DIVERSIFIED INVESTORS PORTFOLIOS
PRE 14A, 1999-09-30
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                            SCHEDULE 14A INFORMATION

          PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

      FILED BY REGISTRANT [X]   FILED BY A PARTY OTHER THAN REGISTRANT [ ]
       -----------------------------------------------------------------

Check the appropriate box:
[X]  Preliminary Proxy Statement
[ ]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
[ ]  Confidential, for Use of the Commission Only (as permitted by Rule
     14a-6(e)(2))

             Diversified Investors Portfolios - Core Bond Portfolio
                (Name of Registrant as Specified In Its Charter)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of the filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:
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<PAGE>
                        DIVERSIFIED INVESTORS PORTFOLIOS
                             4 Manhattanville Road
                            Purchase, New York 10577

November 5, 1999

Dear Investor:

On December 3, 1999 at 10:00 a.m., (Eastern time) we will hold a special
meeting of investors in Core Bond Portfolio (formerly known as the
"Government/Corporate Bond Portfolio") to vote on important proposals relating
to the Portfolio. Core Bond Portfolio is a series of Diversified Investors
Portfolios.

VOTING ONLY TAKES A FEW MINUTES - PLEASE RESPOND PROMPTLY.

Please take a few moments to read the enclosed materials and then cast your
vote on the enclosed proxy card. Items 1 and 2 have been carefully considered
by the Board of Trustees of Diversified Investors Portfolios, which is
responsible for protecting your interests as an investor. The Board of Trustees
of Diversified Investors Portfolios believes that the proposals are fair and
reasonable and recommends that you vote in favor of the proposals.

The proposals you will vote on for the Portfolio are summarized below. Complete
information is contained in the enclosed Proxy Statement.

     ITEM 1.   To approve a new Investment Subadvisory Agreement between
               Diversified Investment Advisors, Inc. and Payden & Rygel.

     ITEM 2.   To authorize the Board of Trustees of Diversified Investors
               Portfolios to select and change investment subadvisers and enter
               into investment subadvisory agreements without obtaining the
               approval of investors.

     ITEM 3.   To transact such other business as may properly come before the
               Special Meeting of Investors and any adjournments thereof.

After you have voted on Items 1 and 2, please be sure to RETURN YOUR SIGNED
PROXY CARD.

This is your opportunity to voice your opinion on matters affecting the
Portfolio. Your participation is extremely important, no matter how large or
small the beneficial interest you own.
<PAGE>
We appreciate your prompt response.  Thank you.

Sincerely,


Robert F. Colby
Secretary
<PAGE>
                              CORE BOND PORTFOLIO
                  a series of Diversified Investors Portfolios
                             4 Manhattanville Road
                            Purchase, New York 10577
                           Telephone: (914) 697-8000

                     NOTICE OF SPECIAL MEETING OF INVESTORS

                          To be held December 3, 1999


A Special Meeting of Investors of CORE BOND PORTFOLIO (formerly known as the
"Government/Corporate Bond Portfolio"), a series of Diversified Investors
Portfolios, will be held at the offices of Diversified Investment Advisors,
Inc., 4 Manhattanville Road, Purchase, New York 10577, on December 3, 1999 at
10:00 a.m., Eastern time, for the following purposes:

     ITEM 1.   To approve a new Investment Subadvisory Agreement between
               Diversified Investment Advisors, Inc. and Payden & Rygel.

     ITEM 2.   To authorize the Board of Trustees of Diversified Investors
               Portfolios to select and change investment subadvisers and enter
               into investment subadvisory agreements without obtaining the
               approval of investors.

     ITEM 3.   To transact such other business as may properly come before the
               Special Meeting of Investors and any adjournments thereof.

THE BOARD OF TRUSTEES OF DIVERSIFIED INVESTORS PORTFOLIOS RECOMMENDS THAT YOU
VOTE IN FAVOR OF ITEMS 1 AND 2.

Only investors of record on October 8, 1999 will be entitled to vote at the
Special Meeting of Investors and at any adjournments thereof.

                           Robert F. Colby, Secretary

November 5, 1999


YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOU PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED PROXY, WHICH WILL HELP AVOID THE ADDITIONAL EXPENSES OF
A SECOND SOLICITATION.
<PAGE>
                              CORE BOND PORTFOLIO
                  a series of Diversified Investors Portfolios
                             4 Manhattanville Road
                            Purchase, New York 10577
                           Telephone: (914) 697-8000

                                PROXY STATEMENT

This Proxy Statement and Notice of Special Meeting with accompanying form of
proxy are being furnished in connection with the solicitation of proxies by the
Board of Trustees of Diversified Investors Portfolios (the "Trust") for use at
a special meeting of investors in Core Bond Portfolio (formerly known as the
"Government/Corporate Bond Portfolio" and referred to herein as the
"Portfolio"), a series of the Trust, or any adjournment thereof, to be held at
the offices of Diversified Investment Advisors, Inc., 4 Manhattanville Road,
Purchase, New York 10577, on December 3, 1999, at 10:00 a.m., Eastern time (the
"Meeting"). The Meeting is being held for the purposes set forth in the
accompanying Notice of Special Meeting. These materials are being mailed by the
Board of Trustees of the Trust on or about November 5, 1999.

The Portfolio is one of thirteen series of the Trust, which is a registered
investment company organized as a New York trust under a Declaration of Trust
dated as of September 1, 1993. The Portfolio was designated as a separate
series of the Trust on September 1, 1993. The mailing address of the Trust is 4
Manhattanville Road, Purchase, New York 10577.

The Portfolio commenced operations on January 3, 1994. The annual report for
the Portfolio for the period ended December 31, 1998, including audited
financial statements, has previously been sent to investors and is available
upon request without charge by contacting Catherine A. Mohr, Diversified
Investors Portfolios, 4 Manhattanville Road, Purchase, New York 10577 or by
calling the Trust toll-free at (800) 926-0044.

MANNER OF VOTING PROXIES AND VOTE REQUIRED

If the accompanying form of proxy is executed properly and returned, the
beneficial interest represented by it will be voted at the Meeting in
accordance with the instructions on the proxy. If no instructions are
specified, the beneficial interest will be voted for proposed Items 1 and 2. If
the enclosed form of proxy is executed and returned, it may nevertheless be
revoked prior to its exercise by a signed writing delivered at the Meeting or
filed with the Secretary of the Trust.

If sufficient votes to approve the proposed Items 1 and 2 are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to

<PAGE>

permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those beneficial interests voted at the
Meeting. When voting on a proposed adjournment, the persons named as proxies
will vote all beneficial interests that they are entitled to vote with respect
to each Item for the proposed adjournment, unless directed to disapprove the
Item, in which case such beneficial interests will be voted against the
proposed adjournment.

The presence in person or by proxy of the holders of a majority of the
outstanding beneficial interests of the Portfolio entitled to vote is required
to constitute a quorum at the Meeting. For purposes of determining the presence
of a quorum for transacting business at the Meeting, abstentions will be
treated as beneficial interests that are present but which have not been voted.
For this reason, abstentions will have the effect of a "no" vote for purposes
of obtaining the requisite approval of the proposals.

The cost of soliciting proxies in the accompanying form, including the fees of
a proxy soliciting agent, will be borne by the Portfolio. In addition to
solicitation by mail, proxies may be solicited by the Board of Trustees of the
Trust, officers, and regular employees and agents of the Trust without
compensation therefor. The Portfolio may reimburse brokerage firms and others
for their expenses in forwarding proxy materials to the beneficial owners and
soliciting them to execute the proxies.

The close of business on October 8, 1999 has been fixed as the Record Date for
the determination of investors entitled to notice of and to vote at the
Meeting. $_____________ in beneficial interests were outstanding as of the
close of business on the Record Date. Investors of record at the close of
business on the Record Date will be entitled to vote in the proportion that
their beneficial interests bear to the total beneficial interests in the
Portfolio.

BACKGROUND

The Portfolio is a master fund within a two-tier, master/feeder mutual fund
structure. Interests in the Portfolio are sold to accredited investors in
private placement transactions which do not involve a public offering under the
Securities Act of 1933, as amended.

