DIVERSIFIED INVESTORS FUNDS GROUP, 485APOS, 1999-03-04

DIVERSIFIED INVESTORS FUNDS GROUP
485APOS, 1999-03-04

Previous: GABELLI CAPITAL SERIES FUNDS INC, NSAR-B, 1999-03-04

Next: SCHWAB CAPITAL TRUST, 497J, 1999-03-04

File Nos. 33-61810
811-7674

As filed with the Securities and Exchange Commission on March 4, 1999

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 14 /X/

and

REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 15 /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 on May 3, 1999,
pursuant to paragraph (a) of Rule 485.

Diversified Investors Portfolios has also executed this registration
statement.

<PAGE>
Prospectus

THE DIVERSIFIED INVESTORS FUNDS GROUP
THE DIVERSIFIED INVESTORS STRATEGIC ALLOCATION FUNDS

Diversified Investment Advisors, Inc.,
investment adviser

MONEY MARKET FUND
Diversified Investors Money Market Fund

BOND FUNDS
Diversified Investors High Quality Bond Fund
Diversified Investors Intermediate Government Bond Fund
Diversified Investors Government/Corporate Bond Fund
Diversified Investors High-Yield Bond Fund

BALANCED FUND
Diversified Investors Balanced Fund

STOCK FUNDS
Diversified Investors Stock Index Fund
Diversified Investors Equity Income Fund
Diversified Investors Equity Value Fund
Diversified Investors Growth & Income Fund
Diversified Investors Equity Growth Fund
Diversified Investors Special Equity Fund
Diversified Investors Aggressive Equity Fund
Diversified Investors International Equity Fund

STRATEGIC ALLOCATION FUNDS
Short Horizon Strategic Allocation Fund
Short/Intermediate Horizon Strategic Allocation Fund
Intermediate Horizon Strategic Allocation Fund
Intermediate/Long Horizon Strategic Allocation Fund
Long Horizon Strategic Allocation Fund

The Securities and Exchange Commission has
not approved or disapproved these securities
or passed upon the accuracy of this prospectus,
and any representation to the contrary
is a criminal offense.

May 3, 1999

<PAGE>

The mutual funds described in this prospectus are designed to meet a variety of
investment goals. The Funds employ a wide range of stock and bond strategies
covering the full risk/reward spectrum. You may choose to allocate your
investment among the Stock, Bond and Money Market Funds or you may choose to
invest in a Strategic Allocation Fund. The Strategic Allocation Funds invest in
combinations of the other Funds determined by Diversified Investment Advisors.

TABLE OF CONTENTS

The Funds at a Glance..........................................................
Money Market Fund......................................................
Bond Funds.............................................................
Balanced Fund..........................................................
Stock Funds............................................................
Strategic Allocation Funds.............................................

Shareholder Services...........................................................
How to Reach the Funds.................................................
How to Purchase Shares.................................................
How the Price of Your Shares is Calculated.............................
How to Sell Shares.....................................................
Shareholder Services and Policies......................................

Dividends and Distributions....................................................

Tax Matters....................................................................

Management.....................................................................

More About the Funds...........................................................
Money Market Fund......................................................
Bond Funds.............................................................
Balanced Fund..........................................................
Stock Funds............................................................
Strategic Allocation Funds.............................................
Risks..................................................................

General Information............................................................

Additional Performance Information.............................................

Financial Highlights...........................................................

Appendix A -- Strategic Allocation Funds.......................................

Appendix B -- Instructions for Purchases and Sales from the Distributor........

Appendix C -- Composite Performance of Subadvisers.............................

<PAGE>

THE FUNDS AT A GLANCE

- ------------------------------------------------------------------------------
MONEY MARKET FUND
- ------------------------------------------------------------------------------

DIVERSIFIED INVESTORS MONEY MARKET FUND

THIS SUMMARY BRIEFLY DESCRIBES THE MONEY MARKET FUND AND THE PRINCIPAL RISKS OF
INVESTING IN IT. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

FUND GOAL

The Fund's goal is to provide liquidity and as high a level of income as is
consistent with the preservation of capital.

MAIN INVESTMENT STRATEGIES

The Fund invests primarily in high quality, short-term money market
instruments. These instruments include short-term U.S. government obligations,
corporate bonds and notes, bank obligations (such as certificates of deposit
and bankers' acceptances), commercial paper and repurchase agreements. The Fund
may invest more than 25% of its total assets in obligations of U.S. banks.

MAIN RISKS

The principal risks of investing in the Fund are described below. The value of
the Fund's shares will change under certain circumstances. This means that your
Fund shares may be worth more or less when you sell them than when you bought
them. See page __ for more information about risks.

o The Fund's rate of income will vary from day to day depending on
short-term interest rates. Investing in high quality, short-term
instruments may result in a lower yield (the income on your
investment) than investing in lower quality or longer-term
instruments.

o The Fund does not maintain a stable net asset value of $1.00 per
share and does not declare dividends on a daily basis (many money
market funds do). Undeclared investment income, or a default on a
portfolio security, may cause the Fund's net asset value to
fluctuate.

o If the Fund concentrates in U.S. bank obligations, the Fund will be
particularly sensitive to adverse events affecting U.S. banks. Banks
are sensitive to changes in money market and general economic
conditions, as well as decisions by regulators that can affect banks'
profitability.

Please note that an investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

Consider investing in the Money Market Fund if you are a conservative investor
who is seeking liquidity and preservation of capital. Because the Fund
emphasizes stability, it may be an appropriate component of a savings plan.

No Fund, by itself, is a complete investment program.

<PAGE>

FUND PERFORMANCE

The following bar chart and tables can help you evaluate the risks of investing
in the Fund, and how the Fund's returns have varied over time.

o The bar chart shows changes in the Fund's performance from year to
year over the last five calendar years.

o The tables show the Fund's best and worst quarters during the years
covered by the bar chart, and how the Fund's average annual returns
for the periods indicated compare to those of a broad measure of
market performance. Please remember that, unlike the Fund, the market
index does not include the costs of buying and selling securities and
other Fund expenses.

When you consider this information, please remember that the Fund's past
performance is not necessarily an indication of how it will perform in the
future.

TOTAL RETURN
(per calendar year)
1994 1995 1996 1997 1998
[bar chart -- for calendar years 1994
through 1998]
1994...........3.45%
1995...........5.50%
1996...........4.87%
1997...........4.98%
1998...........4.91%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------------------- ----------------------
Highest 1.78% June 30, 1995
- ----------------- ----------- ----------------------
Lowest 0.56% March 31, 1994
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ------------------ --------------- -----------------
1 Year 5 Years
- ------------------ --------------- -----------------
Money Market Fund 4.91% 4.74%
- ------------------ --------------- -----------------
Salomon Bros.
3-Month T-Bill
Index _____% ____%
- ------------------ --------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE MONEY MARKET FUND.

- ------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- ------------------------------------------------------------------------------
Redemption Fee None
- ------------------------------------------------------------------------------
Exchange Fee None
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets) as a % of average net assets (1)
- ------------------------------------------------------------------------------
Advisory Fee .25%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fees .25%
- ------------------------------------------------------------------------------
Other Expenses
- ------------------------------------------------------------------------------
Administrative Services Fee .30%
- ------------------------------------------------------------------------------
Miscellaneous Expenses .32%
- ------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.12%*
- ------------------------------------------------------------------------------

*BECAUSE SOME OF THE FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL TOTAL
OPERATING EXPENSES FOR THE PRIOR YEAR WERE .80%. THESE FEE WAIVERS AND
REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1The Fund invests in securities through an underlying mutual fund. This table
and the example below reflect the expenses of the Fund and that underlying
fund.

EXAMPLE

This example is intended to help you compare the cost of investing in the Money
Market Fund to the cost of investing in other mutual funds. The example assumes
that:
o you invest $10,000 in the Fund for the time periods indicated;
o you reinvest all dividends; and
o you then sell all your shares at the end of those periods.

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5% return
is required by the SEC for the purpose of this example and is not a
prediction of the Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the same
before taking into consideration any fee waivers or reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

- --------------- ------------- ------------- -------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------------- ------------- -------------
$--- $--- $--- $---
- --------------- ------------- ------------- -------------

<PAGE>

- ------------------------------------------------------------------------------
BOND FUNDS
- ------------------------------------------------------------------------------

DIVERSIFIED INVESTORS HIGH QUALITY BOND FUND
DIVERSIFIED INVESTORS INTERMEDIATE GOVERNMENT BOND FUND
DIVERSIFIED INVESTORS GOVERNMENT/CORPORATE BOND FUND
DIVERSIFIED INVESTORS HIGH-YIELD BOND FUND

THIS SUMMARY BRIEFLY DESCRIBES THE BOND FUNDS AND THE PRINCIPAL RISKS OF
INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

HIGH QUALITY BOND FUND The Fund's goal is to provide a high risk-adjusted return
while focusing on the preservation of capital.

INTERMEDIATE GOVERNMENT BOND FUND The Fund's goal is to provide as high a level of current
income as is consistent with the preservation of capital.

GOVERNMENT/CORPORATE BOND FUND The Fund's goal is to achieve maximum total return.

HIGH-YIELD BOND FUND The Fund's goal is to provide a high level of current
income.

MAIN INVESTMENT STRATEGIES

HIGH QUALITY BOND FUND

</TABLE>

The High Quality Bond Fund invests primarily in high quality bonds and other
debt securities with short and intermediate maturities. Under normal
circumstances the Fund invests at least 65% of its assets in these securities.

The Fund considers securities rated A or better by Standard & Poor's or A3 or
better by Moody's (and securities that the Fund's advisers believe are of
comparable quality) to be high quality.

The dollar-weighted average maturity of the Fund generally does not exceed
three years under normal circumstances.

INTERMEDIATE GOVERNMENT BOND FUND

The Intermediate Government Bond Fund invests primarily in U.S. government
obligations and repurchase agreements secured by U.S. government obligations.
Under normal circumstances the Fund invests at least 65% of its assets in these
securities.

The Fund's dollar-weighted average maturity generally is between three and five
years (and does not exceed ten years) under normal circumstances.

GOVERNMENT/CORPORATE BOND FUND

The Government/Corporate Bond Fund invests primarily in investment grade debt
securities and U.S. government obligations (including mortgage-backed

<PAGE>

securities guaranteed by U.S. government agencies and instrumentalities). Under
normal circumstances the Fund invests at least 65% of its assets in U.S.
government securities and corporate bonds.

Investment grade debt securities carry a rating of at least BBB from Standard &
Poor's or Baa from Moody's or are of comparable quality as determined by the
Fund's advisers.

The Fund's dollar-weighted average maturity generally is between five and
fifteen years (and does not exceed thirty years) under normal circumstances.

HIGH-YIELD BOND FUND

The High-Yield Bond Fund invests primarily in high-yielding, income producing
debt securities and preferred stocks. Under normal circumstances the Fund
invests at least 65% of its assets in these securities.

The Fund may invest all or a substantial portion of its assets in lower-rated
debt securities, commonly referred to as "junk bonds." Investing in junk bonds
is an aggressive approach to income investing.

MAIN RISKS

The principal risks of investing in the Bond Funds are described below. The
value of each Fund's shares will change daily as the value of its underlying
securities change. This means that your Fund shares may be worth more or less
when you sell them than when you bought them. See page __ for more information
about risks.

o MARKET RISK. This is the risk that the prices of securities will rise
or fall due to changing economic, political or market conditions, or
due to a company's individual situation.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. A change
in interest rates could cause a Fund's share price to go down.
Generally, the longer the average maturity of the bonds in a Fund,
the more the Fund's share price will fluctuate in response to
interest rate changes.

o PREPAYMENT RISK. The issuers of debt securities held by a Fund may be
able to prepay principal due on the securities, particularly during
periods of declining interest rates. The Fund may not be able to
reinvest that principal at attractive rates, reducing income to the
Fund. On the other hand, rising interest rates may cause prepayments
to occur at slower than expected rates. This effectively lengthens
the maturities of the affected securities, making them more sensitive
to interest rate changes and the Fund's share price more volatile.
Mortgage-backed securities are particularly susceptible to prepayment
risk and their prices may be volatile.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by a Fund, causing a loss. Or, an issuer's financial condition
may deteriorate, lowering the credit quality of a security and
leading to greater volatility in the price of the security and in
shares of a Fund. Investments held by the High-Yield Bond Fund will
be particularly susceptible to credit risk. U.S. government
securities are generally considered not to be subject to credit risk.

<PAGE>

regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

o DERIVATIVES. Each Fund may, but is not required to, engage in certain
investment strategies involving derivatives (such as options,
futures, swaps and forward currency contracts). These investment
strategies may be employed only in connection with hedging
activities. The success or failure of a hedging transaction will
depend on the advisers' ability to predict movements in the hedge,
the investment being hedged and the market in general (and the
correlation between these factors). Derivatives may not always be
available on terms that make economic sense (for example, they may be
too costly), and, when used, their transaction costs and premiums may
adversely affect Fund performance.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

Consider investing in the Bond Funds if you are seeking current income (or, for
the Government/Corporate Bond Fund, high total return). Consider the HIGH
QUALITY BOND FUND if you are seeking a higher yield than a money market fund
through investments in high quality, short-term debt securities. Consider the
INTERMEDIATE GOVERNMENT BOND FUND if you are seeking a higher yield than a
money market fund and more price stability than a lower quality or longer-term
bond fund. This Fund offers an added measure of protection against credit risk
with its focus on U.S. government securities. Consider the GOVERNMENT/CORPORATE
BOND FUND if you are seeking a higher level of current income than is generally
available from short-term securities and are willing to accept the greater
price fluctuations associated with higher levels of income. Consider the
HIGH-YIELD BOND FUND if you are seeking a higher level of current income than
is generally available from a higher quality bond fund and are willing to
accept significant price volatility and risk of loss.

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

The following bar charts and tables can help you evaluate the risks of
investing in the Bond Funds, and how the Funds' returns have varied over time.

o The bar charts show changes in the Funds' performance from year to year.

o The tables show the Funds' best and worst quarters during the years
covered by the bar charts, and how the Funds' average annual returns for
the periods indicated compare to those of broad measures of market
performance. Please remember that, unlike the Funds, the market indices do
not include the costs of buying and selling securities and other Fund
expenses.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

HIGH QUALITY BOND FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........11.85%
1996............4.51%
1997............5.11%
1998............6.08%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 2.79% March 31, 1995
- ----------------- ----------- ----------------------
Lowest -0.23% March 31, 1994
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
High Quality
Bond Fund 6.08% ____%
- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp.
Bond Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

INTERMEDIATE GOVERNMENT BOND FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997............6.88%
1998............6.47%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 4.20% March 31, 1995
- ----------------- ----------- ----------------------
Lowest -1.48% March 31, 1994
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- -------------- -------------------
Since Inception
1 Year February 22, 1996
- ----------------- -------------- -------------------
Intermediate
Government
Bond Fund 6.47% ____%
- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp.
Bond Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

GOVERNMENT/CORPORATE BOND FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........20.30%
1996............2.74%
1997............8.14%
1998............7.13%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 8.16% June 30, 1995
- ----------------- ----------- ----------------------
Lowest -2.81% March 31, 1994
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Government/
Corporate
Bond Fund 7.13% ____%
- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp.
Bond Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

HIGH-YIELD BOND FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........12.28%
1998............2.20%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 4.87% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -4.76% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year January 30, 1996
- ----------------- ---------------- -----------------
High-Yield
Bond Fund 2.20% ____%
- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp.
Bond Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE BOND FUNDS.

<S> <C> <C> <C> <C>
- --------------------------------- --------------- --------------- --------------- ---------------
INTERMEDIATE GOVERNMENT/
SHAREHOLDER FEES (fees paid HIGH QUALITY GOVERNMENT CORPORATE HIGH-YIELD
directly from your investment) BOND FUND BOND FUND BOND FUND BOND FUND
- --------------------------------- --------------- --------------- --------------- ---------------
Maximum Sales Charge (Load)
Imposed on Purchases None None None None
- --------------------------------- --------------- --------------- --------------- ---------------
Maximum Deferred Sales
Charge (Load) None None None None
- --------------------------------- --------------- --------------- --------------- ---------------
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends None None None None
- --------------------------------- --------------- --------------- --------------- ---------------
Redemption Fee None None None None
- --------------------------------- --------------- --------------- --------------- ---------------
Exchange Fee None None None None
- --------------------------------- --------------- --------------- --------------- ---------------
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from Fund assets) as
a % of average net assets (1)
- --------------------------------- --------------- --------------- --------------- ---------------
Advisory Fee .35% .35% .35% .55%
- --------------------------------- --------------- --------------- --------------- ---------------
Distribution (12b-1) Fees .25% .25% .25% .25%
- --------------------------------- --------------- --------------- --------------- ---------------
Other Expenses
- --------------------------------- --------------- --------------- --------------- ---------------
Administrative
Services Fee .30% .30% .30% .30%
- --------------------------------- --------------- --------------- --------------- ---------------
Miscellaneous Expenses .87% 1.01% .42% .78%
- --------------------------------- --------------- --------------- --------------- ---------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.77%* 1.91%* 1.32%* 1.88%*
- --------------------------------- --------------- --------------- --------------- ---------------
</TABLE>

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE 1.00% FOR THE HIGH
QUALITY BOND FUND, 1.00% FOR THE INTERMEDIATE GOVERNMENT BOND FUND, 1.00%
FOR THE GOVERNMENT/CORPORATE BOND FUND AND 1.10% FOR THE HIGH-YIELD BOND
FUND. THESE FEE WAIVERS AND REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT
ANY TIME.

1Each Fund invests in securities through an underlying mutual fund. This
table and the example below reflect the expenses of the Fund and that
underlying fund.

EXAMPLE

This example is intended to help you compare the cost of investing in a Bond
Fund to the cost of investing in other mutual funds. The example assumes that:
o you invest $10,000 in a Fund for the time periods indicated;
o you reinvest all dividends; and
o you then sell all your shares at the end of those periods.

o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<S> <C> <C> <C> <C>
- ------------------- ---------------- --------------- --------------- -------------
INTERMEDIATE GOVERNMENT/
HIGH QUALITY GOVERNMENT CORPORATE HIGH-YIELD
BOND FUND BOND FUND BOND FUND BOND FUND
- ------------------- ---------------- --------------- --------------- -------------
1 year $___ $___ $___ $___
- ------------------- ---------------- --------------- --------------- -------------
3 years $___ $___ $___ $___
- ------------------- ---------------- --------------- --------------- -------------
5 years $___ $___ $___ $___
- ------------------- ---------------- --------------- --------------- -------------
10 years $___ $___ $___ $___
- ------------------- ---------------- --------------- --------------- -------------
</TABLE>

- -------------------------------------------------------------------------------
BALANCED FUND
- -------------------------------------------------------------------------------

DIVERSIFIED INVESTORS BALANCED FUND

THIS SUMMARY BRIEFLY DESCRIBES THE BALANCED FUND AND THE PRINCIPAL RISKS OF
INVESTING IN IT. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

FUND GOAL

The Fund's goal is to provide a high total investment return through investment
in a broadly diversified portfolio of stocks, bonds and money market
instruments.

MAIN INVESTMENT STRATEGIES

The Fund invests in a managed mix of equity and debt securities of
predominately U.S. issuers.

The Fund varies the percentage of assets invested in any one type of security
in accordance with its advisers' interpretation of economic and market
conditions, fiscal and monetary policy, and underlying securities values. Under
normal circumstances, the Fund invests approximately 60% of its assets in
equity securities and 40% of its assets in fixed income and money market
securities.

MAIN RISKS

The principal risks of investing in the Balanced Fund are described below. The
value of the Fund's shares will change daily as the value of its underlying
securities change. This means that your Fund shares may be worth more or less
when you sell them than when you bought them. See page __ for more information
about risks.

o MARKET RISK. This is the risk that the prices of securities will rise
or fall due to changing economic, political or market conditions, or
due to a company's individual situation. Historically, equity
securities have been more volatile than debt securities in response
to market risk.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. A change

<PAGE>

in interest rates could cause the Fund's share price to go down.
Generally, the longer the average maturity of the bonds in the Fund,
the more the Fund's share price will fluctuate in response to
interest rate changes.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by the Fund, causing a loss. Or, an issuer's financial condition
may deteriorate, lowering the credit quality of a security and
leading to greater volatility in the price of the security and in
shares of the Fund. The prices of lower rated securities often are
more volatile than those of higher rated securities.

o PREPAYMENT RISK. The issuers of debt securities held by the Fund may
be able to prepay principal due on the securities, particularly
during periods of declining interest rates. The Fund may not be able
to reinvest that principal at attractive rates, reducing income to
the Fund. On the other hand, rising interest rates may cause
prepayments to occur at slower than expected rates. This effectively
lengthens the maturities of the affected securities, making them more
sensitive to interest rate changes and the Fund's share price more
volatile. Mortgage-backed securities are particularly susceptible to
prepayment risk and their prices may be volatile.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing the Fund's share price to
be volatile. Also, in certain circumstances, the Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

o DERIVATIVES. The Fund may, but is not required to, engage in certain
investment strategies involving derivatives (such as options,
futures, swaps and forward currency contracts). These investment
strategies may be employed only in connection with hedging
activities. The success or failure of a hedging transaction will
depend on the advisers' ability to predict movements in the hedge,
the investment being hedged and the market in general (and the
correlation between these factors). Derivatives may not always be
available on terms that make economic sense (for example, they may be
too costly), and, when used, their transaction costs and premiums may
adversely affect Fund performance.

Please note that an investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

Consider investing in the Balanced Fund if you are seeking a diversified
investment program through both stocks and bonds.

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

The following bar chart and tables can help you evaluate the risks of investing
in the Fund, and how the Fund's returns have varied over time.

<PAGE>

o The bar chart shows changes in the Fund's performance from year to year
over the last four calendar years.

o The tables show the Fund's best and worst quarters during the years
covered by the bar chart, and how the Fund's average annual returns for
the periods indicated compare to those of a broad measure of stock
performance and a broad measure of bond performance. Please remember that,
unlike the Fund, the market indices do not include the costs of buying and
selling securities and other Fund expenses.

When you consider this information, please remember that the Fund's past
performance is not necessarily an indication of how it will perform in the
future.

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........28.47%
1996...........16.39%
1997...........18.67%
1998...........11.81%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 10.69% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -8.74% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Balanced
Fund 11.81% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp.
Bond Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE BALANCED FUND.

