the Fund's future performance.
THE EXAMPLE SHOULD NOT BE COnSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF THE FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2 Includes the Fund's pro rata share of the Portfolio's expenses.
3 12b-1 fees are asset-based sales charges. After a substantial period of time
annual payment of these fees may total more than the maximum sales charge that
would have been permissible if imposed entirely as an initial sales charge.
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INVESTMENT INFORMATION
INVESTMENT OBJECTIVE AND PRiNCIPAL INVESTMENT POLICIES
This section describes the Fund's investment objective and principal
investment policies. Because the Fund invests through S&P 500 Index Master
Portfolio, the principal investment policies in this section relate to the
Portfolio, unless otherwise noted. Additional investment policies and risk
considerations are described in the next sections.
INVESTMENT OBJECTIVE. The Fund's investment objective is to match the
performance of the S&P 500 Index.
The Fund's investment objective may be changed without shareholder
approval, but shareholders will be given at least 30 days' prior written notice
before any change is implemented. Of course, there can be no assurance that the
Fund will achieve its investment objective.
INVESTMENT POLICIES. The Fund seeks its objective by investing all of its
investable assets in S&P 500 Index Master Portfolio, which has a similar
investment objective as the Fund. The Portfolio seeks its objective by
investing substantially all of its assets in the stocks comprising the S&P 500
Index. The weightings of stocks in the S&P 500 Index are based on each stock's
relative total market capitalization; that is, its market price per share times
the number of shares outstanding. The percentage of the Portfolio's assets
invested in each stock is approximately the same as the percentage that stock
represents in the S&P 500 Index. Under normal market conditions, at least 90%
of the Portfolio's total assets is invested in securities comprising the S&P
500 Index.
The Portfolio attempts to achieve, in both rising and falling markets, a
correlation of at least 95% between its total return before expenses and the
total return of the S&P 500 Index. The Portfolio's ability to match the
investment performance of the S&P 500 Index may be affected by, among other
things, Portfolio expenses, the amount of cash and cash equivalents held by the
Portfolio, the manner in which the total return of the S&P 500 Index is
calculated and the timing, frequency and size of cash flows into and out of the
Portfolio. The investment advisers of the Fund and the Portfolio regularly
monitor the Portfolio's correlation to the S&P 500 Index. In the unlikely event
that the Portfolio cannot achieve a correlation of at least 95%, the Fund's
Trustees will consider alternative arrangements.
In the future, the Portfolio may select another index if it is deemed to
be more representative of the performance of publicly traded common stocks in
the aggregate.
In seeking to replicate the performance of the S&P 500 Index, the
Portfolio also may engage in futures and options transactions and other
derivative securities transactions, and may lend its portfolio securities, each
of which involves risk. See Appendix A ( Permitted Investments and Investment
Practices.
The Portfolio may invest not more than 10% of its total assets under
normal market conditions in cash and high-quality money market instruments.
These investments are made to provide liquidity and when there is an unexpected
or abnormal level of investments in or redemptions from the Portfolio.
<PAGE>
ADDITIONAL INVESTMENT POLICIES
This section describes additional investment policies of S&P 500 Index
Master Portfolio. See "Risk Considerations" for more information.
OPTIONS AND FUTURES. The Portfolio may use various investment techniques
to increase or decrease its exposure to changing security prices or other
factors that affect security values, or to create substitutes for comparable
market positions in underlying securities. These techniques may involve
derivative transactions such as buying and selling futures contracts and
options, entering into swap agreements and purchasing indexed securities.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a security at a specified future time
and price, or for making payment of a cash settlement based on changes in the
value of a security, an index of securities or other assets. Options generally
involve a right, which may or may not be exercised, to buy or sell a commodity
or financial instrument at a particular price on a specified future date. In
many cases, the futures contracts and options that may be purchased or sold by
the Portfolio are standardized contracts traded on commodities exchanges or
boards of trade. As a result, the primary credit risk is the creditworthiness
of the exchange. Future contracts are, however, subject to market risk, meaning
adverse price changes. See Appendix A.
The Portfolio may use these practices in its effort to match the return of
the S&P 500 Index. If the Portfolio judges market conditions incorrectly or
employs a strategy that does not correlate well with its investments, these
techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
the Portfolio and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could result in a
loss if the counterparty to the transaction does not perform as promised.
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes, the Portfolio may invest
without limit in cash and in U.S. dollar-denominated high quality money market
and short-term instruments, including U.S. Government obligations, obligations
of domestic and foreign banks, repurchase agreements, commercial paper
(including variable amount master demand notes) and short-term corporate debt
obligations. These investments may result in a lower yield than would be
available from investments with a lower quality or longer term. To the extent
the Portfolio invests in these investments it will not be pursuing its
investment objective.
OTHER PERMITTED INVESTMENTS. For more information regarding the
Portfolio's permitted investments and investment practices, see Appendix A. The
Portfolio will not necessarily invest or engage in each of the investments and
investment practices in Appendix A but reserves the right to do so.
INVESTMENT RESTRICTIONS. The Statement of Additional Information contains
a list of specific investment restrictions which govern the investment policies
of the Fund and the Portfolio. Under its investment restrictions, the Fund may
borrow money and enter into reverse repurchase agreements in an amount not to
exceed 331/3% of the Fund's assets (including the borrowing) less liabilities
(not including the borrowing). Except as otherwise noted, the Fund's investment
objectives and policies may be changed without shareholder approval. If a
percentage or rating restriction (other than a restriction as to borrowing) is
adhered to at the time an investment is made, a later change in percentage or
rating resulting from changes in the Fund's securities is not a violation of
policy.
<PAGE>
PORTFOLIO TURNOVER. Securities of the Portfolio are sold whenever the
Portfolio's adviser believes it is appropriate to do so in light of the
Portfolio's investment objective, without regard to the length of time a
particular security may have been held. The amount of brokerage commissions and
realization of taxable capital gains will tend to increase as the level of
portfolio activity increases.
BROKERAGE TRANSACTIONS. The primary consideration in placing the
Portfolio's securities transactions with broker-dealers for execution is to
obtain and maintain the availability of execution at the most favorable prices
and in the most effective manner possible. The Portfolio may execute brokerage
or other agency transactions through an investment adviser or distributor of
the Portfolio. These entities may be paid for these transactions.
RISK CONSIDERATIONS
The risks of investing in the Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Since
the investment characteristics and, therefore, the investment risks directly
associated with such characteristics of the Fund correspond to those of the
Portfolio, the following is a discussion of certain of the risks associated
with the investments of the Portfolio. Unless otherwise specified,
references to the investment policies and risks of the Portfolio also should be
understood as references to the investment policies and risks of the Fund.
CHANGES IN NET ASSET VALUE. The Fund's net asset value will fluctuate
based on changes in the values of the portfolio securities held by the
Portfolio. This means that an investor's shares may be worth more or less at
redemption than at the time of purchase. Equity securities fluctuate in
response to general market and economic conditions and other factors, including
actual and anticipated earnings, changes in management, political developments
and the potential for takeovers and acquisitions. The value of the debt
securities generally goes down when interest rates go up, and up when rates go
down.
CORRELATION WITH THE S&P 500 INDEX. Differences between the S&P 500 Index
and the Portfolio's investment portfolio may cause differences in performance.
Even if the Portfolio's investments match the S&P 500 Index exactly, its
returns could differ from the Index on a day-to-day basis because of
differences in how the Portfolio and the S&P 500 Index are valued. The
Portfolio normally values all of its investments at 4:00 p.m. Eastern time. The
S&P 500 Index is valued by its sponsor, who may use different closing prices
than the Portfolio does. The Portfolio's returns also will reflect Portfolio
expenses and the size and frequency of cash flows into and out of the
Portfolio. Also, the Portfolio generally will hold cash in an amount determined
necessary to fund shareholder redemptions. All of these factors will affect the
Portfolio's correlation with the Index. The Fund's returns also will reflect
Fund expenses, including its pro rata share of Portfolio expenses.
INVESTMENT PRACTICES. Certain of the investment practices employed for the
Portfolio may entail certain risks. These risks are in addition to the risks
described above and are described in Appendix A.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE OF THE FUND. The Fund
does not invest directly in securities. Instead, the Fund invests all of its
investable assets in S&P 500 Index Master Portfolio, which has a similar
investment objective and similar investment policies as the Fund. The
Portfolio, in turn, buys, holds and sells securities in accordance with that
objective and those policies. Of course, there can be no assurance that either
the Fund or the Portfolio will achieve its objective. The Trustees of the Fund
<PAGE>
believe that the aggregate per share expenses of the Fund and the Portfolio are
less than or approximately equal to the expenses that the Fund would incur if
the assets of the Fund were invested directly in the types of securities held
by the Portfolio.
The Fund may withdraw its investment in the Portfolio at any time, and
will do so if the Trustees believe it to be in the best interest of the Fund's
shareholders. If the Fund were to withdraw its investment in the Portfolio, the
Fund could either invest directly in securities in accordance with the
investment policies described above or invest in another mutual fund or pooled
investment vehicle having similar investment objectives and policies. If the
Fund were to withdraw, the Fund could receive securities from the Portfolio
instead of cash, causing the Fund to incur brokerage, tax and other charges or
leaving it with securities which may or may not be readily marketable or widely
diversified.
The Portfolio may not change its investment objective and certain of its
investment policies and restrictions without approval by a majority (as defined
by the Investment Company Act of 1940) of its holders. These policies and
restrictions are described in the Statement of Additional Information. A change
in the Portfolio's investment objective, policies or restrictions may cause the
Fund to withdraw its investment in the Portfolio. When the Fund is asked to
vote on matters concerning the Portfolio, the Fund will either hold a
shareholder meeting and vote in accordance with shareholder instructions or
otherwise act in accordance with applicable rules and regulations. Of course,
the Fund could be outvoted, or otherwise adversely affected, by other investors
in the Portfolio.
The Portfolio may sell interests to investors in addition to the Fund.
These investors may be mutual funds which offer shares to their shareholders
with different costs and expenses than the Fund. Therefore, the investment
returns for all investors in funds investing in the Portfolio may not be the
same. These differences in returns are also present in other mutual fund
structures.
SHAREHOLDER SERVICES
This section describes how to do business with the Fund and the
shareholder services that are available.
HOW TO PURCHASE SHARES
Shares of the Fund are available to individual and institutional
investors. You may be able to establish new accounts in the Fund under certain
retirement plans (a "Plan"). These Plans include, but are not limited to,
401(k), 403(b) and 457 Plans, Money Purchase Plans, Profit Sharing Plans,
Simplified Employee Pension Plans, Keogh Plans and IRAs. Consult with your
Service Agent and your tax and retirement advisers. If you are a participant in
a Plan, you should obtain the Plan's conditions for participation from your
Plan administrator.
The Fund's share price, called net asset value, is calculated every
business day. The Fund's shares are sold without a sales charge. Purchases may
be made Monday through Friday, except on certain holidays. Shares are purchased
at the net asset value next calculated after your investment is received in
good order and is accepted by the Distributor. Net asset value is normally
calculated at 4 p.m. Eastern time, unless the financial markets close early.
You may purchase shares in the Fund through the Distributor directly or by
authorizing your Plan to purchase shares on your behalf. See Appendix B for
information on purchases directly through the Distributor. See your Plan
administrator to obtain purchase instructions if you are a participant in a
<PAGE>
Plan. Plans which include fixed investment options may restrict or prohibit the
purchase of shares of the Fund with monies withdrawn from those fixed
investment options.
The minimum initial investment is $5,000. This minimum is currently being
waived by the Fund. There is no minimum for subsequent investments. A Plan may,
however, impose minimum investment requirements. Plan participants should
consult their Plan administrator.
The Fund reserves the right to cease offering its shares for sale at any
time or to reject any order for the purchase of shares.
HOW TO SELL SHARES
On any business day, you may redeem all or a portion of your shares. Your
transaction will be processed at net asset value the next time it is calculated
after your redemption request in good order is received and accepted by the
Distributor. Redemption proceeds normally will be paid or mailed within seven
days. A redemption is treated as a sale for tax purposes, and could result in
taxable gain or loss in a non-tax-sheltered account.
Participants in a Plan should obtain redemption instructions from their
Plan administrator. If you purchased shares directly through the Distributor,
see Appendix B for redemption instructions.
A signature guarantee is required for the following:
o any redemption by mail if the proceeds are to be paid to someone else or
are to be mailed to an address other than your address of record;
o any redemption by mail if the proceeds are to be wired to a bank;
o any redemption request for more than $50,000; and
o requests to transfer registration of shares to another owner.
At the Fund's discretion signature guarantees may also be required for
other redemptions. A signature guarantee assures that a signature is genuine
and protects shareholders from unauthorized account transfers. Banks, savings
and loan associations, trust companies, credit unions, broker-dealers and
member firms of a national securities exchange may guarantee signatures. Call
your financial institution to see if it has this capability. A signature
guarantee is not the same as a notarized signature.
SHAREHOLDER SERVICES AND POLICIES
Exchanges. On any business day you may exchange all or a portion of your
shares for shares of any other available fund in The Diversified Investors
Funds Group. To make exchanges, please follow the procedures for redemptions.
Plan participants should contact their Plan administrator. Exchanges are
processed at net asset value the next time it is calculated after your exchange
request in good order is received and approved. The Fund reserves the right to
reject any exchange request or to modify or terminate the exchange privilege at
any time. An exchange is the sale of shares of one fund and purchase of shares
of another, and could result in taxable gain or loss in a non-tax-sheltered
account.
Redemption proceeds. The Fund intends to pay redemption proceeds in cash,
but reserves the right to pay in kind by delivery of investment securities
<PAGE>
equal to the redemption price. In these cases, you might incur brokerage costs
in converting the securities to cash. The right of any shareholder to receive
payment of redemption proceeds may be suspended, or payment may be postponed,
in certain circumstances. These circumstances include any period the New York
Stock Exchange is closed (other than weekends or holidays) or trading on the
Exchange is restricted, any period when an emergency exists and any time the
Securities and Exchange Commission permits mutual funds to postpone payments
for the protection of investors.
