DIVERSIFIED INVESTORS PORTFOLIOS, POS AMI, 2000-04-06

DIVERSIFIED INVESTORS PORTFOLIOS
POS AMI, 2000-04-06

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2000

FILE NO. 811-8272
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM N-1A

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REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 8

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DIVERSIFIED INVESTORS PORTFOLIOS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

FOUR MANHATTANVILLE ROAD,
PURCHASE, NEW YORK 10577
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 914-697-8000

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ROBERT F. COLBY, ESQ.
DIVERSIFIED INVESTMENT ADVISORS, INC.
FOUR MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
ROGER P. JOSEPH, ESQ.
BINGHAM DANA LLP
150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110

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EXPLANATORY NOTE

Diversified Investors Portfolios has filed this Registration Statement pursuant
to Section 8(b) of the Investment Company Act of 1940. However, beneficial
interests in the Portfolios are not being registered under the Securities Act of
1933, since such interests will be issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Only 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 may make investments in the Portfolios. This Registration
Statement is not an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in the Portfolios.
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PART A

Responses to Items 1, 2, 3, 5 and 9 have been omitted pursuant to General
Instruction B.2(b) of Form N-1A.

ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS.

PORTFOLIO GOALS

The goal of the MONEY MARKET PORTFOLIO is to provide liquidity and as high a
level of current income as is consistent with the preservation of capital.

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

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

The goal of the CORE BOND PORTFOLIO is to achieve maximum total return.

The goal of the HIGH-YIELD BOND PORTFOLIO is to provide a high level of current
income.

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

The goal of the VALUE AND INCOME PORTFOLIO (FORMERLY CALLED EQUITY INCOME
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 goal.

The goal of the ARK VALUE PORTFOLIO is to provide a high total investment return
through investment primarily in a diversified portfolio of common stocks.

The goal of the EQUITY VALUE PORTFOLIO is to provide a high total investment
return through investment primarily in a diversified portfolio of common stocks.

The goal of the GROWTH & INCOME PORTFOLIO is to provide capital appreciation and
current income.

The goal of the EQUITY GROWTH PORTFOLIO is to provide a high level of capital
appreciation through investment in a diversified portfolio of common stocks with
a potential for above-average growth in earnings; current income is a secondary
goal.

The goal of the SPECIAL EQUITY 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 goal of the AGGRESSIVE EQUITY PORTFOLIO is to provide a high level of
capital appreciation primarily through investing in a diversified portfolio of
common stocks.

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

The goal of each Portfolio may be changed without investor approval. Of course,
there can be no assurance that any Portfolio will achieve its goal.

MAIN INVESTMENT STRATEGIES

The investment strategies described below are the strategies that, in the
opinion of each Portfolio's advisers, are most likely to be important in trying
to achieve the Portfolio's investment goal. There can, of course, be no
assurance that any Portfolio will achieve its investment goal. Except as noted
below, each Portfolio's goal and strategies may be changed without investor
approval.

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

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

Each Portfolio may, from time to time, take temporary defensive positions that
are inconsistent with the Portfolio's principal investment strategies in
attempting to respond to adverse market, political or other conditions. When
doing so, the Portfolio may invest without limit in high quality money market
and other short-term instruments, and may not be pursuing its investment goal.
These investments may result in a lower yield than would be available from
investments with a lower quality or longer term.

MONEY MARKET PORTFOLIO

A money market instrument is a short-term IOU issued by banks or other
corporations, the U.S. or a foreign government or state or local governments.
Money market instruments have maturity dates of 13 months or less. Money market
instruments may include certificates of deposit, bankers' acceptances, variable
rate demand notes (where the interest rate is reset periodically and the holder
may demand payment from the issuer at any time), fixed-term obligations,
commercial paper (short term unsecured debt of corporations), asset-backed
securities (which are backed by pools of accounts receivable such as car
installment loans or credit card receivables) and repurchase agreements. In a
repurchase agreement, the seller sells a security and agrees to buy it back at a
later date (usually within seven days) and at a higher price, which reflects an
agreed upon interest rate.

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

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

The Portfolio does not declare dividends on a daily basis (many money market
funds do). Investment income that has not yet been declared as a dividend, or a
default on a portfolio security, may cause the Portfolio's net asset value to
fluctuate.

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

The Portfolio's managers employ a "top down" approach when selecting securities
for the Portfolio. This means that the portfolio managers look first at broad
market factors, and, on the basis of those market factors, choose certain
sectors or industries in which to invest. The managers then look at individual
companies within those sectors or industries. The managers use the same top down
approach when deciding which securities to sell. Securities are sold when the
Portfolio needs cash to meet redemptions, or when the managers believe that
better opportunities exist or that particular securities no longer fit within
the overall strategy for achieving the Portfolio's goal. In general, the
portfolio managers attempt
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to temper income volatility in the Portfolio by investing significant portions
of the portfolio in securities with maturities of thirty to forty-five days.
BOND PORTFOLIOS

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

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

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

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

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

The Portfolio also invests in mortgage-backed securities backed by pass-through
certificates issued or guaranteed by the U.S. government or its agencies, and in
other high quality, short-term obligations (such as corporate bonds and notes,
bank obligations and repurchase agreements). ALTHOUGH THE PORTFOLIO INVESTS IN
U.S. GOVERNMENT OBLIGATIONS, AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT.

The Portfolio's duration generally is between one and five years, and its
dollar-weighted average maturity generally is between three and ten years under
normal circumstances. The Portfolio may invest in securities with maturities of
as much as thirty years.

Home mortgage loans are typically grouped together into "pools" by banks and
other lending institutions. Interests in these pools (called mortgage-backed
securities) are then sold to investors, allowing the bank or other lending
institution to have more money available to loan to home buyers. When homeowners
make interest and principal payments, these payments are passed on to the
investors in the pool. Most of these pools are guaranteed by U.S. government
agencies or by government
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sponsored private corporations -- familiarly called "Ginnie Maes", "Fannie Maes"
and "Freddie Macs." Mortgaged-backed securities include collateralized mortgage
obligations, or CMOs.

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

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

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

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

The portfolio managers of the HIGH QUALITY BOND PORTFOLIO, INTERMEDIATE
GOVERNMENT BOND PORTFOLIO and CORE BOND PORTFOLIO use "top down" economic
analysis to determine economic outlook and to forecast interest rates. They also
analyze the yield curve under multiple market conditions in making maturity and
duration decisions for portfolio securities. The managers of the High Quality
Bond Portfolio and the Intermediate Government Bond Portfolio then attempt to
select securities that will enable each Portfolio to maintain a stable net asset
value and at the same time to achieve a high level of income. The managers of
the Core Bond Portfolio attempt to select securities that will enable the
Portfolio to achieve growth of capital and a high level of income. The managers
use the same top down approach when deciding which securities to sell.
Securities are sold when a Portfolio needs cash to meet redemptions, or when the
managers believe that better opportunities exist or that particular securities
no longer fit within the overall strategy for achieving the Portfolio's goal.

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

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

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

In selecting investments for the Portfolio, the Portfolio's advisers exclude
securities that are in default or that pay interest in the form of additional
debt securities. As a result, the Portfolio may be somewhat more conservative
than certain other high-yield funds. The Portfolio is designed to outperform
more aggressive high-yield funds in high-yield market downturns, and its
performance may lag these funds in high-yield market upturns. Of course, it is
possible that the Portfolio will not perform as expected.
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The Portfolio may also invest in equity securities, including common stocks,
warrants and rights. Investors should carefully consider the special risks of
investing in this Portfolio.

* * *

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

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

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

The Balanced Portfolio seeks to meet its investment objective by maintaining a
broadly diversified portfolio of stocks and bonds. The Portfolio invests in a
managed mix of equity and debt securities of predominately U.S. issuers.
However, the Portfolio may invest in securities of foreign issuers, including
issuers located in emerging, or developing, markets.

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

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

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

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

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

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

The ARK VALUE PORTFOLIO invests primarily in stocks of companies which, in the
opinion of the Portfolio's advisers, are trading at low valuations relative to
market and/or historical levels. These stocks tend to have relatively low
price/earnings ratios and/or relatively low price/book value ratios. Low price/
earnings ratios or price/book value ratios mean that the stock is less expensive
than average relative to

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the company's earnings or book value, respectively. The Portfolio emphasizes
common stocks and preferred stocks listed on the New York Stock Exchange and on
other national securities exchanges and, to a lesser extent, stocks that are
traded over-the-counter.

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

Portfolios that use a value-oriented strategy search for those companies that
appear to be trading below their true worth. These companies tend to have
relatively low price/earnings ratios and/or relatively low price/book value
ratios. Low price/earnings ratios or price/book value ratios mean that a stock
is less expensive than average relative to the company's earnings or book value,
respectively. These funds use research to identify potential investments,
examining such features as a firm's financial condition, business prospects,
competitive position and business strategy. They look for companies that appear
likely to come back into favor with investors, for reasons that may range from
good prospective earnings or strong management teams to new products or
services. Of course, these companies may not achieve their expected values
because the circumstances causing the underpricing worsen or do not change, or
because the funds are incorrect in their determinations that the companies are
under valued.

The portfolio managers of the VALUE AND INCOME PORTFOLIO, ARK VALUE PORTFOLIO
and EQUITY VALUE PORTFOLIO use a "bottom up" value-oriented approach in
selecting investments for the Portfolios. When portfolio managers use a "bottom
up" approach, they look primarily at individual companies against the context of
broader market factors. A value-oriented approach attempts to identify companies
that appear to be trading below their true worth. The managers use the same
bottom up approach when deciding which securities to sell. Securities are sold
when a Portfolio needs cash to meet redemptions, or when the managers believe
that better opportunities exist or that particular securities no longer fit
within the overall strategy for achieving the Portfolio's goals.

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

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

Portfolios that use a growth-oriented strategy search for companies growing
faster than the economy as a whole. Often, these companies are in expanding
industries, such as computers and pharmaceuticals. While the size of a company
is not necessarily a factor in determining whether its stock is suitable for a
growth fund, a growth strategy that focuses on larger companies is generally
considered less aggressive than one that focuses on smaller companies. Many
stocks owned by growth funds do not pay dividends and can be more volatile than
other types of investments. As a result, growth funds are appropriate for
investors who have long-term investment horizons.
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The SPECIAL EQUITY PORTFOLIO invests primarily in stocks of small to medium size
companies which, in the opinion of the Portfolio's advisers, present an
opportunity for significant increases in earnings, revenue and/or value, without
consideration for current income. The Special Equity Portfolio emphasizes common
stocks of U.S. companies with market capitalizations of less than $2 billion.
The Portfolio uses multiple managers to control the volatility often associated
with investments in companies of this size. The Portfolio utilizes two
growth-style managers and two value-oriented managers. The Portfolio is designed
to provide an opportunity for higher returns relative to the broad small cap
market during periods when a particular style is out of favor.

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

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

The portfolio managers of the GROWTH & INCOME PORTFOLIO, EQUITY GROWTH
PORTFOLIO, SPECIAL EQUITY PORTFOLIO and AGGRESSIVE EQUITY PORTFOLIO use a
"bottom up" approach in selecting securities, relying primarily on stock
selection against the context of broader market factors. These managers look for
companies that they believe are in dynamic high growth sectors of the world
economy, and that are thought to have dominant or strong competitive positions
within their sectors. They also look for companies that are expected to have
strong earnings growth potential. The managers use the same bottom up approach
when deciding which securities to sell. Securities are sold when a Portfolio
needs cash to meet redemptions, or when the managers believe that better
opportunities exist or that particular securities no longer fit within the
overall strategy for achieving the Portfolio's goal.

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

The portfolio managers of the International Equity Portfolio use a "bottom up"
approach in which stock selection is based on in-depth local research. In
selecting individual securities, the portfolio managers use a value-oriented
strategy to identify companies that appear to be trading below their true worth.
The managers blend their basic, fundamental approach with macroeconomics and
political judgments on the outlook for economies, industries, currencies and
markets. The managers also use a bottom up approach when deciding which
securities to sell. Securities are sold when the Portfolio needs cash to meet
redemptions, or when the managers believe that better opportunities exist or
that particular securities no longer fit within the overall strategy for
achieving the Portfolio's goal.

* * *

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

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

MAIN RISKS

Investing in a mutual fund involves risk. An investor should consider the risks
it will assume. Certain of these risks are described below. More information
about risks appears in Part B to this Registration Statement. A Portfolio's net
asset value will change daily as the value of its underlying securities change.
This means that an interest in a Portfolio may be worth more or less when it is
sold than when it was bought. An investor may receive little or no return on its
investment in the Portfolios. An investor may lose money if it invests in the
Portfolios.

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

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

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

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

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

VALUE INVESTING. When a Portfolio's portfolio managers use a value oriented
approach in managing the Portfolio, they look for securities that they believe
are currently undervalued, or priced below their true worth, but whose issuers
have good longer term prospects. An issuer may be undervalued relative to the
stock market in general, relative to the underlying value of its assets or
relative to what a sophisticated private investor would pay for the entire
company. Value investing is based on the belief that securities of companies
which are temporarily underpriced may provide a higher total return over time
than securities of companies whose positive attributes are reflected in the
securities' current price.

A security may not achieve its expected value because the circumstances causing
it to be undervalued worsen (causing the price to decline further) or do not
change, or because an adviser is incorrect in its
<PAGE> 11
A-9

determination that the security is undervalued. In addition, Portfolios with a
value orientation may underperform certain other stock funds (those emphasizing
growth stocks, for example) during periods when value stocks are not in favor.

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

FOREIGN SECURITIES. Each Portfolio may invest a portion of its assets in foreign
securities. The International Equity Portfolio will invest a substantial portion
of its assets in foreign securities. Investing in foreign securities involves
risks in addition to those of investing in U.S. securities, including risks
relating to political, social and economic developments abroad, as well as risks
resulting from the differences between the regulations to which U.S. and foreign
issuers and markets are subject.

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

- Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be
less public information about their operations.

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

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

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

- The International Equity Portfolio and the Balanced Portfolio may invest
in issuers located in emerging, or developing, markets.

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

- All of the risks of investing in foreign securities are heightened by
investing in developing countries.
<PAGE> 12
A-10

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

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

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

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

- protecting against a decline in value of a Portfolio's current or
anticipated securities holdings;

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

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

A hedge is designed to neutralize a loss on a portfolio position with a gain in
the hedge position. A properly executed hedge will result in a loss in the
portfolio position being offset by a gain in the hedge position, or vice versa.
However, the market movement of a hedge may not be of the same magnitude as the
market movement of the hedged position. The success or failure of a hedging
transaction will depend on the advisers' ability to predict movements in the
hedge, the investment being hedged and the market in general (and the
correlation between these factors). Derivatives may not always be available on
terms that make economic sense (for example, they may be too costly), and, when
used, their transaction costs and premiums may adversely affect Portfolio
performance. The ability to use derivatives to hedge may also be restricted by
limits established by securities and commodities exchanges and by tax
considerations.

ITEM 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE.

INVESTMENT ADVISERS

Diversified Investment Advisors, Inc. is the investment adviser of each of the
Portfolios. 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 USA is an indirect,
wholly-owned subsidiary of AEGON N.V., a Netherlands corporation which is a
publicly traded international insurance group.

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

The subadvisers make the day-to-day investment decisions for the Portfolios and
place the purchase and sale orders for securities transactions, subject in all
cases to the general supervision of Diversified. The subadvisers are listed
below.
<PAGE> 13
A-11

SUBADVISERS

The subadvisers described in this section are responsible for the daily
management of the Portfolios named below. Diversified provides general
supervision of the subadvisers. Except as otherwise noted, investment decisions
are made by a committee of each subadviser's personnel.

MONEY MARKET PORTFOLIO AND

INTERMEDIATE GOVERNMENT BOND PORTFOLIO

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

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

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

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

CORE BOND PORTFOLIO

Payden & Rygel. Payden was formed in 1984 and is owned by certain of its
employees. Payden (or its predecessors) has been a registered investment adviser
since 1983. The principal business address of Payden is 333 South Grand Avenue,
32nd Floor, Los Angeles, California 90071.

HIGH QUALITY BOND PORTFOLIO

Merganser Capital Management Limited Partnership. Merganser, organized in April,
2000, is the successor to an investment adviser formed in 1984 and is owned by
certain of its employees. Merganser is a registered investment adviser. The
principal business address of Merganser is One Cambridge Center, Cambridge,
Massachusetts 02142.

HIGH-YIELD BOND PORTFOLIO

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

BALANCED PORTFOLIO

Aeltus Investment Management, Inc.
Payden & Rygel

Aeltus Investment Management, Inc. Aeltus was formed in 1972 and is an indirect
wholly-owned subsidiary of Aetna Inc. Aeltus has been a registered investment
adviser since 1972. The principal business address of Aeltus is 10 State House
Square, Hartford, Connecticut 06103-3602.

