<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Domini Social Equity Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Mari A. Wilson
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
DOMINI SOCIAL EQUITY FUND
September 15, 1997
Dear Fellow Shareholder:
The attached materials include a proxy statement and your proxy card for the
upcoming special shareholders' meeting on October 21, 1997. The proxy card
serves as a ballot, allowing you to express your views regarding certain aspects
of the Fund's operations. Please fill out and sign the proxy card and return it
in the enclosed postage-paid envelope and we will vote the proxy exactly as you
tell us at the shareholders' meeting.
By completing and signing the proxy card, and mailing it to the Fund, you
reduce the possibility that the Fund will need to conduct additional or
follow-up solicitations of shareholders.
When you review the attached proxy statement, you will discover that the
Fund is requesting that you consider several matters that involve proposals to
restructure the management of the Fund in order to provide for a more
centralized and focused management structure. With the encouragement of the
Fund's Trustees, the principals of the Portfolio's current investment adviser,
Kinder, Lydenberg & Domini & Co., Inc. including myself, and other investment
company and marketing professionals, have formed a new management company,
Domini Social Investments LLC ("DSI"), whose focus is to provide management
services to the Fund and to expand the kinds of products available to socially
responsible investors. In connection with this restructuring, you are being
asked to vote on a new management agreement with DSI and a submanagement
agreement with Mellon Equity Associates which has been providing the Fund with
day to day portfolio management for several years.
Shareholders are also being asked to elect a combined Board of Trustees and
to authorize the selection of subadvisers by the Board. In addition,
shareholders are being asked to vote on amending the Fund's Declaration of Trust
to clarify provisions relating to the election of Trustees.
The vote of each shareholder is important to the Fund. After careful
consideration, the Board of Trustees of the Fund, including its independent
Trustees, and I approved the proposals relating to the Fund and recommend that
you vote "FOR" each of the proposals.
After you have voted on the proposals, please be sure to SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
I look forward to continuing to serve you in my new capacity as head of
Domini Social Investments. Thank you.
Sincerely,
Amy L. Domini
Chair and President
<PAGE>
THE NOTICE, SET FORTH BELOW, CONSTITUTES THE FORMAL AGENDA FOR THE SPECIAL
MEETING OF SHAREHOLDERS. THE NOTICE SPECIFIES WHAT ISSUES WILL BE CONSIDERED BY
SHAREHOLDERS, AND THE TIME AND LOCATION OF THE MEETING.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. IF
YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE
IF MAILED IN THE UNITED STATES. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE
FUND OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY
PROMPTLY.
DOMINI SOCIAL EQUITY FUND
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(800) 762-6814
--------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 21, 1997
--------------------------
A Special Meeting of Shareholders of DOMINI SOCIAL EQUITY FUND (the "Fund")
will be held at the offices of Bingham, Dana & Gould LLP at 150 Federal Street,
25th Floor, Boston, Massachusetts 02110, on Tuesday, October 21, 1997 at 11:00
a.m. for the following purposes, all as set forth in the accompanying Proxy
Statement.
ITEM 1. To vote on new management arrangements, as follows:
ITEM 1a: To vote on a Management Agreement between Domini Social
Investments LLC ("DSI") and Domini Social Index-SM- Portfolio (the
"Portfolio"). Substantially all of the Fund's investable assets are
invested in the Portfolio.
ITEM 1b: To vote on a Submanagement Agreement between DSI and
Mellon Equity Associates.
ITEM 2. To vote on authorizing the Trustees of the Portfolio to select and
change the investment submanager and enter into submanagement
agreements without obtaining the approval of investors.
ITEM 3. To amend the Declaration of Trust of the Portfolio and the
Declaration of Trust of the Fund to clarify voting provisions with
respect to the election of Trustees by Shareholders.
ITEM 4. To elect seven Trustees of the Fund and seven Trustees of the
Portfolio.
ITEM 5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR ITEMS 1A, 1B, 2, 3 AND 4.
Only shareholders of record on September 8, 1997 will be entitled to vote at
the meeting and at any adjournments thereof.
Linda T. Gibson, SECRETARY
September 15, 1997
PLEASE RETURN YOUR PROXY CARD PROMPTLY
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
<PAGE>
PROXY STATEMENT
This Proxy Statement and Notice of Special Meeting with accompanying form of
proxy are being furnished in connection with the solicitation of proxies by and
on behalf of the Board of Trustees of Domini Social Equity Fund (the "Fund"), to
be used at a special meeting of shareholders (the "Meeting") of the Fund, to be
held at the offices of Bingham, Dana & Gould LLP, 150 Federal Street, 25th
Floor, Boston, Massachusetts 02110, on Tuesday, October 21, 1997 at 11:00 a.m.
and at any adjournments thereof. The Meeting is being held for the purposes set
forth in the accompanying Notice.
On September 8, 1997 there were outstanding 8,831,391 shares of the Fund.
Shareholders of record at the close of business on September 8, 1997 will be
entitled to one vote for each share held on such date. Shareholders of a
majority of the outstanding Shares on that date will constitute a quorum at the
Meeting.
The Fund is a no-load, diversified, open-end management investment company
that seeks to achieve its investment objective by investing all of its
investable assets in Domini Social Index-SM- Portfolio (the "Portfolio"). The
Portfolio is an open-end, diversified management investment company having the
same investment objective as the Fund.
Solicitation of proxies is being made by the mailing of this Notice and
Proxy Statement with its enclosures on or about September 15, 1997. If the
accompanying proxy is executed and returned in time for the Meeting, the shares
covered thereby will be voted in accordance with the proxy on all matters that
may properly come before the Meeting (or any adjournment thereof). Proxy
solicitations will be made primarily by mail, but proxy solicitations also may
be made by telephone, telegraph or personal interviews conducted by officers of
the Fund and the Fund's service contractors. In addition, D.F. King & Co., Inc.
may call shareholders of the Fund to ask if they would be willing to have their
votes recorded by telephone. The latter telephone voting procedure is designed
to authenticate the shareholder's identity by asking the shareholder to provide
his or her social security number (in the case of an individual) or taxpayer
identification number (in the case of an entity). The shareholder's telephone
vote will be recorded and a confirmation will be sent to the shareholder to
ensure that the vote has been taken in accordance with the shareholder's
instructions. Although a shareholder's vote may be taken by telephone, each
shareholder of the Fund will receive a copy of this Proxy Statement and may vote
by mail using the enclosed proxy card. The Fund has been advised by
Massachusetts counsel that this telephonic voting system is not inconsistent
with the Massachusetts law. The cost of solicitation of the shareholders by D.F.
King is expected to be approximately $2,500 plus reasonable out-of-pocket
expenses. With respect to a telephone solicitation by the
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firm, additional expenses would include $5.00 per telephone vote transacted,
$2.50 per outbound telephone contact and costs relating to obtaining
shareholders' telephone numbers. The Fund will bear all proxy solicitation
costs.
The Fund's Annual Report, containing audited financial statements for its
fiscal year ended July 31, 1996, and the most recent semi-annual report for the
six-month period ended January 31, 1997 have been previously sent to
shareholders and are available without charge upon request by calling the Fund
at (800) 762-6814.
Investors in the Portfolio will be asked to vote on the matters described
under Items 1a, 1b, 2, 3 and 4 at a meeting of the Portfolio's investors. By
voting in favor of these Items, Fund shareholders will be authorizing the Fund's
Trustees to vote in favor of those items at such meeting of the Portfolio's
investors.
BACKGROUND
The Fund is an index fund whose investment objective is to provide its
shareholders with long-term total return which corresponds to the total return
performance of the Domini 400 Social Index-SM-, an index comprised of stocks
selected according to social criteria. As discussed in the Fund's Prospectus,
the Fund is currently organized in a master/feeder structure, and does not
manage its own portfolio of securities, but invests all of its investable assets
in the Domini Social Index-SM- Portfolio, a separate registered management
investment company with the same investment objective and policies as the Fund.
The Portfolio currently employs as investment adviser, Kinder, Lydenberg, Domini
& Co., Inc. ("KLD"), which developed and maintains the Domini 400 Social
Index-SM-. The Portfolio also employs, as investment manager, Mellon Equity
Associates ("Mellon Equity"), to manage the investments of the Portfolio on a
day to day basis. KLD provides certain administrative services to the Fund and
the Portfolio, and in the case of the Portfolio, certain sponsorship services.
In addition to KLD and Mellon Equity, as more fully described in the Fund's
prospectus, a number of other entities provide services to the Portfolio and the
Fund, including Signature Broker-Dealer Services, Inc. ("Signature") as fund
administrator and distributor, Investors Bank & Trust Company as custodian, and
Fundamental Shareholder Services, Inc. as transfer agent.
As the Fund has experienced rapid growth in assets over the past few years,
the Trustees and officers of the Fund have increasingly felt that changes were
needed in the management of the Fund, and in particular, that a more centralized
management approach was needed. To that end, various approaches were explored,
and the principals of KLD, with the encouragement of the Trustees, have set up a
new management company, Domini Social Investments LLC ("DSI"), to provide this
centralized management function.
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Subject to the approval of the shareholders of the Fund, DSI will provide
this centralized management function by providing investment supervisory and
administrative services, as well as overall operational support to the Fund and
the Portfolio. These services will be provided pursuant to a management
agreement with the Portfolio, as more fully discussed in Item 1a below. It is
also proposed that Mellon Equity, as sub-manager, will continue to provide the
day to day portfolio management to the Portfolio as more fully described in Item
1b. DSI, through license arrangements with KLD, will have access to the Domini
400 Social Index-SM-, which KLD will continue to maintain. As more fully
described below, DSI will also enter into a Sponsorship Agreement with the Fund
pursuant to which it will provide the Fund with centralized administration and
operating services. No immediate changes are anticipated with respect to the
other service providers to the Fund, and therefore, it is not anticipated that
there will be any interruption in services to the Fund caused by the proposed
changes in management arrangements.
