As filed with the Securities and Exchange Commission on November 22, 1995
Registration Nos. 33-29180, 811-5823
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 7
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9
DOMINI SOCIAL EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 617-423-0800
Philip W. Coolidge, Esq.
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 28, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number of its shares of beneficial
interest (without par value) pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrant filed the Notice required by Rule 24f-2 on September 22,
1995 for Registrant's fiscal year ended July 31, 1995.
Domini Social Index Portfolio has also executed this registration statement.
DSI201.EDG
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<TABLE>
<CAPTION>
DOMINI SOCIAL EQUITY FUND
CROSS REFERENCE SHEET
(As required by Rule 495)
<S> <C> <C>
Item Number Statement of Additional
Form N-1A, Part A Prospectus Caption Information Caption
1 Front Cover Page *
2 Expense Summary *
3 Financial Highlights; *
Performance Information
4 Front Cover Page; Investment *
Objective and Policies
5 The Fund; Management; *
Adviser, Manager, Administrator;
Service Organizations, Transfer Agent
and Custodian; Back Cover Page;
Other Information Concerning Shares
of the Fund-Expenses
5A Not Applicable
6 Other Information Concerning Shares *
of the Fund-Description of Shares,
Voting Rights and Liabilities;
Service Organizations, Transfer Agent
and Custodian; Other Information
Concerning Shares of the Fund-Dividends
and Capital Gain Distributions;
Tax Matters
7 Purchases and Redemptions of Shares; *
Purchases; Other Information Concerning
Shares of the Fund, Net Asset Value,
Distribution Plan and Agreement; Service
Organizations, Transfer Agent and Custodian;
8 Purchases and Redemptions of Shares- *
Redemptions
9 Not Applicable *
Item Number Statement of Additional
Form N-1A, Part B Prospectus Caption Information Caption
10 * Front Cover Page
11 * Front Cover Page
12 * The Fund
13 Investment Objectives and Investment Objectives,
Policies Policies and Restrictions
14 * Management of the Fund
and Portfolio-Trustees,
Officers
15 * Management of the Fund
and Portfolio-Trustees,
Officers
16 Other Information Concerning Management of the Fund
Shares of the Fund-Expenses and the Portfolio-
Administrator
Management of the Fund- Management of the Fund
Administrator and the Portfolio-
Administrator
Purchases and Redemptions of Management of the Fund and
Shares-Distribution Plan the Portfolio-
and Agreement Distributor
Service Organizations, Transfer Management of the Fund and
Agent and Custodian- Portfolio-Administrative
Transfer Agent and Custodian; Services Plan; Transfer
Back Cover Page Agent, Custodian and
Service Organizations;
Independent Auditors;
Back Cover Page
* Management of the Fund
and the Portfolio-
Distributor
17 * Investment Objectives,
Policies and
Restrictions-Security
Transactions
18 Other Information Concerning Description of Shares-
Shares of the Fund- Voting Rights and
Description of Shares, Liabilities
Voting Rights and Liabilities
19 Purchases and Redemptions of Not Applicable
Shares
Other Information Concerning Determination of Net Asset
Shares of the Fund-Net Value
Asset Value; Purchases and
Redemptions of Shares
20 Tax Matters Taxation
21 * Management of the Fund
and the Portfolio-
Distributor
* Management of the Fund
and the Portfolio-
Distributor
* Not Applicable
22 * Performance Information
23 * Financial Statements
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Form N-1A, Part C
Information required to be included in Part C is set forth under the
appropriately numbered item in Part C of this registration statement.
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PROSPECTUS
November 28, 1995
DOMINI SOCIAL EQUITY FUND
The investment objective of the Domini Social Equity Fund (the "Fund")
is to provide its shareholders with long-term total return which corresponds to
the total return performance of the Domini Social IndexSM, an index comprised of
stocks selected according to social criteria. The Fund seeks to achieve its
investment objective by investing all of its investable assets in the Domini
Social Index Portfolio (the "Portfolio"), a diversified open-end management
investment company having the same investment objective as the Fund. The
Portfolio invests in the common stocks included in the Domini Social IndexSM.
TABLE OF CONTENTS PAGE
The Fund.............................................................
Expense Summary......................................................
Financial Highlights.................................................
Performance Information..............................................
Investment Objective and Policies....................................
Management ..........................................................
Purchases and Redemptions of Shares..................................
Tax Matters..........................................................
Other Information Concerning Shares of the Fund......................
Service Organizations, Transfer Agent and Custodian..................
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The investment adviser of the Portfolio is Kinder, Lydenberg, Domini &
Co., Inc. The investment manager of the Portfolio is Mellon Equity Associates.
The administrator and distributor of the Fund, and the administrator of the
Portfolio, is Signature Broker-Dealer Services, Inc. INVESTMENTS IN THE FUND ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. SHARES OF THE FUND ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK, AND THE SHARES ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL,
STATE OR OTHER GOVERNMENTAL AGENCY.
"DominiSM" and "Domini Social IndexSM" are service marks of Kinder,
Lydenberg, Domini & Co., Inc.
This Prospectus sets forth concisely the information concerning the
Fund that a prospective investor ought to know before investing. The Fund has
filed with the Securities and Exchange Commission a Statement of Additional
Information, dated November 28, 1995 as amended from time to time, which
contains more detailed information about the Fund and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the Statement of
Additional Information without charge by contacting the Distributor (see back
cover for address and phone number).
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PORTFOLIO. THE FUND INVESTS IN THE
PORTFOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) INVESTMENT
FUND STRUCTURE. "HUB AND SPOKE(R) " IS A REGISTERED SERVICE MARK OF SIGNATURE
FINANCIAL GROUP, INC. SEE "SPECIAL INFORMATION CONCERNING THE HUB AND SPOKE(R)
STRUCTURE" HEREIN.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
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THE FUND
Domini Social Equity Fund (the "Fund") is a no-load, diversified,
open-end management investment company which was organized as a business trust
under the laws of the Commonwealth of Massachusetts on June 7, 1989. Although
shares of the Fund are sold without a sales load, Signature Broker-Dealer
Services, Inc. ("Signature") may receive a distribution fee from the Fund
pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund offers to
buy back (redeem) its shares from its shareholders at any time at net asset
value.
Shares of the Fund are sold continuously by Signature, the Fund's
distributor (the "Distributor"). The minimum initial investment is $1,000,
except that the minimum initial investment for an Individual Retirement Account
("IRA") is $250. An investor should obtain from the Distributor, and should read
in conjunction with this prospectus, the materials describing the procedures
under which Fund shares may be purchased and redeemed. See "Purchases and
Redemptions of Shares" herein.
Proceeds from the sale of shares of the Fund are invested in the
Portfolio which then purchases securities in accordance with its investment
objective and policies. Kinder, Lydenberg, Domini & Co., Inc. ("KLD") is the
Portfolio's investment adviser (the "Adviser"). Mellon Equity Associates
("Mellon Equity") is the Portfolio's investment manager (the "Manager").
Signature, the administrator of the Fund (the "Administrator") and of the
Portfolio (the "Portfolio Administrator"), supervises the overall administration
of the Fund and of the Portfolio. The Boards of Trustees of the Fund and of the
Portfolio provide broad supervision over the affairs of the Fund and of the
Portfolio, respectively. The Trustees who are not "interested persons" of the
Fund as defined in the 1940 Act (the "Independent Trustees"), are separate and
independent from the Independent Trustees of the Portfolio. For further
information about the Trustees of the Fund and the Portfolio, see "Management of
the Fund and the Portfolio" in the Statement of Additional Information.
A majority of the Fund's Trustees are not affiliated with the Adviser.
The Adviser determines the composition of the Domini Social Index. The
following persons are primarily responsible for the development and maintenance
of the Domini Social Index (which determines the composition of the Portfolio's
securities) : Steven D. Lydenberg, Director of Research, KLD, since 1990 ; and
Peter D. Kinder, President, KLD, since 1988. The Manager manages the investments
of the Portfolio from day to day in accordance with the Portfolio's investment
objective and policies.
The Fund is obligated to pay a fee to the Administrator at an annual
rate equal to 0.15% of the Fund's average daily net assets, and the Fund may pay
a fee to the Distributor up to an annual rate equal to 0.25% of the Fund's
average daily net assets, in each case calculated on an annualized basis for the
Fund's then-current fiscal year. The Portfolio is obligated to pay a fee to the
Adviser at an annual rate equal to 0.05% of the Portfolio's average daily net
assets and a fee to the Portfolio Administrator at an annual rate equal to 0.05%
of the Portfolio's average daily net assets, in each case on an annualized basis
for the Portfolio's then-current fiscal year. The Portfolio is obligated to pay
a fee to the Manager equal on an annual basis to the following percentages of
the Portfolio's average daily net assets for its then-current fiscal year: 0.10%
of assets up to $50 million; 0.30% of assets between $50 million and
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$100 million; 0.20% of assets between $100 million and $500 million; and 0.15%
of assets over $500 million. See "Management - Manager" herein for more detailed
information on the fees of the Manager. The Fund and the Portfolio must also pay
all of their respective other expenses.
EXPENSE SUMMARY
The following table provides (i) a summary of expenses relating to
purchases and sales of shares of the Fund, and the aggregate annual operating
expenses for the Fund and the Portfolio, as a percentage of average net assets
of the Fund, and (ii) an example illustrating the dollar cost of such expenses
on a $1,000 investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES.............................. 0%
ANNUAL OPERATING EXPENSES:
Advisory and Management Fees.......................... 0.25%
12b-1 Fees............................................ 0%
Other Expenses
- Administrative Services Fees...................... 0.20%
- Expense Payment Fees.............................. 0.53%
Total Operating Expenses.............................. 0.98%
EXAMPLE:
A shareholder of the Fund would pay the following expenses on a $1,000
investment in the Fund, assuming (1) 5% annual return and (2) redemption
at the end of:
3
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1 year............................................. $10
3 years............................................ $31
5 years............................................ $54
10 years........................................... $120
The purpose of the expense table provided above is to help investors
understand the various costs and expenses that a shareholder will bear directly
or indirectly. Pursuant to expense payment arrangements between Signature and
each of the Fund and the Portfolio , Signature pays all of the operating
expenses of the Fund and the Portfolio , including the advisory, management and
administrative services fees. Under these arrangements, Signature receives
expense payment fees (i) from the Fund, at an annual rate equal to 0.48% of the
Fund's average daily net assets for its then-current fiscal year, and (ii) from
the Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily
net assets for its then-current fiscal year. As a result, the aggregate annual
operating expenses (including amortization of organization expenses) of the Fund
and the Portfolio will not exceed 0.98% of the average daily net assets
of the Fund. All of the advisory, management and administrative services fees
shown above are paid through the expense payment arrangements. After the expense
payment arrangements terminate on December 31, 1999, the dollar-based expenses
of the Fund and the Portfolio will each be paid directly. For more information
with respect to the expenses of the Fund and the Portfolio , see "Management"
herein.
The Fund may pay a distribution fee at an annual rate of up to 0.25% of
the Fund's average daily net assets in reimbursement of, or in anticipation of,
expenses incurred by the Distributor in connection with the sale of shares of
the Fund. Long-term shareholders may pay more than the economic equivalent of
the maximum distribution charges permitted by the National Association of
Securities Dealers, Inc. The Fund may pay fees to Service Organizations (as
defined below) in amounts up to an annual rate of 0.25%
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of the daily net asset value of shares of the Fund owned by shareholders with
whom the Service Organization has a servicing relationship. The Fund does not
currently intend to enter into agreements with and pay fees to Service
Organizations, but it may do so in the future. See "Other Information Concerning
Shares of the Fund - Distribution Plan and Agreement" and "Service
Organizations, Transfer Agent and Custodian" herein.
THE "EXAMPLE" SET FORTH ABOVE IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL
EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund's Trustees believe that the aggregate per share expenses of
the Fund and the Portfolio will be less than or approximately equal to the
expenses which the Fund would incur if it retained the services of an investment
adviser and an investment manager and invested directly in the types of
securities being held by the Portfolio. See "Other Information Concerning Shares
of the Fund - Expenses" herein for further discussion of Fund and Portfolio
expenses.
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated
periods have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, whose reports thereon appear in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements included in the Statement of Additional Information.
The Fund's Annual Report includes a discussion of those factors,
strategies and techniques that materially affected the Fund's performance during
the fiscal year ended July 31, 1995, as well as certain related information. A
copy of the Annual Report will be made available without charge upon request.
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FOR THE FISCAL YEARS ENDED JULY 31
For the Period
August 10, 1990
1995 1994 1993 1992 TO JULY 31, 1991
---- ---- ---- ---- ----------------
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Net Asset Value,
beginning of
period.............. $12.13 $12.00 $11.06 $9.95 $10.00
Income from
investment
operations:
Net investment
income........... 0.172 0.175 0.137 0.117 0.018
Net realized
and
unrealized
gain (loss) on
investments...... 2.825 0.178(a) 0.968 1.106 (0.068)(a)
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Total from
investment
operations.......... 2.997 0.353 1.105 1.223 (0.050)
Less distributions:
Dividends to
shareholders
from net
investment
income........... (0.195) (0.150) (0.150) (0.113) -
Dividends to
shareholders
from realized
capital gains.... (0.082) (0.073) (0.015) - -
Total distributions.... (0.277) (0.223) (0.165) (0.113) -
Net asset value,
end of period....... $14.85 $12.13 $12.00 $11.06 $9.95
Total return........... 25.10% 2.90% 10.00% 12.30% (0.50)%
Ratios/supplemental
data:
Net assets, end
of period
(in 000's)....... $54,638 $31,369 $17,229 $7,174 $1,740
Ratio of
expenses to
average net
assets(c)........ 0.90% 0.75% 0.75% 0.75% 0.75%(b)
Ratio of net
investment
income to
average net
assets(c)........ 1.38% 1.67% 1.41% 1.53% 1.49%(b)
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(a) After effect of transaction in capital stock.
(b) Annualized.
(c) Includes the Fund's share of Domini Social Index Portfolio's expenses as
well as a waiver of fees and payment of expenses by the Administrator. Without
the limitations set forth in the expense payment arrangements and fee waivers in
effect during the indicated periods, the ratios of net investment income and
expenses to average net assets for the fiscal years ended July 31, 1995, 1994,
1993, 1992, and the period ended July 31, 1991 would have been 1.13% and 1.15%,
1.39% and 1.03%, 1.26% and 0.90%,
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1.53% and 0.75%, and 1.49% and 0.75%, respectively. For more information with
respect to the expense payment arrangements, see "Other Information Concerning
Shares of the Fund-Expenses" herein.
PERFORMANCE INFORMATION
Performance information concerning the Fund may from time to time be
used in advertisements, shareholder reports or other communications to
shareholders. The Fund may provide period and average annualized "total rates of
return" with respect to the Fund. The "total rate of return" of the Fund refers
to the change in the value of an investment in a Fund over a stated period based
on any change in net asset value per share and includes the value of any shares
purchasable with any dividends or capital gains distributions declared during
such period. Period total rates of return may be annualized. An annualized total
rate of return is a compounded total rate of return which assumes that the
period total rate of return is generated over a 52-week period, and that all
dividends and capital gains distributions are reinvested. An annualized total
rate of return will be slightly higher than a period total rate of return if the
period is shorter than one year, because of the effect of compounding.
The Fund may provide "yield" quotations with respect to the Fund. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day or one-month period (which period shall be stated in any
advertisement or communications with a shareholder). This income is then
"annualized", that is, the amount of income generated by the investment over the
period is assumed to be generated over a 52-week period and is shown as a
percentage of investment. A "yield" quotation, unlike a total rate of return
quotation, does not reflect changes in net asset value.
From time to time the Fund may also quote fund rankings from various
sources, such as Lipper Analytical Services, Inc., and may compare its
performance to that of the Domini Social Index and various other unmanaged
securities indices, such as the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500") and the Dow Jones Industrial Average. "Standard &
Poor(R)", "S&P(R)" and "Standard & Poor's 500(R)" are trademarks of Standard &
Poor's Corporation.
See the Statement of Additional Information for further information
concerning the calculation of yield and any total rate of return quotations.
Since the Fund's yield and total rate of return quotations are based on
historical earnings and since such yield and rates of return fluctuate over the
time, such quotations should not be considered as an indication or
representation of the future performance of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE - The investment objective of the Fund is to
provide its shareholders with long-term total return (reflecting both dividend
and price performance of the Fund) which corresponds to the total return
performance of the Domini Social Index (sometimes referred to herein as the
"Index"). There can, of course, be no assurance that the Fund will achieve its
investment objective. The investment objective of the Fund may be changed
without approval by the Fund's shareholders.
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INVESTMENT POLICIES - The Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio, which has
the same investment objective as the Fund. The Portfolio seeks to achieve its
investment objective by investing in the common stocks comprising the Domini
Social Index. The Portfolio will approximate the weightings of securities held
by the Portfolio to the weightings of the stocks in the Index, except as
described below, and will seek a correlation between the weightings of
securities held by the Portfolio and the weightings of the stocks in the Index
of 0.95 or better. A figure of 1.0 would indicate a perfect correlation. As of
September 30, 1995, the correlation between the weightings of securities held by
the Portfolio and the weightings of the stocks in the Index was 0.99. To the
extent practicable, the Portfolio will attempt to be fully invested. The ability
of the Fund to duplicate the performance of the Domini Social Index by investing
in the Portfolio will depend to some extent on the size and timing of cash flows
into and out of the Fund and the Portfolio as well as the Fund's and the
Portfolio's expenses. Adjustments in the securities holdings of the Portfolio to
accommodate cash flows will track the Domini Social Index to the extent
practicable, but this will result in brokerage expenses.
SOCIAL CRITERIA - The Domini Social Index is a common stock index
developed and maintained by the Adviser comprised of the common stocks of
approximately 400 companies which meet certain social criteria. The weightings
of the stocks comprising the Index are based upon market capitalization. The
criteria used in developing and maintaining the Domini Social Index involve
subjective judgment by the Adviser. The Adviser seeks to exclude companies
which, based on data available to the Adviser, derive more than 2% of their
gross revenues from the sale of military weapons; derive any revenues from the
manufacture of tobacco products or alcoholic beverages; derive any revenues from
gambling enterprises; or own directly or operate nuclear power plants or
participate in businesses related to the nuclear fuel cycle. In evaluating
stocks for inclusion in the Index, the Adviser considers criteria such as
environmental performance, particularly in taking positive initiatives in
environmental matters; its employee relations; its corporate citizenship; and
the quality of a company's products and its attitudes with regard to consumer
issues. Environmental performance includes a company's record on waste disposal,
toxic emissions, fines or penalties, and efforts in waste and emissions
reductions, recycling, and the use of environmentally beneficial fuels.
Corporate citizenship includes a company's record on philanthropic activities
and its interaction with the communities it affects. Employee relations includes
a company's record with regard to labor matters, its commitment to work place
safety and to equal employment opportunity (reflected, for example, in the
number of women and minorities in executive positions), the breadth, quality and
innovation of its employee benefit programs, and its commitment to provide
employees with a meaningful participation in company profits either through
stock purchase or profit sharing plans.
The Adviser intends to vote proxies of companies included in the
Portfolio consistent with the social criteria used in developing and maintaining
the Index.
INDEX MANAGEMENT - The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities included
in the Index. Moreover, inclusion of a stock in the Domini Social Index does not
imply an opinion by the Adviser as to the merits of that specific stock as an
investment. However, the Adviser believes that enterprises which exhibit a
social awareness, based on the criteria described above, should be better
prepared to meet future societal needs for goods and services and may
8
<PAGE>
also be less likely to incur certain legal liabilities that may be incurred when
a product or service is determined to be harmful, and that such enterprises
should over the longer term be able to provide a positive return to investors.
In selecting stocks for inclusion in the Index:
1. The Adviser evaluated, in accordance with the social criteria
described above, each of the companies the stocks of which comprise the S&P 500.
If a company whose stock was included in the S&P 500 met the Adviser's social
criteria and met the Adviser's further criteria for industry diversification,
financial solvency, market capitalization, and minimal portfolio turnover, it
was included in the Domini Social Index. As of September 30, 1995, of the 500
companies whose stocks comprised the S&P 500, approximately 51% were included in
the Index.
2. The remaining stocks comprising the Domini Social Index (I.E., those
which are not included in the S&P 500) were selected based upon the Adviser's
evaluation of the social criteria described above, as well as upon the Adviser's
criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover. Because of the social criteria
applied in the selection of stocks comprising the Domini Social Index, industry
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500, and certain
industry sectors will be excluded altogether.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole. Since some industries are characterized by
companies of relatively small stock capitalization, the S&P 500 does not
comprise the 500 largest companies listed on the New York Stock Exchange. Not
all stocks included in the S&P 500 are listed on the New York Stock Exchange.
However, the total market value of the S&P 500 as of September 30, 1995
represented 76% of the aggregate market value of common stocks traded on the New
York Stock Exchange.
Inclusion of a stock in the S&P 500 Index in no way implies an opinion
by S&P as to its attractiveness as an investment, nor is S&P a sponsor of or
otherwise affiliated with the Fund or the Portfolio.
Some of the stocks included in the Domini Social IndexSM may be stocks
of foreign issuers (provided that the stocks are traded in the United States in
the form of American Depositary Receipts or similar instruments the market for
which is denominated in United States dollars). Securities of foreign issuers
may represent a greater degree of risk (I.E., as a result of exchange rate
fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization, (I.E., market price per share
times the number of shares outstanding). Because of this weighting, as of
September 30, 1995 approximately 38% of the Domini Social Index was comprised of
the 20 largest companies in that Index.
9
<PAGE>
The Adviser may exclude from the Domini Social Index stocks issued by
companies which are in bankruptcy or whose bankruptcy the Adviser believes may
be imminent.
The Portfolio intends to readjust its securities holdings periodically
such that those holdings will correspond, to the extent reasonably practicable,
to the Domini Social Index both in terms of composition and weighting. The
timing and extent of adjustments in the holdings of the Portfolio, and the
extent of the correlation of the holdings of the Portfolio with the Domini
Social Index, will reflect the Manager's judgment as to the appropriate balance
between the goal of correlating the holdings of the Portfolio with the
composition of the Index, and the goals of minimizing transaction costs and
keeping sufficient reserves available for anticipated redemptions of shares. To
the extent practicable, the Portfolio will seek a correlation between the
weightings of securities held by the Portfolio to the weightings of the
securities in the Index of 0.95 or better. Subject to the goal of achieving a
0.95 or better correlation between the weightings of the securities held by the
Portfolio and the weightings of the securities in the Index, the Manager may
slightly overweight and/or underweight certain holdings of the Portfolio
compared to the Index in an effort to enhance the performance of the Portfolio
to help offset the expenses of the Portfolio and the Fund and the effect of the
size and timing of cash flows into and out of the Portfolio and the Fund. There
can be no assurances, of course, that such portfolio enhancement strategies will
be successful, and the performance of the Portfolio may as a result be worse
than if such strategies were not undertaken. The Board of Trustees of the
Portfolio will receive and review, at least quarterly, a report prepared by the
Manager comparing the performance of the Fund and the Portfolio with that of the
Index, and comparing the composition and weighting of the Portfolio's holdings
with those of the Index, and will consider what action, if any, should be taken
in the event of a significant variation between the performance of the Fund or
the Portfolio, as the case may be, and that of the Index, or between the
composition and weighting of the Portfolio's securities holdings with those of
the stocks comprising the Index. If the correlation between the weightings of
securities held by the Portfolio and the weightings of the stocks in the Index
falls below 0.95, the Board of Trustees will review with the Manager methods for
increasing such correlation, such as through adjustments in securities holdings
of the Portfolio.
The Portfolio may invest cash reserves in short-term debt securities
(I.E., securities having a remaining maturity of one year or less) issued by
agencies or instrumentalities of the United States Government, bankers'
acceptances, commercial paper or certificates of deposit, provided that the
issuer satisfies the Adviser's social criteria. The Portfolio does not currently
intend to invest in direct obligations of the United States Government.
Short-term debt securities purchased by the Portfolio will be rated at least
Prime-1 by Moody's Investors Service, Inc. or A-1+ or A-1 by S&P or, if not
rated, determined to be of comparable quality by the Portfolio's Board of
Trustees. The Portfolio's policy is to hold its assets in such securities
pending readjustment of its portfolio holdings of stocks comprising the Domini
Social Index and in order to meet anticipated redemption requests. Such
investments are not intended to be used for defensive purposes in periods of
anticipated market decline.
Frequent changes in the Portfolio's holdings may result from the policy
of attempting to correlate the Portfolio's securities holdings with the
composition of the Index, and the frequency of such changes will increase as the
rate and volume of purchases and redemptions of shares of the Portfolio
increases.
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The annual portfolio turnover rates of the Portfolio for the fiscal years ended
July 31, 1994 and July 31, 1995 were 8% and 6%, respectively.
The Portfolio's primary consideration in placing securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. Neither the Portfolio nor the Fund will engage in
brokerage transactions with the Adviser, the Manager or the Administrator or any
of their respective affiliates or any affiliate of the Fund or the Portfolio.
For further discussion regarding securities trading by the Portfolio, see the
Statement of Additional Information.
Consistent with applicable regulatory policies, including those of the
Board of Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Portfolio may make loans of its securities to member banks of
the Federal Reserve System and to broker-dealers. Such loans would be required
to be secured continuously by collateral and cash or cash equivalents maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. The Portfolio would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During the existence of
a loan, the Portfolio would continue to collect the equivalent of the dividends
paid by the issuer on the securities loaned and would also receive interest on
investment of cash collateral. The Portfolio may pay finder's and other fees in
connection with securities loans. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.
Although it has no current intention to do so, the Portfolio may make
short sales of securities or maintain a short position, if at all times when a
short position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.
SPECIAL INFORMATION CONCERNING THE HUB AND SPOKE(R) STRUCTURE
The Fund and the Portfolio are utilizing certain proprietary rights,
know-how and financial services referred to as Hub and Spoke(R) from Signature
Financial Group, Inc. ("Signature Financial"), of which the Administrator is a
wholly owned subsidiary. Hub and Spoke(R) is a registered service mark of
Signature Financial.
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objective as the Fund. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions as the Fund and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the
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Fund should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Administrator at (617) 423-0800. The Hub and Spoke investment fund
structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
The investment objective of the Fund may be changed without the
approval of the Fund's shareholders, but not without written notice thereof to
shareholders thirty days prior to implementing the change. If there were a
change in the Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-current
financial positions and needs. The investment objective of the Portfolio may
also be changed without the approval of the investors in the Portfolio, but not
without written notice thereof to the investors in the Portfolio (and notice by
the Fund to its shareholders) 30 days prior to implementing the change. There
can, of course, be no assurance that the investment objective of either the Fund
or the Portfolio will be achieved. See "Investment Restrictions" in the
Statement of Additional Information for a description of the fundamental
policies of the Fund and of the Portfolio that cannot be changed without
approval by the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Fund or the Portfolio, respectively. Except as
stated otherwise, all investment guidelines, policies and restrictions described
herein and in the Statement of Additional Information are non-fundamental.
Smaller funds investing in the Portfolio may be materially affected by
the actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk.
(However, this possibility exists as well for traditionally structured funds
which have large or institutional investors.) Also, funds with a greater pro
rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Subject to exceptions that are not inconsistent
with applicable rules or policies of the Securities and Exchange Commission,
whenever the Fund is requested to vote on matters pertaining to the Portfolio ,
the Fund will hold a meeting of shareholders of the Fund and will cast all of
its votes in the same proportion as the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the Fund's votes at the Portfolio
meeting. The percentage of the Fund's votes representing Fund shareholders not
voting will be voted by the Trustees of the Fund in the same proportion as the
Fund shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objective, policies or restrictions may require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in a
distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund. Notwithstanding the
above, there are other means for meeting shareholder redemption requests, such
as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if
the Board of Trustees of the Fund determines that it is in the best interests of
the Fund to do so. Upon any such withdrawal, the Board of Trustees would
consider what action might be taken, including the investment of all the assets
of the Fund in another pooled investment entity having the same investment
objective as the Fund
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or the retention of an investment adviser to manage the Fund's assets in
accordance with the investment policies described above with respect to the
Portfolio. In the event the Trustees of the Fund were unable to find a
substitute investment company in which to invest the Fund's assets and were
unable to secure directly the services of an investment adviser and investment
manager, the Trustees will seek to determine the best course of action.
For more information about the Portfolio's policies, management and
expenses see "Investment Objective and Policies," "Management," and "Other
Information Concerning Shares of the Fund - Expenses." For information about the
Portfolio's investment restrictions see the Statement of Additional Information.