Taxpayer identification number. On the account application or other
appropriate form, you will be asked to certify that your social security or
taxpayer identification number is correct and that you are not subject to
backup withholding for failing to report income to the IRS. If you are subject
to the 31% backup withholding or you did not certify your taxpayer
identification, the IRS requires the Fund to withhold 31% of any dividends and
redemption or exchange proceeds.
Share certificates. Share certificates are not issued.
Involuntary redemptions. If your account balance falls below $1,000 as a
result of a redemption or exchange, you will be given notice and 15 days to
establish the minimum balance. If you do not, your account may be closed and
the proceeds sent to you.
Telephone transactions. You may initiate redemptions and exchanges by
telephone. The Fund and its agents will not be responsible for any losses
resulting from unauthorized transactions when procedures designed to verify the
identity of the caller are followed. It may be difficult to reach the Fund by
telephone during periods of unusual market activity. If you are unable to reach
a representative by telephone, please consider sending written instructions.
Address changes. To change the address on your account contact your Plan
administrator or call (914) 697-8000 and send a written request signed by all
account owners. Include the name of the Fund, the account numbers(s), the
name(s) on the account and both the old and new addresses.
Registration changes. To change the name on an account, the shares are
generally transferred to a new account. In some cases, legal documentation may
be required. For more information, contact your Plan administrator or call
(914) 697-8000. If your shares are held of record by a financial institution,
contact that financial institution for ownership changes.
Statements and reports. The Fund will send you a confirmation statement
after every transaction that affects your account balance or your account
registration. Information regarding the tax status of income dividends and
capital gains distributions will be mailed to investors with non-tax-sheltered
accounts early each year.
Financial reports for the Fund will be mailed semiannually to all
shareholders.
DIVIDENDS AND DISTRIBUTIONS
Shares begin accruing dividends on the day following the date of purchase,
and accrue dividends through and including the day of redemption. Substantially
all of the Fund's net income from dividends and interest is paid to its
shareholders of record annually on or about the last day of DECEMBER.
<PAGE>
The Fund's net realized short-term and long-term capital gains, if any,
will be distributed to the Fund's shareholders at least annually, in December.
The Fund may also make additional distributions to its shareholders to the
extent necessary to avoid the application of the 4% non-deductible excise tax
on certain undistributed income and net capital gains of mutual funds.
Distributions are paid in additional shares issued at net asset value
unless the shareholder elects to receive payment in cash.
MANAGEMENT
TRUSTEES AND OFFICERS. The Fund is supervised by the Board of Trustees of
The Diversified Investors Funds Group. The Portfolio is supervised by the Board
of Trustees of Master Investment Portfolio. More information on the Trustees
and Fund officers may be found under "Management" in the Statement of
Additional Information.
INVESTMENT ADVISERS. Diversified Investment Advisors, Inc. is the
investment adviser of the Fund.
Diversified is an indirect, wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"), a financial services holding company whose primary emphasis is life
and health insurance and annuity and investment products. AEGON is an indirect,
wholly-owned subsidiary of AEGON nv, a Netherlands corporation which is a
publicly traded international insurance group. Diversified was incorporated in
1992.
All of the Fund's investable assets are invested in S&P 500 Index Master
Portfolio. Barclays Global Fund Advisors is the investment adviser of the
Portfolio. Diversified provides general supervision of the Fund's investment in
the Portfolio, subject to policies approved by the Fund's Board of Trustees.
Pursuant to an Investment Advisory Contract with the Portfolio, Barclays
provides investment guidance and policy direction in connection with the
management of the Portfolio's assets, subject to the overall authority of the
Portfolio's Board of Trustees and in conformity with Delaware Law and the
stated policies of the Portfolio. Barclays is a direct subsidiary of Barclays
Global Investors, N.A. (which, in turn, is an indirect subsidiary of Barclays
Bank PLC) and is located at 45 Fremont Street, San Francisco, California 94105.
As of April 30, 1998, Barclays and its affiliates provided investment advisory
services for over $575 billion of assets.
Barclays, Barclays Bank PLC and their affiliates deal, trade and invest
for their own account in the types of securities in which the Portfolio may
invest and may have deposit, loan and commercial banking relationships with the
issuers of securities purchased by the Portfolio. Barclays has informed the
Portfolio that in making investment decisions, it does not use material inside
information in its possession.
Independent legal counsel to Master Investment Portfolio and special
counsel to Barclays, has advised Master Investment Portfolio and Barclays that
Barclays and its affiliates may perform the services contemplated by the
Investment Advisory Contract and this Prospectus without violation of the
Glass-Steagall Act. Such counsel has pointed out, however, that there are no
controlling judicial or administrative interpretations or decisions and that
future judicial or administrative interpretations of, or decisions relating to,
present federal or state statutes, including the GlassSteagall Act, and
relating to the permissible activities of banks and their subsidiaries or
<PAGE>
affiliates, as well as future changes in such statutes, regulations and
judicial or administrative decisions or interpretations, could prevent such
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any such services, it is expected
that new agreements would be proposed or entered into with another entity or
entities qualified to perform such services.
Diversified is entitled to receive a combined investment advisory and
administration fee, which is accrued daily and payable monthly, at the annual
rate of 0.35% of the Fund's average daily net assets for its then current
fiscal year. Diversified may waive its investment advisory fees to the extent
necessary to limit the Fund's total operating expenses to a specified level.
Diversified may also contribute to the Fund from time to time to help it
maintain a competitive expense ratio. These arrangements are voluntary and may
be terminated at any time.
Barclays is entitled to receive a fee from the Portfolio which is payable
monthly, at the annual rate of 0.05% of the Portfolio's average daily net
assets for its then current fiscal year. Barclays did not waive its advisory
fees during the fiscal year ended February 28, 1998. Barclay's advisory fee is
an expense of the Portfolio borne proportionately by its interest-holders such
as the Fund.
The Fund currently does not employ an investment subadviser, but in the
future Diversified may delegate the daily management of all or a portion of the
Fund's assets to one or more subadvisers. Diversified has obtained an exemptive
order from the Securities and Exchange Commission which would permit
Diversified to employ subadvisers for the Fund or any underlying portfolio in
which the Fund invests and of which Diversified is the investment adviser
without shareholder approval, subject to compliance with certain conditions.
The exemptive order also would permit the terms of sub-advisory agreements to
be changed and the employment of subadvisers to be continued after events that
would otherwise cause an automatic termination of a sub-advisory agreement, in
each case without shareholder approval if those changes or continuation are
approved by the Fund's Board of Trustees. If the Fund or any underlying
portfolio in which the Fund invests and of which Diversified is the investment
adviser adds or changes a subadviser without shareholder approval, this
Prospectus would be revised and shareholders notified.
ADMINISTRATOR. Diversified provides administrative services to the Fund,
including regulatory reporting, office facilities and equipment and personnel.
Diversified's fee for these services is described above. Diversified may agree
to waive a portion of its fee from time to time.
Stephens Inc. located at 111 Center Street, Little Rock, Arkansas 72201,
and Barclays Global Investors, N.A., located at 45 Fremont Street, San
Francisco, CA 94105, serve as the Portfolio's co-administrators pursuant to a
CoAdministration Agreement with the Portfolio. Under the CoAdministration
Agreement, Stephens and Barclays Global Investors provide general supervision
of the operations of the Portfolio, other than the provision of investment
advice. The administrative services provided to the Portfolio also include
coordination of the other services provided to the Portfolio, compilation of
information for reports to the SEC and state securities commissions,
preparation of proxy statements and interest holder reports and general
supervision of data compilation in connection with preparing periodic reports
to the Portfolio's Board of Trustees and Officers. In addition, Stephens
furnishes office space and certain facilities to conduct business, and
compensates the Portfolio's trustees, officers and employees who are affiliated
with Stephens. Stephens has delegated certain of its administrative duties to
Investors Bank & Trust Company. Stephens and Barclays Global Investors will not
be entitled to receive compensation for these services for so long as each
receives compensation for providing coadministration services to a fund that
invests in the Portfolio. Stephens also services as the placement agent of the
Portfolio's shares.
<PAGE>
SERVICING AGENTS. Diversified and other agents who have entered into
Service Agreements with Diversified are the Fund's Servicing Agents. All
shareholders must be represented by a Servicing Agent. Diversified's address is
Four Manhattanville Road, Purchase, New York 10577.
DISTRIBUTION ARRANGEMENTS. Diversified Investors Securities Corp., Four
Manhattanville Road, Purchase, New York 10577, is the distributor of shares of
the Fund. Under a Distribution Plan which has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, the Fund may pay monthly fees
at an annual rate of up to 0.25% of the Fund's average daily net assets. These
fees may be used by the Distributor to reimburse itself for its services or for
advertising, marketing or other promotional activities.
CUSTODIAN. Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts 02205, is the Fund's and the Portfolio's custodian. Fund
securities may be held by a sub-custodian bank approved by the Trustees.
Investors Bank & Trust Company also acts as the Fund's accounting services
agent.
TRANSFER AGENT. Diversified is the Fund's transfer agent. Investors Bank &
Trust Company acts as transfer and dividend-disbursing agent for the Portfolio.
TAXES
This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
The Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies so that it will not be liable for
any federal income or excise taxes. The Fund seeks to qualify as a regulated
investment company by investing all of its assets in the Portfolio. The
Portfolio will be treated as a non-publicly traded partnership rather than as
regulated investment company or a corporation under the Internal Revenue Code,
and as such, shall not be subject to federal income tax. As a non-publicly
traded partnership, any interest, dividends, gains and losses of the Portfolio
are deemed to be "passed through" to the Fund in proportion to the Fund's
interest in the Portfolio. If the Portfolio were to accrue but not distribute
any interest, dividends or gains, the Fund would be deemed to have recognized
its allocable share of such income, regardless of whether or not such income
has been distributed by the Portfolio. However, the Portfolio seeks to minimize
recognition by the Fund and other investors of interest, dividends and gains
without a corresponding distribution.
With certain exceptions, Fund dividends and capital gains distributions
are subject to federal income tax and may also be subject to state and local
taxes. Dividends and distributions are treated in the same manner for federal
tax purposes whether they are paid in cash or as additional shares. Generally,
distributions from the Fund's net investment income and short-term capital
gains will be taxed as ordinary income. A portion of the Fund's distributions
from net investment income may be eligible for the dividends-received deduction
available to corporations. Distributions of long-term net capital gains will be
taxed as such regardless of how long the shares of the Fund have been held. The
Fund may pay withholding or other taxes to foreign governments during the year,
however, and these taxes will reduce the Fund's dividends.
Distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares just before the Fund makes a distribution may pay
the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.
<PAGE>
Plans which invest in the Fund and satisfy all conditions applicable to
such Plans under the Internal Revenue Code generally will not be subject to
federal tax liability on either distributions from the Fund or redemptions of
shares of the Fund. Rather, participants in such Plans will be taxed when they
begin taking distributions from the Plan in accordance with the rules under the
Internal Revenue Code governing the taxation of such distributions.
Early each year, the Fund will notify its shareholders (other than Plan
participants) of the amount and tax status of distributions paid to
shareholders for the preceding year.
This section is not intended to be a full discussion of present or
proposed federal income tax law and its effects on the Fund and investors
therein. See the Statement of Additional Information for a further discussion.
There may be other federal, state, or local tax considerations applicable to a
particular investor. Please consult your own tax advisers regarding the status
of your account under state and local laws.
PERFORMANCE INFORMATION
Fund performance may be quoted in advertising, shareholder reports and
other communications. The Fund may provide its yield and/or total return for
certain periods and may also quote fund rankings from various sources, such as
Russell Data Services (a division of Frank Russell Company), Lipper Analytical
Services, Inc., Weisenberger Investment Company Service, Morningstar, Inc. and
CDA. The current yield for the Fund will be calculated by dividing net
investment income per share during a recent 30-day period by the net asset
value per share on the last day of the period and annualizing the result. Total
return refers to the change over a stated period in the value of an investment
in the Fund, reflects any change in net asset value and is compounded to
include the value of any shares purchased with dividends or capital gains
declared during the period. Yield reflects only net income as of a stated time,
while total return reflects all components of investment return over a stated
period of time. For more information about the calculation of yield and total
return, see the Statement of Additional Information.
Please note that the investment results of the Fund will fluctuate over
time. All performance information is historical and should not be considered a
representation of what an investment may earn in the future.
GENERAL INFORMATION
NET ASSET VALUE. Net asset value per share for the Fund is calculated each
business day at the close of regular trading on the New York Stock Exchange,
normally 4 p.m. Eastern time.
All purchases, redemptions and exchanges will be processed at net asset
value the next time it is calculated after a request is received and approved
by the Distributor. The Fund's NAV is calculated by taking the fair value of
the Fund's total assets (i.e., the value of its investments in the Portfolio
plus cash and other assets), subtracting all of its liabilities, and dividing
by the total number of shares outstanding. Expenses are accrued daily and
applied when determining the NAV.
The Fund's investment in the Portfolio is valued at the NAV of the
Portfolio's shares. The Portfolio calculates the NAV of its shares on the same
day and at the same time as the Fund. Except for debt obligations with
remaining maturities of 60 days or less, which are valued at amortized cost,
<PAGE>
the Portfolio's other assets are valued at current market prices, or if such
prices are not readily available, at fair value as determined in good faith in
accordance with guidelines approved by the Board of Trustees of Master
Investment Portfolio. Prices used for such valuations may be provided by
independent pricing services.
ORGANIZATION. The Fund is a series of The Diversified Investors Funds
Group. The Diversified Investors Funds Group is a Massachusetts business trust
which was organized on April 23, 1993; it also is an open-end management
investment company registered under the Investment Company Act of 1940. The
Diversified Investors Funds Group currently has sixteen active series.
The Fund is a diversified mutual fund. Under the Investment Company Act of
1940, a diversified mutual fund must manage at least 75% of its total assets so
that no more than 5% of those assets are invested in any one company at the
time of investment.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the trust's
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the trust itself was unable to meet its
obligations.
The Portfolio is a series of Master Investment Portfolio, which is a
Delaware business trust organized on October 21, 1993 and an open-end
management investment company registered under the Investment Company Act of
1940.
