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[LOGO OF DOMINI SOCIAL INVESTMENTS]
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Domini Institutional Social Equity Fund
Semi-Annual Report (Unaudited)
January 31, 1999
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[LOGO OF DOMINI SOCIAL INVESTMENTS]
Dear Shareholders:
We are pleased to report that for the 12 months ended January 31, 1999, the
Domini Institutional Social Equity Fund rose 39.34%, while the Standard &
Poor's 500 (S&P 500) rose 32.49%./1/ For the one year, five year, and since
inception + period ended December 31, 1998, the Fund returned 33.98%, 25.01%,
and 19.86% versus the S&P 500 which returned 28.58%, 24.04% and 19.39% for the
same period.
Market Performance
As a passively managed index fund, our fund attempts to reflect the
performance of the market for U.S. equities that a socially responsible
investor might invest in. During the past 12 months, our portfolio benefited
from an investing public seeking companies with greater earnings predictability
as the fiscal crisis that began in the Pacific Rim ricocheted around the globe
and finally began to be felt by our own markets. We also benefited from our
avoidance of much exposure to industries such as oil, chemicals, mining and
heavy machinery stocks and emphasis on companies that are the beneficiaries of
ever faster and lower cost technology.
Although the year ended January 31, 1999 was an extraordinarily good one for
investors, it included a particularly volatile period. From July 17, 1998 to
August 31, 1998, the S&P 500 dropped 19.3%. During that same period, the Domini
Institutional Social Equity Fund dropped 16.1%. The drop in the market did not
last long. By November 23rd, the S&P 500 and the Fund were back up to the
levels they had reached at the July peak. This market decline was the largest
we have experienced since the Fund's inception, and we were pleased to see our
Fund's relative performance.
Asset Growth
Domini Social Investments, the Fund's management company, recently passed a
milestone. This quarter, total assets under management grew to over $1 billion,
making us the largest socially responsible no-load mutual fund family. We are
pleased to report that the Fund's growth in assets reflects the growing market
for socially responsible investments in general. A recent study issued by The
Conference Board found that the assets managed in socially screened portfolios
grew at a rate of 227% from 1995-1997, compared to only 84% for assets managed
by all pension funds. Citing the Social Investment Forum, the Conference Board
also reported that in 1997, $1.2 trillion, or 9% of the total investment assets
under management in the U.S., are invested in portfolios engaged in some form
of socially responsive behavior./2/
A Sustainable Economic System
As social investors, we are happy with all of this good news, but are ever
mindful that our goals go beyond maximizing total return. Together we are
working to create a new context for corporate behavior: Sustainability. The
hallmarks of a just and sustainable system include environmental stewardship,
the meeting of basic human needs, equitable access to capital, democratic
participation and a respect for diversity--the very things we look for in the
companies in which we invest. While these may be lofty goals, we believe that
it is the responsibility of every sector of society, including investors, to
further them. All economic and financial decisions have societal implications,
and the investments we make today will shape the world we live in tomorrow.
Social Change through Social Research
Through our social screening process and our shareholder activism we are
creating a world of information on the many ways corporate management teams
make decisions that affect our lives. From information comes
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knowledge and positive change can only come through knowledge. By creating a
market for corporate accountability information socially responsible investors
are helping to shape a better future.
Every six months, our report to shareholders provides me with an opportunity
to review both new trends in the field of socially responsible investing, and
our work within the industry. This year we are profiling twenty companies with
particularly strong stock market returns for the year ended January 31, 1999.
We choose to share these stories with you because at Domini Social Investments
we are committed to delivering a double bottom line. We continuously strive to
produce superior investment results, but we must never lose sight of our role
in helping to create a just and sustainable world for tomorrow.
Thank you for your continued support of the Fund and its ideals.
Sincerely yours,
/s/ Amy Domini
Amy L. Domini
The performance information quoted represents past performance and is not
indicative of future results. Return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
/1/ Average annual total return for the Domini Institutional Social Equity
Fund for the five-year period and the period since inception (6/3/91) as
of January 31, 1999 was 25.88% and 20.56%, respectively. (The Fund, which
commenced operations on May 30, 1996, invests all its assets in the Domini
Social Index Portfolio which has the same investment objectives as the
Fund. Performance prior to commencement of operations is the performance
of the Domini Social Index Portfolio adjusted for expenses of the Fund.)
Average annual total return for the S&P 500 for the five year period and
the period since the Fund's inception (6/3/91) as of January 31, 1999 was
24.22% and 19.62%, respectively. The S&P 500 Index is an unmanaged index
used to portray the pattern of common stock movement based on the average
performance of 500 widely held common stocks. An investment cannot be made
directly in an index.
/2/ Conference Board Report: Press Release issued by The Conference Board,
February 4, 1999.
Unlike other mutual funds, the Fund seeks to achieve its investment
objective by investing all of its investable assets in the Domini Social
Index Portfolio, a separate portfolio with an identical investment
objective. The Domini 400 Social Index is an index. An investment cannot
be made directly in an index. Please obtain the fund's current prospectus
by calling 1-800-762-6814, or online at www.domini.com. Signature Broker-
Dealer Services, Inc., Distributor. 3/99
+ Performance prior to the Fund's inception (5-30-96) is the performance of
the Domini Social Index Portfolio adjusted for expenses of the Fund.
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The following are brief social profiles of the top 20 performers in our port-
folio for the year ended January 31, 1999. It should be noted that while these
firms' stock price experienced the highest gain over the year, these were not
the top 20 companies driving the Domini Institutional Social Equity Fund's
(the "Fund") performance. Because our portfolio is market-cap weighted, and
this listing has not been corrected for market capitalization, some of the
smaller firms on the list did not have as great an impact on portfolio perfor-
mance as larger firms in the portfolio. The Fund's performance was affected by
other holdings that under-performed those listed below. The percentage change
for the year in each firm's stock price is indicated in parentheses.
Dell Computer Corporation (305.6%) pioneered mail-order sales of computers
in the 1980s, resulting in lower prices to consumers without a sacrifice of
quality, and the innovative practice of building computers to customer speci-
fications. The firm's Dell Foundation limits its giving primarily to the Aus-
tin, Texas, area, reserving its contributions for programs affecting children
and youth in grades K-12. The Foundation has funded a number of educational
summer camps for children. In 1996, the foundation provided the CEDEN Family
Resource Center with its entire wish list of school supplies needed for disad-
vantaged children and their families. Dell is one of the sponsors of a non-
profit group run by the National Association of Women Business Owners that
certifies that businesses are women-owned, to make it easier for corporations
and the government to identify legitimately women-owned businesses with whom
to establish contracts. Dell belongs to a number of voluntary EPA programs,
targeting reduced energy use in plants and office buildings, greenhouse gas
reduction and municipal solid waste reduction. Dell reports that its newest
facility, opened in April 1997, either reuses or recycles 90% of the solid
wastes it generates each month. In the U.S., since 1996, Dell has operated an
Asset Recovery Service, through which it will collect from its large corpo-
rate, educational, or government customers outdated computers and take them to
recycling services. In Europe, the company's Green Away program takes back any
ecologically labeled computer from any customer for reuse or recycling.
Providian Financial Corporation (213.7%) provides credit services, including
credit cards and home equity loans, and deposit services, including money mar-
ket deposit accounts and certificates of deposit for retail and institutional
customers. The company's primary focus is to provide services to underserved
middle- and low-income individuals, including the "unbanked" market, which
consists of immigrants, individuals with a credit problem in the past, and the
recently divorced or widowed. Providian is notable for its innovative charita-
ble giving program. In 1997, Providian donated $5 million to improve day care
in the state of New Hampshire, including provisions for an in-depth study of
child-care needs. Providian Bancorp's First Deposit National Bank subsidiary
received an "Outstanding" rating from the U.S. Office of the Comptroller of
the Currency for its performance in community reinvestment. In June 1997, with
the spin-off of Providian Bancorp as Providian Financial Corporation, Shailesh
J. Mehta, an Asian American, was named chief executive officer. In addition,
two women and two minorities (including Mr. Mehta) serve on the company's ten-
member board of directors. Providian provides the unusual employee benefit of
a six-week paid sabbatical in addition to the approximately four and a half
weeks off that employees may accumulate in a "time bank." Employees who have
worked for the firm for six years are eligible for the sabbatical. The company
has developed a computer database to serve its customers by mail and telephone
and does not have local branches. A Providian employee talks with every poten-
tial customer and customizes the credit card according to the person's afford-
able interest rate and credit limit. According to a December 1997 Investor's
Business Daily article, Providian's computer system has 100,000 card varia-
tions to choose from. Following these procedures, the company's risk-adjusted
return (the return after credit losses) is reportedly substantially higher
than the industry average.
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Charles Schwab Corporation (186%) provides discount brokerage services, fo-
cusing on the small investor. Schwab has pioneered the development of products
in the discount brokerage industry. In FY 1997, the company and its foundation
donated 1% ($3.23 million) of average trailing three-year net earnings before
taxes (NEBT) to over 500 nonprofit organizations. Approximately half of its
cash giving through its foundation is in the form of grants matching employee
contributions, contributing two dollars for every dollar an employee donates.
Schwab has adopted an elementary school in the Haight-Ashbury neighborhood
where approximately 20 of its employees volunteer as tutors. The company makes
an annual award (a $5,000 grant to a nonprofit agency of the employee's
choice) to an employee for exceptional volunteer activities. The company has
made notable progress in the promotion of women and minorities, particularly
to line positions with profit-and-loss responsibilities within the corpora-
tion. One woman serves among the company's five senior line executives. She is
one of the five highest paid officers at the company. As of 1997, approxi-
mately 22% of the company's 80 senior vice presidents were women. One woman
serves on the company's ten-member board of directors. Schwab has notably pro-
gressive policies on gays and lesbians in the workplace, and was among the
first in the country to adopt a benefits policy including health care for the
domestic partners of its employees. Since 1993 the company has a diversity
taskforce which has provided training to all managers. Since that time, sev-
eral internal employee affinity groups have formed, including ones for gay men
and lesbians, Hispanic Americans, and African Americans. The firm holds
monthly seminars on work/family issues for its employees. The company permits
employees to contribute a portion of accrued vacation or sick-leave time to
employees with life-threatening illnesses. Employees with terminal illnesses
may obtain up to $50,000 of the value of their life insurance policy. In FY
1997, the company granted a total of one million stock options to all non-of-
ficer employees, and reports that it expects to make similar grants annually.
A May 1997 Investor's Business Daily article reported that the company's em-
ployee turnover rate was well below the industry norm.
Novell Inc. (181%) develops and markets computer software and applications,
including networking systems, operating systems, word processing and spread-
sheet products, database products, and connectivity hardware. A December 1993
New York Times article credited the company with starting the annual Silicon
Valley "Food Bowl," in which companies collect food and money for the Second
Harvest Food Bank. The company is a strong supporter of food drives. One woman
serves on the company's eight-member board of directors. Prior to 1997, Mary
M. Burnside was chief operating officer for the firm and was one of the
company's seven senior line executives. The company offers health benefits to
same-sex domestic partners of its employees. Novell has long had a cash bonus
program for all employees. In December of each year, the firm makes a cash
award of between 3% and 14% of salary, depending on firm performance and on
manager evaluations. Since 1995 the bonus has been tied to division perfor-
mance, rather than overall corporate performance. Novell grants the vast ma-
jority of new employees substantial numbers of stock options when they join
the firm. The company's retirement benefits are covered by a 401(k) savings
plan through which the firm matches 100% of employee contributions up to 4% of
base compensation. In addition to more conventional recycling programs, Novell
recycles obsolete software manuals and cleans up obsolete diskettes and do-
nates them to local schools. In 1995 the company donated software it estimates
was worth $250,000 to the World Wildlife Fund to link its offices worldwide.
