DIVERSIFIED INVESTORS PORTFOLIOS, N-1A/A, 1996-04-19

DIVERSIFIED INVESTORS PORTFOLIOS
N-1A/A, 1996-04-19

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As filed with the Securities and Exchange Commission on April 19, 1996

File No. 811-8272
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

UNDER THE INVESTMENT COMPANY ACT OF 1940 / /

Amendment No. 4 /X/

DIVERSIFIED INVESTORS PORTFOLIOS

(Exact Name of Registrant as Specified in Charter)

FOUR MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577

(Address of Principal Executive Office) (ZIP Code)

Registrant's Telephone Number, including Area Code: (914) 697-8000

Robert F. Colby
Diversified Investment Advisors, Inc.
Four Manhattanville Road
Purchase, New York 10577

(Name and Address of Agent for Service)

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EXPLANATORY NOTE

This Registration Statement of Diversified Investors Portfolios has
been filed by the Registrant pursuant to Section 8(b) of the Investment Company
Act of 1940, as amended (the "1940 Act"). However, beneficial interests in the
Registrant are not being registered under the Securities Act of 1933, as amended
(the "1933 Act"), since such interests will be offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any beneficial interests in the Registrant.

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PART A

DIVERSIFIED INVESTORS PORTFOLIOS - MONEY MARKET PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Money Market Portfolio (the "Portfolio"), is described herein. Beneficial
interests in the Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.

The investment objective of the Portfolio is to provide liquidity and
as high a level of current income as is consistent with the preservation of
capital. The Portfolio seeks to accomplish its investment objective by investing
in domestic and foreign U.S. dollar-denominated money market obligations with
maturities of 397 days or less. An investment in the Portfolio is neither
insured nor guaranteed by the U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Capital Management Group, a division
of 1740 Advisers, Inc. ("Capital Management Group"), is the subadviser (the
"Subadviser") of the Portfolio. The Adviser and Subadviser are referred to
herein collectively as the "Advisers". Diversified is also the administrator
(the "Administrator") of the Portfolio. Diversified Investors Securities Corp.
is the exclusive placement agent ("DISC" or the "Placement Agent") of interests
in the Portfolio and the Trust in general.

The Portfolio pursues its investment objective by investing in high
quality short-term money market instruments consistent with its specific
investment objective. Securities in which the Portfolio invests may not earn as
high a level of current income as long-term or lower quality securities which
generally have less liquidity and greater market risk and fluctuate in market
value to a greater extent.

The investment objective of the Portfolio may be changed without the
vote of the holders of a majority of the outstanding voting securities of the

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Portfolio. There can be no assurance that the investment objective of the
Portfolio will be achieved.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

To achieve its investment objective, the Portfolio invests in U.S.
dollar-denominated short-term money market obligations, including securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, time deposits, bankers' acceptances
and other short-term obligations issued by domestic banks and domestic branches
and subsidiaries of foreign banks, repurchase agreements, and high quality
domestic commercial paper and other short-term corporate obligations, including
those with floating or variable rates of interest. In addition, the Portfolio
may lend portfolio securities, enter into reverse repurchase agreements, and
invest in securities issued by foreign banks and corporations outside the United
States. The Portfolio reserves the right to concentrate 25% or more of its total
assets in obligations of domestic branches of domestic banks.

In accordance with Rule 2a-7 under the Investment Company Act of 1940,
as amended (the "1940 Act"), the Portfolio will maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 days or less and invest only in U.S.
dollar-denominated securities determined in accordance with procedures
established by the Board of Trustees of the Trust (the "Board of Trustees") to
present minimal credit risks and which are rated in one of the two highest
rating categories for debt obligations by at least two nationally recognized
statistical rating organizations (an "NRSRO") (or one NRSRO if the instrument
was rated by only one such organization) or, if unrated, are of comparable
quality as determined in accordance with procedures established by the Board of
Trustees (collectively, "Eligible Securities").

Eligible Securities include "First Tier Securities" and "Second Tier
Securities." First Tier Securities include those that possess a rating in the
highest category in the case of a single-rated security or at least two ratings
in the highest rating category in the case of multiple-rated securities or, if
the securities do not possess a rating, are determined to be of comparable
quality by the Advisers pursuant to the guidelines adopted by the Board of
Trustees. All other Eligible Securities are Second Tier Securities. The
Portfolio will invest at least 95% of its total assets in First Tier Securities.

The NRSROs currently rating instruments of the type the Portfolio may
purchase are Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Duff & Phelps, Inc. ("Duff"), Fitch Investors Service,
Inc. ("Fitch"), IBCA Limited and IBCA Inc. ("IBCA") and Thomson BankWatch, Inc.
("BankWatch"), and their rating criteria are described below. Part B contains
further information concerning the rating criteria and other requirements
governing the Portfolio's investments, including information relating to the
treatment of securities subject to a tender or demand feature and securities

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deemed to possess a rating based on comparable rated securities of the same
issuer.

The following is a description of the two highest commercial paper,
bond and other short-and long-term rating categories assigned by S&P, Moody's,
Fitch, Duff, IBCA and BankWatch:

COMMERCIAL PAPER AND SHORT-TERM RATINGS

The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high as
for issues designated A-1.

The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

The rating Fitch-1 (Highest Grade) is the highest commercial paper
rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.

The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.

The designation A-1 by IBCA indicates that the obligation is supported
by a very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.

A-3

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The rating TBW-1 is the highest short-term obligation rating assigned
by BankWatch. Obligations rated TBW-1 are regarded as having the strongest
capacity for timely repayment. Obligations rated TBW-2 are supported by a strong
capacity for timely repayment, although the degree of safety is not as high as
for issues rated TBW-1.

BOND AND LONG-TERM RATINGS

Bonds rated AAA are considered by S&P to be the highest grade
obligations and possess an extremely strong capacity to pay principal and
interest. Bonds rated AA by S&P are judged by S&P to have a very strong capacity
to pay principal and interest, and in the majority of instances, differ only in
small degrees from issues rated AAA.

Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds
rated Aa by Moody's are judged by Moody's to be of high quality by all standards
and, together with the Aaa group, they comprise what are generally known as
high-grade bonds. Bonds rated Aa are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuations of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2
and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category, the modifier 2 indicates a
mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
the rating category.

Bonds rated AAA by Fitch are judged by Fitch to be strictly high-grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.

Bonds rated AAA by Duff are considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than U.S.
Treasury debt. Bonds rated AA are considered by Duff to be of high credit
quality with strong protection factors. Risk is modest but may vary slightly
from time to time because of economic conditions.

Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA by IBCA
have a very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic

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or financial conditions may increase investment risk albeit not very
significantly.

IBCA also assigns a rating to certain international and U.S. banks. An
IBCA bank rating represents IBCA's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short- Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.

In addition to its ratings of short-term obligations, BankWatch assigns
a rating to each issuer it rates, in gradations of A through E. BankWatch
examines all segments of the organization, including, where applicable, the
holding company, member banks or associations, and other subsidiaries. In those
instances where financial disclosure is incomplete or untimely, a qualified
rating (QR) is assigned to the institution. BankWatch also assigns, in the case
of foreign banks, a country rating which represents an assessment of the overall
political and economic stability of the country in which the bank is domiciled.

The Portfolio will not invest more than 5% of its total assets in the
securities (including the securities collateralizing a repurchase agreement) of,
or subject to puts (including letters of credit, guaranties or other credit
support) issued by, a single issuer, except that (i) the Portfolio may invest
more than 5% of its total assets in a single issuer for a period of up to three
business days in certain limited circumstances, (ii) the Portfolio may invest in
obligations issued or guaranteed by the U.S. Government without any such
limitation, and (iii) the limitation with respect to puts does not apply to
unconditional puts if no more than 10% of the Portfolio's total assets is
invested in securities issued or guaranteed by the issuer of the unconditional
put. Investments in rated securities not rated in the highest category by at
least two rating organizations (or one rating organization if the instrument was
rated by only one such organization), and unrated securities not determined by
the Board of Trustees to be comparable to those rated in the highest category,
will be limited to 5% of the Portfolio's total assets, with the investment in
any one such issuer being limited to no more than the greater of 1% of the
Portfolio's total assets or $1,000,000. As to each security, these percentages
are measured at the time the Portfolio purchases the security.

The Portfolio seeks to achieve its investment objective through
investments in the following types of U.S. dollar-denominated money market
instruments.

BANK OBLIGATIONS. The Portfolio may invest in U.S. dollar-denominated
certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations issued by domestic banks and domestic branches and
subsidiaries of

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foreign banks. Certificates of deposit are certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Such instruments include Yankee Certificates of Deposit ("Yankee CDs"),
which are certificates of deposit denominated in U.S. dollars and issued in the
United States by the domestic branch of a foreign bank. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits which may be held by the
Portfolio are not insured by the Federal Deposit Insurance Corporation or any
other agency of the U.S. Government. The Portfolio will not invest more than 10%
of the value of its net assets in time deposits maturing in longer than seven
days and other instruments which are illiquid or not readily marketable. The
Portfolio may also invest in certificates of deposit and time deposits issued by
foreign banks outside the United States.

The Portfolio may also invest in bankers' acceptances and other
short-term obligations. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft drawn on it by a customer. These
instruments reflect the obligation both of the bank and of the drawer to pay the
face amount of the instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations which have either fixed, floating or
variable interest rates.

To the extent the Portfolio's investments are concentrated in the
banking industry, the Portfolio will have correspondingly greater exposure to
the risk factors which are characteristic of such investments. Sustained
increases in interest rates can adversely affect the availability or liquidity
and cost of capital funds for a bank's lending activities, and a deterioration
in general economic conditions could increase the exposure to credit losses. In
addition, the value of an investment in the Portfolio could be affected by
economic or regulatory developments in or related to the banking industry, which
industry also is subject to the effects of the concentration of loan portfolios
in leveraged transactions and in particular businesses, and competition within
the banking industry, as well as with other types of financial institutions. The
Portfolio, however, will seek to minimize its exposure to such risks by
investing only in debt securities which are determined to be of high quality.

U.S. GOVERNMENT AND AGENCY SECURITIES. Securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities include U.S.
Treasury securities, which differ only in their interest rates, maturities and
times of issuance. Treasury Bills have initial maturities of one year or less;
Treasury Notes have initial maturities of one to ten years; and Treasury Bonds
generally have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities, for
example, Government National Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, by the right of the issuer to borrow from
the Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. While the U.S. Government provides financial support
to such U.S. Government- sponsored agencies or instrumentalities, no assurance
can be given that it will

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always do so, since it is not so obligated by law. The Portfolio will invest in
such securities only when the Advisers are satisfied that the credit risk with
respect to the issuer is minimal.

COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial paper
purchased by the Portfolio will consist only of U.S. dollar-denominated direct
obligations issued by domestic and, subject to the 5% limit discussed below (see
"Foreign Securities"), foreign entities. The other corporate obligations in
which the Portfolio may invest consist of high quality, U.S. dollar-denominated
short-term bonds and notes (including variable amount master demand notes)
issued by domestic corporations.

The Portfolio may invest in commercial paper issued by major
corporations in reliance on the exemption from registration afforded by Section
3(a)(3) of the 1933 Act. Such commercial paper may be issued only to finance
current transactions and must mature in nine months or less. Trading of such
commercial paper is conducted primarily by institutional investors through
investment dealers, and individual investor participation in the commercial
paper market is very limited.

UNSECURED PROMISSORY NOTES. The Portfolio also may purchase unsecured
promissory notes ("Notes") which are not readily marketable and have not been
registered under the 1933 Act, provided such investments are consistent with the
Portfolio's investment objective. The Notes purchased by the Portfolio will have
remaining maturities of 13 months or less and will be deemed by the Board of
Trustees, or by the Advisers on its behalf, to present minimal credit risks and
will meet the quality criteria set forth above. The Portfolio will invest no
more than 10% of its net assets in such Notes and in other securities that are
not readily marketable (which securities would include floating and variable
rate demand obligations as to which the Portfolio cannot exercise the demand
feature described in Part B and as to which there is no secondary market).

RESTRICTED SECURITIES. The Portfolio may invest in securities that are
subject to legal or contractual restrictions on resale. These securities may be
illiquid and, thus, the Portfolio may not purchase them to the extent that more
than 10% of the value of its net assets would be invested in illiquid
securities. However, if a substantial market of qualified institutional buyers
develops pursuant to Rule 144A under the 1933 Act for such securities held by
the Portfolio, the Portfolio intends to treat such securities as liquid
securities in accordance with procedures approved by the Board of Trustees. To
the extent that for a period of time, qualified institutional buyers cease
purchasing such restricted securities pursuant to Rule 144A, the Portfolio's
investing in such securities may have the effect of increasing the level of
illiquidity in the Portfolio during such period.

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of delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. The Portfolio will adhere to the following
conditions whenever its securities are loaned: (i) the Portfolio must receive at
least 100% cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase this collateral whenever the market value of the loaned
securities including accrued interest exceeds the level of the collateral; (iii)
the Portfolio must be able to terminate the loan at any time; (iv) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (v) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower. However, if a material event adversely affecting the loaned securities
were to occur, the Portfolio would terminate the loan and regain the right to
vote the securities.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. Repurchase
agreements involve the acquisition by the Portfolio of an underlying debt
instrument, subject to an obligation of the seller to repurchase, and the
Portfolio to resell, the instrument at a fixed price, usually not more than one
week after its purchase. The Portfolio or a sub-custodian will have custody of
securities acquired by the Portfolio under a repurchase agreement.

Repurchase agreements may be entered into for the Portfolio with
sellers, which are usually member banks of the Federal Reserve System or member
firms of the New York Stock Exchange (or a subsidiary thereof). Such
transactions afford an opportunity for the Portfolio to earn a return on
available cash at minimal market risk. Certain costs may be incurred by the
Portfolio in connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Portfolio may be delayed or
limited. Repurchase agreements are considered collateralized loans under the
1940 Act.

The Portfolio may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated redemption requests, and not for
leverage. One means of borrowing is by agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed date and price (a "reverse repurchase agreement"). At the
time the Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government securities or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities. Reverse repurchase agreements are considered to be
borrowings by the Portfolio.

FOREIGN SECURITIES. The Portfolio may invest in U.S. dollar-denominated
foreign securities issued outside the United States, such as obligations of
foreign branches and subsidiaries of domestic banks and foreign banks, including
Eurodollar certificates of deposit, Eurodollar time deposits and Canadian time
deposits, commercial paper of Canadian and other foreign issuers, and U.S.

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dollar-denominated obligations issued or guaranteed by one or more foreign
governments or any of their agencies or instrumentalities. Foreign securities
may represent a greater degree of risk than do securities of domestic issuers
due to possible exchange rate fluctuations, possible exchange controls, less
publicly available information, more volatile markets, less securities
regulation, less favorable tax provisions (including possible withholding
taxes), changes in governmental administration or economic or monetary policy
(in the United States or abroad), war or expropriation. For a complete
description of foreign securities the Portfolio may purchase, see "Investment
Policies" in Part B.

CERTAIN OTHER OBLIGATIONS. In order to allow for investments in new
instruments that may be created in the future, the Portfolio may invest in
obligations other than those listed previously, provided such investments are
consistent with the Portfolio's investment objective, policies and restrictions.

Part B includes a discussion of additional investments such as zero
coupon obligations, variable rate and floating rate securities, participation
interests, guaranteed investment contracts and when-issued and forward
commitment securities. Part B also includes a discussion of nonfundamental
investment policies, as well as a listing of specific investment restrictions
which constitute fundamental policies of the Portfolio and cannot be changed
without the approval of the holders of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Portfolio. See "Investment
Restrictions" in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

The Board of Trustees provides broad supervision over the affairs of
the of Portfolio. For further information about the Trustees and officers of the
Trust see "Management of the Fund" in Part B. A majority of the Trust's Trustees
are not affiliated with the Advisers.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.25% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the
Diversified are made by committee and not by managers individually.

Diversified is an indirect, wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"), a financial services holding company whose primary emphasis is life
and health insurance and annuity and investment products. AEGON is an indirect,
wholly-owned subsidiary of AEGON nv, a Netherlands corporation which is a
publicly traded international insurance group. Diversified was incorporated in
1992 for the purpose of acting as investment adviser to the Portfolio and other
series of the Trust. Accordingly, the Trust is the first family of investment
companies for which Diversified serves as investment adviser. It is the

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Adviser's responsibility to select, subject to the review and approval of the
Board of Trustees, an appropriate subadviser with a distinguished background and
to review such subadviser's continued performance.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Capital Management Group. Capital Management Group
makes the investment selections for the Portfolio consistent with the guidelines
and directions set by the Adviser and the Board of Trustees. For its services
under the Subadvisory Agreement, Capital Management Group receives a fee from
Diversified. This fee is calculated by multiplying the arithmetic average of the
beginning and ending monthly net assets in the Portfolio by the fee schedule and
dividing by twelve. The fee is paid on a quarterly basis at an annual rate equal
to 0.05% of the Portfolio's average daily net assets. Capital Management Group
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio.

Capital Management Group is a division of 1740 Advisers, Inc., which is
a subsidiary of The Mutual Life Insurance Company of New York. Its address is
1740 Broadway, New York, New York 10019. Total assets under management by
Capital Management Group as of December 31, 1995 were approximately $639
million, $594 of which were assets of registered investment companies.
Investment management decisions of Capital Management Group are made by
committee and not by managers individually.

Under the Advisory Agreement with the Trust, Diversified, as
Administrator, provides the Trust with general office facilities and supervises
the overall administration of the Trust, including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of, the independent contractors and agents of the
Trust; the preparation and filing of all documents required for compliance by
the Trust with applicable laws and regulations; providing equipment and clerical
personnel necessary for maintaining the organization of the Trust; preparation
of certain documents in connection with meetings of Trustees and investors in
the Trust; and the maintenance of books and records of the Trust. The
Administrator provides persons satisfactory to the Board of Trustees to serve as
officers of the Trust. Such officers, as well as certain other employees and
Trustees of the Trust, may be directors, officers or employees of Diversified or
its affiliates. Diversified receives no additional compensation for providing
such administrative services.

The Trust has not retained the services of a distributor, as interests
in the Portfolio are offered solely in private placement transactions. See
"Management of the Fund" in Part B for additional information about DISC, the
Placement Agent of interests in the Portfolio.

Expenses. The expenses of the Trust include the compensation of its
Trustees who are not affiliated with the Adviser or Subadviser; governmental
fees; interest charges; taxes; fees and expenses of independent auditors, of
legal counsel and of any transfer agent, custodian or registrar of the Trust;
insurance premiums; and expenses of calculating the net asset value of, and the
net income on, interests in the Portfolio.

A-10

<PAGE> 13
Expenses of the Trust also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Trust's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
officers and commissions; expenses of meetings of investors and Trustees; and
the advisory fees payable to the Adviser under the Advisory Agreement.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth below. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio will vote as a separate
class, except as to voting of Trustees, as otherwise required by the 1940 Act,
or if determined by the Trustees to be a matter which affects all Series. As to
any matter which does not affect a particular Series, only investors in the one
or more affected Series are entitled to vote. The Portfolio is not required and
has no current intention of holding special meetings of investors, but the
Portfolio will hold special meetings of investors when in the judgment of the
Trustees it is necessary or desirable to submit matters for an investor vote.
Changes in fundamental policies will be submitted to investors for approval.
Investors under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of investors)
have the right to communicate with other investors in connection with requesting
a meeting of investors for the purpose of removing one or more Trustees.
Investors also have the right to remove one or more Trustees without a meeting
by a declaration in writing by a specified number of investors. Upon liquidation
of the Portfolio, investors would be entitled to share pro rata in the net
assets of the Portfolio (and no other Series) available for distribution to
investors.

The Portfolio determines its net income and realized capital gains, if
any, on each Portfolio Business Day (as defined below) and allocates all such
income and gain pro rata among the investors in the Portfolio at the time of
such determination.

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<PAGE> 14
The "net income" of the Portfolio consists of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio (and no other Series).

Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Trust) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.

It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See "General Description of the
Registrant" above.

An investment in the Portfolio may be made in U.S. dollars without a
sales load at the net asset value next determined after an order is received in
"good order" by the Portfolio. There is no minimum initial or subsequent
investment in the Portfolio.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

A-12

<PAGE> 15
additions to or reductions in the investor's investment in the Portfolio
effected as of 4:00 p.m., New York time, on such day, and (ii) the denominator
of which is the aggregate net asset value of the Portfolio as of 4:00 p.m., New
York time, on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of 4:00 p.m.,
New York time, on the following Portfolio Business Day.

The Portfolio's assets are valued by using the amortized cost method of
valuation. This method of valuation involves valuing a security at its cost at
the time of purchase and thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. The market value of the securities
held by the Portfolio will fluctuate on the basis of the creditworthiness of the
issuers of such securities and on the levels of interest rates generally. While
the amortized cost method provides certainty in valuation, it may result in
periods when the value so determined is higher or lower than the price the
Portfolio would receive if the security were sold.

ITEM 8. REDEMPTION OR REPURCHASE.

The Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be. Investments in the Portfolio may not be
transferred.

The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the New York Stock Exchange ("NYSE") is closed (other
than weekends or holidays) or trading on the NYSE is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

A-13

<PAGE> 16
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - HIGH QUALITY BOND PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, High Quality Bond Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide as high a level
of current income as is consistent with the preservation of capital. The
Portfolio seeks to accomplish its investment objective by investing primarily in
high quality debt securities with short and intermediate maturities. An
investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Merganser Capital Management Corp.
("Merganser") is the subadviser (the "Subadviser") of the Portfolio. The Adviser
and Subadviser are referred to herein collectively as the "Advisers".
Diversified is also the administrator (the "Administrator") of the Portfolio.
Diversified Investors Securities Corp. is the exclusive placement agent ("DISC"
or the "Placement Agent") of interests in the Portfolio and the Trust in
general.

The Portfolio pursues its investment objective by investing at least
65% of its assets under normal circumstances in high quality debt securities
with short and intermediate maturities (including repurchase agreements and
reverse repurchase agreements). See "Short-Term Instruments" below for an
explanation of high quality ratings.

The Advisers attempt to maintain the Portfolio's "duration" between one
and four years, which means that the Portfolio's overall sensitivity to interest
rates should be slightly more than that of bonds and notes with remaining
average maturities from one to four years. The Portfolio's dollar-weighted
average maturity (or dollar-weighted average life in the case of asset-backed
and mortgage-backed securities) may be longer than four years from time to time,
but

<PAGE> 17
will not exceed five years under normal conditions. The Portfolio may hold
individual securities with remaining maturities of up to thirty years.

A primary goal of the Portfolio is consistency of return with minimal
exposure to negative total returns on an annual basis. The Adviser's strategy is
to position the Portfolio in those high quality sectors of the fixed income
market that offer the most attractive yields, on a risk-adjusted basis. The
duration of the Portfolio will be a function of the security and sector
selection process and market conditions in general. Since the value of fixed
income securities generally fluctuates inversely with changes in interest rates,
the value of securities held by the Portfolio will tend to decline during
periods of rising interest rates.

The investment objective of the Portfolio may be changed without the
vote of the holders of a majority of the outstanding voting securities of the
Portfolio. There can, of course, be no assurance that the investment objective
of the Portfolio will be achieved.

DESCRIPTION OF PORTFOLIO INVESTMENTS

The Advisers normally select only securities having a minimum long-term
quality rating of A- by Standard & Poor's Ratings Group ("S&P") or A3 by Moody's
Investors Service, Inc. ("Moody's"), respectively at the time of purchase, or,
in the case of instruments that are not rated or are rated by other agencies
(i.e., Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff"),
etc.) are deemed by the Advisers to be of similar quality. Money market
securities have a minimum short-term rating of at least A-1 or P-1 by S&P or
Moody's, respectively, or an equivalent rating by other agencies. The Portfolio
may continue to hold such securities if their ratings are reduced after
purchase.

Additional information about the investment policies of the Portfolio
appears in Part B.

U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may invest in U.S.
Government securities and securities issued or guaranteed by its agencies or
instrumentalities. These securities have varying degrees of government backing.
They may be backed by the credit of the government as a whole or only by the
issuing agency. For example, securities issued by certain agencies are supported
only by the credit of the agency that issued them, and not by the U.S.
Government. Securities issued by the Federal Home Loan Mortgage Corporation and
the Federal National Mortgage Association are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances. U.S. Treasury
bonds, notes and bills, and some agency securities, such as those issued by the
Government National Mortgage Association, are backed by the full faith and
credit of the U.S. Government as to payment of principal and interest and are
the highest quality government securities. There is no assurance that the U.S.
Government will support obligations of its agencies unless it is required to do
so by law. An investment in the Portfolio is not guaranteed by the U.S.
Government. For additional information on U.S. Government securities, see Part
B.

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<PAGE> 18
The Portfolio may invest a portion of its assets in short-term U.S.
Government securities with remaining maturities of one year or less and
repurchase agreements relating thereto. When the Advisers believe market
conditions warrant a temporary defensive position, the Portfolio may invest up
to 100% of its assets in these instruments.

CORPORATE BONDS. The Portfolio may purchase public or private corporate
bonds, issued by domestic or foreign issuers, that meet the Portfolio's minimum
credit quality criteria at the time of purchase. The corporate bond market is
customarily subdivided into several segments, which include industrial, public
utilities, rail and transportation bonds, and bonds issued by banks and other
financial institutions.

YANKEE BONDS AND EURODOLLAR BONDS. The Portfolio may purchase yankee
and eurodollar issues that meet its minimum credit quality standards. Yankee
issues are dollar denominated bonds issued in the United States market by
foreign issuers and are, therefore, subject to Securities and Exchange
Commission ("SEC") regulations. Issuers of yankee bonds include, among others,
foreign corporation, foreign governments and agencies, and multilateral lending
institutions. Eurodollar bonds are fixed income securities that are denominated
in dollars, are underwritten by an international syndicate, and are sold upon
issuance to non- U.S. investors. U.S.-based investors may purchase eurodollar
bonds in the secondary market after a seasoning period. Eurodollar bonds are not
subject to SEC regulations.

MORTGAGE PASS THROUGHS AND COLLATERALIZED MORTGAGE OBLIGATIONS. The
Portfolio may purchase mortgage and mortgage-related securities such as pass
throughs, collateralized mortgage obligations, and mortgage derivatives that
meet the Portfolio's minimum credit quality. Mortgage pass throughs are
securities that pass through to investors an undivided interest in a pool of
underlying mortgages. These may be issued or guaranteed by U.S. government
agencies, or may consist of whole loans originated and issued by private limited
purpose corporations or conduits. Collateralized mortgage obligation bonds and
mortgage derivatives are obligations of special purpose corporations that are
collateralized or supported by mortgages or mortgage securities such as pass
throughs.

ASSET-BACKED SECURITIES. The Portfolio may purchase public or private
asset-backed securities in various types, which are fixed income securities that
are collateralized or "backed" by installment receivables (usually consumer
loans) for which some type of credit enhancement is provided. Asset-backed
securities that are eligible for purchase by the Portfolio include securities
backed by automobile receivables, credit card receivables, home equity loans,
manufactured housing loans, business and recreational vehicle loans, computer
leases, and agricultural equipment loans.

SHORT-TERM INSTRUMENTS. Cash, commercial paper, short-term obligations,
repurchase agreements or other forms of debt securities may be held to provide a
reserve for future purchases of securities during periods of unusual market
conditions or in order to reduce volatility, or as a temporary defensive measure
when the Advisers determine security markets to be overvalued. The Portfolio
limits its short-term investments to those U.S. dollar-denominated instruments

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<PAGE> 19
which are determined by or on behalf of the Board of Trustees of the Trust (the
"Board of Trustees") to present minimal credit risks and which are of "high
quality" as determined by a major rating service (i.e., rated P-1 by Moody's or
A-1 by S&P) or, in the case of instruments which are not rated, are of
comparable quality pursuant to procedures established by the Board of Trustees.
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 longer term.

The following is a description of the two highest commercial paper,
bond and other short-and long-term rating categories assigned by S&P, Moody's,
Fitch, Duff, IBCA Limited and IBCA Inc. ("IBCA") and Thomson BankWatch, Inc.
("BankWatch"):

COMMERCIAL PAPER AND SHORT-TERM RATINGS

A-4

<PAGE> 20
The designation A-1 by IBCA indicates that the obligation is supported
by a very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.

The rating TBW-1 is the highest short-term obligation rating assigned
by BankWatch. Obligations rated TBW-1 are regarded as having the strongest
capacity for timely repayment. Obligations rated TBW-2 are supported by a strong
capacity for timely repayment, although the degree of safety is not as high as
for issues rated TBW-1.

BOND AND LONG-TERM RATINGS

A-5

<PAGE> 21
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA by IBCA
have a very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very significantly.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. Repurchase
agreements involve the acquisition by the Portfolio of an underlying debt
instrument subject to an obligation of the seller to repurchase, and the
Portfolio to resell, the instrument at a fixed price usually not more than one
week after its purchase. The Portfolio's custodian or a sub-custodian will have
custody of securities acquired by the Portfolio under a repurchase agreement.

A-6

<PAGE> 22
The Portfolio may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated redemption requests, and not for
leverage. One means of borrowing is by agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed date and price (a "reverse repurchase agreement"). At the
time the Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government securities or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities.

RULE 144A SECURITIES. The Portfolio may purchase securities in the
United States that are not registered for sale under federal securities laws but
which can be resold to institutions under Rule 144A under the 1933 Act. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are treated as exempt from the Portfolio's 15% limit on
illiquid securities. Under the supervision of the Board of Trustees, the
Advisers determine the liquidity of restricted securities and, through reports
from the Advisers, the Board of Trustees will monitor trading activity in
restricted securities. Because Rule 144A is relatively new, it is not possible
to predict how these markets will develop. If institutional trading in
restricted securities were to decline, the liquidity of the Portfolio could be
adversely affected.

OPTIONS AND FUTURES CONTRACTS. The Portfolio may buy and sell options
and futures contracts to manage its exposure to changing interest rates and
security prices. Some options and futures strategies, including selling futures,
buying puts, and writing calls, hedge the Portfolio's investments against price
fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase market exposure. The Portfolio may invest in
options (including over-the-counter options) and futures contracts based on any
type of security or index related to its investments.

Options and futures can be volatile investments, and involve certain
risks. If the Advisers apply a hedge at an inappropriate time or judge interest
rates incorrectly, options and futures strategies may lower the Portfolio's
return. The costs of hedging are not reflected in an investor's yield but are
reflected in the investor's total return. An investor could also experience
losses if the Portfolio's options and futures positions were poorly correlated
with its other investments, or if it could not close out its positions because
of an illiquid secondary market.

The Portfolio currently does not intend to engage in the writing of
options, except for the purpose of terminating an existing position or under the
limited circumstances described in Part B. Nevertheless, the Portfolio has the
authority to write options and may do so in the future if the Advisers determine
that such transactions are in the best interests of the Portfolio.

A-7

<PAGE> 23
receive interest on the loaned securities as well as by either investing the
cash collateral in short-term securities or obtaining yield in the form of
interest paid when U.S. Government obligations are used as collateral. There may
be risks of delay in receiving additional collateral or risks of delay in
recovery of the securities or even loss of rights in the collateral should the
borrower of the securities fail financially. The Portfolio will adhere to the
following conditions whenever its securities are loaned: (i) the Portfolio must
receive at least 100% cash collateral or equivalent securities from the
borrower; (ii) the borrower must increase this collateral whenever the market
value of the loaned securities including accrued interest exceeds the level of
the collateral; (iii) the Portfolio must be able to terminate the loan at any
time; (iv) the Portfolio must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities, and
any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower. However, if a material event adversely
affecting the loaned securities were to occur, the Portfolio would terminate the
loan and regain the right to vote the securities.

DELAYED DELIVERY TRANSACTIONS. In order to help ensure the availability
of suitable securities for the Portfolio, the Advisers may purchase securities
for the Portfolio on a "when-issued" or on a "forward delivery" basis, which
means that the obligations would be delivered to the Portfolio at a future date
beyond customary settlement time. Under normal circumstances, the Portfolio
would take delivery of such securities. In general, the Portfolio would not pay
for the securities until they are received, and would not start earning interest
on the obligations until the contractual settlement date. While awaiting
delivery of the obligations purchased on such basis, the Portfolio would
establish a segregated account consisting of cash, cash equivalents or high
grade liquid debt securities equal to the amount of its commitments to purchase
"when- issued" securities. An increase in the percentage of the Portfolio's
assets committed to the purchase of securities on a "when-issued" basis may
increase the volatility of its net asset value.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may, in each
case up to 5% of the Portfolio's assets, also utilize the following investments
and investment techniques and practices: investments in securities denominated
in foreign currencies, options on futures contracts, foreign currency exchange
transactions or options on foreign currencies. See Part B for further
information.

Changes to the Portfolio's securities generally are made without regard
to the length of time a security has been held, or whether a sale would result
in the recognition of a profit or loss. Therefore, the rate of portfolio
turnover is not a limiting factor to trading when such trading is deemed
appropriate. The Portfolio engages in trading if it believes a transaction net
of costs (including custodian charges) will help it achieve its investment
objective. The portfolio turnover rate in the Portfolio is expected to be less
than 100% annually. See the Statement of Additional Information, including the
financial statements incorporated by reference therein, for further information.
The amount of brokerage commissions and realized capital gains will tend to
increase as the level of portfolio activity increases. The primary consideration
in placing

A-8

<PAGE> 24
portfolio security transactions with broker-dealers for execution is to obtain,
and maintain the availability of, execution at the most favorable prices and in
the most effective manner possible. See "Portfolio Transactions and Brokerage
Commissions" "Brokerage Allocation and Other Practices" in Part B.

As a diversified fund, no more than 5% of the assets of the Portfolio
may be invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. As a nonfundamental operating investment policy, no
more than 15% of the Portfolio's net assets may be invested in (i) securities
the resale of which is restricted under federal securities laws; and (ii)
illiquid or not readily marketable securities (including repurchase agreements
maturing in more than seven days, over-the-counter options and assets used to
cover over-the-counter options). Additional fundamental and operating investment
policies of the Portfolio are contained in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.35% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Merganser. The Subadviser makes the day-to-day

A-9

<PAGE> 25
investment selections for the Portfolio consistent with the guidelines and
directions set by Diversified and the Board of Trustees. For its services under
the Subadvisory Agreement, Merganser receives a fee from Diversified. This fee
is calculated by multiplying the arithmetic average of the beginning and ending
monthly net assets in the Portfolio by the fee schedule and dividing by twelve.
The fee is paid on a quarterly basis at an annual rate equal to 0.50% of the
first $10 million of net assets; 0.375% of the next $15 million of net assets;
0.25% of the next $75 million of net assets; and 0.1875% of net assets in excess
of $100 million. Merganser furnishes at its own expense all services, facilities
and personnel necessary in connection with managing the Portfolio's investments
and effecting securities transactions for the Portfolio.

Merganser was formed in September 1987 and is owned by Edward R.
Bedrosian, Edward M. Safran, Douglas A. Kelly, James S. Wakefield, employees of
Merganser. Total assets under management for all institutional bond clients at
December 31, 1995 were approximately $2.1 billion, $203.5 million of which are
assets of registered investment companies. The principal business address of
Merganser is One Cambridge Center, Cambridge, Massachusetts 02142. Investment
management decisions by Merganser are made by committee and not by managers
individually.

A-10

<PAGE> 26
preparing and mailing reports to investors and to governmental officers and
commissions; expenses of meetings of investors and Trustees; and the advisory
fees payable to the Adviser under the Advisory Agreement.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

A-11

<PAGE> 27
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio (and no other Series).

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each day the Advisers are open for business ("Portfolio
Business Day"). As of 4:00 p.m., New York time, on each such day, the value of
each investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of 4:00 p.m., New York time, on such day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 4:00 p.m., New York time, on such day plus or minus, as the case may be,
the amount of net additions to or reductions in the investor's investment in the
Portfolio effected as of 4:00 p.m., New York time, on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m., New York time, on such day, plus or minus, as the case may be, the
amount of net additions to or reductions in the aggregate investments in the
Portfolio by all investors in

A-12

<PAGE> 28
the Portfolio. The percentage so determined will then be applied to determinethe
value of the investor's interest in the Portfolio as of 4:00 p.m., New York
time, on the following Portfolio Business Day.

The Portfolio values its assets based on their current market value
when market quotations are available. Where market quotations are not available,
assets are valued at fair value as determined in good faith under the direction
of the Board of Trustees. Debt obligations with 60 days or less remaining to
maturity may be valued by the amortized cost method which the Trust's Trustees
have determined to constitute fair value for such securities.

ITEM 8. REDEMPTION OR REPURCHASE.

The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on the NYSE is restricted or, to the extent otherwise permitted by
the 1940 Act, if an emergency exists.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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<PAGE> 29
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - GOVERNMENT/CORPORATE BOND PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Government/Corporate Bond Portfolio (the "Portfolio"), is described
herein. Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to achieve maximum total
return. The Portfolio seeks to accomplish its objective by investing in
investment grade debt securities, U.S. Government obligations, and high quality
short-term obligations. An investment in the Portfolio is neither insured nor
guaranteed by the U.S. Government.

The Portfolio pursues its investment objective by investing in
investment grade debt securities, U.S. Government obligations, including U.S.
Government agency and instrumentality obligations and collateralized mortgage
obligations guaranteed by these agencies and high quality short-term obligations
(including repurchase agreements and reverse repurchase agreements). At least
65% of the Portfolio's assets is invested in U.S. Government securities,
corporate bonds and short-term instruments.

The Advisers attempt to maintain the Portfolio's "duration" between
three and ten years, which means that the Portfolio's overall sensitivity to
interest rates should be similar to that of bonds and notes with remaining
average

<PAGE> 30
maturities from three to fifteen years. The Portfolio's dollar-weighted average
maturity (or dollar-weighted average life in the case of mortgage-backed
securities) may be longer than fifteen years from time to time, but will not
exceed thirty years under normal conditions. The Government/Corporate Bond
Portfolio may hold individual securities with remaining maturities up to thirty
years.

Since the value of fixed income securities generally fluctuates
inversely with changes in interest rates, the duration of the Portfolio will
vary to reflect the Advisers' assessments of prospective changes in interest
rates. The Advisers' strategy will be to adjust the duration of the Portfolio so
that the Portfolio may benefit from relative price appreciation when interest
rates decline and may protect capital value when interest rates rise. The
success of this strategy will depend on the Advisers' ability to manage the
Portfolio through changes in interest rates, and there is a risk that the value
of the securities held by the Portfolio will decline.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

U.S. GOVERNMENT AND AGENCY AND INSTRUMENTALITY SECURITIES. The
Portfolio may invest in U.S. Government securities and securities issued or
guaranteed by agencies or instrumentalities of the U.S. Government. Securities
issued or guaranteed by agencies or instrumentalities of the U.S. Government
have varying degrees of government backing. They may be backed by the credit of
the government as a whole or only by the issuing agency. For example, securities
issued by certain agencies are supported only by the credit of the agency that
issued them, and not by the U.S. Government. U.S. Treasury bonds, notes and
bills, and some agency securities, such as those issued by the Government
National Mortgage Association, are backed by the full faith and credit of the
U.S. Government as to payment of principal and interest and are the highest
quality government securities. There is no assurance that the U.S. Government
will support obligations of its agencies unless it is required to do so by law.
An investment in the Portfolio is not guaranteed by the U.S. Government. For
additional information on U.S. Government securities, see Part B.

The Portfolio may invest a portion of its assets in short-term U.S.
Government securities with remaining maturities of one year or less and
repurchase agreements relating thereto. When the Advisers believe market
conditions warrant a temporary defensive position, the Portfolio may invest up
to 100% of its assets in these instruments.

CORPORATE BONDS. The Portfolio may purchase debt securities of United
States corporations only if they carry a rating of at least Baa from Moody's
Investors Service, Inc. ("Moody's") or BBB from Standard & Poor's Ratings Group

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<PAGE> 31
("S&P") or which, if not rated by these rating agencies, are judged by the
Advisers to be of comparable quality. Securities rated Baa by Moody's and BBB by
S&P may have speculative characteristics. Changes in economic condition or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher grade securities. See Part B
for an explanation of these ratings.

FOREIGN SECURITIES. The Portfolio may invest in securities of foreign
issuers. The Portfolio's investments in unlisted foreign securities are subject
to the overall restrictions applicable to investments in illiquid securities.
The Advisers do not intend to concentrate more than 25% of such foreign
investments in any one type of instrument or in any foreign country. Foreign
securities may represent a greater degree of risk than do securities of domestic
issuers due to possible exchange rate fluctuations, possible exchange controls,
less publicly available information, more volatile markets, less securities
regulation, less favorable tax provisions (including possible withholding
taxes), changes in governmental administration or economic or monetary policy
(in the United States or abroad), war or expropriation. Forward foreign currency
exchange contracts may also be entered into for the purchase or sale of foreign
currency solely for hedging purposes against adverse rate changes. A currency
exchange contract allows a definite price in dollars to be fixed for foreign
securities that have been purchased or sold (but not settled) for the Portfolio.
Entering into such exchange contracts may result in the loss of all or a portion
of the benefits which otherwise could have been obtained from favorable
movements in exchange rates. In addition, entering into such contracts means
incurring certain transaction costs and bearing the risks of incurring losses if
rates do not move in the direction anticipated.

SHORT-TERM INSTRUMENTS. Cash, commercial paper, short-term obligations,
repurchase agreements, bank certificates of deposit or other forms of debt
securities may be held to provide a reserve for future purchases of securities
during periods of unusual market conditions or in order to reduce volatility, or
as a temporary defensive measure when the Advisers determine security markets to
be overvalued. The Portfolio limits its short-term investments to those U.S.
dollar-denominated instruments which are determined by or on behalf of the Board
of Trustees of the Trust (the "Board of Trustees") to present minimal credit
risks and which are of "high quality" as determined by a major rating service
(i.e., rated P-1 by Moody's or A-1 by S&P) or, in the case of instruments which
are not rated, are of comparable quality pursuant to procedures established by
the Board of Trustees. 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 longer term.

Repurchase agreements may be entered into for the Portfolio with
sellers, which are usually member banks of the Federal Reserve System or member
firms of

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<PAGE> 32
the New York Stock Exchange (or a subsidiary thereof). Such transactions afford
an opportunity for the Portfolio to earn a return on available cash at minimal
market risk. Certain costs may be incurred by the Portfolio in connection with
the sale of the securities if the seller does not repurchase them in accordance
with the repurchase agreement. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the securities, realization on the
securities by the Portfolio may be delayed or limited. Repurchase agreements are
considered collateralized loans under the 1940 Act.

Options and futures can be volatile investments, and involve certain
risks. If the Advisers apply a hedge at an inappropriate time or judge interest
rates incorrectly, options and futures strategies may lower an investor's
return. An investor could also experience losses if the Portfolio's options and
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market.

The Portfolio currently does not intend to engage in the writing of
options, except for the purpose of terminating an existing position or under the

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<PAGE> 33
limited circumstances described in Part B. Nevertheless, the Portfolio has the
authority to write options and may do so in the future if the Advisers determine
that such transactions are in the best interests of the Portfolio.

LENDING OF PORTFOLIO SECURITIES. The Portfolio has the authority to
lend portfolio securities to brokers, dealers and other financial organizations.
By lending its securities, the Portfolio can increase its income by continuing
to receive interest on the loaned securities as well as by either investing the
cash collateral in short-term securities or obtaining yield in the form of
interest paid when U.S. Government obligations are used as collateral. There may
be risks of delay in receiving additional collateral or risks of delay in
recovery of the securities or even loss of rights in the collateral should the
borrower of the securities fail financially. The Portfolio will adhere to the
following conditions whenever its securities are loaned: (i) the Portfolio must
receive at least 100% cash collateral or equivalent securities from the
borrower; (ii) the borrower must increase this collateral whenever the market
value of the loaned securities including accrued interest exceeds the level of
the collateral; (iii) the Portfolio must be able to terminate the loan at any
time; (iv) the Portfolio must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities, and
any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower. However, if a material event adversely
affecting the loaned securities were to occur, the Portfolio would terminate the
loan and regain the right to vote the securities.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may, in each
case up to 5% of the Portfolio's assets, also utilize the following investments
and investment techniques and practices: options on futures contracts, foreign
currency exchange transactions and options on foreign currencies. See Part B for
further information.