VOTING AND OTHER RIGHTS. The Diversified Investors Funds Group may issue
an unlimited number of shares, may create new series of shares and may divide
shares in each series into classes. Each share of the Fund gives the
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. All shares of each series of The Diversified Investors
Funds Group have equal voting rights except that, in matters affecting only a
particular fund or class, only shares of that particular fund or class are
entitled to vote.
The Fund currently offers one class of shares, the Diversified Class.
Because The Diversified Investors Funds Group is a Massachusetts business
trust, the Fund is not required to hold annual shareholder meetings.
Shareholder approval will usually be sought only for changes in certain
investment restrictions and for the election of Trustees under certain
circumstances. Trustees may be removed by shareholders under certain
circumstances. Each share of the Fund is entitled to participate equally in
dividends and other distributions and the proceeds of any liquidation of the
Fund.
EXPENSES. In addition to amounts payable to its service providers and
under the Distribution Plan, the Fund is responsible for its expenses,
including the compensation of Trustees that are not affiliated with
Diversified, any government fees, taxes, accounting and legal fees, expenses of
communicating with shareholders, interest expense and insurance premiums. The
Fund is responsible for its proportionate share of the expenses of the
Portfolio.
INDEPENDENT ACCOUNTANTS. PriceWaterhouseCoopers LLP serves as independent
accountant for the Fund. KPMG Peat Marwick LLP serves as independent accountant
for the Portfolio.
YEAR 2000. The Fund could be adversely affected if the computer systems
used by the Fund or its service providers are not programmed to accurately
process information on or after January 1, 2000. AEGON has adopted and has in
<PAGE>
place a Year 2000 Assessment and Planning Project (the "Project") to review and
analyze its information technology and systems to determine if they are Year
2000 compatible. AEGON has begun to convert or modify, where necessary,
critical data processing systems. It is contemplated that the plan will be
substantially completed by early 1999. AEGON does not expect this Project to
have a significant effect on operations. However, to mitigate the effect of
outside influences upon the success of the Project, AEGON has undertaken
communications with its significant customers, suppliers and other third
parties to determine their Year 2000 compatibility and readiness. AEGON's
management believes that the issues associated with the Year 2000 will be
resolved with no material financial impact on AEGON.
Since the Year 2000 computer problem and its resolution is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived Project, including testing
procedures, there is no certainty that any company will achieve complete
success. Notwithstanding the efforts or results of AEGON and the Fund, their
ability to function unaffected to and through Year 2000 may be adversely
affected by actions (or failures to act) of third parties beyond their
knowledge or control.
-------------------------------
The Statement of Additional Information dated the date of this Prospectus
contains more detailed information about the Fund, including information
relating to (i) investment policies and restrictions, (ii) the Trustees,
officers and investment advisers, (iii) securities transactions, (iv) the
Fund's shares, including rights and liabilities of shareholders, (v) the method
used to calculate performance information and (vi) the determination of net
asset value.
No person has been authorized to give any information or make any
representations not contained in this Prospectus or the Statement of Additional
Information in connection with the offering made by this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Fund or its distributor. This Prospectus does not
constitute an offering by the Fund or its distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
APPENDIX A
PERMITTED INVESTMENTS
AND INVESTMENT PRACTICES
Repurchase Agreements A repurchase agreement is an agreement where a person
buys a security and simultaneously commits to sell the security to the seller
at an agreed upon price (including principal and interest) on an agreed upon
date within a number of days from the date of purchase. The Portfolio bears a
risk of loss in the event the other party defaults on its obligations and the
Portfolio is delayed or prevented from its right to dispose of the collateral
securities or if the Portfolio realizes a loss on the sale of the collateral
securities.
Reverse Repurchase Agreements Reverse repurchase agreements involve the sale of
securities held by the Portfolio and the agreement by the Portfolio to
repurchase the securities at an agreedupon price, date and interest payment.
When the Portfolio enters into reverse repurchase transactions, securities of a
dollar amount equal in value to the securities subject to the agreement will be
maintained in a segregated account with the Portfolio's custodian. The
segregation of assets could impair the Portfolio's ability to meet its current
obligations or impede investment management if a large portion of the
Portfolio's assets are involved. Reverse repurchase agreements are considered
to be a form of borrowing.
Forward Commitments or Purchases on a WhenIssued Basis Forward commitments or
purchases of securities on a whenissued basis are transactions where the price
of the securities is fixed at the time of commitment and the delivery and
payment ordinarily takes place beyond customary settlement time. The interest
rate realized on these securities is fixed as of the purchase date and no
interest accrues to the buyer before settlement. The securities are subject to
market fluctuation due to changes in market interest rates; the securities are
also subject to fluctuation in value pending settlement based upon public
perception of the creditworthiness of the issuer of these securities.
Standby Commitments - A security purchased subject to a standby commitment may
be sold at a fixed price prior to maturity and may be sold at any time at
market rates. A premium may be paid for a standby commitment and will have the
effect of reducing the yield otherwise payable on the underlying security.
Securities Lending Consistent with applicable regulatory requirements and in
order to generate additional income, the Portfolio may lend securities to
broker-dealers and other institutional borrowers. The Portfolio must be able to
terminate the loan at any time and the loan must be continuously secured by
collateral (usually cash or U.S. government securities) in an amount not less
than the market value, determined daily, of the securities loaned. It is
intended that the value of securities loaned by the Portfolio would not exceed
one-third of the Portfolio's total assets. In the event of the bankruptcy of
the other party to a securities loan, the Portfolio could experience delays in
recovering either the securities lent or cash. To the extent that, in the
meantime, the value of the securities lent has increased or the value of the
securities purchased has decreased, the Portfolio could experience a loss. The
voting rights of such securities may pass to the borrower; however, the
Portfolio will seek to call loans, to vote proxies, or otherwise to obtain
rights to vote or consent if a material event affecting the investment is to
occur.
Restricted or Illiquid Securities Securities that may not be sold freely to the
public absent registration or securities for which there is no readily
available market are referred to as restricted or illiquid securities,
respectively. The Portfolio may invest up to 15% of its net assets in illiquid
securities, including restricted securities that are illiquid. The absence of a
<PAGE>
trading market can make it difficult to ascertain a market value for these
investments. Disposing of illiquid securities may involve timeconsuming
negotiation and legal expense, and it may be difficult or impossible for the
Portfolio to sell them promptly at an acceptable price.
Rule 144A Securities - The Portfolio may purchase restricted securities that
are not registered for sale to the general public if it is determined that
there is a dealer or institutional market in the securities. In that case, the
securities will not be treated as illiquid for purposes of the Portfolio's
investment limitation described above. These securities are known as "Rule 144A
securities" because they are traded under SEC Rule 144A among qualified
institutional buyers. Institutional trading in Rule 144A securities is
relatively new and the liquidity of these investments could be impaired if
trading in Rule 144A securities does not develop or if qualified institutional
buyers become, for a time, uninterested in purchasing Rule 144A securities.
Futures and Options on Futures Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specified
security at a specified future time and at a specified price. An option on a
futures contract gives the purchaser the right, in exchange for a premium, to
assume a position in a futures contract at a specified exercise price during
the term of the option. The Portfolio may purchase and sell stock index futures
contracts and options on stock index futures contracts, and currency futures
contracts and options on currency futures contracts.
Other Investment Companies - Subject to applicable statutory and regulatory
limitations, assets of the Portfolio may be invested in shares of other
investment companies and foreign investment trusts. The Portfolio may invest up
to 5% of its assets in exchange-traded closed-end investment companies.
U.S. Treasury Obligations U.S. Treasury obligations include bills, notes and
bonds issued by the U.S. Treasury and separately traded interest and principal
component parts of these obligations that are transferable through the Federal
bookentry system known as Separately Traded Registered Interest and Principal
Securities (STRIPS). STRIPS are sold as zero coupon securities. These
securities are usually structured with two classes that receive different
portions of the interest and principal payments from the underlying obligation.
The yield to maturity on the interestonly class is extremely sensitive to the
rate of principal payments on the underlying obligation. The market value of
the principalonly class generally is unusually volatile in response to changes
in interest rates. See "Zero Coupon Securities" for more information.
U.S. Government Agencies Certain Federal agencies such as the Government
National Mortgage Association (GNMA) have been established as instrumentalities
of the U.S. government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S. government,
are either backed by the full faith and credit of the United States (e.g.,
GNMA) or supported by the issuing agencies' right to borrow from the Treasury.
The issues of other agencies are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage Association).
Bank Obligations Bank obligations include certificates of deposit, time
deposits (including Eurodollar time deposits) and bankers' acceptances and
other shortterm debt obligations issued by domestic banks, foreign subsidiaries
or foreign branches of domestic banks, domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking institutions.
The Portfolio has established certain minimum credit quality standards for bank
obligations in which it invests.
<PAGE>
Bankers' Acceptances A banker's acceptance is a bill of exchange or time draft
drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less.
Certificates of Deposit A certificate of deposit is a negotiable
interestbearing instrument with a specific maturity. Certificates of deposit
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
Time Deposits A time deposit is a nonnegotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.
Commercial Paper Commercial paper is the term used to designate unsecured
shortterm promissory notes issued by corporations and other entities.
Maturities on these issues vary from one to 270 days.
Variable and Floating Rate Instruments Certain obligations may carry variable
or floating rates of interest and may involve a conditional or unconditional
demand feature permitting the holder to demand payment of principal at any time
or at specified intervals. These obligations may include variable amount master
demand notes. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices, such as a Federal
Reserve composite index. A demand instrument with a demand notice period
exceeding seven days may be considered illiquid if there is no secondary market
for such security. The interest rate on these securities may be reset daily,
weekly, quarterly, or some other reset period and may have a floor or ceiling
on interest rate charges. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market interest rates.
Non-U.S. Securities. The Portfolio may invest a portion of its assets in
non-U.S. securities. Investments in non-U.S. securities involve risks relating
to political, social and economic developments abroad, as well as risks
resulting from the differences between the regulations to which U.S. and
non-U.S. issuers and markets are subject. These risks may include
expropriation, confiscatory taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets and political
or social instability. Enforcing legal rights may be difficult, costly and slow
in non-U.S. countries, and there may be special problems enforcing claims
against non-U.S. governments. In addition, non-U.S. companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations.
Non-U.S. markets may be less liquid and more volatile than U.S. markets, and
may offer less protection to investors such as the Portfolio. Prices at which
the Portfolio may acquire securities may be affected by trading by persons with
material non-public information and by securities transactions by brokers in
anticipation of transactions by the Portfolio.
Because non-U.S. securities often are denominated in currencies other than
the U.S. dollar, changes in currency exchange rates will affect the Portfolio's
net asset value, the value of dividends and interest earned and gains and
losses realized on the sale of securities. In addition, some non-U.S. currency
values may be volatile and there is the possibility of governmental controls on
currency exchanges or governmental intervention in currency markets.
Equity securities traded in certain foreign countries may trade at
price-earnings multiples higher than those of comparable companies trading on
<PAGE>
securities markets in the United States, which may not be sustainable. Rapid
increases in money supply in certain countries may result in speculative
investment in equity securities which may contribute to volatility of trading
markets.
The costs attributable to non-U.S. investing, such as the costs of
maintaining custody of securities in non-U.S. countries, frequently are higher
than those involved in U.S. investing. As a result, the operating expense ratio
of the Portfolio may be higher than that of a fund investing exclusively in
U.S. securities.
Indexed Securities. Indexed securities include commercial paper, certificates
of deposit, and other fixed-income securities whose values at maturity or
coupon interest rates are determined by reference to the returns of the S&P 500
Index or comparable stock indices. Indexed securities can be affected by stock
prices as well as changes in interest rates and the creditworthiness of their
issuers and may not track the S&P 500 Index as accurately as direct investments
in the S&P 500 Index.
<PAGE>
APPENDIX B
INSTRUCTIONS FOR PURCHASES AND REDEMPTIONS FROM THE DISTRIBUTOR
PURCHASES
Initial and subsequent purchases may be made by check or wire transfer.
Checks should be in U.S. dollars, drawn on a U.S. bank, made payable to The
Diversified Investors Funds Group and mailed to:
The Diversified Investors Funds Group
Four Manhattanville Road
Purchase, New York 10577
In the case of an initial purchase, the check must be accompanied by a
completed Account Application. If shares are purchased with a check that does
not clear, the purchase will be canceled and any losses or fees incurred in the
transaction will be the responsibility of the investor. If shares are purchased
with a check and a redemption request relating to such shares is received
within 15 days of such purchase, the redemption proceeds will be paid only when
the check clears.
If you would like to purchase shares in the Fund by a wire transfer,
please call (914) 697-8000 for wire transfer instructions and direct your bank
to transmit immediately available funds in accordance with such instructions.
Investors who make initial purchases by wire transfer must complete an Account
Application and mail it to The Diversified Investors Fund Group at the address
above.
REDEMPTIONS
Redemption requests may be made by mail and, in certain circumstances,
telephone. The proceeds of the redemption will be sent by mail or, if
authorized on the Account Application, wire transfer.
Redemption requests by mail must specify the dollar amount or number of
shares to be redeemed, the account number and the name of the Fund. The
redemption request must be signed in exactly the same way that the account is
registered. If there is more than one owner of the shares, each owner must sign
the redemption request.
<PAGE>
Requests to redeem shares in the Fund should be mailed to The Diversified
Investors Funds Group at:
The Diversified Investors Fund Group
Four Manhattanville Road
Purchase, New York 10577
You may redeem shares by telephone if you authorized such redemptions on
your Account Application. The Fund reserves the right to refuse telephone
redemptions and may limit the number of telephone redemptions or the amount
that can be redeemed by telephone at any time. Instructions for wire
redemptions are included in the Account Application.
<PAGE>
DIVERSIFIED INVESTORS STOCK INDEX FUND
Four Manhattanville Road
Purchase, New York 10577
914-697-8000
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 7, 1999
The Diversified Investors Stock Index Fund (the "Fund") is a series of The
Diversified Investors Funds Group. This Statement of Additional Information
describes the shares of the Fund.
TABLE OF CONTENTS
PAGE
The Trust.................................................................