Diversified Investment Advisors, Inc., a Delaware corporation (the "Adviser"),
4 Manhattanville Road, Purchase, New York 10577, manages the assets of the
Portfolio pursuant to an Investment Advisory Agreement dated as of January 3,
1994 (the "Advisory Agreement"). The Advisory Agreement was most recently
approved by the Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons," as defined in the Investment Company
Act of 1940, as amended (the "1940 Act"), of any party to such agreement (the
"Independent Trustees") on November 10, 1998. The Advisory Agreement was most
recently submitted to a vote of investors in the Portfolio on January 3, 1994

<PAGE>

in connection with its initial approval. Subject to the terms of the Advisory
Agreement, the Adviser is responsible for the management of the Portfolio,
selects and employs, subject to the review and approval of the Board of
Trustees of the Trust, one or more subadvisers to make the day-to-day
investment selections for the Portfolio consistent with the guidelines and
directions set by the Adviser and the Board of Trustees, and reviews the
subadvisers' continued performance. The Adviser may terminate the services of
any subadviser at any time.

Prior to August 18, 1999, Capital Management Group, a division of Capital
Management, Inc. ("Capital Management"), a corporation having its principal
offices at 1740 Broadway, New York, New York 10019, served as the investment
subadviser of the Portfolio pursuant to an Investment Subadvisory Agreement
between Capital Management and the Adviser. As subadviser, Capital Management
was responsible for investing the Portfolio's assets in a manner consistent
with the terms of the Subadvisory Agreement and the investment objectives of
the Portfolio. The Capital Management Subadvisory Agreement was most recently
approved by the Board of Trustees of the Trust, including a majority of the
Independent Trustees, on November 10, 1998. The Capital Management Subadvisory
Agreement was most recently submitted to a vote of investors in the Portfolio
on January 3, 1994 in connection with its initial approval.

At a regular meeting of the Board of Trustees of the Trust held on August 17,
1999, the Board considered, at the Adviser's recommendation, the termination of
Capital Management as the subadviser of the Portfolio. The Board reviewed
Capital Management's investment performance as subadviser and considered the
Adviser's reasons for recommending termination. The Board then reviewed the
Adviser's procedures for selecting new subadvisers. As discussed in Item 1
below under the heading "Evaluation by the Board of Trustees," the Board
authorized the Adviser to terminate the Capital Management Subadvisory
Agreement and enter into a new subadvisory agreement with Payden & Rygel
("Payden"). Accordingly, effective August 18, 1999, the Adviser terminated the
Capital Management Subadvisory Agreement and entered into a Subadvisory
Agreement with Payden.

In accordance with the requirements of the 1940 Act, the Payden Subadvisory
Agreement must be approved by the holders of beneficial interests in the
Portfolio.

     ITEM 1.   TO APPROVE A NEW INVESTMENT SUBADVISORY AGREEMENT BETWEEN
               DIVERSIFIED INVESTMENT ADVISORS, INC. AND PAYDEN & RYGEL.
<PAGE>
COMPARISON OF THE SUBADVISORY AGREEMENTS

The terms of the Payden Subadvisory Agreement are similar to those of the
Capital Management Subadvisory Agreement except for the identity of the service
provider, the effective date and termination date and the compensation payable
by the Adviser to the subadviser.

A description of the investment advisory fees to be paid by the Adviser to
Payden is set forth below under the caption "Investment Advisory Fees."

The Payden Subadvisory Agreement became effective on August 18, 1999 and, if
approved by the vote of the holders of a "majority of the outstanding voting
securities" (as such term is defined below) of the Portfolio, will continue in
effect through August 18, 2001, and thereafter from year to year, subject to
approval annually in accordance with the 1940 Act. The Subadvisory Agreement
may be terminated at any time without the payment of any penalty by the Board
of Trustees of the Trust or by the vote of a "majority of the outstanding
voting securities" of the Portfolio or by the Adviser. The Subadvisory
Agreement may also be terminated by Payden upon 90 days' advance written notice
to the Adviser. The Subadvisory Agreement will also terminate automatically in
the event of its "assignment" (as defined in the 1940 Act).

Under the Payden Subadvisory Agreement, as under the Capital Management
Subadvisory Agreement, Payden will furnish continuing portfolio management
services to the Portfolio, subject always to the provisions of the 1940 Act and
to the investment objectives, policies, procedures and restrictions imposed by
the Portfolio's then current Registration Statement under the 1940 Act.
Investment management decisions of Payden will be made by committee and not by
managers individually. Payden will also provide the Adviser with such
investment advice and reports and data as are requested by the Adviser.

Like the Capital Management Subadvisory Agreement, the Payden Subadvisory
Agreement provides that the subadviser shall be responsible only for managing
the assets of the Portfolio in good faith and in accordance with investment
guidelines, and shall have no responsibility whatsoever for, and shall incur no
liability on account of, (i) selection of such investment guidelines, (ii)
advice on, or management of, any other assets for the Adviser, (iii) filing of
any tax or information returns or forms, withholding or paying any taxes, or
seeking any exemption or refund, (iv) registration of the Portfolio with any
government or agency, or (v) administration of the plans and trusts investing
through the Portfolio, and shall be indemnified by the Adviser for any loss in
carrying out the terms and provisions of the agreement, including reasonable
attorney's fees, indemnification to broker-dealers and futures commission
merchants, fines, taxes, penalties and interest. Payden, however, shall be
liable for any liability, damages, or expenses of the Adviser arising out of
the negligence, malfeasance or violation of applicable law by any of its
<PAGE>
employees in providing management under the Subadvisory Agreement; and, in such
cases, the indemnification by the Adviser referred to above shall be
inapplicable.

Investors should refer to Exhibit A attached hereto for the complete terms of
the Payden Subadvisory Agreement. The description of the Subadvisory Agreement
set forth herein is qualified in its entirety by the provisions of the
Subadvisory Agreement as set forth in such Exhibit.

INVESTMENT ADVISORY FEES

Under the Payden Subadvisory Agreement, the Adviser (not the Portfolio) pays
the subadviser for its services on the basis of the following annual fee
schedule:

                              Payden Fee Schedule

              .20% of the first $50 million of net assets managed
              .15% of the next $50 million of net assets managed
              .10% of the next $400 million of net assets managed
              .05% of net assets managed in excess of $500 million


In order to determine the applicable fee, the following calculation will be
performed. First, the net assets of the Portfolio and the net assets of each
other portfolio of Diversified Investors Portfolios which are managed by Payden
as subadviser (collectively, the "Other Portfolios") will be added together.
Next, the fee schedule stated above will be applied to those aggregate net
assets, with the resulting fee expressed as a percentage of the aggregate net
assets. That percentage, or basis point, charge will then be applied to the
Portfolio's net assets, with the result being the fee payable by the Adviser to
Payden. By virtue of this calculation, the assets of the Other Portfolios are
used to achieve a lower basis point fee than would otherwise be available, but
the Adviser does not actually pay a fee on those assets of the Other Portfolios
under this Subadvisory Agreement.

Currently, there is one Other Portfolio. As of June 30, 1999, the net assets of
the Portfolio were $597,279,664, and the net assets of the Other Portfolio
which are managed by Payden were $184,353,066. Under the Payden Subadvisory
Agreement, net assets are determined by reference to market value. Fees are
calculated monthly and paid by the Adviser quarterly.

The Payden Subadvisory Agreement provides that if at any time during the term
of the Subadvisory Agreement, Payden charges another of its clients a lower fee
than that set forth above for the management of a similarly structured fixed
income fund, then the Adviser will also be charged the lower rate by Payden.
The Adviser will benefit from the lower rate from the first day that it is in
effect for the other client.
<PAGE>
Under the Capital Management Subadvisory Agreement, the Adviser (not the
Portfolio) paid Capital Management for its services on the basis of the
following annual fee schedule:

                        Capital Management Fee Schedule

                    .15% of the net assets of the Portfolio


Under the Capital Management Subadvisory Agreement, net assets were equal to
the market value of the Portfolio. Fees were calculated monthly by multiplying
the arithmetic average of the beginning and ending monthly net assets of the
Portfolio by the fee schedule and dividing by twelve. Fees were paid by the
Adviser quarterly.

Approval of the Payden Subadvisory Agreement, by itself, would have no effect
upon the amount of advisory fees paid by the Portfolio to the Adviser. The
Adviser, not the Portfolio, pays investment advisory fees to Payden as
subadviser to the Portfolio.

Fees payable to Capital Management for services provided pursuant to the
Capital Management Subadvisory Agreement for the period from January 1, 1998 to
December 31, 1998 were $675,427. Neither Capital Management nor any affiliated
person of Capital Management, nor any affiliated person of any such affiliated
person, received any other fees from the Adviser or from the Portfolio for
services provided to the Portfolio during the fiscal year of the Portfolio
ended December 31, 1998. There were no other material payments by the Adviser
or the Portfolio to Capital Management, any affiliated person of Capital
Management or any affiliated person of any such affiliated person, during the
fiscal year of the Portfolio ended December 31, 1998.

