SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
Domini Institutional Trust
(Name of Registrant as Specified In Its Charter)
Mari A. Wilson
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
________________________________________________________________________
2. Aggregate number of securities to which transaction applies:
________________________________________________________________________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
________________________________________________________________________
4. Proposed maximum aggregate value of transaction:
________________________________________________________________________
5. Total fee paid:
________________________________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
________________________________________________________________________
2. Form, Schedule or Registration Statement No.:
________________________________________________________________________
3. Filing Party:
________________________________________________________________________
4. Date Filed:
________________________________________________________________________
<PAGE>
PRELIMINARY DRAFT / CONFIDENTIAL
FOR COMMISSION USE ONLY
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
6 St. James Avenue, Boston, Massachusetts 02116
(800) 762-6814
September 19, 1997
Dear Fellow Shareholder:
The attached materials include a proxy statement and your proxy card for the
upcoming special shareholders' meeting on October 21, 1997. The proxy card
serves as a ballot, allowing you to express your views regarding certain
aspects of the Fund's operations. Please fill out and sign the proxy card and
return it in the enclosed postage-paid envelope and we will vote the proxy
exactly as you tell us at the shareholders' meeting.
By completing and signing the proxy card, and mailing it to the Fund, you
reduce the possibility that the Fund will need to conduct additional or
follow-up solicitations of shareholders.
When you review the attached proxy statement, you will discover that the Fund
is requesting that your consider several matters that involve proposals to
restructure the management of the Fund in order to provide for a more
centralized and focused management structure. With the encouragement of the
Fund's Trustees, the principals of the portfolio's current investment adviser,
Kinder, Lydenberg & Domini & Co., Inc. including myself, and other investment
company and marketing professionals, have formed a new management company,
Domini Social Investments LLC ("DSI"), whose focus is to provide management
services to the Fund and to expand the kinds of products available to socially
responsible investors. In connection with this restructuring, you are being
asked to vote on a new management agreement with DSI and a submanagement
agreement with Mellon Equity Associates which has been providing the Fund with
day to day portfolio management for several years.
Shareholders are also being asked to elect a combined Board of Trustees and to
authorize the selection of subadvisers by the Board. In addition, shareholders
are being asked to vote on amending the Fund's Declaration of Trust to clarify
provisions relating to the election of Trustees.
The vote of each shareholder is important to the Fund. After careful
consideration, the Board of Trustees of the Fund, including its independent
Trustees, and I approved the proposals relating to the Fund and recommend that
you vote "FOR" each of the proposals.
After you have voted on the proposals, please be sure to SIGN YOUR PROXY CARD
AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
I look forward to continuing to serve you in my new capacity as head of Domini
Social Investments. Thank you.
Sincerely,
Amy L. Domini
Chair and President
<PAGE>
THE NOTICE, SET FORTH BELOW, CONSTITUTES THE FORMAL AGENDA FOR THE SPECIAL
MEETING OF SHAREHOLDERS. THE NOTICE SPECIFIES WHAT ISSUES WILL BE CONSIDERED BY
SHAREHOLDERS, AND THE TIME AND LOCATION OF THE MEETING.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. IF YOU
DO NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICTED YOUR VOTING INSTRUCTIONS
ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE
PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE
FUND OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY
PROMPTLY.
PRELIMINARY DRAFT / CONFIDENTIAL
FOR COMMISSION USE ONLY
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
6 St. James Avenue, Boston, Massachusetts 02116
(800) 762-6814
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held October 21, 1997
A Special Meeting of Shareholders of DOMINI INSTITUTIONAL SOCIAL EQUITY
FUND (the "Fund") will be held at the offices of Bingham, Dana & Gould LLP at
150 Federal Street, 25th Floor, Boston, Massachusetts 02110, on Tuesday,
October 21, 1997 at 11:00 a.m. for the following purposes, all as set forth in
the accompanying Proxy Statement.
ITEM 1. To vote on new management arrangements, as follows:
ITEM 1a: To vote on a Management Agreement between Domini
Social Investments LLC ("DSI") and Domini Social IndexSM
Portfolio (the "Portfolio"). Substantially all of the Fund's
investable assets are invested in the Portfolio.
ITEM 1b: To vote on a Submanagement Agreement between DSI and
Mellon Equity Associates.
ITEM 2. To vote on authorizing the Trustees of the Portfolio to
select and change the investment submanager and enter into
submanagement agreements without obtaining the approval of
investors.
ITEM 3. To amend the Declaration of Trust of the Portfolio and the
Declaration of Trust of the Fund to clarify voting provisions
with respect to the election of Trustees by Shareholders.
ITEM 4. To elect seven Trustees of the Fund and seven Trustees of
the Portfolio.
ITEM 5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR ITEMS 1A, 1B, 2, 3 AND 4.
Only shareholders of record on September 8, 1997 will be entitled to vote
at the meeting and at any adjournments thereof.
Linda T. Gibson, Secretary
September 19, 1997
PLEASE RETURN YOUR PROXY CARD PROMPTLY
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
<PAGE>
PRELIMINARY DRAFT / CONFIDENTIAL
PROXY STATEMENT
This Proxy Statement and Notice of Special Meeting with accompanying form
of proxy are being furnished in connection with the solicitation of proxies by
and on behalf of the Board of Trustees of Domini Institutional Social Equity
Fund (the "Fund"), to be used at a special meeting of shareholders (the
"Meeting") of the Fund, to be held at the offices of Bingham, Dana & Gould LLP
at 150 Federal Street, 25th Floor, Boston, Massachusetts 02110, on Tuesday,
October 21, 1997 at 11:00 a.m. and at any adjournments thereof. The Meeting is
being held for the purposes set forth in the accompanying Notice.
On September 8, 1997 there were outstanding [#] shares of the Fund.
Shareholders of record at the close of business on September 8, 1997 will be
entitled to one vote for each share held on such date. Shareholders of a
majority of the outstanding Shares on that date will constitute a quorum at the
Meeting.
The Fund is a no-load, diversified, open-end management investment
company that seeks to achieve its investment objective by investing all of its
investable assets in Domini Social IndexSM Portfolio (the "Portfolio"). The
Portfolio is an open-end, diversified management investment company having the
same investment objective as the Fund.
Solicitation of proxies is being made by the mailing of this Notice and
Proxy Statement with its enclosures on or about September 12, 1997. If the
accompanying proxy is executed and returned in time for the Meeting, the shares
covered thereby will be voted in accordance with the proxy on all matters that
may properly come before the Meeting (or any adjournment thereof). It is
expected that proxy solicitations will be made primarily by mail. The Fund will
bear all proxy solicitation costs. The Fund's officers and service contractors
may also solicit proxies by telephone or personal interview at no additional
cost to the Fund.
The Fund's Annual Report, containing audited financial statements for its
fiscal year ended July 31, 1996, and the most recent semi-annual report for the
six-month period ended January 31, 1997 have been previously sent to
shareholders and are available without charge upon request by calling the Fund
at (800) 762-6814.
Investors in the Portfolio will be asked to vote on the matters described
under Items 1a, 1b, 2, 3 and 4 at a meeting of the Portfolio's investors. By
voting in favor of these Items, Fund shareholders will be authorizing the
Fund's Trustees to vote in favor of those items at such meeting of the
Portfolio's investors.
BACKGROUND
The Fund is an index fund whose investment objective is to provide its
shareholders with long-term total return which corresponds to the total return
performance of the Domini 400 Social IndexSM, an index comprised of stocks
selected according to social criteria. As discussed in the Fund's Prospectus,
the Fund is currently organized in a master/feeder structure, and does not
manage its own portfolio of securities, but invests all of its investable
assets in the Domini Social IndexSM Portfolio, a separate registered management
<PAGE>
investment company with the same investment objective and policies as the Fund.
The Portfolio currently employs as investment adviser, Kinder, Lydenberg,
Domini & Co., Inc. ("KLD"), which developed and maintains the Domini 400 Social
IndexSM. The Portfolio also employs, as investment manager, Mellon Equity
Associates ("Mellon Equity"), to manage the investments of the Portfolio on a
day to day basis. KLD provides certain administrative and sponsorship services
to the Fund and the Portfolio. In addition to KLD and Mellon Equity, as more
fully described in the Fund's prospectus, a number of other entities provide
services to the Portfolio and the Fund, including Signature Broker-Dealer
Services, Inc. ("Signature") as fund administrator and distributor, Investors
Bank & Trust Company as custodian, and Fundamental Shareholder Services, Inc.
as transfer agent.
As the Fund and the Portfolio have experienced rapid growth since the
Fund began operations, the Trustees and officers of the Fund and the Portfolio
have increasingly felt that changes were needed in the management of the Fund
and the Portfolio, and in particular, that a more centralized management
approach was needed. To that end, various approaches were explored, and the
principals of KLD, with the encouragement of the Trustees, have set up a new
management company, Domini Social Investments LLC ("DSI"), to provide this
centralized management function.
Subject to the approval of the shareholders of the Fund, DSI will provide
this centralized management function by providing investment supervisory and
administrative services, as well as overall operational support to the Fund and
the Portfolio. These services will be provided pursuant to a management
agreement with the Portfolio, as more fully discussed in Item 1a below. It is
also proposed that Mellon Equity, as sub-manager, will continue to provide the
day to day portfolio management to the Portfolio as more fully described in
Item 1b. DSI, through license arrangements with KLD, will have access to the
Domini 400 Social IndexSM, which KLD will continue to maintain. As more fully
described below, DSI will also enter into a Sponsorship Agreement with the Fund
pursuant to which it will provide the Fund with centralized administration and
operating services. No immediate changes are anticipated with respect to the
other service providers to the Fund, and therefore, it is not anticipated that
there will be any interruption in services to the Fund caused by the proposed
changes in management arrangements.
As required by the Investment Company Act of 1940, as amended (the "1940
Act") the management and submanagement agreements with DSI and Mellon Equity
must be approved by investors in the Portfolio, including the Fund. The
proposal in Item 2 below would permit the Trustees, subject to applying for and
receiving exemptive relief from the Securities and Exchange Commission, to hire
one or more new sub-managers without seeking approval by the shareholders,
although shareholders would still be required to approve any changes in the
Portfolio's investment manager.
As part of the restructuring of the Fund's and the Portfolio's management
structure, it is also proposed, in Item 4 below, that the Fund and the
Portfolio each add Trustees to their respective Boards, who currently serve as
Trustees of the Domini Social Equity Fund (the "Equity Fund"), another open-end
management company which invests all of its assets in the Portfolio.
Concurrently, the Trustees of the Fund and the Portfolio have been nominated to
serve as Trustees of the Equity Fund, thus providing for a common board for the
Portfolio, the Fund and the Equity Fund.
The Fund's Trustees believe that this new management structure is in the
best interest of Fund shareholders, and recommend that the shareholders vote to
<PAGE>
approve each of the items relating to the new structure. However, except for
matters proposed in Items 1a and 1b, the implementation of which is contingent
upon approval of both Items 1a and 1b, the implementation of each proposal is
not contingent upon the approval of any other proposals. Thus, the Trustees
intend to implement the new Management Agreement with DSI and the Submanagement
Agreement with Mellon Equity, assuming approval of Items 1a and 1b, and
terminate the existing investment advisory agreement with KLD and the existing
management agreement with Mellon Equity, whether or not the shareholders
approve the other proposals in this proxy statement.
In addition to the matters discussed in this Proxy Statement for which a
shareholder vote is required, the Trustees of the Fund have implemented or
intend to implement other changes in the operations of the Fund in order to
facilitate a more centralized management structure. In particular, the Trustees
have approved a sponsorship agreement between the Fund and DSI, pursuant to
which DSI provides the Fund with administrative services and management
functions (other than the provision of investment advice), and the termination
of the expense reimbursement arrangements between KLD and the Portfolio and
between KLD and the Fund. Currently, KLD serves as Sponsor of each of the
Portfolio and the Fund under in each case a sponsorship agreement pursuant to
which KLD performs certain administrative services for the Portfolio and the
Fund, respectively and is obligated to pay all of the ordinary operating
expenses of the Portfolio and the Fund, respectively (excluding brokerage fees
and commissions, interest, taxes and other extraordinary expenses) and for
which KLD receives a fee, equal on an annual basis to 0.20% of the average
daily nets assets of the Portfolio for its then current fiscal year and 0.10%
of the average daily net assets of the Fund for its then fiscal year. Pursuant
to letter agreements between KLD and Signature, Signature is obligated to pay
such operating expenses of the Portfolio and the Fund. In effect, such expense
payment arrangements have ensured that the annual ordinary operating expenses
for the Fund (excluding brokerage fees and commissions, interest, taxes and
other extraordinary expenses) would not exceed (or fall below) 0.30% of the
average daily net assets of the Fund. Both the Sponsorship Agreement between
KLD and the Portfolio and the Sponsorship Agreement between KLD and the Fund
are terminable at any time by the mutual agreement of the parties. SEE "CURRENT
AND PRO FORMA EXPENSE SUMMARY" below.
DSI has also informed the Board that it, or an affiliate, intends to
become qualified as a broker dealer and a transfer agent within the next year.
In that event, the Trustees of the Fund would consider appointing DSI, or such
affiliate, the distributor and/or transfer agent for the Fund. Such
appointments do not require shareholder approval.