As required by the Investment Company Act of 1940, as amended (the "1940
Act") the management and submanagement agreements with DSI and Mellon Equity
must be approved by investors in the Portfolio, including the Fund. The proposal
in Item 2 below would permit the Trustees, subject to applying for and receiving
exemptive relief from the Securities and Exchange Commission, to hire one or
more new submanagers without seeking approval by the shareholders, although
shareholders would still be required to approve any changes in the Portfolio's
investment manager.
As part of the effort to centralize and simplify the Fund's management
structure, it is also proposed, in Item 4 below, that the Fund and the Portfolio
combine their respective Boards of Trustees into one combined Board.
The Fund's Trustees believe that this new management structure is in the
best interest of Fund shareholders, and recommend that the shareholders vote to
approve each of the items relating to the new structure. However, except for the
matters proposed in Items 1a and 1b, the implementation of which is contingent
upon approval of both Items 1a and 1b, the implementation of each proposal is
not contingent upon the approval of any other proposals. Thus, the Trustees
intend to implement the new Management Agreement with DSI and the Submanagement
Agreement with Mellon Equity, assuming approval of Items 1a and 1b, and
terminate the existing investment advisory agreement with KLD and the existing
management agreement with Mellon Equity, whether or not the shareholders approve
the other proposals in this proxy statement.
In addition to the matters discussed in this Proxy Statement for which a
shareholder vote is required, the Trustees of the Fund have implemented or
intend to implement other changes in the operations of the Fund in order to
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facilitate a more centralized management structure. In particular, the Trustees
have approved a sponsorship agreement between the Fund and DSI, pursuant to
which DSI provides the Fund with administrative services and management
functions (other than the provision of investment advice), and the termination
of the expense reimbursement arrangements between KLD and the Portfolio and
between Signature and the Fund. Currently, KLD serves as Sponsor of the
Portfolio under a sponsorship agreement (the "KLD Sponsorship Agreement")
pursuant to which KLD performs certain administrative services for the
Portfolio, and is obligated to pay all of the ordinary operating expenses of the
Portfolio (excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses) for which KLD receives a fee, equal on an annual basis
to 0.20% of the average daily net assets of the Portfolio for its then current
fiscal year. Pursuant to a letter agreement between KLD and Signature, Signature
is obligated to pay such operating expenses of the Portfolio. Similarly,
Signature is currently obligated to pay all of the ordinary operating expenses
of the Fund (including the Fund's share of the Portfolio's expenses, but
excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses) and with respect to such payment obligation, Signature
receives from the Fund a fee equal, on an annual basis, to 0.78% of the average
daily net assets of the Fund for its then current fiscal year pursuant to an
agreement with the Fund (the "Fund Expense Agreement"). In effect, such expense
payment arrangements have ensured that the annual ordinary operating expenses
for the Fund (excluding brokerage fees and commissions, interest, taxes and
other extraordinary expenses) would not exceed (or fall below) 0.98% of the
average daily net assets of the Fund. Both the Sponsorship Agreement between KLD
and the Portfolio and the Fund Expense Agreement between Signature and the Fund
terminate on December 31, 1999, unless sooner terminated by the mutual agreement
of the parties. In connection with the restructuring, Signature, KLD and the
Fund and the Portfolio intend to terminate these agreements, and the Fund
anticipates making a final payment to Signature of $550,000. SEE "CURRENT AND
PRO FORMA EXPENSE SUMMARY" below.
DSI has also informed the Board that it, or an affiliate, intends to become
qualified as a broker dealer and a transfer agent within the next year. In that
event, the Trustees of the Fund would consider appointing DSI, or such
affiliate, the distributor and/or transfer agent for the Fund. Such appointments
do not require shareholder approval.
The Trustees unanimously recommend that shareholders approve each of the
items. In making this recommendation, the Trustees' main consideration was the
potential effect on the shareholders resulting from the management
restructuring, including the new fee arrangements, which raise the fees which
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the Fund will be contractually obligated to pay after one year, thereby
potentially reducing the return to shareholders. The Trustees considered the
increased level of services and commitment which the Fund could expect from the
new arrangements, and how these would benefit shareholders, including DSI's
commitment to develop state of the art shareholder servicing, to expand the
availability of the Fund to retirement plan sponsors and to develop new socially
responsible investment products that would be available to the shareholders. The
Trustees also considered the level of expertise that DSI would bring to the
Fund, and the continuing commitment, through DSI, of certain principals who had
been involved with the Fund since its inception. In this regard, the Trustees
considered the alternatives available to the Fund, several of which had been
explored over the past year, including bringing in third parties to provide the
management function, and the benefits to be derived from the establishment of
the new entity, which would combine the continuing commitment of the founders of
the Fund with increased management focus and capability. With respect to the
potential fee increases, the Trustees reviewed the fees paid by other socially
and/or environmentally responsible mutual funds, and determined that the Fund's
aggregate advisory and administration fees, after the proposed restructuring,
would still be within the competitive range, and that for a period of one year
during which the reduction in fees would be in effect, the Fund's total expense
ratio was expected to be one of the lowest of those funds in its category. The
Trustees also considered the Fund's total operating expenses after the one year
period of fee reduction, and, based upon current expense levels of the Fund and
other funds in its category, the Trustees felt that it was reasonable to expect
that the Fund's fee levels would still be very competitive. In this regard, the
Trustees also considered the undertaking by DSI to consider voluntary fee
waivers, following the one year period, as necessary to assure that the Fund's
shareholders would continue to enjoy very competitive fee levels. Finally, the
Trustees explored the financial resources that would be available to DSI. As a
new entity, with no operating history, the Trustees reviewed projections of
anticipated revenues and operating expenses, and based upon these projections,
believed that it was reasonable to expect that DSI would have the assets
necessary to provide the Fund with the increased level of services proposed. A
more detailed discussion of the Board's considerations is set forth under Item
1a below.
In addition to the major items relating to the restructuring of the
management arrangements, shareholders are also being asked to approve amendments
to the Declaration of Trust of the Fund and the Portfolio to clarify the rights
of shareholders with respect to the election of Trustees.
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CURRENT AND PRO FORMA 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, under the expense structure prior to the management
restructuring and after the management restructuring, assuming that the
proposals in Items 1a and 1b are approved. The pro forma expenses are intended
to provide shareholders with information about the impact of the new management
arrangements upon Fund expenses for the one year period following the
restructuring, and assume the same expenses and level of assets as existed for
the Fund and the Portfolio during the fiscal year ended July 31, 1997. The pro
forma expenses are estimated and have not been audited.
<TABLE>
<CAPTION>
PRO FORMA EXPENSES
CURRENT EXPENSES (ONE YEAR PERIOD
(PRIOR TO FOLLOWING
MANAGEMENT MANAGEMENT
RESTRUCTURING) RESTRUCTURING)
------------------- ----------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES................. 0% 0%
ANNUAL OPERATING EXPENSES:
Advisory and Management Fees................... 0.125% 0.154%(1)
12b-1 Fees..................................... 0.120% 0.120%
Other Expenses
Administrative Services and Sponsorship
Fees....................................... 0.225% 0.423%(2)
Other Expenses............................... 0%(3) 0.283%
Expense Payment Fees......................... 0.510%(4) 0%
----- -----
Total Operating Expenses(5)...................... 0.980%(6) 0.980%(7)
----- -----
----- -----
Example:(8)
A shareholder of the Fund would pay the following
expense on a $1,000 investment in the Fund,
assuming (1) 5% annual return and (2) redemption
at the end of:
1 year....................................... $ 10 $ 10
3 years...................................... $ 31 $ 31
5 years...................................... $ 54 $ 54
10 years..................................... $ 120 $ 120
</TABLE>
- ------------------------------
(1) Under the proposed Management Agreement, DSI's fee for advisory and
administrative services to the Portfolio will be 0.20% of the average daily
net assets of the Portfolio, but will be reduced to the extent necessary to
keep the aggregate annual operating expenses of the Portfolio (excluding
brokerage fees and commissions, interest, taxes and other extraordinary
expenses) at no greater than .20% of the average daily net assets of the
Portfolio, for the one year period following effectiveness of the Agreement.
If the fee reduction were not in effect, Advisory and Management Fees for
the Portfolio would be .20% of the average daily net assets of the
Portfolio.
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(2) Under the Sponsorship Agreement between DSI and the Fund which will be
entered into as part of the management restructuring, DSI's fee for
administrative and sponsorship services will be 0.50% of the average daily
net assets of the Fund, but will be reduced to the extent necessary to keep
the aggregate annual operating expenses of the Fund (including the Fund's
share of the Portfolio's expense, but excluding, brokerage fees and
commissions, interest, taxes and other extraordinary expenses) at no greater
than .98% of the average daily net assets of the Fund, for the one year
period following effectiveness of the Sponsorship Agreement. If the fee
reduction were not in effect, administrative services and sponsorship fees
for the Fund would be .50% of the average daily net assets of the Fund.
(3) Pursuant to an expense payment arrangement between Signature and the Fund,
Signature currently pays all of the ordinary operating expenses of the Fund,
including the advisory, management, 12b-1 and administrative services fees.