-----------
As a matter of fundamental policy, the Fund will invest all of its
investable assets (either directly or through the Portfolio) in one or more of:
(i) stocks comprising an index of securities selected applying social criteria,
which initially will be the Domini Social Index, (ii) short-term debt securities
of issuers which meet social criteria, (iii) cash, and (iv) options on equity
securities. This fundamental policy cannot be changed without the approval of
the holders of a majority of the Fund's shares (which, as used in this
Prospectus, means the lesser of (a) more than 50% of the outstanding shares of
the Fund, or (b) 67% or more of the outstanding shares of the Fund present at a
meeting at which holders of more than 50% of the Fund's outstanding shares are
represented in person or by proxy). Except for this fundamental policy, investor
approval is not required to change the Fund's or the Portfolio's investment
objective or any of the investment policies described above.
The Statement of Additional Information includes a discussion of other
investment policies and a listing of specific investment restrictions which
govern the Portfolio's and the Fund's investment policies. Certain of the
investment restrictions listed in the Statement of Additional Information may
not be changed by the Portfolio without the approval of the Fund and the other
investors in the Portfolio or by the Fund without the approval of the
shareholders of the Fund. If a percentage or rating restriction on investment or
utilization of assets is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
Portfolio's total assets or the value of the Portfolio's securities or a later
change in the rating of a security held by the Portfolio will not be considered
a violation of policy.
Expenses of the Portfolio with respect to investment advisory services,
investment management services and administration services are described herein
under "Management - Adviser, - Manager and - Administrator," respectively.
MANAGEMENT
The Boards of Trustees of the Fund and the Portfolio provide broad
supervision over the affairs of the Fund and the Portfolio, respectively. The
Fund has retained the services of Signature as administrator, but has not
retained the services of an investment adviser or investment manager since the
Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio. The
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Portfolio has retained the services of Signature as administrator, KLD as
investment adviser, and Mellon Equity as investment manager.
ADVISER
KLD provides advice to the Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The services provided by the Adviser
consist of determining the stocks to be included in the Index and evaluating, in
accordance with the Adviser's social criteria, debt securities which may be
purchased by the Portfolio. For its services under the Advisory Agreement, the
Adviser receives from the Portfolio a fee accrued daily and paid monthly at an
annual rate equal to 0.05% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then-current fiscal year.
Amy Lee Domini is a principal executive officer of KLD. Ms. Domini is a
Chartered Financial Analyst and has been in the investment field for twenty
years. She has co-authored three books on social investing, ETHICAL INVESTING
(Addison-Wesley, 1986), INVESTING FOR GOOD (Herbert Collins, 1993) and THE
SOCIAL INVESTMENT ALMANAC (Henry Holt Reference Books, 1992), and is currently a
trustee of Loring, Wolcott & Coolidge, a firm of private trustees. Ms. Domini
serves on the Governing Board of the Interfaith Center on Corporate
Responsibility and is a former member of the Board of the National Association
of Community Development Loan Funds. She is a member of both the Committee on
Trust Funds and the Church Pension Fund at the Episcopal Church (USA). Ms.
Domini has worked to promote both shareholder activism and community development
investing which, in combination with the integration of social criteria into
investment decisions, in her view serve to encourage the business community to
accept more responsibility for its impact on society.
Peter D. Kinder, president of KLD, received his training as a lawyer
and has practiced in both the public and private sectors with a particular
emphasis on administrative law. He co-authored LAW AND BUSINESS (McGraw-Hill,
1990 [3d ed.]), ETHICAL INVESTING (Addison-Wesley, 1986), INVESTING FOR GOOD
(Herbert Collins, 1993) and THE SOCIAL INVESTMENT ALMANAC (Henry Holt Reference
Books, 1992). As a member of the Board of the Social Investment Forum, Mr.
Kinder participated in the Forum's CERES Project which developed the Valdez
Principles proposing environmental standards to be adopted by U.S. corporations.
Steven D. Lydenberg, Director of Research of KLD, has been active in
social research for nineteen years. For twelve years he served the Council on
Economic Priorities, ultimately as Director of Corporate Accountability
Research. From 1987 to 1989, Mr. Lydenberg was an investment associate with
Franklin Research and Development, where he edited Franklin's newsletter,
INVESTING FOR A BETTER WORLD. Mr. Lydenberg has authored numerous publications
on issues of corporate social responsibility, including RATING AMERICA'S
CORPORATE CONSCIENCE (Addison-Wesley, 1986) and THE SOCIAL INVESTMENT ALMANAC
(Henry Holt Reference Books, 1992), as well as co- authored INVESTING FOR GOOD
(Herbert Collins, 1993). He is a Chartered Financial Analyst.
"DominiSM" and "Domini Social IndexSM" are service marks of KLD.
Pursuant to agreements with the Fund and the Portfolio, the Portfolio will be
required to discontinue use of such
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service marks if KLD ceases to be the investment adviser of the Portfolio, and
the Fund will be required to discontinue the use of such service marks if either
KLD ceases to be the investment adviser of the Portfolio or the Fund ceases to
invest all of its assets in the Portfolio.
MANAGER
Mellon Equity manages the Portfolio on a day-to-day basis pursuant to
an Investment Management Agreement (the "Management Agreement"). Mellon Equity
does not determine the composition of the Domini Social Index.
Prior to November 21, 1994, the investment manager of the Portfolio was
State Street Bank and Trust Company (the "Former Manager"). For the fiscal year
ended July 31, 1994, the Former Manager voluntarily waived a portion of its
management fees and was paid investment management fees equal to 0.07% of the
average daily net assets of the Portfolio. On October 5, 1994 the Portfolio
notified the Former Manager of its intent to terminate the investment management
agreement between the Portfolio and the Former Manager (the "Former Agreement").
The Board of Trustees of the Portfolio authorized the Portfolio to
enter into a new investment management agreement (the "Management Agreement")
with Mellon Equity, pursuant to which Mellon Equity assumed responsibilities for
the management of the Portfolio's assets on November 21, 1994. Except for the
investment management fee to be paid thereunder, the terms and conditions of the
Management Agreement are not substantially different from the terms and
conditions of the Former Agreement. Under the Management Agreement, the
Portfolio will pay Mellon Equity an investment management fee equal on an annual
basis to the following percentages of the Portfolio's average daily net assets
for its then-current fiscal year: 0.10% of assets up to $50 million; 0.30% of
assets between $50 million and $100 million; 0.20% of assets between $100
million and $500 million; and 0.15% of assets over $500 million.
Mellon Equity is a Pennsylvania business trust whose sole beneficiary
is MBC Investments Corporation, a wholly-owned subsidiary of Mellon Bank
Corporation. Mellon Equity has been registered as an investment adviser under
the Investment Advisers Act of 1940 since 1986. Prior to 1987, the Manager was
part of the Equity Management Group of Mellon Bank Corporation's Trust and
Investment Department, which has managed pension assets since 1947. As of
September 30, 1995, the Manager had approximately $7.6 billion in assets under
management.
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Mellon Equity believes that performance of investment management
services for the Portfolio will not violate the Glass-Steagall Act or other
applicable banking laws or regulations. However, future statutory or regulatory
changes, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could prevent
Mellon Equity from continuing to perform such services for the Portfolio. If
Mellon Equity were prohibited from acting as investment manager to the
Portfolio, it is expected that the Trustees would recommend to shareholders
approval of a new investment management agreement with another qualified
investment manager selected by the Trustees, or that the Trustees would
recommend other appropriate action.
ADMINISTRATOR
Pursuant to Administrative Services Agreements, Signature provides the
Fund and the Portfolio with general office facilities and supervises the overall
administration of the Fund and the Portfolio, including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of, the independent contractors and agents of the
Fund or the Portfolio; the preparation and filing of all documents required for
compliance by the Fund or the Portfolio with applicable laws and regulations;
and arranging for the maintenance of books and records of the Fund and the
Portfolio. Signature provides persons satisfactory to the Board of Trustees of
the Fund or the Portfolio to serve as officers of the Fund or the Portfolio.
Such officers, as well as certain other employees and Trustees of the Fund or
the Portfolio, may be directors, officers or employees of Signature or its
affiliates. For these services and facilities, Signature receives fees computed
and paid monthly from the Fund at an annual rate equal to 0.15% of the average
daily net assets of the Fund, and from the Portfolio at an annual rate equal to
0.05% of the average daily net assets of the Portfolio, in each case on an
annualized basis for the Fund's or the Portfolio's then-current fiscal year.
Signature is a wholly-owned subsidiary of Signature Financial Group, Inc.
Pursuant to a Sub-Administrative Services Agreement between Signature
and KLD, KLD serves as Sub-Administrator of the Fund. In such capacity, KLD
performs certain administrative services requested by the Administrator,
including assisting personnel of the Administrator in answering questions from
the general public, the media and investors in the Fund regarding the securities
holdings of the Portfolio. For these services, KLD receives from the
Administrator such compensation as they may agree on from time to time.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased without a sales load at the net
asset value next determined after an order for shares is received and accepted
by the Fund provided such order is received and accepted prior to the close of
the New York Stock Exchange on any day the New York Stock Exchange is open for
trading (a "Fund Business Day").
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The minimum initial investment in the Fund is $1,000, except that the minimum
initial investment for an IRA is $250. There is no minimum on additional
investments.
The Fund reserves the right to cease offering its shares for sale at
any time or to reject any order for the purchase of its shares.
For each shareholder of record, the Fund establishes an open account to
which all shares purchased are credited together with any dividends and capital
gains distributions which are paid in additional shares. See "Other Information
Concerning Shares of the Fund - Dividends and Capital Gains Distributions".
Although most shareholders elect not to receive share certificates, certificates
for full shares can be obtained on specific written request to the Fund. No
certificates are issued for fractional shares.
Shares may be purchased directly from the Distributor or through
Service Organizations (see "Service Organizations" below) by clients of those
Service Organizations. If an investor purchases shares through a Service
Organization, the Service Organization must promptly transmit such order to the
Fund so that the order receives the net asset value next determined following
receipt of the order. Service Organizations may impose minimum customer account
and other requirements in addition to those imposed by the Fund. Investors
wishing to purchase shares through a Service Organization should contact that
organization directly for appropriate instructions. Other investors may purchase
Fund shares in the manner described below.
Investors desiring to purchase shares of the Fund by mail should
complete an Account Application and mail the Application and a check (in U.S.
dollars), payable to "Domini Social Equity Fund," to the Fund at the following
address:
Domini Social Equity Fund
P.O. Box 117
New York, New York 10274-0117
An investor desiring to purchase shares by a wire transfer of funds
should request its bank to transmit immediately available funds . The
information transmitted with the funds must include the investor's name and
address and a statement indicating whether a new account is being established by
such wire transfer or whether such wire transfer is being made by a shareholder
with an account with the Fund. If the initial purchase by an investor is by a
wire transfer of funds, an account number will be assigned to such investor and
an Account Application must subsequently be completed and mailed to the Fund.
For purchases by wire transfer, please call Fundamental Shareholder Services,
Inc., the Fund's transfer agent (the "Transfer Agent"), at 1-800-782-4165 to
obtain wire transfer instructions.
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Investors making purchases through a Service Organization should be
aware that it is the responsibility of the Service Organization to transmit
orders for purchases of shares by its customers to the Transfer Agent and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
For further information on how to purchase shares of the Fund, an
investor should contact the Distributor (see back cover for address and phone
number).
AUTOMATIC INVESTMENT PLAN
The Fund offers a plan for regularly investing specified dollar amounts
($25.00 minimum in monthly, quarterly, semi-annual or annual intervals) in the
Fund. If an Automatic Investment Plan is selected, subsequent investments will
be automatic and will continue until such time as the Fund and the investor's
bank are notified to discontinue further investments. Due to the varying
procedures to prepare, process and to forward the bank withdrawal information to
the Fund, there may be a delay between the time of the bank withdrawal and the
time the money reaches the Fund. The investment in the Fund will be made at the
public offering price per share determined on the day that both the check and
bank withdrawal data are received in the form required by the Fund. Further
information about the plan and form may be obtained from the Transfer Agent or
the Distributor at the telephone numbers listed on the back cover of the
prospectus.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund may be used as a funding medium for an Individual
Retirement Account ("IRA"). An Internal Revenue Service-approved IRA plan is
available from the Distributor naming Investors Bank & Trust Company as
custodian. The minimum initial investment for an IRA is $250; the minimum
subsequent investment is $100. IRAs are available to individuals who receive
compensation or earned income and their spouses whether or not they are active
participants in a tax-qualified or Government-approved retirement plan. An IRA
contribution by an individual who participates, or whose spouse participates, in
a tax-qualified or Government-approved retirement plan may not be deductible
depending upon various factors, including the individual's income. Individuals
also may establish an IRA to receive a "rollover" contribution of distributions
from another IRA or a qualified plan. Tax advice should be obtained before
planning a rollover.
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in its
account at any time at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to the Fund. Redemptions
will therefore be effected on the same day the redemption order is received by
the Fund provided such order is received and accepted prior to the close of the
Fund Business Day. The proceeds of a redemption will be paid by the Fund in
federal funds normally on the next Fund
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Business Day, but in any event within seven days if all checks in payment for
the purchase of shares to be redeemed have been cleared by the Fund (which may
take up to 15 days). Redemptions may be made by letter to the Fund specifying
the dollar amount or number of shares to be redeemed and the account number. The
letter must be signed in exactly the same way the account is registered and the
signatures must be guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange or by a commercial bank
(not a savings bank) which is a member of the Federal Deposit Insurance
Corporation. In some cases the Fund may require the furnishing of additional
documents.
An investor may redeem shares in any amount by written or telephonic
request. Written requests should be mailed to the Fund at the following address:
Domini Social Equity Fund
P.O. Box 117
New York, New York 10274-0117
An investor may redeem shares by wire or telephone if the appropriate
box on the Account Application has been completed. Redemptions may be paid by
the Fund by check or by wire transfer. Instructions for wire redemptions are set
forth in the Account Application. If shares to be redeemed are held in
certificate form, the certificates must be mailed to the Fund at the address
noted above. Do not sign the certificates and, for protection, use registered
mail.
The Fund, Transfer Agent and Distributor reserve the right to refuse
wire or telephone redemptions. Procedures for redeeming shares by wire or
telephone may be modified or terminated at any time by the Fund or the
Distributor. The Fund, Transfer Agent and Distributor will not be liable for any
loss, liability, cost or expense for acting upon telephone instructions believed
to be genuine. Accordingly, shareholders will bear the risk of loss. The Fund
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including, without limitation, recording telephone
instructions and/or requiring the caller to provide some form of personal
identification. Failure to employ reasonable procedures may make the Fund liable
for any losses due to unauthorized or fraudulent telephone instructions. The
following information must be supplied by the shareholder or broker at the time
a request for a telephone redemption is made: (1) the shareholder's account
number; (2) the shareholder's social security number; and (3) the name and
account number of the shareholder's designated securities dealer or bank.
A Service Organization may request a wire redemption provided a Wire
Authorization Form is on file with the Fund. The proceeds of a wire redemption
will be sent to an account with a Service Organization designated on the
appropriate form. The Fund reserves the right to restrict or terminate wire
redemption privileges. Proceeds of wire redemptions will be transferred within
seven days after receipt of the request.
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The value of shares redeemed may be more or less than the shareholder's
cost, depending on the Fund's performance during the period the shareholder
owned its shares. Redemptions of shares are taxable events on which the
shareholder may recognize a gain or a loss.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns shares of the Fund with an aggregate value of
$10,000 or more may establish a Systematic Withdrawal Plan under which he or she
redeems at net asset value the number of full and fractional shares which will
produce the monthly, quarterly, semi-annual or annual payments specified
(minimum $50.00 per payment). Depending on the amounts withdrawn, systematic
withdrawals may deplete the investor's principal. Investors contemplating
participation in this Plan should consult their tax advisers. No additional
charge to the shareholder is made for this service.
TAX MATTERS
Each year the Fund intends to qualify and elect to be treated as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") . Provided the Fund meets all income, distribution and
diversification requirements of the Code, and distributes all of its net
investment income and realized capital gains to shareholders in accordance with
the timing requirements imposed by the Code, the Fund will not be required to
pay any federal income or excise taxes. The Portfolio will also not be required
to pay any federal income or excise taxes. However, shareholders of the Fund
normally will have to pay federal income taxes, and any state or local taxes, on
the dividends and any realized net capital gains distributions they receive from
the Fund. At the end of each calendar year, each shareholder receives
information for tax purposes on the dividends and any realized net capital gains
distributions received during that calendar year including the portion taxable
as ordinary income, the portion taxable as capital gains, the portion, if any,
representing a return of capital (which generally is free of current taxes but
results in a basis reduction) and the amount of dividends eligible for the
dividends-received deduction for corporations.
Dividends and distributions to shareholders will be treated in the same
manner for federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund. Distributions of net long-term capital gains
(I.E., the excess of net long-term capital gains over net short-term capital
losses) will cause any short-term capital loss realized on the disposition by a
Fund's shareholder of Fund shares held for six or fewer months to be
recharacterized, to the extent of those distributions, as long-term capital
loss. Under the back-up withholding rules of the Code, certain shareholders may
be subject to 31% withholding of federal income tax on distributions and
payments made by the Fund. Generally, shareholders are subject to back-up
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain other certifications.
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The Fund is organized as a Massachusetts business trust and, under
current law, is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as it qualifies as a regulated investment company under
the Code.
The foregoing discussion is intended for general information only. A
prospective shareholder should consult with its own tax advisor as to the tax
consequences of an investment in the Fund including the status of distributions
from the Fund under applicable state or local law.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The Fund determines the net asset value of each of its shares on each
Fund Business Day. This determination is made once during each such day as of
the close of regular trading on the New York Stock Exchange by deducting the
amount of the Fund's liabilities from the value of its assets and dividing the
difference by the number of shares of the Fund outstanding. A share's net asset
value is effective for orders received by the Distributor prior to the close of
the Fund Business Day on which such net asset value is determined.
Since the Fund will invest all of its assets in the Portfolio, the
value of the Fund's assets will be equal to the value of its beneficial interest
in the Portfolio. The net asset value of the Portfolio is determined as of the
close of regular trading on the New York Stock Exchange on each Fund Business
Day, by deducting the amount of the Portfolio's liabilities from the value of
its assets. At the close of each such Fund Business Day, the value of the Fund's
beneficial interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage, effective for that day, which
represents the Fund's share of the aggregate beneficial interests in the
Portfolio. (See "Description of Shares, Voting Rights and Liabilities" below.)
Equity securities held by the Portfolio are valued at the last sale
price on the exchange on which they are primarily traded or on the NASDAQ system
for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. If the Portfolio purchases option
contracts, such option contracts which are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Short-term obligations with remaining maturities of less than
sixty days are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of the Portfolio. Portfolio securities
(other than short-term obligations with remaining maturities of less than sixty
days) for which there are no such quotations or valuations are valued at fair
value as determined in good faith by or at the direction of the Portfolio's
Board of Trustees.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Substantially all of the Fund's net income from dividends and interest
is paid to the Fund's shareholders semi-annually (in the months of June and
December) as a dividend. For this purpose, the Fund's "net income from dividends
and interest" consists of all income from dividends and interest accrued on the
assets of the Fund (I.E., the Fund's share of the Portfolio's net income from
dividends and
21
<PAGE>
interest), less all actual and accrued expenses of the Fund determined in
accordance with generally accepted accounting principles.
The Fund also declares a long-term capital gains distribution to its
shareholders on an annual basis, usually in December, if the Fund's share of the
Portfolio's profits during the year from the sale of securities held for longer
than the applicable long-term capital gains holding period exceeds the Fund's
share of the Portfolio's losses during such year from the sale of securities
together with the Fund's share of the Portfolio's net capital losses carried
forward from prior years (to the extent not used to offset short-term capital
gains). The Fund's share of the Portfolio's net short-term capital gains
realized during each fiscal year will also be distributed at that time.
The Fund will also make additional distributions to its shareholders to
the extent necessary to avoid application of the 4% non-deductible excise tax
created by the Tax Reform Act of 1986 on certain undistributed income and net
capital gains of mutual funds.
A shareholder of the Fund may elect to receive dividends and capital
gains distributions in either cash or additional shares. Unless otherwise
specified in writing by a shareholder, all dividends and capital gains
distributions will be reinvested in additional shares.
EXPENSES
The Fund and the Portfolio each pay all of their respective expenses,
including the compensation of their respective Trustees who are not affiliated
with the Administrator or the Adviser; governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the Fund
or the Portfolio; fees and expenses of independent auditors, of legal counsel
and of any transfer agent, custodian, registrar or dividend disbursing agent of
the Fund or the Portfolio; insurance premiums; and expenses of calculating the
net asset value of the Portfolio and of shares of the Fund.
The Fund will also pay all fees under its Administrative Services Plan;
expenses of distributing and redeeming shares and servicing shareholder
accounts; expenses of preparing, printing and mailing prospectuses, reports,
notices, proxy statements and reports to shareholders and to governmental
offices and commissions; expenses of shareholder meetings; and expenses relating
to the issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes.
The Portfolio will also pay the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to governmental offices and
commissions; expenses of meetings of investors; and the advisory fees payable to
the Adviser under the Advisory Agreement, the management fees payable to the
Manager under the Management Agreement and the administrative fees payable to
the Portfolio Administrator.
Pursuant to expense payment arrangements between Signature and each of
the Fund and the Portfolio
22
<PAGE>
effective January 1, 1995, Signature has agreed to pay all of the operating
expenses of the Fund and the Portfolio . The arrangements will terminate on
December 31, 1999 unless sooner terminated by mutual agreement of the parties.
Under these arrangements Signature receives expense payment fees computed and
paid monthly (i) from the Fund, at an annual rate equal to 0.48% of the Fund's
average daily net assets for its then-current fiscal year, and (ii) from the
Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily net
assets for its then-current fiscal year. See "Management of the Fund and the
Portfolio" in the Statement of Additional Information for more information
regarding expense payment arrangements
.
DISTRIBUTION PLAN AND AGREEMENT
The Trustees of the Fund have adopted a Distribution Plan (the
"Distribution Plan") in accordance with Rule 12b-1 under the 1940 Act after
having concluded that there is a reasonable likelihood that the Distribution
Plan will benefit the Fund and its shareholders. As contemplated by the
Distribution Plan, Signature, as the Distributor, acts as agent of the Fund in
connection with the offering of shares of the Fund pursuant to a Distribution
Agreement. Signature, as the Distributor, acts as the principal underwriter of
shares of the Fund and bears the compensation of personnel necessary to provide
such services and all costs of travel, office expenses (including rent and
overhead) and equipment.
Under the Distribution Plan, Signature may receive a fee from the Fund
at an annual rate not to exceed 0.25% of the Fund's average daily net assets in
anticipation of, or as reimbursement for, costs and expenses incurred in
connection with the sale of shares of the Fund, such as payments to
broker-dealers who advise shareholders regarding the purchase, sale or retention
of shares of the Fund, payments to employees of Signature, advertising expenses
and the expenses of printing and distributing prospectuses and reports used for
sales purposes, expenses of preparing and printing sales literature and other
distribution-related expenses. Signature will provide to the Trustees of the
Fund a quarterly written report of amounts expended by it under the Distribution
Plan and the purposes for which such expenditures were made.
No payments under the Distribution Plan are made to the Service
Organizations, although Service Organizations may receive payments under the
Administrative Services Plan. (See "Service Organizations" below.)
23
<PAGE>
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (without
par value) and to divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial interests in the
Fund. Each share represents an equal proportionate interest in the Fund with
each other share. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each share held. The Fund is not
required to hold annual meetings of shareholders but the Fund will hold special
meetings of shareholders when in the judgment of the Trustees it is necessary or
desirable to submit matters for a shareholder vote. Upon liquidation of the
Fund, shareholders would be entitled to share pro rata in the net assets of the
Fund available for distribution to shareholders. Shareholders have under certain
circumstances the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have under certain circumstances the right to
remove one or more Trustees without a meeting.
The Fund reserves the right to create and issue any number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series). Currently, the Fund has only one
series of shares, all of which are of the same class. The Fund may establish
additional classes of any series of shares. For example, the Fund may offer
another class of shares that has lower annual distribution fees or shareholder
servicing fees. Prior to offering another class of shares, the Fund would either
issue a new prospectus and statement of additional information or amend this
Prospectus and the Statement of Additional Information to reflect such issuance.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Fund itself was unable to meet its
obligations.
The Portfolio, in which all of the investable assets of the Fund are
invested, is organized as a trust under the laws of the State of New York. The
Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (I.E ., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Fund's Trustees believe that neither the Fund
nor its shareholders will be adversely affected by reason of the Fund's
investing in the Portfolio. In addition, whenever the Fund is requested to vote
on a fundamental policy of the Portfolio, the Fund will hold a meeting of its
shareholders and will cast its vote as instructed by its shareholders.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each Fund Business Day. At the close
of each such Fund Business Day, the
24
<PAGE>
value of each investor's beneficial interest in the Portfolio will be determined
by multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals, which are to be
effected as of the close of business on that day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be re-computed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the close of business on the following Fund Business Day.
SERVICE ORGANIZATIONS, TRANSFER AGENT AND CUSTODIAN
ADMINISTRATIVE SERVICES PLAN
The Fund has adopted an Administrative Services Plan (the
"Administrative Plan") which provides that the Fund may obtain the services of
an administrator, shareholder servicing organizations, a transfer agent and a
custodian and may enter into agreements providing for the payment of fees for
such services. See "Management - Administrator" above and "Service
Organizations" and "Transfer Agent and Custodian" below. The Portfolio has also
adopted an Administrative Services Plan which provides that the Portfolio may
obtain the services of an administrator, a transfer agent and a custodian, and
may enter into agreements providing for the payment of fees for such services.
SERVICE ORGANIZATIONS
The Fund may also contract with various banks, trust companies (other
than Mellon Equity), broker-dealers (other than Signature) or other financial
organizations (collectively, "Service Organizations") to provide administrative
services for the Fund, such as maintaining shareholder accounts and records. The
Fund may pay fees to Service Organizations (which may vary depending upon the
services provided) in amounts up to an annual rate of 0.25% of the daily net
asset value of the shares of the Fund owned by shareholders with whom the
Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different
conditions on their clients such as requiring their clients to invest more than
the minimum initial investment specified by the Fund or charging a direct fee
for servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Fund. Each Service Organization
has agreed to transmit to its clients a schedule of any such fees. Shareholders
using Service Organizations are urged to consult them regarding any such fees or
conditions.
The Fund does not currently intend to enter into agreements with and
pay fees to Service Organizations, but it may do so in the future.
25
<PAGE>
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Fund and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
TRANSFER AGENT AND CUSTODIAN
The Fund has entered into a Transfer Agency Agreement with Fundamental
Shareholder Services, Inc. ("FSSI"), pursuant to which FSSI acts as Transfer
Agent for the Fund . The Transfer Agent maintains an account for each
shareholder of the Fund , performs other transfer agency functions and acts as
dividend disbursing agent for the Fund . Pursuant to Custodian Agreements,
Investors Bank & Trust Company ("IBT") acts as the custodian of the Fund's
assets (I.E., cash and the Fund's interest in the Portfolio) and as the
custodian of the Portfolio's assets (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Portfolio's cash and
securities, handling the receipt and delivery of securities, determining income
and collecting interest on the Portfolio's investments, maintaining books of
original entry for portfolio and fund accounting and other required books and
accounts, and calculating the daily net asset value of shares of the Portfolio.
Securities held by the Portfolio may be deposited into certain securities
depositaries. The Custodian does not determine the investment policies of the
Portfolio or decide which securities the Portfolio will buy or sell. The
Portfolio may, however, invest in securities of the Custodian and may deal with
the Custodian as principal in securities transactions. IBT also serves as
transfer agent for the Portfolio. For their services, FSSI and IBT will receive
such compensation as may from time to time be agreed upon by each of them and
the Fund or the Portfolio.
-----------
The Fund's Statement of Additional Information contains more detailed
information about the Fund and the Portfolio, including information related to
(i) investment policies and restrictions of the Fund and the Portfolio, (ii) the
Trustees, officers, investment adviser, investment manager and administrator of
the Fund and the Portfolio, (iii) portfolio transactions, (iv) the Fund's
shares, including rights and liabilities of shareholders, (v) additional
performance information, including the method used to calculate yield and total
rate of return quotations of the Fund , (vi) determination of the net asset
value of shares of the Fund, and (vii) the audited financial statements of the
Fund and the Portfolio at July 31, 1995.