Investment Objective, Policies and Associated Risk Factors of the Fund....
Performance Information...................................................
Determination of Net Asset Value; Valuation of Securities ................
Management................................................................
Investment Advisory Services..............................................
Custodian and Transfer Agent..............................................
Taxation..................................................................
Distribution Plan.........................................................
Independent Accountants...................................................
Description of the Trust; Fund Shares.....................................
Financial Statements......................................................
Appendix..................................................................
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Fund's
Prospectus, also dated February 7, 1999, as amended from time to time. This
Statement of Additional Information should be read only in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge. To
obtain a Prospectus, please contact Diversified Investors Securities Corp., the
Fund's Distributor, at the address and telephone number listed above. Terms
which are used herein without definition and which are defined in the
Prospectus have the same meaning herein as in the Prospectus.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
DIVERSIFIED INVESTORS STOCK INDEX FUND
THE TRUST
The Diversified Investors Stock Index Fund is a series of The Diversified
Investors Funds Group (the "Diversified Investors Trust"), a diversified,
openend management investment company. The Diversified Investors Trust was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on April 23, 1993. The Fund seeks its investment objective by
investing all of its investable assets in S&P 500 Index Master Portfolio (the
"Portfolio"), a series of the Master Investment Portfolio ("MIP"), which has a
similar investment objective and similar investment policies as the Fund.
The investment adviser of the Fund is Diversified Investment Advisors,
Inc. ("Diversified"). The investment adviser of the Portfolio is Barclays
Global Fund Advisors ("Barclays").
INVESTMENT OBJECTIVE, POLICIES AND
ASSOCIATED RISK FACTORS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to match the performance of the
S&P 500 Index. There can, of course, be no assurance that the Fund will achieve
its investment objective.
INVESTMENT POLICIES
The following supplements the discussion of the various investment
strategies and techniques set forth in the Prospectus. Because the Fund invests
through the Portfolio, this discussion relates to the Portfolio.
BANK OBLIGATIONS
Domestic commercial banks organized under federal law are supervised and
examined 4by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to have their deposits insured by the Federal
Deposit Insurance Corporation. Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition, state banks
whose obligations may be purchased by the Portfolio are insured by the FDIC
(but, depending on the amount of the obligation purchased, this insurance may
not be of material value to the Portfolio) and are subject to federal
examination and to a substantial body of federal law and regulation. As a
result of federal or state laws and regulations, domestic banks whose
obligations may be purchased by the Portfolio, among other things, generally
are required to maintain specified levels of reserves, are limited in the
amounts which they can loan to a single borrower, and are subject to other
regulations designed to promote financial soundness. However, not all of such
laws and regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches and subsidiaries of domestic banks and
domestic and foreign branches of foreign banks, such as certificates of deposit
and time deposits, may be general obligations of the parent banks in addition
to the issuing branch, or may be limited by the terms of a specific obligation
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and governmental regulation. Such obligations are subject to risks that are
different from or are in addition to those of domestic banks. These risks
include foreign economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. These foreign branches and subsidiaries are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks, such as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial record keeping requirements. In addition,
less information may be publicly available about a foreign branch of a domestic
bank or about a foreign bank than about a domestic bank. A domestic branch of a
foreign bank with assets in excess of $1 billion may be subject to reserve
requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state.
In addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states may be required to: (a) pledge to the
regulator, by depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by the
appropriate regulatory authority; and (b) maintain assets within the state in
an amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies or
branches within the state.
VARIABLE RATE AND FLOATING RATE SECURITIES
The Portfolio may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
397 days, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 397 days, in each case upon not
more than 30 days' notice. Variable rate demand notes include master demand
notes which are obligations that permit the Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct
arrangements between the Portfolio, as lender, and the borrower. The interest
rates on these notes fluctuate from time to time. The issuer of such
obligations normally has a corresponding right, after a given period, to prepay
in its discretion the outstanding principal amount of the obligations plus
accrued interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating rate demand obligation is based on
a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a variable
rate demand obligation is adjusted automatically at specified intervals.
Frequently, such obligations are collateralized by letters of credit or other
credit support arrangements provided by banks. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the
Portfolio's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and the Portfolio may invest in obligations which are
not so rated only if Barclays determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the
Portfolio may invest. Barclays, on behalf of the Portfolio, will consider on an
ongoing basis the creditworthiness of the issuers of the floating and variable
rate demand obligations held by the Portfolio. The Portfolio will not invest
more than 10% of the value of its net assets in floating or variable rate
demand obligations as to which it cannot exercise the demand feature on not
more than seven days' notice if there is no secondary market available for
these obligations, and in other securities that are not readily marketable.
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REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a person purchases a
security and simultaneously commits to resell that security to the seller
(which is usually a member bank of the Federal Reserve System or a member firm
of the New York Stock Exchange (or a subsidiary thereof)) at an agreedupon date
within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreedupon
market rate of interest which is unrelated to the coupon rate or maturity of
the purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreedupon price, which obligation is in effect secured by
the value of the underlying security, usually U.S. Government or government
agency issues. Under the Investment Company Act of 1940, as amended (the "1940
Act"), repurchase agreements may be considered to be loans by the buyer. The
Portfolio's risk is limited to the ability of the seller to pay the agreed upon
amount on the delivery date. If the seller defaults, the underlying security
constitutes collateral for the seller's obligation to pay although the
Portfolio may incur certain costs in liquidating this collateral and in certain
cases may not be permitted to liquidate this collateral. All repurchase
agreements entered into by the Portfolio are fully collateralized, with such
collateral being marked to market daily.
The Portfolio may borrow funds for temporary or emergency purposes, such
as meeting larger than anticipated redemption requests, and not for leverage.
One means of borrowing is by agreeing to sell portfolio securities to financial
institutions such as banks and brokerdealers and to repurchase them at a
mutually agreed date and price (a "reverse repurchase agreement"). At the time
the Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government securities or highgrade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures Contracts. The Portfolio may enter into futures contracts. U.S.
futures contracts have been designed by exchanges which have been designated
"contracts markets" by the CFTC, and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange markets, and,
through their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
Purchases or sales of stock index futures contracts are used to attempt to
protect the Portfolio's current or intended stock investments from broad
fluctuations in stock prices. For example, the Portfolio may sell stock index
futures contracts in anticipation of or during a decline in the market value of
the Portfolio's securities. If such decline occurs, the loss in value of
portfolio securities may be offset, in whole or part, by gains on the futures
position. When the Portfolio is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock index futures
contracts in order to gain rapid market exposure that may, in part or entirely,
offset increases in the cost of securities that the Portfolio intends to
purchase. As such purchases are made, the corresponding positions in stock
index futures contracts will be closed out. In a substantial majority of these
transactions, the Portfolio will purchase such securities upon termination of
the futures position, but under unusual market conditions, a long futures
position may be terminated without a related purchase of securities.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It
is expected that the initial deposit would be approximately 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
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payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that specified in
the contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms may call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.
To the extent the Portfolio enters into futures contracts, the assets in
the segregated asset account maintained to cover the Portfolio's obligations
with respect to such futures contracts will consist of cash, cash equivalents
or high quality liquid debt securities from its portfolio in an amount equal to
the difference between the fluctuating market value of such futures contracts
and the aggregate value of the initial and variation margin payments made by
the Portfolio with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
may cause temporary price distortions.
In addition, futures contracts entail risks. Although Barclays believes
that use of such contracts will benefit the Portfolio, if Barclays' investment
judgment about the general direction of stock prices is incorrect, the
Portfolio's overall performance would be poorer than if it had not entered into
any such contract. For example, if the Portfolio has hedged against the
possibility of an increase in stock prices and stock prices decrease instead,
the Portfolio will lose part or all of the benefit of the increased value of
the securities which it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell securities to meet daily variation
margin requirements. The Portfolio may have to sell securities at a time when
it may be disadvantageous to do so.
Options on Futures Contracts. The Portfolio may purchase and write options
on futures contracts for hedging purposes. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying securities, it may or may not be less risky than ownership of
the futures contract or underlying securities.
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The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities.
The amount of risk the Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, the Portfolio will retain the full amount
of the option premium which provides a partial hedge against any decline that
may have occurred in the portfolio holdings of the Portfolio. The writing of a
put option on a futures contract constitutes a partial hedge against increasing
prices of the security which is deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than the
exercise price, the Portfolio will retain the full amount of the option premium
which provides a partial hedge against any increase in the price of securities
which the Portfolio intends to purchase. If a put or call option the Portfolio
has written is exercised, the Portfolio will incur a loss which will be reduced
by the amount of the premium it receives. In the case of a call option written
by the Portfolio, the loss is potentially unlimited. Depending on the degree of
correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, the Portfolio's losses from
options on futures may to some extent be reduced or increased by changes in the
value of portfolio securities.
Additional Risks of Options on Futures Contracts. The successful use of
futures contracts and options on futures contracts draws upon Barclays' skill
and experience with respect to such instruments. Should stock prices move in an
unexpected manner, the Portfolio may not achieve the anticipated benefits of
futures contracts or options on futures contracts or may realize losses and
thus will be in a worse position than if such strategies had not been used. In
addition, the correlation between movements in the price of futures contracts
or options on futures contracts and movements in the price of the securities
hedged or used for cover will not be perfect and could produce unanticipated
losses.
LOANS OF PORTFOLIO SECURITIES
The Portfolio may lend securities from its portfolio to brokers, dealers
and financial institutions (but not individuals) if cash, U.S. Government
securities or other high quality debt obligations equal to at least 100% of the
current market value of the securities loaned (including accrued interest
thereon) plus the interest payable to the Portfolio with respect to the loan is
maintained with the Portfolio. In determining whether or not to lend a security
to a particular broker, dealer or financial institution, Barclays considers all
relevant facts and circumstances, including the size, creditworthiness and
reputation of the broker, dealer or financial institution. Any loans of
portfolio securities are fully collateralized based on values that are marked
to market daily. The Portfolio does not enter into any portfolio security
lending arrangements having a duration longer than one year. Any securities
that a Portfolio receives as collateral do not become part of its portfolio at
the time of the loan and, in the event of a default by the borrower, the
Portfolio will, if permitted by law, dispose of such collateral except for such
part thereof that is a security in which the Portfolio is permitted to invest.
During the time securities are on loan, the borrower will pay the Portfolio any
<PAGE>
accrued income on those securities, and the Portfolio may invest the cash
collateral and earned income or receive an agreed-upon fee from a borrower that
has delivered cash-equivalent collateral. In the event of the bankruptcy of the
other party to a securities loan, the Portfolio could experience delays in
recovering either the securities lent or cash. To the extent that, in the
meantime, the value of the securities lent has increased or the value of the
securities purchased has decreased, the Portfolio could experience a loss. The
Portfolio will not lend securities having a value that exceeds one-third of the
current value of its total assets. Loans of securities by the Portfolio are
subject to termination at the Portfolio's or the borrower's option. The
Portfolio may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers are not permitted to be affiliated, directly or
indirectly, with the Portfolio or Barclays.
CERTAIN OTHER OBLIGATIONS
In order to allow for investments in new instruments that may be created
in the future, if the Prospectus for the Portfolio is supplemented, the
Portfolio may invest in obligations other than those listed previously,
provided such investments are consistent with the Portfolio's investment
objective, policies and restrictions.
INVESTMENT RESTRICTIONS
The fundamental policies of the Fund and the Portfolio may not be changed
without the approval of a "majority of the outstanding voting securities" of
the Fund or the Portfolio, as the case may be. "Majority of the outstanding
voting securities" under the 1940 Act and as used in this Statement of
Additional Information means, with respect to the Fund (or the Portfolio), the
lesser of (i) 67% or more of the outstanding voting securities of the Fund (or
of the total beneficial interests of the Portfolio) present at a meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund
(or of the total beneficial interests of the Portfolio) are present or
represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund (or of the total beneficial interest of the Portfolio).
Whenever the Fund is requested to vote on a fundamental policy of the
Portfolio, the Fund will either hold a meeting of its shareholders and cast its
vote as instructed by the shareholders (except in limited circumstances as
permitted by applicable rules and regulations), or otherwise vote in accordance
with applicable law. If a percentage or a rating restriction on investment or
utilization of assets is adhered to at the time an investment is made or assets
are so utilized, a later change in such percentage resulting from changes in
the Fund's or the Portfolio's total assets or the value of the Fund's or the
Portfolio's securities, or a later change in the rating of a portfolio
security, will not be considered a violation of the relevant policy.
Fundamental Policies. As a matter of fundamental policy, the Fund may not
(except that no investment restriction of the Fund shall prevent the Fund from
investing all of its assets in an openend investment company with the same or a
similar investment objective as the Fund):
(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of
the current value of its net assets, including the amount borrowed,
or purchase any securities at any time at which borrowings exceed 5%
of the total assets of the Fund taken at market value. It is intended
that the Fund would borrow money only from banks and only to
accommodate requests for the repurchase of shares of the Fund while
effecting an orderly liquidation of portfolio securities.
<PAGE>
(2) Underwrite securities issued by other persons except that all or any
portion of the assets of the Fund may be invested in one or more
investment companies, to the extent not prohibited by the 1940 Act,
the rules and regulations thereunder, and exemptive orders granted
under such Act, and except insofar as the Fund may technically be
deemed an underwriter under the Securities Act in Selling a security.
(3) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loan not exceed 30%
of the Fund's total assets (taken at market value), (b) through the
use of repurchase agreements or fixed time deposits or the purchase
of short-term obligations or (c) by purchasing all or a portion of an
issue of debt securities of types commonly distributed privately to
financial institutions. The purchase of short-term commercial paper
or a portion of an issue of debt securities which is part of an issue
to the public shall not be considered the making of a loan.
(4) Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts in the ordinary course of business (the foregoing
shall not be deemed to preclude the Fund from purchasing or selling
futures contracts or options thereon, and the Fund reserves the
freedom of action to hold and to sell real estate acquired as a
result of the ownership of securities by the Fund).
