DOMINI INSTITUTIONAL TRUST, 485BPOS, 1998-11-25

DOMINI INSTITUTIONAL TRUST
485BPOS, 1998-11-25

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As filed with the Securities and Exchange Commission on November 25, 1998
Registration Nos. 333-14449 and 811-07599

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6

DOMINI INSTITUTIONAL TRUST
(Exact Name of Registrant as Specified in Charter)

11 West 25th Street, New York, NY 10010
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code:
212-352-9200

Amy L. Domini
Domini Social Investments LLC
11 West 25th Street
New York, NY 10010
(Name and Address of Agent for Service)

Copy to:

Roger P. Joseph, Esq.
Bingham Dana LLP, 150 Federal Street, Boston, MA 02110

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 27, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has registered an indefinite number of its shares of
beneficial interest (par value $0.01 per share) pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed the notice required by Rule
24f-2 with respect to its series, Domini Institutional Social Equity Fund (for
its fiscal year ending July 31, 1998), on September 29, 1998.

Domini Social Index Portfolio has also executed this Registration Statement.

<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
CROSS REFERENCE SHEET
(As required by Rule 495)

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

Item Number Statement of Additional
Form N-1A, Part A Prospectus Caption Information Caption
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1 Front Cover Page *
- --------------------------------------------------------------------------------------------------------------------------
2 Expense Summary *
- --------------------------------------------------------------------------------------------------------------------------
3 Financial Highlights; Performance Information
Performance Information
- --------------------------------------------------------------------------------------------------------------------------
4 Front Cover Page; Investment in the Fund; *
Investment Objective and Policies
- --------------------------------------------------------------------------------------------------------------------------
5 The Fund; Management - Manager, *
Submanager, Sponsor; Transfer Agent
and Custodian; Other Information
Concerning Shares of the Fund-
Expenses; Back Cover Page
- --------------------------------------------------------------------------------------------------------------------------
5A Not Applicable *
- --------------------------------------------------------------------------------------------------------------------------
6 Special Information Concerning the Description of Shares, Voting Rights
Master-Feeder Investment Fund Structure; and Liabilities
Other Information Concerning
Shares of the Fund-Description
of Shares, Voting Rights and
Liabilities; Management-Transfer
Agent and Custodian; Other
Information Concerning Shares
of the Fund-Dividends and
Capital Gains Distributions;
Tax Matters
- --------------------------------------------------------------------------------------------------------------------------
7 Purchases and Redemptions of *
Shares-Purchases; Other
Information Concerning Shares
of the Fund-Net Asset Value,
Management-Distributor; Transfer
Agent and Custodian
- --------------------------------------------------------------------------------------------------------------------------
8 Purchases and Redemptions of *
Shares-Redemptions
- --------------------------------------------------------------------------------------------------------------------------
9 Not Applicable *
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Item Number Statement of Additional
Form N-1A, Part B Prospectus Caption Information Caption
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10 * Front Cover Page
- --------------------------------------------------------------------------------------------------------------------------
11 * Front Cover Page
- --------------------------------------------------------------------------------------------------------------------------
12 * The Fund
- --------------------------------------------------------------------------------------------------------------------------
13 Investment Objective and Investment Objective,
Policies Policies and Restrictions
- --------------------------------------------------------------------------------------------------------------------------
14 * Management of the Trust
and the
Portfolio-Trustees of the Trust and
the Portfolio, Officers
- --------------------------------------------------------------------------------------------------------------------------
15 * Management of the Trust
and the
Portfolio-Trustees of the Trust and
the Portfolio, Officers
- --------------------------------------------------------------------------------------------------------------------------
16 Other Information Concerning *
Shares of the Fund-Expenses
Management of the Trust Management of the Trust and the
and the Portfolio-Sponsor Portfolio-Manager and Submanager,
Sponsor

Purchases and Redemptions of Management of the Trust
Shares-Distribution and the
Agreement Portfolio-Distributor

Management-Transfer Management of the Trust
Agent and Custodian; and Portfolio;
Back Cover Page Independent Auditors;
Page Back Cover Page

* Management of the Trust
and the
Portfolio-Distributor
- --------------------------------------------------------------------------------------------------------------------------
17 * Portfolio Transactions
and Brokerage Commissions
- --------------------------------------------------------------------------------------------------------------------------
18 Other Information Concerning Description of Shares,
Shares of the Fund-Description Voting Rights and
of Shares, Voting Rights and Liabilities
Liabilities

- --------------------------------------------------------------------------------------------------------------------------
19 Purchases and Redemptions of Management of the Trust
Shares; Other Information and the
Concerning Shares of the Portfolio-Transfer Agent,
Fund-Net Asset Value Custodian
- --------------------------------------------------------------------------------------------------------------------------
20 Tax Matters Taxation
- --------------------------------------------------------------------------------------------------------------------------
21 * Management of the Trust
and the
Portfolio-Distributor
- --------------------------------------------------------------------------------------------------------------------------
22 Performance Information Performance Information
- --------------------------------------------------------------------------------------------------------------------------
23 * Financial Statements
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------

</TABLE>

Form N-1A, Part C

Information required to be included in Part C is set forth under the
appropriately numbered item in Part C of this registration statement.
<PAGE>

PROSPECTUS

November 27, 1998

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND

The investment objective of the Domini Institutional Social Equity Fund
(the "Fund") is to provide its shareholders with long-term total return which
corresponds to the total return performance of the Domini 400 Social Index-SM-
(the "Domini Social Index"), an index comprised of stocks selected according to
social criteria. The Fund seeks to achieve its investment objective by investing
all of its investable assets in the Domini Social Index Portfolio (the
"Portfolio"), a diversified open-end management investment company having the
same investment objective as the Fund. The Portfolio invests in the common
stocks included in the Domini Social Index. There can, of course, be no
assurance that the Fund will achieve its investment objective.

TABLE OF CONTENTS
Investment in the Fund
The Fund
Expense Summary
Financial Highlights
Performance Information
Investment Objective and Policies
Management
Purchases and Redemptions of Shares
Tax Matters
Other Information Concerning Shares of the Fund

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The manager of the Portfolio is Domini Social Investments LLC. The
investment submanager of the Portfolio is Mellon Equity Associates. The sponsor
of the Fund is Domini Social Investments LLC and the distributor of the Fund is
Signature Broker-Dealer Services, Inc. (the "Distributor").

INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK,AND THE SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER FEDERAL, STATE OR OTHER GOVERNMENTAL
AGENCY.
<PAGE>

"Domini" and "Domini 400 Social Index" are service marks of Kinder,
Lydenberg, Domini & Co., Inc.

This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor ought to know before investing. The Fund has filed
with the Securities and Exchange Commission("SEC") a Statement of Additional
Information("SAI"), dated November 27, 1998 as amended from time to time, which
contains more detailed information about the Fund and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the SAI without
charge by contacting the distributor (see back cover for address and phone
number).

THE SEC MAINTAINS A WEB SITE (HTTP.//WWW.SEC.GOV) THAT CONTAINS THE SAI,
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE FUND AND
THE PORTFOLIO.

UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PORTFOLIO. THE FUND INVESTS IN THE
PORTFOLIO THROUGH A MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE "SPECIAL
INFORMATION CONCERNING THE MASTER-FEEDER INVESTMENT FUND STRUCTURE" HEREIN.

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.

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<PAGE>

INVESTMENT IN THE FUND

The Fund seeks to provide its shareholders with long-term total return
which corresponds to the total return performance of the Domini Social Index,
an index comprised of stocks selected according to social criteria. The Fund may
be appropriate, therefore, for investors who are willing to ride out stock
market fluctuations in pursuit of long-term returns. Because the Fund seeks to
track, rather than exceed, the performance of a particular index, the Fund is
not managed in the same way as other mutual funds. In particular, the manager
generally does not judge the merits of any particular stock as an investment.
Therefore, investors should not expect to achieve the potentially greater
results that could be obtained by a fund that aggressively seeks growth.

The value of an investment in the Fund varies from day to day, generally
reflecting changes in the financial condition of the companies in which the
Portfolio invests, general market conditions and political and economic factors.
Stock prices can fluctuate dramatically in response to these and other factors
or speculation about these factors. Over the long term, stocks have generally
shown greater growth potential than other types of securities. However, when
you sell your Fund shares, they may be worth more or less than what you paid for
them. Like any mutual fund, you may lose money if you invest in the Fund.

Potential investors should note that because the Portfolio seeks to be
fully invested in the stocks comprising the Domini Social Index, the Fund is not
a balanced investment plan. You should carefully consider your investment
objectives and risk tolerance before making a decision to invest in the Fund.

THE FUND

The Domini Institutional Social Equity Fund is a no-load,
diversified, open-end management investment company. The Fund is a series of
shares of beneficial interest of Domini Institutional Trust (the "Trust"), a
business trust organized under the laws of the Commonwealth of Massachusetts
(commonly known as a "Massachusetts business trust") on April 1, 1996.

Shares of the Fund are sold continuously by the Fund's Distributor.
The minimum initial investment is $2,000,000. See "Purchases and Redemptions of
Shares" herein.

Proceeds from the sale of shares of the Fund are invested in the
Portfolio which then purchases securities in accordance with its investment

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<PAGE>

objective and policies. Domini Social Investments LLC ("DSIL" or the "Manager")
is the Portfolio's manager and provides investment supervisory and
administration services to the Portfolio. Mellon Equity Associates ("Mellon
Equity" or the "Submanager") is the Portfolio's investment submanager DSIL is
also the sponsor ("Sponsor") of the Fund and provides administrative services to
the Fund. The Boards of Trustees of the Fund and of the Portfolio provide broad
supervision over the affairs of the Fund and of the Portfolio, respectively. The
Trustees who are not "interested persons" of the Fund as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent
Trustees"), are the same as the Independent Trustees of the Portfolio. A
majority of the Fund's Trustees are not affiliated with the Manager or the
Submanager. For further information about the Trustees of the Fund and the
Portfolio, see "Management of the Fund and the Portfolio" in the Statement of
Additional Information.

Kinder, Lydenberg, Domini & Co., Inc. ("KLD"), the former investment
adviser of the Portfolio and an affiliate of DSIL, determines the composition of
the Domini Social Index (which determines the composition of the Portfolio's
securities). The following persons are primarily responsible for the development
and maintenance of the Domini Social Index: Amy L. Domini, Founder of KLD, since
1988; Steven D. Lydenberg, Director of Research, KLD, since 1990; and Peter D.
Kinder, President, KLD, since 1988. The Submanager manages the investments of
the Portfolio from day to day in accordance with the Portfolio's investment
objective and policies. See "Management" herein for more detailed information on
the management of the Fund and the Portfolio.

EXPENSE SUMMARY

The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of the Fund, and the estimated aggregate annual
operating expenses for the Fund (including the Fund's share of Portfolio
expenses), 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.

The purpose of the expense table is to help investors understand the
various costs and expenses that a shareholder will bear directly or indirectly.
See "Management" and "Other Information Concerning Shares of the Fund--Expenses"
for more information with respect to the expenses of the Fund and the Portfolio.

4
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES. . . . . . . . . . . . . . None
ANNUAL OPERATING EXPENSES:
Advisory and Management Fees . . . . . . . . . . . . 0.19%(1)
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . 0%
Other Expenses after Expense Reimbursements
--Administrative Services and Sponsorship
Fees. . . . . . . . . . . . . . . . . . . . . . . 0%(2)
--Other Expenses . . . . . . . . . . . . . . . . . . . 0.11%(3)
------
Total Operating Expenses . . . . . . . . . . . . . . . 0.30%(3)(4)
------
------
</TABLE>

(1) Under the Management Agreement between the Portfolio and DSIL, DSIL's fee
for advisory and administrative services to the Portfolio is 0.20% of the
average daily net assets of the Portfolio. Currently, DSIL is waiving its
fee 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 0.20% of the average
daily net assets of the Portfolio. This fee waiver is voluntary and may be
reduced or terminated at any time.

(2) Under the Sponsorship Agreement between DSIL and the Fund, DSIL's fee for
administrative and sponsorship services is 0.25% of the average daily net
assets of the Fund. Currently, DSIL is waiving its fee to the extent
necessary to keep the aggregate annual operating expenses of the Fund
(including the Fund's share of the Portfolio's expenses but excluding

5
<PAGE>

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. This expense waiver is voluntary and may be reduced or terminated at
any time.

(3) DSIL has made a voluntary undertaking to reimburse the Fund for ordinary
operating expenses (excluding brokerage fees and commissions, interest,
taxes and other extraordinary expenses) to the extent such ordinary
expenses exceed 0.30% of the average daily net assets of the Fund. Without
this voluntary undertaking, it is estimated that "Other Expenses" of the
Fund would be 0.17% of the average daily net assets of the Fund and "Total
Operating Expenses" of the Fund would be 0.36% 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, 1998. This
reimbursement undertaking may be reduced or terminated at any time.

(4) Without the fee waivers and reimbursement undertaking described in
footnotes (1), (2) and (3) above, it is estimated that the aggregate
annual operating expenses of the Fund (including the Fund's share of the
Portfolio's expenses) would be 0.61% 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, 1998.

EXAMPLE:
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:

<TABLE>
<CAPTION>
<S> <C>
1 year. . . . . . . . . . . . . . . . . .$3
3 years . . . . . . . . . . . . . . . . $10
5 years . . . . . . . . . . . . . . . . $17
10 years. . . . .. . . . . . . . . . . . $38
</TABLE>

THE "EXAMPLE" SET FORTH ABOVE IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES AND

6
<PAGE>

RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.

The Trust's Trustees believe that the aggregate per share expenses of the
Fund and the Portfolio will be less than or approximately equal to the expenses
which the Fund would incur if it retained the services of an investment manager
and an investment submanager and invested directly in the types of securities
being held by the Portfolio.