26
<PAGE>
DOMINI SOCIAL EQUITY FUND
6 St. James Avenue
Boston, MA 02116
DOMINI SOCIAL EQUITY FUND
- ----------------------
PROSPECTUS
November 28, 1995
- ----------------------
PORTFOLIO INVESTMENT CUSTODIAN:
ADVISER: Investors Bank &
Kinder, Lydenberg, Trust Company
Domini & Co., Inc. 89 South Street
129 Mt. Auburn Street Boston, MA 02111
Cambridge, MA 02138
(617) 547-7479
PORTFOLIO INVESTMENT AUDITORS:
MANAGER: KPMG Peat Marwick LLP
Mellon Equity 99 High Street
Associates Boston, MA 02110
500 Grant Street
Suite 3700 LEGAL COUNSEL:
Pittsburgh, PA Bingham, Dana & Gould
15258-0001 150 Federal Street
Boston, MA 02110
ADMINISTRATOR AND
DISTRIBUTOR: TRANSFER AGENT:
Signature Broker-Dealer Fundamental Shareholder
Services, Inc. Services, Inc.
6 St. James Avenue 90 Washington Street
Boston, MA 02116 New York, NY 10006
(800) 762-6814 (800) 782-4165
Investing for Good
Printed on Recycled Paper
DSI196A
<PAGE>
DSI195
STATEMENT OF ADDITIONAL INFORMATION
November 28, 1995
DOMINI SOCIAL EQUITY FUND
Table of Contents Page
1. The Fund ............................................................. 2
2. Investment Objective, Policies and Restrictions ...................... 2
3. Performance Information .............................................. 9
4. Determination of Net Asset Value; Valuation of Portfolio Securities .. 10
5. Management of the Fund and the Portfolio ............................. 11
6. Independent Auditors ................................................. 21
7. Taxation...............................................................21
8. Portfolio Transactions and Brokerage Commissions.......................23
9. Description of Shares, Voting Rights and Liabilities...................25
10.Financial Statements ..................................................27
DOMINI SOCIAL EQUITY FUND
6 St. James Avenue, Boston, Massachusetts 02116
(800) 762-6814
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Fund's Prospectus dated November 28, 1995, as amended from time to time. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting Signature Broker-Dealer Services, Inc., the Fund's distributor , at
(800) 762-6814.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.
<PAGE>
1. THE FUND
Domini Social Equity Fund (the "Fund") is a no-load diversified
open-end management investment company which was organized as a business trust
under the laws of the Commonwealth of Massachusetts on June 7, 1989. The Fund
offers to buy back (redeem) its shares from its shareholders at any time at net
asset value. References in this Statement of Additional Information to the
"Prospectus" are to the current Prospectus of the Fund, as amended or
supplemented from time to time.
Signature Broker-Dealer Services, Inc. ("Signature"), the Fund's
administrator (the "Administrator"), supervises the overall administration of
the Fund. The Board of Trustees provides broad supervision over the affairs of
the Fund. Shares of the Fund are continuously sold by Signature, the Fund's
distributor (the "Distributor"). The minimum initial investment is $1,000,
except that the minimum initial investment for an Individual Retirement Account
is $250. An investor should obtain from the Distributor, and should read in
conjunction with the Prospectus, the materials describing the procedures under
which Fund shares may be purchased and redeemed.
The Fund seeks to achieve its investment objective by investing all its
assets in the Domini Social Index Portfolio (the "Portfolio"), a diversified
open-end management investment company having the same investment objective as
the Fund. Kinder, Lydenberg, Domini & Co., Inc. ("KLD") is the Portfolio's
investment adviser (the "Adviser"). Mellon Equity Associates ("Mellon Equity")
is the Portfolio's investment manager (the "Manager"). The Adviser determines
the composition of the Domini Social IndexSM. The Manager manages the
investments of the Portfolio from day to day in accordance with the Portfolio's
investment objective and policies. "DominiSM" and "Domini Social IndexSM" are
service marks of Kinder, Lydenberg, Domini & Co., Inc.
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective
The investment objective of the Fund is to provide its shareholders
with long-term total return (reflecting both dividend and price performance of
the Fund) which corresponds to the performance of the Domini Social Index
(sometimes referred to herein as the "Index"). There can, of course, be no
assurance that the Fund will achieve its investment objective. The investment
objective of the Fund may be changed without approval by the Fund's
shareholders.
Investment Policies
The Fund seeks to achieve its investment objective by investing all its
assets in the Portfolio, which has the same investment objective as the Fund.
The Fund may withdraw its investment in the Portfolio at any time if the Board
of Trustees of the Fund determines that it is in the best interests of the Fund
to do so. Upon any such withdrawal, the Board of Trustees would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having the same investment
objective
2
<PAGE>
as the Fund, or the retaining of an investment adviser to manage the Fund's
assets in accordance with the investment policies described below with respect
to the Portfolio. The approval of the Fund's shareholders would not be required
to change any of the Fund's investment policies.
The following supplements the information concerning the Portfolio's
investment policies contained in the Prospectus and should only be read in
conjunction therewith.
A company which is not included in the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") may be included in the Domini Social Index
primarily in order to afford representation to an industrial sector which would
otherwise be under-represented in the Index. Because of the social criteria
applied in the selection of stocks comprising the Domini Social Index, industry
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500.
The Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
foreign withholding taxes; however, there can be no assurance that such laws may
not become applicable to certain of the Portfolio's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
respect to any of the Portfolio's investments, the effect may be to reduce the
income received by the Portfolio on such investments.
Although neither the Fund nor the Portfolio has any current intention
to do so, the Fund and the Portfolio may invest in securities which may be
resold pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act").
It is a fundamental policy of the Portfolio and the Fund that neither
the Portfolio nor the Fund may invest more than 25% of the total assets of the
Portfolio or the Fund, respectively, in any one industry, although the Fund will
invest all of its assets in the Portfolio, and the Portfolio may and would
invest more than 25% of its assets in an industry if stocks in that industry
were to comprise more than 25% of the Domini Social Index. Based on the current
composition of the Index, this is considered highly unlikely. If the Portfolio
were to concentrate its investments in a single industry, the Portfolio and the
Fund would be more susceptible to any single economic, political or regulatory
occurrence than would be another investment company which was not so
concentrated.
Loans of Securities: The Portfolio may lend its securities to brokers,
dealers and financial institutions, provided that (1) the loan is secured
continuously by collateral, consisting of U.S. Government securities or cash or
letters of credit, which is marked to the market daily to ensure that each loan
is fully collateralized at all times; (2) the Portfolio may at any time call the
loan and obtain the return of the securities loaned within five business days;
(3) the Portfolio will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Portfolio.
3
<PAGE>
The Portfolio will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Adviser or the Manager.
Although the Portfolio reserves the right to lend its securities, it
has no current intention of doing so in the foreseeable future.
Risk Factors Involved in Option Contracts: Although it has no current
intention to do so, the Portfolio may in the future enter into certain
transactions in stock options for the purpose of hedging against possible
increases in the value of securities which are expected to be purchased by the
Portfolio or possible declines in the value of securities which are expected to
be sold by the Portfolio. Generally, the Portfolio would only enter into such
transactions on a short-term basis pending readjustment of its holdings of
underlying stocks.
The purchase of an option on an equity security provides the holder
with the right, but not the obligation, to purchase the underlying security, in
the case of a call option, or to sell the underlying security, in the case of a
put option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire amount
of the premium, plus related transaction costs, but not more. Upon exercise of
the option, the holder is required to pay the purchase price of the underlying
security in the case of a call option, or deliver the security in return for the
purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated
only by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a position
held by the Portfolio, and the Portfolio could be required to purchase or sell
the instrument underlying an option, make or receive a cash settlement or meet
ongoing variation margin requirements. The inability to close out option
positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on the possible use of hedging strategies by the Portfolio.
4
<PAGE>
The approval of the Fund and of the other investors in the Portfolio is
not required to change the investment objective or any of the investment
policies discussed above, including those concerning security transactions.
Investment Restrictions
The Fund and the Portfolio have each adopted the following policies
which may not be changed without approval by holders of a "majority of the
outstanding shares" of the Fund or the Portfolio, respectively, which as used in
this Statement of Additional Information means the vote of the lesser of (i) 67%
or more of the outstanding "voting securities" of the Fund or the Portfolio,
respectively, present at a meeting, if the holders of more than 50% of the
outstanding "voting securities" of the Fund or the Portfolio, respectively, are
present or represented by proxy, or (ii) more than 50% of the outstanding
"voting securities" of the Fund or the Portfolio, respectively. The term "voting
securities" as used in this paragraph has the same meaning as in the Investment
Company Act of 1940, as amended (the "1940 Act").
Except as described below, whenever the Fund is requested to vote on a
change in the investment restrictions of the Portfolio, the Fund will hold a
meeting of its shareholders and will cast its vote proportionately as instructed
by its shareholders. However, subject to applicable statutory and regulatory
requirements, the Fund would not request a vote of its shareholders with respect
to (a) any proposal relating to the Portfolio, which proposal, if made with
respect to the Fund, would not require the vote of the shareholders of the Fund,
or (b) any proposal with respect to the Portfolio that is identical in all
material respects to a proposal that has previously been approved by
shareholders of the Fund. Any proposal submitted to holders in the Portfolio,
and that is not required to be voted on by shareholders of the Fund, would
nevertheless be voted on by the Trustees of the Fund.
Neither the Fund nor the Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes either the Fund or the Portfolio may borrow an amount not
to exceed 1/3 of the current value of the net assets of the Fund or the
Portfolio, respectively, including the amount borrowed (moreover, neither the
Fund nor the Portfolio may purchase any securities at any time at which
borrowings exceed 5% of the total assets of the Fund or the Portfolio,
respectively, taken in each case at market value) (it is intended that the
Portfolio would borrow money only from banks and only to accommodate requests
for the withdrawal of all or a portion of a beneficial interest in the Portfolio
while effecting an orderly liquidation of securities); for additional related
restrictions, see clause (i) under the caption "Non-Fundamental State and
Federal Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that either the Fund or the Portfolio may obtain such short-term credit
as may be necessary for the clearance of purchases and sales of securities and
except that either the Fund or the Portfolio may make deposits of initial
deposit and
5
<PAGE>
variation margin in connection with the purchase, ownership, holding or sale of
options;
(3) write any put or call option or any combination thereof, provided
that this shall not prevent (i) the purchase, ownership, holding or sale of
warrants where the grantor of the warrants is the issuer of the underlying
securities, or (ii) the purchase, ownership, holding or sale of options on
securities;
(4) underwrite securities issued by other persons, except that the Fund
may invest all or any portion of its assets in the Portfolio and except insofar
as either the Fund or the Portfolio may technically be deemed an underwriter
under the 1933 Act in selling a security;
(5) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio and provided that any such
loans not exceed 30% of its total assets (taken in each case at market value),
or (b) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of its net assets will be
invested in repurchase agreements maturing in more than seven days; for
additional related restrictions, see paragraph (6) immediately following;
(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to Rule
144A under the 1933 Act if the Board of Trustees determines that a liquid market
exists for such securities) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that the Fund may invest
all or any portion of its assets in the Portfolio;
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (the Fund and Portfolio reserve the freedom of
action to hold and to sell real estate acquired as a result of the ownership of
securities by the Fund or the Portfolio);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open the Fund or the Portfolio, as
applicable, owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and unless not more than 5% of the Fund's or the Portfolio's, as
applicable, net assets (taken in each case at market value) is held as
collateral for such sales at any one time (it is the present intention of the
Portfolio and the Fund to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes);
(9) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
6
<PAGE>
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Portfolio's or the
Fund's, as applicable, assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States), except that for purposes of this restriction the issuer of an option
shall not be deemed to be the issuer of the security or securities underlying
such contract and except that the Fund may invest all or any portion of its
assets in the Portfolio; or
(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Domini Social
Index, in which case the Portfolio or the Fund, as applicable, will invest more
than 25% of its assets in that industry, and except that the Fund may invest all
of its assets in the Portfolio.
Non-Fundamental State and Federal Restrictions: In order to comply with
certain state and federal statutes and regulatory policies, neither the Fund nor
the Portfolio will as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the total assets of the
Fund or the Portfolio, respectively (taken in each case at cost) (moreover,
neither the Fund nor the Portfolio will purchase any securities at any time at
which borrowings exceed 5% of its total assets (taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of the net
assets of the Fund or the Portfolio, respectively (taken in each case at market
value), provided that collateral arrangements with respect to options, including
deposits of initial deposit and variation margin, are not considered a pledge of
assets for purposes of this restriction,
(iii) sell any security which it does not own unless by virtue of its ownership
of other securities it has at the time of sale a right to obtain securities,
without payment of further consideration, equivalent in kind and amount to the
securities sold, and provided that if such right is conditional the sale is made
upon the same conditions,
(iv) invest for the purpose of exercising control or management, except that all
of the assets of the Fund may be invested in the Portfolio,
(v) purchase securities issued by any registered investment company, except that
the Fund may invest all its assets in the Portfolio and except by purchase in
the open market where no commission or profit to a sponsor or dealer results
from such purchase other than the customary broker's commission, or except when
such purchase, though not made in the open market, is part of a plan of merger
or consolidation; provided, however, that (except for the Fund's investment in
the Portfolio) the Fund and the Portfolio will not purchase the securities of
any registered investment company if such purchase at the time thereof would
cause more than 10% of the total assets of the Fund or the Portfolio,
respectively
7
<PAGE>
(taken at the greater of cost or market value) to be invested in the securities
of such issuers or would cause more than 3% of the outstanding voting securities
of any such issuer to be held by the Fund or the Portfolio, respectively ; and
provided, further, that (except for the Fund's investment in the Portfolio) the
Fund and the Portfolio shall not purchase securities issued by any open-end
investment company,
(vi) invest more than 10% of the net assets of the Fund or the Portfolio,
respectively (taken at the greater of cost or market value), in securities
(excluding Rule 144A securities) that are restricted as to resale under the 1933
Act,
(vii) invest more than 15% of the net assets of the Fund or the Portfolio,
respectively (taken at the greater of cost or market value), (a) in securities
that are restricted as to resale by the 1933 Act (including Rule 144A
securities), and (b) in securities that are issued by issuers which (including
the period of operation of any predecessor company or unconditional guarantor of
such issuer) have been in operation less than three years, provided, however,
that no more than 5% of the net assets of the Fund or the Portfolio,
respectively, are invested in securities issued by issuers which (including
predecessors) have been in operation less than three years,
(viii) purchase puts, calls, straddles, spreads and any combination thereof if
the value of its aggregate investment in such securities will exceed 5% of the
Funds or the Portfolio's total assets at the time of such purchase,
(ix) purchase securities of any issuer if such purchase at the time thereof
would cause it to hold more than 10% of any class of securities of such issuer,
for which purposes all indebtedness of an issuer shall be deemed a single class
and all preferred stock of an issuer shall be deemed a single class, except that
option contracts shall not be subject to this restriction, and except that the
Fund may invest all or any portion of its assets in the Portfolio,
(x) purchase or retain any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the Fund or
the Portfolio, as the case may be, or is an officer or director of the Adviser
or the Manager, if after the purchase of the securities of such issuer by the
Fund or the Portfolio, as the case may be, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, all taken
at market value, of such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5% of such shares
or securities, or both, all taken at market value, except that the Fund may
invest all or any portion of its assets in the Portfolio,
(xi) invest more than 5% of the Fund's or the Portfolio's net assets in warrants
(valued at the lower of cost or market), but not more than 2% of the
8
<PAGE>
Fund's or the Portfolio's net assets may be invested in warrants not
listed on the New York Stock Exchange Inc. ("NYSE") or the American Stock
Exchange, or
(xii) make short sales of securities or maintain a short position, unless at all
times when a short position is open , the Fund or the Portfolio owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
and equal in amount to the securities sold short, and unless not more than 10%
of the Fund's or the Portfolio's, respectively, net assets (taken at market
value) is represented by such securities, or securities convertible into or
exchangeable for such securities, at any one time (neither the Fund nor the
Portfolio has any current intention to engage in short selling).
Restrictions (i) through (xii) are not fundamental and may be changed
with respect to the Fund by the Fund without approval by the Fund's shareholders
or with respect to the Portfolio by the Portfolio without the approval of the
Fund or its other investors. The Fund will comply with the state securities laws
and regulations of all states in which it is registered. The Portfolio will
comply with the applicable investment limitations found in the state securities
laws and regulations of all states in which the Fund is registered.
Percentage Restrictions: If a percentage restriction or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the securities held by the Fund or the Portfolio or a later change in
the rating of a security held by the Fund or the Portfolio will not be
considered a violation of policy; provided that if at any time the ratio of
borrowings of the Fund or the Portfolio to the net asset value of the Fund or
the Portfolio, respectively, exceeds the ratio permitted by Section 18(f) of the
1940 Act, the Fund or the Portfolio as the case may be, will take the corrective
action required by Section 18(f).
3. PERFORMANCE INFORMATION
The Fund will calculate its total rate of return for any period by (a)
dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share (i.e., net asset value) on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate of
return quotation will be calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.
9
<PAGE>
Any current "yield" quotation of the Fund shall consist of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a thirty calendar day period and shall be calculated by (a) raising to
the sixth power the sum of 1 plus the quotient obtained by dividing the Fund's
net investment income earned during the period by the product of the average
daily number of shares outstanding during the period that were entitled to
receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.
The Fund's total rate of return for the fiscal year ended July 31, 1995
was 25.11%. The Fund's annualized total rate of return for the fiscal periods
since inception (August 10, 1990) through July 31, 1995 was 9.68%. Total rate of
return and yield information with respect to the Domini Social Index will be
computed in the same fashion as set forth above with respect to the Fund, except
that for purposes of this computation an investment will be assumed to have been
made in a portfolio consisting of all of the stocks comprising the Domini Social
Index weighted in accordance with the weightings of the stocks comprising the
Index. Performance information with respect to the Domini Social Index will not
take into account brokerage commission and other transaction costs which will be
incurred by the Portfolio.
4. DETERMINATION OF NET ASSET VALUE;
VALUATION OF PORTFOLIO SECURITIES
The net asset value of each share of the Fund is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
weekday except for the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). This determination of net asset value of shares of the Fund is
made once during each such day as of the close of the NYSE by dividing the value
of the Fund's net assets (i.e., the value of its investment in the Portfolio and
any other assets less its liabilities, including expenses payable or accrued) by
the number of shares outstanding at the time the determination is made.
Purchases and redemptions will be effected at the time of determination of net
asset value next following the receipt of any purchase or redemption order
deemed to be in good order. See "Purchases and Redemptions of Shares" in the
Prospectus.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same day as the Fund
determines its net asset value per share. The net asset value of the Fund's
investment in the Portfolio is equal to the Fund's pro rata share of the total
investment of the Fund and of other investors in the Portfolio less the Fund's
pro rata share of the Portfolio's liabilities. Equity securities held by the
Portfolio are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last quoted bid price for securities in which there were no sales during
the day or for unlisted securities not reported on the NASDAQ system. If the
Portfolio purchases option contracts, such option contracts which are traded on
commodities or securities
10
<PAGE>
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Short-term obligations with remaining maturities of less than
sixty days are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of the Portfolio. Portfolio securities
(other than short-term obligations with remaining maturities of less than sixty
days) for which there are no such quotations or valuations are valued at fair
value as determined in good faith by or at the direction of the Portfolio's
Board of Trustees.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by the
Portfolio's Board of Trustees. While no single standard for determining fair
value exists, as a general rule, the current fair value of a security would
appear to be the amount which the Portfolio could expect to receive upon its
current sale. Some, but not necessarily all, of the general factors which may be
considered in determining fair value include: (i) the fundamental analytical
data relating to the investment; (ii) the nature and duration of restrictions on
disposition of the securities; and (iii) an evaluation of the forces which
influence the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be considered in
determining fair value, some of the specific factors include: type of security,
financial statements of the issuer, cost at date of purchase, size of holding,
discount from market value, value of unrestricted securities of the same class
at the time of purchase, special reports prepared by analysts, information as to
any transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the security, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
Interest income on short-term obligations held by the Portfolio is
determined on the basis of interest accrued less amortization of premium.
5. MANAGEMENT OF THE FUND AND THE PORTFOLIO
The Trustees and officers of the Fund and the Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Fund. Unless otherwise indicated below, the address of each Trustee and
officer is 6 St. James Avenue, Boston, Massachusetts 02116.
Trustees of the Fund
AMY LEE DOMINI* -- Chair and Trustee of the Fund; Trustee of the Portfolio;
Officer of Kinder, Lydenberg, Domini & Co., Inc.; Trustee, Loring, Wolcott &
Coolidge (since 1987).
PHILIP W. COOLIDGE* -- President and Trustee of the Fund; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. (since
December, 1988) and Signature Broker-Dealer Services, Inc. (since April, 1989).
11
<PAGE>
WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02146;
Trustee of the Fund; President, Environmental Packaging Technologies (since
1990); Vice President, BMW Technologies, Inc. (from 1986 to 1990); Director,
Logos Corporation (from 1988 to 1990); Director, Gold Hill Computers (from 1989
to 1990).
KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Trustee of the Fund;
Professor of Business Environment, Florida International University (since
August, 1991); Associate Professor of Management, Rochester Institute of
Technology (from 1980 to 1991); Peace Fellow, Bunting Institute (from 1987 to
1988).
EMILY WATTS CARD -- 2730 Wilshire Boulevard, Suite 618, Santa Monica, California
90403; Trustee of the Fund; Attorney (since 1989); President, The Card Group,
Inc.; Director, Women in Film; Director, Investor's Circle; Director, Newcomb
College Alumnae Board; Director, University of Southern California Think Tank
Board.
Trustees of the Portfolio
AMY LEE DOMINI* -- Chair and Trustee of the Portfolio; Officer of Kinder,
Lydenberg, Domini & Co., Inc.; Trustee, Loring, Wolcott & Coolidge (since 1987).
PHILIP W. COOLIDGE* -- President and Trustee of the Portfolio; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. (since
December, 1988) and Signature Broker-Dealer Services, Inc. (since April, 1989).
ALLEN M. MAYES -- 7985 Willow Creek Drive, Beaumont, Texas 77707; Trustee of the
Portfolio; Senior Associate General Secretary of the General Board of Pensions
of the United Methodist Church (since May, 1982); Member of the Board of
Directors of Investor Responsibility Research Center (since January, 1989);
Member of Board of Trustees of Wiley College (since November, 1969).
TIMOTHY SMITH -- 475 Riverside Drive, New York, New York 10115; Trustee of the
Portfolio; Executive Director of the Interfaith Center on Corporate
Responsibility (since 1974).
FREDERICK C. WILLIAMSON -- 5 Roger Williams Green, Providence, Rhode Island
02904; Trustee of the Portfolio; Rhode Island State Historic Preservation
Officer (since 1969); Trustee, National Park Trust, (since April 1992); Trustee,
National Parks and Conservation Association (since 1986); Chairman, Governor's
Advisory Committee on Home Heating; Corporation Board, Harvard Community Health
Plan; President Emeritus, National Conference of State Historic Preservation
Officers; Trustee Emeritus, National Trust for Historic Preservation; Treasurer
and Past Chairman, R.I. Black Heritage Society.
Each Trustee is paid an annual fee as follows for serving as Trustee of
the Fund and/or Portfolio and is reimbursed for expenses incurred in connection
with service as a Trustee. The compensation paid to the Trustees for the fiscal
year ended July 31, 1995 is set forth below. The Trustees may hold various other
directorships unrelated to the Fund or Portfolio.
12
<PAGE>
Fund Trustees
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
AGGREGATE ACCRUED AS FROM THE
COMPENSATION PART OF FUND
FROM THE FUND ANNUAL BENEFITS AND THE
FUND EXPENSES UPON RETIREMENT PORTFOLIO
<S> <C> <C> <C> <C>
Amy Lee Domini*, Chair and None None None None
Trustee
Philip E. Coolidge*, President None None None None
and Trustee
William C. Osborn, Trustee $1,200 None None $1,200
Karen Paul, Trustee $1,200 None None $1,200
Emily Watts Card, Trustee $1,200 None None $1,200
</TABLE>
Portfolio Trustees
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED AS COMPENSATION
COMPENSATION PART OF FROM THE
FROM THE PORTFOLIO ANNUAL BENEFITS FUND AND THE
PORTFOLIO EXPENSES UPON RETIREMENT PORTFOLIO
<S> <C> <C> <C> <C>
Amy L. Domini*, Chair and None None None None
Trustee
Philip W. Coolidge*, President None None None None
and Trustee
Allen M. Mayes, Trustee $1,200 None None $1,200
Timothy Smith, Trustee $1,200 None None $1,200
Frederick C. Williamson, $1,200 None None $1,200
Trustee
</TABLE>
Officers
PETER D. KINDER -- Vice President of the Fund and the Portfolio; Officer of
Kinder, Lydenberg, Domini & Co., Inc. (since March, 1988).
STEVEN D. LYDENBERG -- Vice President of the Fund and the Portfolio; Director of
Research of Kinder, Lydenberg, Domini & Co., Inc. (since January, 1990);
Investment Associate, Franklin Research and Development (from 1987 to 1989).
JOHN R. ELDER -- Treasurer of the Fund and the Portfolio; Vice President, SFG
(since April, 1995); Treasurer, Phoenix Family of Mutual Funds (prior to April,
1995); Audit Manager, Price Waterhouse (prior to 1983).
13
<PAGE>
THOMAS M. LENZ -- Secretary of the Fund and the Portfolio; Vice President and
Associate General Counsel, Signature Financial Group, Inc. (since November,
1989); Assistant Secretary, Signature Broker-Dealer Services, Inc. (since
February, 1991).
DAVID G. DANIELSON--Assistant Treasurer of the Fund and the Portfolio; Assistant
Manager, Signature Financial Group, Inc. (since May 1991); Graduate Student,
Northeastern University (from April 1990 to March 1991).
LINDA T. GIBSON -- Assistant Secretary of the Fund and the Portfolio; Legal
Counsel and Assistant Secretary, Signature Financial Group, Inc. (since June,
1991); Assistant Secretary, Signature Broker-Dealer Services, Inc. (since
November, 1992); law student, Boston University School of Law (prior to May,
1992).
JAMES S. LELKO--Assistant Treasurer of the Fund and the Portfolio; Assistant
Manager, Signature Financial Group, Inc. (since January 1993); Senior Tax
Compliance Accountant, Putnam Companies (since prior to December 1992).
MOLLY S. MUGLER -- Assistant Secretary of the Fund and the Portfolio; Legal
Counsel and Assistant Secretary, Signature Financial Group, Inc. (since
December, 1988); Assistant Secretary, Signature Broker-Dealer Services, Inc.
(since April, 1989).
BARBARA M. O'DETTE -- Assistant Treasurer of the Fund and the Portfolio;
Assistant Treasurer, Signature Financial Group, Inc. (since December, 1988) and
Signature Broker-Dealer Services, Inc. (since April, 1989).
ANDRES E. SALDANA -- Assistant Secretary of the Fund and the Portfolio; Legal
Counsel and Assistant Secretary, Signature Financial Group, Inc. (since
November, 1992); Assistant Secretary, Signature Broker-Dealer Services, Inc.
(since September, 1993); Attorney, Ropes & Gray (September, 1990 to November,
1992) .
DANIEL E. SHEA--Assistant Treasurer of the Fund and the Portfolio; Assistant
Manager of Fund Administration, Signature Financial Group, Inc., since November
1993; Supervisor and Senior Technical Advisor, Putnam Investments, since prior
to 1990.
14
<PAGE>
Messrs. Coolidge, Elder, Lenz, Danielson, Lelko, Saldana and Shea and
Mss. Gibson, Mugler and O'Dette also hold similar positions for other investment
companies for which Signature or an affiliate serves as the principal
underwriter. Each officer of the Fund holds the same position with the
Portfolio.
The Trustees who are not "interested persons" (the "Disinterested
Trustees") of the Fund as defined by the 1940 Act are separate from the
Disinterested Trustees of the Portfolio. Any conflict of interest between the
Fund and the Portfolio will be resolved by the Trustees of the Fund and the
Portfolio in accordance with their fiduciary obligations and in accordance with
the 1940 Act.
As of October 29, 1995 all Trustees and officers of the Fund and the
Portfolio as a group owned less than 1% of the Fund's outstanding shares
including shares owned by Signature of which Mr. Coolidge is Chief Executive
Officer and Director. As of the same date, the following shareholders of record
owned 5% or more of the outstanding shares of the Fund: Charles Schwab & Co.,
Inc. (as a nominee on behalf of its customers), 1,260,874 shares (30.69%) (the
Fund has no knowledge as to the beneficial ownership of these shares); Home
Missioners of America, 246,586 shares (6.00%). The Fund has no knowledge of any
other owners of record or beneficial owners of 5% or more of the outstanding
shares of the Fund. Shareholders owning 25% or more of the outstanding shares of
the Fund may take actions without the approval of any other investor in the
Fund.