Pursuant to the current Sponsorship Agreement between the Portfolio and KLD,
KLD pays the ordinary operating expenses of the Portfolio, except the
sponsorship fees, and excluding brokerage fees and commissions, interest,
taxes and other extraordinary expenses. KLD has entered into expense payment
arrangements with Signature pursuant to which Signature currently provides
these expense payment services to the Portfolio. As a result, the aggregate
annual ordinary operating expenses (including amortization of organization
expenses) of the Fund and the Portfolio are set at 0.98% of the average
daily net assets of the Fund. All of the advisory, 12b-1 and management fees
shown above are paid through these expense payment arrangements. During any
period, the amounts paid to Signature or KLD under the expense payment
arrangements may be greater or less than amounts actually paid by Signature
or KLD, as the case may be, under the arrangements during that period. These
expense payment arrangements are being terminated in connection with the
management restructuring.
(4) See footnote 3 above.
(5) Other Expenses and Total Operating Expenses do not reflect the anticipated
payment to Signature by the Fund of $550,000 in connection with termination
of the expense payment arrangements with Signature nor the expenses incurred
by the Fund in connection with the termination of such agreements with
Signature, which are considered to be extraordinary expenses. Had such
expenses been included, "Other Expenses" and "Total Operating Expenses"
would be 0.79% and 1.49% respectively of the average daily net assets of the
Fund, assuming the same level of assets and expenses of the Fund as existed
during the fiscal year ended July 31, 1997.
(6) See footnote 3 above.
(7) Without the automatic fee reductions, which expire in one year, it is
estimated that under the proposed management restructuring, the aggregate
annual operating expenses of the Fund (including the Fund's share of the
Portfolio's expenses) would be 1.103% of the average daily net assets of the
Fund, assuming the same level of assets and expenses of the Fund as existed
during the fiscal year ended July 31, 1997.
(8) Without the automatic fee reductions, which expire in one year, it is
estimated that under the proposed management restructuring, 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 1 year,
3 years, 5 years and 10 years respectively: 11, 34, 58 and 129.
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ITEM 1: NEW MANAGEMENT ARRANGEMENTS FOR THE FUND, AS FOLLOWS:
ITEM 1A: TO VOTE ON A MANAGEMENT AGREEMENT BETWEEN DOMINI SOCIAL
INVESTMENTS LLC ("DSI") AND DOMINI SOCIAL INDEX-SM- PORTFOLIO (THE
"PORTFOLIO"). SUBSTANTIALLY ALL OF THE FUND'S INVESTABLE ASSETS
ARE INVESTED IN THE PORTFOLIO.
ITEM 1B: TO VOTE ON A SUBMANAGEMENT AGREEMENT BETWEEN DSI AND MELLON EQUITY
ASSOCIATES.
ITEM 1A: A MANAGEMENT AGREEMENT BETWEEN THE
PORTFOLIO AND DOMINI SOCIAL INVESTMENTS LLC
APPOINTMENT OF DOMINI SOCIAL INVESTMENTS LLC AS MANAGER
Kinder, Lydenberg, Domini & Co., Inc. ("KLD") currently provides advice to
the Portfolio pursuant to an investment advisory agreement (the "KLD Advisory
Agreement") which provides that KLD, as Adviser, will determine the stock to be
included in the Domini 400 Social Index-SM- (the "Index") and will evaluate, in
accordance with KLD's social criteria, debt securities which may be purchased by
the Portfolio. If Item 1a is approved, the management of the Fund's assets will
be supervised by Domini Social Investments LLC ("DSI") a newly formed
Massachusetts limited liability company, pursuant to a management agreement
between the Portfolio and DSI (the "Proposed Management Agreement").
The creation of DSI, by current principals of KLD and certain other
investment company and marketing professionals, and the proposal to appoint DSI
as manager of the Portfolio, resulted from an effort on the part of the Trustees
and officers of the Fund and the Portfolio to provide the Fund and the Portfolio
with more centralized and efficient management services. Under the Proposed
Management Agreement, DSI will provide the Fund with both investment management
and administrative services, including the provision of general office
facilities and supervising the overall administration of the Fund. Upon the
effectiveness of the Proposed Management Agreement with DSI, the current
investment advisory agreement with KLD will terminate. KLD will continue to
determine and monitor the composition of the Index, and provide other services
relating to socially responsible investments pursuant to a license agreement
between DSI and KLD. It is anticipated that the establishment of DSI, and the
transfer of the Portfolio's management and administration to DSI, will permit
KLD to concentrate on its mission to provide services relating to socially
responsible investments. DSI, on the other hand, will be able to
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focus its energies and the experience of its principals on providing the
Portfolio and the Fund with professional fund management and, as supervisor of
the Portfolio's investments, will seek to ensure that securities holdings track
the composition and weightings of the securities comprising the Index maintained
by KLD.
The assets of the Portfolio have been managed on a day to day basis since
November 21, 1994 by Mellon Equity Associates ("Mellon Equity") pursuant to a
management agreement dated October 4, 1994 (the "Existing Mellon Agreement").
Concurrently with the proposal to appoint DSI as Manager, shareholders are also
being asked to approve a submanagement agreement (the "Submanagement Agreement")
between DSI and Mellon Equity as more fully set forth in Item 1b below. If Item
1b is approved, subject to the oversight of DSI, Mellon Equity will continue to
manage the day to day investment affairs of the Portfolio, resulting in
continuous and uninterrupted advisory services. Termination of the Existing
Mellon Agreement will be effective as of the time DSI assumes responsibility for
the management of the Portfolio's assets and upon the approval of the
Submanagement Agreement as further set forth in Item 1b below.
DESCRIPTION OF DSI
DSI is a newly formed Massachusetts limited liability company with offices
at 11 West 25th Street, 7th Floor, New York, New York 10010, and is registered
as an investment adviser under the Investment Advisers Act of 1940. DSI was
founded by the principals of KLD, and now includes other investment company and
marketing professionals, as more fully set forth below.
Amy L. Domini is the Manager and principal executive officer of DSI. Ms.
Domini specializes in working with individuals and institutions that wish to
integrate social or ethical criteria into their investment decisions. Ms. Domini
has been in the investment field for 19 years, co-authored a book on social
investing, ETHICAL INVESTING (Addison-Wesley, 1984) and is currently a trustee
of Loring, Wolcott & Coolidge, a firm of private trustees. Ms. Domini has served
as principal executive officer of KLD, the Portfolio's current investment
adviser, responsible for determining which stocks are to be included in the
Index. Ms. Domini also serves as Trustee of the Episcopal Church Pension Fund
and a member of the governing board of the Interfaith Center of Corporate
Responsibility. 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. Ms.
Domini is currently Chairman of the Board and President of the Fund, Chief
Executive Officer, Secretary, Treasurer and 51%
9
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owner of KLD, and a 21.25% owner of DSI. Ms. Domini's address is c/o Loring,
Wolcott & Coolidge, 230 Congress Street, Boston, MA 02110.
Peter D. Kinder is a lawyer by training, and practiced law for ten years in
both the public and private sectors. During that time, Mr. Kinder litigated
corporate responsibility issues in the contexts of the environment, charitable
trusts, consumer frauds, and energy supplies. Since then he has co-authored
INVESTING FOR GOOD (Harper Collins, 1993), THE SOCIAL INVESTMENT ALMANAC (Henry
Holt & Co., 1992), LAW AND BUSINESS (McGraw-Hill, 1990) and ETHICAL INVESTING
(Addison-Wesley, 1984) and contributed to three other books. He currently writes
a regular column for Business Ethics magazine. Mr. Kinder holds degrees from
Princeton University and Ohio State University. Mr. Kinder is currently Vice
President of the Fund, President and 19% owner of KLD, and a 21.25% owner of
DSI. Mr. Kinder's address is c/o Kinder, Lydenberg, Domini & Co., Inc., 129 Mt.
Auburn Street, Cambridge, MA 02138.
David P. Wieder is President and founder of Fundamental Shareholder
Services, Inc. ("FSSI"), a registered transfer agent specializing in assisting
financial services firms in the areas of shareholder servicing, marketing, and
technology. FSSI has served as the Fund's transfer agent since 1995. Through
FSSI, Mr. Wieder has provided advice to leading financial institutions, small-
and medium-sized mutual funds, and non-profit organizations. In addition to
founding FSSI in 1990, Mr. Wieder has been associated with the Fundamental
Family of Funds. He has also worked at LaSalle Economics, Inc. as an economic
analyst and American Express as a financial analyst. Mr. Wieder is also active
in the National Investment Company Service Association and the Investment
Company Institute, where he serves as a member of the Direct Marketing, Sales
Force Marketing and Operations Committees. Mr. Wieder holds a degree in
Economics from Cornell University. Mr. Wieder is a 21.25% owner of DSI. Mr.
Wieder's address is c/o Domini Social Investments LLC, 11 West 25th Street, 7th
Floor, New York, NY 10010.
Sigward M. Moser is President and a founder of Communication House
International, Inc., an international marketing firm specializing in cross
cultural and financial communications. Mr. Moser has provided advice to
governments, non-profit organizations and major European and American
corporations to develop communication and marketing programs. Mr. Moser has also
worked for international advertising agencies in the U.S. and in Europe. Mr.
Moser is also active in the Financial Communications Society, where he serves as
a member of the Board of Directors. Mr. Moser holds a degree in Advertising from
the University of Economics, Vienna, Austria. Mr. Moser is a 21.25% owner of
DSI. Mr. Moser's address is c/o Domini Social Investments LLC, 11 West 25th
Street, 7th Floor, New York, NY 10010.
10
<PAGE>
Steven D. Lydenberg is currently Vice President of the Fund, Director of
Research and 20% owner of KLD and 5% owner of DSI. He has been active in social
research since 1975. For twelve years he worked with the Council on Economic
Priorities, ultimately Director of Corporate Accountability Research. Mr.