(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Fund's investment
objective, up to 25% of its assets, at market value at the time of
each investment, may be invested in any one industry, except that
positions in futures contracts shall not be subject to this
restriction and except that this restriction shall not apply to any
industry in which the S&P 500 Stock Index (or any other index which
the Fund selects to track its performance) becomes concentrated to
the extent the Fund likewise becomes concentrated.
(6) Issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the
rules and regulations promulgated thereunder.
As a matter of fundamental policy, the Portfolio may not:
(1) Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be
invested, and securities issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities may be purchased, without regard
to such limitation.
(2) Hold more than 10% of the outstanding voting securities of any single
issuer. This Investment Restriction applies only with respect to 75%
of its total assets.
(3) Invest in commodities, except that the Portfolio may purchase and
sell (i.e., write) options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts
or indexes.
<PAGE>
(4) Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Portfolio may
purchase and sell securities that are secured by real estate or
issued by companies that invest or deal in real estate.
(5) Borrow money, except to the extent permitted under the 1940 Act,
except that the Portfolio may borrow up to 20% of the current value
of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up
to 20% of the current value of its net assets (but investments may
not be purchased while any such outstanding borrowing in excess of 5%
of its net assets exists). For purposes of this investment
restriction, the Portfolio's entry into options, forward contracts,
futures contracts, including those relating to indexes, and options
on future contracts or indexes shall not constitute borrowing to the
extent certain segregated accounts are established and maintained by
the Portfolio.
(6) Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, the Portfolio may
lend its portfolio securities in an amount not to exceed one-third of
the value of its total assets. Any loans of portfolio securities will
be made according to guidelines established by the Securities and
Exchange Commission and Master Investment Portfolio's Board of
Trustees.
(7) Act as an underwriter of securities of other issuers, except to the
extent the Portfolio may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of
portfolio securities.
(8) Invest 25% or more of its total assets in the securities of issuers
in any particular industry or group of closely related industries and
except that there shall be no limitation with respect to investments
in (i) obligations of the U.S. Government, its agencies or
instrumentalities; and (ii) any industry in which the S&P 500 Index
becomes concentrated to the same degree during the same period.
(9) Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 3, 5, 12 and 13 may be deemed to give
rise to a senior security.
(10) Purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward
contracts, futures contracts, including those related to indexes, and
options on futures contracts or indexes.
Non-fundamental Policies: The Portfolio may not as a matter of operating
policy:
(1) Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
(2) Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to
the purchase of securities on a when-issued or forward commitment
basis and the deposit of assets in escrow in connection with writing
covered put and call options and collateral and initial or variation
margin arrangements with respect to options, forward contracts,
futures contracts, including those relating to indexes, and options
on futures contracts or indexes.
<PAGE>
(3) Purchase, sell or write puts, calls or combinations thereof, except
as may be described in the Portfolio's offering documents.
(4) Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors)
unless the securities are fully guaranteed or insured by the U.S.
Government, a state, commonwealth, possession, territory, the
District of Columbia or by an entity in existence at least three
years, or the securities are backed by the assets and revenues of any
of the foregoing, if such purchase would cause the value of its
investments in all such companies to exceed 5% of the value of its
total assets.
(5) Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are
illiquid, if, in the aggregate, more than 15% of the value of the
Portfolio's net assets would be so invested.
(6) Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
(7) Purchase or retain securities of any issuer if the officers of
Trustees of Diversified Investors Trust, Master Investment Portfolio,
or either investment adviser owning beneficially more than onehalf of
one percent (0.5%) of the securities of the issuer together owned
beneficially more than 5% of such securities.
The non-fundamental policies (1) through (7) may be changed by the Board
of Trustees of the Master Investment Portfolio at any time.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Except as may be required to ensure satisfaction of certain tests
applicable to regulated investment companies under the Code, portfolio changes
are made without regard to the length of time a security has been held, or
whether a sale would result in the recognition of a profit or loss. Therefore,
the rate of portfolio turnover is not a limiting factor when changes are
appropriate.
The Portfolio's purchases and sales of securities may be principal
transactions, that is, securities may be purchased directly from the issuer or
from an underwriter or market maker for the securities. There usually are no
brokerage commissions paid for such purchases and, therefore, the Portfolio
does not anticipate paying brokerage commissions in such transactions. Any
transactions for which the Portfolio pays a brokerage commission will be
effected at the best price and execution available. Purchases from underwriters
of securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and the asked price.
Allocations of transactions, including their frequency, to various dealers
is determined by Barclays in its best judgment and in a manner deemed to be in
the best interest of the investors in the Portfolio rather than by any formula.
The primary consideration is prompt execution of orders in an effective manner
at the most favorable price.
Investment decisions for the Portfolio will be made independently from
those for any other account or investment company that is or may in the future
become managed by Barclays or its affiliates. If, however, the Portfolio and
other investment companies or accounts managed by Barclays are
<PAGE>
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for the
Portfolio and for other investment companies managed by Barclays occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
Furthermore, in certain circumstances affiliates of Barclays whose investment
portfolios are managed internally, rather than by Barclays, might seek to
purchase or sell the same type of investments at the same time as the
Portfolio. Such an event might also adversely affect the Portfolio.
PERFORMANCE INFORMATION
From time to time, quotations of the performance of the Fund may be
included in advertisements, sales literature or shareholder reports. These
performance figures are calculated in the following manner for the Fund:
YIELD
The yield quotation will be based on the annualized net investment income
per share over a 30day period. The current yield is calculated by dividing the
net investment income per share earned during the period by the net asset value
per share on the last day of that period. The resulting figure is then
annualized. Net investment income per share is determined by dividing (i) the
dividends and interest earned during the period, minus accrued expenses for the
period, by (ii) the average number of shares entitled to receive dividends
during the period multiplied by the net asset value per share on the last day
of the period.
TOTAL RETURNS
The total return will be calculated for certain periods by determining the
average annual compounded rates of return over those periods that would cause
an investment of $1,000 (with all distributions reinvested) to reach the value
of that investment at the end of the periods. The Fund may also calculate (i) a
total return assuming an initial account value of $1,000 and/or (ii) total
rates of return which represent aggregate performance over a period of
yearbyyear performance.
Any yield or total return quotation provided for the Fund should not be
considered as representative of the performance of the Fund in the future since
the net asset value of shares of the class will vary based not only on the
type, quality and maturities of the securities held in the Fund or the
Portfolio, but also on changes in the current value of such securities and on
changes in the expenses of the Fund and the Portfolio. These factors and
possible differences in the methods used to calculate yields and total return
should be considered when comparing the yield and total return of the Fund to
yields and total rates of return published for other investment companies or
other investment vehicles. Total return reflects the performance of both
principal and income.
COMPARISON OF FUND PERFORMANCE
Comparison of the quoted nonstandardized performance of various
investments is valid only if performance is calculated in the same manner.
Since there are different methods of calculating performance, investors should
consider the effect of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other
investment companies or types of investments.
<PAGE>
In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. The Portfolio may invest in
some instruments not eligible for inclusion in such an index, and may be
prohibited from investing in some instruments included in this index.
Evaluations of the Fund's performance made by independent sources may also be
used in advertisements concerning the Fund. Sources for the Fund's performance
information may include, but are not limited to, the following:
Asian Wall Street Journal, a weekly Asian newspaper that often
reviews U.S. mutual funds investing internationally.
Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports
the performance rankings and ratings of a variety of mutual funds
investing abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Consumer Digest, a monthly business/financial magazine that includes
a "Money Watch" section featuring financial news.
Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market
fund activity, and including certain averages as performance benchmarks,
specifically "Donoghue's Money Fund Average" and "Donoghue's Government
Money Fund Average."
Financial Times, Europe's business newspaper, which features from
time to time articles on international or countryspecific funds.
Financial World, a general business/financial magazine that includes
a "Market Watch" department reporting on activities in the mutual fund
industry.
Forbes, a national business publication that from time to time
reports the performance of specific investment companies in the mutual
fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic
and business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis,
a weekly publication of industrywide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.
New York Times, a nationally distributed newspaper which regularly
covers financial news.
<PAGE>
Personal Investing News, a monthly news publication that often
reports on investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that
includes a "Mutual Funds Outlook" section reporting on mutual fund
performance measures, yields, indices and portfolio holdings.
Success, a monthly magazine targeted to the world of entrepreneurs
and growing business, often featuring mutual fund performance data.
U.S. News and World Report, a national business weekly that
periodically reports mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Weisenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records, and price
ranges.
Working Women, a monthly publication that features a "Financial
Workshop" section reporting on the mutual fund/financial industry.
World Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
DETERMINATION OF NET ASSET VALUE; VALUATION OF SECURITIES
The Fund determines the net asset value of its shares each day on which
the New York Stock Exchange is open for trading. As a result, the Fund will
normally determine the net asset value of its Shares every weekday except for
the following holidays or the days on which they are observed: New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas. This daily
determination of net asset value is made as of the close of regular trading on
the New York Stock Exchange, normally 4:00 p.m., New York time, by dividing the
total assets of the Fund (including its interest in the Portfolio) less all of
the Fund's liabilities, by the total number of shares outstanding at the time
the determination is made. Purchases and redemptions will be effected at the
time of determination of net asset value next following the receipt of any
purchase or redemption order deemed to be in good order.
Trading in securities on most nonU.S. exchanges and overthecounter markets
is normally completed before the close of regular trading on the New York Stock
Exchange and may also take place on days on which the New York Stock Exchange
is closed. If events materially affecting the value of nonU.S. securities occur
between the time when the exchange on which they are traded closes and the time
when the Fund's or the Portfolio's net asset value is calculated, such
securities may be valued at fair value in accordance with procedures
established by and under the general supervision of the Diversified Investors
Trust's Board of Trustees or the Master Investment Portfolio's Board of
Trustees.
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or at the ask price on the NASDAQ system for
unlisted national market issues, or at the last quoted bid price for securities
<PAGE>
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. Portfolio securities (other than shortterm
obligations) for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Boards of
Trustees of the Diversified Investors Trust and the Master Investment
Portfolio.
Any assets or liabilities initially denominated in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate or,
alternatively, at the mean of the current bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank that is a
regular participant in the foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If neither of these alternatives is available or both are deemed not to
provide a suitable methodology for converting a foreign currency into U.S.
dollars, the Boards of Trustees of the Diversified Investors Trust and the
Master Investment Portfolio, in good faith, will establish a conversion rate
for such currency.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by
the Boards of Trustees of the Diversified Investors Trust and the Master
Investment Portfolio. While no single standard for determining fair value
exists, as a general rule, the current fair value of a security would appear to
be the amount which the Fund or the Portfolio, as the case may be, could expect
to receive upon its current sale. Some, but not necessarily all, of the general
factors which may be considered in determining fair value include: (a) the
fundamental analytical data relating to the investment; (b) the nature and
duration of restrictions on disposition of the securities; and (c) an
evaluation of the forces which influence the market in which these securities
are purchased and sold. Without limiting or including all of the specific
factors which may be considered in determining fair value, some of the specific
factors include: type of security, financial statements of the issuer, cost at
date of purchase, size of holding, discount from market value, value of
unrestricted securities of the same class at the time of purchase, special
reports prepared by analysts, information as to any transactions or offers with
respect to the security, existence of merger proposals or tender offers
affecting the securities, price and extent of public trading in similar
securities of the issuer or comparable companies, and other relevant matters.
The Portfolio determines the net asset value of its shares at the same
times and in the same manner as the Fund.
MANAGEMENT
The respective Trustees and officers of the Diversified Investors Trust
and the Master Investment Portfolio and their principal occupations during the
past five years are set forth below. Their titles may have varied during that
period. Asterisks indicate those Trustees who are "interested persons" (as
defined in the 1940 Act) of the Diversified Investors Trust or the Master
Investment Portfolio, as the case may be. Unless otherwise indicated, the
address of each Trustee and officer of the Diversified Investors Trust is Four
Manhattanville Road, Purchase, New York 10577 and the address of each Trustee
and officer of the Master Investment Portfolio is 111 Center Street, Little
Rock, Arkansas 72201.
TRUSTEES OF THE DIVERSIFIED INVESTORS TRUST
Robert Lester Lindsay............ Retired. Executive Vice President, The
Mutual Life Insurance Company of New York
(prior to July 1989); His address is Two
Huguenot Center, Tenafly, New Jersey
076702520. Age: 64.
<PAGE>
Nikhil Malvania.................. Partner, DeanerMalvania Associates (since
1991). Manager and Vice President,
Strategic Planning Associates (prior to
1991). His address is 88 Perry Street, New
York, New York 10014. Age: 47.
Mark Mullin*..................... Vice President, Diversified (since April,
1995). Portfolio Manager, AEGON Netherlands
(April 1993- March 1995). Age: 35.
Joyce Galpern Norden............. CoDirector, Urman's Health Clinical Research
Program Medical Center, University of
Pennsylvania (since May 1995). Foundations
Director, American Jewish Committee (October
1993 to May 1995). Executive Director,
FoodPeople Allied to Combat Hunger Inc.
(February 1991 to September 1993). Her
address is Nine Evergreen Way, North
Tarrytown, New York 10591. Age: 59.
Tom A. Schlossberg*.............. President, Diversified (since October 1992).
Executive Vice President and Head of Pension
Operations, The Mutual Life Insurance
Company of New York (January 1993 to
December 1993). Age: 48.
OFFICERS OF THE DIVERSIFIED INVESTORS TRUST
Mr. Schlossberg is President, Chief Executive Officer and Chairman of the
Board and Mr. Flynn is Vice President of the Trust. Each other officer also
holds the same position indicated with the Trust.
Robert F. Colby.................. Secretary; Vice President and Chief
Corporate Counsel, Mutual Life Insurance
Company of New York (April 1993 to December
1993); Vice President and General Counsel,
Diversified (since November 1993); Vice
President of Diversified Investors
Securities Corp. ("DISC") (since November
1993). Age: 43.
Alfred C. Sylvain................ Treasurer and Assistant Secretary; Vice
President and Treasurer of Diversified,
(since November 1993); Treasurer of DISC
(since November 1993); Vice President,
Mutual Life Insurance Company of New York
(since January 1991). Age: 47.