The Fund's Declaration of Trust provides that it will indemnify its
Trustees and officers (the "Indemnified Parties") against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Fund, unless, as to liability to the Fund or
its shareholders, it is finally adjudicated that the Indemnified Parties engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in their offices, or unless with respect to any other matter it
is finally adjudicated that the Indemnified Parties did not act in good faith in
the reasonable belief that their actions were in the best interests of the Fund.
In case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such Indemnified Parties have not engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
Adviser and Manager
KLD provides advice to the Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The services provided by the Adviser
consist of determination of the stocks to be included in the Index and
evaluating, in accordance with the Adviser's social criteria, debt securities
which may be purchased by the Portfolio. The Adviser furnishes at its own
expense all facilities and personnel necessary in connection with providing
these
15
<PAGE>
services. The Advisory Agreement will continue in effect if such continuance is
specifically approved at least annually by the Portfolio's Board of Trustees or
by a majority vote of the Fund and of the other investors in the Portfolio at a
meeting called for the purpose of voting on the Advisory Agreement (with the
vote of each being in proportion to the amount of their investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Advisory Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to
others and may permit other investment companies in addition to the Portfolio
and the Fund to use the name "DominiSM" or "Domini Social IndexSM" in their
names. Pursuant to agreements with the Fund and the Portfolio, if KLD ceases to
be the investment adviser of the Portfolio, the Portfolio will be required to
discontinue the use of such service marks, and if either KLD ceases to be the
investment adviser of the Portfolio or the Fund ceases to invest all of its
assets in the Portfolio, the Fund will be required to discontinue the use of
such service marks. The Advisory Agreement is terminable without penalty on not
more than 60 days' nor less than 30 days' written notice by the Portfolio when
authorized either by majority vote of the Fund and of the other investors in the
Portfolio (with the vote of each being in proportion to the amount of their
investment) or by a vote of a majority of its Board of Trustees, or by the
Adviser, and will automatically terminate in the event of its assignment. The
Advisory Agreement provides that neither the Adviser nor its personnel shall be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in its services to the Portfolio,
except for wilful misfeasance, bad faith or gross negligence or reckless
disregard of its or their obligations and duties under the Advisory Agreement.
The Fund's Prospectus contains a description of fees payable to the
Adviser for services under the Advisory Agreement. For the fiscal years ended
July 31, 1993 , 1994 and 1995, the Adviser voluntarily waived all of its
advisory fees.
Mellon Equity manages the assets of the Portfolio pursuant to an
Investment Management Agreement (the "Management Agreement"). The Manager
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio. The Management Agreement will continue in effect
if such continuance is specifically approved at least annually by the
Portfolio's Board of Trustees or by a majority vote of the Fund and of the other
investors in the Portfolio at a meeting called for the purpose of voting on the
Management Agreement (with the vote of each being in proportion to the amount of
their investment), and, in either case, by a majority of the Portfolio's
Trustees who are not parties to the Management Agreement or interested persons
of any such party at a meeting called for the purpose of voting on the
Management Agreement.
The Management Agreement provides that the Manager may render services
to others. The Management Agreement is terminable without penalty upon not more
than 60 days' nor less than 30 days' written notice by the Portfolio when
authorized either by majority vote of the Fund and of the other investors in the
16
<PAGE>
Portfolio (with the vote of each being in proportion to the amount of their
investment) or by a vote of the majority of its Board of Trustees, or by the
Manager, and will automatically terminate in the event of its assignment. The
Management Agreement provides that neither the Manager nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in its services to the
Portfolio, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard for its or their obligations and duties under the Management
Agreement.
The Fund's Prospectus contains a description of fees payable to the
Manager for services under the Management Agreement. Prior to November 21, 1994,
State Street Bank and Trust Company (the "Former Manager") served as investment
manager to the Portfolio. For the fiscal year ended July 31, 1993, the Former
Manager voluntarily waived all of its management fees. For the fiscal year ended
July 31, 1994, the Portfolio incurred $16,986 in management fees to the Former
Manager. For the period August 1, 1994 through November 20, 1994, the Portfolio
incurred $10,180 in management fees to the Former Manager. For the period
November 21, 1994 through July 31, 1995, the Portfolio incurred $29,409 in
management fees to the Manager.
Administrator
Pursuant to Administrative Services Agreements, Signature provides the
Fund and the Portfolio with general office facilities and supervises the overall
administration of the Fund and the Portfolio, including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of, the independent contractors and agents of the
Fund or the Portfolio; the preparation and filing of all documents required for
compliance by the Fund and the Portfolio with applicable laws and regulations;
and arranging for the maintenance of books and records of the Fund and the
Portfolio. The Administrator provides persons satisfactory to the Board of
Trustees of the Fund or the Portfolio to serve as officers of the Fund or the
Portfolio. Such officers, as well as certain other employees and Trustees of the
Fund or the Portfolio, may be directors, officers or employees of the
Administrator or its affiliates.
Pursuant to a Sub-Administrative Services Agreement between Signature
and KLD, KLD serves as Sub-Administrator of the Fund. In such capacity, KLD
performs certain administrative services requested by the Administrator,
including assisting personnel of the Administrator in answering questions from
the general public, the media and investors in the Fund regarding the securities
holdings of the Portfolio. For these services, KLD receives from the
Administrator such compensation as they may agree on from time to time.
The Fund's Prospectus contains a description of the fees payable to the
Administrator by the Fund or payable to Signature, as the administrator of the
Portfolio (the "Portfolio Administrator") by the Portfolio, as the case may be,
under the Administrative Services Agreements. For the fiscal years ended July
31, 1993 , 1994 and 1995, the Administrator voluntarily waived all of its
administrative services fees from the Fund. For the same periods, the
17
<PAGE>
Portfolio Administrator voluntarily waived all of its administrative services
fees from the Portfolio.
The Administrative Services Agreement with the Fund provides that
Signature may render administrative services to others. The Administrative
Services Agreement with the Fund also provides that neither the Administrator
nor its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Fund, except
for wilful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their obligations
and duties under the Fund's Administrative Services Agreement.
The Administrator has agreed to reimburse the Fund for its operating
expenses (exclusive of interest, taxes, brokerage, and extraordinary expenses)
which in any year exceed the limits prescribed by any state in which the Fund's
shares are qualified for sale. The Fund may elect not to qualify its shares for
sale in every state. The Fund believes that currently the most restrictive
expense ratio limitation imposed by any state is 2.5% of the first $30 million
of the Fund's average net assets for its then-current fiscal year, 2% of the
next $70 million of such assets, and 1.5% of such assets in excess of $100
million. For the purpose of this obligation to reimburse expenses, the Fund's
annual expenses are estimated and accrued daily, and any appropriate estimated
payments will be made by the Administrator. Subject to the obligation of the
Administrator to reimburse the Fund for its excess expenses as described above,
the Fund has, under its Administrative Services Agreement, confirmed its
obligation for payment of all its other expenses. See "Other Information
Concerning Shares of the Fund -- Expenses" in the Fund's Prospectus.
The Administrative Services Agreement with the Portfolio provides that
Signature may render administrative services to others. The Administrative
Services Agreement with the Portfolio terminates automatically if it is assigned
and may be terminated without penalty by majority vote of the Fund and of the
other investors in the Portfolio (with the vote of each being in proportion to
the amount of their investment) or by either party on not more than 60 days' nor
less than 30 days' written notice. The Administrative Services Agreement with
the Portfolio also provides that neither Signature, as the Portfolio's
Administrator, nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration or management of
the Portfolio, except for wilful misfeasance, bad faith or gross negligence in
the performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Portfolio's Administrative Services
Agreement.
Signature is a wholly-owned subsidiary of Signature Financial Group,
Inc.
Distributor
The Fund has adopted a Distribution Plan which provides that the Fund
may pay the Distributor a fee not to exceed 0.25% per annum of the Fund's
average daily net assets in anticipation of, or as reimbursement for, expenses
incurred in connection with the sale of shares of the Fund, such as payments to
18
<PAGE>
broker-dealers who advise shareholders regarding the purchase, sale or retention
of shares of the Fund, payments to employees of the Distributor, advertising
expenses and the expenses of printing and distributing prospectuses and reports
used for sales purposes, expenses of preparing and printing sales literature and
other distribution-related expenses. For the fiscal years ended July 31, 1993 ,
1994 and 1995, the Fund did not accrue any distribution fees. No payments under
the Distribution Plan will be made to Service Organizations, although Service
Organizations may receive payments under the Administrative Services Plan
referred to below.
The Distribution Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Fund's Trustees and a majority of the Fund's Trustees who are
not "interested persons of the Fund" and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any agreement
related to such Plan ("Qualified Trustees"). The Distributor will provide to the
Trustees of the Fund a quarterly written report of amounts expended by it under
the Distribution Plan and the purposes for which such expenditures were made.
The Distribution Plan further provides that the selection and nomination of the
Fund's Qualified Trustees shall be committed to the discretion of the
disinterested Trustees of the Fund. The Distribution Plan may be terminated at
any time by a vote of a majority of the Fund's Qualified Trustees or by a vote
of the shareholders of the Fund. The Distribution Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders and may not be materially amended in any case without a
vote of the majority of both the Fund's Trustees and the Fund's Qualified
Trustees. The Distributor will preserve copies of any plan, agreement or report
made pursuant to the Distribution Plan for a period of not less than six (6)
years from the date of the Distribution Plan, and for the first two (2) years
the Distributor will preserve such copies in an easily accessible place.
The Fund has entered into a Distribution Agreement with the
Distributor. Under the Distribution Agreement, the Distributor acts as the agent
of the Fund in connection with the offering of shares of the Fund.
Administrative Services Plans; Transfer Agent,
Custodian and Service Organizations
The Fund has adopted an Administrative Services Plan (the
"Administrative Plan") which provides that the Fund may obtain the services of
an administrator, one or more service organizations, a transfer agent and a
custodian, and may enter into agreements providing for the payment of fees for
such services. The Administrative Plan will continue in effect indefinitely if
such continuance is specifically approved at least annually by a vote of both a
majority of the Fund's Trustees and a majority of the Fund's Trustees who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of the Administrative Plan or in any
agreement related to such Plan ("Qualified Trustees"). The Administrative Plan
requires that the Fund shall provide to the Fund's Board of Trustees and the
Fund's Board of Trustees shall review, at least quarterly, a written report of
the amounts expended (and the purposes therefor) under the Administrative Plan.
The Administrative Plan may be terminated at any time by a vote of a majority of
the Fund's Qualified
19
<PAGE>
Trustees or by a majority vote of the Fund's shareholders. The Administrative
Plan may not be amended to increase materially the amount of permitted expenses
thereunder without the approval of a majority of the Fund's shareholders and may
not be materially amended in any case without a vote of the majority of both the
Fund's Trustees and the Fund's Qualified Trustees.
The Fund has entered into a Transfer Agency Agreement with Fundamental
Shareholder Services, Inc. ("FSSI") pursuant to which FSSI acts as the transfer
agent for the Fund. The Fund has entered into a Custodian Agreement with
Investors Bank & Trust Company ("IBT") pursuant to which IBT acts as custodian
for the Fund. The Portfolio has entered into a Transfer Agency Agreement with
IBT pursuant to which IBT acts as transfer agent for the Portfolio. The
Portfolio has entered into a Custodian Agreement with IBT pursuant to which IBT
acts as custodian for the Portfolio. For additional information, see "Transfer
Agent and Custodian" in the Prospectus.
The Fund may from time to time enter into agreements with various
banks, trust companies (other than Mellon Equity), broker-dealers (other than
Signature) or other financial organizations to provide administrative services
for the Fund, such as maintaining shareholder accounts and records. For the
fiscal years ended July 31, 1993 , 1994 and 1995, the Fund did not accrue any
service organization fees. For additional information, see "Service
Organizations, Transfer Agent and Custodian--Service Organizations" in the
Prospectus.
The Portfolio has also adopted an Administrative Services Plan (the
"Portfolio Administrative Plan") which provides that the Portfolio may obtain
the services of an administrator, a transfer agent and a custodian, and may
enter into agreements providing for the payment of fees for such services. The
Portfolio Administrative Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Portfolio's Trustees and a majority of the Portfolio's Trustees
who are not "interested persons" of the Portfolio and who have no direct or
indirect financial interest in the operation of the Portfolio Administrative
Plan or in any agreement related to such Plan ("Qualified Trustees"). The
Portfolio Administrative Plan requires that the Portfolio shall provide to the
Portfolio's Board of Trustees and the Portfolio's Board of Trustees shall
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Portfolio Administrative Plan. The Portfolio
Administrative Plan may be terminated at any time by a vote of a majority of the
Portfolio's Qualified Trustees or by a majority vote of the investors in the
Portfolio (with the vote of each being in proportion to the amount of their
investment). The Portfolio Administrative Plan may not be amended to increase
materially the amount of permitted expenses thereunder without the approval of a
majority of the investors in the Portfolio (with the vote of each being in
proportion to the amount of their investment) and may not be materially amended
in any case without a vote of the majority of both the Portfolio's Trustees and
the Portfolio's Qualified Trustees.
20
<PAGE>
Expenses
Pursuant to expense payment arrangements between Signature and each of
the Fund and the Portfolio effective January 1, 1995, Signature has agreed to
pay all of the operating expenses of the Fund and the Portfolio. The
arrangements will terminate on December 31, 1999 unless sooner terminated by
mutual agreement of the parties. Under these arrangements, Signature receives
expense payment fees computed and paid monthly (i) from the Fund, at an annual
rate equal to 0.48% of the Fund's average daily net assets for its then-current
fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of
the Portfolio's average daily net assets for its then-current fiscal year. Prior
to January 1, 1995, the Fund and the Portfolio each had entered into expense
reimbursement agreements (the "Prior Agreements") with Signature pursuant to
which the aggregate annual operating expenses (including amortization of an
organization expenses) of the Fund and the Portfolio would not exceed 0.98% of
the Fund's average daily net assets for its then-current fiscal year. Under the
Prior Agreements, Signature agreed to pay the expenses of the Fund and the
Portfolio (except for fees payable under each of the Administrative Services
Agreements, the Distribution Agreement, the Management Agreement, the Advisory
Agreement and expenses related to the organization of the Fund and the
Portfolio) until April 30, 2000, all subject to reimbursement by the Fund or the
Portfolio, as the case may be.
6. INDEPENDENT AUDITORS
KPMG Peat Marwick LLP are the independent auditors for the Fund and for
the Portfolio, providing audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the Securities
and Exchange Commission.
7. TAXATION
Each year the Fund intends to qualify and elect to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements (applied through the Fund's proportionate
interest in the Portfolio) as to the nature of the Fund's gross income, the
amount of Fund distributions and the composition and holding period of the
Fund's portfolio assets. Because the Fund intends to distribute all of its net
investment income and net realized capital gains to shareholders in accordance
with the timing requirements imposed by the Code, it is not expected that the
Fund will be required to pay any federal income or excise taxes. If the Fund
should fail to qualify as a "regulated investment company" in any year, the Fund
would incur a regular corporate federal income tax upon its taxable income and
Fund distributions would generally be taxable as ordinary dividend income to the
shareholders.
Under interpretations of the Internal Revenue Service, (1) the
Portfolio will be treated for federal income tax purposes as a partnership and
(2) for
21
<PAGE>
purposes of determining whether the Fund satisfies the income and
diversification requirements to maintain its status as a regulated investment
company, the Fund, as an investor in the Portfolio, will be deemed to own a
proportionate share of the Portfolio's assets and will be deemed to be entitled
to the Portfolio's income or loss attributable to that share. The Portfolio has
advised the Fund that it intends to conduct its operations so as to enable its
investors, including the Fund, to satisfy those requirements.
Shareholders of the Fund will have to pay federal income taxes and any
state or local income taxes on the dividends and capital gain distributions they
receive from the Fund. Dividends from ordinary income and any distributions from
net short-term capital gains are taxable to shareholders as ordinary income for
federal income tax purposes, whether the distributions are made in cash or in
additional shares. A portion of the Fund's ordinary income dividends is normally
eligible for the dividends received deduction for corporations if the recipient
otherwise qualifies for that deduction with respect to its holding of Fund
shares. Availability of the deduction for a particular shareholder is subject to
certain limitations, and deducted amounts may be subject to the alternative
minimum tax and result in certain basis adjustments. Distributions of net
capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses), whether made in cash or in additional shares, are
taxable to shareholders as long-term capital gains without regard to the length
of time the shareholders have held their shares.
Amounts not distributed on a timely basis in accordance with the
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of the excise tax, the Fund must, and intends to,
distribute during each calendar year substantially all of its ordinary income
for that year and substantially all of its capital gain in excess of its capital
losses for that year, plus any undistributed ordinary income and capital gains
from previous years. Any Fund dividend that is declared in October, November, or
December of any calendar year, that is payable to shareholders of record in such
a month, and that is paid the following January will be treated as if received
by the shareholders on December 31 of the year in which the divided is declared.
The Fund will notify shareholders regarding the federal tax status of its
distributions after the end of each calendar year.
Any Fund distribution will have the effect of reducing the per share
net asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of
shares of the Fund by a shareholder that holds such shares as a capital asset
will be treated as long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales.
22
<PAGE>
The Fund anticipates that the Portfolio will be treated as a
partnership for federal income tax purposes. As such, the Portfolio is not
subject to federal income taxation. Instead, the Fund must take into account, in
computing its federal income tax liability, its share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether it has received any cash distributions from the Portfolio. Withdrawals
by the Fund from the Portfolio generally will not result in the Fund recognizing
any gain or loss for federal income tax purposes, except that (1) gain will be
recognized to the extent that any cash distributed exceeds the basis of the
Fund's interest in the Portfolio prior to the distribution, (2) income or gain
will be realized if the withdrawal is in liquidation of the Fund's entire
interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, and (3) loss will be recognized if
the distribution is in liquidation of that entire interest and consists solely
of cash and/or unrealized receivables. The basis of the Fund's interest in the
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in the Portfolio, increased by the Fund's share of income from
the Portfolio and decreased by the Fund's share of losses from the Portfolio and
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. The investment by the Fund in the Portfolio does
not cause the Fund to be liable for any income or franchise tax in the State of
New York.
Fund shareholders may be subject to state and local taxes on Fund
distributions to them. Shareholders are advised to consult with their tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
8. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Manager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Manager in a similar capacity.
The Portfolio's primary consideration in placing securities
transactions with broker-dealers for execution is to obtain and maintain the
availability of execution at the most favorable prices and in the most effective
manner possible. The Manager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Manager on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Manager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a
23
<PAGE>
fixed underwriting commission or concession. From time to time, soliciting
dealer fees are available to the Manager on the tender of the Portfolio's
securities in so-called tender or exchange offers. Such soliciting dealer fees
are in effect recaptured for the Portfolio by the Manager. At present no other
recapture arrangements are in effect. Consistent with the foregoing primary
consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees of the
Portfolio may determine, the Manager may consider sales of shares of the Fund
and of securities of other investors in the Portfolio as a factor in the
selection of broker-dealers to execute the Portfolio's securities transactions.
Under the Management Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Manager may cause the Portfolio to pay a
broker-dealer acting on an agency basis which provides brokerage and research
services to the Manager or the Adviser an amount of commission for effecting a
securities transaction for the Portfolio in excess of the amount other
broker-dealers would have charged for the transaction if the Manager determines
in good faith that the greater commission is reasonable in relation to the value
of the brokerage and research services provided by the executing broker-dealer
viewed in terms of either a particular transaction or the Manager's or the
Adviser's overall responsibilities to the Portfolio or to its other clients. Not
all of such services are useful or of value in advising the Portfolio.
The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Manager and the Adviser currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will, in the judgment of
the Manager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Manager's or the Adviser's other clients, in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Manager or the Adviser for no
consideration other than brokerage or underwriting commissions.
The Manager and the Adviser attempt to evaluate the quality of research
provided by brokers. The Manager and the Adviser sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the Manager nor the Adviser is
able to quantify the amount of commissions which are paid as a result of such
research because a substantial number of transactions are effected through
24
<PAGE>
brokers which provide research but which are selected principally because of
their execution capabilities.
The fees that the Portfolio pays to the Manager and the Adviser will
not be reduced as a consequence of the Portfolio's receipt of brokerage and
research services. To the extent the Portfolio's securities transactions are
used to obtain brokerage and research services, the brokerage commissions paid
by the Portfolio will exceed those that might otherwise be paid for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services may be useful and of value to the Manager or the
Adviser in serving both the Portfolio and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients may be
useful to the Manager or the Adviser in carrying out its obligations to the
Portfolio. While such services are not expected to reduce the expenses of the
Manager or the Adviser, the Manager or the Adviser would, through use of the
services, avoid the additional expenses which would be incurred if it should
attempt to develop comparable information through its own staff. For the fiscal
years ended July 31, 1993 , 1994 and 1995, the Portfolio paid brokerage
commissions of $8,000 , $13,000 and $15,222, respectively.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Manager's or the Adviser's other
clients. Investment decisions for the Portfolio and for the Manager's or the
Adviser's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Fund's Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
(without par value) and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the Fund. Each share represents an equal proportionate interest in the Fund
with each other share. Upon liquidation or dissolution of the Fund, the Fund's
shareholders are entitled to share pro rata in the Fund's net assets available
for distribution to its shareholders. The Fund reserves the right to create and
issue a number of series of shares, in which case the shares of each series
would participate equally in the earnings,
25
<PAGE>
dividends and assets of the particular series (except for any differences among
classes of shares of a series). Shares of each series would be entitled to vote
separately to approve advisory agreements or changes in investment policy, but
shares of all series may vote together in the election or selection of Trustees,
principal underwriters and accountants for the Fund. Upon liquidation or
dissolution of the Fund, the shareholders of each series would be entitled to
share pro rata in the net assets of their respective series available for
distribution to shareholders.
Shareholders are entitled to one vote for each share held. Shareholders
in the Fund do not have cumulative voting rights, and shareholders owning more
than 50% of the outstanding shares of the Fund may elect all of the Trustees of
the Fund if they choose to do so and in such event the other shareholders in the
Fund would not be able to elect any Trustee. The Fund is not required to hold
annual meetings of shareholders but the Fund will hold special meetings of
shareholders when in the judgment of the Fund's Trustees it is necessary or
desirable to submit matters for a shareholder vote. No material amendment may be
made to the Fund's Declaration of Trust without the affirmative vote of the
holders of a majority of its outstanding shares. Shares have no preference,
preemptive, conversion or similar rights. Shares, when issued, are fully paid
and non-assessable, except as set forth below. The Fund may enter into a merger
or consolidation, or sell all or substantially all of its assets, if approved by
the vote of the holders of two-thirds of its outstanding shares, except that if
the Trustees of the Fund recommend such sale of assets, the approval by vote of
the holders of a majority of the Fund's outstanding shares will be sufficient.
The Fund may also be terminated upon liquidation and distribution of its assets,
if approved by the vote of the holders of two-thirds of its outstanding shares.
If not so terminated, the Fund will continue indefinitely. Stock certificates
are issued only upon the written request of a shareholder.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that the Fund shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Fund, its shareholders, Trustees, officers,
employees and agents covering possible tort and other liabilities. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate insurance existed
and the Fund itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the Fund
are not binding upon the Trustees individually but only upon the property of the
Fund and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Fund protects a Trustee against any liability
to which he or she would otherwise be subject by reason of wilful misfeasance,
bad
26
<PAGE>
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each Fund Business Day. At the close
of each such business day, the value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio effective for that day. Any additions or withdrawals,
which are to be effected as of the close of business on that day, will then be
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio will then be re-computed as the percentage equal to the fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the close of business on such day plus or minus, as the case may
be, the amount of any additions to or withdrawals from the investor's investment
in the Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the close of business on the following Fund Business Day.
10. FINANCIAL STATEMENTS
Financial statements of the Fund and the Portfolio as of July 31, 1995
included herein have been so included in reliance upon the report of KPMG Peat
Marwick LLP, independent auditors, as experts in accounting and auditing.
DSI195
27
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1995
(SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS -- 97.9%
APPAREL -- 0.9%
Brown Group Inc............ 400 $ 9,950
Hartmarx Corp*............. 600 3,675
Lands' End Inc............. 800 12,300
Liz Claiborne, Inc......... 2,000 45,750
Nike Inc. (Class B)........ 1,900 171,713
Oshkosh B' Gosh, Inc....... 300 5,100
Phillips-Van Heusen
Corp...................... 600 9,450
Reebok International
Ltd....................... 2,200 78,925
Russell Corp............... 1,000 28,250
Stride Rite Corp........... 1,200 13,350
VF Corp.................... 1,600 88,400
-----------
466,863
-----------
COMMERCIAL PRODUCTS & SERVICES -- 1.9%
Autodesk Inc............... 1,200 54,300
Cintas Corp................ 1,200 45,000
Deluxe Corp................ 2,000 64,250
Donnelley, R.R. & Sons
Co........................ 3,900 145,762
Harland (J.H.) Co.......... 900 19,912
HON Industries Inc......... 800 21,800
Kelly Services (Class A)... 975 26,568
Miller, (Herman) Inc....... 800 19,200
Moore Corp., Ltd........... 2,400 52,800
National Service
Industries, Inc........... 1,300 38,350
New England Business
Service Inc............... 300 6,412
Pitney Bowes Inc........... 3,800 152,475
Standard Register Co. ..... 700 14,962
Wallace Computer Services,
Inc....................... 500 29,188
Xerox Corp................. 2,700 321,634
-----------
1,012,613
-----------
CONSTRUCTION -- 0.3%
Centex Corp................ 900 25,200
Fleetwood Enterprises
Inc....................... 1,300 26,813
Graco Inc.................. 200 5,800
Kaufman & Broad Home
Corp...................... 800 11,500
Rouse Co................... 1,200 25,200
Sherwin-Williams Co. ...... 2,200 80,300
TJ International Inc....... 400 8,350
-----------
183,163
-----------
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
CONSUMER PRODUCTS & SERVICES -- 0.2%
Avery Dennison Corp........ 1,400 $ 56,175
C C H Inc.................. 700 14,875
ISCO Inc. ................. 200 2,050
Tennant Co................. 200 5,000
Zurn Industries Inc........ 200 4,375
-----------
82,475
-----------
ENERGY -- 4.0%
Amoco Corp................. 12,600 847,350
Anadarko Petroleum Corp.... 1,600 68,000
Apache Corp................ 1,900 52,013
Atlantic Richfield Co...... 4,100 472,525
Consolidated Natural Gas
Co. ...................... 2,400 90,000
ENERGEN Corp............... 300 6,600
Enron Corp................. 6,550 227,612
Helmerich & Payne Inc...... 600 17,250
Louisiana Land &
Exploration Co. .......... 900 35,775
Oryx Energy Co.*........... 2,600 37,375
Pennzoil Co. .............. 1,300 60,938
Rowan Companies Inc.*...... 1,800 13,050
Santa Fe Energy Resources
Inc.*..................... 2,500 23,438
Sun Company................ 3,000 88,125
Williams Companies Inc.
(The)..................... 2,800 103,600
-----------
2,143,651
-----------
FINANCIAL -- 10.6%
Ahmanson (H.F.) & Co....... 3,000 67,125
American Express Co. ...... 12,700 488,950
Banc One Corporation....... 10,223 324,587
Bank of Boston Corp........ 2,850 123,619
BankAmerica Corp........... 9,600 518,400
Bankers Trust (N.Y.)