Fees that would have been payable to Payden for services provided pursuant to
the Payden Subadvisory Agreement for the period from January 1, 1998 to
December 31, 1998, had the Payden Subadvisory Agreement been in effect for such
period are $457,810. The aggregate of these fees represents a 32% decrease from
the amount of fees that would have been payable to Capital Management for such
period under the Capital Management Subadvisory Agreement.

For the Portfolio's fiscal year ended December 31, 1998, no commissions were
paid to any broker (i) that is an affiliated person of the Portfolio, (ii) that
is an affiliated person of any affiliated person of the Portfolio, or (iii) an
affiliated person of which is an affiliated person of the Portfolio, the
Adviser, Capital Management, Payden or the distributor of the Portfolio.
<PAGE>

INFORMATION REGARDING PAYDEN

Payden is a California corporation having an office at 333 South Grand Avenue,
32nd Floor, Los Angeles, California 90071. 75.9%, 5.9% and 5.9% of Payden's
stock is owned by Joan A. Payden, John P. Isaacson, and Scott A. King,
respectively. The business address of each of these individuals is c/o Payden &
Rygel, 333 South Grand Avenue, 32nd Floor, Los Angeles, California 90071.
Payden is registered with the SEC as an investment adviser. Its primary
business is providing fixed income investment counsel to its clients.

MANAGEMENT AND GOVERNANCE. Listed below are the names, positions and principal
occupations of the members of the Board of Directors and the principal
executive officer of Payden, as of August 31, 1999. The principal business
address of each member of the Board of Directors and principal executive
officer, as it relates to his or her duties at Payden, is the same as that of
Payden, unless noted below.

                         POSITION WITH
NAME                     PAYDEN                       PRINCIPAL OCCUPATION

Joan Ann Payden          President and Chief          Investment adviser with
                         Executive Officer,           Payden & Rygel
                         Director

John Paul Isaacson       Managing Principal,          Investment adviser with
                         Director                     Payden & Rygel

Scott Anthony King       Managing Principal, Chief    Investment adviser with
                         Financial Officer,           Payden & Rygel
                         Director

No officer or director of the Portfolio currently is an officer or employee of
Payden or a member of Payden's Board of Directors. No officer or Trustee of the
Trust has any other material direct or indirect interest in Payden or any other
person controlling, controlled by or under common control with Payden. Since
January 1, 1998, none of the Trustees of the Trust has had any material
interest, direct or indirect, in any material transactions, or in any material
proposed transactions, to which Payden was or is to be a party.

MANAGEMENT ACTIVITIES.  Payden's total assets under management as of August 31,
1999 totaled almost $27 billion.

Payden acts as investment subadviser for the fixed income portion of the
Balanced Portfolio, a series of Diversified Investors Portfolios with a similar
investment objective as the Portfolio. Information concerning the Balanced
Portfolio's net assets and the fees paid to Payden for its services to the
Balanced Portfolio are set forth on Exhibit B. However, while Payden is
<PAGE>
managing all of the assets of the Portfolio, it is only managing a portion of
the assets of the Balanced Portfolio.

THE EVALUATION BY THE BOARD OF TRUSTEES

The Board of Trustees of the Trust authorized the Adviser to terminate the
Capital Management Subadvisory Agreement and approved the Payden Subadvisory
Agreement at a meeting held on August 17, 1999.

Before authorizing the Adviser to terminate the Capital Management Subadvisory
Agreement, the Board of Trustees of the Trust reviewed with the Adviser its
recommendations that the manner in which the Portfolio's assets are invested be
changed and that the services of Capital Management as subadviser of the
Portfolio be terminated. The Adviser reported since the Portfolio was first
organized in 1994, mortgage-backed and similar securities have come to play a
more important role in the fixed income securities market. As a result, the
Adviser was recommending that the Board of Trustees of the Trust change the
Portfolio's name from the Government/Corporate Bond Portfolio to the Core Bond
Portfolio, switch its benchmark from the Lehman Government/Corporate Index to
the Lehman Aggregate Index and broaden the types of fixed income securities in
which it invested, in order to take full advantage of the broader fixed income
security market. The Adviser noted that it was important for the Portfolio to
have a subadviser that was experienced and skilled at managing a wide variety
of fixed income securities, given that its securities would be invested more
broadly. The Adviser further noted that Capital Management's expertise lay in
managing more traditional types of fixed income securities, and that Capital
Management was not as experienced in this broader fixed income securities
market. As a result, while Capital Management's investment performance has been
good, the Adviser recommended that management responsibilities for the
Portfolio be transferred to a subadviser having more experience and expertise
in a broader range of fixed income securities.

The Board of Trustees then reviewed the Adviser's procedures for selecting new
subadvisers. The Trustees considered information with respect to Payden and
whether the Payden Subadvisory Agreement was in the best interests of the
Portfolio and its holders of beneficial interests. The Trustees considered the
nature and quality of services expected to be provided by Payden and reviewed
and discussed information regarding fees and performance. In evaluating
Payden's ability to provide services to the Portfolio, the Trustees considered
information as to Payden's business organization, financial resources,
personnel and other matters. The Trustees compared the investment performance
of certain fixed income accounts advised by Payden, and managed in a manner
consistent with the proposed management of the Portfolio, against various
benchmarks and against the investment performance of the Portfolio's assets as
managed by Capital Management.


<PAGE>

Based upon its review, the Board of Trustees concluded (a) that the Portfolio
as managed by Capital Management did not take full advantage of the broad fixed
income securities market, (b) the terms of the Payden Subadvisory Agreement are
reasonable, fair and in the best interests of the Portfolio and its holders of
beneficial interests, and (c) the fees provided in the Payden Subadvisory
Agreement are fair and reasonable in light of the usual and customary charges
made for services of the same nature and quality. Accordingly, after
consideration of the above factors, and such other factors and information as
it deemed relevant, the Board of Trustees, including all of the Independent
Trustees, authorized the Adviser to terminate the Capital Management
Subadvisory Agreement, approved the Payden Subadvisory Agreement and voted to
recommend the approval of the Payden Subadvisory Agreement by the holders of
beneficial interests in the Portfolio.

REQUIRED VOTE

Approval of the Subadvisory Agreement will require the approval of "a majority
of the outstanding voting securities" (as defined below) of the Portfolio
present in person or represented by proxy at a meeting of the holders of the
beneficial interests in the Portfolio. Under the 1940 Act, a "majority of the
outstanding voting securities" of an issuer means the affirmative vote by the
lesser of (a) 67% or more of the issuer's voting securities present at a
meeting if the holders of more than 50% of the issuer's outstanding voting
securities are present in person or represented by proxy or (b) more than 50%
of the issuer's outstanding voting securities (a "1940 Act Majority").

In the event that the Subadvisory Agreement does not receive the requisite
investor approval, the Adviser would negotiate a new investment subadvisory
agreement with a different advisory organization or make other appropriate
arrangements, in either event subject to approval in accordance with the 1940
Act.

THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT INVESTORS IN THE PORTFOLIO
VOTE FOR APPROVAL OF THE PAYDEN SUBADVISORY AGREEMENT.

     ITEM 2.   TO AUTHORIZE THE BOARD OF TRUSTEES OF DIVERSIFIED INVESTORS
               PORTFOLIOS TO SELECT AND CHANGE INVESTMENT SUBADVISERS AND ENTER
               INTO INVESTMENT SUBADVISORY AGREEMENTS WITHOUT OBTAINING THE
               APPROVAL OF INVESTORS.

As discussed above, the Adviser selects and employs one or more subadvisers to
make the day-to-day investment selections for the Portfolio, and reviews the
subadvisers' continued performance. See "Background." The Adviser may terminate
the services of any subadviser at any time; however, retaining the services of
a new subadviser currently requires Portfolio investor approval.
<PAGE>
The 1940 Act requires that all contracts pursuant to which persons serve as
investment advisers to investment companies be approved by investors. This
requirement currently applies to the appointment of any new or replacement
subadviser to the Portfolio. However, the Trust has received exemptive relief
from the Securities and Exchange Commission from these investor vote
requirements. If this proposed Item 2 is approved by the Portfolio's investors,
the Board of Trustees of the Trust would be able, without further investor
approval, to appoint additional or replacement subadvisers so long as certain
requirements are complied with. The Trustees would not, however, be able to
replace the Adviser as investment adviser without complying with the 1940 Act
and applicable regulations governing investor approval of advisory contracts.