A-12

VALUE AND INCOME PORTFOLIO

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

ARK VALUE PORTFOLIO

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

EQUITY VALUE PORTFOLIO

GROWTH & INCOME PORTFOLIO

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

EQUITY GROWTH PORTFOLIO

Dresdner RCM Global Investors LLC
Montag & Caldwell Incorporated

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

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

SPECIAL EQUITY PORTFOLIO

Goldman Sachs Asset Management

Husic Capital Management

RS Investment Management, L.P.
Westport Asset Management, Inc.

Created in 1988, Goldman Sachs Asset Management ("Goldman Sachs") is a unit of
the Investment Management Division of Goldman, Sachs & Co., a worldwide
investment banking firm, with numerous offices throughout the United States and
globally. The business address of the Goldman Sachs branch office responsible
for managing the Portfolio is 2502 Rocky Point Drive, Suite 500, Tampa, Florida
33607.

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

Husic Capital Management. ("Husic") was founded in March 1986 and is a
California limited partnership. The General Partner of Husic is Frank J. Husic &
Co., a California corporation ("Husic & Co.").

<PAGE> 15

A-13

Mr. Frank J. Husic is the sole shareholder of Husic & Co. Husic has been a
registered investment adviser since 1986. The principal business address of
Husic is 555 California Street, Suite 2900, San Francisco, California 94104.

RS Investment Management, L.P. RS was formed in 1999 and is indirectly owned by
BankAmerica Corporation. RS (or its predecessor) as been a registered investment
adviser since 1982. The principal business address of RS is 555 California
Street, San Francisco, California 94104.

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

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

AGGRESSIVE EQUITY PORTFOLIO

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

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

INTERNATIONAL EQUITY PORTFOLIO

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

Capital Guardian uses a system of multiple portfolio managers. Within investment
guidelines, each portfolio manager makes individual decisions as to company,
country, industry, timing and percentage based on extensive field research and
direct company contact.
<PAGE> 16
A-14

ADVISORY FEES

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

<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Money Market Portfolio 0.25%
--------------------------------------------------------------------------------
High Quality Bond Portfolio 0.35%
--------------------------------------------------------------------------------
Intermediate Government Bond Portfolio 0.35%
--------------------------------------------------------------------------------
Core Bond Portfolio 0.35%
--------------------------------------------------------------------------------
High-Yield Bond Portfolio 0.55%
--------------------------------------------------------------------------------
Balanced Portfolio 0.45%
--------------------------------------------------------------------------------
Value and Income Portfolio 0.45%
--------------------------------------------------------------------------------
Ark Value Portfolio (1)
--------------------------------------------------------------------------------
Equity Value Portfolio 0.57%
--------------------------------------------------------------------------------
Growth & Income Portfolio 0.60%
--------------------------------------------------------------------------------
Equity Growth Portfolio 0.62%
--------------------------------------------------------------------------------
Special Equity Portfolio 0.80%
--------------------------------------------------------------------------------
Aggressive Equity Portfolio 0.97%
--------------------------------------------------------------------------------
International Equity Portfolio 0.75%
--------------------------------------------------------------------------------
</TABLE>

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

(1) Ark Value Portfolio commenced operations in April 2000 and pays an
investment management fee equal to 0.57% of its net assets (after waivers).

CAPITAL STOCK

Each Portfolio is a separate series of Diversified Investors Portfolios, 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 Portfolios. Currently,
there are fourteen active Series of the Trust. Investments in a 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 a Portfolio (e.g.,
investment companies, insurance company separate accounts and common and
commingled trust funds) will each be liable for all obligations of that
Portfolio (and of no other Series). However, the risk of an investor in a
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 a Portfolio have no
preemptive or conversion rights and are fully paid and nonassessable, except as
set forth below.

Each investor in a Portfolio is entitled to a vote in proportion to the amount
of its investment in that Portfolio. Investors in a 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
Portfolios are not required and have 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 a Portfolio, investors in that
Portfolio would be entitled to share pro rata in the net assets of the Portfolio
(and no other Series) available for distribution to investors.
<PAGE> 17
A-15

ITEM 7. INVESTOR INFORMATION.
HOW NET INCOME IS CALCULATED

Each Portfolio determines its net income and realized capital gains, if any, on
each day the New York Stock Exchange is open for trading (referred to as a
"Business Day") and allocates all such income and gain pro rata among the
investors in the Portfolio at the time of such determination.

The "net income" of a 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 a Portfolio. All the net income of a Portfolio is allocated pro
rata among the investors in that Portfolio (and no other Series).

THE PURCHASE AND REDEMPTION OF BENEFICIAL INTERESTS IN THE PORTFOLIO

Beneficial interests in the Portfolios 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. Investments in the Portfolios may only be made by
investment companies, common or commingled trust funds or similar organizations
or entities which 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.

An investment in each Portfolio is made without a sales load. All investments
are made at net asset value next determined after an order is received by a
Portfolio. There is no minimum initial or subsequent investment in a Portfolio.
However, since each Portfolio intends to be as fully invested at all times as is
reasonably practicable in order to enhance the yield on its assets, investments
must be made in federal funds (i.e., moneys credited to the account of a
Portfolio's custodian bank by a U.S. Federal Reserve Bank).

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

Each investor in a Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of the close of regular trading on the New
York Stock Exchange, on each Business Day, the value of each investor's
beneficial interest in a Portfolio is 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 withdrawals, which are to be effected on that day,
are then effected. Thereafter, the investor's percentage of the aggregate
beneficial interests in the Portfolio is then re-computed 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 the close of regular trading on such day plus
or minus, as the case may be, the amount of any additions to or withdrawals from
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 the
same time on such day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage so determined is then applied to
determine the value of the investor's interest in the Portfolio as of the close
of regular trading on the following Business Day of the Portfolio.

An investor in a Portfolio may withdraw all or any portion of its investment at
any time after a withdrawal request in proper form is received by the Portfolio
from the investor. The proceeds of a withdrawal will be paid by the Portfolio in
federal funds normally on the Business Day the withdrawal is effected, but in
any event within seven days. The Portfolios may pay the redemption price in kind
with readily marketable securities (instead of cash). If securities are
distributed, an investor could incur brokerage, tax or other charges in
converting the securities to cash. Investments in a Portfolio may not be
transferred.
<PAGE> 18
A-16

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 is closed (other than weekends or
holidays) or trading on the Exchange is restricted, or, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.

TAX MATTERS

Each Portfolio expects to be treated as a partnership for federal income tax
purposes. As a result, the Portfolios do not expect to pay any federal income
taxes and, generally, investors in a Portfolio should not have to pay federal
income taxes when they receive distributions or make withdrawals from a
Portfolio. However, each investor in a Portfolio must take into account its
share of that Portfolio's ordinary income, expense, capital gains and losses,
credits and other items, whether or not distributed, in determining its income
tax liability.

It is intended that a 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 Internal Revenue Code of 1986, as
amended, assuming that the investor invested all of its assets in the Portfolio.

The foregoing tax discussion is only for an investor's general information, and
does not take account of the special rules applicable to certain investors (such
as tax-exempt investors) or a number of special circumstances. Each investor
should consult its own tax advisers regarding the tax consequences in its
circumstances of an investment in a Portfolio, as well as any state, local or
foreign tax consequences to them of investing in a portfolio.

ITEM 8. DISTRIBUTION ARRANGEMENTS.

The exclusive placement agent for the Portfolios is Diversified Investors
Securities Corp. ("DISC"). The address of DISC is 4 Manhattanville Road,
Purchase, New York 10577. DISC receives no compensation for serving as the
exclusive placement agent for the Portfolios.
<PAGE> 19

PART B

ITEM 10. COVER PAGE AND TABLE OF CONTENTS.

This Part B sets forth information with respect to Money Market Portfolio, High
Quality Bond Portfolio, Intermediate Government Bond Portfolio, Core Bond
Portfolio, High-Yield Bond Portfolio, Balanced Portfolio, Value and Income
Portfolio, Ark Value Portfolio, Equity Value Portfolio, Growth & Income
Portfolio, Equity Growth Portfolio, Special Equity Portfolio, Aggressive Equity
Portfolio and International Equity Portfolio, each a series of Diversified
Investors Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The date of this Part B and
Part A to the Registration Statement for each Portfolio is April 30, 1999.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Portfolio History........................................... B-2
Description of each Portfolio and Its Investments and
Risks..................................................... B-2
Management of each Portfolio................................ B-20
Control Persons and Principal Holders of Securities......... B-22
Investment Advisory and Other Services...................... B-22
Brokerage Allocation and Other Practices.................... B-30
Capital Stock and Other Securities.......................... B-32
Purchase, Redemption and Pricing of Securities.............. B-34
Taxation of each Portfolio.................................. B-36
Underwriters................................................ B-37
Calculations of Performance Data............................ B-38
Financial Statements........................................ B-38
Appendix A -- Description of Securities Ratings............. A-1
</TABLE>
<PAGE> 20
B-2

ITEM 11. PORTFOLIO HISTORY.

Diversified Investors Portfolios (the "Trust") was organized as a trust under
the laws of the State of New York on September 1, 1993. The Trust consists of
fourteen series: Money Market Portfolio, High Quality Bond Portfolio,
Intermediate Government Bond Portfolio, Core Bond Portfolio, High-Yield Bond
Portfolio, Balanced Portfolio, Value and Income Portfolio (formerly called
Equity Income Portfolio), Ark Value Portfolio, Equity Value Portfolio, Growth &
Income Portfolio, Equity Growth Portfolio, Special Equity Portfolio, Aggressive
Equity Portfolio, and International Equity Portfolio (each a "Portfolio" and
collectively the "Portfolios").

ITEM 12. DESCRIPTION OF EACH PORTFOLIO AND ITS INVESTMENTS AND RISKS.

The investment objective of MONEY MARKET PORTFOLIO is to provide liquidity and
as high a level of current income as is consistent with the preservation of
capital.

The investment objective of HIGH QUALITY BOND PORTFOLIO is to provide a high
risk-adjusted return while focusing on the preservation of capital.

The investment objective of INTERMEDIATE GOVERNMENT BOND PORTFOLIO is to provide
as high a level of current income as is consistent with the preservation of
capital.

The investment objective of CORE BOND PORTFOLIO is to achieve maximum total
return.

The investment objective of HIGH-YIELD BOND PORTFOLIO is to provide a high level
of current income.

The investment objective of BALANCED PORTFOLIO is to provide a high total
investment return through investment in a broadly diversified portfolio of
stocks, bonds and money market instruments.

The investment objective of VALUE AND INCOME PORTFOLIO (FORMERLY CALLED EQUITY
INCOME 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.

The investment objective of ARK VALUE PORTFOLIO is to provide a high total
investment return through investment primarily in a diversified portfolio of
common stocks.

The investment objective of EQUITY VALUE PORTFOLIO is to provide a high total
investment return through investment primarily in a diversified portfolio of
common stocks.

The investment objective of GROWTH & INCOME PORTFOLIO is to provide capital
appreciation and current income.

The investment objective of EQUITY GROWTH PORTFOLIO is to provide a high level
of capital appreciation through investment in a diversified portfolio of common
stocks with a potential for above-average growth in earnings; current income is
a secondary objective.

The investment objective of SPECIAL EQUITY 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 investment objective of AGGRESSIVE EQUITY PORTFOLIO is to provide a high
level of capital appreciation primarily through investing in a diversified
portfolio of common stocks.

The investment objective of INTERNATIONAL EQUITY PORTFOLIO is to provide a high
level of long-term capital appreciation through investment in a diversified
portfolio of securities of foreign issuers.

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

The Portfolios may, but need not, invest in any or all of the investments and
utilize any or all of the investment techniques described in Part A to this
Registration Statement and herein. Diversified Investment Advisors, Inc.
("Diversified" or the "Adviser") is the investment adviser of each Portfolio.
<PAGE> 21
B-3

Diversified delegates the daily management of each Portfolio to one or more
subadvisers (each, a "Subadviser" and collectively, the "Subadvisers").
Diversified supervises and monitors the Subadvisers.

BANK OBLIGATIONS

Bank obligations include certificates of deposit, time deposits (including
Eurodollar time deposits) and bankers' acceptances and other short-term debt
obligations issued by domestic banks, foreign subsidiaries or foreign branches
of domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. The Portfolios
have established certain minimum credit quality standards for bank obligations
in which they invest.

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 and time
deposits, may be general obligations of the parent banks in addition to the
issuing branch, or may be limited by the terms of a specific obligation and
governmental regulation. Such obligations are subject to risks that are
different from or are in addition to those of domestic banks. These risks
include foreign economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. These foreign branches and subsidiaries are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks, such as mandatory reserve requirements, loan limitations, and accounting,
auditing and financial record keeping requirements. In addition, less
information may be publicly available about a foreign branch of a domestic bank
or about a foreign bank than about a domestic bank. A domestic branch of a
foreign bank with assets in excess of $1 billion may be subject to reserve
requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state.

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

U.S. GOVERNMENT AND AGENCY SECURITIES

U.S. Treasury obligations include bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of these
obligations that are transferable through the Federal book-entry system known as
Separately Traded Registered Interest and Principal Securities (STRIPS). STRIPS
are sold as zero coupon securities. These securities are usually structured with
two classes that receive different portions of the interest and principal
payments from the underlying obligation. The yield to maturity on the
interest-only class is extremely sensitive to the rate of principal payments on
the underlying obligation. The market value of the principal-only class
generally is unusually volatile in response to changes in interest rates. See
"Zero Coupon Securities" below for more information.
<PAGE> 22
B-4

U.S. Treasury securities 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.

Certain Federal agencies such as the Government National Mortgage Association
(GNMA) have been established as instrumentalities of the U.S. government to
supervise and finance certain types of activities. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, for example, GNMA
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.

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. "Letter of credit" paper has no limitations on
purchasers.

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
<PAGE> 23
B-5

the obligations plus accrued interest upon a specified number of days' notice to
the holders of such obligations. The interest rate on a floating rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable rate demand obligation is adjusted automatically at specified
intervals. The interest rate on these securities may be reset daily, weekly,
quarterly, or some other reset period and may have a floor or ceiling on
interest rate charges. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates.
Frequently, such obligations are backed 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
Portfolio's Subadviser determines that at the time of investment the obligations
are of comparable quality to the other obligations in which the Portfolio may
invest. The applicable Subadviser, 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 Portfolio's Subadviser 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

Each Portfolio may invest up to 15% (10% for the Money Market Portfolio) of its
net assets in illiquid securities, including restricted securities that are
illiquid.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered 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
<PAGE> 24
B-6

for delays on resale and uncertainty in valuation. The absence of a trading
market can make it difficult to ascertain a market value for these investments.
In addition, 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.

Rule 144A under the 1933 Act 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 applicable Subadviser will monitor the liquidity of Rule 144A securities for
each Portfolio under the supervision of the Trust's Board of Trustees. In
reaching liquidity decisions, the Subadviser will consider, among other things,
the following factors: (a) the frequency of trades and quotes for the security,
(b) the number of dealers and other potential purchasers wishing to purchase or
sell the security, (c) dealer undertakings to make a market in the security and
(d) 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).

Institutional trading in Rule 144A securities is relatively new and the
liquidity of these investments could be impaired if trading in Rule 144A
securities does not develop or if qualified institutional buyers become, for a
time, uninterested in purchasing Rule 144A securities.

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. 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 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 (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 secured by the value of the underlying security,
usually U.S. Government or government agency issues. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), repurchase agreements may be
considered to be loans by the buyer. 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
<PAGE> 25
B-7

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. The segregation of assets could impair the Portfolio's ability to meet
its current obligations or impede investment management if a large portion of
the Portfolio's assets are involved. Reverse repurchase agreements also involve
the risk that the market value of the securities sold by the Portfolio may
decline below the repurchase price of those securities.

The Portfolios may, together with other registered investment companies managed
by the Portfolios' Subadvisers or their affiliates, transfer uninvested cash
balances into a single joint account, the daily aggregate balance of which will
be invested in one or more repurchase agreements, including tri-party subcustody
repurchase arrangements.

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,
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
United States 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.

MONEY MARKET PORTFOLIO

The Money Market Portfolio may invest in the following foreign securities: (a)
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); (b) high quality, U.S. dollar-denominated
short-term bonds and notes (including variable amount master demand notes)
issued by foreign
<PAGE> 26
B-8

corporations (including Canadian commercial paper, which is commercial paper
issued by a Canadian corporation or a Canadian subsidiary of a U.S. corporation,
and Europaper, which is U.S. dollar-denominated commercial paper of a foreign
issuer); and (c) 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 Portfolio's Subadviser 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.

PORTFOLIOS OTHER THAN THE MONEY MARKET PORTFOLIO

Not more than 5% of a Portfolio's assets may be invested in closed-end
investment companies which primarily hold foreign securities. Investments in
such companies 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.