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<PAGE> 34
custodian charges) will help it achieve its investment objective. The portfolio
turnover rate in the Portfolio is expected to be less than 200% annually. See
the Statement of Additional Information, including the financial statements
incorporated by reference therein, for further information. The amount of
brokerage commissions and realized capital gains will tend to increase as the
level of portfolio activity increases. The primary consideration in placing
portfolio security transactions with broker-dealers for execution is to obtain,
and maintain the availability of, execution at the most favorable prices and in
the most effective manner possible. See "Brokerage Allocation and Other
Practices" in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.35% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the
Diversified are made by committee and not by managers individually.

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<PAGE> 35
Board of Trustees, an appropriate subadviser with a distinguished background and
to review such subadviser's continued performance.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Capital Management Group. Capital Management Group
makes the investment selections for the Portfolio consistent with the guidelines
and directions set by the Adviser and the Board of Trustees. For its services
under the Subadvisory Agreement, Capital Management Group receives a fee from
Diversified. This fee is calculated by multiplying the arithmetic average of the
beginning and ending monthly net assets in the Portfolio by the fee schedule and
dividing by twelve. The fee is paid on a quarterly basis at an annual rate equal
to 0.15% of the Portfolio's average daily net assets. Capital Management Group
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio.

Capital Management Group is a division of 1740 Advisers, Inc., which is
a subsidiary of The Mutual Life Insurance Company of New York. Its address is
1740 Broadway, New York, New York 10019. Total assets under management by
Capital Management Group as of December 31, 1995 were approximately $639
million, $594 million of which were assets of registered investment companies.
Investment management decisions of Capital Management Group are made by
committee and not by managers individually.

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<PAGE> 36
Expenses of the Trust also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Trust's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
officers and commissions; expenses of meetings of investors and Trustees; and
the advisory fees payable to the Adviser under the Advisory Agreement.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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<PAGE> 37
The "net income" of the Portfolio consists of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio (and no other Series).

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

A-9

<PAGE> 38
additions to or reductions in the investor's investment in the Portfolioeffected
as of 4:00 p.m., New York time, on such day, and (ii) the denominator of which
is the aggregate net asset value of the Portfolio as of 4:00 p.m., New York
time, on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of 4:00 p.m.,
New York time, on the following Portfolio Business Day.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

A-10

<PAGE> 39
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - BALANCED PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Balanced Portfolio (the "Portfolio"), is described herein. Beneficial
interests in the Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.

The investment objective of the Portfolio is to provide a high total
return consistent with a broad mix of stocks, bonds and money market
instruments. The Portfolio seeks to accomplish its investment objective by
investing in a broad mix of stocks, bonds and money market instruments. An
investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Institutional Capital Corporation
("Institutional Capital") is the subadviser (the "Subadviser") of the Portfolio.
The Adviser and Subadviser are referred to herein collectively as the
"Advisers". Diversified is also the administrator (the "Administrator") of the
Portfolio. Diversified Investors Securities Corp. is the exclusive placement
agent ("DISC" or the "Placement Agent") of interests in the Portfolio and the
Trust in general.

The Portfolio pursues its investment objective by investing in a
managed mix of common stocks (and/or equivalents including American Depository
Receipts), preferred stocks, debt securities of U.S. domiciled corporations,
U.S. government securities, commercial paper of U.S. corporations, and bank
obligations. The Advisers will determine the proportions of each type of
investment to achieve an asset mix they believe appropriate for an investor who
desires diversification of investment. The Portfolio will vary the proportion of
each type of asset purchased according to the Advisers' interpretations of
changes in economic conditions and the sensitivity of each type of investment to
those changes. In seeking to maximize participation in positive markets and
preservation of capital in negative markets, the Advisers will shift emphasis
among stocks, bonds and short-term instruments in response to market conditions.

<PAGE> 40
The investment objective of the Portfolio may be changed without the
vote of the holders of a majority of the outstanding voting securities of the
Portfolio. There can, of course, be no assurance that the investment objective
of the Portfolio will be achieved.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

The Portfolio's policy is to invest its assets in a broad list of
equity and fixed income securities, such as common stocks, preferred stocks and
bonds, including short-term obligations. The list may be diversified not only by
companies and industries, but also by type of security. Some fixed income
securities may also have a right to purchase common stock by means of a
conversion privilege or attached warrants. The Portfolio may vary the percentage
of assets invested in any one type of security in accordance with the Advisers'
interpretation of economic and market conditions, fiscal and monetary policy,
and underlying security values. However, at least 25% of the total assets of the
Portfolio are always invested in fixed income senior securities including debt
securities and preferred stock. In selecting common stocks, emphasis is placed
on investing in established companies with medium to large market
capitalizations, i.e., $100,000,000 or more, and seasoned management teams.
Greater than 75% of the Portfolio's non-convertible long-term debt investments
consist of "investment grade" securities (rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P")), although unrated debt securities may be purchased and
held if they are judged by the Advisers to be of equivalent quality. Securities
rated Baa by Moody's or BBB by S&P may have speculative characteristics. Changes
in economic conditions or other circumstances may weaken more severely the
capacity of issuers of Baa or BBB securities to make principal and interest
payments than in the case of issuers of higher grade bonds. Less than 5% of the
Portfolio's investments consist of securities rated lower than Baa by Moody's or
BBB by S&P For a description of these ratings, see Part B.

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<PAGE> 41
foreign securities that have been purchased or sold (but not settled) for the
Portfolio. Entering into such exchange contracts may result in the loss of all
or a portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates. In addition, entering into such contracts
means incurring certain transaction costs and bearing the risk of incurring
losses if rates do not move in the direction anticipated.

The Portfolio may enter into transactions in futures contracts, options
on futures contracts, options on securities indexes and options on securities,
for the purpose of hedging the Portfolio's securities, which would have the
effect of reducing the volatility of an investment in the Portfolio. In general,
each such transaction involves the establishment of a position which is expected
to move in a direction opposite to that of the security or securities being
hedged.

For example, the Portfolio may sell futures contracts, or purchase put
options on futures contracts, securities indexes or securities for the purpose
of protecting against an anticipated decline in the value of securities held by
the Portfolio. In the event that such decline occurs, and the hedging
transaction is successful, the reduced value of portfolio securities will be
offset, in whole or in part, by a corresponding gain on the futures or option
position. Conversely, when the Portfolio is not fully invested in the securities
market, and it expects a significant market advance, it may purchase futures
contracts or call options on futures contracts, security indexes or securities
in order to gain rapid market exposure that may in part or entirely offset
increases in the cost of securities that the Portfolio intends to purchase. Part
B includes further information about the transactions in futures and option
contracts to be entered into by the Portfolio.

Gain or loss to the Portfolio on transactions in security index futures
or options will depend on price movements in the stock market generally (or in a
particular industry or segment of the market), rather than price movements of
individual securities. A security index assigns relative values to the
securities included in the index and the index fluctuates with changes in the
market values of the securities so included. Some security index futures or
options are based on broad market indexes, such as the Standard & Poor's 500 or
the New York Stock Exchange Composite Index. In contrast, certain exchanges
offer futures or options on narrower market indexes, such as the Standard &
Poor's 100 or indexes based on an industry or market segment, such as oil and
gas stocks. Options on indexes and options on securities are traded on
securities exchanges regulated by the Securities and Exchange Commission.
Futures contracts and options on futures contracts are traded only on designated
contract markets regulated by the Commodity Futures Trading Commission and
through a registered futures commission merchant which is a member of such
contract market. A commission must be paid on each completed purchase and sale
transaction. Transactions on such exchanges are cleared through a clearing
corporation, which guarantees performance between the clearing members which are
parties to each contract.

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<PAGE> 42
authority to write options and may do so in the future if the Advisers determine
that such transactions are in the best interests of the Portfolio.

Cash, commercial paper, short-term obligations, repurchase agreements
or other forms of debt securities may be held to provide a reserve for future
purchases of common stock or securities during periods of unusual market
conditions or in order to reduce volatility, or as a temporary defensive measure
when the Advisers determine security markets to be overvalued. The Portfolio
limits its short-term investments to those U.S. dollar-denominated instruments
which are determined by or on behalf of the Board of Trustees of the Trust (the
"Board of Trustees") to present minimal credit risks and which are of "high
quality" as determined by a major rating service (i.e., rated P-1 by Moody's or
A-1 by S&P) or, in the case of instruments which are not rated, are of
comparable quality pursuant to procedures established by the Board of Trustees.
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 longer term.

Repurchase agreements involve the acquisition by the Portfolio of an
underlying debt instrument subject to an obligation of the seller to repurchase,
and the Portfolio to resell, the instrument at a fixed price usually not more
than one week after its purchase. The Portfolio's custodian or a sub-custodian
will have custody of securities acquired by the Portfolio under a repurchase
agreement.

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<PAGE> 43
securities are treated as exempt from the Portfolio's 15% limit on illiquid
securities described below. Under the supervision of the Board of Trustees, the
Advisers will determine the liquidity of restricted securities and, through
reports from the Advisers, the Board of Trustees will monitor trading activity
in restricted securities. Because Rule 144A is relatively new, it is not
possible to predict how these markets will develop. If institutional trading in
restricted securities were to decline, the liquidity of the Portfolio could be
adversely affected.

In order to help ensure the availability of suitable securities for the
Portfolio, the Advisers may purchase securities for the Portfolio on a "when-
issued" or on a "forward delivery" basis, which means that the obligations would
be delivered to the Portfolio at a future date beyond customary settlement time.
Under normal circumstances, the Portfolio would take delivery of such
securities. In general, the Portfolio would not pay for the securities until
they are received, and would not start earning interest on the obligations until
the contractual settlement date. While awaiting delivery of the obligations
purchased on such basis, the Portfolio would establish a segregated account
consisting of cash, cash equivalents or high grade liquid debt securities equal
to the amount of its commitments to purchase "when-issued" securities. An
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a "when-issued" basis may increase the volatility of its net
asset value.

The Portfolio has the authority to lend portfolio securities to
brokers, dealers and other financial organizations. By lending its securities,
the Portfolio can increase its income by continuing to receive interest on the
loaned securities as well as by either investing the cash collateral in
short-term securities or obtaining yield in the form of interest paid when U.S.
Government obligations are used as collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. The Portfolio will adhere to the following conditions whenever
its securities are loaned: (i) the Portfolio must receive at least 100% cash
collateral or equivalent securities from the borrower; (ii) the borrower must
increase this collateral whenever the market value of the loaned securities
including accrued interest exceeds the level of the collateral; (iii) the
Portfolio must be able to terminate the loan at any time; (iv) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (v) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower. However, if a material event adversely affecting the loaned securities
were to occur, the Portfolio would terminate the loan and regain the right to
vote the securities.

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<PAGE> 44
turnover rate for common stocks in the Portfolio and for the Portfolio as a
whole is expected to be less than 100% annually. The amount of brokerage
commissions and realized capital gains will tend to increase as the level of
portfolio activity increases. The primary consideration in placing portfolio
security transactions with broker-dealers for execution is to obtain, and
maintain the availability of, execution at the most favorable prices and in the
most effective manner possible. See "Brokerage Allocation and Other Practices"
in Part B.

Part B includes a discussion of additional nonfundamental investment
policies and a listing of specific investment restrictions which constitute
fundamental policies of the Portfolio, and cannot be changed without the
approval of the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio. See "Investment Restrictions" in Part
B.

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.45% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

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<PAGE> 45
companies for which Diversified serves as investment adviser. It is the
Adviser's responsibility to select, subject to the review and approval of the
Board of Trustees, an appropriate subadviser with a distinguished background and
to review such subadviser's continued performance.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Institutional Capital. The Subadviser makes the
investment selections for the Portfolio consistent with the guidelines and
directions set by the Adviser and the Board of Trustees. For its services under
the Subadvisory Agreement, Institutional Capital receives a fee from
Diversified. This fee is accrued monthly by multiplying the arithmetic average
of the beginning and ending monthly net assets in the Portfolio by the fee
schedule and dividing by twelve. The fee is paid on a quarterly basis at an
annual rate equal to 0.55% of the first $25 million of net assets; 0.45% of the
next $25 million of net assets; and 0.35% of net assets in excess of $50
million. Institutional Capital furnishes at its own expense all services,
facilities and personnel necessary in connection with managing the Portfolio's
investments and effecting securities transactions for the Portfolio.

Institutional Capital was formed in January 1970 and is owned by Robert
H. Lyon, Barbara A. Chiesa, Margaret Raymond, Donald D. Wieman, Gary S. Maurer
and Gerrold K. Sensor, employees of Institutional Capital. Total assets under
management for all balanced fund clients at December 31, 1995 were approximately
$579 million, $183 million of which were assets of registered investment
companies. The principal business address of Institutional Capital is 303 West
Madison Street, Chicago, Illinois 60606. Investment management decisions of
Institutional Capital are made by committee and not by managers individually.

A-7

<PAGE> 46
legal counsel and of any transfer agent, custodian or registrar of the Trust;
insurance premiums; and expenses of calculating the net asset value of, and the
net income on, interests in the Portfolio.

Expenses of the Trust also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Trust's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
officers and commissions; expenses of meetings of investors and Trustees; and
the advisory fees payable to the Adviser under the Advisory Agreement.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

The Portfolio determines its net income and realized capital gains, if
any, on each Portfolio Business Day (as defined below) and allocates all such
income

A-8

<PAGE> 47
and gain pro rata among the investors in the Portfolio at the time of such
determination.

The "net income" of the Portfolio consists of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio (and no other Series).

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

A-9

<PAGE> 48
recomputed as the percentage equal to the fraction (i) the numerator of which
isthe value of such investor's investment in the Portfolio as of 4:00 p.m., New
York time, on such day plus or minus, as the case may be, the amount of net
additions to or reductions in the investor's investment in the Portfolio
effected as of 4:00 p.m., New York time, on such day, and (ii) the denominator
of which is the aggregate net asset value of the Portfolio as of 4:00 p.m., New
York time, on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of 4:00 p.m.,
New York time, on the following Portfolio Business Day.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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<PAGE> 49
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - EQUITY INCOME PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Equity Income Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide a high level of
current income through investment in a diversified portfolio of common stocks
with relatively high current yields; capital appreciation is a secondary
objective. An investment in the Portfolio is neither insured nor guaranteed by
the U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Asset Management Group, a division of
1740 Advisers, Inc. ("Asset Management Group"), is the subadviser (the
"Subadviser") of the Portfolio. The Adviser and Subadviser are referred to
herein collectively as the "Advisers". Diversified is also the administrator
(the "Administrator") of the Portfolio. Diversified Investors Securities Corp.
is the exclusive placement agent ("DISC" or the "Placement Agent") of interests
in the Portfolio and the Trust in general.

The Portfolio seeks to achieve its investment objective by investing
primarily in a diversified portfolio of stocks of companies, which, in the
opinion of the Advisers, are fundamentally sound financially and which pay
relatively high dividends on a consistent basis. The Advisers' attempt to manage
the Portfolio so that it will outperform other equity income funds in negative
markets. As a result of this objective, the Portfolio may underperform relative
to other equity income funds in positive markets. The Portfolio invests
primarily in common stocks listed on the New York Stock Exchange (the "NYSE")
and on other national securities exchanges and, to a lesser extent, in stocks
that are traded over-the-counter. The Portfolio also invests in bonds and
short-term
<PAGE> 50
obligations as well as securities convertible into common stocks, preferred
stocks, debt securities and short-term obligations. The Portfolio allocates its
investments among different industries and companies, and changes its portfolio
securities for investment considerations and not for trading purposes.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

The Portfolio's policy is to invest in a broad list of equity and fixed
income securities, including short-term obligations. The list may be diversified
not only by companies and industries, but also by type of security. Some fixed
income securities may also have a call on common stock by means of a conversion
privilege or attached warrants. The Portfolio may vary the percentage of assets
invested in any one type of security in accordance with the Advisers'
interpretation of economic and market conditions, fiscal and monetary policy,
and underlying security values.

The Portfolio's current policy is not to invest more than 25% of its
assets in securities of foreign issuers, including investments in sponsored
American Depositary Receipts ("ADRs"). ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the underlying foreign
securities. The Portfolio's investments in unlisted foreign securities, not
including ADRs, are subject to the overall restrictions applicable to
investments in illiquid securities. Foreign securities, including ADRs, may
represent a greater degree of risk than do securities of domestic issuers due to
possible exchange rate fluctuations, possible exchange controls, less publicly
available information, more volatile markets, less securities regulation, less
favorable tax provisions (including possible withholding taxes), changes in
governmental administration or economic or monetary policy (in the United States
or abroad), war or expropriation. The Portfolio may invest up to 5% of its
assets in closed-end investment companies which primarily hold foreign
securities. Forward foreign currency exchange contracts may also be entered into
for the purchase or sale of foreign currency solely for hedging purposes against
adverse rate changes. A currency exchange contract allows a definite price in
dollars to be fixed for foreign securities that have been purchased or sold (but
not settled) for the Portfolio. Entering into such exchange contracts may result
in the loss of all or a portion of the benefits which otherwise could have been
obtained from favorable movements in exchange rates. In addition, entering into
such contracts means incurring certain transaction costs and bearing the risk of
incurring losses if rates do not move in the direction anticipated.

A-2
<PAGE> 51
such transaction involves the establishment of a position which is expected to
move in a direction opposite to that of the security or securities being hedged.

Part B includes further information about the transactions in futures
and option contracts to be entered into by the Portfolio. Gain or loss to the
Portfolio on transactions in security index futures or options will depend on
price movements in the stock market generally (or in a particular industry or
segment of the market), rather than price movements of individual securities. A
security index assigns relative values to the securities included in the index
and the index fluctuates with changes in the market values of the securities so
included. Some security index futures or options are based on broad market
indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures or options on
narrower market indexes, such as the Standard & Poor's 100 or indexes based on
an industry or market segment, such as oil and gas stocks. Options on indexes
and options on securities are traded on securities exchanges regulated by the
Securities and Exchange Commission. Futures contracts and options on futures
contracts are traded only on designated contract markets regulated by the
Commodity Futures Trading Commission and through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees performance between the
clearing members which are parties to each contract.

A-3
<PAGE> 52
quality pursuant to procedures established by the Board of Trustees. 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 longer term.

The Portfolio may purchase securities in the United States that are not
registered for sale under federal securities laws but which can be resold to
institutions under Rule 144A under the 1933 Act. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are treated as exempt from the Portfolio's 15% limit on illiquid
securities. Under the supervision of the Board of Trustees, the Advisers will
determine the liquidity of restricted securities and, through reports from the
Advisers, the Board of Trustees will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

A-4
<PAGE> 53
Under normal circumstances, the Portfolio would take delivery of such
securities. In general, the Portfolio would not pay for the securities until
they are received, and would not start earning interest on the obligations until
the contractual settlement date. While awaiting delivery of the obligations
purchased on such basis, the Portfolio would establish a segregated account
consisting of cash, cash equivalents or high grade liquid debt securities equal
to the amount of its commitments to purchase "when-issued" securities. An
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a "when-issued" basis may increase the volatility of its net
asset value.

A-5
<PAGE> 54
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. As a nonfundamental operating investment policy, no
more than 15% of the Portfolio's net assets may be invested in (i) securities
the resale of which is restricted under federal securities laws; and (ii)
illiquid or not readily marketable securities (including repurchase agreements
maturing in more than seven days).

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.45% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Asset Management Group. Asset Management Group
makes the investment selections for the Portfolio consistent with the guidelines
and directions set by the Adviser and the Board of Trustees. For its services
under the Subadvisory Agreement, Asset Management Group receives a fee from
Diversified. This fee is accrued monthly by multiplying the arithmetic average

A-6
<PAGE> 55
of the beginning and ending monthly net assets in the Portfolio by the fee
schedule and dividing by twelve. This fee is paid on a quarterly basis at an
annual rate equal to 0.25% of the Portfolio's average daily net assets. Asset
Management Group furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolio's investments and
effecting securities transactions for the Portfolio.

Asset Management Group is a division of 1740 Advisers, Inc., which is a
subsidiary of The Mutual Life Insurance Company of New York. Its address is 1740
Broadway, New York, New York 10019. Total assets under management by Asset
Management Group as of December 31, 1995 were approximately $1.0 billion, $910
million of which were assets of registered investment companies. Investment
management decisions of Asset Management Group are made by committee and not by
managers individually.

A-7
<PAGE> 56
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

A-8
<PAGE> 57
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Trust) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

A-9
<PAGE> 58
The Portfolio values its assets based on their current market value
when market quotations are available. Where market quotations are not available,
assets are valued at fair value as determined in good faith under the direction
of the Board of Trustees. Debt obligations with 60 days or less remaining to
maturity may be valued by the amortized cost method which the Trust's Trustees
have determined to constitute fair value for such securities.

ITEM 8. REDEMPTION OR REPURCHASE.

An investor in the Portfolio may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal request in
proper form is furnished by the investor to the Portfolio by the designated
cutoff time for each accredited investor. The proceeds of a reduction or
withdrawal will be paid by the Portfolio in federal funds normally on the
Portfolio Business Day the withdrawal is effected, but in any event within seven
days. The Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be. Investments in the Portfolio may not be
transferred.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

A-10
<PAGE> 59
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - GROWTH & INCOME PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

Item 4. General Description of Registrant.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Growth & Income Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide current income
and capital appreciation. In general, the objective of the Portfolio is to
achieve greater capital appreciation than an income fund and less price
volatility than a growth fund. The Portfolio seeks to achieve its investment
objective by investing primarily in a diversified portfolio of securities
selected for their potential to generate current income or long term capital
appreciation. An investment in the Portfolio is neither insured nor guaranteed
by the U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Putnam Advisory Company, Inc.
("Putnam") is the subadviser (the "Subadviser") of the Portfolio. The Adviser
and Subadviser are referred to herein collectively as the "Advisers".
Diversified is also the administrator (the "Administrator") of the Portfolio.
Diversified Investors Securities Corp. is the exclusive placement agent ("DISC"
or the "Placement Agent") of interests in the Portfolio and the Trust in
general.

The Portfolio seeks to achieve its investment objective by investing
primarily in a diversified portfolio of stocks, selected for their potential to
generate current income and/or long term capital appreciation. The Portfolio
invests primarily in preferred stocks and common stocks listed on the New York
Stock Exchange (the "NYSE") and on other national securities exchanges and, to a
lesser extent, in stocks that are traded over-the-counter. The Portfolio also
invests in bonds and short-term obligations as well as securities convertible
into common stocks, preferred stocks, debt securities and short-term
obligations. The Portfolio allocates its investments among different industries
and companies,
<PAGE> 60
and changes its portfolio securities for investment considerations and not for
trading purposes. In general, the Portfolio seeks to invest in growing,
financially stable and undervalued companies.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

The Portfolio may enter into transactions in futures contracts, options
on futures contracts, options on securities indexes and options on securities,
for the purpose of hedging the Portfolio's securities, which would have the
effect of reducing the volatility of the net asset value an investment in the
Portfolio. In general, each such transaction involves the establishment of a
position which

A-2
<PAGE> 61
is expected to move in a direction opposite to that of the security or
securities being hedged.

A-3
<PAGE> 62
quality pursuant to procedures established by the Board of Trustees. 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 longer term.

A-4
<PAGE> 63
Under normal circumstances, the Portfolio would take delivery of such
securities. In general, the Portfolio would not pay for the securities until
they are received, and would not start earning interest on the obligations until
the contractual settlement date. While awaiting delivery of the obligations
purchased on such basis, the Portfolio would establish a segregated account
consisting of cash, cash equivalents or high grade liquid debt securities equal
to the amount of its commitments to purchase "when-issued" securities. An
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a "when-issued" basis may increase the volatility of its net
asset value.

A-5
<PAGE> 64
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. As a nonfundamental operating investment policy, no
more than 15% of the Portfolio's net assets may be invested in (i) securities
the resale of which is restricted under federal securities laws; and (ii)
illiquid or not readily marketable securities (including repurchase agreements
maturing in more than seven days).

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.60% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Putnam. The Subadviser makes the investment
selections for the Portfolio consistent with the guidelines and directions set
by the Adviser and the Board of Trustees. For its services under the Subadvisory
Agreement, Putnam receives a fee from Diversified. This fee is accrued monthly
by multiplying the arithmetic average of the beginning and ending monthly net

A-6
<PAGE> 65
assets in the Portfolio by the fee schedule and dividing by twelve. The fee is
paid on a quarterly basis at an annual rate equal to 0.30% of the first
$100 million of net assets; and 0.20% of net assets in excess of $100 million.
Putnam furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio.

Putnam was formed in 1937 and is owned by Marsh & McLennon Companies,
Inc. The principal address of Putnam is One Post Office Square, Boston, MA
02109. Total assets under management for growth and income clients at December
31, 1995 were approximately $868 million, $125 million of which were assets of
registered investment companies. Investment management decisions of Putnam are
made by committee and not by managers individually.

A-7
<PAGE> 66
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

A-8
<PAGE> 67
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Trust) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

A-9
<PAGE> 68
The Portfolio values its assets based on their current market value
when market quotations are available. Where market quotations are not available,
assets are valued at fair value as determined in good faith under the direction
of the Board of Trustees. Debt obligations with 60 days or less remaining to
maturity may be valued by the amortized cost method which the Trust's Trustees
have determined to constitute fair value for such securities.

ITEM 8. REDEMPTION OR REPURCHASE.

Item 9. Pending Legal Proceedings.

Not applicable.

A-10
<PAGE> 69
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - INTERNATIONAL EQUITY PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, International Equity Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide a high level of
capital appreciation through investment in a diversified portfolio of securities
of foreign issuers. The Portfolio seeks to achieve its investment objective by
investing primarily in foreign securities. Foreign securities are defined as
securities of issuers, wherever organized, which trade solely on a foreign
exchange or, in the judgment of the Advisers, have their principal activities
outside of the United States. In determining whether an issuer's principal
activities and interests are outside the United States, the Advisers will look
at such factors as the location of its assets, personnel, sales and earnings.
Under normal circumstances, at least 65% of the assets of the Portfolio are
invested in foreign equity securities. The Advisers will purchase securities of
companies in a minimum of 3 countries outside the United States.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Capital Guardian Trust Company
("Capital Guardian") is the subadviser (the "Subadviser") of the Portfolio. The
Adviser and Subadviser are referred to herein collectively as the "Advisers".
Diversified is also the administrator (the "Administrator") of the Portfolio.
Diversified Investors Securities Corp. is the exclusive placement agent ("DISC"
or the "Placement Agent") of interests in the Portfolio and the Trust in
general.

When allocating the Portfolios' investments among geographic regions
and individual countries, the Advisers consider various criteria, such as
prospects for relative economic growth among countries, expected levels of
inflation, government policies influencing business conditions, and the outlook
for currency
<PAGE> 70
relationships. The Portfolio expects to invest most of its assets in securities
of issuers located in developed countries in the following geographic areas:
Canada, the Far East, Australia and Europe.

The Portfolio may invest up to 10% of its assets in securities of
issuers in the world's emerging markets. Countries with emerging markets include
those that have an emerging stock market as defined by the International Finance
Corporation, those with low-to middle-income economies according to the World
Bank, and those listed in World Bank publications as developing. While the
Advisers believe that these investments present the possibility for significant
growth over the long-term, they also entail significant risks. Many investments
in emerging markets can be considered speculative, and their prices can be much
more volatile than those in the more developed nations of the world. This
difference reflects the greater uncertainties of investing in less established
markets and economies.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

The Portfolio may invest in all types of securities, most of which are
denominated in foreign currencies. While the Advisers expect that opportunities
for long term growth of capital will come primarily from common stocks,
securities convertible into common stock, non-convertible preferred stocks and
depository receipts for these securities, the Portfolio may also invest in any
type or quality of debt securities if the Advisers believe that doing so may
result in long term growth. Forward foreign currency exchange contracts may also
be entered into for the purchase or sale of foreign currency solely for hedging
purposes against adverse rate changes. A currency exchange contract allows a
definite price in dollars to be fixed for foreign securities that have been
purchased or sold (but not settled) for the Portfolio. Entering into such
exchange contracts may result in the loss of all or a portion of the benefits
which otherwise could have been obtained from favorable movements in exchange
rates. In addition, entering into such contracts means incurring certain
transaction costs and bearing the risk of incurring losses if rates do not move
in the direction anticipated.

Investments in foreign equity and debt securities involve increased or
additional risks from those encountered when investing in securities of domestic
issuers. The Advisers evaluate the risks and opportunities when investing in
particular foreign securities. Such risks include trade balances and imbalances
and related economic policies; currency exchange rate fluctuations; foreign
exchange control policies; expropriation or confiscatory taxation; limitations
on the removal of funds or other assets; political or social instability; the
diverse structure and liquidity of securities markets in various countries and
regions; policies of governments with respect to possible nationalization of

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<PAGE> 71
their own industries; and other specific local, political and economic
considerations.

Part B includes further information about the transactions in futures
and option contracts to be entered into by the Portfolio.

The Portfolio currently does not intend to engage in the writing of
options, except for the purpose of terminating an existing position or under the
limited circumstances described in Part B. Nevertheless, the Portfolio has the
authority to write options and may do so in the future if the Adviser determines
that such transactions are in the best interests of the Portfolio.

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<PAGE> 72
Cash, commercial paper, short-term obligations, repurchase agreements
or other forms of debt securities may be held to provide a reserve for future
purchases of common stock or securities during periods of unusual market
conditions or in order to reduce volatility, or as a temporary defensive measure
when the Advisers determine security markets to be overvalued. The Portfolio
limits its short-term investments to those U.S. dollar-denominated instruments
which are determined by or on behalf of the Board of Trustees of the Trust (the
"Board of Trustees") to present minimal credit risks and which are of "high
quality" as determined by a major rating service (i.e., rated P-1 by Moody's or
A-1 by S&P) or, in the case of instruments which are not rated, are of
comparable quality pursuant to procedures established by the Board of Trustees.
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 longer term.

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<PAGE> 73
Advisers, the Board of Trustees will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

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<PAGE> 74
placing portfolio security transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the most favorable prices
and in the most effective manner possible. See "Brokerage Allocation and Other
Practices" in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.80% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

A-6
<PAGE> 75
Board of Trustees, an appropriate subadviser with a distinguished background and
to review such subadviser's continued performance.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Capital Guardian. The Subadviser makes the
investment selections for the Portfolio consistent with the guidelines and
directions set by the Adviser and the Board of Trustees. For its services under
the Subadvisory Agreement, Capital Guardian receives a fee from Diversified.
This fee is accrued monthly by multiplying the arithmetic average of the
beginning and ending monthly net assets in the Portfolio by the fee schedule and
dividing by twelve. The fee is paid on a quarterly basis at an annual rate equal
to 0.72% of net assets in the Portfolio. Capital Guardian furnishes at its own
expense all services, facilities and personnel necessary in connection with
managing the Portfolio's investments and effecting securities transactions for
the Portfolio.

Capital Guardian was formed in 1968 and is owned by certain of its
employees. The principal address of Capital Guardian is 333 South Hope Street,
Los Angeles, California 90071. Total assets under management for all
international equity clients by Capital Guardian at December 31, 1995 were
approximately $15 billion, $613 million of which were assets of registered
investment companies. Investment management decisions of Capital Guardian are
made by committee and not by managers individually.

A-7
<PAGE> 76
Expenses of the Trust also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Trust's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
officers and commissions; expenses of meetings of investors and Trustees; and
the advisory fees payable to the Adviser under the Advisory Agreement.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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<PAGE> 77
The "net income" of the Portfolio consists of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio (and no other Series).

Investor inquiries regarding the Portfolio may be directed to the
Exclusive Placement Agent/DISC at Four Manhattanville Road, Purchase, New York
10577 (914) 697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

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<PAGE> 78
York time, on such day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of 4:00 p.m., New York time, on such day, plus
or minus, as the case may be, the amount of net additions to or reductions in
the aggregate investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of 4:00 p.m., New York time, on the
following Portfolio Business Day.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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<PAGE> 79
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - EQUITY GROWTH PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Equity Growth Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide a high level of
capital appreciation through investment in a diversified portfolio of common
stocks with potential for above average growth in earnings and dividends;
current income is a secondary objective. The Portfolio seeks to achieve its
investment objective by investing in a diversified portfolio of common stocks.
Investments will be selected based on their potential for above average growth
in earnings and dividends, with current income a secondary consideration. An
investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Jundt Associates, Inc. ("Jundt") is
the subadviser (the "Subadviser") of the Portfolio. The Adviser and Subadviser
are referred to herein collectively as the "Advisers". Diversified is also the
administrator (the "Administrator") of the Portfolio. Diversified Investors
Securities Corp. is the exclusive placement agent ("DISC" or the "Placement
Agent") of interests in the Portfolio and the Trust in general.

The Portfolio seeks to achieve its investment objective by investing
primarily in a diversified portfolio of common stocks but may also invest in
other types of securities such as preferred stock, convertible and
non-convertible bonds and warrants and in foreign securities including American
Depository Receipts. Under normal circumstances, at least 65% of the Portfolio's
assets is invested in equity securities. This is a fundamental investment policy
and may not be changed without investor approval. Investments will be selected
based on their potential for above average growth in earnings and dividends,
with
<PAGE> 80
current income a secondary consideration. The Portfolio invests primarily in
stocks of companies that have a market value of all their issued and outstanding
common stock of $10 to $15 billion and preferred stocks and common stocks listed
on the New York Stock Exchange (the "NYSE") and on other national securities
exchanges and, to a lesser extent, in stocks that are traded over-the-counter.
The Portfolio also invests in bonds and short-term obligations as well as
securities convertible into common stocks, preferred stocks, debt securities and
short-term obligations. The Portfolio allocates its investments among different
industries and companies, and changes its portfolio securities for investment
considerations and not for trading purposes.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

While the Portfolio's policy is to invest its assets primarily in
preferred and common stocks with potential for above average growth in earnings
and dividends, appreciation may be sought in other types of securities such as
convertible and non-convertible bonds and warrants. The Portfolio may vary the
percentage of assets invested in any one type of security in accordance with the
Adviser's interpretation of economic and market conditions, fiscal and monetary
policy, and underlying security values. In selecting stocks, emphasis is placed
on investing in companies with medium to large market capitalizations, i.e., the
market value of all issued and outstanding common stock of the company equals
approximately $10 to $15 billion.

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<PAGE> 81
favorable movements in exchange rates. In addition, entering into such contracts
means incurring certain transaction costs and bearing the risk of incurring
losses if rates do not move in the direction anticipated.

The Portfolio currently does not intend to engage in the writing of
options, except for the purpose of terminating an existing position or under the
limited circumstances described in Part B. Nevertheless, the Portfolio has the
authority to write options and may do so in the future if the Adviser determines
that such transactions are in the best interests of the Portfolio.

Cash, commercial paper, short-term obligations, repurchase agreements
or other forms of debt securities may be held to provide a reserve for future

A-3
<PAGE> 82
purchases of common stock or securities during periods of unusual market
conditions or in order to reduce volatility, or as a temporary defensive measure
when the Advisers determine security markets to be overvalued. The Portfolio
limits its short-term investments to those U.S. dollar-denominated instruments
which are determined by or on behalf of the Board of Trustees of the Trust (the
"Board of Trustees") to present minimal credit risks and which are of "high
quality" as determined by a major rating service (i.e., rated P-1 by Moody's or
A-1 by S&P) or, in the case of instruments which are not rated, are of
comparable quality pursuant to procedures established by the Board of Trustees.
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 longer term.

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<PAGE> 83
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

A-5
<PAGE> 84
portfolio security transactions with broker-dealers for execution is to obtain,
and maintain the availability of, execution at the most favorable prices and in
the most effective manner possible. See "Brokerage Allocation and Other
Practices" in Part B.

Part B a discussion of additional nonfundamental investment policies
and a listing of specific investment restrictions which constitute fundamental
policies of the Portfolio, and cannot be changed without the approval of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the Portfolio. See "Investment Restrictions" in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.70% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

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<PAGE> 85
Board of Trustees, an appropriate subadviser with a distinguished background and
to review such subadviser's continued performance.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Jundt. The Subadviser makes the investment
selections for the Portfolio consistent with the guidelines and directions set
by the Adviser and the Board of Trustees. For its services under the Subadvisory
Agreement, Jundt receives a fee from Diversified. This fee is accrued monthly by
multiplying the arithmetic average of the beginning and ending monthly net
assets in the Portfolio by the fee schedule and dividing by twelve. The fee is
paid on a quarterly basis at an annual rate equal to 0.625% of net assets in the
Portfolio. Jundt furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolio's investments and
effecting securities transactions for the Portfolio.

Jundt was formed in December 1972 and is owned by James Jundt and
Marcus Jundt, employees of Jundt. Total assets under management for all core
equity clients at December 31, 1995 were approximately $2.4 billion, $363
million of which were assets of registered investment companies. The principal
business address of Jundt is 1550 Utica Avenue South, Suite 950, St. Louis Park,
Minnesota 55416. Investment management decisions of Jundt are made by committee
and not by managers individually.

A-7
<PAGE> 86
Expenses of the Trust also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Trust's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
officers and commissions; expenses of meetings of investors and Trustees; and
the advisory fees payable to the Adviser under the Advisory Agreement.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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<PAGE> 87
The "net income" of the Portfolio consists of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio (and no other Series).

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

A-9
<PAGE> 88
additions to or reductions in the investor's investment in the Portfolio
effected as of 4:00 p.m., New York time, on such day, and (ii) the denominator
of which is the aggregate net asset value of the Portfolio as of 4:00 p.m., New
York time, on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of 4:00 p.m.,
New York time, on the following Portfolio Business Day.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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<PAGE> 89
PART A

DIVERSIFIED INVESTORS PORTFOLIOS - SPECIAL EQUITY PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Special Equity Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide a high level of
capital appreciation through investment in a diversified portfolio of common
stocks of small to medium size companies. The Portfolio seeks to achieve its
investment objective by investing primarily in a diversified portfolio of stocks
of small to medium size companies which, in the opinion of the Portfolio's
investment advisers, will present an opportunity for significant increases in
earnings and/or value, without consideration for current income. An investment
in the Portfolio is neither insured nor guaranteed by the U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Pilgrim Baxter & Associates, ARK Asset
Management Co., Inc., Liberty Investment Management Inc., and Westport Asset
Management, Inc. are the subadvisers (the "Subadvisers") of the Portfolio. The
Adviser and Subadviser are referred to herein collectively as the "Advisers".
Diversified is also the administrator (the "Administrator") of the Portfolio.
Diversified Investors Securities Corp. is the exclusive placement agent ("DISC"
or the "Placement Agent") of interests in the Portfolio and the Trust in
general.

The Portfolio seeks to achieve its investment objective by investing
primarily in a diversified portfolio of stocks of small to medium size companies
which, in the opinion of the Portfolio's Advisers, will present an opportunity
for significant increases in earnings and/or value, without consideration for
current income. The Portfolio's primary equity investments are common stocks of
small and medium sized U.S. companies with market capitalizations of less than
$2 billion. Multiple managers are used to control the volatility often
<PAGE> 90
associated with investments in small to medium size companies and to maximize
opportunities in positive markets. The Portfolio 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. The Portfolio
allocates its investments among different industries and companies, and changes
its portfolio securities for investment considerations and not for trading
purposes.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

While the Portfolio's policy is to invest its assets primarily in
common stocks with potential for above average growth in earnings, appreciation
may be sought in other types of securities such as preferred stocks, convertible
and non-convertible bonds and warrants as well as foreign securities including
American Depository Receipts. The Portfolio may vary the percentage of assets
invested in any one type of security in accordance with the Advisers'
interpretation of economic and market conditions, fiscal and monetary policy,
and underlying security values. In selecting stocks, emphasis is placed on
investing in companies with small to medium market capitalizations, i.e., the
market value of all issued and outstanding common stock of the company equals up
to approximately $1.5 billion. Investing in equity securities of small to medium
companies involves risks not typically associated with investment in comparable
securities of large companies. Such smaller companies may have narrow product
lines and limited financial and managerial resources. Since the market for the
equity securities of small companies is often characterized by less information
and liquidity than that for the equity securities of large companies, securities
of such small companies may be subject to more abrupt or erratic market
movements than securities of large companies or market averages in general.
Therefore, an investment in the Portfolio may be subject to greater declines in
value than an investment in an equity fund investing in the equity securities of
large companies.

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<PAGE> 91
war or expropriation. The Portfolio may invest up to 5% of its assets in
closed-end investment companies which primarily hold foreign securities. Forward
foreign currency exchange contracts may also be entered into for the purchase or
sale of foreign currency solely for hedging purposes against adverse rate
changes. A currency exchange contract allows a definite price in dollars to be
fixed for foreign securities that have been purchased or sold (but not settled)
for the Portfolio. Entering into such exchange contracts may result in the loss
of all or a portion of the benefits which otherwise could have been obtained
from favorable movements in exchange rates. In addition, entering into such
contracts means incurring certain transaction costs and bearing the risk of
incurring losses if rates do not move in the direction anticipated.

The Portfolio may enter into transactions in futures contracts, options
on futures contracts, options on securities indexes and options on securities,
for the purpose of hedging the Portfolio's securities, which would have the
effect of reducing the volatility of the net asset value of an investment in the
Portfolio. In general, each such transaction involves the establishment of a
position which is expected to move in a direction opposite to that of the
security or securities being hedged.

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<PAGE> 92
The Portfolio currently does not intend to engage in the writing of
options, except for the purpose of terminating an existing position or under the
limited circumstances described in Part B. Nevertheless, the Portfolio has the
authority to write options and may do so in the future if the Advisers determine
that such transactions are in the best interests of the Portfolio.

The Portfolio may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated redemption requests, and not for
leverage, and by agreeing to sell portfolio securities to financial institutions
such as banks and broker-dealers and to repurchase them at a mutually agreed
date and price (a "reverse repurchase agreement"). At the time the Portfolio
enters into a reverse repurchase agreement it will place in a segregated
custodial account cash, U.S. Government securities or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities. Reverse repurchase agreements are considered to be
borrowings by the Portfolio.

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<PAGE> 93
The Portfolio may purchase securities in the United States that are not
registered for sale under federal securities laws but which can be resold to
institutions under Rule 144A under the 1933 Act. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are treated as exempt from the Portfolio's 15% limit on illiquid
securities. Under the supervision of the Board of Trustees, the Advisers will
determine the liquidity of restricted securities and, through reports from the
Advisers, the Board of Trustees will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

In order to help ensure the availability of suitable securities for the
Portfolio, the Advisers may purchase securities for the Portfolio on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
would be delivered to the Portfolio at a future date beyond customary settlement
time. Under normal circumstances, the Portfolio would take delivery of such
securities. In general, the Portfolio would not pay for the securities until
they are received, and would not start earning interest on the obligations until
the contractual settlement date. While awaiting delivery of the obligations
purchased on such basis, the Portfolio would establish a segregated account
consisting of cash, cash equivalents or high grade liquid debt securities equal
to the amount of its commitments to purchase "when-issued" securities. An
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a "when-issued" basis may increase the volatility of its net
asset value.