John F. Hughes................... Assistant Secretary; Senior Counsel, Mutual
Life Insurance Company of New York (since
January 1988); Vice President and Senior
Counsel, Diversified (since November 1993);
Assistant Secretary, DISC (since November
1993). Age: 57.
The Declaration of Trust provide that the Trust will indemnify its
Trustees and officers as described below under "Description of the Trust; Fund
Shares."
TRUSTEES OF THE MASTER INVESTMENT PORTFOLIO
Jack S. Euphrat.................. Private Investor. His address is 415 Walsh
Road, Atherton, California 94027. Age: 75.
<PAGE>
R. Greg Feltus*.................. Senior Executive Vice President of Stephens
Inc.; Manager of Financial Services Group;
President of Stephens Insurance Services,
Inc.; Senior Vice President of Stephens
Sports Management Inc.; and President of
Investors Brokerage Insurance, Inc. Age: 46.
Thomas S. Goho................... Associate Professor of Finance, Calloway
School of Business and Accounting, Wake
Forest University (since 1982). His address
is P.O. Box 7285, Reynolda Station,
Winston-Salem, NC 27104. Age: 55.
W. Rodney Hughes*................ Private Investor. His address is 31
Dellwood Court, San Rafael, California
94901. Age: 71.
J. Tucker Morse*................. Chairman of Home Account Networks, Inc.;
Real Estate Developer; Chairman of
Renaissance Properties Ltd.; President of
Morse Investment Corporation; and
Co-Managing Partner of Main Street Ventures.
His address is 4 Beaufain Street,
Charleston, South Carolina 29401. Age: 52.
OFFICERS OF MASTER INVESTMENT PORTFOLIO
Mr. Feltus is President of the Master Investment Portfolio.
Richard H. Blank, Jr............. Chief Operating Officer, Secretary and
Treasurer of MIP; Associate of Financial
Services Group of Stephens Inc.; Director of
Stephens Sports Management Inc.; and
Director of Capo Inc. Age: 41.
<PAGE>
COMPENSATION
For the fiscal year ended December 31, 1997, the Diversified Investors
Trust provided the following compensation to its Trustees.
<TABLE>
<CAPTION>
PENSION OR COMPENSATION
AGGREGATE RETIREMENT ESTIMATED FROM THE
COMPENSATION BENEFITS ANNUAL TRUSTS AND
NAME OF FROM THE ACCRUED AS BENEFITS FUND COMPLEX
PERSON, DIVERSIFIED PART OF FUND UPON PAID TO
POSITION INVESTORS TRUST EXPENSES RETIREMENT TRUSTEES
<S> <C> <C> <C> <C>
Tom A. Schlossberg -0- None N/A -0-
Trustee
Robert L. Lindsay $9,750 None N/A $13,000
Trustee
Nikhil Malvania $9,750 None N/A $13,000
Trustee
Joyce Galpern $9,750 None N/A $13,000
Norden Trustee
</TABLE>
For the fiscal year ended February 28, 1998, the Master Investment
Portfolio provided the following compensation to its Trustees:
<TABLE>
<CAPTION>
AGGREGATE PENSION OR COMPENSATION
COMPENSATION RETIREMENT ESTIMATED FROM THE
FROM THE BENEFITS ANNUAL TRUSTS AND
NAME OF MASTER ACCRUED AS BENEFITS FUND COMPLEX
PERSON, INVESTMENT PART OF FUND UPON PAID TO
POSITION PORTFOLIO EXPENSES RETIREMENT TRUSTEES 1
<S> <C> <C> <C> <C>
Jack S. Euphrat -0- -0- -0- $11,250
Trustee
________________________
1 Master Investment Portfolio, Masterworks Funds Inc. and Managed Series
Investment Trust are considered to be members of the same fund complex as such
term is defined in Form N-1A under the 1940 Act (the "Barclays Fund Complex").
Stagecoach Funds, Inc., Stagecoach Trust and Life & Annuity Trust together form
a separate fund complex (the "Wells Fargo Fund Complex"). Each of the Trustees
and the principal officer of MIP serves in the identical capacity as
directors/trustees and/or officer of each registered open-ended management
investment company in both the Barclays and Wells Fargo Fund Complexes. The
Trustees are compensated by other Companies and Trusts within the fund
complexes for their services as Directors/Trustees to such Companies and
Trusts.
<PAGE>
R. Greg Feltus, -0- -0- -0- -0-
Trustee
Thomas S. Goho, -0- -0- -0- $11,250
Trustee
Zoe Ann Hines,2 -0- -0- -0- -0-
Trustee
W. Rodney Hughes, -0- -0- -0- $11,000
Trustee
Robert M. Joses,3 -0- -0- -0- $1,000
Trustee
J. Tucker Morse, -0- -0- -0- $11,000
Trustee
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of the date of this Statement of Additional Information, there are no
outstanding shares of the Fund.
As of November 1, 1998, the S&P 500 Stock Fund of Master Works Funds Inc.,
111 Center Street, Little Rock, Arkansas 72201, owned approximately 85.82% of
the outstanding voting securities of the Portfolio and could be considered a
controlling person of the Portfolio for purposes of the 1940 Act. As of
November 1, 1998, Mass Mutual Indexed Equity Fund, 1295 State Street,
Springfield, Massachusetts 01111, owned approximately 9.37% of the outstanding
voting securities of the Portfolio.
INVESTMENT ADVISORY SERVICES
Diversified manages the assets of the Fund and provides administrative
services to the Fund pursuant to an Investment Advisory Agreement (the
"Diversified Advisory Agreement") with the Trust, and subject to the investment
policies described herein and in the Prospectus. Barclays Global Fund Advisors
manages the assets of the Portfolio pursuant to an Investment Advisory
Agreement with the Master Investment Portfolio (the "Barclays Advisory
Agreement"). Subject to such further policies as the Board of Trustees of the
Trust may determine, Diversified provides general supervision of the Fund's
investment in the Portfolio.
The Diversified Advisory Agreement provides that Diversified may render
services to others. The agreement is terminable without penalty on not more
than 60 days' nor less than 30 days' written notice by the Fund when authorized
either by majority vote of the investors in the Fund or by a vote of a majority
of the Board of Trustees of the Trust, or by Diversified on not more than 60
days' nor less than 30 days' written notice, as the case may be, and will
________________________
2 Joe Ann Hines retired as of January 28, 1998.
3 Robert M. Joses retired as of December 31, 1997.
<PAGE>
automatically terminate in the event of its assignment. The agreement provides
that neither Diversified nor its personnel shall be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in the execution of security transactions for the Fund,
except for willful misfeasance, bad faith, gross negligence or reckless
disregard of its or their obligations and duties under the Diversified Advisory
Agreement. The Barclays Advisory Agreement is terminable without penalty on 60
days written notice by either party.
Diversified's fees with respect to the Fund are described in the
Prospectus.
Diversified is an investment firm dedicated to meeting the complete needs
of retirement plan sponsors and participants from pre through postretirement.
Diversified provides flexible, highquality services coupled with the employment
of independent investment managers in an innovative investment structure.
Diversified provides services with respect to $10 billion in retirement
plan assets and has offices in Boston, Charlotte, Chicago, Cincinnati, Dallas,
Houston, New Orleans, New York, Philadelphia, Portland and San Francisco. It
maintains recordkeeping for 400,000 participants and has 600 employees
dedicated to retirement plan investment and administration. Its employees
average more than seven years of retirement plan experience.
As experts in customizing retirement solutions, Diversified offers
comprehensive programs of highquality investments and administrative services
to defined benefit, defined contribution and notforprofit pension plan
sponsors. Diversified forms a partnership with its clients to provide
exceptional plan design, participant communication programs, recordkeeping
services and technical guidance. Diversified's investment structure provides
access to an array of complementary investment alternatives representing the
major asset classes along the risk/reward spectrum.
Diversified may enter into an investment subadvisory agreement with a
subadvisor. Subadvisers may be selected from more than 2,000 independent firms.
Through a rigorous portfolio manager selection process which includes
researching each potential subadviser's asset class, track record,
organizational structure, management team, consistency of performance and
assets under management, five to ten potential subadvisers will be chosen. Out
of that group, Diversified will then carefully choose the three most qualified
potential subadvisers based on performance evaluation, ownership structure,
personnel and philosophy to return for an onsite visit and a quantitative and
qualitative analysis by the investment committee. Out of those three potential
subadvisers, Diversified then will hire the most qualified, independent
subadviser for the Fund, subject to approval by the Board of Trustees of the
Trust, including a majority of the Trustees who are not "interested persons" of
the Trust.
Any Subadviser's performance on behalf of the Fund would be carefully
monitored by Diversified taking into consideration investment objectives and
policies and level of risk.
Diversified brings comprehensive monitoring and control to the investment
management process. It seeks superior portfolio management and moves
purposefully in replacing managers when warranted. From a plan sponsor's
perspective, replacing a manager, and not the investment fund, is a key
advantage in avoiding the expense and difficulty of reenrolling participants or
disrupting established plan administration. Diversified has applied for an
Exemptive Order from the Securities and Exchange Commission which would permit
Diversified to obtain the services of one or more subadvisers without investor
or shareholder approval.
Highly disciplined manager evaluation on both a quantitative and
qualitative basis is an ongoing process. Diversified's Manager Monitoring Group
<PAGE>
gathers and analyzes performance and Diversified's Investment Committee reviews
it. Performance attribution, risk/return ratios and purchase/sale assessments
are prepared monthly and, each quarter, a more comprehensive review is
completed which consists of manager visits, fundamental analysis and
statistical analysis. Extensive quarterly analysis is conducted to ensure that
the investment fund is being managed in line with the stated objectives.
Semiannually, the Investment Committee reviews the backup manager selection,
regression analysis and universe comparisons.
A number of "red flags" signal a more extensive and frequent manager
review. These flags consist of a return inconsistent with the investment
objective, changes in Barclays leadership, ownership or portfolio managers,
large changes in assets under management and changes in philosophy or
discipline. The immediate response to any red flag is to assess the potential
impact on the manager's ability to meet investment objectives. Diversified
monitors "backup" additional independent managers for each investment class so
that, should a manager change be warranted, the transition can be effected on a
timely basis.
Barclays provides investment guidance and policy direction in connection
with the Management of the Portfolio assets. As of april 30, 1998, Barclays
and its affiliates provided advisory services for approximately $575 billion in
assets.
Barclays, Barclays Bank PLC, the indirect parent of Barclays and their
affiliates deal, trade and invest for their own account in the types of
securities in which the Portfolio may invest and may have deposit, loan and
commercial banking relationships with the issuers of securities purchased by
the Portfolio.
Morrison and Foerster LLP, counsel to the Master Investment Portfolio, has
advised the Master Investment Portfolio that Barclays and its affiliates may
perform the services contemplated by the investment advisory agreement between
Barclays and the Portfolio and this Prospectus without violation of the
Glass-Steagall Act. Such counsel has pointed out, however, that there are no
controlling judicial or administrative interpretations or decisions and that
future judicial or administrative interpretations of, or decisions relating to,
present federal or state statutes, including the Glass-Steagall Act, and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such entities from continuing to perform, in whole or in part, such
services. If Barclays were prohibited from performing any such services, it is
expected that a new agreement would be proposed or entered into with another
entity or entities qualified to perform such services.
ADMINISTRATOR
Diversified provides administrative services to the Fund under the
Investment Advisory Agreement with Diversified Investors Trust. This agreement
is described in the Fund's Prospectus. The agreement provides that Diversified
may render services to others as administrator. In addition, the agreement
terminates automatically if it is assigned and may be terminated without
penalty by majority vote of the Trust's shareholders, or by either party on not
more than 60 days' nor less than 30 days' written notice. The agreement also
provides that neither Diversified nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in connection
with administrative services provided to the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their duties or obligations
under said agreements.
<PAGE>
CUSTODIAN AND TRANSFER AGENT
Pursuant to the Investment Advisory Agreement with the Trust, Diversified
acts as transfer agent for the Fund (the "Transfer Agent"). The Transfer Agent
maintains an account for each shareholder of the Fund, performs other transfer
agency functions, and acts as dividend disbursing agent for the Fund.
Pursuant to a Custodian Agreement, Investors Bank & Trust Company acts as
the custodian of the Fund's assets (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the cash and securities
of the Fund, handling the receipt and delivery of securities, determining
income and collecting interest on the investments of the Fund, maintaining
books of original entry for portfolio accounting and other required books and
accounts, and calculating the daily net asset value of beneficial interests in
the Fund. Securities held by the Fund may be deposited into the Federal
ReserveTreasury Department Book Entry System or the Depository Trust Company
and may be held by a subcustodian bank if such arrangements are reviewed and
approved by the Board of Trustees. The Custodian does not determine the
investment policies of the Fund or decide which securities the Fund will buy or
sell. The Fund may, however, invest in securities of the Custodian and may deal
with the Custodian as principal in securities and foreign exchange
transactions. For its services, the Custodian will receive such compensation as
may from time to time be agreed upon by it and the Trust.
The Custodian also acts as custodian to the Portfolio.
TAXATION
The Fund intends to qualify as a regulated investment company ("RIC") for
federal income tax purposes by meeting all applicable requirements of
Subchapter M of the Code, including requirements as to the nature of the Fund's
gross income, the amount of Fund distributions and the composition of the
Fund's portfolio assets. Because the Fund intends to distribute all of its net
investment income and net realized capital gains to its shareholders in
accordance with the timing requirements imposed by the Code, it is expected
that the Fund will not be required to pay any entity level federal income or
excise taxes, although foreignsource income may be subject to foreign
withholding taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund will incur a regular corporate
federal income tax upon its taxable income (thereby reducing the return
realized by Fund shareholders) and Fund distributions would constitute ordinary
corporate dividends when issued to shareholders. However, Plans which hold the
shares of the Fund on their participants' behalf ("Qualified Investors") would
not, in that event, incur any income tax liability on such distributions
provided such Plans remain exempt from federal income tax.
