DOMINI INSTITUTIONAL TRUST, N-30D, 1999-09-30

DOMINI INSTITUTIONAL TRUST
N-30D, 1999-09-30

Previous: K2 DESIGN INC, SC 13D, 1999-09-30

Next: INTERVU INC, S-3, 1999-09-30

<PAGE>

[LOGO OF DOMINI SOCIAL INVESTMENTS]

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

Domini Institutional Social Equity Fund

Annual Report
July 31, 1999
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter from the President..................................... 2

Recent Developments........................................... 4

Social Profiles............................................... 5

Performance Chart............................................. 15

Domini Social Index Portfolio

Portfolio of Investments.................................... 17

Statement of Assets and Liabilities......................... 25

Statement of Operations..................................... 26

Statement of Changes in Net Assets.......................... 27

Financial Highlights........................................ 27

Notes to Financial Statements............................... 28

Report of Independent Auditors.............................. 30

Domini Institutional Social Equity Fund

Statement of Assets and Liabilities......................... 31

Statement of Operations..................................... 32

Statement of Changes in Net Assets.......................... 33

Financial Highlights........................................ 34

Notes to Financial Statements............................... 35

Report of Independent Auditors.............................. 37

For More Information.......................................... Inside back cover
</TABLE>

1
<PAGE>

LETTER FROM THE PRESIDENT

Dear Shareholders:

We are pleased to report that for the 12 months ended July 31, 1999, the Do-
mini Institutional Social Equity Fund rose 23.12%, while the Standard & Poor's
500 rose 20.20%. For the one year, five year and since inception periods ended
June 30, 1999, the Fund returned 26.15%, 28.92%, and 20.18% versus the S&P 500
which returned 22.76%, 27.85% and 19.65%. *

Market Performance

As a passively managed index fund, our Fund attempts to reflect the perfor-
mance of the market for U.S. equities that a socially responsible investor
might invest in. During the past 12 months, our portfolio has generally bene-
fited from broad market trends. During most of that period, investor appetite
for seasoned growth stocks with predictable earnings streams continued to
drive markets. This is consistent with our own investment approach and so
helped our portfolio.

From February through April 1999, investors shifted gears and began buying
stocks that had previously lagged behind, such as heavy industrials, natural
resource recovery industries, and other industries that the socially responsi-
ble investor tends to avoid. Generally this behavior occurs as an economy re-
covers from recession. While the United States had not been in recession,
Thailand, Brazil and other important trading partners did begin to climb out
of the recession they had been locked in. This was a particularly concrete ex-
ample of the way the globalization of world markets is affecting all aspects
of life here in America. Recent months have seen a market more balanced in in-
terest between growth stocks and cyclical stocks, and we have benefited from
that trend.

Globalization and the Socially Responsible Investor

In the United States, we have enjoyed an extraordinarily robust and long-lived
economic expansion. This prosperity has largely grown out of the globalization
of our markets and our ability to source manufacturing anywhere in the world
we choose. Regretfully, this global economy has not brought with it a higher
standard of living for all people and is in fact compromising other cultures
and less developed economies. Here in America, communal goals such as safe-
guarding our rapidly dwindling wetlands and old-growth forests, rebuilding our
public schools, supporting our cultural institutions, and caring for our el-
derly in a dignified and gentle way are often set aside. Abroad, the tradi-
tional concept of community has faced less of a challenge; but as the walls
come down, cultures are at risk, and so too are the means to meeting these
simple societal aspirations.

Perhaps it is time for the nation and for the world to ask what economic well-
being will bring us if it does not bring a more civilized society for all. Is
it not the goal of all people to provide a better world for the next genera-
tion?

The world abounds with examples of extraordinary contrast as traditional ways
sit side by side with western ones. An old woman stands by in her kimono as
her granddaughter jogs down a track in the latest spandex crea-

2
<PAGE>

tion. A culturally diverse group of men and women videoconference from around
the world and speak in their second language to decide where to site the fac-
tory they are building. It is one world and we cannot turn back the clock.

Although the global economy creates social challenges we could not have imag-
ined a decade ago it also brings with it tremendous opportunities. Everyone,
from the global corporation to the small child in central Africa, can benefit
from the crossing of cultures.

As socially responsible investors, we encourage companies to harness the best
of every culture, and the wisdom of every age. Indigenous cultures around the
globe are drawn to capitalism by the universal goals all people share. These
include food, clothing, shelter, education, health care, personal safety and a
clean environment. We encourage corporations to be ever mindful of these
goals. This is a new world, and it will lead to greater things so long as we
aim to improve the lives of all people while allowing the richest aspects of
cultural independence and pluralism to survive.

Responsible investors ask the hard questions about the impact our corporations
have as they reach out into this new global marketplace. We seek opportunities
to work with them to devise alternatives to the historic cycle of exploitation
that has become the norm. The human suffering that results from manufacturing
our products in sweatshop conditions and the devastation of the natural envi-
ronment to meet consumer demand is not sustainable and should not be accept-
able to civilized people. At Domini Social Investments we continue to work
with corporations to raise the bar, and to let them know that there is more
than one "bottom line."

On the pages that follow we highlight a number of corporations in our portfo-
lio that are valuing their employees and the environment in new ways that re-
flect the ever-changing world in which we live. We hope that you enjoy reading
this report and once again, we thank you for your investment and for your con-
tinuing support of socially responsible investing.
Very truly yours,

/s/ Amy L. Domini
Amy L. Domini
[email protected]
- -------------------------------------------------------------------------------
*Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than you paid for them. The Fund, which commenced opera-
tions on May 30, 1996, invests all its assets in the Domini Social Index Port-
folio which has the same investment objectives as the Fund. The Domini Social
Index Portfolio commenced operations on June 3, 1991. Performance prior to
commencement of operations is the performance of the Domini Social Index Port-
folio adjusted for expenses of the Fund. The S&P 500 Index is an unmanaged in-
dex 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 di-
rectly in an index. This material must be accompanied or preceded by the
Fund's current prospectus. DSIL Investment Services LLC, Distributor. 9/99

3
<PAGE>

RECENT DEVELOPMENTS

In April, as part of our ongoing commitment to provide you with the highest
possible level of transparency, we became the first mutual fund company to
make its current proxy voting record public. You may view our votes at
www.domini.com/ProxyVoting.html. Our announcement received some wonderful me-
dia attention, including The New York Times, and supportive opinion-pieces on
TheStreet.com and CBS Marketwatch.com.

The Fund has received a five star rating from Morningstar (Overall rating
among 3,043 domestic equity funds for the 3-year period ended 6/30/99).

Due to continued confidence and support for socially responsible investing,
Domini Social Investments' assets under management have grown to more than
$1.3 billion, and media interest continues to build. Here are some recent me-
dia highlights: The July issue of Black Enterprise Magazine featured a story
on social investing, and Kiplinger's Personal Finance Magazine ran a very in-
formative piece on socially responsible stocks in July. Also in July our
website was selected Fund Site of the month by Mutual Funds Magazine. We even
received a brief mention in the August issue of Time magazine.

Amy Domini was selected by Smart Money magazine as one of the 30 most influen-
tial people in the mutual fund industry, and continues to appear as a frequent
guest on CNBC.
- -------------------------------------------------------------------------------

The New York Times, "Domini's Proxy Votes Are an Open Book", May 30,1999;
TheStreet.com, "Let's Take Fund Proxy Votes Out of the Shadows", Steven Syre
and Steve Bailey, April 12, 1999; CBSMarketwatch.com, "The Gadfly: Investor
Should Know how Fund Votes", Michael Collins, Aug. 8, 1999; Black Enterprise
Magazine, "Doing Well By Doing Good", July 1999; MutualFunds Online, "Fund
Site of the Month: Domini Social Equity Web Site, Gateway to a Socially Con-
scious Fund with a Difference"; Kiplingers Personal Finance Magazine, "Stocks
that Reflect Your Conscience", July 1999; Time Magazine, "Good-Guy Investing",
August 16, 1999; Smart Money, "Power Brokers: The SmartMoney 30", September
,1999 (selected by team of reporters and editors among 100 nominees, accord-
ing to various criteria including assets they control directly, assets they
control indirectly, influence over individual investors and influence over
fund managers).

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than you paid for them. MorningstarTM proprietary ratings
reflect historical risk-adjusted performance as of 6/30/99, and are subject to
change each month. The Fund also received five stars for the 3-year period
ended 6/30/99. Five stars is the highest rating, representing the top 10% of
funds in its broad asset class. The next 22.5% receive 4 stars, and the next
35% receive 3 stars. Morningstar ratings are calculated from a fund's 3-year
and 5-year average annual returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments, and a risk factor that reflects fund perfor-
mance below 90-day Treasury bill returns.