Corp...................... 2,000 129,000
Barnett Banks Inc.......... 2,500 138,750
Beneficial Corp............ 1,400 66,325
Block (H. & R.), Inc....... 2,800 105,000
Cincinnati Financial
Corp...................... 1,305 70,470
CoreStates Financial
Corp...................... 3,700 135,050
Dime Bancorp Inc.*......... 2,600 27,625
Edwards (A.G.), Inc........ 1,525 37,362
Federal National Mortgage
Association............... 6,900 646,013
Fifth Third Bancorp........ 1,700 96,900
</TABLE>
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1995
(SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
FINANCIAL -- CONTINUED
<S> <C> <C>
First Chicago Corp......... 2,300 $ 139,725
First Fed Financial
Corp.*.................... 200 3,000
First Fidelity
Bancorporation............ 2,050 129,150
Golden West Financial
Corp...................... 1,500 70,125
Great Western Financial
Corp...................... 3,600 76,950
Household International
Inc....................... 2,500 131,250
Mellon Bank Corp........... 3,750 150,469
Merrill Lynch & Co.,
Inc....................... 4,550 252,525
Morgan (J.P.) & Co.,
Inc....................... 4,700 343,687
NBD Bancorp Inc............ 4,100 139,400
Norwest Corp............... 8,400 237,300
PNC Bank Corp.............. 5,800 142,825
Piper Jaffray Inc.......... 300 5,063
ReliaStar Financial
Corp...................... 900 34,312
Shawmut National Corp...... 3,350 103,431
Student Loan Marketing
Association............... 1,950 105,056
SunTrust Banks, Inc........ 3,000 181,125
Transamerica Corp.......... 1,750 108,281
Value Line Inc............. 300 8,925
Vermont Financial Services
Corp...................... 100 2,750
Wachovia Corp.............. 4,400 167,750
Wells Fargo & Co........... 1,250 227,969
Wesco Financial Corp....... 150 19,350
-----------
5,755,594
-----------
FOOD & BEVERAGES -- 10.2%
Archer-Daniels-Midland
Co........................ 13,425 221,512
Ben & Jerry's (Class A)*... 100 1,400
CPC International Inc...... 3,800 234,650
Campbell Soup Co........... 6,450 301,537
Coca-Cola Company.......... 32,400 2,134,350
Fleming Cos., Inc.......... 1,200 31,650
General Mills, Inc......... 4,150 216,837
Heinz (H.J.) Company....... 6,200 268,926
Hershey Foods Corp......... 2,300 132,537
Kellogg Co................. 5,600 402,501
PepsiCo, Inc............... 20,200 946,833
Quaker Oats Co............. 3,500 121,625
Ralston Purina Group....... 2,550 136,425
Smucker (J.M.) Co. (Class
A)........................ 1,000 21,875
Super Valu Inc............. 1,900 58,425
Sysco Corp................. 4,700 146,288
TCBY Enterprises, Inc...... 500 2,938
Tootsie Roll Industries,
Inc....................... 618 22,254
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
FOOD & BEVERAGES -- CONTINUED
Wrigley, (Wm.) Jr. Co...... 3,000 $ 133,500
-----------
5,536,063
-----------
HEALTHCARE -- 8.0%
Acuson Corp.*.............. 1,000 11,500
Allergan Inc............... 1,700 51,425
Alza Corp.*................ 2,400 61,800
Angelica Corp.............. 300 7,575
Apogee Enterprises, Inc.... 300 5,194
Becton Dickinson &
Company................... 1,800 105,975
Bergen Brunswig Corp.
(Class A)................. 945 20,436
Biomet Inc.*............... 2,900 44,225
Community Psychiatric
Centers*.................. 1,000 12,750
Forest Laboratories,
Inc.*..................... 1,250 55,468
Humana Inc.*............... 4,000 77,500
Johnson & Johnson.......... 16,500 1,183,867
Manor Care Inc............. 1,550 50,181
Medtronic Inc.............. 2,900 237,800
Merck & Co., Inc........... 31,600 1,631,350
Mylan Laboratories Inc..... 2,200 66,275
Schering-Plough Corp....... 9,600 446,400
St. Jude Medical Inc....... 1,100 60,225
Stryker Corp............... 1,200 52,500
Sunrise Medical Inc.*...... 600 16,425
United American
Healthcare*............... 200 3,550
US Health Care Inc......... 4,300 135,988
-----------
4,338,409
-----------
HOUSEHOLD GOODS -- 4.8%
Alberto Culver Co. (Class
B)........................ 700 21,175
Avon Products, Inc......... 1,700 115,600
Bassett Furniture
Industries, Inc........... 300 7,500
Church & Dwight Co.,
Inc....................... 400 8,400
Clorox Co.................. 1,400 91,875
Colgate-Palmolive Co....... 3,700 259,000
Handleman Co............... 700 7,262
Harman International
Industries, Inc. ......... 600 23,625
Hasbro Inc................. 2,150 66,919
Leggett & Platt Inc........ 1,050 48,694
Mattel, Inc................ 5,669 160,149
Maytag Corp................ 2,900 47,488
Newell Co.................. 4,200 106,575
</TABLE>
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1995
(SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
HOUSEHOLD GOODS -- CONTINUED
<S> <C> <C>
Oneida, Ltd................ 200 $ 3,000
Procter & Gamble Co. ...... 17,600 1,212,200
Rubbermaid Inc............. 4,100 121,975
Shaw Industries............ 3,400 57,375
Snap-On Tools Corp......... 1,000 41,750
Springs Industries, Inc.
(Class A)................. 600 23,550
Stanhome, Inc.............. 400 12,850
Stanley Works (The)........ 1,200 47,550
Thomas Industries.......... 200 3,525
Whirlpool Corp............. 1,900 109,725
Zenith Electronics
Corp.*.................... 1,600 14,000
-----------
2,611,762
-----------
INSURANCE -- 6.0%
Aetna Life & Casualty
Co........................ 2,900 179,438
Alexander & Alexander
Services Inc. ............ 1,100 25,300
Allstate Corp.............. 1 20
American General Corp...... 5,200 189,150
American International
Group, Inc................ 12,100 907,541
Chubb Corp................. 2,200 184,800
CIGNA Corp................. 1,900 153,188
GEICO Corp................. 1,700 94,775
General Re Corp............ 2,100 278,513
Hartford Steam Boiler...... 600 26,700
Jefferson-Pilot Corp....... 1,300 72,637
Lincoln National Corp...... 2,400 98,700
Marsh & McLennan Companies,
Inc....................... 1,900 150,100
Providian Corp............. 2,500 89,688
SAFECO Corp................ 1,600 93,600
St. Paul Companies......... 2,100 102,375
Torchmark Corp............. 1,800 69,300
Travelers Corp............. 8,209 388,859
UNUM Corp.................. 1,900 91,912
USF&G Corp................. 2,600 42,900
USLIFECorp................. 500 20,875
-----------
3,260,371
-----------
MANUFACTURING -- 1.6%
Applied Materials, Inc.*... 2,300 237,800
Briggs & Stratton Corp..... 800 26,700
Cincinnati Milacron Inc.... 900 28,125
Clarcor Inc................ 300 6,937
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
MANUFACTURING -- CONTINUED
Dionex Corp.*.............. 200 9,625
Fastenal Co................ 1,200 $ 40,200
Goulds Pumps, Inc.......... 600 13,200
Hunt Manufacturing Co...... 400 5,600
Illinois Tool Works Inc.... 2,850 168,150
James River Corp. of
Virginia.................. 2,000 66,750
Lawson Products, Inc. ..... 300 8,063
Millipore Corp............. 1,200 41,400
Modine Manufacturing Co.... 800 25,000
Nordson Corp............... 500 27,875
Thermo Electron Corp....... 2,250 96,188
Watts Industries Inc.
(Class A)................. 1,000 23,250
Wellman Inc................ 1,000 26,875
-----------
851,738
-----------
MEDIA -- 7.6%
BET Holdings Inc. (Class
B)*....................... 400 7,100
CBS, Inc................... 1,600 124,200
Capital Cities/ABC, Inc.... 3,900 455,325
Comcast Corp. (Class A).... 5,900 119,475
Disney (Walt) Company
(The)..................... 13,300 779,716
Dow Jones & Co. Inc........ 2,600 92,300
Frontier Corp.............. 2,300 61,813
Gannett Co., Inc........... 3,700 202,575
King World Productions
Inc.*..................... 900 37,688
Knight-Ridder Inc.......... 1,250 70,312
Lee Enterprises Inc........ 500 18,875
McGraw-Hill Inc............ 1,300 99,937
Media General Inc. (Class
A)........................ 600 20,400
Meredith Corp.............. 600 17,250
New York Times Co. (The)
(Class A)................. 2,500 63,750
Nynex Corp................. 10,800 445,500
SBC Communications......... 15,500 745,937
Scholastic Inc.*........... 500 32,875
Tele-Communications, Inc.
(Class A)*................ 16,400 410,000
Times Mirror Co. (Class
A)........................ 3,100 89,125
Turner Broadcasting System
Inc. (Class A)............ 2,200 47,850
Viacom, Inc.*.............. 1,800 91,575
Washington Post Co. (The)
(Class B)................. 300 81,300
-----------
4,114,878
-----------
</TABLE>
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1995
(SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
MISCELLANEOUS -- 2.0%
<S> <C> <C>
Alco Standard Corp......... 1,350 $ 109,856
Allwaste, Inc.*............ 1,200 6,750
American Greetings Corp.
(Class A)................. 2,050 62,013
Avnet, Inc................. 1,000 52,000
Bemis Co., Inc............. 1,400 39,725
CPI Corp................... 400 8,700
Cross, A.T. Co. (Class
A)........................ 500 7,875
DeVRY INC.*................ 400 9,100
Fedders Corp............... 750 5,063
Fuller (H.B.) Co........... 500 17,625
General Signal Corp........ 1,250 46,094
Groundwater Technology,
Inc.*..................... 200 2,650
Harcourt General Inc....... 1,900 85,500
Hillenbrand Industries
Inc....................... 1,700 50,575
Ionics Inc.*............... 400 15,250
Jostens Inc................ 1,400 31,850
KENETECH Corp.*............ 900 10,800
Marriott International
Inc....................... 3,100 112,375
National Education
Corp.*.................... 600 3,225
Omnicom Group, Inc......... 1,000 60,375
Polaroid Corporation....... 1,150 49,306
Premier Industrial Corp.... 2,350 58,162
Sealed Air Corp.*.......... 500 25,375
Service Corp.
International............. 2,350 80,194
Sonoco Products Co......... 2,205 56,228
Toro Co. (The)............. 300 8,587
Whitman Corp............... 2,600 50,700
-----------
1,065,953
-----------
RESOURCE DEVELOPMENT -- 3.2%
Air Products & Chemicals,
Inc....................... 2,900 162,400
Aluminum Co. of America.... 4,600 261,625
ARCO Chemical Co........... 2,450 117,600
Battle Mountain Gold
Co. ...................... 1,800 17,100
Betz Laboratories, Inc..... 700 31,588
Cabot Corp................. 1,200 67,650
Calgon Carbon Corp......... 1,200 14,250
Consolidated Papers Inc.... 1,100 65,313
Cyprus Amax Minerals Co. .. 2,600 72,475
Echo Bay Mines Ltd......... 3,000 27,562
Inland Steel Industries
Inc....................... 1,200 34,500
Mead Corp.................. 1,400 82,425
Morton International
Inc....................... 3,900 117,000
Nalco Chemical Co.......... 1,650 58,781
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
RESOURCE DEVELOPMENT -- CONTINUED
Nucor Corp................. 2,300 $ 123,625
Praxair Inc. .............. 3,700 103,600
Scott Paper Company........ 3,800 174,325
Sigma-Aldrich
Corporation............... 1,300 65,325
Westvaco Corp.............. 1,800 81,450
Worthington Industries,
Inc....................... 2,250 46,969
-----------
1,725,563
-----------
RETAIL -- 11.6%
Albertson's, Inc........... 6,400 190,400
American Stores Co......... 3,800 111,625
Bob Evans Farms, Inc....... 1,200 23,400
Charming Shoppes Inc. ..... 2,000 9,750
Circuit City Stores Inc.... 2,500 92,813
Claire's Stores Inc. ...... 500 10,000
Dayton-Hudson Corp. ....... 1,800 136,125
Dillard Department
Stores.................... 2,900 89,900
Dollar General Corp. ...... 1,656 55,898
Egghead Inc.*.............. 300 3,938
Gap, Inc. (The)............ 3,800 132,525
Giant Food Inc. (Class
A)........................ 1,400 42,700
Gibson Greetings Inc....... 500 7,375
Great Atlantic & Pacific
Tea Co., Inc.............. 1,200 33,450
Hannaford Brothers Co...... 1,300 34,938
Hechinger Co. (Class A).... 800 5,300
Home Depot, Inc. (The)..... 12,033 528,030
Huffy Corp................. 300 3,750
International Dairy Queen,
Inc. (Class A)*........... 600 12,600
K-Mart Corp................ 11,400 179,550
Kroger Company*............ 2,800 87,150
Lillian Vernon Corp........ 200 3,700
Limited, Inc. (The)........ 8,950 183,475
Longs Drug Stores, Inc..... 500 18,312
Lowe's Companies, Inc...... 4,000 147,500
Luby's Cafeterias, Inc..... 500 9,875
May Department Stores Co... 6,300 273,263
McDonald's Corp............ 17,800 687,608
Melville Corp.............. 2,650 95,400
Mercantile Stores Co.,
Inc....................... 1,000 46,625
Morrison Restaurants
Inc....................... 750 17,531
Nordstrom Inc.............. 2,100 84,525
Penney, J.C. Co., Inc...... 5,950 287,831
Pep Boys - Manny, Moe &
Jack...................... 1,450 40,781
Petrie Stores Corp. ....... 1,200 8,400
</TABLE>
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1995
(SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
RETAIL -- CONTINUED
<S> <C> <C>
Price/Costco Inc.*......... 4,765 $ 85,472
Ryan's Family Steak Houses,
Inc.*..................... 1,300 9,100
Sears Roebuck & Co......... 9,900 322,987
Skyline Corp............... 200 3,350
Specs Music Inc.*.......... 200 700
TJX Companies Inc. (The)... 2,000 29,250
Tandy Corp................. 1,900 112,813
Toys 'R' Us, Inc.*......... 6,950 194,600
Wal-Mart Stores, Inc....... 58,800 1,565,550
Walgreen Co................ 3,200 165,600
Whole Foods Market*........ 300 4,575
Woolworth (F.W.) Co........ 3,500 54,688
-----------
6,244,728
-----------
TECHNOLOGIES -- 14.9%
Advanced Micro Devices,
Inc.*..................... 2,650 86,456
Amdahl Corp.*.............. 3,000 29,813
American Power Conversion
Corp.*.................... 2,400 45,000
Analog Devices, Inc.*...... 1,850 67,062
Apple Computer, Inc........ 3,200 144,000
Automatic Data Processing,
Inc....................... 3,700 236,800
Baldor Electric Co......... 400 13,050
Borland International,
Inc.*..................... 600 7,500
Cisco Systems, Inc.*....... 7,000 390,250
Compaq Computer Corp.*..... 6,700 340,025
Computer Assoc.
International Inc......... 4,100 300,837
Cooper Industries Inc. .... 2,900 108,388
DSC Communications Corp.*.. 3,050 163,937
Digital Equipment Corp.*... 3,800 145,825
Grainger, (W.W.) Inc. ..... 1,300 76,213
Hewlett-Packard Co......... 13,100 1,020,163
Hubbell Inc. (Class B)..... 830 48,762
Intel Corp................. 21,300 1,384,563
International Business
Machines Inc.............. 15,000 1,633,125
MCI Communications Corp.... 17,200 412,800
Micron Technology, Inc..... 5,300 331,229
Novell Inc.*............... 9,300 168,562
Perkin-Elmer Corp.......... 1,100 37,262
Quarterdeck Corp.*......... 400 5,875
Raychem Corp............... 1,200 45,600
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
TECHNOLOGIES -- CONTINUED
Shared Medical Systems
Corp...................... 600 $ 24,975
Solectron Corp.*........... 1,200 43,650
Sprint Corp................ 8,900 304,825
Stratus Computer Inc.*..... 700 18,200
Sun Microsystems Inc.*..... 2,400 115,500
Tandem Computers Inc.*..... 2,900 38,063
Tektronix, Inc............. 850 40,906
Tellabs, Inc.*............. 2,300 102,350
Thomas & Betts Corp........ 500 33,813
Xilinx Inc.*............... 600 71,925
-----------
8,037,304
-----------
TRANSPORTATION -- 2.5%
AMR Corp.*................. 2,000 150,000
Airborne Freight Corp...... 400 8,550
Alaska Air Group, Inc.*.... 300 5,775
CSX Corp................... 2,700 226,463
Conrail Inc................ 2,100 129,675
Consolidated Freightways,
Inc....................... 1,100 26,263
Delta Air Lines, Inc....... 1,300 103,025
Federal Express Corp.*..... 1,450 97,875
GATX Corp.................. 600 30,225
Norfolk Southern Corp...... 3,400 246,925
Roadway Services........... 1,100 55,550
Ryder System, Inc.......... 1,950 48,506
Santa Fe Pacific Corp...... 2,656 75,696
Southwest Airlines Inc..... 3,800 109,250
UAL Corp.*................. 350 52,281
Yellow Corp................ 600 9,075
-----------
1,375,134
-----------
UTILITIES -- 7.0%
American Water Works Co.,
Inc....................... 900 27,563
Ameritech Corp............. 14,100 682,087
Atlanta Gas & Light Co. ... 700 24,500
Bell Atlantic Corp......... 11,200 641,200
BellSouth Corp............. 12,700 860,425
Brooklyn Union Gas Company
(The)..................... 1,250 30,469
California Energy Co.,
Inc.*..................... 1,200 22,950
Citizens Utilities Co.
(Class A)*................ 5,695 64,074
Connecticut Energy Corp.... 200 3,900
Eastern Enterprises........ 500 15,125
</TABLE>
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1995
(SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
UTILITIES -- CONTINUED
<S> <C> <C>
El Paso Natural Gas Co..... 1,000 $ 25,375
Equitable Resources Inc.... 800 22,200
Idaho Power Co............. 1,000 24,250
LG & E Energy Corp......... 900 34,762
MCN Corp. ................. 1,700 32,300
NICOR Inc. ................ 1,200 30,450
Noram Energy Corp.......... 3,400 23,375
Northwestern Public Service
Co. ...................... 200 5,200
Oklahoma Gas & Electric
Co........................ 1,000 34,000
ONEOK Inc.................. 700 16,275
Pacific Enterprises........ 2,200 53,075
Pacific Telesis Group...... 10,800 305,100
Peoples Energy Corp........ 900 23,625
Potomac Electric Power
Co........................ 2,800 58,100
Public Service Co. of
Colorado.................. 1,600 50,600
Southern New England
Telecom................... 1550 53,087
Telephone & Data Systems... 1,500 58,125
US West Inc................ 11,900 510,213
Washington Gas Light Co.... 1,200 21,900
-----------
3,754,305
-----------
VEHICLE COMPONENTS -- 0.6%
Cooper Tire & Rubber Co.... 2,150 55,363
Cummins Engine Co., Inc.... 1,150 48,300
Dana Corp.................. 2,600 76,700
Federal-Mogul Corp. ....... 800 17,100
Genuine Parts.............. 3,200 120,800
SPX Corp................... 200 2,875
<CAPTION>
ISSUER SHARES VALUE
- -------------------------------- ---------- -----------
<S> <C> <C>
VEHICLE COMPONENTS -- CONTINUED
Smith, A.O................. 400 $ 10,900
Spartan Motors Inc.*....... 300 3,038
Worldway Corp.*............ 200 2,175
-----------
337,251
-----------
Total Common Stocks (Cost
$43,200,668)....................... 52,897,818
-----------
PREFERRED STOCK -- 0.6%
FEDERAL SPONSORED CREDIT -- 0.6%
Federal Home Loan Mortgage
Corp...................... 4,600 301,300
-----------
Total Preferred Stock (Cost
239,422)........................... 301,300
-----------
TOTAL INVESTMENTS -- 98.5%
(COST, $43,440,090)(A)................. 53,199,118
OTHER ASSETS, LESS LIABILITIES --
1.5%................................... 803,670
-----------
NET ASSETS -- 100.0%.................... $54,002,788
-----------
-----------
</TABLE>
- ------------
*Non-income producing security.
(a)The aggregate cost for federal income tax purposes is $43,453,725, the
aggregate gross unrealized appreciation is $10,474,465, and the aggregate
gross unrealized depreciation is $729,072, resulting in net unrealized
appreciation of $9,745,393.
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $43,440,090) (Note 1).......................... $53,199,118
Cash...................................................................... 813,520
Dividends receivable...................................................... 99,082
Deferred organization expenses (Note 1)................................... 8,657
-----------
Total Assets.......................................................... 54,120,377
-----------
LIABILITIES:
Expenses payable (Note 2)................................................. 21,045
Payable for securities purchased.......................................... 96,544
-----------
Total Liabilities..................................................... 117,589
-----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS...................... $54,002,788
-----------
-----------
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $54,002,788
-----------
-----------
</TABLE>
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................. $ 902,936
EXPENSES (NOTES 1 AND 2):
Investment management fee...................................... $ 39,589
Investment advisory fee........................................ 19,795
Administration fee............................................. 19,795
Expense reimbursement fee...................................... 118,532
Amortization of organization expenses.......................... 10,359
----------
Total Expenses............................................. 208,070
Less: Waiver of expenses....................................... (39,590)
----------
Net Expenses........................................................... 168,480
----------
NET INVESTMENT INCOME.......................................................... 734,456
NET REALIZED GAIN ON INVESTMENTS (NOTE 3):
Proceeds from sales............................................ 2,483,407
Cost of securities sold........................................ 2,077,980
----------
Net realized gain on investments....................................... 405,427
NET UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of year.............................................. 1,029,594
End of year.................................................... 9,759,028
----------
Net change in unrealized appreciation.................................. 8,729,434
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $9,869,317
----------
----------
</TABLE>
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31,1995 JULY 31, 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income....................................................... $ 734,456 $ 545,816
Net realized gain on investments............................................ 405,427 207,560
Net change in unrealized appreciation....................................... 8,729,434 (216,317)
-------------- --------------
Net Increase in Net Assets Resulting from Operations.................... 9,869,317 537,059
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions................................................................... 14,888,452 14,967,462
Reductions.................................................................. (2,076,641) (1,377,702)
-------------- --------------
Net increase in Net Assets from Transactions in Investors'
Beneficial Interests................................................... 12,811,811 13,589,760
-------------- --------------
Total Increase in Net Assets........................................ 22,681,128 14,126,819
NET ASSETS:
Beginning of year........................................................... 31,321,660 17,194,841
-------------- --------------
End of year................................................................. $ 54,002,788 $ 31,321,660
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 10,
YEAR ENDED 1990***
---------------------------------------------------------- TO JULY 31,
JULY 31, 1995 JULY 31, 1994 JULY 31, 1993 JULY 31, 1992 1991
------------- ------------- ------------- ------------- ---------------
FINANCIAL HIGHLIGHTS:
<S> <C> <C> <C> <C> <C>
Net investment
income to average
net assets*........ 1.85% 2.13% 1.88% 1.99% 1.85%**
Expenses to average
net assets*........ 0.43% 0.29% 0.29% 0.29% 0.29%**
Portfolio turnover
rate............... 6% 8% 4% 3% --
</TABLE>
- --------------------------------------------------------------------------------
*Reflects a voluntary waiver of fees by the Administrator and Adviser. Due to
the limitations set forth in the expense payment arrangements, had the
Administrator and Adviser not waived their fees, the ratios of net investment
income and expenses to average net assets as stated would not have changed
for the periods ended July 31, 1993, 1992 and 1991. For the years ended July
31, 1995 and 1994, the ratios of net investment income and expenses to
average net assets would have been 1.75% and 0.53% and 2.00% and 0.42%,
respectively. (See Note 2.)
**Annualized.
***Commencement of operations.
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. Domini Social Index Portfolio (the
"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 Portfolio intends to correlate its investment portfolio as closely as is
practicable with the Domini Social Index (the "Index"), which is a common stock
index developed and maintained by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"),
the Portfolio's Adviser. The Declaration of Trust permits the Trustees to issue
an unlimited number of beneficial interests in the Portfolio. The Portfolio
commenced operations upon effectiveness on August 10, 1990 and began investment
operations on June 3, 1991. The following is a summary of the significant
accounting policies of the Portfolio:
A. VALUATION OF INVESTMENTS. The 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 recorded on the ex-dividend date.
C. FEDERAL TAXES. The Portfolio's policy is to comply with the applicable
provisions of the Internal Revenue Code. Accordingly, no provision for Federal
taxes is necessary.
D. DEFERRED ORGANIZATION EXPENSE. Expenses incurred by the Portfolio in
connection with its organization are being amortized by the Portfolio on a
straight-line basis over a five-year period.
E. 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. INVESTMENT ADVISORY FEES. The Portfolio has retained KLD as the
Investment Adviser of the Portfolio. The services provided by KLD consist of the
determination of the stocks to be included in the Index and evaluating, in
accordance with KLD's criteria, debt securities which may be purchased by the
Portfolio. For its services under the Investment Advisory Agreement, KLD
receives from the Portfolio a fee accrued daily at an annual rate equal to 0.05%
of the Portfolio's average daily net assets. For the year ended July 31, 1995,
KLD voluntarily waived all of its fees.
B. INVESTMENT MANAGEMENT FEES. For the period August 1, 1994 through
November 20, 1994, the Portfolio retained State Street Bank and Trust Company
("State Street") as the Investment Manager of the Portfolio. State Street did
not determine the composition of the Index. For its services under the prior
Management Agreement, State Street received from the Portfolio a fee accrued
daily at an annual rate equal to 0.10% of the Portfolio's average daily net
assets. For the period August 1, 1994 through November 20, 1994, the Portfolio
accrued and paid investment management fees of $10,180 to State Street.
On October 5, 1994, the Board of Trustees of the Portfolio voted to
terminate the investment management agreement between the Portfolio and State
Street. Termination was effective as of November 21, 1994, at which time Mellon
Equity Associates ("MEA") assumed responsibility for the management of the
Portfolio's assets. MEA does not determine the composition of the Index. Under
the new Management Agreement, the Portfolio pays MEA an investment management
fee equal on an annual basis to the following percentages of the Portfolio's
average daily net assets for its then-current fiscal year: 0.10% of assets up to
$50 million; 0.30% of assets between $50 million and $100 million; 0.20% of
assets between $100 million and $500 million; and 0.15% of assets over $500
million. For the period November 21, 1994 through July 31, 1995, the Portfolio
accrued and paid investment management fees of $29,409 to MEA.
C. EXPENSE PAYMENT AGREEMENTS. Pursuant to expense payment arrangements
between Signature and each of the Fund and the Portfolio effective January 1,
1995, Signature has agreed to pay all of the operating expenses of the Fund and
the Portfolio, including the advisory and management fees of the Portfolio and
the administration fees of the Fund and the Portfolio. Under these arrangements,
Signature receives expense payment fees (i) from the Fund, at an annual rate
equal to 0.48% of the Fund's average daily net assets for its then-current
fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of
the Portfolio's average daily net assets for its then-current fiscal year. As a
result, the aggregate annual operating expenses (including amortization of
organization expenses) of the Fund and the Portfolio will not exceed 0.98% of
the average daily net assets of the Fund. After the expense payment arrangements
terminate on December 31, 1999, the dollar-based expenses of the Fund and the
Portfolio will each be paid directly. Prior to January 1, 1995, the Fund and the
Portfolio each had entered into expense reimbursement agreements (the "Prior
Agreements") with Signature pursuant to which the aggregate annual operating
expenses (including amortization of an organization expenses) of the Fund and
the Portfolio would not exceed 0.98% of the Fund's average daily net assets for
its then-current fiscal year. Under the Prior Agreements, Signature agreed to
pay the expenses of the Fund and the Portfolio (except for fees payable under
each of the Administrative Services Agreements, the Distribution Agreement, the
Management Agreement, the Advisory Agreement and expenses related to the
organization of the Fund and the Portfolio) until April 30, 2000, all subject to
reimbursement by the Fund or the Portfolio, as the case may be. For the year
ended July 31, 1995, Signature incurred approximately $90,542 in expenses on
behalf of the Portfolio.
D. REIMBURSEMENT OF EXPENSES. The Administrator has agreed to pay certain
expenses of the Domini Social Equity Fund (the "Fund"), formerly the Domini
Social Index Trust, and the Portfolio subject to reimbursement. To accomplish
such reimbursement, the Administrator may either receive an expense
reimbursement fee from the Fund and the
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1995
- --------------------------------------------------------------------------------
Portfolio or may reimburse the Fund and the Portfolio directly for expenses
incurred such that after such reimbursement the aggregate expenses of the Fund
and the Portfolio will not exceed 0.98% of the average daily net assets of the
Fund. For the period August 1, 1994 through December 31, 1994, the aggregate
expenses of the Fund and the Portfolio were limited to 0.75% of the average
daily net assets of the Fund. The expense reimbursement fee agreement will
terminate on the earlier of April 30, 2000, or the date on which the cumulative
reimbursement fee equals the cumulative payments of such reimbursable expenses
made by the Administrator. For the year ended July 31, 1995, the Administrator
incurred approximately $90,542 in expenses on behalf of the Portfolio.