We are concerned by recent workforce reductions, including a 17% reduction in
1997, and reductions of 6% and 17.5% in 1995 and 1994, respectively, following
acquisition of the company's WordPerfect and Quattro Pro business.
Cisco Systems, Inc. (162.5%) develops and markets internetworking systems
that connect and man-
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age communications among local and wide area computer networks. Cisco has
adopted the Costano elementary school in the economically disadvantaged neigh-
borhood of East Palo Alto, California. Through 1995 it had contributed
$120,000 in products and services to this predominantly nonwhite school, in-
cluding the establishment of a computer lab. It has also worked with the Glide
Memorial Church in San Francisco to enable the homeless to have employment in-
formation through the Internet. In 1995, fifty schools whose applications
showed the ability to support and implement an internetworking site received
approximately $10,000 in equipment, service, and training. The firm encourages
volunteerism by matching employees' contributions of either time or money to
nonprofit organizations. In FY 1996, the firm placed approximately 7.7% of its
subcontracted purchases for goods and services with women-owned and minority-
owned firms (KLD's threshold for a "strength" in this area is 5%). In January
1998, Fortune magazine listed Cisco as one of "The 100 Best Companies to Work
for in America." Family-oriented benefits offered by the firm include flextime
work schedules, a flexible spending account with a child care option, resource
and referral services for dependent care and health benefits to same-sex do-
mestic partners. Employees on maternity leave receive disability pay for a pe-
riod in addition to the unpaid three months of federally mandated maternity
leave. The company grants stock options to all employees when hired. Cisco
holds a monthly breakfast meeting where current CEO, John Chambers, a strong
advocate of teamwork and open communication, is available for questions from
employees. There is an open door policy for communication with management, and
executive offices, including the CEO's, are no more elaborate than the spartan
arrangements throughout the company. All executives fly coach class. There are
no reserved parking spaces for executives at the company's headquarters. As of
April 1996, Cisco reported that it recycled approximately 225 tons of paper,
corrugated containers, aluminum, and glass each year. All the stationery it
purchases has 100% recycled content.
Egghead.com, Inc. (149.5%) is a specialty retail company selling personal
computer software, hardware, and related products. In 1995 the company ex-
tended full medical and dental benefits to the domestic partners of their gay
and lesbian employees. While praising this notably progressive policy, we are
concerned by the firm's lack of women on its eight-member board of directors
or among the company's six senior line executives. In addition, we are con-
cerned by the company's 49% workforce reduction between 1995 and 1997, and in-
adequate retirement benefits. Egghead has an extensive office recycling pro-
gram, and encourages software manufacturers to reduce product packaging.
The Gap, Inc. (148.1%) operates apparel specialty stores under the brand
names The Gap, GapKids, babyGap, Banana Republic, and Old Navy Clothing. The
Gap Foundation has made contributions to AIDS programs, programs focusing on
low-income youth and families, after school computer literacy programs, and to
the San Francisco Women's Centers, and has been a strong supporter of environ-
mental campaigns. The Gap strongly supports its employee volunteer programs,
allowing five hours of paid company time each month for an employee to do vol-
unteer work if the employee also volunteers five hours of his or her own time.
Many of the company's top executives are active in volunteer activities, work-
ing, for example, in meal kitchens for the homeless, and schools in economi-
cally disadvantaged neighborhoods. In 1995 the company extended full medical
and dental benefits to the domestic partners of its gay and lesbian employees.
The company includes AIDS education in its employee training programs. There
are no women or minorities among the firm's six senior line executives, al-
though several women hold noteworthy line management positions. In 1997 the
company reported that of 27 vice presidents, eight were women. In addition,
women hold a substantial percentage of the regional and zone vice president
positions at the firm. The firm offers a number of family oriented benefits,
including a flexible spending account with dependent care options, prena-
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tal counseling, gift certificates for new parents at babyGap, and flextime
schedules at corporate headquarters. The company has implemented a new ap-
proach to managing its contracting relationships, incorporating environmental
design, including the use of certified wood, into new construction. In 1998
the company told KLD that it does not allow animal testing of any of its per-
sonal care products or their raw ingredients. The Gap has permitted indepen-
dent monitoring of its vendors in Central America, although the firm has not
yet extended this program to other areas. Kinder, Lydenberg, Domini & Co.,
(KLD), the Fund's adviser on social screening, has written the company on be-
half of Domini Social Investments, requesting information about the allega-
tions in recent lawsuits concerning labor conditions at contract-supplier fac-
tories in the Northern Mariana Islands, and we will be watching their progress
closely.
Tele-Communications, Inc. (TCI) (140.6%) Note: Effective March 10, 1999, TCI
was removed from the Portfolio due to its acquisition by AT&T. TCI builds,
owns, and operates cable television systems, and provides satellite-delivered
video entertainment, information and home shopping programming services. In
1996 the company announced the formation of an educational subsidiary to pro-
vide educational programming to schools. From 1989 through 1996, the company
had donated approximately $40 million in programming, computer connections,
and teacher training in schools around the country. In 1995 TCI contributed
approximately $960,000 to provide scholarships for 400 master teachers to at-
tend technology seminars at its newly created J. C. Sparkman Center for Educa-
tional Technology. Also in 1995, the company committed an additional $20 mil-
lion to provide satellite connections for 10,000 schools that do not have ac-
cess to cable. No women or minorities serve on the company's ten-member board
of directors or among its five senior line executives. In 1995 the company in-
itiated a diversity recruitment program and hired 15 minority and women manag-
ers. It is also a sponsor of Inroads International and the Denver Coalition
for Diversity. Family benefits include a maternity/paternity leave of three
months, also available to parents who adopt a child. Employees receive a per-
centage of their salary up to 100% while on leave, depending on length of
service. The company also provides child-care resource and referral services.
Sun Microsystems, Inc. (140%) develops and manufactures computer
workstations, network servers, and operating systems software. Sun is a large
supporter of programs for the economically disadvantaged, and has made grants
over the past few years to a program for homeless youth in San Jose, a train-
ing program for health technicians in Andover, Massachusetts, a role model
program for at-risk youths in San Jose, California, and a Lowell, Massachu-
setts, small business development agency. As an alternative to established
charities, Sun allows employees to donate to non-traditional charitable orga-
nizations of their choice through payroll deductions. Sun is a major supporter
of Career Beginnings, a program intended to help underachieving minority stu-
dents do better in school. The Sun Microsystems Foundation has provided funds
to Merrimack College to provide mentors and counselors to at-risk eighth-grade
students as part of an effort to lower a local high school's high dropout
rate. In 1996 the company pledged $1 million for in-kind donations over three
years for programs to connect elementary and secondary schools to the
Internet. The company was one of the first to extend its matching gifts pro-
gram for employees to workers outside the U.S. In 1995 the firm introduced
volunteer service opportunities in its overseas locations, and from 1995 to
1996, Sun reported that participation increased 40% to 2,300 volunteers.
The firm has notably progressive policies on gays and lesbians in the
workplace, including health benefits to same-sex domestic partners of employ-
ees. In 1996, Business Ethics magazine ranked Sun Microsystems 5th among the
10 best companies for gay men and lesbians. The company maintains an
internship/job-training program jointly with Opportunities Industrialization
Center West, a job training or-
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ganization for the economically disadvantaged. All of Sun Microsystem's em-
ployees are eligible for cash profit sharing, based on salary and individual
and company performance measures. The firm has a reputation for openness and
humor in its employee relations, including an annual prank played on a senior
executive by the company's engineers: in 1990 CEO Scott McNealy's office was
turned into a miniature golf course. Sun's environmental efforts include the
recycling of 60% of its office and manufacturing solid waste annually, a "de-
sign for the environment" program that addresses recyclability in product de-
sign, environmental criteria for vendors, and an energy efficiency program
called "SMART office" that turns off electrical devices when not in use. In
1997 the company reported that its asset recovery program (for product trade-
ins and obsolete equipment) recycles close to 99% of all material collected by
melting components to recover gold, platinum, and silver, recovering generic
components, and recycling shipping materials. In 1997 the EPA gave the firm
its Energy Star Award.
Microsoft Corporation (136.1%) develops and markets operating systems, ap-
plications software, hardware, and manuals for personal computers. In FY 1997,
the company donated 0.58% ($14 million) of average trailing three-year net
earnings before taxes (NEBT) to charity. The company also reported making in-
kind donations it valued at $45.17 million. A major focus of the company's
charitable giving is to establish computer services in public libraries and
schools. The company also donated $17 million in computer technology to human
services organizations. Among such grants in 1996 and 1997, Microsoft donated
software to Focus: HOPE, an organization that trains economically disadvan-
taged individuals to become technicians and engineers. Among Microsoft's com-
bined cash and in- kind contributions in 1996 were a donation of $10.1 million
in software to the United Negro College Fund, $3 million for a pilot online
service in public libraries, and $100,000 to Boston's Computer Museum for its
after-school programs for inner-city youth. In the last several years, the
company has increased its charitable giving. A 1994 Corporate Philanthropy re-
port characterized Microsoft as a late but significant supporter of the North-
west AIDS Foundation. The company also generously supports Trust for Public
Land, a nonprofit organization involved in land conservation. Microsoft, along
with some other technology companies, has been criticized for overvaluing
product donations by using suggested retail prices, which are far above what
charities normally pay for retail products. KLD, on behalf of Domini Social
Investments, has recently written to Microsoft, asking the firm to take a more
prominent leadership role in community affairs and charitable giving. In addi-
tion, we are closely following the federal government's antitrust suit against
the company, and will be re-evaluating the firm upon the suit's conclusion.
Microsoft makes extensive use of stock options as an incentive for rank and
file employees. A 1992 study found that of 11,000 Microsoft employees at that
time, 3,400 had become millionaires through their stock holdings. A 1997 sur-
vey by Careers & the disABLED magazine ranked Microsoft ninth among 50 compa-
nies with the best reputation for employing and accommodating the disabled. In
1996 the company was ranked second. The firm was one of the first major U.S.
corporations to offer health benefits to same-sex domestic partners of employ-
ees. One woman serves on the firm's eight-member board of directors. Although
there are no women or minorities among the firm's nine most senior line execu-
tives, Microsoft has developed a reputation as a meritocracy in which women
can be promoted in technical areas, areas often dominated by men in the indus-
try. A June 1996 Fortune magazine article reported that approximately 32% of
Microsoft's domestic employees are women. In 1995, 21% of the company's tech-
nical hires were women, while only 14% of women nationwide graduated as com-
puter science majors. The firm also offers generous adoption benefits that go
beyond Federal requirements.