4
<PAGE>

SOCIAL PROFILES

As we near the end of the century that brought us the rise of the modern cor-
poration, we thought we would take a moment to note some surprising and re-
markable changes that have taken place in the last few years. One of the most
exciting aspects of socially responsible investing is watching major corpora-
tions begin, little by little, to adopt the concepts we have been advocating
for so long, and to surprise us with new innovations on old ideas.

This year, we profile a few companies in our portfolio that have instituted
practices, or undergone changes, that were unheard of ten years ago. We have
chosen to highlight a small group of companies in the following areas: Diver-
sity, the Environment, and Employee Involvement. For variety, we decided not
to discuss any company in more than one issue area. However, because progress
in these areas can be an indication of strong, forward-looking management,
several of these companies have impressive stories to tell in all three areas.

We are pleased to present these recent developments, and hope they are an in-
dication of greater things to come. We hope you will find this information as
exciting as we do.

Diversity

A commitment to diversity is more than just a commitment to basic fairness. We
believe that a corporation's commitment to diversity can be an important com-
ponent of a well-managed company. As the world gets smaller and smaller, and
the markets open up to serve a more diverse group of people, some firms are
beginning to realize that they can benefit from the guidance, and leadership,
of those individuals who have been underrepresented and often excluded --
women and minorities.

The following companies have taken some dramatic steps to promote women and
minorities to positions of power within their ranks. Although these companies
represent a small minority of U.S. corporations, their examples demonstrate
what an active commitment to diversity can accomplish.

Hewlett-Packard Company. Ten years ago, few would have predicted that one of
the largest best known companies in the world would, in effect, be run by wom-
en. With a market-capitalization of over $106 billion, Hewlett-Packard is rec-
ognized as one of the best-managed companies in the world. In June 1999, a
woman, Carleton S. Fiorina, was named President and CEO of the company. In ad-
dition, in October 1998 Ann Livermore was appointed head of the company's new
unit, Enterprise Computing Solutions Organization, with responsibility for
one-third of the company's revenues. A woman also serves as vice president and
general manager of the company's LaserJet Solutions Group, which accounted for
approximately 20% of the firm's 1997

5
<PAGE>

revenues. The general manager of the company's medical products group is also
a woman. In FY 1998, women accounted for 28% of officials and managers, and
minorities accounted for 15%.

Such remarkable developments do not come about by accident -- they result from
focused programs that help promote and recruit women and minorities, and an
atmosphere that encourages women and minorities to stay and grow within the
company. This is one reason why good performance in this area can be an indi-
cation of solid management.

Not surprisingly, Hewlett-Packard has a number of progressive policies in
place to support working mothers. In 1998, for the eleventh year, Working
Mother magazine included the firm on its list of the 100 best workplaces for
working mothers. Among other generous benefits, employees are given up to 52
weeks of leave for childbirth, 40 weeks more than the federally required 12
unpaid weeks. In an initiative formed with the local school district, Hewlett-
Packard has an on-site elementary school at its Santa Rosa, California,
facility. Alternative work schedules include flextime (used by over 50% of the
employees), compressed workweeks, job sharing, and telecommuting.

Hewlett-Packard has made a substantial effort to purchase goods and services
from minority- and women-owned firms, and has been rated among the 50
companies with the best reputation for employing and accommodating the
disabled. The company also extends health and relocation benefits to domestic
partners of its U.S. employees, including gays and lesbians.

American Express Company, one of the world's most influential financial serv-
ices corporations, recently announced that in 2001, an African-American, Ken-
neth I. Chenault, will be promoted to the position of CEO. Mr. Chenault is
currently President and Chief Operating Officer of the firm.

The company links management compensation to an employee's ability to meet
diversity goals, to integrate diversity considerations into business
functions, and to address diversity concerns raised by an annual employee
survey.

In August 1998, Fortune magazine included American Express on its listing of
the 50 best companies for Asians, Blacks, and Hispanics. At that time, the
company reported that 17% of its managers were minorities. In 1998, for the
ninth year, Working Mother magazine included American Express on its list of
the 100 best workplaces for working mothers. American Express also extends
health care and other benefits to same-sex partners of its gay and lesbian em-
ployees.

6
<PAGE>

Maytag Corporation provided another indication of the recent progress made by
minorities in mainstream American business, when in May 1999, it appointed
Lloyd D. Ward, an African-American, to CEO. He was promoted to the position of
President and Chief Operating Officer in February 1998 after serving as Execu-
tive Vice President and President of Maytag Appliances.

Fannie Mae provides liquidity to home mortgage markets by buying mortgages
from lending institutions and issuing mortgage-backed securities, thereby cre-
ating a secondary market for these mortgages. In 1968, Congress established
Fannie Mae as a privately managed company. Prior to that, it was part of the
predecessor to the Department of Housing and Urban Development.

On January 1, 1999, Franklin D. Raines, an African-American, became CEO and
chair of the board of directors at the company. Mr. Raines had served as vice
chair of the company until leaving in September 1996 to serve as the White
House budget director. There are two women and two minorities (including Mr.
Raines) among the company's seven senior line executives. The company reported
that, as of December 1997, 43% of its officers and directors were women and
21.5% were minorities.

The company incorporates diversity issues into its calculations for executive
incentive pay, and provides diversity training to all employees. Diversity is-
sues are integrated into all aspects of its in-house training and development
courses. The company has a standing diversity council and an office of diver-
sity, and a mentoring program that provides support for the advancement of
women and minorities.

In 1998 Gay Financial Weekly praised Fannie Mae's policies towards gays and
lesbians, stating that the company had "gone above and beyond all others in
corporate America to ensure equal treatment for its gay and lesbian employ-
ees." The company extends benefits, including health insurance, to opposite-
and same-sex domestic partners, and is also a frequent contributor to AIDS-re-
lated organizations.

Golden West Financial is the only major publicly traded U.S. Company we are
aware of that has more women on its board of directors than men (five of
nine). Three of these women are minorities. Marion O. Sandler is co-CEO, along
with Herbert M. Sandler, her husband. Golden West Financial is a savings and
loan holding company, primarily involved in financing residential mortgage
loans.

7
<PAGE>

The Environment

Global companies have an increasingly significant impact on our ever-shrinking
planet. If we are to survive, our corporations, upon whom so many of us depend
for food, clothing and shelter, must learn to reinvent themselves to serve a
growing population, without exhausting what remains of our natural resources.

A handful of companies have begun to take modest steps in that direction. Unu-
sual and exciting things are happening at companies like Interface, Xerox and
Herman Miller. Also, new, innovative technology companies like Catalytica are
surfacing, whose primary mission is to produce environmentally beneficial
technologies. We hope that the efforts of these pioneers will encourage their
competitors to raise the bar even higher.

Interface, Inc. When Ray Anderson discusses Interface's impact on the natural
world, he speaks of his personal awakening to the current state of the envi-
ronment, which hit him like a "spear in the chest." Strong words from the CEO
and founder of the largest manufacturer of industrial carpet tile in the
world. He describes himself as a relatively recent convert to the environmen-
tal movement, having built a successful international corporation without con-
cern for its impact on the environment, except that it act within the limits
of the law. Since then, he has prompted his company to become a leader in in-
dustrial ecology through a corporate-wide cultural and operational shift.

Ray Anderson has made his company an environmental leader by completely re-
thinking the structure of the company's manufacturing processes, and envi-
sioning it anew for the 21st century. Interface's ambitious goal is to no
longer be a net "taker" from the earth. Mr. Anderson believes that this goal
is not only necessary for earth's survival, but is necessary to ensure that
the company will be able to continue to compete in the 21st century.

Interface is a resource-intensive company whose largest divisions are petrole-
um-dependent. In late 1994, Interface began a long-range program designed to
achieve greater resource efficiency and ecological sustainability through
closed-loop recycling, the use of benign sources of energy for production
processes, and the elimination of wasted raw materials and energy from all op-
erations. The company is beginning to push the boundaries of what
"sustainability" means, through the use of solar energy and a host of innova-
tions to increase efficiency and eventually produce a closed-loop system.

In January 1995, the company initiated a worldwide war-on-waste program. The
program utilizes teams consisting of a multidisciplinary group of em-ployees
who identify and eliminate waste from a process or product. Any employee can
join or form a team for any reason. The company applies a

8
<PAGE>

zero-based definition: "Waste" equals any measurable cost that goes into manu-
facturing a product, but that does not result in identifiable value to the
customer. All system input is considered to be waste until proven otherwise.
The company reports that in FY 1995 and FY 1996, it saved $25 million elimi-
nating such waste, and expected to eliminate $75 million more by the end of FY
1998.

One of Mr. Anderson's great insights is that people have no interest in pur-
chasing carpet. They would rather have the benefits that carpet offers, with-
out having to worry about the costs of ownership, such as cleaning it and re-
placing it every few years as it wears out. Interface therefore leases a car-
peting service to its customers that it calls the "Evergreen Lease." Interface
is responsible for servicing the carpet and replacing worn tiles. Generally,
only 20% of an office's carpet shows 80% of the wear. By replacing only the
worn sections, this service reduces the consumption of carpeting material by
80%. The customer benefits by having a carpet that always looks new, and In-
terface is able to take used carpet tiles that would otherwise end up in a
landfill, and recycle and re-use them. This concept is not only cost-effec-
tive, but also provides clear environmental benefits.