This Item 2 is intended to facilitate the efficient supervision and management
of the subadvisers by the Adviser and the Trustees of the Trust. The Adviser
continuously monitors the performance of the subadvisers and may from time to
time recommend that the Board of Trustees of the Trust replace a subadviser or
appoint additional subadvisers, depending on the Adviser's assessment of which
subadviser or combination of subadvisers it believes will optimize the
Portfolio's chances of achieving its investment objective. If the Portfolio's
investors approve this proposed Item 2, the Portfolio would no longer be
required to call an investor meeting each time a new subadviser is appointed.

Investor meetings entail substantial costs which could diminish the benefits of
the current subadvisory arrangements. These costs must be weighed against the
benefits of investor scrutiny of proposed contracts with additional or
replacement subadvisers. However, even in the absence of investor approval, any
proposal to add or replace subadvisers would receive careful review. First, the
Adviser would assess the Portfolio's needs and, if it believed additional or
replacement subadvisers could benefit the Portfolio, would search for available
investment subadvisers. Second, any recommendations made by the Adviser would
have to be approved by a majority of the Trustees of the Portfolio Trust,
including a majority of the Independent Trustees. In selecting any new or
replacement subadvisers, the Trustees are required to determine that an
investment management agreement with the subadviser is reasonable, fair and in
the best interests of a fund and its investors, and that the fees provided in
the agreement are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality. Finally,
any further appointments of additional or replacement subadvisers would have to
comply with the conditions contained in the Securities and Exchange Commission
exemptive order, which include that the Portfolio furnish to its investors
(including the Fund) certain information about the additional or replacement
subadvisers.

The Trustees of the Trust believe that the proposed authority for the Board of
Trustees of the Trust to select and change investment subadvisers and enter
<PAGE>
into investment subadvisory agreements without obtaining the approval of
Portfolio investors is in the best interests of the investors in the Portfolio.

REQUIRED VOTE

Authorizing the Board of Trustees of the Trust to select and change investment
subadvisers and enter into investment subadvisory agreements without obtaining
the approval of Portfolio investors will require the approval of a 1940 Act
Majority of the outstanding voting securities of the Portfolio, present in
person or represented by proxy at a meeting of investors in the Portfolio.

THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT THE INVESTORS IN THE
PORTFOLIO VOTE FOR AUTHORIZING THE TRUSTEES OF THE PORTFOLIO TRUST TO SELECT
AND CHANGE INVESTMENT SUBADVISERS AND ENTER INTO INVESTMENT SUBADVISORY
AGREEMENTS WITHOUT OBTAINING THE APPROVAL OF INVESTORS.

     ITEM 3.   TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
               SPECIAL MEETING OF INVESTORS AND ANY ADJOURNMENTS THEREOF.

Management of the Trust knows of no other business to be presented at the
Meeting. If any additional matters should be properly presented, it is intended
that the enclosed proxy (if not limited to the contrary) will be voted in
accordance with the judgment of the persons named in such proxy.

                             ADDITIONAL INFORMATION

The Portfolio's exclusive placement agent is Diversified Investors Securities
Corp., 4 Manhattanville Road, Purchase, New York 10577. The Portfolio's
Administrator and Transfer Agent is Diversified Investment Advisors, Inc., 4
Manhattanville Road, Purchase, New York 10577.

As of the Record Date, no Trustees or officers of the Trust owned beneficially
or had the right to vote any outstanding interests in the Portfolio.
[**CONFIRM**]

As of the Record Date, the following persons owned of record or had the right to
vote 5% or more of the outstanding beneficial interests in the Portfolio:
[**CONFIRM**]
<PAGE>


 Name and Address of        Amount and Nature of                 Percent of
    Record Owner              Record Ownership              Beneficial Interest

AUSA Life Insurance            $______________                     _____%
  Company, Inc.
4 Manhattanville Road
Purchase, NY  10577

Diversified Investment         $______________                     _____%
  Advisors Collective
  Trust
4 Manhattanville Road
Purchase, NY  10577

Diversified Investors          $______________                     _____%
  Funds Group
4 Manhattanville Road
Purchase, NY  10577

The Trust is a New York trust and as such is not required to hold annual
meetings of investors, although special meetings may be called for the
Portfolio, or for the Trust as a whole, for purposes such as electing Trustees
or removing Trustees, changing fundamental policies, or approving an advisory
contract. Investor proposals to be presented at any subsequent meeting of
investors must be received by the Trust at the Trust's office within a
reasonable time before the proxy solicitation is made.

YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.


                                    By Order of the Board of Trustees,


                                    Robert F. Colby, Secretary

November 5, 1999
<PAGE>
PROXY CARD                                                           PROXY CARD

                              CORE BOND PORTFOLIO
                  A SERIES OF DIVERSIFIED INVESTORS PORTFOLIOS

                         A PROXY FOR A SPECIAL MEETING
                    OF INVESTORS TO BE HELD DECEMBER 3, 1999

        The undersigned, revoking all Proxies heretofore given, hereby appoints
each of Tom A. Schlossberg, Robert F. Colby and Gerald L. Katz, or any of them,
as Proxies of the undersigned with full power of substitution, to vote on
behalf of all of the undersigned beneficial interests in Core Bond Portfolio
(the "Portfolio"), a series of Diversified Investors Portfolios, which the
undersigned is entitled to vote at the Special Meeting of Investors of the
Portfolio to be held at the offices of Diversified Investment Advisors, Inc., 4
Manhattanville Road, Purchase, New York 10577 on December 3, 1999, at 10:00
a.m., Eastern time, and at any adjournment thereof, as fully as the undersigned
would be entitled to vote if personally present, as follows:

PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.

1.   To approve a new Investment Subadvisory Agreement between Diversified
     Investment Advisors, Inc. and Payden & Rygel.

             __ FOR               __ AGAINST              __ ABSTAIN

2.   To authorize the Board of Trustees of Diversified Investors Portfolios to
     select and change investment subadvisers and enter into investment
     subadvisory agreements without obtaining the approval of investors.

             __ FOR               __ AGAINST              __ ABSTAIN


THE BENEFICIAL INTERESTS REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR
ANY PROPOSALS FOR WHICH NO CHOICE IS INDICATED.
<PAGE>
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.

Date:_______________
                                    __________________________________
                                    Signature

                                    __________________________________
                                    Signature of joint owner, if any

NOTE:  PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD

When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as such.
If signing on behalf of a corporation, please sign the full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners
should each sign this proxy.

<PAGE>

                                                                      Exhibit A
                        INVESTMENT SUBADVISORY AGREEMENT

     INVESTMENT SUBADVISORY AGREEMENT, dated as of August 19, 1999, by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified"), and Payden & Rygel, a California corporation ("Subadvisor").

                                  WITNESSETH:

     WHEREAS, Diversified has been organized to operate as an investment
advisor registered under the Investment Advisers Act of 1940, and has been
retained to provide investment advisory services to the Core Bond Portfolio
("Portfolio"), a series of Diversified Investors Portfolios, a diversified
openend management investment company registered under the Investment Company
Act of 1940 ("1940 Act");

     WHEREAS, Diversified desires to retain the Subadvisor to furnish it with
portfolio investment advisory services in connection with Diversified's
investment advisory activities on behalf of the Portfolio, and the Subadvisor
is willing to furnish such services to Diversified;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:

     1. Duties of the Subadvisor. In accordance with and subject to the
Investment Advisory Agreement between the Portfolio and Diversified, attached
hereto as Schedule A (the "Advisory Agreement"), Diversified hereby appoints
the Subadvisor to perform the portfolio investment advisory services described
herein for the investment and reinvestment of the Portfolio's assets, subject
to the control and direction of Diversified and the Diversified Investors
Portfolios' Board of Trustees, for the period and on the terms hereinafter set
forth.

     The Subadvisor shall provide Diversified with such investment advice and
supervision as the latter may from time to time consider necessary for the
proper supervision of the Portfolio's assets. The Subadvisor shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Portfolio shall be held uninvested, subject always to the provisions of
the 1940 Act and to the Portfolio's thencurrent Registration Statement on Form
N1-A.