The Trustees unanimously recommend that shareholders approve each of the
items. In making this recommendation, the Trustees' main consideration was the
potential effect on the shareholders resulting from the management
restructuring, including the new fee arrangements, which raise the fees which
the Fund will be contractually obligated to pay after one year, thereby
potentially reducing the return to shareholders. The Trustees considered the
increased level of services and commitment which the Fund could expect from the
new arrangements, and how these would benefit shareholders, including DSI's
commitment to develop state of the art shareholder servicing, to expand the
availability of the Fund to retirement plan sponsors and to develop new
socially responsible investment products that would be available to the
shareholders. The Trustees also considered the level of expertise that DSI
<PAGE>
would bring to the Fund, and the continuing commitment, through DSI, of certain
principals who had been involved with the Fund since its inception. In this
regard, the Trustees considered the alternatives available to the Fund, several
of which had been explored over the past year, including bringing in third
parties to provide the management function, and the benefits to be derived from
the establishment of the new entity, which would combine the continuing
commitment of the founders of the Fund with increased management focus and
capability. With respect to the potential fee increases, the Trustees reviewed
the fees paid by other socially and/or environmentally responsible mutual
funds, and determined that the Fund's aggregate advisory and administration
fees, after the proposed restructuring, would still be within the competitive
range, and that for a period of one year during which the reduction in fees and
voluntary expense reimbursements would be in effect, the Fund's total expense
ratio was expected to be one of the lowest of those funds in its category. The
Trustees also considered the Fund's total operating expenses after the one year
period of fee reduction and voluntary expense reimbursements and, based upon
current expense levels of the Fund and other funds in its category, the
Trustees felt that it was reasonable to expect that the Fund's fee levels would
still be very competitive. In this regard, the Trustees also considered the
undertaking by DSI to consider voluntary fee waivers, following the one year
period, as necessary to assure that the Fund's shareholders would continue to
enjoy very competitive fee levels. Finally, the Trustees explored the financial
resources that would be available to DSI. As a new entity, with no operating
history, the Trustees reviewed projections of anticipated revenues and
operating expenses, and based upon these projections, believed that it was
reasonable to expect that DSI would have the assets necessary to provide the
Fund with the increased level of services proposed. A more detailed discussion
of the Board's considerations is set forth under Item 1a below.
In addition to the major items relating to the restructuring of the
management arrangements, shareholders are also being asked to approve
amendments to the Declaration of Trust of the Fund and the Portfolio to clarify
the rights of shareholders with respect to the election of Trustees.
<PAGE>
CURRENT AND PRO FORMA EXPENSE SUMMARY
The following table provides (i) a summary of expenses relating to
purchases and sales of shares of the Fund, and the aggregate annual operating
expenses for the Fund and the Portfolio, as a percentage of average net assets
of the Fund, and (ii) an example illustrating the dollar cost of such expenses
on a $1,000 investment in the Fund, under the expense structure prior to the
management restructuring and after the management restructuring, assuming that
the proposals in Items 1a and 1b are approved. The pro forma expenses are
intended to provide shareholders with information about the impact of the new
management arrangements upon Fund expenses for the one year period following
the restructuring, and assume the same level of assets and expenses as existed
for the Fund and the Portfolio during the fiscal year ended July 31, 1997. The
pro forma expenses are estimated and have not been audited.
CURRENT PRO FORMA
EXPENSES EXPENSES
(Prior to (One Year
Management Period Following
Restructuring) Management
______________ Restructuring)
SHAREHOLDER TRANSACTION EXPENSES.............. 0% 0%
ANNUAL OPERATING EXPENSES:
Advisory and Management Fees................. 0.125% 0.154%1/
12b-1 Fees................................... 0% 0%
Other Expenses After Expense Reimbursements
Administrative Services and Sponsorship Fees 0.095% 0%2/
Other Expenses ............................. 0%3/ 0.146%4/
Expense Payment Fees ....................... 0.080%5/ 0%
Total Operating Expenses ..................... 0.300% 0.300%6/
======= =======
Example7/:
A shareholder of the Fund would pay the following
expense on a $1,000 investment in the Fund,
assuming (1) 5% annual return and (2) redemption
at the end of:
1 year ................................... $ 3 $ 3
3 years .................................. $10 $10
- ---------------------------
1/Under the proposed Management Agreement, DSI's fee for advisory and
administrative services to the Portfolio will be 0.20% of the average daily net
assets of the Portfolio, but will be reduced to the extent necessary to keep
the aggregate annual operating expenses of the Portfolio (excluding brokerage
fees and commissions, interest, taxes and other extraordinary expenses) at no
greater than .20% of the average daily net assets of the Portfolio, for the one
year period following effectiveness of the Agreement. If the fee reduction were
not in effect, Advisory and Management Fees for the Portfolio would be .20% of
the average daily net assets of the Portfolio.
2/Under the Sponsorship Agreement between DSI and the Fund which will be
entered into as part of the management restructuring, DSI's fee for
administrative and sponsorship services will be 0.25% of the average daily net
assets of the Fund, but will be reduced to the extent necessary to keep the
Footnote Continued on Next Page
<PAGE>
- ---------------------------
(footnote continued from previous page)
aggregate annual operating expenses of the Fund (including the Fund's share of
the Portfolio's expense, but excluding, brokerage fees and commissions,
interest, taxes and other extraordinary expenses) at no greater than 0.30% of
the average daily net assets of the Fund, for the one year period following
effectiveness of the Sponsorship Agreement. If the fee reduction were not in
effect, administrative services and sponsorship fees for the Fund would be .25%
of the average daily net assets of the Fund.
3/Pursuant to the current Sponsorship Agreements between the Portfolio
and KLD and the Fund and KLD, KLD pays the ordinary operating expenses of the
Portfolio and the Fund, except the sponsorship fees, and excluding brokerage
fees and commissions, interest, taxes and other extraordinary expenses. KLD has
entered into expense payment arrangements with Signature pursuant to which
Signature currently provides these expense payment services to the Portfolio
and the Fund. As a result, the aggregate annual ordinary operating expenses
(including amortization of organization expenses) of the Fund and the Portfolio
are set at 0.30% of the average daily net assets of the Fund. All of the
advisory, administration and management fees shown above are paid through these
expense payment arrangements. During any period, the amounts paid to Signature
or KLD under the expense payment arrangements may be greater or less than
amounts actually paid by Signature or KLD, as the case may be, under the
arrangements during that period. Had expense payment arrangements not been in
place, the total operating expenses of the Fund (including the Fund's share of
the Portfolio's expenses) would have been 0.622% of the average daily net
assets of the Fund for the fiscal year ended July 31, 1997. These expense
payment arrangements are being terminated in connection with the management
restructuring.
4/Reflects a voluntary undertaking on the part of DSI to reimburse the
Fund for ordinary operating expenses (excluding brokerage fees and commissions,
interest, taxes and other extraordinary expenses) for a period of one year from
the effective date of the management restructuring to the extent such ordinary
operating expenses exceed .30% of the average daily net assets of the Fund.
Without this voluntary undertaking, it is estimated that under the proposed
management restructuring, "Other Expenses" of the Fund would be 0.358% of the
average daily net assets of the Fund, and "Total Operating Expenses" of the
Fund would be 0.512% of the average daily net assets of the Fund, assuming the
same level of assets and expenses of the Fund as existed during the fiscal year
ended July 31, 1997.
5/See footnote 3 above.
6/Without the automatic fee reductions and voluntary expense
reimbursement undertaking, which expire in one year, it is estimated that under
the proposed management restructuring, the aggregate annual operating expenses
of the Fund would be 0.808% of the average daily net assets of the Fund,
assuming the same level of assets and expenses of the Fund as existed during
the fiscal year ended July 31, 1997.
7/Without the automatic fee reductions and voluntary expense
reimbursement undertaking, which expire in one year, it is estimated that under
the proposed management restructuring, a shareholder of the Fund would pay the
following expenses on a $1,000 investment in the Fund, assuming (1) 5% annual
return and (2) redemption at the end of 1 year and 3 years respectively: $8 and
$26.
<PAGE>
ITEM 1: NEW MANAGEMENT ARRANGEMENTS FOR THE FUND, AS FOLLOWS:
ITEM 1A: TO VOTE ON A MANAGEMENT AGREEMENT BETWEEN DOMINI SOCIAL
INVESTMENTS LLC ("DSI") AND DOMINI SOCIAL INDEXSM PORTFOLIO (THE
"PORTFOLIO"). SUBSTANTIALLY ALL OF THE FUND'S INVESTABLE ASSETS
ARE INVESTED IN THE PORTFOLIO.
ITEM 1B: TO VOTE ON A SUBMANAGEMENT AGREEMENT BETWEEN DSI AND
MELLON EQUITY ASSOCIATES.
ITEM 1A: A MANAGEMENT AGREEMENT BETWEEN THE PORTFOLIO AND DOMINI SOCIAL
INVESTMENTS LLC
APPOINTMENT OF DOMINI SOCIAL INVESTMENTS LLC AS MANAGER
Kinder, Lydenberg, Domini & Co., Inc. ("KLD") currently provides advice
to the Portfolio pursuant to an investment advisory agreement (the "KLD
Advisory Agreement") which provides that KLD, as Adviser, will determine the
stock to be included in the Domini 400 Social IndexSM (the "Index") and will
evaluate, in accordance with KLD's social criteria, debt securities which may
be purchased by the Portfolio. If Item 1a is approved, the management of the
Fund's assets will be supervised by Domini Social Investments LLC ("DSI") a
newly formed Massachusetts limited liability company, pursuant to a management
agreement between the Portfolio and DSI (the "Proposed Management Agreement").
The creation of DSI, by current principals of KLD and certain other
investment company and marketing professionals, and the proposal to appoint DSI
as manager of the Portfolio, resulted from an effort on the part of the
Trustees and officers of the Fund and the Portfolio to provide the Fund and the
Portfolio with more centralized and efficient management services. Under the
Proposed Management Agreement, DSI will provide the Fund with both investment
management and administrative services, including the provision of general
office facilities and supervising the overall administration of the Fund. Upon
the effectiveness of the Proposed Management Agreement with DSI, the current
investment advisory agreement with KLD will terminate. KLD will continue to
determine and monitor the composition of the Index, and provide other services
relating to socially responsible investments pursuant to a license agreement
between DSI and KLD. It is anticipated that the establishment of DSI, and the
transfer of the Portfolio's management and administration to DSI, will permit
KLD to concentrate on its mission to provide services relating to socially
responsible investments. DSI, on the other hand, will be able to focus its
energies and the experience of its principals on providing the Portfolio and
the Fund with professional fund management and, as supervisor of the
Portfolio's investments, will seek to ensure that securities holdings track the
composition and weightings of the securities comprising the Index maintained by
KLD.
The assets of the Portfolio have been managed on a day to day basis since
November 21, 1994 by Mellon Equity Associates ("Mellon Equity") pursuant to a
management agreement dated October 4, 1994 (the "Existing Mellon Agreement").
Concurrently with the proposal to appoint DSI as Manager, shareholders are also
being asked to approve a submanagement agreement (the "Submanagement
<PAGE>
Agreement") between DSI and Mellon Equity as more fully set forth in Item 1b
below. If Item 1b is approved, subject to the oversight of DSI, Mellon Equity
will continue to manage the day to day investment affairs of the Portfolio,
resulting in continuous and uninterrupted advisory services. Termination of the
Existing Mellon Agreement will be effective as of the time DSI assumes
responsibility for the management of the Portfolio's assets and upon the
approval of the Submanagement Agreement as further set forth in Item 1b below.
DESCRIPTION OF DSI
DSI is a newly formed Massachusetts limited liability company with
offices at 11 West 25th Street, 7th Floor, New York, New York 10010, and is
registered as an investment adviser under the Investment Advisers Act of 1940.
DSI was founded by the principals of KLD, and now includes other investment
company and marketing professionals, as more fully set forth below.
Amy L. Domini is the Manager and principal executive officer of DSI. Ms.
Domini specializes in working with individuals and institutions that wish to
integrate social or ethical criteria into their investment decisions. Ms.
Domini has been in the investment field for 19 years, co-authored a book on
social investing, Ethical Investing (Addison-Wesley, 1984) and is currently a
trustee of Loring, Wolcott & Coolidge, a firm of private trustees. Ms. Domini
has served as principal executive officer of KLD, the Portfolio's current
investment adviser, responsible for determining which stocks are to be included
in the Index. Ms. Domini also serves as Trustee of the Episcopal Church Pension
Fund and a member of the governing board of the Interfaith Center of Corporate
Responsibility. Ms. Domini has worked to promote both shareholder activism and
community development investing which, in combination with the integration of
social criteria into investment decisions, in her view serve to encourage the
business community to accept more responsibility for its impact on society. Ms.
Domini is currently Chairman of the Board and President of the Fund, Chief
Executive Officer, Secretary, Treasurer and 42.50% owner of KLD, and a 21.25%
owner of DSI. Ms. Domini's address is c/o Loring, Wolcott & Coolidge, 230
Congress Street, Boston, MA 02110.
Peter D. Kinder is a lawyer by training, and practiced law for ten years
in both the public and private sectors. During that time, Mr. Kinder litigated
corporate responsibility issues in the contexts of the environment, charitable
trusts, consumer frauds, and energy supplies. Since then he has co-authored
Investing for Good (Harper Collins, 1993), The Social Investment Almanac (Henry
Holt & Co., 1992), Law and Business (McGraw-Hill, 1990) and Ethical Investing
(Addison-Wesley, 1984) and contributed to three other books. He currently
writes a regular column or Business Ethics magazine. Mr. Kinder holds degrees
from Princeton University and Ohio State University. Mr. Kinder is currently
Vice President of the Fund, President and 19% owner of KLD, and a 21.25% owner
of DSI. Mr. Kinder's address is c/o Kinder, Lydenberg, Domini & Co., Inc., 125
Mt. Auburn Street, Cambridge, MA 02138.