The company installed its first solar unit for a fabric plant in North Caro-
lina in 1997, and installed another solar array at its Bentley Mills carpet
production facility in California early this year. In 1997 Interface intro-
duced a carpet product called Terratex that is made entirely from 100% recy-
cled polyester fiber.

Xerox Corporation established a goal in 1994 to create waste-free products
within waste-free factories and waste-free offices. This initiative targets
nine areas, including air emissions, solid and hazardous wastes, water
emissions, energy conservation, and use of post-consumer materials. The com-
pany uses product design, reduced packaging, and the management of manufactur-
ing processes to reach these goals. Its already extensive quality programs are
tied to these company-wide environmental goals.

In 1992 Xerox introduced copiers with recyclable cartridges. At Xerox's ex-
pense, customers can mail back used cartridges, and the company will re-use or
recycle them. In 1996 customers returned nearly 65% of all cartridges. At the
company's toner plant in Webster, New York, approximately 7 million pounds of
toner have been reprocessed. Plants in the Netherlands and Oklahoma City have
also recycled approximately 90% of toner found to be out of specification. The
company's copier toner manufacturing process utilizes recycled raw materials
such as plastic milk and water jug containers. Since 1995, through its Toner
Container Return program, the company has reused or recycled approximately 2
million toner containers.

9
<PAGE>

The company has a comprehensive annual environmental report that details a va-
riety of company-wide efforts to improve its impact on the environment. The
publication reports thoroughly and publicly on the following: environmental
benchmarks and goals, progress towards meeting goals, emissions data, regula-
tory problems, remediation liabilities, environmental challenges they face,
internal communications systems, environmental policies and practices outside
the U.S., and health and safety data.

Catalytica, Inc., a recent addition to our portfolio, was formed by a former
chemical engineer at Exxon who believed that there was not enough work being
done to increase the environmental efficiency of chemical reactions.
Catalytica focuses its research and development primarily on catalysts with
environmental benefits (Catalysts are substances introduced into a chemical
reaction to control or affect the resulting product).

Natural gas is a cleaner burning fossil fuel than oil or coal. As a fossil fu-
el, however, it produces carbon dioxide, which is the primary contributor to
global warming. Environmentalists often portray natural gas as an interim fuel
on the road toward fossil-fuel alternatives. Catalytica's XONON catalytic sys-
tem helps to smooth that transition by dramatically reducing NOx, carbon mon-
oxide, and unburned hydrocarbon emissions from natural gas turbines. NOx is
one of the six greenhouse gases contributing to global warming that were
targeted for reductions in the Kyoto treaty on climate change. Among other ap-
plications, this technology will be used for both new and installed General
Electric turbines, as well as part of a system to generate electricity for the
city of Santa Clara, California.

Catalytica is also developing a number of innovative manufacturing techniques
for the pharmaceutical industry that are designed to increase the efficiency
of chemical reactions and reduce the generation of hazardous waste in the man-
ufacture of drugs.

Herman Miller, Inc. designs and manufactures furniture and furniture systems
for offices and health care facilities. It is one of those companies that do
many things well, with strengths in diversity, employee relations, the envi-
ronment and product quality and innovation. In 1999 Fortune magazine ranked
the company third for corporate responsibility and environment in its annual
survey of America's Most Admired Companies. In 1998 the company celebrated its
75th year in operation.

Herman Miller is a substantial user of recycled materials in its manufacturing
processes. Its own recycling activities include the use of fabric scraps for
insulation in packaging, the re-use of waste powder paint in its furniture
coating process, and the production of a 100% recyclable office chair manufac-
tured with as much as 70% recycled content. Much of the company's unused pro-
duction scraps are resold to auto, leather, and carpet makers.

10
<PAGE>

Through the company's participation in the Environmental Protection Agency's
Wastewi$e program, the company has reduced its volume of transport packaging
of finished goods by 50%, eliminating the use of 500,000 pounds of wood pal-
lets and 982,800 pounds of corrugated boxes. The Wastewi$e program is a volun-
tary EPA partnership whereby companies set environmental goals in three areas:
waste prevention, buying or manufacturing of recycled products, and recycling
collection.

The company has undertaken notable energy conservation projects. At its
cogeneration plant the company burns its non-plastic, non-toxic waste to power
the central plant's heat and air-conditioning and to provide 10% of its elec-
tricity. The company owns a new building that uses passive solar energy design
methods to manage the heat gain in the plant.

Since 1990 Herman Miller reported that it has used only tropical woods that
come from sustained-yield forests. It has phased out use of Brazilian rosewood
and Honduran mahogany under this policy, although it continues to use mahogany
from other sources. For several decades the company has had a policy that all
facilities must allocate 50% of their land to green spaces.

The company helped to establish the Green Building Fund, a nonprofit philan-
thropic arm of the U.S. Green Building Foundation. The foundation works to
minimize the impact of new buildings on the environment and on workers.

Employee Involvement

Since the early 1980s, a new breed of corporate manager has arisen at certain
companies, advocating increased employee involvement. Under their guidance,
new initiatives are pushing decision-making down the corporate ladder, remov-
ing layers of supervisory management, creating self-directed work teams, im-
plementing financial rewards tied to quality improvement and cost savings, of-
fering stock options to most or all employees, job skills development, cross
training, and quality instruction. At some of these firms, accompanying this
empowerment of workers is an increased sharing of financial information and a
deliberate effort to educate employees about how their business is run.

We believe that the shift to a more actively involved workforce that is taking
place at a number of pioneering companies is an important advance for employee
relations that recognizes the worth and dignity of the individual employee at
the same time that it may help position companies to compete more effectively
in the global marketplace. We look forward to the day when these practices be-
come more widely established.

11
<PAGE>

The computer industry has been particularly aggressive and innovative in this
area. The tremendous growth of the industry, particularly in California, has
seen the granting of stock options to most or all employees become virtually
the norm. Among the many such software firms in our portfolio that have made
granting stock options to all employees standard operating procedure are 3Com,
Cisco Systems, Novell, and Tellabs.

3Com Corporation manufactures and markets networking products for both local
area and wide area networks, including switches, hubs, remote access systems,
routers, network management software, network interface cards, modems, and
handheld connected organizers.

As of May 1998, 3Com had 12,920 employees. All employees receive stock options
when they join the firm. A typical employee might receive approximately 1,000
options. All employees are eligible to participate in a stock-based Employee
Incentive Plan. Employees can be awarded additional stock option grants based
upon their contributions to the company. This is done as part of the annual
salary review. In addition, the company has a twice-yearly cash profit sharing
plan (3Reward) available to all employees. In the second half of 1997, employ-
ees received a payout equal to 9.9% of their salary. In the first half of
1997, the payout was equal to 3.6% of employee salaries. The company's goal is
to distribute approximately 8% of profits under this plan.

The company has stated that it practices open-book management and generally
involves employees in management decision-making processes.

The company's 3Bonus program provides a variety of financial rewards for ex-
ceptional work. In a given year, 25% to 30% of its employees receive awards
that can include stock options, cash bonuses (up to 25% of monthly base pay),
or gifts (weekend trips, for example). Each year, 3Com devotes the equivalent
of 4% of its spending on employees' salaries to the 3Bonus program. All em-
ployees are eligible for rewards.

In January 1999, 3Com was included on Fortune magazine's list "The 100 Best
Companies to Work for in America." The list was compiled by Robert Levering
and Milton Moskowitz, authors of the 1984 and 1993 books of the same title.

Symantec Corporation, a software marketer and developer, has two innovative
programs whereby group managers distribute bonuses. Under the A++ Award pro-
gram, each manager is given an annual budget of approximately $500 per group
member. The manager then makes a series of quarterly cash awards to employees
whose work has exemplified the values of the firm. Any employee can nominate
another employee at the firm for this award, which can total as much as
$3,000. The company's Star Award seeks to reward individuals who have helped
in the work of cross-functional teams and

12
<PAGE>

departments other than their own. All executive staff members have a pool of
stock from which they may make awards in blocks of 100 shares. The company
also offers stock options and profit-sharing.

Tellabs, Inc. manufactures and markets voice and data networking products for
the telecommunications industry.

As of January 1999, all of the company's approximately 4,980 employees partic-
ipated in either a bonus plan or a cash profit sharing plan. In July 1996, the
company started a Global Option Program under which all full time employees
were granted 400 options plus 20 options for each year of service. Shares
awarded through the program vest immediately. In October 1998, the company
made another grant to all full-time employees of 200 options.

Tellabs also has a program under which it awards common stock to full time em-
ployees. Awards are made based on the number of continuous years of service.
Employees with five years of service receive 10 shares, those with 15 years of
service receive 25 shares, and those with 20 years of service receive 50
shares.