FINANCIAL HIGHLIGHTS

The following selected data for a share outstanding for the indicated
periods has been audited by KPMG Peat Marwick LLP, independent auditors, whose
report thereon is included in the Fund's annual report which is incorporated by
reference in the Statement of Additional Information. This information should be
read in conjunction with the financial statements incorporated by reference in
the Statement of Additional Information.

The Fund's Annual Report includes a discussion of those factors, strategies
and techniques that materially affected the Fund's performance during the fiscal
year ended July 31, 1998, as well as certain related information. A copy of the
Annual Report will be made available without charge upon request.

7
<PAGE>

<TABLE>
<CAPTION>
For the For the For the period
Year ended year ended May 30, 1996(1) to
July 31, 1998 July 31, 1997 July 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
For a share outstanding for the Period:
Net asset value, beginning of period. . . . . . . $14.71 $9.60 $10.00
------ -------
Income (loss) from investment operations:
Net investment income. . . . . . . . . . . . . 0.15 0.13 0.02
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . 3.17 5.11 (0.41)
------ -------
Total income (loss) from investment
operations . . . . . . . . . . . . . . . . . . 3.32 5.24 (0.39)
------ -------

Less distributions and dividends:
Dividends to shareholders from net
investment income . . . . . . . . . . . . . . (0.13) (0.13) (0.01)
Distributions to shareholders from net
realized gains. . . . . . . . . . . . . . . . (0.03) (0.00)(2) --
------ -------
Total distributions and dividends. . . . . . . . . (0.16) (0.13) (0.01)
------ -------

Net asset value, end of period . . . . . . . . . . $17.87 $14.71 $9.60
------ -------
------ -------
Total return . . . . . . . . . . . . . . . . . . . 22.74% 54.9% (3.9%)
Ratios/Supplemental data:
Net assets, end of period (000's omitted). . . $116,321 $71,267 $17,972
Ratio of net investment income to
average net assets . . . . . . . . . . . . . . 0.96%(3) 1.25%(4) 1.42%(4)(5)

Ratio of expenses to average net assets. . . . 0.30%(3) 0.33%(4) 0.52%(4)(5)
</TABLE>

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

(1) Commencement of operations

(2) Distribution was less than $0.005.

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<PAGE>

(3) Reflects a waiver of fees and expenses paid by the Sponsor due to
limitations set forth in the Sponsorship Agreement. Had the Sponsor not waived
their fees and reimbursed expenses, the ratios of expenses and net investment
income to average daily net assets for the year ended July 31 1998 would have
been 0.61% and 0.65% respectively.

(4) Total expenses include expenses paid by the former administrator or sponsor
in excess of expense payment and sponsor fees. Had these expenses not been paid
by Signature or KLD, the ratios of expenses and net investment income to average
daily net assets for the periods ended July 31, 1997 and 1996 would have been
0.65 and 0.93% , and 0.97% and 1.15%, respectively.

(5) Annualized.

PERFORMANCE INFORMATION

Performance information concerning the Fund may from time to time be used
in advertisements, shareholder reports or other communications to shareholders.
The Fund may provide period and average annualized "total rates of return" with
respect to the Fund. The "total rate of return" refers to the change in the
value of an investment in a Fund over a stated period based on any change in net
asset value per share and includes the value of any shares purchasable with any
dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return is a
compounded total rate of return which assumes that the period total rate of
return is generated over a 52-week period, and that all dividends and capital
gains distributions are reinvested. An annualized total rate of return will be
slightly higher than a period total rate of return if the period is shorter than
one year, because of the effect of compounding.

Historical total return information for any period or portion thereof
prior to the establishment of the Fund will be that of the Portfolio, adjusted
to assume that all charges, expenses and fees of the Fund and the Portfolio
which are presently in effect were deducted during such periods. The table that
follows sets forth average annual total return information for the periods
indicated:

<TABLE>
<CAPTION>
<S> <C> <C>
7/31/98 9/30/98
------- -------
1 Year: . . . . . . . . . . . 22.74% 12.10%
5 Years:. . . . . . . . . . . 23.07% 19.98%
Commencement of Investment. .
in the Portfolio* to date: 19.03% 17.01%
</TABLE>

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<PAGE>

*Domini Social Index Portfolio commenced operations on June 3, 1991.

The Fund may provide "yield" quotations with respect to the Fund. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day or one-month period (which period shall be stated in any
advertisement or communications with a shareholder). This income is then
"annualized", that is, the amount of income generated by the investment over the
period is assumed to be generated over a 52-week period and is shown as a
percentage of investment. A "yield" quotation, unlike a total rate of return
quotation, does not reflect changes in net asset value.

From time to time the Fund may also quote fund rankings from various
sources, such as Lipper Analytical Services, Inc.and Morningstar, Inc., and may
compare the Fund's performance to that of the Domini Social Index and various
other unmanaged securities indices, such as the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") and the Dow Jones Industrial Average.
"Standard & Poor", "S&P" and "Standard & Poor's 500" are trademarks of McGraw
Hill Companies.

See the Statement of Additional Information for further information concerning
the calculation of yield and any total rate of return quotations. SINCE THE
FUND'S YIELD AND TOTAL RATE OF RETURN QUOTATIONS ARE BASED ON HISTORICAL
EARNINGS AND SINCE SUCH YIELD AND RATES OF RETURN FLUCTUATE OVER TIME, SUCH
QUOTATIONS SHOULD NOT BE CONSIDERED AS AN INDICATION OR REPRESENTATION OF THE
FUTURE PERFORMANCE OF THE FUND.

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE - The investment objective of the Fund is to provide
its shareholders with long-term total return (reflecting both dividend and price
performance of the Fund) which corresponds to the total return performance of
the Domini Social Index (sometimes referred to herein as the "Index"). There
can, of course, be no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may be changed without approval
by the Fund's shareholders.

INVESTMENT POLICIES - The Fund seeks to achieve its investment

10
<PAGE>

objective by investing all of its investable assets in the Portfolio, which has
the same investment objective as the Fund. The Portfolio seeks to achieve its
investment objective by investing substantially all of its assets in the common
stocks comprising the Domini Social Index. The Portfolio will approximate the
weightings of securities held by the Portfolio to the weightings of the stocks
in the Domini Social Index, except as described below, and will seek a
correlation between the weightings of securities held by the Portfolio and the
weightings of the stocks in the Domini Social Index of 0.95 or better. A figure
of 1.0 would indicate a perfect correlation. As of September 30, 1998, the
correlation between the weightings of securities held by the Portfolio and the
weightings of the stocks in the Domini Social Index was 0.99. To the extent
practicable, the Portfolio will attempt to be fully invested. The ability of the
Fund to duplicate the performance of the Domini Social Index by investing in the
Portfolio will depend to some extent on the size and timing of cash flows into
and out of the Fund and the Portfolio as well as the Fund's and the Portfolio's
expenses. Adjustments in the securities holdings of the Portfolio to accommodate
cash flows will track the Domini Social Index to the extent practicable, but
this will result in brokerage expenses.

SOCIAL CRITERIA - The Domini Social Index was developed and is currently
maintained by KLD. The Domini Social Index is a common stock index comprised of
the stocks of approximately 400 companies which meet certain social criteria.
The weightings of the stocks comprising the Domini Social Index are based upon
market capitalization. The criteria, and application thereof, used in
developing and maintaining the Domini Social Index involve the subjective
judgment of KLD. KLD, based on available data, seeks to exclude the following
types of companies: firms that derive more than 2% of their gross revenues from
the sale of military weapons; firms that derive any revenue from the manufacture
of tobacco products or alcoholic beverages; firms that derive any revenue from
gambling enterprises; and firms that have an ownership share in, or operate,
nuclear power plants. KLD also considers criteria such as corporate citizenship,
employee relations, environmental performance, and product-related issues when
evaluating stocks for inclusion in the Domini Social Index. The corporate
citizenship criteria include a company's record with regard to its philanthropic
activities and its community relations in general. The employee relations
criteria include a company's record with regard to labor matters, workplace
safety, equal

11
<PAGE>

employment opportunity, employee benefit programs, and meaningful participation
in company profits either through stock purchase or profit sharing plans. The
environmental performance criteria include a company's record with regard to
fines or penalties, waste disposal, toxic emissions, efforts in waste reduction
and emissions reduction, recycling, and environmentally beneficial fuels,
products and services. The product-related criteria include a company's record
with regard to product safety, marketing practices and commitment to quality.

The Manager intends to vote proxies of companies included in the Portfolio
consistent with the social criteria used in developing and maintaining the
Domini Social 400 Index.

INDEX MANAGEMENT - The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities included
in the Domini Social 400 Index. Moreover, inclusion of a stock in the Domini 400
Social Index does not imply an opinion by KLD or the Manager as to the merits of
that specific stock as an investment. However, KLD and the Manager believe that
enterprises which exhibit a social awareness, based on the criteria described
above, should be better prepared to meet future societal needs for goods and
services and may also be less likely to incur certain legal liabilities that may
be incurred when a product or service is determined to be harmful, and that such
enterprises should over the longer term be able to provide a positive return to
investors.

In selecting stocks for inclusion in the Domini Social 400 Index:

1. KLD evaluated, in accordance with the social criteria described above,
each of the companies the stocks of which comprise the S&P 500. If a
companywhose stock was included in the S&P 500 met KLD's social criteria and met
KLD's further criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover, it was included in the Domini
400 Social Index. As of July 31, 1998, of the 500 companies whose stocks
comprised the S&P 500, approximately 48% were included in the Domini Social
Index.

2. The remaining stocks comprising the Domini Social Index (i.e., those
which are not included in the S&P 500) were selected based upon KLD's evaluation
of the social criteria described above, as well as upon KLD's criteria for
industry diversification, financial solvency, market capitalization, and minimal
portfolio turnover. Because of the social criteria applied in the selection of
stocks comprising the Domini Social Index, industry sector

12
<PAGE>

weighting in the Domini Social Index may vary materially from the industry
weightings in other stock indices, including the S&P 500, and certain industry
sectors will be excluded altogether.

The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole. Since some industries are characterized by
companies of relatively small stock capitalization, the S&P 500 does not
comprise the 500 largest companies listed on the New York Stock Exchange. Not
all stocks included in the S&P 500 are listed on the New York Stock Exchange.
However, the total market value of the S&P 500 as of July 31, 1998 represented
approximately 83% of the aggregate market value of common stocks traded on the
New York Stock Exchange.

Inclusion of a stock in the S&P 500 Index in no way implies an opinion by
S&P as to its attractiveness as an investment, nor is S&P a sponsor of or
otherwise affiliated with the Fund or the Portfolio.

Some of the stocks included in the Domini Social Index may be stocks of
foreign issuers (provided that the stocks are traded in the United States in the
form of American Depositary Receipts or similar instruments the market for which
is denominated in United States dollars). Securities of foreign issuers may
represent a greater degree of risk (i.e., as a result of exchange rate
fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers.

The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization, (i.e., market price per share
times the number of shares outstanding). Because of this weighting, as of July
31, 1998 approximately 45% of the Domini Social Index was comprised of the 20
largest companies in that Index.

KLD may exclude from the Domini Social Index stocks issued by companies
which are in bankruptcy or whose bankruptcy KLD believes may be imminent. KLD
may also remove from the Domini Social Index stocks issued by companies which
no longer meet their investment criteria.

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<PAGE>

The Portfolio intends to readjust its securities holdings periodically such
that those holdings will correspond, to the extent reasonably practicable, to
the Domini Social Index both in terms of composition and weighting. The timing
and extent of adjustments in the holdings of the Portfolio, and the extent of
the correlation of the holdings of the Portfolio with the Domini 400 Social
Index, will reflect the Submanager's judgment as to the appropriate balance
between the goal of correlating the holdings of the Portfolio with the
composition of the Domini Social Index, and the goals of minimizing transaction
costs and keeping sufficient reserves available for anticipated redemptions of
Fund shares. To the extent practicable, the Portfolio will seek a correlation
between the weightings of securities held by the Portfolio to the weightings of
the securities in the Domini Social Index and will seek to match, before
expenses, a correlation between the performance of the Fund and the performance
of the Domini Social Index of 0.95 or better. The Board of Trustees of the
Portfolio will receive and review, at least quarterly, a report prepared by the
Submanager comparing the performance of the Fund and the Portfolio with that of
the Domini Social Index, and comparing the composition and weighting of the
Portfolio's holdings with those of the Domini Social Index, and will consider
what action, if any, should be taken in the event of a significant variation
between the performance of the Fund or the Portfolio, as the case may be, and
that of the Domini Social Index, or between the composition and weighting of the
Portfolio's securities holdings with those of the stocks comprising the Domini
Social Index. If the correlation between the weightings of securities held by
the Portfolio and the weightings of the stocks in the Domini Social Index or the
correlation between the performance of the Fund, before expenses, and the
performance of the Domini Social Index falls below 0.95, the Board of Trustees
will review with the Submanager methods for increasing such correlation, such as
through adjustments in securities holdings of the Portfolio.

The Portfolio may invest cash reserves in short-term debt securities (i.e.,
securities having a remaining maturity of one year or less) issued by agencies
or instrumentalities of the United States Government, bankers' acceptances,
commercial paper or certificates of deposit, provided that the issuer satisfies
certain social criteria. The Portfolio does not currently intend to invest in
direct obligations of the United States Government. Short-term debt securities
purchased by the Portfolio will be rated at least Prime-1 by Moody's Investors

14
<PAGE>

Service, Inc. or A-1+ or A-1 by S&P or, if not rated, determined to be of
comparable quality by the Portfolio's Board of Trustees. The Portfolio's policy
is to hold its assets in such securities pending readjustment of its portfolio
holdings of stocks comprising the Domini Social Index and in order to meet
anticipated redemption requests. Such investments are not intended to be used
for defensive purposes in periods of anticipated market decline.