<S> <C>
- ---------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
- ------------------------------------------------------------------------ --------------
Maximum Sales Charge (Load) Imposed on Purchases None
- ------------------------------------------------------------------------ --------------
Maximum Deferred Sales Charge (Load) None
- ------------------------------------------------------------------------ --------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- ------------------------------------------------------------------------ --------------
Redemption Fee None
- ------------------------------------------------------------------------ --------------
Exchange Fee None
- ------------------------------------------------------------------------ --------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets) as a % of average net assets (1)
- ------------------------------------------------------------------------ --------------
Advisory Fee .45%
- ------------------------------------------------------------------------ --------------
Distribution (12b-1) Fees .25%
- ------------------------------------------------------------------------ --------------
Other Expenses
- ------------------------------------------------------------------------ --------------
Administrative Services Fee .30%
- ------------------------------------------------------------------------ --------------
Miscellaneous Expenses .21%
- ------------------------------------------------------------------------ --------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.21%*
- ------------------------------------------------------------------------ --------------
</TABLE>

*BECAUSE SOME OF THE FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL TOTAL
OPERATING EXPENSES FOR THE PRIOR YEAR WERE 1.10%. THESE FEE WAIVERS AND
REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1The Fund invests in securities through an underlying mutual fund. This
table and the example below reflect the expenses of the Fund and that
underlying fund.

EXAMPLE

This example is intended to help you compare the cost of investing in the
Balanced Fund to the cost of investing in other mutual funds. The example
assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you reinvest all dividends; and
o you then sell all your shares at the end of those periods.

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of the Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<PAGE>

- -----------------------------------------------------------------------------
STOCK FUNDS
- -----------------------------------------------------------------------------

DIVERSIFIED INVESTORS STOCK INDEX FUND
DIVERSIFIED INVESTORS EQUITY INCOME FUND
DIVERSIFIED INVESTORS EQUITY VALUE FUND
DIVERSIFIED INVESTORS GROWTH & INCOME FUND
DIVERSIFIED INVESTORS EQUITY GROWTH FUND
DIVERSIFIED INVESTORS SPECIAL EQUITY FUND
DIVERSIFIED INVESTORS AGGRESSIVE EQUITY FUND
DIVERSIFIED INVESTORS INTERNATIONAL EQUITY FUND

THIS SUMMARY BRIEFLY DESCRIBES THE STOCK FUNDS AND THE PRINCIPAL RISKS OF
INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

STOCK INDEX FUND The Fund's goal is to match the performance of the
Standard & Poor's 500 Composite Stock Price Index.

EQUITY INCOME FUND The Fund's goal is to provide a high level of current income
through investment in a diversified portfolio of common
stocks with relatively high current yield. Capital
appreciation is a secondary goal.

EQUITY VALUE FUND The Fund's goal is to provide a high total investment
return through investment primarily in a diversified
portfolio of common stocks.

GROWTH & INCOME FUND The Fund's goal is to provide capital appreciation and
current income.

EQUITY GROWTH FUND The Fund's goal is to provide a high level of capital
appreciation through investment in a diversified portfolio
of common stocks with a potential for above-average
growth in earnings. Current income is a secondary goal.

SPECIAL EQUITY FUND The Fund's goal is to provide a high level of capital
appreciation through investment in a diversified portfolio
of common stocks of small to medium size companies.

AGGRESSIVE EQUITY FUND The Fund's goal is to provide a high level of capital
appreciation primarily through investing in a diversified
portfolio of common stocks.

INTERNATIONAL EQUITY FUND The Fund's goal is to provide a high level of long-term
capital appreciation through investment in a diversified
portfolio of securities of foreign issuers.

</TABLE>

<PAGE>

MAIN INVESTMENT STRATEGIES

STOCK INDEX FUND

The Stock Index Fund invests substantially all of its assets (at least 90%
under normal conditions) in the stocks comprising the Standard & Poor's 500
Composite Stock Price Index1. In attempting to match the return of the S&P 500
Index, the Fund invests approximately the same percentage of its assets in each
stock as the stock represents in the S&P 500 Index. The Fund may also use
various investment techniques such as buying and selling futures contracts and
options, entering into swap agreements and purchasing indexed securities.

EQUITY INCOME FUND

The Equity Income Fund invests primarily in common stocks of companies which,
in the opinion of the Fund's advisers, are fundamentally sound financially and
which pay relatively high dividends on a consistent basis.

EQUITY VALUE FUND

The Equity Value Fund invests primarily in common stocks of companies which, in
the opinion of the Fund's advisers, are trading at low valuations relative to
market and/or historical levels.

GROWTH & INCOME FUND

The Growth & Income Fund invests primarily in securities selected in large part
for their potential to generate long-term capital appreciation. The Fund may
also select securities based on their potential to generate current income. The
Fund emphasizes common stocks and securities of growing, financially stable and
undervalued companies.

EQUITY GROWTH FUND

The Equity Growth Fund invests primarily in common stocks of companies that its
advisers believe have the potential for above average growth in earnings and
dividends. The Fund uses multiple managers to control the volatility often
associated with growth funds.

SPECIAL EQUITY FUND

________________

1 Standard & Poor's does not sponsor the Stock Index Fund, nor is it affiliated
in any way with the Fund's advisers. "Standard & Poor's(," "S&P 500(," and
"Standard & Poor's 500("are trademarks of The McGraw-Hill Companies, Inc. The
Stock Index Fund 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 the Stock Index Fund.

<PAGE>

consideration for current income. The Fund emphasizes common stocks of U.S.
companies with market capitalizations of less than $1 billion. The Fund uses
multiple managers to control the volatility often associated with investments
in companies of this size.

AGGRESSIVE EQUITY FUND

The Aggressive Equity Fund invests primarily in high growth companies without
regard to market capitalization. The Fund seeks to invest in companies which
present an opportunity for significant increases in earnings, revenue and/or
value, without consideration for current income. The Fund invests primarily in
common stocks. The value of shares of this Fund may be quite volatile.

INTERNATIONAL EQUITY FUND

The International Equity Fund invests primarily in foreign securities. Under
normal circumstances, the Fund invests at least 65% of its assets in equity
securities of issuers in at least three countries other than the United States.
The Fund may invest up to 10% of its assets in securities of issuers in
developing countries.

MAIN RISKS

The principal risks of investing in the Stock Funds are described below. The
value of each Fund's shares will change daily as the value of its underlying
securities change. This means that your Fund shares may be worth more or less
when you sell them than when you bought them. See page __ for more information
about risks.

o GROWTH SECURITIES. Growth securities typically are quite sensitive to
market movements because their market prices tend to reflect future
expectations. When it appears those expectations will not be met, the
prices of growth securities typically fall. The success of a Fund's
investment in growth securities depends largely on the Fund's
advisers' skill in assessing the growth potential of the companies
that issued the securities.

o SMALLER COMPANIES. The securities of smaller capitalized companies
may have more risks than those of larger, more seasoned companies.
They may be particularly susceptible to market downturns because of
limited product lines, markets, distribution channels or financial
and management resources. Also, there may be less publicly available
information about small cap companies. As a result, their prices may
be more volatile, causing a Fund's share price to be volatile.
Investments held by the Special Equity Fund are likely to be
particularly susceptible to the risks of small cap companies.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize

<PAGE>

reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

The International Equity Fund may invest in issuers located in
emerging, or developing, markets. All of the risks of investing in
foreign securities are heightened by investing in these markets.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. Longer
term obligations are usually more sensitive to interest rate changes
than shorter term obligations. A change in interest rates could cause
a Fund's share price to go down. Generally, the longer the average
maturity of the bonds in a Fund, the more the Fund's share price will
fluctuate in response to interest rate changes.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by a Fund, causing a loss. Or, an issuer's financial condition
may deteriorate, lowering the credit quality of a security and
leading to greater volatility in the price of the security and in
shares of the Fund. The prices of lower rated securities often are
more volatile than those of higher rated securities.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

Consider investing in the Stock Funds if you can tolerate stock market
fluctuations and changes in the value of your investment. Consider the STOCK
INDEX FUND if you wish to keep investment expenses low while seeking
potentially high long-term returns from investments in large companies.
Consider the EQUITY INCOME FUND if you are seeking capital appreciation with an
income component to temper volatility. Consider the GROWTH & INCOME FUND if you
are seeking a greater potential for capital appreciation than an income fund
and less price volatility than a growth fund. Consider the EQUITY VALUE FUND,
EQUITY GROWTH FUND, SPECIAL EQUITY FUND, AGGRESSIVE EQUITY FUND and
INTERNATIONAL EQUITY FUND if you are seeking growth from equity investments,
can tolerate substantial changes in the value of your investment and do not
require current income from your investment. The Special Equity Fund emphasizes
securities of small to medium size companies. The Aggressive Equity Fund
emphasizes securities of high growth companies without regard to market
capitalization. As a result, the Special Equity Fund and the Aggressive Equity
Fund may be particularly volatile.

No Fund, by itself, is a complete investment program.

<PAGE>

FUND PERFORMANCE

The following bar charts and tables can help you evaluate the risks of
investing in the Stock Funds, and how the Funds' returns have varied over time.

o The bar charts show changes in the Funds' performance from year to year.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

STOCK INDEX FUND

The Fund began operations on March 1, 1999 and does not have a full calendar
year of investment returns at the date of this prospectus.

EQUITY INCOME FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........34.62%
1996...........17.91%
1997...........29.31%
1998...........12.47%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------------------- ----------------------
- ----------------- ----------- ----------------------
Highest 15.50% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -9.54% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Equity Income
Fund 12.47% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Value Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

EQUITY VALUE FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........21.43%
1998...........10.79%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 13.63% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -9.32% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year June 13, 1996
- ----------------- ---------------- -----------------
Equity
Value Fund 10.79% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Value Index _____% ____%
- ----------------- ---------------- -----------------

<PAGE>

GROWTH & INCOME FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........32.11%
1996...........21.61%
1997...........34.14%
1998...........34.63%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 24.96% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -12.01% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Growth &
Income Fund 34.63% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

EQUITY GROWTH FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........18.50%
1996...........17.93%
1997...........26.54%
1998...........35.97%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 29.77% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -11.31% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Equity
Growth Fund 35.97% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Growth Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

SPECIAL EQUITY FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........41.50%
1996...........25.76%
1997...........25.82%
1998............3.10%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 20.84% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -20.13% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Special
Equity Fund 3.10% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 2000
Growth Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

AGGRESSIVE EQUITY FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997............6.13%
1998...........41.79%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 32.85% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -18.48 December 31, 1997
- ----------------- ----------- ----------------------

- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 2000
Growth Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

INTERNATIONAL EQUITY FUND

TOTAL RETURN
(per calendar year)

1997 1998

[bar chart -- for calendar years 1997
and 1998]

1997............7.74%
1998...........10.47%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 16.67% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -16.75% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year January 18, 1996
- ----------------- ---------------- -----------------
International
Equity Fund 10.47% ____%
- ----------------- ---------------- -----------------
MSCI GDP
EAFE Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THE TABLES BELOW DESCRIBE THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE STOCK FUNDS.

<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid STOCK EQUITY INCOME EQUITY GROWTH &
directly from your investment) INDEX FUND FUND VALUE FUND INCOME FUND
- -------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases None None None None
- -------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) None None None None
- -------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None None
- -------------------------------------------------------------------------------------------------
Redemption Fee None None None None
- -------------------------------------------------------------------------------------------------
Exchange Fee None None None None
- -------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from Fund assets) as
a % of average net assets (1)
- -------------------------------------------------------------------------------------------------
Advisory Fee .40% .45% .57% .60%
- -------------------------------------------------------------------------------------------------
Distribution (12b-1) Fees .25% .25% .25% .25%
- -------------------------------------------------------------------------------------------------
Other Expenses
- -------------------------------------------------------------------------------------------------
Administrative
Services Fee None .30% .30% .30%
- -------------------------------------------------------------------------------------------------
Miscellaneous Expenses None .20% .54% .24%
- -------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES .65% 1.20%* 1.66%* 1.39%*
- -------------------------------------------------------------------------------------------------
</TABLE>

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE 1.00% FOR THE EQUITY INCOME
FUND, 1.10% FOR THE EQUITY VALUE FUND AND 1.15% FOR THE GROWTH & INCOME
FUND. THESE FEE WAIVERS AND REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT
ANY TIME.

1Each Fund invests in securities through an underlying mutual fund. This
table and the example below reflect the expenses of the Fund and that
underlying fund.

<PAGE>

<S> <C> <C> <C> <C>
- --------------------------------- --------------- --------------- --------------- ----------------
EQUITY
SHAREHOLDER FEES (fees paid GROWTH SPECIAL AGGRESSIVE INTERNATIONAL
directly from your investment) FUND EQUITY FUND EQUITY FUND EQUITY FUND
- --------------------------------- --------------- --------------- --------------- ----------------
Maximum Sales Charge (Load) None None None None
Imposed on Purchases
- --------------------------------- --------------- --------------- --------------- ----------------
Maximum Deferred Sales None None None None
Charge (Load)
- --------------------------------- --------------- --------------- --------------- ----------------
Maximum Sales Charge (Load) None None None None
Imposed on Reinvested Dividends
- --------------------------------- --------------- --------------- --------------- ----------------
Redemption Fee None None None None
- --------------------------------- --------------- --------------- --------------- ----------------
Exchange Fee None None None None
- --------------------------------- --------------- --------------- --------------- ----------------
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from Fund assets) as
a % of average net assets (1)
- --------------------------------- --------------- --------------- --------------- ----------------
Advisory Fee .62% .80% .97% .75%
- --------------------------------- --------------- --------------- --------------- ----------------
Distribution (12b-1) Fees .25% .25% .25% .25%
- --------------------------------- --------------- --------------- --------------- ----------------
Other Expenses
- --------------------------------- --------------- --------------- --------------- ----------------
Administrative
Services Fee .30% .30% .30% .30%
- --------------------------------- --------------- --------------- --------------- ----------------
Miscellaneous Expenses .20% .22% 1.18% .42%
- --------------------------------- --------------- --------------- --------------- ----------------
TOTAL ANNUAL FUND OPERATING
EXPENSES 1.37%* 1.57%* 2.70%* 1.72%*
- --------------------------------- --------------- --------------- --------------- ----------------
</TABLE>

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE 1.25% FOR THE EQUITY GROWTH
FUND, 1.50% FOR THE SPECIAL EQUITY FUND, 1.50% FOR THE AGGRESSIVE EQUITY
FUND AND 1.40% FOR THE INTERNATIONAL EQUITY FUND. THESE FEE WAIVERS AND
REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1Each Fund invests in securities through an underlying mutual fund. This
table and the example below reflect the expenses of the Fund and that
underlying fund.

EXAMPLE

This example is intended to help you compare the cost of investing in a Stock
Fund to the cost of investing in other mutual funds. The example assumes that:
o you invest $10,000 in a Fund for the time periods indicated;
o you reinvest all dividends; and
o you then sell all your shares at the end of those periods.

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of any Fund's future performance); and
o the Fund's operating expenses shown in the tables above remain the
same before taking into consideration any fee waivers or
reimbursements.

<PAGE>

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<S> <C> <C> <C> <C>
- ------------------- ---------------- --------------- -------------- ---------------
STOCK EQUITY EQUITY GROWTH &
INDEX FUND INCOME FUND VALUE FUND INCOME FUND
- ------------------- ---------------- --------------- -------------- ---------------
1 year $___ $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
3 years $___ $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
5 years N/A $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
10 years N/A $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------

- ------------------- ---------------- --------------- -------------- ---------------
EQUITY GROWTH SPECIAL AGGRESSIVE INTERNATIONAL
FUND EQUITY FUND EQUITY FUND EQUITY FUND
- ------------------- ---------------- --------------- -------------- ---------------
1 year $___ $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
3 years $___ $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
5 years $___ $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
10 years $___ $___ $___ $___
- ------------------- ---------------- --------------- -------------- ---------------
</TABLE>

- ------------------------------------------------------------------------------
STRATEGIC ALLOCATION FUNDS
- ------------------------------------------------------------------------------

SHORT HORIZON STRATEGIC ALLOCATION FUND
SHORT/INTERMEDIATE HORIZON STRATEGIC ALLOCATION FUND
INTERMEDIATE HORIZON STRATEGIC ALLOCATION FUND
INTERMEDIATE/LONG HORIZON STRATEGIC ALLOCATION FUND
LONG HORIZON STRATEGIC ALLOCATION FUND

THIS SUMMARY BRIEFLY DESCRIBES EACH OF THE STRATEGIC ALLOCATION FUNDS AND THE
PRINCIPAL RISKS OF INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORE ABOUT THE
FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

SHORT HORIZON
STRATEGIC ALLOCATION FUND The Fund's goal is to provide a high level of income and
preservation of capital.

SHORT/INTERMEDIATE HORIZON
STRATEGIC ALLOCATION FUND The Fund's goal is to achieve reasonable returns with
considerably less than average volatility as compared to
other balanced funds.
<PAGE>

INTERMEDIATE HORIZON
STRATEGIC ALLOCATION FUND The Fund's goal is to achieve long-term returns from a
combination of investment income and capital appreciation
with slightly less than average volatility as compared to
other balanced funds.

INTERMEDIATE/LONG HORIZON
STRATEGIC ALLOCATION FUND The Fund's goal is to achieve long-term returns from a
combination of investment income and capital appreciation
with slightly more than average volatility as compared to
other balanced funds.

LONG HORIZON
STRATEGIC ALLOCATION FUND The Fund's goal is to provide long-term returns from
growth of capital and growth of income.

</TABLE>

MAIN INVESTMENT STRATEGIES

The Strategic Allocation Funds are asset allocation funds. Each Fund invests in
a combination of the Funds (other than the Balanced Fund and the Stock Index
Fund) described above in this prospectus. Diversified selects the combination
and amount of underlying Funds based on each Strategic Allocation Fund's
investment goal.

The following chart shows approximately how much of the assets of each
Strategic Allocation Fund are invested in the Money Market, Bond and Stock
Funds. These allocations reflect Diversified's present strategy for asset
allocation during normal market conditions, and may be changed at any time.
Under severe market conditions, Diversified may allocate the assets of each
Strategic Allocation Fund without limit to the Money Market Fund. For specific
allocations to the underlying Funds, see Appendix A.

<S> <C> <C> <C>
------------------- ------------------- --------------------
MONEY MARKET BOND STOCK
FUND FUNDS FUNDS
------------------- ------------------- --------------------
- ------------------------------------ ------------------- ------------------- --------------------
SHORT HORIZON 10% 80% 10%
- ------------------------------------ ------------------- ------------------- --------------------
SHORT/INTERMEDIATE HORIZON None 70% 30%
- ------------------------------------ ------------------- ------------------- --------------------
INTERMEDIATE HORIZON None 50% 50%
- ------------------------------------ ------------------- ------------------- --------------------
INTERMEDIATE/LONG HORIZON None 30% 70%
- ------------------------------------ ------------------- ------------------- --------------------
LONG HORIZON None None 100%
- ------------------------------------ ------------------- ------------------- --------------------
</TABLE>

Each Strategic Allocation Fund is a non-diversified fund, meaning that it is
not limited by the Investment Company Act of 1940 as to the amount of its
assets that may be invested in a single issuer (although certain
diversification requirements under the Internal Revenue Code still apply).

MAIN RISKS

The principal risks of investing in the Strategic Allocation Funds are
described below. Please remember that the risks of investing in each Strategic
Allocation Fund depend on the underlying Funds in which the Strategic
Allocation Fund invests and, in turn, on the securities that the underlying
Funds hold and the investment strategies they use. For example, the Short
Horizon and Short/Intermediate Horizon Strategic Allocation Funds invest more
of their assets in the Bond Funds. As a result, the Short Horizon and
Short/Intermediate Horizon Funds may be more susceptible to interest rate risk
and credit risk than the Strategic Allocation Funds investing more of their
assets in the Stock Funds. Similarly, the Strategic Allocation Funds investing
more of their assets in the Stock Funds may be susceptible to greater price
volatility under certain market conditions than the Strategic Allocation Funds
investing more of their assets in the Bond Funds. The value of each Strategic
Allocation Fund's shares will change daily as the value of its underlying

<PAGE>

securities change. This means that your Fund shares may be worth more or less
when you sell them than when you bought them. See page ___ for more information
about risks.

It is also possible that the Funds will not perform as intended. For
example, the Short Horizon Strategic Allocation Fund is expected to
be the least volatile of the Funds. However, under certain market
conditions this Fund could be the most volatile.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. A change
in interest rates could cause the Funds' share prices to go down.
Generally, the longer the average maturity of the bonds in a Fund,
the more the Fund's share price will fluctuate in response to
interest rate changes.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by the underlying Funds, causing a loss. Or, an issuer's
financial condition may deteriorate, lowering the credit quality of a
security and leading to greater volatility in the price of the
security and in shares of a Fund. The prices of lower rated
securities often are more volatile than those of higher rated
securities.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

o GROWTH SECURITIES. Growth securities typically are quite sensitive to
market movements because their market prices tend to reflect future
expectations. When it appears those expectations will not be met, the
prices of growth securities typically fall. The success of an
underlying Fund's investment in growth securities depends largely on
the Fund's advisers' skill in assessing the growth potential of the
companies that issued the securities.

o SMALLER COMPANIES. The securities of smaller capitalized companies
may have more risks than those of larger, more seasoned companies.

<PAGE>

They may be particularly susceptible to market downturns and their
prices may be more volatile, causing a Fund's share price to be
volatile.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

Consider investing in the Strategic Allocation Funds if you are seeking a
long-term, professionally managed asset allocation investment program. You
should not invest in the Strategic Allocation Funds to provide for short-term
financial needs or to play short-term swings in the stock or bond markets.
Consider the SHORT HORIZON STRATEGIC ALLOCATION FUND if you are seeking current
income through investment primarily in the Money Market and Bond Funds.
Consider the SHORT/INTERMEDIATE HORIZON STRATEGIC ALLOCATION FUND if you are
seeking current income through investment primarily in the Bond Funds with
slightly more volatility than the Short Horizon Strategic Allocation Fund and
less volatility than the other Strategic Allocation Funds. Consider the
INTERMEDIATE HORIZON STRATEGIC ALLOCATION FUND if you are seeking high
long-term returns through a diversified investment portfolio of stocks, fixed
income and money market securities. Consider the INTERMEDIATE/LONG HORIZON
STRATEGIC ALLOCATION FUND if you are seeking long-term returns through
investment primarily in the Stock and Bond Funds with slightly more volatility
as compared to other balanced funds. Consider the LONG HORIZON STRATEGIC
ALLOCATION FUND if you are seeking long-term growth through equity investments
and can tolerate substantial changes in the value of your investment.