The company promotes participation through training and education for manage-
ment and non-management employees.

Union Pacific Resources Group engages in the exploration for and production of
natural gas, natural gas liquids, and crude oil. The company derived the ma-
jority of its FY 1998 revenues from natural gas or natural gas liquids, fuels
with substantial environmental advantages over oil and coal.

In 1996, as part of a systematic program to change the culture of the corpora-
tion after its spin-off from Union Pacific Corporation, the company estab-
lished a group of 45 employees, dubbed Change Agents, assigned the task of de-
veloping systems to create a new culture. Among the company initiatives as
part of this program were the implementation of a job performance evaluation
procedure incorporating feedback from peers as well as supervisors, a new job
classification system, and the creation of an Employee Development Center. The
company offers its employees 40 hours of professional training per year, as
well as profit-sharing and stock options.

Apogee Enterprises, Inc. engineers, designs, and installs curtain-wall and
window systems for commercial and institutional buildings and automobiles. The
company also fabricates finished glass products and provides coating services
to buildings for strength and energy efficiency.

Apogee's highly decentralized management structure has encouraged its employ-
ees to identify strongly with the company. Managers at all levels have exten-
sive decision-making powers, including hiring, work scheduling, and in-

13
<PAGE>

ventory control. Managers are rewarded for achieving financial, as well as
personal goals (such as developing computer skills, learning a foreign lan-
guage, etc.). The company rarely resorts to layoffs, even during economic
downturns.

The company has an open-book policy and shares monthly profit-and-loss state-
ments with its employees. At some of its facilities, the company shares more
detailed financial information. Its Viracon glass fabrication plants share
line-by-line operating results each month with all managers, including first-
line supervisors. Each quarter all Viracon employees review their plant's fi-
nancial results.

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

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than you paid for them.

Unlike other mutual funds, the Domini Social Equity Fund seeks to achieve its
investment objective by investing all of its investable assets in the Domini
Social Index Portfolio ("DSIP"). As of July 31, 1999, these companies repre-
sented the following percentages of the DSIP: Hewlett Packard: 1.80%; American
Express: 1.01%; Maytag: 0.10%; Fannie Mae: 1.20%; Golden West Financial:
0.09%; Interface: 0.01%; Xerox: 0.55%; Catalytica: 0.01%; Herman Miller:
0.04%; Cisco: 3.37%; 3Com: 0.15%; Symantec: 0.03%; Tellabs: 0.41%; Union Pa-
cific Resources Group: 0.08%; Apogee Enterprises: 0.004. The composition of
the DSIP is subject to change.

The preceding profiles should not be deemed an offer to sell or a solicitation
of an offer to buy the stock of any of the companies noted, or a recommenda-
tion concerning the merits of any of these companies as an investment. This
material must be accompanied or preceded by the Fund's current prospectus.
DSIL Investment Services LLC, distributor. 09/99

IN MEMORIAM

In June of 1999, Dr. Allen M. Mayes, a founding trustee of the Domini Institu-
tional Social Equity Fund, passed away. Allen was a man of extraordinary cour-
age and vision. His deep faith prompted him to take a leadership role during
the era of our nation's civil rights struggle. Throughout his later years, his
service as Director of Ministerial Services for the Texas Annual Conference of
The United Methodist Church, and as Senior Associate General Secretary of the
General Board of Pensions of the United Methodist Church gave him a breadth of
experience in managing socially screened assets that made his contributions to
our fund so valuable. On our board, Allen served as a constant reminder of the
greater goals of peace and justice that underlie our efforts at Domini Social
Investments. He will be missed.

14
<PAGE>

COMPARISON OF $10,000 INVESTMENT IN THE
DOMINI INSTITUTIONAL SOCIAL EQUITY FUND AND S&P 500/1/

[LINE GRAPH]

Domini Institutional Social Equity Fund/2/ S&P 500/1/
------------------------------------------ ----------
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 12.2204 11.74513

1/31/93 12.89376 12.39685

4/30/93 12.62491 12.52083

7/31/93 12.96598 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 13.50288

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 17.7157

1/31/96 18.85141 19.49132

4/30/96 19.48813 20.1598

7/31/96 19.08306 19.83869

10/31/96 21.20848 21.98457

1/31/97 23.9672 24.63018

4/30/97 24.76304 25.21475

7/31/97 29.38935 30.15839

10/31/97 28.15276 29.05176

1/31/98 30.95879 31.24764
2/28/98 33.252 33.493
3/31/98 34.63 35.212
4/30/98 34.815 35.579
5/31/98 34.167 34.959
6/30/98 35.927 36.379
7/31/98 35.73 35.992
8/31/98 30.451 30.781
9/30/98 32.396 32.753
10/31/98 35.221 35.417
11/30/98 37.525 37.564
12/31/98 40.372 39.728
1/31/99 42.871 41.389
2/28/99 41.798 40.103
3/31/99 43.174 41.708
4/30/99 44.253 43.323
5/31/99 43.278 42.3
6/30/99 46.046 44.648
7/31/99 44.715 43.254

Average Annual Return
- -------------------------------
1 Year Ended 23.12%
7/31/99
- -------------------------------
5 Years Ended 27.50%
7/31/99
- -------------------------------
Inception (6/3/91) 19.53%
to 7/31/99 /(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 Fund began investing in the stocks comprising the Domini 400 Social
Index on June 3, 1991. The above chart begins on June 30, 1991.

15
<PAGE>

[This Page Intentionally Left Blank]

16
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Basic Materials -- 1.3%
Air Products & Chemicals, Inc. .......................... 52,300 $ 1,748,781
Alcoa, Inc............................................... 84,600 5,065,425
Battle Mountain Gold Company (b)......................... 48,100 93,194
Bemis Company, Inc....................................... 12,000 444,000
Cabot Corporation........................................ 14,600 350,400
Calgon Carbon Corporation................................ 8,100 54,675
Caraustar Industries, Inc................................ 5,200 129,350
Catalytica, Incorporated (b)............................. 5,800 72,500
Consolidated Papers, Inc. ............................... 20,700 589,950
Cyprus Amax Minerals Company............................. 19,700 258,563
Echo Bay Mines Ltd.(b)................................... 25,000 32,811
Ecolab Inc............................................... 29,700 1,265,963
Fuller (H.B.) Company.................................... 3,100 215,450
IMCO Recycling Inc....................................... 3,100 54,056
Mead Corporation......................................... 22,900 938,900
Minerals Technologies Inc. .............................. 4,800 257,400
Nalco Chemical Company................................... 15,100 776,706
Nucor Corporation........................................ 19,950 967,575
Praxair, Inc. ........................................... 35,800 1,651,275
Ryerson Tull, Inc. ...................................... 6,400 136,800
Sigma-Aldrich Corporation................................ 23,100 776,738
Sonoco Products Company.................................. 23,345 625,938
Westvaco Corporation..................................... 22,900 674,119
Worthington Industries, Inc.............................. 20,400 298,350
------------
17,478,919
------------
Business & Professional
Services -- 0.1%
Avery Dennison Corporation............................... 26,000 1,595,750
Dionex Corporation (b)................................... 4,900 211,619
Isco, Inc. (b)........................................... 800 4,750
Wellman, Inc............................................. 7,000 113,312
------------
1,925,431
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Capital Goods -- 2.0%
Baldor Electric Company.................................. 7,500 $ 136,406
Case Corporation......................................... 17,000 809,625
Cooper Industries, Inc................................... 21,300 1,168,836
Cross (A.T.) Company (b)................................. 2,300 11,500
Crown Cork & Seal Company, Inc........................... 28,000 820,750
Cummins Engine Company, Inc.............................. 9,700 627,469
Deere & Company.......................................... 53,000 2,027,250
Emerson Electric Co...................................... 99,600 5,944,875
Graco Inc................................................ 4,675 144,341
Granite Construction Incorporated........................ 6,050 153,141
HON Industries, Inc...................................... 13,600 316,200
Hubbell Incorporated..................................... 14,460 596,475
Hunt Corporation......................................... 1,600 14,200
Illinois Tool Works Inc.................................. 57,100 4,243,244
Ionics, Inc. (b)......................................... 3,400 115,175
Lawson Products, Inc..................................... 2,300 54,625
Leggett & Platt, Inc..................................... 45,000 1,153,125
Milacron Inc............................................. 7,800 133,575
Herman Miller, Inc. ..................................... 17,800 467,250
Molex Incorporated....................................... 35,137 1,227,599
Moore Corporation........................................ 19,400 161,263
National Service Industries, Inc......................... 9,000 317,810
New England Business Service, Inc........................ 2,900 83,194
Pitney Bowes Inc......................................... 61,500 3,912,938
Raychem Corporation...................................... 17,700 674,813
Smith (A.O.) Corporation................................. 4,900 142,713
Standard Register Company................................ 6,200 180,188
Thomas & Betts Corporation............................... 12,600 570,150
Thomas Industries Inc.................................... 3,300 69,094
------------
26,277,824
------------
</TABLE>