The annual portfolio turnover rates of the Portfolio for the fiscal years
ended July 31, 1997 and July 31, 1998 were 1% and 5%, respectively. The
Portfolio's average brokerage commission rates paid per share for the fiscal
years ended July 31, 1997 and July 31, 1998 were $0.05 and $0.04, respectively.

The Portfolio's primary consideration in placing securities transactions
with broker-dealers is to seek the best price and execution The Portfolio
may pay higher commission rates than the lowest available when the Manager or
Submanager believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. Neither the Portfolio nor the Fund will engage in brokerage
transactions with the Manager, the Submanager or the Sponsor or any of their
respective affiliates or any affiliate of the Fund or the Portfolio. For
further discussion regarding securities trading by the Portfolio, see the
Statement of Additional Information.

Consistent with applicable regulatory policies, including those of the
Board of Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Portfolio may make loans of its securities to member banks of
the Federal Reserve System and to broker-dealers. Such loans would be required
to be secured continuously by collateral consisting of securities, cash or cash
equivalents maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Portfolio would have the right to
call a loan and obtain the securities loaned at any time on three days' notice.
During the existence of a loan, the Portfolio would continue to collect the
equivalent of the dividends paid by the issuer on the securities loaned and
would also receive interest on investment of cash collateral. The Portfolio may
pay finder's and other fees in connection with securities loans. Loans of
securities involve a risk that the borrower may fail to return the securities or
may fail to provide additional collateral.

Although it has no current intention to do so, the Portfolio may make short
sales of securities or maintain a short position, if at all times when a short
position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.

15
<PAGE>

SPECIAL INFORMATION CONCERNING THE MASTER-FEEDER INVESTMENT FUND STRUCTURE

Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve the investment objective of the
Fund by investing all of the Fund's investable assets in the Portfolio, a
separate registered investment company with the same investment objective as the
Fund. In addition to selling a beneficial interest to the Fund, the Portfolio
may sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions as
the Fund and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Manager at (212) 352-9200.

The investment objective of the Fund may be changed without the approval of
the Fund's shareholders, but not without written notice thereof to shareholders
thirty days prior to implementing the change. If there were a change in the
Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then-current financial
positions and needs. The investment objective of the Portfolio may also be
changed without the approval of the investors in the Portfolio, but not without
written notice thereof to the investors in the Portfolio (and notice by the Fund
to its shareholders) 30 days prior to implementing the change. There can, of
course, be no assurance that the investment objective of either the Fund or the
Portfolio will be achieved. See "Investment Restrictions" in the Statement of
Additional Information for a description of the fundamental policies of the Fund
and of the Portfolio that cannot be changed without approval by the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund or the Portfolio, respectively. Except as stated otherwise, all
investment guidelines, policies and restrictions described herein and in the
Statement of Additional Information are non-fundamental.

The Portfolio, in which all of the investable assets of the Fund are invested,
is organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Trust and other entities investing in the
Portfolio (i.e., other investment companies, insurance company

16
<PAGE>

separate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Trust incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trust's Trustees believe that neither the Fund
nor its shareholders will be adversely affected by reason of the Fund's
investing in the Portfolio.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. (However, this
possibility exists as well for traditionally structured funds which have large
or institutional investors.) Also, funds with a greater pro rata ownership in
the Portfolio could have effective voting control of the operations of the
Portfolio. Subject to exceptions that are not inconsistent with applicable
rules or policies of the Securities and Exchange Commission, whenever the Trust
is requested to vote on matters pertaining to the Portfolio, the Trust will hold
a meeting of shareholders of the Fund and will cast all of its votes in the same
proportion as the votes of the Fund's shareholders. Fund shareholders who do not
vote will not affect the Trust's votes at the Portfolio meeting. The percentage
of the Trust's votes representing Fund shareholders not voting will be voted by
the Trustees of the Trust in the same proportion as the Fund shareholders who
do, in fact, vote. Certain changes in the Portfolio's investment objective,
policies or restrictions may require the Fund to withdraw its interest in the
Portfolio. Any such withdrawal could result in a distribution "in kind" of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.

The Trust may withdraw the Fund's investment from the Portfolio at any
time, if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective as the Fund or the retention of an investment adviser to
manage the Fund's assets in accordance with the investment policies described
above with respect to the Portfolio. In the event the Trustees of the Trust were
unable to find a substitute investment company in which to invest the Fund's
assets and were unable to secure directly the services of an investment manager

17
<PAGE>

and investment submanager, the Trustees will seek to determine the best course
of action.

For more information about the Portfolio's policies, management and
expenses see "Investment Objective and Policies", "Management", and "Other
Information Concerning Shares of the Fund - Expenses". For information about the
Portfolio's investment restrictions see the Statement of Additional Information.

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

As a matter of fundamental policy, the Trust will invest all of the
investable assets of the Fund (either directly or through the Portfolio) in one
or more of: (i) stocks comprising an index of securities selected applying
social criteria, which initially will be the Domini Social Index, (ii)
short-term debt securities of issuers which meet social criteria, (iii) cash,
and (iv) options on equity securities. This fundamental policy cannot be changed
without the approval of the holders of a majority of the Fund's shares (which,
as used in this Prospectus, means the lesser of (a) more than 50% of the
outstanding shares of the Fund, or (b) 67% or more of the outstanding shares of
the Fund present at a meeting at which holders of more than 50% of the Fund's
outstanding shares are represented in person or by proxy). Except for this
fundamental policy, investor approval is not required to change the Fund's or
the Portfolio's investment objective or any of the investment policies described
above.

The Statement of Additional Information filed with the Securities and
Exchange Commission includes a discussion of other investment policies and a
listing of specific investment restrictions which govern the Portfolio's and the
Fund's investment policies. Certain of the investment restrictions listed in the
Statement of Additional Information may not be changed by the Portfolio without
the approval of the shareholders of the Fund and the other investors in the
Portfolio or by the Trust without the approval of the shareholders of the Fund.
If a percentage or rating restriction on investment or utilization of assets is
adhered to at the time an investment is made or assets are so utilized, a later
change in percentage resulting from changes in the Portfolio's total assets or
the value of the Portfolio's securities or a later change in the rating of a
security held by the Portfolio will not be considered a violation of policy.

Expenses of the Portfolio with respect to investment management and
administrative services, investment submanagement services and sponsorship
services and administration services are described herein under "Management -
Manager, - Submanager and - Sponsor", respectively.

MANAGEMENT

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<PAGE>

The Boards of Trustees of the Fund and the Portfolio provide broad
supervision over the affairs of the Fund and the Portfolio, respectively. The
Fund has retained the services of DSIL as Sponsor, but has not retained the
services of an investment manager or investment submanager since the Fund seeks
to achieve its investment objective by investing all of its investable assets in
the Portfolio. The Portfolio has retained the services of DSIL as investment
manager and Mellon Equity as investment submanager.

MANAGER

DSIL, a Massachusetts limited liability company, provides investment management
and administrative services to the Portfolio pursuant to a Management Agreement.
DSIL has been registered as an investment adviser under the Investment Advisers
Act of 1940 since 1997. The services provided by the Manager consist of
investment supervisory services, overall operational support and administrative
services. The administrative services include the provision of general office
facilities and supervising the overall administration of the Portfolio. For its
services under the Management Agreement, the Manager receives from the Portfolio
a fee accrued daily and paid monthly at an annual rate equal to 0.20% of the
Portfolio's average daily net assets, on an annualized basis for the Portfolio's
then-current fiscal year. Currently, DSIL is waiving its fee 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 0.20% of the average daily net assets
of the Portfolio. This expense waiver is voluntary and may be reduced or
terminated at any time.

Prior to October 22, 1997, KLD, as the Portfolio's former investment
adviser, received from the Portfolio a fee accrued daily and paid monthly at an
annual rate equal to 0.025% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then-current fiscal year. Additionally,
prior to October 22, 1997, KLD received from the Portfolio a fee accrued daily
and paid monthly at an annual rate equal to 0.025% of the average daily net
assets of the Portfolio for its then current fiscal year for administrative
services.

"Domini-SM-" and "Domini Social Index-SM-" are service marks of KLD which
are licensed to DSIL with the consent of Amy L. Domini. Pursuant to agreements
among DSIL, Amy L. Domini, and each of the Fund and the Portfolio, the Portfolio
may be required to discontinue use of these service

19
<PAGE>

marks if DSIL ceases to be the Manager of the Portfolio or Ms. Domini withdraws
her consent, and the Fund may be required to discontinue the use of these
service marks if either DSIL ceases to be the Sponsor of the Fund or Ms. Domini
withdraws her consent or if either DSIL ceases to be the Manager of the
Portfolio or the Fund ceases to invest all of its assets in the Portfolio.

SUBMANAGER

Mellon Equity provides investment submanagement services to the Portfolio
on a day-to-day basis pursuant to a Submanagement Agreement with DSIL. Mellon
Equity does not determine the composition of the Domini Social Index.

Under the Submanagement Agreement, DSIL pays Mellon Equity an investment
submanagement fee equal on an annual basis to 0.10% of the average daily net
assets of the Portfolio. Prior to October 22, 1997, the Portfolio paid Mellon
Equity an investment management fee equal on an annual basis to 0.10% of the
average daily net assets of the Portfolio.

Mellon Equity is a Pennsylvania business trust founded in 1987 whose
beneficial owners are Mellon Bank N.A. and MMIP, Inc. (a wholly owned
subsidiary of Mellon Bank Corporation ("Mellon Bank"))and with its principal
offices at 500 Grant Street, Pittsburgh, PA 1528-0001. Mellon Equity has been
registered as an investment adviser under the Investment Advisers Act of 1940
since 1986. Prior to 1987, the Submanager was part of the Equity Management
Group of Mellon Bank's Trust and Investment Department, which managed
domestic equity, tax-exempt and institutional pension assets since 1947. As
of September 30, 1998, the Submanager had approximately $21.8 billion in
assets under management.

The Portfolio is team managed and John R. O'Toole (a senior vice president
of Mellon Equity, and CFA), is the team leader. He has been actively involved
in the portfolio management of the Portfolio since November 1994. He has been
employed by Mellon Equity and/or Mellon Bank as a portfolio manager for over
five years. Ms. Jocelin Reed (a vice president of Mellon Equity, and CFA) has
been responsible for the day to day portfolio management of the Portfolio since
November 1996.

SPONSOR

Pursuant to a Sponsorship Agreement, DSIL provides the Fund with the
administrative personnel and services necessary to operate the Fund. In addition
to general administrative services and facilities for the Fund similar to those
provided by DSIL to the Portfolio under the Management Agreement, DSIL answers
questions from the general public, the media and investors in the Fund regarding

20
<PAGE>

the composition of the Domini Social Index and the securities holdings of the
Portfolio. For these services and facilities, DSIL receives fees computed and
paid monthly from the Fund at an annual rate equal to 0.25% of the average daily
net assets of the Fund for the Fund's then-current fiscal year. Currently, DSIL
is reducing its fee to the extent necessary to keep the aggregate annual
operating expenses of the Fund (including the Fund's share of the Portfolio's
expenses 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 fiscal year ended July 31, 1998, DSIL waived all its fee
in the amount of $185,056. DSIL has also voluntarily agreed to reimburse
expenses to the extent necessary to keep the aggregate annual operating expenses
of the Fund (including the Fund's share of the Portfolio's expenses 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 fiscal year ended July 31, 1998, DSIL reimbursed expenses
on behalf of the Fund in the amount of $94,624.

DISTRIBUTOR

Signature Broker-Dealer Services, Inc is the principal distributor for
the shares of the Fund for which services it receives no fee. However, the
Fund's Board has approved the appointment of DSIL Investment Services LLC, a
wholly owned subsidiary of DSIL, as the Fund's distributor effective upon
completion of certain regulatory requirements anticipated to occur in the
first quarter of 1999.

TRANSFER AGENT AND CUSTODIAN

The Fund has entered into a Transfer Agency Agreement with FSSI, 11 West
25th Street, 7th Floor, New York, NY 10010, pursuant to which FSSI acts as
Transfer Agent for the Fund. The Transfer Agent maintains an account for each
shareholder of the Fund, performs other transfer agency functions and acts as
dividend disbursing agent for the Fund. Pursuant to Custodian Agreements,
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116,
acts as the custodian of the Fund's assets (i.e.., cash and the Fund's interest
in the Portfolio) and as the custodian of the Portfolio's assets (the
"Custodian"). The Custodian's responsibilities include safeguarding and
controlling the Portfolio's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on the
Portfolio's investments, maintaining books of original entry for portfolio and
fund accounting and other required books and accounts, and calculating the daily
net asset value of the Portfolio and the daily net asset value of shares of the
Fund. Securities held by the Portfolio may be deposited into certain securities
depositaries. The Custodian does not

21
<PAGE>

determine the investment policies of the Portfolio or decide which securities
the Portfolio will buy or sell. The Portfolio may, however, invest in securities
of the Custodian and may deal with the Custodian as principal in securities
transactions. IBT also serves as transfer agent for the Portfolio. For their
services, FSSI and IBT will receive such compensation as may from time to time
be agreed upon by each of them and the Fund or the Portfolio.

PURCHASES AND REDEMPTIONS OF SHARES

PURCHASES

Shares of the Fund may be purchased directly from the Distributor without a
sales load at the net asset value next determined after an order for shares is
received in good order by the Transfer Agent provided such order is received
prior to the close of regular trading (normally 4:00 p.m. Eastern Time) on any
day the New York Stock Exchange is open for trading (a "Fund Business Day"). The
minimum initial investment in the Fund is $2,000,000. The Fund in its sole
discretion may permit purchases for lesser amounts. The Fund reserves the right
to cease offering its shares for sale at any time or to reject any order for the
purchase of its shares. The Fund expects to reject any order that is not an
exempt transaction under the relevant state securities laws.