3. INVESTMENT TRANSACTIONS. Purchase and sales of investments, other than U.S.
Government securities and short-term obligations, aggregated $15,541,954 and
$2,483,407, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Trustees and Shareholders
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the Domini Social Index Portfolio as
of July 31, 1995, 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 each of the years in
the four-year period then ended and for the period from August 10, 1990
(commencement of operations) to July 31, 1991. These financial statements and
financial highlights are the responsibility of the Portfolio'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
standards. 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, 1995 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall 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 the
Domini Social Index Portfolio as of July 31, 1995, the results of its operations
for the year then ended, the 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 four-year period then ended and for the period from August 10, 1990 to July
31, 1991, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 25, 1995
<PAGE>
DOMINI SOCIAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1)............ $54,002,631
Receivable for fund shares sold........................................... 669,071
Deferred organization expenses (Note 1)................................... 13,108
-----------
Total Assets.......................................................... 54,684,810
-----------
LIABILITIES:
Expenses payable (Note 2)................................................. 45,326
Payable for fund shares redeemed.......................................... 1,948
-----------
Total Liabilities..................................................... 47,274
-----------
NET ASSETS.................................................................... $54,637,536
-----------
-----------
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $44,591,383
Undistributed net investment income....................................... 39,069
Accumulated net realized gain on investment............................... 248,952
Net unrealized appreciation of investment................................. 9,758,132
-----------
NET ASSETS.................................................................... $54,637,536
-----------
-----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE ($54,637,536/3,679,740 SHARES)................... $ 14.85
-----------
-----------
</TABLE>
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO:
Investment income from Portfolio............................................ $ 902,930
Expenses from Portfolio..................................................... (168,479)
----------
Net Income from Portfolio............................................... 734,451
EXPENSES (NOTES 1 AND 2):
Administration fee............................................... $ 59,401
Expense reimbursement fee........................................ 171,355
Amortization of organization expenses............................ 15,720
---------
Total Expenses............................................... 246,476
Less: Waiver of expenses......................................... (59,401)
---------
Net Expenses............................................................ 187,075
----------
NET INVESTMENT INCOME........................................................... 547,376
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain from Portfolio............................................ 405,386
Net change in unrealized appreciation from Porfolio......................... 8,728,561
----------
Net realized and unrealized gain from Portfolio............................. 9,133,947
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $9,681,323
----------
----------
</TABLE>
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1995 JULY 31, 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income........................................................ $ 547,376 $ 428,371
Net realized gain from Portfolio............................................. 405,386 207,559
Net change in unrealized appreciation from Portfolio......................... 8,728,561 (216,316)
-------------- --------------
Net Increase in Net Assets from Operations................................. 9,681,323 419,614
-------------- --------------
FROM DISTRIBUTIONS AND DIVIDENDS:
Dividends to shareholders from net investment income......................... (596,572) (353,164)
Distributions to shareholders from net realized gain......................... (224,400) (156,122)
-------------- --------------
Net Decrease in Net Assets from Distributions and Dividends................ (820,972) (509,286)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares................................................ 18,000,269 17,262,648
Net asset value of shares issued in reinvestment of dividends and
distributions............................................................... 607,013 343,281
Payments for shares redeemed................................................. (4,199,386) (3,375,659)
-------------- --------------
Net Increase in Net Assets from Capital Share Transactions................. 14,407,896 14,230,270
-------------- --------------
Total Increase in Net Assets............................................. 23,268,247 14,140,598
NET ASSETS:
Beginning of year............................................................ 31,369,289 17,228,691
-------------- --------------
End of year (including undistributed net investment income of $39,069 and
$88,265, respectively)...................................................... $ 54,637,536 $ 31,369,289
-------------- --------------
-------------- --------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold......................................................................... 1,368,854 1,397,442
Issued in reinvestment of dividends and distributions........................ 47,501 28,145
Redeemed..................................................................... (322,273) (276,162)
-------------- --------------
Net increase................................................................. 1,094,082 1,149,425
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
----------------------------------------------------------
AUGUST 10, 1990 JULY 31, 1995 JULY
31, 1994 JULY 31, 1993 JULY 31, 1992
TO JULY 31, 1991
------------- ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period..... $12.13 $12.00 $11.06 $ 9.95 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income................ 0.172 0.175 0.137 0.117 0.018
Net realized and unrealized gain
(loss) on investments............... 2.825 0.178* 0.968 1.106 (0.068)*
------ ------ ------ ------ ------
Total income from investment
operations.............................. 2.997 0.353 1.105 1.223 (0.050)
------ ------ ------ ------ ------
Less distributions and dividends:
Dividends to shareholders from net
investment income................... (0.195) (0.150) (0.150) (0.113) --
Distributions to shareholders from
net realized gain................... (0.082) (0.073) (0.015) -- --
------ ------ ------ ------ ------
Total distributions...................... (0.277) (0.223) (0.165) (0.113) --
------ ------ ------ ------ ------
Net asset value, end of period........... $14.85 $12.13 $12.00 $11.06 $ 9.95
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratios/supplemental data
Total return......................... 25.10% 2.90% 10.00% 12.30% (0.50)%
Net assets, end of period (in
000's).............................. $54,638 $31,369 $17,229 $7,174 $1,740
Ratio of expenses to average net
assets***........................... 0.90 % 0.75 % 0.75 % 0.75 % 0.75 %**
Ratio of net investment income to
average net assets***............... 1.38 % 1.67 % 1.41 % 1.53 % 1.49 %**
</TABLE>
- --------------------------------------------------------------------------------
*After effect of transaction in capital stock.
**Annualized.
***Includes the Fund's share of Domini Social Index Portfolio's expenses as
well as a waiver of fees and payment of expenses by the Administrator.
Without the limitations set forth in the expense payment arrangements
and fee waivers in effect during the indicated periods, the ratios
of net investment income and expenses to average net assets for the
years ended July 31, 1995, 1994, 1993, 1992 and the period ended
July 31, 1991 would have been 1.13% and 1.15%, 1.39% and 1.03%, 1.26%
and 0.90%, 1.53% and 0.75%, and 1.49% and 0.75%, respectively. (See
Note 2.)
See Notes to Financial Statements
<PAGE>
DOMINI SOCIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. Domini Social Equity Fund (the "Fund"),
formerly the Domini Social Index Trust is a Massachusetts business trust
registered under the Investment Company Act of 1940 (the "Act"), as an open-end
management investment company. The Fund invests substantially all of its assets
in the Domini Social Index Portfolio (the "Portfolio"), an open-end, diversified
management investment 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 (99.9997% at July 31, 1995). The financial
statements 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 upon effectiveness on August 10, 1990 and began investment operations
on June 3, 1991. The following is a summary of the significant accounting
policies of the Fund:
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 investment in the Portfolio. Dividends
to shareholders are declared and paid semiannually from net investment income.
Distributions to shareholders of 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
distribute substantially all of its taxable income, including net realized
gains, if any, within the prescribed time periods. Accordingly, no provision for
federal income or excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES. Organizational costs are being amortized
on a straight-line basis over a five-year period. The amount paid by the Fund on
any redemption of the Fund's initial shares will be reduced by the pro rata
portion of any unamortized organization expenses which the number of the initial
shares redeemed bears to the total number of initial shares outstanding
immediately prior to such redemption. To the extent that the proceeds of the
redemptions are less than such pro rata portion of any unamortized organization
expenses, Signature Broker-Dealer Services, Inc. ("Signature"), the
Administrator and Distributor of the Fund, has agreed to reimburse the Fund for
such difference.
E. OTHER. All net investment income of the Portfolio is allocated pro rata
among the Fund and the other investors in the Portfolio.
2. TRANSACTIONS WITH AFFILIATES.
A. ADMINISTRATION. The Fund has retained Signature to serve as Administrator
and Distributor. Signature provides administrative services necessary for the
operations of the Fund, furnishes office space and facilities required for
conducting the business of the Fund and pays the compensation of the Fund's
officers and Trustee affiliated with Signature. For its services under the
Administrative Services Agreement, Signature receives from the Fund a fee
accrued daily at an annual rate equal to 0.15% of the Fund's average daily net
assets. The Portfolio has entered into a similar agreement with Signature at a
rate of 0.05%. For the year ended July 31, 1995, Signature voluntarily waived
all of its fees.
B. DISTRIBUTION. The Trustees have adopted a Distribution Plan (the "Plan")
in accordance with Rule 12b-1 under the Act. Signature acts as agent of the Fund
and principal underwriter of shares of the Fund pursuant to the Plan. Under the
Plan, Signature may receive a fee from the Fund at an annual rate not to exceed
0.25% of the Fund's average daily net assets in anticipation of, or as
reimbursement for, costs and expenses incurred in connection with the sale of
shares of the Fund. For the year ended July 31, 1995, Signature received no fees
from the Fund pursuant to the Plan.
C. EXPENSE PAYMENT ARRANGEMENTS. Pursuant to expense payment arrangements
between Signature and each of the Fund and the Portfolio effective January 1,
1995, Signature has agreed to pay all of the operating expenses of the Fund and
the Portfolio, including the advisory and management fees of the Portfolio and
the administration fees of the Fund and the Portfolio. Under these arrangements,
Signature receives expense payment fees (i) from the Fund, at an annual rate
equal to 0.48% of the Fund's average daily net assets for its then-current
fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of
the Portfolio's average daily net assets for its then-current fiscal year. As a
result, the aggregate annual operating expenses (including amortization of
organization expenses) of the Fund and the Portfolio will not exceed 0.98% of
the average daily net assets of the Fund. After the expense payment arrangements
terminate on December 31, 1999, the dollar-based expenses of the Fund and the
Portfolio will each be paid directly. Prior to January 1, 1995, the Fund and the
Portfolio each had entered into expense reimbursement agreements (the "Prior
Agreements") with Signature pursuant to which the aggregate annual operating
expenses (including amortization of an organization expenses) of the Fund and
the Portfolio would not exceed 0.98% of the Fund's average daily net assets for
its then-current fiscal year. Under the Prior Agreements, Signature agreed to
pay the expenses of the Fund and the Portfolio (except for fees payable under
each of the Administrative Services Agreements, the Distribution Agreement, the
Management Agreement, the Advisory Agreement and expenses related to the
organization of the Fund and the Portfolio) until April 30, 2000, all subject to
reimbursement by the Fund or the Portfolio, as the case may be. For the year
ended July 31, 1995, Signature incurred approximately $183,778 in expenses on
behalf of the Fund.
3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio aggregated $14,888,452 and $2,076,641, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Trustees and Shareholders
Domini Social Equity Fund:
We have audited the accompanying statement of assets and liabilities of the
Domini Social Equity Fund as of July 31, 1995, 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 each of the years in the four-year period then ended and for the period from
August 10, 1990 (commencement of operations) to July 31, 1991. These financial
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
standards. 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 the investment owned as of
July 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall 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 the
Domini Social Equity Fund as of July 31, 1995, the results of its operations for
the year then ended, the changes in its 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 four-year period then ended and for the period from August 10, 1990 to July
31, 1991, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 25, 1995
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Financial Statements Included In Part A:
Financial Highlights
Financial Statements Included In Part B:
For the Registrant:
Statement of Assets and Liabilities at July 31, 1995
Statement of Operations at July 31, 1995
Statements of Changes in Net Assets for the fiscal years ended July 31, 1995 and
July 31, 1994
Financial Highlights
Notes to Financial Statements at July 31, 1995
Report of Independent Auditors
For Domini Social Index Portfolio:
Portfolio Investments at July 31, 1995
Statement of Assets and Liabilities at July 31, 1995
Statement of Operations at July 31, 1995
Statement of Changes in Net Assets for the fiscal years ended July 31, 1995 and
July 31, 1994
Financial Highlights
Notes to Financial Statements at July 31, 1995
Report of Independent Auditors
(b) Exhibits
1. Amended and Restated Declaration of Trust of the Registrant.5
2. By-Laws of the Registrant.5
4. Specimen of certificate representing ownership of the Registrant's
Shares of Beneficial Interest.3
6. Distribution Agreement between the Registrant and Signature Broker-
Dealer Services, Inc., as distributor.1
8. Custodian Agreement between the Registrant and Investors Bank & Trust
Company, as custodian.1
9(a) Form of Transfer Agency Agreement between the Registrant and
Fundamental Shareholder Services, Inc.5
9(b) Administrative Services Agreement between the Registrant and Signature
Broker-Dealer Services, Inc., as administrator.1
9(c) Copy of Administrative Services Plan of the Registrant.1
10. Not applicable.
11. Consent of KPMG Peat Marwick LLP, independent auditors for the
Registrant.5
13. Copies of investment representation letters from initial shareholders.1
15. Distribution Plan of the Registrant.1
16. Performance Calculations.2
17. Financial Data Schedule.5
18. Powers of Attorney.2,4
1 Incorporated by reference from Pre-Effective Amendment No. 2 to this
Registration Statement as filed with the Securities and Exchange Commission on
June 7, 1989.
2 Incorporated by reference from Post-Effective Amendment No. 1 to this
Registration Statement as filed with the Securities and Exchange Commission on
December 2, 1991.
3 Incorporated by reference from Post-Effective Amendment No. 2 to this
Registration Statement as filed with the Securities and Exchange Commission on
November 16, 1992.
4 Incorporated by reference from Post-Effective Amendment No. 4 to this
Registration Statement as filed with the Securities and Exchange Commission on
September 16, 1993.
5 Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Title of Class: Shares of Beneficial Interest (without par value).
Number of Record Holders as of November 1, 1995: 1,963.
Item 27. Indemnification
Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, filed as an Exhibit herewith; (b) Section 4 of the
Distribution Agreement by and between the Registrant and Signature Broker-
Dealer Services, Inc., filed as an Exhibit herewith; and (c) the undertaking of
the Registrant regarding indemnification set forth in Item 32 below.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator and distributor are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the Investment
Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser
Not applicable.
Item 29. Principal Underwriters
(a) Signature Broker-Dealer Services, Inc. ("Signature"), the
Registrant's Distributor, is also the distributor for Fund, a series investment
company consisting of seven separate funds, Community Bankers Mutual Fund, Inc.,
a series investment company consisting of three separate funds, First Funds of
America, a series investment company consisting of five separate funds, First
Cash Funds of America, a series investment company consisting of four separate
funds, BT Investment Funds, a series investment company consisting of nine
separate funds, BT Institutional Funds, a series investment company consisting
of five separate funds, BT Pyramid Funds, a series investment company consisting
of four separate funds, Yankee Funds, a series investment company consisting of
ten separate funds, Hyperion Government Mortgage Trust, a series investment
company consisting of two separate funds, Hyperion Government Mortgage Trust II,
a series investment company consisting of two separate funds, Advisors
International Fund, The Flex-funds, a series investment company consisting of
five separate funds, The Flex-funds II, and Green Century Funds, a series
investment company consisting of two separate funds.
(b) The following are the directors and officers of Signature. The
principal business address of each of these persons is 6 St. James Avenue,
Boston, Massachusetts unless otherwise noted.
Philip W. Coolidge: President, Chief Executive Officer and Director of
Signature. President and Trustee of Registrant.
Linwood C. Downs: Treasurer of Signature.
Linda T. Gibson: Assistant Secretary of Signature.
Thomas M. Lenz: Assistant Secretary of Signature. Secretary of Registrant.
Molly S. Mugler: Assistant Secretary of Signature. Assistant Secretary of
Registrant.
Barbara M. O'Dette: Assistant Treasurer of Signature. Assistant Treasurer of
Registrant.
Beth A. Remy: Assistant Treasurer of Signature.
Andres E. Saldana: Assistant Secretary of Signature. Assistant Secretary of
Registrant.
Julie J. Wyetzner: Product Management Officer of Signature.
Kate B.M. Bolsover: Director of Signature; Signature Financial Group (Europe),
Ltd., 49 St. James's Street, London SW1A 1JT.
Robert G. Davidoff: Director of Signature; CMNY Capital, L.P., 135 East 57th
Street, New York, NY 10022.
Leeds Hackett: Director of Signature; Hackett Associates Limited, 1260 Avenue
of the Americas, 12th Floor, New York, NY 10020
Laurence B. Levine: Director of Signature; Blair Corporation, 250 Royal Palm
Way, Palm Beach, FL 33480
Donald S. Chadwick: Director of Signature; 4609 Bayard Street, Apartment 411,
Pittsburgh, PA 15213.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the offices of the Registrant and at the following locations:
Signature Broker-Dealer Services, Inc. (administrator and distributor): 6 St.
James Avenue, Boston, MA 02116.
Investors Bank & Trust Company (custodian): P.O. Box 1537, Boston, MA 02205.
Fundamental Shareholder Services, Inc. (transfer agent): 90 Washington Street,
New York, NY 10006.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant's Declaration of Trust mandates indemnification by
the Registrant of its Trustees, officers and certain others under certain
conditions. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to Trustees,
officers and controlling persons of the Registrant, pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee of officer
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or controlling person
of the Registrant in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether or not such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 (the "Act") as though such provisions of the Act
were applicable to the Registrant except that the request referred to in the
third full paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant, regardless
of the net asset value or value of shares held by such requesting shareholders.
(c) If the information called for by Item 5A of Form N-1A is contained
in the latest annual report to shareholders, the registrant shall furnish each
person to whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Boston, and Commonwealth of Massachusetts on the
21st day of November, 1995.
DOMINI SOCIAL EQUITY FUND
By: /s/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on November 21, 1995.
Signature, Title
/S/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE
President and Trustee
/S/ JOHN R. ELDER
JOHN R. ELDER
Treasurer, Principal Financial Officer and Principal Accounting Officer
EMILY WATTS CARD*
EMILY WATTS CARD
Trustee
AMY L. DOMINI*
AMY L. DOMINI
Trustee
KAREN PAUL*
KAREN PAUL
Trustee
WILLIAM C. OSBORN*
WILLIAM C. OSBORN
Trustee
*By /S/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE
*Pursuant to powers of attorney previously filed.
<PAGE>
SIGNATURES
Domini Social Index Portfolio has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A (File No. 33-29180) of
Domini Social Equity Fund to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts on the 21st day of November, 1995.
DOMINI SOCIAL INDEX PORTFOLIO
By: /S/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE, President
This Post-Effective Amendment to the Registration Statement on Form
N-1A (File No. 33-29180) of Domini Social Equity Fund has been signed below by
the following persons in the capacities indicated on November 25, 1995.
Signature, Title
/S/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE
President and Trustee of Domini Social Index Portfolio
/S/ JOHN R. ELDER
JOHN R. ELDER
Treasurer, Principal Financial Officer and Principal Accounting Officer of
Domini Social Index Portfolio
AMY L. DOMINI*
AMY L. DOMINI
Trustee of Domini Social Index Portfolio
ALLEN M. MAYES*
ALLEN M. MAYES
Trustee of Domini Social Index Portfolio
FREDERICK C. WILLIAMSON*
FREDERICK C. WILLIAMSON
Trustee of Domini Social Index Portfolio
TIMOTHY SMITH*
TIMOTHY SMITH
Trustee of Domini Social Index Portfolio
*By /S/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE
*Pursuant to powers of attorney previously filed.
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Amended and Restated Declaration of Trust of the Registrant.
2. By-Laws of the Registrant.
9(a) Form of Transfer Agency Agreement between the Registrant
and Fundamental Shareholder Services, Inc.
11. Consent of KPMG Peat Marwick LLP, independent auditors for
the Registrant.
17. Financial Data Schedule.
DSI197 (DOMDECTR)
DOMINI SOCIAL INDEX TRUST
(formerly Domini Social Index Fund)
AMENDED AND RESTATED DECLARATION OF TRUST
Dated as of March 1, 1990
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
PAGE
ARTICLE I--NAME AND DEFINITIONS 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--TRUSTEES 3
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 3
Section 2.4 Vacancies 4
Section 2.5 Delegation of Power to Other Trustees 4
ARTICLE III--POWERS OF TRUSTEES 4
Section 3.1 General 4
Section 3.2 Investments 5
Section 3.3 Legal Title 6
Section 3.4 Issuance and Repurchase of Securities 6
Section 3.5 Borrowing Money; Lending Trust Property 6
Section 3.6 Delegation; Committees 6
Section 3.7 Collection and Payment 6
Section 3.8 Expenses 7
Section 3.9 Manner of Acting; By-Laws 7
Section 3.10 Miscellaneous Powers 7
Section 3.11 Principal Transactions 7
Section 3.12 Trustees and Officers as Shareholders 8
ARTICLE IV--INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER
AGENT AND SHAREHOLDER SERVICING AGENTS 8
Section 4.1 Investment Adviser 8
Section 4.2 Distributor 9
Section 4.3 Administrator 9
Section 4.4 Transfer Agent and Shareholder Servicing Agents 9
Section 4.5 Parties to Contract 9
ARTICLE V--LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS 10
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 10
Section 5.2 Non-Liability of Trustees, etc. 10
Section 5.3 Mandatory Indemnification 11
Section 5.4 No Bond Required of Trustees 12
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 12
Section 5.6 Reliance on Experts, etc. 13
i
<PAGE>
ARTICLE VI--SHARES OF BENEFICIAL INTEREST 13
Section 6.1 Beneficial Interest 13
Section 6.2 Rights of Shareholders 13
Section 6.3 Trust Only 13
Section 6.4 Issuance of Shares 14
Section 6.5 Register of Shares 14
Section 6.6 Transfer of Shares 14
Section 6.7 Notices 15
Section 6.8 Voting Powers 15
Section 6.9 Series Designation 15
ARTICLE VII--REDEMPTIONS 18
Section 7.1 Redemptions 18
Section 7.2 Suspension of Right of Redemption 18
Section 7.3 Redemption of Shares; Disclosure of Holding 18
Section 7.4 Redemptions of Accounts of Less than
Minimum Amount 19
ARTICLE VIII--DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS 19
ARTICLE IX--DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. 19
Section 9.1 Duration 19
Section 9.2 Termination of Trust 20
Section 9.3 Amendment Procedure 20
Section 9.4 Merger, Consolidation and Sale of Assets 22
Section 9.5 Incorporation, Reorganization 22
Section 9.6 Incorporation or Reorganization of Series 22
ARTICLE X--REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 23
ARTICLE XI--MISCELLANEOUS 23
Section 11.1 Filing 23
Section 11.2 Governing Law 23
Section 11.3 Counterparts 23
Section 11.4 Reliance by Third Parties 23
Section 11.5 Provisions in Conflict with Law or Regulations 24
Section 11.6 Principal Office 24
ii
</TABLE>
<PAGE>
DSI197 (DOMDECTR)
AMENDED AND RESTATED DECLARATION OF TRUST
OF
DOMINI SOCIAL INDEX TRUST
Dated as of March 1, 1990
WHEREAS, the Trustees have previously established a trust through a
Declaration of Trust dated June 7, 1989 for the investment and reinvestment of
funds contributed thereto; and
WHEREAS, no shares having ever been issued pursuant to such Declaration
of Trust, the Trustees hereby amend and restate such Declaration of Trust; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable Shares of Beneficial Interest (without par
value) ("Shares") issued in one or more series as hereinafter provided; and
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares issued
hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1. NAME. The name of the trust is hereby amended to be
"Domini Social Index Trust".
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "ADMINISTRATOR" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.3 hereof.
(b) "BY-LAWS" means the By-laws referred to in Section 3.9 hereof, as
from time to time amended.
(c) "COMMISSION" has the meaning given that term in the l940 Act.
(d) "CUSTODIAN" means a party employed by the Trust to furnish services
as described in Article X of the By-Laws.
<PAGE>
2
(e) "DECLARATION" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "DECLARATION", "HEREOF",
"HEREIN", and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(f) "DISTRIBUTOR" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.2 hereof.
(g) "INTERESTED PERSON" has the meaning given that term in the l940
Act.
(h) "INVESTMENT ADVISER" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(i) "MAJORITY SHAREHOLDER VOTE" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the l940
Act, except that such term may be used herein with respect to the Shares of the
Trust as a whole or the Shares of any particular series, as the context may
require.
(j) "1940 ACT" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(k) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign.
(l) "SHAREHOLDER" means a record owner of outstanding Shares.
(m) "SHARES" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series of Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(n) "SHAREHOLDER SERVICING AGENT" means a party furnishing services to
the Trust pursuant to any shareholder servicing contract described in Section
4.4 hereof.
(o) "TRANSFER AGENT" means a party furnishing services to the Trust
pursuant to any transfer agency contract described in Section 4.4 hereof.
(p) "TRUST" means the trust created hereby.
(q) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(r) "TRUSTEES" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified
<PAGE>
3
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three nor more than 15.
SECTION 2.2. TERM OF OFFICE OF TRUSTEES. Subject to the provisions of
Section l6(a) of the l940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided; except
that (a) any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) any Trustee may be removed with cause, at any time by
written instrument signed by at least two-thirds of the remaining Trustees,
specifying the date when such removal shall become effective; (c) any Trustee
who has attained a mandatory retirement age established pursuant to any written
policy adopted form time to time by at least two thirds of the Trustees shall,
automatically and without action of such Trustee or the remaining Trustees, be
deemed to have retired in accordance with the terms of such policy, effective as
of the date determined in accordance with such policy; (d) any Trustee who has
become incapacitated by illness or injury as determined by a majority of the
other Trustees, may be retired by written instrument signed by a majority of the
other Trustees, specifying the date of his retirement; and (e) a Trustee may be
removed at any meeting of Shareholders by a vote of two thirds of the
outstanding Shares of each series. For purposes of the foregoing clause (b), the
term "cause" shall include, but not be limited to, failure to comply with such
written policies as may from time to time be adopted by at least two thirds of
the Trustees with respect to the conduct of Trustees and attendance at meetings.
Upon the resignation, retirement or removal of a Trustee, or his otherwise
ceasing to be a Trustee, he shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to the Trust or
the remaining Trustees any Trust Property held in the name of the resigning,
retiring or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.3. RESIGNATION AND APPOINTMENT OF TRUSTEES. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy by
appointing such other individual as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
<PAGE>
4
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16
(a) of the 1940 Act.
SECTION 2.4. VACANCIES. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
SECTION 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
<PAGE>
5
SECTION 3.2. INVESTMENTS. (a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an investment
company;
(ii) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of U.S. and foreign currencies, any form of gold
or other precious metal, commodity contracts, any form of option contract,
contracts for the future acquisition or delivery of fixed income or other
securities, shares of, or any other interest in, any investment company as
defined in the Investment Company Act of 1940, and securities of every nature
and kind, including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed or sponsored by any and all Persons, including,
without limitation,
(A) states, territories and possessions of the United States and the
District of Columbia and any political subdivision, agency or instrumentality of
any such Person,
(B) the U.S. Government, any foreign government, any political
subdivision or any agency or instrumentality of the U.S. Government, any foreign
government or any political subdivision of the U.S. Government or any foreign
government,
(C) any international instrumentality,
(D) any bank or savings institution, or
(E) any corporation, trust, partnership or other organization organized
under the laws of the United States or of any state, territory or possession
thereof, or under any foreign law;
or in "when issued" contracts for any such securities, to retain Trust assets in
cash and from time to time to change the securities or obligations in which the
assets of the Trust are invested; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect of
any of said investments; and
(iii) to carry on any other business in connection with or incidental
to any of the foregoing powers, to do everything necessary, proper or desirable
for the accomplishment of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, and to do every other act or
thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
(b) The Trustees shall not be limited to investing in securities or
obligations maturing before the possible termination of the Trust, nor shall the
<PAGE>
6
Trustees be limited by any law limiting the investments which may be made by
fiduciaries.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
SECTION 3.3. LEGAL TITLE. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person or nominee, on such terms as the Trustees may determine. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds of the Trust or other Trust Property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
SECTION 3.5. BORROWING MONEY; LENDING TRUST PROPERTY. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust Property.
SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
SECTION 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
<PAGE>
7
SECTION 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
SECTION 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees at which a quorum is
present, including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of a majority of the
Trustees. The Trustees may adopt By-Laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not reserved to the Shareholders.
SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, the Administrator, Trustees,
officers, employees, agents, the Investment Adviser, the Distributor, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust; (f) to the extent permitted by law, indemnify any person
with whom the Trust has dealings, including any Investment Adviser,
Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing
Agent and any dealer, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.
SECTION 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted
by the 1940 Act, or any order of exemption issued by the Commission, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Administrator, Shareholder Servicing
Agent, Custodian, Distributor or Transfer Agent or with any Interested Person of
such Person; but
<PAGE>
8
the Trust may, upon customary terms, employ any such Person, or firm or company
in which such Person is an Interested Person, as broker, legal counsel,
registrar, transfer agent, dividend disbursing agent or custodian.