David P. Wieder is President and founder of Fundamental Shareholder
Services, Inc. ("FSSI"), a registered transfer agent specializing in assisting
financial services firms in the areas of shareholder servicing, marketing, and
technology. FSSI has served as the Fund's transfer agent since 1995. Through
FSSI, Mr. Wieder has provided advice to leading financial institutions, small-
and medium-sized mutual funds, and non-profit organizations. In addition to
<PAGE>
founding FSSI in 1990, Mr. Wieder has been associated with the Fundamental
Family of Funds. He has also worked at LaSalle Economics, Inc. as an economic
analyst and American Express as a financial analyst. Mr. Wieder is also active
in the National Investment Company Service Association and the Investment
Company Institute, where he serves as a member of the Direct Marketing, Sales
Force Marketing and Operations Committees. Mr. Wieder holds a degree in
Economics from Cornell University. Mr. Wieder is a 21.25% owner of DSI. Mr.
Wieder's address is c/o Domini Social Investments LLC, 11 West 25th Street, 7th
Floor, New York, New York 10010.
Sigward M. Moser is President and a founder of Communication House
International, Inc., an international marketing firm specializing in cross
cultural and financial communications. Mr. Moser has provided advice to
governments, non-profit organizations and major European and American
corporations to develop communication and marketing programs. Mr. Moser has
also worked for international advertising agencies in the U.S. and in Europe.
Mr. Moser is also active in the Financial Communications Society, where he
serves as a member of the Board of Directors. Mr. Moser holds a degree in
Advertising from the University of Economics, Vienna, Austria. Mr. Moser is a
21.25% owner of DSI. Mr. Moser's address is c/o Domini Social Investments LLC,
11 West 25th Street, 7th Floor, New York, New York 10010.
Steven D. Lydenberg is currently Vice President of the Fund, Director of
Research and 5% owner of KLD and 5% owner of DSI. He has been active in social
research since 1975. For twelve years he worked with the Council on Economic
Priorities, ultimately Director of Corporate Accountability Research. Mr.
Lydenberg has authored numerous publications on issues of corporate social
responsibility, including Rating America's Corporate Conscience
(Addison-Wesley, 1986), and co-authored Investing for Good and The Social
Investment Almanac. Mr. Lydenberg holds degrees from Columbia College and
Cornell University. He is a Chartered Financial Analyst (CFA). Mr. Lydenberg's
address is c/o Kinder, Lydenberg, Domini & Co., Inc., 125 Mt. Auburn Street,
Cambridge, MA 02138.
James Earl Brooks of 4 Arlington Street, Cambridge, Massachusetts is also
a 10% owner of KLD and DSI.
In addition to serving as Manager to the Portfolio if Item 1a is
approved, DSI also will serve as Sponsor of the Fund pursuant to a Sponsorship
Agreement approved by the Trustees of the Fund at a meeting on June 30, 1997.
As Sponsor, DSI will provide overall administrative and operational support to
the Fund subject to the supervision of the Fund's Board of Trustees, including:
(i) maintaining office facilities and furnishing clerical services necessary
for maintaining the organization of the Fund and for performing administrative
and management functions; (ii) supervising the overall administration of the
Fund, including negotiation of contracts and fees with and the monitoring of
performance and billings of the Fund's transfer agent, distributor, shareholder
servicing agents, custodian and other independent contractors or agents; (iii)
overseeing the preparation of and, if applicable, filing all documents required
for compliance by the Fund with applicable laws and regulations, including
registration statements, prospectuses and statements of additional information,
semi-annual and annual reports to shareholders, proxy statements and tax
returns; (iv) preparing agendas and supporting documents for and minutes of
meetings of Trustees, committees of Trustees and shareholders; and (v)
arranging for maintenance of the books and records of the Fund. For its
services under the Sponsorship Agreement, DSI receives a fee equal, on an
annual basis, to .25% of the Fund's average daily net assets, except that for
the first year of the Agreement, the fee payable to DSI will be reduced by the
<PAGE>
amount, if any, by which the total ordinary operating expenses of the Fund
(including the Fund's pro rata portion of the expenses of the Portfolio)
exceed, on an annual basis, .30% of the average daily net assets of the Fund
for its current fiscal year.
"Domini" and "Domini Social Index" are service marks of KLD which are
licensed to DSI with the consent of Amy L. Domini. Pursuant to agreements among
DSI, Amy L. Domini and each of the Fund and the Portfolio, the Portfolio may be
required to discontinue use of such service marks if DSI ceases to be the
Manager of the Portfolio or Amy L. Domini withdraws her consent, and the Fund
may be required to discontinue the use of such marks if DSI ceases to be the
Sponsor of the Fund or Amy L. Domini withdraws her consent or either DSI ceases
to be the Manager of the Portfolio or the Fund ceases to invest all of its
assets in the Portfolio.
The following summary of the Proposed Management Agreement is qualified
in its entirety by the provisions of the Proposed Management Agreement as set
forth in Appendix A hereto.
THE PROPOSED MANAGEMENT AGREEMENT
Description of Proposed Management Agreement. Under the Proposed
Management Agreement, DSI, as investment manager, will furnish continuously an
investment program for the Portfolio and will have authority to determine from
time to time what securities are purchased, sold or exchanged, and what portion
of the assets of the Portfolio is held uninvested, subject always to the
restrictions of the Portfolio's Declaration of Trust and By-laws, as each may
be amended from time to time, the provisions of the 1940 Act and the Fund's
prospectus. DSI will also make recommendations as to the manner in which
proxies, voting rights, rights to consent to corporate action and any other
rights pertaining to portfolio securities will be exercised; and will take all
actions which DSI deems necessary to implement Fund investment policies
including the placement of all orders for the purchase or sale of securities
for the Portfolio's account with the brokers or dealers selected by it, and
instructing the custodian or any subcustodian as to the settlement of such
purchases or sales. In providing the services and assuming the obligations
under the Proposed Management Agreement, DSI may employ, at its own expense, or
may request that the Portfolio employ (subject to the requirements of the 1940
Act) one or more subadvisers or managers, provided that DSI shall supervise the
activities of any subadviser or submanager. If Item 1b is approved, DSI will
appoint Mellon Equity to act as submanager for the Portfolio.
Under the Proposed Management Agreement, DSI will also perform such
administrative and management services as may from time to time be reasonably
requested, including: (i) maintaining office facilities and furnishing clerical
services 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, shareholder servicing agents, custodian and other independent
contractors or agents; (iii) overseeing (with advice of the Portfolio's
counsel) the preparation of and, if applicable, filing all documents required
for compliance by the Portfolio with applicable laws and regulations, including
registration statements, prospectuses and statements of additional information,
semi-annual and annual reports to shareholders, proxy statements and tax
returns; (iv) preparing agendas and supporting documents for and minutes of
<PAGE>
meetings of Trustees, committees of Trustees and shareholders; and (v)
arranging for maintenance of the books and records of the Portfolio. In
providing the services and assuming the obligations under the Proposed
Management Agreement, DSI may employ, at its own expense, one or more entities
to perform its obligations under the Agreement, provided that DSI shall
supervise the activities of any such entity.
The Proposed Management Agreement, if approved by a Majority Shareholder
Vote of the Portfolio's investors, will become effective on the effective date
of the proposed management restructuring, and will continue in effect for a
two-year period, and thereafter from year to year, subject to approval annually
in accordance with the 1940 Act. The Proposed Management Agreement may be
terminated at any time without the payment of any penalty by the Portfolio's
Board of Trustees or by Majority Shareholder Vote of the Portfolio's investors,
or by DSI, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party. The Proposed Management Agreement will also
terminate automatically in the event of its "assignment" (as defined in the
1940 Act).
Under the Proposed Management Agreement, as under the KLD Advisory
Agreement and Existing Mellon Agreement, DSI will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Portfolio in
connection with the matters to which the Proposed Management Agreement relates,
except a loss resulting from DSI's willful misfeasance, or its bad faith or
gross negligence in the performance of its obligations and duties, or by reason
of DSI's reckless disregard of its obligations and duties under such agreement.
The Proposed Management Agreement, like the KLD Advisory Agreement and Existing
Mellon Agreement, provides that the Manager may render services to others.
Description of Current Agreements. Pursuant to the KLD Advisory Agreement
currently in effect, KLD furnishes continuously an investment program by
determining the stocks to be included in the Index and evaluating, in
accordance with KLD's social criteria, debt securities which may be purchased
by the Portfolio, subject always to the restrictions of the Portfolio's
Declaration of Trust and By-laws, as each may be amended from time to time, the
provisions of the 1940 Act and the Fund's prospectus, and provides, at its own
expense, all facilities and personnel necessary in connection with providing
these services. KLD also makes recommendations as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to the securities held by the Portfolio should be exercised. KLD is not
responsible, however, for providing advice as to the investment merits of
particular securities or as to the purchase or sale of securities. The KLD
Advisory Agreement continues in effect if such continuance is specifically
approved at least annually by the Portfolio's Board of Trustees or by a
majority of the outstanding voting securities of the Portfolio at a meeting
called for the purpose of voting on the KLD Advisory Agreement (with the vote
of each investor in the Portfolio being in proportion to the amount of its
interests in the Portfolio), and, in either case, by a majority of a
Portfolio's Trustees who are not parties to the KLD Advisory Agreement or
interested persons of any such party at a meeting called for the purpose of
voting on the KLD Advisory Agreement. The KLD Advisory Agreement is dated May
1, 1990, and was approved by a Majority Shareholder Vote of invested in the
Portfolio on December 3, 1991, and amended by the Trustees to decrease the fees
payable thereunder on October 4, 1996.
<PAGE>
The Existing Mellon Agreement provides that Mellon Equity shall act as
investment manager to the Portfolio and as such, shall manage the assets of the
Portfolio on a daily basis, subject always to the restrictions of the
Portfolio's Declaration of Trust, By-laws and then current registration
statement. In particular, Mellon Equity takes all actions to implement the
investment policies of the Portfolio, and in particular, places all orders for
the purchase or sale of securities for the Portfolio with brokers or dealers
selected by it and gives instructions to the custodian or subcustodian with
respect to the settlement of such purchases and sales. Mellon Equity provides,
at its own expense, all facilities and personnel necessary in connection with
providing these services. The Existing Mellon Agreement continues in effect if
such continuance is specifically approved at least annually by the Portfolio's
Board of Trustees or by a majority of the outstanding voting securities of the
Portfolio at a meeting called for the purpose of voting on the Existing Mellon
Agreement (with the vote of each investor in the Portfolio being in proportion
to the amount of its interests in the Portfolio), and, in either case, by a
majority of a Portfolio's Trustees who are not parties to the Existing Mellon
Agreement or interested persons of any such party at a meeting called for the
purpose of voting on the Agreement. Further information with respect to the
Existing Mellon Agreement is included under Item 1b.
Fees Under the Proposed and Existing Agreements. Under the Proposed
Management Agreement, the Portfolio will pay to DSI for the services to be
rendered and facilities to be provided, a fee accrued daily and payable monthly
at an annual rate equal to .20% of the Portfolio's average daily net assets for
the then current fiscal year. However, the Proposed Management Agreement also
provides that for a period of one year, this fee will be reduced to the extent
necessary to keep the Portfolio's annual operating expenses (excluding amounts
payable under the Proposed Management Agreement, and brokerage fees and
commissions, interest, taxes, and any other extraordinary expenses of the
Portfolio) at no more than .20% of the Portfolio's average daily net assets for
the then current year. Shareholders should consult the "CURRENT AND PRO FORMA
EXPENSE SUMMARY" above for a description of the Fund's expenses, which includes
expenses in addition to the Portfolio's expenses.
Under the current KLD Advisory Agreement, the fees payable to KLD are
equal to .025% of the Portfolio's average daily net assets for the then current
fiscal year, under the Existing Mellon Agreement, the fees payable to Mellon
Equity are equal to .10% of the Portfolio's average daily net assets for the
then current fiscal year, and under the KLD Sponsorship Agreement, the fees
payable to KLD for administrative services are equal to .025% of the
Portfolio's average daily net assets for the then current fiscal year, bringing
aggregate investment management and administration fees under the current
agreements to .15% of the Portfolio's average daily net assets for its then
current fiscal year. These fees reflect amendments to the current KLD Advisory
Agreement and the Existing Mellon Agreement effective as of October 4, 1996
which reduced the fees payable under those agreements. Prior to October 4,
1996, under the current KLD Advisory Agreement, the fees payable to KLD were
equal to .05% of the Portfolio's average daily net assets for the then current
fiscal year and under the Existing Mellon Agreement, the fees payable to Mellon
Equity were on an annual basis equal to the following percentages of the
Portfolio's average daily net assets for its then current fiscal year: 0.10% of
assets up to $50 million; 0.30% of assets between $50 million and $100 million;
0.20% of assets between $100 million and $500 million; and 0.15% of assets over
$500 million. For the fiscal year ended July 31, 1997 the Portfolio incurred
advisory fees under the KLD Advisory Agreement of $46,528 and management fees
under the Existing Mellon Agreement of $182,885. In addition, for the fiscal
year ended July 31, 1997, the Portfolio incurred $46,528 in administrative
fees, resulting in fees for investment management and administrative services
<PAGE>
for the Portfolio of $275,941 for the fiscal year ended July 31, 1997. Had the
Proposed Management Agreement been in effect for that period, the Portfolio
would have incurred $257,154 in fees for investment management and
administrative services, reflecting the fee reduction provision which will be
in effect for a one year period following the effectiveness of the Agreement.
Had the Proposed Management Agreement been in effect for the fiscal year ended
July 31, 1997, and assuming expiration of the fee reduction provision, the
Portfolio would have incurred $333,927 in fees for investment management and
administrative services.