For each shareholder of record, the Fund establishes an open account to
which all shares purchased are credited together with any dividends and capital
gains distributions which are paid in additional shares. See "Other Information
Concerning Shares of the Fund - Dividends and Capital Gains Distributions". No
share certificates will be issued.

Purchases By Mail. Investors desiring to purchase shares of the Fund by
mail should complete an Account Application and mail the Application and a check
(in U.S. dollars), payable to "Domini Institutional Social Equity Fund," to the
Fund at the following address:

Domini Institutional Social Equity Fund
P.O. Box 959
New York, New York 10159-0959

For overnight deliveries, please use the following address:

Domini Institutional Social Equity Fund
11 West 25th Street, 7th Floor

22
<PAGE>

New York, NY 10010-2001
(212) 352-9200

Purchases by Bank Wire. An investor desiring to purchase shares by a wire
transfer of funds should request its bank to transmit immediately available
funds. The information transmitted with the funds must include the investor's
name and address and a statement indicating whether a new account is being
established by such wire transfer or whether such wire transfer is being made by
a shareholder with an account with the Fund. If the initial purchase by an
investor is by a wire transfer of funds, an account number will be assigned to
such investor and an Account Application must subsequently be completed and
mailed to the Fund. For purchases by wire transfer, please call FSSI, the Fund's
transfer agent (the "Transfer Agent"), at 1-800-582-6757 to obtain wire transfer
instructions.

Purchases by Exchange of Securities. At the discretion of the Manager, and
upon pre-approval, shares of the Fund may be purchased by exchanging securities
acceptable to the Trust for shares of the Fund. The Trust will not accept a
security in exchange for Fund shares unless (a) the security is consistent with
the investment objective and polices of the Fund and the Portfolio, and (b) the
security is deemed acceptable by the Manager and the Submanager. Securities
offered in exchange for shares of the Fund will be valued in accordance with the
usual valuation procedure for the Fund. See "Net Asset Value".

For further information on how to purchase shares of the Fund, an investor
should call 1-800-582-6757.

REDEMPTIONS

A shareholder may redeem all or any portion of the shares in its account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to the Fund. Redemptions will
therefore be effected on the same day the redemption order is received by the
Fund provided such order is received in good order on a Fund Business Day prior
to the time at which the net asset value of the Fund is determined.

The proceeds of a redemption will be paid by the Fund normally on the next Fund
Business Day, but in any event within seven days if all checks in payment for
the purchase of shares to be redeemed have been cleared by the Fund (which may
take up to 15 days). Redemptions may be paid by the Fund by check or by wire
transfer if the appropriate box on the Account Application has been completed.
Instructions for wire redemptions are set forth in the Account Application. The
Fund's Transfer Agent reserves the right to charge for wires.

23
<PAGE>

Redemptions by Mail. Redemptions may be made by letter to the Fund
specifying the dollar amount or number of shares to be redeemed and the account
number. The letter must be signed in exactly the same way the account is
registered. To protect you and the Fund against fraud, redemptions exceeding
$50,000 (and for all written redemptions, regardless of amount, made within 30
days following any changes in account registration), must be signature
guaranteed. You can obtain a signature guarantee from most banks, savings
institutions, credit unions, broker-dealers, and other guarantors acceptable to
the Fund and its transfer agent. The Fund and its transfer agent cannot accept
guarantors from notaries public or organizations that do not provide
reimbursement in the case of the fraud. The Fund and its transfer agent may, at
its option, request further documentation from corporations, executors,
administrators, trustees or guardians. In some cases the Fund may require the
furnishing of additional documents. Written requests should be mailed to the
Fund at the following address:

Domini Institutional Social Equity Fund
P.O. Box 959
New York, New York 10159-0959

For overnight deliveries, please use the following address:

Domini Institutional Social Equity Fund
11 West 25th Street, 7th Floor
New York, NY 10010-2001
(212) 352-9200

Redemptions by Telephone. An investor may also redeem shares by telephone
(by calling 1-800-582-6757) if the appropriate box on the Account Application
has been completed. The Trust, Transfer Agent and Distributor will not be liable
for any loss, liability, cost or expense for acting upon telephone instructions
believed to be genuine. Accordingly, shareholders will bear the risk of loss.
The Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including, without limitation, recording
telephone instructions and/or requiring the caller to provide some form of
personal identification. Failure to employ reasonable procedures may make the
Fund liable for any losses due to unauthorized or fraudulent telephone
instructions. The following information must be supplied by the shareholder or
broker at the time a request for a telephone redemption is made: (1) the
shareholder's account number; (2) the shareholder's social security number; and
(3) the name and account number of the shareholder's designated securities
dealer or bank.

The Trust, Transfer Agent and Distributor reserve the right to refuse wire

24
<PAGE>

or telephone redemptions. Procedures for redeeming shares by wire or telephone
may be modified or terminated at any time by the Trust or the Distributor. The
Trust reserves the right to restrict or terminate wire redemption privileges.
Proceeds of wire redemptions will be transferred within seven days after receipt
of the request.

The value of shares redeemed may be more or less than the shareholder's
cost, depending on the Fund's performance during the period the shareholder
owned its shares. Redemptions of shares are taxable events on which the
shareholder may recognize a gain or a loss.

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

TAX MATTERS

The Fund has elected to be treated and intends to qualify each year as
a"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). Provided the Fund qualifies as a "regulated investment
company" under the Code, and distributes all of its net investment income and
realized capital gains to shareholders in accordance with the timing
requirements imposed by the Code, the Fund will not be required to pay any
federal income or excise taxes. The Portfolio also does not expect be required
to pay any federal income or excise taxes. Shareholders of the Fund normally
will have to pay federal income taxes, and any state or local taxes, on the
dividends and other distributions they receive from the Fund. Generally,
distributions from the Fund's net investment income and short-term capital gains
will be taxed as ordinary income. Distributions from long-term net capital
gains will be taxed as such regardless of how long the shares of the Fund have
been held. Dividends and distributions to shareholders will be treated in the
same manner for federal income tax purposes whether received in cash or
reinvested in additional shares of the Fund. Distributions of net capital gains
(i.e.., the excess of net long-term capital gains over net short-term capital
losses) will cause any short-term capital loss realized on the disposition by a
Fund's shareholder of Fund shares held for six or fewer months to be
recharacterized, to the extent of those distributions, as long-term capital
loss.

After the end of each calendar year, each shareholder receives information
for

25
<PAGE>

tax purposes on the dividends and any capital gains distributions received
during that calendar year including the portion taxable as ordinary income, the
portion taxable as long-term capital gains, the portion, if any, representing a
return of capital (which generally is free of current taxes but results in a
basis reduction), the amount, if any, of federal income tax withheld, and the
amount of any dividends eligible for the dividends-received deduction for
corporations.

Under the back-up withholding rules of the Code, certain shareholders may
be subject to 31% withholding of federal income tax on distributions and
payments made by the Fund. Generally, shareholders are subject to back-up
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain other certifications.

The Trust is organized as a Massachusetts business trust and, under current
law, the Fund is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as the Fund qualifies as a regulated investment company
under the Code.

The foregoing discussion is intended for general information only. A
prospective shareholder should consult with its own tax advisor as to the tax
consequences of an investment in the Fund, including the status of distributions
from the Fund under applicable state or local law.

OTHER INFORMATION CONCERNING SHARES OF THE FUND

Net Asset Value

The Trust determines the net asset value of each of the Fund's shares on
each Fund Business Day. This determination is made once during each such day as
of the close of regular trading on the New York Stock Exchange by deducting the
amount of the Fund's liabilities from the value of its assets and dividing the
difference by the number of shares of the Fund outstanding. A share's net asset
value is effective for orders received by the Distributor on a Fund Business Day
prior to the time at which such net asset value is determined.

Since the Trust will invest all of the Fund's investable assets in the

26
<PAGE>

Portfolio, the value of the Fund's investable assets will be equal to the value
of its beneficial interest in the Portfolio. The net asset value of the
Portfolio is determined as of the close of regular trading on the New York Stock
Exchange on each Fund Business Day, by deducting the amount of the Portfolio's
liabilities from the value of its assets. The value of the Fund's beneficial
interest in the Portfolio will be determined by multiplying the net asset value
of the Portfolio by the percentage, effective for that day, which represents the
Fund's share of the aggregate beneficial interests in the Portfolio. (See
"Description of Shares, Voting Rights and Liabilities" below.)

Equity securities held by the Portfolio are valued at the last sale price
on the exchange on which they are primarily traded or on the NASDAQ system for
unlisted national market issues, or at the last quoted bid price for securities
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. If the Portfolio purchases option contracts, such
option contracts which are traded on commodities or securities exchanges are
normally valued at the settlement price on the exchange on which they are
traded. Short-term obligations with remaining maturities of less than sixty days
are valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees of the Portfolio. Portfolio securities (other than short-term
obligations with remaining maturities of less than sixty days) for which there
are no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Portfolio's Board of Trustees.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Substantially all of the Fund's net income from dividends and interest is
paid to the Fund's shareholders quarterly (in the months of March, June,
September and December) as a dividend. For this purpose, the Fund's "net income
from dividends and interest" consists of all income from dividends and interest
accrued on the assets of the Fund (i.e., the Fund's share of the Portfolio's net
income from dividends and interest), less all actual and accrued expenses of the
Fund determined in accordance with generally accepted accounting principles.

The Fund usually declares and distributes a capital gains distribution to
its shareholders on an annual basis in December, if the Fund's share of the
Portfolio's profits during the year from the sale of securities held for longer
than the applicable long-term capital gains holding period exceeds the Fund's
share of the Portfolio's losses during such year from the sale of securities
together with the Fund's share of the Portfolio's net capital losses carried
forward from prior years (to the extent not used to offset short-term capital
gains). The Fund's share of the Portfolio's net short-term capital gains
realized during each fiscal year will also be distributed at that time.

The Fund will also make additional distributions to its shareholders to the

27
<PAGE>

extent necessary to avoid application of the 4% nondeductible excise tax created
by the Tax Reform Act of 1986 on certain undistributed income and net capital
gains of mutual funds.

A shareholder of the Fund may elect to receive dividends and capital gains
distributions in either cash or additional shares. Unless otherwise specified in
writing by a shareholder, all dividends and capital gains distributions will be
reinvested in additional shares.

EXPENSES

The Fund and the Portfolio each are responsible for all of their respective
expenses, including the compensation of their respective Trustees who are not
interested persons of the Fund or the Portfolio; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund or the Portfolio; fees and expenses of independent auditors, of legal
counsel and of any transfer agent, custodian, registrar or dividend disbursing
agent of the Fund or the Portfolio; insurance premiums; and expenses of
calculating the net asset value of the Portfolio and of shares of the Fund.

The Fund will also pay sponsorship fees payable to the Sponsor; all
expenses of distributing and redeeming shares and servicing shareholder
accounts; expenses of preparing, printing and mailing prospectuses, reports,
notices, proxy statements and reports to shareholders and to governmental
offices and commissions; expenses of shareholder meetings; and expenses relating
to the issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes.

Under the Sponsorship Agreement DSIL 's fee was reduced to the extent
necessary to keep the aggregate annual operating expenses of the Fund (including
the Fund's share of the Portfolio's expenses 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 through October 22, 1998.
Currently, DSIL is continuing with this fee reduction on a voluntary basis.
However, this reduction may be reduced or terminated at any time.

The Portfolio is also responsible for the expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Portfolio's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
offices and commissions; expenses of meetings of investors; and the investment
management fees payable to the Manager.

Under the Management Agreement, DSIL's fee was reduced to the extent
necessary to keep the aggregate annual operating expenses of the Portfolio

28
<PAGE>

(excluding brokerage fees and commissions, interest, taxes and extraordinary
expenses) at no greater than 0.20% of the average daily net assets of the
Portfolio through October 22, 1998. Currently, DSIL is continuing with this
fee reduction on a voluntary basis. However, this reduction may be reduced
or terminated at any time.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial Interest (par value $0.01 per
share) and to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in the
Fund. Each share represents an equal proportionate interest in the Fund with
each other share. Shares have no preemptive or conversion rights. Shares when
issued are fully paid and nonassessable, except as set forth below. Shareholders
are entitled to one vote for each share held. The Trust is not required to hold
annual meetings of shareholders of the Fund but the Trust will hold special
meetings of shareholders of the Fund when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. Upon
liquidation of the Fund, shareholders would be entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders. Shareholders
have under certain circumstances the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting.

The Trust reserves the right to create and issue any number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series). Currently, the Trust has only one
series of shares, all of which are of the same class. The Trust may establish
additional classes of any series of shares. For example, the Fund may offer
another class of shares that has lower annual distribution fees or shareholder
servicing fees. Prior to offering another class of shares, the Trust would
either issue a new prospectus and statement of additional information or amend
this Prospectus and the Statement of Additional Information to reflect such
issuance.

29
<PAGE>

Year 2000. Many software programs were written to use two digits to represent
the year (e.g. 98) rather than four digits (e.g. 1998). Systems that rely on
these programs assume that the first two digits of the year are "1" and "9".
Significant problems could occur if after December 31, 1999, these systems
misinterpret the date as 19xx rather than 20xx; hence, the Year 2000 (Y2K)
challenge. The Fund could be adversely affected if the computer systems used by
the Fund or its service providers are not programmed to accurately process
information on or after January 1, 2000. DSIL, the Fund and its service
providers are diligently working to resolve any potential Year 2000 problems.
While it is likely these efforts will be successful, the failure to implement
any necessary modifications could have an adverse impact on the Fund. The Fund
also could be adversely affected if the issuers of securities held by the Fund
do not solve their Year 2000 problems, or if it costs them large amounts of
money to solve these problems.

Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each Fund Business Day. At the close of each
such Fund Business Day, the value of each investor's beneficial interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, effective for that day, which represents that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
withdrawals, which are to be effected as of the close of business on that day,
will then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of any additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of business on such day plus or minus, as the

30
<PAGE>

case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business on the
following Fund Business Day.

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

The Statement of Additional Information filed with the Securities and
Exchange Commission contains more detailed information about the Trust and the
Portfolio, including information related to (i) investment policies and
restrictions of the Fund and the Portfolio, (ii) the Trustees, officers, Manager
of the Portfolio and Sponsor of the Fund, (iii) portfolio transactions, (iv) the
Fund's shares, including rights and liabilities of shareholders, (v) additional
performance information, including the method used to calculate yield and total
rate of return quotations of the Fund, (vi) determination of the net asset value
of shares of the Fund, and (vii) the audited financial statements of the Fund
and the Portfolio as of and for the year ended July 31, 1998.

31
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND

Domini Social Investments
P.O. Box 959
New York, NY 10159-0959
(800) 762-6814
www.domini.com

PORTFOLIO INVESTMENT
MANAGER AND FUND SPONSOR:
Domini Social Investments LLC
11 West 25th Street, 7th Floor
New York, NY 10010

PORTFOLIO INVESTMENT
SUBMANAGER:
Mellon Equity Associates
Pittsburgh, PA

CUSTODIAN:
Investors Bank &
Trust Company
Boston, MA

INDEPENDENT AUDITORS:
KPMG Peat Marwick LLP
Boston, MA

LEGAL COUNSEL:
Bingham Dana LLP
Boston, MA

DISTRIBUTOR:
Signature Broker-Dealer
Services, Inc.
21 Milk Street
Boston, MA 02109
(800) 762-6814

TRANSFER AGENT:
FSSI
New York, NY

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
Investing for Good-SM-

32
<PAGE>

- ----------------------------
Prospectus

NOVEMBER 27, 1998

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 27, 1998
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND

Table of Contents Page

1. The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Investment Objective, Policies and Restrictions . . . . . . . . . . 2

3. Performance Information . . . . . . . . . . . . . . . . . . . . . . 9

4. Determination of Net Asset Value; Valuation of
Portfolio Securities. . . . . . . . . . . . . . . . . . . . . . . . 10

5. Management of the Fund and the Portfolio. . . . . . . . . . . . . . 11

6. Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . 21

7. Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

8. Portfolio Transactions and Brokerage Commissions. . . . . . . . . . 24

9. Description of Shares, Voting Rights and Liabilities. . . . . . . . 26

10. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 28

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
11 West 25th Street, 7th Floor, New York, New York 10010
(800) 762-6814

This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Fund's
Prospectus dated November 27, 1998, as amended from time to time. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting Signature Broker-Dealer Services, Inc., the Fund's distributor, at
(800) 762-6814.

This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.

1
<PAGE>

1. THE FUND

The Domini Institutional Social Equity Fund (the "Fund") is a no-load,
diversified, open-end management investment company. The Fund is a series of
shares of beneficial interest of Domini Institutional Trust (the "Trust"), which
was organized as a business trust under the laws of the Commonwealth of
Massachusetts on April 1, 1996. The Trust offers to buy back (redeem) shares of
the Fund from its shareholders at any time at net asset value. References in
this Statement of Additional Information to the "Prospectus" are to the current
Prospectus of the Fund, as amended or supplemented from time to time.

Domini Social Investments LLC ("DSIL") the Fund's sponsor (the "Sponsor"),
supervises the overall administration of the Fund. The Board of Trustees
provides broad supervision over the affairs of the Fund. Shares of the Fund are
continuously sold by Signature Broker-Dealer Services, Inc. ("Signature"), the
Fund's distributor (the "Distributor"). The minimum initial investment is
$2,000,000. An investor should obtain from the Distributor, and should read in
conjunction with the Prospectus, the materials describing the procedures under
which Fund shares may be purchased and redeemed.

The Fund seeks to achieve its investment objective by investing all its
assets in the Domini Social Index Portfolio (the "Portfolio"), a diversified
open-end management investment company having the same investment objective as
the Fund. DSIL is the Portfolio's investment manager (the "Manager"). Mellon
Equity Associates ("Mellon Equity") is the Portfolio's investment submanager
(the "Submanager"). Kinder, Lydenberg, Domini & Co., Inc. ("KLD") determines
the composition of the Domini 400 Social Index-SM-(the "Domini Social Index").
The Submanager manages the investments of the Portfolio from day to day in
accordance with the Portfolio's investment objective and policies. "Domini-SM-"
and "Domini 400 Social Index -SM-" are service marks of KLD.

2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide its shareholders with
long-term total return (reflecting both dividend and price performance of the
Fund) which corresponds to the performance of the Domini 400 Social Index-SM-.
There can, of course, be no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may be changed without approval

2
<PAGE>

by the Fund's shareholders.

INVESTMENT POLICIES

The Trust seeks to achieve the investment objective of the Fund by
investing all of the Fund's investable assets in the Portfolio, which has the
same investment objective as the Fund. The Trust may withdraw the Fund's
investment in the Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interests of the Fund to do so. Upon any such
withdrawal, the Board of Trustees would consider what action might be taken,
including the investment of all the investable assets of the Fund in another
pooled investment entity having the same investment objective as the Fund, or
the retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Portfolio. The
approval of the Fund's shareholders would not be required to change any of the
Fund's investment policies.

The following supplements the information concerning the Portfolio's
investment policies contained in the Prospectus and should only be read in
conjunction therewith.

A company which is not included in the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") may be included in the Domini Social Index
primarily in order to afford representation to an industrial sector which would
otherwise be under-represented in the Domini Social Index. Because of the social
criteria applied in the selection of stocks comprising the Domini Social Index,
industry sector weighting in the Domini Social Index may vary materially from
the industry weightings in other stock indices, including the S&P 500.

The Portfolio does not purchase securities which the Portfolio believes, at
the time of purchase, will be subject to exchange controls or foreign
withholding taxes; however, there can be no assurance that such laws may not
become applicable to certain of the Portfolio's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
respect to any of the Portfolio's investments, the effect may be to reduce the
income received by the Portfolio on such investments.

Although neither the Fund nor the Portfolio has any current intention to do
so, the Fund and the Portfolio may invest in securities which may be resold
pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act").

It is a fundamental policy of the Portfolio and the Fund that neither the
Portfolio nor the Fund may invest more than 25% of the total assets of the
Portfolio or the Fund, respectively, in any one industry, although the Fund will

3
<PAGE>

invest all of its assets in the Portfolio, and the Portfolio may and would
invest more than 25% of its assets in an industry if stocks in that industry
were to comprise more than 25% of the Domini Social Index. Based on the current
composition of the Domini Social Index, this is considered highly unlikely. If
the Portfolio were to concentrate its investments in a single industry, the
Portfolio and the Fund would be more susceptible to any single economic,
political or regulatory occurrence than would be another investment company
which was not so concentrated.

LOANS OF SECURITIES: The Portfolio may lend its securities to brokers,
dealers and financial institutions, provided that (1) the loan is secured
continuously by collateral, consisting of U.S. Government securities or cash or
letters of credit, which is marked to the market daily to ensure that each loan
is fully collateralized at all times; (2) the Portfolio may at any time call the
loan and obtain the return of the securities loaned within three business days;
(3) the Portfolio will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Portfolio.

The Portfolio will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.

In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Manager or the Submanager.

Although the Portfolio reserves the right to lend its securities, it has no
current intention of doing so in the foreseeable future.

RISK FACTORS INVOLVED IN OPTION CONTRACTS: Although it has no current
intention to do so, the Portfolio may in the future enter into certain
transactions in stock options for the purpose of hedging against possible
increases in the value of securities which are expected to be purchased by the
Portfolio or possible declines in the value of securities which are expected to
be sold by the Portfolio. Generally, the Portfolio would only enter into such
transactions on a short-term basis pending readjustment of its holdings of
underlying stocks.

The purchase of an option on an equity security provides the holder with
the right, but not the obligation, to purchase the underlying security, in the
case of a call option, or to sell the underlying security, in the case of a put

4
<PAGE>

option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire
amount of the premium, plus related transaction costs, but not more. Upon
exercise of the option, the holder is required to pay the purchase price of
the underlying security in the case of a call option, or deliver the security
in return for the purchase price in the case of a put option.

Prior to exercise or expiration, an option position may be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase
or sell the instrument underlying an option, make or receive a cash settlement
or meet ongoing variation margin requirements. The inability to close out
option positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.

Each exchange on which option contracts are traded has established a number
of limitations governing the maximum number of positions which may be held by a
trader, whether acting alone or in concert with others. The Manager does not
believe that these trading and position limits would have an adverse impact on
the possible use of hedging strategies by the Portfolio.

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

The approval of the Fund and of the other investors in the Portfolio is not
required to change the investment objective or any of the non-fundamental
investment policies discussed above, including those concerning security
transactions.

INVESTMENT RESTRICTIONS

The Fund and the Portfolio have each adopted the following policies which
may not be changed without approval by holders of a "majority of the outstanding
shares" of the Fund or the Portfolio, respectively, which as used in this
Statement of Additional Information means the vote of the lesser of (i) 67% or
more of the outstanding "voting securities" of the Fund or the Portfolio,
respectively, present at a meeting, if the holders of more than 50% of the
outstanding "voting securities" of the Fund or the Portfolio, respectively, are
resent or represented by proxy, or (ii) more than 50% of the outstanding "voting
securities" of the Fund or the Portfolio, respectively. The term "voting

5
<PAGE>

securities" as used in this paragraph has the same meaning as in the Investment
Company Act of 1940, as amended (the "1940 Act").

Except as described below, whenever the Trust is requested to vote on a
change in the investment restrictions of the Portfolio, the Trust will hold a
meeting of the shareholders of the Fund and will cast its vote proportionately
as instructed by the Fund's shareholders. However, subject to applicable
statutory and regulatory requirements, the Trust would not request a vote of
shareholders of the Fund with respect to (a) any proposal relating to the
Portfolio, which proposal, if made with respect to the Fund, would not require
the vote of the shareholders of the Fund, or (b) any proposal with respect to
the Portfolio that is identical in all material respects to a proposal that has
previously been approved by shareholders of the Fund. Any proposal submitted to
holders in the Portfolio, and that is not required to be voted on by
shareholders of the Fund, would nevertheless be voted on by the Trustees of the
Trust.

Neither the Fund nor the Portfolio may:

(1) borrow money, except that as a temporary measure for extraordinary or
emergency purposes either the Fund or the Portfolio may borrow an amount not to
exceed 1/3 of the current value of the net assets of the Fund or the Portfolio,
respectively, including the amount borrowed (moreover, neither the Fund nor the
Portfolio may purchase any securities at any time at which borrowings exceed 5%
of the total assets of the Fund or the Portfolio, respectively, taken in each
case at market value) (it is intended that the Portfolio would borrow money only
from banks and only to accommodate requests for the withdrawal of all or a
portion of a beneficial interest in the Portfolio while effecting an orderly
liquidation of securities);

(2) purchase any security or evidence of interest therein on margin, except
that either the Fund or the Portfolio may obtain such short-term credit as may
be necessary for the clearance of purchases and sales of securities and except
that either the Fund or the Portfolio may make deposits of initial deposit and
variation margin in connection with the purchase, ownership, holding or sale of
options;

(3) write any put or call option or any combination thereof, provided that
this shall not prevent (i) the purchase, ownership, holding or sale of warrants
where the grantor of the warrants is the issuer of the underlying securities, or
(ii) the purchase, ownership, holding or sale of options on securities;

(4) underwrite securities issued by other persons, except that the Fund may

6
<PAGE>

invest all or any portion of its assets in the Portfolio and except insofar as
either the Fund or the Portfolio may technically be deemed an underwriter under
the 1933 Act in selling a security;

(5) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio and provided that any such
loans not exceed 30% of its total assets (taken in each case at market value),
or (b) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of its net assets will be
invested in repurchase agreements maturing in more than seven days; for
additional related restrictions, see paragraph (6) immediately following;

(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to
Rule 144A under the 1933 Act if the Board of Trustees determines that a liquid
market exists for such securities) if, as a result thereof, more than 10% of its
net assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that the Fund may invest
all or any portion of its assets in the Portfolio;

(7) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein), interests
in oil, gas or mineral leases, commodities or commodity contracts in the
ordinary course of business (the Fund and Portfolio reserve the freedom of
action to hold and to sell real estate acquired as a result of the ownership of
securities by the Fund or the Portfolio);

(8) make short sales of securities or maintain a short position, unless at
all times when a short position is open the Fund or the Portfolio, as
applicable, owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and unless not more than 5% of the Fund's or the Portfolio's, as
applicable, net assets (taken in each case at market value) is held as
collateral for such sales at any one time;

(9) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;

(10) as to 75% of its assets, purchase securities of any issuer if such

7
<PAGE>

purchase at the time thereof would cause more than 5% of the Portfolio's or the
Fund's, as applicable, assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States), except that for purposes of this restriction the issuer of an option
shall not be deemed to be the issuer of the security or securities underlying
such contract and except that the Fund may invest all or any portion of its
assets in the Portfolio; or

(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Domini Social
Index, in which case the Portfolio or the Fund, as applicable, will invest more
than 25% of its assets in that industry, and except that the Fund may invest all
of its assets in the Portfolio.

NON-FUNDAMENTAL RESTRICTIONS: In order to comply with certain federal
statutes and regulatory policies, neither the Fund nor the Portfolio will as a
matter of operating policy:

purchase puts, calls, straddles, spreads and any combination thereof if the
value of its aggregate investment in such securities will exceed 5% of the
Fund's or the Portfolio's total assets at the time of such purchase.