SECTION 3.12. TRUSTEES AND OFFICERS AS SHAREHOLDERS. Except as
hereinafter provided, no officer, Trustee or Member of the Advisory Board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser, Administrator or of the Distributor, and no Investment Adviser,
Administrator or Distributor of the Trust, shall take long or short positions in
the securities issued by the Trust. The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, Trustee or member of the Advisory Board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the current prospectus or statement of
additional information for the Shares being purchased; or
(d) The Investment Adviser, the Distributor, the Administrator, or any
of their officers, partners, directors or trustees from purchasing Shares prior
to the effective date of the Trust's Registration Statement under the Securities
Act of l933, as amended, relating to the Shares.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND SHAREHOLDER SERVICING AGENTS
SECTION 4.1. INVESTMENT ADVISER. Subject to a Majority Shareholder Vote
of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby the other party to each such contract shall
undertake to furnish the Trust such management, investment advisory, statistical
and research facilities and services, promotional activities, and such other
facilities and services, if any, with respect to one or more series of Shares,
as the Trustees shall from time to time consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provision of the Declaration, the Trustees may delegate to
the Investment Adviser authority (subject to such general or specific
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9
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of assets of the Trust on behalf of the Trustees or
may authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Investment Adviser (and
all without further action by the Trustees). Any of such purchases, sales, loans
or exchanges shall be deemed to have been authorized by all the Trustees. Such
services may be provided by one or more Persons.
SECTION 4.2. DISTRIBUTOR. The Trustees may in their discretion from
time to time enter into one or more distribution contracts providing for the
sale of Shares whereby the Trust may either agree to sell the Shares to the
other party to any such contract or appoint any such other party its sales agent
for such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the Declaration
or the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares. Such services may be provided by one or more Persons.
SECTION 4.3. ADMINISTRATOR. The Trustees may in their discretion from
time to time enter into one or more administrative services contracts whereby
the other party to each such contract shall undertake to furnish such
administrative services to the Trust as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine, provided that such terms and conditions are not
inconsistent with the provisions of this Declaration or the By-Laws. Such
services may be provided by one or more Persons.
SECTION 4.4. TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS. The
Trustees may in their discretion from time to time enter into one or more
transfer agency and shareholder servicing contracts whereby the other party to
each such contract shall undertake to furnish such transfer agency and/or
shareholder services to the Trust or to shareholders of the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of this
Declaration or the By-Laws. Such services may be provided by one or more
Persons. Except as otherwise provided in the applicable shareholder servicing
contract, a Shareholder Servicing Agent shall be deemed to be the record owner
of outstanding Shares beneficially owned by customers of such Shareholder
Servicing Agent for whom it is acting pursuant to such shareholder servicing
contract.
SECTION 4.5. PARTIES TO CONTRACT. Any contract of the character
described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any Custodian
contract as described in Article X of the By-Laws may be entered into with any
Person, although one or more of the Trustees or officers of the Trust may be an
officer, partner, director, trustee, shareholder, or member of such other party
to the contract, and no such contract shall be invalidated or rendered voidable
by
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10
reason of the existence of any such relationship; nor shall any Person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of any such contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was not inconsistent with the provisions of this
Article IV or the By-Laws. The same Person may be the other party to contracts
entered into pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian
contract as described in Article X of the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series other than Trust Property
allocated or belonging to that series.
SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, wilful misfeasance, gross negligence or reckless disregard of his
duties.
SECTION 5.3. MANDATORY INDEMNIFICATION. (a) Subject to the exceptions
and limitations contained in paragraph (b) below:
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11
(i) every person who is or has been a Trustee or officer of the Trust
shall be indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim", "action", "suit", or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee or
officer or other disposition not involving a final adjudication as provided in
paragraph (b) (i) or (b) (ii) above resulting in a payment by a Trustee or
officer, unless there has been either a determination that such Trustee or
officer did not engage in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or by a
reasonable determination, based upon a review of readily available facts (as
opposed to a full trial-type inquiry) that he did not engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a Person who has ceased to be such a Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such Person. Nothing contained herein shall affect any rights
to indemnification to which personnel other than Trustees and officers may be
entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
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12
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, Shareholder Servicing Agent, Transfer Agent or other
Person dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under the
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually, but as Trustees
under the Declaration, and that the obligations of any such instrument are not
binding upon any of the Trustees or Shareholders individually, but bind only the
trust estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind any of
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, Shareholders,
Trustees, officers, employees and agents in such amount as the Trustees shall
deem adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
<PAGE>
13
SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, any Shareholder Servicing Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder may be divided into transferable Shares, which may be divided into one
or more series as provided in Section 6.9 hereof. Each such series shall have
such class or classes of Shares as the Trustees may from time to time determine.
The number of Shares authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.
SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, pre-emptive, appraisal, conversion
or exchange rights, except as the Trustees may determine with respect to any
series of Shares.
SECTION 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and the
Shareholders. It is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, corporation, bailment
or any form of legal relationship other than a trust. Nothing in the Declaration
shall be construed to make the Shareholders, either by themselves or with the
Trustees, partners or members of a joint stock association.
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14
SECTION 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, and on such terms as the Trustees may deem best, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection, with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares of any series into a
greater or lesser number without thereby changing their proportionate beneficial
interests in Trust Property allocated or belonging to such series. Contributions
to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or integral multiples thereof.
SECTION 6.5. REGISTER OF SHARES. A register or registers shall be kept
at the principal office of the Trust or at an office of the Transfer Agent or
any one or more Shareholder Servicing Agents which register or registers, taken
together, shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register or registers shall be conclusive as to who are the
holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent, the Shareholder
Servicing Agent which is the agent of record for such Shareholder, or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
SECTION 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees, the Transfer Agent or
the Shareholder Servicing Agent which is the agent of record for such
Shareholder, of a duly executed instrument of transfer, together with any
certificate or certificates (if issued) for such Shares and such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent, Shareholder Servicing Agent or
registrar nor any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees, the Transfer
Agent or the Shareholder Servicing Agent which is the agent of record for such
Shareholder; but until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and neither
the
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15
Trustees nor any Transfer Agent, Shareholder Servicing Agent or registrar nor
any officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law.
SECTION 6.7. NOTICES. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote, except that Shares
held in the treasury of the Trust shall not be voted. Shares shall be voted by
individual series on any matter submitted to a vote of the Shareholders of the
Trust except as provided in Section 6.9(g) hereof. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the By-Laws to be taken by Shareholders. At any meeting of
Shareholders of the Trust or of any series of the Trust, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are not otherwise represented in person or by proxy at
the meeting, proportionately in accordance with the votes cast by holders of all
shares otherwise represented at the meeting in person or by proxy as to which
such Shareholder Servicing Agent is the agent of record. Any shares so voted by
a Shareholder Servicing Agent will be deemed represented at the meeting for
quorum purposes. The By-Laws may include further provisions for Shareholder
votes and meetings and related matters.
SECTION 6.9. SERIES DESIGNATION. As set forth in Appendix I hereto, the
Trustees have authorized the division of Shares into series, as designated and
established pursuant to the provisions of Appendix I and this Section 6.9. The
Trustees, in their discretion, may authorize the division of Shares into one or
more additional series, and the different series shall be established and
designated, and the variations in the relative rights, privileges and
preferences as between the different series shall be fixed and determined by the
Trustees upon and subject to the following provisions:
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16
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption and the price, terms and manner
of redemption, and special and relative rights as to dividends and on
liquidation.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issuance or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income and earnings thereon,
profits therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
proceeds, funds or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them to and among any one or
more of the series established and designated from time to time in such manner
and on such basis as the Trustees, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all series for all purposes. No Shareholder of any
particular series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees, in their sole discretion, deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to any particular series be charged with liabilities, expenses,
costs, charges or reserves attributable to any other series. All Persons who
have extended credit which has been allocated to a particular series, or who
have a claim or contract which has been allocated to any particular series,
shall look only to the assets of that particular series for payment of such
credit, claim or contract.
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(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest in the
net assets allocated or belonging to such series only, and such interest shall
not extend to the assets of the Trust generally. Dividends and distributions on
Shares of a particular series may be paid with such frequency as the Trustees
may determine, which may be monthly or otherwise, pursuant to a standing vote or
votes adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of that series only, from such of the income and capital gains,
accrued or realized, from the assets belonging to that series, as the Trustees
may determine, after providing for actual and accrued liabilities belonging to
that series. All dividends and distributions on Shares of a particular series
shall be distributed PRO RATA to the Shareholders of that series in proportion
to the number of Shares of that series held by such Shareholders at the date and
time of record established for the payment of such dividends or distributions.
Shares of any particular series of the Trust may be redeemed solely out of Trust
Property allocated or belonging to that series. Upon liquidation or termination
of a series of the Trust, Shareholders of such series shall be entitled to
receive a PRO RATA share of the net assets of such series only.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series, except that (i) when required by
the l940 Act to be voted in the aggregate, Shares shall not be voted by
individual series, and (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
(i) Notwithstanding anything in this Declaration to the contrary, the
Trustees may, in their discretion, authorize the division of Shares of any
series into Shares of one or more classes or subseries of such series. All
Shares of a class or a subseries shall be identical with each other and with the
Shares of each other class or subseries of the same series except for such
variations between classes or subseries as may be approved by the Board of
Trustees and be permitted under the 1940 Act or pursuant to any exemptive order
issued by the Commission.
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ARTICLE VII
REDEMPTIONS
SECTION 7.L REDEMPTIONS. In case any Shareholder at any time desires to
dispose of his Shares, he may deposit his certificate or certificates therefor,
duly endorsed in blank or accompanied by an instrument of transfer executed in
blank, or if the Shares are not represented by any certificate, a written
request or other such form of request as the Trustees may from time to time
authorize, at the office of the Transfer Agent, the Shareholder Servicing Agent
which is the agent of record for such Shareholder, or at the office of any bank
or trust company, either in or outside of the Commonwealth of Massachusetts,
which is a member of the Federal Reserve System and which the said Transfer
Agent or the said Shareholder Servicing Agent has designated in writing for that
purpose, together with an irrevocable offer in writing in a form acceptable to
the Trustees to sell the Shares represented thereby to the Trust at the net
asset value per Share thereof, next determined after such deposit as provided in
Section 8.1 hereof. Payment for said Shares shall be made to the Shareholder
within seven days after the date on which the deposit is made, unless (i) the
date of payment is postponed pursuant to Section 7.2 hereof, or (ii) the
receipt, or verification of receipt, of the purchase price for the Shares to be
redeemed is delayed, in either of which events payment may be delayed beyond
seven days.
SECTION 7.2 SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment of the
redemption proceeds for the whole or any part of any period (i) during which the
New York Stock Exchange is closed other than customary week-end and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which disposal
by the Trust of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust fairly to determine the value of its
net assets, or (iv) during which the Commission for the protection of
Shareholders by order permits the suspension of the right of redemption or
postponement of the date of payment of the redemption proceeds; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment of the
redemption proceeds until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
SECTION 7.3. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the Trustees
shall, at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares has or may become concentrated in any Person to an extent
which would disqualify the Trust, or any series of the Trust, as a regulated
investment company under the Internal Revenue Code of l986, as amended (the
<PAGE>
19
"Code"), then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number of
Shares of the Trust, or such series of the Trust, sufficient to maintain or
bring the direct or indirect ownership of Shares of the Trust, or such series of
the Trust, into conformity with the requirements for such qualification, and
(ii) to refuse to transfer or issue Shares of the Trust, or such series of the
Trust, to any Person whose acquisition of the Shares of the Trust, or such
series of the Trust, would result in such disqualification. The redemption shall
be effected at the redemption price and in the manner provided in Section 7.l
hereof.
The Shareholders of the Trust shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
of the Trust as the Trustees deem necessary to comply with the provisions of the
Code, or to comply with the requirements of any other authority. Upon the
failure of a Shareholder to disclose such information and to comply with such
demand of the Trustees, the Trust shall have the power to redeem such Shares at
a redemption price determined in accordance with Section 7.1 hereof.
SECTION 7.4 REDEMPTIONS OF ACCOUNTS OF LESS THAN MINIMUM AMOUNT. The
Trustees shall have the power, and any Shareholder Servicing Agent with whom the
Trust has so agreed (or a subcontractor of such Shareholder Servicing Agent)
shall have the power, at any time to redeem Shares of any Shareholder at a
redemption price determined in accordance with Section 7.l hereof if at such
time the aggregate net asset value of the Shares owned by such Shareholder is
less than a minimum amount as determined from time to time and disclosed in a
prospectus of the Trust or in the Shareholder Servicing Agent's (or sub-
contractor's) agreement with its customer. A Shareholder shall be notified that
the aggregate value of his Shares is less than such minimum amount and allowed
60 days to make an additional investment before redemption is processed.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall set
forth in the By-Laws or in a duly adopted vote or votes of the Trustees such
bases and times for determining the per Share net asset value of the Shares or
net income, or the declaration and payment of dividends and distributions, as
they may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
SECTION 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
SECTION 9.2. TERMINATION OF TRUST. (a) The Trust may be terminated (i) by
a Majority Shareholder Vote of its Shareholders, or (ii) by the Trustees by
written notice to the Shareholders. Any series of the Trust may be terminated
<PAGE>
20
(i) by a Majority Shareholder Vote of the Shareholders of that series, or (ii)
by the Trustees by written notice to the Shareholders of that series. Upon the
termination of the Trust or any series of the Trust:
(i) The Trust or series of the Trust shall carry on no business except
for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
series of the Trust and all the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or series of the Trust shall have
been wound up, including the power to fulfill or discharge the contracts of the
Trust, collect the assets of the Trust or series of the Trust, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property of the Trust or series of the Trust to one or more
Persons at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind, discharge or pay
the liabilities of the Trust or series of the Trust, and to do all other acts
appropriate to liquidate the business of the Trust or series of the Trust;
provided, that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all of the Trust Property of the Trust or
series of the Trust shall require Shareholder approval in accordance with
Section 9.4 or 9.6 hereof, respectively; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of the Trust or series of the Trust, in
cash or in kind or partly in cash and partly in kind, among the Shareholders of
the Trust or series of the Trust according to their respective rights.
(b) After termination of the Trust or series of the Trust and distribution
to the Shareholders of the Trust or series of the Trust as herein provided, a
majority of the Trustees shall execute and lodge among the records of the Trust
an instrument in writing setting forth the fact of such termination, and the
Trustees shall thereupon be discharged from all further liabilities and duties
hereunder with respect to the Trust or series of the Trust, and the rights and
interests of all Shareholders of the Trust or series of the Trust shall
thereupon cease.
SECTION 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended
by a Majority Shareholder Vote of the Shareholders or by any instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of the Shares of the Trust. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to designate series in accordance with Section 6.9 hereof, to
change the name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code of l986, as amended, or to (i) change the state or
other jurisdiction designated herein as the state or other jurisdiction whose
laws shall be the governing law hereof, (ii) effect such changes herein as the
<PAGE>
21
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the laws of such state or other jurisdiction applicable to
trusts or voluntary associations, (B) to permit the Trust to elect to be treated
as a "regulated investment company" under the applicable provisions of the
Internal Revenue Code of 1986, as amended, or (C) to permit the transfer of
shares (or to permit the transfer of any other beneficial interests or shares in
the Trust, however denominated), and (iii) in conjunction with any amendment
contemplated by the foregoing clause (i) or the foregoing clause (ii) to make
any and all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (ii) or clause (iii) to be conclusively
evidenced by the execution of any such amendment by a majority of the Trustees,
but the Trustees shall not be liable for failing so to do.
(b) No amendment which the Trustees have determined would affect the
rights, privileges or interests of holders of a particular series of Shares, but
not the rights, privileges or interests of holders of all series of Shares
generally, and which would otherwise require a Majority Shareholder Vote under
paragraph (a) of this Section 9.3, may be made except with the vote or consent
by a Majority Shareholder Vote of Shareholders of such series.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
(d) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the Majority Shareholder Vote of the Shares or
that series of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
(f) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority of the
Trustees.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust
<PAGE>
22
Property (or all or substantially all of the Trust Property allocated or
belonging to a particular series of the Trust) including its good will, upon
such terms and conditions and for such consideration when and as authorized at
any meeting of Shareholders called for such purpose by the vote of the holders
of two-thirds of the outstanding Shares of all series of the Trust voting as a
single class, or of the affected series of the Trust, as the case may be, or by
an instrument or instruments in writing without a meeting, consented to by the
vote of the holders of two-thirds of the outstanding Shares of all series of the
Trust voting as a single class, or of the affected series of the Trust, as the
case may be; provided, however, that if such merger, consolidation, sale, lease
or exchange is recommended by the Trustees, the vote or written consent by
Majority Shareholder Vote shall be sufficient authorization; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of the Commonwealth
of Massachusetts. Nothing contained herein shall be construed as requiring
approval of Shareholders for any sale of assets in the ordinary course of the
business of the Trust.
SECTION 9.5. INCORPORATION, REORGANIZATION. With the approval of the
holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
SECTION 9.6. INCORPORATION OR REORGANIZATION OF SERIES. With the
approval of a Majority Shareholder Vote of any series, the Trustees may sell,
lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.
<PAGE>
23
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. FILING. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other place or places as may be required under the laws of the
Commonwealth of Massachusetts and may also be filed or recorded in such other
places as the Trustees deem appropriate. Each amendment so filed shall state or
be accompanied by a certificate signed and acknowledged by a Trustee stating
that such action was duly taken in the manner provided herein, and unless such
amendment or such certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its filing. A restated
Declaration, integrating into a single instrument all of the provisions of the
Declaration which are then in effect and operative, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of this original
Declaration and the various amendments thereto.
SECTION 11.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
SECTION 11.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, is a Trustee hereunder
certifying to: (i) the number or identity of Trustees or Shareholders, (ii) the
due authorization of the execution of any instrument or writing, (iii) the form
of any vote passed at a meeting of Trustees or Shareholders, (iv) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (v) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (vi) the existence of any fact or facts which in any manner relates
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
SECTION 11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any such provision is in conflict
<PAGE>
24
with the 1940 Act, the regulated investment company provisions of the Internal
Revenue Code of l986, as amended, or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration; provided however, that such determination shall not affect any
of the remaining provisions of this Declaration or render invalid or improper
any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
SECTION 11.6. PRINCIPAL OFFICE. The principal office of the Trust is 6
St. James Avenue, 9th Floor, Boston, Massachusetts, 02116.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of this 1st
day of March, 1990.
/S/ MOLLY S. MUGLER
Molly S. Mugler
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
/S/ PHILIP W. COOLIDGE
Philip W. Coolidge
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
/S/ GAIL E. MCHUGH
Gail E. McHugh
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
<PAGE>
25
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS.
March 1, 1990
Then personally appeared the above-named Molly S. Mugler, Philip W.
Coolidge and Gail E. McHugh, who severally acknowledged the foregoing instrument
to be their free act and deed.
Before me,
/S/ MARK PIETKIEWICZ
Notary Public
My commission expires: January 27, 1997
<PAGE>
26
Appendix I
DOMINI SOCIAL INDEX TRUST
Establishment and
Designation of Series of Shares of
Beneficial Interest (without par value)
Pursuant to Section 6.9 of the Amended and Restated Declaration of
Trust, dated as of March 1, 1990 (the "Declaration of Trust"), of the Domini
Social Index Trust (the "Trust"), the Trustees of the Trust hereby establish and
designate one series of Shares (as defined in the Declaration of Trust) (the
"Fund") to have the following special and relative rights:
1. The Fund shall be designated as follows:
Domini Social Index Trust
2. The Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of the Fund shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters on which Shares of the Fund shall be entitled to vote, shall represent a
PRO RATA beneficial interest in the assets allocated or belonging to the Fund,
and shall be entitled to receive its PRO RATA share of the net assets of the
Fund upon liquidation of the Fund, all as provided in Section 6.9 of the
Declaration of Trust. The proceeds of sales of Shares of the Fund, together with
any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to the Fund, unless otherwise required by law.
3. Shareholders of the Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to such Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Fund as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses or
to change the designation of the Fund now or hereafter created, or to otherwise
change the special and relative rights of the Fund.
<PAGE>
Appendix I
DOMINI SOCIAL EQUITY FUND
(formerly Domini Social Index Trust)
AMENDMENT NO. 1 TO AMENDED AND RESTATED DECLARATION OF TRUST AND
AMENDED AND RESTATED ESTABLISHMENT AND DESIGNATION OF SERIES OF
SHARES OF BENEFICIAL INTEREST (WITHOUT PAR VALUE)
Dated as of July 19, 1993
The undersigned, being the Trustees of Domini Social Index Trust, a
Massachusetts business trust (the "Trust"), acting pursuant to Article IX,
Section 9.3 of the Amended and Restated Declaration of Trust dated as of March
1, 1990 (the "Declaration"), hereby amend the Declaration as follows in order to
change the name of the Trust as follows:
SECTION 1.1. NAME. The name of the trust is changed to "Domini
Social Equity Fund".
Pursuant to Article IX, Section 9.3 and Article VI, Section 6.9 of the
Declaration, the Trustees of the Trust hereby redesignate the Trust's initial
series of Shares (as defined in the Declaration), Domini Social Index Trust (the
"Fund"), in order to change the Fund's name as follows:
1. The Fund shall be redesignated as follows:
Domini Social Equity Fund
and shall have the following special and relative rights:
2. The Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of the Fund. Each Share of the Fund shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters on which Shares of the Fund shall be entitled to vote, shall represent a
PRO RATA beneficial interest in the assets allocated or belonging to the Fund,
and shall be entitled to receive its PRO RATA share of the net assets of the
Fund upon liquidation of the Fund, all as provided in Section 6.9 of the
Declaration. The proceeds of sales of Shares of the Fund, together with any
income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to the Fund, unless otherwise required by law.
3. Shareholders of the Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration.
<PAGE>
2
4. The assets and liabilities of the Trust shall be allocated to the
Fund as set forth in Section 6.9 of the Declaration.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration, the Trustees (including any successor Trustees) shall have the
right at any time and from time to time to create additional series, to
reallocate assets and expenses, to change the designation of the Fund or any
other series created hereafter, or otherwise to change the special and relative
rights of the Fund or any such other series.
IN WITNESS WHEREOF, the undersigned have as of the year and day first
written above executed this Amendment to the Declaration. This instrument may be
executed by the Trustees on separate counterparts but shall be effective only
when signed by a majority of the Trustees.
/S/ AMY L. DOMINI
Amy L. Domini
As Trustee and not Individually
/S/ PHILIP W. COOLIDGE
Philip W. Coolidge
As Trustee and not Individually
/S/ BADI G. FOSTER
Badi G. Foster
As Trustee and not Individually
/S/ KAREN PAUL
Karen Paul
As Trustee and not Individually
/S/ WILLIAM C. OSBORN
William C. Osborn
As Trustee and not Individually
/S/ EMILY W. CARD
Emily W. Card
As Trustee and not Individually
DSI197 (DSI99)
BY-LAWS
OF
DOMINI SOCIAL EQUITY FUND
(formerly, DOMINI SOCIAL INDEX TRUST)
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT ADVISER",
"MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES", "TRANSFER
AGENT", "TRUST", "TRUST PROPERTY" and "TRUSTEES" have the respective meanings
given them in the Declaration of Trust of Domini Social Equity Fund (formerly,
Domini Social Index Trust) dated June 7, 1989 as amended and restated March 1,
1990.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk. SECTION 2. OTHER OFFICES. The Trust may have offices
in such other places without as well as within the Commonwealth as the Trustees
may from time to time determine.
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. A meeting of Shareholders may be called at any time by
a majority of the Trustees and shall be called by any Trustee upon written
request, which shall specify the purpose or purposes for which such meeting is
to be called, of Shareholders holding in the aggregate not less than 10% of the
outstanding Shares entitled to vote on the matters specified in such written
request. Any such meeting shall be held within or without the Commonwealth of
Massachusetts on such day and at such time as the Trustees shall designate. The
holders of a majority of outstanding Shares entitled to vote present in person
or by proxy shall constitute a quorum at any meeting of the Shareholders. In the
absence of a quorum, a majority of outstanding Shares entitled to vote present
in person or by proxy may adjourn the meeting from time to time until a quorum
shall be present.
SECTION 2. NOTICE OF MEETINGS Notice of all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
address as recorded on the register of the Trust, mailed at least 10 days and
not more than 60 days before the meeting. Only the business stated in the
notice of the meeting shall be considered at such meeting. Any adjourned meeting
may be held as adjourned without further notice.
<PAGE>
No notice need be given to any Shareholder who shall have failed to inform
the Trust of his current address or if a written waiver of notice, executed
before or after the meeting by the Shareholder or his attorney thereunto
authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE. For the purpose of determining the Shareholders who
are entitled to notice of and to vote at any meeting, or to participate in any
distribution, or for the purpose of any other action, the Trustees may from time
to time close the transfer books for such period, not exceeding 30 days, as the
Trustees may determine; or without closing the transfer books the Trustees may
fix a date not more than 60 days prior to the date of any meeting of
Shareholders or distribution or other action as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a vote of a majority of the Trustees, proxies may be solicited in
the name of the Trust or one or more Trustees or officers of the Trust. Only
Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
such Share may be voted by such guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
SECTION 5. INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
SECTION 6. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
2
<PAGE>
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the Chairman or by any
Trustee. Notice of the time and place of each meeting other than regular or
stated meetings shall be given by the Secretary or an Assistant Secretary or by
the officer or Trustee calling the meeting and shall be mailed to each Trustee
at least two days before the meeting, or shall be telegraphed, cabled, or
wirelessed to each Trustee at his business address, or personally delivered to
him at least one day before the meeting. Notice of a meeting need not be given
to any Trustee if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. A notice or waiver of notice need not specify the purpose
of any meeting. The Trustees may meet by means of a telephone conference circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, which telephone conference meeting shall be
deemed to have been held at a place designated by the Trustees at the meeting.
Participation in a telephone conference meeting shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of the Trustees may be taken by the Trustees without a meeting if all
the Trustees consent to the action in writing and the written consents are filed
with the records of the Trustees' meetings. Such consents shall be treated as a
vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees present
in person at any regular or special meeting of the Trustees shall constitute a
quorum for the transaction of business at such meeting and (except as otherwise
required by law, the Declaration or these By-Laws) the act of a majority of the
Trustees present at any such meeting, at which a quorum is present, shall be the
act of the Trustees. In the absence of a quorum, a majority of the Trustees
present may adjourn the meeting from time to time until a quorum shall be
present. Notice of an adjourned meeting need not be given.
SECTION 3. ATTENDANCE BY TRUSTEES. A Trustee who fails, during any fiscal
year of the Trust, to attend at least 75% of the meetings of the Board, or who
fails to attend at least 75% of the meetings of each Committee of the Board of
which such Trustee is a member, unless such failure was the result of an illness
or incapacity which, as determined by the Board, is not likely to materially
interfere with the future performance of the duties of such Trustee, shall be
subject to removal for cause by vote of two-thirds of the remaining Trustees.
The foregoing shall not be construed to limit in any way the authority of the
Board with respect to removal of Trustees.
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ARTICLE V
COMMITTEES AND ADVISORY BOARD
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three Trustees to hold office at the
pleasure of the Trustees. While the Trustees are not in session, the Executive
Committee shall have the power to conduct the current and ordinary business of
the Trust, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
the Executive Committee except those powers which by law, the Declaration or
these By-Laws the Trustees are prohibited from so delegating. The Trustees may
also elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation a
Committee may elect its own chairman.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may (i)
provide for stated meetings of any Committee, (ii) specify the manner of calling
and notice required for special meetings of any Committee, (iii) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (iv) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (v) authorize the members of a Committee to meet by means
of a telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records of
decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
SECTION 3. ADVISORY BOARD. The Trustees may appoint an Advisory Board to
consist in the first instance of not less than three members. Members of such
Advisory Board shall not be Trustees or officers and need not be Shareholders. A
member of such Advisory Board shall hold office for such period as the Trustees
may by vote provide and may resign therefrom by a written instrument signed by
him which shall take effect upon its delivery to the Trustees. The Advisory
Board shall have no legal powers and shall not perform the functions of Trustees
in any manner, such Advisory Board being intended merely to act in an advisory
capacity. Such Advisory Board shall meet at such times and upon such notice as
the Trustees may by vote provide.
SECTION 4. CHAIRMAN. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to hold office until his
successor shall have been duly elected and qualified. The Chairman shall not
hold any other office. The Chairman may be, but need not be, a Shareholder. The
Chairman shall preside at all meetings of the Trustees and shall have such other
duties as from time to time may be assigned to him by the Trustees.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
President, a Treasurer and a Secretary, each of whom shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, one or
more Assistant Treasurers, and one or more Assistant Secretaries. The Trustees
may delegate to any officer or committee the power to appoint any subordinate
officers or agents.
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SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise provided
by law, the Declaration or these By-Laws, the President, the Treasurer and the
Secretary shall hold office until his respective successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. The Secretary and Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall not hold any other office.