Currently, under the KLD Sponsorship Agreement with the Portfolio, KLD is
obligated to pay all of the Portfolio's annual operating expenses (excluding
amounts payable under the KLD Sponsorship Agreement, and brokerage fees and
commissions, interest, taxes, and any other extraordinary expenses of the
Portfolio) and in return receives a fee payable monthly at an annual rate equal
to .20% of the Portfolio's average daily net assets for the then current fiscal
year. The existing KLD Sponsorship Agreement has the effect of ensuring that
the Portfolio's ordinary expenses are maintained at a certain level. The KLD
Sponsorship Agreement will be terminated as part of the management
restructuring. However, for a period of one year the Proposed Management
Agreement will provide for a reduction in the fee payable to DSI to the extent
necessary to maintain ordinary expenses at that same level.
Except for the fee to be paid thereunder, the terms and conditions of the
Proposed Management Agreement relating to investment management services are
not substantially different from the terms and conditions of the KLD Advisory
Agreement and the Existing Mellon Agreement, and those terms and conditions
relating to administrative services are not substantially different from the
terms and conditions relating to the provision of administrative services in
the existing Sponsorship Agreement between KLD and the Portfolio.
CONSIDERATION OF THE BOARD OF TRUSTEES
The Board's Recommendation. The Trustees of the Portfolio and the Fund
were first introduced to the DSI proposal to centralize management at meetings
of the Boards held on April 14, 1997, and further considered the proposal at
meetings held on June 13, 1997 and June 30, 1997. In addition, the members of
the Boards who are not "interested persons of the Portfolio and the Fund
(referred to hereafter as the "Independent Trustees") met with outside counsel
to such Independent Trustees at meetings held on June 13, June 19, and June 30,
1997. At the meeting held on June 30, 1997, the Trustees of the Portfolio,
including all of the Independent Trustees, approved the Proposed Management
Agreement with DSI, subject to approval of the investors in the Portfolio,
including the Fund.
The Board's Responsibilities. In determining whether to approve the
Proposed Management Agreement, the Trustees, assisted by outside counsel,
analyzed the proposal in light of their fiduciary duties as Trustees in order
to determine whether the appointment of DSI and the potential increase in fees
was in the best interests of the Portfolio's investors. Outside counsel to the
Independent Trustees assisted in preparing an analysis of the Trustee's
fiduciary duties in connection with their review and approval of the Proposed
Management Agreement. In addition to advising the Independent Trustees about
their fiduciary duties, counsel assisted the Independent Trustees in analyzing
<PAGE>
the issues presented in connection with the appointment of a newly created
management company without an operating history, and worked with the
Independent Trustees in requesting information from DSI with respect to its
proposal. In addition, counsel assisted the Independent Trustees is analyzing
the proposed fee increase and in evaluating the potential effects of the
increase on the Portfolio and its investors.
DSI's Presentation to the Board. In presenting the proposed management
arrangements, current principals of KLD described the existing management
structure and how it had evolved from the start-up stages of the Portfolio and
the Fund, and the present need for a new, more focused management system. In
particular, Ms. Domini explained how the resources and facilities of KLD had
been strained by the demands resulting from the rapid growth of the Fund and
the increasing number of investor inquiries. For example, the Trustees were
provided with statistics indicating that the number of investor calls had
increased from approximately 2,600 calls during the five-month period ending
May 1996 to over 7,300 calls for the same period ending May, 1997. The Trustees
were informed that KLD, as primarily a provider of social research, did not
have the expertise in fund management to provide the Portfolio and the Fund
with the leadership it required, nor the expertise or personnel to provide the
Fund with marketing initiatives. DSI also informed the Board that it would have
experienced compliance personnel on its staff, and that it intended to expand
its operations to be able to provide, in the near future, full service fund
administration, as well as distributorship and shareholder servicing functions.
The Trustees were presented with materials showing the anticipated lines of
authority, stemming from the Trustees, who would continue to maintain overall
supervisory responsibility for the Portfolio and the Fund, to the Manager,
which would provide more direct supervision of the other service providers.
The Trustees were also presented with materials on the principals of DSI,
their backgrounds, and information with respect to the businesses with which
they are currently associated, with particular attention to those principals
who were not also associated with KLD. In this regard, it was noted that Mr.
Wieder, a principal of DSI, had over a two year relationship with the Fund as
the founder and President of Fundamental Shareholder Services, Inc., the
present transfer agent for the Fund. It was also noted that Mr. Moser, another
principal of DSI, had particular expertise in marketing financial products. In
addition, the Trustees were informed of the long-standing commitment to social
issues of the DSI principals.
The Trustees also received information on the projected financial
resources of DSI, and the potential ability of DSI to provide the services for
which it would be responsible. The Trustees were presented with a three year
business plan, as well as projections of revenues and expenses.
Comparative Advisory and Administration Fees. In considering the fees
under the Proposed Management Agreement, the Trustees also considered the fees
under the proposed Sponsorship Agreement between DSI and the Fund, pursuant to
which DSI would receive an annual fee equal to .25% of the Fund's average daily
net assets. The combined fees under the two agreements result in an aggregate
annual fee for investment management and administration services of .45% of the
Fund's average daily net assets. The Trustees were presented with comparative
data with respect to the expense ratios and advisory/administration expenses of
other funds committed to socially responsible investments. Using as a source
Lipper's Directors' and Analytical Data, First Edition, 1997, DSI demonstrated
<PAGE>
that the proposed advisory/administration fee for the Fund at an annual rate of
.45% of average net assets was lower than the advisory/administration fees for
other socially and environmentally responsible funds included in the data base
(which does not include any institutional funds). Such fees ranged from 0.515%
to 1.350% of average net assets. DSI also demonstrated that the proposed total
expense ratio of 0.30% of net assets which would be in place for the one year
period following the effectiveness of the Proposed Management Agreement was the
lowest total expense ratio for socially and environmentally responsible funds
in the Lipper data base.
The Board's Consideration of the Fee Increase. The Trustees requested,
and DSI provided, information to assist the Trustees in their consideration of
the proposed fee increase, including information and reports relating to the
Fund's current and proposed fee structures, the Fund's expenses, and the
anticipated expenses and profitability of DSI. The Board acknowledged that the
fees currently payable to KLD for its role in preparing and maintaining the
Index and providing administrative and sponsorship services to the Portfolio
and the Fund were not sufficient to enable KLD to provide the kind of
management services needed by the Portfolio and the Fund. The Board also took
into consideration DSI's expressed commitment to keeping the overall fees of
the Portfolio and the Fund competitive with other funds in its class, and the
understanding therefore, that DSI might waive, on a voluntary basis, fees in
the future. The Trustees also considered the anticipated benefits to the
Portfolio and the Fund and the Fund's shareholders in having DSI, with its
commitment to socially responsible investing, act as manager of the Portfolio
and the Fund. On the basis of this information and other information obtained
and reviewed by the Trustees, including all of the Independent Trustees, the
Trustees determined that the proposed increase in management fees was
reasonable in light of the services to be provided and would result in benefits
to the Shareholders.
THE MAXIMUM FEE PAYABLE UNDER THE PROPOSED MANAGEMENT AGREEMENT IS
GREATER THAN THE FEE CURRENTLY PAYABLE BY THE PORTFOLIO FOR ADVISORY,
MANAGEMENT AND ADMINISTRATIVE SERVICES. HOWEVER, FOR A PERIOD OF ONE YEAR, THE
PROPOSED MANAGEMENT AGREEMENT PROVIDES FOR A REDUCTION IN MANAGEMENT FEES TO
THE EXTENT NECESSARY TO MAINTAIN THE PORTFOLIO'S ORDINARY OPERATING EXPENSES AT
CURRENT LEVELS. DSI HAS ALSO AGREED TO REIMBURSE THE FUND FOR CERTAIN ORDINARY
OPERATING EXPENSES ON A VOLUNTARY BASIS FOR A ONE YEAR PERIOD IN ORDER TO
FURTHER ASSURE THAT ORDINARY OPERATING EXPENSES ARE MAINTAINED AT CURRENT
LEVELS. ABSENT FURTHER VOLUNTARY FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE
FUND'S ORDINARY OPERATING EXPENSES WILL INCREASE AS A RESULT OF THE APPROVAL OF
ITEM 1A AFTER ONE YEAR. IN ADDITION, DUE TO THE TERMINATION OF THE EXISTING
EXPENSE REIMBURSEMENT ARRANGEMENTS WITH RESPECT TO THE PORTFOLIO AND THE FUND
IN CONNECTION WITH THE MANAGEMENT RESTRUCTURING, AND THE FEES PAYABLE UNDER THE
SPONSORSHIP AGREEMENT BETWEEN THE FUND AND DSI, THE NEW CONTRACTUAL
ARRANGEMENTS WILL, AFTER THE FIRST YEAR OF OPERATION, RESULT IN AN INCREASE IN
THE ORDINARY OPERATING EXPENSES OF THE FUND.
As noted above, the Proposed Management Agreement must be approved by a
majority of the outstanding interests of the Portfolio. This requires approval
by the holders of 67% or more of the outstanding interests in the Portfolio
which are present at the meeting of the investors of the Portfolio held for
that purpose, if the holders of more than 50% of such shares are present in
person or by proxy, or more than 50% of the outstanding interests in Portfolio,
<PAGE>
whichever is less (a "Majority Shareholder Vote"). The Fund will cast all the
Fund's votes with respect to the Proposed Management Agreement in the same
proportion as the votes of the Fund's shareholders cast at the Meeting of the
Fund's shareholders on this Item 1a. The percentage of the Fund's votes
representing Fund shareholders not voting at the Meeting will be voted by the
Fund in the same proportion as those cast by Fund shareholders who do, in fact,
vote.
If the proposal does not receive the requisite shareholder approvals,
then (a) the Proposed Management Agreement would not become effective, (b) the
existing contractual arrangements would continue, and (c) the Trustees of the
Fund will meet to consider possible alternatives, which might include
resubmission of the Proposed Management Agreement for approval or withdrawal of
the assets of the Fund from the Portfolio.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR APPROVAL OF THE PROPOSED MANAGEMENT
AGREEMENT. In so doing, they have acted in what they believe to be the best
interests of the shareholders of the Fund.
ITEM 1B: TO VOTE ON A SUBMANAGEMENT AGREEMENT BETWEEN
DOMINI SOCIAL INVESTMENTS LLC AND MELLON EQUITY
ASSOCIATES
Mellon Equity has served as the investment manager of the Portfolio since
November 21, 1994 pursuant to the terms of the Investment Management Agreement
dated October 5, 1994 and amended by the Trustees to decrease the fees payable
thereunder on October 4, 1996 (the "Existing Mellon Agreement"). The Existing
Mellon Agreement was approved by Majority Shareholder Vote of the shareholders
of the Fund and the interests in the Portfolio at a meeting of shareholders
held on January 25, 1995. The termination of the Existing Mellon Agreement and
the appointment of Mellon Equity as Submanager of the Portfolio is part of the
effort to provide the Fund and the Portfolio with centralized management. Under
the proposed new management arrangements, DSI will have overall supervisory
authority over the investment of the Portfolio's assets, while Mellon Equity
will continue to manage the assets on a day to day basis pursuant to an
investment submanagement agreement (the "Submanagement Agreement") between DSI
and Mellon (the "Submanager"). A copy of the Submanagement Agreement is
attached hereto as Appendix B.
Termination of the Existing Mellon Agreement and the appointment of
Mellon Equity as Submanager will become effective when DSI assumes
responsibility for the management of the Portfolio's assets and is contingent
upon approval of Item 1a. The appointment of Mellon Equity as Submanager is
expected to provide the Portfolio with continuing effective and capable
investment management services. As Submanager, Mellon Equity manages the assets
of the Portfolio on a day to day basis. Mellon Equity does not determine the
composition of the Index; rather, Mellon's function is to ensure that the
Portfolio's securities holdings track the composition and weightings of the
securities comprising the Index.
MELLON EQUITY ASSOCIATES
Mellon Equity is a Pennsylvania business trust founded in 1987, which is
beneficially owned by Mellon Bank, N.A. (99% beneficial interest) and MMIP (1%
beneficial interest), a wholly-owned subsidiary of Mellon Bank Corporation
<PAGE>
("Mellon Bank"). Mellon Equity is a professional investment counseling firm
that provides investment management services to the equity and balanced
pension, public fund, and profit-sharing investment management markets, and is
a registered investment adviser under the Advisers Act. As of December 31,
1996, Mellon Equity had discretionary management authority with respect to
approximately $11.3 billion of assets. Mellon's predecessor organization
managed domestic equity, tax-exempt and institutional pension accounts since
1947. The address of Mellon Equity and each of the principal executive officers
and directors of Mellon Equity is 500 Grant Street, Suite 3700, Pittsburgh,
Pennsylvania 15258.
John O'Toole, Senior Vice President and Portfolio Manager for Mellon
Equity, is primarily responsible for providing investment management services
to the Portfolio on behalf of Mellon Equity. Mr. O'Toole has been involved in
the development and evolution of the investment process since its inception in
1982, and has managed portfolios utilizing a quantitative approach since the
inception of the process. Mr. O'Toole joined Mellon Bank as a portfolio manager
in 1979 and has had extensive experience in portfolio management and
quantitative applications. Prior to joining Mellon Equity in April 1990, Mr.
O'Toole was a Vice President/Senior Portfolio Manager with the Mellon Private
Capital Management Group of Mellon Bank's Trust and Investment Department.
Mr. O'Toole is a Chartered Financial Analyst and is a member of the
Association for Investment Management and Research, and is past president and a
former board member of the Pittsburgh Society of Financial Analysts. He has
also participated in AIMR's Performance Presentation Standards implementation
process as a member of the sub-committee for After-Tax Reporting. He graduated
from the University of Chicago with an MBA, concentrating in Finance, and
received his Bachelor's Degree in Economics from the University of
Pennsylvania.
The names and principal occupations of the principal executive officers
and trustees of Mellon Equity are shown on the table below.