This restriction is not fundamental and may be changed with
respect to the Fund by the Fund without approval by the Fund's shareholders or
with respect to the Portfolio by the Portfolio without the approval of the Fund
or its other investors. While the Fund expects to reject any order that is not
an exempt transaction under the relevant state securities laws, the Fund will
comply with the state securities laws and regulations of all states in which it
is registered.

PERCENTAGE RESTRICTIONS: If a percentage restriction or rating restriction
on investment or utilization of assets set forth above or referred to in the
Prospectus is adhered to at the time an investment is made or assets are so

8
<PAGE>

utilized, a later change in percentage resulting from changes in the value of
the securities held by the Fund or the Portfolio or a later change in the rating
of a security held by the Fund or the Portfolio will not be considered a
violation of policy; provided that if at any time the ratio of borrowings of the
Fund or the Portfolio to the net asset value of the Fund or the Portfolio,
respectively, exceeds the ratio permitted by Section 18(f) of the 1940 Act, the
Fund or the Portfolio as the case may be, will take the corrective action
required by Section 18(f).

3. PERFORMANCE INFORMATION

The Trust will calculate the Fund's total rate of return for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share (i.e., net asset value) on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate
of return quotation will be calculated by (x) adding 1 to the period total rate
of return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.

Any current "yield" quotation of the Fund shall consist of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a thirty calendar day period and shall be calculated by (a) raising to
the sixth power the sum of 1 plus the quotient obtained by dividing the Fund's
net investment income earned during the period by the product of the average
daily number of shares outstanding during the period that were entitled to
receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.

Total rate of return and yield information with respect to the Domini
Social Index will be computed in the same fashion as set forth above with
respect to the Fund, except that for purposes of this computation an investment
will be assumed to have been made in a portfolio consisting of all of the stocks
comprising the Domini Social Index weighted in accordance with the weightings of
the stocks comprising the Domini Social Index. Performance information with
respect to the Domini Social Index will not take into account brokerage
commission and other transaction costs which will be incurred by the Portfolio.

Historical performance information for any period or portion thereof prior

9
<PAGE>

to the establishment of the Fund will be that of the Portfolio, adjusted to
assume that all charges, expenses and fees of the Fund and the Portfolio which
are presently in effect were deducted during such periods, as permitted by
applicable SEC staff interpretations.

4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
PORTFOLIO SECURITIES

The net asset value of each share of the Fund is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
weekday except for the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day). This determination of net asset value
of shares of the Fund is made once during each such day as of the close of the
NYSE by dividing the value of the Fund's net assets (i.e., the value of its
investment in the Portfolio and any other assets less its liabilities, including
expenses payable or accrued) by the number of shares outstanding at the time the
determination is made. Purchases and redemptions will be effected at the time
of determination of net asset value next following the receipt of any purchase
or redemption order deemed to be in good order. See "Purchases and Redemptions
of Shares" in the Prospectus.

The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable
or accrued) is determined at the same time and on the same day as the Fund
determines its net asset value per share. The net asset value of the Fund's
investment in the Portfolio is equal to the Fund's pro rata share of the
total investment of the Fund and of other investors in the Portfolio less the
Fund's pro rata share of the Portfolio's liabilities. Equity securities held
by the Portfolio are valued at the last sale price on the exchange on which
they are primarily traded or on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities in which there
were no sales during the day or for unlisted securities not reported on the
NASDAQ system. If the Portfolio purchases option contracts, such option
contracts which are traded on commodities or securities exchanges are
normally valued at the settlement price on the exchange on which they are
traded. Short-term obligations with remaining maturities of less than sixty
days are valued at amortized cost, which constitutes fair value as determined
by the Board of Trustees of the Portfolio. Portfolio securities (other than
short-term obligations with remaining maturities of less than sixty days) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Portfolio's Board of
Trustees.

A determination of value used in calculating net asset value must be a fair

10
<PAGE>

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

Interest income on short-term obligations held by the Portfolio is
determined on the basis of interest accrued less amortization of premium.

Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each Fund Business Day. At the close of each
such business day, the value of each investor's interest in the Portfolio will
be determined by multiplying the net asset value of the Portfolio by the
percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio effective for that day. Any additions or
withdrawals, which are to be effected as of the close of business on that day,
will then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be re-computed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of any additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of business on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business on the
following Fund Business Day.

5. MANAGEMENT OF THE FUND AND THE PORTFOLIO

11
<PAGE>

The Trustees and officers of the Trust and the Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Each Trustee and officer of the
Trust also serves the Portfolio in the same capacity. Asterisks indicate
those Trustees and officers who are "interested persons" (as defined in the
1940 Act) of the Trust. Unless otherwise indicated below, the address of
each officer is 11 West 25th Street, New York, New York 10010.

TRUSTEES OF THE TRUST AND THE PORTFOLIO

EMILY W. CARD -- 1158 26th Street, #450, Santa Monica, California
90403; Attorney; President, The Card Group, Inc; Trustee, Domini Social Equity
Fund. Her date of birth is May 8, 1942.

AMY L. DOMINI* -- 230 Congress Street, Boston, Massachusetts 02110; Chair,
President and Trustee of the Trust, Portfolio and Domini Social Equity Fund;
Managing Principal of DSILsince 1997; Officer of Kinder, Lydenberg, Domini &
Co., Inc.; Private Trustee, Loring, Wolcott & Coolidge; Trustee, New England
Quarterly (since 1998); Board Member, Social Investment Forum (since 1994)
Trustee, Episcopal Church Pension Fund; Former Member, Governing Board,
Interfaith Center on Corporate Responsibility; Former Trustee, National
Association Community Loan Funds; Former Board Member of National Community
Capital Association (1987 - 1990). Her date of birth is January 15, 1950.

ALLEN M. MAYES -- P.O. Box 21222, Beaumont, Texas 77720; Trustee, Domini Social
Equity Fund; 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. His date of birth is September 20, 1920.

WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02146;
Manager, Venture Investment Management Company LLC; Trustee, Domini Social
Equity Fund; Vice President and General Manager, TravElectric Services Corp
(prior to 1995); President, Environmental Technologies [Packaging] (prior to
1993); Director, Evergreen Solar, Inc; Director, Conservation Services Group.
His date of birth is July 7, 1944.

KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Associate Dean and
Professor of Business Environment, Florida International University (since
1991); Trustee, Domini Social Equity Fund. Partner, Trinity Industrial
Technology (since 1995); Director,

12
<PAGE>

Center for Management in the Americas (since 1997); and Co-director, center for
Global Business (since 1988). Her date of birth is September 23, 1944.

TIMOTHY SMITH -- 475 Riverside Drive, New York, New York 10115; Executive
Director, Interfaith Center on Corporate Responsibility; Trustee, Calvert New
Africa Fund; Trustee, Domini Social Equity Fund. His date of birth is September
15, 1943.

FREDERICK C. WILLIAMSON -- Five Roger Williams Green, Providence, Rhode Island
02904; Treasurer and Trustee, RIGHA (charitable foundation supporting health
care needs) since 1990; Chairman, Rhode Island Historical Preservation and
Heritage Commission since 1995; Trustee, National Parks and Conservation
Association (1986 - 1997); Advisor, National Parks and Conservation Association
(since 1997); Trustee of the National Park Trust (since 1991); Trustee, Domini
Social Equity Fund. His date of birth is September 20, 1914.

Each Trustee who is not an "interested person" as defined in the 1940 act
(a "Disinterested Trustee") receives an annual retainer for serving as a Trustee
of the Fund, the Portfolio and the Domini Social Equity Fund of $4,000, and in
addition, receives $500 for attendance at each joint meeting of the Boards of
the Fund, the Portfolio and the Domini Social Equity Fund (reduced to $250 in
the event that a Trustee participates at an in-person meeting by telephone),
such retainer and fees in no event to exceed in the aggregate $6,000 per year.
In addition, each Disinterested Trustee receives reimbursement for reasonable
expenses incurred in attending meetings. The compensation paid to the
Trustees for the fiscal year ended July 31, 1998 is set forth below. The
Trustees may hold various other directorships unrelated to the Trust or
Portfolio.

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<PAGE>

PENSION OR TOTAL
RETIREMENT COMPENSATION
AGGREGATE BENEFITS FROM THE
COMPENSATION ACCRUED AS TRUST, PORTFOLIO
FROM THE PART OF ANNUAL BENEFITS AND DOMINI SOCIAL
TRUST TRUST UPON EQUITY FUND
EXPENSES RETIREMENT

<S> <C> <C> <C> <C>
Amy L. Domini*, Chair,
President and Trustee None None None None
Emily W. Card, Trustee $1,000 None None $6,000
Karen Paul, Trustee $1,000 None None $6,000
William C. Osborn, Trustee $1,000 None None $6,000
Allen M. Mayes, Trustee $1,000 None None $6,000
Timothy Smith, Trustee $1,000 None None $6,000
Frederick C. Williamson, Sr., $1,000 None None $6,000
</TABLE>

OFFICERS

PETER D. KINDER* -- Vice President of the Trust and the Portfolio; President of
Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social Investments LLC
(since 1997). His date of birth is September 28, 1946.

STEVEN D. LYDENBERG* -- Vice President of the Trust and the Portfolio; Director
of Research of Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social
Investments LLC (since 1997). His date of birth is October 21, 1945.

DAVID P. WIEDER* -- Vice President of the Trust and the Portfolio (since 1997);
Chief Executive Officer and Member, Domini Social Investments LLC (since 1997);
President of FSSI (since 1989); Vice-President of investment
companies within Fundamental Family of Funds (1989-1997); Vice President of
Fundamental Portfolio Advisors (1991-1997). His date of birth is January 8,
1966.

SIGWARD M. MOSER* -- Vice President of the Trust and the Portfolio (since 1997);
President of Communications House International, Inc.; Director of Financial
Communications Society; President and Member Domini Social Investments LLC
(since 1997). His date of birth is June 12, 1962.

CAROLE M. LAIBLE* -- Secretary and Treasurer of the Trust and the Portfolio
(since 1997); Financial Compliance Officer of Domini Social Investments LLC
(since 1997); Board of Governors, Daytop-NJ (since 1998); Financial Compliance
Officer, FSSI (1994-1997); Financial Compliance Officer and Secretary of
investment companies within Fundamental Family of Funds (1994-1997); General
Service Manager, McGladrey & Pullen LLP (certified public accountants) prior to
1994. Her date of birth is October 31, 1963.

As of November 11 , 1998, all Trustees and officers of the Trust and the
Portfolio as a group owned less than 1% of the Fund's outstanding shares.
Shareholders owning 25% or more of the outstanding shares of the Fund may take
actions without the approval of any other investor in the Fund. As of November

14
<PAGE>

20, 1998 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
<S> <C> <C>
Jessie Smith Noyes Foundation, Inc. 594,042.123 9.1%
Attn: Nicholas Jacangelo
c/o McGrath, Doyle & Phair
150 Broadway - Suite 1703
New York, NY 10038

Compton Foundation, Inc. 701760.215 10.7%
545 Middlefield Road - Suite 178
Menlo Park, CA 94025

Home Missioners of America 643,353.987 9.8%
P.O. Box 465618
Cincinnati, OH 45246-5618

Wendel and Co. 725000 716,398.694 10.9%
The Bank of New York
Mutual Fund/Reorg. Dept.
P.O. Box 1066-Wall Street Station
New York, NY 10268

M&I Trust Co., TTEE 408,109.958 6.23%
Attn: Mutual Funds
1000 N. Water Street
Milwaukee, WI 53202

American Baptist Foundation 441,606.590 6.74%
PO Box 851
Valley Forge, PA 19482-0851
</TABLE>

15
<PAGE>

The Disinterested Trustees of the Trust are the same as the
Disinterested Trustees of the Portfolio. The disinterested Trustees have
adopted written procedures reasonably appropriate to deal with potential
conflicts of interest arising from the fact that the same individuals are
Trustees of the Trust and the Portfolio, up to and including creating a
separate board of Trustees. Any conflict of interest between the Trust and
the Portfolio will be resolved by the Trustees in accordance with their
fiduciary obligations and in accordance with the 1940 Act. The Trust's
Declaration of Trust provides that it will indemnify its Trustees and
officers (the "Indemnified Parties") against liabilities and expenses
incurred in connection with litigation in which they may be involved because
of their offices with the Trust, unless, as to liability to the Trust or Fund
shareholders, it is finally adjudicated that the Indemnified Parties 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 the Indemnified Parties did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Trust. In case of settlement, such indemnification will not
be provided unless it has been determined by a court or other body approving
the settlement or other disposition, or by a reasonable determination, based
upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that
such Indemnified Parties have not engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of their duties.

MANAGER AND SUBMANAGER

DSIL provides advice to the Portfolio pursuant to a Management Agreement
(the "Management Agreement"). The services provided by the Manager consist of
furnishing continuously an investment program for the Portfolio. DSIL will have
authority to determine from time to time what securities are purchased, sold or
exchanged, and what portion of assets of the Portfolio is held uninvested.
DSIL will also perform such administrative and management tasks 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 monitoring of performance and billings of the
Portfolio's transfer agent, shareholder servicing agents, custodian and other
independent contractors or agents; (iii) overseeing (with the advice of
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

16
<PAGE>

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 Portfolio. The
Manager furnishes at its own expense all facilities and personnel necessary in
connection with providing these services. The Management Agreement will
continue 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 Management Agreement (with the vote of each investor in
the Portfolio being in proportion to the amount of its investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Management Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Management Agreement.