American Depository Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other forms of depositary receipts for
securities of foreign issuers provide an alternative method for a Portfolio to
make foreign investments. These securities are not denominated in the same
currency as the securities into which they may be converted and fluctuate in
value based on the underlying security. Generally, ADRs, in registered form, are
designed for use in U.S. securities markets and EDRs and GDRs, in bearer form,
are designed for use in European and global securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs and GDRs are European and global receipts
evidencing a similar arrangement.

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

Forward currency exchange contracts may be entered into for each Portfolio for
the purchase or sale of foreign currency to hedge against adverse rate changes
or otherwise to achieve the Portfolio's investment objectives. A currency
exchange contract allows a definite price in dollars to be fixed for securities
of foreign issuers that have been purchased or sold (but not settled) for the
Portfolio.

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
affected 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
<PAGE> 27
B-9

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.

Each Portfolio may also enter into proxy hedges and cross hedges. In a proxy
hedge, which generally is less costly than a direct hedge, a Portfolio, having
purchased a security, will sell a currency whose value is believed to be closely
linked to the currency in which the security is denominated. Interest rates
prevailing in the country whose currency was sold would be expected to be closer
to those in the U.S. and lower than those of securities denominated in the
currency of the original holding. This type of hedging entails greater risk than
a direct hedge because it is dependent on a stable relationship between the two
currencies paired as proxies and the relationships can be very unstable at
times. A Portfolio may enter into a cross hedge if a particular currency is
expected to decrease against another currency. The Portfolio would sell the
currency expected to decrease and purchase a currency which is expected to
increase against the currency sold in an amount equal to some or all of the
Portfolio's holdings denominated in the currency sold.

Entering into 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 Portfolios (other than the International Equity Portfolio) will not
routinely enter into foreign currency hedging transactions with respect to
security transactions; however, the Portfolios may do so when their Subadvisers
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 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 to this Registration
Statement 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.

Even if a hedge is generally successful, 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
<PAGE> 28
B-10

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

WHEN-ISSUED SECURITIES

Forward commitments or purchases of securities on a when-issued basis are
transactions where the price of the securities is fixed at the time of
commitment and the delivery and payment ordinarily takes place beyond customary
settlement time. The interest rate realized on these securities is fixed as of
the purchase date and no interest accrues to the buyer before settlement. The
securities are subject to market fluctuation due to changes in market interest
rates; the securities are also subject to fluctuation in value pending
settlement based upon public perception of the creditworthiness of the issuer of
these securities.

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 require 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 Portfolios expect always to have cash, cash equivalents, or high
quality debt securities sufficient to cover any commitments or to limit any
potential risk. However, although the Portfolios do not intend to make such
purchases for speculative purposes and intend 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, the 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 zero coupon security pays no interest or principal to its holder during its
life. A zero coupon security is sold at a discount, frequently substantial, and
redeemed at face value at its maturity date. The market prices of zero coupon
securities are generally more volatile than the market prices of securities of
similar maturity that pay interest periodically, and zero coupon securities are
likely to react more to interest rate changes than non-zero coupon securities
with similar maturity and credit qualities.

A Portfolio may acquire zero coupon obligations when consistent with its
investment objective and policies. Since interest income is accrued throughout
the term of the zero coupon obligation but is not
<PAGE> 29
B-11

actually received until maturity, a Portfolio may have to sell other securities
to pay dividends based on such accrued income prior to maturity of the zero
coupon obligation.

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

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. or foreign
stocks, U.S. Government 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 may be used to attempt to
protect the Portfolio's current or intended stock investments from broad
fluctuations in stock prices. For example, the Portfolio may sell stock index
futures contracts in anticipation of or during a decline in the market value of
the Portfolio's securities. If such decline occurs, the loss in value of
portfolio securities may be offset, in whole or part, by gains on the futures
position. When 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 may call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by buying
(or selling, as the case may be) on a commodities exchange an identical futures
contract calling for delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, 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
<PAGE> 30
B-12

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 generally 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.

When a Portfolio enters into futures contracts, the Portfolio will establish a
segregated account to cover the Portfolio's obligations with respect to such
futures contracts. The assets in the account 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 forecast of general interest rate or other trends by the applicable
Subadviser may still not result in a successful transaction.

In addition, futures contracts entail risks. Although the Subadvisers believe
that use of such contracts will benefit the Portfolios, if the Subadvisers'
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 may purchase and write options on
futures contracts for hedging purposes. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying securities, it may or may not be less risky than ownership of the
futures contract or underlying securities. 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.
<PAGE> 31
B-13

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.

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 writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security or 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 investment 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. In the case of a call
option written by the Portfolio, the loss is potentially unlimited. Depending on
the degree of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the Portfolio's
losses from options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.

The Board of Trustees of the Trust adopted the requirement that futures
contracts and options on futures contracts be used either (a) as a hedge without
regard to any quantitative limitation, or (b) for other purposes to the extent
that immediately thereafter the aggregate amount of margin deposits on all
(non-hedge) futures contracts of a 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, may 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
<PAGE> 32
B-14

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.

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.

Losses from the writing of call options are potentially unlimited. Accordingly,
the Portfolios intend that any call options on foreign currencies that they
write (other than for cross-hedging purposes as described below) will be
covered. 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 another
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 may also 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, forward contracts and options on foreign currencies 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.
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
<PAGE> 33
B-15

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 (a) other complex foreign
political and economic factors, (b) lesser availability than in the United
States of data on which to make trading decisions, (c) delays in the Portfolio's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (d) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (e) lesser trading volume.

The successful use of futures contracts, options on futures contracts and
options on foreign currencies draws upon the applicable Subadviser's skill and
experience with respect to such instruments. Should stock prices, or 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
foreign currencies 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 or
foreign currencies and movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce unanticipated
losses.

OPTIONS ON SECURITIES -- PORTFOLIOS OTHER THAN THE MONEY MARKET PORTFOLIO

The Portfolios may write (sell) covered call and put options to a limited extent
on their portfolio securities ("covered options"). However, a Portfolio may
forego 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
<PAGE> 34
B-16

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
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. 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 investment 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 investment 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.
<PAGE> 35
B-17

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
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. 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 applicable Subadviser
will monitor the creditworthiness of dealers with whom a Portfolio enters into
such options transactions under the general supervision of Diversified and the
Trust's Board of Trustees.

OPTIONS ON SECURITIES INDICES -- PORTFOLIOS OTHER THAN THE 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 applicable
Subadviser believes 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. A Portfolio will not purchase such options unless the
applicable Subadviser believes 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, a Portfolio may be forced to liquidate portfolio securities
to meet settlement obligations.

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

In a short sale, a Portfolio 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
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). In such
<PAGE> 36
B-18

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, it is not expected that more than 40% of a
Portfolio's total assets would be involved in short sales against the box. The
Portfolios do not currently intend to engage in such sales.

REAL ESTATE INVESTMENT TRUSTS

Real Estate Investment Trusts ("REITs") pool investors' funds for investment
primarily in income producing real estate or real estate related loans or
interests. A REIT is not taxed on income distributed to its investors or
unitholders if it complies with regulatory requirements relating to its
organization, ownership, assets and income and a regulatory requirement that it
distribute to its investors or unitholders as least 95% of its taxable income
for each taxable year. Generally, REITs can be classified as Equity REITs,
Mortgage REITs and hybrid REITs. Equity REITs invest the majority of their
assets directly in real property and derive their income primarily through rents
and capital gains from appreciation realized through property sales. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments. Mortgage
REITs are sensitive to the credit quality of the underlying borrowers. Hybrid
REITs combine the characteristics of both Equity and Mortgage REITs. The value
of REITs may be affected by management skill, cash flow and tax and regulatory
requirements. REITs are also subject to risks generally associated with
investments in real estate. A Portfolio will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.

LOANS OF PORTFOLIO SECURITIES

Each Portfolio may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government securities
or other high quality debt obligations equal to at least 100% of the current
market value of the securities loaned (including accrued interest thereon) plus
the interest payable to the Portfolio with respect to the loan is maintained
with the Portfolio. In determining whether or not to lend a security to a
particular broker, dealer or financial institution, the Portfolio's Subadviser
considers all relevant facts and circumstances, including the size,
creditworthiness and reputation of the broker, dealer or financial institution.
Any loans of portfolio securities are fully collateralized based on values that
are marked to market daily. No Portfolio enters into any portfolio security
lending arrangements having a duration longer than one year. Any securities that
a Portfolio receives as collateral do not become part of its portfolio at the
time of the loan and, in the event of a default by the borrower, the Portfolio
will, if permitted by law, dispose of such collateral except for such part
thereof that is a security in which the Portfolio is permitted to invest. During
the time securities are on loan, the borrower will pay the Portfolio any accrued
income on those securities, and the Portfolio may invest the cash collateral and
earned income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. In the event of the bankruptcy of the other party to
a securities loan, the Portfolio could experience delays in recovering either
the securities lent or cash. To the extent that, in the meantime, the value of
the securities lent has increased or the value of the securities purchased has
decreased, a Portfolio could experience a loss. No Portfolio will lend
securities having a value that exceeds one-third of the current value of its
total assets. Loans of securities by a Portfolio are subject to termination at
the Portfolio's or the borrower's option. A Portfolio may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker.
<PAGE> 37
B-19

TEMPORARY DEFENSIVE POSITIONS

CERTAIN OTHER OBLIGATIONS

Each Portfolio may invest in instruments other than those listed previously,
provided such investments are consistent with the 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 Subadvisers also make their own evaluations of these
securities. 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 applicable Subadviser will consider such an event in its determination
of whether the Portfolio should continue to hold the obligation. A description
of the ratings used herein and in Part A to this Registration Statement is set
forth in Appendix A.
INVESTMENT RESTRICTIONS

The "fundamental policies" of each Portfolio 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 herein and in Part A 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.

Fundamental Policies. 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
<PAGE> 38
B-20

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(s), up to 25% of its total assets
may be invested in any one industry (except that the Money Market Portfolio
reserves the freedom of action to concentrate 25% or more of its assets in
obligations of domestic branches of domestic banks); or

(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.

For purposes of restriction (1) above, arrangements with respect to securities
lending are not treated as borrowing.

Non-Fundamental Policies. Each Portfolio will not, as a matter of operating
policy, acquire any securities of registered open-end investment companies or
registered unit investment trusts in reliance on Section 12(d)(1)(F) or
12(d)(1)(G) of the 1940 Act. This policy may be changed by the Board of Trustees
of the Trust.

ITEM 13. MANAGEMENT OF EACH PORTFOLIO.

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. Asterisks indicate that those Trustees and officers are "interested
persons" (as defined in the 1940 Act) of the Trust. Unless otherwise indicated
below, the address of each Trustee and officer is 4 Manhattanville Road,
Purchase, New York 10577. The address of the Trust is 4 Manhattanville Road,
Purchase, New York 10577.
TRUSTEES

NEAL M. JEWELL Consultant (since 1995). Independent
Trustee, EAI Select (a registered investment
company) (since 1995); Executive Vice
President (November 1991 to January 1995),
Director of Overseas Pensions (January 1990
to October 1991), American International
Group Asset Management. His address is 355
Thornridge Drive, Stamford, Connecticut
06903. Age: 65.

EUGENE M. MANNELLA Executive Vice President, Investment
Management Services, Inc. (since August
1993). President, Brooks Asset Management
LLC; President Arapaho Partners LLC; Senior
Vice President, Lehman Brothers Inc. (May
1986 to August 1993). His address is Two
Orchard Neck Road, Center Moriches, New York
11934. Age: 46.

MARK MULLIN* Vice President, Diversified (since April,
1995). Portfolio Manager, AEGON Netherlands
(April 1993 to March 1995). Age: 36.

<PAGE> 39

B-21

PATRICIA L. SAWYER President and Executive Search Consultant,
Smith & Sawyer LLC (since 1990). Her address
is Smith & Sawyer LLC, P.O. Box 8063, Vero
Beach, Florida 32963. Age: 49.

TOM A. SCHLOSSBERG* President, Diversified (since October 1992).
Executive Vice President and Head of Pension
Operations, The Mutual Life Insurance
Company of New York (January 1993 to
December 1993). Age: 50.

OFFICERS
Mr. Schlossberg is President, Chief Executive Officer and Chairman of the Board.

ROBERT F. COLBY Secretary; Vice President and Chief
Corporate Counsel, The Mutual Life Insurance
Company of New York (April 1993 to December
1993); Vice President and General Counsel,
Diversified (since November 1993); Vice
President of Diversified Investors
Securities Corp. ("DISC") (since November
1993). Age: 44.

ALFRED C. SYLVAIN Treasurer; Vice President (since April
1994), Treasurer and Assistant Secretary
(since November 1993) of Diversified;
Director (since February 1995) and Treasurer
(since January 1994) of DISC. Age: 48.

JOHN F. HUGHES Assistant Secretary; Vice President and
Senior Counsel, Diversified (since November
1993); Vice President, AUSA Life Insurance
Company (since November, 1993); Assistant
Secretary, DISC (since November 1993). Age:
58.

COMPENSATION
For the fiscal year ended December 31, 1999, the Trust provided the following
compensation to its Trustees.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
AGGREGATE PENSION OR COMPENSATION
COMPENSATION RETIREMENT FROM THE TRUSTS
FROM BENEFITS ESTIMATED AND
DIVERSIFIED ACCRUED AS ANNUAL FUND COMPLEX
INVESTORS PART OF BENEFITS UPON PAID
NAME OF PERSON, POSITION PORTFOLIOS FUND EXPENSES RETIREMENT TO TRUSTEES
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tom A. Schlossberg
Trustee None None None None
-------------------------------------------------------------------------------------------------------------------
Neal M. Jewell
Trustee $9,750 None $4,500 $14,250
-------------------------------------------------------------------------------------------------------------------
Eugene M. Mannella
Trustee $9,750 None $4,500 $14,250
-------------------------------------------------------------------------------------------------------------------
Mark Mullin
Trustee None None $3,250 $3,250
-------------------------------------------------------------------------------------------------------------------
Patricia L. Sawyer
Trustee $13,000 None None $13,000
-------------------------------------------------------------------------------------------------------------------
</TABLE>

The Declaration of Trust provides that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust unless, as
to liability to the Trust or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in
<PAGE> 40
B-22

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 of the Trust,
or in a written opinion of independent counsel, that such officers or Trustees
have not engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.

CODE OF ETHICS

The Trustees of The Diversified Investors Funds Group, The Diversified Investors
Funds Group II Diversified Investment Advisors, Inc. and Diversified Investors
Securities Corp., the investment adviser and the broker-dealer, respectively,
have adopted a combined Code of Ethics (the"Code"). This Code prohibits specific
types of personal securities transactions which would create a conflict of
interest. It also establishes reporting requirements and preventive procedures
pursuant to the provisions of Rule 17j-1(b)(1) under the 1940 Act.

ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

At March 31, 2000, the Trustees and officers of the Trust as a group owned
beneficially less than 1% of the of the outstanding interests in each of the
Portfolios.

At March 31, 2000, AUSA Life Insurance Company, Inc. ("AUSA"), Four
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 19.73% 15.89%
- ----------------------------------------------------------------------------------------------------
High Quality Bond 40.13% 18.37%
- ----------------------------------------------------------------------------------------------------
Intermediate Government Bond 37.65% 13.58%
- ----------------------------------------------------------------------------------------------------
Core Bond 28.37% 22.72%
- ----------------------------------------------------------------------------------------------------
High-Yield Bond 24.77% 2.50%
- ----------------------------------------------------------------------------------------------------
Balanced 55.78% .58%
- ----------------------------------------------------------------------------------------------------
Value and Income 52.06% 23.14%
- ----------------------------------------------------------------------------------------------------
Equity Value 18.13% 3.53%
- ----------------------------------------------------------------------------------------------------
Growth & Income 43.32% 2.21%
- ----------------------------------------------------------------------------------------------------
Equity Growth 54.59% 10.18%
- ----------------------------------------------------------------------------------------------------
Special Equity 38.29% 17.21%
- ----------------------------------------------------------------------------------------------------
Aggressive Equity 38.52% --
- ----------------------------------------------------------------------------------------------------
International Equity 37.14% 10.21%
- ----------------------------------------------------------------------------------------------------
</TABLE>

ITEM 15. INVESTMENT ADVISORY AND OTHER 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 subject to the investment
<PAGE> 41
B-23

policies described herein and in Part A. Subject to such further policies as the
Board of Trustees of the Trust 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 one or more Subadvisers.

Each Advisory Agreement and Subadvisory 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' written notice by the
Portfolio when 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 of the Trust or
by the Adviser, as the case may be, on not more than 60 days' written notice, or
by the applicable Subadviser on not less than 90 days' written notice, 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.

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 N.V., a Netherlands corporation which is a
publicly traded international insurance group. Diversified was incorporated in
1992 for the purpose of acting as the investment adviser to the Portfolios.