Lydenberg has authored numerous publications on issues of corporate social
responsibility, including RATING AMERICA'S CORPORATE CONSCIENCE (Addison-Wesley,
1986), and co-authored INVESTING FOR GOOD AND THE SOCIAL INVESTMENT ALMANAC. Mr.
Lydenberg holds degrees from Columbia College and Cornell University. He is a
Chartered Financial Analyst (CFA). Mr. Lydenberg's address is c/o Kinder,
Lydenberg, Domini & Co., Inc., 129 Mt. Auburn Street, Cambridge, MA 02138.
James Earl Brooks of 4 Arlington Street, Cambridge, Massachusetts is also a
10% owner of KLD and DSI.
In addition to serving as Manager to the Portfolio if Item 1a is approved,
DSI also will serve as Sponsor of the Fund pursuant to a Sponsorship Agreement
approved by the Trustees of the Fund at a meeting held on June 30, 1997. As
Sponsor, DSI will provide overall administrative and operational support to the
Fund subject to the supervision of the Fund's Board of Trustees, including: (i)
maintaining office facilities and furnishing clerical services necessary for
maintaining the organization of the Fund and for performing administrative and
management functions; (ii) supervising the overall administration of the Fund,
including negotiation of contracts and fees with and the monitoring of
performance and billings of the Fund's transfer agent, distributor, shareholder
servicing agents, custodian and other independent contractors or agents; (iii)
overseeing the preparation of and, if applicable, filing all documents required
for compliance by the Fund with applicable laws and regulations, including
registration statements, prospectuses and statements of additional information,
semi-annual and annual reports to shareholders, proxy statements and tax
returns; (iv) preparing agendas and supporting documents for and minutes of
meetings of Trustees, committees of Trustees and shareholders; and (v) arranging
for maintenance of the books and records of the Fund. For its services under the
Sponsorship Agreement, DSI receives a fee equal, on an annual basis, to .50% of
the Fund's average daily net assets, except that for the first year of the
Agreement, the fee payable to DSI will be reduced by the amount, if any, by
which the total ordinary operating expenses of the Fund (including the Fund's
pro rata portion of the expenses of the Portfolio) exceed, on an annual basis,
.98% of the average daily net assets of the Fund for its current fiscal year.
"Domini" and "Domini Social Index" are service marks of KLD which are
licensed to DSI with the consent of Amy L. Domini. Pursuant to agreements among
DSI, Amy L. Domini and each of the Fund and the Portfolio, the
11
<PAGE>
Portfolio may be required to discontinue use of such service marks if DSI ceases
to be the Manager of the Portfolio or Amy L. Domini withdraws her consent, and
the Fund may be required to discontinue the use of such marks if DSI ceases to
be the Sponsor of the Fund or Amy L. Domini withdraws her consent or either DSI
ceases to be the Manager of the Portfolio or the Fund ceases to invest all of
its assets in the Portfolio.
The following summary of the Proposed Management Agreement is qualified in
its entirety by the provisions of the Proposed Management Agreement as set forth
in Appendix A hereto.
THE PROPOSED MANAGEMENT AGREEMENT
DESCRIPTION OF PROPOSED MANAGEMENT AGREEMENT. Under the Proposed Management
Agreement, DSI, as investment manager, will furnish continuously an investment
program for the Portfolio and will have authority to determine from time to time
what securities are purchased, sold or exchanged, and what portion of the assets
of the Portfolio is held uninvested, subject always to the restrictions of the
Portfolio's Declaration of Trust and By-laws, as each may be amended from time
to time, the provisions of the 1940 Act and the Fund's prospectus. DSI will also
make recommendations as to the manner in which proxies, voting rights, rights to
consent to corporate action and any other rights pertaining to portfolio
securities will be exercised; and will take all actions which DSI deems
necessary to implement Fund investment policies including the placement of all
orders for the purchase or sale of securities for the Portfolio's account with
the brokers or dealers selected by it, and instructing the custodian or any
subcustodian as to the settlement of such purchases or sales. In providing the
services and assuming the obligations under the Proposed Management Agreement,
DSI may employ, at its own expense, or may request that the Portfolio employ
(subject to the requirements of the 1940 Act) one or more subadvisers or
managers, provided that DSI shall supervise the activities of any subadviser or
submanager. If Item 1b is approved, DSI will appoint Mellon Equity to act as
submanager for the Portfolio.
Under the Proposed Management Agreement, DSI will also perform such
administrative and management services as may from time to time be reasonably
requested, including: (i) maintaining office facilities and furnishing clerical
services necessary for maintaining the organization of the Portfolio and for
performing administrative and management functions; (ii) supervising the overall
administration of the Portfolio, including negotiation of contracts and fees
with and the monitoring of performance and billings of the Portfolio's transfer
agent, shareholder servicing agents, custodian and other independent contractors
or agents; (iii) overseeing (with advice of the Portfolio's counsel)
12
<PAGE>
the preparation of and, if applicable, filing all documents required for
compliance by the Portfolio with applicable laws and regulations, including
registration statements, prospectuses and statements of additional information,
semi-annual and annual reports to shareholders, proxy statements and tax
returns; (iv) preparing agendas and supporting documents for and minutes of
meetings of Trustees, committees of Trustees and shareholders; and (v) arranging
for maintenance of the books and records of the Portfolio. In providing the
administration services under the Proposed Management Agreement, DSI may employ,
at its own expense, one or more entities to perform its obligations under the
Agreement, provided that DSI shall supervise the activities of any such entity.
The Proposed Management Agreement, if approved by a Majority Shareholder
Vote (as defined hereafter) of the Portfolio's investors, will become effective
on the effective date of the proposed management restructuring, and will
continue in effect for a two-year period, and thereafter from year to year,
subject to approval annually in accordance with the 1940 Act. The Proposed
Management Agreement may be terminated at any time without the payment of any
penalty by the Portfolio's Board of Trustees or by Majority Shareholder Vote of
the Portfolio's investors, or by DSI, in each case on not more than 60 days' nor
less than 30 days' written notice to the other party. The Proposed Management
Agreement will also terminate automatically in the event of its "assignment" (as
defined in the 1940 Act).
Under the Proposed Management Agreement, as under the KLD Advisory Agreement
and Existing Mellon Agreement, DSI will not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which the Proposed Management Agreement relates, except a loss
resulting from DSI's willful misfeasance, or its bad faith or gross negligence
in the performance of its obligations and duties, or by reason of DSI's reckless
disregard of its obligations and duties under such agreement. The Proposed
Management Agreement, like the KLD Advisory Agreement and Existing Mellon
Agreement, provides that the Manager may render services to others.
DESCRIPTION OF CURRENT AGREEMENTS. Pursuant to the KLD Advisory Agreement
currently in effect, KLD furnishes continuously an investment program by
determining the stocks to be included in the Index and evaluating, in accordance
with KLD's social criteria, debt securities which may be purchased by the
Portfolio, subject always to the restrictions of the Portfolio's Declaration of
Trust and By-laws, as each may be amended from time to time, the provisions of
the 1940 Act and the Fund's prospectus, and provides, at its own expense, all
facilities and personnel necessary in connection with providing these services.
KLD also makes recommendations as to the manner in
13
<PAGE>
which voting rights, rights to consent to corporate action and any other rights
pertaining to the securities held by the Portfolio should be exercised. KLD is
not responsible, however, for providing advice as to the investment merits of
particular securities or as to the purchase or sale of securities. The KLD
Advisory Agreement continues in effect if such continuance is specifically
approved at least annually by the Portfolio's Board of Trustees or by a majority
of the outstanding voting securities of the Portfolio at a meeting called for
the purpose of voting on the KLD Advisory Agreement (with the vote of each
investor in the Portfolio being in proportion to the amount of its interests in
the Portfolio), and, in either case, by a majority of a Portfolio's Trustees who
are not parties to the KLD Advisory Agreement or interested persons of any such
party at a meeting called for the purpose of voting on the KLD Advisory
Agreement. The KLD Advisory Agreement is dated May 1, 1990, and was approved by
a Majority Shareholder Vote of the Fund and the Portfolio on December 3, 1991,
and amended by the Trustees to decrease the fees payable thereunder on October
4, 1996.
The Existing Mellon Agreement provides that Mellon Equity shall act as
investment manager to the Portfolio and as such, shall manage the assets of the
Portfolio on a daily basis, subject always to the restrictions of the
Portfolio's Declaration of Trust, By-laws and then current registration
statement. In particular, Mellon Equity takes all actions to implement the
investment policies of the Portfolio, and in particular, places all orders for
the purchase or sale of securities for the Portfolio with brokers or dealers
selected by it and gives instructions to the custodian or subcustodian with
respect to the settlement of such purchases and sales. Mellon Equity provides,
at its own expense, all facilities and personnel necessary in connection with
providing these services. The Existing Mellon Agreement continues in effect if
such continuance is specifically approved at least annually by the Portfolio's
Board of Trustees or by a majority of the outstanding voting securities of the
Portfolio at a meeting called for the purpose of voting on the Existing Mellon
Agreement (with the vote of each investor in the Portfolio being in proportion
to the amount of its interests in the Portfolio), and, in either case, by a
majority of a Portfolio's Trustees who are not parties to the Existing Mellon
Agreement or interested persons of any such party at a meeting called for the
purpose of voting on the Agreement. Further information with respect to the
Existing Mellon Agreement is included under Item 1b.