The Management Agreement provides that the Manager may render services to
others. DSIL 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
submanagers, subject to DSIL's supervision. The Management Agreement is
terminable without penalty on not more than 60 days' nor less than 30 days'
written notice by the Portfolio when authorized either by majority vote of the
outstanding voting securities in the Portfolio (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment) or by a
vote of a majority of its Board of Trustees, or by the Manager, and will
automatically terminate in the event of its assignment. The Management
Agreement provides that neither the Manager nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for willful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Management Agreement.

The Fund's Prospectus contains a description of fees payable to the Manager
for services under the Management Agreement.

DSIL is a 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
(the "Advisers Act"). The names of the principal owners of DSIL, their
relationship to the Trust and their percentage ownership of DSIL follows:
Amy L. Domini, Chairman of the Board and President of the Trust, is the
Manager and a 21.55% owner of DSIL. Ms. Domini is also Chief Executive
Officer, Secretary, Treasurer and 51% owner of KLD which licenses the Domini
Social Index to DSIL. Peter D. Kinder, Vice President of the Trust, is a
21.25% owner of DSIL. Mr. Kinder is also President and 19% owner of KLD.
Sigward M. Moser, Vice President of the Trust, is a 21.25% owner of DSIL.
David P.

17
<PAGE>

Wieder, Vice President of the Trust is a 21.25% owner of DSIL. Mr. Wieder
is also President and an owner of FSSI, a registered transfer agent which has
served as the Fund's transfer agent since 1995.

Mellon Equity manages the assets of the Portfolio pursuant to an Investment
Submanagement Agreement (the "Submanagement Agreement"). 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 the
Portfolio's Board of Trustees or by a majority vote of the outstanding voting
securities in the Portfolio at a meeting called for the purpose of voting on the
Submanagement Agreement (with the vote of each being in proportion to the amount
of its investment), and, in either case, by a majority of the Portfolio's
Trustees who are not parties to the Submanagement Agreement or interested
persons of any such party 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
upon not more than 60 days' nor less than 30 days' written notice by the
Portfolio when authorized either by majority vote of the outstanding voting
securities in the Portfolio (with the vote of each being in proportion to the
amount of their investment) or by a vote of the majority of its Board of
Trustees, 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 mistake of law or for any loss arising
out of any investment or for any act or omission in its services to the
Portfolio, except for willful misfeasance, bad faith or gross negligence or
reckless disregard for its or their obligations and duties under the
Submanagement Agreement.

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
("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. Mellon Bank'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,

18
<PAGE>

Suite 3700, Pittsburgh, Pennsylvania 15258.

The Fund's Prospectus contains a description of fees payable to the
Submanager for services under the Submanagement Agreement. Prior to October
22, 1997, pursuant to an investment advisory agreement (the "KLD Advisory
Agreement"), KLD served as investment adviser to the Portfolio and furnished
continuously an investment program by determining the stocks to be included in
the Domini Social Index. Additionally, prior to October 22, 1997, pursuant to
a management agreement (the "Mellon Equity Management Agreement"), Mellon Equity
served as investment manager and managed the assets of the Portfolio on a daily
basis. Prior to November 21, 1994, pursuant to an investment management
agreement (the "State Street Management Agreement"), State Street Bank and Trust
Company served as investment manager to the Portfolio. Prior to October 22,
1997, pursuant to a sponsorship agreement (the "KLD Sponsorship Agreement"), KLD
furnished administrative services for the Portfolio. Prior to November 6, 1996,
pursuant to an administrative services agreement (the "Signature Administration
Agreement"), Signature served as the administrator of the Portfolio. Prior to
October 22, 1997, the aggregate investment management and administration fees
under the prior agreements with respect to the Portfolio were equal to 0.15% of
the Portfolio's average daily net assets for its then current fiscal year.

For the fiscal year end July 31, 1998, the Portfolio incurred approximately
$701,774 in Management fees pursuant to the Management Agreement, $17,385 in
advisory fees pursuant To the KLD Advisory Agreement, $17,385 in aggregate
administration fees pursuant to the Signature Administration Agreement and
$86,354 in management fees pursuant to the Mellon Equity Management Agreement.
For the fiscal year ended July 31, 1997, the Portfolio incurred $46,528 in
advisory fees pursuant to the KLD Advisory Agreement, $46,528 in administration
fees pursuant to the KLD Sponsorship Agreement, $156,868 in aggregate
administration fees pursuant to the Signature Administration Agreement, and
$182,885 in management fees pursuant to the Mellon Equity Management Agreement.
For the fiscal year ended July 31, 1996, the Portfolio incurred $38,150 in
advisory fees pursuant to the KLD Advisory Agreement, $38,150 in aggregate
administration fees pursuant to the Signature Administration Agreement and the
KLD Sponsorship Agreement, and $128,901 in management fees pursuant to the
Mellon Equity Management Agreement. For the fiscal year ended July 31, 1995, KLD
waived all of its fees payable pursuant to the KLD Advisory Agreement, Signature
waived all of its fees payable pursuant to the Signature Administration
Agreement and the Portfolio incurred $10,180 in management fees pursuant to the
State Street Management Agreement and $29,409 in management fees pursuant to the
Mellon Equity Management Agreement.

SPONSOR

19
<PAGE>

Pursuant to a Sponsorship Agreement, DSIL provides the Trust with
oversight, administrative and management services. DSIL provides the Trust
with general office facilities and supervises the overall administration of
the Trust, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of,
the independent contractors and agents of the Trust; the preparation and
filing of all documents required for compliance by the Trust with applicable
laws and regulations, including registration statements, prospectuses and
statements of additional information, semi-annual and annual reports to
shareholders, proxy statements and tax returns; preparing agendas and
supporting documents for and minutes of meetings of Trustees, committees of
Trustees and shareholders; maintaining telephone coverage to respond to
shareholder inquiries; answering questions from the general public, the media
and investors in the Fund regarding the securities holdings of the Portfolio,
limits on investment and the Trust's proxy voting philosophy and shareholder
activism philosophy; and arranging for the maintenance of books and records
of the Trust. The Sponsor provides persons satisfactory to the Board of
Trustees of the Trust to serve as officers of the Trust. Such officers, as
well as certain other employees and Trustees of the Trust, may be directors,
officers or employees of the Sponsor or its affiliates. For the fiscal year
ended July 31, 1998, DSIL waived all of its fees under the Sponsorship
Agreement amounting to $94,624.

The Fund's Prospectus contains a description of the fees payable to the
Sponsor under the Sponsorship Agreement. Prior to October 22, 1997, Signature
served as administrator. For the period from May 1, 1996 (commencement of
operations) through July 31, 1996, Signature voluntarily waived all of its
administrative fees from the Fund. For the fiscal year ended July 31, 1997, the
Fund incurred $14,212 in administrative fees.

The Sponsorship Agreement with the Trust provides that DSIL may render
administrative services to others. The Sponsorship Agreement with the Trust
also provides that neither the Sponsor nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under the
Sponsorship Agreement.

DISTRIBUTOR

The Trust has entered into a Distribution Agreement with Signature. Under
the Distribution Agreement, the Distributor acts as the agent of the Trust in
connection with the offering of shares of the Fund. The Distributor
receives no additional compensation for its services under the Distribution
Agreement. Signature is a wholly-owned subsidiary of Signature Financial Group,

20
<PAGE>

Inc.

TRANSFER AGENT AND CUSTODIAN

The Trust has entered into a Transfer Agency Agreement with FSSI pursuant
to which FSSI acts as the transfer agent for the Fund. Mr. David P. Wieder,
Vice President of the Trust and a principal of DSIL, the Manager of the
Portfolio and Sponsor of the Trust, is a 60% owner of, and President of FSSI.
For its services to the Fund as transfer agent, FSSI receives compensation on a
per account basis plus an asset-based charge and out-of-pocket expenses. The
Trust has entered into a Custodian Agreement with Investors Bank & Trust Company
("IBT") pursuant to which IBT acts as custodian for the Fund. The Portfolio has
entered into a Transfer Agency Agreement with IBT pursuant to which IBT acts
as transfer agent for the Portfolio. The Portfolio has entered into a
Custodian Agreement with IBT pursuant to which IBT acts as custodian for the
Portfolio. For additional information, see "Transfer Agent and Custodian" in
the Prospectus.

6. INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110 are the
independent auditors for the Trust and for the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission.

7. TAXATION

The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements (applied through the Fund's proportionate
interest in the Portfolio) as to the nature of the Fund's gross income, the
amount of Fund distributions and the composition of the
Fund's portfolio assets. Because the Fund intends to distribute all of its net
investment income and net realized capital gains to shareholders in accordance
with the timing requirements imposed by the Code, it is not expected that the
Fund will be required to pay any federal income or excise taxes although the
Fund's foreign-source income may be subject to foreign withholding taxes. If
the Fund should fail to qualify as a "regulated investment company" in any year,
the Fund would incur a regular corporate federal income tax upon its taxable
income and Fund distributions would generally be taxable as ordinary dividend
income to the shareholders. As long as it qualifies as a "regulated investment
company" under the Code, the Fund

21
<PAGE>

will not be required to pay Massachusetts income or excise taxes.

Under interpretations of the Internal Revenue Service, the Portfolio
expects that (1) the Portfolio will be treated for federal income tax purposes
as a partnership and (2) for purposes of determining whether the Fund satisfies
the income and diversification requirements to maintain its status as a
regulated investment company, the Fund, as an investor in the Portfolio, will be
deemed to own a proportionate share of the Portfolio's assets and will be deemed
to be entitled to the Portfolio's income or loss attributable to that share. The
Portfolio has advised the Fund that it intends to conduct its operations so as
to enable its investors, including the Fund, to satisfy those requirements.

Shareholders of the Fund normally will have to pay federal income taxes and
any state or local income taxes on the dividends and other distributions
they receive from the Fund. Dividends from ordinary income and any distributions
from net short-term capital gains are taxable to shareholders as ordinary income
for federal income tax purposes, whether the distributions are paid in cash or
reinvested in additional shares. A portion of the Fund's ordinary income
dividends (but none of the Fund's capital gains) is normally eligible for the
dividends received deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Fund shares.
Availability of the deduction for a particular corporate shareholder is subject
to certain limitations, and deducted amounts may be subject to the alternative
minimum tax and result in certain basis adjustments. Distributions of net
capital gains (i.e., the excess of net long-term capital gains over net short-
term capital losses), whether paid in cash or reinvested in additional shares,
are taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held their
shares.

Any Fund dividend that is declared in October, November, or December of
any calendar year, that is payable to shareholders of record in such a month,
and that is paid the following January will be treated as if received by the
shareholders on December 31 of the year in which the divided is declared. The
Fund will notify shareholders regarding the federal tax status of its
distributions after the end of each calendar year.

Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.

In general, any gain or loss realized upon a taxable disposition of shares

22
<PAGE>

of the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than twelve months and otherwise as a short-term capital gain or loss. However,
any loss realized upon a disposition of shares in the Fund held for six months
or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales.

Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses.

Investment income received by the Fund from foreign securities may be
subject to foreign income taxes withheld at the source; the Fund does not expect
to be able to pass through to shareholders foreign tax credits with respect to
such foreign taxes. The United States has entered into tax treaties with many
foreign countries that may entitle the Fund to a reduced rate of tax or an
exemption from tax on such income; the Fund intends to qualify for treaty
reduced rates where available. It is not possible, however, to determine the
Fund's effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known.

The Fund anticipates that the Portfolio will be treated as a partnership
for federal income tax purposes. As such, the Portfolio is not subject to
federal income taxation. Instead, the Fund must take into account, in computing
its federal income tax liability, its share of the Portfolio's income, gains,
losses, deductions, credits and tax preference items, without regard to whether
it has received any cash distributions from the Portfolio. Withdrawals by the
Fund from the Portfolio generally will not result in the Fund recognizing any
gain or loss for federal income tax purposes, except that (1) gain will be
recognized to the extent that any cash distributed exceeds the basis of the
Fund's interest in the Portfolio prior to the distribution, (2) income or gain
will be realized if the withdrawal is in liquidation of the Fund's entire
interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, and (3) loss will be recognized if
the distribution is in liquidation of that entire interest and consists solely
of cash and/or unrealized receivables. The basis of the Fund's interest in the
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in the Portfolio, increased by the Fund's share of income from
the Portfolio and decreased by the Fund's share of losses from the Portfolio and
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.

The Portfolio is organized as a New York trust. The Portfolio is not

23
<PAGE>

subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. The investment by the Fund in the Portfolio does
not cause the Fund to be liable for any income or franchise tax in the State of
New York.

Fund shareholders may be subject to state and local taxes on Fund
distributions to them. Shareholders are advised to consult with their tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.

8. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Submanager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Submanager in a similar capacity.

The Portfolio's primary consideration in placing securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Submanager attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of the Portfolio and other clients of
the Submanager on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Submanager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Submanager on the tender of
the Portfolio's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Portfolio by the
Submanager. At present no other recapture arrangements are in effect.
Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. and such other policies as the
Trustees of the Portfolio may determine, the Submanager may consider sales of
shares of the Fund and of securities of other investors in the Portfolio as a
factor in the selection of broker-dealers to execute the Portfolio's securities
transactions.

Under the Submanagement Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Submanager may cause the Portfolio to pay a
broker-dealer acting on an agency basis which provides brokerage and research

24
<PAGE>

services to the Submanager or the Manager an amount of commission for effecting
a securities transaction for the Portfolio in excess of the amount other broker-
dealers would have charged for the transaction if the Submanager determines in
good faith that the greater commission is reasonable in relation to the value of
the brokerage and research services provided by the executing broker-dealer
viewed in terms of either a particular transaction or the Submanager's or the
Manager's overall responsibilities to the Portfolio or to its other clients.
Not all of such services are useful or of value in advising the Portfolio.