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 provides services with respect to $26 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 500,000 participants and has 750 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 4,000 independent firms. Through a
rigorous portfolio manager selection process which includes researching each
potential subadviser's asset class, track record, organizational structure,
management team, consistency of performance and assets under management, five to
ten potential subadvisers are chosen. Out of that group, Diversified then
carefully chooses the three most qualified potential subadvisers based on
performance evaluation, ownership structure, personnel and philosophy to return
for an on-site visit and a quantitative and qualitative analysis by the
investment committee. Out of those three potential subadvisers, Diversified then
hires the most qualified, independent subadviser for each Portfolio, subject to
approval by the Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons" of the Trust.

Each Subadviser's performance on behalf of a Portfolio is carefully monitored by
Diversified taking into consideration investment objectives and policies and
level of risk. Diversified brings comprehensive monitoring and control to the
investment management process. It seeks superior portfolio management and moves
purposefully in replacing managers when warranted. From a plan sponsor's
perspective,
<PAGE> 42
B-24

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.

Diversified Investors Portfolios has obtained an exemptive order from the
Securities and Exchange Commission which permits the Portfolios to obtain the
services of one or more subadvisers without investor approval or the approval of
the shareholders of the funds that invest in the Portfolios. The exemptive order
also permits the terms of sub-advisory agreements to be changed and the
employment of subadvisers to be continued after events that would otherwise
cause an automatic termination of a sub-advisory agreement, in each case without
shareholder approval if those changes or continuation are approved by the
Trust's Board of Trustees. If a subadviser were added or changed without
shareholder approval, the prospectuses of the funds that invest in the
applicable portfolio would be revised and shareholders notified. Before a
Portfolio relies on the exemptive order, the Portfolio's investors must approve
it.

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 objective,
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 class so that, should a
manager change be warranted, the transition can be effected on a timely basis.

SUBADVISERS

The Subadvisers make the day-to-day investment decisions for the Portfolios,
subject in all cases to the general supervision of Diversified. The Subadvisers
are listed below.

MONEY MARKET PORTFOLIO AND

INTERMEDIATE GOVERNMENT BOND PORTFOLIO

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

CORE BOND PORTFOLIO

Payden & Rygel. Payden was formed in April of 1984 and is owned by certain of
its employees.

HIGH QUALITY BOND PORTFOLIO

Merganser Capital Management Limited Partnership. Merganser was formed in 2000
as the successor to the business an investment adviser formed in 1984 and is
owned by certain of its employees.

HIGH-YIELD BOND PORTFOLIO

Delaware Investment Advisers. Delaware Investment Advisers is a series of
Delaware Management Business Trust. Delaware is indirectly owned by Lincoln
National Corp.
<PAGE> 43
B-25

BALANCED PORTFOLIO

Aeltus Investment Management, Inc.
Payden & Rygel

Aeltus Investment Management, Inc. Aeltus was formed in November of 1972 and is
an indirect wholly-owned subsidiary of Aetna Inc.

Payden & Rygel. Payden was formed in April of 1984 and is owned by certain of
its employees.

VALUE AND INCOME PORTFOLIO

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

ARK VALUE PORTFOLIO

Ark Asset Management Co., Inc. Ark was formed in August of 1989 and is owned by
Ark Asset Holdings, Inc. Ark Asset Holdings, Inc. is owned by Ark employees.

EQUITY VALUE PORTFOLIO

Ark Asset Management Co., Inc. Ark was formed in August of 1989 and is owned by
Ark Asset Holdings, Inc. Ark Asset Holdings, Inc. is owned by Ark employees.

GROWTH & INCOME PORTFOLIO

Putnam Advisory Company, Inc. Putnam was formed in 1937 and is owned by Marsh &
McLennon Companies, Inc.

EQUITY GROWTH PORTFOLIO

Dresdner RCM Global Investors LLC
Montag & Caldwell Incorporated

Dresdner RCM Global Investors LLC was established in 1996, when Dresdner Bank AG
acquired RCM Capital Management, LLC.

Montag & Caldwell Incorporated was established in 1945 and is owned by Alleghany
Corporation.

SPECIAL EQUITY PORTFOLIO

Goldman Sachs Asset Management

Husic Capital Management

RS Investment Management, L.P.
Westport Asset Management, Inc.

Goldman Sachs Asset Management is a separate operating division of Goldman,
Sachs & Co., a worldwide investment banking firm, with numerous offices
throughout the United States and globally. Goldman, Sachs & Co. acquired Liberty
Investment Management, Inc., the predecessor firm, in January of 1997. In the
late spring or early summer of 1999, the Goldman Sachs Group, L.P., the holding
company that controls Goldman, Sachs & Co., will pursue an initial public
offering. Simultaneously with the offering, the Goldman Sachs Group, L.P. will
merge into The Goldman Sachs Group, Inc.

Husic Capital Management. ("Husic") was founded in March 1986 and is a
California limited partnership. The General Partner of Husic is Frank J. Husic &
Co., a California corporation ("Husic & Co."). Mr. Frank J. Husic is the sole
shareholder of Husic & Co. Husic has been a registered investment adviser since
1986. The principal business address of Husic is 555 California Street, Suite
2900, San Francisco,

<PAGE> 44

B-26

California 94104.

RS Investment Management, L.P. RS was established in 1999 and is indirectly
owned by BankAmerica Corporation.

Westport Asset Management, Inc. was formed in 1983 and is owned by certain of
its employees.

AGGRESSIVE EQUITY PORTFOLIO

McKinley Capital Management, Inc. McKinley was formed in March of 1991 and is
owned by Robert B. Gillam.

INTERNATIONAL EQUITY PORTFOLIO

Capital Guardian Trust Company. Capital Guardian was formed in 1968 and is owned
by Capital Group International, Inc., which is owned by The Capital Group
Companies, Inc.
<PAGE> 45
B-27

ADVISORY FEES

Diversified is entitled to receive investment advisory fees, which are accrued
daily and payable monthly, at an annual percentage of each Portfolio's average
daily net assets. The rates for the Portfolios are shown in the table below.

Each of the Subadvisers is entitled to receive a fee from Diversified at an
annual percentage of each Portfolio's average daily net assets. The rates are
shown in the table below.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMPENSATION COMPENSATION
(%) (%)
PORTFOLIO SUBADVISERS TO ADVISER (1) TO SUBADVISERS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Portfolio Capital Management Group 0.25 0.05
- ------------------------------------------------------------------------------------------------------------------
High Quality Bond Merganser Capital Management Limited
Portfolio Partnership 0.35 (2)
- ------------------------------------------------------------------------------------------------------------------
Intermediate Government
Bond Portfolio Capital Management Group 0.35 0.15
- ------------------------------------------------------------------------------------------------------------------
Core Bond Portfolio Payden & Rygel 0.35 0.15
- ------------------------------------------------------------------------------------------------------------------
High-Yield Bond
Portfolio Delaware Investment Advisers 0.55 (3)
- ------------------------------------------------------------------------------------------------------------------
Aeltus Investment Management, Inc. 0.45
Balanced Portfolio Payden & Rygel (4) (5)
- ------------------------------------------------------------------------------------------------------------------
Value and Income
Portfolio Asset Management Group 0.45 (6)
- ------------------------------------------------------------------------------------------------------------------
Ark Value Portfolio Ark Asset Management Co., Inc. 0.57 (7)
- ------------------------------------------------------------------------------------------------------------------
Equity Value Portfolio Ark Asset Management Co., Inc. 0.57 (8)
- ------------------------------------------------------------------------------------------------------------------
Growth & Income
Portfolio Putnam Advisory Company, Inc. 0.60 (9)
- ------------------------------------------------------------------------------------------------------------------
Dresdner RCM Global Investors LLC Montag
Equity Growth Portfolio & Caldwell, Inc. 0.62 (10)
- ------------------------------------------------------------------------------------------------------------------
Special Equity
Portfolio Goldman Sachs Asset Management 0.80 0.50
Husic Capital Management
RS Investment Management, L.P.
Westport Asset Management, Inc.
- ------------------------------------------------------------------------------------------------------------------
Aggressive Equity
Portfolio McKinley Capital Management, Inc. 0.97 (10)
- ------------------------------------------------------------------------------------------------------------------
International Equity
Portfolio Capital Guardian Trust Company 0.75 (11)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

- ---------------
(1) The Adviser is currently waiving a portion of its fees.

(2) 0.25% on the first $100,000,000 of average net assets of the High Quality
Bond Portfolio and 0.15% on all assets in excess of $100,000,000.

(3) 0.40% on the first $20,000,000 of average net assets of the High-Yield
Bond Portfolio, 0.30% on the next $20,000,000 in assets and 0.20% on
assets in excess of $40,000,000.

(4) For Aeltus, 0.20% on the first $200,000,000 of average net assets, 0.15%
on the next $300,000,000 of average net assets, 0.125% on the next
$500,000,000 of average net assets, and 0.10% on all assets in excess of
$1,000,000,000. For Payden & Rygel, 0.20% on the first $50,000,000 of
average net assets, 0.15% on the next $50,000,000 of average net assets,
and 0.10% on all assets in excess of $100,000,000.
<PAGE> 46
B-28

(5) 0.35% on the first $50,000,000 of average net assets of the Balanced
Portfolio, 0.30% on the next $50,000,000 in assets and 0.25% on assets in
excess of $100,000,000.

(6) 0.25% on the first $100,000,000 of average net assets of the Value and
Income Portfolio and 0.20% on assets in excess of $100,000,000.

(7) 0.45% on the first $100,000,000 of average net assets of the Ark Value
Portfolio, 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.

(8) 0.45% on the first $100,000,000 of average net assets of the Equity Value
Portfolio, 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.

(9) 0.30% on the first $100,000,000 of average net assets of the Growth &
Income Portfolio, 0.20% on assets in excess of $100,000,000.

(10) With respect to assets of the Equity Growth Portfolio allocated to each
Subadviser: 0.50% on the first $50,000,000 of average net assets, 0.25%
on the next $50,000,000 in assets and 0.20% on all assets in excess of
$100,000,000.

(11) 0.90% on the first $10,000,000 of average net assets of the Aggressive
Equity Portfolio, 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.

(12) 0.75% on the first $25,000,000 of average net assets of the
International Equity Portfolio, 0.60% on the next $25,000,000 in assets,
0.425% from $50,000,000 in assets to $250,000,000 in assets, and 0.375%
on all assets in excess of $250,000,000.

Diversified has agreed to waive its investment advisory fees to the extent
necessary to limit the total operating expenses of each Portfolio to a specified
level. Diversified also may contribute to the Portfolios from time to time to
help them maintain competitive expense ratios. These arrangements are voluntary
and may be terminated at any time.

For the fiscal year ended December 31, 1997, Diversified earned and voluntarily
waived advisory fees as indicated with respect to the following Portfolios:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PORTFOLIO EARNED WAIVED
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $ 553,205 $ --
- ----------------------------------------------------------------------------------------
High Quality Bond 707,143 --
- ----------------------------------------------------------------------------------------
Intermediate Government Bond 340,670 15,525
- ----------------------------------------------------------------------------------------
Core Bond (formerly Government/Corporate Bond) 1,174,374 --
- ----------------------------------------------------------------------------------------
High-Yield Bond 182,367 46,946
- ----------------------------------------------------------------------------------------
Balanced 1,547,690 --
- ----------------------------------------------------------------------------------------
Value and Income (formerly Equity Income) 4,950,239 --
- ----------------------------------------------------------------------------------------
Equity Value 882,508 56,044
- ----------------------------------------------------------------------------------------
Growth & Income 1,679,535 --
- ----------------------------------------------------------------------------------------
Equity Growth 2,405,212 --
- ----------------------------------------------------------------------------------------
Special Equity 4,986,640 --
- ----------------------------------------------------------------------------------------
Aggressive Equity 182,991 61,577
- ----------------------------------------------------------------------------------------
International Equity 1,434,770 16,399
- ----------------------------------------------------------------------------------------
</TABLE>

<PAGE> 47
B-29

For the fiscal year ended December 31, 1998, Diversified earned and voluntarily
waived advisory fees as indicated with respect to the following Portfolios:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PORTFOLIO EARNED WAIVED
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $ 654,703 --
- -----------------------------------------------------------------------------------------
High Quality Bond 753,726 --
- -----------------------------------------------------------------------------------------
Intermediate Government Bond 491,360 $ 2,380
- -----------------------------------------------------------------------------------------
Core Bond (formerly Government/Corporate Bond) 1,606,383 --
- -----------------------------------------------------------------------------------------
High-Yield Bond 423,436 $27,930
- -----------------------------------------------------------------------------------------
Balanced 2,065,391 --
- -----------------------------------------------------------------------------------------
Value and Income (formerly Equity Income) 5,830,442 --
- -----------------------------------------------------------------------------------------
Equity Value 2,104,570 $42,746
- -----------------------------------------------------------------------------------------
Growth & Income 3,258,008 --
- -----------------------------------------------------------------------------------------
Equity Growth 3,276,416 11,336
- -----------------------------------------------------------------------------------------
Special Equity 6,306,533 5,925
- -----------------------------------------------------------------------------------------
Aggressive Equity 470,377 51,355
- -----------------------------------------------------------------------------------------
International Equity 2,029,625 30,764
- -----------------------------------------------------------------------------------------
</TABLE>

For the fiscal year ended December 31, 1999, Diversified earned and voluntarily
waived advisory fees as indicated with respect to the following Portfolios:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PORTFOLIO EARNED WAIVED
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $ 925,652 --
- -----------------------------------------------------------------------------------------
High Quality Bond 794,958 --
- -----------------------------------------------------------------------------------------
Intermediate Government Bond 605,483 --
- -----------------------------------------------------------------------------------------
Core Bond (formerly Government/Corporate Bond) 1,995,476 --
- -----------------------------------------------------------------------------------------
High-Yield Bond 617,744 --
- -----------------------------------------------------------------------------------------
Balanced 2,284,131 --
- -----------------------------------------------------------------------------------------
Value and Income (formerly Equity Income) 16,502,830 --
- -----------------------------------------------------------------------------------------
Equity Value 2,378,610 --
- -----------------------------------------------------------------------------------------
Growth & Income 5,981,552 --
- -----------------------------------------------------------------------------------------
Equity Growth 5,900,858 --
- -----------------------------------------------------------------------------------------
Special Equity 7,623,496 --
- -----------------------------------------------------------------------------------------
Aggressive Equity 1,394,114 --
- -----------------------------------------------------------------------------------------
International Equity 3,213,534 --
- -----------------------------------------------------------------------------------------
</TABLE>

In addition to amounts payable under the Advisory Agreement, the Trust's
expenses include, among other things, the costs of securities transactions, the
compensation of Trustees that are not affiliated with Diversified, government
fees, taxes, accounting and legal fees, expenses of communicating with
investors, interest expense, and insurance premiums.

The following table shows each Portfolio's expenses, after waivers and
reimbursements, for the fiscal year ended December 31, 1999, expressed as a
percentage of average net assets.

<PAGE> 48

B-30

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PORTFOLIO EXPENSES
- ---------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio 0.28%
- ---------------------------------------------------------------------------
High Quality Bond Portfolio 0.38%
- ---------------------------------------------------------------------------
Intermediate Government Bond Portfolio 0.39%
- ---------------------------------------------------------------------------
Core Bond Portfolio 0.37%
- ---------------------------------------------------------------------------
High-Yield Bond Portfolio 0.60%
- ---------------------------------------------------------------------------
Balanced Portfolio 0.50%
- ---------------------------------------------------------------------------
Equity Income Portfolio 0.46%
- ---------------------------------------------------------------------------
Equity Value Portfolio 0.60%
- ---------------------------------------------------------------------------
Growth & Income Portfolio 0.62%
- ---------------------------------------------------------------------------
Equity Growth Portfolio 0.64%
- ---------------------------------------------------------------------------
Special Equity Portfolio 0.84%
- ---------------------------------------------------------------------------
Aggressive Equity Portfolio 1.00%
- ---------------------------------------------------------------------------
International Equity Portfolio 0.86%
- ---------------------------------------------------------------------------
</TABLE>

ADMINISTRATOR

Diversified provides administrative services to the Portfolios under the
Advisory Agreement with the Trust. The Advisory Agreement provides that
Diversified may render services to others as administrator. In addition, the
Advisory Agreement terminates automatically if it is assigned and may be
terminated without penalty by majority vote of the investors in the Trust (with
the vote of each being in proportion to the amount of its investment). The
Advisory Agreement also provides that neither Diversified nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in connection with administrative services provided to any Portfolio,
except for willful misfeasance, bad faith or gross negligence in the performance
of its or their duties or by reason of reckless disregard of its or their duties
or obligations under said agreements. Diversified receives no additional
compensation for providing such administrative services.