Changes to the Portfolio's securities generally are made without regard
to the length of time a security has been held, or whether a sale would result
in

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<PAGE> 94
the recognition of a profit or loss. Therefore, the rate of portfolio turnover
is not a limiting factor to trading when such trading is deemed appropriate. The
Portfolio engages in trading if it believes a transaction net of costs
(including custodian charges) will help it achieve its investment objective. The
portfolio turnover rate in the Portfolio is expected to be less than 100%
annually. See the Statement of Additional Information, including the financial
statements incorporated by reference therein, for further information. The
amount of brokerage commissions and realized capital gains will tend to increase
as the level of portfolio activity increases. The primary consideration in
placing portfolio security transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the most favorable prices
and in the most effective manner possible. See "Brokerage Allocation and Other
Practices" in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.80% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

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Diversified is an indirect, wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"), a financial services holding company whose primary emphasis is life
and health insurance and annuity and investment products. AEGON is an indirect,
wholly-owned subsidiary of AEGON nv, a Netherlands corporation which is a
publicly traded international insurance group. Diversified was incorporated in
1992 for the purpose of acting as investment adviser to the Portfolio and other
series of the Trust. Accordingly, the Trust is the first family of investment
companies for which Diversified serves as investment adviser. It is the
Adviser's responsibility to select, subject to the review and approval of the
Board of Trustees, an appropriate subadviser or subadvisers with a distinguished
background and to review such subadviser's continued performance.

Diversified has entered into Investment Subadvisory Agreements with
each of the Subadvisers (the "Subadvisory Agreements"). The Subadvisers make the
day-to-day investment selections for the Portfolio consistent with the
guidelines and directions set by Diversified and the Board of Trustees. For its
services under the Subadvisory Agreement, each of the Subadvisers receives a fee
from Diversified. This fee is accrued monthly by multiplying the arithmetic
average of the beginning and ending monthly net assets in the Portfolio by the
fee schedule and dividing by twelve. The fee is paid on a quarterly basis at an
annual rate equal to 0.50% of the portfolios net assets under management by each
of the Subadvisers. The Subadvisers furnish at their own expense all services,
facilities and personnel necessary in connection with managing the Portfolio's
investments and effecting securities transactions for the Portfolio.

There are four Subadvisers:

* ARK Asset Management Co., Inc. ("Ark") was formed in July 1989 and is
owned by C. Charles Hetzel, Henry Breck, Colman M. Brandt and Jay
Mermelstein, employees of ARK Asset Holdings, Inc. Assets under
management for all small capitalization clients at December 31, 1995
equalled approximately $1.7 billion, $83 million of which were assets
of registered investment companies. The principal business address of
Ark is One New York Plaza, New York 10004.

* Liberty Investment Management, Inc. ("Liberty") was formed in 1994
and is owned by certain of its employees, Liberty succeeded to certain
of the investment management businesses of Eage Asset Management, Inc.
Assets under management for all small capitalization equity clients at
December 31, 1995 equaled approximately $401 million, $91 million of
which were assets of registered investment companies. The principal
business address of Eagle is 880 Carillon Parkway, St. Petersburg,
Florida 33716.

* Pilgrim Baxter & Associates, Ltd. ("Pilgrim") was formed in 1995 is
and owned by United Asset Management, Inc., a publicly owned
corporation. Pilgrim succeeded to certain of the investment management
businesses and acquired the corporate name of Pilgrim Baxter &
Associates, Ltd. in April 1995. Assets under management for all small
capitalization equity clients at December 31, 1995 were approximately
$4.7 billion, $2.6 billion of which were assets of registered
investment companies. The principal business address of Pilgrim is 1255
Drummers Lanes, Wayne, Pennsylvania 19087.

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* Westport Asset Management, Inc. ("Westport") was formed in July 1983
and is owned by Andrew J. Knuth and Ronald H. Oliver, employees of
Westport. Total assets under management for all equity clients at
December 31, 1995 equalled approximately $520 million, $119 million of
which were assets of registered investment companies. The principal
business address of Westport is 253 Riverside Avenue, Westport,
Connecticut 06880.

Investment management decisions by each of the Subadvisers are made by
committee and not by managers individually.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

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thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.

Investor inquiries regarding the Portfolio may be directed to the
Exclusive Placement Agent/DISC at Four Manhattanville Road, Purchase, New York
10577 (914) 697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

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maturity may be valued by the amortized cost method which the Trust's Trustees
have determined to constitute fair value for such securities.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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PART A

DIVERSIFIED INVESTORS PORTFOLIOS - INTERMEDIATE GOVERNMENT BOND PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Intermediate Government Bond Portfolio (the "Portfolio"), is described
herein. Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide as high a level
of current income as is consistent with the preservation of capital. The
Portfolio seeks to accomplish this objective by investing in high quality U.S.
Government securities with intermediate maturities and high quality short-term
obligations. An investment in the Portfolio is neither insured nor guaranteed by
the U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. 1740 Advisers, Inc. ("1740 Advisers")
is the subadviser (the "Subadviser") of the Portfolio. The Adviser and
Subadviser are referred to herein collectively as the "Advisers". Diversified is
also the administrator (the "Administrator") of the Portfolio. Diversified
Investors Securities Corp. is the exclusive placement agent ("DISC" or the
"Placement Agent") of interests in the Portfolio and the Trust in general.

The Portfolio pursues its investment objective by investing in high
quality U.S. Government obligations, including U.S. Government agency
obligations, including collateralized mortgage obligations guaranteed by those
agencies, and high quality short-term obligations (including repurchase
agreements and reverse repurchase agreements).

The Advisers attempt to maintain the Portfolio's "duration" between one
and five years, which means that the Portfolio's overall sensitivity to interest
rates should be similar to that of bonds and notes with remaining average
maturities from one to five years. The Portfolio's dollar-weighted average
maturity (or dollar-weighted average life in the case of mortgage-backed
<PAGE> 101
securities) may be longer than five years from time to time, but will not exceed
ten years under normal conditions. The Portfolio may hold individual securities
with remaining maturities of up to thirty years.

Since the value of fixed income securities generally fluctuates
inversely with changes in interest rates, the duration of the Portfolio will
vary to reflect the Advisers' assessments of prospective changes in interest
rates, so that the Portfolio may benefit from relative price appreciation when
interest rates decline and may protect capital value when interest rates rise.
The success of this strategy will depend on the Advisers' ability to manage the
Portfolio through changes in interest rates, and there is a risk that the value
of the securities held by the Portfolio will decline.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may invest in U.S.
Government securities. U.S. Government securities are securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. U.S.
Government securities have varying degrees of government backing. They may be
backed by the credit of the government as a whole or only by the issuing agency.
For example, securities issued by certain agencies are supported only by the
credit of the agency that issued them, and not by the U.S. Government.
Securities issued by the Federal Home Loan Mortgage Corporation and the Federal
National Mortgage Association are supported by the agency's right to borrow
money from the U.S. Treasury under certain circumstances. U.S. Treasury bonds,
notes and bills, and some agency securities, such as those issued by the
Government National Mortgage Association, are backed by the full faith and
credit of the U.S. Government as to payment of principal and interest and are
the highest quality government securities. There is no assurance that the U.S.
Government will support such obligations of its agencies unless it is required
to do so by law. The Portfolio itself, and an investment therein, are not
guaranteed by the U.S. Government. For additional information on U.S. Government
securities, see Part B.

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conditions or in order to reduce volatility, or as a temporary defensive measure
when the Advisers determine security markets to be overvalued. The Portfolio
limits its short-term investments to those U.S. dollar-denominated instruments
which are determined by or on behalf of the Board of Trustees of the Trust (the
"Board of Trustees") to present minimal credit risks and which are of "high
quality" as determined by a major rating service [i.e., rated P-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation)] or, in the
case of instruments which are not rated, are of comparable quality pursuant to
procedures established by the Board of Trustees. 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
longer term.

The Portfolio may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated withdrawal and/or liquidation requests,
and not for leverage. One means of borrowing is by agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). At the time the Portfolio enters into a reverse repurchase
agreement it will place in a segregated custodial account cash, U.S. Government
securities or high-grade debt obligations having a value equal to the repurchase
price, including accrued interest. Reverse repurchase agreements involve the
risk that the market value of the securities sold by the Portfolio may decline
below the repurchase price of those securities.

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restricted securities. Because Rule 144A is relatively new, it is not possible
to predict how these markets will develop. If institutional trading in
restricted securities were to decline, the liquidity of the Portfolio could be
adversely affected.

Options and futures can be volatile investments, and involve certain
risks. If the Advisers apply a hedge at an inappropriate time or judges interest
rates incorrectly, options and futures strategies may lower the Portfolio's
return. The costs of hedging are not reflected in the Portfolio's yield but are
reflected in the Portfolio's total return. The Portfolio could also experience
losses if its options and futures positions were poorly correlated with its
other investments, or if it could not close out its positions because of an
illiquid secondary market.

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DELAYED DELIVERY TRANSACTIONS. In order to help ensure the availability
of suitable securities for the Portfolio, the Advisers may purchase securities
for the Portfolio on a "when-issued" or on a "forward delivery" basis, which
means that the obligations would be delivered to the Portfolio at a future date
beyond customary settlement time. Under normal circumstances, the Portfolio
would take delivery of such securities. In general, the Portfolio would not pay
for the securities until they are received, and would not start earning interest
on the obligations until the contractual settlement date. While awaiting
delivery of the obligations purchased on such basis, the Portfolio would
establish a segregated account consisting of cash, cash equivalents or high
grade liquid debt securities equal to the amount of its commitments to purchase
"when-issued" securities. An increase in the percentage of the Portfolio's
assets committed to the purchase of securities on a "when-issued" basis may
increase the volatility of its net asset value.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may, in each
case up to 5% of the Portfolio's assets, also utilize the following investments
and investment techniques and practices: investments in foreign securities,
options on futures contracts, foreign currency exchange transactions and options
on foreign currencies. See Part B for further information.

As a diversified fund, no more than 5% of the assets of the Portfolio
may be invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. As a nonfundamental operating investment policy, no
more than 15% of the Portfolio's net assets may be invested in (i) securities
the resale of which is restricted under federal securities laws; and (ii)
illiquid or not readily marketable securities (including repurchase agreements
maturing in more than seven days[, over-the-counter options and assets used to
cover over-the-counter options]). Additional fundamental and operating
investment policies of the Portfolio are contained in Part B.

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ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.35% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are taken by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Capital Management Group, a division of 1740
Advisers. The Subadviser makes the investment selections for the Portfolio
consistent with the guidelines and directions set by the Adviser and the Board
of Trustees. For its services under the Subadvisory Agreement, Capital
Management Group receives a fee from Diversified accrued daily and paid monthly
at an annual rate equal to 0.15% of the Portfolio's average daily net assets.
The Subadviser furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolio's investments and
effecting securities transactions for the Portfolio.

1740 Advisers is a subsidiary of The Mutual Life Insurance Company of
New York. Its address is 1740 Broadway, New York, New York 10019. Total assets
under management by Capital Management Group as of December 31, 1995 were
approximately $639 million, $594 million of which were assets of registered
investment companies. Investment management decisions of 1740 Advisers are made
by committee and not by managers individually.

Under the Advisory Agreement with the Trust, Diversified, as
Administrator, provides the Trust with general office facilities and supervises
the overall

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administration of the Trust, including, among other responsibilities, the
negotiation of contracts and fees with, and the monitoring of performance and
billings of, the independent contractors and agents of the Trust; the
preparation and filing of all documents required for compliance by the Trust
with applicable laws and regulations; providing equipment and clerical personnel
necessary for maintaining the organization of the Trust; preparation of certain
documents in connection with meetings of Trustees and investors in the Trust;
and the maintenance of books and records of the Trust. The Administrator
provides persons satisfactory to the Board of Trustees to serve as officers of
the Trust. Such officers, as well as certain other employees and Trustees of the
Trust, may be directors, officers or employees of Diversified or its affiliates.
Diversified receives no additional compensation for providing such
administrative services.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

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information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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Investor inquiries regarding the Portfolio may be directed to the
Exclusive Placement Agent/DISC at Four Manhattanville Road, Purchase, New York
10577 (914) 697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

ITEM 8. REDEMPTION OR REPURCHASE.

An investor in the Portfolio may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal request in

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proper form is furnished by the investor to the Portfolio by the designated
cutoff time for each accredited investor. The proceeds of a reduction or
withdrawal will be paid by the Portfolio in federal funds normally on the
Portfolio Business Day the withdrawal is effected, but in any event within seven
days.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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PART A

DIVERSIFIED INVESTORS PORTFOLIOS - HIGH-YIELD BOND PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, High-Yield Bond Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to seek a high level of
current income. The Portfolio pursues its investment objective by investing in a
diversified portfolio consisting primarily of high-yielding, fixed-income and
zero coupon securities, such as bonds, debentures and notes, convertible
securities and preferred stocks. The Portfolio may invest all or a substantial
portion of its assets in lower-rated debt securities, commonly referred to as
"junk bonds". Such investments may include foreign securities and obligations
issued or guaranteed by the U.S. government, any of its states or territories,
any foreign government or any of their respective subdivisions, agencies or
instrumentalities.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Delaware Investment Advisors, a
division of Delaware Management Company, Inc. ("Delaware"), is the subadviser
(the "Subadviser") of the Portfolio. The Adviser and Subadviser are referred to
herein collectively as the "Advisers". Diversified is also the administrator
(the "Administrator") of the Portfolio. Diversified Investors Securities Corp.
is the exclusive placement agent ("DISC" or the "Placement Agent") of interests
in the Portfolio and the Trust in general.

The Portfolio normally will invest at least 65% of its assets in
high-yielding, income producing debt securities and preferred stocks, including
convertible and zero coupon securities. Zero coupon securities are debt
securities that pay no cash income but are sold at substantial discounts from
their fact value. Certain zero coupon securities also are sold at substantial
discounts but provide for the commencement of regular interest payments at a
<PAGE> 111
deferred date. The Portfolio may invest up to 35% of its assets in equity
securities, including common stocks, warrants and rights.

Lower-rated debt securities usually are defined as securities rated Ba
or lower by Moody's or BB or lower by S&P. Lower-rated debt securities are
considered speculative and involve greater risk of default or price changes due
to changes in the issuer's creditworthiness than higher-rated securities and are
more sensitive to changes in the issuer's capacity to pay. Investing in
lowerrated debt securities is an aggressive approach to income investing. The
1980s saw a dramatic increase in the use of lower-rated debt securities to
finance highly leveraged corporate acquisitions and restructurings. Past
experience may not provide an accurate indication of future performance of
lower-rated debt securities, especially during period of economic recession. In
fact, from 1989 to 1991, the percentage of lower-rated debt securities that
defaulted rose significantly above prior levels.

Lower-rated debt securities may be thinly traded, which can adversely
affect the prices at which they can be sold and can result in high transaction
costs. If market quotations are not available, these lower-rated debt securities
will be valued in accordance with standards set by the Board of Trustees,
including the use of outside pricing services. Judgment plays a greater role in
valuing lower-rated debt securities than securities for which more extensive
quotations and last-sale information are available. Adverse publicity and
changing investor perceptions may affect the ability of outside pricing services
used by the Portfolio to value its portfolio securities, and the Portfolio's
ability to dispose of the lower-rated bonds. The market prices of lower-rated
debt securities may decline significantly in periods of general economic
difficulty, which may follow periods of rising interest rates. During an
economic downturn or a prolonged period of rising interest rates, the ability of
issuers of lower-rated debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired. The Portfolio may choose,
at its own expense or in conjunction with others, to pursue litigation or
otherwise exercise its rights as a security holder to seek to protect the
interests of security holders if it determines this to be in the interest of
Portfolio investors.

The considerations discussed above for lower-rated debt securities also
are applicable to lower quality unrated debt instruments of all types, including
loans and other direct indebtedness of businesses with poor credit standing.
Unrated debt instruments are not necessarily of lower quality than rated
securities but they may not be attractive to as many buyers.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

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SHORT-TERM INSTRUMENTS. Cash, commercial paper, short-term obligations,
repurchase agreements, bank certificates of deposit or other forms of debt
securities may be held to provide a reserve for future purchases of securities
during periods of unusual market conditions or in order to reduce volatility, or
as a temporary defensive measure when the Advisers determine security markets to
be overvalued. The Portfolio limits its short-term investments to those U.S.
dollar-denominated instruments which are determined by or on behalf of the Board
of Trustees of the Trust (the "Board of Trustees") to present minimal credit
risks and which are of "high quality" as determined by a major rating service
(i.e., rated P-1 by Moody's or A-1 by S&P) or, in the case of instruments which
are not rated, are of comparable quality pursuant to procedures established by
the Board of Trustees. 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 longer term.

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from the Advisers, the Board of Trustees will monitor trading activity in
restricted securities. Because Rule 144A is relatively new, it is not possible
to predict how these markets will develop. If institutional trading in
restricted securities were to decline, the liquidity of the Portfolio could be
adversely affected.

Options and futures can be volatile investments, and involve certain
risks. If the Advisers apply a hedge at an inappropriate time or judge interest
rates incorrectly, options and futures strategies may lower an investor's
return. An investor could also experience losses if the Portfolio's options and
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market.

DELAYED DELIVERY TRANSACTIONS. In order to help ensure the availability
of suitable securities for the Portfolio, the Advisers may purchase securities
for the Portfolio on a "when-issued" or on a "forward delivery" basis, which
means that the obligations would be delivered to the Portfolio at a future date
beyond customary settlement time. Under normal circumstances, the Portfolio
would take delivery of such securities. In general, the Portfolio would not pay
for the securities until they are received, and would not start earning interest
on the obligations until the contractual settlement date. While awaiting
delivery of the obligations purchased on such basis, the Portfolio would
establish a segregated account consisting of cash, cash equivalents or high
grade liquid debt securities equal to the amount of its commitments to purchase
"when-issued" securities. An increase in the percentage of the Portfolio's
assets committed to the purchase of securities on a "when-issued" basis may
increase the volatility of its net asset value.

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conditions whenever its securities are loaned: (i) the Portfolio must receive at
least 100% cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase this collateral whenever the market value of the loaned
securities including accrued interest exceeds the level of the collateral; (iii)
the Portfolio must be able to terminate the loan at any time; (iv) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (v) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower. However, if a material event adversely affecting the loaned securities
were to occur, the Portfolio would terminate the loan and regain the right to
vote the securities.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may, in each
case up to 5% of the Portfolio's assets, also utilize the following investments
and investment techniques and practices: options on futures contracts, and
options on foreign currencies. See Part B for further information.

Changes to the Portfolio's securities generally are made without regard
to the length of time a security has been held, or whether a sale would result
in the recognition of a profit or loss. Therefore, the rate of portfolio
turnover is not a limiting factor to trading when such trading is deemed
appropriate. The Portfolio engages in trading if it believes a transaction net
of costs (including custodian charges) will help it achieve its investment
objective. The portfolio turnover rate in the Portfolio is expected to be less
than 200% annually. The amount of brokerage commissions and realized capital
gains will tend to increase as the level of portfolio activity increases. The
primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. See "Brokerage Allocation and Other Practices" in Part B.

ITEM 5. MANAGEMENT OF THE FUND.

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INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.60% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the
Diversified are made by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Delaware. Delaware makes the investment selections
for the Portfolio consistent with the guidelines and directions set by the
Adviser and the Board of Trustees. For its services under the Subadvisory
Agreement, Delaware receives a fee from Diversified. This fee is calculated by
multiplying the arithmetic average of the beginning and ending monthly net
assets in the Portfolio by the fee schedule and dividing by twelve. The fee is
paid on a quarterly basis at an annual rate equal to 0.40% on the first
$20,000,000 in assets, 0.30% on the next $20,000,000 in assets and 0.20% on
assets in excess of $40,000,000. Delaware furnishes at its own expense all
services, facilities and personnel necessary in connection with managing the
Portfolio's investments and effecting securities transactions for the Portfolio.

Delaware was formed in February 1985 and is owned by Lincoln National
Corp. Total assets under management for all high-yield bond clients at December
31, 1995 were approximately $2.0 billion, $1.5 billion of which were assets of
registered investment companies. The principal business address of Delaware is
2005 Market Street, Philadelphia, Pennsylvania 19103. Investment management
decisions of Delaware are made by committee and not by managers individually.

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connection with meetings of Trustees and investors in the Trust; and the
maintenance of books and records of the Trust. The Administrator provides
persons satisfactory to the Board of Trustees to serve as officers of the Trust.
Such officers, as well as certain other employees and Trustees of the Trust, may
be directors, officers or employees of Diversified or its affiliates.
Diversified receives no additional compensation for providing such
administrative services.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

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or more affected Series are entitled to vote. The Portfolio is not required and
has no current intention of holding special meetings of investors, but the
Portfolio will hold special meetings of investors when in the judgment of the
Trustees it is necessary or desirable to submit matters for an investor vote.
Changes in fundamental policies will be submitted to investors for approval.
Investors under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of investors)
have the right to communicate with other investors in connection with requesting
a meeting of investors for the purpose of removing one or more Trustees.
Investors also have the right to remove one or more Trustees without a meeting
by a declaration in writing by a specified number of investors. Upon liquidation
of the Portfolio, investors would be entitled to share pro rata in the net
assets of the Portfolio (and no other Series) available for distribution to
investors.

The "net income" of the Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the Portfolio. All the net income of the
Portfolio is allocated pro rata among the investors in the Portfolio (and no
other Series).

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

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An investment in the Portfolio may be made in U.S. dollars without a
sales load at the net asset value next determined after an order is received in
"good order" by the Portfolio. There is no minimum initial or subsequent
investment in the Portfolio.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

ITEM 8. REDEMPTION OR REPURCHASE.

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investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be. Investments in the Portfolio may not be
transferred.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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PART A

DIVERSIFIED INVESTORS PORTFOLIOS - EQUITY VALUE PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Equity Value Portfolio (the "Portfolio"), is described herein. Beneficial
interests in the Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.

The investment objective of the Portfolio is to provide a high total
investment return through investment in a diversified portfolio of common
stocks. An investment in the Portfolio is neither insured nor guaranteed by the
U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. Ark Asset Management Co., Inc. ("Ark")
is the subadviser (the "Subadviser") of the Portfolio. The Adviser and
Subadviser are referred to herein collectively as the "Advisers". Diversified is
also the administrator (the "Administrator") of the Portfolio. Diversified
Investors Securities Corp. is the exclusive placement agent ("DISC" or the
"Placement Agent") of interests in the Portfolio and the Trust in general.

The Portfolio seeks to achieve its investment objective by investing
primarily in a diversified portfolio of stocks of companies, which, in the
opinion of the Advisers, are trading at low valuations relative to maket and/or
historical levels. The 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 means that the stock is less expensive than average
relative to the company's earnings or book value, respectively. The Portfolio
invests primarily in common stocks listed on the New York Stock Exchange (the
"NYSE") and on other national securities exchanges and, to a lesser extent, in
stocks that are traded over-the-counter. The Portfolio 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. The Portfolio
<PAGE> 121
allocates its investments among different industries and companies, and changes
its portfolio securities for investment considerations and not for trading
purposes.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

FOREIGN SECURITIES

The Portfolio's current policy is not to invest more than 25% of its
assets in securities of foreign issuers, including investments in sponsored
American Depositary Receipts ("ADRs"). ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the underlying foreign
securities. The Advisers do not intend to concentrate more than 25% of such
foreign investments in any one type of instrument or in any foreign country. The
Portfolio's investments in unlisted foreign securities, not including ADRs, are
subject to the overall restrictions applicable to investments in illiquid
securities. Foreign securities, including ADRs, may represent a greater degree
of risk than do securities of domestic issuers due to possible exchange rate
fluctuations, possible exchange controls, less publicly available information,
more volatile markets, less securities regulation, less favorable tax provisions
(including possible withholding taxes), changes in governmental administration
or economic or monetary policy (in the United States or abroad), war or
expropriation. The Portfolio may invest up to 5% of its assets in closed-end
investment companies which primarily hold foreign securities. Forward foreign
currency exchange contracts may also be entered into for the purchase or sale of
foreign currency solely for hedging purposes against adverse rate changes. A
currency exchange contract allows a definite price in dollars to be fixed for
foreign securities that have been purchased or sold (but not settled) for the
Portfolio. Entering into such exchange contracts may result in the loss of all
or a portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates. In addition, entering into such contracts
means incurring certain transaction costs and bearing the risk of incurring
losses if rates do not move in the direction anticipated.

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OPTIONS AND FUTURES CONTRACTS

Part B includes further information about the transactions in futures
and option contracts to be entered into by the Portfolio. Gains or losses to the
Portfolio on transactions in security index futures or options will depend on
price movements in the stock market generally (or in a particular industry or
segment of the market), rather than price movements of individual securities. A
security index assigns relative values to the securities included in the index
and the index fluctuates with changes in the market values of the securities so
included. Some security index futures or options are based on broad market
indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures or options on
narrower market indexes, such as the Standard & Poor's 100 or indexes based on
an industry or market segment, such as oil and gas stocks. Options on indexes
and options on securities are traded on securities exchanges regulated by the
Securities and Exchange Commission. Futures contracts and options on futures
contracts are traded only on designated contract markets regulated by the
Commodity Futures Trading Commission and through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees performance between the
clearing members which are parties to each contract.

SHORT TERM INVESTMENTS

Cash, commercial paper, short-term obligations, repurchase agreements
or other forms of debt securities may be held to provide a reserve for future

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purchases of common stock or securities during periods of unusual market
conditions or in order to reduce volatility, or as a temporary defensive measure
when the Advisers determine security markets to be overvalued. The Portfolio
limits its short-term investments to those U.S. dollar-denominated instruments
which are determined by or on behalf of the Board of Trustees of the Trust (the
"Board of Trustees") to present minimal credit risks and which are of "high
quality" as determined by a major rating service (i.e., rated P-1 by Moody's or
A-1 by S&P) or, in the case of instruments which are not rated, are of
comparable quality pursuant to procedures established by the Board of Trustees.
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 longer term.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS

RULE 144A SECURITIES

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securities. Under the supervision of the Board of Trustees, the Advisers will
determine the liquidity of restricted securities and, through reports from the
Advisers, the Board of Trustees will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

DELAYED DELIVERY TRANSACTIONS

In order to help ensure the availability of suitable securities for the
Portfolio, the Advisers may purchase securities for the Portfolio on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
would be delivered to the Portfolio at a future date beyond customary settlement
time. Under normal circumstances, the Portfolio would take delivery of such
securities. In general, the Portfolio would not pay for the securities until
they are received, and would not start earning interest on the obligations until
the contractual settlement date. While awaiting delivery of the obligations
purchased on such basis, the Portfolio would establish a segregated account
consisting of cash, cash equivalents or high grade liquid debt securities equal
to the amount of its commitments to purchase "when-issued" securities. An
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a "when-issued" basis may increase the volatility of its net
asset value.

LENDING OF PORTFOLIO SECURITIES

The Portfolio has the authority to lend portfolio securities to
brokers, dealers and other financial organizations. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by either investing the cash collateral in
short-term securities or obtaining yield in the form of interest paid when U.S.
Government obligations are used as collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. The Portfolio will adhere to the following conditions whenever
its securities are loaned: (i) the Portfolio must receive at least 100% cash
collateral or equivalent securities from the borrower; (ii) the borrower must
increase this collateral whenever the market value of the loaned securities
including accrued interest exceeds the level of the collateral; (iii) the
Portfolio must be able to terminate the loan at any time; (iv) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (v) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower. However, if a material event adversely affecting the loaned securities
were to occur, the Portfolio would terminate the loan and regain the right to
vote the securities.

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OTHER INVESTMENTS AND INVESTMENT TECHNIQUES

ITEM 5. MANAGEMENT OF THE FUND.

INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.57% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion

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of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Ark Asset Management Co., Inc. Ark Asset
Management Co., Inc. makes the investment selections for the Portfolio
consistent with the guidelines and directions set by the Adviser and the Board
of Trustees. For its services under the Subadvisory Agreement, Ark Asset
Management Co., Inc. receives a fee from Diversified. This fee is accrued
monthly by multiplying the arithmetic average of the beginning and ending
monthly net assets in the Portfolio by the fee schedule and dividing by twelve.
This fee is paid on a quarterly basis at an annual rate equal to 0.45% on the
first $100,000,000 in assets, 0.40% on the next $50,000,000 in assets and 0.35%
on the next $50,000,000 in assets; when the Portfolio achieves $200,000,000 in
assets, the rate shall be 0.40% on assets up to $200,000,000 and 0.35% on assets
in excess of $200,000,000 so long as the Portfolio continues to have more than
$200,000,000 in assets. Ark Asset Management Co., Inc. furnishes at its own
expense all services, facilities and personnel necessary in connection with
managing the Portfolio's investments and effecting securities transactions for
the Portfolio.

Ark Asset Management Co., Inc. was formed in July 1989 and is owned by
certain employees of Ark Asset Holdings, Inc. Its address is 55 Water Street,
New York, NY 10041. Total assets under management by Ark Asset Management Co.,
Inc. for equity value clients as of December 31, 1995 were approximately $9.8
billion, $75 million of which were assets of registered investment companies.
Investment management decisions of Ark Asset Management Co., Inc. are made by
committee and not by managers individually.

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be directors, officers or employees of Diversified or its affiliates.
Diversified receives no additional compensation for providing such
administrative services.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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Changes in fundamental policies will be submitted to investors for approval.
Investors under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of investors)
have the right to communicate with other investors in connection with requesting
a meeting of investors for the purpose of removing one or more Trustees.
Investors also have the right to remove one or more Trustees without a meeting
by a declaration in writing by a specified number of investors. Upon liquidation
of the Portfolio, investors would be entitled to share pro rata in the net
assets of the Portfolio (and no other Series) available for distribution to
investors.

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

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<PAGE> 129
The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

ITEM 8. REDEMPTION OR REPURCHASE.

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<PAGE> 130
on the NYSE is restricted or, to the extent otherwise permitted by the 1940 Act,
if an emergency exists.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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PART A

DIVERSIFIED INVESTORS PORTFOLIOS - AGGRESSIVE EQUITY PORTFOLIO

Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Diversified Investors Portfolios (the "Trust") is a diversified,
open-end management investment company which was organized as a Trust under the
laws of the State of New York on September 1, 1993. Beneficial interests of the
Trust are divided into series, thirteen of which are currently active and one of
which, Aggressive Equity Portfolio (the "Portfolio"), is described herein.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.

The investment objective of the Portfolio is to provide a high level of
capital appreciation through investment in a diversified portfolio of common
stocks of small to medium size companies. The Aggressive Equity Fund is designed
for investors in search of substantial long-term growth who can accept
above-average stock market risk and little or no current income. An investment
in the Portfolio is neither insured nor guaranteed by the U.S. Government.

Diversified Investment Advisors, Inc. ("Diversified") is the investment
adviser (the "Adviser") of the Portfolio. McKinley Capital Management, Inc.
("MCKinley"), is the subadviser (the "Subadviser") of the Portfolio. The Adviser
and Subadviser are referred to herein collectively as the "Advisers".
Diversified is also the administrator (the "Administrator") of the Portfolio.
Diversified Investors Securities Corp. is the exclusive placement agent ("DISC"
or the "Placement Agent") of interests in the Portfolio and the Trust in
general.

The Portfolio seeks to achieve its investment objective by investing
primarily in a diversified portfolio of stocks of small to medium size companies
which, in the opinion of the Advisers, will present an opportunity for
significant increases in earnings, revenue and/or value, without consideration
for current income. The Portfolio's primary equity investments are common stocks
of small and medium sized U.S. companies. The Portfolio also invests in bonds
and short-term obligations as well as securities convertible into common stocks,
preferred stocks, debt securities and short-term obligations. The Portfolio
allocates its investments among different industries and companies, and changes
<PAGE> 132
its portfolio securities for investment considerations and not for trading
purposes.

DESCRIPTION OF PORTFOLIO INVESTMENTS

Additional information about the investment policies of the Portfolio
appears in Part B.

While the Aggressive Equity Portfolio's policy is to invest its assets
primarily in common stocks with potential for above average growth in earnings
and/or revenue, appreciation may be sought in other types of securities such as
preferred stocks, convertible and non-convertible bonds, warrants and foreign
securities including American Depository Receipts. The Aggressive Equity
Portfolio may vary the percentage of assets invested in any one type of security
in accordance with the Advisers' interpretation of economic and market
conditions, fiscal and monetary policy, and underlying securities values.

In selecting stocks, emphasis is placed on investing in companies with
consistent, above-average and accelerating profitability and growth. These
companies tend to have higher price/earnings ratios which means that the stock
is more expensive than average relative to the company's earnings. Investing in
equity securities of small to medium companies involves risks not typically
associated with investment in comparable securities of large companies. Such
smaller and medium companies may have narrow product lines and limited financial
and managerial resources. Since the market for the equity securities of small
and medium companies is often characterized by less information and liquidity
than that for the equity securities of large companies, securities of such small
and medium companies or market averages in general. Therefore, an investment in
the Aggressive Equity Fund may be subject to greater declines in value than an
investment in an equity fund investing in the equity securities of large
companies.

FOREIGN SECURITIES

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or economic or monetary policy (in the United States or abroad), war or
expropriation. The Portfolio may invest up to 5% of its assets in closed-end
investment companies which primarily hold foreign securities. Forward foreign
currency exchange contracts may also be entered into for the purchase or sale of
foreign currency solely for hedging purposes against adverse rate changes. A
currency exchange contract allows a definite price in dollars to be fixed for
foreign securities that have been purchased or sold (but not settled) for the
Portfolio. Entering into such exchange contracts may result in the loss of all
or a portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates. In addition, entering into such contracts
means incurring certain transaction costs and bearing the risk of incurring
losses if rates do not move in the direction anticipated.

OPTIONS AND FUTURES CONTRACTS

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are cleared through a clearing corporation, which guarantees performance between
the clearing members which are parties to each contract.

SHORT TERM INSTRUMENTS

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS

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segregated custodial account cash, U.S. Government securities or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities.

RULE 144A SECURITIES

DELAYED DELIVERY TRANSACTIONS

In order to help ensure the availability of suitable securities for the
Portfolio, the Advisers may purchase securities for the Portfolio on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
would be delivered to the Portfolio at a future date beyond customary settlement
time. Under normal circumstances, the Portfolio would take delivery of such
securities. In general, the Portfolio would not pay for the securities until
they are received, and would not start earning interest on the obligations until
the contractual settlement date. While awaiting delivery of the obligations
purchased on such basis, the Portfolio would establish a segregated account
consisting of cash, cash equivalents or high grade liquid debt securities equal
to the amount of its commitments to purchase "when-issued" securities. An
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a "when-issued" basis may increase the volatility of its net
asset value.

LENDING OF PORTFOLIO SECURITIES

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including accrued interest exceeds the level of the collateral; (iii) the
Portfolio must be able to terminate the loan at any time; (iv) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (v) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower. However, if a material event adversely affecting the loaned securities
were to occur, the Portfolio would terminate the loan and regain the right to
vote the securities.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES

ITEM 5. MANAGEMENT OF THE FUND.

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<PAGE> 137
INVESTMENT ADVISERS AND ADMINISTRATOR

Subject to such policies as the Board of Trustees may determine, and
pursuant to an Investment Advisory Agreement with the Portfolio (the "Advisory
Agreement"), as the Adviser, Diversified manages the assets of the Portfolio,
including providing general supervision of the Subadviser. For its services
under the Advisory Agreement, the Adviser receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.97% of the
Portfolio's average daily net assets. The Adviser is currently waiving a portion
of its investment advisory fee. Investment management decisions of the Adviser
are made by committee and not by managers individually.

Diversified has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with Mckinley Capital Management Inc. McKinley Capital
Management Inc. makes the investment selections for the Portfolio consistent
with the guidelines and directions set by the Adviser and the Board of Trustees.
For its services under the Subadvisory Agreement, McKinley Capital Management
Inc. receives a fee from Diversified. This fee is accrued monthly by multiplying
the arithmetic average of the beginning and ending monthly net assets in the
Portfolio by the fee schedule and dividing by twelve. This fee is paid on a
quarterly basis at an annual rate equal to 0.90% on the first $10,000,000 in
assets, 0.80% on the next $15,000,000 in assets, 0.60% on the next $25,000,000
in assets, 0.40% on the next $50,000,000 in assets and 0.35% on assets in excess
of $100,000,000. McKinley Capital Management Inc. furnishes at its own expense
all services, facilities and personnel necessary in connection with managing the
Portfolio's investments and effecting securities transactions for the Portfolio.

McKinley Capital Management Inc. was formed in March 1991 and is owned
by Robert Gillan. Its address is 3301 C Street, Anchorage, Alaska 99502. Total
assets under management by McKinley Capital Management Inc. as of December 31,
1995 were approximately $375 million, none of which were assets of registered
investment companies. Investment management decisions of McKinley Capital
Management Inc. are made by committee and not by managers individually.

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laws and regulations; providing equipment and clerical personnel necessary for
maintaining the organization of the Trust; preparation of certain documents in
connection with meetings of Trustees and investors in the Trust; and the
maintenance of books and records of the Trust. The Administrator provides
persons satisfactory to the Board of Trustees to serve as officers of the Trust.
Such officers, as well as certain other employees and Trustees of the Trust, may
be directors, officers or employees of Diversified or its affiliates.
Diversified receives no additional compensation for providing such
administrative services.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Portfolio is a separate series of the Trust, which is organized as
a trust under the laws of the State of New York. Under the Declaration of Trust,
the Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolio. Currently, the Portfolio is one of
thirteen active Series of the Trust. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in the Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio (and of no other
Series). However, the risk of an investor in the Portfolio incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations. Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above. For more
information regarding the Trustees of the Trust, see "Management of the Fund" in
Part B.

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or if determined by the Trustees to be a matter which affects all Series. As to
any matter which does not affect a particular Series, only investors in the one
or more affected Series are entitled to vote. The Portfolio is not required and
has no current intention of holding special meetings of investors, but the
Portfolio will hold special meetings of investors when in the judgment of the
Trustees it is necessary or desirable to submit matters for an investor vote.
Changes in fundamental policies will be submitted to investors for approval.
Investors under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of investors)
have the right to communicate with other investors in connection with requesting
a meeting of investors for the purpose of removing one or more Trustees.
Investors also have the right to remove one or more Trustees without a meeting
by a declaration in writing by a specified number of investors. Upon liquidation
of the Portfolio, investors would be entitled to share pro rata in the net
assets of the Portfolio (and no other Series) available for distribution to
investors.

Investor inquiries regarding the Portfolio may be directed to the
Placement Agent/DISC at Four Manhattanville Road, Purchase, New York 10577 (914)
697-8000.

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.

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An investment in the Portfolio may be made in U.S. dollars without a
sales load at the net asset value next determined after an order is received in
"good order" by the Portfolio. There is no minimum initial or subsequent
investment in the Portfolio.

The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.

ITEM 8. REDEMPTION OR REPURCHASE.

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The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on the NYSE is restricted or, to the extent otherwise permitted by
the 1940 Act, if an emergency exists.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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PART B

ITEM 10. COVER PAGE.

Not Applicable.

ITEM 11. TABLE OF CONTENTS.

<TABLE>
<S> <C>
General Information and History . . . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . . . B-1
Management of the Fund . . . . . . . . . . . . . . . . . . . . . B-27
Control Persons and Principal Holders of Securities . . . . . . B-28
Investment Advisory and Other Services . . . . . . . . . . . . . B-29
Brokerage Allocation and Other Practices . . . . . . . . . . . . B-32
Capital Stock and Other Securities . . . . . . . . . . . . . . . B-32
Purchase, Redemption and Pricing of Securities Being Offered . . B-34
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . B-37
Calculations of Performance Data . . . . . . . . . . . . . . . . B-37
Financial Statements . . . . . . . . . . . . . . . . . . . . . . B-37
</TABLE>

ITEM 12. GENERAL INFORMATION AND HISTORY.

Not applicable.

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.

Part A contains additional information about the investment objective
and policies of each of Money Market Portfolio, High Quality Bond Portfolio,
Government/Corporate Bond Portfolio, Balanced Portfolio, Equity Income
Portfolio, Growth & Income Portfolio, Equity Growth Portfolio, Special Equity
Portfolio, Intermediate Government Bond Portfolio, High-Yield Bond Portfolio,
International Equity Portfolio, Equity Value Portfolio and Aggressive Equity
Portfolio (each a "Portfolio and collectively the "Portfolios"), the thirteen
active series of Diversified Investors Portfolio (the "Trust"). There can, of
course, be no assurance that a Portfolio will achieve its investment objective.
This Part B should only be read in conjunction with Part A of this Registration
Statement.

The approval of the investors in a Portfolio is not required to change
any of the investment policies of the Portfolio discussed herein or in Part A of
this Registration Statement, unless otherwise indicated.

The Trust is an open-end diversified management investment company
which was organized as a trust under the laws of the State of New York on
September 1, 1993. Beneficial interests in the Trust will be issued in private
placement transactions in each of the Portfolios.

As of the date hereof, there are no other active series of the Trust.
However, additional series may be added from time to time.

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The investment adviser of each Portfolio is Diversified Investment
Advisors, Inc. ("Diversified" or the "Adviser"). The subadviser (the
"Subadviser") of each Portfolio is set forth in the table below.

<TABLE>
<CAPTION>
Portfolio Portfolio Subadviser
- --------- --------------------
<S> <C>
Money Market Portfolio . . . . . . . . . Capital Management Group
High Quality Bond Portfolio . . . . . . Merganser Capital Management
Corp.
Intermediate Government Bond Portfolio . Capital Management Group
Government/Corporate Bond Portfolio . . Capital Management Group
High-Yield Bond Portfolio . . . . . . . Delaware Investment Advisors
Balanced Portfolio . . . . . . . . . . . Institutional Capital Corporation
Equity Income Portfolio . . . . . . . . Asset Management Group
Equity Value Portfolio . . . . . . . . . Ark Asset Management, Inc.
Growth & Income Portfolio . . . . . . . Putnam Advisory Company, Inc.
Equity Growth Portfolio . . . . . . . . Jundt Associates, Inc.
Special Equity Portfolio . . . . . . . . Four Subadvisers(1)
Aggressive Equity Portfolio. . . . . . . McKinley Capital Management, Inc.
International Equity Portfolio . . . . . Capital Guardian Trust Company
</TABLE>

As to each Portfolio, the Adviser and its Subadviser or Subadvisers are
referred to herein collectively as the "Advisers."

BANK OBLIGATIONS

Domestic commercial banks organized under federal law are supervised
and examined by the Comptroller of the Currency and are required to be members
of the Federal Reserve System. Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition, state banks are
subject to federal examination and to a substantial body of federal law and
regulation. As a result of federal or state laws and regulations, domestic
banks, among other things, generally are required to maintain specified levels
of reserves, are limited in the amounts which they can loan to a single
borrower, and are subject to other regulations designed to promote financial
soundness. However, not all of such laws and regulations apply to the foreign
branches of domestic banks.

Obligations of foreign branches and subsidiaries of domestic banks and
domestic and foreign branches of foreign banks, such as certificates of deposit
("CDs") and time deposits ("TDs"), may be general obligations of the parent
banks in addition to the issuing branch, or may be limited by the terms of a
specific obligation and governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.

- ----------
(1) Diversified Investors Special Equity Fund has four Subadvisers: Pilgrim
Baxter & Associates; Ark Asset Management Co., Inc.; Liberty Investment
Management, Inc.; and Westport Asset Management, Inc.

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These foreign branches and subsidiaries are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial record keeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank.

Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may be subject to reserve requirements imposed by the Federal Reserve
System or by the state in which the branch is located if the branch is licensed
in that state.

In addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states may be required to: (1) pledge to the
regulator, by depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by the appropriate
regulatory authority; and (2) maintain assets within the state in an amount
equal to a specified percentage of the aggregate amount of liabilities of the
foreign bank payable at or through all of its agencies or branches within the
state.