Lowe's Companies, Inc. (131.5%) operates retail building supply centers. In
recent years, Lowe's has substantially expanded the size of its stores, shift-
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ing its customer focus from contractors to do-it-yourself home repairers. In
1993 Lowe's was among the founders of the nonprofit Home Safety Council. The
company does cause-related marketing around the issue of home safety and has
supported community efforts such as fire safety houses operated by local fire
departments. The company is a member of the Home Improvement Industry's Af-
fordable Housing Coalition. Two women serve on the company's 12-member board
of directors, one of whom is African- American. In January 1998, Lowe's was
included on Fortune magazine's list "The 100 Best Companies to Work for in
America." Lowe's was also mentioned in the 1993 book of the same name, which
praised the company's job security, opportunities for advancement, and commit-
ment to employee ownership. For many years, Lowe's has offered a profit-based
employee stock ownership (ESOP) retirement plan. As of January 1997, this plan
was the second-largest shareholder and held 12.8% of the company's stock.
Lowe's competes on an "everyday low price" strategy. In October 1995, Lowe's
ranked sixth in Business Week magazine's list of the Top Ten Non-acquirers in
the U.S., which described the business strategy as one of replicating the
originally successful model for operations rather than relying on acquisition
of, or diversification into, other businesses. As part of the firm's focus on
customer service, Lowe's CEO discusses improvements and customer requirements
with a group of randomly selected customers every month over dinner.
Micron Technology, Inc. (130.7%) manufactures and markets semiconductors,
flash memory, personal computers and printed circuit boards. The company's
charitable activities focus on education. In 1994 the company pledged a $6
million matching donation for construction of a new college of engineering at
Boise State University. The company has also supported secondary-school educa-
tion initiatives both in Boise, Idaho, and in rural regions of the state. The
company promotes community involvement initiatives by its employees. In 1997
these included building a house for a low-income family. Micron's generous
profit sharing plan pays a quarterly cash bonus consisting of 10% of after-tax
profits to all employees who have worked with the firm for at least six
months. The firm distributes the first $500,000 of this cash profit sharing
equally among employees, and the remainder is distributed as a percentage of
compensation. The company also pays an additional amount to employees every
six months based on the company's return on equity and the employee's individ-
ual performance. Employees accept a lower base pay than that of their peers at
similar companies, but by limiting payroll the company can theoretically limit
layoffs in bad times in this notoriously cyclical industry. Family benefits
provided by the company include maternity and paternity leave, adoption leave,
phase-back for new mothers, flextime, and job-sharing. In September 1997, the
EPA gave Micron Technology its Evergreen Award for Pollution Prevention,
praising Micron's efforts to recycle and reuse water consumed in its semicon-
ductor manufacturing processes. The company also reported that it had replaced
solvent- based cleaning processes with nonpolluting water-based processes. In
1997 the company's manufacturing facilities were awarded ISO 14001 certifica-
tion, based on its environmental programs. There is room for improvement in
the firm's record on diversity, with no women or minorities on its eight-mem-
ber board of directors or among its seven senior line executives.
Apple Computer, Inc. (122.6%) Since its founding in the mid-1980s, Apple has
been one of the most innovative companies in the computer industry. In 1997
four Apple products received the annual Business Week magazine awards for in-
novative design. From 1993 through 1997 Apple received more (14) of these
Business Week awards than any other U.S. corporation. In 1997, due to finan-
cial difficulties, Apple eliminated most of its community affairs department,
and reduced its number of permanent employees by 36%. Historically, the
company's charitable giving had been notably innovative, including computer
donation programs to schools, adult literacy programs, AIDS research and edu-
cation, and programs for the disabled. In 1995 the company gave $1.5 million
to the Public Broadcasting service com-
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munity-based training of parents and child care providers. Apple had also in-
vested in public/private affordable housing partnerships. Its donations to
primary education had been particularly strong. In 1997 it awarded $1 million
in equipment and training to ten schools and ten colleges. According to the
Corporate Philanthropy Report newsletter, the company's education grants may
survive the cutbacks. Apple was ranked fourth among 50 companies with the best
reputation for employing and accommodating the disabled. The firm has notably
progressive policies towards its gay and lesbian employees, and, in 1993, be-
came one of a limited number of U.S. firms to offer health benefits to same-
sex domestic partners of employees. In 1994 the firm refused to change its
policies toward gays and lesbians, despite local protests challenging its
siting of a plant in Texas. Apple has had a strong record on promoting women
to positions of considerable authority among its senior executives, although
there are no women on the company's six-member board of directors or among the
company's five senior line executives. Apple's diversity efforts focus on dis-
ability initiatives, personal and professional development, diversity train-
ing, recruiting a diverse work force, and identifying business opportunities
in minority markets. The company reduced its toxic emissions by 97% between
1988 and 1992 and was one of the first companies to design computers to con-
sume less energy. In November 1996, Apple announced that it would no longer do
business with government agencies of Burma, partially in response to activists
protesting the human rights policies of that country's government and the de-
cision of the State of Massachusetts to cease contracting with companies doing
business with Burma.
Xilinx, Inc. (122.4%) designs, develops, and markets CMOS (complementary
metal-oxide-silicon) programmable logic devices and related software for com-
puters. Xilinx originated the idea of a customer-programmable integrated cir-
cuit and pioneered the field programmable gate array (FPGA) market in 1984. As
of 1996, it controlled approximately 72% of the FPGA market. Family benefits
offered by the company include maternity, paternity and adoption leave, depen-
dent care and resource referral, flextime, and job sharing. All employees par-
ticipate in the firm's profit sharing plan. Payments are made quarterly. The
first 50% of the payments are divided equally among all participants and the
other 50% are divided proportionately based on salary. In FY 1996, approxi-
mately 1.2% of profits were distributed to employees. The company distributed
approximately $1.2 million to employees in 1995 and $1.4 million in 1994 under
this program. Like many smaller, relatively young, high-tech firms, Xilinx of-
fers stock options to all employees when they join the firm. New hires receive
options proportional to their salary level. Additional options may be granted
in conjunction with annual job performance reviews. In late 1996, it adopted a
policy under which the firm would make contributions if it achieved certain
financial targets. Unlike many other Silicon Valley high-tech companies,
Xilinx deliberately cultivates a non-confrontational management style.
Allergan, Inc. (118.9%) develops, manufactures, and markets specialty phar-
maceuticals for eye diseases, skin care, and neuromuscular disorders, surgical
products, and other optical contact lens products. The company has made nota-
ble progress in the promotion of women and minorities, particularly to line
positions with profit-and-loss responsibilities within the corporation. As of
1996 the company had a formal mentoring program for high profile managers that
included women and minorities. Family benefits include flextime and sports and
workout facilities for all employees. Allergan publishes a biennial environ-
mental report, and reported that from 1991-96, it reduced its use of ozone de-
pleting compounds by 98%. The company is currently eliminating the use of CFCs
in facility air conditioning worldwide. In addition, it has a goal of elimi-
nating CFC-11 and CFC-12 use by the year 2001. The firm's environmental prod-
uct design program aims to eliminate or minimize the use of hazardous waste in
all products or processes. In 1994 the company instituted an Environmental
Achievement Award to recognize innovative environmental efforts by employees.
As of
9
<PAGE>
1997, two of Allergan's manufacturing facilities had received the EN/ISO 14001
certification, a global standard for environmental management systems. As of
August 1998, animal rights groups were targeting the company for testing per-
sonal care and household products on animals. In 1998 the company told KLD
that it used animal testing during the development of medical products, that
such tests are necessary for human safety and to continue innovative product
development, and are legally required under FDA regulations. The company makes
skin care products which many animal rights supporters consider to be cosmet-
ics, which are not required to be tested on animals, unless they make thera-
peutic claims. The company told KLD that it is actively pursuing alternatives
to the use of laboratory animals.
Wal-Mart Stores, Inc. (114%) is a general retailer operating throughout the
U.S. As of early 1997, Wal-Mart operated 2,311 Wal- Mart general merchandise
stores, 433 Sam's wholesale clubs, and 33 distribution centers. The company
has a reputation as one of the best-managed larger U.S. companies. It prides
itself on its low prices and superior customer service, and pioneered the re-
tail concept of "everyday low prices." Wal-Mart does not disclose its level of
charitable giving. According to Corporate Philanthropy Report, in 1996 the
firm donated $81 million to charity, including $2.5 million annually to an
Economic Development Grant program to help local communities attract new busi-
nesses. Its giving program focuses on the United Way, the Children's Miracle
Network, and scholarship programs. In 1996 the company raised $14.3 million
for the Children's Miracle Network. The company matches employees' charitable
donations up to $2,000. As of early 1997, over 600 college students had re-
ceived four-year $20,000 scholarships under the firm's scholarship fund pro-
viding support to college students majoring in science and technology. In 1996
it made $12.8 million in scholarship grants. The firm's Volunteerism Always
Pays program will donate $100 to organizations with which employees spend 15
hours of volunteer time within a three-month period. Wal-Mart's primary busi-
ness strategy has been to locate its stores in rural areas near small towns.
Its remarkable success, which often comes at the expense of small shop owners
in these towns, has prompted much debate. Critics of the company argue it is
responsible for a decline in vitality of these towns and have often fiercely
opposed Wal-Mart's plans to build stores. The company argues that it is pro-
viding a valuable service (goods at a low cost) and local jobs.
Domini Social Investments has filed shareholder resolutions with the company
concerning its diversity record. In 1996, after two years of resolutions, Wal-
Mart committed itself to improve its equal employment opportunity record and
the information it shares with the public. For competitive reasons, Wal-Mart
did not agree to release its EEO-1 data (a confidential report companies must
file with the U.S. Equal Employment Opportunity Commission). However, at the
annual meeting Wal-Mart's chair publicly affirmed the company's commitment to
diversity, including its board. Two women and three minorities (one African-
American and two Hispanic-Americans) serve on the company's 15-member board of
directors. To increase promotion of women and minorities, Wal-Mart has under-
taken a number of initiatives including training and career development pro-
grams, internships, a mentoring program, and recruitment. A 1997 survey ranked
Wal-Mart first among 50 companies with the best reputation for employing and
accommodating the disabled. Wal-Mart has been working since 1993 to increase
its business with minority owned companies, and in October 1997, Wal-Mart en-
tered a $72.5 million revolving line of credit agreement with a consortium of
minority-owned banks assembled by Gateway Bank, an African-American owned bank
based in Missouri. The 1993 book "The 100 Best Companies to Work for in Ameri-
ca" praised Wal-Mart for its friendly culture, opportunities for advancement,
and strong employee identification with its image. The firm has cash profit
sharing at virtually all levels, even for part time personnel. Until 1997,
Wal-Mart was one of the largest employers in the U.S. not to have a retirement
savings plan for employees, relying on its profit sharing plan. As
10
<PAGE>
of 1997, the company added a 401(k) plan and now makes cash contributions to
employee savings plans annually, with no required employee match. According to
an August 1997 Wall Street Journal article, of Wal-Mart's 30,000 managers, ap-
proximately 60% were formerly hourly workers. In 1996, Wal-Mart completed its
third "environmentally friendly" store, designed to use half the energy of a
typical store, environmentally friendly materials in its construction and use
CFC- free air conditioning and solar-powered signs. KLD has written to Wal-
Mart, on behalf of Domini Social Investments, concerning the recent lawsuit
filed on behalf of workers in Saipan, in the Northern Mariana Islands. We have
also recently joined with other concerned investors in an additional letter to
the company requesting a meeting to discuss several open issues with share-
holder activists concerning the firm's social performance.