     In particular, the Subadvisor shall, without limiting the foregoing: (i)
continuously review, supervise and implement the investment program of the
Portfolio; (ii) monitor regularly the relevant securities for the Portfolio to
determine if adjustments are warranted and, if so, to make such adjustments;
(iii) determine, in the Subadvisor's discretion, the securities to be purchased
or sold or exchanged in order to keep the Portfolio in balance with its
designated investment strategy; (iv) determine, in the Subadvisor's discretion,

<PAGE>

whether to exercise warrants or other rights with respect to the Portfolio's
securities; (v) determine, in the Subadvisor's discretion, whether the merit of
an investment has been substantially impaired by extraordinary events or
financial conditions, thereby warranting the removal of such securities from
the Portfolio; (vi) as promptly as practicable after the end of each calendar
month, furnish a report showing: (a) all transactions during such month, (b)
all assets of the Portfolio on the last day of such month, rates of return, and
(c) such other information relating to the Portfolio as Diversified may
reasonably request; (vii) meet at least four times per year with Diversified
and with such other persons as may be designated on reasonable notice and at
reasonable locations, at the request of Diversified, to discuss general
economic conditions, performance, investment strategy, and other matters
relating to the Portfolio; (viii) provide the Portfolio with records concerning
the Subadvisor's activities which the Portfolio is required by law to maintain;
and (ix) render regular reports to the Portfolio's officers and Directors
concerning the Subadvisor's discharge of the foregoing responsibilities.

     The Subadvisor shall also make recommendations to Diversified as to the
manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Portfolio's securities shall be exercised.

     Should the Board of Trustees at any time make any definite determination
as to investment policy with respect to the Portfolio and notify the Subadvisor
thereof in writing, the Subadvisor shall be bound by such determination for the
period, if any, specified in such notice or until similarly notified that such
policy has been revoked. The initial Statement of Investment Policy and
Guidelines is attached hereto as Appendix 1.

     The Subadvisor shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
Portfolio securities for the Portfolio's account with brokers or dealers
selected by it, and to that end the Subadvisor is authorized as the agent of
the Portfolio to give instructions to the custodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
Subject to the primary objective of obtaining the best available prices and
execution, the Subadvisor may place orders for the purchase and sale of
portfolio securities with such broker/dealers who provide statistical, factual
and financial information and services to the Portfolio, to the Subadvisor, or
to any other fund or account for which the Subadvisor provides investment
advisory services and may place such orders with broker/dealers who sell shares
of the Portfolio or who sell shares of any other fund for which the Subadvisor
provides investment advisory services. Broker/dealers who sell shares of the
funds of which Payden & Rygel is investment advisor shall only receive orders
for the purchase or sale of portfolio securities to the extent that the placing
of such orders is in compliance with the Rules of the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.

     Notwithstanding the provisions of the previous paragraph and subject to
such policies and procedures as may be adopted by the Board of Trustees and

<PAGE>

officers of the Portfolio, the Subadvisor may pay a member of an exchange,
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, in such instances
where the Subadvisor has determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such member, broker or dealer, viewed in terms of
either that particular transaction or the Subadvisor's overall responsibilities
with respect to the Portfolio and to other funds and separate accounts for
which the Subadvisor exercises investment discretion.

     2. Allocation of Charges and Expenses. The Subadvisor shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 1 above. It is understood that the Portfolio
will pay all of its own expenses and liabilities including, without limitation,
compensation and outofpocket expenses of Trustees not affiliated with the
Subadvisor or Diversified; governmental fees; interest charges; taxes;
membership dues; fees and expenses of independent auditors, of legal counsel
and of any transfer agent, administrator, distributor, shareholder servicing
agents, registrar or dividend disbursing agent of the Portfolio; expenses of
distributing and redeeming shares and servicing shareholder accounts; expenses
of preparing, printing and mailing prospectuses, shareholder reports, notices,
proxy statements and reports to governmental officers and commissions and to
shareholders of the Portfolio; expenses connected with the execution, recording
and settlement of Portfolio security transactions; insurance premiums; fees and
expenses of the custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the
Portfolio; expenses of shareholder meetings; expenses of litigation and other
extraordinary or nonrecurring events and expenses relating to the issuance,
registration and qualification of shares of the Portfolio.

     3. Compensation of the Subadvisor. For the services to be rendered,
Diversified shall pay to the Subadvisor an investment advisory fee computed in
accordance with the terms of Schedule B herewith attached. If the Subadvisor
serves for less than the whole of any period specified, its compensation shall
be prorated.

     4. Covenants and Representations of the Subadvisor. The Subadvisor agrees
that it will not deal with itself, or with the Trustees of the Portfolio or
with Diversified, or the principal underwriter or distributor as principals in
making purchases or sales of securities or other property for the account of
the Portfolio, except as permitted by the 1940 Act, and will comply with all
other provisions of the Declaration of Trust and any current Registration
Statement on Form N1A of the Portfolio relative to the Subadvisor, Advisor and
its Trustees and officers.

     5. Limits on Duties. The Subadvisor shall be responsible only for managing
the assets in good faith and in accordance with the investment objectives,
fundamental policies and restrictions, and shall have no responsibility
whatsoever for, and shall incur no liability on account of (i) diversification,

<PAGE>

selection or establishment of such investment objectives, fundamental policies
and restrictions (ii) advice on, or management of, any other assets for
Diversified or the Portfolio, (iii) filing of any tax or information returns or
forms, withholding or paying any taxes, or seeking any exemption or refund,
(iv) registration with any government or agency, or (v) administration of the
plans and trusts investing through the Portfolio, or (vi) overall Portfolio
compliance with the requirements of the 1940 Act, which requirements are
outside of the Subadvisor's control, and Subchapter M of the Internal Revenue
Code of 1986, as amended, and shall be indemnified and held harmless by
Diversified for any loss in carrying out the terms and provisions of this
Agreement, including reasonable attorney's fees, indemnification to the
Portfolio, or any shareholder thereof and, brokers and commission merchants,
fines, taxes, penalties and interest. Subadvisor, however, shall be liable for
any liability, damages, or expenses of Diversified arising out of the
negligence, malfeasance or violation of applicable law by any of its employees
in providing management under this Agreement; and, in such cases, the
indemnification by Diversified, referred to above, shall be inapplicable.

     The Subadvisor may apply to Diversified at any time for instructions and
may consult counsel for Diversified or its own counsel with respect to any
matter arising in connection with the duties of the Subadvisor. Also, the
Subadvisor shall be protected in acting upon advice of Diversified and/or
Diversified's counsel and upon any document which Subadvisor reasonably
believes to be genuine and to have been signed by the proper person or persons.

     6. Exclusivity. Subadvisor represents to Diversified that during the term
of this Agreement Subadvisor will not manage any portfolio, any collective
trust, openend investment company registered under the Investment Company Act
of 1940, Variable Insurance Contract registered under the Investment Company
Act of 1940, or insurance company separate account that are offered to the
types of employee benefit plans referred to in Schedule C and sponsored by
competitors of Diversified in providing services to such types of employee
benefit plans referred to in Schedule C and sponsored by competitors of
Diversified in providing services to such types of employee benefit plans
without providing Diversified with 60 days prior written notice. It is
understood that Subadvisor shall not be limited by this section 6 with respect
to any other portfolio that it may offer (such as a small, medium or large
capitalization specific portfolio, a portfolio that includes a significant
portion devoted to nonU.S. securities or a commingled vehicle that is not
sponsored by a provider of bundled services to the types of employee benefit
plans specified on Schedule C).

     7. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, and, unless
terminated earlier as provided below, shall remain in force for two years, on
which date it will terminate unless its continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of the Trustees of the
Portfolio who are not "interested persons" to this Agreement or of the

<PAGE>

Subadvisor or Diversified at an in person meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Portfolio or by vote of a majority of the outstanding voting securities of the
Portfolio. However, if the shareholders of the Portfolio fail to approve the
Agreement as provided herein, the Subadvisor may continue to serve hereunder in
the manner and to the extent permitted by the Investment Company Act of 1940
and Rules thereunder.

     This Agreement may be terminated at any time without the payment of any
penalty by the Trustees, or by the vote of a majority of the outstanding voting
securities of the Portfolio, or by Diversified. The Subadvisor may terminate
the Agreement only upon giving 90 days' advance written notice to Diversified.
This Agreement shall automatically terminate in the event of its assignment.

     This Agreement may be amended only if such amendment is approved by the
vote of a majority of the outstanding voting securities of the Portfolio and by
vote of a majority of the Board of Trustees of the Portfolio who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.

     The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.