Name Position Principal Occupation
W. Keith Smith Trustee Director & Vice Chairman
Ronald Philip O'Hanley Trustee and Chairman Senior Vice President
Christopher Mark Condron Trustee Vice Chairman
James Milton Gockley Trustee Chief Legal Counsel
Joan Green Treasurer Finance
William P. Rydell President and Chief President
Executive Officer
Robert A. Wilk Senior Vice President Portfolio Manager
John R. O'Toole Senior Vice President Portfolio Manager
Steven A. Falci Senior Vice President Portfolio Manager
<PAGE>
Ronald P. Gala Senior Vice President Portfolio Manager
Kenneth A. Barker Senior Vice President Director-Quantitative
Analysis & Systems
James E. Foster Senior Vice President Director-Marketing & Sales
Patricia K. Nichols Senior Vice President Finance & Administration
John W. Keller Senior Vice President Director of Equity Trading
John J. Dagenhard Senior Vice President Director of Client Service
In addition to serving as Submanager to the Portfolio, Mellon Equity also
serves as investment adviser to other investment companies with similar
investment objective as set forth in Appendix C hereto.
DESCRIPTION OF THE PROPOSED SUBMANAGEMENT AGREEMENT
The Submanager manages the assets of the Portfolio pursuant to the
Submanagement Agreement. Under the 1940 Act and regulations thereunder, the
Submanagement Agreement must be approved by a Majority Shareholder Vote of the
Portfolio. The following summary of the Submanagement Agreement is qualified in
its entirety by the provisions of the Submanagement Agreement as set forth in
Appendix B hereto.
Subject to such policies as the Board of Trustees of the Portfolio and
DSI, as Manager, may determine, the Submanager provides the Portfolio with such
investment advice and supervision as the latter may from time to time consider
necessary for the proper supervision of its investment assets. The Submanager
furnishes at its own expense all services, facilities and personnel necessary
in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio. The Submanagement Agreement will
continue in effect if such continuance is specifically approved at least
annually by (i) the Portfolio's Board of Trustees or (ii) the other investors
in the Portfolio (with the vote of each Portfolio investor being cast in
proportion to the amount of its investment in the Portfolio) and, in either
case, by a majority vote of the Portfolio's Disinterested Trustees who are not
interested persons of the Portfolio or Mellon Equity at a meeting called for
the purpose of voting on the Submanagement Agreement.
The Submanagement Agreement provides that the Submanager may render
services to others. The Submanagement Agreement is terminable without penalty
on no more than 60 days' nor less than 30 days' written notice when authorized
by majority vote of the investors in the Portfolio (with the vote of each
Portfolio investor being cast in proportion of the amount of its investment in
the Portfolio) or by the Trustees of the Portfolio, or by the Manager with the
consent of the Trustees and may be terminated by the Submanager on not less
than 90 days' written notice to the Manager and the Trustees, and will
automatically terminate in the event of its assignment. The Submanagement
Agreement provides that the Submanager shall not be liable for any error of
judgment or for any act or omission in the execution of securities transactions
<PAGE>
for the Portfolio, except for willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties under the Submanagement
Agreement.
The terms and conditions of the Submanagement Agreement are not
substantially different from the terms and conditions of the Existing Mellon
Agreement between the Portfolio and Mellon Equity except for the supervisory
role given to the Manager in the Submanagement Agreement. In particular, the
Submanager is required to notify the Manager in advance of the Submanager's
intention to purchase any securities except insofar as the requirement for such
notification may be waived or limited by the Manger, it being understood that
the Submanager shall be responsible for compliance with any restrictions
imposed in writing by the Manager from time to time in order to facilitate
compliance with the Portfolio's investment restrictions and such other
restrictions as the Manager may determine. Further, the Manager or the Trustees
of the Portfolio may at any time, upon written notice to the Submanager,
suspend or restrict the right of the Submanager to determine what securities
shall be purchased or sold on behalf of the Portfolio and what portion if any,
of the assets of the Portfolio allocated by the Manager to the Submanager shall
be held uninvested.
In addition, the fees payable to Mellon Equity under the Submanagement
Agreement are payable by DSI and not the Portfolio. Finally, the termination
provisions provide that the Manager may, with the consent of the Portfolio's
Trustees, terminate the Submanagement Agreement, and Mellon Equity must give 90
days notice of its intent to terminate the Agreement.
Under the Submanagement Agreement, DSI will pay Mellon Equity an
investment submanagement fee equal on an annual basis to 0.10% of the
Portfolio's average daily net assets. This fee is the same as the fee Mellon
Equity currently receives under the Existing Mellon Agreement. For the fiscal
year ended July 31, 1997, Mellon Equity was paid an investment management fee
of $182,885. Further information with respect to the Submanagement Agreement is
given under Item 1a above.
CONSIDERATION OF THE BOARD OF TRUSTEES
The Trustees considered the Submanagement Agreement in connection with
their consideration of the new management structure as more fully set forth
under Item 1a. In approving the Submanagement Agreement, the Trustees of the
Fund and Portfolio considered in particular the performance of Mellon Equity
under the Existing Mellon Agreement and gave considerable weight to the desire
not to interrupt the provision of day-to-day services to the Fund that Mellon
Equity has been providing. The Trustees also considered the experience and
reputation of Mellon Equity; its capabilities with respect to compliance and
control; and the fees payable under the Submanagement Agreement in relation to
the fees payable under the Existing Mellon Agreement and the fees payable by
other investment companies with similar levels of assets.
As noted above, the Submanagement Agreement must be approved by a
Majority Shareholder Vote of the outstanding interests in the Portfolio. The
Fund will cast all the Fund's votes with respect to the Submanagement Agreement
in the same proportion as the votes of the Fund's shareholders cast at the
Meeting on this Item 1b. The percentage of the Fund's votes representing Fund
shareholders not voting at the Meeting will be voted by the Fund in the same
proportion as those cast by Fund shareholders who do, in fact, vote.
<PAGE>
If the proposal does not receive the requisite shareholder approvals,
then (a) neither the Proposed Management Agreement with DSI nor the
Submanagement Agreement with Mellon Equity would become effective, (b) the
existing contractual arrangements would continue, and (c) the Trustees of the
Fund will meet to consider possible alternatives, which might include
resubmission of the Submanagement Agreement for approval or withdrawal of the
assets of the Fund from the Portfolio.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR APPROVAL OF THE SUBMANAGEMENT AGREEMENT. In
so doing, they have acted in what they believe to be the best interests of
the shareholders of the Fund.
ITEM 2: AUTHORIZING THE TRUSTEES TO SELECT AND CHANGE THE INVESTMENT SUBMANAGER
AND ENTER INTO SUBMANAGEMENT AGREEMENTS WITHOUT OBTAINING THE APPROVAL OF
SHAREHOLDERS.
As discussed above, DSI will employ a submanager to perform the daily
management of the Portfolio's portfolio of securities. DSI will monitor and
supervise the activities of the submanager and may terminate the services of a
submanager at any time. However, retaining the services of a new submanager
currently requires shareholder approval.
The 1940 Act requires that all contracts pursuant to which persons serve
as investment advisers to investment companies be approved by its shareholders.
This requirement would apply to the appointment of a new or replacement
submanager to the Portfolio. The Securities and Exchange Commission (the "SEC")
has recently granted exemptive relief from the requirement to several other
investment companies, subject to certain conditions designed to provide
protection to the interests of shareholders. Although neither the Fund nor the
Portfolio has any current intention to recommend a change in submanager or the
appointment of an additional submanager, the Fund and the Portfolio may in the
future apply for such an exemption, and if it is granted and this proposed Item
2 is approved, the Board of Trustees would be able, without further shareholder
approval, to appoint additional or replacement submanagers. The Trustees would
not, however, replace DSI as Manager without complying with the 1940 Act and
applicable regulations governing shareholder approval of advisory contracts.
This Item 2 is intended to facilitate the efficient supervision and
management of the submanager by DSI and the Trustees. DSI will continuously
monitor the performance of the submanager and may from time to time recommend
that the Board of Trustees replace the submanager or appoint additional
submanagers, depending upon DSI's assessment of what submanager or submanagers
would optimize the Fund's chances of achieving its investment objective. As
noted above, DSI has no current plans to recommend the selection of an
additional submanager or a replacement submanager to replace Mellon Equity,
both of which would currently require shareholder approval. However, if the
Fund and the Portfolio were to apply for and the SEC were to grant the
exemptive relief and shareholders were to approve this proposed Item 2, the
Trustees would no longer be required to call a Fund shareholder meeting each
time a new submanager is appointed. There can be no assurance that the SEC
would grant the requested exemptive relief.
<PAGE>
Shareholder meetings entail substantial costs which could diminish the
benefits of the proposed submanager arrangement. These costs must be weighed
against the benefits of shareholder scrutiny of proposed contracts with
additional or replacement submanagers. However, even in the absence of
shareholder approval, any proposal to add or replace submanagers would receive
careful review. First, DSI would assess the Fund's needs and, it if believed
additional or replacement submanagers could benefit the Fund, would seek out an
available submanager. Second, any recommendations made by DSI would have to be
approved by a majority of the Trustees, including a majority of the
Disinterested Trustees. In selecting any new or replacement submanager, the
Trustees are required to determine than an investment submanagement agreement
with the submanager is reasonable, fair and in the best interests of the Fund
and its shareholders, and that the fees provided in the agreement are fair and
reasonable in light of the usual and customary charges made by others for
services of the same nature and quality. Finally, any further appointments of
additional or replacement submanagers would have to comply with any conditions
contained in the SEC exemptive order, if such order is granted.
The Trustees believe that the proposed authority to select and change
investment submanagers and enter into investment submanagement agreements
without obtaining the approval of shareholders is in the best interests of the
shareholders of the Fund.
VOTE REQUIRED
The proposed must be approved by a Majority Shareholder Vote of the
outstanding interests in the Portfolio. The Fund will cast all the Fund's votes
with respect to this proposal in the same proportion as the votes of the Fund's
shareholders cast at the Meeting on this Item 2. The percentage of the Fund's
votes representing Fund shareholders not voting at the Meeting will be voted by
the Fund in the same proportion as those cast by Fund shareholders who do, in
fact, vote.
THE BOARD OF TRUSTEES OF THE FUNDS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR AUTHORIZING THE TRUSTEES TO SELECT AND CHANGE
INVESTMENT SUBMANAGERS AND ENTER INTO INVESTMENT SUBMANAGEMENT AGREEMENTS
WITHOUT OBTAINING THE APPROVAL OF SHAREHOLDERS.
ITEM 3: AMENDMENT THE DECLARATION OF TRUST OF THE PORTFOLIO AND THE DECLARATION
OF TRUST OF THE FUND TO CLARIFY VOTING PROVISIONS WITH RESPECT TO THE ELECTION
OF TRUSTEES BY SHAREHOLDERS.
The Board of Trustees of the Portfolio has approved, and recommends that
investors in the Portfolio approve, a proposal to amend certain provisions of
the Amended and Restated Declaration of Trust of the Portfolio dated as of
October 11, 1989 (the "Portfolio's Declaration of Trust") to clarify that
investors may, under certain circumstances, elect Trustees of the Portfolio.
Similarly, the Board of Trustees of the Fund has approved, and recommends that
shareholders of the Fund approve, a proposal to amend certain provisions of the
Declaration of Trust of the Fund dated as of April 1, 1996 (the "Fund's
Declaration of Trust"), to also clarify that the shareholders of the Fund may,
under certain circumstances, elect Trustees of the Fund.
The Portfolio's Declaration of Trust currently provides, in Section 2.2
of Article II, that beginning with the Trustees elected at the first meeting of
investors, each Trustee holds office until the termination of the Portfolio
<PAGE>
unless the Trustee resigns or is removed as otherwise provided in the
Declaration. Although the Portfolio's Declaration provides in Section 2.4 that
investors may, under certain circumstances, fill a vacancy, there is no other
specific provision permitting election of Trustees by the investors in the
Portfolio. Similarly, the Fund's Declaration of Trust does not specifically
provide for the election of Trustees by shareholders, and vacancies are to be
filled by vote of the other Trustees, subject to the limitations in the 1940
Act. In addition, as in the case of the Portfolio's Declaration, Section 2.2 of
the Fund's Declaration provides that Trustees are to hold office during the
lifetime of the Fund except in the case of resignation, removal, retirement or
incapacitation.
Although the Trustees of the Portfolio and the Fund believe that the
general powers granted to the Trustees under the respective Declarations
including the power and authority to call a meeting of the investors or
shareholders, as the case may be, at any time, permit the Trustees to call for
the election of Trustees by the investors or shareholders at such meeting, the
Trustees of both the Portfolio and the Fund have recommended that the
respective Declarations of Trust be amended. Such amendments would specifically
provide that the Trustees can call for the election of Trustees by the
investors or shareholders, as the case may be, whether or not specifically
required under the Investment Company Act of 1940, and to provide that a
Trustee shall hold office only until his or her successor is elected and
qualified, or until he or she sooner dies, resigns or as otherwise removed as
provided in the respective Declarations of Trust.
If this item is approved by Shareholders and the other investors in the
Portfolio, Section 2.2 of Article II of the Portfolio's Declaration of Trust
shall be amended to read as follows:
A Trustee may be elected either by the Holders or, as provided in
this Declaration and subject to the limitations of the 1940 Act, by the
Trustees. Each Trustee shall hold office during the lifetime of this
Trust, or until the election and qualification of his or her successor,
or until he or she sooner dies, resigns or is removed as provided in
Section 2.3 below.
If this Item is approved, the Fund's Declaration of Trust will also be amended
by adding similar language to Section 2.2 of Article II of the Fund's
Declaration. In addition, Section 6.8 of Article VI of the Fund's Declaration
will be amended by specifically stating that Shareholders shall have the power
to vote for the election of Trustees.