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

The following bar charts and tables can help you evaluate the risks of
investing in the Strategic Allocation Funds, and how the Funds' returns have
varied over time.

o The bar charts show changes in the Funds' performance from year to year.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

SHORT HORIZON STRATEGIC ALLOCATION FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........8.69%
1998...........6.35%

- -----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- -----------------------------------------------------
- ------------------------------------ ----------------
Quarter Ending
- --------------------- -------------- ----------------
Highest 3.91% June 30, 1997
- --------------------- -------------- ----------------
Lowest 0.14% March 31, 1997
- --------------------- -------------- ----------------

- -----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- -----------------------------------------------------
- --------------------- --------------- ---------------
Since Inception
1 Year April 15, 1996
- --------------------- --------------- ---------------
Short Horizon
Strategic
Allocation Fund 6.35% 7.70%
- --------------------- --------------- ---------------
Lehman Bros.
Gov./Corp. Bond
Index ____% _____%
- --------------------- --------------- ---------------

SHORT/INTERMEDIATE HORIZON STRATEGIC ALLOCATION FUND

The Fund began operations on __________, 1998 and does not have a full calendar
year of investment returns at the date of this prospectus.

<PAGE>

INTERMEDIATE HORIZON STRATEGIC ALLOCATION FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........14.29%
1998...........12.31%

- --------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- --------------------------------------------------------
- ------------------------------------ -------------------
Quarter Ending
- --------------------- -------------- -------------------
Highest 10.56% December 31, 1998
- --------------------- -------------- -------------------
Lowest -6.07% September 30, 1998
- --------------------- -------------- -------------------

- --------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- --------------------------------------------------------
- --------------------- --------------- ------------------
Since Inception
1 Year April 15, 1996
- --------------------- --------------- ------------------
Intermediate
Horizon Strategic
Allocation Fund 12.31% 12.75%
- --------------------- --------------- ------------------
S&P 500 Index _____% ____%
- --------------------- --------------- ------------------
Lehman Bros.
Gov./Corp. Bond
Index _____% ____%
- --------------------- --------------- ------------------

INTERMEDIATE/LONG HORIZON STRATEGIC ALLOCATION FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........18.95%
1998...........14.05%

- --------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- --------------------------------------------------------
- ------------------------------------ -------------------
Quarter Ending
- --------------------- -------------- -------------------
Highest 14.65% June 30, 1997
- --------------------- -------------- -------------------
Lowest -8.63% September 30, 1998
- --------------------- -------------- -------------------

- --------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- --------------------------------------------------------
- --------------------- --------------- ------------------
Since Inception
1 Year April 15, 1996
- --------------------- --------------- ------------------
Intermediate/Long
Horizon Strategic
Allocation Fund 14.05% 15.86%
- --------------------- --------------- ------------------
S&P 500 Index _____% ____%
- --------------------- --------------- ------------------

<PAGE>

LONG HORIZON STRATEGIC ALLOCATION FUND

The Fund began operations on __________, 1998 and does not have a full calendar
year of investment returns at the date of this prospectus.

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE STRATEGIC ALLOCATION FUNDS.

<S> <C> <C> <C> <C> <C>
- -------------------------------- ------------- ------------ ------------- ------------- ------------
SHORT/
SHORT INTERMEDIATE INTERMEDIATE INTERMEDIATE/ LONG
HORIZON HORIZON HORIZON LONG HORIZON HORIZON
SHAREHOLDER FEES (fees paid STRATEGIC STRATEGIC STRATEGIC STRATEGIC STRATEGIC
directly from your investment) ALLOCATION ALLOCATION ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND FUND FUND
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Maximum Sales Charge (Load)
Imposed on Purchases None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Maximum Deferred Sales Charge
(Load) None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Redemption Fee None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Exchange Fee None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from Fund assets) as
a % of average net assets
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Advisory Fee .20% .20% .20% .20% .20%
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Distribution (12b-1) Fees None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Other Expenses
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Administrative
Services Fee None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
Miscellaneous Expenses None None None None None
- -------------------------------- ------------- ------------ ------------- ------------- ------------
TOTAL ANNUAL FUND OPERATING
EXPENSES (1) .20% .20% .20% .20% .20%
- -------------------------------- ------------- ------------ ------------- ------------- ------------
</TABLE>

1EACH STRATEGIC ALLOCATION FUND ALSO BEARS ITS PRO RATA SHARE OF THE FEES
AND EXPENSES (INCLUDING ADVISORY AND RULE 12B-1 FEES) OF THE UNDERLYING
FUNDS IN WHICH IT INVESTS AND THE INVESTMENT RETURNS FOR THE STRATEGIC
ALLOCATION FUND WILL BE NET OF THE EXPENSES OF THE STRATEGIC ALLOCATION FUND
AND THOSE UNDERLYING FUNDS. Based on the expense ratios for the Money
Market, Bond and Stock Funds in which the Strategic Allocation Funds invest,
the average weighted expense ratios are expected to be: from 1.12% to 1.26%
for the Short Horizon Strategic Allocation Fund; from 1.16% to 1.37% for the
Short/Intermediate Horizon Strategic Allocation Fund; from 1.22% to 1.43%
for the Intermediate Horizon Strategic Allocation Fund; from 1.27% to 1.49%
for the Intermediate/Long Horizon Strategic Allocation Fund; and from 1.31%
to 1.58% for the Long Horizon Strategic Allocation Fund. A range of expense
ratios is given because the percentage of each Strategic Allocation Fund's
assets invested in the underlying Funds will fluctuate. Based on these

<PAGE>

ranges, the target ratios of 1.19%, 1.29%, 1.33%, 1.38% and 1.45%,
respectively, are used to calculate the expenses a shareholder would incur
as reflected in the example below.

EXAMPLE

This example is intended to help you compare the cost of investing in a
Strategic Allocation Fund to the cost of investing in other mutual funds. The
example assumes that:
o you invest $10,000 in a Fund for the time periods indicated;
o you reinvest all dividends; and
o you then sell all your shares at the end of those periods.

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of any Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

- ------------------- ---------------- ------------------ ----------------- --------------- -----------------
INTERMEDIATE/
SHORT/ INTERMEDIATE LONG HORIZON
SHORT HORIZON INTERMEDIATE HORIZON STRATEGIC LONG HORIZON
STRATEGIC HORIZON STRATEGIC STRATEGIC ALLOCATION STRATEGIC
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND FUND ALLOCATION FUND
- ------------------- ---------------- ------------------ ----------------- --------------- -----------------
1 year $___ $___ $___ $___ $___
- ------------------- ---------------- ------------------ ----------------- --------------- -----------------
3 years $___ $___ $___ $___ $___
- ------------------- ---------------- ------------------ ----------------- --------------- -----------------
5 years $___ $___ $___ $___ $___
- ------------------- ---------------- ------------------ ----------------- --------------- -----------------
10 years $___ $___ $___ $___ $___
- ------------------- ---------------- ------------------ ----------------- --------------- -----------------
</TABLE>

SHAREHOLDER SERVICES

This section describes how to do business with the Funds and shareholder
services that are available.

- ------------------------------------------------------------------------------
HOW TO REACH THE FUNDS
- ------------------------------------------------------------------------------

BY TELEPHONE Call collect at (914) 697-8000

BY MAIL The Diversified Investors Funds Group
(or The Diversified Investors Strategic Allocation Funds)
4 Manhattanville Road
Purchase, New York 10577

- ------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------------

Shares of the Funds are available to individual and institutional investors.
You may be able to establish new accounts in a Fund under certain retirement
plans. These plans include, but are not limited to, 401(k), 403(b) and 457

<PAGE>

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. Plans may
prohibit purchases or redemptions of Fund shares during certain circumstances,
such as a change in plan administrators. Consult your plan administrator for
more information.

Each Fund's shares are sold without a sales charge. Purchases may be made
Monday through Friday, except on certain holidays. Shares are purchased at net
asset value (NAV) next calculated after your investment is received in good
order and is accepted by the Distributor.

You may purchase shares in a Fund through the Distributor directly or by
authorizing your retirement 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 retirement plan. Plans which include fixed investment options
may restrict or prohibit the purchase of shares of certain of the Funds with
monies withdrawn from those fixed investment options.

The minimum initial investment is $5,000. The Funds are currently waiving this
minimum. There is no minimum for subsequent investments. A retirement plan may,
however, impose minimum investment requirements. Plan participants should
consult their plan administrator.

Each 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 THE PRICE OF YOUR SHARES IS CALCULATED
- ------------------------------------------------------------------------------

Each Fund calculates its NAV every day that the New York Stock Exchange is open
for trading. This calculation is made at the close of regular trading on the
Exchange, normally 4 p.m. Eastern time.

- ------------------------------------------------------------------------------
What is NAV?

NAV refers to a Fund's NET ASSET VALUE. Net asset value per share is calculated
by dividing the total value of a Fund's securities and other assets, less
liabilities, by the total number of shares outstanding. Securities are valued
at market value or, if a market quotation is not readily available, at their
fair value determined in good faith under procedures established by and under
the supervision of the Trustees. Foreign securities are valued based on
quotations from the primary market in which they are traded, and converted from
the local currency into U.S. dollars using current exchange rates. Money market
instruments maturing within sixty days are valued at amortized cost, which
approximates market value.
- ------------------------------------------------------------------------------

Please note that trading may take place in foreign securities held by a Fund on
days when the Fund is not open for business. As a result, the Fund's NAV may
change on days on which it is not possible to purchase or sell shares of the
Fund.

- ------------------------------------------------------------------------------
HOW TO SELL SHARES
- ------------------------------------------------------------------------------

On any business day, you may sell (redeem) all or a portion of your shares.
Your transaction will be processed at the applicable Fund's NAV 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.

<PAGE>

Participants in a retirement 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 Funds' 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. To make exchanges, please follow the procedures
for sales described above under "How to Sell Shares." Plan participants should
contact their plan administrator. Exchanges are processed at NAV the next time
it is calculated after your exchange request in good order is received and
approved. The Funds reserve 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 Funds intend to pay redemption proceeds in cash, but reserve the right to
pay in kind by delivery of investment securities equal to the redemption price.
In these cases, you might incur brokerage costs in converting the securities to
cash.

Your right 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.

INVOLUNTARY REDEMPTIONS

If your account balance falls below $1,000 as a result of a redemption or
exchange, your account may be closed and the proceeds sent to you. You will be
given notice before this occurs.

<PAGE>

TELEPHONE TRANSACTIONS

You may initiate redemptions and exchanges by telephone. The Funds and their
agents will not be responsible for any losses resulting from unauthorized
transactions when procedures designed to verify the identity of the caller are
followed. During periods of unusual market activity, severe weather or other
abnormal circumstances, it may be difficult for you to reach a representative
of the Funds by telephone. In that case, 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 your Fund(s), 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 Funds will send you a confirmation statement quarterly reflecting regularly
scheduled contributions and other transactions affecting your account. The
Funds will also send you a confirmation statement after every transaction that
affects 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 Funds will be mailed semiannually to all
shareholders.

DIVIDENDS AND DISTRIBUTIONS

As a Fund shareholder, you are entitled to your share of a Fund's net income
and gains on its investments. Each Fund passes substantially all of its
earnings along to its investors as distributions. When a Fund earns dividends
from stocks and interest from bonds and other debt securities and distributes
those earnings to shareholders, it is called a DIVIDEND DISTRIBUTION. A Fund
realizes capital gains when it sells securities for a higher price than it
paid. When these gains are distributed to shareholders, it is called a CAPITAL
GAIN DISTRIBUTION.

Shares begin accruing dividends on the day following the date of purchase, and
accrue dividends through and including the day of sale. Each Fund pays
substantially all of its net income from dividends and interest to its
shareholders of record annually on or about the last day of DECEMBER.

Each Fund distributes any net realized short-term and long-term capital gains
to its shareholders at least annually, in December. Each 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.

You will receive all distributions from a Fund in additional shares of the same
Fund issued at NAV.

<PAGE>

TAX MATTERS

This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation, and the status of your
account under state and local laws.

Shareholders are usually required to pay federal income tax on any dividends or
other distributions received, whether the distributions are in cash or in Fund
shares. Shareholders may also be required to pay state and local taxes.
Distributions from interest on U.S. government obligations may not be exempt
from state and local taxes.

Generally, distributions from a Fund's net investment income and short-term
capital gains will be taxed as ordinary income. A portion of distributions from
net investment income may be eligible for the dividends-received deduction
available to corporations. Distributions from long-term capital gains will, for
tax purposes, be treated as long-term capital gains no matter how long you have
held your Fund shares. The tax you pay on a given capital gains distribution
generally depends on how long the Fund has held the portfolio securities it
sold, and not on how long you have held your Fund shares.

For each Fund, Fund distributions will reduce the distributing Fund's NAV per
share. As a result, shareholders who buy shares just before a 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.

If you sell your shares of a Fund, or exchange them for shares of another Fund,
you generally will be subject to tax on any taxable gain. Your taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange).

Retirement plans that invest in a Fund and satisfy applicable Internal Revenue
Code conditions generally will not be subject to federal tax liability on
either distributions from a Fund or redemptions of shares of a Fund.
Participants in these retirement plans will be taxed when they begin taking
distributions from the plan in accordance with Internal Revenue Code rules.

By law, each Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.

Early each year, each Fund will notify its shareholders (other than retirement
plan participants) of the amount and tax status of distributions paid to
shareholders for the preceding year.

MANAGEMENT

- ------------------------------------------------------------------------------
INVESTMENT ADVISERS
- ------------------------------------------------------------------------------

FUNDS OTHER THAN THE STOCK INDEX FUND

Diversified Investment Advisors, Inc. is the investment adviser of each of the
underlying mutual funds (called Portfolios) in which these Funds invest.
Diversified also advises each Strategic Allocation Fund. 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.

<PAGE>

Diversified has selected subadvisers for each Portfolio. Diversified provides
general supervision of the subadvisers and also manages the assets of each
Strategic Allocation Fund, subject in each case to policies set by the
Trustees. Diversified's investment management decisions are made by a committee
of Diversified's personnel.

The subadvisers make the day-to-day investment decisions for the Portfolios and
place the purchase and sale orders for securities transactions, subject in all
cases to the general supervision of Diversified. The subadvisers are listed
below; see "Subadvisers."

STOCK INDEX FUND

Diversified is the investment adviser of the Stock Index Fund, providing
general supervision of the Fund's investment in its underlying Portfolio,
subject to policies set by the Trustees.

Barclays Global Fund Advisors is the investment adviser of the Portfolio in
which the Stock Index Fund invests. Barclays Global Fund Advisors was formed in
[__________] and is a direct subsidiary of Barclays Global Investors, N.A.
(which, in turn, is an indirect subsidiary of Barclays Bank PLC). Barclays
Global Fund Advisors has been a registered investment adviser since
[__________]. The principal business address of Barclays Global Fund Advisors
is 45 Fremont Street, San Francisco, California 94105. Investment management
decisions of Barclays Global Fund Advisors are made by committee and not by
managers individually.

- ------------------------------------------------------------------------------
SUBADVISERS
- ------------------------------------------------------------------------------

MONEY MARKET FUND
INTERMEDIATE GOVERNMENT BOND FUND
GOVERNMENT/CORPORATE BOND FUND

Capital Management Group. Capital Management Group is a division of 1740
Advisers, Inc., a wholly-owned subsidiary of The MONY Group, Inc. Capital
Management Group has been a registered investment adviser since 1971. The
address of Capital Management Group is 1740 Broadway, New York, New York 10019.

The following representatives of Capital Management Group are primarily
responsible for the day-to-day management of the Funds indicated:

Money Market Fund: David E. Wheeler, Investment Vice President and Portfolio
Manager, has been responsible for the day-to-day management of the Money Market
Fund since 1997. Mr. Wheeler has been employed by Capital Management Group
since 1994 and was employed at AIG Investment Advisers prior to 1994.

Intermediate Government Bond Fund and Government/Corporate Bond Fund: Gregory
Staples, Vice President, has been responsible for the day-to-day management of
both the Intermediate Government Bond Fund and the Government/Corporate Bond
Fund since 1994. Mr. Staples has been employed by Capital Management Group
since 1987.

HIGH QUALITY BOND FUND

Merganser Capital Management Corporation. Merganser was formed in 1984 and is
owned by certain of its employees. Merganser has been a registered investment
adviser since 1984. The principal business address of Merganser is One
Cambridge Center, Cambridge, Massachusetts 02142.

<PAGE>

Investment management decisions of Merganser are made by committee and not by
managers individually.

HIGH-YIELD BOND FUND

Delaware Investment Advisers. Delaware Investment Advisers is a series of
Delaware Management Business Trust. Delaware is indirectly owned by Lincoln
National Corp. Delaware and its predecessors have been registered investment
advisers since 1952. The principal business address of Delaware Investment
Advisers is 2005 Market Street, Philadelphia, Pennsylvania 19103.

Investment management decisions of Delaware Investment Advisers are made by
committee and not by managers individually.

BALANCED FUND

Institutional Capital Corporation. Institutional Capital was formed in January
of 1970 and is owned by certain of its employees. Institutional Capital has
been a registered investment adviser since 1975. The principal business address
of Institutional Capital is 225 West Wacker Drive, Chicago, Illinois 60606.

Investment management decisions of Institutional Capital are made by committee
and not by managers individually.

EQUITY INCOME FUND

Asset Management Group. Asset Management Group is a division of 1740 Advisers,
Inc., which is a wholly-owned subsidiary of The MONY Group, Inc. Asset
Management Group has been a registered investment adviser since 1971. The
address of Asset Management Group is 1740 Broadway, New York, New York 10019.

Investment management decisions at Asset Management Group are made by committee
and not by managers individually.

EQUITY VALUE FUND

Ark Asset Management Co., Inc. Ark was formed in August of 1989 and is owned by
Ark Asset Holdings, Inc. Ark Asset Holdings, Inc. is owned by Ark employees.
Ark has been a registered investment adviser since 1989. The principal address
of Ark is 125 Broad Street, New York, New York 10004.

Investment management decisions of Ark are made by committee and not by
managers individually.

GROWTH & INCOME FUND

Putnam Advisory Company, Inc. Putnam was formed in 1937 and is owned by Marsh &
McLennon Companies, Inc. Putnam has been a registered investment adviser since
1968. The principal address of Putnam is One Post Office Square, Boston,
Massachusetts 02109.

The investment management decisions of Putnam are made by committee and not by
managers individually.

<PAGE>

EQUITY GROWTH FUND

Dresdner RCM Global Investors, LLC
Montag & Caldwell Incorporated

Dresdner RCM Global Investors, LLC was established in 1996, when Dresdner Bank
acquired RCM Capital Management, LLC. Dresdner RCM has been a registered
investment adviser since 1972. The principal address of Dresdner RCM is Four
Embarcadero Center, Suite 2900, San Francisco, California 94111.

Investment management decisions of Dresdner RCM are made by committee and not
by managers individually.

Montag & Caldwell Incorporated was established in 1945 and is owned by
Alleghany Corporation. Montag & Caldwell has been a registered investment
adviser since 1968. The principal address of Montag & Caldwell is 3343
Peachtree Road, N.E., Suite 1100, Atlanta, Georgia 30326-1022.

Investment management decisions of Montag & Caldwell are made by committee and
not by managers individually.

SPECIAL EQUITY FUND

Ark Asset Management Co., Inc.
Goldman Sachs Asset Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.

Ark Asset Management Co., Inc. was formed in August of 1989 and is owned by Ark
Asset Holdings, Inc. Ark Asset Holdings, Inc. is owned by Ark employees. Ark
has been a registered investment adviser since 1989. The principal address of
Ark is 125 Broad Street, New York, New York 10004.

Ronald Wiener, Vice Chairman and Portfolio Manager, has been primarily
responsible for the day-to-day management of the Special Equity Fund on behalf
of Ark since 1994. Mr. Wiener has been employed by Ark since 1986 and was
employed at Lehman Management Co., Inc. as Senior Vice President and Senior
Portfolio Manager, Specialty Growth Equity Management, from 1986 to 1989.

Goldman Sachs Asset Management is a separate operating division of Goldman,
Sachs & Co., a worldwide investment banking firm, with numerous offices
throughout the United States and globally. Goldman, Sachs & Co. acquired
Liberty Investment Management, Inc., the predecessor firm, in January of 1997.
Liberty had been a registered investment adviser since 1994. Liberty's
predecessor, Eagle Asset Management, Inc., had been a registered investment
adviser since 1984. The business address of the Goldman Sachs branch office
responsible for managing the Fund is 2502 Rocky Point Drive, Suite 500, Tampa,
Florida 33607.

Herbert E. Ehlers, Managing Director, and Timothy G. Ebright, Portfolio
Manager, have been responsible for the day-to-day management of the Special
Equity Fund on behalf of Liberty, and now Goldman Sachs, since 1994. Mr. Ehlers
and Mr. Ebright have been employed by Goldman Sachs since 1997. Before that,
they were employed by Liberty Investment Management, Inc. or its predecessor,
Eagle Asset Management, Inc., since 1980 and 1988, respectively.

<PAGE>

Pilgrim Baxter & Associates, Ltd. was formed in [1995] and is owned by United
Asset Management, Inc., a publicly-owned corporation. Pilgrim has been a
registered investment adviser since 1982. The principal business address of
Pilgrim is 825 Duportail Road, Wayne, Pennsylvania 19087.

Gary Pilgrim, Chief Executive Officer, has been responsible for the day-to-day
management of the Special Equity Fund on behalf of Pilgrim since September
1998. He is a founding partner of Pilgrim and has been employed by Pilgrim
since [___________].

Westport Asset Management, Inc. was formed in 1983 and is owned by certain of
its employees. Westport has been a registered investment adviser since 1983.
The principal business address of Westport is 253 Riverside Avenue, Westport,
Connecticut 06880.