FEES UNDER THE PROPOSED AND EXISTING AGREEMENTS. Under the Proposed
Management Agreement, the Portfolio will pay to DSI for the services to be
rendered and facilities to be provided, a fee accrued daily and payable monthly
at an annual rate equal to .20% of the Portfolio's average daily net assets for
the then current fiscal year. However, the Proposed Management Agreement also
provides that for a period of one year, this fee will be reduced to the
14
<PAGE>
extent necessary to keep the Portfolio's annual operating expenses (excluding
amounts payable under the Proposed Management Agreement, and brokerage fees and
commissions, interest, taxes, and any other extraordinary expenses of the
Portfolio) at no more than .20% of the Portfolio's average daily net assets for
the then current year. Shareholders should consult the "CURRENT AND PRO FORMA
EXPENSE SUMMARY" above for a description of the Fund's expenses, which includes
expenses in addition to the Portfolio's expenses.
Under the current KLD Advisory Agreement, the fees payable to KLD are equal
to .025% of the Portfolio's average daily net assets for the then current fiscal
year, under the Existing Mellon Agreement, the fees payable to Mellon Equity are
equal to .10% of the Portfolio's average daily net assets for the then current
fiscal year, and under the KLD Sponsorship Agreement, the fees payable to KLD
for administrative services are equal to .025% of the Portfolio's average daily
net assets for the then current fiscal year, bringing aggregate investment
management and administration fees under the current agreements to .15% of the
Portfolio's average daily net assets for its then current fiscal year. These
fees reflect amendments to the current KLD Advisory Agreement and the Existing
Mellon Agreement effective as of October 4, 1996 which reduced the fees payable
under those agreements. Prior to October 4, 1996, under the current KLD Advisory
Agreement, the fees payable to KLD were equal to .05% of the Portfolio's average
daily net assets for the then current fiscal year and under the Existing Mellon
Agreement, the fees payable to Mellon Equity were on an annual basis equal 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 fiscal year ended
July 31, 1997 the Portfolio incurred advisory fees under the KLD Advisory
Agreement of $46,528 and management fees under the Existing Mellon Agreement of
$182,885. In addition, for the fiscal year ended July 31, 1997, the Portfolio
incurred $46,528 in administrative fees. As a result, total fees for investment
management, advisory and administrative services for the Portfolio were $275,941
for the fiscal year ended July 31, 1997. Had the Proposed Management Agreement
been in effect for that period, the Portfolio would have incurred $257,154 in
fees for investment management, advisory and administrative services, reflecting
the fee reduction provision which will be in effect for a one year period
following the effectiveness of the Agreement. Had the Proposed Management
Agreement been in effect for the fiscal year ended July 31, 1997, and assuming
expiration of the fee reduction provision, the Portfolio would have incurred
$333,927 in fees for investment management, advisory and administrative
services.
15
<PAGE>
Currently, under the KLD Sponsorship Agreement with the Portfolio, KLD is
obligated to pay all of the Portfolio's annual operating expenses (excluding
amounts payable under the KLD Sponsorship Agreement, and brokerage fees and
commissions, interest, taxes, and any other extraordinary expenses of the
Portfolio) and in return receives a fee payable monthly at an annual rate equal
to .20% of the Portfolio's average daily net assets for the then current fiscal
year. The existing KLD Sponsorship Agreement has the effect of ensuring that the
Portfolio's ordinary expenses are maintained at a certain level. The KLD
Sponsorship Agreement will be terminated as part of the management
restructuring. However, for a period of one year the Proposed Management
Agreement will provide for a reduction in the fee payable to DSI to the extent
necessary to maintain ordinary expenses at that same level.
Except for the fee to be paid thereunder, the terms and conditions of the
Proposed Management Agreement relating to investment management services are not
substantially different from the terms and conditions of the KLD Advisory
Agreement and the Existing Mellon Agreement, and those terms and conditions
relating to administrative services are not substantially different from the
terms and conditions relating to the provision of administrative services in the
existing Sponsorship Agreement between KLD and the Portfolio.
CONSIDERATION OF THE BOARD OF TRUSTEES
THE BOARD'S RECOMMENDATION. The Trustees of the Portfolio and the Fund were
first introduced to the DSI proposal to centralize management at meetings of the
Boards held on April 14, 1997, and further considered the proposal at meetings
held on June 13, 1997 and June 30, 1997. In addition, the members of the Boards
who are not "interested persons" of the Portfolio and the Fund (referred to
hereafter as the "Independent Trustees") conferred with outside counsel to such
Independent Trustees on June 13, June 19, and June 30, 1997. At the meeting held
on June 30, 1997, the Trustees of the Portfolio, including all of the
Independent Trustees, approved the Proposed Management Agreement with DSI,
subject to approval of the investors in the Portfolio, including the Fund.
THE BOARD'S RESPONSIBILITIES. In determining whether to approve the
Proposed Management Agreement, the Trustees, assisted by outside counsel,
analyzed the proposal in light of their fiduciary duties as Trustees in order to
determine whether the appointment of DSI and the potential increase in fees was
in the best interests of the Portfolio's investors. Outside counsel to the
Independent Trustees assisted in preparing an analysis of the Trustees'
fiduciary duties in connection with their review and approval of the Proposed
16
<PAGE>
Management Agreement. In addition to advising the Independent Trustees about
their fiduciary duties, counsel assisted the Independent Trustees in analyzing
the issues presented in connection with the appointment of a newly created
management company without an operating history, and worked with the Independent
Trustees in requesting information from DSI with respect to its proposal. In
addition, counsel assisted the Independent Trustees in analyzing the proposed
fee increase and in evaluating the potential effects of the increase on the
Portfolio and its investors.
DSI'S PRESENTATION TO THE BOARD. In presenting the proposed management
arrangements, current principals of KLD described the existing management
structure and how it had evolved from the start-up stages of the Portfolio and
the Fund, and the present need for a new, more focused management system. In
particular, Ms. Domini explained how the resources and facilities of KLD had
been strained by the demands resulting from the rapid growth of the Fund and the
increasing number of investor inquiries. For example, the Trustees were provided
with statistics indicating that the number of investor calls had increased from
approximately 2,600 calls during the five-month period ending May 1996 to over
7,300 calls for the same period ending May, 1997. The Trustees were informed
that KLD, as primarily a provider of social research, did not have the expertise
in fund management to provide the Portfolio and the Fund with the leadership
required by the growth in assets, nor the expertise or personnel to provide the
Fund with marketing initiatives. DSI also informed the Board that it would
employ experienced compliance personnel, and that it intended to expand its
operations to be able to provide, in the near future, full service fund
administration, as well as distributorship and shareholder servicing functions.
The Trustees were presented with materials showing the anticipated lines of
authority, stemming from the Trustees, who would continue to maintain overall
supervisory responsibility for the Portfolio and the Fund, to the Manager, which
would provide more direct supervision of the other service providers.
The Trustees were also presented with materials on the principals of DSI,
their backgrounds, and information with respect to the businesses with which
they are currently associated, with particular attention to those principals who
were not also associated with KLD. In this regard, it was noted that Mr. Wieder,
a principal of DSI, had over a two year relationship with the Fund as the
founder and President of Fundamental Shareholder Services, Inc., the present
transfer agent for the Fund. It was also noted that Mr. Moser, another principal
of DSI, had particular expertise in marketing financial products. In addition,
the Trustees were informed of the long-standing commitment to social issues of
the DSI principals.
17
<PAGE>
The Trustees also received information on the projected financial resources
of DSI, and the potential ability of DSI to provide the services for which it
would be responsible. The Trustees were presented with a three year business
plan, as well as projections of revenues and expenses.
COMPARATIVE ADVISORY AND ADMINISTRATION FEES. In considering the fees under
the Proposed Management Agreement, the Trustees also considered the fees under
the proposed Sponsorship Agreement between DSI and the Fund, pursuant to which
DSI would receive an annual fee equal to .50% of the Fund's average daily net
assets. The combined fees under the two agreements result in an aggregate annual
fee for investment management and administration services of .70% of the Fund's
average daily net assets. The Trustees were presented with comparative data with
respect to the expense ratios and advisory/administration expenses of other
funds committed to socially responsible investments. Using as a source LIPPER'S
DIRECTORS' AND ANALYTICAL DATA, FIRST EDITION, 1997, DSI demonstrated that the
proposed advisory/administration fee for the Fund at an annual rate of .70% of
average net assets was within the range of advisory/ administration fees for
other socially and environmentally responsible funds. Such fees ranged from
0.515% to 1.350% of average net assets. DSI also demonstrated that the proposed
total expense ratio of 0.98% of net assets which would be in place for the one
year period following the effectiveness of the Proposed Management Agreement was
one of the lowest total expense ratios for socially and environmentally
responsible funds in the Lipper data base.
THE BOARD'S CONSIDERATION OF THE FEE INCREASE AND OTHER EXPENSES. The
Trustees requested, and DSI provided, information to assist the Trustees in
their consideration of the proposed fee increase, including information and
reports relating to the Fund's current and proposed fee structures, the Fund's
expenses, and the anticipated expenses and profitability of DSI. The Board
acknowledged that the fees currently payable to KLD for its role in preparing
and maintaining the Index and providing administrative and sponsorship services
to the Portfolio and the Fund were not sufficient to enable KLD to provide the
kind of management services needed by the Portfolio and the Fund. The Board also
took into consideration DSI's expressed commitment to keeping the overall fees
of the Portfolio and the Fund competitive with other funds in its class, and the
understanding therefore, that DSI might waive, on a voluntary basis, fees in the
future. The Trustees also considered the anticipated benefits to the Portfolio
and the Fund and the Fund's shareholders in having DSI, with its commitment to
socially responsible investing, to act as manager of the Portfolio and the Fund.
On the basis of this information and other information obtained and reviewed by
the Trustees, including all of the Independent Trustees, the Trustees determined
that the proposed increase in
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<PAGE>
management fees was reasonable in light of the services to be provided and would
result in benefits to the Shareholders.