Comcast Corporation (112.5%) provides electronic retailing services and de-
velops, manages, and operates cable and cellular communications systems. The
company holds equity interests in Sprint PCS, Teleport Communications, and
Primestar Partners. Comcast supports and participates in Cable in the Class-
room, an industry-sponsored program that provides free cable access, program-
ming, and support materials. The company delivers 540 hours of commercial-free
programming to public secondary schools. In May 1997, the company committed to
providing one million hours of access to the Internet via cable modems for
more than 250 libraries in 20 states. Comcast has also committed, at no
charge, to install a high-speed cable modem and provide basic Internet service
in each elementary school and secondary school in the company's service area.
The company has developed a K-12 web site that features links to over 500 of
the best education sites on the Internet. Comcast also participates in
MercerNet, an interactive wide-area fiber optic network developed by the com-
pany and an educational consortium in Mercer County, New Jersey, linking the
county's public school districts, community colleges, local science center and
public libraries with each other. The company's Comcast Cellular Communica-
tions subsidiary participates in the "ClassLink" initiative, which allows
teachers and staff of schools to call parents and emergency services using
cellular phones. In 1996 Comcast cellular raised $285,000 for the Ronald Mc-
Donald house program for families with seriously ill children in Philadelphia,
and the company's majority-controlled QVC subsidiary worked with the Fashion
Footwear Association of New York to raise $1.2 million for breast cancer re-
search and education. In November 1997, the Philadelphia Commission on Human
Relations named Comcast the recipient of its Corporate Responsibility Award
for working with the City to create a rowing camp targeted to minority and in-
ner-city youth. Along with other cable firms, Comcast participates in activi-
ties sponsored by the Kaitz Foundation, which promotes training of women and
minorities for positions in the industry. In May 1997, the company's chair of
the board of directors, Ralph J. Roberts, received the Whitney Young Award
from the Urban League of Philadelphia in recognition of his support for equal
rights and equal opportunity.
Granite Construction Inc. (107.8%) is a civil construction company that
works on infrastructure projects for the public sector and site preparation
for the private sector. In 1995 Granite formed a partnership with the City of
Sacramento, California, and a local developer to reclaim the land on one of
the company's former quarries, resulting in the construction of a four-mil-
lion-square-foot office park and 120 acres of green space reserved for recre-
ation, ballparks, and golf. One woman serves on the company's eight-member
board of directors. Women in senior staff positions include the firm's vice
president and treasurer. In January 1998, Granite was included on Fortune
magazine's list "The 100 Best Companies to Work for in America." The company
encourages each branch office to be actively involved in the communities in
which they are located. As of December 1997, Granite's non-union hourly and
salaried employees owned 30% of the company through an employee stock owner-
ship plan (ESOP). The company emphasizes training for all employees and has
historically promoted from within the organization.
11
<PAGE>
As part of its contracting business, Granite is involved in numerous environ-
mental remediation projects that include moving and processing contaminated
soils associated with underground storage tanks or landfills. In October 1992,
Granite was the first construction company to win the Malcolm Baldridge Na-
tional Quality Award in the small business category. Congress established the
award in 1987 to honor companies that have demonstrated world- class quality
in the way they conduct their business and achieve customer satisfaction.
Solectron Corp. (106.8%) provides electronics manufacturers with various
services, including complex printed circuit boards, the testing and assembly
of electronic systems, materials management, and turnkey manufacturing manage-
ment. Solectron is a member of the Santa Clara Valley Manufacturing Group, a
group consisting of executives from companies in the Silicon Valley dealing
with community problems including transportation, housing and education. The
company also supports the Asian Law Alliance, an organization providing legal
counseling to individuals with housing, immigration, domestic violence, and
civil rights problems. Five out of the company's eight senior line executives,
including the firm's CEO, are Asian-American, including two women. Two Asian-
Americans (including the CEO) serve on the company's ten-member board of di-
rectors. The firm has a remarkably diverse workforce, reporting approximately
four dozen languages and dialects currently spoken in the workplace. All em-
ployees are eligible for the company 's worldwide program for awarding quar-
terly cash bonuses on the basis of productivity and quality. The company's re-
tirement benefits are covered solely through a 401(k) savings plan through
which the firm matches a portion of employee contributions. For employees who
make less than $30,000, the firm generously matches 50% of contribution up to
6% of base compensation. As part of a 1992 settlement with local regulators
concerning two California facilities, the company agreed to accelerate its
plans to eliminate the use of ozone-depleting Freons and to install controls
to reduce by 90% its emissions of volatile organic compounds at these plants.
Solectron has since phased out all uses of Freons, as well as volatile organic
compounds, in its cleaning processes for electronic circuit boards at its
Milpitas plant. The company has formal waste reduction programs at the plant,
and also recycles shipping, packaging, and soldering materials. It is working
toward implementing its California environmental standards throughout its op-
erations worldwide. In July 1998, the company told KLD that it had no accruals
for environmental remediation. In 1997 and 1991 Solectron won the Malcolm
Baldridge National Quality Award in the manufacturing category. In 1996 it won
a quality award from the State of North Carolina, and in 1998, the Malaysian
Prime Minister's Quality Award. The firm uses Japanese manufacturing tech-
niques, including just-in-time manufacturing, statistical process control, and
continuous flow manufacturing. Line workers have the authority to shut down
assembly lines if they believe quality standards are not being met.
American Power Conversion (100%) manufactures and markets uninterruptible
power supply products, electrical surge protectors, and associated products
for use with computers and workstations. The firm concentrates its charitable
giving in Rhode Island, making gifts primarily through in-kind product dona-
tions. Originally a strong supporter of the Rhode Island economy, the firm has
recently changed course and expanded its operations overseas. In mid-1997, the
company told KLD that it donated primarily to the educational community. It is
an active sponsor of Tech Corps, an initiative to bring technology into the
public school system, and has donated products, money, and expertise to this
effort in Rhode Island. The company is also involved in SMILE, a science and
math club formed for low income minority children. As of February 1998, em-
ployees held 5.1% of the company's stock through its non- contributory Em-
ployee Stock Ownership Plan. The company's uninterruptible power supply prod-
ucts contain a rechargeable battery and a battery charger. The company pro-
vides information on battery recycling, trains its re-sellers on battery recy-
cling and recycles batteries that its customers send back to them. The com-
12
<PAGE>
pany recycles 100% of the hot water used during manufacturing processes. The
company is ISO 9000 certified and its manufacturing facilities in the United
States and Galway, Ireland, are ISO 9002 certified. ISO is an international
quality standards certification organization.
As of January 31, 1999, the companies listed above represented the following
proportions of the Domini Social Index Portfolio (DSIP): Dell Computer: 2.22%,
Providian Fin'l: .25%, Charles Schwab: .49%, Novell: .12%, Cisco Systems:
3.07%, Egghead.com: .01%, The Gap: .64%, Tele-Communications, Inc.: .64%, Sun
Microsystems: .74%, Microsoft: 7.60%, Lowe's Companies: .36%, Micron Technolo-
gy: .29%, Apple Computer: .10%, Xilinx: .10%, Allergan: .09%, Wal-Mart Stores:
3.37%, Comcast: .44%, Granite Construction: .01%, Solectron: .18%, American
Power Conversion: .08%. The composition of the DSIP is subject to change.
Past performance is no guarantee of future results. Performance of individ-
ual stocks is not necessarily representative of performance of the portfolio
as a whole, which is made up of 400 companies. Return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Unlike other mutual funds, the
Domini Social Equity Fund invests all of its investable assets in the DSIP,
which is a separate portfolio with an identical investment objective.
Please obtain the Fund's current prospectus which includes charges and ex-
penses, by calling 1-800-762-6814 or online at www.domini.com. Read it care-
fully before investing or sending money. Signature Broker Dealer Services,
Distributor.
13
<PAGE>
COMPARISON OF $10,000 INVESTMENT IN THE
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND AND S&P 500/1/
Dollars (thousands)
6/30/91 10 10
10/30/91 10.59134 10.67656
1/31/92 11.26964 11.20443
4/30/92 11.26964 11.45136
7/31/92 11.80416 11.8094
10/31/92 12.07098 11.74513
1/31/93 12.89376 12.39685
4/30/93 12.62491 12.52083
7/31/93 12.98598 12.8416
10/31/93 13.6461 13.50023
1/31/94 13.94968 13.99337
4/30/94 13.2057 13.18614
7/31/94 13.36719 13.50286
10/31/94 13.85207 14.02062
1/31/95 13.97643 14.05953
4/30/95 15.20832 15.47674
7/31/95 16.72338 17.01578
10/31/95 17.41034 17.71574
1/31/96 18.85141 19.49132
4/30/96 19.48813 20.1598
7/31/96 19.10401 19.83869
10/31/96 21.23331 21.98457
1/31/97 24.04361 24.63018
4/30/97 24.88223 25.21475
7/31/97 29.59193 30.15839
10/31/97 28.4909 29.05178
1/31/98 31.38037 31.24764
2/28/98 33.71 33.493
3/31/98 35.119 35.212
4/30/98 35.321 35.578
5/31/98 34.692 34.959
6/30/98 36.503 36.379
7/31/98 36.32 35.992
8/31/98 30.974 30.781
9/30/98 32.978 32.753
10/31/98 35.869 35.417
11/30/98 38.231 37.564
12/31/98 41.176 39.728
1/31/99 43.726 41.389
Past performance is not predictive of future results.
---------------------------
Average Annual
Total Return
---------------------------
1 Year Ended 39.34%
1/31/99
---------------------------
5 Years Ended 25.88%
1/31/99
---------------------------
Inception (6/31/91) 20.56%
to 1/31/99/2/
---------------------------
/1/ The performance information in this chart represents past performance. The
investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. The S&P 500 is an unmanaged index used to portray the
pattern of common stock movement based on the average performance of 500
widely held common stocks. The index does not pay expenses.
/2/ The Domini Institutional Social Equity Fund, which commenced operations on
May 30, 1996 invests all of its assets in the Domini Social Index Portfo-
lio which has the same investment objectives as the Fund. Performance
prior to commencement of operations is the performance of the Domini So-
cial Index Portfolio adjusted for expenses of the Fund.