Andrew Knuth, Portfolio Manager, has been responsible for the day-to day
management of the Special Equity Fund on behalf of Westport since 1994 and has
been employed by Westport since 1983.

AGGRESSIVE EQUITY FUND

McKinley Capital Management, Inc. McKinley was formed in March of 1991 and is
owned by Robert B. Gillam. McKinley has been a registered investment adviser
since 1991. The principal business address of McKinley is 3301 C Street,
Anchorage, Alaska 99503.

Robert B. Gillam, Portfolio Manager, has been responsible for the day-to-day
supervision of management of the Aggressive Equity Fund since 1996 and has been
employed by McKinley since 1991.

INTERNATIONAL EQUITY FUND

Capital Guardian Trust Company. Capital Guardian was formed in 1968 and is
owned by Capital Group International, Inc., which is owned by The Capital Group
Companies, Inc. Capital Guardian is a trust company regulated by the California
Department of Financial Institutions. The principal address of Capital Guardian
is 333 South Hope Street, Los Angeles, California 90071.

Capital Guardian uses a system of multiple portfolio managers. Within
investment guidelines, each portfolio manager makes individual decisions as to
company, country, industry, timing and percentage based on extensive field
research and direct company contact.

<PAGE>

- ------------------------------------------------------------------------------
ADVISORY FEES
- ------------------------------------------------------------------------------

For the fiscal year ended December 31, 1998, Diversified and the subadvisers
received aggregate advisory fees (after waivers) equal to that percentage of
each Fund's average daily net assets set forth in the table below. The Stock
Index Fund commenced operations in 1999.

- ------------------------------------------------------------- --------------
Money Market Fund 0.25%
- ------------------------------------------------------------- --------------
High Quality Bond Fund 0.35%
- ------------------------------------------------------------- --------------
Intermediate Government Bond Fund 0.35%
- ------------------------------------------------------------- --------------
Government/Corporate Bond Fund 0.35%
- ------------------------------------------------------------- --------------
High-Yield Bond Fund 0.55%
- ------------------------------------------------------------- --------------
Balanced Fund 0.45%
- ------------------------------------------------------------- --------------
Equity Income Fund 0.45%
- ------------------------------------------------------------- --------------
Equity Value Fund 0.57%
- ------------------------------------------------------------- --------------
Growth & Income Fund 0.60%
- ------------------------------------------------------------- --------------
Equity Growth Fund 0.62%
- ------------------------------------------------------------- --------------
Special Equity Fund 0.80%
- ------------------------------------------------------------- --------------
Aggressive Equity Fund 0.97%
- ------------------------------------------------------------- --------------
International Equity Fund 0.75%
- ------------------------------------------------------------- --------------
Short Horizon Strategic Allocation Fund 0.20%
- ------------------------------------------------------------- --------------
Short/Intermediate Horizon Strategic Allocation Fund 0.20%
- ------------------------------------------------------------- --------------
Intermediate Horizon Strategic Allocation Fund 0.20%
- ------------------------------------------------------------- --------------
Intermediate/Long Horizon Strategic Allocation Fund 0.20%
- ------------------------------------------------------------- --------------
Long Horizon Strategic Allocation Fund 0.20%
- ------------------------------------------------------------- --------------

MORE ABOUT THE FUNDS

Each Fund's goal and principal investment strategies, and the main risks of
investing in the Funds, are summarized at the beginning of this prospectus.
More information on investment strategies, investments and risks appears in
this section. These are the strategies that, in the opinion of each Fund's
advisers, are most likely to be important in trying to achieve the Fund's
investment goal. There can, of course, be no assurance that any Fund will
achieve its investment goal. Except as noted below, each Fund's goal and
strategies may be changed without shareholder approval.

Please note that each Fund may also use strategies and invest in securities
that are not described below but which are described in the Statement of
Additional Information. Of course, the Fund's advisers may decide, as a matter
of investment strategy, not to use the investments and investment techniques
described below and in the Statement of Additional Information at any
particular time.

Each Fund (other than the Stock Index Fund) is actively managed, and the
portfolio managers may trade securities frequently, resulting, from time to
time, in an annual portfolio turnover rate of over 100%. Trading securities may
produce capital gains, which are taxable when distributed to investors with
non-tax-sheltered accounts. Active trading may also increase the amount of
commissions or mark-ups to broker-dealers that the Fund pays when it buys and
sells securities. The "Financial Highlights" section of this prospectus shows
each Fund's historical portfolio turnover rate.

<PAGE>

instruments, and may not be pursuing its investment goal. These investments may
result in a lower yield than would be available from investments with a lower
quality or longer term. In addition, the International Equity Fund may invest
in foreign currencies.

- -----------------------------------------------------------------------------
What are Money Market Instruments?

A MONEY MARKET INSTRUMENT is a short-term IOU issued by banks or other
corporations, the U.S. or a foreign government or state or local governments.
Money market instruments have maturity dates of 13 months or less. Money market
instruments may include CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES, VARIABLE
RATE DEMAND NOTES (where the interest rate is reset periodically and the holder
may demand payment from the issuer at any time), FIXED-TERM OBLIGATIONS,
COMMERCIAL PAPER (short term unsecured debt of corporations), ASSET-BACKED
SECURITIES (which are backed by pools of accounts receivable such as car
installment loans or credit card receivables) and REPURCHASE AGREEMENTS. In a
repurchase agreement, the seller sells a security and agrees to buy it back at
a later date (usually within seven days) and at a higher price, which reflects
an agreed upon interest rate.
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------
MONEY MARKET FUND
- -----------------------------------------------------------------------------

This Fund invests primarily in high quality, short-term money market
instruments. The Fund may invest more than 25% of its total assets in
obligations of U.S. banks.

The Fund complies with industry regulations applicable to money market funds.
These regulations require that the Fund's investments mature or be deemed to
mature within 397 days from the date of acquisition, that the average maturity
of the Fund's investments (on a dollar-weighted basis) be ninety days or less,
and that all of the Fund's investments be in U.S. dollar-denominated high
quality securities which have been determined by the Fund to present minimal
credit risks. Investments in high quality, short-term instruments may, in many
circumstances, result in a lower yield than would be available from investments
in instruments with a lower quality or a longer term.

The Fund does not maintain a stable net asset value of $1.00 per share and does
not declare dividends on a daily basis (many money market funds do). Undeclared
investment income, or a default on a portfolio security, may cause the Fund's
net asset value to fluctuate.

If the Fund concentrates in bank obligations, the Fund will be particularly
sensitive to adverse events affecting U.S. banks. Banks are sensitive to
changes in money market and general economic conditions, as well as decisions
by regulators that can affect banks' profitability.

The Fund's portfolio managers employ a "top down" approach when selecting
securities for the Fund. This means that the portfolio managers look first at
broad market factors, and, on the basis of those market factors, choose certain
sectors or industries in which to invest. The managers then look at individual
companies within those sectors or industries. In general, the portfolio
managers attempt to temper income volatility in the Fund by investing
significant portions of the portfolio in securities with maturities of thirty
to forty-five days.

<PAGE>

- -----------------------------------------------------------------------------
BOND FUNDS
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------
What is a Bond?

A BOND, which is also called a DEBT SECURITY or DEBT OBLIGATION, is like a
loan. The issuer of the bond, which could be the U.S. government, a
corporation, or a city or state, borrows money from investors and agrees to pay
back the loan amount (the PRINCIPAL) on a certain date (the MATURITY DATE).
Usually, the issuer also agrees to pay interest on certain dates during the
period of the loan. Some bonds, such as ZERO COUPON BONDS, do not pay interest,
but instead pay back more at maturity than the original loan. Most bonds pay a
fixed rate of interest (or income), but some bonds' interest rates may change
based on market or other factors.
- -----------------------------------------------------------------------------

The HIGH QUALITY BOND FUND invests primarily in high quality debt securities
with short and intermediate maturities, such as corporate bonds and notes,
mortgage-backed and asset-backed securities, U.S. Treasury and government
agency obligations, securities of foreign issuers (such as Yankee bonds) and
repurchase agreements. Under normal circumstances the Fund invests at least 65%
of its assets in these securities.

The dollar-weighted average maturity of the Fund generally does not exceed
three years under normal circumstances. Individual securities held by the Fund
may have longer maturities. Short-term debt securities generally fluctuate less
in price, and have lower yields, than longer-term securities of comparable
quality. The Fund's duration generally is between one and three years. Duration
is a way of measuring the Fund's overall sensitivity to interest rate
fluctuations. The net asset value of a fund with a shorter duration will
generally fluctuate less in response to interest rate changes than that of a
fund with a longer duration.

The Fund considers securities rated A or better by Standard & Poor's or A3 or
better by Moody's (and securities that the Fund's advisers believe are of
comparable quality) to be high quality. Ratings are described in the Statement
of Additional Information. Investments in higher quality instruments may result
in a lower yield than would be available from investments in lower quality
instruments.

- -----------------------------------------------------------------------------
What are U.S. Government Obligations?

U.S. GOVERNMENT OBLIGATIONS are securities that are issued or guaranteed as to
principal and interest by the U.S. government or one of its agencies or
instrumentalities. Some obligations of U.S. government agencies and
instrumentalities are supported by the "full faith and credit" of the United
States, others by the right of the issuer to borrow from the U.S. Treasury, and
others only by the credit of the agency or instrumentality. U.S. government
obligations generally have less credit risk than other debt obligations.
- -----------------------------------------------------------------------------

The INTERMEDIATE GOVERNMENT BOND FUND invests primarily in U.S. government
obligations and repurchase agreements secured by U.S. government obligations.
Under normal circumstances the Fund invests at least 65% of its assets in these
securities. U.S. government obligations are issued or guaranteed as to
principal and interest by the U.S. government or one of its agencies or
instrumentalities. Some obligations of U.S. government agencies and
instrumentalities are supported by the "full faith and credit" of the United
States, others by the right of the issuer to borrow from the U.S. Treasury, and
others only by the credit of the agency or instrumentality.

The Fund also invests in mortgage-backed securities backed by pass-through
certificates issued or guaranteed by the U.S. government or its agencies, and
in other high quality, short-term obligations (such as corporate bonds and

<PAGE>

notes, bank obligations and repurchase agreements). ALTHOUGH THE FUND INVESTS
IN U.S. GOVERNMENT OBLIGATIONS, AN INVESTMENT IN THE FUND IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT.

The Fund's duration generally is between one and five years, and its
dollar-weighted average maturity generally is between three and five years (and
does not exceed ten years) under normal circumstances. The Fund may invest in
securities with maturities of as much as thirty years.

- -----------------------------------------------------------------------------
What are Mortgage-Backed Securities?

Home mortgage loans are typically grouped together into "POOLS" by banks and
other lending institutions. Interests in these pools (called MORTGAGE-BACKED
SECURITIES) are then sold to investors, allowing the bank or other lending
institution to have more money available to loan to home buyers. When
homeowners make interest and principal payments, these payments are passed on
to the investors in the pool. Most of these pools are guaranteed by U.S.
government agencies or by government sponsored private corporations --
familiarly called "GINNIE MAES", "FANNIE MAES" and "FREDDIE MACS."
Mortgaged-backed securities include COLLATERALIZED MORTGAGE OBLIGATIONS, or
CMOs.
- -----------------------------------------------------------------------------

The GOVERNMENT/CORPORATE BOND FUND invests primarily in investment grade debt
securities and U.S. government obligations (including mortgage-backed
securities guaranteed by U.S. government agencies and instrumentalities). Under
normal circumstances the Fund invests at least 65% of its assets in U.S.
government securities and corporate bonds.

The Fund also invests in high quality, short-term obligations and repurchase
agreements, and in securities of foreign issuers.

Investment grade debt securities carry a rating of at least BBB from Standard &
Poor's or Baa from Moody's or are of comparable quality as determined by the
Fund's advisers.

The Fund's duration generally is between three and ten years, and its
dollar-weighted average maturity generally is between five and fifteen years
(and does not exceed thirty years) under normal circumstances. While
longer-term securities tend to have higher yields than short-term securities,
they are subject to greater price fluctuations as a result of interest rate
changes and other factors.

The portfolio managers of the HIGH QUALITY BOND FUND, INTERMEDIATE GOVERNMENT
BOND FUND and GOVERNMENT/CORPORATE BOND FUND use "top down" economic analysis
to determine economic outlook and to forecast interest rates. They also analyze
the yield curve under multiple market conditions in making maturity and
duration decisions for portfolio securities. The managers of the High Quality
Bond Fund and the Intermediate Government Bond Fund then attempt to select
securities that will enable each Fund to maintain a stable share price and at
the same time to achieve a high level of income. The managers of the
Government/Corporate Bond Fund attempt to select securities that will enable
the Fund to achieve a high total return.

The HIGH-YIELD BOND FUND invests primarily in high-yielding, income producing
debt securities, such as debentures and notes, and in convertible and
non-convertible preferred stocks. Under normal circumstances the Fund invests
at least 65% of its assets in these securities.

<PAGE>

and risk of default in the payment of interest and principal, than higher-rated
securities. Lower-rated debt securities usually are defined as securities rated
BB or lower by Standard & Poor's or Ba or lower by Moody's. See the Statement
of Additional Information for more information on ratings.

Lower quality securities tend to be issued by companies that are less secure
financially. In addition, in the event these companies have financial
difficulty, banks or other senior lenders have priority in being repaid. As a
result, when selecting investments, the Fund's advisers rely on fundamental
research to identify companies with adequate cash flows, attractive valuations
and strong management teams.

In selecting investments for the Fund, the Fund's advisers exclude securities
that are in default or that pay interest in the form of additional debt
securities. As a result, the Fund may be somewhat more conservative than
certain other high-yield funds. The Fund is designed to outperform more
aggressive high-yield funds in high-yield market downturns, and its performance
may lag these funds in high-yield market upturns. Of course, it is possible
that the Fund will not perform as expected.

The Fund may also invest in equity securities, including common stocks,
warrants and rights. Investors should carefully consider the special risks of
investing in this Fund.

* * *

Fixed income securities may bear fixed, fixed and contingent, or variable rates
of interest and may involve equity features, such as conversion or exchange
rights or warrants for the acquisition of stock of the same or a different
issuer or participations based on revenues, sales or profits. Changes in
interest rates will generally cause bigger changes in prices of longer-term
securities than in prices of shorter-term securities.

Each of the Bond Funds may use derivatives solely for hedging purposes. These
may include options, futures, swaps and forward currency contracts.

Each of the Bond Funds will use short-term debt and money market instruments,
including short-term U.S. government and corporate obligations, commercial
paper, bank obligations and repurchase agreements, in varying amounts for
liquidity and cash management, and as a risk management tool.

- -----------------------------------------------------------------------------
BALANCED FUND
- -----------------------------------------------------------------------------

The Balanced Fund seeks to meet its investment objective by maintaining a
broadly diversified portfolio of stocks and bonds. The Fund invests in a
managed mix of equity and debt securities of predominately U.S.
issuers.

The Fund's equity securities include common and preferred stocks (and their
equivalents such as American Depositary Receipts). The Fund's debt securities
include corporate bonds, notes and commercial paper, U.S.
government securities and bank obligations.

The Fund varies the percentage of assets invested in any one type of security
in accordance with its advisers' interpretation of economic and market
conditions, fiscal and monetary policy, and underlying securities values. Under
normal circumstances, the Fund invests approximately 60% of its assets in
equity securities and approximately 40% of its assets in fixed income
securities (investing at least 25% in fixed-income senior securities, including
debt securities and preferred stock).

In selecting common stocks, the Fund emphasizes established companies. Most of
the Fund's long-term debt investments are investment grade (rated BBB or better
by Standard & Poor's or Baa or better by Moody's) or considered by the Fund's
advisers to be of comparable quality.

<PAGE>

The Fund's advisers use a value-oriented strategy in managing the Fund's equity
securities; the advisers emphasize U.S. government obligations in the Fund's
fixed income portfolio. The advisers attempt to shift between these asset
classes to maximize participation in rising markets and to preserve capital in
declining markets.

- -----------------------------------------------------------------------------
What is Value Investing?

Funds that use a VALUE-ORIENTED STRATEGY search for those companies that appear
to be trading below their true worth. These funds use research to identify
potential investments, examining such features as a firm's financial condition,
business prospects, competitive position and business strategy. They look for
companies that appear likely to come back into favor with investors, for
reasons that may range from good prospective earnings or strong management
teams to new products or services.
- -----------------------------------------------------------------------------

The Fund may use derivatives solely for hedging purposes. These may include
options, futures, swaps and forward currency contracts.

The Fund will use short-term debt and money market instruments, including
short-term U.S. government and corporate obligations, commercial paper, bank
obligations and repurchase agreements, in varying amounts for liquidity and
cash management, and as a risk management tool.

- -----------------------------------------------------------------------------
STOCK FUNDS
- -----------------------------------------------------------------------------

The STOCK INDEX FUND seeks its objective by investing in the stocks comprising
the Standard & Poor's 500 Composite Stock Price 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 Fund invests approximately the same percentage of its assets
in each stock as the stock represents in the S&P 500 Index. Under normal market
conditions, the Fund invests at least 90% of its assets in securities
comprising the S&P 500 Index.

The Stock Index Fund 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 Fund's ability to match the investment
performance of the S&P 500 Index may be affected by, among other things, Fund
expenses, the amount of cash and cash equivalents held by the Fund, 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 Fund. The Fund's advisers
regularly monitor the Fund's correlation to the S&P 500 Index. In the unlikely
event that the Fund cannot achieve a correlation of at least 95%, the Fund's
Trustees will consider alternative arrangements.

In the future, the Stock Index Fund 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 Stock Index
Fund may use various investment techniques, such as buying and selling futures
contracts and options, entering into swap agreements and purchasing indexed
securities. The Fund may also lend its portfolio securities. These techniques
may increase the Fund's volatility and may involve a small investment of cash
relative to the magnitude of the risk being taken.

The Stock Index Fund 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 Fund.

<PAGE>

The EQUITY INCOME FUND invests primarily in stocks of companies which, in the
opinion of the Fund's advisers, are fundamentally sound financially and which
pay relatively high dividends on a consistent basis. The Fund emphasizes common
stocks and preferred stocks listed on the New York Stock Exchange and on other
national securities exchanges and, to a lesser extent, stocks that are traded
over-the-counter.

The EQUITY VALUE FUND invests primarily in stocks of companies which, in the
opinion of the Fund's advisers, are trading at low valuations relative to
market and/or historical levels. These stocks tend to have relatively low
price/earnings ratios and/or relatively low price/book value ratios. Low
price/earnings ratios or price/book value ratios mean that the stock is less
expensive than average relative to the company's earnings or book value,
respectively. The Fund emphasizes common stocks and preferred stocks listed on
the New York Stock Exchange and on other national securities exchanges and, to
a lesser extent, stocks that are traded over-the-counter.

The portfolio managers of the EQUITY INCOME FUND and EQUITY VALUE FUND use a
"bottom up" value-oriented approach in selecting investments for the Funds.
When portfolio managers use a "bottom up" approach, they look primarily at
individual companies against the context of broader market factors. A
value-oriented approach attempts to identify companies that appear to be
trading below their true worth. The managers of the Equity Income Fund also
attempt to select securities with relatively high current yields.

The GROWTH & INCOME FUND invests primarily in securities selected in large part
for their potential to generate long-term capital appreciation. The Fund also
may select securities based on their potential to generate current income. The
Fund emphasizes securities of growing, financially stable and undervalued
companies. This Fund attempts to achieve more capital appreciation than an
income fund and less price volatility than a growth fund. The Fund emphasizes
common stocks and preferred stocks listed on the New York Stock Exchange and on
other national securities exchanges and, to a lesser extent, stocks that are
traded over-the-counter.

The EQUITY GROWTH FUND invests primarily in common stocks of companies with
potential for above average growth in earnings and dividends. Under normal
circumstances the Fund invests at least 65% of its assets in equity securities.
The Fund emphasizes common and preferred stocks listed on the New York Stock
Exchange and other national securities exchanges and, to a lesser extent,
stocks that are traded over-the-counter. The Fund uses multiple managers to
control the volatility often associated with growth funds.

- -----------------------------------------------------------------------------
What is Growth Investing?

Funds that use a GROWTH-ORIENTED STRATEGY search for companies growing faster
than the economy as a whole. Often, these companies are in expanding
industries, such as computers and pharmaceuticals. While the size of a company
is not necessarily a factor in determining whether its stock is suitable for a
growth fund, a growth strategy that focuses on larger companies is generally
considered less aggressive than one that focuses on smaller companies. Many
stocks owned by growth funds do not pay dividends and can be more volatile than
other types of investments. As a result, growth funds are appropriate for
investors who have long-term investment horizons.
- -----------------------------------------------------------------------------

<PAGE>

investments in companies of this size. The Fund utilizes two growth-style
managers and two value-oriented managers. The Fund is designed to provide an
opportunity for higher returns relative to the broad small cap market during
periods when a particular style is out of favor.

Investing in securities of smaller companies involves special risks. Investors
should carefully consider the risks of investing in the Special Equity Fund.

The AGGRESSIVE EQUITY FUND invests primarily in high growth companies without
regard to market capitalization. The Fund seeks to invest in companies which
present an opportunity for significant increases in earnings, revenue and/or
value, without consideration for current income, to achieve excess market
returns relative to its benchmark, the Russell 2000 Growth Index. The Fund also
emphasizes stocks of companies with consistent, above-average and accelerating
profitability and growth. The investment characteristics, such as
price-to-earnings ratio, of the Fund can undergo major changes at any time. As
a result, the value of shares of this Fund may be very volatile.

The portfolio managers of the GROWTH & INCOME FUND, EQUITY GROWTH FUND, SPECIAL
EQUITY FUND and AGGRESSIVE EQUITY FUND use a "bottom up" approach in selecting
securities, relying primarily on stock selection against the context of broader
market factors. These managers look for companies that they believe are in
dynamic high growth sectors of the world economy, and that are thought to have
dominant or strong competitive positions within their sectors. They also look
for companies that are expected to have strong earnings growth potential.

The INTERNATIONAL EQUITY FUND invests primarily in foreign securities, meaning
securities of issuers that, in the opinion of the Fund's advisers, have their
principal activities outside the United States or whose securities are traded
primarily outside the United States. Under normal circumstances the Fund
invests at least 65% of its assets in equity securities of issuers in at least
three countries other than the United States. The Fund invests most of its
assets in securities of issuers in Canada, Australia and developed countries in
Europe and the Far East. The Fund may invest up to 10% of its assets in
securities of issuers in developing countries. The Fund may also invest in any
type or quality of debt securities, including lower-rated securities, and may
enter into forward currency exchange contracts solely for hedging purposes.

