Rule 497(e)
File Nos. 333-14449
and 811-07599
Supplement dated August 22, 1997
to Prospectus dated November 7, 1996
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
At a meeting held on June 30, 1997, the Board of Trustees of Domini
Institutional Social Equity Fund (the "Fund") voted to approve certain changes
in the management of the Fund in order to provide for a more centralized
management structure. On that same date, the Board of Trustees of Domini Social
Index (SM) Portfolio (the "Portfolio") also approved a restructuring of the
management of the Portfolio. Because substantially all of the Fund's investable
assets are invested in the Portfolio, the proposed new management structure
affects both the Fund and the underlying Portfolio. The restructuring includes
the following changes.
The Portfolio will enter into a new management agreement (the "Proposed
Management Agreement") with Domini Social Investments LLC ("DSI"), subject to
shareholder approval, pursuant to which DSI will provide investment supervisory
and administrative services, and a new submanagement agreement (the "Proposed
Mellon Agreement") with Mellon Equity Associates ("Mellon Equity"), subject to
shareholder approval, pursuant to which Mellon Equity will manage the
investments of the Portfolio on a day to day basis. For its services under the
Proposed Management Agreement, DSI will receive a fee equal on an annual basis
to 0.20% of the Portfolio's average daily net assets, except that for the first
year of the Agreement, the fee payable to DSI will be reduced by the amount, if
any, by which the total ordinary operating expenses of the Portfolio exceed, on
an annual basis, 0.20% of the average daily net assets of the Portfolio for its
current fiscal year. The Trustees of the Fund have authorized the calling of a
Special Meeting of Shareholders of the Fund to vote on these agreements as
well as other matters, and the solicitation of proxies in connection therewith.
The Portfolio currently employs, as investment adviser, Kinder, Lydenberg,
Domini & Co., Inc. ("KLD"), which developed and maintains the Domini 400 Social
Index(SM), and as investment manager, Mellon Equity, to manage the investments
of the Portfolio on a day to day basis. See "MANAGEMENT--Adviser" in the
Prospectus and "MANAGEMENT OF THE TRUST AND THE PORTFOLIO--Adviser and Manager"
in the Statement of Additional Information for a description of the current
agreements with KLD and Mellon Equity. DSI is a newly created management
company formed by the principals of KLD and other investment company and
marketing professionals.
As part of the management restructuring, the Board of Trustees of the Fund
has approved a Sponsorship Agreement with DSI pursuant to which DSI will
provide the Fund with centralized administration and management functions
(other than the provision of investment advice). For its services under the
Sponsorship Agreement, DSI will receive a fee equal on an annual basis to 0.25%
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 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,
0.30% of the average daily net assets of the Fund for its current fiscal year.
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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), for which KLD receives a fee equal on
an annual basis to 0.20% of the average daily net 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 current fiscal year. Pursuant to letter agreements between
KLD and Signature Broker-Dealer Services, Inc. ("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 (including the Fund's share of the Portfolio's
expenses, but 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. It is intended that these expense payment
arrangements will terminate in connection with the restructuring. Signature
currently serves as Distributor of the Fund and as Placement Agent to the
Portfolio and provides administrative services to the Portfolio and the Fund,
and intends to assist in the transition to the new management structure.
"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.