14
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Apparel -- 0.2%
Brown Group, Inc. ...................................... 2,500 $ 40,156
Hartmarx Corporation (b)................................ 5,500 27,500
Liz Claiborne, Inc. .................................... 10,400 397,800
Oshkosh B'Gosh.......................................... 2,600 41,275
Phillips-Van Heusen Corporation......................... 4,200 26,513
Reebok International Ltd. (b)........................... 9,000 133,875
Russell Corporation..................................... 5,800 114,188
Springs Industries, Inc. ............................... 2,900 121,075
Stride Rite Corporation................................. 7,400 73,075
Timberland Company (The) (b)............................ 1,800 81,000
V. F. Corporation....................................... 20,000 852,500
------------
1,908,957
------------
Banking -- 5.3%
Banc One Corporation.................................... 197,685 10,353,752
BankBoston Corporation.................................. 49,700 1,835,794
Bankers Trust New York Corporation...................... 15,900 1,383,300
Fifth Third Bancorp..................................... 44,825 3,067,711
Mellon Bank Corporation................................. 43,900 2,941,300
Morgan (J.P.) & Co. Incorporated........................ 29,600 3,122,800
PNC Bank Corp. ......................................... 50,700 2,595,206
SunTrust Banks, Inc. ................................... 53,700 3,782,494
Synovus Financial Corp. ................................ 44,750 1,118,750
US Bancorp.............................................. 122,800 4,136,825
Vermont Financial Services Corp. ....................... 1,800 54,000
Wachovia Corporation.................................... 34,000 3,013,250
Washington Mutual Inc. ................................. 100,202 4,208,484
Wells Fargo & Company................................... 273,000 9,537,938
------------
51,151,604
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Commercial Products & Services -- 1.9%
Angelica Corporation.................................... 1,300 $ 19,581
Avery Dennison Corporation.............................. 19,400 959,088
Bemis Company, Inc. .................................... 8,400 285,600
Cintas Corporation...................................... 17,700 1,346,306
Deluxe Corporation...................................... 13,400 477,375
DeVry Inc. (b).......................................... 11,600 341,475
Donnelley (R.R.) & Sons Company......................... 22,700 855,506
Ecolab Inc. ............................................ 21,500 833,125
Harland (John H.) Company............................... 4,900 68,294
Herman Miller, Inc. .................................... 14,300 270,806
HON Indudstries Inc. ................................... 9,800 199,675
Ikon Office Solutions................................... 22,600 361,600
Interface Inc. ......................................... 8,300 85,594
Kelly Services, Inc. ................................... 6,075 168,581
Moore Corporation....................................... 14,300 165,344
National Service Industries, Inc. ...................... 6,700 229,475
New England Business Service, Inc. ..................... 2,300 76,044
Pitney Bowes Inc. ...................................... 45,800 3,151,613
Sealed Air Corporation.................................. 13,900 737,569
Sonoco Products Company................................. 16,945 472,342
Standard Register Company............................... 4,400 136,950
Tennant Company......................................... 1,400 51,800
Xerox Corporation....................................... 55,400 6,869,600
------------
18,163,343
------------
Construction -- 0.2%
Apogee Enterprises, Inc. ............................... 4,300 44,344
Centex Corporation...................................... 9,600 414,600
Champion Enterprises Inc. (b)........................... 7,700 179,988
Fleetwood Enterprises, Inc. ............................ 5,400 199,800
Granite Construction Incorporated....................... 4,350 140,831
</TABLE>
15
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Construction -- Continued
Kaufman & Broad Home Corporation........................ 8,000 $ 225,500
Osmonics Inc. (b)....................................... 2,100 18,638
Rouse Company........................................... 11,500 271,688
Sherwin-Williams Company................................ 28,800 738,000
Skyline Corporation..................................... 1,400 43,050
TJ International, Inc. ................................. 2,300 55,488
------------
2,331,927
------------
Energy -- 1.3%
Anadarko Petroleum Corporation.......................... 19,800 535,838
Apache Corporation...................................... 15,800 304,150
Atlantic Richfield Company.............................. 54,000 3,098,250
Consolidated Natural Gas Company........................ 16,000 821,000
Enron Corp ............................................. 55,900 3,689,400
Helmerich & Payne, Inc. ................................ 7,800 136,988
Oryx Energy Company (b)................................. 17,700 215,719
Pennzoil Company........................................ 7,400 85,563
Questar Corporation..................................... 13,200 220,275
Rowan Companies, Inc. (b)............................... 13,900 122,494
Santa Fe Energy Resources, Inc. (b)..................... 16,900 98,231
Sun Company, Inc. ...................................... 15,500 544,438
Union Pacific Resources Group, Inc. .................... 41,800 337,013
Williams Companies...................................... 72,200 2,382,600
------------
12,591,959
------------
Financial Services -- 5.5%
American Express Company................................ 76,400 7,859,650
Block (H & R), Inc. .................................... 16,700 732,713
Dime Bancorp............................................ 19,200 465,600
Edwards (A.G.), Inc. ................................... 15,187 514,460
Fannie Mae.............................................. 175,000 12,753,125
Federal Home Loan Mortgage Corporation.................. 114,600 7,105,200
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Financial Services -- Continued
First Tennessee National Corporation.................... 21,300 $ 778,781
FirstFed Financial Corp. (b)............................ 3,400 54,188
Golden West Financial................................... 9,500 891,813
Household International, Inc. .......................... 81,246 3,569,746
MBIA Inc. .............................................. 16,500 1,081,781
MBNA Corporation........................................ 135,450 3,784,135
Merrill Lynch & Co., Inc. .............................. 59,900 4,552,400
Providian Financial Corporation......................... 23,900 2,409,419
Schwab (Charles) Corporation............................ 67,700 4,760,156
Student Loan Marketing Association...................... 27,500 1,211,719
Transamerica Corporation................................ 20,800 1,164,800
Value Line, Inc. ....................................... 1,500 58,125
------------
53,747,811
------------
Foods & Beverages -- 6.1%
Ben & Jerry's Homemade, Inc. (b)........................ 600 14,400
Bestfoods............................................... 48,200 2,425,063
Campbell Soup Company................................... 75,200 3,529,700
Coca-Cola Company....................................... 416,200 27,235,088
Fleming Companies, Inc. ................................ 6,000 53,625
General Mills Incorporated.............................. 25,800 2,165,588
Heinz (H.J.) Company.................................... 61,100 3,440,694
Hershey Foods Corporation............................... 24,200 1,361,250
Kellogg Company......................................... 68,500 2,799,938
Nature's Sunshine Products, Inc. ....................... 2,600 34,613
Odwalla, Incorporated (b)............................... 500 3,375
PepsiCo, Inc............................................ 247,700 9,675,781
Quaker Oats Company..................................... 22,700 1,262,688
Ralston Purina Company.................................. 52,800 1,445,400
Smucker (J.M.) Company.................................. 4,600 115,000
</TABLE>
16
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Foods & Beverages -- Continued
SUPERVALU Inc. ......................................... 20,200 $ 554,238
Sysco Corporation....................................... 56,400 1,536,900
Tootsie Roll Industries, Inc. .......................... 5,054 227,746
Wrigley (Wm.) Jr. Company............................... 19,700 1,844,413
------------
59,725,500
------------
Health Care -- 8.9%
Acuson Corporation (b).................................. 4,400 58,850
ADAC Laboratories (b)................................... 3,000 66,188
Allergan, Inc. ......................................... 10,800 830,250
ALZA Corporation (b).................................... 14,600 738,213
Becton Dickinson and Company............................ 41,600 1,487,200
Bergen Brunswig Corporation............................. 16,336 457,408
Biomet, Inc. (b)........................................ 18,700 684,888
Boston Scientific Corporation (b)....................... 66,400 1,622,650
Forest Laboratories, Inc. (b)........................... 13,300 614,294
Guidant Corp............................................ 50,600 2,982,238
Humana Health Plans, Inc. (b)........................... 27,800 496,925
IMS Health Inc. ........................................ 55,200 2,021,700
Johnson & Johnson....................................... 227,000 19,295,000
Mallinckrodt, Inc. ..................................... 11,500 401,781
McKesson HBOC Inc....................................... 45,820 3,442,228
Medtronic, Inc. ........................................ 82,800 6,598,125
Merck & Co., Inc. ...................................... 201,000 29,496,750
Mylan Laboratories, Inc. ............................... 20,900 637,450
Oxford Health Plans, Inc. (b)........................... 13,400 231,987
Schering-Plough Corporation............................. 248,100 13,521,450
St. Jude Medical Inc. (b)............................... 13,500 351,844
Stryker Corporation..................................... 16,000 742,000
Sunrise Medical Inc. (b)................................ 3,500 27,781
United American Healthcare Corporation (b).............. 800 950
------------
86,808,150
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Household Goods -- 5.5%
Alberto-Culver Company.................................. 8,800 $ 226,600
Avon Products, Inc. .................................... 44,400 1,640,025
Bassett Furniture Industries............................ 1,800 39,937
Black & Decker Corp..................................... 14,900 789,700
Church & Dwight Co., Inc. .............................. 3,000 117,375
Clorox Company.......................................... 17,600 2,202,200
Colgate-Palmolive Company............................... 49,400 3,973,612
Enesco Group, Inc. ..................................... 2,200 44,550
Fedders Corporation..................................... 6,400 33,200
Fort James Corp. ....................................... 37,200 1,334,550
Gillette Company........................................ 187,300 11,003,875
Handleman Company (b)................................... 4,900 59,719
Harman International Industries, Inc. .................. 2,930 123,060
Hasbro, Inc. ........................................... 21,750 808,828
Huffy Corporation....................................... 1,700 24,650
Kimberly-Clark Corporation.............................. 91,464 4,556,050
Leggett & Platt......................................... 32,800 668,300
Mattel, Inc. ........................................... 47,785 1,084,122
Maytag Corporation...................................... 14,700 928,856
Newell Co. ............................................. 27,000 1,122,188
Oneida Ltd. ............................................ 2,300 33,063
Procter & Gamble Company................................ 224,000 20,356,000
Rubbermaid Incorporated................................. 25,100 809,475
Shaw Industries, Inc. .................................. 23,500 497,906
Snap-On Incorporated.................................... 9,850 334,900
Stanley Works........................................... 14,200 357,662
Thomas Industries Inc. ................................. 2,200 40,425
Whirlpool Corporation................................... 12,400 557,225
------------
53,768,053
------------
Insurance -- 4.5%
Aetna, Inc.............................................. 23,870 2,151,284
American General Corporation............................ 42,662 3,042,334
</TABLE>
17
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Insurance -- Continued
American International Group, Inc. (b).................. 208,650 $ 21,477,910
Chubb Corporation....................................... 27,300 1,603,875
CIGNA Corporation....................................... 35,200 2,899,600
Cincinnati Financial Corporation........................ 27,585 908,581
Hartford Steam Boiler Inspection and Insurance.......... 4,550 171,762
Jefferson-Pilot Corporation............................. 17,950 1,359,713
Lincoln National Corp. ................................. 16,900 1,407,981
Marsh & McLennan Companies, Inc. ....................... 43,450 2,731,919
MGIC Investment Corp. .................................. 18,100 662,912
ReliaStar Financial Corporation......................... 15,100 625,706
SAFECO Corporation...................................... 22,600 878,575
St. Paul Companies, Inc. ............................... 38,864 1,141,630
Torchmark Corporation................................... 23,300 764,531
UNUM Corporation........................................ 23,400 1,414,237
Wesco Financial Corporation............................. 1,200 399,600
------------
43,642,150
------------
Media -- 3.7%
Banta Corporation....................................... 4,650 111,019
Comcast Corporation..................................... 62,200 4,228,630
Disney (Walt) Company................................... 345,900 11,414,700
Dow Jones & Company..................................... 15,600 698,100
Harcourt General........................................ 11,600 556,800
King World Productions, Inc. (b)........................ 12,200 333,975
Lee Enterprises, Inc. .................................. 7,200 201,600
McGraw-Hill Companies................................... 16,400 1,773,250
Media General, Inc...................................... 4,200 210,000
MediaOne Group, Inc. (b)................................ 102,500 5,746,406
Meredith Corporation.................................... 8,300 309,175
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Media -- Continued
New York Times Company.................................. 30,400 $ 1,043,100
Scholastic Corporation (b).............................. 2,500 141,563
Tele-Communications, Inc. (b)........................... 90,900 6,232,331
Times Mirror Company.................................... 14,000 770,875
Viacom, Inc. (b)........................................ 11,700 981,337
Washington Post Company................................. 1,700 967,300
------------
35,720,161
------------
Miscellaneous -- 0.8%
American Greetings Corporation.......................... 11,500 454,250
Caraustar Industries, Inc. ............................. 4,000 113,000
Case Corporation........................................ 11,700 221,569
CPI Corp. .............................................. 1,400 37,012
Cross (A.T.) Company.................................... 2,300 14,662
Deere & Company......................................... 40,200 1,309,012
Gibson Greetings, Inc. (b).............................. 2,300 22,856