     8. Certain Records. Any records to be maintained and preserved pursuant to
the provisions of Rule 31a1 and Rule 31a2 adopted under the 1940 Act which are
prepared or maintained by the Subadvisor on behalf of the Portfolio are the
property of the Portfolio and will be surrendered promptly to the Portfolio on
request.

     9. Survival of Compensation Rates. All rights to compensation under this
Agreement shall survive the termination of this Agreement.

     10. Entire Agreement. This Agreement states the entire agreement of the
parties with respect to investment advisory services to be provided to the
Portfolio by the Subadvisor and may not be amended except in a writing signed
by the parties hereto and approved in accordance with Section 7 hereof.

     11. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

     12. Change of Management and Pending Litigation. Subadvisor represents to
Diversified that it will disclose to Diversified promptly after it has
knowledge of any significant change or variation in its management structure or
personnel or any significant change or variation in its management style or

<PAGE>

investment philosophy. In addition, Subadvisor represents to Diversified that
it will similarly disclose to Diversified, promptly after it has knowledge, the
existence of any pending legal action being brought against it whether in the
form of a lawsuit or a nonroutine investigation by any federal or state
governmental agency.

     Diversified represents to Subadvisor that any information received by
Diversified pursuant to this section will be kept strictly confidential and
will not be disclosed to any third party.

     13. Use of Name. Subadvisor hereby agrees that Diversified may use the
Subadvisor's name in its marketing or advertising materials. Diversified agrees
to allow the Subadvisor to examine and approve any such materials prior to use.

     IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.

                              Diversified Investment Advisors, Inc.


                              By:        /s/ John F. Hughes
                                   ------------------------------
                                    John F. Hughes


                              Payden & Rygel


                              By:       /s/ Brian Matthews
                                   ------------------------------
                                    Brian Matthews

<PAGE>


                                                                 SCHEDULE A

                         INVESTMENT ADVISORY AGREEMENT


     AGREEMENT made as of January 3, 1994 by and between the
Government/Corporate Bond Portfolio, a series of Diversified Investors
Portfolios (herein called the "Portfolio"), and Diversified Investment
Advisors, Inc. a Delaware corporation (herein called "Diversified").

     WHEREAS, the Portfolio is registered as a diversified, openend, management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and

     WHEREAS, Diversified has been organized to operate as an investment
advisor registered under the Investment Advisers Act of 1940; and

     WHEREAS, the Portfolio desires to retain Diversified to render investment
advisory services, and Diversified is willing to so render such services on the
terms hereinafter set forth;

     NOW, THEREFORE, this Agreement

                                  WITNESSETH:

     In consideration of the promises and mutual covenants herein contained, it
is agreed between the parties hereto as follows:

1. The Portfolio hereby appoints Diversified to act as investment advisor to
the Portfolio for the period and on the terms set forth in this Agreement
Diversified accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.

2. (a) Diversified shall, at its expense, (i) employ subadvisors or associate
with itself such entities as it believes appropriate to assist it in performing
its obligations under this Agreement and (ii) provide all services, equipment
and facilities necessary to perform its obligations under this Agreement.

   (b) The Portfolio shall be responsible for all of its expenses and
liabilities, including, but not limited to: compensation and outofpocket
expenses of Trustees not affiliated with any subadvisor or Diversified;
governmental fees; interest charges; taxes; membership dues; fees and expenses
of independent auditors, of legal counsel and of any transfer agent,
administrator, distributor, shareholder servicing agents, registrar or dividend
disbursing agent of the Portfolio; expenses of distributing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, shareholder reports, notices, proxy statements and

<PAGE>

reports to governmental officers and commissions and to shareholders of the
Portfolio; expenses connected with the execution, recording and settlement of
Portfolio security transactions; insurance premiums; fees and expenses of the
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of shares of the Portfolio; expenses of shareholder
meetings; expenses of litigation and other extraordinary or nonrecurring events
and expenses relating to the issuance, registration and qualification of shares
of the Portfolio.

3. (a) Subject to the general supervision of the Board of Trustees of the
Portfolio, Diversified shall formulate and provide an appropriate investment
program on a continuous basis in connection with the management of the
Portfolio, including research, analysis, advice, statistical and economic data
and information and judgments of both a macroeconomic and microeconomic
character.

     Diversified will determine the securities to be purchased, sold, lent,
exchanged or otherwise disposed of or acquired by the Portfolio in accordance
with predetermined guidelines as set forth from time to time in the Portfolio's
thencurrent prospectus and Statement of Additional Information ("SAI") and will
place orders pursuant to its determinations either directly with the issuer or
with any broker or dealer who deals in such securities. In placing orders with
brokers and dealers, Diversified will use its reasonable best efforts to obtain
the best net price and the most favorable execution of its orders, after taking
into account all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Consistent with this obligation, Diversified may, to the extent
permitted by law, purchase and sell Portfolio securities to and from brokers
and dealers who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
the Portfolio and/or other accounts over which Diversified or any of its
affiliates exercises investment discretion.

     Subject to the review of the Portfolio's Board of Trustees from time to
time with respect to the extent and continuation of the policy, Diversified is
authorized to pay to a broker or dealer who provides such brokerage and
research services a commission for effecting a securities transaction for the
Portfolio which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Diversified
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of Diversified with respect to the accounts as to which it
exercises investment discretion.

     In placing orders with brokers and/or dealers, Diversified intends to seek
best price and execution for purchases and sales and may effect transactions
through itself and its affiliates on a securities exchange provided that the
commissions paid by the Portfolio are "reasonable and fair" compared to

<PAGE>

commissions received by other brokerdealers having comparable execution
capability in connection with comparable transactions involving similar
securities and provided that the transactions in connection with which such
commissions are paid are effected pursuant to procedures established by the
Board of the Trustees of the Portfolio. All transactions are effected pursuant
to written authorizations from the Portfolio conforming to the requirements of
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a22(T)
thereunder. Pursuant to such authorizations, an affiliated brokerdealer may
transmit, clear and settle transactions for the Portfolio that are executed on
a securities exchange provided that it arranges for unaffiliated brokers to
execute such transactions.

     Diversified shall determine from time to time the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to the Portfolio's securities shall be exercised, provided, however, that
should the Board of Trustees at any time make any definite determination as to
investment policy and notify Diversified thereof in writing, Diversified shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked.
Diversified Will determine what portion of securities owned by the Portfolio
shall be invested in securities described by the policies of the Portfolio and
what portion, if any, should be held uninvested. Diversified will determine
whether and to what extent to employ various investment techniques available to
the Portfolio. In effecting transactions with respect to securities or other
property for the account of the Portfolio, Diversified may deal with itself and
its affiliates, with the Trustees of the Portfolio or with other entities to
the extent such actions are permitted by the 1940 Act.

     (b) Diversified also shall provide to the Portfolio administrative
assistance in connection with the operation of the Portfolio, which shall
include compliance with all reasonable requests of the Portfolio for
information, including information required in connection with the Portfolio's
filings with the Securities and Exchange Commission and state securities
commissions.

     (c) As manager of the assets of the Portfolio, Diversified shall make
investments for the account of the Portfolio in accordance with Diversified's
best judgment and within the Portfolio's investment objectives, guidelines, and
restrictions, the 1940 Act and the provisions of the Internal Revenue Code of
1986 relating to regulated investment companies subject to policy decisions
adopted by the Board of Trustees.

     (d) Diversified shall furnish to the Board of Trustees periodic reports on
the investment performance of the Portfolio and on the performance of its
obligations under this Agreement and shall supply such additional reports and
information as the Portfolio's officers or Board of Trustees shall reasonably
request

     (e) On occasions when Diversified deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as other customers,
Diversified, to the extent permitted by applicable law, may aggregate the

<PAGE>

securities to be so sold or purchased in order to obtain the best execution or
lower brokerage commissions, if any. Diversified may also on occasion purchase
or sell a particular security for one or more customers in different amounts.
On either occasion, and to the extent permitted by applicable law and
regulations, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, win be made by Diversified in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Portfolio and to such other customers.

     (f) Diversified shall also provide the Portfolio with the following
services as may be required:

          (i)    providing office space, equipment and clerical personnel
                 necessary for maintaining the organization of the Portfolio
                 and for performing administrative and management functions;

          (ii)   supervising the overall administration of the Portfolio,
                 including negotiation of contracts and fees with and the
                 monitoring of performance and billings of the Portfolio's
                 transfer agent, custodian and other independent contractors or
                 agents;

          (iii)  preparing and, if applicable, filing all documents required
                 for compliance by the Portfolio with applicable laws and
                 regulations, including registration statements, registration
                 fee filings, semiannual and annual reports to investors, proxy
                 statements and tax returns;

          (iv)   preparation of agendas and supporting documents for and
                 minutes of meeting of Trustees, committees of Trustees and
                 investors; and

          (v)    maintaining books and records of the Portfolio.