In recommending the restructuring to the Shareholders, the Trustees also
considered the one-time payment to Signature in connection with the termination
of the current expense payment arrangements and the associated expenses, and
determined that the benefits associated with the termination outweighed the
costs involved.
THE MAXIMUM FEE PAYABLE UNDER THE PROPOSED MANAGEMENT AGREEMENT IS GREATER
THAN THE FEE CURRENTLY PAYABLE BY THE PORTFOLIO FOR ADVISORY, MANAGEMENT AND
ADMINISTRATIVE SERVICES. HOWEVER, FOR A PERIOD OF ONE YEAR, THE PROPOSED
MANAGEMENT AGREEMENT PROVIDES FOR A REDUCTION IN MANAGEMENT FEES TO THE EXTENT
NECESSARY TO MAINTAIN THE FUND'S ORDINARY OPERATING EXPENSES AT CURRENT LEVELS.
ABSENT FEE WAIVERS, THE FUND'S ORDINARY OPERATING EXPENSES ARE LIKELY TO
INCREASE AS A RESULT OF THE APPROVAL OF ITEM 1A AFTER ONE YEAR ASSUMING CURRENT
LEVELS OF FUND ASSETS. IN ADDITION, DUE TO THE TERMINATION OF EXPENSE
REIMBURSEMENT ARRANGEMENTS WITH RESPECT TO THE PORTFOLIO AND THE FUND IN
CONNECTION WITH THE MANAGEMENT RESTRUCTURING, AND THE FEES PAYABLE UNDER THE
SPONSORSHIP AGREEMENT BETWEEN THE FUND AND DSI, THE NEW CONTRACTUAL ARRANGEMENTS
WILL LIKELY, AFTER THE FIRST YEAR OF OPERATION, RESULT IN AN INCREASE IN THE
ORDINARY OPERATING EXPENSES OF THE FUND.
As noted above, the Proposed Management Agreement must be approved by a
majority of the outstanding interests of the Portfolio. This requires approval
by the holders of 67% or more of the outstanding interests in the Portfolio
which are present at the meeting of the investors of the Portfolio held for that
purpose, if the holders of more than 50% of such shares are present in person or
by proxy, or more than 50% of the outstanding interests in Portfolio, whichever
is less (a "Majority Shareholder Vote"). The Fund will cast all the Fund's votes
with respect to the Proposed Management Agreement in the same proportion as the
votes of the Fund's shareholders cast at the Meeting of the Fund's shareholders
on this Item 1a. The percentage of the Fund's votes representing Fund
shareholders not voting at the Meeting will be voted by the Fund in the same
proportion as those cast by Fund shareholders who do, in fact, vote.
If the proposal does not receive the requisite shareholder approvals, then
(a) the Proposed Management Agreement would not become effective, (b) the
existing contractual arrangements would continue, and (c) the Trustees of the
Fund will meet to consider possible alternatives, which might include
resubmission of the Proposed Management Agreement for approval or withdrawal of
the assets of the Fund from the Portfolio.
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THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR APPROVAL OF THE PROPOSED MANAGEMENT AGREEMENT.
In so doing, they have acted in what they believe to be the best interests of
the shareholders of the Fund.
ITEM 1B: TO VOTE ON A SUBMANAGEMENT AGREEMENT BETWEEN DOMINI SOCIAL
INVESTMENTS LLC AND MELLON EQUITY ASSOCIATES
Mellon Equity has served as the investment manager of the Portfolio since
November 21, 1994 pursuant to the terms of the Investment Management Agreement
dated October 5, 1994 and amended by the Trustees to decrease the fees payable
thereunder on October 4, 1996 (the "Existing Mellon Agreement"). The Existing
Mellon Agreement was approved by Majority Shareholder Vote of the shareholders
of the Fund and the interests in the Portfolio at a meeting of shareholders held
on January 25, 1995. The termination of the Existing Mellon Agreement and the
appointment of Mellon Equity as Submanager of the Portfolio is part of the
effort to provide the Fund and the Portfolio with centralized management. Under
the proposed new management arrangements, DSI will have overall supervisory
authority over the investment of the Portfolio's assets, while Mellon Equity
will continue to manage the assets on a day to day basis pursuant to an
investment submanagement agreement (the "Submanagement Agreement") between DSI
and Mellon (the "Submanager"). A copy of the Submanagement Agreement is attached
hereto as Appendix B.
Termination of the Existing Mellon Agreement and the appointment of Mellon
Equity as Submanager will become effective when DSI assumes responsibility for
the management of the Portfolio's assets and is contingent upon approval of Item
1a. The appointment of Mellon Equity as Submanager is expected to provide the
Portfolio with continuing effective and capable investment management services.
As Submanager, Mellon Equity manages the assets of the Portfolio on a day to day
basis. Mellon Equity does not determine the composition of the Index; rather,
Mellon's function is to ensure that the Portfolio's securities holdings track
the composition and weightings of the securities comprising the Index.
MELLON EQUITY ASSOCIATES
Mellon Equity is a Pennsylvania business trust founded in 1987, which is
beneficially owned by Mellon Bank, N.A. (99% beneficial interest) and MMIP (1%
beneficial interest), a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon Bank"). Mellon Equity is a professional investment counseling firm that
provides investment management services to the equity and balanced
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<PAGE>
pension, public fund, and profit-sharing investment management markets, and is a
registered investment adviser under the Advisers Act. As of December 31, 1996,
Mellon Equity had discretionary management authority with respect to
approximately $11.3 billion of assets. Mellon's predecessor organization managed
domestic equity, tax-exempt and institutional pension accounts since 1947. The
address of Mellon Equity and each of the principal executive officers and
directors of Mellon Equity is 500 Grant Street, Suite 3700, Pittsburgh,
Pennsylvania 15258.
John O'Toole, Senior Vice President and Portfolio Manager for Mellon Equity,
is primarily responsible for providing investment management services to the
Portfolio on behalf of Mellon Equity. Mr. O'Toole has been involved in the
development and evolution of the investment process since its inception in 1982,
and has managed portfolios utilizing a quantitative approach since the inception
of the process. Mr. O'Toole joined Mellon Bank as a portfolio manager in 1979
and has had extensive experience in portfolio management and quantitative
applications. Prior to joining Mellon Equity in April 1990, Mr. O'Toole was a
Vice President/Senior Portfolio Manager with the Mellon Private Capital
Management Group of Mellon Bank's Trust and Investment Department.
Mr. O'Toole is a Chartered Financial Analyst and is a member of the
Association for Investment Management and Research, and is past president and a
former board member of the Pittsburgh Society of Financial Analysts. He has also
participated in AIMR's Performance Presentation Standards implementation process
as a member of the sub-committee for After-Tax Reporting. He graduated from the
University of Chicago with an MBA, concentrating in Finance, and received his
Bachelor's Degree in Economics from the University of Pennsylvania.
The names and principal occupations of the principal executive officers and
trustees of Mellon Equity are shown on the table below.
<TABLE>
<CAPTION>
NAME POSITION PRINCIPAL OCCUPATION
- ------------------------------- ------------------------- ------------------------
<S> <C> <C>
W. Keith Smith Trustee Director & Vice Chairman
Ronald Philip O'Hanley Trustee and Chairman Senior Vice President
Christopher Mark Condron Trustee Vice Chairman
James Milton Gockley Trustee Chief Legal Counsel
Joan Green Treasurer Finance
William P. Rydell President and Chief President
Executive Officer
Robert A. Wilk Senior Vice President Portfolio Manager
John R. O'Toole Senior Vice President Portfolio Manager
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION PRINCIPAL OCCUPATION
- ------------------------------- ------------------------- ------------------------
Steven A. Falci Senior Vice President Portfolio Manager
<S> <C> <C>
Ronald P. Gala Senior Vice President Portfolio Manager
Kenneth A. Barker Senior Vice President Director-Quantitative
Analysis & Systems
James E. Foster Senior Vice President Director-Marketing &
Sales
Patricia K. Nichols Senior Vice President Finance & Administration
John W. Keller Senior Vice President Director of Equity
Trading
John J. Dagenhard Senior Vice President Director of Client
Service
</TABLE>
In addition to serving as Submanager to the Portfolio, Mellon Equity also
serves as investment adviser to other investment companies with similar
investment objective as set forth in Appendix C hereto.
DESCRIPTION OF THE PROPOSED SUBMANAGEMENT AGREEMENT
The Submanager manages the assets of the Portfolio pursuant to the
Submanagement Agreement. Under the 1940 Act and regulations thereunder, the
Submanagement Agreement must be approved by a Majority Shareholder Vote of the
Portfolio. The following summary of the Submanagement Agreement is qualified in
its entirety by the provisions of the Submanagement Agreement as set forth in
Appendix B hereto.
Subject to such policies as the Board of Trustees of the Portfolio and DSI,
as Manager, may determine, the Submanager provides the Portfolio with such
investment advice and supervision as the latter may from time to time consider
necessary for the proper supervision of its investment assets. The Submanager
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio. The Submanagement Agreement will continue in
effect if such continuance is specifically approved at least annually by (i) the
Portfolio's Board of Trustees or (ii) the other investors in the Portfolio (with
the vote of each Portfolio investor being cast in proportion to the amount of
its investment in the Portfolio) and, in either case, by a majority vote of the
Portfolio's Independent Trustees who are not interested persons of the Portfolio
or Mellon Equity at a meeting called for the purpose of voting on the
Submanagement Agreement.