Hillenbrand Industries, Inc. ........................... 11,000 517,000
Hunt Manufacturing Co. ................................. 1,600 18,300
Ionics, Inc. (b)........................................ 2,300 74,462
Jostens, Inc. .......................................... 5,900 137,544
Marriott International, Inc. ........................... 42,100 1,478,762
Omnicom Group Inc. ..................................... 28,400 1,817,600
Polaroid Corporation.................................... 7,100 121,144
Service Corporation International....................... 45,800 727,075
Toro Company............................................ 1,800 62,550
Vincam Group, Inc. (The)................................ 2,100 38,062
Whitman Corporation..................................... 16,200 315,900
------------
7,480,760
------------
Miscellaneous Manufacturing -- 0.9%
Applied Materials, Inc. (b)............................. 62,300 3,936,581
Brady (W.H.) Co. ....................................... 3,500 95,375
</TABLE>
18
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Miscellaneous Manufacturing -- Continued
CLARCOR Inc. ........................................... 3,850 $ 79,406
Crown Cork & Seal Company, Inc. ........................ 20,400 646,425
Dionex Corporation (b).................................. 3,500 135,187
Fastenal Company........................................ 6,000 231,375
Gerber Scientific Inc. ................................. 3,600 69,075
Graco Inc. ............................................. 3,375 82,687
Illinois Tool Works Inc. ............................... 42,300 2,551,219
Isco, Inc. ............................................. 800 4,700
Lawson Products, Inc. .................................. 1,600 34,800
Milcron Inc. ........................................... 6,200 121,287
Millipore Corporation................................... 7,100 216,994
Nordson Corporation..................................... 2,400 153,000
Watts Industries........................................ 4,200 61,425
Wellman, Inc. .......................................... 4,900 46,856
------------
8,466,392
------------
Resource Development -- 1.2%
Air Products & Chemicals, Inc. ......................... 38,500 1,294,563
Aluminum Company of America............................. 30,900 2,584,013
Battle Mountain Gold Company (b)........................ 37,900 139,756
Cabot Corporation....................................... 11,100 278,888
Calgon Carbon Corporation............................... 6,200 39,525
Catalytica Inc. (b)..................................... 4,500 66,375
Consolidated Papers, Inc. .............................. 14,600 338,538
Cyprus Amax Minerals Company............................ 14,900 142,481
Echo Bay Mines Ltd (b).................................. 23,200 39,150
Fuller (H.B.) Company................................... 2,200 94,600
IMCO Recycling Inc. .................................... 2,300 28,175
Inland Steel Industries, Inc. .......................... 6,400 96,800
Mead Corporation........................................ 17,000 486,625
Morton International, Inc. ............................. 20,600 533,025
Nalco Chemical Company.................................. 10,400 286,000
Nucor Corporation....................................... 14,550 712,950
Praxair, Inc. .......................................... 26,200 846,588
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Resource Development -- Continued
Sigma-Aldrich Corporation............................... 16,700 $ 475,950
Westvaco Corporation.................................... 16,800 370,650
Worthington Industries, Inc. ........................... 15,000 208,125
------------
9,062,777
------------
Retail -- 11.7%
Albertson's, Inc. ...................................... 41,500 2,531,500
American Stores Companies............................... 46,400 1,682,000
Bob Evans Farms, Inc. .................................. 6,700 155,775
Charming Shoppes, Inc. (b).............................. 15,600 57,525
Circuit City Stores, Inc. .............................. 16,700 922,675
Claire's Stores, Inc. .................................. 8,100 159,975
Costco Companies Inc. (b)............................... 36,515 3,026,181
CVS Corporation......................................... 65,500 3,586,125
Dayton Hudson Corporation............................... 74,200 4,730,250
Dillard Department Stores, Inc. ........................ 17,700 439,181
Dollar General Corporation.............................. 34,081 849,895
Egghead, Inc. (b)....................................... 3,800 64,600
Gap, Inc. (The)......................................... 97,725 6,272,724
Great Atlantic & Pacific Tea Company, Inc. ............. 6,100 203,587
Hannaford Bros. Co. .................................... 6,800 320,450
Home Depot, Inc. ....................................... 261,598 15,793,979
Kmart Corporation (b)................................... 82,700 1,452,419
Kroger Co. (b).......................................... 43,100 2,736,850
Lands' End, Inc. (b).................................... 4,700 152,162
Lillian Vernon Corporation.............................. 1,500 22,219
Limited, Inc. (The)..................................... 39,000 1,330,875
Longs Drug Stores Corporation........................... 6,200 237,537
Lowe's Companies, Inc. ................................. 59,500 3,469,594
Luby's Cafeterias, Inc. ................................ 3,700 57,119
May Department Stores Company........................... 39,400 2,378,775
</TABLE>
19
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Retail -- Continued
McDonald's Corporation.................................. 114,300 $ 9,008,269
Men's Wearhouse Inc. (b)................................ 5,000 148,125
Meyer Fred, Inc. (b).................................... 26,000 1,625,000
Nordstrom, Inc.......................................... 24,800 1,032,300
Penney (J.C.) Company, Inc.............................. 42,700 1,673,306
Pep Boys -- Manny, Moe & Jack........................... 10,300 162,225
Ruby Tuesday, Inc. ..................................... 5,200 103,675
Ryan's Family Steakhouse, Inc. (b)...................... 6,300 87,019
Sears, Roebuck and Co. ................................. 64,900 2,604,112
Staples, Inc. (b)....................................... 78,900 2,258,512
Starbucks Corporation (b)............................... 14,900 775,731
Tandy Corporation....................................... 16,400 885,600
TCBY Enterprises, Inc................................... 3,200 19,200
TJX Companies, Inc...................................... 54,500 1,611,156
Toys "R' Us, Inc. (b)................................... 43,520 652,800
Wal-Mart Stores, Inc.................................... 21,800 111,725
Walgreen Company........................................ 84,100 5,256,250
Wal-Mart Stores, Inc.................................... 380,300 32,705,800
Wendys International Inc. .............................. 20,400 485,775
Whole Foods Market, Inc. (b)............................ 4,100 131,456
Wild Oats Markets, Inc. (b)............................. 2,100 50,531
------------
114,022,539
------------
Technology -- 33.2%
3Com Corporation (b).................................... 60,100 2,824,700
Adaptec Inc (b)......................................... 17,700 409,312
Advanced Micro Devices, Inc. (b)........................ 24,100 552,794
AirTouch Communications, Inc. (b)....................... 96,500 9,318,281
American Power Conversion (b)........................... 15,900 812,888
Analog Devices, Inc. (b)................................ 27,000 803,250
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Technology -- Continued
Apple Computer, Inc. (b)................................ 22,400 $ 922,600
AT&T Corporation........................................ 304,900 27,669,675
Ault Inc. (b)........................................... 500 4,062
Autodesk, Inc. ......................................... 7,400 326,987
Automatic Data Processing, Inc.......................... 102,100 4,345,631
Avnet, Inc.............................................. 6,100 274,119
Baldor Electric Company................................. 5,900 116,894
Broderbund Software Inc. (b)............................ 36,400 1,699,425
Ceridian Corp. (b)...................................... 12,000 952,500
Cisco Systems, Inc. (b)................................. 266,650 29,748,141
Citizens Utilities Company.............................. 43,067 336,461
Compaq Computer Corporation............................. 286,988 13,667,804
Computer Associates International, Inc. ................ 92,800 4,698,000
Cooper Industries, Inc.................................. 18,600 770,737
Dell Computer Corp. (b)................................. 215,000 21,500,000
EMC Corp. Mass (b)...................................... 84,700 9,221,712
Emerson Electric Company................................ 74,300 4,323,331
Grainger (W.W.), Inc.................................... 15,900 647,925
Hewlett-Packard Company................................. 175,100 13,723,462
Hubbell Incorporated.................................... 10,660 390,422
Hutchinson Technology (b)............................... 3,100 142,987
Inprise Corp. (b)....................................... 7,900 40,487
Intel Corporation....................................... 281,400 39,659,812
LSI Logic (b)........................................... 23,500 655,062
Lucent Technologies, Inc. .............................. 222,000 24,988,875
Merix Corporation (b)................................... 600 3,619
Micron Technology, Inc. (b)............................. 36,000 2,812,500
Microsoft Corporation (b)............................... 421,000 73,675,000
Molex Incorporated...................................... 25,937 770,005
National Semiconductor Corporation (b).................. 27,600 357,075
</TABLE>
20
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Technology -- Continued
Novell Inc. (b)......................................... 59,100 $ 1,204,162
PeopleSoft, Inc......................................... 39,000 772,687
Perkin-Elmer Corporation................................ 8,400 798,525
QRS Corporation (b)..................................... 1,200 60,000
Raychem Corporation..................................... 13,100 329,137
Scientific Atlanta Inc. ................................ 12,300 382,837
Shared Medical Systems Corporation...................... 4,100 192,700
Solectron Corporation (b)............................... 19,900 1,772,344
Sprint Corporation...................................... 72,700 6,097,712
Sun Microsystems, Inc. (b).............................. 64,200 7,174,350
Symantic Corporation.................................... 9,300 190,069
Tektronix, Inc. ........................................ 7,700 194,906
Tellabs, Inc. (b)....................................... 32,800 2,812,600
Texas Instruments, Inc. ................................ 65,900 6,515,862
Thomas & Betts Corporation.............................. 9,200 406,525
Xilinx, Inc. (b)........................................ 12,000 996,000
------------
323,066,951
------------
Transportation -- 1.1%
Airborne Freight Corporation............................ 7,800 273,000
Alaska Air Group, Inc. (b).............................. 4,100 206,537
AMR Corporation (b)..................................... 30,700 1,803,625
Consolidated Freightways Corporation (b)................ 3,100 49,600
Delta Air Lines, Inc. .................................. 24,800 1,353,150
FDX Holding Corporation (b)............................. 24,900 2,034,019
GATX Corporation........................................ 8,000 297,500
Norfolk Southern Corporation............................ 64,000 1,764,000
Roadway Express, Inc. .................................. 2,800 46,375
Ryder System, Inc. ..................................... 11,500 280,312
Southwest Airlines Co. ................................. 56,850 1,527,844
UAL Corporation (b)..................................... 9,600 597,600
Yellow Corporation (b).................................. 3,700 66,369
------------
10,299,931
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Utilities -- 7.6%
AGL Resources Inc....................................... 9,000 $ 181,125
American Water Works, Inc............................... 13,500 400,781
Ameritech............................................... 186,300 12,132,787
Aquarion Company........................................ 1,100 42,419
Bell Atlantic Corporation............................... 262,022 15,721,320
BellSouth Corporation................................... 330,200 14,735,175
CalEnergy Company, Inc. (b)............................. 9,600 306,000
Cleco Corporation....................................... 3,500 110,250
Connecticut Energy Corporation.......................... 1,500 40,594
Eastern Enterprises..................................... 3,400 136,850
El Paso Energy Corporation.............................. 20,000 660,000
Energen Corporation..................................... 4,600 78,487
Equitable Resources, Inc. .............................. 5,900 153,769
Frontier Corporation.................................... 28,600 1,033,175
Idaho Power Company..................................... 6,000 197,250
KeySpan Energy.......................................... 26,400 714,450
LG&E Energy Corp........................................ 21,700 572,337
MCN Corporation......................................... 12,600 223,650
New Century Energies, Inc. ............................. 19,100 840,400
NICOR Inc. ............................................. 7,800 300,787
Northwest Natural Gas Co. .............................. 3,900 91,650
Northwestern Corp. ..................................... 3,600 95,850
Oklahoma Gas and Electric Company....................... 12,900 326,531
Peoples Energy Corporation.............................. 5,500 189,750
Potomac Electric Power Company.......................... 19,900 463,919
SBC Communications Inc. ................................ 330,258 17,833,932
Sonat Inc. ............................................. 18,300 471,225
Telephone and Data Systems, Inc. ....................... 10,200 543,150
U S West Communications Group (b)....................... 84,741 5,227,459
</TABLE>
21
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (Continued)
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Utilities -- Continued
Washington Gas Light Company............................ 7,500 $ 180,000
------------
74,005,072
------------
Vehicle Components -- 0.4%
Cooper Tire and Rubber Company.......................... 12,400 265,825
Cummins Engine Company, Inc. ........................... 6,900 262,200
Dana Corporation........................................ 27,700 1,139,162
Federal-Mogul Corporation............................... 11,000 651,750
Genuine Parts Company................................... 30,000 956,250
Modine Manufacturing Company............................ 4,600 132,250
Smith (A.O.) Corporation................................ 3,700 88,800
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>
Vehicle Components -- Continued
Spartan Motors, Inc. (b)................................ 1,700 $ 10,200
SPX Corporation......................................... 4,916 347,779
------------
3,854,216
------------
Total Investments(a) -- 99.7%................................... $969,818,253
Other Assets, less liabilities -- 0.3%.......................... 2,903,137
------------
Net Assets -- 100.0%............................................ $972,721,390
============
</TABLE>
- --------
(a) The aggregate cost for book and federal income tax purposes is
$646,719,849, the aggregate gross unrealized appreciation is $336,191,769,
and the aggregate gross unrealized depreciation is $13,093,365, resulting
in net unrealized appreciation of $323,098,404.