     4. Diversified shall give the Portfolio the benefit of Diversified's best
judgment and efforts in rendering services under this Agreement. As an
inducement to Diversified's undertaking to render these services, the Portfolio
agrees that Diversified shall not be liable under this Agreement for any
mistake in judgment or in any other event whatsoever provided that nothing in
this Agreement shall be deemed to protect or purport to protect Diversified
against any liability to the Portfolio or its investors to which Diversified
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Advisees duties tinder this Agreement or
by reason of the Advisees reckless disregard of its obligations and duties
hereunder.

     5. In consideration of the services to be rendered by Diversified under
this Agreement, the Portfolio shall pay Diversified a fee accrued daily and
paid monthly at an annual rate equal to .35% of the Portfolio's average daily

<PAGE>

net assets. If the fees payable to Diversified pursuant to this paragraph 5
begin to accrue before the end of any month or if this Agreement terminates
before the end of any month, the fees for the period from that date to the end
of that month or from the beginning of that month to the date of termination,
as the case may be, shall be prorated according to the proportion which the
period bears to the full month in which the effectiveness or termination
occurs. For purposes of calculating the monthly fees, the value of the net
assets of the Portfolio shall be computed in the manner specified in its
Regulation Statement on Form N1A for the computation of net asset value. For
purposes of this Agreement, a "business day" is any day the New York Stock
Exchange is open for trading.

     In compliance with the requirements of Rule 31a3 under the 1940 Act,
Diversified hereby agrees that all records which it maintains for the Portfolio
are property of the Portfolio and further agrees to surrender promptly to the
Portfolio any such records upon the Portfolio's request. Diversified further
agrees to preserve for the periods prescribed by Rule 31a2 under the 1940 Act
any such records required to be maintained by Rule 31aI under the 1940 Act.

     6. This Agreement shall be effective as to the Portfolio as of the date
the Portfolio commences investment operations after this Agreement shall have
been approved by the Board of Trustees of the Portfolio and the investor(s) in
the Portfolio in the manner contemplated by Section 15 of the 1940 Act and,
unless sooner terminated is provided herein, shall continue until the second
anniversary of the date hereof. Thereafter, if not terminated, this Agreement
shall continue in effect as to the Portfolio for successive periods of 12
months each, provided such continuance is specifically approved at least
annually by the vote of a majority of those members of the Board of Trustees of
the Portfolio who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval; and either (a) by the vote of a majority of the full Board of
Trustees or (b) by vote of a majority of the outstanding voting securities of
the Portfolio; provided, however, that this Agreement may be terminated by the
Portfolio at any time, without the payment of any penalty, by the Board of
Trustees of the Portfolio or by vote of a majority of the voting securities of
the Portfolio on 60 days' written notice to Diversified, or by Diversified as
to the Portfolio at any time, without payment of any penalty, on 90 days'
written notice to the Portfolio. This Agreement will immediately terminate in
the event of its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities", "interested person" and "assignment" shall
have the same meanings as such terms have in the 1940 Act and the rule and
regulatory constructions thereunder.)

     7. Except to the extent necessary to perform Diversified's obligations
under this Agreement, nothing herein shall be deemed to limit or restrict the
right of Diversified, or any affiliate of Diversified, or any employee of
Diversified, to engage in any other business or devote time and attention to
the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other trust,
corporation, firm, individual or association.

     8. The investment management services of Diversified to the Portfolio
under this Agreement are not to be deemed exclusive as to Diversified and
Diversified will be free to render similar services to others.

     Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.

     No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge, or termination is
sought and no material amendment of this Agreement shall be effective until

<PAGE>

approved by vote of the holders of a majority of the outstanding voting
securities of the Portfolio.

     This Agreement embodies the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provision's hereof or otherwise affect their construction or effect. Should any
part of this Agreement be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors, to the extent permitted by law.

     9. This Agreement shall be construed in accordance with the laws of the
State of New York provided that nothing herein shall be construed in a manner
inconsistent with the requirements of 1940 Act.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.

                                       Diversified Investors Portfolio


                                       By:  /s/ Tom Schlossberg
                                           -------------------------------
                                            Tom Schlossberg
                                            Chairman and President


                                       Diversified Investment Advisors, Inc.


                                       By:  /s/ Gerald L. Katz
                                           -------------------------------
                                            Gerald L. Katz
                                            Vice President and CFO


<PAGE>



                                                                   SCHEDULE B


This Subadvisor shall be compensated for its services under this Agreement on
the basis of the below-described annual fee schedule. For purposes of applying
this decremental fee schedule, any other asset managed by Payden & Rygel for
Diversified will be combined with the assets of this Portfolio to determine the
applicable basis points charged, e.g., if Payden & Rygel manage $40M for this
Portfolio and $65M for one or more additional Diversified funds, then the
applicable marginal charge for this Portfolio would be .0010 of net assets in
excess of $100M for this example. The fee schedule shall only be amended by
agreement between the parties.

                                FEE SCHEDULE

                    .0020 OF THE FIRST $50M NET ASSETS
                    .0015 OF THE NEXT $50 M OF NET ASSETS
                    .0010 OF THE NEXT $400M OF NET ASSETS
                    .0005 OF NET ASSETS IN EXCESS OF $500M

Net assets are equal to the market value of the Portfolio. Fees will be
calculated by multiplying the arithmetic average of the beginning and ending
monthly net assets by the fee schedule and dividing by twelve. The fee will be
paid quarterly.

Payden & Rygel agree that if anytime during the term of this Subadvisory
Agreement, Payden & Rygel offer another of its clients a lower fee than that
set forth in this Schedule B for the management of a similarly structured Core
Bond Portfolio or Core Bond Fund then Diversified will also be charged the
lower rate. Diversified will benefit from the lower rate from the first day
that it is in effect for Payden & Rygel's other client. It is understood and
agreed by both Payden & Rygel and Diversified that this final paragraph of
Schedule B is applicable solely to Diversified's Core Bond Portfolio and not to
any other fund/asset which Payden & Rygel may manage in the future on
Diversified's behalf.




<PAGE>

                                                                 SCHEDULE C


Target market for 401(a), 403(b) and 457 plans is those plans between $1 and
$250 million.



<PAGE>


                                                                 APPENDIX I




                                                               August 6, 1999







                 STATEMENT OF INVESTMENT POLICY AND GUIDELINES

                                      FOR

                            THE CORE BOND PORTFOLIO

                                   MANAGED BY

                                 PAYDEN & RYGEL





<PAGE>




                 STATEMENT OF INVESTMENT POLICY AND GUIDELINES
                                      FOR
                            THE CORE BOND PORTFOLIO

                                   MANAGED BY

                                 PAYDEN & RYGEL




                               TABLE OF CONTENTS


I.      PURPOSE
II.     OBJECTIVES
III.    INVESTMENT GUIDELINES
IV.     PERFORMANCE EVALUATION
V.      COMMUNICATION
VI.     OTHER



<PAGE>


                 STATEMENT OF INVESTMENT POLICY AND GUIDELINES
                                      FOR
                            THE CORE BOND PORTFOLIO
                                   MANAGED BY
                                 PAYDEN & RYGEL

I.  PURPOSE

The purpose of this Statement of Investment Policy and Guidelines is to
communicate the Core Bond Portfolio investment objectives, guidelines and
performance evaluation standards adopted by Diversified Investment Advisors and
its subadviser, Payden & Rygel.

This statement is intended to (1) help the subadvisor understand Diversified's
investment goals (2) identify portfolio management activities to be employed by
the subadviser to achieve those goals, and (3) supply Diversified with a tool
to monitor and evaluate the operations of the portfolio.

II.  OBJECTIVES AND CONSTRAINTS

The primary objectives of the portfolio are:
o  To achieve maximum total return.
o  To outperform the Lehman Brothers Aggregate Index over full market cycles.
o  To achieve midsecond quartile or better performance among a group of peer
   portfolios as defined by recognized reporting services (e.g., Lipper, or
   Frank Russell) over 3-5 year periods.

The primary constraints for the portfolio are:
o  To manage portfolio risk to be not substantially greater than the Lehman
   Aggregate index or peer portfolios annualized standard deviation over 3-5
   year periods
o  To maintain tracking error versus the Lehman Aggregate to within two
   percent on average over 3-5 year periods.