17
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Consumer Cyclicals -- 12.0%
American Greetings Corporation........................... 15,000 $ 440,625
Angelica Corporation..................................... 1,300 16,656
Apogee Enterprises, Inc. ................................ 5,600 55,300
AutoZone, Inc. (b)....................................... 34,200 844,312
Bandag, Incorporated..................................... 4,900 164,456
Banta Corporation........................................ 6,050 148,981
Bassett Furniture Industries............................. 2,400 59,400
Black & Decker Corporation............................... 19,900 1,149,225
Block (H&R), Inc. ....................................... 22,100 1,207,212
Brown Shoe Company, Inc.................................. 3,800 75,762
Centex Corporation....................................... 13,600 458,150
Champion Enterprises, Inc. (b)........................... 10,600 145,087
Charming Shoppes, Inc. (b)............................... 20,500 137,094
Circuit City Stores, Inc. ............................... 45,800 2,164,050
Cintas Corporation....................................... 25,200 1,615,950
Claire's Stores, Inc..................................... 11,100 263,625
Cooper Tire and Rubber Company........................... 16,600 373,500
Costco Companies Inc. (b)................................ 50,115 3,746,096
Dana Corporation......................................... 37,600 1,569,800
Dayton Hudson Corporation................................ 101,300 6,552,844
Delphi Automotive Systems Corporation.................... 128,700 2,316,600
DeVry Inc. (b)........................................... 15,200 315,400
Dillard, Inc............................................. 24,500 754,906
Dollar General Corporation............................... 50,201 1,327,189
Dow Jones & Company...................................... 20,700 1,032,412
Egghead.com, Inc. (b).................................... 6,800 59,075
Enesco Group, Inc. ...................................... 3,400 72,675
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Consumer Cyclicals -- Continued
Fedders Corporation...................................... 6,400 $ 42,000
Federal-Mogul Corporation................................ 16,100 780,850
Fleetwood Enterprises, Inc. ............................. 7,700 177,581
Gap, Inc. (The).......................................... 196,687 9,195,117
Genuine Parts Company.................................... 40,600 1,261,137
Gibson Greetings, Inc. (b)............................... 2,300 11,500
Handleman Company (b).................................... 6,600 73,837
Harcourt General......................................... 16,300 756,931
Harland (John H.) Company................................ 6,500 130,812
Harman International Industries, Inc..................... 3,930 172,920
Hartmarx Corporation (b)................................. 5,500 24,063
Hasbro, Inc. ............................................ 44,725 1,162,850
Hillenbrand Industries, Inc.............................. 14,800 665,075
Home Depot, Inc. ........................................ 339,098 21,638,691
Huffy Corporation........................................ 2,500 28,125
IMS Health Incorporated.................................. 72,300 2,015,363
Interface, Inc........................................... 11,000 98,313
Jostens, Inc............................................. 7,400 149,850
Kmart Corporation (b).................................... 112,900 1,637,050
Kaufman & Broad Home Corporation......................... 10,500 218,531
Kelly Services, Inc. .................................... 7,975 245,730
Lands' End, Inc. (b)..................................... 6,700 303,594
Lee Enterprises, Inc. ................................... 9,700 295,244
Lillian Vernon Corporation............................... 1,500 21,375
Limited, Inc. (The)...................................... 49,600 2,266,100
Liz Claiborne, Inc. ..................................... 14,000 543,375
Lowe's Companies, Inc. .................................. 84,700 4,467,925
Marriott International, Inc. ............................ 56,900 1,995,056
Mattel, Inc.............................................. 95,085 2,234,498
</TABLE>

18
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Consumer Cyclicals -- Continued
May Department Stores Company............................ 77,300 $ 2,990,544
Maytag Corporation....................................... 20,200 1,406,425
McGraw-Hill Companies, Inc............................... 45,100 2,294,463
Media General, Inc....................................... 5,900 300,163
Men's Wearhouse, Inc. (b)................................ 8,800 218,900
Meredith Corporation..................................... 11,900 427,656
Modine Manufacturing Company............................. 6,500 208,203
New York Times Company................................... 40,100 1,576,431
Nordstrom, Inc........................................... 32,000 1,006,000
Omnicom Group Inc........................................ 40,800 2,891,700
Oshkosh B'Gosh, Inc...................................... 3,800 64,600
Penney (J.C.) Company, Inc............................... 60,100 2,629,375
Pep Boys -- Manny, Moe & Jack............................ 11,700 194,513
Phillips-Van Heusen Corporation.......................... 5,700 48,450
Reebok International Ltd. (b)............................ 12,300 149,138
Rouse Company (The)...................................... 15,800 384,138
Russell Corporation...................................... 7,300 140,069
SPX Corporation (b)...................................... 6,915 587,775
Scholastic Corporation (b)............................... 3,600 160,650
Sears, Roebuck and Co.................................... 86,800 3,515,400
Service Corporation International........................ 62,300 989,013
Shaw Industries, Inc. (b)................................ 32,300 680,319
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Consumer Cyclicals -- Continued
Sherwin-Williams Company (The)......................... 38,300 $ 1,034,100
Skyline Corporation.................................... 1,900 57,594
Snap-on Incorporated................................... 15,050 526,750
Springs Industries, Inc................................ 4,000 159,000
Stanley Works (The).................................... 20,300 567,131
Staples, Inc. (b)...................................... 106,100 3,063,638
Stride Rite Corporation................................ 9,700 88,513
TJ International, Inc.................................. 3,300 102,300
TJX Companies, Inc..................................... 73,300 2,423,481
Tandy Corporation...................................... 44,100 2,262,881
Tennant Company........................................ 1,700 58,225
Timberland Company (The) (b)........................... 2,400 195,150
Times Mirror Company................................... 16,500 994,125
Toro Company........................................... 2,700 95,850
Toys 'R' Us, Inc. (b).................................. 55,920 908,700
VF Corporation......................................... 27,000 1,066,500
Venator Group, Inc. (b)................................ 30,100 316,050
Wal-Mart Stores, Inc................................... 1,018,600 43,035,850
Washington Post Company................................ 2,300 1,299,500
Whirlpool Corporation.................................. 17,200 1,233,025
------------
162,032,163
------------
Consumer Staples -- 15.8%
Alberto-Culver Company................................. 12,500 319,531
Albertson's, Inc....................................... 95,900 4,765,031
Avon Products, Inc..................................... 59,600 2,711,800
Ben & Jerry's Homemade, Inc. (b)....................... 1,200 25,200
</TABLE>

19
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Consumer Staples -- Continued
Bergen Brunswig Corporation.............................. 30,736 $ 491,776
Bestfoods................................................ 63,800 3,110,250
Bob Evans Farms, Inc..................................... 9,000 190,407
CVS Corporation.......................................... 89,500 4,452,625
Campbell Soup Company.................................... 99,500 4,378,000
Church & Dwight Co., Inc................................. 4,300 188,931
Clorox Company........................................... 26,900 3,012,800
Coca-Cola Company........................................ 564,800 34,064,500
Colgate-Palmolive Company................................ 133,800 6,606,375
Comcast Corporation...................................... 169,500 6,525,750
Darden Restaurants, Inc. 29,800 650,012
Deluxe Corporation 17,900 671,250
Disney, Walt Company (The) (b)........................... 471,300 13,019,662
Donnelley (R.R.) & Sons Company.......................... 29,500 1,032,500
Fleming Companies, Inc. 8,000 96,500
Fort James Corporation................................... 50,400 1,839,600
General Mills Incorporated............................... 34,800 2,881,875
Gillette Company......................................... 253,900 11,123,994
Great Atlantic & Pacific Tea Company, Inc................ 8,500 293,781
Hannaford Bros. Co. 9,700 554,719
Heinz (H.J.) Company..................................... 82,000 3,864,250
Hershey Foods Corporation................................ 31,900 1,850,200
Kellogg Company.......................................... 92,400 3,216,675
Kimberly-Clark Corporation............................... 121,864 7,433,704
King World Productions, Inc. (b)......................... 16,200 564,975
Kroger Co. (b)........................................... 189,100 4,975,694
Longs Drug Stores Corporation............................ 8,600 296,162
Luby's, Inc.............................................. 4,600 68,137
McDonald's Corporation................................... 310,800 12,956,475
MediaOne Group, Inc. (b)................................. 138,600 10,031,175
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Consumer Staples -- Continued
Nature's Sunshine Products, Inc. 3,800 $ 35,625
Newell Rubbermaid Inc.................................... 64,378 2,784,348
Odwalla, Inc. (b) 500 3,500
Oneida Ltd............................................... 3,500 91,000
PepsiCo, Inc............................................. 338,100 13,228,162
Procter & Gamble Company................................. 304,100 27,521,050
Quaker Oats Company...................................... 30,800 2,096,325
Ralston Purina Company................................... 74,200 2,221,362
Ruby Tuesday, Inc........................................ 6,600 138,600
Ryan's Family Steakhouse, Inc. (b)....................... 8,400 89,775
Smucker (J.M.) Company................................... 6,500 157,219
Starbucks Corporation (b) 40,900 950,925
SUPERVALU Inc............................................ 27,300 621,075
SYSCO Corporation........................................ 75,400 2,464,638
TCBY Enterprises, Inc. .................................. 4,100 23,063
Tootsie Roll Industries, Inc............................. 7,420 256,918
Tupperware Corporation................................... 12,600 297,675
Viacom, Inc. (b)......................................... 32,100 1,346,194
Walgreen Company......................................... 229,200 6,489,225
Wendy's International, Inc. ............................. 28,200 819,563
Whitman Corporation...................................... 20,400 388,875
Whole Foods Market, Inc. (b)............................. 5,700 250,800
Wild Oats Markets, Inc. (b).............................. 2,700 98,213
Wrigley (Wm.) Jr. Company................................ 26,500 2,111,719
------------
212,750,165
------------
</TABLE>