CUSTODIAN

Pursuant to Custodian Agreements, Investors Bank & Trust Company acts as the
custodian of each Portfolio's assets (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the cash and securities of
each Portfolio, handling the receipt and delivery of securities, determining
income and collecting interest on the investments of each Portfolio, 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 Board of 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 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

PricewaterhouseCoopers LLP serves as the Portfolios' independent accountants
providing audit and accounting services including (a) audit of the annual
financial statements, (b) assistance and consultation with respect to filings
with the SEC and (c) preparation of annual income tax returns.
<PAGE> 49
B-31

ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.

Except as may be required to ensure satisfaction of certain tests applicable to
regulated investment companies under the Internal Revenue Code of 1986, as
amended (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 applicable Subadviser believes that a transaction net of costs
(including custodian charges) will help achieve the Portfolio's investment
objective.

Set forth below are the turnover rates for the Portfolios. A rate of 100%
indicates that the equivalent of all the Portfolio's assets have been sold and
reinvested in a year. High portfolio turnover may result in realization of
substantial net capital gains or losses. To the extent net short term capital
gains are realized, any distributions resulting from such gains are considered
ordinary income for federal income tax purposes.

TURNOVER TURNOVER TURNOVER
PORTFOLIO RATES 1997 RATES 1998 RATES 1999
<S> <C> <C> <C>
High Quality Bond 62% 68% 56%
Intermediate Government Bond 45% 45% 25%
Core Bond (formerly Government/Corporate Bond) 64% 102% 307%
High-Yield Bond 109% 83% 145%
Balanced 87% 91% 256%
Value and Income (formerly Equity Income) 33% 31% 43%
Equity Value 120% 107% 80%
Growth & Income 87% 75% 86%
Equity Growth 91% 104% 44%
Special Equity 146% 173% 171%
Aggressive Equity 243% 121% 132%
International Equity 31% 33% 35%
</TABLE>

A Portfolio's purchases and sales of securities may be principal transactions,
that is, securities may be purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually are no brokerage
commissions paid for such purchases and, therefore, the Portfolios do not
anticipate paying brokerage commissions in such transactions.

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

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 Portfolio's Subadviser or its affiliates. If, however, a
Portfolio and other investment companies or accounts managed by the Subadviser
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
<PAGE> 50
B-32

Portfolio. In addition, when purchases or sales of the same security for a
Portfolio and for other investment companies managed by the Subadviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.

The following Portfolios paid the approximate brokerage commissions indicated
for the fiscal years noted below:

Balanced Portfolio:

Fiscal year ended December 31, 1997: $324,465

Fiscal year ended December 31, 1998: $488,301

Fiscal year ended December 31, 1999: $826,394

Value and Income Portfolio

Fiscal year ended December 31, 1997: $659,256

Fiscal year ended December 31, 1998: $855,733

Fiscal year ended December 31, 1999: $1,129,249

Equity Value Portfolio

Fiscal year ended December 31, 1997: $548,229

Fiscal year ended December 31, 1998: $890,565

Fiscal year ended December 31, 1999: $742,561

Growth & Income Portfolio

Fiscal year ended December 31, 1997: $390,268

Fiscal year ended December 31, 1998: $728,627

Fiscal year ended December 31, 1999: $1,093,564

Equity Growth Portfolio

Fiscal year ended December 31, 1997: $483,139

Fiscal year ended December 31, 1998: $853,305

Fiscal year ended December 31, 1999: $749,655

Special Equity Portfolio

Fiscal year ended December 31, 1997: $1,017,376

Fiscal year ended December 31, 1998: $1,495,526

Fiscal year ended December 31, 1999: $1,349,955

Aggressive Equity Portfolio

Fiscal year ended December 31, 1997: $48,943

Fiscal year ended December 31, 1998: $114,263

Fiscal year ended December 31, 1999: $235,606

International Equity Portfolio

Fiscal year ended December 31, 1997: $295,967

Fiscal year ended December 31, 1998: $414,060

Fiscal year ended December 31, 1999: $494,520

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

ITEM 17. 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 fourteen 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

<PAGE> 51
B-33

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.

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 any 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.
<PAGE> 52
B-34

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 willful 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 willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Trust. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that such
officers or Trustees have not engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.

ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.

Beneficial interests in each 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. Investments in each Portfolio may only be made by
investment companies, common or commingled trust funds or similar organizations
or entities which 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 net asset value of each Portfolio (i.e., the value of its securities and
other assets less its liabilities, including expenses payable or accrued) is
determined each day during which the New York Stock Exchange (the "Exchange") is
open for trading ("Business Day"). As of the date of this Registration
Statement, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. This
determination of net asset value of each Portfolio is made once each day as of
the close of regular trading on the Exchange (normally 4:00 p.m. Eastern time).
As set forth in more detail below, purchases and withdrawals will be effected at
the time of determination of net asset value next following the receipt of any
purchase or withdrawal order.

Trading in securities on most non-U.S. exchanges and over-the-counter markets is
normally completed before the close of regular trading on the New York Stock
Exchange and may also take place on days on which the New York Stock Exchange is
closed. If events materially affecting the value of non-U.S. securities occur
between the time when the exchange on which they are traded closes and the time
when a Portfolio's net asset value is calculated, such securities may be valued
at fair value in accordance with procedures established by and under the general
supervision of the Board of Trustees of the Trust.

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
<PAGE> 53
B-35

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 Trust's 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 of the Trust.

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,
Diversified, under the supervision of the Board of Trustees of the Trust, in
good faith, will establish a conversion rate for such currency.

A determination of fair value used in calculating net asset value must be made
in good faith utilizing procedures approved by the Board of Trustees of the
Trust. 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: (a) the fundamental analytical data relating to the
investment; (b) the nature and duration of restrictions on disposition of the
securities; and (c) an evaluation of the forces which influence the market in
which these securities are purchased and sold. Without limiting or including all
of the specific factors which may be considered in determining fair value, some
of the specific factors include: type of security, financial statements of the
issuer, cost at date of purchase, size of holding, discount from market value,
value of unrestricted securities of the same class at the time of purchase,
special reports prepared by analysts, information as to any transactions or
offers with respect to the security, existence of merger proposals or tender
offers affecting the securities, price and extent of public trading in similar
securities of the issuer or comparable companies, and other relevant matters.

Each investor in each Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of 4:00 p.m. (New York time) (or any earlier
close of regular trading on the Exchange) 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 (a) the
numerator of which is the value of such investor's investment in the Portfolio
as of 4:00 p.m. (or the earlier close of regular trading on the Exchange) 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 (b) the denominator of which is the aggregate net asset value of the
Portfolio as of 4:00 p.m. (or the earlier close of regular trading on the
Exchange) 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 a Portfolio as of 4:00 p.m.
(or the earlier close of regular trading on the Exchange) on the following day
the Exchange is open for trading.
<PAGE> 54
B-36

Subject to compliance with applicable regulations, the Trust has reserved the
right to pay the redemption price of beneficial interests in a Portfolio, either
totally or partially, by a distribution in kind of readily marketable securities
(instead of cash). The securities so distributed would be valued at the same
amount as that assigned to them in calculating the net asset value for the
beneficial interests being sold. If a holder of beneficial interests received a
distribution in kind, such holder could incur brokerage or other charges in
converting the securities to cash.

The Trust may suspend the right of redemption or postpone the date of payment
for beneficial interests in a Portfolio more than seven days during any period
when (a) trading in the markets the Portfolio normally utilizes is restricted,
or an emergency, as defined by the rules and regulations of the SEC, exists
making disposal of the Portfolio's investments or determination of its net asset
value not reasonably practicable; (b) the Exchange is closed (other than
customary weekend and holiday closings); or (c) the SEC has by order permitted
such suspension.

ITEM 19. TAXATION OF EACH PORTFOLIO.

The Trust is organized as a trust under New York law. The Trust has determined
that each Portfolio is properly treated as a separate partnership for federal
and New York State income tax purposes. Accordingly, under those tax laws, the
Portfolios are not subject to any income tax. Each Portfolio's taxable year ends
December 31. Although the Portfolios are not subject to federal income tax, they
file appropriate federal income tax returns.

A Portfolio may be subject to foreign withholding and other taxes with respect
to income on certain securities of non-U.S. issuers. These taxes may be reduced
or eliminated under the terms of an applicable U.S. income tax treaty. It is not
possible to determine a Portfolio's effective rate of foreign tax in advance,
since the amount of the Portfolio's assets to be invested within various
countries is not known. The Trust does not anticipate that investors qualifying
as regulated investment companies under Section 851 of the Code ("RICs") and
investing substantially all of their assets in any Portfolio other than the
International Equity Portfolio will be able to pass through to their
shareholders any foreign tax credit or deduction for federal income tax purposes
with respect to the foreign withholding taxes paid by the Portfolio, if any.
Investors qualifying as RICs and investing in the International Equity Portfolio
may be able to pass through to their shareholders any foreign tax credit or
deduction for federal income tax purposes with respect to the foreign
withholding taxes paid by that Portfolio, if any, if at the end of the
investor's fiscal year the investor holds more than 50% of its assets in foreign
stocks and securities.

Each investor in a Portfolio must take into account its share of that
Portfolio's ordinary income, expense, capital gains and losses, credits, and
other items in determining its income tax liability. The determination of such
share is made in accordance with the governing instruments of the Trust and the
Code, and regulations promulgated thereunder. Distributions to and withdrawals
by an investor are generally not taxable. However, to the extent the cash
proceeds of any withdrawal or distribution exceed an investor's adjusted tax
basis in its partnership interest in a Portfolio, the investor will generally
realize gain for federal income tax purposes. If, upon a complete withdrawal
(i.e., a redemption of its entire interest in the Portfolio), the investor's
adjusted tax basis in its partnership interest in the Portfolio exceeds the
proceeds of the withdrawal, the investor will generally realize a loss for
federal income tax purposes. An investor's adjusted tax basis in its partnership
interest in the Portfolio will generally be the aggregate price paid therefor,
increased by the amounts of its distributive shares of items of realized net
income and gain (including income, if any, exempt from federal income tax), and
reduced, but not below zero, by the amounts of its distributive shares of items
of net loss and the amounts of any distributions received by the investor. This
discussion does not address any distributions by the Portfolios in kind (i.e.,
any distributions of readily marketable securities or other non-cash property),
which will be subject to special tax rules and may have consequences different
from those described in this paragraph.

The Trust believes that, in the case of an investor in a Portfolio that seeks to
qualify as a RIC, the investor should be treated for federal income tax purposes
as an owner of an undivided interest in the
<PAGE> 55
B-37

assets and operations of the Portfolio, and accordingly should be deemed to own
a proportionate share of each of the assets of the Portfolio and be entitled to
treat as earned by it the portion of the Portfolio's gross income attributable
to that share. Each investor should consult its tax advisers regarding whether,
in light of its particular tax status and any special tax rules applicable to
it, this approach applies to its investment in the Portfolio, or whether a
Portfolio should be treated, as to it, as a separate entity as to which the
investor has no direct interest in Portfolio assets or operations.

In order to enable an investor in a Portfolio that is otherwise eligible to
qualify as a RIC to so qualify, the Trust intends that each Portfolio will
satisfy the requirements of Subchapter M of the Code relating to the nature of
each Portfolio's gross income and the composition (diversification) of each
Portfolio's assets as if those requirements were directly applicable to such
Portfolio and will allocate and permit withdrawals of its net investment income
and any net realized capital gains in a manner that will enable an investor that
is a RIC to comply with the qualification requirements imposed by Subchapter M
of the Code.

Foreign exchange gains and losses realized by a Portfolio will generally be
treated as ordinary income and losses for federal income tax purposes. Certain
uses of foreign currency and foreign currency forward contracts and investments
in certain "passive foreign investment companies" may be limited in order to
enable an investor that is a RIC to avoid imposition of a tax. A Portfolio may
elect to mark to market any investments in "passive foreign investment
companies" on the last day of each year. This election may cause the Portfolio
to recognize income prior to the receipt of cash payments with respect to those
investments; in order to distribute this income and avoid a tax on any RICs
investing in the Portfolio, the Portfolio may be required to liquidate portfolio
securities that it might otherwise have continued to hold.

A Portfolio's investment in zero-coupon bonds will cause the Portfolio to
recognize income prior to the receipt of cash payments with respect to those
securities. In order to enable any investor which is a RIC to distribute this
income and avoid a tax, the Portfolio may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially resulting
in additional taxable gain or loss.

A Portfolio's short sales "against the box" and transactions in options, foreign
currency forward contracts, and futures contracts, if any, will be subject to
special tax rules that may affect the amount, timing, and character of Portfolio
income. For example, certain positions held for the Portfolio on the last
business day of each taxable year will be marked to market (i.e., treated as if
sold) on that day, and any gain or loss associated with the positions will be
treated as 60% long-term and 40% short-term capital gain or loss. Certain
positions held for a Portfolio that substantially diminish its risk of loss with
respect to other positions in its portfolio may constitute "straddles," and may
be subject to special tax rules that would cause deferral of Portfolio losses
and adjustments in the holding periods of Portfolio securities. Certain tax
elections exist for straddles that may alter the effects of these rules. Each
Portfolio intends to limit its activities in options, foreign currency forward
contracts, and futures contracts to the extent necessary to enable any investor
which is a RIC to meet the requirements of Subchapter M of the Code.

There are certain tax issues which will be relevant to only certain investors,
specifically, investors which are segregated asset accounts and investors who
contribute assets other 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 advisers as to the tax consequences of an investment in a
Portfolio.

The above discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions, or the state, local, or non-U.S. tax laws that may
be applicable to certain investors. Investors should consult their own tax
advisers with respect to the special tax rules that may apply in their
particular situations, as well as the state, local, or foreign tax consequences
to them of investing in a Portfolio.
<PAGE> 56
B-38

ITEM 20. UNDERWRITERS.

The exclusive placement agent for the Portfolios is Diversified Investors
Securities Corp. ("DISC"). DISC receives no compensation for serving as the
exclusive placement agent for the Portfolios.

ITEM 21. CALCULATION OF PERFORMANCE DATA.

Not applicable.

ITEM 22. FINANCIAL STATEMENTS.

The financial statements of the Trust as of December 31, 1999, have been filed
with the Securities and Exchange Commission as part of the Trust's annual report
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder, and are
hereby incorporated herein by reference from such report. A copy of such report
will be provided without charge to each person receiving this Part B.

<PAGE> 57
A-1

APPENDIX A

DESCRIPTION OF SECURITY RATINGS

STANDARD & POOR'S

CORPORATE AND MUNICIPAL BONDS

AAA -- An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA -- An obligation rated AA differs from the highest rated obligations only in
a small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A -- An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB -- An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB -- An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

Plus (+) or minus (-) -- The ratings from AA to BB may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.

COMMERCIAL PAPER, INCLUDING TAX EXEMPT

A-1 -- A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2 -- A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

A-3 -- A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

MOODY'S

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. 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 risk appear somewhat larger than the Aaa securities.
<PAGE> 58
A-2

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 some time 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 Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:

- - Leading market positions in well established industries.

- - High rates of return on funds employed.

- - Conservative capitalization structure 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.
<PAGE> 59

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS.

<TABLE>
<S> <C> <C>
a(1) Declaration of Trust of the Registrant.(1)
a(2) Form of Amended and Restated Establishment and Designation
of Series of Beneficial Interests.*
b By-Laws of the Registrant.(1)
d(1) Form of Investment Advisory Agreement between the Registrant
and Diversified Investment Advisors, Inc.
("Diversified").(1)
d(2) Form of Investment Subadvisory Agreement.(1)
d(3) Form of Investment Subadvisory Agreement between Diversified
and Husic Capital Management.*
d(4) Form of Investment Subadvisory Agreement between Diversified
and Payden & Rygel.*
d(5) Form of Investment Subadvisory Agreement between Diversified
and Merganser Capital Management, LP.*
d(6) Form of Investment Advisory Agreement between the Registrant
on behalf of Ark Value Portfolio and Diversified.*
d(7) Form of Investment Subadvisory Agreement between Diversified
and Ark Asset Management Co., Inc.*
g Form of Custodian Contract between the Registrant and
Investors Bank & Trust Company.(1)
l Investment representation letters from initial investors.(1)
p Code of Ethics.*
</TABLE>

- ---------------
(1) Incorporated herein by reference from the Registrant's Registration
Statement (the "Registration Statement") on Form N-1A (File No. 811-8272) as
filed with the U.S. Securities and Exchange Commission (the "Commission") on
April 30, 1997.

(*) Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not Applicable.

ITEM 25. INDEMNIFICATION.

Reference is made to Article V of the Registrant's Declaration of Trust,
incorporated by reference from the registration statement on Form N-1A of
Diversified Investors Portfolios (File No. 811-8272) as filed with the
Securities and Exchange Commission on April 30, 1997.

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 a
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

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

C- 1
<PAGE> 60

Information as to the name, address and principal business of the directors and
executive officers of Diversified is included in its Form ADV as filed with the
Commission, and such information is hereby incorporated herein by reference from
such Form ADV.

ITEM 27. PRINCIPAL UNDERWRITERS.