In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, the Advisers carefully evaluate such investments on a
case-by-case basis.

U.S. GOVERNMENT AND AGENCY SECURITIES

Securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities include U.S. Treasury securities, which differ only in
their interest rates, maturities and times of issuance. Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial maturities
of one to ten years; and Treasury Bonds generally have initial maturities of
greater than ten years. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. A Portfolio will
invest in such securities only when the Advisers are satisfied that the credit
risk with respect to the issuer is minimal.

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COMMERCIAL PAPER

Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under an agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.

The Portfolios may purchase three types of commercial paper, as
classified by exemption from registration under the Securities Act of 1933, as
amended (the "1933 Act"). The three types include open market, privately placed,
and letter of credit commercial paper. Trading of such commercial paper is
conducted primarily by institutional investors through investment dealers or
directly through the issuers. Individual investor participation in the
commercial paper market is very limited.

OPEN MARKET. "Open market" commercial paper refers to the commercial
paper of any industrial, commercial, or financial institution which is openly
traded, including directly issued paper. "Open market" paper's 1933 Act
exemption is under Section 3(a)(3) which limits the use of proceeds to current
transactions, limits maturities to 270 days and requires that the paper contain
no provision for automatic rollovers.

PRIVATELY PLACED. "Privately placed" commercial paper relies on the
exemption from registration provided by Section 4(2), which exempts transactions
by an issuer not involving any public offering. The commercial paper may only be
offered to a limited number of accredited investors. "Privately placed"
commercial paper has no maturity restriction.

LETTER OF CREDIT. "Letter of credit" commercial paper is exempt from
registration under Section 3(a)(2) of the 1933 Act. It is backed by an
irrevocable or unconditional commitment by a bank to provide funds for repayment
of the notes. Unlike "open market" and "privately placed" commercial paper,
"letter of credit" paper has no limitations on purchases.

VARIABLE RATE AND FLOATING RATE SECURITIES

The Portfolios may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
397 days, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 397 days, in each case upon not
more than 30 days' notice. Variable rate demand notes include master demand
notes which are obligations that permit a Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Portfolio, as lender, and the borrower. The interest rates on these
notes fluctuate from time to time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. The
interest rate on a floating rate demand obligation is based on a known lending

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<PAGE> 146
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, such obligations are
collateralized by letters of credit or other credit support arrangements
provided by banks. Because these obligations are direct lending arrangements
between the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary market
for these obligations, although they are redeemable at face value. Accordingly,
where these obligations are not secured by letters of credit or other credit
support arrangements, a Portfolio's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies and a Portfolio may invest in
obligations which are not so rated only if the Advisers determine that at the
time of investment the obligations are of comparable quality to the other
obligations in which the Portfolio may invest. The Advisers, on behalf of a
Portfolio, will consider on an ongoing basis the creditworthiness of the issuers
of the floating and variable rate demand obligations held by the Portfolio. The
Portfolios will not invest more than 15% (10% in the case of the Money Market
Portfolio) of the value of their net assets in floating or variable rate demand
obligations as to which they cannot exercise the demand feature on not more than
seven days' notice if there is no secondary market available for these
obligations, and in other securities that are not readily marketable. See
"Investment Restrictions" below.

PARTICIPATION INTERESTS

A Portfolio may purchase from financial institutions participation
interests in securities in which such Portfolio may invest. A participation
interest gives a Portfolio an undivided interest in the security in the
proportion that the Portfolio's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating or
variable rates of interest, with remaining maturities of 13 months or less. If
the participation interest is unrated, or has been given a rating below that
which is permissible for purchase by the Portfolio, the participation interest
will be backed by an irrevocable letter of credit or guarantee of a bank, or the
payment obligation otherwise will be collateralized by U.S. Government
securities, or, in the case of unrated participation interests, the Advisers
must have determined that the instrument is of comparable quality to those
instruments in which a Portfolio may invest. For certain participation
interests, a Portfolio will have the right to demand payment, on not more than
seven days' notice, for all or any part of the Portfolio's participation
interest in the security, plus accrued interest. As to these instruments, a
Portfolio intends to exercise its right to demand payment only upon a default
under the terms of the security, as needed to provide liquidity to meet
redemptions, or to maintain or improve the quality of its investment portfolio.
A Portfolio will not invest more than 15% (10% in the case of the Money Market
Portfolio) of its net assets in participation interests that do not have this
demand feature, and in other securities that are not readily marketable. See
"Investment Restrictions" below.

ILLIQUID SECURITIES

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered

B-5
<PAGE> 147
under the 1933 Act, securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven days. Securities
which have not been registered under the 1933 Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them which, if
possible at all, would result in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.

The Securities and Exchange Commission (the "SEC") has recently adopted
Rule 144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act for resales of certain securities to qualified institutional buyers.

The Advisers will monitor the liquidity of Rule 144A securities for
each Portfolio under the supervision of the Board of Trustees of the Trust (the
"Board of Trustees"). In reaching liquidity decisions, the Advisers will
consider, among other things, the following factors: (1) the frequency of trades
and quotes for the security, (2) the number of dealers and other potential
purchasers wishing to purchase or sell the security, (3) dealer undertakings to
make a market in the security and (4) the nature of the security and of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

UNSECURED PROMISSORY NOTES

A Portfolio also may purchase unsecured promissory notes ("Notes")
which are not readily marketable and have not been registered under the 1933
Act, provided such investments are consistent with the Portfolio's investment
objective. The Notes purchased by the Portfolio will have remaining maturities
of 13 months or less and will be deemed by the Board of Trustees to present
minimal credit risks. The Portfolio will invest no more than 15% (10% in the
case of the Money Market Portfolio) of its net assets in such Notes and in other
securities that are not readily marketable (which securities would include
floating and variable rate demand obligations as to which the Portfolio cannot

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exercise the demand feature described above and as to which there is no
secondary market). See "Investment Restrictions" below.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS

Repurchase agreements are agreements by which a person purchases a
security and simultaneously commits to resell that security to the seller (which
is usually a member bank of the Federal Reserve System or a member firm of the
New York Stock Exchange (the "NYSE") (or a subsidiary thereof)) at an
agreed-upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an
agreed-upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed-upon price, which obligation is in
effect collateralized by the value of the underlying security, usually U.S.
Government or government agency issues. Under the Investment Company Act of
1940, as amended (the "1940 Act"), repurchase agreements may be considered to be
loans by the buyer. A Portfolio's risk is limited to the ability of the seller
to pay the agreed upon amount on the delivery date. If the seller defaults, the
underlying security constitutes collateral for the seller's obligation to pay
although a Portfolio may incur certain costs in liquidating this collateral and
in certain cases may not be permitted to liquidate this collateral. All
repurchase agreements entered into by the Portfolios are fully collateralized,
with such collateral being marked to market daily.

The Portfolios may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated redemption requests, and not for
leverage. One means of borrowing is by agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed date and price (a "reverse repurchase agreement"). At the
time a Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government securities or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities.

FOREIGN SECURITIES - ALL PORTFOLIOS

The Portfolios may invest their assets in securities of foreign
issuers. Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less publicly
available information about foreign companies, particularly those not subject to
the disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing and financial
reporting requirements comparable to those applicable to domestic issuers.
Investments in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, brokerage or other taxation, limitation on the removal of
funds or other assets of a Portfolio, political or financial instability or
diplomatic and other developments which would affect such investments. Further,

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economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States.

It is anticipated that in most cases the best available market for
foreign securities would be on exchanges or in over-the-counter markets located
outside the United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
U.S. companies. Foreign security trading practices, including those involving
securities settlement where a Portfolio's assets may be released prior to
receipt of payment, may expose a Portfolio to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities exchanges,
brokers and listed companies than in the United States.

FOREIGN SECURITIES - MONEY MARKET PORTFOLIO

The Money Market Portfolio may invest in the following foreign
securities: (i) U.S. dollar-denominated obligations of foreign branches and
subsidiaries of domestic banks and foreign banks (such as Eurodollar CDs, which
are U.S. dollar-denominated CDs issued by branches of foreign and domestic banks
located outside the United States; Eurodollar TDs ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a foreign or domestic bank;
and Canadian TDs, which are essentially the same as ETDs except they are issued
by branches of major Canadian banks), (ii) high quality, U.S. dollar-denominated
short-term bonds and notes (including variable amount master demand notes)
issued by foreign corporations, (including Canadian commercial paper, which is
commercial paper issued by a Canadian corporation or a Canadian counterpart of a
U.S. corporation, and Europaper, which is U.S. dollar-denominated commercial
paper of a foreign issuer) and (iii) U.S. dollar-denominated obligations issued
or guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by the Advisers
to be of comparable quality to the other obligations in which the Money Market
Portfolio may invest. Such securities also include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.

FOREIGN SECURITIES - PORTFOLIOS OTHER THAN MONEY MARKET PORTFOLIO

Each Portfolio's policy is to invest not more than 5% of a Portfolio's
assets in closed-end investment companies which primarily hold foreign
securities. Investments in such companies may entail the risk that the market
value of such investments may be substantially less than their net asset value
and that there would be duplication of investment management and other fees and
expenses. Securities of foreign issuers include investments in sponsored

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American Depositary Receipts ("ADRs"). ADRs are depository receipts for
securities of foreign issuers and provide an alternative method for a Portfolio
to make foreign investments. These securities will not be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets. ADRs
are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities.

The Portfolios may invest in foreign securities that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than foreign securities of the same class that
are not subject to such restrictions.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Because some Portfolios may buy and sell securities denominated in
currencies other than the U.S. dollar and receive interest, dividends and sale
proceeds in currencies other than the U.S. dollar, the Portfolios from time to
time may enter into foreign currency exchange transactions to convert to and
from different foreign currencies and to convert foreign currencies to and from
the U.S. dollar. The Portfolios either enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or use forward contracts to purchase or sell foreign currencies.

A forward foreign currency exchange contract is an obligation by a
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. A Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.

The Portfolios may enter into foreign currency hedging transactions in
an attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into the Advisers' long-term investment
decisions, the Portfolios will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, the Advisers
believe that it is important to have the flexibility to enter into foreign
currency hedging transactions when they determine that the transactions would be
in a Portfolio's best interest. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of

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the hedged currency increase. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies will change as
a consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

While these contracts are not presently regulated by the Commodity
Futures Trading Commission ("CFTC"), the CFTC may in the future assert authority
to regulate forward contracts. In such event a Portfolio's ability to utilize
forward contracts in the manner set forth in Part A may be restricted. Forward
contracts may reduce the potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a
Portfolio than if it had not entered into such contracts. The use of foreign
currency forward contracts may not eliminate fluctuations in the underlying U.S.
dollar equivalent value of the prices of or rates of return on a Portfolio's
foreign currency denominated portfolio securities and the use of such techniques
will subject the Portfolio to certain risks.

The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. In
addition, a Portfolio may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit a Portfolio's ability
to use such contract to hedge or cross-hedge its assets. Also, with regard to a
Portfolio's use of cross-hedges, there can be no assurance that historical
correlations between the movement of certain foreign currencies relative to the
U.S. dollar will continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies underlying a
Portfolio's cross- hedges and the movements in the exchange rates of the foreign
currencies in which the Portfolio's assets that are the subject of such
cross-hedges are denominated.

GUARANTEED INVESTMENT CONTRACTS

The Portfolios may invest in guaranteed investment contracts ("GICs")
issued by insurance companies. Pursuant to such contracts, a Portfolio makes
cash contributions to a deposit fund of the insurance company's general account.
The insurance company then credits to the fund guaranteed interest. The GICs
provide that this guaranteed interest will not be less than a certain minimum
rate. The insurance company may assess periodic charges against a GIC for
expenses and service costs allocable to it, and the charges will be deducted
from the value of the deposit fund. Because a Portfolio may not receive the
principal amount of a GIC from the insurance company on seven days' notice or
less, the GIC is considered an illiquid investment and, together with other
instruments in a Portfolio which are not readily marketable, will not exceed 15%
(10% in the case of the Money Market Portfolio) of the Portfolio's net assets.
The term of a GIC will be 13 months or less. In determining average weighted
portfolio maturity, a GIC will be deemed to have a maturity equal to the longer
of the period of time remaining until the next readjustment of the guaranteed
interest rate or the

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period of time remaining until the principal amount can be recovered from the
issuer through demand.

WHEN-ISSUED SECURITIES

The Portfolios may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, under normal circumstances, the
Portfolios would take delivery of such securities. When a Portfolio commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, the
Portfolio establishes procedures consistent with the relevant policies of the
SEC. Since those policies currently recommend that an amount of a Portfolio's
assets equal to the amount of the purchase be held aside or segregated to be
used to pay for the commitment, the Portfolio expects always to have cash, cash
equivalents, or high quality debt securities sufficient to cover any commitments
or to limit any potential risk. However, although a Portfolio does not intend to
make such purchases for speculative purposes and intends to adhere to the
provisions of SEC policies, purchases of securities on such bases may involve
more risk than other types of purchases. For example, a Portfolio may have to
sell assets which have been set aside in order to meet redemptions. Also, if a
Portfolio determines it is advisable as a matter of investment strategy to sell
the "when-issued" or "forward delivery" securities, a Portfolio would be
required to meet its obligations from the then available cash flow or the sale
of securities, or, although it would not normally expect to do so, from the sale
of the "when- issued" or "forward delivery" securities themselves (which may
have a value greater or less than the Portfolio's payment obligation).

ZERO COUPON OBLIGATIONS

A Portfolio may acquire zero coupon obligations when consistent with
its investment objective and policies. Such obligations have greater price
volatility than coupon obligations and will not result in payment of interest
until maturity. Since dividend income is accrued throughout the term of the zero
coupon obligation but is not actually received until maturity, a Portfolio may
have to sell other securities to pay said accrued dividends prior to maturity of
the zero coupon obligation.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS - PORTFOLIOS OTHER THAN MONEY
MARKET PORTFOLIO

General. The successful use of such instruments draws upon the
Advisers' skill and experience with respect to such instruments. Should interest
or exchange rates move in an unexpected manner, a Portfolio may not achieve the
anticipated benefits of futures contracts or options on futures contracts or may
realize losses and thus will be in a worse position than if such strategies had
not been used. In addition, the correlation between movements in the price of
futures contracts or options on futures contracts and movements in the price of
the securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.

Futures Contracts. A Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any index of U.S.
Government

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securities, foreign government securities or corporate debt securities. U.S.
futures contracts have been designed by exchanges which have been designated
"contracts markets" by the CFTC, and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange markets, and,
through their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange. A Portfolio may enter
into futures contracts which are based on debt securities that are backed by the
full faith and credit of the U.S. Government, such as long-term U.S. Treasury
Bonds, Treasury Notes, Government National Mortgage Association modified
pass-through mortgage-backed securities and three-month U.S. Treasury Bills. A
Portfolio may also enter into futures contracts which are based on bonds issued
by entities other than the U.S. Government.

Purchases or sales of stock index futures contracts are used to attempt
to protect the Portfolio's current or intended stock investments from broad
fluctuations in stock prices. For example, the Portfolio may sell stock index
futures contracts in anticipation of or during a decline in the market value of
the Portfolio's securities that might otherwise result. If such decline occurs,
the loss in value of portfolio securities may be offset, in whole or part, by
gains on the futures position. When a Portfolio is not fully invested in the
securities market and anticipates a significant market advance, it may purchase
stock index futures contracts in order to gain rapid market exposure that may,
in part or entirely, offset increases in the cost of securities that the
Portfolio intends to purchase. As such purchases are made, the corresponding
positions in stock index futures contracts will be closed out, in a substantial
majority of these transactions, the Portfolio will purchase such securities upon
termination of the futures position; but under unusual market conditions, a long
futures position may be terminated without a related purchase of securities.

At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are

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made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, a Portfolio will incur brokerage fees when it
purchases or sells futures contracts.

The purpose of the acquisition or sale of a futures contract, in the
case of a Portfolio which holds or intends to acquire fixed-income securities,
is to attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase, a
Portfolio might enter into futures contracts for the sale of debt securities.
Such a sale would have much the same effect as selling an equivalent value of
the debt securities owned by the Portfolio. If interest rates did increase, the
value of the debt security in a Portfolio would decline, but the value of the
futures contracts to the Portfolio would increase at approximately the same
rate, thereby keeping the net asset value of the Portfolio from declining as
much as it otherwise would have. The Portfolio could accomplish similar results
by selling debt securities and investing in bonds with short maturities when
interest rates are expected to increase. However, since the futures market is
more liquid than the cash market, the use of futures contracts as an investment
technique allows a Portfolio to maintain a defensive position without having to
sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market. To the extent a Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to cover the
Portfolio's obligations with respect to such futures contracts will consist of
cash, cash equivalents or high quality liquid debt securities from its portfolio
in an amount equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and variation
margin payments made by the Portfolio with respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct

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forecast of general interest rate trends by the Advisers may still not result in
a successful transaction.

In addition, futures contracts entail risks. Although the Advisers
believe that use of such contracts will benefit the Portfolios, if the Advisers'
investment judgment about the general direction of interest rates is incorrect,
a Portfolio's overall performance would be poorer than if it had not entered
into any such contract. For example, if a Portfolio has hedged against the
possibility of an increase in interest rates which would adversely affect the
price of debt securities held by it and interest rates decrease instead, the
Portfolio will lose part or all of the benefit of the increased value of its
debt securities which it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if a Portfolio has
insufficient cash, it may have to sell debt securities to meet daily variation
margin requirements. Such sales of bonds may be, but will not necessarily be, at
increased prices which reflect the rising market. A Portfolio may have to sell
securities at a time when it may be disadvantageous to do so.

Options on Futures Contracts. The Portfolios intend to purchase and
write options on futures contracts for hedging purposes. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.

The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.

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The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

The Board of Trustees has adopted the requirement that futures
contracts and options on futures contracts be used either (i) as a hedge without
regard to any quantitative limitation, or (ii) for other purposes to the extent
that immediately thereafter the aggregate amount of margin deposits on all
(non-hedge) futures contracts of the Portfolio and premiums paid on outstanding
(non-hedge) options on futures contracts owned by the Portfolio does not exceed
5% of the market value of the total assets of the Portfolio. In addition, the
aggregate market value of the outstanding futures contracts purchased by the
Portfolio may not exceed 50% of the market value of the total assets of the
Portfolio. Neither of these restrictions will be changed by the Board of
Trustees without considering the policies and concerns of the various applicable
federal and state regulatory agencies.

Options on Foreign Currencies. A Portfolio may purchase and write
options on foreign currencies for hedging purposes in a manner similar to that
in which futures contracts on foreign currencies, or forward contracts, will be
utilized. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Portfolio may purchase put options on the foreign currency. If the value of
the currency does decline, a Portfolio will have the right to sell such currency
for a fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.

A Portfolio may write options on foreign currencies for the same types
of hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.

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Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.

The Portfolios intend to write covered call options on foreign
currencies. A call option written on a foreign currency by a Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.

The Portfolios also intend to write call options on foreign currencies
that are not covered for cross-hedging purposes. A call option on a foreign
currency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which
the Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate. In
such circumstances, the Portfolio collateralizes the option by maintaining in a
segregated account with its custodian, cash or U.S. Government securities or
other high quality liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to market daily.

Additional Risks of Options on Futures Contracts, Forward Contracts and
Options on Foreign Currencies. Unlike transactions entered into by a Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.

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Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political

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and economic factors, (ii) lesser availability than in the United States of data
on which to make trading decisions, (iii) delays in the Portfolio's ability to
act upon economic events occurring in foreign markets during nonbusiness hours
in the United States, (iv) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States, and (v)
lesser trading volume.

OPTIONS ON SECURITIES - PORTFOLIOS OTHER THAN MONEY MARKET PORTFOLIO

The Portfolios may write (sell) covered call and put options to a
limited extent on its portfolio securities ("covered options"). However, a
Portfolio may forgo the benefits of appreciation on securities sold or may pay
more than the market price on securities acquired pursuant to call and put
options written by the Portfolio.

When a Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which a Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, a Portfolio forgoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.

When a Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which a Portfolio has no control, the Portfolio must purchase the
underlying security from the option holder at the exercise price. By writing a
covered put option, a Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. A Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at the exercise price.

A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." Where a Portfolio cannot effect a closing purchase transaction, it
may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.

When a Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's statement of assets and liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
current

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market value of the option written. The current market value of a traded option
is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.

A Portfolio may purchase call and put options on any securities in
which it may invest. A Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. A
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.

A Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle a Portfolio, in exchange for the premium paid, to sell
a security, which may or may not be held in the Portfolio's portfolio, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's portfolio securities. Put options also may be purchased by a
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. A Portfolio would
ordinarily recognize a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would recognize a loss if
the value of the securities remained at or above the exercise price. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.

The Portfolios have adopted certain other nonfundamental policies
concerning option transactions which are discussed below. A Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.

The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the

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volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.

The Portfolios may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolios will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Advisers will monitor
the creditworthiness of dealers with whom a Portfolio enters into such options
transactions under the general supervision of the Trustees.

OPTIONS ON SECURITIES INDICES - PORTFOLIOS OTHER THAN MONEY MARKET PORTFOLIO

In addition to options on securities, the Portfolios may also purchase
and write (sell) call and put options on securities indices. Such options give
the holder the right to receive a cash settlement during the term of the option
based upon the difference between the exercise price and the value of the index.
Such options will be used for the purposes described above under "Options on
Securities."

Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close out
options positions on securities indices is more likely to occur, although the
Portfolios generally will only purchase or write such an option if the Advisers
believe the option can be closed out.

Use of options on securities indices also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolios will not purchase such options unless
the Advisers believe the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.

Price movements in the Portfolios' securities may not correlate
precisely with movements in the level of an index and, therefore, the use of
options on indices cannot serve as a complete hedge. Because options on
securities indices require settlement in cash, the Advisers may be forced to
liquidate portfolio securities to meet settlement obligations.

SHORT SALES "AGAINST THE BOX" - PORTFOLIOS OTHER THAN MONEY MARKET PORTFOLIO

In a short sale, a fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. A
Portfolio may engage in short sales only if at the time of the short sale it
owns or has the

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right to obtain, at no additional cost, an equal amount of the security being
sold short. This investment technique is known as a short sale "against the
box".

In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If a Portfolio engages in a short sale, the collateral for the short
position will be maintained by its custodian or qualified sub-custodian. While
the short sale is open, a Portfolio maintains in a segregated account an amount
of securities equal in kind and amount to the securities sold short or
securities convertible into or exchangeable for such equivalent securities.
These securities constitute the Portfolio's long position.

The Portfolios will not engage in short sales against the box for
investment purposes. A Portfolio may, however, make a short sale as a hedge,
when it believes that the price of a security may decline, causing a decline in
the value of a security (or a security convertible or exchangeable for such
security), or when a Portfolio wants to sell the security at an attractive
current price, but also wishes to defer recognition of gain or loss for federal
income tax purposes or for purposes of satisfying certain tests applicable to
regulated investment companies under the Code. In such case, any future losses
in a Portfolio's long position should be reduced by a gain in the short
position. Conversely, any gain in the long position should be reduced by a loss
in the short position. The extent to which such gains or losses are reduced
depends upon the amount of the security sold short relative to the amount a
Portfolio owns. There are certain additional transaction costs associated with
short sales against the box, but the Portfolios endeavor to offset these costs
with the income from the investment of the cash proceeds of short sales.

As a nonfundamental operating policy, the Advisers do not expect that
more than 40% of a Portfolio's total assets would be involved in short sales
against the box. The Advisers do not currently intend to engage in such sales.

CERTAIN OTHER OBLIGATIONS

In order to allow for investments in new instruments that may be
created in the future, upon amending this registration statement, a Portfolio or
Portfolios may invest in obligations other than those listed previously,
provided such investments are consistent with a Portfolio's investment
objective, policies and restrictions.

RATING SERVICES

The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, the Advisers also make their own evaluations of these
securities, subject to review by the Board of Trustees. After purchase by a
Portfolio, an obligation may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Portfolio. Neither event would
require a Portfolio to dispose of the obligation, but the Advisers will consider
such an

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event in their determination of whether a Portfolio should continue to hold the
obligation. A description of security ratings used herein and in Part A is set
forth below:

Standard & Poor's Ratings Group ("Standard & Poor's")

Corporate and Municipal Bonds

AAA - Debt rated AAA have the highest ratings assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.

AA - Debt rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues
only in a small degree.

A - Debt rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debts in higher rated categories.

BBB - Debt rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
debts in this category than for debts in higher rated
categories.

BB - Debt rated BB is regarded as having less near-term
vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and
principal payments.

Commercial Paper, including Tax Exempt

A - Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this
category are further refined with the designations 1, 2, and 3
to indicate the relative degree of safety.

A-1 - This designation indicates that the degree of safety
regarding timely payment is very strong.

Moody's Investors Service, Inc.

Corporate and Municipal Bonds

Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged". Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure.

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While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long term risks appear
somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Commercial Paper

Prime-1 - Issuers rated P-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:

- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well established access to a range of financial markets and
assured sources of alternate liquidity.

Except as stated otherwise, all investment policies and restrictions
described herein are nonfundamental, and may be changed without prior
shareholder approval.

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INVESTMENT RESTRICTIONS

The following investment restrictions are "fundamental policies" of
each Portfolio and may not be changed with respect to the Portfolio without the
approval of a "majority of the outstanding voting securities" of the Portfolio.
"Majority of the outstanding voting securities" under the 1940 Act and as used
in this registration statement means, with respect to the Portfolio, the lesser
of (i) 67% or more of the total beneficial interests of the Portfolio present at
a meeting, if the holders of more than 50% of the total beneficial interests of
the Portfolio are present or represented by proxy, or (ii) more than 50% of the
total beneficial interests of the Portfolio. If a percentage or a rating
restriction on investment or utilization of assets is adhered to at the time an
investment is made or assets are so utilized, a later change in such percentage
resulting from changes in a Portfolio's total assets or the value of a
Portfolio's securities, or a later change in the rating of a portfolio security,
will not be considered a violation of the relevant policy.

As a matter of fundamental policy, no Portfolio may:

(1) borrow money or mortgage or hypothecate assets of the Portfolio,
except that in an amount not to exceed 1/3 of the current value of the
Portfolio's assets (including such borrowing) less liabilities (not including
such borrowing), it may borrow money and enter into reverse repurchase
agreements, and except that it may pledge, mortgage or hypothecate not more than
1/3 of such assets to secure such borrowings or reverse repurchase agreements,
provided that collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, are not considered a
pledge of assets for purposes of this restriction and except that assets may be
pledged to secure letters of credit solely for the purpose of participating in a
captive insurance company sponsored by the Investment Company Institute;

(2) underwrite securities issued by other persons except insofar as the
Trust or the Portfolio may technically be deemed an underwriter under the 1933
Act in selling a portfolio security;

(3) make loans to other persons except (a) through the lending of the
Portfolio's portfolio securities and provided that any such loans not exceed 30%
of the Portfolio's total assets (taken at market value), (b) through the use of
repurchase agreements or the purchase of short-term obligations or (c) by
purchasing debt securities of types distributed publicly or privately;

(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
Trust may hold and sell, for the Portfolio's portfolio, real estate acquired as
a result of the Portfolio's ownership of securities);

(5) concentrate its investments in any particular industry (excluding
U.S. Government securities), but if it is deemed appropriate for the achievement
of the Portfolio's investment objective, up to 25% of its total assets may be
invested in any one industry (except that the Money Market Portfolio reserves
the

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<PAGE> 166
freedom of action to concentrate 25% or more of its assets in obligations of
domestic branches of domestic banks);

(6) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.

State and Federal Restrictions. In order to comply with certain state
and federal statutes and policies each Portfolio will not as a matter of
operating policy:

(i) borrow money for any purpose in excess of 10% of the
Portfolio's total assets (taken at cost), except that
the Portfolio may borrow for temporary or emergency
purposes up to 1/3 of its assets;

(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's net assets (taken at market value),
provided that collateral arrangements with respect to options
and futures, including deposits of initial deposit and
variation margin, reverse repurchase agreements, when-issued
securities and other similar investment techniques are not
considered a pledge of assets for purposes of this restriction;

(iii) purchase any security or evidence of interest therein
on margin, except that such short-term credit as may
be necessary for the clearance of purchases and sales
of securities may be obtained and except that
deposits of initial deposit and variation margin may
be made in connection with the purchase, ownership,
holding or sale of futures;

(iv) invest for the purpose of exercising control or management;

(v) purchase securities issued by any other investment company
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan
of merger or consolidation; provided, however, that securities
of any investment company will not be purchased for the
Portfolio if such purchase at the time thereof would cause (a)
more than 10% of the Portfolio's total assets (taken at the
greater of cost or market value) to be invested in the
securities of such issuers; (b) more that 5% of the Portfolio's
total assets (taken at the greater of cost or market value) to
be invested in any one investment company; or (c) more than 3%
of the outstanding voting securities of any such issuer to be
held for the Portfolio; and provided further that the Portfolio
may not purchase any security from any open-end investment
company;

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<PAGE> 167
(vi) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio to hold more than 10% of any
class of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;

(vii) purchase or retain in the Portfolio's portfolio any securities
issued by an issuer any of whose officers, directors, trustees
or security holders is an officer or Trustee of the Trust, or
is an officer or partner of the Adviser or Subadviser, if after
the purchase of the securities of such issuer for the Portfolio
one or more of such persons owns beneficially more than 1/2 of
1% of the shares or securities, or both, all taken at market
value, of such issuer, and such persons owning more than 1/2 of
1% of such shares or securities together own beneficially more
than 5% of such shares or securities, or both, all taken at
market value;

(viii) invest more than 5% of the Portfolio's net assets in warrants
(valued at the lower of cost or market), but not more than 2%
of the Portfolio's net assets may be invested in warrants not
listed on the NYSE or the American Stock Exchange; and

(ix) make short sales of securities or maintain a short position
(excluding short sales if the Portfolio owns an equal amount of
such securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities
of equivalent kind and amount) if such short sales represent
more than 25% of the Portfolio's net assets (taken at market
value); provided, however, that the value of the Portfolio's
short sales of securities (excluding U.S. Government
securities) of any one issuer may not be greater than 2% of the
value (taken at market value) of the Portfolio's net assets or
more than 2% of the securities of any class of any issuer.

(x) enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which
are not readily marketable (which securities would include
participation interests that are not subject to the demand
feature described in this registration statement and floating
and variable rate demand obligations as to which no secondary
market exists and the Portfolio cannot exercise the demand
feature described in this registration statement on not more
than seven days' notice), if, in the aggregate, more than 15%
(10% in the case of the Money Market Portfolio) of its net
assets would be so invested. A Portfolio may not invest in TDs
maturing in more than seven days.

Policies (i) through (x) may be changed by the Board of Trustees.

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<PAGE> 168
ITEM 14. MANAGEMENT OF THE FUND.

The Trustees and officers of the Trust and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. An asterisk indicates that a Trustee is an "interested
person" (as defined in the 1940 Act) of the Trust. Unless otherwise indicated,
the address of each Trustee and officer is Four Manhattanville Road, Purchase,
New York 10577.

TRUSTEES

Donald E. Flynn* Vice President, AEGON USA, Inc., 1988 to
present; Executive Vice President, AEGON USA
Investment Management, Inc., 1988 to present;
Vice President, AEGON USA Managed Portfolios,
Inc., 1988 to present.

Neal M. Jewell Executive Vice President, American
International Group Asset Management (since
November 1991); Director of Oversees
Pensions, American International Group Asset
Management (December 1990 to October 1991);
Executive Vice President Pensions, Mutual of
New York (prior to June 1989). His address is
355 Thornridge Drive, Stamford, Connecticut
06903.

Eugene M. Mannella Vice President, Investment Management
Services, Inc. (since August 1993); Senior
Vice President, Lehman Brothers Inc. (May
1986 to August 1993). His address is Two
Orchard Neck Road, Center Moriches, New York
11934.

Patricia L. Sawyer Executive Vice President and Director, Robert
L. Smith & Co. (since July 1990); Vice
President, American Express (September 1988
to July 1990). Her address is 256 West 10th
Street, New York, New York 10014.

Tom A. Schlossberg* Vice President, Diversified (since October
1992); Executive Vice President and Head of
Pension Operations, Mutual Life Insurance
Company of New York.

OFFICERS

Mr. Schlossberg is President, Chief Executive Officer and Chairman of
the Board of Trustees of the Trust. In addition, he holds the same position with
The Diversified Investors Funds Group (the "Diversified Funds Group"), an
open-end management investment company, of which Mr. Schlossberg is also a
trustee.

Robert F. Colby Secretary; Vice President and Chief Corporate
Counsel, Mutual Life Insurance Company of New
York; Vice President and General Counsel,
Diversified (since November 1993); Vice
President of Diversified Investors Securities
Corp. ("DISC") (since November 1993).

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<PAGE> 169
Alfred C. Sylvain Treasurer and Assistant Secretary; Vice
President and Treasurer of Diversified (since
November 1993); Treasurer of DISC (since
November 1993); Vice President, Mutual Life
Insurance Company of New York (since July
1987).

John F. Hughes Assistant Secretary; Senior Counsel, Mutual
Life Insurance Company of New York; Vice
President and Senior Counsel, Diversified
(since November 1993); Assistant Secretary,
DISC (Since November 1993).

No director, officer of employee of Diversified or any of their
affiliates will receive any compensation from the Trust for serving as a Trustee
or officer of the Trust.

The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers as described below under Item 18.

ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

At December 31, 1995, AUSA Life Insurance Company, Inc. ("AUSA"), 4
Manhattanville Road, Purchase, New York 10577 and The Mutual Life Insurance
Company ("MONY"), 1740 Broadway, New York, New York 10019 owned the following
percentage interests of the outstanding beneficial interests of the Portfolios
indicated (all such interests being held in separate accounts of AUSA and MONY,
respectively):

<TABLE>
<CAPTION>
AUSA MONY
---- ----
<S> <C> <C>
Money Market 42% 47%
High Quality Bond 54% 39%
Intermediate Government Bond 64% 30%
Government/Corporate Bond 26% 69%
High-Yield Bond 73% 6%
Balanced 53% 5%
Equity Income 68% 30%
Growth & Income 73% 21%
Equity Growth 86% 11%
Special Equity 52% 46%
International Equity 41% 50%
</TABLE>

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<PAGE> 170
COMPENSATION

For the fiscal year ended December 31, 1995, the Portfolios provided
the following compensation to its trustees.

<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Compensation
Name of Compensa- Benefits Accrued Estimated Annual From Registrant
Person, tion From As Part of Fund Benefits Upon and Fund Complex
Position Registrant Expenses Retirement Paid to Directors
- -------- ---------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Tom A. Schlossberg - 0 - None N/A - 0 -
Trustee

Donald E. Flynn - 0 - None N/A - 0 -
Trustee

Neal M. Jewell $10,000 None N/A $10,000
Trustee

Eugene M. Mannella $10,000 None N/A $10,000
Trustee

Patricia L. Sawyer $10,000 None N/A $10,000
Trustee
</TABLE>

As of December 31, 1995 the officers and Trustees of the Trust owned
beneficially and in the aggregate less than 1% of the outstanding interests in
the Money Market Portfolio.

ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.

Investment Advisory Services. The Adviser manages the assets of each
Portfolio pursuant to an Investment Advisory Agreement (the "Advisory
Agreement") with the Trust with respect to that Portfolio and the investment
policies described herein and in Part A. Subject to such further policies as the
Board of Trustees may determine, the Adviser provides general investment advice
to each Portfolio.

For each Portfolio, the Adviser has entered into an Investment
Subadvisory Agreement (each a "Subadvisory Agreement") with each Subadviser.

It is the responsibility of a Subadviser to make the day-to-day
investment decisions for its Portfolio and to place the purchase and sales
orders for securities transactions of such Portfolio, subject in all cases to
the general supervision of the Adviser. Each Subadviser furnishes at its own
expense all services, facilities and personnel necessary in connection with
managing its Portfolio's investments and effecting securities transactions for
the Portfolio.

Each Advisory Agreement provides that the Adviser or a Subadviser, as
the case may be, may render services to others. Each agreement is terminable
without penalty on not more than 60 days' nor less than 30 days' written notice
by a Portfolio when

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<PAGE> 171
authorized either by majority vote of the investors in the Portfolio (with the
vote of each being in proportion to the amount of its investment) or by a vote
of a majority of the Board of Trustees, or by the Adviser or a Subadviser on not
more than 60 days' nor less than 30 days' written notice, as the case may be,
and will automatically terminate in the event of its assignment. Each agreement
provides that neither the Adviser nor Subadviser nor their personnel shall be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution of security
transactions for the corresponding Portfolio, except for willful misfeasance,
bad faith, gross negligence or reckless disregard of its or their obligations
and duties under the Advisory Agreement and the Subadvisory Agreement, as the
case may be.

The Adviser's and Subadviser's fees are described in Part A. The
Adviser, if required by applicable state law, shall reimburse a Portfolio's
investor(s) or waive all or part of its fees up to, but not exceeding, its
investment advisory fees. Such reimbursement, if required, will be equal to the
combined aggregate annual expenses of the investor and its Portfolio which
exceed that expense limitation with the lowest threshold prescribed by any state
in which that investor is qualified for offer or sale. Management of the Trust
has been advised that the lowest such threshold currently in effect is 2 1/2% of
net assets up to $30,000,000, 2% of the next $70,000,000 of net assets and 1/2%
of net assets in excess of that amount.

Diversified is an investment firm dedicated to meeting the complete
needs of retirement plan sponsors and participants from pre- through
post-retirement. Diversified provides flexible, high-quality services coupled
with the employment of independent investment managers in an innovative
investment structure.

Diversified services over $8 billion in retirement plan assets and has
offices in Boston, Charlotte, Chicago, Cincinnati, Dallas, Houston, New Orleans,
New York, Philadelphia, Portland and San Francisco. It maintains recordkeeping
for 300,000 participants and has 490 employees dedicated to retirement plan
investment and administration. Its employees average more than seven years of
retirement plan experience.

As experts in customizing retirement solutions, Diversified offers
comprehensive programs of high-quality investments and administrative services
to defined benefit, defined contribution and not-for-profit pension plan
sponsors. Diversified forms a partnership with its clients to provide
exceptional plan design, participant communication programs, recordkeeping
services and technical guidance.

Diversified's investment structure provides access to an array of
complementary investment alternatives representing the major asset classes along
the risk/reward spectrum. Subadvisers are selected from more than 2,000 highly
accomplished independent firms. Each subadviser's performance is carefully
monitored by Diversified taking into consideration fund performance in light of
investment objectives and policies and level of risk.

Through a rigorous portfolio manager selection process which includes
researching each subadviser's asset class, track record, organizational
structure, management team, consistency of performance and assets under
management, five to ten subadvisers are chosen. Out of that group, Diversified
then carefully chooses the three most qualified subadvisers based on performance
evaluation, ownership structure, personnel and

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<PAGE> 172
philosophy to return for an on-site visit and a quantitative and qualitative
analysis by the investment committee. Out of those three subadvisers,
Diversified then hires the most qualified, independent subadviser for each
Portfolio, subject to approval by the Board of Trustees including a majority of
the Trustees who are not "interested persons" of the Trust.

Diversified brings comprehensive monitoring and control to the
investment management process. It seeks superior portfolio management and moves
purposefully in replacing managers when warranted. From a plan sponsor's
perspective, Replacing a manager, and not the investment fund, is a key
advantage in avoiding the expense and difficulty of re-enrolling participants or
disrupting established plan administration. Replacing a Subadviser, however,
will necessitate a proxy solicitation which involves other expenses.

Highly disciplined manager evaluation on both a quantitative and
qualitative basis, is an ongoing process. Diversified's Manager Monitoring Group
gathers and analyzes performance and Diversified's Investment Committee reviews
it. Performance attribution, risk/return ratios and purchase/sale assessments
are prepared monthly and, each quarter, a more comprehensive review is completed
which consists of manager visits, fundamental analysis and statistical analysis.
Extensive quarterly analysis is conducted to ensure that the investment fund is
being managed in line with the stated objectives. Semiannually, the Investment
Committee reviews the back-up manager selection, regression analysis and
universe comparisons.

A number of "red flags" signal a more extensive and frequent manager
review. These flags consist of a return inconsistent with the investment
objectives changes in subadviser leadership, ownership or portfolio managers,
large changes in assets under management and changes in philosophy or
discipline. The immediate response to any red flag is to assess the potential
impact on the manager's ability to meet investment objectives. Diversified
monitors "back-up" additional independent managers for each investment so that,
should a manager change be warranted, the transition can be effected on a timely
basis.

Administrator. For a description of the administrative services
Diversified provides to the Portfolios under the Advisory Agreements, see Part
A.

Placement Agent. Investor inquiries may be directed to the Trust's
exclusive placement agent, DISC, Four Manhattanville Road, Purchase, New York
10577 ([914] 697- 8000).

Custodian. Pursuant to a Custodian Agreement, Investors Bank & Trust
Company acts as the custodian of Portfolio's assets (the "Custodian"). The
Custodian's responsibilities include safeguarding and controlling the
Portfolios' cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest on the Portfolios'
investments, maintaining books of original entry for portfolio accounting and
other required books and accounts, and calculating the daily net asset value of
beneficial interests in each Portfolio. Securities held by the Portfolios may be
deposited into the Federal Reserve-Treasury Department Book Entry System or the
Depository Trust Company and may be held by a subcustodian bank if such
arrangements are reviewed and approved by the Trustees of the Trust. The
Custodian does not determine the investment policies of the Portfolios or decide
which securities the Portfolios will buy or sell. A Portfolio may, however,
invest in securities of the

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<PAGE> 173
Custodian and may deal with the Custodian as principal in securities and foreign
exchange transactions. For its services, the Custodian will receive such
compensation as may from time to time be agreed upon by it and the Trust.

Independent Accountants. Coopers & Lybrand, L.L.P. serves as the
Portfolios' independent accountants providing audit and accounting services
including (i) examination of the annual financial statements, (ii) assistance
and consultation with respect to the preparation of filings with the SEC and
(iii) preparation of annual income tax returns.

ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.

Except as may be required to ensure satisfaction of certain tests
applicable to regulated investment companies under the Code, portfolio changes
are made without regard to the length of time a security has been held, or
whether a sale would result in the recognition of a profit or loss. Therefore,
the rate of portfolio turnover is not a limiting factor when changes are
appropriate. Portfolio trading is engaged in for a Portfolio if the Advisers
believe that a transaction net of costs (including custodian charges) will help
achieve the Portfolio's investment objective.

A Portfolio's purchase and sales of securities may be principal
transactions, that is, securities may be purchased directly from the issuer or
from an underwriter or market maker for the securities. There usually are no
brokerage commissions paid for such purchases and, therefore, the Portfolios do
not anticipate paying brokerage commissions in such transactions. Any
transactions for which a Portfolio pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and the asked price.

Allocations of transactions, including their frequency, to various
dealers is determined by the Subadvisers in their best judgement and in a manner
deemed to be in the best interest of the investors in a Portfolio rather than by
any formula. The primary consideration is prompt execution of orders in an
effective manner at the most favorable price.

Investment decisions for a Portfolio will be made independently from
those for any other account or investment company that is or may in the future
become managed by the Advisers or their affiliates. If, however, a Portfolio and
other investment companies or accounts managed by the Subadvisers are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by a Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for a
Portfolio and for other investment companies managed by the Subadvisers occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
Furthermore, in certain circumstances affiliates of the Subadvisers whose
investment portfolios are managed internally, rather than by the Subadvisers,
might seek to purchase or sell the same type of investments at the same time as
a Portfolio. Such an event might also adversely affect that Portfolio.

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ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.