20
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Financial Services -- 15.8%
Aetna, Inc. ............................................. 32,170 $ 2,637,940
American Express Company................................. 103,100 13,583,425
American General Corporation............................. 57,462 4,446,122
American International Group, Inc. ...................... 283,550 32,927,244
Bank One Corporation..................................... 270,285 14,747,425
BankBoston Corporation................................... 67,700 3,177,669
CIGNA Corporation........................................ 46,600 4,109,537
Capital One Financial Corporation........................ 45,000 2,086,875
Chittenden Corporation................................... 6,061 168,950
Chubb Corporation........................................ 40,300 2,410,444
Cincinnati Financial Corporation......................... 37,385 1,406,611
Dime Bancorp, Inc. ...................................... 24,800 499,100
Edwards (A.G.), Inc. .................................... 20,987 579,765
Freddie Mac.............................................. 159,100 9,128,362
Fannie Mae............................................... 234,600 16,187,400
Fifth Third Bancorp...................................... 61,525 4,002,970
First Tennessee National Corporation..................... 29,400 1,076,775
Firstar Corporation...................................... 152,000 3,961,500
FirstFed Financial Corp. (b)............................. 4,000 64,000
Golden West Financial.................................... 12,700 1,218,406
HSB Group, Inc. ......................................... 6,350 258,365
Household International, Inc. ........................... 109,346 4,695,044
Jefferson-Pilot Corporation.............................. 24,050 1,757,153
Lincoln National Corporation............................. 45,700 2,285,000
MBIA Inc. ............................................... 22,700 1,299,575
MBNA Corporation......................................... 182,950 5,214,075
MGIC Investment Corporation.............................. 24,800 1,222,950
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Financial Services -- Continued
Marsh & McLennan Companies, Inc. ........................ 60,050 $ 4,563,800
Mellon Bank Corporation.................................. 118,900 4,012,875
Merrill Lynch & Co., Inc. ............................... 84,200 5,730,863
Morgan (J.P.) & Co. Incorporated......................... 40,600 5,191,725
PNC Bank Corp. .......................................... 69,300 3,664,238
Providian Financial Corporation.......................... 32,600 2,966,600
ReliaStar Financial Corp. ............................... 20,300 921,113
SLM Holding Corporation.................................. 37,300 1,697,150
SAFECO Corporation....................................... 31,200 1,187,550
St. Paul Companies, Inc. (The)........................... 51,564 1,604,930
Schwab (Charles) Corporation............................. 186,900 8,235,281
SunTrust Banks, Inc. .................................... 73,600 4,747,200
Synovus Financial Corp. ................................. 62,050 1,136,291
Torchmark Corporation.................................... 30,100 989,538
U.S. Bancorp............................................. 165,900 5,163,638
UnumProvident Corp. ..................................... 54,500 2,820,375
Value Line, Inc. ........................................ 2,100 83,738
Wachovia Corporation..................................... 46,200 3,606,488
Washington Mutual, Inc. ................................. 135,702 4,656,275
Wells Fargo & Company.................................... 378,300 14,753,700
Wesco Financial Corporation.............................. 1,600 491,200
------------
213,377,250
------------
Healthcare -- 8.2%
Acuson Corporation 5,800 101,137
ADAC Laboratories (b).................................... 3,600 25,425
Allergan, Inc. .......................................... 15,100 1,426,950
ALZA Corporation (b)..................................... 23,100 1,123,237
Becton Dickinson and Company............................. 56,600 1,552,962
Biomet, Inc.............................................. 25,700 934,838
</TABLE>

21
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Healthcare -- Continued
Boston Scientific Corporation (b)........................ 90,200 $ 3,658,738
Forest Laboratories, Inc. (b)............................ 18,900 968,625
Guidant Corporation (b).................................. 69,200 4,052,525
Humana Inc. (b).......................................... 38,400 417,600
Johnson & Johnson........................................ 307,900 28,365,288
Mallinckrodt Inc......................................... 16,300 552,163
McKesson HBOC, Inc....................................... 63,220 1,963,771
Medtronic, Inc........................................... 133,700 9,634,756
Merck & Co., Inc......................................... 540,300 36,571,556
Mylan Laboratories, Inc.................................. 28,700 652,925
Oxford Health Plans, Inc. (b)............................ 17,800 318,175
St. Jude Medical, Inc. (b)............................... 19,300 717,719
Schering-Plough Corporation.............................. 336,900 16,508,100
Stryker Corporation (b).................................. 22,000 1,342,000
Sunrise Medical Inc. (b)................................. 3,500 23,188
United American Healthcare Corporation (b)............... 800 1,000
------------
110,912,678
------------
Industrial, Construction & Housing -- 0.6%
American Power Conversion (b)............................ 43,200 896,400
Ault Incorporated (b).................................... 500 2,750
Brady Corporation........................................ 4,700 164,500
CLARCOR Inc.............................................. 5,250 103,358
Fastenal Company......................................... 8,700 514,388
Hutchinson Technology Incorporated (b)................... 5,100 134,194
Merix Corporation (b).................................... 600 4,725
Millipore Corporation.................................... 10,100 411,575
Nordson Corporation...................................... 3,700 212,750
Osmonics, Inc. (b)....................................... 2,100 21,263
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Industrial, Construction & Housing -- Continued
Sealed Air Corporation (b)............................... 19,100 $ 1,227,175
Solectron Corporation (b)................................ 57,500 3,705,156
Spartan Motors, Inc...................................... 1,700 10,625
Watts Industries, Inc.................................... 5,600 100,100
------------
7,508,959
------------
Natural Resources -- 0.8%
Anadarko Petroleum Corporation........................... 27,200 1,038,700
Apache Corporation....................................... 25,200 1,069,425
Atlantic Richfield Company............................... 73,700 6,637,606
Helmerich & Payne, Inc................................... 11,000 281,188
PennzEnergy Company...................................... 10,700 175,881
Rowan Companies, Inc. (b)................................ 18,500 348,031
Santa Fe Snyder Corporation (b).......................... 37,100 343,175
Sunoco, Inc.............................................. 20,700 631,350
------------
10,525,356
------------
Printing, Publishing & Telecommunications -- 3.8%
AT&T Corp................................................ 728,377 37,830,081
Citizens Utilities Company (b)........................... 59,467 706,171
Frontier Corporation..................................... 39,500 2,189,781
Sprint Corporation....................................... 198,000 10,234,125
------------
50,960,158
------------
Technology -- 29.6%
Adaptec, Inc. (b)........................................ 23,600 917,450
Advanced Micro Devices, Inc. (b)......................... 32,600 560,313
Analog Devices, Inc. (b)................................. 36,600 1,578,375
Apple Computer, Inc. (b)................................. 36,300 2,021,456
Applied Materials, Inc. (b).............................. 85,400 6,143,462
</TABLE>