The portfolio managers of the International Equity Fund use a "top down"
approach, first performing a broad economic analysis, the identifying countries
and sectors that are believed to have the potential to outperform the market
over a particular holding period, and then selecting individual securities. In
selecting individual securities, the portfolio managers use a value-oriented
strategy to identify companies that appear to be trading below their true
worth.

* * *

Each of the Stock Funds may use derivatives solely for hedging purposes. These
may include options, futures, swaps and forward currency contracts.

Each of the Stock Funds may also invest in bonds and short-term obligations as
well as securities convertible into common stocks, preferred stocks, debt
securities and short-term obligations. These Funds will use short-term
obligations and money market securities, including commercial paper, bank
obligations and repurchase agreements, in varying amounts for liquidity and
cash management, and as a risk management tool.

- -----------------------------------------------------------------------------
STRATEGIC ALLOCATION FUNDS
- -----------------------------------------------------------------------------

Each Strategic Allocation Fund invests in a combination of the Funds (other
than the Balanced Fund and the Stock Index Fund) described above in this

<PAGE>

prospectus. This policy of investing in the other Funds is a fundamental policy
that cannot be changed without shareholder approval. Diversified selects the
combination and amount of underlying Funds based on each Strategic Allocation
Fund's investment objective.

The following chart shows target allocations for the assets of each Strategic
Allocation Fund among the Money Market, Bond and Stock Funds. These allocations
reflect Diversified's present strategy for asset allocation during normal
market conditions, and may be changed at any time. Under severe market
conditions, Diversified also may allocate the assets of each Strategic
Allocation Fund without limit to the Money Market Fund. For specific
allocations to the underlying Funds, see Appendix A.

- -----------------------------------------------------------------------------
RISKS
- -----------------------------------------------------------------------------

Investing in a mutual fund involves risk. Before investing, you should consider
the risks you will assume. Certain of these risks are described below. More
information about risks appears in the Funds' Statement of Additional
Information. The value of a Fund's shares will change daily as the value of its
underlying securities change. This means that your Fund shares may be worth
more or less when you sell them than when you bought them. You may receive
little or no return on your investment in the Funds. You may lose money if you
invest in the Funds.

Please remember that the risks of investing in each Fund depend on the
securities that the Fund holds and the investment strategies it uses. For
example, Funds investing more of their assets in fixed income securities may be
more susceptible to interest rate risk and credit risk than Funds investing
more of their assets in equity securities. Similarly, Funds investing more of
their assets in equity securities may be susceptible to greater price
volatility under certain circumstances than Funds investing more of their
assets in fixed income securities. Please remember that an investment in the
Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.

MARKET RISK. This is the risk that the prices of securities will rise or fall
due to changing economic, political or market conditions, or due to a company's
individual situation. Historically, equity securities have been more volatile
than debt securities in response to market risk.

INTEREST RATE RISK. In general, the prices of debt securities rise when
interest rates fall, and fall when interest rates rise. Longer term obligations
are usually more sensitive to interest rate changes than shorter term
obligations. A change in interest rates could cause a Fund's share price to go
down. Generally, the longer the average maturity of the bonds in a Fund, the
more the Fund's share price will fluctuate in response to interest rate
changes.

<PAGE>

CREDIT RISK. Some issuers may not make payments on debt securities held by a
Fund, causing a loss. Or, an issuer may suffer adverse changes in its financial
condition that could lower the credit quality of a security, leading to greater
volatility in the price of the security and in shares of a Fund. A change in
the quality rating of a bond or other security can also affect the security's
liquidity and make it more difficult for a Fund to sell. The lower quality debt
securities in which the Funds may invest are more susceptible to these problems
than higher quality obligations. Investments held by the High-Yield Bond Fund
will be particularly susceptible to credit risk. U.S. government securities are
generally considered not to be subject to credit risk.

GROWTH SECURITIES. Growth securities typically are quite sensitive to market
movements because their market prices tend to reflect future expectations. When
it appears those expectations will not be met, the prices of growth securities
typically fall. The success of a Fund's investment in growth securities depends
largely on the Fund's advisers' skill in assessing the growth potential of the
companies that issued the securities. In addition, a Fund investing in growth
securities may underperform certain other stock funds (those emphasizing value
stocks, for example) during periods when growth stocks are out of favor.

SMALLER COMPANIES. The securities of smaller capitalization companies may have
more risks than those of larger, more seasoned companies. They may be
particularly susceptible to market downturns because of limited product lines,
markets, distribution channels or financial and management resources. Also,
there may be less publicly available information about small cap companies.
Investments in small cap companies may be in anticipation of future products or
services to be provided by the companies. If those products or services are
delayed, the prices of the securities of the companies may drop. Sometimes, the
prices of the securities of smaller capitalized companies rise and fall based
on investor perception rather than economics. Securities of small cap companies
may be thinly traded, making their disposition more difficult. For all these
reasons, the prices of the securities of small cap companies may be more
volatile, causing a Fund's share price to be volatile. Funds that invest a
higher percentage of their assets in small cap stocks are generally more
volatile than funds investing a higher percentage of their assets in larger,
more established companies. Investments held by the Special Equity Fund are
likely to be particularly susceptible to the risks of small cap companies.

FOREIGN SECURITIES. Each Fund may invest a portion of its assets in foreign
securities. The International Equity Fund will invest a substantial portion of
its assets in foreign securities. Investing in foreign securities involves
risks in addition to those of investing in U.S. securities, including 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
foreign issuers and markets are subject.

o These risks may include expropriation of assets, confiscatory
taxation, withholding taxes on dividends and interest paid on Fund
investments, currency exchange controls and other limitations on the
use or transfer of Fund assets and political or social instability.

o Foreign 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.

o Foreign markets may be less liquid and more volatile than U.S.
markets. Rapid increases in money supply may result in speculative
investing, contributing to volatility. Also, equity securities may
trade at price-earnings multiples that are higher than those of
comparable U.S. companies, and that may not be sustainable. As a
result, there may be rapid changes in the value of foreign
securities.

o Foreign markets may offer less protection to investors. Enforcing
legal rights may be difficult, costly and slow. There may be special
problems enforcing claims against foreign governments.

<PAGE>

o Since foreign securities often trade in currencies other than the
U.S. dollar, changes in currency exchange rates will affect a Fund's
net asset value, the value of dividends and interest earned, and
gains and losses realized on the sale of securities. An increase in
the U.S. dollar relative to these other currencies will adversely
affect the value of the Fund. In addition, some foreign currency
values may be volatile and there is the possibility of governmental
controls on currency exchanges or governmental intervention in
currency markets. Controls or intervention could limit or prevent a
Fund from realizing value in U.S. dollars from its investment in
foreign securities.

o The International Equity Fund may invest in issuers located in
emerging, or developing, markets.

o Emerging or developing countries are generally defined as
countries in the initial stages of their industrialization
cycles with low per capita income.

o All of the risks of investing in foreign securities are
heightened by investing in developing countries.

o The markets of developing countries have been more volatile than
the markets of developed countries with more mature economies.
These markets often have provided higher rates of return, and
greater risks, to investors, but they also may provide lower
rates of return or negative returns, for extended periods.

PREPAYMENT RISK. The issuers of debt securities held by a Fund may be able to
prepay principal due on the securities, particularly during periods of
declining interest rates. The Fund may not be able to reinvest that principal
at attractive rates, reducing income to the Fund. On the other hand, rising
interest rates may cause prepayments to occur at slower than expected rates.
This effectively lengthens the maturities of the affected securities, making
them more sensitive to interest rate changes and the Fund's share price more
volatile. Mortgage-backed securities are particularly susceptible to prepayment
risk and their prices may be volatile.

SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURITIES. Convertible securities,
which are debt securities that may be converted into stock, are subject to the
market risk of stocks, and, like other debt securities, are also subject to
interest rate risk and the credit risk of their issuers. Call provisions may
allow the issuer to repay the debt before it matures.

DERIVATIVES. Each Fund may, but is not required to, engage in certain
investment strategies involving derivatives (such as options, futures, swaps
and forward currency contracts). These investment strategies may be employed
only in connection with hedging activities such as the following:

o protecting against a decline in value of a Fund's current or
anticipated securities holdings;

o as a substitute for buying or selling portfolio holdings; and

o seeking to generate income to offset expenses or increase return.

A hedge is designed to neutralize a loss on a portfolio position with a gain in
the hedge position. A properly executed hedge will result in a loss in the
portfolio position being offset by a gain in the hedge position, or vice versa.
However, the market movement of a hedge may not be of the same magnitude as the
market movement of the hedged position. The success or failure of a hedging
transaction will depend on the advisers' ability to predict movements in the

<PAGE>

hedge, the investment being hedged and the market in general (and the
correlation between these factors). Derivatives may not always be available on
terms that make economic sense (for example, they may be too costly), and, when
used, their transaction costs and premiums may adversely affect Fund
performance. The ability to use derivatives to hedge may also be restricted by
limits established by securities and commodities exchanges and by tax
considerations.

STRATEGIC ALLOCATION FUNDS. Each Strategic Allocation Fund invests solely in
the underlying Funds, as a matter of fundamental policy. As a result, each
Strategic Allocation Fund's performance is directly related to the performance
of the underlying Funds, and investors in the Strategic Allocation Funds are
subject to all of the risks associated with investments in the underlying
Funds.

YEAR 2000 RISK. The Funds could be adversely affected if the computer systems
used by the Funds or their service providers are not programmed to accurately
process information on or after January 1, 2000. Diversified's owner, AEGON,
has adopted and has in place a Year 2000 Assessment and Planning 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
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 Funds, 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.

GENERAL INFORMATION

DISTRIBUTION ARRANGEMENTS. Diversified Investors Securities Corp., Four
Manhattanville Road, Purchase, New York 10577, is the distributor of shares of
each of the Money Market, Bond, Balanced and Stock Funds. Under a Distribution
Plan which has been adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, each Fund (other than the Strategic Allocation Funds) 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.

- -----------------------------------------------------------------------------
What are Distribution (12b-1) Fees?

DISTRIBUTION FEES, also called 12B-1 FEES, are fees that are deducted from Fund
assets and are used to compensate those financial professionals who sell Fund
shares and provide ongoing services to shareholders and to pay other marketing
and advertising expenses. Because you pay these fees during the whole period
that you own the shares, over time, you may pay more than if you had paid other
types of sales charges.
- -----------------------------------------------------------------------------

INVESTMENT STRUCTURE. Each Fund (except for the Strategic Allocation Funds)
invests in securities through an underlying mutual fund having the same
investment goal and strategies. A Fund may stop investing in its underlying
mutual fund at any time, and will do so if the Fund's Trustees believe that to
be in the best interests of the Fund's shareholders. The Fund could then invest

<PAGE>

in another mutual fund or pooled investment vehicle or invest directly in
securities. If a Fund were to stop investing in its underlying mutual fund, the
Fund could receive securities from the underlying mutual fund 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.

BROKERAGE TRANSACTIONS. Each Fund's advisers may use brokers or dealers for
Fund transactions who also provide brokerage and research services to the Fund
or other accounts over which the advisers exercise investment discretion. A
Fund may "pay up" for brokerage services, meaning that it is authorized to pay
a broker or dealer who provides these brokerage and research services a
commission for executing a portfolio transaction which is higher than the
commission another broker or dealer would have charged. However, a Fund will
"pay up" only if the Fund's advisers determine in good faith that the higher
commission is reasonable in relation to the brokerage and research services
provided, viewed in terms of either the particular transaction or all of the
accounts over which the advisers exercise investment discretion.

SHARE CLASSES. Each of the Money Market, High-Yield Bond, Equity Value, Equity
Growth, Special Equity and International Equity Funds currently offers three
classes of shares. Diversified Class shares are described in this prospectus.
The other two classes of shares, Stephens Premium Class shares and Stephens
Institutional Class shares, may have different expenses, which may affect the
performance of those shares. Call the Distributor at (914) 697-8000 for more
information.

ADDITIONAL PERFORMANCE INFORMATION

Fund performance may be quoted in advertising, shareholder reports and other
communications. Each 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 a Fund will be calculated by dividing net investment
income per share during a recent 30-day period (7-day period for the Money
Market Fund) 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 a 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 each Fund will fluctuate over time.
All performance information is historical and should not be considered a
representation of what an investment in the Funds may earn in the future.

- -----------------------------------------------------------------------------
TOTAL RETURNS
- -----------------------------------------------------------------------------

Before the Funds and Portfolios commenced operations, the assets that were
contributed to certain Portfolios were managed in Pooled Separate Accounts of
The MONY Group, Inc. (formerly The Mutual Life Insurance Company of New York).
The total return for each Fund (other than the High-Yield Bond, Stock Index,
Equity Value and Aggressive Equity Funds) for any period which includes a
period prior to the contribution by the Pooled Separate Account will reflect
the performance of the Pooled Separate Account. Pooled Separate Account
performance will only be included, however, from the date that the Pooled
Separate Account adopted investment objectives, policies and practices and was
managed in a manner that are in all material respects the same as for the
applicable Fund. This Pooled Separate Account performance will be adjusted to
reflect current Fund fees and expenses, after waivers and reimbursements. The
Pooled Separate Accounts were not registered under the Investment Company Act
of 1940 and were not subject to certain investment restrictions imposed by that

<PAGE>

Act or the Internal Revenue Code. If the Pooled Separate Accounts had been so
registered, investment performance might have been adversely affected.

As of December 31, 1998, the average annual total returns for each of the
following Funds, including the Pooled Separate Accounts referred to above, were
as follows:

<S> <C> <C> <C> <C> <C> <C>
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
FOR THE
PERIOD
FOR THE FOR THE FOR THE FOR THE SINCE
YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
INCEPTION ENDED ENDED ENDED ENDED THROUGH
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
MONEY MARKET 11/78 4.91% 4.92% 4.74% 5.17% 7.52%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
HIGH QUALITY BOND 7/90 6.08% 5.23% 5.56% -- 6.46%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
INTERMEDIATE GOVERNMENT BOND 7/90 6.47% 5.64% 5.56% -- 7.06%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
GOVERNMENT/CORPORATE BOND 1/78 7.13% 5.98% 6.69% 8.76% 8.74%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
HIGH-YIELD BOND 8/95 2.20% 8.11% -- -- 8.87%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
BALANCED 12/92 11.81% 15.59% 14.47% -- 14.23%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
EQUITY INCOME 1/78 12.47% 19.69% 18.10% 14.92% 14.49%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
EQUITY VALUE 4/96 10.79% -- -- -- 15.67%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
GROWTH & INCOME 1/86 34.63% 29.98% 22.87% 17.41% 16.50%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
EQUITY GROWTH 3/93 35.97% 26.60% 20.20% -- 18.37%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
SPECIAL EQUITY 1/86 3.10% 17.72% 18.21% 16.75% 15.78%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
AGGRESSIVE EQUITY 4/96 41.79% -- -- -- 18.09%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
INTERNATIONAL EQUITY 12/92 10.47% 11.11% 10.16% -- 13.50%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
SHORT HORIZON STRATEGIC
ALLOCATION FUND 6/96 6.35% -- -- -- 7.70%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
SHORT/INTERMEDIATE HORIZON
STRATEGIC ALLOCATION FUND 4/98 -- -- -- --
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
INTERMEDIATE HORIZON
STRATEGIC ALLOCATION FUND 6/96 12.31% -- -- -- 12.75%
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
INTERMEDIATE/LONG HORIZON
STRATEGIC ALLOCATION FUND 6/96 14.05 -- -- -- 15.86
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
LONG HORIZON STRATEGIC
ALLOCATION FUND 4/98 -- -- -- --
- ----------------------------- ---------- ---------- ---------- --------- ---------- ----------
</TABLE>

The Stock Index Fund began operations on March 1, 1999 and therefore had no
performance history as of December 31, 1998.

- ------------------------------------------------------------------------------
COMPOSITE PERFORMANCE OF DIVERSIFIED AND THE SUBADVISERS
- ------------------------------------------------------------------------------

The table below shows total returns calculated for all private accounts and
collective investment vehicles managed by Diversified during the periods
indicated with investment objectives, policies and restrictions substantially
similar to the Strategic Allocation Funds and which have been managed as these
Funds are managed. Diversified has managed these collective investment vehicles
since October 1, 1992. The returns are adjusted to assume that all charges,
expenses and fees of the Strategic Allocation Funds which are presently in
effect were deducted during the periods.

<PAGE>

The average annual total returns at December 31, 1998 for all such private
accounts and collective investment vehicles managed by Diversified, adjusted to
assume that all charges, expenses and fees presently in effect were deducted,
are as follows:

<S> <C> <C> <C> <C> <C>
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
INCEPTION SINCE
DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
SHORT HORIZON
STRATEGIC ALLOCATION FUND 10/92 6.35% 6.30% 6.58% 6.70%
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
SHORT/INTERMEDIATE HORIZON
STRATEGIC ALLOCATION FUND
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
INTERMEDIATE HORIZON
STRATEGIC ALLOCATION FUND 10/92 12.31% 11.74% 10.72% 10.95%
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
INTERMEDIATE/LONG HORIZON
STRATEGIC ALLOCATION FUND 10/92 14.05% 16.24% 14.59% 14.87%
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
LONG HORIZON
STRATEGIC ALLOCATION FUND
- ------------------------------------------ ----------- --------- ---------- ---------- -----------
</TABLE>

See Appendix C for the past performance of the subadvisers to the High-Yield
Bond Fund, Equity Value Fund, Growth & Income Fund, Equity Growth Fund and
Aggressive Equity Fund in managing substantially similar accounts.

FINANCIAL HIGHLIGHTS

This table is intended to help you understand each Fund's performance and other
financial information for the fiscal periods indicated. "Total return" shows
how much your investment in a Fund would have increased or decreased during
each period, assuming you had reinvested all dividends and distributions. These
financial statements and notes have been audited by PricewaterhouseCoopers LLP,
independent accountants for the Fund, whose report is included in the Fund's
annual report.

[To be added by amendment.]

<PAGE>
APPENDIX A

STRATEGIC ALLOCATION FUNDS

Under normal circumstances, the Strategic Allocation Funds are allocated among
the Money Market, Bond and Stock Funds as follows:

<S> <C> <C> <C> <C> <C> <C>
--------------------- ---------------------- ----------------------
SHORT HORIZON SHORT/INTERMEDIATE INTERMEDIATE HORIZON
STRATEGIC HORIZON STRATEGIC STRATEGIC
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
---------- ---------- ----------- ---------- ---------- -----------
TARGET TARGET TARGET
NORMAL WITHIN NORMAL WITHIN NORMAL WITHIN
RANGE RANGE RANGE RANGE RANGE RANGE
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Money Market 0-20% 10% 0-10% 0% 0-10% 0%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
High Quality Bond 10-30% 20% 5-25% 15% 0-20% 10%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Intermediate Government Bond 10-30% 20% 0-15% 5% 0-15% 5%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Government/Corporate Bond 20-40% 30% 25-45% 35% 15-35% 25%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
High-Yield Bond 0-20% 10% 5-25% 15% 0-20% 10%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Equity Income 0-20% 10% 0-10% 4% 0-10% 5%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Equity Value N/A N/A 0-10% 5% 0-20% 10%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Growth & Income N/A N/A 0-10% 4% 0-10% 5%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Equity Growth N/A N/A 0-10% 5% 0-20% 10%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Special Equity N/A N/A 0-10% 6% 0-20% 10%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Aggressive Equity N/A N/A 0-10% 2% 0-10% 3%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
International Equity N/A N/A 0-10% 4% 0-15% 7%
- ---------------------------- ---------- ---------- ----------- ---------- ---------- -----------
</TABLE>
--------------------- ----------------------
INTERMEDIATE/LONG LONG HORIZON
HORIZON STRATEGIC STRATEGIC
ALLOCATION FUND ALLOCATION FUND
--------------------- ----------------------
---------- ---------- ---------- -----------
TARGET TARGET
NORMAL WITHIN NORMAL WITHIN
RANGE RANGE RANGE RANGE
---------- ---------- ---------- -----------
- ---------------------------- ---------- ---------- ---------- -----------
Money Market 0-10% 0% 0-10% 0%
- ---------------------------- ---------- ---------- ---------- -----------
High Quality Bond 0-10% 5% 0-10% 0%
- ---------------------------- ---------- ---------- ---------- -----------
Intermediate Government Bond 0-10% 5% 0-10% 0%
- ---------------------------- ---------- ---------- ---------- -----------
Government/Corporate Bond 0-20% 12% 0-10% 0%
- ---------------------------- ---------- ---------- ---------- -----------
High-Yield Bond 0-15% 8% 0-10% 0%
- ---------------------------- ---------- ---------- ---------- -----------
Equity Income 0-15% 5% 0-15% 5%
- ---------------------------- ---------- ---------- ---------- -----------
Equity Value 5-25% 16% 15-35% 25%
- ---------------------------- ---------- ---------- ---------- -----------
Growth & Income 0-15% 5% 0-15% 5%
- ---------------------------- ---------- ---------- ---------- -----------
Equity Growth 5-25% 16% 15-35% 25%
- ---------------------------- ---------- ---------- ---------- -----------
Special Equity 0-20% 14% 10-30% 20%
- ---------------------------- ---------- ---------- ---------- -----------
Aggressive Equity 0-10% 4% 0-15% 5%
- ---------------------------- ---------- ---------- ---------- -----------
International Equity 0-20% 10% 5-25% 15%
- ---------------------------- ---------- ---------- ---------- -----------
<PAGE>
APPENDIX B

INSTRUCTIONS FOR PURCHASES AND SALES FROM THE DISTRIBUTOR

PURCHASES

Initial and subsequent purchases may be made by check or wire transfer. Checks
should be in U.S. dollars and drawn on a U.S. bank. Checks for shares of the
Money Market, Bond, Balanced and Stock Funds should be made payable to The
Diversified Investors Funds Group and mailed to:

The Diversified Investors Funds Group
4 Manhattanville Road
Purchase, New York 10577

Checks for shares of the Strategic Allocation Funds should be made payable to
The Diversified Investors Strategic Allocation Funds and mailed to

The Diversified Investors Strategic Allocation Funds
4 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 fifteen days of such purchase, the redemption proceeds will be paid only
when the check clears.