The term "brokerage and research services" includes advice as to the value
of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Submanager and the Manager currently intend to make only a limited use of such
brokerage and research services.

Although commissions paid on every transaction will, in the judgment of the
Submanager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Submanager's or the Manager's other clients, in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Submanager or the Manager for no
consideration other than brokerage or underwriting commissions.

The Submanager and the Manager attempt to evaluate the quality of research
provided by brokers. The Submanager and the Manager sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the Submanager nor the Manager
is able to quantify the amount of commissions which are paid as a result of such
research because a substantial number of transactions are effected through
brokers which provide research but which are selected principally because of
their execution capabilities.

The fees that the Portfolio pays to the Submanager and the Manager will not
be reduced as a consequence of the Portfolio's receipt of brokerage and research
services. To the extent the Portfolio's securities transactions are used to
obtain brokerage and research services, the brokerage commissions paid by the

25
<PAGE>

Portfolio will exceed those that might otherwise be paid for such portfolio
transactions and research, by an amount which cannot be presently determined.
Such services may be useful and of value to the Submanager or the Manager in
serving both the Portfolio and other clients and, conversely, such services
obtained by the placement of brokerage business of other clients may be useful
to the Submanager or the Manager in carrying out its obligations to the
Portfolio. While such services are not expected to reduce the expenses of the
Submanager or the Manager, the Submanager or the Manager would, through use of
the services, avoid the additional expenses which would be incurred if it should
attempt to develop comparable information through its own staff. For the fiscal
years ended July 31, 1996, 1997, and 1998, the Portfolio paid brokerage
commissions of $45,017, 101,639, and $175,344 respectively.

In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Submanager's or the Manager's other
clients. Investment decisions for the Portfolio and for the Submanager's or the
Manager's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to be
equitable to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust is a Massachusetts business trust established under a Declaration
of Trust dated as of April 1, 1996. Its authorized capital consists of an
unlimited number of shares of beneficial interest of $0.01 par value, issued in
separate series. Each share of each series represents an equal proportionate
interest in that series with each other share of that series.

The assets of the Trust received for the issue or sale of the shares of
each fund and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the

26
<PAGE>

liabilities in respect to such series and with such a share of the general
liabilities of the Trust. If a series were unable to meet its obligations, the
assets of all other series might be available to creditors for that purpose, in
which case the assets of such other series could be used to meet liabilities
which are not otherwise properly chargeable to them. Expenses with respect to
any two or more series are to be allocated in proportion to the asset value of
the respective series except where allocations of direct expenses can otherwise
be fairly made. The officers of the Trust, subject to the general supervision
of the Trustees, have the power to determine which liabilities are allocable to
a given series, or which are general or allocable to two or more series. In the
event of the dissolution or liquidation of the Trust or any series, the holders
of the shares of any series are entitled to receive as a class the value of the
underlying assets of such shares available for distribution to shareholders.

Shares of the Trust entitle their holder to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series, a Shareholder Servicing Agent may vote any shares as to which such
Shareholder Servicing Agent is the agent of record and which are not represented
in person or by proxy at the meeting, proportionately in accordance with the
votes cast by holders 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 purposes of quorum requirements.

The Trustees of the Trust have the authority to designate additional series
and to designate the relative rights and preferences as between the different
series. There is presently one series so designated. All shares issued and
outstanding will be fully paid and nonassessable by the Trust, and redeemable as
described in this Statement of Additional Information and in the Prospectus.

The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust unless, as
to liability to Trust or Fund 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

27
<PAGE>

Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.

Under Massachusetts law, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides for the maintenance, by or on
behalf of the Trust and the Fund, of appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Fund and its shareholders and the Trust's Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the Fund
itself was unable to meet its obligations.

10. FINANCIAL STATEMENTS

The audited financial statements of the Fund and the Portfolio (Statement
of Assets and Liabilities at July 31, 1998, Statement of Operations for the year
ended July 31, 1998, Statement of Changes in Net Assets for each of the years in
the two-year period ended July 31, 1998, Financial Highlights for each of the
years in the five-year period ended July 31, 1998, Notes to Financial Statements
and Independent Auditors' Report), each of which is included in the Annual
Report to Shareholders of the Fund which has been filed with the Securities and
Exchange Commission pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder, are hereby incorporated by reference into this Statement of
Additional Information and have been so incorporated in reliance upon the
report of KPMG Peat Marwick LLP, independent auditors, on behalf of the Fund
and the Portfolio.

28
<PAGE>

A copy of such report will be provided, without charge, to each person receiving
this Statement of Additional Information upon request by calling (800) 762-6814.

<PAGE>

PART C

Item 24. Financial Statements and Exhibits.

(a) Financial Statements:

The following financial statements are included in Part A:

Financial Highlights

The following financial statements are incorporated by reference into
Part B:

For Domini Institutional Social Equity Fund

Statement of Assets and Liabilities at July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statements of Changes in Net Assets for the two years ended
July 31, 1998, and 1997 and the period May 30, 1996 (commencement of
operations) to July 31, 1996

Financial Highlights for the years ended July 31 1998 and 1997, and
for the period May 30, 1996 (commencement of operations) to July 31,
1996
Notes to Financial Statements at July 31, 1998

For Domini Social Index Portfolio:

Portfolio of Investments at July 31, 1998
Statement of Assets and Liabilities at July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statement of Changes in Net Assets for each of the years in the two-
year period ended July 31, 1998
Financial Highlights for each of the years in the five year
period ended July 31, 1998
Notes to Financial Statements at July 31, 1998

(b) Exhibits:

1(a). Declaration of Trust.(1)

1(b). Certificate and Amendment No. 1 to Declaration of Trust of the
Registrant. (4)

2. By-Laws of the Registrant, as amended June 13, 1997. (3)

6(a). Form of Distribution Agreement between the Registrant and Signature
Broker-Dealer Services, Inc. ("SBDS") as principal underwriter.(2)

8. Custody Agreement between the Registrant and Investors Bank &
Trust Company.(1)

9(a). Transfer Agency Agreement between the Registrant and Fundamental
Shareholder Services, Inc.(1)

9(b). Sponsorship Agreement between Registrant and DSIL, as Sponsor. (4)

10. Opinion of Counsel.(2)

11. Consents of KPMG Peat Marwick LLP, independent auditors for
the Registrant and Domini Social Index Portfolio.(5)

16. Schedule for Computation of Performance Information.(2)

19. Powers of Attorney.(5)

27. Financial Data Schedule.(5)

(1)Incorporated herein by reference from the Registrant's registration
statement on Form N-1A (the "Registration Statement") (File no. 811-07599) as
filed with the U.S. Securities and Exchange Commission (the "SEC") on April 18,
1996.

(2)Incorporated herein by reference from the Registration Statement on Form N-1A
(File no. 811-07599) as filed with the SEC on October 18, 1996.

(3)Incorporated herein by reference from the Registration Statement on
Form N-1A as filed with the SEC on September 29, 1997.

(4)Incorporated herein by reference from the Registration Statement on
Form N-1A as filed with the SEC on November 26, 1997.

(5)Filed herewith

<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.

Not applicable.

Item 26. Number of Holders of Securities.

(1) (2)
Title of Class Number of Record Holders
(par value $0.01 per share) (as of October 31, 1998)

Domini Institutional Social Equity Fund 33

Item 27. Indemnification.

Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an exhibit to the Registration Statement.

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

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to directors,
trustees, officers or controlling persons of the Registrant and the principal
underwriter by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the SEC, such indemnification is
against public policy as expressed in the 1933 Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by directors, trustees, officers or controlling persons of the Registrant
and principal underwriter in connection with the successful defense of any act,
suit or proceeding) is asserted against the Registrant by such director,
trustee, officer or controlling person or principal underwriter in connection
with the shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issues.

Item 28. Business and Other Connections of Investment Adviser.

Not Applicable.

Item 29. Principal Underwriters.

(a) SBDS is the distributor for the Registrant. SBDS and its affiliates
serve as the distributor for other registered investment companies.

(b) The information required by this Item 29 with respect to each director
or officer of SBDS is incorporated herein by reference from Schedule A of
Form BD (File No. 8-41134) as filed by SBDS pursuant to the Securities Exchange
Act of 1934.

Item 30. Location of Accounts and Records.

The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:

Name Address

Domini Social Investments LLC 11 W. 25th Street
(administrator) New York, New York 10010

FSSI 11 W. 25th Street
(transfer agent) New York, New York 10010

Signature Broker-Dealer Services, Inc. 21 Milk Street
(distributor) Boston, MA 02109

<PAGE>

Investors Bank & Trust Company 200 Clarendon Street
(custodian) Boston, MA 02116

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

(a) If the information called for by Item 5A of Form N-1A is contained
in the latest annual report to shareholders, the Registrant will furnish each
person to whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.

<PAGE>

SIGNATURES

Domini Social Index Portfolio has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A (File No. 33-29180) of
Domini Institutional Trust to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth of
Massachusetts on the 24th day of November, 1998.

DOMINI SOCIAL INDEX PORTFOLIO

By: /s/ Amy L. Domini
------------------------------------
Amy L. Domini
President of Domini Social Index
Portfolio

This Post-Effective Amendment to the Registration Statement on Form N-1A of
Domini Institutional Trust has been signed below by the following persons in the
capacities indicated below on November 24, 1998.

Signature Title
--------- -----

/s/ Amy L. Domini
- -----------------------------------
Amy L. Domini President (Principal Executive Officer)
and Trustee of Domini Social Index
Portfolio

/s/ Carole M. Laible
- -----------------------------------
Carole M. Laible Treasurer (Principal Accounting and
Financial Officer) of Domini Social
Index Portfolio

Allen M. Mayes*
- -----------------------------------
Allen M. Mayes Trustee of Domini Social Index Portfolio

William C. Osborn*
- -----------------------------------
William C. Osborn Trustee of Domini Social Index Portfolio

Karen Paul*
- -----------------------------------
Karen Paul Trustee of Domini Social Index Portfolio

Timothy H. Smith*
- -----------------------------------
Timothy H. Smith Trustee of Domini Social Index Portfolio

Frederick C. Williamson, Sr.*
- -----------------------------------
Frederick C. Williamson, Sr. Trustee of Domini Social Index Portfolio

*By: /s/ Amy L. Domini
-------------------------------
Amy L. Domini
Executed by Amy L. Domini on
behalf of those indicated
pursuant to Powers of Attorney.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement on Form N-1A meets all of
the requirements for effectiveness pursuant to Rule 485(b) under the Securities
Act of 1933 and that the Registrant has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 24th day of November, 1998.

DOMINI INSTITUTIONAL TRUST

By: /s/ Amy L. Domini
-------------------------------------
Amy L. Domini
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on November 24, 1998.

Signature Title
--------- -----

/s/ Amy L. Domini
- -----------------------------------
Amy L. Domini President (Principal Executive Officer)
and Trustee of Domini Institutional Trust

/s/ Carole M. Laible
- -----------------------------------
Carole M. Laible Treasurer (Principal Accounting and
Financial Officer) of Domini
Institutional Trust

Allen M. Mayes*
- -----------------------------------
Allen M. Mayes Trustee of Domini Institutional Trust

William C. Osborn*
- -----------------------------------
William C. Osborn Trustee of Domini Institutional Trust

Karen Paul*
- -----------------------------------
Karen Paul Trustee of Domini Institutional Trust

Timothy H. Smith*
- -----------------------------------
Timothy H. Smith Trustee of Domini Institutional Trust

Frederick C. Williamson, Sr.*
- -----------------------------------
Frederick C. Williamson, Sr. Trustee of Domini Institutional Trust

*By: /s/ Amy L. Domini
-------------------------------
Amy L. Domini
Executed by Amy L. Domini on
behalf of those indicated
pursuant to Powers of Attorney.

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit
- ----------- ----------------------

EX-99.B11(b) Consent of KPMG Peat Marwick LLP, independent auditors for
the Registrant and Domini Social Index Portfolio.

EX-99.B19 Powers of Attorney

EX-99.B27 Financial Data Schedule

<PAGE>

Consent of Independent Auditors

The Board of Trustees
Domini Institutional Social Equity Fund
Domini Social Index Portfolio:

We consent to the use of our reports for the Domini Institutional Social Equity
Fund, dated September 15, 1998, and the Domini Social Index Portfolio, dated
August 24, 1998, incorporated herein by reference, and to the references to our
Firm under the headings "Financial Highlights" in the Prospectus and
"Independent Auditors" and "Financial Statements" in the Statement of Additional
Information.

/s/ KPMG Peat Marwick LLP

Boston, Massachusetts
November 25, 1998

<PAGE>

POWER OF ATTORNEY

The undersigned hereby constitutes and appoints Carole M. Laible, Sigward
M. Moser, and David P. Wieder, and each of them, with full powers of
substitution as her true and lawful attorneys and agents to execute in her name
and on her behalf in any and all capacities the Registration Statements on
Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as her own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.

/s
Amy L. Domini

<PAGE>

POWER OF ATTORNEY

The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
5th day of November, 1998.

/s
Allen M. Mayes

<PAGE>

POWER OF ATTORNEY

The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder and each of them, with full powers
of substitution as his true and lawful attorneys and agents to execute in his
name and on his behalf in any and all capacities the Registration Statements on
Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.

/s
William C. Osborn
<PAGE>

POWER OF ATTORNEY

The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder and each of them, with full powers
of substitution as her true and lawful attorneys and agents to execute in her
name and on her behalf in any and all capacities the Registration Statements on
Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as her own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
24th day of November, 1998.

/s/ Karen Paul
-------------------------------
Karen Paul

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.

/s
Timothy Smith

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.

/s
Frederick C. Williamson, Sr.

<PAGE>
<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
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<NUMBER-OF-SHARES-REDEEMED> 45,030
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<ACCUMULATED-NII-PRIOR> 0
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