Each Portfolio is a series of the Trust, which is organized under the
laws of the State of New York. Under the Trust's Declaration of Trust, the
Trustees are authorized to issue beneficial interests in one or more series
(each a "Series"), including the Portfolios. Currently, the thirteen Portfolios
are the only active Series of the Trust. Investors in a Series will be held
personally liable for the obligations and liabilities of that Series (and of no
other Series), subject, however, to indemnification by the Trust in the event
that there is imposed upon an investor a greater portion of the liabilities and
obligations of the Series than its proportionate beneficial interest in the
Series. The Declaration of Trust also provides that the Trust shall maintain
appropriate insurance (for example, a fidelity bond and errors and omissions
insurance) for the protection of the Trust, its investors, Trustees, officers,
employees and agents, and covering possible tort and other liabilities. Thus,
the risk of an investor incurring financial loss on account of investor
liability is limited to circumstances in which both inadequate insurance existed
and the Trust itself was unable to meet its obligations.

Investors in a Series are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
Series only. Upon liquidation or dissolution of a Series, investors are entitled
to share pro rata in that Series' (and no other Series') net assets available
for distribution to its investors. The Trust reserves the right to create and
issue additional Series of beneficial interests, in which case the beneficial
interests in each new Series would participate equally in the earnings,
dividends and assets of that particular Series only (and no other Series). Any
property of the Trust is allocated and belongs to a specific Series to the
exclusion of all other Series. All consideration received by the Trust for the
issuance and sale of beneficial interests in a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings and proceeds thereof, and any funds or payments derived from any
reinvestment of such proceeds, is held by the Trustees in a separate subtrust (a
Series) for the benefit of investors in that Series and irrevocably belongs to
that series for all purposes. Neither a Series nor investors in that Series
possess any right to or interest in the assets belonging to any other Series.

Investments in a Series have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Investments in a Series may not be transferred. Certificates representing an
investor's beneficial interest in a Series are issued only upon the written
request of an investor.

Each investor is entitled to a vote in proportion to the amount of its
investment in each Series. Investors in a Series do not have cumulative voting
rights, and investors holding more than 50% of the aggregate beneficial
interests in all outstanding Series may elect all of the Trustees if they choose
to do so and in such event other investors would not be able to elect any
Trustees. Investors in each Series will vote as a separate class except as to
voting of Trustees, as otherwise required by the 1940 Act, or if determined by
the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of a particular Series, only investors in the one
or more affected Series are entitled to vote. The Trust is not required and has
no current intention of holding annual meetings of investors, but the Trust will
hold special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote.

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The Trust's Declaration of Trust may be amended without the vote of investors,
except that investors have the right to approve by affirmative majority vote any
amendment which would affect their voting rights, alter the procedures to amend
the Declaration of Trust, or as required by law or by the Trust's registration
statement, or as submitted to them by the Trustees. Any amendment submitted to
investors which the Trustees determine would affect the investors of any Series
shall be authorized by vote of the investors of such Series and no vote will be
required of investors in a Series not affected.

The Trust or any Series (including the Portfolio) may enter into a
merger or consolidation, or sell all or substantially all of its assets, if
approved (a) at a meeting of investors by investors representing the lesser of
(i) 67% or more of the beneficial interests in the affected Series present of
represented at such meeting, if investors in more than 50% of all such
beneficial interests are present or represented by proxy, or (ii) more than 50%
of all such beneficial interests, or (b) by an instrument in writing without a
meeting, consented to by investors representing not less than a majority of the
beneficial interests in the affected Series. The Trust or any Series (including
any Portfolio) may also be terminated (i) upon liquidation and distribution of
its assets if approved by the vote of two thirds of its investors (with the vote
of each being in proportion to the amount of its investment), (ii) by the
Trustees by written notice to its investors, or (iii) upon the bankruptcy or
expulsion of an investor in the affected Series, unless the investors in such
Series, by majority vote, agree to continue the Series. The Trust will be
dissolved upon the dissolution of the last remaining Series.

The Trust's Declaration of Trust provides that obligations of the Trust
are not binding upon the Trustees individually but only upon the property of the
Trust and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust protects a Trustee against any liability
to which he would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.

The Trust's Declaration of Trust further provides that it will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Trust, unless, as to liability to the Trust or its investors,
it is finally adjudicated that they engaged in wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their offices,
or unless with respect to any other matter it is finally adjudicated that they
did not act in good faith in the reasonable belief that their actions were in
the best interests of the Trust. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that such
officers or Trustees have not engaged in wilful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.

Beneficial interests in the Portfolios are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See Item 4 in Part A.

B-34
<PAGE> 176
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or at the ask price on the NASDAQ system for
unlisted national market issues, or at the last quoted bid price for securities
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. Bonds and other fixed income securities (other
than short-term obligations, but including listed issues) are valued on the
basis of valuations furnished by a pricing service, the use of which has been
approved by the Board of Trustees. In making such valuations, the pricing
service utilizes both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Short-term obligations which mature in 60 days or less are valued at
amortized cost, which approximates fair value as determined by the Board of
Trustees. Futures and option contracts that are traded on commodities or
securities exchanges are normally valued at the settlement price on the exchange
on which they are traded. Portfolio securities (other than short-term
obligations) for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Board of
Trustees.

Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between issue price and stated redemption price at maturity) and premiums
(generally, the excess of purchase price over stated redemption price at
maturity). Interest income on short-term obligations is determined on the basis
of interest and discount accrued less amortization of premium.

Any assets or liabilities initially denominated in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate or,
alternatively, at the mean of the current bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks. If
neither of these alternatives is available or both are deemed not to provide a
suitable methodology for converting a foreign currency into U.S. dollars, the
Board of Trustees, in good faith, will establish a conversion rate for such
currency.

A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by the
Board of Trustees. While no single standard for determining fair value exists,
as a general rule, the current fair value of a security would appear to be the
amount which a Portfolio could expect to receive upon its current sale. Some,
but not necessarily all, of the general factors which may be considered in
determining fair value include: (i) the fundamental analytical data relating to
the investment; (ii) the nature and duration of restrictions on disposition of
the securities; and (iii) an evaluation of the forces which influence the market
in which these securities are purchased and sold. Without limiting or including
all of the specific factors which may be considered in determining fair value,
some of the specific factors include: type of security, financial statements of
the issuer, cost at date of purchase, size of holding, discount from market
value, value of unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as to any
transactions or

B-35
<PAGE> 177
offers with respect to the security, existence of merger proposals or tender
offers affecting the securities, price and extent of public trading in similar
securities of the issuer or comparable companies, and other relevant matters.

Each investor in each Portfolio may add to or reduce its investment in
the Portfolio on each day that the Adviser and the Subadviser of the Portfolio
are open for business. As of 4:00 p.m. (New York time) on each such day, the
value of each investor's interest in a Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage representing
that investor's share of the aggregate beneficial interests in the Portfolio.
Any additions or reductions which are to be effected on that day will then be
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio will then be recomputed as the percentage equal to the fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of 4:00 p.m. on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the investor's investment in the
Portfolio effected on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 p.m. on such day plus or
minus, as the case may be, the amount of the net additions to or reductions in
the aggregate investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of 4:00 p.m. on the following day the
NYSE is open for trading.

Each Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be. A Portfolio will not make a distribution in kind
except in circumstances in which the owner of a beneficial interest in that
Portfolio is permitted to redeem in kind or unless requested by such owner.

Investments in the Portfolio may not be transferred.

ITEM 20. TAX STATUS.

The Trust is organized as a New York trust. The Portfolios are not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. However each investor in a Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of the Trust) of the Portfolio's ordinary income and capital gain in determining
its income tax liability. The determination of such share will be made in
accordance with the Code, and regulations promulgated thereunder.

Under interpretations of the Internal Revenue Service (1) each
Portfolio will be treated for federal income tax purposes as a partnership which
is not a publicly traded partnership and (2) for purposes of determining whether
an investor in a Portfolio satisfies requirements of Subchapter M of the Code,
the investor will be deemed to own a proportionate share of the Portfolio's
assets and will be deemed to be entitled to the Portfolio's income attributable
to that share. The Trust has advised the initial

B-36
<PAGE> 178
investors that it intends to conduct its operations so as to enable investors to
satisfy those requirements.

Each Portfolio, since it is taxed as a partnership, is not subject to
federal income taxation. Instead, an investor must take into account, in
computing its federal income tax liability, its share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether it has received any cash distributions from the Portfolio.

Withdrawals by investors from a Portfolio generally will not result in
their recognizing any gain or loss for federal income tax purposes, except that
(1) gain will be recognized to the extent that any cash distributed exceeds the
basis of the investor's interest in the Portfolio prior to the distribution, (2)
income or gain will be realized if the withdrawal is in liquidation of the
investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if the distribution is in liquidation of that entire interest and
consists solely of cash and/or unrealized receivables. The basis of an
investor's interest in a Portfolio generally equals the amount of cash and the
basis of any property that the investor invests in the Portfolio, increased by
the investor's share of income from the Portfolio and decreased by the amount of
any cash distributions and the basis of any property distributed from the
Portfolio.

The Portfolios' taxable year-end will be December 31. Although, as
described above, a Portfolio will not be subject to federal income tax, it will
file appropriate income tax returns.

It is intended that each Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code.

There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts and
investors who contribute assets rather than cash to a Portfolio. It is intended
that such segregated asset accounts will be able to satisfy diversification
requirements applicable to them and that such contributions of assets will not
be taxable provided certain requirements are met. Such investors are advised to
consult their own tax advisors as to the tax consequences of an investment in a
Portfolio.

ITEM 21. UNDERWRITERS.

Not applicable.

ITEM 22. CALCULATIONS OF PERFORMANCE DATA.

Not applicable.

ITEM 23. FINANCIAL STATEMENTS.

The audited financial statements of the Trust (Portfolio of Investments
at December 31, 1995, Statements of Assets and Liabilities at December 31, 1995,
Statements of Operations for the applicable periods ended December 31, 1995,
Statements of Changes in Net Assets for the applicable periods ended December
31, 1995, Notes to

B-37
<PAGE> 179
Financial Statements and Report of Independent Accountants), each of which is
included in the 1995 Annual Report to Shareholders of the Trust are incorporated
by reference into this Part B. A copy of the Annual Report for the Trust
accompanies this Part B.

B-38
<PAGE> 180

DIVERSIFIED INVESTORS PORTFOLIOS

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE
MARKET QUALITY BOND BOND BOND BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost.......................... $141,642,545 $164,768,936 $94,192,491 $341,805,334 $198,158,473
------------ ------------ ----------- ------------ ------------
Investments, at market........................ $141,642,545 $166,373,100 $95,259,796 $357,816,218 $212,478,597
Repurchase agreement, at value................ 56,639 4,459,931 82,793 86,916 5,702,169
Cash.......................................... 2,636 0 0 1,054 0
Receivable from custodian..................... 0 0 0 0 0
Foreign currency holdings, at value (cost
$693,265).................................... 0 0 0 0 0
Receivable for securities sold................ 0 133,800 0 0 837,128
Interest receivable........................... 0 2,097,824 761,765 4,277,561 989,678
Dividends receivable.......................... 0 0 0 0 147,754
Receivable from securities lending............ 0 0 2,307 6,231 10,650
Receivable for forward currency contracts..... 0 0 0 0 0
Reimbursement from advisor.................... 3,211 532 14,093 1,417 25,732
------------ ------------ ----------- ------------ ------------
Total assets............................... 141,705,031 173,065,187 96,120,754 362,189,397 220,191,708
------------ ------------ ----------- ------------ ------------
LIABILITIES:
Deposit for securities loaned................. 0 0 10,071,250 25,518,850 45,257,850
Payable for securities purchased.............. 0 453,494 338 0 7,806,862
Payable for forward currency contracts........ 0 0 0 0 0
Accrued expenses:
Investment advisory fees..................... 29,753 48,735 25,897 90,155 60,959
Custody fees................................. 5,633 6,931 5,266 10,998 6,224
Professional fees............................ 21,664 21,937 20,085 19,574 20,181
Printing fees................................ 2,971 1,961 998 3,253 1,115
Miscellaneous fees........................... 6,762 6,026 5,306 7,157 5,562
------------ ------------ ----------- ------------ ------------
Total liabilities............................ 66,783 539,084 10,129,140 25,649,987 53,158,753
------------ ------------ ----------- ------------ ------------
Net assets.................................... $141,638,248 $172,526,103 $85,991,614 $336,539,410 $167,032,955
============ ============ =========== ============ ============
Net assets consist of:
Paid-in capital.............................. $141,638,248 $170,921,939 $84,924,309 $320,528,526 $152,712,831
Net unrealized appreciation on investments,
and translation of assets and liabilities
in foreign currencies...................... 0 1,604,164 1,067,305 16,010,884 14,320,124
------------ ------------ ----------- ------------ ------------
Net assets................................. $141,638,248 $172,526,103 $85,991,614 $336,539,410 $167,032,955
============ ============ =========== ============ ============

EQUITY GROWTH & EQUITY SPECIAL HIGH
INCOME INCOME GROWTH EQUITY YIELD BOND
------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost.......................... $660,136,580 $108,334,032 $216,333,251 $275,177,944 $8,056,922
------------ ------------ ------------ ------------ ----------
Investments, at market........................ $805,216,482 $116,524,886 $255,883,019 $320,663,277 $8,218,968
Repurchase agreement, at value................ 52,740 18,370,832 9,713,052 21,477,900 0
Cash.......................................... 341 0 0 0 818,124
Receivable from custodian..................... 0 0 117,734 0 0
Foreign currency holdings, at value (cost
$693,265).................................... 0 0 0 0 0
Receivable for securities sold................ 0 708,217 0 2,909,595 0
Interest receivable........................... 0 0 0 0 186,824
Dividends receivable.......................... 1,486,610 139,049 98,460 234,431 0
Receivable from securities lending............ 3,223 1,470 19,961 6,894 0
Receivable for forward currency contracts..... 0 0 0 0 0
Reimbursement from advisor.................... 2,387 2,967 (1,228) 18,641 10,320
------------ ------------ ------------ ------------ ----------
Total assets............................... 806,761,783 135,747,421 265,830,998 345,310,738 9,234,236
------------ ------------ ------------ ------------ ----------
LIABILITIES:
Deposit for securities loaned................. 40,890,000 8,425,791 43,316,000 25,513,600 0
Payable for securities purchased.............. 1,217,191 2,424,207 0 4,096,494 211,375
Payable for forward currency contracts........ 0 0 0 0 0
Accrued expenses:
Investment advisory fees..................... 269,680 58,059 121,159 194,740 2,835
Custody fees................................. 33,745 5,296 6,921 22,690 4,507
Professional fees............................ 33,478 17,704 18,688 18,458 9,897
Printing fees................................ 5,904 352 555 1,062 636
Miscellaneous fees........................... 9,255 4,281 5,285 5,469 7,391
------------ ------------ ------------ ------------ ----------
Total liabilities............................ 42,459,253 10,935,690 43,468,608 29,852,513 236,641
------------ ------------ ------------ ------------ ----------
Net assets.................................... $764,302,530 $124,811,731 $222,362,390 $315,458,225 $8,997,595
============ ============ ============ ============ ==========
Net assets consist of:
Paid-in capital.............................. $619,222,628 $116,620,877 $182,812,622 $269,972,892 $8,835,549
Net unrealized appreciation on investments,
and translation of assets and liabilities
in foreign currencies...................... 145,079,902 8,190,854 39,549,768 45,485,333 162,046
------------ ------------ ------------ ------------ ----------
Net assets................................. $764,302,530 $124,811,731 $222,362,390 $315,458,225 $8,997,595
============ ============ ============ ============ ==========

INTERNATIONAL
EQUITY

-------------
<S> <C>
ASSETS:
Investments, at cost.......................... $78,000,625
-----------
Investments, at market........................ $79,175,541
Repurchase agreement, at value................ 0
Cash.......................................... 4,575,760
Receivable from custodian..................... 0
Foreign currency holdings, at value (cost
$693,265).................................... 687,767
Receivable for securities sold................ 162,684
Interest receivable........................... 35,859
Dividends receivable.......................... 72,106
Receivable from securities lending............ 0
Receivable for forward currency contracts..... 190,253
Reimbursement from advisor.................... 6,191
-----------
Total assets............................... 84,906,161
-----------
LIABILITIES:
Deposit for securities loaned................. 0
Payable for securities purchased.............. 1,261,434
Payable for forward currency contracts........ 29,556
Accrued expenses:
Investment advisory fees..................... 143,910
Custody fees................................. 11,973
Professional fees............................ 7,675
Printing fees................................ 1,459
Miscellaneous fees........................... 3,839
-----------
Total liabilities............................ 1,459,846
-----------
Net assets.................................... $83,446,315
===========
Net assets consist of:
Paid-in capital.............................. $82,111,576
Net unrealized appreciation on investments,
and translation of assets and liabilities
in foreign currencies...................... 1,334,739
-----------
Net assets................................. $83,446,315
===========
</TABLE>

See notes to financial statements.

8 - 9

<PAGE> 181

DIVERSIFIED INVESTORS PORTFOLIOS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HIGH INTERMEDIATE GOVERNMENT/
MONEY QUALITY GOVERNMENT CORPORATE
MARKET BOND BOND BOND BALANCED
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income.................................. $ 0 $ 0 $ 0 $ 0 $ 1,737,553
Interest income.................................. 9,420,480 10,560,001 4,881,454 19,315,534 4,608,571
---------- ----------- ----------- ----------- -----------
Total income................................... 9,420,480 10,560,001 4,881,454 19,315,534 6,346,124
---------- ----------- ----------- ----------- -----------
Expenses:
Investment advisory fees......................... 391,657 562,958 286,019 1,011,116 639,345
Custody fees..................................... 48,971 42,976 38,278 68,817 54,977
Professional fees................................ 25,341 25,441 22,529 25,811 24,073
Printing fees.................................... 3,953 2,942 1,979 4,234 2,096
Miscellaneous fees............................... 22,990 21,477 19,071 23,609 18,621
---------- ----------- ----------- ----------- -----------
Total Expenses................................. 492,912 655,794 367,876 1,133,587 739,112
Expenses waived by the investment advisor........ 22,086 9,897 44,808 0 51,1460
---------- ----------- ----------- ----------- -----------
Net expenses................................... 470,826 645,897 323,068 1,133,587 687,966
---------- ----------- ----------- ----------- -----------
Net investment income............................. 8,949,654 9,914,104 4,558,386 18,181,947 5,658,158
---------- ----------- ----------- ----------- -----------
Net realized and unrealized gains (losses) on
investments:
Net realized gains (losses) on investments....... (4,226) (634,835) 379,479 1,365,500 11,609,960
Net realized gains (losses) on foreign currency
transactions................................... 0 0 0 0 0
Net unrealized appreciation on investments....... 0 7,048,911 5,777,385 29,472,541 17,788,835
Net increase in unrealized appreciation on
translation of assets and liabilities in
foreign currencies............................. 0 0 0 0 0
---------- ----------- ----------- ----------- -----------
Net realized and unrealized gains (losses) on
investments.................................... (4,226) 6,414,076 6,156,864 30,838,041 29,398,795
---------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations..................................... $8,945,428 $16,328,180 $10,715,250 $49,019,988 35,056,953
========== =========== =========== =========== ===========

<CAPTION>
HIGH
EQUITY GROWTH & EQUITY SPECIAL YIELD
INCOME INCOME GROWTH EQUITY BOND*
------------ ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income.................................. $ 20,486,295 $ 1,626,970 $ 421,856 $ 1,688,432 $ 0
Interest income.................................. 4,278,028 624,447 1,810,218 1,232,053 240,742
------------ ----------- ----------- ----------- --------
Total income................................... 24,764,323 2,251,417 2,232,074 2,920,485 240,742
------------ ----------- ----------- ----------- --------
Expenses:
Investment advisory fees......................... 2,878,308 639,911 1,272,213 2,018,861 11,146
Custody fees..................................... 170,931 42,763 49,087 175,111 9,060
Professional fees................................ 40,231 20,681 21,131 22,446 9,897
Printing fees.................................... 6,885 1,333 1,536 2,043 636
Miscellaneous fees............................... 32,710 18,191 19,476 20,993 7,390
------------ ----------- ----------- ----------- --------
Total Expenses................................. 3,129,065 722,879 1,363,443 2,239,454 38,129
Expenses waived by the investment advisor........ 0 28,140 0 82,511 20,785
------------ ----------- ----------- ----------- --------
Net expenses................................... 3,129,065 694,739 1,363,443 2,156,943 17,344
------------ ----------- ----------- ----------- --------
Net investment income............................. 21,635,258 1,556,678 868,631 763,542 223,398
------------ ----------- ----------- ----------- --------
Net realized and unrealized gains (losses) on
investments:
Net realized gains (losses) on investments....... 9,847,566 19,009,812 4,768,375 45,159,729 6,659
Net realized gains (losses) on foreign currency
transactions................................... 0 0 0 0 0
Net unrealized appreciation on investments....... 158,219,366 9,319,254 24,304,762 40,748,255 162,046
Net increase in unrealized appreciation on
translation of assets and liabilities in
foreign currencies............................. 0 0 0 0 0
------------ ----------- ----------- ----------- --------
Net realized and unrealized gains (losses) on
investments.................................... 168,066,932 28,329,066 29,073,137 85,907,984 168,705
------------ ----------- ----------- ----------- --------
Net increase in net assets resulting from
operations..................................... $189,702,190 $29,885,744 $29,941,768 $86,671,526 $392,103
============ =========== =========== =========== ========

INTERNATIONAL
EQUITY**
-------------
<S> <C>
Investment income:
Dividend income.................................. $ 198,388
Interest income.................................. 66,670
----------
Total income................................... 265,058
----------
Expenses:
Investment advisory fees......................... 143,910
Custody fees..................................... 11,973
Professional fees................................ 7,675
Printing fees.................................... 1,459
Miscellaneous fees............................... 3,838
----------
Total Expenses................................. 168,855
Expenses waived by the investment advisor........ 6,191
----------
Net expenses................................... 162,664
----------
Net investment income............................. 102,394
----------
Net realized and unrealized gains (losses) on
investments:
Net realized gains (losses) on investments....... 16,793
Net realized gains (losses) on foreign currency
transactions................................... (8,241)
Net unrealized appreciation on investments....... 1,174,916
Net increase in unrealized appreciation on
translation of assets and liabilities in
foreign currencies............................. 159,823
----------
Net realized and unrealized gains (losses) on
investments.................................... 1,343,291
----------
Net increase in net assets resulting from
operations..................................... $ 1,445,685
==========
</TABLE>
- ---------------
* August 22, 1995, Commencement of Operations
** September 29, 1995, Commencement of Operations
# Net of withholding taxes of $25,308

See Notes to Financial Statements.

10 - 11

<PAGE> 182

DIVERSIFIED INVESTORS PORTFOLIOS

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HIGH INTERMEDIATE GOVERNMENT/
MONEY QUALITY GOVERNMENT CORPORATE
MARKET BOND BOND BOND BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income........................ $ 8,949,654 $ 9,914,104 $ 4,558,386 $18,181,947 $ 5,658,158
Net realized gains (losses) on investments... (4,226) (634,835) 379,479 1,365,500 11,609,960
Net realized gains (losses) on foreign
currency transactions...................... 0 0 0 0 0
Net unrealized appreciation on investments... 0 7,048,911 5,777,385 29,472,541 17,788,835
Net increase in unrealized appreciation on
translation of assets and liabilities in
foreign currencies......................... 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations................................. 8,945,428 16,328,180 10,715,250 49,019,988 35,056,953
------------ ------------ ------------ ------------ ------------
From capital transactions:
Proceeds from capital invested............... 393,166,782 141,659,639 38,046,469 151,446,357 80,590,418
Value of capital withdrawn................... 421,983,754 129,457,932 49,408,845 110,912,327 74,123,531
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from capital transactions.......... (28,816,972) 12,201,707 (11,362,376) 40,534,030 6,466,887
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets......... (19,871,544) 28,529,887 (647,126) 89,554,018 41,523,840
Net assets:
Beginning of year............................ 161,509,792 143,996,216 86,638,740 246,985,392 125,509,115
------------ ------------ ------------ ------------ ------------
End of year.................................. $141,638,248 $172,526,103 $ 85,991,614 $336,539,410 $167,032,955
============ ============ ============ ============ ============
- ---------------
* August 22, 1995 Commencement of Operations
** September 29, 1995 Commencement of Operations.

<CAPTION>
HIGH
EQUITY GROWTH & EQUITY SPECIAL YIELD
INCOME INCOME GROWTH EQUITY BOND*
------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income........................ $ 21,635,258 $ 1,556,678 $ 868,631 $ 763,542 $ 223,398
Net realized gains (losses) on investments... 9,847,566 19,009,812 4,768,375 45,159,729 6,659
Net realized gains (losses) on foreign
currency transactions...................... 0 0 0 0 0
Net unrealized appreciation on investments... 158,219,366 9,319,254 24,304,762 40,748,255 162,046
Net increase in unrealized appreciation on
translation of assets and liabilities in
foreign currencies......................... 0 0 0 0 0
------------ ------------ ------------ ------------ ----------
Net increase in net assets resulting from
operations................................. 189,702,190 29,885,744 29,941,768 86,671,526 392,103
------------ ------------ ------------ ------------ ----------
From capital transactions:
Proceeds from capital invested............... 231,491,356 93,751,429 93,276,744 113,103,544 9,081,530
Value of capital withdrawn................... 245,585,114 93,408,742 49,673,952 101,988,710 476,038
------------ ------------ ------------ ------------ ----------
Net increase (decrease) in net assets
resulting from capital transactions.......... (14,093,758) 342,687 43,602,792 11,114,834 8,605,492
------------ ------------ ------------ ------------ ----------
Net increase (decrease) in net assets......... 175,608,432 30,228,431 73,544,560 97,786,360 8,997,595
Net assets:
Beginning of year............................ 588,694,098 94,583,300 148,817,830 217,671,865 0
------------ ------------ ------------ ------------ ----------
End of year.................................. $764,302,530 $124,811,731 $222,362,390 $315,458,225 $8,997,595
============ ============ ============ ============ ==========
- ---------------
* August 22, 1995 Commencement of Operations
** September 29, 1995 Commencement of Operations

<CAPTION>
INTERNATIONAL
EQUITY**
-------------
From operations:
Net investment income........................ $ 102,394
Net realized gains (losses) on investments... 16,793
Net realized gains (losses) on foreign
currency transactions...................... (8,241)
Net unrealized appreciation on investments... 1,174,916
Net increase in unrealized appreciation on
translation of assets and liabilities in
foreign currencies......................... 159,823
-----------
Net increase in net assets resulting from
operations................................. 1,445,685
-----------
From capital transactions:
Proceeds from capital invested............... 86,991,521
Value of capital withdrawn................... 4,990,891
-----------
Net increase (decrease) in net assets
resulting from capital transactions.......... 82,000,630
-----------
Net increase (decrease) in net assets......... 83,446,315
Net assets:
Beginning of year............................ 0
-----------
End of year.................................. $83,446,315
===========
- ---------------
* August 22, 1995 Commencement of Operations
** September 29, 1995 Commencement of Operations
</TABLE>

See notes to financial statements.

12 - 13

<PAGE> 183

DIVERSIFIED INVESTORS PORTFOLIOS

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
HIGH INTERMEDIATE GOVERNMENT/
QUALITY GOVERNMENT CORPORATE
MONEY MARKET BOND BOND BOND
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
From operations:
Net investment income.................................... $ 5,160,230 $ 10,028,083 $4,037,896 $ 12,824,729
Net realized gains (losses) on investments............... (9,238) (2,474,325) (286,190 ) (5,306,941)
Net increase (decrease) in unrealized appreciation on
investments............................................ 0 (5,444,747) (4,710,080 ) (13,461,657)
------------ ------------ ----------- ------------
Net increase in net assets resulting from operations..... 5,150,992 2,109,011 (958,374 ) (5,943,869)
------------ ------------ ----------- ------------
From Capital Transactions:
Proceeds from capital invested........................... 439,406,062 324,614,137 118,805,465 292,110,188
Value of capital withdrawn............................... (283,047,262) (182,726,932) (31,208,351) (39,180,927)
------------ ------------ ----------- ------------
Net increase in net assets resulting from capital
transactions........................................... 156,358,800 141,887,205 87,597,114 252,929,261
------------ ------------ ----------- ------------
Net increase in net assets............................... 161,509,792 143,996,216 86,638,740 246,985,392
Net Assets:
Beginning of period...................................... -- -- -- --
------------ ------------ ----------- ------------
End of period............................................ $161,509,792 $143,996,216 $86,638,740 $246,985,392
============ ============ =========== ============

EQUITY GROWTH & EQUITY
BALANCED INCOME INCOME GROWTH
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
From operations:
Net investment income.................................... $ 3,614,958 $ 18,966,219 $ 1,333,425 $ 105,785
Net realized gains (losses) on investments............... 425,349 (3,691,850) (3,271,268) (3,498,589)
Net increase (decrease) in unrealized appreciation on
investments............................................ (3,468,711) (13,139,464) (1,128,400) 15,245,006
------------ ------------ ----------- ------------
Net increase in net assets resulting from operations..... 571,596 2,134,905 (3,066,243) 11,852,202
------------ ------------ ----------- ------------
From Capital Transactions:
Proceeds from capital invested........................... 212,140,323 672,360,914 138,102,752 256,748,572
Value of capital withdrawn............................... (87,202,804) (85,801,721) (40,453,209) (119,782,944)
------------ ------------ ----------- ------------
Net increase in net assets resulting from capital
transactions........................................... 124,937,519 586,559,193 97,649,543 136,965,628
------------ ------------ ----------- ------------
Net increase in net assets............................... 125,509,115 588,694,098 94,583,300 148,817,830
Net Assets:
Beginning of period...................................... -- -- -- --
------------ ------------ ----------- ------------
End of period............................................ $125,509,115 $588,694,098 $94,583,300 $148,817,830
============ ============ =========== ============

SPECIAL
EQUITY
------------
<S> <C>
From operations:
Net investment income.................................... $ 607,963
Net realized gains (losses) on investments............... (4,329,355)
Net increase (decrease) in unrealized appreciation on
investments............................................ 4,737,078
------------
Net increase in net assets resulting from operations..... 1,015,686
------------
From Capital Transactions:
Proceeds from capital invested........................... 320,045,388
Value of capital withdrawn............................... (103,389,209)
------------
Net increase in net assets resulting from capital
transactions........................................... 216,656,179
------------
Net increase in net assets............................... 217,671,865
Net Assets:
Beginning of period...................................... --
------------
End of period............................................ $217,671,865
============
</TABLE>

See notes to financial statements.

14 - 15

<PAGE> 184

MONEY MARKET PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----------- ----------
<C> <S> <C> <C>
COMMERCIAL PAPER
$1,000,000 American Express Credit Corp, 5.60%, Due 02/02/96...... $ 994,711
1,000,000 American Express Credit Corp, 5.45%, Due 03/26/96...... 986,829
800,000 Associates Corp of North America, 5.71%, Due
01/22/96............................................. 797,081
2,000,000 Avco Financial Services Canada, 5.76%, Due 01/05/96.... 1,998,080
4,000,000 Avco Financial Services Canada, 5.60%, Due 03/06/96.... 3,958,311
5,000,000 Banco Real SA, 5.62%, Due 04/15/96..................... 4,916,481
2,000,000 Bank of New York, 5.83%, Due 01/22/96.................. 1,992,551
1,500,000 Bell South Telecom, 5.75%, Due 01/09/96................ 1,497,605
3,500,000 CIT Group Holdings Inc, 5.80%, Due 01/31/96............ 3,481,956
3,400,000 CIT Group Holdings Inc, 5.70%, Due 02/09/96............ 3,377,928
2,000,000 Canadian Imperial Bank, 5.60%, Due 02/20/96............ 1,983,822
5,000,000 Chevron UK Inc, 5.78%, Due 01/26/96.................... 4,978,325
5,000,000 Colonial Pipeline Company, 5.70%, Due 01/26/96......... 4,978,625
700,000 Colonial Pipeline Company, 5.67%, Due 02/16/96......... 694,708
700,000 Colonial Pipeline Company, 5.62%, Due 02/28/96......... 693,443
6,000,000 Commercial Credit Company, 5.76%, Due 01/16/96......... 5,983,680
3,900,000 Consolidation Coal Company, 5.70%, Due 01/12/96........ 3,891,973
1,300,000 Consolidation Coal Company, 5.79%, Due 01/08/96........ 1,298,118
1,900,000 Cooperative Finance Corp, 5.63%, Due 02/27/96.......... 1,882,469
2,100,000 Cooperative Finance Corp, 5.50%, Due 02/27/96.......... 2,081,071
4,300,000 Copley Financing Corporation, 5.75%, Due 01/24/96...... 4,282,830
3,092,000 Enterprise Funding Corporation, 5.78%, Due 01/10/96.... 3,086,539
3,000,000 Enterprise Funding Corporation, 5.78%, Due 01/12/96.... 2,993,738
1,000,000 Ford Motor Credit Corporation, 5.75%, Due 01/18/96..... 996,965
2,400,000 Ford Motor Credit Corporation, 5.75%, Due 01/18/96..... 2,392,716
700,000 Ford Motor Credit Corporation, 5.77%, Due 01/05/96..... 699,327
3,200,000 General Electric Capital Corp, 5.75%, Due 01/19/96..... 3,189,778
6,000,000 General Motors Acceptance Corp, 5.70%, Due 01/09/96.... 5,990,500
1,100,000 Household Finance Corp, 5.75%, Due 01/12/96............ 1,097,716
200,000 Household Finance Corp, 5.77%, Due 01/26/96............ 199,135
1,000,000 Household Finance Corp, 5.71%, Due 01/29/96............ 995,242
4,000,000 Household Finance Corp--Canada, 5.75%, Due 01/03/96.... 3,997,444
2,800,000 JHM Funding Inc, 5.75%, Due 01/11/96................... 2,794,633
4,000,000 JHM Funding Inc, 5.73%, Due 01/23/96................... 3,984,720
5,000,000 Merrill Lynch and Company Inc, 5.75%, Due 01/24/96..... 4,980,035
925,000 Midwest Funding Corp, 5.83%, Due 07/01/22 (a).......... 929,298
2,800,000 Morgan JP & Company, 5.77%, Due 01/08/96............... 2,795,961
5,000,000 National Westminster Bank Plc, 5.73%, Due 01/08/96..... 4,992,837
3,600,000 Norwest Corp, 5.72%, Due 01/26/96...................... 3,584,556
6,000,000 Olympic, 5.825%, Due 12/15/96.......................... 6,022,981
1,100,000 PHH Corp, 5.74%, Due 01/19/96.......................... 1,096,492
1,200,000 PHH Corp, 5.75%, Due 01/23/96.......................... 1,195,400
500,000 Rockwell International Corp, 5.70%, Due 01/26/96....... 497,863
1,000,000 Royal Bank of Canada, 5.70%, Due 01/29/96.............. 995,250
</TABLE>

<PAGE> 185

MONEY MARKET PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----------- ----------
<C> <S> <C> <C>
COMMERCIAL PAPER--(CONTINUED)
$6,000,000 Seagram Joseph and Sons Inc, 5.70%, Due 01/18/96....... $ 5,981,950
500,000 Sears Roebuck Acceptance Corp, 5.70%, Due 01/16/96..... 498,654
700,000 Sears Roebuck Acceptance Corp, 5.70%, Due 01/29/96..... 696,676
3,200,000 Sears Roebuck Acceptance Corp, 5.70%, Due 02/02/96..... 3,182,773
2,605,000 Toronto Dominion Bank, 5.68%, Due 01/08/96............. 2,601,301
400,000 Toronto Dominion Bank, 5.97%, Due 01/08/96............. 399,403
6,000,000 Transamerica Commercial Finance--Canada, 5.77%,
Due 01/04/96......................................... 5,995,191
5,000,000 Wachovia Bank of N. Carolina, 5.75%, Due 01/11/96...... 5,031,943
-----------
Total Commercial Paper (Cost $140,647,614)............. 140,647,614 99.30%
----------- ------
BANKERS ACCEPTANCES
1,000,000 Republic National Bank New York NY, 5.53%, Due 02/01/96
(cost $994,931)...................................... 994,931 0.70%
----------- ------
Total Securities (cost $141,642,545)................... 141,642,545 100.00%
----------- ------
REPURCHASE AGREEMENT
56,630 Repurchase Agreement with Morgan Stanley, dated
12/29/95, 5.65%, proceeds at maturity $56,665, due
01/02/96. (Collateralized by US Treasury Note, 7.25%,
due 08/15/04 with a market value of $57,874) (cost
$56,639)............................................. 56,639 .04%
----------- ------
Total Investments (cost $141,699,184).................. $141,699,184 100.04%
Liabilities Less Other Assets.......................... (60,936) (.04)
----------- ------
Net Assets............................................. $141,638,248 100.00%
============ ======
</TABLE>

- ---------------

(a) This interest rate is subject to change periodically based on the greater of
the 30 or 90 day Federal composite rate. This instrument resets on a weekly
basis. The rate shown was in effect as of December 31, 1995.

See notes to financial statements.

<PAGE> 186

HIGH QUALITY BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----------- ----------
<C> <S> <C> <C>
CORPORATE BONDS AND NOTES
AUTO
$ 655,159 Chrysler Financial Corp 8.65% Due 10/15/96.............. $ 656,640
2,863,011 Ford Motor Company 6.27% Due 01/02/00................... 2,863,808
1,000,000 Ford Motor Credit 7.15% Due 01/26/00.................... 1,045,390
1,010,792 General Motors Acceptance Corp, Grantor Trust 1995-A
7.15% Due 03/15/00...................................... 1,029,401
------------
Total Auto.............................................. 5,595,239 3.24%
------------ -------
BANKING
1,000,000 Banque National of Paris 9.875% Due 05/25/98............ 1,081,561
5,000,000 Discover Card Master Trust I 93-2A 5.40% Due 11/16/01... 4,989,646
1,000,000 European Investment Bank 6.60% Due 05/15/97............. 1,017,390
3,000,000 First Hawaiian Bank Medium Term Note 7.50% Due
11/20/96................................................ 3,038,605
3,523,095 Fleet Finance 1191-A 8.45% Due 04/15/06................. 3,630,089
2,000,000 Korean Development Bank 8.90% Due 03/12/96.............. 2,012,155
3,000,000 Korean Development Bank 7.73% Due 05/05/97.............. 3,072,088
98,730 Rochester Community Savings Bank Grantor Trust 1991-B
6.70% Due 04/15/97...................................... 98,792
391,458 Security Pacific Home Equity Loan 1991-2 8.10% Due
06/15/20................................................ 407,277
295,531 Shawmut REMIC Trust 6.40% Due 09/15/96.................. 294,879
2,887,902 Western Finance Grantor Trust 4.60% Due 04/01/99........ 2,859,339
4,000,000 Western Finance Grantor Trust 5.875% Due 03/01/02....... 4,021,237
------------
Total Banking........................................... 26,523,058 15.37%
------------ -------
BUSINESS MACHINES
3,408,769 IBM Credit Receivable Lease Asset Master Trust 93-1A
4.55% Due 11/15/00...................................... 3,382,488
1,537,529 IBM Credit Receivable Lease Asset Master Trust 6.55% Due
07/16/01................................................ 1,567,403
------------
Total Business Machines................................. 4,949,891 2.87%
------------ -------
CONSTRUCTION
3,655,000 Case Equipment Loan Trust 1194-C A2, 8.10% Due
06/15/01................................................ 3,814,575 2.21%
------------ -------
CREDIT CARDS
2,540,000 First Chicago Master Trust 6.25% Due 08/15/99........... 2,567,888
1,000,000 Household Affinity Credit Card Master Trust 7.00% Due
12/15/99................................................ 1,026,650
1,000,000 Maryland Bank of North America Master Credit Card Trust
1993-3A 5.40% Due 09/15/00.............................. 996,190
6,000,000 National Credit Card Trust 1989 9.45% Due 12/31/97...... 6,094,735
5,000,000 Peoples' Bank Credit Card Trust Series 1993-1 4.80% Due
12/15/99................................................ 4,986,395
7,000,000 Private Label Credit Card Master Trust 7.15% Due
06/20/01................................................ 7,101,074
------------
Total Credit Cards...................................... 22,772,932 13.20%
------------ -------
</TABLE>

See notes to financial statements.

<PAGE> 187

HIGH QUALITY BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
FINANCE
$1,250,000 Associates Corp of North America 8.89% Due 04/12/98..... $ 1,337,287
2,000,000 Associates Corp of North America 6.46% Due 09/18/00..... 2,047,959
4,000,000 Associates Corp of North America 5.99% Due 12/15/00..... 4,017,317
5,000,000 Carco 1994-3 8.125% Due 10/15/99........................ 5,209,375
1,000,000 British Gas Finance Inc. 8.75% Due 09/15/98............. 1,063,288
1,774,000 General Electric Capital Corp 9.375% Due 06/08/96....... 1,800,610
5,000,000 Lehman Brothers Inc. 7.625% Due 08/01/98................ 5,191,900
725,000 Lehman Medium Term Note 6.08% Due 07/08/98.............. 723,978
595,696 Merrill Lynch Mortgage Investors 10.10% Due 11/15/07.... 647,730
1,045,443 Merrill Lynch Mortgage Investors 10.35% Due 05/15/09.... 1,185,407
645,941 Merrill Lynch Mortgage Investors 9.40% Due 09/15/09..... 715,309
1,560,647 Merrill Lynch Mortgage Investors 9.00% Due 07/15/11..... 1,650,898
4,000,000 Navistar Finance 6.55% Due 11/20/01..................... 4,054,956
1,000,000 Norwest Financial 6.00% Due 08/15/97.................... 1,006,692
3,595,252 Resolution Trust Corp. 7.00% Due 02/15/04............... 3,612,487
2,347,954 Resolution Trust Corp. 6.77% Due 07/25/25............... 2,390,020
1,000,000 Signet Medium Term Note 1993-1A 5.20% Due 02/15/02...... 993,079
5,000,000 Salomon Brothers Medium Term Note 6.42% 01/15/96........ 5,001,740
------------
Total Finance........................................... 42,650,032 24.72%
------------ -------
HOME EQUITY
74,262 First Interstate of California 8.90% Due 11/15/97....... 74,108 0.04%
------------ -------
INSURANCE
38,892 Central Life Assurance Company 9.00% Due 11/01/96....... 39,091 0.02%
------------ -------
MANUFACTURING
853,242 Chemical Financial Acceptance Corp. 90-1 9.40% Due
03/17/97 ............................................... 861,544
3,075,914 Chemical Financial Acceptance Corp. 9.25% Due
05/15/98................................................ 3,267,080
------------
Total Manufacturing..................................... 4,128,624 2.39%
------------ -------
REAL ESTATE
913,992 Daiwa Home Equity Loans 7.875% Due 11/25/19............. 924,658
4,295,583 Travelers Mortgage 12.00% Due 03/01/14.................. 4,822,604
103,337 US Home Equity Loan 9.25% Due 01/15/21.................. 103,124
789,634 US Home Equity Loan 8.50% Due 04/15/21.................. 810,329
------------
Total Real Estate....................................... 6,660,715 3.86%
------------ -------
RETAIL
2,750,000 Sears Credit Account 5.90% Due 11/16/98................. 2,756,295 1.60%
------------ -------
SECURITY & COMMODITY BROKERS/DEALERS
6,250,000 Bear Stearns 7.625% Due 09/15/99........................ 6,602,406
5,000,000 Morgan Stanley 7.32% Due 01/15/97....................... 5,085,775
------------
Total Security & Commodity Brokers/Dealers.............. 11,688,181 6.78%
------------ -------
Total Corporate Bonds and Notes (cost $131,817,332)..... 131,652,741 76.31%
------------ -------
FOREIGN GOVERNMENT DEBT
1,000,000 Kingdom of Denmark 7.75% Due 12/15/96................... 1,021,555
1,379,151 Pemex Exp Grantor Trust 7.66% Due 08/15/01.............. 1,447,055
7,000,000 Province of Ontario 7.75% Due 06/04/02.................. 7,681,233
5,000,000 Province of Quebec 9.125% Due 08/22/01.................. 5,665,625
------------
Total Foreign Government Debt (cost $15,265,413)........ 15,815,468 9.17%
------------ -------

</TABLE>

See notes to financial statements.