The Submanagement Agreement provides that the Submanager may render services
to others. The Submanagement Agreement is terminable without penalty on no more
than 60 days' nor less than 30 days' written notice
22
<PAGE>
when authorized by majority vote of the investors in the Portfolio (with the
vote of each Portfolio investor being cast in proportion of the amount of its
investment in the Portfolio) or by the Trustees of the Portfolio, or by the
Manager with the consent of the Trustees and may be terminated by the Submanager
on not less than 90 days' written notice to the Manager and the Trustees, and
will automatically terminate in the event of its assignment. The Submanagement
Agreement provides that the Submanager shall not be liable for any error of
judgment or for any act or omission in the execution of securities transactions
for the Portfolio, except for willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties under the Submanagement
Agreement.
The terms and conditions of the Submanagement Agreement are not
substantially different from the terms and conditions of the Existing Mellon
Agreement between the Portfolio and Mellon Equity except for the supervisory
role given to the Manager in the Submanagement Agreement. In particular, the
Submanager is required to notify the Manager in advance of the Submanager's
intention to purchase any securities except insofar as the requirement for such
notification may be waived or limited by the Manger, it being understood that
the Submanager shall be responsible for compliance with any restrictions imposed
in writing by the Manager from time to time in order to facilitate compliance
with the Portfolio's investment restrictions and such other restrictions as the
Manager may determine. Further, the Manager or the Trustees of the Portfolio may
at any time, upon written notice to the Submanager, suspend or restrict the
right of the Submanager to determine what securities shall be purchased or sold
on behalf of the Portfolio and what portion if any, of the assets of the
Portfolio allocated by the Manager to the Submanager shall be held uninvested.
In addition, the fees payable to Mellon Equity under the Submanagement
Agreement are payable by DSI and not the Portfolio. Finally, the termination
provisions provide that the Manager may, with the consent of the Portfolio's
Trustees, terminate the Submanagement Agreement, and Mellon Equity must give 90
days notice of its intent to terminate the Agreement.
Under the Submanagement Agreement, DSI will pay Mellon Equity an investment
submanagement fee equal on an annual basis to 0.10% of the Portfolio's average
daily net assets. This fee is the same as the fee Mellon Equity currently
receives under the Existing Mellon Agreement. For the fiscal year ended July 31,
1997, Mellon Equity was paid an investment management fee of $182,885. Further
information with respect to the Submanagement Agreement is given under Item 1a
above.
23
<PAGE>
CONSIDERATION OF THE BOARD OF TRUSTEES
The Trustees considered the Submanagement Agreement in connection with their
consideration of the new management structure as more fully set forth under Item
1a. In approving the Submanagement Agreement, the Trustees of the Fund and
Portfolio considered in particular the performance of Mellon Equity under the
Existing Mellon Agreement and gave considerable weight to the desire not to
interrupt the provision of day-to-day services to the Fund that Mellon Equity
has been providing. The Trustees also considered the experience and reputation
of Mellon Equity; its capabilities with respect to compliance and control; and
the fees payable under the Submanagement Agreement in relation to the fees
payable under the Existing Mellon Agreement and the fees payable by other
investment companies with similar levels of assets.
As noted above, the Submanagement Agreement must be approved by a Majority
Shareholder Vote of the outstanding interests in the Portfolio. The Fund will
cast all the Fund's votes with respect to the Submanagement Agreement in the
same proportion as the votes of the Fund's shareholders cast at the Meeting on
this Item 1b. The percentage of the Fund's votes representing Fund shareholders
not voting at the Meeting will be voted by the Fund in the same proportion as
those cast by Fund shareholders who do, in fact, vote.
If the proposal does not receive the requisite shareholder approvals, then
(a) neither the Proposed Management Agreement with DSI nor the Submanagement
Agreement with Mellon Equity would become effective, (b) the existing
contractual arrangements would continue, and (c) the Trustees of the Fund will
meet to consider possible alternatives, which might include resubmission of the
Submanagement Agreement for approval or withdrawal of the assets of the Fund
from the Portfolio.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR APPROVAL OF THE SUBMANAGEMENT AGREEMENT. In so
doing, they have acted in what they believe to be the best interests of the
shareholders of the Fund.
ITEM 2: AUTHORIZING THE TRUSTEES TO SELECT AND
CHANGE THE INVESTMENT SUBMANAGER AND ENTER INTO
SUBMANAGEMENT AGREEMENTS WITHOUT OBTAINING THE
APPROVAL OF SHAREHOLDERS.
As discussed above, DSI will employ a submanager to perform the daily
management of the Portfolio's portfolio of securities. DSI will monitor and
supervise the activities of the submanager and may terminate the services of a
24
<PAGE>
submanager at any time. However, retaining the services of a new submanager
currently requires shareholder approval.
The 1940 Act requires that all contracts pursuant to which persons serve as
investment advisers to investment companies be approved by its shareholders.
This requirement would apply to the appointment of a new or replacement
submanager to the Portfolio. The Securities and Exchange Commission (the "SEC")
has recently granted exemptive relief from the requirement to several other
investment companies, subject to certain conditions designed to provide
protection to the interests of shareholders. Although neither the Fund nor the
Portfolio has any current intention to recommend a change in submanager or the
appointment of an additional submanager, the Fund and the Portfolio may in the
future apply for such an exemption, and if it is granted and this proposed Item
2 is approved, the Board of Trustees would be able, without further shareholder
approval, to appoint additional or replacement submanagers. The Trustees would
not, however, replace DSI as Manager without complying with the 1940 Act and
applicable regulations governing shareholder approval of advisory contracts.
This Item 2 is intended to facilitate the efficient supervision and
management of the submanager by DSI and the Trustees. DSI will continuously
monitor the performance of the submanager and may from time to time recommend
that the Board of Trustees replace the submanager or appoint additional
submanagers, depending upon DSI's assessment of what submanager or submanagers
would optimize the Fund's chances of achieving its investment objective. As
noted above, DSI has no current plans to recommend the selection of an
additional submanager or a replacement submanager to replace Mellon Equity, both
of which would currently require shareholder approval. However, if the Fund and
the Portfolio were to apply for and the SEC were to grant the exemptive relief
and shareholders were to approve this proposed Item 2, the Trustees would no
longer be required to call a Fund shareholder meeting each time a new submanager
is appointed. There can be no assurance that the SEC would grant the requested
exemptive relief.
Shareholder meetings entail substantial costs which could diminish the
benefits of the proposed submanager arrangement. These costs must be weighed
against the benefits of shareholder scrutiny of proposed contracts with
additional or replacement submanagers. However, even in the absence of
shareholder approval, any proposal to add or replace submanagers would receive
careful review. First, DSI would assess the Fund's needs and, it if believed
additional or replacement submanagers could benefit the Fund, would seek out an
available submanager. Second, any recommendations made by DSI would have to be
approved by a majority of the Trustees, including a majority of the Independent
Trustees. In selecting any new or replacement
25
<PAGE>
submanager, the Trustees are required to determine than an investment
submanagement agreement with the submanager is reasonable, fair and in the best
interests of the Fund and its shareholders, and that the fees provided in the
agreement are fair and reasonable in light of the usual and customary charges
made by others for services of the same nature and quality. Finally, any further
appointments of additional or replacement submanagers would have to comply with
any conditions contained in the SEC exemptive order, if such order is granted.
The Trustees believe that the proposed authority to select and change
investment submanagers and enter into investment submanagement agreements
without obtaining the approval of shareholders is in the best interests of the
shareholders of the Fund.
VOTE REQUIRED
The proposed must be approved by a Majority Shareholder Vote of the
outstanding interests in the Portfolio. The Fund will cast all the Fund's votes
with respect to this proposal in the same proportion as the votes of the Fund's
shareholders cast at the Meeting on this Item 2. The percentage of the Fund's
votes representing Fund shareholders not voting at the Meeting will be voted by
the Fund in the same proportion as those cast by Fund shareholders who do, in
fact, vote.
THE BOARD OF TRUSTEES OF THE FUNDS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR AUTHORIZING THE TRUSTEES TO SELECT AND CHANGE
INVESTMENT SUBMANAGERS AND ENTER INTO INVESTMENT SUBMANAGEMENT AGREEMENTS
WITHOUT OBTAINING THE APPROVAL OF SHAREHOLDERS.
ITEM 3: AMENDMENT THE DECLARATION OF TRUST OF THE PORTFOLIO AND THE DECLARATION
OF TRUST OF THE FUND TO CLARIFY VOTING PROVISIONS WITH RESPECT TO THE ELECTION
OF TRUSTEES BY SHAREHOLDERS.
The Board of Trustees of the Portfolio has approved, and recommends that
investors in the Portfolio approve, a proposal to amend certain provisions of
the Amended and Restated Declaration of Trust of the Portfolio dated as of
October 11, 1989 (the "Portfolio's Declaration of Trust") to clarify that
investors may, under certain circumstances, elect Trustees of the Portfolio.
Similarly, the Board of Trustees of the Fund has approved, and recommends that
shareholders of the Fund approve, a proposal to amend certain provisions of the
Amended and Restated Declaration of Trust of the Fund dated as of March 1, 1990
(the "Fund's Declaration of Trust"), to also clarify that the shareholders of
the Fund may, under certain circumstances, elect Trustees of the Fund.
26
<PAGE>
The Portfolio's Declaration of Trust currently provides, in Section 2.2 of
Article II, that beginning with the Trustees elected at the first meeting of
investors, each Trustee holds office until the termination of the Portfolio
unless the Trustee resigns or is removed as otherwise provided in the
Declaration. Although the Portfolio's Declaration provides in Section 2.4 that
investors may, under certain circumstances, fill a vacancy, there is no other
specific provision permitting election of Trustees by the investors in the
Portfolio. Similarly, the Fund's Declaration of Trust does not specifically
provide for the election of Trustees by shareholders, and vacancies are to be
filled by vote of the other Trustees, subject to the limitations in the 1940
Act. In addition, as in the case of the Portfolio's Declaration, Section 2.2 of
the Fund's Declaration provides that Trustees are to hold office during the
lifetime of the Fund except in the case of resignation, removal, retirement or
incapacitation.