Not applicable.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

Diversified Investors Portfolios
4 Manhattanville Road
Purchase, New York 10577

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

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

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

ITEM 29. MANAGEMENT SERVICES.

Not applicable.

ITEM 30. UNDERTAKINGS.

Not applicable.

C- 2
<PAGE> 61

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the County of Westchester and the State of New York, on the 6th
day of April, 2000.

DIVERSIFIED INVESTORS PORTFOLIOS

By: /s/ ROBERT F. COLBY

--------------------------------------
Robert F. Colby
Secretary
<PAGE> 62

EXHIBIT LIST

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(a)(2) Amended and Restated Establishment and Designation of Series
of Beneficial Interests.
(d)(3) Form of Investment Subadvisory Agreement between Diversified
and Husic Capital Management.
(d)(4) Form of Investment Subadvisory Agreement between Diversified
and Payden & Rygel.
(d)(5) Form of Investment Subadvisory Agreement between Diversified
and Merganser Capital Management, LP.
(d)(6) Form of Investment Advisory Agreement between the Registrant
on behalf of Ark Value Portfolio and Diversified.
(d)(7) Form of Investment Subadvisory Agreement between Diversified
and Ark Asset Management Co., Inc.
(p) Code of Ethics.
</TABLE>

<PAGE> 1
Exhibit a(2)
FORM OF
DIVERSIFIED INVESTORS PORTFOLIOS

AMENDED AND RESTATED
ESTABLISHMENT AND DESIGNATION OF SERIES OF BENEFICIAL INTERESTS
DATED AS OF APRIL ____, 2000

Pursuant to Section 6.2 of the Declaration of Trust, dated as of
September 1, 1993, as amended (as so amended, the "Declaration of Trust"), of
Diversified Investors Portfolios (the "Trust"), the undersigned, being not less
than a majority of the Trustees of the Trust, do hereby amend and restate the
Trust's existing Establishment and Designation of Series appended to the
Declaration of Trust in order to (i) establish and designate an additional
series of Interests (as defined in the Declaration of Trust) to the Trust's
series of Interests (each a "Series" and collectively the "Series") and (ii)
change the name of one existing Series of the Trust. No changes to the special
and relative rights of the existing Series are intended by this amendment and
restatement.

1. (a) The existing Series are as follows:

Money Market Portfolio
High Quality Bond Portfolio
Intermediate Government Bond Portfolio
Core Bond Portfolio
High-Yield Bond Portfolio
Balanced Portfolio
Equity Income Portfolio
Equity Value Portfolio
Growth & Income Portfolio
Equity Growth Portfolio
Special Equity Portfolio
Aggressive Equity Portfolio
International Equity Portfolio.

(b) An additional Series is hereby designated "Ark Value
Portfolio."

(c) The name of the Series currently designated "Equity
Income Portfolio" is hereby changed to "Value &
Income Portfolio."

2. Each Series shall be authorized to hold cash, invest in securities,
instruments and other properties, and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Investment Company Act of 1940, as amended, to the extent pertaining
to that Series. The proceeds of sales of Interests of a Series, together with
any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to that Series, unless otherwise required by law.

<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT

INVESTMENT SUBADVISORY AGREEMENT, dated as of November 16, 1999, by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified") and Husic Capital Management, a California limited partnership
(hereinafter "Subadvisor" or "Husic")

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 Special Equity
Portfolio ("Portfolio"), a series of Diversified Investors Portfolios, a
diversified open-end 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 such amount of the Portfolio's
assets as is determined from time to time by the Portfolio's Board of Trustees
and communicated in writing to the Subadvisor, 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 reasonably consider necessary
for the proper supervision of the Subadvisor's portion 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 under the control of
the Subadvisor shall be held uninvested, subject always to the provisions of
the 1940 Act and to the Portfolio's then-current Registration Statement on Form
N-1A.

In particular, the Subadvisor shall, without limiting the foregoing: (i)
continuously review, supervise and implement the investment program of the
<PAGE> 2
Portfolio under their control; (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, 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
as requested in writing; and (ix) render regular reports as requested to the
Portfolio's officers and Directors concerning the Subadvisor's discharge of the
foregoing responsibilities.

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 in writing
that such policy has been revoked. The initial Statement of Investment Policy
and Guidelines is attached hereto as Appendix I ("Guidelines").

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 best 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

2
<PAGE> 3
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 Husic 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. Diversified understands and
agrees that Subadvisor's brokerage practices shall be consistent with the
disclosure in Schedule F of Subadvisor's Form ADV, as amended from time to time,
and that Subadvisor's brokerage practices so disclosed shall be deemed
acceptable for purposes of this Agreement.

Notwithstanding the provisions of the previous paragraph and subject to
such policies and procedures as may be adopted by the Board of Trustees and
officers of the Portfolio and communicated in writing to Subadvisor, 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 out-of-pocket 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
non-recurring events and expenses relating to the issuance, registration and
qualification of shares of the Portfolio.

3
<PAGE> 4
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 Portfolio's 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 N-1A of the Portfolio relative to the
Subadvisor, Advisor and its Trustees and officers.

5. Representations and Warranties of Diversified. Diversified represents
and warrants to Subadvisor and agrees with Subadvisor as follows. Diversified
has the requisite legal capacity and authority to execute, deliver and perform
its obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Diversified and is the legal, valid and binding
agreement of Diversified, enforceable against Diversified in accordance with
its terms. Diversified's execution of this Agreement and the performance of its
obligations hereunder do not conflict with or violate any provisions of the
governing documents (if any) of Diversified or the Portfolio or any obligations
by which Diversified or the Portfolio is bound, whether arising by contract,
operation of law or otherwise. Diversified is experienced in engaging
subadvisors and is aware of the risks associated with such engagements,
including the risk that the Portfolio could suffer substantial diminution in
value.

6. Allocation of Investments. Diversified acknowledges and understands
that Subadvisor engages in an investment advisory business apart from managing
the Portfolio. This will create conflicts of interest with the Portfolio over
Subadvisor's time devoted to managing the Portfolio and the allocation of
investment opportunities among accounts (including the Portfolio) managed by
Subadvisor. Subadvisor will attempt to resolve all such conflicts in a manner
that is generally fair to all of its clients. Diversified confirms that
Subadvisor may give advice and take action with respect to any of its other
clients that may differ from advice given or the timing or nature of action
taken with respect to the Portfolio so long as it is Subadvisor's policy, to the
extent practicable, to allocate investment opportunities to the Portfolio over
a period of time on a fair and equitable basis relative to other clients.
Nothing in this Agreement shall be deemed to obligate Subadvisor to acquire for
the Portfolio any security that Subadvisor or Subadvisor's officers, partners,
employees or affiliates may acquire for Subadvisor's or their own

4
<PAGE> 5
accounts or for the account of any other client, if, in the absolute discretion
of Subadvisor, it is not practical or desirable to acquire such Security for
the Portfolio.

7. Limits on Duties. The Subadvisor shall be responsible only for
managing the assets in good faith and in accordance with the Portfolio's
Guidelines and shall have no responsibility whatsoever for, and shall incur no
liability on account of (i) diversification, selection, establishment or
modification of such Guidelines (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, or compliance with Subchapter M of the
Internal Revenue Code of 1986, as amended, and Husic and its partners, officers
and employees shall to the fullest extent permitted by applicable law (and
subject to the applicable provisions of Section 17(i) of the 1940 Act), be
indemnified and held harmless by Diversified for Husic's actions or omissions
in carrying out the terms and provisions of this Agreement, and including,
without limitation, against any actual or alleged loss, claim, damage,
expense, (including without limitation, reasonable attorneys fees and costs),
costs and settlement related to or resulting from indemnification to the
Portfolio, or any shareholder thereof and, brokers and commission merchants,
fines, taxes, penalties and interest. To the extent permitted under applicable
law, Diversified agrees that Subadvisor will not be liable to Diversified or
the Portfolio for any losses incurred by Diversified or the Portfolio that
arise out of or are in any way connected with any recommendation or other act
or failure to act of Subadvisor under this Agreement, including, but not
limited to, any error in judgment with respect to the Portfolio, so long as
such recommendation or other act or failure to act does not constitute a breach
of Subadvisor's fiduciary duty to Diversified or the Portfolio, or a breach of
applicable law, or a breach of the terms of this Agreement. Should any such
breach occur 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.

8. Exclusivity. Subadvisor represents to Diversified that during the term
of this Agreement Subadvisor will not enter into any further agreement to
subadvise any similar portfolio, any collective trust, open-end 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

<PAGE> 6
that are offered to the types of employee benefit plans (referenced in Schedule
C) without providing Diversified with written notice after agreement is reached.
It is understood that Subadvisor shall not be limited by this section 8 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 non-U.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).

9. 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" with respect to this Agreement or of
the 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.

10. Certain Records. Any records to be maintained and preserved pursuant
to the provisions of Rule 31a-1 and Rule 31a-2 adopted under the 1940 Act which
are prepared or maintained by the Subadvisor on behalf of the Portfolio are the

6
<PAGE> 7
property of the Portfolio and will be surrendered promptly to the Portfolio on
request.

11. Survival of Compensation Rates. All rights to compensation under this
Agreement and the provisions of Section 7 hereof, shall survive the termination
of this Agreement.

12. 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 9 hereof.

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

14. 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
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 non-routine 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.

15. Use of Name and Confidentiality. Subadvisor hereby agrees that
Diversified may use the Subadvisor's name in its marketing or advertising
materials. Diversified agrees to allow the Subadvisor a reasonable time to
examine and approve any such materials prior to use. Except as required by law,
(a) Subadvisor agrees to maintain in strict confidence all financial
information regarding Diversified that is furnished to Subadvisor by
Diversified (except that Diversified consents to disclosure of Diversified's
identity as a client of Subadvisor), and (b) Diversified agrees to maintain in
strict confidence all investment advice and information furnished to
Diversified by Subadvisor. Notwithstanding anything to the contrary above,
Diversified consents to the use and disclosure by Subadvisor of Subadvisor's
investment experience and performance with respect to the Portfolio, without
disclosing the identity of Diversified in connection with such experience or
performance. Subadvisor may disclose identity of Diversified in its
representative client list.

7
<PAGE> 8
16. Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any and all
other provisions hereof.

17. Delivery of Information. Diversified acknowledges receipt of
Subadvisor's brochure required to be delivered under the Investment Advisers
Act of 1940 (including the information in Part II of Subadvisor's Form ADV).
Upon written request by Diversified, Subadvisor agrees to deliver annually,
without charge, Subadvisor's brochure required by the Investment Advisers Act
of 1940.

18. Third-Party Beneficiaries. Neither party intends for this
Agreement to benefit any third party not expressly named in this Agreement.

19. Binding Arbitration. The parties waive their right to seek
remedies in court, including any right to a jury trial. The parties agree that
in the event of any dispute between the parties arising out of, relating to or
in connection with this Agreement or the Portfolio, such dispute shall be
resolved exclusively by arbitration to be conducted only in New York, New York
in accordance with the rules of JAMS/ENDISPUTE applying the laws of New York.
Disputes shall not be resolved in any other forum or venue. The parties agree
that such arbitration shall be conducted by a retired judge who is experienced
in resolving disputes regarding the securities business, that discovery shall
not be permitted except as required by the rules of JAMS/ENDISPUTE, that the
arbitration award shall not include factual findings or conclusions of law and
that no punitive damages shall be awarded. The parties understand that any
party's right to appeal or to seek modification of any ruling or award of the
arbitrator is severely limited. Any award rendered by the arbitrator shall be
final and binding, and judgment may be entered on it in any court of competent
jurisdiction in New York, New York or as otherwise provided by law.

Notwithstanding the foregoing, the Subadvisor may bring an action in any
court of competent jurisdiction in New York, New York for equitable relief to
compel performance of the indemnification and defense obligations of
Diversified under Section 7 of this Agreement.

8
<PAGE> 9
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
---------------------------------

Husic Capital Management

By: /s/ Cynthia A. Slaherty
---------------------------------

9
<PAGE> 10
APPENDIX I

November 16, 1999

STATEMENT OF INVESTMENT POLICY AND GUIDELINES

FOR THE

HUSIC CAPITAL MANAGEMENT

SMALL CAPITALIZATION PORTFOLIO
<PAGE> 11
2

STATEMENT OF INVESTMENT POLICY AND GUIDELINES
FOR
THE HUSIC CAPITAL MANAGEMENT
SMALL CAPITALIZATION PORTFOLIO

TABLE OF CONTENTS

I. PURPOSE

II. OBJECTIVES

III. INVESTMENT GUIDELINES

IV. PERFORMANCE EVALUATION

V. COMMUNICATION

VI. OTHER

<PAGE> 12
3

STATEMENT OF INVESTMENT POLICY AND GUIDELINES
FOR
THE HUSIC CAPITAL MANAGEMENT
SMALL CAPITALIZATION PORTFOLIO

I. PURPOSE

The purpose of this Statement of Investment Policy and Guidelines is to
communicate the Husic Small Capitalization Portfolio investment objectives,
guidelines and performance evaluation standards adopted by Diversified
Investment Advisors and its sub-advisor, Husic Capital Management.

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

II. OBJECTIVES AND CONSTRAINTS

The primary objectives of the fund are:
- - To provide a high level of capital appreciation through investment in a
diversified portfolio of common stocks of small to medium size companies.
- - To outperform the Russell 2000 Growth Index over full market cycles.
- - To achieve mid-second quartile or better performance among a group of peer
funds as defined by recognized reporting services and consulting
organizations (e.g., Lipper, Frank Russell, Callan).

The primary constraint of the fund is:
- - To manage the portfolio without excessive risk relative to the Russell 2000
Growth Index, or peer funds, as measured by annualized standard deviation
over 3-5 year periods.

<PAGE> 13
4

III. INVESTMENT GUIDELINES

A) Permissible securities:
----------------------

In addition to legal requirements specified in the Diversified prospectus to
conform with SEC requirements:

- - Common stocks of small to medium size companies as defined below. As of August
1999, small capitalization firms range from $50 million to $1.9 billion, and
mid-cap companies are defined to be greater than $1.9 billion and less than
$8.4 billion.
- - Preferred stocks of small to medium size companies.
- - Convertible debt securities of small to medium size U.S. corporations.
- - ADR's up to 10% of portfolio holdings.
- - Any security residing in the Russell 2000 Growth Index.

B) Prohibited Securities, and Limitations and Restrictions on Permissible
Investments:
- -------------------------------------------------------------------------

- - No more than 5% of the assets (at cost) of the portfolio may be invested in
the securities of any one issuer (other than U.S. government securities).
- - Any combination of three names may not exceed 25% of the market value of the
portfolio, with no single name exceeding 9% of the market value of the
portfolio.
- - No more than 25% of the assets of the portfolio may be invested in securities
of issuers in any one industry.
- - No more than 5% of the voting securities of any one issuer may be acquired.
- - Non-public illiquid securities may not exceed 15% of the portfolio under
normal market conditions (i.e., 144A).
- - The portfolio may not borrow funds except for temporary or emergency purposes.

C) Leverage:
---------

The portfolio may not be leveraged beyond short-term (e.g., one to two week)
marginal cash overdraft borrowing (e.g., 1-5% of the portfolio) resulting from
temporary cash management.

D) Derivatives:
------------

- - Derivatives may not be used for speculative purposes.
- - Exchange traded Russell 2000 Index futures can be used for hedging purposes
either to securitize cash inflows or to immunize securities for redemption
requests.
- - Exchange traded covered call options may be utilized up to the extent of the
individual security holding as part of the sales strategy, but should not
exceed 20% of the portfolio.
- - No uncovered call writing is permitted.
<PAGE> 14
5

E) Quality
-------

- - Non-dollar foreign securities are prohibited.

F) Capitalization Guidelines Relative to Benchmark
-----------------------------------------------

- - At least 75% of the market value of the portfolio should be invested in
securities with an average weighted market cap between 10% and 200% of the
average weighted market cap of the Russell 2000 Growth Index

- - Not more than 25% of the market value of the portfolio should be invested in
securities with an average weighted market cap between 200% and 1000% of the
average weighted market cap of the Russell 2000 Growth Index, unless the
security resides in the Russell 2000 Growth Index

- - No securities with a market cap above 1000% of the average weighted market cap
of the Russell 2000 Growth Index, unless it still resides in that Index

G) Risk Controls
-------------

- - Standard deviation of return not more than 25% greater than the Russell 2000
Growth Index, or the median in a peer universe, over 3-5 year periods

- - A minimum of 30 securities in the portfolio at all times

- - A maximum of 50% in any one sector (as defined by Frank Russell Co.)