<PAGE> 188

HIGH QUALITY BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
U.S. GOVERNMENT SECURITY
$4,250,000 Midstate Trust II A3 9.35% Due 04/01/98 (cost
$4,339,597)............................................. $ 4,555,745 2.64%
------------ -------
U.S. GOVERNMENT AGENCY
17,148 Federal Home Loan Mortgage Corp. 5.25% Due 07/01/97..... 15,670
3,202,226 Federal Home Loan Mortgage Corp. 9.00% Due 10/01/05..... 3,328,326
847,965 Federal Home Loan Mortgage Corp. REMIC Series MH-1
10.15% Due 04/15/06..................................... 867,408
1,474,068 Federal Home Loan Mortgage Corp. 7.50% Due 03/01/08..... 1,504,654
585,098 Federal Home Loan Mortgage Corp. 6.50% Due 03/01/13..... 582,494
908,800 Federal Home Loan Mortgage Corp. 7.00% Due 01/01/18..... 919,714
1,779,984 Federal National Mortgage Association 8.00% Due
07/25/97................................................ 1,805,756
855,524 Federal National Mortgage Association 6.75% Due
02/01/03................................................ 856,267
418,353 Federal National Mortgage Association 7.00% Due
04/01/04................................................ 421,210
1,200,000 Guaranteed Export Certificates 4.61% Due 09/01/98....... 1,183,103
2,873,555 Guaranteed Export Certificates 4.813% Due 12/15/98...... 2,864,544
------------
Total U.S. Government Agency (cost $13,346,594)......... 14,349,146 8.32%
------------ -------
Total Securities (cost $164,768,936).................... 166,373,100 96.43%
------------ -------
REPURCHASE AGREEMENT
4,459,231 Repurchase Agreement with Morgan Stanley, dated
12/29/95, 5.65%, proceeds at maturity $4,461,992, due
01/02/96 (Collateralized by US Treasury Note, 7.25%, due
08/15/04, with a market value of $4,557,181) (cost
$4,459,931)............................................. 4,459,931 2.59%
------------ -------
Total Investments (cost $169,228,867)................... 170,833,081 99.02%
Other Assets Less Liabilities........................... 1,693,072 .98%
------------ -------
Net Assets.............................................. $172,526,103 100.00%
============ =======
</TABLE>

The aggregate cost of securities for federal income tax purposes at
December 31, 1995 is $169,228,867.

The following amount is based on costs for federal income tax purposes:

<TABLE>
<S> <C>
Gross unrealized appreciation........................... $ 2,205,913
Gross unrealized depreciation........................... (601,749)
-----------
Net unrealized appreciation............................. $ 1,604,164
===========
</TABLE>

See notes to financial statements.

<PAGE> 189

INTERMEDIATE GOVERNMENT BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ---------- ----------
<C> <S> <C> <C>
BANK NOTES
$4,000,000 Republic New York Securities Corp 6.15% Due 2/12/96
(d)(g) (cost $4,000,636)............................... $4,000,647 4.65%
----------- ------
COMMERCIAL PAPER
4,000,000 Lehman Brothers Holdings, Inc. 4.90% Due 04/25/96 (d)(g)
(cost $4,000,636)...................................... 4,000,636 4.65%
----------- ------
TIME DEPOSITS
413,885 First National Bank of Boston, Nassau 4.81%
Due 01/02/96 (d)(g).................................... 413,940
657,365 First Union Bank, Nassau 5.8125% Due 01/02/96 (d)........ 657,470
1,000,000 Harris Bank and Trust, Nassau 5.8125% Due 01/19/96 (d)... 1,000,159
-----------
Total Time Deposits (cost $2,071,580).................... 2,071,569 2.41%
----------- ------
SHORT-TERM OBLIGATIONS
100,000 Federal National Mortgage Association 5.57% Due
01/03/96............................................... 99,938
200,000 Federal National Mortgage Association 5.67% Due
01/09/96............................................... 199,685
2,700,000 Federal National Mortgage Association 5.45% Due
01/12/96............................................... 2,694,686
600,000 Federal National Mortgage Association 5.58% Due
01/25/96............................................... 597,582
300,000 Federal National Mortgage Association 5.59% Due
01/29/96............................................... 298,602
200,000 Federal National Mortgage Association 5.55% Due
02/16/96............................................... 198,520
2,300,000 Federal Home Loan Mortgage Corp. 5.57% Due 01/05/96...... 2,297,865
200,000 Federal Home Loan Mortgage Corp. 5.60% Due 01/08/96...... 199,720
200,000 Federal Home Loan Mortgage Corp. 5.60% Due 01/16/96...... 199,471
200,000 Federal Home Loan Mortgage Corp. 5.65% Due 01/16/96...... 199,466
900,000 Federal Home Loan Mortgage Corp. 5.64% Due 01/16/96...... 897,603
3,500,000 Federal Home Loan Mortgage Corp. 5.65% Due 01/16/96...... 3,490,662
300,000 Federal Home Loan Mortgage Corp. 5.55% Due 01/16/96...... 299,214
3,900,000 Federal Home Loan Mortgage Corp. 5.54% Due 02/20/96...... 3,868,791
200,000 Federal Home Loan Mortgage Corp. 5.67% Due 01/22/96...... 199,276
1,500,000 Federal Home Loan Mortgage Corp. 5.65% Due 01/22/96...... 1,494,585
500,000 Federal Home Loan Mortgage Corp. 5.45% Due 01/22/96...... 498,259

</TABLE>

See notes to financial statements.

<PAGE> 190

INTERMEDIATE GOVERNMENT BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
$ 500,000 Federal Home Loan Mortgage Corp. 5.55% Due 01/24/96...... $ 498,073
2,100,000 Federal Home Loan Mortgage Corp. 5.53% Due 02/26/96...... 2,081,290
-----------
Total Short-term Obligations (cost $20,313,288).......... 20,313,288 23.62%
----------- ------
U.S. GOVERNMENT SECURITIES
5,000,000 U.S. Treasury Note 5.125% Due 3/31/96.................... 4,998,430
7,000,000 U.S. Treasury Note 7.75% Due 12/31/99 (a)................ 7,599,375
5,500,000 U.S. Treasury Note 8.875% Due 05/15/00................... 6,245,938
6,000,000 U.S. Treasury Note 8.50% Due 11/15/00.................... 6,796,865
2,000,000 U.S. Treasury Note 5.625% Due 11/30/00 (a)............... 2,020,000
-----------
Total U.S. Government Securities (cost $29,473,700)...... 27,660,608 32.17%
----------- ------

U.S. GOVERNMENT AGENCY
2,000,000 Student Loan Mortgage Association 6.52% Due 09/26/00..... 2,029,798
5,000,000 Federal Home Loan Bank 7.39% Due 08/22/01................ 5,402,410
3,000,000 Federal Home Loan Mortgage Corp 6.50% Due 02/15/21....... 3,036,837
5,300,000 Federal Home Loan Mortgage Corp 7.00% Due 06/15/22....... 5,492,597
1,627,397 Federal Home Loan Mortgage Corp 6.28% Due 08/25/23 (f)... 1,620,170
2,000,000 Federal Home Loan Mortgage Corp 6.50% Due 02/15/24 (f)... 2,005,238
2,000,000 Federal National Mortgage Assn 7.00% Due 01/25/03........ 2,059,658
3,000,000 Federal National Mortgage Assn 6.44% Due 06/21/05........ 3,120,687
12,481 Government National Mortgage Assn 7.50% Due 04/15/02..... 12,906
39,284 Government National Mortgage Assn 7.50% Due 06/15/07..... 40,622
14,393 Government National Mortgage Assn 7.50% Due 07/15/07..... 14,883
3,802,084 Government National Mortgage Assn 7.50% Due 08/15/07..... 3,931,592
1,672,796 Government National Mortgage Assn 7.50% Due 09/15/07..... 1,729,775
240,134 Government National Mortgage Assn 6.50% Due 09/15/08..... 242,386
1,344,200 Government National Mortgage Assn 6.50% Due 10/15/08..... 1,356,802
2,100,134 Government National Mortgage Assn 6.50% Due 11/15/08..... 2,119,822

</TABLE>

See notes to financial statements.

<PAGE> 191

INTERMEDIATE GOVERNMENT BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
$ 415,316 Government National Mortgage Assn 7.00% Due 11/15/08..... $ 419,210
2,500,000 Tennesee Valley Authority 6.375% Due 06/15/05............ 2,577,655
-----------
Total U.S. Government Agency (cost $34,332,651).......... 37,213,048 43.27%
----------- ------
Total Securities (cost $94,192,491)...................... 95,259,796 110.77%
----------- ------
REPURCHASE AGREEMENT
82,780 Repurchase agreement with Morgan Stanley, dated 12/29/95
5.65%, proceeds at maturity $82,831, due 01/02/96
(Collateralized by US Treasury Note, 7.25%, Due
08/15/04, with a market value of $84,598) (cost
$82,793)............................................... 82,793 0.10%
----------- ------
Total Investments (cost $94,275,284)..................... $95,342,589 110.87%
Liabilities Less Other Assets............................ (9,350,975) (10.87)%
----------- ------
Net Assets............................................... $85,991,614 100.00%
=========== ======
The aggregate cost of securities for federal income tax purposes
at December 31, 1995 is $94,275,284.
The following amount is based on costs for federal income tax purposes:
Aggregate gross unrealized appreciation.................. $1,222,622
Aggregate gross unrealized depreciation.................. (155,317)
-----------
Net unrealized appreciation.............................. $1,067,305
===========
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(f) This interest rate is reset on a monthly basis. The rate shown was in effect
as of December 31, 1995.

(g) This interest rate is reset on a daily basis. The rate shown was in effect
as of December 31, 1995.

See notes to financial statements.

<PAGE> 192

GOVERNMENT/CORPORATE BOND FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
BANK NOTES
$4,000,000 Republic New York Securities Corp, 6.15% Due 02/12/96
(d)(g) (cost $4,000,638)............................. $ 4,000,649 1.19%
----------- ------
TIME DEPOSITS
9,853,197 First National Bank of Boston, Nassau, 4.81% Due
01/02/96 (d)(g)...................................... 9,854,757
1,665,653 First Union Bank, Nassau, 5.8125% Due 01/02/96 (d)..... 1,665,919
10,000,000 Fleet Bank, Rhode Island, Cayman, 5.8125% Due 01/31/96
(d).................................................. 10,001,595
-----------
Total Time Deposits (cost $21,522,282)................. 21,522,271 6.40%
----------- ------
COMMERCIAL PAPER
4,000,000 American Express Credit Corp 5.45% Due 03/26/96........ 3,947,317
1,200,000 Associates Corp of North America 5.68% Due 01/10/96.... 1,197,917
1,700,000 Associates Corp of North America 5.71% Due 01/22/96.... 1,693,799
3,500,000 Avco Financial Services Canada 5.76% Due 01/05/96...... 3,496,640
2,000,000 Avco Financial Services Canada 5.60% Due 03/06/96...... 1,979,156
2,600,000 Avco Financial Services Canada 5.80% Due 01/12/96...... 2,594,554
3,000,000 Bank of New York 5.73% Due 01/19/96.................... 2,990,450
600,000 Bell South Telecom Inc 5.75% Due 01/09/96.............. 599,042
1,900,000 Chevron UK Inc 5.60% Due 03/25/96...................... 1,874,582
950,000 Colonial Pipeline Co 5.67% Due 02/16/96................ 942,818
300,000 Colonial Pipeline Co 5.62% Due 02/28/96................ 297,190
1,100,000 Commercial Credit Company 5.72% Due 01/17/96........... 1,096,854
1,100,000 Consolidation Coal Co 5.70% Due 01/12/96............... 1,097,736
1,300,000 Consolidation Coal Co 5.76% Due 01/04/96............... 1,298,960
1,800,000 Copley Financing Corp 5.78% Due 01/02/96............... 1,799,133
5,800,000 Dupont EI De Nemours & Co 5.67% Due 01/26/96........... 5,775,336
2,300,000 Enterprise Funding Corp 5.73% Due 01/26/96............. 2,290,116
2,000,000 Ford Motor Credit Corp 5.75% Due 01/18/96.............. 1,993,930
600,000 Ford Motor Credit Corp 5.77% Due 01/05/96.............. 599,423
3,500,000 General Electric Capital Corp 5.63% Due 02/14/96....... 3,474,821
1,050,000 General Motors 5.83% Due 01/26/96...................... 1,045,409
2,200,000 Goldman Sachs Group 5.75% Due 01/10/96................. 2,196,134
1,200,000 Goldman Sachs Group 5.58% Due 01/19/96................. 1,196,280
1,200,000 JHM Funding Inc 5.75% Due 01/12/96..................... 1,197,508
3,300,000 Merrill Lynch and Co Inc 5.73% Due 01/31/96............ 3,283,192
1,200,000 Cooperative Finance Corp 5.63% Due 02/27/96............ 1,188,928
2,100,000 Cooperative Finance Corp 5.50% Due 02/27/96............ 2,081,071
1,000,000 Norwest Corp 5.72% Due 01/26/96........................ 995,710
2,000,000 PHH Corp 5.68% Due 01/19/96............................ 1,993,689
400,000 PHH Corp 5.75% Due 01/23/96............................ 398,467
100,000 Prudential Funding Corp 5.78% Due 01/12/96............. 99,791
300,000 Prudential Funding Corp 5.82% Due 01/02/96............. 299,855
1,000,000 Royal Bank of Canada 5.70% Due 01/29/96................ 995,249
</TABLE>
See notes to financial statements.

<PAGE> 193

GOVERNMENT/CORPORATE BOND FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----------- ----------
<C> <S> <C> <C>
$1,000,000 Seagram Joseph and Sons Inc 5.70% Due 01/18/96......... $ 996,991
300,000 Sears Roebuck Acceptance Corp 5.70% Due 01/16/96....... 299,193
900,000 Sears Roebuck Acceptance Corp 5.70% Due 02/02/96....... 895,155
1,000,000 Transamerica Commercial Finance--Canada 5.77%
Due 01/04/96......................................... 999,199
5,000,000 Xerox Credit Corp 5.67% Due 01/19/96................... 4,984,250
1,000,000 Xerox Credit Corp 5.65% Due 02/26/96................... 990,898
-----------
Total Commercial Paper (cost $67,176,743).............. 67,176,743 19.96%
----------- ------
SHORT TERM FLOATING RATE CORPORATE NOTE
142,000 Midwest Funding Corp, 5.83%, Due 07/01/22.............. 142,660
1,000,000 Olympic, 5.825%, Due 12/15/96.......................... 1,003,830
-----------
Total Short Term Floating Rate Corporate Note (cost
$1,146,490).......................................... 1,146,490 0.34%
----------- ------
CORPORATE BONDS AND NOTES
AEROSPACE PRODUCTS
4,000,000 BF Goodrich 8.65% Due 04/15/25......................... 4,815,796
5,000,000 Boeing Company 8.625% Due 11/15/31..................... 6,404,210
-----------
Total Aerospace Products............................... 11,220,006 3.33%
----------- ------
BANKING
4,000,000 Bank Of New York 6.50% Due 12/01/03.................... 4,074,108
5,000,000 Chase Manhattan Co 8.00% Due 05/01/05.................. 5,241,120
5,000,000 Chase Manhattan Co 1995-1 6.00% Due 05/15/00 (f)....... 4,997,995
5,000,000 International Bank Recon & Dev, 8.875% Due 03/01/26.... 6,593,765
6,000,000 Swiss Bank Corp--NY 7.50% Due 07/15/25................. 6,515,088
-----------
Total Banking.......................................... 27,422,076 8.15%
----------- ------
BEVERAGES
5,000,000 Seagrams (Joseph E.) & Sons 9.65% Due 08/15/18......... 6,742,045 2.00%
----------- ------
CIGARETTES
5,000,000 American Brands 9.125% Due 03/01/16.................... 5,245,220
5,000,000 RJR Nabisco Inc. 8.75% Due 04/15/04.................... 5,131,805
-----------
Total Cigarettes....................................... 10,377,025 3.08%
----------- ------
CONSUMER GOODS & SERVICES
5,200,000 Proctor & Gamble 9.36% Due 01/01/21.................... 6,815,744 2.03%
----------- ------
ELECTRICAL EQUIPMENT
5,000,000 Legrand 8.50% Due 02/15/25............................. 5,998,615 1.78%
----------- ------
FINANCE
5,000,000 Advanta Credit Card 6.12% Due 02/10/01 (f)............. 5,019,695
7,040,000 Discover Card Master Trust 1994--2A, 6.05% Due 10/16/04
(e).................................................. 7,087,654
6,000,000 Dow Capital BV 9.20% Due 06/01/10...................... 7,318,182
5,000,000 General Electric Capital Corp 8.50% Due 07/24/08....... 5,978,205
6,000,000 Nationsbank Card Master Trust 6.45% Due 04/15/03 (a)... 6,184,554
</TABLE>

See notes to financial statements.

<PAGE> 194

GOVERNMENT/CORPORATE BOND FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
$5,000,000 Paccar Financial Corp 5.52% Due 09/03/96............... $ 4,999,645
3,000,000 Standard Credit Card Master Trust 95-11, 6.00% Due
11/15/00 (e)......................................... 2,995,347
-----------
Total Finance.......................................... 39,583,282 11.76%
----------- ------
FOREIGN GOVERNMENT
5,000,000 Province of Quebec 7.50% Due 7/15/23................... 5,266,045 1.57%
----------- ------
HOTELS
5,000,000 Marriott International Inc 7.875% Due 4/15/05.......... 5,428,865 1.61%
----------- ------
INSURANCE
5,000,000 Prudential Insurance 8.10% Due 7/15/15................. 5,348,445 1.59%
----------- ------
MEDICAL & OTHER HEALTH SERVICE
5,000,000 Columbia Healthcare 7.50% Due 12/15/23................. 5,389,690 1.60%
----------- ------
MOTOR VEHICLES & EQUIPMENT
5,000,000 Ford Holdings 9.375% Due 03/01/20...................... 6,392,125
5,000,000 General Motors Acceptance Corp 8.40% Due 10/15/99...... 5,352,775
5,000,000 General Motors Acceptance Corp 8.80% Due 03/01/21...... 6,267,795
-----------
Total Motor Vehicles & Equipment....................... 18,012,695 5.35%
----------- ------
OIL & GAS
5,000,000 Atlantic Richfield 9.00% Due 05/01/31 (a).............. 6,522,885
5,000,000 Occidental Petroleum 10.125% Due 09/15/09.............. 6,490,545
4,000,000 Texaco Capital 9.75 Due 03/15/20....................... 5,464,416
-----------
Total Oil & Gas........................................ 18,477,846 5.49%
----------- ------
PAPER & FOREST PRODUCTS
7,500,000 Westvaco 10.125% Due 06/01/19.......................... 8,842,485 2.63%
----------- ------
UTILITIES--ELECTRIC
3,000,000 Commonwealth Edison 7.00% Due 07/01/05................. 3,111,426
10,000,000 Commonwealth Edison 8.125% Due 01/15/07................ 10,316,470
5,000,000 Hydro-Quebec 8.50% Due 12/01/29........................ 5,864,445
5,000,000 Texas Utilities Electric 7.875% Due 04/01/24........... 5,378,405
-----------
Total Utilities--Electric.............................. 24,670,746 7.33%
----------- ------
Total Corporate Bonds and Notes (cost $184,336,220).... 199,595,610 59.30%
----------- ------

U.S. GOVERNMENT SECURITIES
5,000,000 U.S. Treasury Note 5.625% Due 11/30/00 (a)............. 5,050,000
10,000,000 U.S. Treasury Note 7.75% Due 12/31/99 (a).............. 10,856,250
-----------
Total U.S. Government Securities (cost $15,687,254).... 15,906,250 4.73%
----------- ------
U.S. GOVERNMENT AGENCY
4,446,610 Federal Home Loan Mortgage Corp, 6.50% Due 09/15/07
(f).................................................. 4,474,401
5,000,000 Federal Home Loan Mortgage Corp, 6.00%, Due 12/15/19... 4,948,045
</TABLE>

See notes to financial statements.

<PAGE> 195

GOVERNMENT/CORPORATE BOND FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
$4,882,190 Federal Home Loan Mortgage Corp, 6.28% Due 08/25/23
(f).................................................. $ 4,860,509
6,345,486 Federal Home Loan Mortgage Corp, 6.50% Due 02/15/24
(f).................................................. 6,362,105
2,167,448 Federal National Mortgage Association, Strip P/O
Due 12/25/18......................................... 2,137,189
2,773,885 Federal National Mortgage Association, Strip P/O Due
08/25/23............................................. 2,661,014
2,697,297 Federal National Mortgage Association, 7.00%, Due
12/01/25............................................. 2,718,364
986,958 Federal National Mortgage Association, 7.00%, Due
10/01/25............................................. 994,668
1,945,480 Federal National Mortgage Association, 7.00%, Due
08/01/25............................................. 1,960,678
201,418 Federal National Mortgage Association, 7.00%, Due
09/01/25............................................. 202,992
3,968,852 Federal National Mortgage Association, 7.00%, Due
11/01/25............................................. 3,999,857
17,187 Government National Mortgage Association, 8.00%,
Due 01/01/24......................................... 17,897
23,569 Government National Mortgage Association, 8.00%,
Due 03/01/24......................................... 24,541
445,051 Government National Mortgage Association, 8.00%,
Due 04/01/24......................................... 463,409
1,517,910 Government National Mortgage Association, 8.00%,
Due 06/01/24......................................... 1,580,523
398,824 Government National Mortgage Association, 8.00%,
Due 07/01/24......................................... 415,276
579,120 Government National Mortgage Association, 8.00%,
Due 08/01/24......................................... 603,009
557,429 Government National Mortgage Association, 8.00%,
Due 09/01/24......................................... 580,423
399,700 Government National Mortgage Association, 8.00%,
Due 10/01/24......................................... 416,188
403,353 Government National Mortgage Association, 8.00%, Due
02/01/25............................................. 419,991
557,857 Government National Mortgage Association, 8.00%, Due
09/01/25............................................. 580,869
3,000,000 Student Loan Mortgage Association 6.52% Due 09/26/00... 3,044,697
5,000,000 Student Loan Mortgage Association 4.40% Due 05/25/04
(a)(f)............................................... 5,001,560
-----------
Total U.S. Government Agency (cost $47,935,707)........ 48,468,205 14.40%
----------- ------
Total Securities (cost $341,805,334)................... 357,816,218 106.32%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 196

GOVERNMENT/CORPORATE BOND FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ----------
<C> <S> <C> <C>
REPURCHASE AGREEMENT
$ 86,902 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $86,956, due
01/02/96 (Collateralized by US Treasury Note,7.25%,
due 08/15/04, with a market value of $88,811) (cost
$86,916)............................................. $ 86,916 0.03%
----------- ------
Total Investments (cost $341,892,250).................. $357,903,134 106.35%
Liabilities Less Other Assets.......................... (21,363,724) (6.35)%
----------- ------
Net Assets............................................. $336,539,410 100.00%
=========== ======
</TABLE>

The aggregate cost of securities for federal income tax purposes at
December 31, 1995 is $341,892,250.

The following amount is based on costs for federal income tax purposes:

<TABLE>
<C> <S> <C> <C>
Gross unrealized appreciation........................... $16,047,094
Gross unrealized depreciation........................... (36,210)
-----------
Net unrealized appreciation............................. $16,010,884
===========
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(e) Zero coupon bond.

(f) This interest rate is reset on a monthly basis. The rate shown was in effect
as of December 31, 1995.

(g) This interest rate is reset on a daily basis. The rate shown was in effect
as of December 31, 1995.

See notes to financial statements.

<PAGE> 197

BALANCED FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
BANK NOTES
$10,000,000 Republic New York Securities Corp, 6.15% Due
02/12/96(d)(g) (cost $10,001,591)...................... $10,001,619 5.99%
----------- ------
TIME DEPOSITS
7,422,703 First National Bank of Boston, Nassau, 4.81% Due
01/02/96(d)(g)......................................... 7,423,856
2,954,047 First Union Bank, Nassau, 5.8125% Due 01/02/96(d)...... 2,954,517
381,100 Fleet Bank, Massachusetts, Nassau, 5.84375% Due
01/05/96(d)............................................ 381,160
10,500,000 Fleet Bank, Rhode Island, Cayman, 5.8125% Due
01/31/96(d)............................................ 10,501,670
4,000,000 Harris Bank and Trust, Nassau, 5.8125% Due
01/19/96(d)............................................ 4,000,636
-----------
Total Time Deposits (cost $25,261,867)................. 25,261,839 15.12%
----------- ------
COMMERCIAL PAPER
2,000,000 Dupont EI De Nemours, 5.69% Due 01/16/96............... 1,994,626
1,500,000 Ford Motor Credit, 5.52% Due 03/01/96.................. 1,485,740
10,000,000 Lehman Brothers Holdings, Inc., 4.90% Due
04/25/96(d)(g)......................................... 10,001,591
-----------
Total Commercial Paper(cost $13,481,957)............... 13,481,957 8.07%
----------- ------
U.S. GOVERNMENT SECURITIES
6,950,000 U.S. Treasury Note 6.875% Due 03/31/97(a).............. 7,089,000
7,900,000 U.S. Treasury Note 6.375% Due 07/15/99................. 8,164,144
5,600,000 U.S. Treasury Note 8.50% Due 02/15/00.................. 6,244,000
4,525,000 U.S. Treasury Note 7.50% Due 11/15/01.................. 4,987,392
9,850,000 U.S. Treasury Note 5.75% Due 08/15/03(a)............... 9,970,032
16,550,000 U.S. Treasury Note 7.875% Due 11/15/04(a).............. 19,166,969
6,200,000 U.S. Treasury Note 6.50% Due 05/15/05(a)............... 6,606,875
-----------
Total U.S. Government Securities (cost $58,765,441).... 62,228,412 37.26%
----------- ------
SHARES COMMON STOCK
------ ------------
AIRCRAFT & PARTS
20,100 McDonnell Douglas...................................... 1,849,200 1.11%
----------- ------
BROADCASTING
22,900 Capital Cities/ABC Inc................................. 2,825,288 1.69%
----------- ------
BUSINESS MACHINES
30,100 International Business Machines........................ 2,761,675
43,300 Silicon Graphics(c).................................... 1,190,750
34,600 Texas Instruments...................................... 1,790,550
-----------
Total Business Machines................................ 5,742,975 3.44%
----------- ------
CHEMICALS & ALLIED PRODUCTS
22,750 Hoechst AG ADR......................................... 3,091,554 1.85 %
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 198

BALANCED FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----- ----------
<C> <S> <C> <C>
COMMERCIAL BANKING
39,200 Bankamerica Corp....................................... $ 2,538,200
37,700 Citicorp............................................... 2,535,325
39,300 Key Corp (new)(a)...................................... 1,424,625
-----------
Total Commercial Banking............................... 6,498,150 3.89%
----------- ------
COMMUNICATIONS
27,500 I T T Corp. (new)(c)................................... 1,457,500
23,350 Motorola Inc. ......................................... 1,330,950
38,000 Tele Danmark ADR....................................... 1,049,750
-----------
Total Communications................................... 3,838,200 2.30%
----------- ------
DRUGS
19,550 American Home Products Corp............................ 1,896,350
71,100 Ciba-Geigy Corp ADR(a)................................. 3,135,894
-----------
Total Drugs............................................ 5,032,244 3.01%
----------- ------
FOOD AND BEVERAGE
29,350 Pepsico Inc. .......................................... 1,639,931
35,800 Philip Morris Companies Inc............................ 3,239,900
91,300 Sara Lee Corp.......................................... 2,910,188
-----------
Total Food and Beverage................................ 7,790,019 4.67%
----------- ------
HOTELS
39,700 Carnival Corp. Cl A(a)................................. 967,688
36,600 Circus Circus Enterprises(c)........................... 1,020,225
-----------
Total Hotels........................................... 1,987,913 1.19%
----------- ------
INDUSTRIAL CHEMICALS
23,150 Dow Chemical Company................................... 1,629,181
38,150 E. I. Dupont de Nemours & Co. ......................... 2,665,731
-----------
Total Industrial Chemicals............................. 4,294,912 2.57%
----------- ------
INDUSTRIAL MACHINERY
43,350 Deere & Co. ........................................... 1,528,088 0.91%
----------- ------
INSURANCE
66,350 Allstate Corp. ........................................ 2,728,644
26,800 Transamerica Corp. .................................... 1,953,050
48,500 Travelers Inc. ........................................ 3,049,438
-----------
Total Insurance........................................ 7,731,132 4.63%
----------- ------
MANUFACTURING
23,600 American Standard Companies(c)......................... 660,800
94,500 Philips Electronics N.V. ADR........................... 3,390,188
-----------
Total Manufacturing.................................... 4,050,988 2.43%
----------- ------
MEDICAL & OTHER HEALTH SERVICES
63,600 Abbott Laboratories.................................... 2,655,300
49,300 Tenet Healthcare Corporation........................... 1,022,975
-----------
Total Medical & Other Health Service................... 3,678,275 2.20%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 199

BALANCED FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----- ----------
<C> <S> <C> <C>
MISCELLANEOUS
98,300 Canadian Pacific(a).................................... $ 1,781,688
24,700 ITT Industries Inc. ................................... 592,800
24,700 Unilever ADR(a)........................................ 3,476,525
-----------
Total Miscellaneous.................................... 5,851,013 3.50%
----------- ------
OIL & GAS
29,850 Amoco Corp. ........................................... 2,145,468
21,950 Atlantic Richfield Co. ................................ 2,430,962
19,850 Mobil Corp. ........................................... 2,223,200
-----------
Total Oil & Gas........................................ 6,799,630 4.07%
----------- ------
PAPER & FOREST PRODUCTS
76,400 International Paper Co. ............................... 2,893,650
51,800 Weyerhaeuser Company................................... 2,240,350
-----------
Total Paper & Forest Products.......................... 5,134,000 3.07%
----------- ------
PERSONAL COMPUTERS
34,300 Compaq Computers(c).................................... 1,646,400 0.99%
----------- ------
PRINTING & PUBLISHING
46,450 Dun & Bradstreet Corp. ................................ 3,007,637
160,100 The News Corporation ADR(a)............................ 3,081,925
74,600 Time Warner Inc. ...................................... 2,825,475
-----------
Total Printing & Publishing............................ 8,915,037 5.34%
----------- ------
RAILROAD
31,450 Burlington Northern Santa Fe(a)........................ 2,453,100
33,950 Union Pacific Corp(a).................................. 2,240,700
-----------
Total Railroad......................................... 4,693,800 2.81%
----------- ------
RETAIL SALES
15,600 Circuit City Stores Inc. .............................. 430,950
61,100 Federated Department Stores(a)(c)...................... 1,680,250
-----------
Total Retail Sales..................................... 2,111,200 1.26%
----------- ------
TOYS
28,268 Mattel................................................. 869,240 0.52%
----------- ------
WASTE MANAGEMENT
89,300 WMX Technologies....................................... 2,667,837 1.60%
----------- ------
Total Common Stock (cost $87,770,805).................. 98,627,095 59.05%
----------- ------
CIGARETTES
451,400 RJR Nabisco Holdings CV, 9.25%, Series C
(cost $2,876,812)...................................... 2,877,675 1.72%
----------- ------
Total Securities (cost $198,158,473)................... 212,478,597 127.21%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 200

BALANCED FUND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
REPURCHASE AGREEMENT
$5,701,274 Repurchase Agreement with Morgan Stanley dated 12/29/95
5.65%, proceeds at maturity $5,704,853, due 01/02/96
(Collateralized by US Treasury Note, 7.25%, due
08/15/04
with a market value of $5,826,506) (cost $5,702,169)... $ 5,702,169 3.41%
----------- ------
Total Investments (cost $203,860,642).................. $218,180,766 130.62%
Liabilities Less Other Assets.......................... (51,147,811) (30.62)%
----------- ------
Net Assets............................................. $167,032,955 100.00%
=========== ======
The aggregate cost of securities for federal income tax purposes at December 31, 1995
is $203,942,187.

The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation.......................... $15,170,091
Gross unrealized depreciation.......................... (931,512)
-----------
Net unrealized appreciation............................ $14,238,579
===========
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(g) This interest rate resets on a daily basis. The rate shown was in effect as
of December 31, 1995.

See notes to financial statements.

<PAGE> 201

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
TIME DEPOSITS
$29,950,949 First National Bank of Boston, Nassau, 4.81%
Due 01/02/06(d)(g)..................................... $29,955,665
2,668,951 First Union Bank, Nassau, 5.8125%, Due 01/02/96(d)..... 2,669,371
3,270,100 Fleet Bank, Massachusetts, Nassau, 5.84375%,
Due 01/05/96(d)........................................ 3,270,615
------------
Total Time Deposits (cost $35,895,651)................. 35,895,651 4.70%
------------ ------
COMMERCIAL PAPER
1,000,000 Avco Financial Services Canada, 5.76%, Due 01/05/96.... 999,040
2,000,000 Avco Financial Services Canada, 5.83%, Due 01/19/96.... 1,993,522
1,600,000 Bank One Corp, 5.72%, Due 01/12/96..................... 1,596,695
6,000,000 Bank of New York, 5.73%, Due 01/19/96.................. 5,980,900
100,000 Bank of New York, 5.85%, Due 01/19/96.................. 99,675
2,000,000 Barclay's Bank PLC, 5.75%, Due 01/17/96................ 2,012,778
1,500,000 Barclay's Bank PLC, 5.77%, Due 01/12/96................ 1,496,875
1,200,000 British Columbia (Province), 5.72%, Due 01/12/96....... 1,197,522
2,400,000 British Columbia (Province), 5.67%, Due 02/01/6........ 2,387,526
3,000,000 Canadian Imperial Bank, 5.60%, Due 02/20/96............ 2,975,733
800,000 Chevron UK Inc, 5.60%, Due 03/25/96.................... 789,298
2,600,000 Chevron Corp, 5.75%, Due 01/12/96...................... 2,594,601
1,750,000 Colonial Pipeline Co, 5.62%, Due 02/28/96.............. 1,733,608
5,200,000 Commercial Credit Company, 5.72%, Due 01/17/96......... 5,185,128
1,000,000 Consolidation Coal Co, 5.70%, Due 01/12/96............. 997,941
7,300,000 Copley Financing Corporation, 5.82%, Due 01/19/96...... 7,276,397
700,000 Copley Financing Corporation, 5.75%, Due 01/24/96...... 697,205
1,482,000 Copley Financing Corporation, 5.78%, Due 01/02/96...... 1,481,286
2,300,000 Dupont EI De Nemours & Co, 5.67%, Due 01/26/96......... 2,290,219
2,700,000 Enterprise Funding Corp, 5.78%, Due 01/12/96........... 2,694,365
1,000,000 Enterprise Funding Corp, 5.73%, Due 01/26/96........... 995,702
2,000,000 Ford Motor Credit Corp, 5.75%, Due 01/18/96............ 1,993,931
600,000 Ford Motor Credit Corp, 5.75%, Due 01/18/96............ 598,179
1,600,000 Ford Motor Credit Corp, 5.92%, Due 01/02/96............ 1,599,210
1,300,000 Ford Motor Credit Corp, 5.77%, Due 01/05/96............ 1,298,750
200,000 General Motors Corp, 5.83%, Due 01/26/96............... 199,125
1,200,000 Goldman Sachs Group, 5.75%, Due 01/10/96............... 1,197,891
2,500,000 Goldman Sachs Group, 5.68%, Due 01/12/96............... 2,494,871
1,000,000 Household Finance Corp--Canada, 5.77%, Due 01/26/96.... 995,672
1,000,000 Household Finance Corp--Canada, 5.75%, Due 01/03/96.... 999,361
1,000,000 JHM Funding Inc, 5.75%, Due 01/11/96................... 998,083
1,400,000 JHM Funding Inc, 5.75%, Due 01/12/96................... 1,397,093
2,000,000 JHM Funding Inc, 5.73%, Due 01/23/96................... 1,992,360
5,000,000 Lehman Brothers Holdings, Inc, 4.90%, Due
04/25/96(d)(g)......................................... 5,000,787
1,000,000 Merrill Lynch and Co Inc, 5.73%, Due 01/31/96.......... 994,907
</TABLE>

See notes to financial statements.

<PAGE> 202

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ------------ ------
<C> <S> <C> <C>
COMMERCIAL PAPER--(CONTINUED)
$4,200,000 JP Morgan & Co, 5.77%, Due 01/08/96.................... $ 4,193,942
2,600,000 PHH Corp, 5.68%, Due 01/19/96.......................... 2,591,795
720,000 Paccar Financial Group, 5.63%, Due 02/27/96............ 713,357
800,000 Prudential Funding Corp, 5.78%, Due 01/12/96........... 798,330
1,900,000 Prudential Funding Corp, 5.82%, Due 01/02/96........... 1,899,079
2,700,000 Prudential Insurance Corp, 5.75%, Due 01/16/96......... 2,692,669
5,000,000 Royal Bank of Canada, 5.70%, Due 01/29/96.............. 4,976,250
1,600,000 Sears Roebuck Acceptance Corp, 5.70%, Due 02/02/96..... 1,591,387
5,300,000 Toronto Dominion Bank, 5.68%, Due 01/08/96............. 5,292,474
995,000 Toronto Dominion Bank, 5.68%, Due 01/08/96............. 993,587
3,900,000 Transamerica Corp, 5.75%, Due 01/12/96................. 3,891,902
3,500,000 Transamerica Finance Group Inc, 5.71%, Due 01/25/96.... 3,485,567
5,000,000 Xerox Corp, 5.67%, Due 01/19/96........................ 4,984,251
------------
Total Commercial Paper (cost $107,340,826)............. 107,340,826 14.04%
------------ ------
BANKERS ACCEPTANCES
2,000,000 Republic National Bank New York, 5.53%
Due 02/01/96 (cost $1,989,861)......................... 1,989,861 0.26%
------------ ------
CONVERTIBLE BOND
COMMUNICATIONS EQUIPMENT
2,000,000 Motorola Inc., Lyon, Zero Coupon,
Due 09/07/09(e) (cost $1,710,000)...................... 2,100,000 0.27%
------------ ------
</TABLE>

<TABLE>
<CAPTION>
SHARES COMMON STOCK
- ---------- ------------
<C> <S> <C> <C>
AIRCRAFT & PARTS
185,000 General Electric...................................... 13,320,000
120,000 Northrop Grumman Corp................................. 7,680,000
100,000 Textron Inc........................................... 6,750,000
90,000 United Technologies................................... 8,538,750
-----------
Total Aircraft & Parts................................ 36,288,750 4.75%
----------- ----------
AUTOMOBILE MAKER
85,000 Chrysler Corp......................................... 4,706,875 0.62%
----------- ----------
CHEMICALS & ALLIED PRODUCTS
70,000 Monsanto Company...................................... 8,575,000
30,000 Olin Corp............................................. 2,227,500
-----------
Total Chemicals & Allied Products..................... 10,802,500 1.41%
----------- ----------
CIGARETTES
110,000 American Brands Inc................................... 4,908,750 0.64%
----------- ----------
COMMERCIAL BANKING
120,000 Banc One Corp......................................... 4,530,000
100,000 BankAmerica Corp...................................... 6,475,000
140,000 Bank of New York(a)................................... 6,825,000
70,000 Chase Manhattan Corp.................................. 4,243,750
70,000 Chemical Banking Corp................................. 4,112,500
55,000 First Interstate Bancorp.............................. 7,507,500
</TABLE>

See notes to financial statements.

<PAGE> 203

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
COMMERCIAL BANKING -- (CONTINUED)
80,000 First Union Corp...................................... 4,450,000
50,000 NationsBank Corporation............................... $ 3,481,250
-----------
Total Commercial Banking.............................. 41,625,000 5.45%
----------- ----------
COMMUNICATIONS EQUIPMENT
170,000 GTE Corp.............................................. 7,480,000 0.98%
----------- ----------
CONSTRUCTION
89,000 Halliburton Company................................... 4,050,000 0.53%
----------- ----------
COSMETICS
84,000 Avon Products Inc..................................... 6,331,500 0.83%
----------- ----------
DRUGS
90,000 American Home Products................................ 8,730,000
80,000 Bristol-Myers Squibb Company.......................... 6,870,000
140,000 Grace W.R. & Company.................................. 8,277,500
150,000 Merck & Company Inc. ................................. 9,862,500
150,000 Pfizer Inc. .......................................... 9,450,000
180,000 Schering-Plough Corp. ................................ 9,855,000
140,000 Smithkline Beecham ADR(a)............................. 7,770,000
150,000 Pharmacia & Upjohn Inc................................ 5,812,500
80,000 Warner Lambert Company................................ 7,770,000
-----------
Total Drugs........................................... 74,397,500 9.73%
----------- ----------
ELECTRICAL EQUIPMENT
60,000 AMP Inc............................................... 2,302,500
110,000 Emerson Electric...................................... 8,992,500
150,000 General Signal........................................ 4,856,250
20,000 Hubbell Inc Cl B...................................... 1,315,000
100,000 Thomas & Betts Corp.(a)............................... 7,375,000
-----------
Total Electrical Equipment............................ 24,841,250 3.25%
----------- ----------
FINANCE
100,000 GATX Corporation...................................... 4,862,500 0.64%
----------- ----------
FINANCIAL SERVICES
160,000 American Express Company.............................. 6,620,000 0.87%
----------- ----------
FOOD AND BEVERAGE
120,000 Philip Morris Companies Inc. ......................... $10,860,000
15,000 General Mills Co...................................... 866,250
-----------
Total Food and Beverage............................... 11,726,250 1.53%
----------- ----------
INDUSTRIAL CHEMICALS
30,000 Dow Chemical Company.................................. 2,111,250
100,000 DuPont E.I. de Nemours & Co. ......................... 6,987,500
100,000 Witco Corporation..................................... 2,925,000
-----------
Total Industrial Chemicals............................ 12,023,750 1.57%
----------- ----------
INDUSTRIAL MACHINERY
140,000 Carpenter Technology.................................. 5,757,500
</TABLE>

See notes to financial statements.