The full text of applicable sections of the Portfolio's Declaration of
Trust and the Fund's Declaration of Trust, as proposed to be amended, are set
forth in the Appendix D to this proxy statement.
It is intended that proxies submitted by Shareholders of the Fund not
limited to the contrary will be voted in favor of amending the Declarations of
Trust of the Portfolio and the Fund as set forth in Appendix D. Amendment of
the Portfolio's Declaration of Trust requires the vote of investors in the
Portfolio holding more than 50% of the total interests entitled to vote. The
amendment to the Fund's Declaration of Trust requires a Majority Shareholder
Vote.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR THE APPROVAL OF THE PROPOSED AMENDMENTS TO
THE PORTFOLIO'S DECLARATION OF TRUST AND THE FUND'S DECLARATION OF TRUST.
<PAGE>
ITEM 4: ELECTION OF SEVEN TRUSTEES OF THE TRUST AND OF THE
PORTFOLIO
It is proposed by the Board of Trustees of each of the Fund and the
Portfolio that there be a common Board of Trustees for each of the Fund and the
Portfolio and the Domini Social Equity Fund (the "Equity Fund") in order to
more efficiently supervise the affairs of each of the Fund and the Portfolio.
The Equity Fund is an open-end management investment company which also invests
all of its investable assets in the Portfolio. Like the Fund, it is organized
under the laws of the Commonwealth of Massachusetts as an entity commonly
referred to as a Massachusetts business trust. The Fund and the Portfolio have
had a common Board of Trustees since the inception of the Fund. Ms. Domini,
Chair of the Board of the Portfolio and the Fund, has served on all three
Boards since commencement of operations. Philip Coolidge, who had also served
on all three Boards, recently resigned from all Boards.
The Board of Trustees of the Fund has fixed the number of Trustees at
seven, and at a meeting on June 13, 1997, elected as Trustees Ms. Karen Paul
and Mr. William Osborn, and nominated for election by the shareholders in
accordance with the provisions of the 1940 Act, Ms. Emily Card. Ms. Paul, Ms.
Card and Mr. Osborn are each currently Trustees of the Equity Fund.
Concurrently, the Board of Trustees of the Portfolio voted to fix the number of
its Trustees at seven, and elected Ms. Card and Mr. Osborn to fill two of the
three vacancies, and nominated Ms. Paul for election by the shareholders. Mr.
Smith and Mr. Williamson, current Trustees of the Fund and the Portfolio, were
elected by the Trustees of the Equity Fund on June 13, 1997 to serve as
Trustees, and the Equity Fund nominated Mr. Mayes for election by the
shareholders of the Equity Fund. Thus, assuming approval of this Item 4, and
approval of a similar proposal by the shareholders of the Equity Fund, the
Portfolio, the Fund and the Equity Fund will have a common Board of Trustees.
The Trustees of each of the Portfolio and the Fund believe that the
supervision of the affairs of the Fund and the Portfolio would be more
efficient and effective if there were a common Board of Trustees. It has
generally been the practice to have combined meetings of the Trustees of the
Fund, the Equity Fund and the Portfolio with Trustees of each present for the
entire meeting. Each of Ms. Paul and Mr. Osborn has served as a Trustee of the
Equity Fund since its inception in 1990, and Ms. Card has served as Trustee of
the Equity Fund since 1992.
It is intended that proxies not limited to the contrary will be voted in
favor of electing each of the nominees as Trustee of the Fund and the
Portfolio. Each nominee, if elected, will serve an indefinite term, until he or
she resigns, retires or is removed, or until his or her successor is duly
chosen and qualified. Each of the Fund's Trustees except for Ms. Paul and Mr.
Osborn were previously elected as Trustees of the Fund by the Fund's
shareholders.
<PAGE>
Trustees who are also officers or affiliated persons receive no
remuneration for their service as Trustees. The Fund's officers receive no
remuneration from the Fund. The compensation paid by the Fund and the Portfolio
to each of its Trustees serving during the fiscal year ended July 31, 1997 is
set forth in the compensation table below:
- -------------------------------------------------------------------------------
Name of Trustee Aggregate Pension or Estimated Total
Compensation Retirement Annual Compensation
from the Fund Benefits Benefits Upon from the Fund,
and the Accrued Retirement the Portfolio
Portfolio** and the Equity
Fund**
- -------------------------------------------------------------------------------
205 0 0 $1,805
Emily W. Card
- -------------------------------------------------------------------------------
Amy Lee Domini* 0 0 0 0
- -------------------------------------------------------------------------------
Allen M. Mayes $2,400 0 0 $2,400
- -------------------------------------------------------------------------------
William C. Osborn 205 0 0 $2,005
- -------------------------------------------------------------------------------
Karen Paul 150 0 0 $1,950
- -------------------------------------------------------------------------------
Timothy Smith $2,400 0 0 $2,455
- -------------------------------------------------------------------------------
Frederick C. Williamson $2,400 0 0 $2,455
- -------------------------------------------------------------------------------
*Ms. Domini is an "interested person" of the Fund, the Portfolio, and the
Equity Fund as that term is defined in the 1940 Act.
**In addition, each Trustee that is not an "interested person" receives
reimbursement for the reasonable expenses of attending Board meetings.
<PAGE>
The following table shows the nominees for election as Trustee and the
officers of the Fund and the Portfolio and their principal occupations which,
unless otherwise specified, are of more than five years duration, although the
titles held may have varied during that period. Asterisks indicate those
Trustees and officers who are "interested persons," as defined in the 1940 Act,
of the Fund or the Portfolio. Unless otherwise indicated, the principal
business address of each officer is 6 St. James Avenue, Boston, Massachusetts
02116. As investing in the Fund is limited to institutional investors, none of
the Trustees or officers own shares of the Fund.
NOMINEES FOR ELECTION AS TRUSTEES OF THE PORTFOLIO AND THE
TRUST
Name, Age, Position with Fund or Portfolio, Principal Occupation and Other
Directorships(1)
EMILY W. CARD (55) 1223 Wilshire Blvd., #334, Santa Monica, California 90403;
Trustee of the Equity Fund since 1992, Trustee of the Portfolio since 1997,
Attorney; President, The Card Group, Inc.
AMY LEE DOMINI* (47) 230 Congress Street, Boston, Massachusetts 02110; Chair,
President and Trustee of the Fund since 1996 and the Portfolio and Equity Fund
since 1990; Manager of Domini Social Investments, LLC (since 1997; Officer of
Kinder, Lydenberg, Domini & Co., Inc.; Private Trustee, Loring, Wolcott &
Coolidge; Trustee, Episcopal Church Pension Fund; Member, Governing Board,
Interfaith Center on Corporate Responsibility. Ms. Domini is married to Peter
D. Kinder.
ALLEN M. MAYES (76) P.O. Box 21222, Beaumont Texas 77720; Trustee of the Fund
since 1996; Trustee of the Portfolio since 1990; Retired Senior Associate
General Secretary of the General Board of Pensions of the United Methodist
Church; Director of Ministerial Services, Texas Annual Conference, The United
Methodist Church; Former Member of the Board of Directors of Investor
Responsibility Research Center; Member of Board of Trustees of Wiley College.
WILLIAM C. OSBORN (52) 115 Buckminster Road, Brookline, Massachusetts 02146;
Trustee of the Equity Fund since 1990; Trustee of the Fund and the Portfolio
since 1997; Manager, Venture Investment Management Company LLC (since 1996);
Vice President and General Manager, TravElectric Services Corp. (from 1993 to
1995); President, Environmental Technologies, Inc. (from 1990 to 1993);
Director, Evergreen Solar, Inc. (since 1996); Director, Conservation Services
Group (since 1992).
KAREN PAUL (52) 4050 Park Avenue, Miami, Florida 33133; Trustee of the Fund
since 1997; Trustee of the Equity Fund since 1990; Associate Dean, Florida
International University since April 1996; Professor of Business Environment,
Florida International University.
TIMOTHY SMITH (53) 475 Riverside Drive, New York, New York 10115; Trustee of
the Portfolio since 1990; Trustee of the Fund since 1996; Trustee of the Equity
Fund since 1997; Executive Director of the Interfaith Center on Corporate
Responsibility; Trustee of the Calvert New Africa Fund (since 1994).
<PAGE>
FREDERICK C. WILLIAMSON, SR. (81) Five Roger Williams Green, Providence, Rhode
Island 02904; Trustee of the Portfolio since 1990; Trustee of the Fund since
1996; Trustee of Equity Fund since 1997; Trustee of Rhode Island Group Health
Association (HMO); Trustee National Parks Trust; Chairman Rhode Island
Historical Preservation and Heritage Commission (since 1995); Trustee of
National Parks and Conservation Association.
OFFICERS OF THE TRUST AND THE PORTFOLIO
Name, Age, Position with Fund or Portfolio, Principal Occupation and Other
Directorships(1)
LINDA T. GIBSON* (31) Secretary of the Fund and the Portfolio; Vice President
and Assistant Secretary, Signature Financial Group, Inc.; Assistant Secretary,
Signature Broker-Dealer Services, Inc. (since October, 1992).
PETER D. KINDER* (50) 129 Mt. Auburn Street, Cambridge, MA 02138-5766, Vice
President of the Fund and the Portfolio; President, Kinder, Lydenberg, Domini &
Co., Inc. Mr. Kinder is married to Amy Lee Domini.
STEVEN D. LYDENBERG*
(51) 129 Mt. Auburn Street, Cambridge, MA 02138-5766, Vice President of the
Fund and the Portfolio; Director of Research, Kinder, Lydenberg, Domini & Co.,
Inc.
MOLLY S. MUGLER* (45)
Assistant Secretary of the Fund and the Portfolio; Vice President and Assistant
Secretary, Signature Financial Group, Inc. and Assistant Secretary, Signature
Broker-Dealer Services, Inc. and its affiliates.
- -------------------------------
(1) Directorships or Trusteeships of companies required to report to the
Securities and Exchange Commission (the "SEC") (i.e., "public companies")
or registered investment companies other than those administered or
advised by the Portfolio's investment adviser or the administrator of the
Fund and the Portfolio.
During the fiscal year ended July 31, 1997 the Board of Trustees of the
Fund and the Portfolio each met nine times. Each incumbent Trustee of the Fund
and the Portfolio attended at least 75% of the meetings of the Board of
Trustees of the Fund and the Portfolio, respectively during his or her term.
The Boards of Trustees of the Fund and the Portfolio have each created a
standing Audit Committee comprised of Messrs. Mayes, Smith and Williamson, none
of whom is an "interested person" of the Fund or its administrator or
distributor or of the Portfolio or its investment adviser, investment manager
or placement agent. The Audit Committees of the Fund and the Portfolio (i)
review the internal and external accounting procedures of the Fund and the
Portfolio, as the case may be, and, among other things, consider the selection
of independent certified public accountants of the Fund or the Portfolio, as
the case may be, (ii) approve all significant services proposed to be performed
by the independent certified public accountants, and (iii) consider the
possibility and effect of such services on their independence. The Audit
Committees met once during the fiscal year ended July 31, 1997. In addition,
the Fund has a standing Nominating Committee comprised of all the Disinterested
<PAGE>
Trustees of the Fund. The Nominating Committee did not meet as a separate
committee during the fiscal year ended July 31, 1997. No policy or procedure
has been established by the Fund or the Portfolio as to the nomination of
Trustees.
The Fund's Declaration of Trust 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
Fund, unless, with respect to liability to the Fund's shareholders, it is
finally adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Fund. 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 the Disinterested Trustees, or in a written opinion of independent
counsel, that such Trustees or officers have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
The Portfolio's Declaration of Trust provides that it will indemnify its
Trustees and officers in the same manner as described above for the Fund
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their offices with the Portfolio.
Election of the nominees as Trustees of the Portfolio will require the
vote of a plurality of the investors in the Portfolio, including the Fund,
holding a plurality of outstanding interests in the Portfolio and election of
the nominees as Trustees of the Fund will require the vote of a plurality of
the outstanding voting securities of the Fund present in person or represented
by proxy at the Meeting.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR ELECTION OF THE
NOMINEES AS TRUSTEES OF THE FUND AND THE PORTFOLIO.
ITEM 5: OTHER BUSINESS
Neither the Trustees of the Fund nor the persons appointed as proxies are
aware of any matters other than those set forth in the accompanying Notice of
Special Meeting which may be presented by others, nor do they have any
intention of bringing before the Meeting for action any matters other than
those specified in such Notice. If any other business shall properly come
before the Meeting, the persons appointed as proxies shall vote thereon in
accordance with their best judgment.
MANNER OF VOTING PROXIES AND VOTE REQUIRED
If the accompanying form of proxy is executed properly and returned,
shares represented by it will be voted at the Meeting in accordance with the
instructions on the proxy. Shareholders of the Fund will vote separately with
respect to each Item. If no instructions are specified, all shares of the Fund
will be voted FOR proposed Items 1a, 1b, 2, 3 and 4. If the enclosed form of
proxy is executed and returned, it may nevertheless be revoked prior to its
exercise by a signed writing delivered at the Meeting or filed with the
Secretary of the Fund.
<PAGE>
In the event that a quorum is not present at the Meeting, or if
sufficient votes to approve any of the proposals are not received, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares voted at the Meeting. When
voting on a proposed adjournment with respect to any of the proposals, the
persons named as proxies will vote all shares that they are entitled to vote
FOR the proposed adjournment, unless directed to disapprove the proposal, in
which case such shares will be voted against the proposed adjournment.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund entitled to vote is required to constitute a
quorum at the Meeting for the purposes of voting on each item. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted. For this
reason, abstentions and broker "non-votes" will have the effect of a "no" vote
for purposes of obtaining the requisite number of votes for approval of items
at the Meeting.