Under interpretations of the Internal Revenue Service (1) the Portfolio
will be treated for federal income tax purposes as a partnership which is not a
publicly traded partnership and (2) for purposes of determining whether the
Fund satisfies requirements of Subchapter M of the Code, the Fund, if it is an
investor in the Portfolio, will be deemed to own a proportionate share of the
Portfolio's assets and will be deemed to be entitled to the Portfolio's income
attributable to that share. The Portfolio has advised the Fund that it intends
to conduct the Portfolio's operations so as to enable investors which invest
substantially all of their assets in the Portfolio, including the Fund, to
satisfy those requirements.
DISTRIBUTIONS
Tax-qualified retirement plans ("Plans") which invest in the Fund
generally will not be subject to tax liability on either distributions from the
<PAGE>
Fund or redemptions of shares of the Fund. Rather, participants are taxed when
they take distributions from the underlying Plan in accordance with the rules
under the Code governing the taxation of such distributions. Plans which are
otherwise generally exempt from federal taxation of their income might
nevertheless be taxed on distributions of the Fund, and any gain realized on
redemption of Fund shares, where the Plan is subject to the unrelated business
taxable income provisions of the Code with respect to its investment in the
Fund because, e.g., its acquisition of shares in the Fund was financed with
debt.
Individual and institutional investors, and Plans which for any reason
prove not to be exempt from federal income taxation, will be subject to tax on
distributions received from the Fund irrespective of the fact that such
distributions are reinvested in additional shares. Distributions to such
investors, other than of net capital gains, will be taxable as ordinary income;
distributions of net capital gains would be taxable to such investors as
longterm capital gain without regard to the length of time they have held the
shares in the Fund. Such capital gains will generally be taxable to such
investors as if the investors had directly realized gains from the same sources
from which they were realized by the Fund. a portion of the dividends received
from the Fund investing in corporate stocks (but none of the Fund's capital
gain distributions) may qualify for the dividends-received deduction for
corporations. Availability of the deduction for particular corporate
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax and may result in certain basis
adjustments. Certain dividends declared in October, November or December of a
calendar year and paid to an investor who is subject to tax on the distribution
in January of the succeeding calendar year are taxable to such investor as if
paid on December 31 of the year in which they were declared. Fund distributions
will reduce the Fund's net asset value per share. Shareholders who buy shares
shortly before the Fund makes a distribution may thus pay the full price for
the shares and then effectively receive a portion of the purchase price back as
a distribution, subject to tax in the case of investors otherwise subject to
income taxation.
Distributions and certain other payments to persons who are not citizens
or residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% on taxable distributions
and other payments to Non-U.S. Persons that are subject to withholding,
regardless of whether a lower rate may be permitted under an applicable treaty.
Any amounts overwithheld may be recovered by such persons by filing a claim for
refund with the U.S. Internal Revenue Service within the time period
appropriate to such claims. Distributions received from the Fund by Non-U.S.
Persons may also be subject to tax under the laws of their own jurisdictions.
The Fund is also required in certain circumstances to apply backup withholding
at the rate of 31% on taxable distributions and redemption proceeds paid to any
shareholder (including a non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments that
have been subject to 30% withholding.
SALE OF SHARES
Any gain or loss realized by a shareholder subject to federal income tax
upon the sale or other disposition of shares of the Fund, or upon receipt of a
distribution in complete liquidation of the Fund, generally will be a capital
gain or loss that will be longterm or shortterm depending upon the
shareholder's holding period for the shares and, if held as a capital asset by
an individual, estate or trust, may qualify for reduced tax rates if such
holding period exceeded eighteen months. Any loss realized on a sale or
exchange of the Fund's shares by such a shareholder will be disallowed to the
extent the shares disposed of are replaced (including by shares acquired
<PAGE>
pursuant to reinvested distribution) within a period of 61 days beginning 30
days before and ending 30 days after the disposition. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any
loss realized by such a shareholder on a disposition of the Fund's shares held
for six months or less will be treated as a longterm capital loss to the extent
of any distributions of net capital gain received by the shareholder with
respect to such shares.
FOREIGN SHAREHOLDERS
The tax consequences to a foreign shareholder of an investment in the Fund
may be different from those described herein. Foreign shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
TAXATION OF THE PORTFOLIO
The Portfolio, if treated for tax purposes as a partnership, would not be
subject to federal income taxation. Instead, the Fund would take into account,
in computing its federal income tax liability, its share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether it has received any cash distributions from the Portfolio.
Withdrawals by the Fund from the Portfolio generally will not result in
the Fund recognizing any gain or loss for federal income tax purposes, except
that (1) gain will be recognized to the extent that any cash distributed
exceeds the basis of the Fund's interest in the Portfolio prior to the
distribution, (2) income or gain will be realized if the withdrawal is in
liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if the distribution is in liquidation of that
entire interest and consists solely of cash and/or unrealized receivables. The
basis of the Fund's interest in the Portfolio generally equals the amount of
cash and the basis of any property the Fund invests in the Portfolio, increased
by the Fund's share of income from the Portfolio and decreased by the amount of
any cash distributions and the basis of any property distributed from the
Portfolio.
FOREIGN WITHHOLDING TAXES
Income received by the Fund or the Portfolio from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries; it is not expected that the Portfolio or the Fund will be able to
"pass through" to the Fund shareholders subject to tax any foreign tax credits
with respect to these taxes.
Tax conventions between certain countries and the United States may reduce
or eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of assets to be invested in various
countries will vary.
EFFECTS OF CERTAIN INVESTMENTS AND INVESTMENT POLICIES
The Fund's current dividend and accounting policies will affect the
amount, timing, and character of distributions to shareholders, and may, under
certain circumstances, make an economic return of capital taxable to
shareholders otherwise subject to taxation. Any investment in deferred interest
bonds, payment-in-kind bonds, certain stripped securities, and certain
securities purchased at a market discount will cause the Fund to recognize
income prior to the receipt of cash payments with respect to those securities.
In order to distribute this income and avoid a tax on the Fund, the Portfolio
may be required to liquidate portfolio securities that it might otherwise have
continued to hold, potentially resulting in additional taxable gain or loss to
the Fund.
<PAGE>
The Fund's transactions in options and futures contracts will be subject
to special tax rules that may affect the amount, timing and character of Fund
income and distributions to shareholders. For example, certain positions held
by the Fund on the last business day of each taxable year will be marked to
market (i.e., treated as if closed out) on that day, and any gain or loss
associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund will limit its activities in options and futures contracts to
the extent necessary to meet the requirements of Subchapter M of the Code. As a
result, however, the Portfolio may be forced to defer the closing out of
certain options and futures contracts beyond the time when it otherwise would
be advantageous to do so.
Special tax considerations apply with respect to foreign investments of
the Fund. Foreign exchange gains and losses realized by the Fund will generally
be treated as ordinary income and loss. The holding of foreign currencies for
nonhedging purposes and investment by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid a tax on the Fund. The
Fund may elect to mark to market any investments in "passive foreign investment
companies" on the last day of each year. This election may cause the Fund to
recognize income prior to the receipt of cash payments with respect to those
investments: In order to distribute this income and avoid a tax on the Fund,
the Fund may be required to liquidate portfolio securities that it might
otherwise have continued to hold.
OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under
current law, neither the Trust nor the Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a RIC for federal income tax purposes.
Distributions of the Fund that are derived from interest on obligations of
the U.S. Government and certain of its agencies and instrumentalities (but
generally not from capital gains realized upon the disposition of such
obligations) may be exempt from state and local taxes. The Fund intends to
advise shareholders of the extent, if any, to which its distributions consist
of such interest.
Shareholders of the Fund may be subject to state and local taxes on the
Fund's distributions to them. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
DISTRIBUTION PLAN
The Diversified Investors Trust has adopted a Distribution Plan with
respect to shares of the Fund in accordance with Rule 12b1 under the 1940 Act
after having concluded that there is a reasonable likelihood that the
Distribution Plan will benefit the Trust, the Fund and the holders of shares of
the Fund. The Distribution Plan provides that the Distributor may receive a fee
from the Fund at an annual rate not to exceed 0.25% of the average daily net
assets of the Fund, in anticipation of, or as reimbursement for, expenses
incurred in connection with the sale of shares of the Fund, such as advertising
expenses and the expenses of printing (excluding typesetting) and distributing
the Prospectus and reports used for sales purposes, expenses of preparing and
printing of sales literature and other distributionrelated expenses.
<PAGE>
The Distribution Plan will continue in effect if such continuance is
specifically approved at least annually by a vote of a majority of the Trustees
who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Distribution Plan or in any
agreement related to such Plan ("Qualified Trustees"). The Distribution Plan
requires that at least quarterly the Diversified Investors Trust and the
Distributor shall provide to the Board of Trustees and the Board of Trustees
shall review a written report of the amounts expended (and the purposes
therefor) under the Distribution Plan. The Distribution Plan further provides
that the selection and nomination of the Trust's disinterested Trustees shall
be committed to the discretion of the Trust's disinterested Trustees then in
office. The Distribution Plan may be terminated at any time by a vote of a
majority of the Trust's Qualified Trustees or by vote of a majority of the
outstanding voting securities of the Fund. The Distribution Plan may not be
amended to increase materially the amount of permitted expenses thereunder
without the approval of a majority of the outstanding voting securities of the
applicable class and may not be materially amended in any case without a vote
of the majority of both the Trustees and the Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to the Distribution Plan for a period of not less than six years from the date
of such plan, agreement, or report, and for the first two years the Distributor
will preserve such copies in an easily accessible place.
As contemplated by the Distribution Plan, Diversified Investors Securities
Corp. acts as the agent of the Fund in connection with the offering of shares
of the Fund pursuant to a Distribution Agreement (the "Distribution
Agreement"). After the Prospectus and periodic reports have been prepared, set
in type and mailed to existing shareholders, the Distributor pays for the
printing and distribution of copies of the Prospectus and periodic reports
which are used in connection with the offering of shares of the Fund to
prospective investors. The Prospectus contains a description of fees payable to
the Distributor under the Distribution Agreement with respect to the Fund.
INDEPENDENT ACCOUNTANTS
PriceWaterhouseCoopers LLP serves as the Fund's independent accountants
providing audit and accounting services including (a) audit of the annual
financial statements, (b) assistance and consultation with respect to filings
with the SEC and (c) preparation of annual income tax returns. KPMG Peat
Marwick LLP is the independent accountant of the Portfolio.
DESCRIPTION OF THE TRUST; FUND SHARES
The Diversified Investors Trust is a Massachusetts business trust
established under a Declaration of Trust dated as of April 23, 1993. The
authorized capital of the Trust consists of an unlimited number of shares of
beneficial interest of $0.00001 par value which may be issued in separate
series. Currently, the Trust has sixteen active series, although additional
series may be established from time to time The Trust may also establish
classes of shares within each series at any time. Each share of a series
represents an equal proportionate interest in that series with each other share
of that series, except that due to varying expenses borne by different classes,
distributions may be different for different classes. Shareholders of each
series are entitled, upon liquidation or dissolution, to a pro rata share in
the net assets of that series that are available for distribution to
shareholders, except to the extent of different expenses borne by different
classes as noted above. All consideration received by a Trust for shares of any
series and all assets in which such consideration is invested belong to that
series and are subject to the liabilities related thereto.
<PAGE>
Shares of the Trust entitle their holder to one vote per share; however,
separate votes are taken by each class or series on matters affecting an
individual class or series. For example, a change in the distribution fee
applicable to a class would be voted only by shareholders of the class
involved. Similarly, a change in investment policy for a series would be voted
upon only by shareholders of the series involved.
The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Trust unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Trust. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
Under Massachusetts law, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of each
separate series of the Trust and provides for indemnification and reimbursement
of expenses out of the property of each separate series of the Trust for any
shareholder held personally liable for the obligations of a particular series.
The Declaration of Trust also provides for the maintenance, by or on behalf of
the Trust and the separate series of the Trust, of appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the
protection of the series, their shareholders, Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and a
series itself was unable to meet its obligations.
FINANCIAL STATEMENTS
This Fund is newly-organized and has not yet issued financial statements.
<PAGE>
Investment Adviser of the Fund,
Administrator and Transfer Agent
Diversified Investment Advisors, Inc.
Four Manhattanville Road
Purchase, NY 10577
Distributor
Diversified Investors Securities Corp.
Four Manhattanville Road
Purchase, NY 10577
Custodian
Investors Bank & Trust Company
89 South Street
Boston, MA 022051537
Independent Accountants
PriceWaterhouseCoopers LLP
1301 Avenue of the Americas
New York, New York 10010
KPMG Peat Marwick LLP
3 Embarcadero Center
San Francisco, California 94111
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The Diversified Investors Stock Index Fund is newly organized and has not
yet issued financial statements.
(b) Exhibits:
1. Declaration of Trust of the Registrant. (3)
1a. Form of Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest. (**)
2. By-Laws of the Registrant. (2)
5A. Investment Advisory Agreement between the Registrant and Diversified
Investment Advisors, Inc. ("Diversified"). (4)
6. Distribution Agreement between the Registrant and Diversified
Investors Securities Corp. ("DISC"). (1)
8. Custodian Agreement between the Registrant and Investors Bank & Trust
Company. (1)
9. Administrative and Transfer Agency Services Agreement between the
Registrant and Diversified. (1)
10. Opinion of Counsel. (1)
13. Investor Representation Letter of Initial Shareholder. (1)
15. Distribution Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "1940 Act"). (1)
19. Powers of Attorney. (3) (**)
- --------------------------
(1) Incorporated herein by reference from Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement (the "Registration Statement") on Form
N-1A (File No. 33-61810) as filed with the U.S. Securities and Exchange
Commission (the "Commission") on January 3, 1994.
(2) Incorporated herein by reference from Post-Effective Amendment No. 7 to
the Registration Statement as filed with the Commission on February 28,
1997.
(3) Incorporated herein by reference from Post-Effective Amendment No. 8 to
the Registration Statement as filed with the Commission on April 29, 1997.
(4) Incorporated herein by reference from Post-Effective Amendment No. 10 to
the Registration Statement as filed with the Commission on October 3,
1997.
(**) Filed herewith.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
NUMBER OF RECORD
HOLDERS AS OF
TITLE OF CLASS NOVEMBER 1, 1998
----------------
Diversified Investors Stock Index Fund 0
ITEM 27. INDEMNIFICATION.