<PAGE> 204

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
INDUSTRIAL MACHINERY--(CONTINUED)
225,000 Deere & Co............................................ $ 7,931,250
160,000 Goulds Pumps.......................................... 4,000,000
110,000 Harsco Corp........................................... 6,393,750
-----------
Total Industrial Machinery............................ 24,082,500 3.15%
----------- ----------
INSURANCE
130,000 Aetna Life & Casualty................................. 9,002,500
110,000 Allstate Corp. ....................................... 4,523,750
90,000 CIGNA Corp ........................................... 9,292,500
150,000 Lincoln National Corp. ............................... 8,062,500
-----------
Total Insurance....................................... 30,881,250 4.04%
----------- ----------
MACHINERY AND INDUSTRIAL EQUIPMENT
120,000 Cooper Industries Inc. ............................... 4,410,000 0.58 %
----------- ----------
MEDICAL & OTHER HEALTH SERVICE
160,000 Baxter International, Inc. ........................... 6,700,000
130,000 U.S. Healthcare Inc. ................................. 6,045,000
-----------
Total Medical & Other Health Service.................. 12,745,000 1.67%
----------- ----------
METAL MINING
180,000 Freeport McMoran Copper & Gold(a)..................... 5,040,000 0.66%
----------- ----------
MOTOR VEHICLES & EQUIPMENT
270,000 Dana Corp............................................. 7,897,500
200,000 Ford Motor............................................ 5,800,000
-----------
Total Motor Vehicles & Equipment...................... 13,697,500 1.79%
----------- ----------
OFFICE & BUSINESS EQUIPMENT
100,000 Harris Corp Inc. ..................................... 5,462,500
120,000 Honeywell Inc. ....................................... 5,835,000
100,000 Pitney Bowes Inc ..................................... 4,700,000
85,000 Xerox Corp............................................ 11,645,000
-----------
Total Office & Business Equipment..................... 27,642,500 3.62%
----------- ----------
OIL & GAS
80,000 Amoco Corp. .......................................... 5,750,000
50,000 Atlantic Richfield.................................... 5,537,500
50,000 British Petroleum PLC ADR............................. 5,106,281
130,000 Chevron Corp. ........................................ 6,825,000
90,000 Exxon Corp. .......................................... 7,211,250
100,000 Occidental Petroleum.................................. 2,137,500
60,000 Royal Dutch Petroleum--NY Reg ADR(a).................. 8,467,500
150,000 Tenneco Inc. ......................................... 7,443,750
85,000 Texaco Inc. .......................................... 6,672,500
-----------
Total Oil & Gas....................................... 55,151,281 7.22%
----------- ----------
OIL AND GAS FIELD SERVICES
140,000 Dresser Industries Inc. .............................. 3,412,500
100,000 McDermott International Inc. ......................... 2,200,000
</TABLE>
See notes to financial statements.

<PAGE> 205

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
OIL AND GAS FIELD SERVICES -- (CONTINUED)
70,000 Mobil Corp. .......................................... $ 7,840,000
190,000 Williams Companies Inc. .............................. 8,336,250
-----------
Total Oil And Gas Field Services...................... 21,788,750 2.85%
----------- ----------
PAPER & FOREST PRODUCTS
130,000 Federal Paper Board Inc. ............................. 6,743,750
110,000 Minnesota Mining & Manufacturing...................... 7,287,500
80,000 Union Camp Corp.(a)................................... 3,810,000
140,000 Weyerhaeuser Company.................................. 6,055,000
-----------
Total Paper & Forrest Products........................ 23,896,250 3.13%
----------- ----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES
130,000 Eastman Kodak Company................................. 8,710,000 1.14%
----------- ----------
PRINTING & PUBLISHING
120,000 Dun & Bradstreet Corp. ............................... 7,770,000
120,000 McGraw-Hill Inc. ..................................... 10,455,000
125,000 Readers Digest Association Inc. ...................... 6,406,250
-----------
Total Printing & Publishing........................... 24,631,250 3.22%
----------- ----------
RAILROADS
85,000 Conrail Inc. ......................................... 5,950,000
110,000 Norfolk Southern Corp. ............................... 8,731,250
-----------
Total Railroads....................................... 14,681,250 1.92%
----------- ----------
REAL ESTATE/INVESTMENT TRUSTS
59,000 Avalon Properties Inc. ............................... 1,268,500
70,000 Bay Apartment Communities............................. 1,697,500
65,000 Developers Diversified Realty Corp.................... 1,950,000
60,000 Equity Residential Properties......................... 1,837,500
64,000 Felcor Suite Hotels Inc. ............................. 1,776,000
193,300 Health Care Property Invest Inc. ..................... 6,789,663
80,000 Healthcare Realty Trust............................... 1,840,000
100,000 Irvine Apartment Communities.......................... 1,925,000
40,000 Redwood Trust Co...................................... 730,000
-----------
Total Real Estate/Investment Trusts................... 19,814,163 2.59%
----------- ----------
REFINING OF NONFERROUS MATERIALS
133,100 Timken Company........................................ 5,091,075 0.67%
----------- ----------
RESIDENTIAL MORTGAGES
100,000 Federal National Mortgage Assoc. ..................... 12,412,500 1.62%
----------- ----------
RETAIL SALES
60,000 J.C. Penney & Co. .................................... 2,857,500
50,000 May Dept Stores....................................... 2,112,500
50,000 Sears Roebuck......................................... 1,950,000
-----------
Total Retail Sales.................................... 6,920,000 0.91%
----------- ----------
</TABLE>

See notes to financial statements.

<PAGE> 206

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
SAVINGS & LOAN HOLDING COMPANIES
290,000 Great Western Financial............................... $ 7,395,000
270,000 Ahmanson H F & Co..................................... 7,155,000
-----------
Total Savings and Loan Holding Cos.................... 14,550,000 1.90%
----------- ----------
TELECOMMUNICATIONS
101,000 Ameritech Corp. ...................................... 5,959,000
100,000 Bell Atlantic Corp.(a)................................ 6,687,500
180,000 Bellsouth Corp. ...................................... 7,830,000
100,000 NYNEX Corp. .......................................... 5,400,000
170,000 Pacific Telesis Group................................. 5,716,250
120,000 SBC Communications.................................... 6,900,000
150,000 Sprint Corp. ......................................... 5,981,250
180,000 US West Inc. ......................................... 6,435,000
150,000 US West Media Group(c)................................ 2,850,000
-----------
Total Telecommunications.............................. 53,759,000 7.03%
----------- ----------
UTILITIES--ELECTRIC
125,000 American Electric Power Inc........................... 5,062,500
150,000 Carolina Power & Light Co. ........................... 5,175,000
120,000 FPL Group Inc. ....................................... 5,565,000
190,000 Southern Company...................................... 4,678,750
-----------
Total Utilities--Electric............................. 20,481,250 2.68%
----------- ----------
WHOLESALE TRADE
320,000 Ogden Corp. .......................................... 6,840,000 0.89 %
----------- ----------
Total Common Stock (cost $513,200,242)................ 657,890,144 86.08%
----------- ----------
Total Securities (cost $660,136,580).................. 805,216,482 105.35%
----------- ----------
</TABLE>

See notes to financial statements.

<PAGE> 207

EQUITY INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
$ 52,732 Repurchase agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $52,765, Due
01/02/96 (Collateralized by US Treasury Note, 7.25%,
due 08/15/04 with a market value of $53,891) (cost
$52,740).............................................. $ 52,740 0.01%
----------- ----------
Total Investments (cost $660,189,320)................. $805,269,222 105.36%
Liabilities Less Other Assets......................... (40,966,692) (5.36)%
----------- ----------
Net Assets............................................ $764,302,530 100.00%
=========== ========
The aggregate cost of securities for federal income tax purposes at December 31,
1995 is $660,285,984.

The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation......................... $169,674,387
Gross unrealized depreciation......................... (24,691,149)
------------
Net unrealized appreciation........................... $144,983,238
============
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(e) Zero coupon bond.

(g) This interest rate resets on a daily basis. The rate shown was in effect as
of December 31, 1995.

See notes to financial statements.

<PAGE> 208

GROWTH AND INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
TIME DEPOSITS
$6,420,627 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96(d)(g)..................................... $ 6,421,634
549,964 First Union Bank, Nassau, 5.8125% Due 01/02/96(d)...... 550,050
1,455,200 Fleet Bank, Massachusetts, Nassau, 5.84375%
Due 01/05/96(d)........................................ 1,455,429
-----------
Total Time Deposits (cost $8,427,113).................. 8,427,113 6.75%
----------- ------
SHARES COMMON STOCK
------ ------------
AIRCRAFT & PARTS
19,000 Allied Signal Inc...................................... 902,500
23,200 Boeing Co.............................................. 1,818,300
16,700 Lockheed Martin........................................ 1,319,300
13,000 Sundstrand Corp........................................ 914,875
-----------
Total Aircraft & Parts................................. 4,954,975 3.97%
----------- ------
ATHLETIC FOOTWEAR
19,300 Nike Inc............................................... 1,343,763 1.08%
----------- ------
AUTOMOTIVE PRODUCTS
29,000 General Motors Corp Cl E(a)............................ 1,508,000
24,700 General Motors Corp Cl H............................... 1,213,388
-----------
Total Automotive Products.............................. 2,721,388 2.18%
----------- ------
BEVERAGES
16,600 Anheuser Busch......................................... 1,110,125 0.89%
----------- ------
BROADCASTING
9,000 Capital Cities/ABC Inc................................. 1,110,375
27,700 Viacom Inc Cl B(c)..................................... 1,312,288
-----------
Total Broadcasting..................................... 2,422,663 1.94%
----------- ------
CABLE & OTHER PAY TV SERVICES
30,500 Liberty Media Group Cl A............................... 819,687 0.66%
----------- ------
CIGARETTES
27,400 Philip Morris Co Inc................................... 2,479,700 1.99%
----------- ------
COMMERCIAL BANKING
22,500 Bank of Boston......................................... 1,040,625
26,300 Bankamerica Corp....................................... 1,702,925
2,400 Barnett Banks Inc...................................... 141,600
19,100 Chemical Banking Corp.................................. 1,122,125
26,300 Citicorp............................................... 1,768,675
20,600 Nationsbank Corp....................................... 1,434,275
-----------
Total Commercial Banking............................... 7,210,225 5.78%
----------- ------
COMMUNICATION SYSTEMS
25,700 3 Com Corp............................................. $ 1,198,263
5,200 US Robotics Corp....................................... 456,300
-----------
Total Communication Systems............................ 1,654,563 1.32%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 209

GROWTH AND INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ----------- ------
<C> <S> <C> <C>
COMPUTER & OFFICE EQUIPMENT
12,300 Alco Standard Corp..................................... $ 561,187
26,600 CUC International Inc.................................. 907,725
13,900 International Business Machines........................ 1,275,325
8,300 Xerox Corp............................................. 1,137,100
-----------
Total Computer & Office Equipment...................... 3,881,337 3.11%
----------- ------
COMPUTER RELATED SERVICES
12,800 Ceridian Corp.......................................... 528,000
15,600 Cisco Systems Inc(c)................................... 1,164,150
32,500 Honeywell.............................................. 1,580,312
-----------
Total Computer Related Services........................ 3,272,462 2.62%
----------- ------
CONSTRUCTION
18,600 Fluor Corp............................................. 1,227,600
18,200 Halliburton Co......................................... 921,375
-----------
Total Construction..................................... 2,148,975 1.72%
----------- ------
CONSUMER GOODS & SERVICES
28,782 Kimberly-Clark Corp.................................... 2,381,710
21,500 Procter & Gamble Company............................... 1,784,500
-----------
Total Consumer Goods & Services........................ 4,166,210 3.34%
----------- ------
CUTLERY, HANDTOOLS, GENERAL HARDWARE
31,200 Black & Decker Corp.................................... 1,099,800 0.88%
----------- ------
DRUGS
27,200 Eli Lilly & Co......................................... 1,530,000
22,500 Merck & Co Inc......................................... 1,479,375
49,300 Pharmacia & Upjohn Inc................................. 1,910,375
31,000 Smithkline Beecham ADR(a).............................. 1,720,500
-----------
Total Drugs............................................ 6,640,250 5.32%
----------- ------
ELECTRICAL EQUIPMENT
13,800 Cabletron Systems Communications(a).................... 1,117,800
18,100 Emerson Electric....................................... 1,479,675
21,400 Hewlett Packard........................................ 1,792,250
20,500 Linear Technology Corp................................. 804,625
19,300 LSI Logic(a)(c)........................................ 632,075
-----------
Total Electrical Equipment............................. 5,826,425 4.67%
----------- ------
FINANCE--SERVICES
21,400 First Data Corp........................................ 1,431,125
16,200 Franklin Resources Inc................................. 816,075
24,100 MBNA Corp.............................................. 888,687
19,200 Merrill Lynch.......................................... 979,200
-----------
Total Finance--Services................................ 4,115,087 3.30%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 210

GROWTH AND INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ------
<C> <S> <C> <C>
FOOD DISTRIBUTOR
7,700 IBP Inc................................................ $ 388,850
29,900 Nabisco Holdings Corp Cl A............................. 975,488
31,400 Pepsico Inc............................................ 1,754,475
-----------
Total Food Distributor................................. 3,118,813 2.50%
----------- ------
HEALTH CARE PRODUCTS
21,700 Amgen Inc(c)........................................... 1,288,437
23,000 Johnson & Johnson...................................... 1,969,375
-----------
Total Health Care Products............................. 3,257,812 2.61%
----------- ------
HOTELS
23,500 Marriott International inc............................. 898,875
33,400 Mirage Resorts Inc..................................... 1,152,300
-----------
Total Hotels........................................... 2,051,175 1.64%
----------- ------
INDUSTRIAL MACHINERY
26,900 Applied Materials Inc.(c).............................. 1,059,188 0.85%
----------- ------
INSURANCE
14,575 American International Group........................... 1,348,188
9,100 Cigna Corp............................................. 939,575
15,800 MGIC Investment(a)..................................... 857,150
27,400 Travelers Inc.......................................... 1,722,775
-----------
Total Insurance........................................ 4,867,688 3.90%
----------- ------
MEDICAL EQUIPMENT
26,400 Baxter International Inc............................... 1,105,500
19,300 Guidant Corp........................................... 815,425
8,500 Medtronic Inc.......................................... 474,938
-----------
Total Medical Equipment................................ 2,395,863 1.92%
----------- ------
METAL MINING
39,500 Freeport McMoran Copper & Gold(a)...................... 1,106,000 0.89%
----------- ------
MISCELLANEOUS
12,500 Pioneer Hi-Bred International.......................... 695,313 0.56%
----------- ------
OIL & GAS
14,100 British Petroleum PLC ADR.............................. 1,439,963
25,300 Enron.................................................. 964,563
20,100 Exxon Corp............................................. 1,610,512
19,900 Mobil Corp............................................. 2,228,800
34,000 Total Petroleum ADR.................................... 1,156,000
-----------
Total Oil & Gas........................................ 7,399,838 5.93%
----------- ------
PHOTOGRAPHIC EQUIPMENT
18,100 Polaroid Corp.......................................... 857,488 0.69%
----------- ------
RAILROADS
17,300 Burlington Northern Sante Fe........................... 1,349,400 1.08%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 211

GROWTH AND INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- --------- ----------- ------
<C> <S> <C> <C>
RETAIL STORES
42,600 Federated Department Stores(a)(c)...................... $1,171,500
20,100 Harcourt General Inc................................... 841,688
29,900 Rite Aid Corp.......................................... 1,024,075
18,300 Safeway Inc(a)(c)...................................... 942,450
30,900 Sears Roebuck & Co..................................... 1,205,100
-----------
Total Retail Stores.................................... 5,184,813 4.15%
----------- ------
SERVICES-HEALTH & ALLIED SERVICES
20,600 Columbia/HCA Healthcare Corp........................... 1,045,450
13,600 HBO & Co............................................... 1,042,100
-----------
Total Services--Health & Allied Services............... 2,087,550 1.67%
----------- ------
SEMICONDUCTORS
18,400 Intel Corp............................................. 1,044,200 0.84%
----------- ------
SOFTWARE MANUFACTURE
22,200 Microsoft Corp(c)...................................... 1,948,050
17,800 Parametric Technology Corp(c).......................... 1,183,700
13,900 Sybase Inc(c).......................................... 500,400
-----------
Total Software Manufacture............................. 3,632,150 2.91%
----------- ------
SPECIALTY CHEMICALS
8,100 Great Lakes Chemical Corp.............................. 583,200
20,200 Pfizer................................................. 1,272,600
32,900 Praxair Inc............................................ 1,106,261
-----------
Total Specialty Chemicals.............................. 2,962,061 2.37%
----------- ------
TELECOMMUNICATIONS
25,200 Bell Atlantic Corp(a).................................. 1,685,250
39,200 GTE Corp............................................... 1,724,800
70,900 MCI Communications..................................... 1,852,261
40,600 Southwestern Bell Corp.(c)............................. 2,334,500
-----------
Total Telecommunications............................... 7,596,811 6.08%
----------- ------
U.S. GOVERNMENT AGENCY
12,600 Federal National Mortgage Association.................. 1,563,975 1.25%
----------- ------
Total Common Stock (cost $99,906,919).................. 108,097,773 86.61%
----------- ------
Total Securities (cost $108,334,032)................... 116,524,886 93.36%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 212

GROWTH AND INCOME PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
REPURCHASE AGREEMENT
$18,367,949 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $18,379,322, due
01/02/96 (Collateralized by US Treasury Note, 7.25%,
due 08/15/04 with a market value of $18,771,414) (cost
$18,370,832)........................................... $ 18,370,832 14.72%
----------- ------
Total Investments (cost $126,704,864).................. 134,895,718 108.08%
Liabilities Less Other Assets.......................... (10,083,987) (8.08)%
----------- ------
Net Assets............................................. $124,811,731 100.00%
=========== ======
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$126,843,209.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation.......................... $ 9,790,143
Gross unrealized depreciation.......................... (1,737,634)
-----------
Net unrealized appreciation............................ $ 8,052,509
===========
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(g) This interest rate resets on a daily basis. The rate shown was in effect as
of December 31, 1995.

See notes to financial statements.

<PAGE> 213

EQUITY GROWTH PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
BANK NOTES
$2,000,000 Republic New York Securities Corp, 6.15%
Due 02/1/6(d)(g)(cost $2,000,316)..................... $ 2,000,316 0.90%
----------- ------
COMMERCIAL PAPER
6,000,000 Lehman Brothers Holdings, Inc, 4.90%
Due 04/25/96(d)(g)(cost $6,000,948)................... 6,000,948 2.70%
----------- ------
TIME DEPOSITS
10,912,901 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96(d)(g).................................... 10,914,626
2,827,299 First Union Bank, Nassau, 5.81255%
Due 01/02/96(d)....................................... 2,827,746
7,575,800 Fleet Bank, Massachusetts, Nassau, 5.84375%
Due 01/05/96(d)....................................... 7,576,998
14,000,000 Fleet Bank, Rhode Island, Cayman, 5.8125%
Due 01/31/96(d)....................................... 14,002,213
-----------
Total Time Deposits (cost $35,321,583)................ 35,321,583 15.88%
----------- ------
SHARES COMMON STOCK
------ -------------
ANIMAL SERVICES
159,050 Petsmart Inc.(a)(c)................................... 4,930,550 2.22%
----------- ------
COMMUNICATIONS EQUIPMENT
147,000 3 Com Corp.(c)........................................ 6,853,875
29,800 Cascade Communications Corp(a)(c)..................... 2,540,450
38,000 Motorola Inc.......................................... 2,166,000
178,400 Tellabs Inc.(c)....................................... 6,600,800
-----------
Total Communications Equipment........................ 18,161,125 8.17%
----------- ------
COMMUNICATIONS SERVICES
117,100 Mobile Telecommunications(c).......................... 2,503,013 1.13%
----------- ------
CONSTRUCTION
179,000 Lowes Co's, Inc....................................... 5,996,500 2.70%
----------- ------
EATING & DRINKING PLACES
328,200 Starbucks Corp.(a)(c)................................. 6,892,200 3.10%
----------- ------
ELECTRICAL EQUIPMENT
93,200 Cisco Systems, Inc.(c)................................ 6,955,050
68,500 Intel Corp............................................ 3,887,375
-----------
Total Electrical Equipment............................ 10,842,425 4.87%
----------- ------
</TABLE>

See notes to financial statements.

<PAGE> 214

EQUITY GROWTH PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
FINANCIAL SERVICES
35,700 First Data Corp (a)................................... $ 2,387,438 1.07%
----------- ----------
FOOD AND BEVERAGE
196,900 Boston Chicken Inc. (a)(c)............................ 6,325,413 2.84%
----------- ----------
MEDICAL & OTHER HEALTH SERVICES
212,300 Healthsource Inc.(c).................................. 7,642,800
63,600 Medtronic Inc......................................... 3,553,650
107,800 Oxford Health Plans(c)................................ 7,963,725
-----------
Total Medical & Other Health Services................. 19,160,175 8.62%
----------- ----------
OFFICE & BUSINESS EQUIPMENT
143,650 CUC International Inc................................. 4,902,056
64,300 Hewlett-Packard Inc................................... 5,385,125
224,700 Informix Corporation(c)............................... 6,741,000
73,600 Microsoft Corp.(c).................................... 6,458,400
180,900 Office Depot(c)....................................... 3,572,775
189,650 Officemax Inc.(c)..................................... 4,243,419
121,750 Oracle Systems Corp.(c)............................... 5,159,156
-----------
Total Office & Business Equipment..................... 36,461,931 16.40%
----------- ----------
PERSONAL SERVICES
137,000 H & R Block, Inc...................................... 5,548,500 2.49%
----------- ----------
RESEARCH, DEVELOPMENT & TESTING
149,400 Biogen, Inc.(c)....................................... 9,188,100 4.13%
----------- ----------
RETAIL SALES
186,500 Autozone Inc.(a)(c)................................... 5,385,188
181,898 Home Depot............................................ 8,708,367
266,462 Staples Inc.(c)....................................... 6,495,010
-----------
Total Retail Sales.................................... 20,588,565 9.26%
----------- ----------
SERVICES-HEALTH & ALLIED SERVICES
137,000 Boston Scientific Corp(a)(c).......................... 6,713,000
97,000 Genzyme Corp--General Division(c)..................... 6,050,375
49,200 HBO & Co.............................................. 3,769,950
88,000 United Healthcare Corp................................ 5,764,000
-----------
Total Services--Health & Allied Services.............. 22,297,325 10.03%
----------- ----------
SOFTWARE DEVELOPMENT
60,500 Intuit Inc.(c)........................................ 4,719,000
46,300 Netcom On-Line Communication(a)(c).................... 1,666,800
28,800 Netscape Communications Corp(a)(c).................... 4,003,200
70,200 Peoplesoft Inc.(a)(c)................................. 3,018,600
69,500 Sybase Inc.(c)........................................ 2,502,000
-----------
Total Software Development............................ 15,909,600 7.15%
----------- ----------
</TABLE>

See notes to financial statements.

<PAGE> 215

EQUITY GROWTH PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
TELECOMMUNICATIONS
220,100 Airtouch Communications Inc.(c)....................... $ 6,217,825
219,600 Ericsson L M Telephone ADR............................ 4,282,200
134,300 Paging Network Inc. Telecom(c)........................ 3,273,562
123,600 Vodafone Group PLC ADR................................ 4,356,900
205,300 Worldcom Inc.......................................... 7,236,825
-----------
Total Telecommunications.............................. 25,367,312 11.41%
----------- ----------
Total Common Stock (cost $173,010,404)................ 212,560,172 95.59%
----------- ----------
Total Securities (Cost $216,333,251).................. 255,883,019 115.07%
----------- ----------
PRINCIPAL
- ----------
REPURCHASE AGREEMENT
$9,711,528 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $9,717,624, due
01/02/96 (Collateralized by US Treasury Note, 7.25%,
due 08/15/04 with a market value of $9,924,849) (cost
$9,713,052)........................................... 9,713,052 4.37%
----------- ----------
Total Investments (cost $226,046,303)................. 265,596,071 119.44%
Liabilities Less Other Assets......................... (43,233,681) (19.44)%
----------- ----------
Net Assets............................................ $222,362,390 100.00%
=========== ========
The aggregate cost of securities for federal income tax purposes at December 31, 1995
is $226,046,303.

The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation......................... $44,075,286
Gross unrealized depreciation......................... (4,525,518)
-----------
Net unrealized appreciation........................... $39,549,768
===========
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(g) This interest rate resets on a daily basis. The rate shown was in effect as
of December 31, 1995.

See notes to financial statements.

<PAGE> 216

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
TIME DEPOSITS
$13,348,289 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96(d)(g)..................................... $13,350,371
1,665,311 First Union Bank, Nassau, 5.8125%
Due 01/02/96(d)........................................ 1,665,571
10,500,000 Fleet Bank, Rhode Island, Cayman, 5.8125%
Due 01/31/96(d)........................................ 10,501,638
-----------
Total Time Deposits (cost $25,517,580)................. 25,517,580 8.09%
----------- ----------
SHARES
- ----------
COMMON STOCK
BANKING EQUITY
110,000 Peoples Bank Bridgeport................................ 2,090,000
162,300 Premier Bancorp........................................ 3,793,763
-----------
Total Banking Equity................................... 5,883,763 1.87%
----------- ----------
BEVERAGES
12,400 Pete's Brewing Company(c).............................. 173,600 0.06%
----------- ----------
BOOKS
34,900 Gartner Group Inc. Cl A(a)(c).......................... 1,670,838 0.53%
----------- ----------
BROADCASTING
47,400 Granite Broadcasting Corp(a)(c)........................ 503,625
42,000 Heftel Broadcasting Corp.(c)........................... 735,000
73,700 Osborn Communications CP-New(c)........................ 626,450
-----------
Total Broadcasting..................................... 1,865,075 0.59%
----------- ----------
CABLE & OTHER PAY TV SERVICES
14,800 Cablevision Systems Corp.(c)........................... 802,900
21,400 Comcast UK Cable Partners(c)........................... 267,500
1,800 Jones Intercable Inc................................... 22,500
64,500 Jones Intercable Inc. Cl A............................. 798,188
-----------
Total Cable & Other Pay TV Services.................... 1,891,088 0.60%
-----------
COMMERCIAL BANKING
11,300 Norwest Corporation.................................... 372,900 0.12%
----------- ----------
COMMUNICATIONS EQUIPMENT
25,700 Ascend Communications Inc(c)........................... 2,084,913
37,800 Picturetel Corp(a)(c).................................. 1,630,125
-----------
Total Communications Equipment......................... 3,715,038 1.18%
----------- ----------
COMMUNICATIONS SERVICES
22,500 Arch Communications Group Inc(c)....................... 540,000
12,000 Cellular Communications of Puerto Rico(c).............. 333,000
11,100 CommNet Cellular Inc.(c)............................... 320,513
-----------
Total Communications Services.......................... 1,193,513 0.38%
----------- ----------
COMPUTER & OFFICE EQUIPMENT
16,000 Aaron Rents Inc Cl B................................... 288,000
52,600 Acxiom Corp.(c)........................................ 1,439,925
25,400 Altron Inc(c).......................................... 762,000
70,000 Amplicon Inc. ......................................... 1,120,000
</TABLE>

See notes to financial statements.

<PAGE> 217

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
COMPUTER & OFFICE EQUIPMENT--(CONTINUED)
14,000 Boise Cascade Office Products(c)....................... $ 598,500
12,400 Cisco Systems Inc(c)................................... 925,350
40,800 Compaq Computer(c)..................................... 1,958,400
38,850 Corporate Express Inc.(c).............................. 1,170,356
12,200 CDW Computer Centers Inc.(a)(c)........................ 494,100
34,600 CUC International Inc. ................................ 1,180,725
46,400 Cambridge Tech Partners Inc.(c)........................ 2,668,000
51,200 Comverse Technology Inc(a)(c).......................... 1,024,000
16,200 Fair Issac & Company Inc. ............................. 419,175
28,150 Jack Henry & Associates................................ 696,712
43,950 McAfee Associates Inc.(c).............................. 1,928,306
41,300 National Computer System Inc........................... 779,538
13,300 Storemedia(c).......................................... 485,450
35,600 Telxon Corp............................................ 805,450
24,800 U. S. Office Products Co.(c)........................... 564,200
54,000 Zebra Technologies Corp.(c)............................ 1,836,000
-----------
Total Computer & Office Equipment...................... 21,144,187 6.70%
----------- ----------
COMPUTER SERVICES
42,000 America On-Line Inc(a)(c).............................. 1,575,000
12,400 Cascade Communications Corp(a)(c)...................... 1,057,100
30,400 Ciber Inc(c)........................................... 710,600
21,000 DST Systems Inc(c)..................................... 598,500
20,900 Diamond Multimedia Systems(c).......................... 749,787
-----------
Total Computer Services................................ 4,690,987 1.49%
----------- ----------
CONSUMER GOODS & SERVICES
30,000 Alternative Resources Corp.(c)......................... 907,500
10,000 Armor All Products Corp. .............................. 181,250
36,800 Kimberly-Clark Corp.................................... 3,045,200
-----------
Total Consumer Goods & Services........................ 4,133,950 1.31%
----------- ----------
DRUGS
58,400 American Safety Razor Company(c)....................... 459,900
27,200 Chiron Corp.(a)(c)..................................... 3,005,600
42,200 Vitalink Pharmacy Services(c).......................... 981,150
-----------
Total Drugs............................................ 4,446,650 1.41%
----------- ----------
EATING & DRINKING PLACES
25,238 Apple South Inc. ...................................... 542,606
29,700 Boston Chicken(a)(c)................................... 954,113
13,400 Papa John's International Inc(a)....................... 551,913
-----------
Total Eating & Drinking Places......................... 2,048,632 0.65%
----------- ----------
EDUCATION
8,600 Apollo Group Inc Cl A(c)............................... 336,475
180,000 ITT Educational Services Inc.(c)....................... 4,432,500
152,500 Kinder Care Learning Centers(c)........................ 1,925,313
</TABLE>

See notes to financial statements.

<PAGE> 218

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
EDUCATION--(CONTINUED)
485,800 National Education Corp................................ $ 3,947,125
-----------
Total Education........................................ 10,641,413 3.37%
----------- ----------
ELECTRICAL EQUIPMENT
26,600 Alantec Corp.(c)....................................... 1,549,450
39,700 Cable Design Technologies(c)........................... 1,746,800
48,350 Checkpoint Systems Inc.(c)............................. 1,807,081
48,900 Kemet Corp.(c)......................................... 1,167,488
13,100 Kent Electronics Corp.(c).............................. 764,712
85,000 Rogers Corp. .......................................... 1,848,750
7,300 Sterling Electronics................................... 125,013
34,700 Tencor Instruments(c).................................. 845,813
49,200 Ultratech Stepper Inc.(c).............................. 1,266,900
-----------
Total Electrical Equipment............................. 11,122,007 3.53%
----------- ----------
ENVIRONMENTAL MANAGEMENT
51,200 United Waste Systems Inc.(c)........................... 1,907,200 0.61%
----------- ----------
FINANCE
73,000 Allied Capital Corporation(a).......................... 994,625
45,327 Allied Capital Lending Co. ............................ 600,583
77,600 Cash American Investments Inc. ........................ 426,800
-----------
Total Finance.......................................... 2,022,008 0.64%
----------- ----------
FINANCIAL SERVICES
31,900 Concord EFS Inc.(c).................................... 1,347,775 0.43%
----------- ----------
FREIGHT AND CARGO
36,000 Fritz Companies Inc.(a)(c)............................. 1,494,000
169,700 Harper Group Inc. ..................................... 3,012,175
-----------
Total Freight and Cargo................................ 4,506,175 1.43%
----------- ----------
GAMING
13,100 Anchor Gaming(c)....................................... 298,025
42,300 Harveys Casinos Resorts................................ 761,400
26,100 Scientific Games Holdings Corp(c)...................... 985,275
-----------
Total Gaming........................................... 2,044,700 0.65%
----------- ----------
GROCERY STORES
44,000 Dairymart Coven Stores Cl A(c)......................... 247,500
37,700 General Nutrition Companies(c)......................... 867,100
19,400 Uni-Marts Inc.......................................... 160,050
-----------
Total Grocery Stores................................... 1,274,650 0.40%
----------- ----------
HEALTH SERVICES & HOSPITAL SUPPLIES
52,900 Advocat Inc.(c)........................................ 588,513
24,000 Circon Corp(c)......................................... 486,000
14,700 Coherent Inc.(c)....................................... 595,350
27,500 Daig Corp(c)........................................... 632,500
21,100 Gulf South Medical Supply Inc.(c)...................... 638,275
</TABLE>

See notes to financial statements.

<PAGE> 219

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
HEALTH SERVICES & HOSPITAL SUPPLIES--(CONTINUED)
22,800 Neuromedical Systems Inc.(c)........................... $ 458,850
28,200 Orthodontic Centers Of America(c)...................... 1,360,650
46,400 Owen Healthcare Inc.(c)................................ 1,281,800
157,500 Owens & Minor Holding Co............................... 2,008,125
48,300 Physician Sales & Service(c)........................... 1,376,550
25,400 Quintiles Transnational Corp.(c)....................... 1,041,400
102,600 Unilab Corporation(c).................................. 275,738
97,200 Universal Health Services Cl B......................... 4,313,250
-----------
Total Health Services & Hospital Supplies.............. 15,057,001 4.77%
----------- ----------
HORTICULTURAL SPECIALTIES
47,000 Sylvan Inc.(c)......................................... 558,125 0.18 %
----------- ----------
HOTELS
12,400 HFS Inc................................................ 1,013,700 0.32%
----------- ----------
INDUSTRIAL MACHINERY
45,700 Applied Materials Inc.(c).............................. 1,799,438
17,600 Astec Industries(c).................................... 173,800
67,500 Electro Rent Corp.(c).................................. 1,468,125
13,400 MSC Industrial Direct Co. Cl A(a)(c)................... 368,500
-----------
Total Industrial Machinery............................. 3,809,863 1.21%
----------- ----------
INSURANCE
56,800 American Travellers Corp.(a)(c)........................ 1,597,500
22,500 Intercargo Inc......................................... 225,000
38,600 National Western Life Insurance Cl A(c)................ 2,161,600
38,700 Western National Corp.................................. 624,038
72,800 Willis Corroon Group ADR(a)............................ 846,300
-----------
Total Insurance........................................ 5,454,438 1.73%
----------- ----------
MANUFACTURING
51,600 Blyth Industries Inc.(c)............................... 1,522,200
3,500 In Focus Systems Inc(c)................................ 126,438
32,900 Qualcomm Inc.(c)....................................... 1,414,700
22,000 Wolverine Tube Inc.(c)................................. 825,000
-----------
Total Manufacturing.................................... 3,888,338 1.23%
----------- ----------
MANUFACTURER OF INTEGRATED CIRCUITS
19,400 Hadco Corp(c).......................................... 545,625 0.17%
----------- ----------
MEDICAL & OTHER HEALTH SERVICE
15,299 Community Health Systems(c)............................ 545,027
27,000 Compdent Corp(c)....................................... 1,120,500
48,200 Genzyme Corp.--General Division(a)..................... 3,006,475
9,500 Health Management Systems Inc(c)....................... 370,500
71,300 Healthsource Inc.(c)................................... 2,566,800
27,300 IDEXX Laboratories Inc.(c)............................. 1,283,100
26,500 Living Centers of America(c)........................... 927,500
60,500 Medpartners/Millikin Inc.(a)(c)........................ 1,996,500
</TABLE>

See notes to financial statements.

<PAGE> 220

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
MEDICAL & OTHER HEALTH SERVICE--(CONTINUED)
42,400 Omnicare Inc.(a)....................................... $ 1,897,400
16,000 Ornda Healthcorp(c).................................... 372,000
37,800 Oxford Health Plans.................................... 2,792,475
19,800 Pacificare Health Systems Cl B(c)...................... 1,722,600
13,850 Phycor Inc.(c)......................................... 700,291
26,600 Physician Reliance(c).................................. 1,057,350
22,200 Quorum Health Group Inc(c)............................. 488,400
32,800 Renal Treatment Centers Inc(c)......................... 1,443,200
23,000 Summit Care Corp.(c)................................... 526,125
-----------
Total Medical & Other Health Service................... 22,816,243 7.23%
----------- ----------
MISCELLANEOUS
100,300 Alpha Industries Inc. ................................. 1,416,738
3,000 Delta & Pine Land Co. ................................. 110,250
32,300 Midwest Grain Products, Inc.(c)........................ 452,200
-----------
Total Miscellaneous.................................... 1,979,188 0.63%
----------- ----------
MOTOR VEHICLES AND EQUIPMENT
42,800 Discount Auto Parts Inc.(c)............................ 1,332,150 0.42%
----------- ----------
NON-DEPOSITORY CREDIT INSTITUTIONS
80,500 The Money Store Inc. .................................. 1,257,813 0.40%
----------- ----------
OIL & GAS
50,200 Berry Petroleum Cl A................................... 508,275
49,700 Daniel Industries...................................... 708,225
88,900 Tosco Corp. ........................................... 3,389,313
-----------
Total Oil & Gas........................................ 4,605,813 1.46%
----------- ----------
PERSONAL CARE PRODUCTS
40,400 Helen of Troy LTD--New................................. 848,400 0.27%
----------- ----------
PERSONNEL SERVICES
31,800 Accustaff Inc(c)....................................... 1,399,200
32,575 Brandon System Corp. .................................. 834,734
51,600 Manpower Inc. ......................................... 1,451,250
23,100 Robert Half International Inc. ........................ 967,312
-----------
Total Personnel Services............................... 4,652,496 1.47%
----------- ----------
PHOTORESIST REMOVAL EQUIPMENT
40,100 Gasonics International Corp(c)......................... 541,350 0.17%
----------- ----------
PLASTICS MATERIALS & SYNTHETIC
139,800 Lydall Inc. ........................................... 3,180,450 1.01%
----------- ----------
POLLUTION CONTROL
51,102 Tetra Tech Inc.(c)..................................... 1,162,561
38,100 U.S. Filter Corp.(c)................................... 1,014,412
-----------
Total Pollution Control................................ 2,176,973 0.69%
----------- ----------
PRINTING & PUBLISHING
50,800 ASM Lithography Holding NV(c).......................... 1,689,100
</TABLE>

See notes to financial statements.

<PAGE> 221

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
PRINTING & PUBLISHING--(CONTINUED)
19,600 Clear Channel Communications........................... $ 864,850
60,000 Houghton Mifflin Company............................... 2,580,000
25,700 Scholastic Corp.(c).................................... 1,998,175
235,000 Steck Vaughn Publishing Corp.(c)....................... 1,733,125
-----------
Total Printing & Publishing............................ 8,865,250 2.81%
----------- ----------
RADIATION MONITORING SERVICE
27,800 Landauer Inc. ......................................... 604,650 0.19%
----------- ----------
RADIO, TV, CONSUMER ELECTRONICS & MUSIC
82,600 Cognex Corp.(c)........................................ 2,870,350 0.91%
----------- ----------
RAILROADS
19,500 Wisconsin Central Transport(c)......................... 1,282,125 0.41%
----------- ----------
REAL ESTATE INVESTMENT TRUST
99,800 Allied Capital Commercial Corp......................... 1,971,050
65,400 Equity Inns Inc........................................ 752,100
22,800 Health Care Property Invest Inc. ...................... 800,850
14,800 RFS Hotel Investors Inc................................ 227,550
26,800 Roc Communities Inc. .................................. 643,200
-----------
Total Real Estate Investment Trust..................... 4,394,750 1.39%
----------- ----------
RETAIL SALES
9,900 Baby Superstore(a)(c).................................. 564,300
62,700 Catherines Stores Corp.(c)............................. 517,275
86,200 Consolidated Stores Corp.(c)........................... 1,874,850
69,000 Fred's Inc. ........................................... 517,500
18,600 Gap Stores............................................. 781,200
29,000 Global Directmail Corp.(c)............................. 797,500
175,000 MacFrugals Bargains Close-Outs......................... 2,450,000
30,300 The Men's Wearhouse Inc(a)............................. 780,225
155,200 Michael Anthony Jewellers Inc.(c)...................... 407,400
23,700 Micro Warehouse Inc.(a)(c)............................. 1,025,025
41,700 Nautica Enterprises Inc(c)............................. 1,824,375
58,200 Pentech International Inc.(c).......................... 116,400
37,700 Sunglass Hut Inc.(c)................................... 895,375
13,100 Tandy Crafts Inc. ..................................... 103,162
81,900 Tommy Hilfiger Corp(c)................................. 3,470,512
52,600 Travel Ports of America(c)............................. 131,500
-----------
Total Retail Sales..................................... 16,256,599 5.15%
----------- ----------
SANITARY SERVICES
44,500 National Sanitary Supply(c)............................ 522,875
27,300 Sanifill Inc(c)........................................ 911,137
-----------
Total Sanitary Services................................ 1,434,012 0.45%
----------- ----------
SAVINGS & LOAN HOLDING COMPANY
52,573 First Republic Bancorp Inc. ........................... 690,020 0.22%
----------- ----------
</TABLE>

See notes to financial statements.

<PAGE> 222

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
SAVINGS INSTITUTIONS
114,000 American Federal Bank.................................. $ 1,738,500
101,400 Charter One Finance Inc................................ 3,105,375
103,000 First Saving Bank of Washington........................ 1,351,875
140,000 Roosevelt Financial Group Inc.(a)...................... 2,712,500
60,000 Washington Mutual Inc(a)............................... 1,732,500
-----------
Total Savings Institutions............................. 10,640,750 3.37%
----------- ----------
SECURITY SYSTEM SERVICES
753,692 Automated Security Holdings ADR........................ 565,267
9,000 Protection One Inc(c).................................. 92,250
130,000 Sensormatic Electronics Corp(a)........................ 2,258,750
-----------
Total Security System Services......................... 2,916,267 0.92%
----------- ----------
SEMICONDUCTOR MANUFACTURER
20,000 FSI International Inc.(c).............................. 405,000
39,100 Input/Output Inc.(a)(c)................................ 2,258,025
17,500 Richardson Electronics................................. 188,125
36,700 Sierra Semiconductor(c)................................ 509,212
-----------
Total Semiconductor Manufacturer....................... 3,360,362 1.07%
----------- ----------
SERVICES-CLEANING & MAINTENANCE TO DWELLERS
28,800 ABM Industries Inc..................................... 799,200 0.25%
----------- ----------
SEWER/DRAIN CLEANING SERVICE
23,900 Roto Rooter Inc........................................ 788,700 0.25%
----------- ----------
SOFTWARE MANUFACTURER
36,800 Actel Corp(c).......................................... 395,600
7,000 American Business Information(c)....................... 135,625
42,200 Astea International Inc(c)............................. 965,325
9,900 Broderbund Software Inc.(a)(c)......................... 601,425
4,900 Catalyst International Inc(c).......................... 56,350
93,200 Computer Associates Intl Inc. ......................... 5,300,750
43,600 Computron Software Inc(c).............................. 784,800
18,000 Dialogic Corp(c)....................................... 693,000
43,700 Electronics For Imaging(c)............................. 1,911,875
71,400 Hyperion Software Corp.(c)............................. 1,517,250
21,300 INSO Corp(a)(c)........................................ 905,250
18,600 Integrated Systems Inc(c).............................. 725,400
9,900 Intuit Inc(c).......................................... 772,200
16,600 Medic Computer Systems Inc.(c)......................... 1,004,300
60,500 Microsoft Corp(c)...................................... 5,308,875
51,900 Netmanage Inc(a)(c).................................... 1,206,675
30,500 Optical Data Systems Inc(c)............................ 770,125
42,000 Oracle Corporation(c).................................. 1,779,750
74,100 Parametric Technology Corp(a).......................... 4,927,650
20,600 Project Software & Development......................... 718,425
19,800 Remedy Corp(c)......................................... 1,173,150
26,600 Shiva Corp(a)(c)....................................... 1,935,150
</TABLE>

See notes to financial statements.