(b) Non-income producing security.
22
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $646,719,849)........................ $969,818,253
Cash............................................................ 9,651,113
Dividends receivable............................................ 860,644
------------
Total assets................................................... 980,330,010
------------
LIABILITIES:
Payable for securities purchased................................ 7,262,726
Accrued expenses (Note 2)....................................... 345,894
------------
Total liabilities.............................................. 7,608,620
------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.......... $972,721,390
============
</TABLE>
See Notes to Financial Statements
23
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF OPERATIONS
Six months ended January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of
$192)........................................... $ 4,133,933
------------
EXPENSES:
Management fee (Note 2).......................... 732,324
Professional fees................................ 40,239
Custody fees (Note 3)............................ 151,869
Trustee fees..................................... 2,000
Miscellaneous.................................... 2,365
------------
Total expenses................................... 928,797
Fees paid indirectly........................... (139,159)
Expenses paid and fee waived by manager........ (59,667)
------------
Net expenses................................... 729,971
------------
NET INVESTMENT INCOME.............................. 3,403,962
Net realized gain on investments
Proceeds from sales.............................. $ 56,957,056
Cost of securities sold.......................... 47,479,386
------------
Net realized gain on investments............... 9,477,670
Net changes in unrealized appreciation of
investments
Beginning of period.............................. $175,720,768
End of period.................................... 323,098,404
------------
Net change in unrealized appreciation.......... 147,377,636
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $160,259,268
============
</TABLE>
See Notes to Financial Statements
24
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
January 31, 1999 Year Ended
(unaudited) July 31, 1998
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income......................... $ 3,403,962 $ 4,628,319
Net realized gain on investments.............. 9,477,670 4,836,426
Net change in unrealized appreciation of
investments.................................. 147,377,636 84,559,360
------------ ------------
Net Increase in Net Assets Resulting from
Operations................................. 160,259,268 94,024,105
------------ ------------
Transactions in Investors' Beneficial Interest:
Additions..................................... 176,349,371 267,044,708
Reductions.................................... (6,122,884) (11,192,148)
------------ ------------
Net Increase in Net Assets from Transactions
in Investors' Beneficial Interests......... 170,226,487 255,852,560
------------ ------------
Total Increase in Net Assets.............. 330,485,755 349,876,665
NET ASSETS:
Beginning of period........................... 642,235,635 292,358,970
------------ ------------
End of period................................. $972,721,390 $642,235,635
============ ============
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
January 31, ---------------------------------------------------------------
1999 July 31, July 31, July 31, July 31,
(unaudited) 1998 1997 1996 1995
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
Net Assets (000's)...... $972,721 $642,236 $292,359 $100,401 $54,003
Ratio of net investment
income to average net
assets................. 0.92%(/1/) 1.05%(/2/) 1.34% 1.48%(/4/) 1.85%(/5/)
Ratio of expenses to
average net assets..... 0.23%(/1/)(/3/) 0.24%(/2/)(/3/) 0.29%(/3/) 0.59%(/3/)(/4/) 0.43%(/5/)
Portfolio turnover
rate................... 8% 5% 1% 5% 6%
</TABLE>
- -------------------------------------------------------------------------------
(/1/) Reflects a voluntary expense reimbursement and fee waiver of 0.02% the
Manager. Had the manager not waived their fee and reimbursed expenses,
the annualized ratios of net investment income and expense to average
net assets for the six months ended January 31, 1999 would have been
0.90% and 0.25%, respectively.
(/2/) Reflects a waiver of 0.01% of fees by the Manager due to limitations set
forth in the Management Agreement. Had the Manager not waived their
fees, the ratios of net investment income and expenses to average net
assets for the year ended July 31, 1998 would have been 1.04% and 0.25%,
respectively.
(/3/) Ratio of expenses to average net assets for the years ended July 31,
1998, 1997 and 1996 include indirectly paid expenses. Excluding
indirectly paid expenses, the expense ratios would have been 0.20%,
0.25% and 0.50% for the years ended July 31, 1998, 1997 and 1996,
respectively and 0.20% for the six months ended January 31, 1999.
(/4/) Had the Expense Payment Agreement and Sponsor Arrangement not been in
place, the ratios of net investment income and expense for the years
ended July 31, 1996 would have been 1.14% and 0.85% respectively.
(/5/) Reflects a voluntary waiver of fees by the Administrator and Adviser due
to the limitations set forth in the Expense Reimbursement Agreement. Had
the Administrator and Adviser not waived their fees, the ratios of net
investment income and expenses to average net assets for the year ended
July 31, 1995 would have been 1.75% and 0.53% respectively.
See Notes to Financial Statements
25
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 (unaudited)
- -------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. Domini Social Index Port-
folio (the "Index Portfolio") is registered under the Investment Company Act
of 1940 (the "Act") as a no-load, diversified, open-end management investment
company which was organized as a trust under the laws of the State of New York
on June 7, 1989. The Index Portfolio intends to correlate its investment port-
folio as closely as is practicable with the Domini 400 Social Index (the "In-
dex"), which is a common stock index developed and maintained by Kinder,
Lydenberg, Domini & Co., Inc. ("KLD"). The Declaration of Trust permits the
Trustees to issue an unlimited number of beneficial interests in the Index
Portfolio. The Index Portfolio commenced operations upon effectiveness on Au-
gust 10, 1990 and began investment operations on June 3, 1991.
The preparation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sure of contingent assets and liabilities at the date of the financial state-
ments and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of the Index Portfolio's significant accounting policies.
(A) Valuation of Investments: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales are
reported.
(B) Dividend Income: Dividend income is reported on the ex-dividend date.
(C) Federal Taxes: The Index Portfolio will be treated as a partnership for
U.S. federal income tax purposes and is therefore not subject to U.S. federal
income tax. As such, each investor in the Index Portfolio will be taxed on its
share of the Index Portfolio's ordinary income and capital gains. It is in-
tended that the Portfolio will be managed in such a way that an investor will
be able to satisfy the requirements of the Internal Revenue Code applicable to
regulated investment companies.
(D) Other: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
2. TRANSACTIONS WITH AFFILIATES.
(A) Manager. Domini Social Investments LLC ("DSIL" or the "Manager") is reg-
istered as an investment adviser under the Investment Advisers Act of 1940.
The services provided by the Manager consist of investment supervisory servic-
es, overall operational support and administrative services. The administra-
tive services include the provision of general office facilities and supervis-
ing the overall administration of the Index Portfolio. For its services under
the Management Agreement, the Manager receives from the Index Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.20%. Currently,
DSIL is waiving its fee to the extent necessary to keep aggregate annual oper-
ating expenses of the Index Portfolio (excluding brokerage fees and commis-
sions, interest, taxes and other extraordinary expenses) at no greater than
0.20% of the average daily net assets of the Index Portfolio. This fee waiver
is voluntary and may be reduced or terminated at any time.
26
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- (Continued)
January 31, 1999 (unaudited)
- -------------------------------------------------------------------------------
(B) Submanager. Mellon Equity provides investment submanagement services to
the Index Portfolio on a day-to-day basis pursuant to a Submanagement Agree-
ment 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 aver-
age daily net assets of the Portfolio.
(C) Prior Advisory, Management, Sponsorship and Administrative
Agreements. Prior to October 22, 1997, pursuant to an investment advisory
agreement, KLD served as investment adviser to the Index Portfolio and fur-
nished continuously an investment program by determining the stocks to be in-
cluded in the Index. KLD received from the Index Portfolio a fee accrued daily
and paid monthly at an annual rate equal to 0.025% of the Portfolio's average
daily net assets. Additionally, prior to October 22, 1997, pursuant to a man-
agement agreement, Mellon Equity served as investment manager and managed the
assets of the Portfolio on a daily basis. Prior to October 22, 1997, pursuant
to a sponsorship agreement, KLD furnished administrative services for the
Portfolio. 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 administrative services. Prior to November 6, 1996, pursuant
to an administrative services agreement, Signature Broker-Dealer Services,
Inc. served as the administrator of the Portfolio. Prior to October 22, 1997,
management and administration fees with respect to the Portfolio were equal to
0.15% of the Index Portfolio's average daily net assets for its then current
fiscal year.