If you would like to purchase shares in a 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 (in case of a purchase of a
Money Market, Bond, Balanced or Stock Fund) or The Diversified Investors
Strategic Allocation Funds (in case of a purchase of a Strategic Allocation
Fund), in each case at the address above.

SALES (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 any of the Money Market, Bond, Balanced or Stock
Funds should be mailed to The Diversified Investors Funds Group at:

The Diversified Investors Fund Group
Four Manhattanville Road
Purchase, New York 10577

Requests to redeem shares in any of the Strategic Allocation Funds should be
mailed to The Diversified Investors Strategic Allocation Funds at:

The Diversified Investors Strategic Allocation Funds
Four Manhattanville Road
Purchase, New York 10577

You may redeem shares by telephone if you authorized such redemptions on your
Account Application. The Funds reserve 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>

APPENDIX C

COMPOSITE PERFORMANCE OF SUBADVISERS

The following table sets forth the average annual total returns of all
institutional private accounts and collective investment vehicles managed by
the subadvisers to the High-Yield Bond Fund, Equity Value Fund, Growth & Income
Fund, Equity Growth Fund and Aggressive Equity Fund with investment objectives,
policies and restrictions substantially similar to each Fund and which have
been managed in the same way that the underlying Portfolio in which each Fund
invests is managed. The data is provided to illustrate the past performances of
the subadvisers in managing substantially similar accounts as measured against
specified market indices and does not represent the performance of the Funds.
Investors should not consider this performance data as an indication of future
performance of the Funds or the subadvisers.

The institutional private accounts and collective investment vehicles that are
included in the subadvisers' composites are not subject to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Funds or the Portfolios by the Investment Company Act of 1940 or the
Internal Revenue Code. The performance results of the subadvisers' composites
could have been adversely affected if the institutional private accounts and
collective investment vehicles included in the composites had been regulated as
investment companies under the federal securities law. The investment results
of the subadvisers' composites presented below are unaudited and are not
intended to predict or suggest the returns that might be experienced by the
Funds or an individual investing in any of the Funds. The use of a methodology
different from that used to calculate the performance data set forth below
could result in different performance data.

The subadvisers' composite performance data shown below were calculated in
accordance with recommended standards of the Association for Investment
Management and Research, retroactively applied to all time periods. All returns
presented were calculated on a total return basis and include all dividends and
interest, accrued income and realized and unrealized gains and losses, and
deductions for brokerage commissions and execution costs. Returns for each
period are adjusted to assume that all charges, expenses and fees of each Fund
and its corresponding Portfolio which are presently in effect were deducted
during such periods. All returns are for the periods ended on December 31,
1998.

- ------------------------------------- ---------- --------- ---------- ---------- ----------
ARK ASSET MANAGEMENT CO., INC.,
SUBADVISER TO EQUITY VALUE FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(4)...... 10.58% 18.56% 18.37% 16.57% 16.95%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(5)............. 15.63% 23.89% 20.85% 17.39% 17.46%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(6).................. 13.58% 20.25% 17.82% 15.54% 15.46%
- ------------------------------------- ---------- --------- ---------- ---------- ----------

</TABLE>

<PAGE>

- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(8)............. 28.75% 28.39% 24.14% 19.22% 19.22%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(6).................. 13.58% 20.25% 17.82% 15.54% 15.54%
- ------------------------------------- ---------- --------- ---------- ---------- ----------

- ------------------------------------- ---------- --------- ---------- ---------- ----------
DRESDNER RCM GLOBAL INVESTORS, LLC,
SUBADVISER TO EQUITY GROWTH FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(9)...... 46.21% 32.15% 25.56% 20.11% 18.21%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(10)............ 38.71% 30.62% 25.70% 20.56% 22.84%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(11)................. 25.69% 23.66% 19.82% 17.21% 15.71%
- ------------------------------------- ---------- --------- ---------- ---------- ----------

- ------------------------------------- ---------- --------- ---------- ---------- ----------
MONTAG & CALDWElL INCORPORATED
SUBADVISER TO EQUITY GROWTH FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(12)..... 28.60% 30.76% 25.13% 20.98% 19.13%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(10)............ 38.71% 30.62% 25.70% 20.56% 22.84%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(11)................. 25.69% 23.66% 19.82% 17.21% 15.71%
- ------------------------------------- ---------- --------- ---------- ---------- ----------

- ------------------------------------- ---------- --------- ---------- ---------- ----------
MCKINLEY CAPITAL MANAGEMENT, INC.,
SUBADVISER TO AGGRESSIVE EQUITY FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(13)..... 42.98% 21.12% 18.88% -- 26.49%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(14)............ 1.23% 8.35% 10.22% -- 4.24%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(15)................. 13.92% 15.89% 15.20% -- 19.46%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
</TABLE>

_________________
(1) Commencement of investment operations is January 1, 1980 for the
subadviser's composite.

(2) The Benchmark Index is the Salomon Brothers High-Yield Market Index.
The Salomon Brothers High-Yield Market Index tracks the performance of below
investment-grade corporate bonds issued in the United States. The index
includes cashpay and deferred-interest bonds that are public, have a fixed
coupon and are non convertible. To enter the index, bonds must also have $50
million or more in face value outstanding, one year or more left to maturity,
and one high-yield rating by Moody's or Standard & Poor's. The index excludes
bonds of bankrupt issuers.

(3) The Peer Group is the Lipper High Current Yield Fund Index. The Lipper
High Current Yield Fund Index tracks the net performance of mutual funds which,
as determined by Lipper Analytical Services, Inc., are managed in accordance
with an investment objective defined as follows: "Aim at high (relative)
current yield from fixed income securities. No quality or maturity
restrictions. Tend to invest in lower grade debt issues".

(4) Commencement of investment operations is April 1, 1985 for the
subadviser's composite.

(5) The Benchmark Index is the Russell 1000 Value Index. The Russell 1000
Value Index measures the performance of those companies included in the Russell
1000 Index with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000 Index measures the performance of the one thousand largest
U.S. companies based on total market capitalization, which represents
approximately 88% of the investable U.S. equity market.

(6) The Peer Group is the Lipper Growth & Income Fund Index. The Lipper
Growth & Income Fund Index tracks the net performance of mutual funds which, as
determined by Lipper Analytical Services, Inc., are managed in accordance with
an investment objective defined as follows: "A fund which combines a growth of
earnings orientation and an income requirement for level and/or rising
dividends".

(7) Commencement of investment operations is January 1, 1989 for the
subadviser's composite.

(8) The Benchmark Index is the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500"). The S&P 500 is used as a broad-based measurement of
changes in domestic stock market conditions and is based on the average
performance of 500 widely held common stocks traded in the United States.

(9) Commencement of investment operations is January 1, 1986 for the
subadviser's composite.

(10) The Benchmark Index is the Russell 1000 Growth Index. The Russell
1000 Growth Index measures the performance of those companies included in the
Russell 1000 Index with higher price-to-book ratios and higher forecasted
growth values. The Russell 1000 Index measures the performance of the one
thousand smallest companies in the Russell 3000 Index, which represents
approximately __% of the total market capitalization of the Russell 3000 Index
(the Russell 3000 Index represents approximately 98% of the investable U.S.
equity market).

<PAGE>

(11) The Peer Group is the Lipper Growth Fund Index. The Lipper Growth
Fund Index tracks the net performance of mutual funds which, as determined by
Lipper Analytical Services, Inc., are managed in accordance with an investment
objective defined as follows: "A fund which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the earnings
of the stocks represented in the major unmanaged stock indices".

(12) Commencement of investment operations is January 1, 1986 for the
subadviser's composite.

(13) Commencement of investment operations is October 1, 1990 for the
subadviser's composite.

(14) The Benchmark Index is the Russell 2000 Growth Index. The Russell
2000 Growth Index measures the performance of those companies included in the
Russell 2000 Index with higher price-to-book ratios and higher forecasted
growth values. The Russell 2000 Index measures the performance of the two
thousand smallest companies in the Russell 3000 Index, which represents
approximately 10% of the total market capitalization of the Russell 3000 Index
(the Russell 3000 Index represents approximately 98% of the investable U.S.
equity market).

(15) The Peer Group is the Lipper Mid Cap Fund Index. The Lipper Mid Cap
Fund Index tracks the net performance of mutual funds which, as determined by
Lipper Analytical Services, Inc., are managed in accordance with an investment
objective defined as follows: "A fund which limits its investments to companies
with average market capitalizations between $800 million and the average market
capitalization of the Wilshire 4500 Index".

<PAGE>

The Statement of Additional Information (SAI) provides more details about the
Funds and their policies. The SAI is incorporated by reference into this
prospectus and is legally part of it.

Additional information about each Fund's investments is available in the Funds'
Annual and Semi-Annual Reports to Shareholders. In the Funds' Annual Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance.

The Annual and Semi-Annual Reports for the Funds list their portfolio holdings
and describe their performance.

To obtain free copies of the SAI and the Annual and Semi-Annual Reports or to
make other inquiries, please call toll-free ______________.

The SAI is also available from the Securities and Exchange Commission. You can
find it on the SEC Internet site at http://www.sec.gov. Information about the
Fund (including the SAI) can also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. You can get information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can receive
copies of this information by sending your request and a duplicating fee to the
SEC's Public Reference Section, Washington, DC 20549-6009.

SEC file numbers: 811-7674
811-07495

<PAGE>
Prospectus

THE DIVERSIFIED INVESTORS FUNDS GROUP

Diversified Investment Advisors, Inc.,
investment adviser

STEPHENS PREMIUM CLASS SHARES

MONEY MARKET FUND
Diversified Investors Money Market Fund

BOND FUNDS
Stephens Intermediate Bond Fund
Diversified Investors High-Yield Bond Fund

STOCK FUNDS
Diversified Investors Equity Value Fund
Diversified Investors Equity Growth Fund
Diversified Investors Special Equity Fund
Stephens Select Equity Fund
Diversified Investors International Equity Fund

The Securities and Exchange Commission has
not approved or disapproved these securities
or passed upon the accuracy of this prospectus,
and any representation to the contrary
is a criminal offense.

May 3, 1999

<PAGE>

TABLE OF CONTENTS

The Funds at a Glance.........................................................
Money Market Fund.....................................................
Bond Funds............................................................
Stock Funds...........................................................

Shareholder Services..........................................................
How to Reach the Funds................................................
How to Purchase Shares................................................
How the Price of Your Shares is Calculated............................
How to Sell Shares....................................................
Shareholder Services and Policies.....................................

Dividends and Distributions...................................................

Tax Matters...................................................................

Management....................................................................

More About the Funds..........................................................
Money Market Fund.....................................................
Bond Funds............................................................
Stock Funds...........................................................
Risks.................................................................

General Information...........................................................

Additional Performance Information............................................

Financial Highlights..........................................................

Appendix A -- Composite Performance of Subadvisers............................

<PAGE>

THE FUNDS AT A GLANCE

- ------------------------------------------------------------------------------
MONEY MARKET FUND
- ------------------------------------------------------------------------------

DIVERSIFIED INVESTORS MONEY MARKET FUND

THIS SUMMARY BRIEFLY DESCRIBES THE MONEY MARKET FUND AND THE PRINCIPAL RISKS OF
INVESTING IN IT. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

FUND GOAL

The Fund's goal is to provide liquidity and as high a level of income as is
consistent with the preservation of capital.

MAIN INVESTMENT STRATEGIES

MAIN RISKS

Please note that an investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

No Fund, by itself, is a complete investment program.

<PAGE>

FUND PERFORMANCE

The following bar chart and tables can help you evaluate the risks of investing
in the Fund, and how the Fund's returns have varied over time.

o The bar chart shows changes in the Fund's performance from year to year
over the last five calendar years.

o The tables show the Fund's best and worst quarters during the years
covered by the bar chart, and how the Fund's average annual returns for
the periods indicated compare to those of a broad measure of market
performance. Please remember that, unlike the Fund, the market index does
not include the costs of buying and selling securities and other Fund
expenses.

o The Stephens Premium Class shares do not have a full calendar year of
investment returns at the date of this prospectus. The bar chart and
tables below show the performance of the Diversified Class shares of the
Fund. The performance of the Stephens Premium Class shares would have been
somewhat higher because the Stephens Premium Class shares have lower
expenses.

When you consider this information, please remember that the Fund's past
performance is not necessarily an indication of how it will perform in the
future.

TOTAL RETURN
(per calendar year)
1994 1995 1996 1997 1998
[bar chart -- for calendar years 1994
through 1998]
1994............3.45%
1995............5.50%
1996............4.87%
1997............4.98%
1998............4.91%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------------------- ----------------------
- ----------------- ----------- ----------------------
Highest 1.78% June 30, 1995
- ----------------- ----------- ----------------------
Lowest 0.56% March 31, 1994
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ------------------ --------------- -----------------
1 Year 5 Years
- ------------------ --------------- -----------------
Money Market
Fund 4.91% 4.74%
- ------------------ --------------- -----------------
Salomon Bros.
3-Month T-Bill
Index ____% ____%
- ------------------ --------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE MONEY MARKET FUND.

- ------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------- -------------
Maximum Sales Charge (Load) Imposed on Purchases None
- ------------------------------------------------------------- -------------
Maximum Deferred Sales Charge (Load) None
- ------------------------------------------------------------- -------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- ------------------------------------------------------------- -------------
Redemption Fee None
- ------------------------------------------------------------- -------------
Exchange Fee None
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets) as a % of average net assets (1)
- ------------------------------------------------------------------------------
- ---------------------------------------------------------- -------------
Advisory Fee .25%
- ---------------------------------------------------------- -------------
Distribution (12b-1) Fees .18%
- ---------------------------------------------------------- -------------
Other Expenses
- ---------------------------------------------------------- -------------
Administrative Services Fee .30%
- ---------------------------------------------------------- -------------
Miscellaneous Expenses .80%
- ---------------------------------------------------------- -------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.53%*
- ---------------------------------------------------------- -------------
- ------------------------------------------------------------------------------

*BECAUSE SOME OF THE FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE .95%. THESE FEE WAIVERS
AND REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1The Fund invests in securities through an underlying mutual fund. This
table and the example below reflect the expenses of the Fund and that
underlying fund.

EXAMPLE

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of the Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

----------- ------------ ------------ ------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------------ ------------ ------------
$___ $___ $___ $___
----------- ------------ ------------ ------------

<PAGE>

- -----------------------------------------------------------------------------
BOND FUNDS
- -----------------------------------------------------------------------------

STEPHENS INTERMEDIATE BOND FUND
DIVERSIFIED INVESTORS HIGH-YIELD BOND FUND

THIS SUMMARY BRIEFLY DESCRIBES THE BOND FUNDS AND THE PRINCIPAL RISKS OF
INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

INTERMEDIATE BOND FUND The Fund's goal is to generate a high level of current
income consistent with a goal to preserve the value of its
investors' investment.

HIGH-YIELD BOND FUND The Fund's goal is to provide a high level of current
income.
</TABLE>

MAIN INVESTMENT STRATEGIES

INTERMEDIATE BOND FUND

The Intermediate Bond Fund invests in a broad range of fixed income securities,
including U.S. government obligations, foreign government debt securities
(including securities issued by developing countries), and preferred stock and
debt securities issued by U.S. and foreign companies. Under normal
circumstances the Fund invests at least 65% of its assets in these securities.

The Fund's dollar-weighted average maturity generally does not exceed ten years
under normal circumstances.

HIGH-YIELD BOND FUND

MAIN RISKS

o MARKET RISK. This is the risk that the prices of securities will rise
or fall due to changing economic, political or market conditions, or
due to a company's individual situation.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. A change

<PAGE>

in interest rates could cause a Fund's share price to go down.
Generally, the longer the average maturity of the bonds in a Fund,
the more the Fund's share price will fluctuate in response to
interest rate changes.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

Consider investing in the Bond Funds if you are seeking current income.
Consider the INTERMEDIATE BOND FUND if you are seeking a higher level of
current income than is generally available from a shorter-term bond fund and
are willing to accept the greater price fluctuations associated with higher
levels of income. Consider the HIGH-YIELD BOND FUND if you are seeking a higher
level of current income than is generally available from a higher quality bond
fund and are willing to accept significant price volatility and risk of loss.

<PAGE>

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

The following bar chart and tables can help you evaluate the risks of investing
in the High-Yield Bond Fund, and how the Fund's returns have varied over time.
The Intermediate Bond Fund began operations on __________, 1998 and does not
have a full calendar year of investment returns at the date of this prospectus.

o The bar chart shows changes in the High-Yield Bond Fund's performance from
year to year over the last two calendar years.

o The tables show the Fund's best and worst quarters during the years
covered by the bar chart, and how the Fund's average annual returns for
the periods indicated compare to those of a broad measure of market
performance. Please remember that, unlike the Fund, the market index does
not include the costs of buying and selling securities and other Fund
expenses.

o The Stephens Premium Class shares do not have a full calendar year of
investment returns at the date of this prospectus. The bar chart and
tables show the performance of the Diversified Class shares of the Fund.
The performance of the Stephens Premium Class shares would have been
somewhat higher because the Stephens Premium Class shares have lower
expenses.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

HIGH-YIELD BOND FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........12.28%
1998............2.20%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------------------- ----------------------
- ----------------- ----------- ----------------------
Highest 4.87% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -4.76% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp. Bond
Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE BOND FUNDS.

<S> <C> <C>
- --------------------------------------------------- ----------------- -----------------
SHAREHOLDER FEES INTERMEDIATE HIGH-YIELD BOND
(fees paid directly from your investment) BOND FUND FUND
- --------------------------------------------------- ----------------- -----------------
Maximum Sales Charge (Load)
Imposed on Purchases None None
- --------------------------------------------------- ----------------- -----------------
Maximum Deferred Sales Charge (Load) None None
- --------------------------------------------------- ----------------- -----------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None
- --------------------------------------------------- ----------------- -----------------
Redemption Fee None None
- --------------------------------------------------- ----------------- -----------------
Exchange Fee None None
- --------------------------------------------------- ----------------- -----------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
as a % of average net assets
- --------------------------------------------------- ----------------- -----------------
Advisory Fee .10% .55%
- --------------------------------------------------- ----------------- -----------------
Distribution (12b-1) Fees .14% .20%
- --------------------------------------------------- ----------------- -----------------
Other Expenses
- --------------------------------------------------- ----------------- -----------------
Administrative
Services Fee .50% .30%
- --------------------------------------------------- ----------------- -----------------
Miscellaneous Expenses .57% .83%
- --------------------------------------------------- ----------------- -----------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.31%* 1.88%* (1)
- --------------------------------------------------- ----------------- -----------------
</TABLE>

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE .90% FOR THE INTERMEDIATE
BOND FUND AND 1.30% FOR THE HIGH-YIELD BOND FUND. THESE FEE WAIVERS AND
REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1The High-Yield Bond Fund invests in securities through an underlying mutual
fund. This table and the example below reflect the expenses of the Fund and
that underlying fund.

EXAMPLE

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of any Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.
<PAGE>

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

-------------------- --------------------- ---------------------
INTERMEDIATE HIGH-YIELD
BOND FUND BOND FUND
-------------------- --------------------- ---------------------
1 year $___ $___
-------------------- --------------------- ---------------------
3 years $___ $___
-------------------- --------------------- ---------------------
5 years $___ $___
-------------------- --------------------- ---------------------
10 years $___ $___
-------------------- --------------------- ---------------------

- ------------------------------------------------------------------------------
STOCK FUNDS
- ------------------------------------------------------------------------------

DIVERSIFIED INVESTORS EQUITY VALUE FUND
DIVERSIFIED INVESTORS EQUITY GROWTH FUND
DIVERSIFIED INVESTORS SPECIAL EQUITY FUND
STEPHENS SELECT EQUITY FUND
DIVERSIFIED INVESTORS INTERNATIONAL EQUITY FUND

THIS SUMMARY BRIEFLY DESCRIBES THE STOCK FUNDS AND THE PRINCIPAL RISKS OF
INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

EQUITY VALUE FUND The Fund's goal is to provide a high total investment
return through investment primarily in a diversified
portfolio of common stocks.

SPECIAL EQUITY FUND The Fund's goal is to provide a high level of capital
appreciation through investment in a diversified portfolio
of common stocks of small to medium size companies.

SELECT EQUITY FUND The Fund's goal is to provide a high total return.

INTERNATIONAL EQUITY FUND The Fund's goal is to provide a high level of long-term
capital appreciation through investment in a diversified
portfolio of securities of foreign issuers.

</TABLE>

<PAGE>

MAIN INVESTMENT STRATEGIES

EQUITY VALUE FUND

The Equity Value Fund invests primarily in common stocks of companies which, in
the opinion of the Fund's advisers, are trading at low valuations relative to
market and/or historical levels.

EQUITY GROWTH FUND

SPECIAL EQUITY FUND

The Special Equity Fund invests primarily in stocks of small to medium size
companies which, in the opinion of the Fund's advisers, present an opportunity
for significant increases in earnings, revenue and/or value, without
consideration for current income. The Fund emphasizes common stocks of U.S.
companies with market capitalizations of less than $1 billion. The Fund uses
multiple managers to control the volatility often associated with investments
in companies of this size.

SELECT EQUITY FUND

The Select Equity Fund invests primarily in equity securities of U.S.
corporations. Under normal circumstances, the Fund invests at least 65% of its
assets in common stocks and other stocks with equity characteristics such as
preferred stocks, warrants, rights and convertible securities. The Fund
emphasizes securities listed on a securities exchange or traded in
over-the-counter markets, and may invest in certain restricted or unlisted
securities. The Fund may invest in small capitalization issuers.