<PAGE> 223

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
SOFTWARE MANUFACTURER--(CONTINUED)
21,000 Sterling Software...................................... $ 1,309,875
16,700 Veritas Software Corp(c)............................... 634,600
-----------
Total Software Manufacturer............................ 35,533,425 11.26%
----------- ----------
SPECIALTY CHEMICALS
29,100 Chemed Corp............................................ 1,131,262
37,600 IMC Global Inc......................................... 1,536,900
-----------
Total Specialty Chemicals.............................. 2,668,162 0.85%
----------- ----------
TELECOMMUNICATIONS
36,500 ACC Corp. ............................................. 841,781
24,100 Allen Group............................................ 539,237
29,600 Aspect Telecommunications Corp(c)...................... 991,600
63,500 AT&T Capital Corp...................................... 2,428,875
11,575 Associated Group Inc.-Cl A(c).......................... 218,477
19,675 Associated Group Inc.-Cl B(c).......................... 373,825
65,000 Cabletron Systems Inc.(c).............................. 5,265,000
1,000 Cellular Communications Inc(c)......................... 49,750
59,975 Centennial Cellular Corp Cl A(c)....................... 1,027,072
78,400 Communications Central Inc.(c)......................... 352,800
53,000 Davel Communications Group(c).......................... 715,500
56,300 Premisys Communications Inc(a)(c)...................... 3,152,800
33,600 Pronet Inc.(c)......................................... 991,200
77,800 TPI Enterprises(c)..................................... 243,125
32,000 VTEL Corp(c)........................................... 592,000
17,800 Worldcom Inc(c)........................................ 627,450
-----------
Total Telecommunications............................... 18,410,492 5.84%
----------- ----------
TRANSPORTATION
92,000 Air Express International Corp......................... 2,116,000
100,000 Airborne Freight Corp.................................. 2,662,500
105,700 Consolidated Freightways Inc........................... 2,801,050
33,300 Oxford Resources Corp. Cl A(c)......................... 749,250
129,700 Pittston Services Group................................ 4,069,337
-----------
Total Transportation................................... 12,398,137 3.93%
----------- ----------
WIDE AREA NETWORKS
100,600 Stratacom Inc(a)(c).................................... 7,394,100
34,600 Sun Microsystems Inc(c)................................ 1,578,625
-----------
Total Wide Area Networks............................... 8,972,725 2.84%
----------- ----------
Total Common Stocks (cost $249,235,219)................ 294,700,091 93.42%
----------- ----------
PREFERRED STOCK
TELECOMMUNICATIONS
9,094 Cellular Communications Inc.(c) (cost $425,145)....... 445,606 0.14%
----------- ----------
Total Securities (cost $275,177,944).................. 320,663,277 101.65%
----------- ----------
</TABLE>

See notes to financial statements.

<PAGE> 224

SPECIAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
REPURCHASE AGREEMENT
$21,474,530 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $21,488,011, due
01/02/96 (Collateralized by US Treasury Note, 7.25%,
due 08/15/04 with a market value of $21,946,233) (cost
$21,477,900).......................................... $ 21,477,900 6.81%
----------- ----------
Total Investments (cost $296,655,844)................. 342,141,177 108.46%
----------- ----------
Liabilities in Excess of Other Assets................. (26,682,952) (8.46)%
----------- ----------
Net Assets............................................ $315,458,225 100.00%
=========== ========
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$297,912,599.

The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation......................... $59,947,614
Gross unrealized depreciation......................... (15,719,036)
-----------
Net unrealized appreciation........................... $44,228,578
===========
</TABLE>

- ---------------

(a) All or part of this security is on loan.

(d) Collateral for securities on loan.

(g) This interest rate resets on a daily basis. The rate shown was in effect as
of December 31, 1995.

See notes to financial statements.

<PAGE> 225

HIGH YIELD BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- -------- --------- ----------
<C> <S> <C> <C>
CORPORATE BONDS AND NOTES
AEROSPACE
$250,000 BE Aerospace 9.75% Due 03/01/03............................. $ 250,625 2.79%
------------ -----

AMUSEMENT & RECREATION
250,000 ARA Group 8.50% Due 06/01/03................................ 261,875
250,000 MGM Grand Hotel Finance Corp 11.75%
Due 05/01/99................................................ 265,000
------------
Total Amusement & Recreation................................ 526,875 5.86%
------------ -----
AUTO PARTS
250,000 Exide Corp 10.75% Due 12/15/02.............................. 271,563
250,000 SPX Corp 11.75% Due 06/01/02................................ 267,500
------------
Total Auto Parts............................................ 539,063 5.99%
------------ -----
BROADCASTING
200,000 Infinity Broadcasting 10.375% Due 03/15/02.................. 214,500
250,000 Viacom International 8.00% Due 07/07/06..................... 255,020
------------
Total Broadcasting.......................................... 469,520 5.22%
------------ -----
CABLE TV SERVICES
250,000 Century Communications 9.75% Due 02/15/02................... 260,000
250,000 Continental Cablevision Inc 11.00% Due 06/01/07............. 278,750
50,000 Jones Intercable 9.625% Due 03/15/02........................ 53,688
125,000 Rogers Cablesystems 9.625% Due 08/01/02..................... 131,250
25,000 Rogers Cablesystems Ltd. 11.00% Due 12/01/15................ 26,875
250,000 TCI Communications 8.75% Due 08/01/15....................... 275,248
------------
Total Cable TV Services..................................... 1,025,811 11.40%
------------ -----
CHEMICAL AND ALLIED PRODUCTS
250,000 AK Steel Holding Corp 10.75% Due 04/01/04................... 276,875
250,000 Freeport McMoran Resource Partners 8.75%
Due 02/15/04................................................ 256,250
75,000 IDEX Corp 9.75% Due 09/15/02................................ 79,500
250,000 NL Industries Inc 11.75% Due 10/15/03....................... 266,875
125,000 Sherritt Gordon Ltd 9.75% Due 04/01/03...................... 132,187
------------
Total Chemical and Allied Products.......................... 1,011,687 11.24%
------------ -----
COMMUNICATION EQUIPMENT
250,000 K-III Communications Corp 10.625% Due 05/01/02.............. 267,500
250,000 Metrocall Inc 10.375% Due 10/01/07.......................... 265,000
------------
Total Communication Equipment............................... 532,500 5.92%
------------ -----
MANUFACTURING
250,000 American Standard Senior Notes 10.875%
Due 05/1/99................................................. 273,125
250,000 Huntsman Corp 10.625% Due 04/15/01.......................... 280,000
250,000 Owens-Illinois Inc 11.00% Due 12/01/03...................... 283,813
250,000 USG Corp 8.50% Due 08/01/05................................. 258,125
250,000 Westinghouse Air 9.375% Due 06/15/05........................ 254,688
------------
Total Manufacturing......................................... 1,348,751 14.99%
------------ -----
</TABLE>

See notes to financial statements.

<PAGE> 226

HIGH YIELD BOND PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- --------- ----- ------------
<C> <S> <C> <C>
MEDICAL AND OTHER HEALTH SERVICES
$250,000 Abbey Healthcare 9.50% Due 11/01/02......................... $ 265,000
250,000 Healthsound Rehabilitation 9.50% Due 04/01/01............... 266,875
70,000 Quorum Health 8.75% Due 11/01/05............................ 72,362
250,000 Tenet Healthcare Corp 8.625% Due 12/01/03................... 263,750
------------
Total Medical and Other Health Services..................... 867,987 9.65%
------------ -----
MISCELLANEOUS
216,458 Midland Cogeneration Venture 10.33% Due 07/23/02............ 228,274 2.54%
------------ -----
OIL AND GAS
250,000 Ferrellgas LP/Fin Corp 10.00% Due 08/01/01.................. 265,000
125,000 Gulf Canada Resources Ltd 9.25% Due 01/15/04................ 129,457
80,000 Vintage Petroleum 9.00% Due 12/15/05........................ 80,700
------------
Total Oil & Gas............................................. 475,157 5.28%
------------ -----
PAPER PRODUCTS
25,000 Buckeye Cellulose Corp 8.50% Due 12/05/05................... 25,656
200,000 Container Corp of America 11.25% Due 05/01/04............... 204,000
125,000 Repap New Brunswick 9.875% Due 07/15/00..................... 125,312
------------
Total Paper Products........................................ 354,968 3.94%
------------ -----
PHARMACEUTICALS
60,000 Ivac Corp 9.25% Due 12/01/02................................ 61,500 0.68%
------------ -----
SECURITY SYSTEMS
250,000 ADT Operations 9.25% Due 08/01/03........................... 267,500 2.97%
------------ -----
TRANSPORTATION
250,000 Viking Star Ship 9.625% Due 07/15/03........................ 258,750 2.88%
------------ ------
Total Investments (cost $8,056,922)......................... $8,218,968 91.35%
------------ ------
Other Assets Less Liabilities............................... 778,627 8.65%
------------ ------
Net Assets.................................................. $8,997,595 100.00%
============ ======
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$8,056,922.
The following amount is based on costs for federal income tax purposes.
Aggregate gross unrealized appreciation..................... $ 174,397
Aggregate gross unrealized depreciation..................... (12,351)
------------
Net unrealized appreciation................................. $ 162,046
============
</TABLE>

See notes to financial statements.

<PAGE> 227

INTERNATIONAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS COUNTRY
- ---------- ---------- ---------- -------
<C> <S> <C> <C> <C>
CORPORATE BONDS AND NOTES
$ 277,000 Bangkok Bank Public Co. 3.25%, Due 03/03/04...... $ 294,313 HK
200,000 British Air Capital 9.75%, due 06/15/05.......... 636,560 UK
15,000,000 Sekisui House 2.50%, Due 01/31/02................ 201,975 JPN
------------
Total Corporate Bonds and Notes (cost
$1,106,891)...................................... 1,132,848 1.36%
------------ -------
CONVERTIBLE BONDS
2,000 Ericson LM 4.25%, Due 06/30/00................... 5,375 SWE
390,000 Sumitomo Bank 3.125% Due 03/31/04................ 353,925 JPN
390,000 Renong Berhad 2.50% Due 01/15/05................. 437,288 MAL
------------
Total Convertible Bonds (cost $762,913).......... 796,588 0.95%
------------ -------
SHARES/UNITS COMMON STOCKS AND WARRANTS
- ------------ --------------------------
AEROSPACE/DEFENSE
74,400 CAE Industries................................... 565,702 0.68% GER
------------ -------
AIRLINES
275,000 Citic Pacific LTD................................ 940,720 HK
17,000 British Airways PLC.............................. 122,997 UK
1,100 Swissair(c)...................................... 803,024 SWI
------------
Total Airlines................................... 1,866,741 2.24%
------------ -------
AMUSEMENT & RECREATION
162,000 Euro Disneyland SCA(c)........................... 369,344 0.44% FRA
------------ -------
AUTO EQUIPMENT
5,900 Mannesmann AG.................................... 1,881,781 GER
6,000 Valeo............................................ 278,260 FRA
------------
Total Auto Equipment............................. 2,160,041 2.59%
------------ -------
BANKING
20,000 ABN AMRO Holdings................................ 912,046 NET
2,000 Banco Popular Espanola........................... 368,788 SPA
48,000 Barclay's PLC.................................... 550,738 UK
6,200 CS Holdings...................................... 637,161 SWI
900 Holderbank Finan Glaris Cl B..................... 692,217 SWI
22,600 International Nederlanden Group.................. 1,511,375 NET
99,000 Morgan Crucible Company PLC...................... 590,228 UK
86,000 National Westminster............................. 866,562 UK
65,000 Overseas Chinese Bkng Corp....................... 813,378 SIN
12,000 Sumitomo Bank.................................... 254,770 JPN
196,000 Westpac Banking Corp............................. 868,946 AUS
------------
Total Banking.................................... 8,066,209 9.67%
------------ -------
BEVERAGES
98,000 Amatil LTD Coca Cola............................. 782,197 AUS
116,000 Lion Nathan...................................... 276,799 NZL
21,000 Seagrams Co Ltd.................................. 727,125 CAN
------------
Total Beverages.................................. 1,786,121 2.14%
------------ -------
</TABLE>

See notes to financial statements.

<PAGE> 228

INTERNATIONAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ------- ----
<C> <S> <C> <C> <C>
BROADCASTING
95,000 British Sky Broadcasting PLC..................... $ 599,574 UK
4,000 Canal Plus....................................... 750,862 FRA
17,100 Grupo Televisa--GDR.............................. 384,750 MEX
13,000 Rogers Communications Cl B(c).................... 145,291 CAN
135,000 Television Broadcasts Ltd........................ 481,019 HK
35,000 Tokyo Broadcasting............................... 576,818 JPN
------------
Total Broadcasting............................... 2,938,314 3.52%
------------ -------
BUILDING CONTRACTOR
52,000 Sekisui House LTD................................ 665,423 0.80% JPN
------------ -------
BUILDING MATERIALS
74,000 Italcenenti Frabbriche Riunit.................... 443,142 GER*
13,000 Tostem Corp...................................... 432,276 JPN
------------
Total Building Materials......................... 875,418 1.05%
------------ -------
CHEMICALS
32,000 AGA AB........................................... 441,814 SWE
1,900 Akzo Dutch....................................... 219,989 NET
20,000 Norsk Hydro...................................... 842,058 NOR
------------
Total Chemicals.................................. 1,503,861 1.80%
------------ -------
COMMUNICATIONS
84 DDI Corp......................................... 651,468 0.78% JPN
------------ -------
CONSUMER GOODS
48,000 Nikon Corp....................................... 651,466 JPN
56,000 Reckitt and Colman PLC........................... 619,920 UK
15,000 Sony Corp........................................ 900,131 JPN
37,000 Thorn EMI PLC.................................... 871,457 UK
------------
Total Consumer Goods............................. 3,042,974 3.65%
------------ -------
DRUGS
49,000 Astra AB......................................... 1,959,343 SWE
52,000 Banyu Pharmaceutical Co.......................... 640,219 JPN
56,000 Sankyo Co Ltd.................................... 1,259,502 JPN
------------
Total Drugs...................................... 3,859,064 4.62%
------------ -------
ELECTRIC UTILITIES
8,400 Asea--A.......................................... 817,538 SWE
180,000 Hong Kong Electric............................... 590,148 MAL
------------
Total Electric Utilities......................... 1,407,686 1.69%
------------ -------
ELECTRONICS
900 BBC Brown Boveri & Cie........................... 1,048,103 SWI
79,000 Bombardier Inc Cl B.............................. 1,042,140 CAN
142,000 Hitachi LTD...................................... 1,431,672 JPN
26,000 Kokusai Electric................................. 544,440 JPN
17,000 Kyocera Corp..................................... 1,264,061 JPN
19,000 Murata Mfg Co Ltd................................ 699,939 JPN
19,000 Omron Corp....................................... 438,383 JPN
24,600 Philips Electronics N.V. ADR..................... 882,525 NET
------------
Total Electronics................................ 7,351,263 8.81%
------------ -------
</TABLE>

See notes to financial statements.

<PAGE> 229

INTERNATIONAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ------- ----
<C> <S> <C> <C> <C>
ENGINEERING
17,000 Chudenko Corp.................................... $ 583,411 0.70% JPN
------------ -------
FINANCIAL SERVICES
3,000 Hong Leong Credit BHD............................ 14,888 MAL
16,800 HSBC Holdings PLC................................ 262,270 UK
20,450 Lend Lease Corp Ltd.............................. 296,635 AUS
29,000 Nomura Securities Co Ltd......................... 632,563 JPN
15,000 Orix Corp........................................ 618,021 JPN
76,000 Wako Securities Co Ltd(c)........................ 674,888 JPN
------------
Total Financial Services......................... 2,499,265 3.00%
------------ -------
FOOD & BEVERAGE
1,200 Nestle (Malaysia) Berhad......................... 8,791 MAL
1,200 Nestle........................................... 1,330,725 SWI
------------
Total Food & Beverage............................ 1,339,516 1.61%
------------ -------
FREIGHT TRANSPORTATION
122,000 Kawasaki Kisen(c)................................ 387,923 JPN
244,000 TNT Limited...................................... 346,651 AUS
------------
Total Freight Transportation..................... 734,574 0.88%
------------ -------
HOTELS
63,000 Forte PLC........................................ 323,272 0.39% UK
------------ -------
INSURANCE
22,800 Alleanza Assicuraz............................... 160,248 ITL
200 Baloise Holdings................................. 417,155 SWI
259,081 GIO Australian Holdings Ltd...................... 603,218 AUS
7,600 Mapfre Vida Seguros.............................. 451,052 SPA
62,000 Mitsui Marine & Fire Ins......................... 442,376 JPN
327 Muenchener Rueckversicherungs.................... 705,964 GER
20 Muenchener Rueckversicherungs--Warrants
(Expires 03/13/98)............................... 2,648 GER
71,000 Yasuda Fire & Marine Ins......................... 502,460 JPN
------------
Total Insurance.................................. 3,285,121 3.94%
------------ -------
INVESTMENT HOLDING COS
665,000 Brierley Investments Ltd......................... 526,015 NZL
337,000 Sime Darby Berhad................................ 895,948 MAL
1,000 UMW Holdings BHD Warrants (Expires 01/26/00)..... 705 MAL
------------
Total Investment Holding Cos..................... 1,422,668 1.70%
------------ -------
MACHINERY PRODUCTION
11,400 ASM Lithography Holding NV(c).................... 379,050 NET
19,000 Atlas Copco AB--Cl A............................. 292,431 SWE
21,000 Atlas Copco AB--Cl B............................. 316,875 SWE
18,000 Mitsubishi Heavy................................. 941,463 JPN
100 Sidel............................................ 31,204 FRA
------------
Total Machinery Production....................... 1,961,023 2.35%
------------ -------
METAL MINING
26,000 Inco Ltd......................................... 864,500 CAN
216,000 Placer Pacific Ltd............................... 446,666 AUS
90,000 Western Mining Corp Holding Ltd.................. 578,430 AUS
------------
Total Metal Mining............................... 1,889,596 2.26%
------------ -------
</TABLE>

See notes to financial statements.

<PAGE> 230

INTERNATIONAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ------- ----
<C> <S> <C> <C> <C>
METAL REFINERIES
17,000 Alcan Aluminum LTD............................... $ 529,125 CAN
107,000 Kawasaki Steel................................... 373,430 JPN
15,000 Pechiney......................................... 567,440 FRA
15,000 Pechiney Warrants (Expires 01/08/96)............. 31 FRA
9,900 Sandvik AB--A.................................... 174,032 SWE
2,800 Sandvik AB--B(c)................................. 49,221 SWE
------------
Total Metal Refineries........................... 1,693,279 2.03%
------------ -------
MOTOR VEHICLES
9,700 Autoliv AB....................................... 567,901 SWE
54,000 Mitsubishi Motor Corp(c)......................... 440,262 JPN
24,000 Toyota Motor Co.................................. 509,539 JPN
2,300 Volkswagen AG.................................... 772,946 GER
30,000 Volvo Aktiebolag B Free.......................... 615,642 SWE
------------
Total Motor Vehicles............................. 2,906,290 3.48%
------------ -------
OIL AND GAS
98,000 British Gas Corp................................. 386,473 UK
17,000 Repsol SA--ADR................................... 558,875 SPA
6,200 Societe National Elf--Aquitaine.................. 457,420 FRA
15,000 YPF Sociedad Anonima--ADR........................ 324,375 ARG
------------
Total Oil and Gas................................ 1,727,143 2.07%
------------ -------
PERSONAL SERVICES
15,000 Secom Co Ltd..................................... 1,044,093 1.25% JPN
------------ -------
PRINTING AND PUBLISHING
93,000 News Corp Ltd.................................... 496,704 AUS
29,000 Singapore Press Holdings Ltd..................... 512,561 SIN
------------
Total Printing and Publishing.................... 1,009,265 1.21%
------------ -------
REAL ESTATE
62,000 City Developments................................ 451,472 SIN
82,000 Mitsui Fudosan................................... 1,009,576 JPN
------------
Total Real Estate................................ 1,461,048 1.75%
------------ -------
RESTAURANTS
24,000 Izumi(c)......................................... 530,479 0.64% JPN
------------ -------
RETAIL SALES
13,000 Electrolux....................................... 534,538 SWE
12,700 Hennes & Mauritz................................. 709,046 SWE
------------
Total Retail Sales............................... 1,243,584 1.49%
------------ -------
SOFTWARE
4,900 SAP AG Vorzug(c)................................. 745,642 0.89% GER
------------ -------
TELECOMMUNICATIONS
86,000 Cable and Wireless............................... 614,203 UK
32,000 Ericsson AB(c)................................... 627,715 SWE
400,000 Hong Kong Telecom................................ 713,920 HK
800 Hong Kong Telecom--ADR........................... 14,200 HK
209 Nippon Telegraph and Telephone Corp.............. 1,691,829 JPN
8,300 Nokia AB K Shares(c)............................. 328,788 FIN
2,000 Rogers Cantel Mobile Comm--B(c).................. 53,000 CAN
</TABLE>

See notes to financial statements.

<PAGE> 231

INTERNATIONAL EQUITY PORTFOLIO

PORTFOLIO OF INVESTMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ---------- ---------- ---------- -------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS--(CONTINUED)
253,000 Telecom Italia Mobile--drnc(c).................. $ 266,308 ITA
456,000 Telecom Italia Mobile(c)........................ 803,381 ITA
18,500 Telecomunicacoes Brasileiras--ADR............... 890,816 BRA
44,000 Telefonica De Espana............................ 609,316 SPA
25,600 Telefonos De Mexico ADR......................... 816,000 MEX
5,400 Vodafone Group PLC ADR.......................... 190,350 UK
------------
Total Telecommunications........................ 7,619,826 9.13%
------------ -------
TELEPHONE UTILITIES
300 Tele Danmark B.................................. 16,403 DEN
34,600 Tele Danmark--ADR............................... 955,825 DEN
------------
Total Telephone Utilities....................... 972,228 1.17%
------------ -------
TEXTILES
28,000 Wacoal Corp..................................... 380,022 0.45% JPN
------------ -------
TIRE PRODUCTION
81,000 Bridgestone Corp................................ 1,287,810 JPN
9,000 Michelin B...................................... 359,420 FRA
------------
Total Tire Production........................... 1,647,230 1.97%
------------ -------
TOBACCO PRODUCTS
58,000 B.A.T. Industries............................... 511,037 0.61% UK
------------ -------
TOYS AND GAMES
18,100 Nintendo Corp Ltd............................... 1,377,437 1.65% JPN
------------ -------
WHOLESALERS
184,000 Hutchison Whampoa............................... 1,120,853 1.34% HK
------------ -------
Total Common Stocks and Warrants
(cost $75,986,728).............................. 77,137,531 92.44%
------------ -------
PREFERRED STOCK
DRUGS AND COSMETICS
200 Wella AG (cost $144,093)........................ 108,574 0.13% GER
------------ -------
Total Investments (cost $78,000,625)............ $79,175,541 94.88%
Total Assets Less Liabilities................... 4,270,774 5.12%
------------ -------
Net Assets...................................... $83,446,315 100.00%
============ =======
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$78,000,625.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation.................... $3,665,875
Gross unrealized depreciation.................... (2,490,959)
------------
Net unrealized appreciation...................... $1,174,916
============
* Traded on Italian exchange
</TABLE>

- ---------------

See notes to financial statements.

<PAGE> 232

COUNTRY COMPOSITION

<TABLE>
<S> <C>
Argentina.......................................................................... 0.42%
Australia.......................................................................... 5.58%
Brazil............................................................................. 1.13%
Canada............................................................................. 4.96%
Denmark............................................................................ 1.23%
Finland............................................................................ 0.42%
France............................................................................. 3.55%
Germany............................................................................ 5.33%
Hong Kong.......................................................................... 4.88%
Italy.............................................................................. 2.11%
Japan.............................................................................. 30.81%
Malasia............................................................................ 1.71%
Mexico............................................................................. 1.52%
Netherlands........................................................................ 4.93%
Norway............................................................................. 1.06%
New Zealand........................................................................ 1.01%
Singapore.......................................................................... 2.24%
Spain.............................................................................. 2.51%
Sweden............................................................................. 8.98%
Switzerland........................................................................ 6.22%
Thailand........................................................................... 0.37%
United Kingdom..................................................................... 9.03%
Total:................................................................... 100.00%
</TABLE>

<PAGE> 233

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Diversified Investors Portfolios (the "Series Portfolio"), a series trust
organized on September 1, 1993 under the laws of the State of New York, is
composed of eleven different series that are, in effect, separate investment
funds: the Money Market Series, the High-Quality Bond Series, the Intermediate
Government Bond Series, the Government/Corporate Bond Series, the Balanced
Series, the Equity Income Series, the Growth & Income Series, the Equity Growth
Series, the Special Equity Series, the High-Yield Bond Series, and the
International Equity Series (each a "Series"). The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of beneficial interests in
each Series. Investors in a Series (e.g., investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of that Series (and of no other Series). On January
3, 1994 (commencement of operations for each series except the High-Yield Bond
Series and the International Equity Series), MONY Pooled Separate Accounts
transferred all of their investable assets at a market value of $1,183,075,019
to those Series with corresponding investment objectives in exchange for
interests in those Series. The High-Yield Bond Series and International Equity
Series commenced operations on August 22, 1995 and September 29, 1995,
respectively.

The International Equity Series was established by a redemption of assets
in-kind, valued at $77,137,079 from the Non-U.S. Equity Fund for Participant
Directed Plans within the Capital Guardian Collective Trust for Employee Benefit
Plans, a bank collective trust fund established and maintained by Capital
Guardian Trust Company, which were immediately invested at market value into the
Portfolio. The transaction resulted in a non-taxable event.

2. SIGNIFICANT ACCOUNTING POLICIES

A. Security Valuation:

Short-term securities having remaining maturities of 60 days or less are
valued at amortized cost or original cost plus accrued interest receivable, both
of which approximate value. The amortized cost of a security is determined by
valuing it at original cost and thereafter amortizing any discount or premium at
a constant rate until maturity. Securities traded on national securities
exchanges are valued at the last sales price as of the close of business on each
day or at the closing bid price for over-the-counter securities. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or at the ask price on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities not reported on
the NASDAQ system. Bonds are valued at the last available price provided by an
independent pricing service for securities traded on a national securities
exchange. Bonds that are listed on a national securities exchange but are not
traded and bonds that are regularly traded in the over-the-counter market are
valued at the mean of the last available bid and asked prices by an independent
pricing service. All other securities will be valued at their fair value as
determined by the Board of Trustees.

B. Repurchase Agreements:

Each Series, along with other affiliated entities of the investment
advisor, may enter into repurchase agreements with financial institutions deemed
to be creditworthy by the Series investment advisor, subject to the seller's
agreement to repurchase and the Series agreement to resell such securities at a
mutually agreed upon price. Securities purchased subject to repurchase
agreements are deposited with a third party custodian, and pursuant to the terms
of the repurchase agreement must have an aggregate market value greater than or
equal to 102% and 105% of domestic and international securities, respectively,
of the repurchase price plus accrued interest at all times. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the Series will require the seller to deposit additional collateral by
the next business day. If the request for additional collateral is not met or
the seller defaults on its repurchase obligation, the Series maintains the right
to

<PAGE> 234

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.

C. Foreign Currency Translation

The accounting records of the International Equity Series are maintained in
U.S. dollars. The market values of foreign securities, currency holdings and
other assets and liabilities are translated to U.S. dollars based on the
prevailing exchange rates each business day. Income and expenses denominated in
foreign currencies are translated at prevailing exchange rates when accrued or
incurred. The Series does not isolate realized gains and losses attributable to
changes in exchange rates from gains and losses that arise from changes in the
market value of investments. Such fluctuations are included with net realized
and unrealized gains or losses on investments. Net realized gains and losses on
foreign currency transactions represent net exchange gains and losses on
disposition of foreign currencies, the difference between the amount of
investment income receivable and foreign withholding taxes receivable recorded
on the Series' books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end and forward foreign currency contracts, resulting from changes in the
exchange rate.

D. Forward Currency Contracts

The International Equity Series may enter into forward currency contracts
and forward cross currency contracts in connection with settling planned
purchases or sales of securities or to hedge the currency exposure associated
with some or all of the Series' portfolio securities. A forward currency
contract is an agreement between two parties to buy and sell a currency at a set
price on a future date. The market value of a forward currency contract
fluctuates with changes in forward currency exchange rates. Forward currency
contracts are marked to market daily and the change in value is recorded by the
Series as an unrealized gain or loss. When a forward currency contract is
extinguished, through delivery or offset by entering into another forward
currency contract, the Series records a realized gain or loss equal to the
different between the value of the contract at the time it was opened and the
value of the contract at the time it was extinguished or offset. These contracts
may involve market risk in excess of the unrealized gain or loss reflected in
the Series' Statement of Assets and Liabilities and the Statement of Operations.
In addition, the Series could be exposed to risk if the counterparties are
unable to meet the terms of the contracts or if the value of the currency
changes unfavorably to the U.S. dollar.

E. Federal Income Taxes:

It is the Series policy to comply with the applicable provisions of the
Internal Revenue Code. Therefore, no federal income tax provision is required.

F. Security Transactions and Investment Income:

Security transactions are accounted for on a trade date basis (the day
after the date the order to buy or sell is executed). Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discount on investments. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.

All of the net investment income and realized and unrealized gains and
losses from security transactions are determined on each valuation day and
allocated pro rata among the investors in a Series at the time of such
determination.

<PAGE> 235

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
G. Operating Expenses:

The Series Portfolio accounts separately for the assets, liabilities and
operations of each Series. Expenses directly attributable to a Series are
charged to that Series, while expenses attributable to all Series are allocated
among them.

H. Other:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

3. FEES AND TRANSACTIONS WITH AFFILIATES

AUSA Life Insurance Company, Inc. ("AUSA") is the parent company of
Diversified Investment Advisors, Inc. (the "Advisor"). AUSA has sub-accounts
which invests in the corresponding Portfolios as follows:

<TABLE>
<CAPTION>
PERCENTAGE INVESTMENT
AUSA SUBACCOUNT IN PORTFOLIO
--------------------------------------------------------------------- ---------------------
<S> <C>
Money Market......................................................... 42.43%
High Quality Bond.................................................... 54.41%
Intermediate Government Bond......................................... 63.72%
Government/Corporate Bond............................................ 25.83%
Balanced............................................................. 92.89%
Equity Income........................................................ 68.02%
Growth & Income...................................................... 72.63%
Equity Growth........................................................ 85.74%
Special Equity....................................................... 51.48%
High Yield Bond...................................................... 73.21%
International Equity................................................. 41.39%
</TABLE>

The Advisor manages the assets of each Series of the Series Portfolio
pursuant to an Investment Advisory Agreement (the "Advisory Agreement") with the
Series Portfolio with respect to each Series. Subject to such further policies
as the Board of Trustees may determine, the Advisor provides general investment
advice to each Series. For its services under the Advisory Agreement, the
Adviser receives from each Series fees accrued daily and paid monthly at an
annual rate equal to the percentages specified in the table below of the
corresponding Series' average daily net assets. The Advisor is currently waiving
a portion of its investment advisory fee.

For each Series, the Advisor has entered into an Investment Subadvisory
Agreement (each a "Subadvisory Agreement") with the subadvisors listed in the
table below (each a "Subadvisor", collectively the "Subadvisors"). It is the
responsibility of a Subadvisor to make the day-to-day investment decisions of
the Series and to place the purchase and sales orders for securities
transactions of such series, subject in all cases to the general supervision of
the Advisor. For its services

<PAGE> 236

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. FEES AND TRANSACTIONS WITH AFFILIATES--(CONTINUED)

under each Subadvisory Agreement, the Subadvisors receive a fee from the
Advisor at an annual rate equal to the percentages specified in the table below
of the corresponding Series' average net assets.

<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIO ADVISOR SUBADVISORS
SERIES PORTFOLIO SUBADVISORS FEE(1) FEE
- ------------------------------------- ------------------------------------- ------- -----------
<S> <C> <C> <C>
Money Market Series.................. Capital Management Group 0.25% 0.05%
High Quality Bond Series............. Merganser Capital Management
Corporation 0.35 (2)
Intermediate Government Bond 1740 Advisors, Inc.
Series............................. 0.35 0.15
Government/Corporate Bond Series..... Capital Management Group 0.35 0.15
Balanced Series...................... Institutional Capital Corporation 0.45 (3)
Equity Income Series................. Asset Management Group 0.45 0.25
Growth & Income Series............... Munder Capital Management, Inc.
(1/1/95--11/13/95) 0.60 (4)
The Putnam Advisory Co Inc.
(11/14/95--12/31/95) 0.60 (4)
Equity Growth Series................. Jundt Associates, Inc. 0.70 0.63
Special Equity Series................ (5) 0.80 0.50
High-Yield Bond Series............... Delaware Investment Advisors 0.55 (6)
International Equity Series.......... Capital Guardian Trust Co. 0.75 (7)
</TABLE>

- ---------------

(1) The Advisor is currently waiving a portion of its fee.

(2) 0.50 on the first $10,000,000 in net assets, 0.375% on the next $15,000,000
in net assets, 0.25 on the next $75,000,000 in net assets and 0.1875% on all
net assets in excess of $100,000,000.

(3) 0.55% on the first $25,000,000 in net assets, 0.45% on the next $25,000,000
in net assets, and 0.35% on all net assets in excess of $50,000,000.

(4) Munder: 0.50% on the first $50,000,000 in net assets, 0.30% on the next
$25,000,000 in net assets, and 0.25% on net assets in excess of $75,000,000.
Putnam: 0.30% on the first $100,000,000 in net assets, 0.20% on net assets
in excess of $100,000,000.

(5) The Special Equity Series has four Subadvisors: Pilgrim Baxter & Associates,
Ltd., Ark Asset Management Co., Inc.; Liberty Investment Management, Inc.;
and Westport Asset Management, Inc.

(6) 0.40% on the first $20,000,000 in net assets, 0.30% on the next $20,000,000
in net assets, and 0.20% on all net assets in excess of $40,000,000.

(7) 0.75% on the first $25,000,000 in net assets, 0.60% on the next $25,000,000
to $50,000,000 in net assets, 0.425% on the next $50,000,000 to $250,000,000
in net assets and 0.375% on all net assets in excess of $250,000,000.

<PAGE> 237

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. FEES AND TRANSACTIONS WITH AFFILIATES--(CONTINUED)
For the year ended December 31, 1995, the Advisor has voluntarily
undertaken to waive fees in accordance with the expense caps as follows:

<TABLE>
<CAPTION>
FUND EXPENSE CAP
------------------------------------------------------------------- ----------------------
<S> <C>
Money Market Series................................................ 30 basis points (b.p.)
High Quality Bond Series........................................... 40 b.p.
Intermediate Government Bond Series................................ 40 b.p.
Government/Corporate Bond Series................................... 40 b.p.
Balanced Series.................................................... 50 b.p.
Equity Income Series............................................... 50 b.p.
Growth & Income Series............................................. 65 b.p.
Equity Growth Series............................................... 75 b.p.
Special Equity Series.............................................. 85 b.p
High-Yield Bond Series............................................. 60 b.p.
International Equity Series........................................ 80 b.p.
</TABLE>

Certain trustees and officers of the Series Portfolio are also directors,
officers or employees of the Advisor or its affiliates. None of the trustees so
affiliated receive compensation for services as trustees of the Series
Portfolio. Similarly, none of the Series Portfolio officers receive compensation
from the Series Portfolio.

4. FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF NET INVESTMENT
RATIO OF EXPENSES, INVESTMENT INCOME, NET
GROSS NET OF INCOME TO OF WAIVERS
EXPENSES WAIVERS TO PORTFOLIO TO PORTFOLIO
TO AVERAGE AVERAGE AVERAGE NET AVERAGE PORTFOLIO
NET ASSETS NET ASSETS ASSETS NET ASSETS TURNOVER
------------- ------------- ------------- ------------- -------------
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Series............... .31% .32% .30% .30% 5.70% 4.05% 5.69% 4.07% n/a n/a
High Quality Bond Series.......... .41 .41 .40 .40 5.83 5.77 5.82 5.79 25% 37%
Intermediate Government Bond
Series.......................... .45 .45 .40 .40 5.57 5.71 5.52 5.76 59 21
Government/Corporate Bond
Series.......................... .39 .40 .39 .40 5.90 5.71 5.90 5.72 122 122
Balanced Series................... .54 .53 .50 .50 4.19 3.57 4.15 3.61 124 118
Equity Income Series.............. .49 .49 .49 -- 3.37 3.43 3.37 3.43 23 30
Growth & Income Series............ .68 .67 .65 .65 1.49 1.35 1.47 1.37 155 21
Equity Growth Series.............. .75 .76 .75 .75 .41 .08 .41 .11 62 75
Special Equity Series............. .88 .88 .85 .85 .33 .27 .30 .30 155 90
High-Yield Bond Series*........... 1.32 n/a .60 n/a 8.45 n/a 7.73 n/a 21 n/a
International Equity Series*...... .83 n/a .80 n/a .53 n/a .50 n/a 7 n/a
</TABLE>

- ---------------

* Annualized (except "Portfolio Turnover")

5. SECURITIES LENDING

The Series may lend its securities to certain firms of the New York Stock
Exchange. The loans are collateralized at all times with cash or securities with
a market value at least equal to the market value of the securities on loan. Any
deficiencies or excess of collateral must be delivered or transferred by the
member firms no later than the close of business on the next business day. As
with other extensions of credit, the Series may bear the risk of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Series receives compensation, net of related
expenses, for

<PAGE> 238

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

lending its securities which is included in interest income on the Statement of
Operations. At December 31, 1995, the Series loaned securities having market
values as follows:

<TABLE>
<CAPTION>
MARKET
VALUE COLLATERAL
----------- -----------
<S> <C> <C>
Intermediate Government Bond Series..................... $ 9,632,499 $10,072,779
Government/Corporate Bond Series........................ 24,882,591 25,522,680
Balanced Series......................................... 44,855,823 45,264,696
Equity Income Series.................................... 32,341,850 40,895,567
Growth & Income Series.................................. 9,295,738 8,426,958
Equity Growth Series.................................... 38,008,275 43,322,473
Special Equity Series................................... 24,289,950 25,517,296
</TABLE>

6. PURCHASE AND SALES OF INVESTMENTS

The aggregate cost of investments purchased and proceeds from sales or
maturities for the year ended December 31, 1995, except for the High-Yield Bond
Series and the International Equity Series, which commenced operations on August
22, 1995 and September 29, 1995, respectively, were as follows:

<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C> <C>
High Quality Bond.................... Government Obligations $ 7,485,156 $ 9,775,000
Other 90,987,861 27,551,146
Intermediate Government Bond......... Government Obligations 39,072,203 46,901,641
Other 2,483,850 0
Government/Corporate Bond............ Government Obligations 197,580,983 209,414,611
Other 122,386,994 79,397,548
Balanced............................. Government Obligations 57,119,727 59,294,289
Other 126,156,208 110,742,597
Equity Income........................ Other 134,758,652 150,097,939
Growth & Income...................... Other 149,015,878 153,018,963
Equity Growth........................ Other 140,230,205 97,274,051
Special Equity....................... Other 377,723,502 364,616,633
High-Yield Bond...................... Other 9,592,564 1,527,669
International Equity................. Other 10,480,055 4,995,961
</TABLE>

<PAGE> 239

DIVERSIFIED INVESTORS PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. FORWARD CURRENCY CONTRACTS

At December 31, 1995, the International Equity Series had entered into
forward currency contracts which contractually obligate the Portfolio to
deliver/receive currency at specified future dates. The open contracts are as
follows:

<TABLE>
<CAPTION>
IN NET
UNITS OF EXCHANGE UNREALIZED
VALUE DATE DELIVER/RECEIVE CURRENCY FOR APPR/(DEPR)
------------------------------ ------------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Buys
01/03/96...................... Spanish Peseta 2,110,172 $ 17,370 $ 24
01/24/96...................... Canadian Dollars 814,248 597,467 (748)
10/30/96...................... Japanese Yen 93,267,250 962,610 (21,277)
-----------
$ (22,001)
=========
Sells
01/02/96...................... Malaysian Ringgit 189 $ 74 $ 0
01/04/96...................... Japanese Yen 15,595,020 151,629 377
01/24/96...................... Canadian Dollars 814,248 593,000 (3,718)
03/11/96...................... German Marks 433,140 300,000 (3,813)
10/15/96...................... Japanese Yen 377,578,600 3,962,000 157,873
10/15/96...................... Japanese Yen 19,026,000 200,000 8,312
10/30/96...................... Japanese Yen 93,267,250 965,000 23,667
-----------
$ 182,697
=========
</TABLE>

<PAGE> 240

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Owners of Beneficial Interests of the
Diversified Investors Portfolios:

We have audited the accompanying statements of assets and liabilities of
Diversified Investors Portfolios (comprising, respectively, the Money Market,
High Quality Bond, Intermediate Government Bond, Government/Corporate Bond,
Balanced, Equity Income, Growth and Income, Equity Growth, Special Equity, High-
Yield Bond and International Equity Portfolios) (collectively the "Series
Portfolios") as of December 31, 1995 and the related statements of operations
for the year then ended, and the statements of changes in net assets and the
financial highlights for each of the two years in the period then ended for each
Portfolio except the High-Yield Bond and International Equity Portfolios, for
which the periods were from August 22, 1995 and September 29, 1995 (commencement
of operations), respectively, to December 31, 1995. These financial statements
and financial highlights are the responsibility of the Series Portfolios
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the Portfolios constituting Diversified Investors Portfolios as of
December 31, 1995, the results of their operations, the changes in their net
assets, and the financial highlights for the periods referred to above in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
February 12, 1996

<PAGE> 241
PART C

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

The financial statements called for by this Item are incorporated
by reference into Part B and listed under Item 23 thereof.

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

Not applicable.

Item 26. Number of Holders of Securities.

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
(as of December 31, 1995)
<S> <C>
Balanced Portfolio 4
Money Market Portfolio 5
Growth & Income Portfolio 4
Equity Growth Portfolio 4
Equity Income Portfolio 4
Special Equity Portfolio 4
High Quality Bond Portfolio 4
Government/Corporate Bond Portfolio 4
Intermediate Government Bond Portfolio 3
High-Yield Bond Portfolio 3
Equity Value Portfolio 0
Aggressive Equity Portfolio 0
International Equity Portfolio 3
</TABLE>

Item 27. Indemnification.

Reference is made to Article V of the Registrant's Declaration of Trust
previously filed with the Commission as Exhibit 1 of Amendment No. 1 dated April
28, 1995 to the Registrant's N-1A Registration Statement - Registration No.
811-8272 under the Investment Company Act of 1940 is incorporated herein by
reference.

The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.

Item 28. Business and Other Connections of Investment Adviser.

Diversified Investment Advisors, Inc. ("Diversified") is an indirect,
wholly-owned subsidiary of AEGON USA, Inc., a financial services holding company
whose primary emphasis is life and health insurance and annuity and investment
products. AEGON is

C-1
<PAGE> 242
an indirect, wholly-owned subsidiary of AEGON nv, a Netherlands corporation
which is a publicly traded international insurance group.

Diversified acts as investment adviser and administrator to each series
of the registrant. The names, addresses and principal business addresses of the
directors and officers of Diversified are as stated on Schedules D of Form ADV
(File No. 801-42910) as declared effective December 16, 1992, as amended, the
text of which is herein incorporated by reference.

Item 29. Principal Underwriters.

Not applicable.

Item 30. Location of Accounts and Records.

Diversified Investors Portfolios
Four Manhattanville Road
Purchase, New York 10577

Diversified Investment Advisors, Inc.
Four Manhattanville Road
Purchase, New York 10577

Diversified Investors Securities Corp.
Four Manhattanville Road
Purchase, New York 10577

Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02205-1537

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

(a) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 (the "Act") as though such provisions of
the Act were applicable to the Registrant.

C-2
<PAGE> 243
SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement on Form N-1A to be signed
on its behalf by the undersigned, thereunto duly authorized, in the County of
Westchester and State of New York on the 19th day of April, 1996

DIVERSIFIED INVESTORS PORTFOLIOS

By /s/ Robert F. Colby
------------------------------------------
Robert F. Colby
Secretary

C-3
<PAGE> 244
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(10) Consent of Independent Accountants
</TABLE>

C-4

<PAGE> 1

[COOPERS & LYBRAND LETTERHEAD]

CONSENT OF INDEPENDENT ACCOUNTANTS

----------------------------------

We consent to the incorporation by reference in this Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A (File No. 811-8272) of our
report dated February 12, 1996, on our audits of the financial statements and
financial highlights of Diversified Investors Portfolio.

We also consent to the reference to our Firm in the Statement of Additional
Information under the caption "Independent Accountants"

/s/ Coopers & Lybrand

Coopers & Lybrand L.L.P.

New York, New York
April 19, 1996