- - Tracking error targeted to not exceed 10% with respect to the Russell 2000
Growth Index over a three year period

- - Elimination of any holding that exceeds cap guidelines established in
section F by current calendar quarter-end

H) Cash Management
---------------

- - Typical cash balances will be maintained in a range of 0-6% under normal
circumstances.
- - Cash balances will not be less than zero except during temporary overdraft
positions to efficiently manage short-term cash requirements during periods of
unusual market conditions (e.g., one to seven business days)
<PAGE> 15
6

IV. PERFORMANCE EVALUATION

- -- The performance benchmark for the fund will be the Russell 2000 Growth
Index. It is expected that the fund will outperform the benchmark by at
least 400 basis points over 3-5 year periods.

- -- Additionally, it is expected that the fund will be in the upper second
quartile of peer universes (specify -- Lipper, Russell, Callan or
Morningstar), or better, over full market cycles.

- -- The foregoing performance objectives are to be accomplished without taking
excessive risk. Specifically, volatility should not exceed the risk
control guidelines established in section (G) over 3-5 year periods, and
the Sharpe ratio should exceed the peer universe average.

V. COMMUNICATION

- -- Monthly -- conference calls to explain to designated Diversified analysts:
the current portfolio position, recent trades and their rationale, market
outlook for the fund, and expected portfolio actions.

- -- Quarterly -- portfolio manager writeups covering material similar to
monthly conference calls, but also including material specified by
Diversified's communications department.

- -- Annually -- meetings between interested parties to reaffirm or change the
Investment Policy Statement, Bi-annual visits by Diversified personnel at
the sub-advisor site to update due diligence.

- -- As needed on an ad hoc basis to explain major market moves between other
communications.

- -- Immediate notification regarding sub-advisor 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.

VI. OTHER

- -- Explanation of best execution trading practices, including soft dollar
arrangements

- -- Evidence of disaster recovery plan, including Y2K, and EURO conversion
plans

- -- Cooperation with outside audits (Diversified's or its clients' auditors,
SEC).

Signed Cynthia A. Slaherty
---------------------------------
(Husic Capital Management)

Signed [Illegible]
---------------------------------
(Diversified Investment Advisors)

<PAGE> 16
SCHEDULE A

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of January 3, 1994 by and between the Special Equity
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, open-end,
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 sub-advisors 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 out-of-pocket
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
<PAGE> 17
-3-

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
commissions received by other broker-dealers 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 11a2-2(T)
thereunder. Pursuant to such authorizations, an affiliated broker-dealer 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.
<PAGE> 18
-4-

(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 judgement 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
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, will 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, semi-annual and annual reports to investors, proxy
statements and tax returns;
<PAGE> 19
-5-

(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 Adviser's duties under this Agreement or
by reason of the Adviser's 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 .80% of the Portfolio's average daily
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 N-1A 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 31a-3 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 31a-2 under the 1940 Act
any such records required to be maintained by Rule 31a-1 under the 1940 Act.

contemplated by Section 15 of the 1940 Act and, unless sooner terminated as
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 outstanding 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
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
<PAGE> 21
-7-

hereof. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions 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.

Attest: Diversified Investors Portfolios

/s/ John F. Hughes By: /s/ Tom Schlossberg
- ----------------------------------- ----------------------------------
Tom Schlossberg
Chairman and President

Attest: Diversified Investment Advisors, Inc.

/s/ Catherine A. Mohr By: /s/ Gerald L. Katz
- ----------------------------------- ----------------------------------
Gerald L. Katz
Vice President and CFO
<PAGE> 22
SCHEDULE B

The Subadvisor shall be compensated for its services under this Agreement on
the basis of the below-described annual fee schedule. The fee schedule shall
only be amended by agreement between the parties.

FEE SCHEDULE

.40% OF THE FIRST $250M OF NET ASSETS
.25% OF NET ASSETS BETWEEN $250M AND $350M
.20% OF NET ASSETS IN EXCESS OF $350M

Net assets are equal to the market value of the Subadvisor's portion 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 sum of the three consecutive months will be paid in arrears on
calendar quarters.

Husic agrees that if at anytime during the term of this Subadvisory Agreement,
Husic offers another of its clients a lower fee than that set forth in this
Schedule B for the management of a similarly structured small-cap growth
separate account 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 Husic's other client. It is understood and agreed by both Husic and
Diversified that this paragraph is applicable solely to Diversified's small-cap
growth Portfolio and not to any other fund/assets which Husic now manages or
may manage in the future on Diversified's behalf.
<PAGE> 23
SCHEDULE C

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

<PAGE> 1
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
open-end management investment company registered under the Investment Company
Act of 1940 ("1940 Act");

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 then-current Registration Statement on Form
N-1A.

<PAGE> 2
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,
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.

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 I.

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 brokers/dealers who sell
shares of the

2
<PAGE> 3
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
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.

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.

<PAGE> 4
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 N-1A 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,
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.

6. Exclusivity. Subadvisor represents to Diversified that during the term
of this Agreement Subadvisor will not manage any portfolio, any collective
trust, open-end 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

4
<PAGE> 5
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 non-U.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
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 31a-1 and Rule 31a-2 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.

<PAGE> 6
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 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 non-routine 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 W. Matthews
-----------------------------------
Brian W. Matthews
Managing Principal

<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT

INVESTMENT SUBADVISORY AGREEMENT, dated as of April 6, 2000, by and between
Diversified Investment Advisors, Inc., a Delaware corporation ("Diversified"),
and Merganser Capital Management, LP, a Massachussets limited partnership
("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 High Quality Bond
Portfolio ("Portfolio"), a series of Diversified Investors Portfolios, a
diversified open-end management investment company registered under the
Investment Company Act of 1940 ("1940 Act");

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 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 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.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Subadvisor is directed to seek for the Portfolio, in its best
judgment, prompt execution in an effective manner at the most favorable price.
Subject to this requirement of seeking the most favorable price, securities may
be bought from or sold to broker-dealers who have furnished statistical,
research and other information or services to the Subadvisor or the Portfolio,
subject to any applicable laws, rules and regulations.
2

<PAGE> 3

6. Exclusivity of the Subadvisor. Subadvisor represents to Diversified that
during the first three years of this Agreement Subadvisor will not manage any
commingled short term market value bond fund(s), average duration maintained
between one and four years, for any other company, except for commingled funds
sponsored by the Subadvisor, in Diversified's target market as noted on Schedule
C. At the end of three years, this exclusive management provision will continue
in effect from year to year if the sum total assets under the Subadvisor's
management for all Portfolios on behalf of Diversified exceed $400 million
dollars.

4
<PAGE> 5

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.

Except as otherwise provided by applicable law, 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.

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

<PAGE> 6
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.

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.

14. Override Provisions. Notwithstanding any other provision of this
Agreement: (a) Prior to this Agreement being approved by a vote of a majority of
the Portfolio's outstanding voting securities in accordance with the 1940 Act:
(i) in no event shall compensation paid to the Subadvisor hereunder exceed the
amount permitted by Rule 15a-4 under the 1940 Act; and (ii) all compensation
paid to the Subadvisor hereunder shall be held in an interest-bearing escrow
account with the Portfolio's custodian, Investors Bank & Trust Company (the
"Escrow Account"). Funds held in the Escrow Account, including interest, shall
be paid to the Subadvisor promptly after approval of this Agreement by the vote
of a majority of the Portfolio's outstanding voting securities in accordance
with the 1940 Act, provided that such approval is obtained no later than 150
days after the date of this Agreement.

(b) If this Agreement is not approved by a vote of a majority of the
Portfolio's outstanding voting securities within the time period stated above,
(i) this Agreement shall immediately terminate; and (ii) the Subadvisor shall
receive from the Escrow Account the lesser of: (a) the sum of the amount of any
costs incurred by the Subadvisor in performing its duties under this Agreement
prior to such termination plus any interest earned on that amount, and (b) the
sum of the amount deposited in the Escrow Account plus any interest earned on
that amount.

Diversified Investment Advisors, Inc.

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

Merganser Capital Management, LP

By: /s/ Edward R. Budrosian
-----------------------------------
Edward R. Budrosian

6
<PAGE> 7
SCHEDULE A

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of January 3, 1994 by and between the High Quality 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, open-end,
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:

2. (a) Diversified shall, at its expense, (i) employ sub-advisors 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.

-2-

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 non-recurring 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
then-current 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.

<PAGE> 9
-3-

-4-

(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
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, will 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;

(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, semi-annual and annual reports to investors, proxy
statements and tax returns;

<PAGE> 11
-5-

(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 Adviser's duties under this Agreement or
by reason of the Adviser's 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 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 N-1A 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.

<PAGE> 12
-6-

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.

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

This Agreement embodies the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter
<PAGE> 13
-7-

hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions 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.

Attest: Diversified Investors Portfolios

/s/ John F. Hughes By: /s/ Tom Schlossberg
- --------------------------- ------------------------------
Tom Schlossberg
Chairman and President

Attest: Diversified Investment Advisors, Inc.

/s/ Catherine A. Mohr By: /s/ Gerald L. Katz
- --------------------------- ------------------------------
Gerald L. Katz
Vice President and CFO
<PAGE> 14
SCHEDULE B

FEE SCHEDULE

.20% of the first $100 million of net assets
.15% of net assets over $100 million and less than or equal to $200 million
.10% of net assets over $200 million and less than or equal to $300 million
.05% of net assets in excess of $300 million

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 in the Portfolio by the fee schedule and dividing by twelve.
The fee will be paid quarterly.

Merganser Capital Management, LP further agrees that if at anytime during the
term of this Subadvisory Agreement, Merganser Capital offers another of its
clients a lower fee than that set forth in this Schedule B for the management
of a similarly structured High Quality Bond Portfolio/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 Merganser's other client. It
is understood and agreed by both Merganser and Diversified that this paragraph
is applicable solely to Diversified's High Quality Bond Portfolio and not to
any other fund assets which Merganser now manages or may manage in the future
on Diversified's behalf.

Merganser Capital Management, LP

By:
---------------------------------

Diversified Investment Advisors, Inc.

By:
---------------------------------
<PAGE> 15
SCHEDULE C

Target market for 401(a) plans is those plans with assets between $1 and $50
million.

For 403(b) plans, the target market is those plans that have an employee base
between 300 - 2000 lives, and with assets between $1 and $15 million.

<PAGE> 1
INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of April 5, 2000 by and between the Ark Value 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, open-end, management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and

WHEREAS, Diversified is 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:

<PAGE> 2
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
non-recurring 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
then-current 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

2
<PAGE> 3

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 commissions received by other broker-dealers 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
11a2-2(T) thereunder. Pursuant to such authorizations, an affiliated
broker-dealer 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.

3
<PAGE> 4
(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
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, will 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, semi-
annual 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
<PAGE> 5
which Diversified would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the Adviser's duties under
this Agreement or by reason of the Adviser's 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 .57% of the Portfolio's average daily
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 N-1A 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 31a-3 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 31a-2 under the 1940
Act any such records required to be maintained by Rule 31a-1 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 as 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 outstanding 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",

5
<PAGE> 6
"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.

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 except as otherwise permitted by applicable law, no material
amendment of this Agreement shall be effective until 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 provisions 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.

6
<PAGE> 7
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.

Attest: Diversified Investors Portfolios

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

Attest: Diversified Investment Advisors, Inc.

By:
- --------------------------- ---------------------------------
Robert F. Colby
Vice President and General Counsel

<PAGE> 8

SCHEDULE A

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of April 5, 2000 by and between the Ark Value
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, open-end,
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.

<PAGE> 9

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 non-recurring
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.

<PAGE> 10
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.

<PAGE> 11

(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;

(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,
semi-annual and annual reports to investors, proxy statements and
tax returns;

4
<PAGE> 12
(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 Adviser's duties under this Agreement or by
reason of the Adviser's 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 .57% of the Portfolio's average daily 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 Registration
Statement on Form N-1A 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.

5
<PAGE> 13
unless sooner terminated as 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 outstanding 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 thereafter.)

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.

6
<PAGE> 14
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions 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.

Attest: Diversified Investors Portfolios

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

Attest: Diversified Investment Advisors, Inc.

By:
- --------------------------------- ---------------------------------
Robert F. Colby
Vice President and General Counsel

<PAGE> 15
SCHEDULE B

The subadvisor shall be compensated for its services under this Agreement on the
basis of the below-described annual fee schedule. The fee schedule shall only be
amended by agreement between the parties.

FEE SCHEDULE

.45% applied to the first $100 million of net assets of the Portfolio
.40% applied to the next $50 million of net assets of the Portfolio
.35% applied to the next $50 million of net assets of the Portfolio

Once the Portfolio's net assets reach $200 million, a flat fee of .40% will be
applied to the first $200 million with .35% applied to all net assets in excess
of $200 million.

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.

<PAGE> 16

SCHEDULE C

Target market for 401(a) plans is those plans with assets between $1 and $50
million.

For 403(b) plans, the target market is those plans that have an employee base
between 300 - 2000 lives, and with assets between $1 and $15 million.

<PAGE> 1

INVESTMENT SUBADVISORY AGREEMENT

INVESTMENT SUBADVISORY AGREEMENT, dated as of April 5, 2000, by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified") and Ark Asset Management Co., Inc., a New York corporation
("Subadvisor").

WITNESSETH:

WHEREAS, Diversified is investment advisor registered under the Investment
Advisers Act of 1940 and has been retained to provide investment advisory
services to the Ark Value Portfolio ("Portfolio"), a series of Diversified
Investors Portfolios, a diversified open-end 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.

<PAGE> 2
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,
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 to by law maintain; and (ix) render
regular reports to the Portfolio's officers and Directors concerning the
Subadvisor's discharge of the foregoing responsibilities.

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 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

2
<PAGE> 3
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 Ark Asset Management Co., Inc. 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
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 out-of-pocket 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
non-recurring events and expenses relating to the issuance, registration and
qualification of shares of the Portfolio.

<PAGE> 4
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, will not take a long or short
position in the shares of the Portfolio except as permitted by the Articles, and
will comply with all other provisions of the Articles and By-Laws and any
current Prospectus 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,
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.

<PAGE> 5
6. Exclusivity. Subadvisor represents to Diversified that during the first
three years of the Agreement Subadvisor will not manage any equity value fund(s)
for any other company operating under a hub-and-spoke structure in Diversified's
target market. (See Schedule C.) At the end of three years, this exclusive
management provision will continue in effect from year to year if the assets
under management exceed $100 million dollars.

If at the end of three years or any year thereafter, the Portfolio's assets
are less than $100 million dollars, then this exclusivity provision will become
inapplicable. This exclusivity provision also ends if either party to the
Agreement terminates the Agreement.

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.

Except as otherwise permitted by applicable law, 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 Fund 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.

<PAGE> 6
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 31a-1 and Rule 31a-2 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.

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

<PAGE> 7
14. Override Provisions. Notwithstanding any other provision of this
Agreement, this Agreement shall immediately terminate no later than 150 days
after the date of hereof.

Diversified Investment Advisors, Inc.

By:
---------------------------------

Ark Asset Management Co., Inc.

By:
---------------------------------

<PAGE> 1
CODE OF ETHICS FOR
THE DIVERSIFIED INVESTORS FUNDS GROUP
THE DIVERSIFIED INVESTORS STRATEGIC ALLOCATION FUNDS
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
DIVERSIFIED INVESTORS PORTFOLIOS

The Diversified Investors Funds Group (the "Trust"), The Diversified
Investors Strategic Allocation Funds (the "SAFs") The Diversified Investors
Strategic Variable Funds (the "Variable SAFs") and Diversified Investors
Portfolios (the "Series Portfolio", together with the Trust and the SAFs, and
the Variable SAFs the "Trusts") have determined to adopt this revised Code of
Ethics (the "Code") as of February 20, 1996, to specify and prohibit certain
types of personal securities transactions deemed to create a conflict of
interest and to establish reporting requirements and preventive procedures
pursuant to the provisions of Rule 17j-1(b)(1) under the Investment Company Act
of 1940 (the "1940 Act").

I. RULES APPLICABLE TO TRUSTEES, OFFICERS AND ACCESS PERSONS OF THE TRUSTS

A. Definitions

1. An "Access Person" means (i) any trustee, director, officer or
Advisory Person (as defined below) of the Trusts, the Investment
Advisor (as defined below) or any Subadvisor (as defined below)
or (ii) any director or officer of the Distributor (as defined
below) who, in the ordinary course of his or her business, makes,
participates in or obtains information regarding the purchase or
sale of securities for any of the Trusts for which the principal
underwriter so acts or whose functions or duties as part of the
ordinary course of his or her business relate to the making of
any recommendation to any of the Trusts regarding the purchase or
sale of securities, or (iii) notwithstanding the provisions of
clause (i) above, where the Investment Advisor or Subadvisor is
primarily engaged in a business or businesses other than advising
registered investment companies or other advisory clients, any
trustee, director, officer or advisory person of the Investment
Advisor or Subadvisor who, with respect to any of the Trusts,
makes any recommendation or participates in the determination of
which recommendation shall be made, or whose principal function
or duties relate to the determination of which recommendation
shall be made to any of the Trusts or who in connection with his
or her duties, obtains any information concerning securities
recommendations being made by such investment advisor to any of
the Trusts.