INTERNATIONAL EQUITY FUND

MAIN RISKS

o GROWTH SECURITIES. Growth securities typically are quite sensitive to
market movements because their market prices tend to reflect future

<PAGE>

expectations. When it appears those expectations will not be met, the
prices of growth securities typically fall. The success of a Fund's
investment in growth securities depends largely on the Fund's
advisers' skill in assessing the growth potential of the companies
that issued the securities.

o SMALLER COMPANIES. The securities of smaller capitalized companies
may have more risks than those of larger, more seasoned companies.
They may be particularly susceptible to market downturns because of
limited product lines, markets, distribution channels or financial
and management resources. Also, there may be less publicly available
information about small cap companies. As a result, their prices may
be more volatile, causing a Fund's share price to be volatile.
Investments held by the Special Equity and Select Equity Funds are
likely to be particularly susceptible to the risks of small cap
companies.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

The International Equity Fund, may invest in issuers located in
emerging, or developing, markets. All of the risks of investing in
foreign securities are heightened by investing in these markets.

o DERIVATIVES. Each Fund may, but is not required to, engage in certain
investment strategies involving derivatives (such as options,
futures, swaps and forward currency contracts). These investment
strategies may be employed only in connection hedging activities. The
success or failure of a hedging transaction will depend on the
advisers' ability to predict movements in the hedge, the investment
being hedged and the market in general (and the correlation between
these factors). Derivatives may not always be available on terms that
make economic sense (for example, they may be too costly), and, when
used, their transaction costs and premiums may adversely affect Fund
performance.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by a Fund, causing a loss. Or, an issuer's financial condition
may deteriorate, lowering the credit quality of a security and
leading to greater volatility in the price of the security and in
shares of the Fund. The prices of lower rated securities often are
more volatile than those of higher rated securities.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

<PAGE>

WHO MAY WANT TO INVEST

Consider investing in the Stock Funds if you are seeking growth from equity
investments, can tolerate substantial changes in the value of your investment
and do not require current income from your investment. The Special Equity Fund
emphasizes securities of small to medium size companies. As a result, the
Special Equity Fund may be particularly volatile.

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

The following bar charts and tables can help you evaluate the risks of
investing in the Stock Funds, and how the Funds' returns have varied over time.

o The bar charts show changes in the Funds' performance from year to year.

o The Stephens Premium Class shares do not have a full calendar year of
investment returns at the date of this prospectus. The bar charts and
tables show the performance of the Diversified Class shares of each Fund.
The performance of the Stephens Premium Class shares would have been
somewhat higher because the Stephens Premium Class shares have lower
expenses.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

EQUITY VALUE FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........21.43%
1998...........10.79%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 13.63% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -9.32% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Value Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

EQUITY GROWTH FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........18.50%
1996...........17.93%
1997...........26.54%
1998...........35.97%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 29.77% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -11.31% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Equity
Growth Fund 35.97% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Growth Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

SPECIAL EQUITY FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........41.50%
1996...........25.76%
1997...........25.82%
1998............3.10%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 20.84% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -20.13% September 30, 1998
- ----------------- ----------- ----------------------

SELECT EQUITY FUND

The Fund began operations on __________, 1998 and does not have a full calendar
year of investment returns at the date of this prospectus.

<PAGE>

INTERNATIONAL EQUITY FUND

TOTAL RETURN
(per calendar year)

1997 1998

[bar chart -- for calendar years 1997
and 1998]

1997............7.74%
1998...........10.47%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 16.67% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -16.75% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year January 18, 1996
- ----------------- ---------------- -----------------
International
Equity Fund 10.47% ____%
- ----------------- ---------------- -----------------
MSCI GDP
EAFE Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THE TABLES BELOW DESCRIBE THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE STOCK FUNDS.

<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
SHAREHOLDER FEES (fees EQUITY EQUITY SPECIAL SELECT INTERNATIONAL
paid directly from your VALUE GROWTH EQUITY EQUITY EQUITY
investment) FUND FUND FUND FUND FUND
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Maximum Sales Charge None None None None None
(Load) Imposed on
Purchases
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Maximum Deferred Sales None None None None None
Charge (Load)
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Maximum Sales Charge None None None None None
(Load) Imposed on
Reinvested Dividends
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Redemption Fee None None None None None
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Exchange Fee None None None None None
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
- ---------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (expenses that
are deducted from Fund
assets) as a % of average
net assets (1)
- ---------------------------------------------------------------------------------------------------
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Advisory Fee .57% .62% .80% .15% .75%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Distribution (12b-1) Fees .25% .06% .07% .09% .15%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Other Expenses
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Administrative
Services Fee .30% .30% .30% .50% .30%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Miscellaneous
Expenses .74% .91% .91% .62% .85%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.86%* 1.89%* 2.08%* 1.36%* 2.05%*
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
- ---------------------------------------------------------------------------------------------------
</TABLE>

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE 1.35% FOR THE EQUITY
VALUE FUND, 1.20% FOR THE EQUITY GROWTH FUND,1.40% FOR THE SPECIAL EQUITY
FUND, .90% FOR THE SELECT EQUITY FUND AND 1.45% FOR THE INTERNATIONAL
EQUITY FUND. THESE FEE WAIVERS AND REIMBURSEMENTS MAY BE REDUCED OR
TERMINATED AT ANY TIME.

1Each Fund (except the Select Equity Fund) invests in securities through
an underlying mutual fund. This table and the example below reflect the
expenses of the Fund and that underlying fund.

<PAGE>

EXAMPLE

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of any Fund's future performance); and
o the Fund's operating expenses shown in the tables above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<S> <C> <C> <C> <C> <C>
- ---------------- ------------- --------------- --------------- --------------- ---------------
EQUITY EQUITY GROWTH SPECIAL SELECT INTERNATIONAL
VALUE FUND FUND EQUITY FUND EQUITY FUND EQUITY FUND
- ---------------- ------------- --------------- --------------- --------------- ---------------
1 year $___ $___ $___ $___ $___
- ---------------- ------------- --------------- --------------- --------------- ---------------
3 years $___ $___ $___ $___ $___
- ---------------- ------------- --------------- --------------- --------------- ---------------
5 years $___ $___ $___ $___ $___
- ---------------- ------------- --------------- --------------- --------------- ---------------
10 years $___ $___ $___ $___ $___
- ---------------- ------------- --------------- --------------- --------------- ---------------
</TABLE>

SHAREHOLDER SERVICES

This section describes how to do business with the Funds and shareholder
services that are available.

- ------------------------------------------------------------------------------
HOW TO REACH THE FUNDS
- ------------------------------------------------------------------------------

BY TELEPHONE Call collect at (501) 374-4361

BY MAIL Stephens Inc.
111 Center Street
Little Rock, AK 72201
Attention: Stephens Capital Management

- ------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------------

Stephens Premium Class shares are available only to investment clients of
Stephens Inc.

Initial and subsequent purchases may be made by check or wire transfer. There
is no minimum initial or subsequent investment amount. Checks should be in U.S.

<PAGE>

dollars and drawn on a U.S. bank. Checks should be made payable to Stephens
Inc. and mailed to the address listed above under "How to Reach the Funds."

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 a Fund by a wire transfer, please call
Stephens Capital Management at (501) 374-4361 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 Stephens Capital Management at
the address above.

Each 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 THE PRICE OF YOUR SHARES IS CALCULATED
- -----------------------------------------------------------------------------

Each Fund calculates its NAV every day that the New York Stock Exchange is open
for trading. This calculation is made at the close of regular trading on the
Exchange, normally 4 p.m. Eastern time.

- -----------------------------------------------------------------------------
What is NAV?

- -----------------------------------------------------------------------------
HOW TO SELL SHARES
- -----------------------------------------------------------------------------

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

<PAGE>

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.

Requests to redeem shares should be mailed to Stephens at the address listed
above under "How to Reach the Funds."

- -----------------------------------------------------------------------------
SHAREHOLDER SERVICES AND POLICIES
- -----------------------------------------------------------------------------

EXCHANGES

On any business day you may exchange all or a portion of your Stephens Premium
Class shares for Stephens Premium Class shares of any other available Fund. To
make exchanges, please call the transfer desk of Stephens Capital Management at
(501) 374-4361. Exchanges are processed at NAV the next time it is calculated
after your exchange request in good order is received and approved. The Funds
reserve 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

TELEPHONE TRANSACTIONS

ADDRESS CHANGES

To change the address on your account contact the transfer desk of Stephens
Capital Management at (501) 374-4361 and send a written request signed by all
account owners. Include the name of your Fund(s), the account numbers(s), the
name(s) on the account and both the old and new addresses.

<PAGE>

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 the transfer desk of Stephens Capital Management at (501)
374-4361.

STATEMENTS AND REPORTS

Financial reports for the Funds will be mailed semiannually to all
shareholders.

DIVIDENDS AND DISTRIBUTIONS

You will receive all distributions from a Fund in additional shares of the same
Fund issued at NAV.

TAX MATTERS

This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation, and the status of your
account under state and local laws.

<PAGE>

tax purposes, be treated as long-term capital gains no matter how long you have
held your Fund shares. The tax you pay on a given capital gains distribution
generally depends on how long the Fund has held the portfolio securities it
sold, and not on how long you have held your Fund shares.

By law, each Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.

Early each year, each Fund will notify its shareholders (other than retirement
plan participants) of the amount and tax status of distributions paid to
shareholders for the preceding year.

MANAGEMENT

- ------------------------------------------------------------------------------
INVESTMENT ADVISER
- ------------------------------------------------------------------------------

Diversified Investment Advisors, Inc. is the investment adviser of each of the
underlying mutual funds in which the Funds invest. Diversified also advises the
Intermediate Bond and Select Equity Funds. 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. Diversified was incorporated in 1992 for the purpose of acting as the
investment adviser to the Funds.

Diversified has selected subadvisers for each underlying mutual fund.
Diversified provides general supervision of the subadvisers and also manages
the assets of the Intermediate Bond and Select Equity Funds, subject in each
case to policies set by the Trustees. Diversified's investment management
decisions are made by a committee of Diversified's personnel.

The subadvisers make the day-to-day investment decisions for the underlying
mutual funds and place the purchase and sale orders for securities
transactions, subject in all cases to the general supervision of Diversified.
The subadvisers are listed below.

- ------------------------------------------------------------------------------
SUBADVISERS
- ------------------------------------------------------------------------------

MONEY MARKET FUND

Capital Management Group. Capital Management Group is a division of 1740
Advisers, Inc., a wholly-owned subsidiary of The MONY Group, Inc. Capital

<PAGE>

Management Group has been a registered investment adviser since 1971. The
address of Capital Management Group is 1740 Broadway, New York, New York 10019.

David E. Wheeler, Investment Vice President and Portfolio Manager, has been
responsible for the day-to-day management of the Money Market Fund since 1997.
Mr. Wheeler has been employed by Capital Management Group since 1994 and was
employed at AIG Investment Advisers prior to 1994.

INTERMEDIATE BOND FUND
AND SELECT EQUITY FUND

Stephens Capital Management. Stephens Capital Management is a division of
Stephens Inc., which is an indirect, wholly-owned subsidiary of Stephens Group,
Inc. The Funds are the first registered investment companies for which Stephens
Capital Management performs investment advisory functions. The principal
business address of Stephens Capital Management is 111 Center Street, Little
Rock, Arkansas 72201.

Investment management decisions of Stephens Capital Management are made by
committee and not by managers individually.

HIGH-YIELD BOND FUND

Investment management decisions of Delaware Investment Advisers are made by
committee and not by managers individually.

EQUITY VALUE FUND

Investment management decisions of Ark are made by committee and not by
managers individually.

EQUITY GROWTH FUND

Dresdner RCM Global Investors, LLC
Montag & Caldwell Incorporated

Investment management decisions of Dresdner RCM are made by committee and not
by managers individually.

<PAGE>

Investment management decisions of Montag & Caldwell are made by committee and
not by managers individually.

SPECIAL EQUITY FUND

Ark Asset Management Co., Inc.
Goldman Sachs Asset Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.

Andrew Knuth, Portfolio Manager, has been responsible for the day-to day
management of the Special Equity Fund on behalf of Westport since 1994 and has
been employed by Westport since 1983.

<PAGE>

INTERNATIONAL EQUITY FUND

- -----------------------------------------------------------------------------
ADVISORY FEES
- -----------------------------------------------------------------------------

- --------------------------------------------------------- ----------------
Money Market Fund 0.25%
- --------------------------------------------------------- ----------------
Intermediate Bond Fund ___%
- --------------------------------------------------------- ----------------
High-Yield Bond Fund 0.55%
- --------------------------------------------------------- ----------------
Equity Value Fund 0.57%
- --------------------------------------------------------- ----------------
Equity Growth Fund 0.62%
- --------------------------------------------------------- ----------------
Special Equity Fund 0.80%
- --------------------------------------------------------- ----------------
Select Equity Fund ___%
- --------------------------------------------------------- ----------------
International Equity Fund 0.75%
- --------------------------------------------------------- ----------------

MORE ABOUT THE FUNDS

Each Fund is actively managed, and the portfolio managers may trade securities
frequently, resulting, from time to time, in an annual portfolio turnover rate
of over 100%. Trading securities may produce capital gains, which are taxable
when distributed to investors with non-tax-sheltered accounts. Active trading
may also increase the amount of commissions or mark-ups to broker-dealers that
the Fund pays when it buys and sells securities. The "Financial Highlights"
section of this prospectus shows each Fund's historical portfolio turnover
rate.

Each Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies in attempting to

<PAGE>

respond to adverse market, political or other conditions. When doing so, the
Fund may invest without limit in high quality money market and other short-term
instruments, and may not be pursuing its investment goal. These investments may
result in a lower yield than would be available from investments with a lower
quality or longer term. In addition, the International Equity Fund may invest
in foreign currencies.

- -----------------------------------------------------------------------------
What are Money Market Instruments?

- -----------------------------------------------------------------------------
MONEY MARKET FUND
- -----------------------------------------------------------------------------

This Fund invests primarily in high quality, short-term money market
instruments. The Fund may invest more than 25% of its total assets in
obligations of U.S. banks.

<PAGE>

- -----------------------------------------------------------------------------
BOND FUNDS
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------
What is a Bond?

The INTERMEDIATE BOND FUND invests in a broad range of fixed income securities,
including U.S. government obligations, foreign government debt securities
(including securities issued by developing countries), and preferred stock and
debt securities issued by U.S. and foreign companies. Under normal
circumstances the Fund invests at least 65% of its assets in these securities.
The Fund's duration generally is between one and five years, and its
dollar-weighted average maturity generally does not exceed ten years under
normal circumstances. Duration is a way of measuring the Fund's overall
sensitivity to interest rate fluctuations. Short-term debt securities generally
fluctuate less in price, and have lower yields, than longer-term securities of
comparable quality.

The portfolio managers of the Intermediate Bond Fund use "top down" economic
analysis to determine economic outlook and to forecast interest rates. They
also analyze the yield curve under multiple market conditions in making
maturity and duration decisions for portfolio securities. The managers then
attempt to select securities that will enable the Fund to maintain a stable
share price and at the same time to achieve a high level of income.

- -----------------------------------------------------------------------------
What are U.S. Government Obligations?

The Fund may invest all or a substantial portion of its assets in lower-rated
debt securities, commonly referred to as "junk bonds." Lower-rated debt
securities offer yields that fluctuate over time but that generally are
superior to the yields offered by higher-rated securities. However, these
securities also involve significantly greater risks, including price volatility
and risk of default in the payment of interest and principal, than higher-rated
securities. Lower-rated debt securities usually are defined as securities rated
BB or lower by Standard & Poor's or Ba or lower by Moody's. See the Statement
of Additional Information for more information on ratings.

Lower quality securities tend to be issued by companies that are less secure
financially. In addition, in the event these companies have financial

<PAGE>

difficulty, banks or other senior lenders have priority in being repaid. As a
result, when selecting investments, the Fund's advisers rely on fundamental
research to identify companies with adequate cash flows, attractive valuations
and strong management teams.

The Fund may also invest in equity securities, including common stocks,
warrants and rights. Investors should carefully consider the special risks of
investing in this Fund.

* * *

Each of the Bond Funds may use derivatives solely for hedging purposes. These
may include options, futures, swaps and forward currency contracts.

- -----------------------------------------------------------------------------
STOCK FUNDS
- -----------------------------------------------------------------------------

The portfolio manager of the Equity Value Fund uses a "bottom up"
value-oriented approach in selecting investments for the Fund. When portfolio
managers use a "bottom up" approach, they look primarily at individual
companies against the context of broader market factors. A value-oriented
approach attempts to identify companies that appear to be trading below their
true worth.

- -----------------------------------------------------------------------------
What is Value Investing?

<PAGE>

- -----------------------------------------------------------------------------
What is Growth Investing?

The SPECIAL EQUITY FUND invests primarily in stocks of small to medium size
companies which, in the opinion of the Fund's advisers, present an opportunity
for significant increases in earnings, revenue and/or value, without
consideration for current income. The Special Equity Fund emphasizes common
stocks of U.S. companies with market capitalizations of less than $1 billion.
The Fund uses multiple managers to control the volatility often associated with
investments in companies of this size. The Fund utilizes two growth-style
managers and two value-oriented managers. The Fund is designed to provide an
opportunity for higher returns relative to the broad small cap market during
periods when a particular style is out of favor. Investing in securities of
smaller companies involves special risks. Investors should carefully consider
the risks of investing in the Special Equity Fund.

The SELECT EQUITY FUND invests primarily in equity securities of U.S.
corporations. Under normal circumstances, at least 65% of the Fund's assets are
invested in common stocks and other securities with equity characteristics such
as preferred stocks, warrants, rights and convertible securities. The Fund may
invest in common stock of any class or series or any similar equity interest,
such as trust or limited partnership interests. These equity investments may or
may not pay dividends and may or may not carry voting rights. The Fund invests
primarily in securities listed on a securities exchange or traded in
over-the-counter markets, and may invest in certain restricted or unlisted
securities. The Fund may invest in small capitalization companies. Investing in
securities of smaller companies involves special risks. Investors should
carefully consider the risks of investing in the Select Equity Fund.

The portfolio managers of the EQUITY GROWTH FUND, SPECIAL EQUITY FUND and
SELECT EQUITY FUND use a "bottom up" approach in selecting securities, relying
primarily on stock selection against the context of broader market factors.
These managers look for companies that they believe are in dynamic high growth
sectors of the world economy, and that are thought to have dominant or strong
competitive positions within their sectors. They also look for companies that
are expected to have strong earnings growth potential.

<PAGE>

type or quality of debt securities, including lower-rated securities, and may
enter into forward currency exchange contracts solely for hedging purposes.

* * *

Each of the Stock Funds may use derivatives solely for hedging purposes. These
may include options, futures, swaps and forward currency contracts.

- -----------------------------------------------------------------------------
RISKS
- -----------------------------------------------------------------------------

<PAGE>

the quality rating of a bond or other security can also affect the security's
liquidity and make it more difficult for a Fund to sell. The lower quality debt
securities in which the Funds may invest are more susceptible to these problems
than higher quality obligations. Investments held by the High-Yield Bond Fund
will be particularly susceptible to credit risk. U.S. government securities are
generally considered not to be subject to credit risk.

o Foreign 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.

o Foreign markets may offer less protection to investors. Enforcing
legal rights may be difficult, costly and slow. There may be special
problems enforcing claims against foreign governments.

<PAGE>

o The International Equity Fund, may invest in issuers located in
emerging, or developing, markets.

o Emerging or developing countries are generally defined as
countries in the initial stages of their industrialization
cycles with low per capita income.

o All of the risks of investing in foreign securities are
heightened by investing in developing countries.

o protecting against a decline in value of a Fund's current or
anticipated securities holdings;

o as a substitute for buying or selling portfolio holdings; and

o seeking to generate income to offset expenses or increase
return.

<PAGE>

transaction will depend on the advisers' ability to predict movements in the
hedge, the investment being hedged and the market in general (and the
correlation between these factors). Derivatives may not always be available on
terms that make economic sense (for example, they may be too costly), and, when
used, their transaction costs and premiums may adversely affect Fund
performance. The ability to use derivatives to hedge may also be restricted by
limits established by securities and commodities exchanges and by tax
considerations.

GENERAL INFORMATION

DISTRIBUTION ARRANGEMENTS. Diversified Investors Securities Corp., Four
Manhattanville Road, Purchase, New York 10577, is the distributor of shares of
each of the Funds. Under a Distribution Plan which has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, each 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.

- -----------------------------------------------------------------------------
What are Distribution (12b-1) Fees?

INVESTMENT STRUCTURE. Each Fund (except for the Intermediate Bond and Select
Equity Funds which invest directly in securities) invests in securities through
an underlying mutual fund having the same investment goal and strategies. A
Fund may stop investing in its underlying mutual fund at any time, and will do
so if the Fund's Trustees believe that to be in the best interests of the
Fund's shareholders. The Fund could then invest in another mutual fund or
pooled investment vehicle or invest directly in securities. If a Fund were to
stop investing in its underlying mutual fund, the Fund could receive securities
from the underlying mutual fund 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.

<PAGE>

SHARE CLASSES. Each of the Funds issues more than one class of shares. Each
Fund issues Stephens Premium Class shares and Stephens Institutional Class
shares. Each Fund other than the Intermediate Bond and Select Equity Funds also
issues Diversified Class shares. Stephens Premium Class shares are described in
this prospectus. The other two classes of shares, Diversified Class shares and
Stephens Institutional Class shares, may have different expenses, which may
affect the performance of those shares. Call the Distributor at (914) 697-8000
for more information.

ADDITIONAL PERFORMANCE INFORMATION

Before the Funds and Portfolios commenced operations, the assets that were
contributed to certain Portfolios were managed in Pooled Separate Accounts of
The MONY Group, Inc. (formerly The Mutual Life Insurance Company of New York).
The total return for each Fund (other than the High-Yield Bond and Equity Value
Funds) for any period which includes a period prior to the contribution by the
Pooled Separate Account will reflect the performance of the Pooled Separate
Account. Pooled Separate Account performance will only be included, however,
from the date that the Pooled Separate Account adopted investment objectives,
policies and practices and was managed in a manner that are in all material
respects the same as for the applicable Fund. This Pooled Separate Account
performance will be adjusted to reflect current Fund fees and expenses, after
waivers and reimbursements. The Pooled Separate Accounts were not registered
under the Investment Company Act of 1940 and were not subject to certain
investment restrictions imposed by that Act or the Internal Revenue Code. If
the Pooled Separate Accounts had been so registered, investment performance
might have been adversely affected.

<PAGE>

Historical performance information for periods prior to the establishment of
the Stephens Premium Class shares for a Fund (other than the Intermediate Bond
and Select Equity Funds) will be that of the respective Diversified Class
shares for that Fund and will be presented in accordance with the applicable
interpretations of the Securities and Exchange Commission.