<PAGE>
SUBMISSION OF CERTAIN PROPOSALS
Proposals of shareholders which are intended to be presented at a future
shareholder meeting must be received by the Fund a reasonable time prior to the
Fund's solicitation of proxies relating to such future meeting. The Fund is an
entity of the type commonly referred to as a "Massachusetts business trust". As
such, it is not required to hold, and has no intention of holding, annual
meetings, although the Fund may hold special shareholder meetings.
ADDITIONAL INFORMATION
INTERESTS OF CERTAIN PERSONS
As of September 8, 1997 the following shareholders of record owned 5% or
more of the outstanding shares of the Fund:
Name and Address of Number of Shares Percent of
Shareholder Owned Shares
[ ](1)
[address] ____________ _____%
[other holders] ____________ _____%
(1) Such shares are held by [ ] as nominee on behalf of its customers and the
Fund has no knowledge as to the beneficial ownership of these shares.
As of September 1, 1997, all Trustees and officers of the Fund as a group
owned less than 1% of the outstanding shares of the Fund. To the knowledge of
the Fund, no other shareholder beneficially owned 5% or more of the outstanding
shares of the Fund as of the same date.
SERVICE PROVIDERS
Signature Broker-Dealer Services, Inc. ("SBDS") is the distributor of
shares of the Fund and placement agent for interests in the Portfolio. SBDS
also serves as administrator of the Fund and the Portfolio, and currently is a
party to expense payment arrangements with respect to as sub-administrator of
the Fund and the Portfolio. SBDS is a wholly-owned subsidiary of Signature
Financial Group, Inc., which directly and indirectly through its subsidiaries
acts as principal underwriter and serves as administrator to other mutual funds
unrelated to the Fund and Portfolio. The address of Signature Financial Group,
Inc. is 6 St. James Avenue, Boston, Massachusetts 02116.
<PAGE>
The Fund is the sole series of Domini Institutional Trust, a business
trust organized under the laws of the Commonwealth of Massachusetts on April 1,
1996. The mailing address of the Fund is 6 St. James Avenue, Boston,
Massachusetts 02116.
By Order of the Board of Trustees.
Linda T. Gibson, Secretary.
<PAGE>
APPENDIX A
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of ______ _ 1997, by and between Domini
Social Index Portfolio, a New York trust (the "Portfolio") and Domini Social
Investments LLC ("DSI" or the "Adviser").
WITNESSETH:
WHEREAS, the Portfolio engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act"), and
WHEREAS, the Portfolio wishes to engage DSI to provide certain investment
advisory and administrative services for the Portfolio, and DSI is willing to
provide such investment advisory and administrative services for the Portfolio
on the terms and conditions hereinafter set forth.
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 DSI. (A) DSI shall act as the Adviser for the Portfolio and
as such 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 restrictions of the Portfolio's Declaration of Trust, dated June
7, 1989, and By-laws, as each may be amended from time to time (respectively,
the "Declaration" and the "By-Laws"), the provisions of the 1940 Act, and the
then-current Registration Statement of the Portfolio. The Adviser shall also
make recommendations as to the manner in which voting rights, rights to consent
to corporate action and any other rights pertaining to the Portfolio's
portfolio securities shall be exercised. Should the Board of Trustees of the
Portfolio at any time, however, make any definite determination as to
investment policy applicable to the Portfolio and notify the Adviser thereof in
writing, the Adviser 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. The Adviser 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 securities for the Portfolio's account with the
brokers or dealers selected by it, and to that end the Adviser is authorized as
the agent of the Portfolio to give instructions to the custodian or any
subcustodian 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, brokers or dealers may be
selected who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser, any subadviser,
submanager or their respective affiliates exercise investment discretion. The
Adviser is authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio 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 the Adviser
<PAGE>
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which the Adviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. In making purchases or sales of securities or other
property for the account of the Portfolio, the Adviser may deal with itself or
with the Trustees of the Portfolio or the Portfolio's underwriter or
distributor, to the extent such actions are permitted by the 1940 Act. In
providing the services and assuming the obligations set forth herein, the
Adviser may subject to the requirements of the 1940 Act or any exemptive order
granted thereunder employ at its own expense, or may request that the Portfolio
employ at the Portfolio's expense, one or more subadvisers or submanagers;
provided that in each case the Adviser shall supervise the activities of each
subadviser. Any agreement between the Adviser and a subadviser shall be subject
to the renewal, termination and amendment provisions applicable to this
Agreement. Any agreement by the Portfolio and a subadviser may be terminated by
the Adviser at any time on not more than 60 days' nor less than 30 days'
written notice to the Portfolio and the subadviser.
(B) Subject to the direction and control of the Board of Trustees of the
Portfolio, DSI shall perform such administrative and management services as may
from time to time be reasonably requested by the Portfolio, which shall include
without limitation: (1) maintaining office facilities (which may be in the
office of DSI, or an affiliate) and furnishing clerical services necessary for
maintaining the organization of the Portfolio and for performing the
administrative and management functions herein set forth; (2) arranging, if
desired by the Portfolio, for Directors, officers or employees of the Adviser
to serve as Trustees, officers or agents of the Portfolio if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by the law; (3) 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; (4) overseeing (with
advice of the Portfolio's counsel), the preparation of and, if applicable,
filing all documents required for compliance by the Trust with applicable laws
and regulations, including registration statements, semi-annual and annual
reports to investors, proxy statements and tax returns; (5) preparation of
agendas and supporting documents for and minutes of meetings of Trustees,
committees of Trustees and investors (6) arranging for maintenance of books and
records of the Trust; (7) maintaining telephone coverage to respond to investor
inquiries regarding matters to which this Agreement pertains to which the
transfer agent is unable to respond; (8) providing reports and assistance
regarding the Portfolio's compliance with securities and tax laws and
investment objectives and restrictions; (9) arranging for dissemination of
yield and other performance information to newspapers and tracking services;
(10) arranging for and preparing annual renewals for fidelity bond and errors
and omissions insurance coverage; (11) developing a budget for the Portfolio,
establishing the rate of expense accruals and arranging for the payment of all
fixed and management expenses; and (12) answering questions from the general
public, the media and investors in the Portfolio regarding (a) the securities
holdings of the Portfolio; (b) any limits in which the Portfolio invests; (c)
the social investment philosophy of the Portfolio; and (d) the proxy voting
philosophy and shareholder activism philosophy of the Portfolio.
Notwithstanding the foregoing, DSI shall not be deemed to have assumed any
duties with respect to, and shall not be responsible for, the distribution of
beneficial interests in the Portfolio, nor shall DSI be deemed to have assumed
or have any responsibility with respect to functions specifically assumed by
<PAGE>
any transfer agent, fund accounting agent or custodian of the Portfolio. In
providing administrative and management services as set forth herein, DSI may,
at its own expense, employ one or more subadministrators; provided that DSI
shall remain fully responsible for the performance of all administrative and
management duties set forth herein and shall supervise the activities of each
subadministrator.
2. Allocation of Charges and Expenses. DSI shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section I above. Except as provided in the foregoing
sentence it is understood that the Portfolio will pay all of its own expenses
including, without limitation, organization costs of the Portfolio;
compensation of Trustees who are not "interested persons" of the Portfolio;
governmental fees, including but not limited to SEC fees and state "blue sky"
fees; interest; loan commitment fees; taxes; brokerage fees and commissions;
membership dues in industry and professional associations; fees and expenses of
auditors and accountants, legal counsel and any transfer agent, distributor,
shareholder, servicing agent, recordkeeper, registrar or dividend disbursing
agent of the Portfolio; expenses of issuing and redeeming beneficial interests
and servicing investor accounts; expenses of preparing, typesetting, printing
and mailing: prospectus for regulatory purposes and for distribution to current
shareholders, investor reports, notices, proxy statements and reports to
governmental officers and commissions and to investors in the Portfolio;
expenses connected with the execution, recording and settlement of 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 the Portfolio (including but not limited to the fees of independent
pricing services); expenses connected with maintaining the Portfolio's
existence as a New York Trust, expenses of meetings of the Portfolio's
investors; expenses relating to the issuance of beneficial interests in the
Portfolio; and such non-recurring or extraordinary expenses as may arise,
including those relating to actions, suits or proceedings to which the
Portfolio may be party and the legal obligation which the Portfolio may have to
indemnity its Trustees and officers with respect thereto.
3. Compensation of DSI. For the services to be rendered and facilities
provided by DSI hereunder, the Portfolio will pay DSI a management fee accrued
daily and payable monthly at an annual rate equal to 0.20% of the Portfolio's
average daily net assets for the Portfolio's then current fiscal year,
provided, however, for a period of one year from the date of this Agreement,
the fee payable to the Adviser shall be the lesser of (i) 0.20% of the
Portfolio's average daily net assets for the Portfolio's then-current fiscal
year and (ii) the percentage obtained by deducting from 0.20%, the Portfolio's
annual operating expenses (excluding amounts payable under this Agreement, and
brokerage fees and commissions, interest, taxes, and any other extraordinary
expenses) expressed as a percentage of the Portfolio's average daily net
assets. The Adviser shall pay any applicable fees to the subadviser(s) on the
Portfolio's behalf If DSI provides services hereunder for less than the whole
of any period specified in this Section 3, the compensation to DSI shall be
accordingly adjusted and prorated.
4. Covenants of DSI. DSI agrees that it will not deal with itself, or
with the Trustees of the Portfolio or the Portfolio's principal underwriter or
distributor, if any, as principals in making purchases or sales of securities
or other property, except as permitted by the 1940 Act, will not take a long or
short position in beneficial interests of the Portfolio except as permitted by
<PAGE>
the Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current Registration Statement of the Portfolio
relative to DSI and its directors and officers.
5. Limitation of Liability of DSI. DSI shall not 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 securities transactions for the
Portfolio, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As used in this Section 5, the term "DSI"
shall include directors, officers and employees of DSI as well as DSI itself.
6. Activities of DSI. The services of DSI to the Portfolio are not to be
deemed to be exclusive, DSI being free to render investment advisory,
administrative and/or other services to others. It is understood that Trustees,
officers, and investors of the Portfolio are or may be or may become interested
in DSI, as directors, officers, employees, or otherwise and that directors,
officers and employees of DSI are or may become similarly interested in the
Portfolio and that DSI may be or may become interested in the Portfolio as an
investor or otherwise.
7. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, shall govern
the relations between the parties hereto thereafter and shall remain in force
until ______ _, 1999, on which date it will terminate unless its continuance
after ______ _, 1999 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Portfolio who are not "interested
persons" of the Portfolio or of DSI at a 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.
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 DSI, in each case on not more than
60 days' nor less than 30 days' written notice to the other party. 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
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
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.
Each party acknowledges and agrees that all obligations of the Portfolio
under this Agreement are binding only with respect to the Portfolio; that any
liability of the Portfolio under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the assets of
the Portfolio.
<PAGE>
The undersigned officer of the Portfolio has executed this Agreement not
individually, but as an officer under the Declaration and the obligations of
this Agreement are not binding upon any of the Trustees, officers or holders of
beneficial interests in the Portfolio individually.
8. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto 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.
DOMINI SOCIAL INDEX PORTFOLIO DOMINI SOCIAL INVESTMENTS LLC
By:______________________ By:________________________
Title:___________________ Title:_____________________
<PAGE>
APPENDIX B
SUBMANAGEMENT AGREEMENT
SUBMANAGEMENT AGREEMENT, dated as of _____ __, 1997, by and between
Domini Social Investments LLC, a Massachusetts limited liability company ("DSI"
or the Manager"), and Mellon Equity Associates, a Pennsylvania business trust
whose sole beneficiary is MBC Investments, a wholly owned subsidiary of Mellon
Bank Corporation ("Mellon" or the "Submanager") .
WITNESSETH:
WHEREAS, the Domini Social Index Portfolio (the "Portfolio") engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (collectively with the
rules and regulations promulgated thereunder, the "1940 Act"); and
WHEREAS, DSI has entered into a Management Agreement (the "Management
Agreement") with the Portfolio wherein DSI has agreed to serve as Manager to
the Portfolio; and
WHEREAS, as permitted by Section 1.A. of the Management Agreement, DSI
wishes to subcontract some of the performance of its obligations thereunder to
Mellon and Mellon desires to accept such obligations on the terms and
conditions hereinafter set forth.
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. Appointment of Mellon. In accordance with and subject to the
Management Agreement between the Portfolio and the Manager, the Manager hereby
retains Mellon to act as the Submanager for the Portfolio for the period and on
the terms set forth in this Agreement. The Submanager accepts such appointment
and agrees to provide an investment program for the Portfolio for the
compensation provided by this Agreement.
2. Duties of the SubManager. The Submanager shall provide the Portfolio
and the Manager with such investment advice and supervision as the Manager may
from time to time consider necessary for the proper supervision of such portion
of the Portfolio's investment assets as the Manager may designate from time to
time. Notwithstanding any provision of this Agreement, the Manager shall retain
all rights and ultimate responsibilities to supervise and, in its discretion,
conduct investment activities relating to the Portfolio. The Submanager 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 allocated by the Manager to the Submanager shall be
held uninvested, subject always to the restrictions of the Portfolio's
Declaration of Trust, dated June 7, 1989, and By-laws, as each may be amended
from time to time (respectively, the "Declaration" and the "By-Laws"), the
provisions of the 1940 Act, and the then-current Registration Statement of the
<PAGE>
Portfolio, and, subject further, to the Submanager notifying the Manager in
advance of the Submanager's intention to purchase any securities except insofar
as the requirement for such notification may be waived or limited by the
Manager, it being understood that the Submanager shall be responsible for
compliance with any restrictions imposed in writing by the Manager from time to
time in order to facilitate compliance with the above-mentioned restrictions
and such other restrictions as the Manager may determine. Further, the Manager
or the Trustees of the Portfolio may at any time, upon written notice to the
Submanager, suspend or restrict the right of the Submanager to determine what
securities shall be purchased or sold on behalf of the Portfolio and what
portion if any, of the assets of the Portfolio allocated by the manager to the
Submanager shall be held uninvested. The Submanager shall also, as requested,
make recommendations to the Manager as to the manner in which proxies, voting
rights, rights to consent to corporate action and any other rights pertaining
to the Portfolio's portfolio securities shall be exercised. Should the Board of
Trustees of the Portfolio or the Manager at any time, however, make any
definite determination as to investment policy applicable to the Portfolio and
notify the Submanager thereof in writing, the Submanager 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.