3. INVESTMENT TRANSACTIONS. Purchase and sales of investments, other than U.S.
Government securities and short-term obligations, for the six months ended
January 31, 1999 aggregated $227,916,978 and $56,957,056, respectively. Cus-
tody fees of the Portfolio were reduced by $139,159 which was compensation for
uninvested cash left on deposit with the custodian. Cash balances could have
been employed to earn additional income for the Portfolio.
27
<PAGE>
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in Domini Social Index Portfolio, at value (Note 1).. $136,141,418
------------
LIABILITIES:
Accrued expenses................................................. 58,236
------------
NET ASSETS........................................................ $136,083,182
============
NET ASSETS CONSIST OF:
Paid-in capital.................................................. $ 82,278,485
Undistributed net investment income.............................. 182,502
Accumulated net realized gain from Portfolio..................... 495,292
Net unrealized appreciation from Portfolio....................... 53,126,903
------------
$136,083,182
============
Shares outstanding................................................ 6,451,361
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
($136,083,182 /6,451,361 )....................................... $21.09
======
</TABLE>
See Notes to Financial Statements
28
<PAGE>
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
STATEMENT OF OPERATIONS
Six months ended January 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME FROM DOMINI SOCIAL INDEX PORTFOLIO:
Investment income from Portfolio................................... $ 662,070
Expenses from Portfolio............................................ 116,240
----------
Net investment income from Portfolio............................. 545,830
EXPENSES:
Sponsor fee (Note 2)............................................... 147,589
Trustees fees...................................................... 1,862
Printing........................................................... 4,492
Registration fees.................................................. 8,257
Professional fees.................................................. 16,274
Transfer agent fees (Note 2)....................................... 37,062
Accounting fees.................................................... 4,500
Miscellaneous...................................................... 4,507
----------
Total Expenses................................................... 224,543
Expenses Reimbursed and Fees Waived.............................. (166,307)
----------
58,236
----------
NET INVESTMENT INCOME............................................... 487,594
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain from Portfolio................................... 1,559,734
Net change in unrealized appreciation from Portfolio............... 21,571,685
----------
Net realized and unrealized gain from Portfolio.................... 23,131,419
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ 23,619,013
==========
</TABLE>
See Notes to Financial Statements
29
<PAGE>
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months Ended
January 31, 1999 Year Ended
(unaudited) July 31, 1998
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income......................... 487,594 $ 864,582
Net realized gain from Portfolio.............. 1,559,734 983,271
Net change in unrealized appreciation from
Portfolio.................................... 21,571,685 16,852,441
------------ ------------
Net Increase in Net Assets from Operations.. 23,619,013 18,700,294
------------ ------------
Distributions and Dividends:
Dividends to shareholders from net investment
income....................................... (488,776) (756,212)
Distributions to shareholders from net
realized gain................................ (2,012,581) (140,033)
------------ ------------
Net Decrease in Net Assets from
Distributions and Dividends................ (2,501,357) (896,245)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares.................. 7,610,076 34,548,379
Net asset value of shares issued in
reinvestment of distributions and dividends.. 2,306,767 705,891
Payments for shares redeemed.................. (11,272,080) (8,004,515)
------------ ------------
Net increase in Net Assets from Capital
Share Transactions......................... (1,355,237) 27,249,755
------------ ------------
Total increase in Net Assets............... 19,762,419 45,053,804
NET ASSETS:
Beginning of period........................... 116,320,763 71,266,959
------------ ------------
End of period (including undistributed net
investment income of $182,502 and $183,684,
respectively)................................ $136,083,182 $116,320,763
============ ============
OTHER INFORMATION
Share Transactions:
Sold.......................................... 431,391 2,131,365
Issued in reinvestment of distributions and
dividends.................................... 117,847 45,030
Redeemed...................................... (606,022) (513,453)
------------ ------------
Net increase.................................. (56,784) 1,662,942
============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
30
<PAGE>
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months ended Year Year For the period
January 31, 1999 ended ended May 30, 1996/1/ to
(Unaudited) July 31, 1998 July 31, 1997 July 31, 1996
---------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
For a share outstanding for
the Period:
Net asset value, beginning
of period.................. $ 17.87 $ 14.71 $ 9.60 $ 10.00
-------- -------- ------- -------
Income (loss) from
investment operations:
Net investment income: 0.11 0.15 0.13 0.02
Net realized and
unrealized gain (loss) on
investments.............. 3.54 3.17 5.11 (0.41)
-------- -------- ------- -------
Total income (loss) from
investment operations.. 3.65 3.32 5.24 (0.39)
-------- -------- ------- -------
Less distributions and
dividends:
Dividends to shareholders
from net investment
income................... (0.11) (0.13) (0.13) (0.01)
Distributions to
shareholders from net
realized gains........... (0.32) (0.03) (0.00)(/2/) --
-------- -------- ------- -------
Total distributions and
dividends.............. (0.43) (0.16) (0.13) (0.01)
-------- -------- ------- -------
Net asset value, end of
period..................... $ 21.09 $ 17.87 $ 14.71 $ 9.60
======== ======== ======= =======
Total return................ 39.34% 22.74% 54.9% (3.9)%
Ratios/Supplemental data:
Net assets, end of period
(000's omitted).......... $136,083 $116,321 $71,267 $17,972
Ratio of net investment
income to average net
assets................... 0.83%(/3/)(/4/)(/6/) 0.96%(/3/)(/4/) 1.25%(/5/) 1.42%(/5/)(/6/)
Ratio of expenses to
average net assets....... 0.30%(/3/)(/4/)(/6/) 0.30%(/3/)(/4/) 0.33%(/5/) 0.52%(/5/)(/6/)
</TABLE>
- -------------------------------------------------------------------------------
(/1/Commencement)of operations.
(/2/Distribution)was less than $0.005.
(/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 net investment
income and expenses to average net assets for the year ended July 31, 1998
would have been 0.65% and 0.61%, respectively, and 0.55% and 0.58%,
respectively for the six months ended January 31, 1999.
(/4/Reflects)a waiver of expenses by the Manager of the Index Portfolio. Had
the Manager not waived their fees, the ratios of net investment income and
expenses to average net assets for the year ended July 31, 1998 would have
been 0.66% and 0.62%, respectively, and 0.57% and 0.60%, respectively for
the six months ended January 31, 1999.
(/5/Total)expenses include expenses paid by the administrator or sponsor in
excess of expense payment and sponsor fees. Had these expenses not been
paid by the administrator or sponsor, the ratios of net investment income
and expenses to average net assets for the periods ended July 31, 1997 and
1996 would have been 0.93% and 0.65%, and 1.15% and 0.97%, respectively.
(/6/Annualized.)
See Notes to Financial Statements
31
<PAGE>
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 (unaudited)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. Domini Institutional Social Equity Fund
(the "Fund") is a series of Domini Institutional Trust and is registered as an
open-end management investment company under the Investment Company Act of
1940. The Fund invests substantially all of its assets in the Domini Social
Index Portfolio (the "Portfolio"), an open-end, diversified management invest-
ment company having the same investment objective as the Fund. The value of
such investment reflects the Fund's proportionate interest in the net assets
of the Portfolio (approximately 18.1% at July 31, 1998). The financial state-
ments of the Portfolio are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. The Fund commenced
operations on May 30, 1996.
The preparation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sure of contingent assets and liabilities at the date of the financial state-
ments and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of the Fund's significant accounting policies.
A. Valuation of Investments. Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. Investment Income and Dividends to Shareholders. The Fund earns income
daily, net of Portfolio expenses, on its investments in the Portfolio. Divi-
dends to shareholders are declared and paid quarterly from net investment in-
come. Distributions to shareholders of net realized capital gains, if any, are
made annually.
C. Federal Taxes. The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to dis-
tribute substantially all of its taxable income, including net realized gains,
if any, within the prescribed time periods. Accordingly, no provision for fed-
eral income or excise tax is necessary.
D. Other. All net investment income and realized and unrealized gains and
losses of the Portfolio are allocated daily pro rata among the Fund and the
other investors in the Portfolio.
2. TRANSACTIONS WITH AFFILIATES.
A. Manager. The Index Portfolio has retained Domini Social Investments LLC
("DSIL" or the Manager) to serve as investment manager and administrator. The
services provided by DSIL consist of investment supervisory services, overall
operational support and administrative services, including the provision of
general office facilities and supervising the overall administration of the
Portfolio. For its services under the Management Agreement, the Manager re-
ceives from the Portfolio a fee accrued daily and paid monthly at an annual
rate equal to 0.20% of the Index Portfolio's average daily net assets. Cur-
rently, DSIL is waiving its fee to the extent necessary to keep the aggregate
annual operating expenses of the Index 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 Index Portfolio. This waiver
is voluntary and may be reduced or terminated at any time. For the six months
ended January 31, 1999, DSIL waived its management fees totalling $59,667.
B. 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
32
<PAGE>
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- (Continued)
January 31, 1999 (unaudited)
- -------------------------------------------------------------------------------
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.
C. 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 simi-
lar to those provided by DSIL to the Index Portfolio under the Management
Agreement, DSIL answers questions from the general public and the media re-
garding the composition of the Domini Social Index and the securities holdings
of the Index 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. 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 ex-
penses) at no greater than 0.30% of the average daily net assets of the Fund.
This waiver is voluntary and may be reduced or terminated at any time. For the
six months ended January 31, 1999, DSIL waived its sponsorship fee and reim-
bursed expenses in the amount of $166,307.
D. Prior Advisory and Management Agreements. Prior to October 22, 1997,
Kinder, Lydenberg, Domini & Co. ("KLD"), as the Index Portfolio's former in-
vestment adviser, received from the Portfolio a fee accrued daily and paid
monthly at annual rate equal to 0.025% of the Index Portfolio's average daily
net assets. Additionally, prior to October 22, 1997, pursuant to a sponsorship
agreement, KLD furnished administrative services for the Portfolio. KLD re-
ceived from the Index Portfolio a fee accrued daily and paid monthly at an an-
nual rate equal to 0.025% of the average daily net assets of the Index Portfo-
lio. Prior to October 22, 1997, the Index Portfolio paid Mellon Equity an in-
vestment management fee equal on an annual basis to 0.10% of the average daily
net assets of the Portfolio. Prior to October 22, 1997, Signature, as the
Fund's former Administrator, received a fee accrued daily and paid monthly at
an annual rate equal to 0.045% of the average daily net assets of the Fund.
E. Other. Certain officers of the Fund are also officers of the transfer
agent, FSSI. Total fees paid to FSSI for the six months ended January 31, 1999
were approximately $37,000.
3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio for the six months ended January 31, 1999 aggregated
$111,856,572 and $92,080,959, respectively.
33
<PAGE>
[LOGO OF DOMINI SOCIAL INVESTMENTS]
P.O. Box 959
New York, NY 10159-0959
800-582-6757
http://www.domini.com
Portfolio Investment Custodian:
Manager Investors Bank &
and Fund Sponsor: Trust Company
Domini Social Boston, MA
Investments, LLC
11 West 25th Street, 7th Independent Auditors:
Floor KPMG Peat Marwick LLP
New York, NY 10010 Boston, MA
Portfolio Investment Legal Counsel:
Submanager: Bingham Dana LLP
Mellon Equity Associates Boston, MA
Pittsburgh, PA
Distributor: Transfer Agent:
Signature Broker-Dealer FSSI
Services, Inc. New York, NY
Boston, MA 02116
800-762-6814