As of December 31, 1998, the average annual total returns for the Stephens
Premium Class shares of each of the following Funds, including the Pooled
Separate Accounts referred to above, were as follows:

<S> <C> <C> <C> <C> <C> <C>
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
FOR THE
PERIOD
FOR THE FOR THE FOR THE FOR THE SINCE
YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
INCEPTION ENDED ENDED ENDED ENDED THROUGH
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
MONEY MARKET 11/78 4.91% 4.92% 4.74% 5.17% 7.52%
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
INTERMEDIATE BOND -- -- -- --
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
HIGH-YIELD BOND 8/95 2.20% 8.11% -- -- 8.87%
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
EQUITY VALUE 4/96 10.79% -- -- -- 15.67%
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
EQUITY GROWTH 3/93 35.97% 26.60% 20.20% -- 18.37%
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
SPECIAL EQUITY 1/86 3.10% 17.72% 18.21% 16.75% 15.78%
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
SELECT EQUITY -- -- -- --
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
INTERNATIONAL EQUITY 12/92 10.47% 11.11% 10.16% -- 13.50%
- ----------------------------- --------- ---------- ---------- --------- ---------- ----------
</TABLE>

See Appendix A for the past performance of the subadvisers to the High-Yield
Bond Fund, Equity Value Fund and Equity Growth Fund with investment objectives,
policies and restrictions substantially similar to each Fund and which have
been managed in the same way that the underlying Portfolio in which each Fund
invests is managed.

FINANCIAL HIGHLIGHTS

[To be added by amendment.]

<PAGE>

APPENDIX A

COMPOSITE PERFORMANCE OF SUBADVISERS

The following table sets forth the average annual total returns of all
institutional private accounts and collective investment vehicles managed by
the subadvisers to the High-Yield Bond Fund, Equity Value Fund and Equity
Growth Fund with investment objectives, policies and restrictions substantially
similar to each Fund and which have been managed in the same way that the
underlying Portfolio in which each Fund invests is managed. The data is
provided to illustrate the past performances of the subadvisers in managing
substantially similar accounts as measured against specified market indices and
does not represent the performance of the Funds. Investors should not consider
this performance data as an indication of future performance of the Funds or
the subadvisers.

<S> <C> <C> <C> <C> <C>
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
---------- --------- ---------- ---------- ----------
- ------------------------------------- ---------- --------- ---------- ---------- ----------
DELAWARE INVESTMENT ADVISERS,
SUBADVISER TO HIGH-YIELD BOND FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(1)...... 3.65% 8.19% 7.06% 9.19% 11.58%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(2)............. 4.42% 9.40% 9.14% 10.68% 9.81%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(3).................. -0.08% 8.50% 7.63% 9.52% 10.90%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
- -------------------------------------------------------------------------------------------
- ------------------------------------- ---------- --------- ---------- ---------- ----------
ARK ASSET MANAGEMENT CO., INC.,
SUBADVISER TO EQUITY VALUE FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(4)...... 10.58% 18.56% 18.37% 16.57% 16.95%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(5)............. 15.63% 23.89% 20.85% 17.39% 17.46%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(6).................. 13.58% 20.25% 17.82% 15.54% 15.46%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
</TABLE>

<PAGE>

<S> <C> <C> <C> <C> <C>
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
- ------------------------------------- ---------- --------- ---------- ---------- ----------
DRESDNER RCM GLOBAL INVESTORS, LLC,
SUBADVISER TO EQUITY GROWTH FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(7)...... 46.21% 32.15% 25.56% 20.11% 18.21%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(8)............. 38.71% 30.62% 25.70% 20.56% 22.84%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(9).................. 25.69% 23.66% 19.82% 17.21% 15.71%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
- -------------------------------------------------------------------------------------------
MONTAG & CALDWELL INCORPORATED
SUBADVISER TO EQUITY GROWTH FUND
- ------------------------------------- ---------- --------- ---------- ---------- ----------
SUBADVISER'S COMPOSITE(10)..... 28.60% 30.76% 25.13% 20.98% 19.13%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
BENCHMARK INDEX(8)............. 38.71% 30.62% 25.70% 20.56% 22.84%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
PEER GROUP(9).................. 25.69% 23.66% 19.82% 17.21% 15.71%
- ------------------------------------- ---------- --------- ---------- ---------- ----------
</TABLE>

____________________
(1) Commencement of investment operations is January 1, 1980 for the
subadviser's composite.

(4) Commencement of investment operations is April 1, 1985 for the
subadviser's composite.

(7) Commencement of investment operations is January 1, 1986 for the
subadviser's composite.

(8) The Benchmark Index is the Russell 1000 Growth Index. The Russell 1000
Growth Index measures the performance of those companies included in the
Russell 1000 Index with higher price-to-book ratios and higher forecasted
growth values. The Russell 1000 Index measures the performance of the one
thousand smallest companies in the Russell 3000 Index, which represents
approximately __% of the total market capitalization of the Russell 3000 Index
(the Russell 3000 Index represents approximately 98% of the investable U.S.
equity market).

<PAGE>

(9) The Peer Group is the Lipper Growth Fund Index. The Lipper Growth Fund
Index tracks the net performance of mutual funds which, as determined by Lipper
Analytical Services, Inc., are managed in accordance with an investment
objective defined as follows: "A fund which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the earnings
of the stocks represented in the major unmanaged stock indices".

(10) Commencement of investment operations is January 1, 1986 for the
subadviser's composite.

The Statement of Additional Information (SAI) provides more details about the
Funds and their policies. The SAI is incorporated by reference into this
prospectus and is legally part of it.

The Annual and Semi-Annual Reports for the Funds list their portfolio holdings
and describe their performance.

To obtain free copies of the SAI and the Annual and Semi-Annual Reports or to
make other inquiries, please call toll-free ______________.

SEC file number: 811-7674

<PAGE>
Prospectus

THE DIVERSIFIED INVESTORS FUNDS GROUP

Diversified Investment Advisors, Inc.,
investment adviser

STEPHENS INSTITUTIONAL CLASS SHARES

MONEY MARKET FUND
Diversified Investors Money Market Fund

BOND FUNDS
Stephens Intermediate Bond Fund
Diversified Investors High-Yield Bond Fund

The Securities and Exchange Commission has
not approved or disapproved these securities
or passed upon the accuracy of this prospectus,
and any representation to the contrary
is a criminal offense.

May 3, 1999

<PAGE>

TABLE OF CONTENTS

Dividends and Distributions...................................................

Tax Matters...................................................................

Management....................................................................

General Information...........................................................

Additional Performance Information............................................

Financial Highlights..........................................................

Appendix A -- Composite Performance of Subadvisers............................

<PAGE>

THE FUNDS AT A GLANCE

- ------------------------------------------------------------------------------
MONEY MARKET FUND
- ------------------------------------------------------------------------------

DIVERSIFIED INVESTORS MONEY MARKET FUND

THIS SUMMARY BRIEFLY DESCRIBES THE MONEY MARKET FUND AND THE PRINCIPAL RISKS OF
INVESTING IN IT. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

FUND GOAL

The Fund's goal is to provide liquidity and as high a level of income as is
consistent with the preservation of capital.

MAIN INVESTMENT STRATEGIES

MAIN RISKS

Please note that an investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

No Fund, by itself, is a complete investment program.

<PAGE>

FUND PERFORMANCE

The following bar chart and tables can help you evaluate the risks of investing
in the Fund, and how the Fund's returns have varied over time.

o The bar chart shows changes in the Fund's performance from year to
year over the last five calendar years.

o The Stephens Institutional Class shares do not have a full calendar
year of investment returns at the date of this prospectus. The bar
chart and tables below show the performance of the Diversified Class
shares of the Fund. The performance of the Stephens Institutional
Class shares would have been somewhat higher because the Stephens
Institutional Class shares have lower expenses.

When you consider this information, please remember that the Fund's past
performance is not necessarily an indication of how it will perform in the
future.

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)

- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 1.78% June 30, 1995
- ----------------- ----------- ----------------------
Lowest 0.56% March 31, 1994
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ------------------ --------------- -----------------
1 Year 5 Years
- ------------------ --------------- -----------------
Money Market
Fund 4.91% 4.74%
- ------------------ --------------- -----------------
Salomon Bros.
3-Month T-Bill
Index ____% ____%
- ------------------ --------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE MONEY MARKET FUND.

- ------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
- -------------------------------------------------------------- -------------
Maximum Sales Charge (Load) Imposed on Purchases None
- -------------------------------------------------------------- -------------
Maximum Deferred Sales Charge (Load) None
- -------------------------------------------------------------- -------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- -------------------------------------------------------------- -------------
Redemption Fee None
- -------------------------------------------------------------- -------------
Exchange Fee None
- -------------------------------------------------------------- -------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets) as a % of average net assets (1)
- -------------------------------------------------------------- -------------
Advisory Fee .25%
- -------------------------------------------------------------- -------------
Distribution (12b-1) Fees None
- -------------------------------------------------------------- -------------
Other Expenses
- -------------------------------------------------------------- -------------
Administrative Services Fee .30%
- -------------------------------------------------------------- -------------
Miscellaneous Expenses .83%
- -------------------------------------------------------------- -------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.38%*
- ------------------------------------------------------------------------------

*BECAUSE SOME OF THE FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE .75%. THESE FEE WAIVERS
AND REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1The Fund invests in securities through an underlying mutual fund. This
table and the example below reflect the expenses of the Fund and that
underlying fund.

EXAMPLE

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of the Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

--------------- ------------- ------------- -------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------- ------------- ------------- -------------
$___ $___ $___ $___
--------------- ------------- ------------- -------------

<PAGE>

- ------------------------------------------------------------------------------
BOND FUNDS
- ------------------------------------------------------------------------------

STEPHENS INTERMEDIATE BOND FUND
DIVERSIFIED INVESTORS HIGH-YIELD BOND FUND

THIS SUMMARY BRIEFLY DESCRIBES THE BOND FUNDS AND THE PRINCIPAL RISKS OF
INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

INTERMEDIATE BOND FUND The Fund's goal is to generate a high level of current
income consistent with a goal to preserve the value of its
investors' investment.

HIGH-YIELD BOND FUND The Fund's goal is to provide a high level of current
income.

MAIN INVESTMENT STRATEGIES
</TABLE>

INTERMEDIATE BOND FUND

The Fund's dollar-weighted average maturity generally does not exceed ten years
under normal circumstances.

HIGH-YIELD BOND FUND

MAIN RISKS

o MARKET RISK. This is the risk that the prices of securities will rise
or fall due to changing economic, political or market conditions, or
due to a company's individual situation.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. A change

<PAGE>

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

WHO MAY WANT TO INVEST

<PAGE>

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

o The bar chart shows changes in the High-Yield Bond Fund's performance from
year to year over the last two calendar years.

o The tables show the Fund's best and worst quarters during the years
covered by the bar chart, and how the Fund's average annual returns for
the periods indicated compare to those of a broad measure of market
performance. Please remember that, unlike the Fund, the market index does
not include the costs of buying and selling securities and other Fund
expenses.

o The Stephens Institutional Class shares do not have a full calendar year
of investment returns at the date of this prospectus. The bar chart and
tables show the performance of the Diversified Class shares of the Fund.
The performance of the Stephens Institutional Class shares would have been
somewhat higher because the Stephens Institutional Class shares have lower
expenses.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

HIGH-YIELD BOND FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........12.28%
1998............2.20%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------------------- ----------------------
- ----------------- ----------- ----------------------
Highest 4.87% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -4.76% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year January 30, 1996
- ----------------- ---------------- -----------------
- ----------------- ---------------- -----------------
High-Yield Bond
Fund 2.20% ____%
- ----------------- ---------------- -----------------
Lehman Bros.
Gov./Corp. Bond
Index _____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE BOND FUNDS.

- -------------------------------------------------------------------------------
SHAREHOLDER FEES INTERMEDIATE HIGH-YIELD
(fees paid directly from your investment) BOND FUND BOND FUND
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases None None
- -------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None None
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None
- -------------------------------------------------------------------------------
Redemption Fee None None
- -------------------------------------------------------------------------------
Exchange Fee None None
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
as a % of average net assets
- -------------------------------------------------------------------------------
Advisory Fee .10% .55%
- -------------------------------------------------------------------------------
Distribution (12b-1) Fees .19% None
- -------------------------------------------------------------------------------
Other Expenses
- -------------------------------------------------------------------------------
Administrative
Services Fee .35% .30%
- -------------------------------------------------------------------------------
Miscellaneous Expenses .52% .88%
- -------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.16%* 1.73%*(1)
- -------------------------------------------------------------------------------

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE .80% FOR THE INTERMEDIATE
BOND FUND AND 1.10% FOR THE HIGH-YIELD BOND FUND. THESE FEE WAIVERS AND
REIMBURSEMENTS MAY BE REDUCED OR TERMINATED AT ANY TIME.

1The High-Yield Bond Fund invests in securities through an underlying mutual
fund. This table and the example below reflect the expenses of the Fund and
that underlying fund.

EXAMPLE

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of any Fund's future performance); and
o the Fund's operating expenses shown in the table above remain the
same before taking into consideration any fee waivers or
reimbursements.
<PAGE>

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

- ------------------------ ---------------------- ----------------------
INTERMEDIATE HIGH-YIELD
BOND FUND BOND FUND
- ------------------------ ---------------------- ----------------------
1 year $___ $___
- ------------------------ ---------------------- ----------------------
3 years $___ $___
- ------------------------ ---------------------- ----------------------
5 years $___ $___
- ------------------------ ---------------------- ----------------------
10 years $___ $___
- ------------------------ ---------------------- ----------------------

- ------------------------------------------------------------------------------
STOCK FUNDS
- ------------------------------------------------------------------------------

DIVERSIFIED INVESTORS EQUITY VALUE FUND
DIVERSIFIED INVESTORS EQUITY GROWTH FUND
DIVERSIFIED INVESTORS SPECIAL EQUITY FUND
STEPHENS SELECT EQUITY FUND
DIVERSIFIED INVESTORS INTERNATIONAL EQUITY FUND

THIS SUMMARY BRIEFLY DESCRIBES THE STOCK FUNDS AND THE PRINCIPAL RISKS OF
INVESTING IN THEM. FOR MORE INFORMATION, SEE "MORe ABOUT THE FUNDS" ON PAGE __.

<S> <C>
FUND GOALS

EQUITY VALUE FUND The Fund's goal is to provide a high total investment
return through investment primarily in a diversified
portfolio of common stocks.

SPECIAL EQUITY FUND The Fund's goal is to provide a high level of capital
appreciation through investment in a diversified portfolio
of common stocks of small to medium size companies.

SELECT EQUITY FUND The Fund's goal is to provide a high total return.

INTERNATIONAL EQUITY FUND The Fund's goal is to provide a high level of long-term
capital appreciation through investment in a diversified
portfolio of securities of foreign issuers.
</TABLE>

<PAGE>

MAIN INVESTMENT STRATEGIES

EQUITY VALUE FUND

The Equity Value Fund invests primarily in common stocks of companies which, in
the opinion of the Fund's advisers, are trading at low valuations relative to
market and/or historical levels.

EQUITY GROWTH FUND

SPECIAL EQUITY FUND

SELECT EQUITY FUND

INTERNATIONAL EQUITY FUND

MAIN RISKS

o GROWTH SECURITIES. Growth securities typically are quite sensitive to
market movements because their market prices tend to reflect future

<PAGE>

o SMALLER COMPANIES. The securities of smaller capitalized companies
may have more risks than those of larger, more seasoned companies.
They may be particularly susceptible to market downturns because of
limited product lines, markets, distribution channels or financial
and management resources. Also, there may be less publicly available
information about small cap companies. As a result, their prices may
be more volatile, causing a Fund's share price to be volatile.
Investments held by the Special Equity and Select Equity Funds are
likely to be particularly susceptible to the risks of small cap
companies.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing a Fund's share price to be
volatile. Also, in certain circumstances, a Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

The International Equity Fund, may invest in issuers located in
emerging, or developing, markets. All of the risks of investing in
foreign securities are heightened by investing in these markets.

o DERIVATIVES. Each Fund may, but is not required to, engage in certain
investment strategies involving derivatives (such as options,
futures, swaps and forward currency contracts). These investment
strategies may be employed only in connection hedging activities. The
success or failure of a hedging transaction will depend on the
advisers' ability to predict movements in the hedge, the investment
being hedged and the market in general (and the correlation between
these factors). Derivatives may not always be available on terms that
make economic sense (for example, they may be too costly), and, when
used, their transaction costs and premiums may adversely affect Fund
performance.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by a Fund, causing a loss. Or, an issuer's financial condition
may deteriorate, lowering the credit quality of a security and
leading to greater volatility in the price of the security and in
shares of the Fund. The prices of lower rated securities often are
more volatile than those of higher rated securities.

Please note that an investment in the Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

<PAGE>

WHO MAY WANT TO INVEST

No Fund, by itself, is a complete investment program.

FUND PERFORMANCE

The following bar charts and tables can help you evaluate the risks of
investing in the Stock Funds, and how the Funds' returns have varied over time.

o The bar charts show changes in the Funds' performance from year to year.

o The Stephens Institutional Class shares do not have a full calendar year
of investment returns at the date of this prospectus. The bar charts and
tables show the performance of the Diversified Class shares of each Fund.
The performance of the Stephens Institutional Class shares would have been
somewhat higher because the Stephens Institutional Class shares have lower
expenses.

When you consider this information, please remember that a Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

EQUITY VALUE FUND

TOTAL RETURN
(per calendar year)
1997 1998
[bar chart -- for calendar years 1997
and 1998]
1997...........21.43%
1998...........10.79%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 13.63% June 30, 1997
- ----------------- ----------- ----------------------
Lowest -9.32% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year June 13, 1996
- ----------------- ---------------- -----------------
Equity
Value Fund 10.79% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Value Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

EQUITY GROWTH FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........18.50%
1996...........17.93%
1997...........26.54%
1998...........35.97%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 29.77% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -11.31% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Equity
Growth Fund 35.97% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 1000
Growth Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

SPECIAL EQUITY FUND

TOTAL RETURN
(per calendar year)
1995 1996 1997 1998
[bar chart -- for calendar years 1995
through 1998]
1995...........41.50%
1996...........25.76%
1997...........25.82%
1998............3.10%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 20.84% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -20.13% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year July 1, 1994
- ----------------- ---------------- -----------------
Special
Equity Fund 3.10% ____%
- ----------------- ---------------- -----------------
S&P 500
Index ____% ____%
- ----------------- ---------------- -----------------
Russell 2000
Growth Index ____% ____%
- ----------------- ---------------- -----------------

SELECT EQUITY FUND

The Fund began operations on __________, 1998 and does not have a full calendar
year of investment returns at the date of this prospectus.

<PAGE>

INTERNATIONAL EQUITY FUND

TOTAL RETURN
(per calendar year)

1997 1998

[bar chart -- for calendar years 1997
and 1998]

1997............7.74%
1998...........10.47%

- ----------------------------------------------------
HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
- ----------------------------------------------------
- ----------------------------- ----------------------
Quarter Ending
- ----------------- ----------- ----------------------
Highest 16.67% December 31, 1998
- ----------------- ----------- ----------------------
Lowest -16.75% September 30, 1998
- ----------------- ----------- ----------------------

- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)
- ----------------------------------------------------
- ----------------- ---------------- -----------------
Since Inception
1 Year January 18, 1996
- ----------------- ---------------- -----------------
International
Equity Fund 10.47% ____%
- ----------------- ---------------- -----------------
MSCI GDP
EAFE Index ____% ____%
- ----------------- ---------------- -----------------

<PAGE>

FUND FEES AND EXPENSES

THE TABLES BELOW DESCRIBE THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE STOCK FUNDS.

<S> <C> <C> <C> <C> <C>
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
SHAREHOLDER FEES (fees EQUITY EQUITY SPECIAL SELECT INTERNATIONAL
paid directly from your VALUE FUND GROWTH FUND EQUITY FUND EQUITY FUND EQUITY
investment) FUND
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Maximum Sales Charge None None None None None
(Load) Imposed on
Purchases
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Maximum Deferred Sales None None None None None
Charge (Load)
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Maximum Sales Charge None None None None None
(Load) Imposed on
Reinvested Dividends
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Redemption Fee None None None None None
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Exchange Fee None None None None None
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
ANNUAL FUND OPERATING
EXPENSES (expenses that
are deducted from Fund
assets) as a % of average
net assets (1)
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Advisory Fee .57% .62% .80% .15% .75%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Distribution (12b-1) Fees None None None .19% None
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Other Expenses
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Administrative
Services Fee .30% .30% .30% .35% .30%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
Miscellaneous
Expenses .84% .82% .83% .52% .85%
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.71%* 1.74%* 1.93%* 1.21%* 1.90%*
- ---------------------------- ----------- ------------- ------------- ------------- ----------------
</TABLE>

*BECAUSE SOME OF EACH FUND'S EXPENSES WERE WAIVED OR REIMBURSED, ACTUAL
TOTAL OPERATING EXPENSES FOR THE PRIOR YEAR WERE 1.10% FOR THE EQUITY
VALUE FUND, 1.00% FOR THE EQUITY GROWTH FUND, 1.20% FOR THE SPECIAL EQUITY
FUND, .85% FOR THE SELECT EQUITY FUND AND 1.25% FOR THE INTERNATIONAL
EQUITY FUND. THESE FEE WAIVERS AND REIMBURSEMENTS MAY BE REDUCED OR
TERMINATED AT ANY TIME.

1Each Fund (except the Select Equity Fund) invests in securities through
an underlying mutual fund. This table and the example below reflect the
expenses of the Fund and that underlying fund.

<PAGE>

EXAMPLE

The example also assumes that:
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC for the purpose of this example and is
not a prediction of any Fund's future performance); and
o the Fund's operating expenses shown in the tables above remain the
same before taking into consideration any fee waivers or
reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

SHAREHOLDER SERVICES

This section describes how to do business with the Funds and shareholder
services that are available.

- ------------------------------------------------------------------------------
HOW TO REACH THE FUNDS
- ------------------------------------------------------------------------------

BY TELEPHONE Call collect at (501) 374-4361

BY MAIL Stephens Inc.
111 Center Street
Little Rock, AK 72201
Attention: Stephens Capital Management

- ------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------------

Stephens Institutional Class shares are available only to investment clients of
Stephens Inc.