Reference is made to Article V of the Registrant's Declaration of Trust,
filed as an Exhibit herewith.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to Trustees, officers
and controlling persons of the Trust pursuant to the Trust's Declaration of
Trust, or otherwise, the Trust has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a Trustee, officer or controlling person of the Trust in
the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Diversified Investment Advisors, Inc. ("Diversified") is an indirect,
wholly-owned subsidiary of AEGON USA, Inc., a financial services holding
company whose primary emphasis is life and health insurance and annuity and
investment products. AEGON is an indirect, wholly-owned subsidiary of AEGON nv,
a Netherlands corporation which is a publicly traded international insurance
group.
Information as to the name, address and principal business of the
directors and executive officers of Diversified is included in its Form ADV as
filed with the Commission, and such information is hereby incorporated herein
by reference from such Form ADV.
Barclays Global Fund Advisors ("Barclays") is a wholly-owned subsidiary of
Barclays Global Investors, a national banking association ("BGI"). Barclays
Global Fund Advisors' business is that of a registered investment adviser to
certain openend management investment companies and various other institutional
investors.
The directors and officers of Barclays consist primarily of persons who
during the past two years have been active in the investment management
business of the former subadviser to the S&P 500 Index Master Portfolio, Wells
Fargo Nikko Investment Advisors ("WFNIA") and, in some cases, the service
business of BGI. Each of the directors and executive officers of Barclays will
also have substantial responsibilities as directors and/or officers of BGI. To
the knowledge of the Registrant, except as set forth below, none of the
directors or executive officers of Barclays is or has been at any time during
the past two fiscal years engaged in any other business, profession, vocation
or employment of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at Barclays Least the Last Two Fiscal Years
<S> <C>
Patricia Dunn Director of Barclays and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
<PAGE>
Lawrence G. Tint Chairman of the Board of Directors of Barclays and
Chairman and Director Chief Executive Officer of BGI
45 Fremont Street, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of Barclays and BGI since May 1997
45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94111
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Diversified Investors Securities Corp. is the principal underwriter
(the "Distributor") of the Registrant. The Distributor also serves as principal
underwriter for the Diversified Investors Strategic Allocation Funds and as the
exclusive placement agent for Diversified Investors Portfolios.
(b) The names, titles and principal business addresses of the officers and
directors of the Distributor are as stated on Form U4 filed by each individual
officer and on Form BD including Schedule A thereof (File No. 845671), the text
of which is hereby incorporated herein by reference.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Diversified Investment Advisors, Inc.
4 Manhattanville Road
Purchase, New York 10577
(administrator and transfer agent)
Diversified Investors Securities Corp.
4 Manhattanville Road
Purchase, New York 10577
(distributor)
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 022051537
(custodian)
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) The Registrant undertakes to comply with Section 16(c) of the 1940 Act
as though such provisions of the 1940 Act were applicable to the Registrant,
except that the request referred to in the third full paragraph thereof may
only be made by shareholders who hold in the aggregate at least 10% of the
outstanding shares of the Registrant, regardless of the net asset value of
shares held by such requesting shareholders.
(b) The Registrant will furnish each person to whom a Part A is delivered
with a copy of the Registrant's latest annual report to shareholders upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the County of Westchester and the State of New York, on the
24th day of November, 1998.
THE DIVERSIFIED INVESTORS
FUNDS GROUP
By: /s/ Tom A. Schlossberg
-----------------------------
Tom A. Schlossberg
Trustee, President,
Chief Executive Officer and Chairman
of the Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on November 24, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
<S> <C>
/s/ Tom A. Schlossberg
- ----------------------------------
Tom A. Schlossberg Trustee, President, Chief Executive Officer and
Chairman of the Board of Trustees of The
Diversified Investors Funds Group
/s/ Robert L. Lindsay
- ----------------------------------
Robert L. Lindsay Trustee of The Diversified Investors Funds Group
/s/ Nikhil Mlvania
- ----------------------------------
Nikhil Malvania Trustee of The Diversified Investors Funds Group
/s/ Mark Mullin
- ----------------------------------
Mark Mullin Trustee of The Diversified Investors Funds Group
/s/ Joyce Galpern Norden
- ---------------------------------- Trustee of The Diversified Investors Funds Group
Joyce Galpern Norden
/s/ Alfred C. Sylvain
- ---------------------------------- Treasurer, Chief Financial Officer and Principal
Alfred C. Sylvain Accounting Officer of The Diversified Investors
Funds Group
</TABLE>
/s/ Robert F. Colby
*By: -----------------------------
Robert F. Colby
Attorney-in-fact pursuant to powers of attorney filed herewith.
<PAGE>
SIGNATURES
Master Investment Portfilio has duly caused this Post-Effective Amendment
No. 13 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Little Rock and the State
of Arkansas, on the 24th day of November, 1998.
MASTER INVESTMENT PORTFOLIO
S&P INDEX MASTER PORTFOLIO
By: /s/ Richard H. Blank, Jr.
-----------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(and Principal Financial Offer)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated:
SIGNATURES TITLE DATE
*/s/ R. Greg Feltus November 24, 1998
- --------------------------
R. Greg Feltus Chairman, President
(Principal Financial Officer),
and Trustee
/s/ Richard H. Blank, Jr. November 24, 1998
- --------------------------
Richard H. Blank Secretary and Treasurer
(Principal Financial Officer)
*/s/ Jack s. Euphrat November 24, 1998
- --------------------------
Jack S. Euphrat Trustee
*/s/ Thoms S. Goho November 24, 1998
- --------------------------
Thomas S. Goho Trustee
*/s/ W. Rodney Hughes November 24, 1998
- --------------------------
W. Rodney Hughes Trustee
*/s/ J. Tucker Moses November 24, 1998
- --------------------------
J. Tucker Morse Trustee
Richard H. Blank, Jr. signs this
document pursuant to powers of attorney
filed herewith.
/s/ Richard H. Blank, Jr.
*By: -----------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
<PAGE>
EXHIBIT LIST
EXHIBIT NO. DESCRIPTION
1a. Form of Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest.
19. Powers of Attorney.
Exhibit 1a
THE DIVERSIFIED INVESTORS FUNDS GROUP
Form of
Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.00001 per share)
Dated as of , 1998
Pursuant to Section 6.9 of the Declaration of Trust, dated as of April 23,
1993, as amended (as so amended, the "Declaration of Trust"), of The
Diversified Investors Funds Group (the "Trust"), the undersigned, being not
less than a majority of the Trustees of the Trust, hereby amend and restate the
existing Establishment and Designation of Series appended to the Declaration of
Trust in order to establish and designate the "Diversified Investors Stock
Index Fund" as an additional series of Shares (as defined in the Declaration of
Trust) of the Trust. No changes to the special and relative rights of the
Trust's existing fifteen series of Shares (the new and the existing series
being referred to singly as a "Fund" and collectively as the "Funds") are
intended by this amendment and restatement.
1. The Funds shall be designated as follows:
The new series of the Trust shall be designated as Diversified Investors
Stock Index Fund.
The other existing series of the Trust shall be designated as follows:
Diversified Investors Balanced Fund
Diversified Investors Money Market Fund
Diversified Investors Growth & Income Fund
Diversified Investors Equity Growth Fund
Diversified Investors Equity Income Fund
Diversified Investors Special Equity Fund
Diversified Investors High Quality Bond Fund
Diversified Investors Government/Corporate Bond Fund
Diversified Investors Intermediate Government Bond Fund
Diversified Investors High-Yield Bond Fund
Diversified Investors International Equity Fund
Diversified Investors Equity Value Fund
Diversified Investors Aggressive Equity Fund
Stephens Intermediate Bond Fund
Stephens Select Equity Fund
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional Share) on
matters on which Shares of the Fund shall be entitled to vote, shall represent
a pro rata beneficial interest in the assets allocated or belonging to the
Fund, and shall be entitled to receive its pro rata share of the net assets of
the Fund upon liquidation of the Fund, all as provided in Section 6.9 of the
Declaration of Trust. The proceeds of sales of Shares of a Fund, together with
any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses, to change the designation of any Fund created previously or now or
hereafter created, or otherwise to change the special and relative rights of
any Fund.
IN WITNESS WHEREOF, the undersigned have executed this Establishment and
Designation of Series as of the day of , 1998. This instrument may be executed
by the Trustees in separate counterparts but shall be effective only when
signed by a majority of the Trustees.
__________________________________
Tom Schlossberg
As Trustee and not Individually
__________________________________
Robert Lester Lindsay
As Trustee and not Individually
__________________________________
Nikhil Malvania
As Trustee and not Individually
__________________________________
Mark Mullin
As Trustee and not Individually
__________________________________
Joyce Galpern Norden
As Trustee and not Individually
Exhibit 19
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Tom A. Scholssberg,
Robert F. Colby, Alfred C. Sylvain and John F. Hughes, and each of them, with
full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the
Registration Statement, and any and all amendments thereto, filed by The
Diversified Investors Funds Group (the "Trust") with the Securities and
Exchange Commission under the Investment Company Act of 1940 and the Securities
Act of 1933 and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable the Company to comply with such
Acts, the rules, regulations and requirements of the Securities Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys or agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 6th
day of November, 1998.
/s/ Mark Mullin
-------------------------
Mark Mullin
STATE OF NEW YORK )
)ss:
COUNTY OF WESTCHESTSER )
On the 6th day of November, 1998 before me personally came Mark Mullin to me
known to be the person described in and who executed the foregoing instrument,
and acknowledged that he executed same.
Catherine A. Mohr
Notary Public, State of New York
No. 31-4656544
Qualified in Westchester County
<PAGE>
Exhibit 19
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent
(each, an "Attorney-in Fact") with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, (i) to execute the Registration Statement of each of MasterWorks
Funds Inc. and Master Investment Portfolio and any investment company whose
fund(s) invest in a Master Portfolio of Master Investment Portfolio (each, a
"Company"), and any or all amendments (including post-effective amendments)
thereto and to file the same, with any and all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commissions or authorities, and (ii) to execute any
and all federal or state regulatory filings, including all applications with
regulatory authorities, state charter or organizational documents and any
amendments or supplements thereto, to be executed by, on behalf of, or for the
benefit of, a Company. The undersigned hereby grants to each Attorney-in-Fact
full power and authority to do and perform each and every act and thing
contemplated above, as fully and to all intents and purposes as he might or
could do in person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by virtue hereof.
Dated: August 11, 1998 /s/ Jack S. Euphrat
------------------------
Jack S. Euphrat
<PAGE>
Exhibit 19
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent
(each, an "Attorney-in Fact") with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, (i) to execute the Registration Statement of each of MasterWorks
Funds Inc. and Master Investment Portfolio and any investment company whose
fund(s) invest in a Master Portfolio of Master Investment Portfolio (each, a
"Company"), and any or all amendments (including post-effective amendments)
thereto and to file the same, with any and all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commissions or authorities, and (ii) to execute any
and all federal or state regulatory filings, including all applications with
regulatory authorities, state charter or organizational documents and any
amendments or supplements thereto, to be executed by, on behalf of, or for the
benefit of, a Company. The undersigned hereby grants to each Attorney-in-Fact
full power and authority to do and perform each and every act and thing
contemplated above, as fully and to all intents and purposes as he might or
could do in person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by virtue hereof.
Dated: August 11, 1998 /s/ R. Greg Feltus
------------------------
R. Greg Feltus
<PAGE>
Exhibit 19
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent
(each, an "Attorney-in Fact") with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, (i) to execute the Registration Statement of each of MasterWorks
Funds Inc. and Master Investment Portfolio and any investment company whose
fund(s) invest in a Master Portfolio of Master Investment Portfolio (each, a
"Company"), and any or all amendments (including post-effective amendments)
thereto and to file the same, with any and all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commissions or authorities, and (ii) to execute any
and all federal or state regulatory filings, including all applications with
regulatory authorities, state charter or organizational documents and any
amendments or supplements thereto, to be executed by, on behalf of, or for the
benefit of, a Company. The undersigned hereby grants to each Attorney-in-Fact
full power and authority to do and perform each and every act and thing
contemplated above, as fully and to all intents and purposes as he might or
could do in person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by virtue hereof.
Dated: August 11, 1998 /s/ Thomas S. Goho
------------------------
Thomas S. Goho
<PAGE>
Exhibit 19
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent
(each, an "Attorney-in Fact") with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, (i) to execute the Registration Statement of each of MasterWorks
Funds Inc. and Master Investment Portfolio and any investment company whose
fund(s) invest in a Master Portfolio of Master Investment Portfolio (each, a
"Company"), and any or all amendments (including post-effective amendments)
thereto and to file the same, with any and all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commissions or authorities, and (ii) to execute any
and all federal or state regulatory filings, including all applications with
regulatory authorities, state charter or organizational documents and any
amendments or supplements thereto, to be executed by, on behalf of, or for the
benefit of, a Company. The undersigned hereby grants to each Attorney-in-Fact
full power and authority to do and perform each and every act and thing
contemplated above, as fully and to all intents and purposes as he might or
could do in person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by virtue hereof.
Dated: August 11, 1998 /s/ W. Rodney Hughes
------------------------
W. Rodney Hughes
<PAGE>
Exhibit 19
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent
(each, an "Attorney-in Fact") with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, (i) to execute the Registration Statement of each of MasterWorks
Funds Inc. and Master Investment Portfolio and any investment company whose
fund(s) invest in a Master Portfolio of Master Investment Portfolio (each, a
"Company"), and any or all amendments (including post-effective amendments)
thereto and to file the same, with any and all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commissions or authorities, and (ii) to execute any
and all federal or state regulatory filings, including all applications with
regulatory authorities, state charter or organizational documents and any
amendments or supplements thereto, to be executed by, on behalf of, or for the
benefit of, a Company. The undersigned hereby grants to each Attorney-in-Fact
full power and authority to do and perform each and every act and thing
contemplated above, as fully and to all intents and purposes as he might or
could do in person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by virtue hereof.
Dated: August 11, 1998 /s/ J. Tucker Morse
------------------------
J. Tucker Morse