22
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Technology -- Continued
Arrow Electronics, Inc. (b)............................ 21,000 $ 447,562
Autodesk, Inc.......................................... 13,100 347,150
Automatic Data Processing, Inc......................... 141,574 5,671,808
Avnet, Inc............................................. 7,700 377,300
BMC Software, Inc. (b)................................. 53,700 2,893,087
CPI Corp............................................... 2,000 67,375
Ceridian Corporation (b)............................... 32,500 910,000
Cisco Systems, Inc. (b)................................ 731,100 45,419,587
Compaq Computer Corporation............................ 389,088 9,338,112
Computer Associates International, Inc................. 122,800 5,633,450
Compuware Corporation (b).............................. 83,800 2,325,450
Dell Computer Corporation (b).......................... 580,500 23,727,937
EMC Corporation (b).................................... 231,700 14,032,331
Gerber Scientific Inc.................................. 4,700 113,094
Grainger (W.W.), Inc................................... 21,300 1,006,425
Hewlett-Packard Company................................ 232,300 24,318,906
Ikon Office Solutions, Inc............................. 33,100 436,506
Inprise Corporation (b)................................ 10,400 45,826
Intel Corporation...................................... 759,400 52,398,600
LSI Logic Corporation (b).............................. 32,700 1,645,218
Lucent Technologies, Inc............................... 695,800 45,270,487
Microsoft Corporation.................................. 1,168,200 100,246,163
Micron Technology, Inc. (b)............................ 57,100 3,547,338
National Semiconductor Corporation (b)................. 37,900 938,025
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Technology -- Continued
Novell, Inc. (b)......................................... 76,600 $ 1,972,450
PE Corp-PE Biosystems Group (b).......................... 5,650 149,725
PeopleSoft, Inc. (b)..................................... 55,100 750,738
Polaroid Corporation..................................... 9,600 220,800
QRS Corporation (b)...................................... 2,700 146,138
Scientific-Atlanta, Inc.................................. 17,100 624,150
Shared Medical Systems Corporation....................... 5,900 353,263
Sun Microsystems, Inc. (b)............................... 177,100 12,020,663
Symantec Corporation (b)................................. 12,100 366,025
Tektronix, Inc........................................... 10,200 323,213
Tellabs, Inc. (b)........................................ 89,600 5,516,000
Texas Instruments Incorporated........................... 89,700 12,916,800
3Com Corporation (b)..................................... 82,600 1,992,725
Xilinx, Inc. (b)......................................... 33,000 2,058,375
Xerox Corporation........................................ 151,400 7,380,750
------------
399,170,608
------------
Transportation -- 1.1%
AMR Corporation.......................................... 40,200 2,607,975
Airborne Freight Corporation............................. 10,700 266,831
Alaska Air Group, Inc. (b)............................... 5,800 257,375
Consolidated Freightways Corporation (b)................. 4,700 49,644
Delta Air Lines, Inc. ................................... 32,000 1,908,000
FDX Holding Corporation (b).............................. 67,800 3,038,288
GATX Corporation......................................... 11,300 450,587
Norfolk Southern Corporation............................. 86,600 2,533,050
Roadway Express, Inc..................................... 4,300 93,794
Ryder System, Inc. ...................................... 15,700 369,931
Southwest Airlines Co.................................... 114,775 2,123,338
</TABLE>

23
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
July 31, 1999
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Transportation -- Continued
UAL Corporation (b)...................................... 11,900 $ 754,906
Yellow Corporation (b)................................... 5,400 92,475
------------
14,546,194
------------
Utilities -- 8.8%
AGL Resources Inc........................................ 12,600 237,825
American Water Works, Inc................................ 21,400 640,662
Ameritech Corporation.................................... 251,500 18,422,375
Aquarion Company......................................... 2,250 78,750
Bell Atlantic Corporation................................ 355,322 22,651,777
BellSouth Corporation.................................... 433,500 20,808,000
Cleco Corporation........................................ 4,700 150,988
Cascade Natural Gas Corporation.......................... 2,000 35,875
Connecticut Energy Corporation........................... 2,200 84,150
Consolidated Natural Gas Company......................... 21,800 1,365,225
Eastern Enterprises...................................... 5,000 194,687
El Paso Energy Corporation............................... 27,800 995,587
Energen Corporation...................................... 6,200 116,250
Enron Corp. ............................................. 80,700 6,874,631
Equitable Resources, Inc. ............................... 7,600 281,675
IDACORP Inc.............................................. 8,200 253,687
KeySpan Corporation...................................... 32,700 907,425
LG&E Energy Corp......................................... 29,700 642,263
MCN Energy Group, Inc. .................................. 18,300 390,019
New Century Energies, Inc................................ 25,900 898,406
NICOR Inc................................................ 10,400 401,700
Northwest Natural Gas Company............................ 5,200 137,150
Northwestern Corporation................................. 4,800 120,000
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
- ------ ------ -----
<S> <C> <C>

Utilities -- Continued
OGE Energy Corp........................................ 17,800 $ 421,638
Peoples Energy Corporation............................. 7,900 290,819
Potomac Electric Power Company......................... 27,100 777,431
Questar Corporation.................................... 18,100 340,506
SBC Communications Inc................................. 449,458 25,703,380
Sonat Inc.............................................. 25,200 886,725
Telephone and Data Systems, Inc........................ 13,700 1,018,938
Union Pacific Resources Group, Inc..................... 56,800 1,011,750
U S West, Inc.......................................... 114,941 6,587,556
Washington Gas Light Company........................... 10,100 281,538
Williams Companies, Inc................................ 98,700 4,151,641
--------------
118,161,029
--------------
Total Investments (a)
-- 99.9%..................................................... $1,345,626,734
Other Assets, less liabilities -- 0.1%......................... 1,778,047
--------------
Net Assets -- 100.0%........................................... $1,347,404,781
==============
</TABLE>
- -----------
(a) The aggregate cost for book and federal income tax purposes is
$1,006,703,336, the aggregate gross unrealized appreciation is
$357,620,142, and the aggregate gross unrealized depreciation is
$18,696,744, resulting in net unrealized appreciation of $338,923,398.
(b) Non-income producing security.

24
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $1,006,703,336).................... $1,345,626,734
Cash.......................................................... 7,020,013
Receivable for securities sold................................ 1,738,780
Dividends receivable.......................................... 1,282,406
--------------
Total assets................................................. 1,355,667,933
--------------
LIABILITIES:
Payable for securities purchased.............................. 8,037,683
Accrued expenses (Note 2)..................................... 225,469
--------------
Total liabilities............................................ 8,263,152
--------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS........ $1,347,404,781
==============
</TABLE>

See Notes to Financial Statements

25
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF OPERATIONS
Year ended July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of
$440).......................................... $ 9,845,270
------------
EXPENSES:
Management fee (Note 2).......................... 1,901,529
Professional fees................................ 65,407
Custody fees (Note 3)............................ 367,440
Trustee fees..................................... 5,000
Miscellaneous.................................... 2,356
------------
Total expenses................................... 2,341,732
Fees paid indirectly........................... (345,517)
Expenses paid and fee waived by manager........ (109,912)
------------
Net expenses................................... 1,886,303
------------
NET INVESTMENT INCOME.............................. 7,958,967
Net realized gain on investments
Proceeds from sales.............................. $ 86,482,202
Cost of securities sold.......................... 70,606,930
------------
Net realized gain on investments............... 15,875,272
Net changes in unrealized appreciation of
investments
Beginning of year................................ $175,720,768
End of year...................................... 338,923,398
------------
Net change in unrealized appreciation.......... 163,202,630
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... $187,036,869
============
</TABLE>

See Notes to Financial Statements

26
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 1999 July 31, 1998
-------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income........................... $ 7,958,967 $ 4,628,319
Net realized gain on investments................ 15,875,272 4,836,426
Net change in unrealized appreciation of
investments.................................... 163,202,630 84,559,360
-------------- ------------
Net Increase in Net Assets Resulting from
Operations.................................... 187,036,869 94,024,105
-------------- ------------
Transactions in Investors' Beneficial Interest:
Additions....................................... 531,746,685 267,044,708
Reductions...................................... (13,614,408) (11,192,148)
-------------- ------------
Net Increase in Net Assets from Transactions
in Investors' Beneficial Interests............ 518,132,277 255,852,560
-------------- ------------
Total Increase in Net Assets................ 705,169,146 349,876,665
NET ASSETS:
Beginning of year............................... 642,235,635 292,358,970
-------------- ------------
End of year..................................... $1,347,404,781 $642,235,635
============== ============
</TABLE>

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
Net Assets (000's)...... $1,347,405 $642,236 $292,359 $100,401 $54,003
Ratio of net investment
income to average net
assets................. 0.84%(/1/) 1.05%(/2/) 1.34% 1.48%(/4/) 1.85%(/5/)
Ratio of expenses to
average net assets..... 0.24%(/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 0.01% by
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 year ended July 31, 1999 would have been
0.83% 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,
1999, 1998, 1997 and 1996 include indirectly paid expenses. Excluding
indirectly paid expenses, the expense ratios would have been 0.20%,
0.20%, 0.25% and 0.50% for the years ended July 31, 1999, 1998, 1997 and
1996, respectively.
(/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

27
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
- -------------------------------------------------------------------------------

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

28
<PAGE>

DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(Continued)
July 31, 1999
- -------------------------------------------------------------------------------

Act of 1940. The services provided by the Manager consist of investment super-
visory services, overall operational support and administrative services. The
administrative services include the provision of general office facilities and
supervising the overall administration of the Index Portfolio. For its serv-
ices under the Management Agreement, the Manager receives from the Index Port-
folio 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 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 fee
waiver is voluntary and may be reduced or terminated at any time.

(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.

3. INVESTMENT TRANSACTIONS. Cost of purchases and sales of investments, other
than U.S. Government securities and short-term obligations, for the year ended
July 31, 1999 aggregated $609,803,880 and $86,482,202, respectively. Custody
fees of the Portfolio were reduced by $345,517 which was compensation for
uninvested cash left on deposit with the custodian.