<PAGE> 2
2. An "Advisory Person" means any employee of any of the Trusts, the
Investment Advisor or any Subadvisor (or any company in a control
relationship to any of the Trusts or such advisors) who, in
connection with his or her regular functions or duties, makes,
participates in or obtains information regarding the purchase or
sale of securities by any of the Trusts or whose functions relate
to any recommendations with respect to such purchases or sales
and any natural person in a control relationship with the Trusts
or such advisors who obtains information regarding the purchase
or sale of securities.

3. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(A) (exclusive of Section (a)(1) of such
Rule) of the Securities Exchange Act of 1934, a copy of which is
attached hereto.

4. "Control" shall have the same meaning as set forth in Section
2(a)(9) of the 1940 Act.

5. "Disinterested Trustee" means a Trustee who is not an "interested
person" within the meaning of Section 2(a)(19) of the 1940 Act.
An "interested person" includes any person who is a trustee,
director, officer, employee or owner of 5% or more of the
outstanding stock of the Advisor. Affiliates of brokers or
dealers are also "interested persons", except as provided in
Rule 2a19-1 under the 1940 Act.

6. "Distributor" shall mean Diversified Investors Securities Corp.
or any other broker-dealer registered under the Securities
Exchange Act of 1934, as amended, that enters into an agreement
to act as principal underwriter to any Trust as contemplated in
Section 15(b) of the 1940 Act.

7. "Investment Advisor" shall mean Diversified Investment Advisors,
Inc. or any other investment advisor registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act")
that contracts with any Trust for the provision of advisory
services as contemplated in Section 15(a) of the 1940 Act.

8. "Portfolio Manager" means any officer or employee of any of the
Trusts, Investment Advisor or a Subadvisor (or any company in a

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control relationship to any of the Trusts or such advisors) who
decides, or participates in deciding, which securities will be
purchased or sold on behalf of that Trust.

9. "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security or the purchase or
sale of a future or index on a security or option thereon.

10. "Security" shall have the meaning as set forth in Section 2(a)(36) of
the 1940 Act (in effect, all securities), except that it shall not
include securities issued by the U.S. Government (or any other
"government security" as that term is defined in the 1940 Act),
bankers' acceptances, bank certificates of deposit, commercial paper,
such other money market instruments as may be designated by the
trustees of the Trusts, and shares of registered open-end investment
companies.

11. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell the security has been made and
communicated and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.

12. "Subadvisor" shall mean any investment advisor registered under the
Advisers Act that the Investment Advisor contracts with to provide
day-to-day investment advisory services to any Trust or a portfolio
thereof.

13. "Unaffiliated Trustee" means a Trustee of the Trusts who is not an
officer, trustee, director, employee or owner of 5% or more of the
outstanding stock of the Advisor or the Advisor's parent or any
subsidiary of the Advisor or its parent. The term includes all
Disinterested Trustees.

B. Avoiding Conflicts of Interest

NO ACCESS PERSON SHALL ENTER INTO OR ENGAGE IN A SECURITY TRANSACTION OR
BUSINESS ACTIVITY OR RELATIONSHIP WHICH MAY RESULT IN ANY FINANCIAL OR
OTHER CONFLICT OF INTEREST BETWEEN SUCH PERSON AND THE TRUSTS AND EACH SUCH
PERSON SHALL AT ALL TIMES AND IN ALL MATTERS ENDEAVOR TO

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PLACE THE INTERESTS OF THE TRUSTS BEFORE HIS OR HER PERSONAL INTERESTS.

C. Statement of General Principles on Personal Investment Activities

PERSONAL INVESTMENT ACTIVITIES ENGAGED IN BY AN ACCESS PERSON SHALL BE
SUBJECT TO THE FOLLOWING GENERAL PRINCIPLES:

1. AS SET FORTH IN SECTION I.B. ABOVE, NO PERSONAL INVESTMENT ACTIVITIES
SHALL CONFLICT WITH THE DUTY TO PLACE THE INTERESTS OF THE TRUSTS
BEFORE ANY PERSONAL INTERESTS;

2. ALL PERSONAL INVESTMENT ACTIVITIES SHALL BE CONDUCTED CONSISTENT WITH
THE REQUIREMENTS AND STANDARDS SET FORTH IN THIS CODE OF ETHICS IN
SUCH A MANNER AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICT OF INTEREST
OR ANY ABUSE OF ANY INDIVIDUAL'S POSITION OF TRUST; AND

3. NO ACCESS PERSON SHALL, DIRECTLY OR INDIRECTLY, OTHERWISE TAKE
INAPPROPRIATE ADVANTAGE OF HIS OR HER POSITIONS WITH THE TRUSTS.

D. Prohibited Personal Investment Activities

1. No Access Person shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership and which he or
she knows or should have known at the time of such purchase or sale:

a. is being considered for purchase or sale by any of the Trusts; or

b. is being purchased or sold by any of the Trusts.

Without limiting the generality of the foregoing, (i) no Portfolio
Manager may purchase or sell any security within seven (7) calendar
days before and after any portfolio of a Trust that he or

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she manages trades in that security and (ii) no person who is an
Advisory Person by virtue of his or her affiliation with a Subadvisor
may purchase or sell any security on the same day there is a pending
buy or sell order in that security by the Trust which is advised by
such Subadvisor.

2. No Advisory Person of any of the Trusts shall acquire any securities
in an initial public offering.

3. No Advisory Person of any of the Trusts shall acquire any securities
in a private placement exempt from the registration requirements of
the Securities Act of 1933, as amended, pursuant to section 4(2) of
that Act without prior written approval by any designated review
officer or the Treasurer, Secretary, Assistant Treasurer or Assistant
Secretary of the Trusts (the "Review Officer"). Prior to granting any
such approval, the Review Officer shall take into account, among
other factors, whether the investment opportunity represented by such
private placement should be reserved for the Trusts and whether the
opportunity is being offered to such Advisory Person by the virtue of
his or her position with a Trust. Any Advisory Person granted
permission to invest in a private placement must disclose such
investment if he or she is subsequently involved in consideration by
a Trust of an investment in the same or an affiliated issuer and the
Trust's decision with respect to such investment shall be subject to
an independent review by Advisory Persons of the Trust with no
personal interest in such issuer.

4. No Advisory Person of any of the Trusts shall purchase and sell, or
sell and purchase, the same (or equivalent) securities within sixty
(60) calendar days without the prior written approval of a Review
Officer. Prior to granting any such approval, the Review Officer
shall determine that no abuses exist and the equities of the
situation strongly support an exemption.

5. No Advisory Person of any of the Trusts shall accept any gift or
other thing of more than de minimis value from any person or entity
that does business with or on behalf of any of the Trusts.

6. No Advisory Person of any of the Trusts shall serve on the governing
board of any publicly traded companies without the

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prior written approval of the Review Officer. Prior to granting any
such approval, the Review Officer shall determine that such board
service is consistent with the interests of the Trusts and shall
ensure that appropriate "Chinese Wall" or other procedures are in
place to isolate such Advisory Person from persons making investment
decisions as to securities of any such company.

E. Exempted Transactions

The prohibitions of Section I.C. and I.D. above shall not apply to:

1. Purchases or sales effected in any account over which such person has
no direct or indirect influence or control;

2. purchases or sales which are nonvolitional on the part of the person
or the Trusts;

3. purchases which are part of an automatic dividend reinvestment plan;

4. purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights
so acquired; and

5. purchases and sales which receive prior approval in writing by the
Review Officer (a) as only remotely potentially harmful to any of the
Trusts because they would be very unlikely to affect a highly
institutional market or because they clearly are not economically
related to the securities to be purchased or sold or held by any of
the Trusts or client or (b) as not representing any danger of the
abuses prescribed by Rule 17j-1, but only if in each case the
prospective purchaser has identified to the Review Officer all
factors of which he or she is aware which are potentially relevant to
a conflicts of interest analysis, including the existence of any
substantial economic relationship between his or her transactions and
securities held or to be held by any of the Trusts.

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II. REPORTING

A. Quarterly Requirements for all Interested Trustees, Officers and
Access Persons

1. Each Access Person, other than the Disinterested Trustees, shall
file with the Review Officer confidential quarterly reports
containing the information required in Section II.A.2 of this
Code with respect to all transactions during the preceding
quarter in any securities in which such person has, or by reason
of such transaction acquires, any direct or indirect beneficial
ownership, provided that (i) no Access Person shall be required
to report transactions effected for any account over which such
Access Person has no direct or indirect influence or control
(except that such access person must file a written certification
stating that he or she has no direct or indirect influence or
control over the account in question) and (ii) an Access Person
who is an Access Person of the Investment Advisor or a Subadvisor
shall file such Access Person's reports unless such reports would
duplicate information recorded pursuant to Rules 204-2(a)(12) or
204-2(a)(13) of the Investment Advisers Act of 1940, in which
case no such reports need be filed by such Access Person pursuant
to this Code. All such Access Persons shall file reports, even
when no transactions have been effected, representing that no
transactions subject to reporting requirements were effected.

2. Every Report shall be made no later than 10 days after the end of
the calendar quarter in which the transaction to which the report
relates was effected, and shall contain the following
information:

a. the date of the transaction, the title and the number of
shares and the principal amount of each security involved;

b. the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);

c. the price at which the transaction was effected; and

d. the name of the broker, dealer or bank with or through whom
the transaction was effected.

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3. Any report may contain a statement that it shall not be
construed as an admission by the person making the report that he
or she has any direct or indirect beneficial ownership in the
security to which the report relates.

4. Each Access Person shall request any broker-dealer with which he
or she maintains a general securities account to send duplicate
copies of statements and confirmations to the Trusts.

B. Quarterly Requirements for Disinterested Trustees

1. Every Disinterested Trustee shall file with the Review Officer a
report containing the information required in the above Section
II.A of this Code of Ethics with respect to transactions in any
securities in which such person has, or by reason or such
transactions acquires, any direct or indirect beneficial
ownership, except exempted transactions listed under Section
IE.1, if such Trustee, at the time of that transaction, knew or
should have known, in the ordinary course of pursuing his or her
official duties as Trustee, that during the 15-day period
immediately preceding or after the transaction by the Trustee:

a. such security was being purchased or sold by any of the
Trusts; or

b. such security was being considered for purchase or sale of
the portfolio of any of the Trusts.

2. Notwithstanding the preceding sentence, any Disinterested Trustee
may, at his or her option, report the information described in
Section II.A.2 with respect to any one or more transactions and
may include a statement that the report shall not be construed as
an admission that the person knew or should have known of
portfolio transactions by the Trusts in such securities.

C. Annual Reporting by Access Persons and Advisory Persons of Securities
Holdings

1. All Access Persons of any of the Trusts shall provide an annual
report to the Trusts certifying that (i) he or she has read and

<PAGE> 9
understood this Code of Ethics and recognizes that he or she is
subject thereto and (ii) he or she has complied with the
requirements of this Code of Ethics and has disclosed or reported
all personal securities transactions required to be disclosed or
reported pursuant to the requirements of this Code of Ethics.

2. All Advisory Persons of any of the Trusts shall disclose through
a written report to the Trusts all securities beneficially owned
by such individual upon the commencement of such individual's
employment and shall update such report on an annual basis
thereafter.

D. Annual Report to Boards of Trustees

The Secretary of the Trusts shall cause to be prepared and delivered
annually to each of the Boards of Trustees of the Trusts a
report:

1. summarizing existing procedures concerning personal investing and
reviewing any changes effected in such procedures during the
year;

2. identifying any violations requiring significant remedial action
during the past year; and

3. identifying any recommended changes in existing restrictions or
procedures based upon the Trusts' experience under this Code of
Ethics, evolving industry practice or developments in applicable
laws or regulations.

III. COORDINATION WITH CODES OF ETHICS OF THE DISTRIBUTOR, THE INVESTMENT
ADVISOR AND THE SUBADVISORS

A. Distributor and Investment Advisor Codes of Ethics

Each of the Investment Advisor and the Distributor have adopted a Code of
Ethics in a form substantially similar to this Code of Ethics with such
changes therein necessary to reflect the different services provided by
these entities. In accordance with certain contractual arrangements, the
Trusts, the Investment Advisor and the Distributor share certain trustees,
officers and employees, including personnel responsible for compliance with
this Code of Ethics. Accordingly, reports or reviews

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required under the Code of Ethics of two or more of the Investment
Advisor, the Distributor or the Trusts will be made jointly to the
extent possible to avoid unnecessary duplication of procedures.

B. Subadvisors Codes of Ethics

Each Subadvisor shall adopt, and deliver to the Trusts a copy of, a
Code of Ethics pursuant to Rule 17j-1(b)(1) of the 1940 Act which
seeks to ensure that all individuals who are Access Persons of any of
the Trusts by virtue of their affiliation with a Subadvisor comply
with the terms of this Code of Ethics by providing procedures and
restrictions substantially equivalent to those set forth herein,
except to the extent variations therein are expressly approved by the
Boards of Trustees of the Trusts. Accordingly, requirements for
reports, reviews and other procedures set forth herein shall be
satisfied for individuals who are Access Persons of the Funds by
virtue of their affiliation with a Subadvisor by equivalent procedures
effected by such Subadvisor. Each Subadvisor shall submit, quarterly,
a certification to the Trusts which states:

1. The Code of Ethics of the Subadvisor in the form delivered to the
Trusts remains in full force and effect and satisfies the
requirements of Section 17(j) of the 1940 Act and Rule 17j-1
thereunder; and

2. no material violations of the Code of Ethics of the Subadvisor
relating to Access Persons of any of the Trusts occurred during
the period since delivery of the last certification (if any
material violations have occurred, the certification shall
include all relevant details).

IV. REVIEW

In reviewing transactions, the Review Officer shall take into account the
exemptions allowed under Section I.E. Before making a determination that a
violation has been committed, the Review Officer shall give such person an
opportunity to supply additional information regarding the transaction in
question.

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V. SANCTIONS

A. Sanctions for Violations by Interested Trustees (except Unaffiliated
Trustees), Officers and Access Persons.

If the Review Officer determines that a violation of this Code has
occurred, he or she shall so advise the appropriate Board of Trustees,
and that Board may impose such sanctions as it deems appropriate,
including, inter alia, a letter of censure or suspension or
termination of the employment of the violator. Without limiting the
generality of the foregoing, any financial profits realized by an
individual through prohibited personal investment activities described
in Section I.D. may be required to be disgorged. All material
violations of the Code and any sanctions imposed as a result thereto
shall be reported to the appropriate Board of Trustees.

B. Sanctions for Violations by Disinterested and Unaffiliated Trustees

If the Review Officer determines that any Disinterested Trustee has
violated this Code, he or she shall so advise the President of the
Trust or Series Portfolio, as appropriate, and also a committee
consisting of the Disinterested Trustees (other than the person whose
transaction is at issue) and shall provide the committee with the
report, the record of pertinent actual or contemplated portfolio
transactions of the Trust or Series Portfolio, as appropriate, and any
additional information supplied by such person. The committee, at its
option, shall either impose such sanctions as it deems appropriate or
refer the matter to the full Board of Trustees of the Trust or Series
Portfolio, as appropriate, which shall impose such sanctions as it
deems appropriate.

VI. MISCELLANEOUS

A. Access Persons

The Secretary or Assistant Secretary of each of the Trusts will
identify all Access Persons who are under a duty to make reports to
the Trusts and will inform such persons of such duty, except that
persons who are Access Persons by virtue of their affiliation with a
Subadvisor shall be identified and informed by an appropriate officer
of that Subadvisor. Any failure by the Secretary or Assistant
Secretary to notify any person

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of his or her duties under this Code shall not relieve such person of
his or her obligations hereunder.

B. Records

Diversified Investors Securities Corp. shall maintain records in the
manner and to the extent set forth below, which records may be
maintained on microfilm under the conditions described in
Rule 31a-2(f) under the 1940 Act, and shall be available for
examination by representatives of the Securities and Exchange
Commission ("SEC"):

1. a copy of this Code and any other code which is, or at any time
within the past five years has been, in effect shall be preserved
in an easily accessible place;

2. a record of any violation of this Code and of any action taken as
a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs;

3. a copy of each report made pursuant to this Code shall be
preserved for a period of not less than five years from the end
of the fiscal year in which it is made, the first two years in an
easily accessible place; and

4. a list of all persons who are required, or within the past five
years have been required, to make reports pursuant to this Code
shall be maintained in an easily accessible place.

C. Confidentiality

All reports of securities transactions and any other information filed
pursuant to this Code shall be treated as confidential, except that
the same may be disclosed to the Boards of Trustees of the Trusts, to
any regulatory or self-regulatory authority or agency upon its request
or as required by law or court or administrative order.

D. Interpretation of Provisions

The Board of Trustees of the Trusts may from time to time adopt such
interpretations of this Code as they deem appropriate.