III. INVESTMENT GUIDELINES

The investment guidelines specified below are in addition to portfolio
compliance procedures necessary to meet legal and regulatory requirements.

A)  Permissible securities:

o   Money market instruments, including Federal funds, repurchase agreements,
    commercial paper, bankers' acceptances, certificates of deposit.
o   U.S. Treasury bills, notes, and bonds.
o   U.S. Federal agency securities.

<PAGE>

o   Mortgagebacked securities.
o   CMO's and nonagency CMO's.
o   Domestic corporate notes, bonds, and debentures, including liquid
    securities issued under rule 144A.
o   Below  investment grade securities, within limits described below for
    quality in section E and sector guidelines in section G.
o   Foreign notes and bonds, including Yankees, Eurodollar, and non-U.S. dollar
    denominated  securities (sovereign and corporate credits).
o   Assetbacked securities, including CBO's and CLO's.
o   Commercial mortgagebacked securities.
o   Taxable municipal securities.
o   Convertible bonds and preferred stock.
o   "When issued" securities, for permissible assets.
o   Forward purchase agreements, or TBA's (To Be Announced securities).
o   U.S. Treasury futures and Eurodollar futures agreements.
o   Caps, floors, swaps, and options as permitted under section D, below.
o   Mortgage derivatives such as IO's and PO's to manage duration.
o   Bond warrants.

B)  Prohibited securities:

o   Common stock.
o   The following mortgagebacked derivative securities Inverse Floaters,
    Residuals (e.g., Z's), Cash Flow floaters.
o   Structured Notes which have principal at risk, or interest payments tied to
    sectors outside the permissible category of securities.
o   Traditional illiquid private placements.
o   Any other security outside the Permissible class (section A, above) without
    prior approval by Diversified (e.g., no REIT's, commodities).

C)  Leverage:

The portfolio may not be leveraged.

D)  Derivatives

o   Derivatives may not be used for speculative purposes.
o   Derivatives may be used as substitutes for cash securities where
    derivatives are cheaper.
o   Derivatives  may be used to hedge purchases and sales of securities, or to
    manage client cash flow (i.e., temporarily securitize cash).
o   Derivatives may also be used to enhance portfolio yield in conjunction with
    a sales program (e.g., covered call writing)
o   Forward contracts or other derivatives may be used to manage currency risk
    arising from nondollar securities.
o   Limits on derivative use reflect other portfolio guidelines regarding
    duration, quality, and so forth.


<PAGE>

E) Quality

o  Average portfolio quality of A or better (Standard & Poor's, or Moody's).
o  Minimum rating of B, or better (S&P, Moody's) for individual securities at
   time of purchase.
o  Up to 5% of the money market instruments may be rated A2/P2 at the time of
   purchase.
o  All other money market instruments must be rated A1/P1. No A3/P3 issues are
   permitted.
o  Securities violating quality standards must be disposed within two weeks.

F) Duration and Convexity

o  Effective duration shall be maintained at +/-15% of the duration of the
   benchmark Lehman Brothers Aggregate index at all times.

G) Sector Allocations

<TABLE>
<CAPTION>

<S>                  <C>                      <C>          <C>         <C>
- ---------------------------------------------------------------------------------------
Index Class          Category                 Minimum      Maximum     Normal Position
- -------------------- ---------------------- ------------ ----------- ------------------
Outside Index        1) Cash                    0%           50%             0%
- -------------------- ---------------------- ------------ ----------- ------------------
Index                2) Governments             10%          80%             10%
- -------------------- ---------------------- ------------ ----------- ------------------
Index                3) Corporates              10%          70%             35%
- -------------------- ---------------------- ------------ ----------- ------------------
Index                4) Mortgage-Backed         10%          50%             40%
- -------------------- ---------------------- ------------ ----------- ------------------

Outside Index        5) Basket Total:            0%:         30%:            15%:
- -------------------- ---------------------- ------------ ----------- ------------------
                     a) High Yield               0%          25%              5%
- -------------------- ---------------------- ------------ ----------- ------------------
                     b) Non-Dollar               0%          30%             10%
- -------------------- ---------------------- ------------ ----------- ------------------
                     c) Converts & Pref.         0%           5%              0%
- -------------------- ---------------------- ------------ ----------- ------------------
                     d) Emerging Mkts.           0%           5%              0%
- -------------------- ---------------------- ------------ ----------- ------------------
</TABLE>

Notes:  (1) Corporates include ABS, Yankees, Eurodollars, CBO's, CLO's.
        (2) MortgageBacked includes Passthroughs, CMO's, Nonagencies, CMBS.
        (3) Basket Total covers High Yield, Nondollar, Converts & Preferred,
            and Emerging Markets outside the benchmark (30% aggregate basket
            maximum)
        (4) Nondollar includes sovereign and corporate securities.

H)  Risk Controls

o   No more than 5% invested in the instruments of any single issuer, except
    those of the U.S. Government, or its agencies, or instruments guaranteed by
    the U.S. Government

<PAGE>

o   No more than 25% of the corporate sector in any one industry.
o   Tracking error budget of 2% around the benchmark index.

I)  Cash Management

o   Cash will typically be nonnegative except for short periods (e.g., 1-5
    business days) to manage unusual liquidity requirements with temporary
    automatic overdraft facilities.
o   During unsettled market conditions, or periods of inverted yield curves,
    the portfolio cash holdings may be substantial to achieve risk or duration
    goals.
o   Cash securities may be allocated to cover "when issued", TBA, or forward
    purchase agreements. Such holdings would be part of regular portfolio cash,
    rather than a segregated cash account.

IV. PERFORMANCE EVALUATION

o   The performance benchmark for the Portfolio will be the Lehman Brothers
    Aggregate Index. It is expected that the Portfolio will outperform the
    benchmark over 3-5 year periods by at least 75-125 basis points.
o   Additionally, it is expected that the Portfolio will be in the upper second
    quartile of peer universes (e.g., Lipper, Russell, or Morningstar), or
    better, over 3-5 year periods.
o   Tracking error against the benchmark should not exceed 150 basis points
    over 3-5 year periods.

V.  COMMUNICATION

In addition to monthly and periodic communications to meet legal and regulatory
compliance requirements:

o   Monthly - conference calls to explain to designated Diversified analysts:
    the current portfolio position, recent trades and their rationale, market
    outlook for the portfolio, and expected portfolio actions
o   Quarterly portfolio manager writeups covering material similar to monthly
    conference calls, but also including material specified by Diversified's
    communications department
o   Annually meetings between interested parties to reaffirm or change the
    Investment Policy Statement. Biannual visits by Diversified personnel at
    the subadviser site to update due diligence.
o   As needed on an ad hoc basis to explain major market moves in addition to
    other communications.
o   Immediate notification regarding subadviser change in ownership, change in
    personnel involved in management of the account, conflicts of interest,
    pending lawsuits or government investigations, change in investment
    philosophy or discipline, or large absolute changes in assets under
    management.

<PAGE>


VI. OTHER

o   Explanation of best execution trading practices, including soft dollar
    arrangements
o   Evidence of disaster recovery plan, including Y2K, and EURO conversion
    plans
o   Cooperation with audits (Diversified's internal or outside, Diversified
    client auditors, or regulators).




Signed   /s/ Brian Matthews
       ----------------------------------              Date   9/18/99
        (Payden & Rygel)


Signed   /s/ Leonard J. Antes                          Date   9/18/99
       ----------------------------------
        (Diversified Investment Advisors)

<PAGE>

                                                                      EXHIBIT B


INVESTMENT COMPANY FOR WHICH PAYDEN SERVES AS INVESTMENT ADVISER:
<TABLE>
<CAPTION>
<S>                    <C>             <C>                                           <C>
- --------------------------------------------------------------------------------------------------------------
FUND NAME              NET ASSETS      ANNUAL RATE OF COMPENSATION                   FEE WAIVERS OR REDUCTIONS

- --------------------------------------------------------------------------------------------------------------
Balanced Portfolio     $514,797,252*   .20% of the first $50M of net assets                 None
                                                        allocated to Payden
                                       .15% of the next $50M of net assets
                                                        allocated to Payden
                                       .10% of assets in excess of $100M
                                                        allocated to Payden

- --------------------------------------------------------------------------------------------------------------
</TABLE>

* As of June 30, 1999. The portion of the assets of Balanced Portfolio actually
allocated to Payden as of June 30, 1999 were $184,353,066.




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