29
<PAGE>

[LOGO OF KPMG Peat Marwick LLP]

Independent Auditors' Report

The Board of Trustees and Investors
Domini Social Index Portfolio:

We have audited the accompanying statement of assets and liabilities, in-
cluding the portfolio of investments, of Domini Social Index Portfolio as of
July 31, 1999, the related statement of operations for the year then ended,
and the statements of changes in net assets for each of the years in the two-
year period then ended, and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our responsi-
bility is to express an opinion on these financial statements and financial
highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
July 31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Domini Social Index Portfolio as of July 31, 1999, the results of its opera-
tions for the year then ended, changes in its net assets for each of the years
in the two-year period then ended, and financial highlights for each of the
years in the five-year period then ended, in conformity with generally ac-
cepted accounting principles.

/s/ KPMG LLP

Boston, Massachusetts
August 25, 1999

30
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1)... $219,533,120
------------
LIABILITIES:
Accrued expenses................................................. 140,395
------------
NET ASSETS........................................................ $219,392,725
============
NET ASSETS CONSIST OF:
Paid-in capital.................................................. $163,788,093
Undistributed net investment income.............................. 218,018
Accumulated net realized gain from Portfolio..................... 1,456,251
Net unrealized appreciation from Portfolio....................... 53,930,363
------------
$219,392,725
============
Shares outstanding................................................ 10,204,217
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
($219,392,725 /10,204,217)....................................... $21.50
======
</TABLE>

See Notes to Financial Statements

31
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
STATEMENT OF OPERATIONS
Year ended July 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
NET INVESTMENT INCOME FROM DOMINI SOCIAL INDEX PORTFOLIO:
Investment income from Portfolio................................... $1,470,873
Expenses from Portfolio............................................ 280,972
----------
Net investment income from Portfolio............................. 1,189,901
EXPENSES:
Sponsor fee (Note 2)............................................... 352,663
Trustees fees...................................................... 6,030
Printing........................................................... 10,498
Registration fees.................................................. 8,257
Professional fees.................................................. 33,769
Transfer agent fees (Note 2)....................................... 74,212
Accounting fees.................................................... 9,000
Miscellaneous...................................................... 12,015
----------
Total Expenses................................................... 506,444
Expenses Reimbursed and Fees Waived (Note 2)..................... (366,049)
----------
140,395
----------
NET INVESTMENT INCOME............................................... 1,049,506
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain from Portfolio................................... 2,520,693
Net change in unrealized appreciation from Portfolio............... 22,375,145
----------
Net realized and unrealized gain from Portfolio.................... 24,895,838
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ 25,945,344
==========
</TABLE>

See Notes to Financial Statements

32
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
--------------------------
July 31, July 31,
1999 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income............................ $ 1,049,506 $ 864,582
Net realized gain from Portfolio................. 2,520,693 983,271
Net change in unrealized appreciation from
Portfolio...................................... 22,375,145 16,852,441
------------ ------------
Net Increase in Net Assets from Operations..... 25,945,344 18,700,294
------------ ------------
Distributions and Dividends:
Dividends to shareholders from net investment
income......................................... (1,015,172) (756,212)
Distributions to shareholders from net realized
gain........................................... (2,012,581) (140,033)
------------ ------------
Net Decrease in Net Assets from Distributions
and Dividends................................ (3,027,753) (896,245)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares..................... 99,181,575 34,548,379
Net asset value of shares issued in reinvestment
of distributions and dividends................. 2,690,723 705,891
Payments for shares redeemed..................... (21,717,927) (8,004,515)
------------ ------------
Net increase in Net Assets from Capital Share
Transactions................................. 80,154,371 27,249,755
------------ ------------
Total increase in Net Assets.................. 103,071,962 45,053,804
NET ASSETS:
Beginning of period.............................. 116,320,763 71,266,959
------------ ------------
End of period (including undistributed net
investment income of $218,018 and $183,684,
respectively).................................. $219,392,725 $116,320,763
============ ============
OTHER INFORMATION
Share Transactions:
Sold............................................. 4,655,613 2,131,365
Issued in reinvestment of distributions and
dividends...................................... 136,144 45,030
Redeemed......................................... (1,095,685) (513,453)
------------ ------------
Net increase..................................... 3,696,072 1,662,942
============ ============
</TABLE>

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

See Notes to Financial Statements

33
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year
Ended Year Year For the period
July 31, ended ended May 30, 1996/1/ to
1999 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: 0.14 0.15 0.13 0.02
Net realized and
unrealized gain (loss)
on investments.......... 3.95 3.17 5.11 (0.41)
-------- -------- ------- -------
Total income (loss) from
investment
operations............ 4.09 3.32 5.24 (0.39)
-------- -------- ------- -------
Less distributions and
dividends:
Dividends to shareholders
from net investment
income.................. (0.14) (0.13) (0.13) (0.01)
Distributions to
shareholders from net
realized gains.......... (0.32) (0.03) (0.00)(/2/) --
-------- -------- ------- -------
Total distributions and
dividends............. (0.46) (0.16) (0.13) (0.01)
-------- -------- ------- -------
Net asset value, end of
period.................... $ 21.50 $ 17.87 $ 14.71 $ 9.60
======== ======== ======= =======
Total return................ 23.12% 22.74% 54.9% (3.9)%
Ratios/Supplemental data:
Net assets, end of period
(000's omitted)......... $219,393 $116,321 $71,267 $17,972
Ratio of net investment
income to average net
assets.................. 0.75%(/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 0.48% and 0.56%, and
respectively for the year ended July 31, 1999.
(/4/)Reflects a waiver of fees 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 0.47% and 0.57%, respectively for
the year ended July 31, 1999.
(/5/)Totalexpenses 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

34
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
- -------------------------------------------------------------------------------

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 16.3% at July 31, 1999). 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.

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

35
<PAGE>

DOMINI INSTITUTIONAL SOCIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- (Continued)
July 31, 1999
- -------------------------------------------------------------------------------
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. Currently,
DSIL is waiving its fee to the extent necessary to keep the aggregate annual
operating expenses of the Index Portfolio (excluding brokerage fees and com-
missions, 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 year ended
July 31, 1999, DSIL waived its management fees totalling $109,912.

B. Submanager. Mellon Equity provides investment submanagement services to
the Portfolio on a day-to-day basis pursuant to a Submanage-ment Agreement
with DSIL. Mellon Equity does not determine the composition of the Domini So-
cial Index.

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
year ended July 31, 1999, DSIL waived its entire sponsorship fee in the amount
of $352,663 and reimbursed expenses in the amount of $13,386.

D. Other. Certain officers of the Fund are also officers of the transfer
agent, FSSI. Total fees paid to FSSI for the year ended July 31, 1999 were ap-
proximately $74,000.

3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio for the year ended July 31, 1999 aggregated $311,761,894 and
$207,901,418, respectively.

4. FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED). For the year ended July
31, 1999, the amount of 20% rate gain distribution was $1,906,186. For federal
income tax purposes, distributions from short-term capital gains are classi-
fied as ordinary income. For corporate shareholders, 100% of dividends paid
from net investment income were eligible for the corporate dividends received
deduction.

36
<PAGE>

[LOGO OF KPMG Peat Marwick LLP]

Independent Auditors' Report

The Board of Trustees and Shareholders
Domini Institutional Social Equity Fund:

We have audited the accompanying statement of assets and liabilities of Do-
mini Institutional Social Equity Fund as of July 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for the three year period then ended and for the period
from May 30, 1996 (commencement of operations) to July 31, 1996. These finan-
cial statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the over-
all financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Domini Institutional Social Equity Fund as of July 31, 1999, the results of
its operations for the year then ended, changes in its net assets for each of
the years in the two-year period then ended, and financial highlights for the
three year period then ended and for the period from May 30, 1996 (commence-
ment of operations) to July 31, 1996, in conformity with generally accepted
accounting principles.

/s/ KPMG LLP

Boston, Massachusetts
September 16, 1999

37
<PAGE>

Domini [LOGO]
------------------
SOCIAL INVESTMENTS

P.O. Box 60494
King of Prussia, PA 19406-0494
800-762-6814
www.domini.com

Portfolio Investment Manager
and Fund Sponsor:
Domini Social Investments LLC
11 West 25th Street, 7th Floor
New York, NY 10010

Portfolio Investment
Submanager:
Mellon Equity Associates
Pittsburgh, PA

Distributor:

DSIL Investment Services LLC
11 West 25th Street, 7th Floor
New York, NY 10010
800-762-6814

CUSIP# 257131102

Custodian:
Investors Bank &
Trust Company
Boston, MA

Independent Auditors:
KPMG LLP
Boston, MA

Legal Counsel:
Bingham Dana LLP
Boston, MA

Transfer Agent:
FSSI
New York, NY