Except as above provided, any two offices may be held by the same person. Any
officer may be, but does not need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause by a vote of a majority
of the Trustees. Any officer or agent appointed by any officer or committee may
be removed with or without cause by such appointing officer or committee.
SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President, unless a
Chairman is so elected by the Trustees, shall be the principal executive officer
of the Trust. Subject to the control of the Trustees and any committee of the
Trustees, the President shall at all times exercise a general supervision and
direction over the affairs of the Trust. The President shall have the power to
employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. The President shall also have the power to grant, issue,
execute or sign such powers of attorney, proxies or other documents as may be
deemed advisable or necessary in the furtherance of the interests of the Trust.
The President shall have such other powers and duties as, from time to time, may
be conferred upon or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, the Vice President or, if there are more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to such custodian
as the Trustees may employ pursuant to Article X hereof. The Treasurer shall
render a statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required to do so by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep the
minutes of all meetings of the Shareholders in proper books provided for that
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust; and shall have charge of the Share transfer
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books, lists and records unless the same are in the charge of the Transfer
Agent. The Secretary shall attend to the giving and serving of all notices by
the Trust in accordance with the provisions of these By-Laws and as required by
law; and subject to these By-Laws, shall in general perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him by the Trustees. Each Assistant Treasurer shall
give a bond for the faithful discharge of his duties, if required to do so by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all of the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees.
SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE
ADVISORY BOARD. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any committee of officers upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall be that annual period as designated by
the Trustees of the Trust.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
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ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed,
cabled or wirelessed for the purposes of these By-Laws when it has been
delivered to a representative of any telegraph, cable or wireless company with
instruction that it be telegraphed, cabled or wirelessed. Any notice shall be
deemed to be given at the time when the same shall be mailed, telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times employ a
bank or trust company having a capital, surplus and undivided profits of at
least $5,000,000 as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Declaration, these By-Laws and the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same upon
written order;
(ii) to receive and receipt for any monies due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of the Trust
and the net asset value of Shares;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least $5,000,000.
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or with such other person as may be permitted
by the Commission, or otherwise in accordance with the 1940 Act, pursuant to
which system all securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal only upon the
order of the Trust or its custodian.
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SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions shall
apply to the employment of a custodian pursuant to this Article X and to any
contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all securities
owned by the Trust or to which it may become entitled, and shall order the
same to be delivered by the custodian only upon completion of a sale,
exchange, transfer, pledge, or other disposition thereof, and upon receipt
by the custodian of the consideration therefor or a certificate of deposit
or a receipt of an issuer or of its Transfer Agent, all as the Trustees
may generally or from time to time require or approve, or to a successor
custodian; and the Trustees shall cause all funds owned by the Trust or to
which it may become entitled to be paid to the custodian, and shall order
the same disbursed only for investment against delivery of the securities
acquired, or in payment of expenses, including management
compensation, and liabilities of the Trust, including distributions to
Shareholders, or to a successor custodian; provided, however, that nothing
herein shall prevent delivery of securities for examination to the broker
purchasing the same in accord with the "street delivery" custom whereby
such securities are delivered to such broker in exchange for a delivery
receipt exchanged on the same day for an uncertified check of such broker
to be presented on the same day for certification.
(b) In case of the resignation, removal or inability to serve of any such
custodian, the Trust shall promptly appoint another bank or trust company
meeting the requirements of this Article X as successor custodian. The
agreement with the custodian shall provide that the retiring custodian
shall, upon receipt of notice of such appointment, deliver all Trust
Property in its possession to and only to such successor, and that pending
appointment of a successor custodian, or a vote of the Shareholders to
function without a custodian, the custodian shall not deliver any Trust
Property to the Trust, but may deliver all or any part of the Trust
Property to a bank or trust company doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least
$5,000,000; provided that arrangements are made for the Trust Property to
be held under terms similar to those on which they were held by the
retiring custodian.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted (a) by the Shareholders by a Majority Shareholder Vote,
or (b) by the Trustees, provided, however, that no By-Law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration or these By-Laws, a vote of the
Shareholders.
DSI198
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT effective as of the _____ day of ____________, 1995 by and
between DOMINI SOCIAL EQUITY FUND, a Massachusetts business trust (the
"Company"), and FUNDAMENTAL SHAREHOLDER SERVICES, INC., a New York Corporation
("FSSI").
WITNESSETH:
WHEREAS, the Company desires to appoint FSSI as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and FSSI desires to accept such appointment;
WHEREAS, FSSI is duly registered as a transfer agent as provided in
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "1934
Act");
WHEREAS, the Company is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Company currently offers shares in one portfolio
("series"), with one class of shares.
o Domini Social Equity Fund
(such series, together with all other series subsequently established by the
Company and made subject to this Agreement in accordance with Article 17, being
herein referred to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the Company and FSSI agree as follows:
ARTICLE 1. Terms of Appointment; Duties of FSSI
1.01 Subject to the terms and conditions set forth in this Agreement,
the Company on behalf of the Funds, hereby employs and appoints FSSI to act as,
and FSSI agrees to act as, transfer agent for each of the Fund(s)' authorized
and issued shares of beneficial interest ("Shares"), dividend disbursing agent
and agent in connection with any accumulation, open- account or similar plans
provided to the shareholders of the Company ("Shareholders") and set out in the
currently effective prospectus and statement of additional information, as each
may be amended from time to time (the "Prospectus") of the Fund(s), including
without limitation any periodic investment plan or periodic withdrawal program.
1.02 FSSI agrees that it will perform the following services:
(a) In connection with procedures established from time to time by
agreement between the Company and FSSI, FSSI shall:
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(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the Fund(s) appointed by the Board of Trustees of the
Company (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi)Prepare and transmit payments for dividends and distributions
declared by the Company on behalf of a Fund; and
(vii) Create and maintain all necessary records including those
specified in Article 10 hereof, in accordance with all applicable laws,
rules and regulations, including but not limited to records required by
Section 31(a) of the Investment Company Act of 1940, as amended (the
"1940 Act"), and those records pertaining to the various functions
performed by it hereunder. All records shall be available for
inspection and use by the Company. Where applicable, such records shall
be maintained by FSSI for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
(viii) Make available during regular business hours all records and
other data created and maintained pursuant to this Agreement for
reasonable audit and inspection by the Company, or any person retained
by the Company. Upon reasonable notice by the Company, FSSI shall make
available during regular business hours its facilities and premises
employed in connection with the performance of its duties under this
Agreement for reasonable visitation by the Company, or any person
retained by the Company.
(ix) At the expense of the Company, FSSI shall maintain an adequate
supply of blank Share certificates for each Fund providing for the
issuance of certificates to meet FSSI's requirements therefor. Such
Share certificates shall be properly signed by facsimile. The Company
agrees that, notwithstanding the death, resignation, or removal of any
officer of the Company whose signature appears on such certificates,
FSSI may continue to countersign certificates which bear such
signatures until otherwise directed by the Company. Share certificates
may be issued and accounted for entirely by FSSI and do not require a
third party registrar or other endorsing party.
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(x) Issue replacement Share certificates in lieu of certificates which
have been lost, stolen, mutilated or destroyed, without any further
action by the Board of Trustees or any officer of the Company, upon
receipt by FSSI of properly executed affidavits and lost certificate
bonds, in form satisfactory to FSSI, with the Company and FSSI as
obligees under the bond. At the discretion of FSSI, and at its sole
risk, FSSI may issue replacement certificates without requiring the
affidavits and lost certificate bonds described above and FSSI agrees
to indemnify the Company against any and all losses or claims which may
arise by reason of the issuance of such new certificates in the place
of the ones allegedly lost, stolen or destroyed.
(xi) Record the issuance of Shares of the Fund(s) and maintain,
pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of the total
number of Shares of each Fund which are authorized, based upon data
provided to it by the Company, and issued and outstanding. FSSI shall
also provide the Company on a regular basis with the total number of
Shares which are authorized and issued and outstanding and shall have
no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to
the issuance or sale of such Shares, which functions shall be the sole
responsibility of the Company.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a) or in any Schedule hereto, FSSI shall: (i) perform all of
the customary services of a transfer agent, dividend disbursing agent and, as
relevant, agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic withdrawal program); including but
not limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, coordinating the mailing, receiving and tabulating of proxies,
coordinating the mailing of Shareholder reports (semi-annually) and prospectuses
(annually) to current Shareholders, withholding taxes on all accounts, including
nonresident alien accounts, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required by federal authorities with respect to
dividends and distributions for all Shareholders for all purchases and
redemptions of Shares and other Shareholder correspondence, preparing and
mailing activity statements for Shareholders, and providing Shareholder account
information; and (ii) provide a system or reports which will enable the Company
to monitor the total number of Shares of each Fund sold in each State. The
Company shall identify to FSSI in writing those transaction types to be treated
as exempt from blue sky reporting. The responsibility of FSSI for a Fund's blue
sky state registration status is solely limited to the initial establishment of
transaction types subject to blue sky compliance by the Company and the
reporting of such transactions to the Company as provided above.
(c) Additionally, FSSI shall utilize a system to identify all Share
transactions which involve purchase and redemption orders that are processed at
a time other than the time of the computation of net asset value per Share next
computed after receipt of such orders, and shall compute the net effect upon the
Fund(s) of such transactions so identified on a daily and cumulative basis.
(d) FSSI may also provide such additional services and functions not
specifically
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described herein as may be mutually agreed upon between FSSI and the Company and
set forth in writing. Procedures applicable to certain of these services may be
established from time to time by agreement between the Company and FSSI.
ARTICLE 2. Sale of Company Shares
2.01 Whenever the Company shall sell or cause to be sold any Shares of a
Fund, the Company shall deliver or cause to be delivered to FSSI a document duly
specifying: (i) the name of the Fund whose Shares were sold; (ii) the number of
Shares sold, trade date, and price; (iii) the amount of money to be delivered to
the Custodian for the sale of such Shares and specifically allocated to such
Fund; and (iv) in the case of a new account, a new account application or
sufficient information to establish an account.
2.02 FSSI will, upon receipt by it of a check or other payment identified
by it as an investment in Shares of one of the Funds and drawn or endorsed to
FSSI as agent for, or identified as being for the account of, one of the Funds,
promptly deposit such check or other payment to the appropriate account and make
the appropriate postings necessary to reflect the investment. FSSI will notify
the Company, or its designee, and the Custodian of all purchases and related
account adjustments.
2.03 Under procedures as established by mutual agreement between the
Company and FSSI, FSSI shall issue to the purchaser or his or her authorized
agent such Shares, computed to the nearest three decimal places, as the
purchaser is entitled to receive, based on the appropriate net asset value of
the Fund's Shares, determined in accordance with the prospectus and applicable
Federal law or regulation. In issuing Shares to a purchaser or his or her
authorized agent, FSSI shall be entitled to rely upon the latest directions, if
any, previously received by FSSI from the purchaser or his authorized agent
concerning the delivery of such Shares.
2.04 FSSI shall not be required to issue any Shares of any Fund where it
has received a written instruction from the Company or written notification from
any appropriate federal or state authority that the sale of the Shares of the
Fund(s) in question has been suspended or discontinued, and FSSI shall be
entitled to rely upon such written instructions or written notification.
2.05 Upon the issuance of any Shares of any Fund(s) in accordance with the
foregoing provisions of this Section, FSSI shall not be responsible for the
payment of any original issue or other taxes, if any, required to be paid by the
Company in connection with such issuance.
2.06 FSSI may establish such additional rules and regulations governing the
transfer or registration of Shares as it may deem advisable and consistent with
such rules and regulations generally adopted by transfer agents, or with the
written consent of the Company, any other rules and regulations.
ARTICLE 3. Returned Checks
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3.01 In the event that any check or other order for the transfer of money
is returned unpaid for any reason, FSSI will take such steps as FSSI may, in its
discretion, deem appropriate to protect the Company from financial loss or as
the Company or its designee may instruct. Provided that the standard procedures,
as agreed upon from time to time between the Company and FSSI, are adhered to by
FSSI, FSSI shall not be liable for any loss suffered by a Fund as a result of
returned or unpaid purchase or redemption transactions. Legal or other expenses
incurred to collect amounts owed to a Fund as a consequence of returned or
unpaid purchase or redemption transactions shall be an expense of that Fund.
ARTICLE 4. Redemptions
4.01 Shares of any Fund may be redeemed in accordance with the procedures
set forth in the Prospectus of that Fund and FSSI will duly process all
redemption requests.
ARTICLE 5. Transfers and Exchanges
5.01 FSSI is authorized to review and process transfers of Shares of each
Fund, exchanges between Funds on the records of the Funds maintained by FSSI,
and exchanges between the Funds and any other entity as may be permitted by the
Prospectus of the Fund. If Shares to be transferred are represented by
outstanding certificates, FSSI will, upon surrender to it of the certificates in
proper form for transfer, and upon cancellation thereof, countersign and issue
new certificates for a like number of Shares and deliver the same. If the Shares
to be transferred are not represented by outstanding certificates, FSSI will,
upon an order therefor by or on behalf of the registered holder thereof in
proper form, credit the same to the transferee on its books. If Shares are to be
exchanged for Shares of another Fund, FSSI will process such exchange in the
same manner as a redemption and sale of Shares, except that it may in its
discretion waive requirements for information and documentation.
ARTICLE 6. Right to Seek Assurances
6.01 FSSI reserves the right to refuse to transfer or redeem Shares until
it is satisfied that the requested transfer or redemption is legally authorized,
and it shall incur no liability for the refusal, in good faith, to make
transfers or redemptions which FSSI, in its judgment, deems improper or
unauthorized, or until it is satisfied that there is no basis for any claims
adverse to such transfer or redemption. FSSI may, in effecting transfers, rely
upon the Uniform Commercial Code, as the same may be amended from time to time,
which in the opinion of legal counsel for the Company or of its own legal
counsel protect it in not requiring certain documents in connection with the
transfer or redemption of Shares of any Fund, and the Company shall indemnify
FSSI for any act or omission by it in reliance upon such law or opinion of legal
counsel of the Company or of its own counsel.
ARTICLE 7. Distributions
7.01 The Company will promptly notify FSSI of the declaration of any
dividend or distribution. The Company shall furnish to FSSI a resolution of the
Board of Trustees of the
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Company certified by the Secretary (a "Certificate"): (i) authorizing the
declaration of dividends on a specified basis and authorizing FSSI to rely on
oral instructions or a Certificate specifying the date and the total amount
payable on the payment date; or (ii) setting forth the date of the declaration
of any dividend or distribution by a Fund, the date of payment thereof, the
record date as of which Shareholders entitled to payment shall be determined,
and the amount payable per share to the Shareholders of record as of that date
and the total amount payable on the payment date.
7.02 The Company or FSSI, on behalf of the Company, shall instruct the
Custodian to place in a dividend disbursing account funds equal to the cash
amount of any dividend or distribution to be paid out. FSSI will calculate,
prepare and mail checks to (at the address as it appears on the records of
FSSI), or (where appropriate) credit such dividend or distribution to the
account of, Fund Shareholders, and maintain and safeguard all underlying
records.
7.03 FSSI will replace lost checks at its discretion and in conformity with
regular business practices.
7.04 FSSI will maintain all records necessary to reflect the crediting of
dividends which are reinvested in Shares of the Fund, including without
limitation daily dividends.
7.05 FSSI shall not be liable for any improper payments made in accordance
with a resolution of the Board of Trustees of the Company.
7.06 If FSSI shall not receive from the Custodian sufficient cash to make
payment to all Shareholders of the Fund as of the record date, FSSI shall, upon
notifying the Company, withhold payment to all Shareholders of record as of the
record date until sufficient cash is provided to FSSI.
ARTICLE 8. Other Duties
8.01 In addition to the duties expressly provided for herein, FSSI shall
perform such other duties and functions and shall be paid such amounts therefor
as may from time to time be agreed to in writing.
ARTICLE 9. Taxes
9.01 It is understood that FSSI shall file such information returns
concerning the payment of dividends and capital gain distributions and tax
withholding with the proper federal, state and local authorities as are required
by law to be filed by the Company and shall withhold such sums as are required
to be withheld by applicable law.
ARTICLE 10. Books and Records
10.01 FSSI shall maintain confidential records showing for each
Shareholder's account the following: (i) names, addresses and tax identification
numbers; (ii) numbers of Shares
6
<PAGE>
held; (iii) historical information (as available from prior transfer agents)
regarding the account of each Shareholder, including dividends paid and date and
price of all transactions in a Shareholder's account; (iv) any stop or
restraining order placed against a Shareholder's account; (v) information with
respect to withholdings; (vi) any capital gain or dividend reinvestment order,
plan application, dividend address and correspondence relating to the current
maintenance of a Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; (viii) any information
required in order for FSSI to perform the calculations contemplated or required
by this Agreement; and (ix) such other information and data as may be required
by applicable law.
10.02 Any records required to be maintained by Rule 31a-1 under the 1940
Act will be preserved for the periods prescribed in Rule 31a-2 under the 1940
Act. Such records may be inspected by the Company at reasonable times. FSSI may,
at its option at any time, and shall forthwith upon the Company's demand, turn
over to the Company and cease to retain in FSSI's files, records and documents
created and maintained by FSSI in performance of its service of for its
protection. At the end of such retention periods, such documents will either be
turned over to the Company, or destroyed in accordance with the Company's
authorization.
10.03 Procedures applicable to the services to be performed hereunder may
be established from time to time by agreement between the Company and FSSI. FSSI
shall have the right to utilize any shareholder accounting and recordkeeping
system which, in its opinion, qualifies to perform any services to be performed
hereunder. FSSI shall keep records relating to the services performed hereunder,
in the form and manner as it may deem advisable.
ARTICLE 11. Fees and Expenses
11.01 For performance by FSSI pursuant to this Agreement, the Company
agrees to pay FSSI an annual maintenance fee for each Shareholder ledger as set
out in the initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 11.02 below may be changed from
time to time subject to mutual agreement between the Company and FSSI.
11.02 In addition to the fee paid under Section 11.01 above, the Company
agrees to reimburse FSSI for out-of-pocket expenses or advances incurred by FSSI
for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by FSSI at the request or with the consent of the
Company including, without limitation, any equipment, supplies, or services
specifically ordered by the Company or required by the Company to be purchased,
will be reimbursed by the Fund(s).
11.03 The Company agrees to pay all fees and reimbursable expenses within
30 days following the mailing of the respective billing notice. Postage for
mailing dividends, proxies, Fund reports and other mailings to all shareholder
accounts shall be advanced to FSSI by the Company at least seven days prior to
the mailing date of such material.
7
<PAGE>
ARTICLE 12. Representations and Warranties of FSSI
FSSI represents and warrants to the Company that:
12.01 It is a corporation duly organized and existing and in good standing
under the laws of the State of New York.
12.02 It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
12.03 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
12.04 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
ARTICLE 13. Representations and Warranties of the Company
The Company represents and warrants to FSSI that:
13.01 It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
13.02 It is empowered under applicable laws and by its charter documents
and by-laws to enter into and perform this Agreement.
13.03 All proceedings required by said charter documents and by-laws have
been taken to authorize it to enter into and perform this Agreement.
13.04 It is an open-end investment company registered under the 1940 Act.
13.05 A registration statement on Form N-1A (including a prospectus and
statement of additional information) under the Securities Act of 1933 and the
1940 Act is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Funds being offered for sale.
13.06 When Shares are hereafter issued in accordance with the terms of the
Prospectus, such Shares shall be validly issued, fully paid and nonassessable by
the Fund(s).
ARTICLE 14. Indemnification
14.01 Except as set forth in subparagraph (f) hereof, FSSI shall not be
responsible for, and the Company shall indemnify and hold FSSI harmless from and
against, any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
8
<PAGE>
(a) All actions taken or omitted to be taken by FSSI or its agents or
subcontractors in good faith in reliance on or use by FSSI or its agents or
subcontractors of information, records and documents which (i) are received by
FSSI or its agents or subcontractors from or on behalf of the Company, (ii) have
been prepared and/or maintained by the Company or any other person or firm on
behalf of the Company, and (iii) were received by FSSI or its agents or
subcontractors from a prior transfer agent.
(b) Any action taken or omitted to be taken by FSSI in connection with
its appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed.
(c) The Company's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Company's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Company hereunder.
(d) The reliance on, or the carrying out by FSSI or its agents or
subcontractors of any instructions or requests, whether written or oral, of the
Company.
(e) The offer or sale of Shares by the Company in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered in such state or
in violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
(f) In addition to any other limitation provided herein, or by law,
indemnification under this Agreement shall not apply to actions or omissions of
FSSI or its directors, officers, employees, agents or subcontractors in cases of
its own gross negligence, willful misconduct, bad faith, reckless disregard of
its duties or their own duties hereunder, knowing violation of law or fraud.
14.02 FSSI shall indemnify and hold the Fund(s) harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributed to any action or failure or omission
to act by FSSI as a result of FSSI's lack of good faith, negligence, willful
misconduct, knowing violation of law or fraud.
14.03 At any time FSSI may apply to any officer of the Company for
instructions, and may consult with legal counsel for the Company with respect to
any matter arising in connection with the services to be performed by FSSI under
this Agreement, and FSSI and its agents or subcontractors shall not be liable
and shall be indemnified by the Company for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel except for a
knowing violation of law. FSSI, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document furnished by or on behalf
of the Company, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents
9
<PAGE>
provided to FSSI or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Company, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Company. FSSI, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of officers of the Company, and one proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
14.04 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, interruption of
electrical power or other utilities, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable to the other for any damages resulting from such
failure to perform or otherwise from such causes.
14.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder as contemplated by this Agreement.
14.06 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking the indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent, which consent shall not be unreasonably
withheld.
ARTICLE 15. Covenants of the Company and FSSI
15.01 The Company shall promptly furnish to FSSI the following:
(a) A certified copy of the resolution of the Trustees of the Company
authorizing the appointment of FSSI and the execution and delivery of this
Agreement.
(b) A copy of the charter documents and by-laws of the Company and all
amendments thereto.
(c) Copies of each resolution of the Trustees of the Company designating
authorized persons to give instructions to FSSI, and a Certificate providing
specimen signatures for such authorized persons.
(d) Certificates as to any change of any Officer or Trustee of the
Company.
(e) If applicable a specimen of the certificate representing Shares in
each Fund of the Company in the form approved by the Trustees, with a
Certificate as to such approval.
10
<PAGE>
(f) Specimens of all new certificates representing Shares, accompanied
by the Trustees' resolutions approving such forms.
(g) All account application forms and other documents relating to
Shareholder accounts or relating to any plan, program or service offered by the
Company.
(h) A list of all Shareholders of the Fund(s) with the name, address and
tax identification number of each Shareholder, and the number of Shares of the
Fund(s) held by each, certificate numbers and denominations (if any certificates
have been issued), a list of any accounts against which stops have been placed,
together with the reasons for said stops, and the number of Shares redeemed by
the Fund(s).
(i) An opinion of counsel for the Company with respect to the validity
of the issuance of the Shares and the status of the Shares under the Securities
Act of 1933.
(j) A copy of the Company's registration statement on Form N-1A as
amended and declared effective by the Securities and Exchange Commission and all
post-effective amendments thereto.
(k) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for FSSI in the proper performance of its
duties.
15.02 FSSI hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Company for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
15.03 FSSI shall keep records relating to the services performed hereunder,
in the form and manner as it may deem acceptable. To the extent required by
Section 31 of the 1940 Act and the Rules thereunder, FSSI agrees that all such
records prepared or maintained by FSSI relating to the services to be performed
by FSSI hereunder are the confidential property of the Company and will be
preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered to the Company on and in accordance with its
request.
15.04 FSSI and the Company agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation of or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any other
person, except as may be required by law.
15.05 In case of any requests or demands for the inspection of the
Shareholder records of the Company, FSSI shall notify the Company and endeavor
to secure instructions from an authorized officer of the Company as to such
inspection. FSSI reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person.
11
<PAGE>
ARTICLE 16. Term of Agreement
16.01 This Agreement shall become effective on the date hereof (the
"Effective Date") and shall continue in effect for 24 months from the Effective
Date (the "Initial Term") and from year to year thereafter with respect to each
Fund, provided that subsequent to the Initial Term, this Agreement may be
terminated by either party at any time without payment of any penalty upon 90
days written notice to the other. In the event such notice is given by the
Company, it shall be accompanied by a resolution of the Board of Trustees,
certified by the Secretary, electing to terminate this Agreement and designating
a successor transfer agent.
16.02 Should the Company exercise its right to terminate, the Company must
notify FSSI in writing via registered mail. All out-of-pocket and ancillary
expenses associated with the movement of records, data, and material will be
borne by the Company. Additionally, FSSI reserves the right to withhold records,
data, or other material pending receipt of any fees, charges or reimbursements
due from the Company.
ARTICLE 17. Additional Funds
17.01 In the event that the Company establishes one or more series of
Shares in addition to the initial series with respect to which it desires to
have FSSI render services as transfer agent under the terms hereof, it shall so
notify FSSI in writing, and if FSSI agrees in writing to provide such services,
such series of Shares shall become a Fund hereunder.
ARTICLE 18. Assignment
18.01 Except as provided in Section 18.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
18.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
18.03 FSSI may, without further consent on the part of the Company,
subcontract for the performance of any of the services to be provided hereunder
to third parties, including any affiliate of FSSI, provided that FSSI shall
remain liable hereunder for any acts or omissions of any subcontractor as if
performed by FSSI.
ARTICLE 19. Amendment
19.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
ARTICLE 20. New York Law to Apply
12
<PAGE>
20.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
ARTICLE 21. Merger of Agreement and Severability
21.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
21.02 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of this Agreement shall
remain in full force and effect.
21.03 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall together,
constitute only one instrument.
21.04 The Company agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of FSSI
hereunder, it shall advise FSSI of such proposed change at least 60 days prior
to the intended date of the same, and shall proceed with such change only if it
shall have received the written consent of FSSI thereto.
21.05 Neither party shall have any duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against any party.
ARTICLE 22. Notices
22.01 Any notice or other instrument in writing authorized or required by
this Agreement to be given to either party hereto will be sufficiently given if
addressed to such party and mailed or delivered to it at its office at the
address set forth below:
For the Company: Domini Social Equity Fund
6 St. James Avenue, Suite 900
Boston, MA 02116
Attn: President
For FSSI: FUNDAMENTAL SHAREHOLDER SERVICES, INC.
90 Washington Street, 19th Floor
New York, New York 10006
Attn: President
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and the year first above written.
DOMINI SOCIAL EQUITY FUND
- ---------------------------------------
Name: Date
Title:
FUNDAMENTAL SHAREHOLDER SERVICES, INC.
- ---------------------------------------
Name: David P. Wieder Date
Title: President
DSI206
14
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated August 25, 1995 on the Domini Social
Equity Fund and Domini Social Index Portfolio included herein and to the
reference to our firm under the captions "FINANCIAL HIGHLIGHTS" in the
prospectus and "INDEPENDENT AUDITORS" and "FINANCIAL
STATEMENTS" in the statement of additional information.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 20, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE ANNUAL
REPORT DATED JULY 31, 1995 FOR THE DOMINI SOCIAL EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT
</LEGEND>
<CIK> 0000851680
<NAME> THE DOMINI SOCIAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 44,243,626
<INVESTMENTS-AT-VALUE> 54,002,631
<RECEIVABLES> 669,071
<ASSETS-OTHER> 13,108
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54,684,810
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,274
<TOTAL-LIABILITIES> 47,274
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,590,469
<SHARES-COMMON-STOCK> 3,679,740
<SHARES-COMMON-PRIOR> 2,585,658
<ACCUMULATED-NII-CURRENT> 39,069
<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 54,637,536
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 902,930
<OTHER-INCOME> 0
<EXPENSES-NET> 187,075
<NET-INVESTMENT-INCOME> 547,376
<REALIZED-GAINS-CURRENT> 405,386
<APPREC-INCREASE-CURRENT> 8,728,561
<NET-CHANGE-FROM-OPS> 9,681,323
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 596,572
<DISTRIBUTIONS-OF-GAINS> 224,400
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<NUMBER-OF-SHARES-SOLD> 1,368,854
<NUMBER-OF-SHARES-REDEEMED> 322,273
<SHARES-REINVESTED> 47,501
<NET-CHANGE-IN-ASSETS> 23,268,247
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<GROSS-EXPENSE> 414,955
<AVERAGE-NET-ASSETS> 39,600,379
<PER-SHARE-NAV-BEGIN> 12.13
<PER-SHARE-NII> 0.172
<PER-SHARE-GAIN-APPREC> 2.825
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</TABLE>