The Submanager 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
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end the Submanager is authorized as the agent of the Portfolio
to give instructions to the custodian or any subcustodian of the Portfolio as
to deliveries of securities and payments of cash for the account of the
Portfolio. The Submanager will advise the manager on the same day it gives any
such instructions. In connection with the selection of such brokers or dealers
and the placing of such orders, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Submanager, the Manager or their respective affiliates
exercise investment discretion. The Submanager is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio 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 the Submanager determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Submanager, the Manager and their respective affiliates have with
respect to accounts over which they exercise investment discretion. In making
purchases or sales of securities or other property for the account of the
Portfolio, the Submanager may deal with itself or with the Trustees of the
Portfolio or the Portfolio's underwriter or distributor, to the extent such
actions are permitted by the 1940 Act. The Board of Trustees of the Portfolio,
in its discretion, may instruct the Submanager to effect all or a portion of
its securities transactions with one or more brokers and/or dealers selected by
the Board of Trustees, if it determines that the use of such brokers and/or
dealers is in the best interest of the Portfolio.
3. Allocation of Charges and Expenses. The Submanager shall furnish at
its own expense all necessary services, facilities and personnel in connection
with its responsibilities under Section 2 above. Except as provided in the
foregoing sentence it is understood that the Portfolio will pay all of its own
expenses including, without limitation, organization costs of the Portfolio;
compensation of Trustees who are not interested persons" of the Portfolio;
<PAGE>
governmental fees; interest charges; loan commitment fees; taxes; membership
dues in industry associations allocable to the Portfolio; fees and expenses of
independent auditors, legal counsel and any transfer agent, distributor,
registrar or dividend disbursing agent of the Portfolio; expenses of issuing
and redeeming beneficial interests and servicing investor accounts; expenses of
preparing, typesetting, printing and mailing investor reports, notices, proxy
statements and reports to governmental officers and commissions and to
investors in the Portfolio; expenses connected with the execution, recording
and settlement of 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 the Portfolio (including but not limited to
the fees of independent pricing services); expenses of meetings of the
Portfolio's investors; expenses relating to the issuance of beneficial
interests in the Portfolio; and such non-recurring or extraordinary expenses as
may arise, including those relating to actions, suits or proceedings to which
the Portfolio may be a party and the legal obligation which the Portfolio may
have to indemnity its Trustees and officers with respect thereto.
4. Compensation of the Submanager. For the services to be rendered by the
Submanager hereunder, the Manager shall pay to the Submanager a fee computed
and paid monthly at an annual rate equal to 0.10% of the Portfolio's average
daily net assets for its then-current fiscal year. If Mellon serves as
Submanager for less than the whole of any period specified in this Section 3,
the compensation to Mellon, as Submanager, shall be prorated.
5. Covenants of the Submanager. The Submanager agrees that it will not
deal with itself, or with the Trustees of the Portfolio or the Portfolio's
principal underwriter or distributor, if any, as principals in making purchases
or sales of securities or other property, except as permitted by the 1940 Act,
will not take a long or short position in beneficial interests of the Portfolio
except as permitted by the Declaration, and will comply with all other
provisions of the Declaration and By-Laws and the then-current Registration
Statement of the Portfolio relative to the Submanager and its directors and
officers.
6. Limitation of Liability of the Submanager. The Submanager shall not 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 securities
transactions for the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Section 6,
the term "Submanager" shall include directors, officers and employees of the
Submanager as well as the Submanager itself. The Portfolio is expressly made a
third party beneficiary of this Agreement, and may enforce any obligations of
the Submanager under this Agreement and recover directly from the Submanager
for any liability the Submanager may have hereunder.
7. Activities of the Submanager. The services of the Submanager to the
Portfolio are not to be deemed to be exclusive, the Submanager being free to
render investment advisory, administrative and/or other services to others. It
is understood that Trustees, officers, and investors of the Portfolio or the
Manager are or may be or may become interested in the Submanager, as directors,
officers, employees, or otherwise and that directors, officers and employees of
<PAGE>
the Submanager are or may become similarly interested in the Portfolio or the
Manager and that the Submanager may be or may become interested in the
Portfolio as an investor or otherwise.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, shall govern
the relations between the parties hereto thereafter and shall remain in force
until _____ __, 1999, on which date it will terminate unless its continuance
after _____ __, 1999 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Portfolio who are not "interested
persons" of the Portfolio or of DSI or the Submanager at a 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.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees of the Portfolio, (ii) the "vote of a majority of
the outstanding voting securities" of the Portfolio, or (iii) DSI with the
prior consent of the Trustees of the Portfolio, in each case on not more than
60 days' nor less than 30 days' written notice to the other party. This
Agreement may be terminated at any time without the payment of any penalty by
the Submanager on not less than 90 days' written notice to the Manager and the
Trustees of the Portfolio. This Agreement shall automatically terminate in the
event of its "assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Parties hereto, the
Trustees of the Portfolio and the "vote of a majority of the outstanding voting
securities" of the Portfolio (except for any such amendment as may be effected
in the absence of such vote without violating the 1940 Act or any exemptive
order granted thereunder).
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. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts provided, however, that nothing herein will be construed in a
manner inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto 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.
MELLON EQUITY ASSOCIATES DOMINI SOCIAL INVESTMENTS LLC
By:______________________ By:________________________
Title:___________________ Title:_____________________
<PAGE>
APPENDIX C
OTHER INVESTMENT COMPANIES WITH SIMILAR INVESTMENT OBJECTIVES TO THE FUND FOR
WHICH MELLON EQUITY ASSOCIATES IS AN INVESTMENT ADVISER OR SUBADVISER
<TABLE>
<CAPTION>
Annual Fee (as a Percentage of Assets as of
Name of Fund Average Net Assets) May 31, 1997
<S> <C> <C>
MML Equity Index Fund 0.09% of first $100,000,000 $21,219,732.67
0.07% of the next $150,000,000
0.05% of assets over $250,000,000
Dreyfus S&P 500 Stock 0.05% until assets exceed $1 billion $986,482,267.69
Index Fund 0.075% thereafter
Dreyfus Stock Index Fund 0.095% $1,277,929,336.37
Dreyfus MidCap Index Fund 0.095% $200,804,249.15
</TABLE>
In each case Mellon Equity Associates also pays the fees for custody of
the investment company's assets with an affiliate of Mellon Equity Associates.
<PAGE>
APPENDIX D
Proposed Amendment to Section 2.2 of Article II of the Declaration of Trust of
Domini Social Index Portfolio (words deleted have been marked through and words
added are italicized)
Section 2.2. Term and Election. A Trustee may be elected either by the Holders
or, as provided in this Declaration and subject to the limitations of the 1940
Act, by the Trustees. Each Trustee shall hold office during the lifetime of
this Trust, or until the election and qualification of his or her successor, or
until he or she sooner dies, [[Each Trustee named herein, or elected or
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his successor has been elected at such meeting and has
qualified to serve as Trustee, as required under the 1940 Act. Beginning with
the Trustees elected at the first meeting of Holders, each Trustee shall hold
office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee]] resigns or is removed as provided in
Section 2.3 below.
Proposed Amendment to Section 2.2 of Article II of the Declaration of Trust of
Domini Institutional Trust (words deleted have been marked through and words
added are italicized)
Section 2.2. Term of Office of Trustees. A Trustee may be elected either by the
Shareholders or, as provided in this Declaration and subject to the limitations
of the 1940 Act, by the Trustees. Subject to the provisions of Section 16(a) of
the 1940 Act, a Trustee [[the Trustees]] shall hold office during the lifetime
of this Trust and until its termination as hereinafter provided or until the
election and qualification of his or her successor; except that (a) any Trustee
may resign his trust (without need for prior or subsequent accounting) by an
instrument in writing signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is specified
therein; (b) any Trustee may be removed with cause, at any time by written
instrument signed by at least two-thirds of the remaining Trustees, specifying
the date when such removal shall become effective; (c) any Trustee who has
attained a mandatory retirement age established pursuant to any written policy
adopted from time to time by at least two thirds of the Trustees shall,
automatically and without action of such Trustees or the remaining Trustees, be
deemed to have retired in accordance with the terms of such policy, effective
as of the date determined in accordance with such policy; (d) any Trustee who
has become incapacitated by illness or injury as determined by a majority of
the other Trustees, may be retired by written instrument signed by a majority
of the other Trustees, specifying the date of his retirement; and (e) a Trustee
may be removed at any meeting of Shareholders by a vote of two thirds of the
outstanding Shares of each series. For purposes of the foregoing clause (b),
the term "cause" shall include, but not be limited to, failure to comply with
such written policies as may from time to time be adopted by at least two
thirds of the Trustees with respect to the conduct of Trustees and attendance
at meetings. Upon the resignation, retirement or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property held in the name of the
resigning, retiring or removed Trustees. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
<PAGE>
documents as the remaining Trustees shall require as provided in the preceding
sentence.
Proposed Amendment to Section 6.8 of Article VII of the Declaration of Trust of
Domini Institutional Trust (words deleted have been marked through and words
added are italicized)
Section 6.8. Voting Powers. The Shareholders shall have power to vote only (i)
for the election and removal of Trustees as provided in Section 2.2 hereof,
(ii) with respect to any investment advisory or management contract as provided
in Section 4.1 hereof, (iii) with respect to termination of Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration
to the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Section 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Section 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or
not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to
the Trust as may be required by the Declaration, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fraction vote,
except that Shares held in the treasury of the Trust shall not be voted. Shares
shall be voted by individual series or class on any matter submitted to a vote
of the Shareholders of the Trust except as provided in Section 6.9(g) hereof.
There shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. At any meeting of Shareholders of the Trust or of any series or
class of the Trust, a Shareholder Servicing Agent may vote any shares as to
which such Shareholder Servicing Agent is the agent of record and which are not
otherwise represented in person or by proxy at the meeting, proportionately in
accordance with the votes cast by beneficial owners of all shares otherwise
represented at the meeting in person or by proxy as to which such Shareholder
Servicing Agent is the agent of record. Any shares so voted by a Shareholder
Servicing Agent will be deemed represented at the meeting for quorum purposes.
The By-Laws may include further provisions for Shareholder votes and meetings
and related matters.
<PAGE>
PRELIMINARY PROXY MATERIALS
NOT FOR DISTRIBUTION
PROXY CARD PROXY CARD
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
A PROXY FOR A SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD OCTOBER 21, 1997
The undersigned, revoking all Proxies heretofore given, hereby appoints
each of Amy L. Domini, David P. Wieder, Roger P. Joseph, and Mari A. Wilson, or
any of them, as Proxies of the undersigned with full power of substitution, to
vote on behalf of all of the undersigned all shares in Domini Institutional
Social Equity Fund which the undersigned is entitled to vote at the Special
Meeting of Shareholders of the Fund to be held at the offices of Bingham, Dana
& Gould LLP at 150 Federal Street, 25th Floor, Boston, Massachusetts 02110, on
Tuesday, October 21, 1997 a.m., Eastern Time, and at any adjournment thereof,
as fully as the undersigned would be entitled to vote if personally present, as
follows:
PROXY SOLICITED ON BEHALF OF THE FUNDS' BOARD OF TRUSTEES.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING
PROPOSALS.
1a. To vote on a Management Agreement between Domini Social
Investments LLC ("DSI") and Domini Social IndexSM
Portfolio (the "Portfolio"). Substantially all of the
Fund's investable assets are invested in the Portfolio.
______FOR ______AGAINST ______ABSTAIN
1b. To vote on a Submanagement Agreement between DSI and
Mellon Equity Associates.
______FOR ______AGAINST ______ABSTAIN
2. To vote on authorizing the Trustees of the Portfolio to select and change
the investment submanager and enter into submanagement agreements without
obtaining the approval of investors.
______FOR ______AGAINST ______ABSTAIN
3. To amend the Declaration of Trust of the Portfolio and the Declaration of
Trust of the Fund to clarify voting provisions with respect to the
election of Trustees by Shareholders.
______FOR ______AGAINST ______ABSTAIN
<PAGE>
4. To elect the following nominees to the Fund's and the
Portfolio's Board of Trustees: Emily W. Card, Philip
W. Coolidge, Amy Lee Domini, Allen M. Mayes, William C.
Osborn, Karen Paul, Timothy Smith, Frederick C.
Williamson.
______For all for the Nominees
______For all of the Nominees (except those indicated below)
______Withhold authority to vote for all of the Nominees
-----------------------------------------------------------------------
If you wish to withhold authority for any nominee, please mark the box
entitled "For all of the Nominees (except those indicated below)" and
write the nominee's name(s) on the line above.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR ANY PROPOSALS
FOR WHICH NO CHOICE IS INDICATED.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON
SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
Date:_______________
-----------------------------------
Signature
-----------------------------------
Signature of joint owner, if any
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD
When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as such.
If signing on behalf of a corporation, please sign the full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners
should each sign this proxy. Please sign, date and return in the enclosed
envelope.