Although the Trustees of the Portfolio and the Fund believe that the general
powers granted to the Trustees under the respective Declarations including the
power and authority to call a meeting of the investors or shareholders, as the
case may be, at any time, permit the Trustees to call for the election of
Trustees by the investors or shareholders at such meeting, the Trustees of both
the Portfolio and the Fund have recommended that the respective Declarations of
Trust be amended. Such amendments would specifically provide that the Trustees
can call for the election of Trustees by the investors or shareholders, as the
case may be, whether or not specifically required under the Investment Company
Act of 1940, and to provide that a Trustee shall hold office only until his or
her successor is elected and qualified, or until he or she sooner dies, resigns
or as otherwise removed as provided in the respective Declarations of Trust.
If this item is approved by Shareholders and the other investors in the
Portfolio, Section 2.2 of Article II of the Portfolio's Declaration of Trust
shall be amended to read as follows:
A Trustee may be elected either by the Holders or, as provided
in this Declaration and subject to the limitations of the 1940
Act, by the Trustees. Each Trustee shall hold office during the
lifetime of this Trust, or until the election and qualification
of his or her successor, or until he or she sooner dies, resigns
or is removed as provided in Section 2.3 below.
If this Item is approved, the Fund's Declaration of Trust will also be amended
by adding similar language to Section 2.2 of Article II of the Fund's
Declaration. In addition, Section 6.8 of Article VI of the Fund's Declaration
will be amended by specifically stating that Shareholders shall have the power
to vote for the election of Trustees.
27
<PAGE>
The full text of applicable sections of the Portfolio's Declaration of Trust
and the Fund's Declaration of Trust, as proposed to be amended, are set forth in
the Appendix D to this proxy statement.
It is intended that proxies submitted by Shareholders of the Fund not
limited to the contrary will be voted in favor of amending the Declarations of
Trust of the Portfolio and the Fund as set forth in Appendix D. Amendment of the
Portfolio's Declaration of Trust requires the vote of investors in the Portfolio
holding more than 50% of the total interests entitled to vote. The amendment to
the Fund's Declaration of Trust requires a Majority Shareholder Vote.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR THE APPROVAL OF THE PROPOSED AMENDMENTS TO THE
PORTFOLIO'S DECLARATION OF TRUST AND THE FUND'S DECLARATION OF TRUST.
ITEM 4: ELECTION OF SEVEN TRUSTEES OF THE TRUST AND OF THE PORTFOLIO
It is proposed by the Board of Trustees of each of the Fund and the
Portfolio that there be a common Board of Trustees between the Fund and the
Portfolio in order to more efficiently supervise the affairs of each of the Fund
and the Portfolio. When the Fund and the Portfolio were organized, the
Independent Trustees of the Fund and the Portfolio were separate. It was thought
that should a conflict of interest arise between or among the shareholders of
the Fund and the investors of the Portfolio (for example, in the event of a
change in applicable federal or state securities or tax laws or regulations, or
public ruling, private letter ruling, no-action or interpretive letter, or any
similar action by securities or tax regulatory authorities or an administrative
or judicial decision in any relevant proceeding), the interests of the Fund's
shareholders and the Portfolio's investors could best be protected by having
separate Independent Trustees. However, after approximately seven years of
operation, no material conflicts have, in fact, materialized and the Trustees of
the Fund and the Portfolio believe that in the unlikely event of a material
conflict arising in the future, it can adequately be resolved. In this regard,
each of the Portfolio and the Fund have adopted procedures for identifying and
resolving conflicts of interest.
The Trustees of each of the Portfolio and the Fund also believe that the
supervision of the affairs of the Fund and the Portfolio will be more efficient
and effective if there is a common Board of Trustees. It has been the practice
to have combined meetings of the Trustees of the Fund and the Portfolio with
Trustees of each present for the entire meeting. Messrs. Mayes, Smith and
Williamson have each served as a Trustee of the Portfolio since its inception in
1990 and have each been invited to attend and have each received materials
28
<PAGE>
relating to all meetings of Trustees of the Fund. Similarly, Ms. Paul and Mr.
Osborn have each served as a Trustee of the Fund since its inception, and Ms.
Card has served as Trustee of the Fund since 1992. Each has been invited to
attend and has received materials relating to most meetings of Trustees of the
Portfolio. Ms. Domini, Chair of the Board of the Portfolio and the Fund, has
served on both Boards since commencement of operations. Philip Coolidge, who had
also served on the Boards of the Portfolio and the Fund, recently resigned from
both Boards.
The Board of Trustees of the Fund has fixed the number of Trustees at seven,
and at a meeting on June 13, 1997, elected Mr. Smith and Mr. Williamson to fill
two of the three vacancies and nominated Mr. Mayes for election by the
shareholders in accordance with the provisions of the 1940 Act. Concurrently,
the Trustees of the Portfolio voted to fix the number of its Trustees at seven
and elected Ms. Card and Mr. Osborn to fill two of the three vacancies and
nominated Ms. Paul for election by investors. In addition, the Trustees of
Domini Institutional Social Equity Fund, an open-end management investment
company (the "Institutional Fund") which, like the Fund invests all of its
investable assets in the Portfolio and which has a common Board of Trustees with
the Portfolio, concurrently elected Ms. Paul and Mr. Osborn to its Board and
nominated for election by its shareholders, Ms. Card. Thus, if shareholders of
the Fund and the Institutional Fund and investors in the Portfolio approve the
seven nominees for election for their respective funds, each of the Fund, the
Portfolio and the Institutional Fund will have a common Board of Trustees.
It is intended that proxies not limited to the contrary will be voted in
favor of electing each of the nominees as Trustee of the Fund and the Portfolio.
Each nominee, if elected, will serve an indefinite term, until he or she
resigns, retires or is removed or until his or her successor is duly chosen and
qualified. Mss. Amy Domini, Karen Paul and Emily Card and Mr. William Osborn
were previously elected as Trustees of the Fund by the Fund's shareholders. Ms.
Domini and Messrs. Mayes, Smith and Williamson were previously elected as
Trustees of the Portfolio by the Portfolio's investors.
Trustees who are also officers or affiliated persons receive no remuneration
for their service as Trustees. The Fund's officers receive no remuneration from
the Fund. The compensation paid by the Fund, the Portfolio and the
29
<PAGE>
Institutional Trust to each of its Trustees serving during the fiscal year ended
July 31, 1997 is set forth in the compensation table below:
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION TOTAL COMPENSATION
FROM THE FUND ESTIMATED ANNUAL FROM THE FUND, THE
AND THE PENSION OR RETIREMENT BENEFITS UPON PORTFOLIO AND THE
NAME OF TRUSTEE PORTFOLIO** BENEFITS ACCRUED RETIREMENT INSTITUTIONAL TRUST**
- -------------------- --------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
Emily W. Card....... $ 1,600 0 0 $ 1,805
Amy Lee Domini*..... 0 0 0 0
Allen M. Mayes...... 0 0 0 $ 2,400
William C. Osborn... $ 1,300 0 0 $ 2,005
Karen Paul.......... $ 1,800 0 0 $ 2,005
Timothy Smith....... $ 55 0 0 $ 2,455
Frederick C.
Williamson......... $ 55 $ 2,455
</TABLE>
- ------------------------------
* Ms. Domini is an "interested person" of the Fund, the Portfolio, and the
Institutional Trust as that term is defined in the 1940 Act.
** In addition, each Trustee that is not an "interested person" receives
reimbursement for the reasonable expenses of attending Board meetings.
The following table shows the nominees for election as Trustee and the
officers of the Fund and the Portfolio and their principal occupations which,
unless otherwise specified, are of more than five years duration, although the
titles held may have varied during that period. Asterisks indicate those
Trustees and officers who are "interested persons," as defined in the 1940 Act,
of the Fund or the Portfolio. Unless otherwise indicated, the principal business
address of each officer is 6 St. James Avenue, Boston, Massachusetts 02116.
NOMINEES FOR ELECTION AS TRUSTEES OF THE PORTFOLIO
AND THE TRUST
<TABLE>
<CAPTION>
SHARES OF THE FUND
OWNED BENEFICIALLY AS
NAME, AGE, POSITION WITH FUND OR PORTFOLIO, OF PERCENT OF
PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1) SEPTEMBER 1, 1997(2) CLASS(3)
- ----------------------------------------------------- --------------------- -------------
<S> <C> <C>
EMILY W. CARD (55)................................... -- --
1223 Wilshire Blvd., #334, Santa Monica, California
90403; Trustee of the Fund since 1992, Trustee of
the Portfolio since 1997, Attorney; President, The
Card Group, Inc.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SHARES OF THE FUND
OWNED BENEFICIALLY AS
NAME, AGE, POSITION WITH FUND OR PORTFOLIO, OF PERCENT OF
PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1) SEPTEMBER 1, 1997(2) CLASS(3)
- ----------------------------------------------------- --------------------- -------------
<S> <C> <C>
AMY LEE DOMINI* (47)................................. 4,186 (4)
230 Congress Street, Boston, Massachusetts 02110;
Chair, President and Trustee of the Fund and the
Portfolio since 1990 and the Institutional Trust
since 1996; Manager of Domini Social Investments LLC
(since 1997); Officer of Kinder, Lydenberg, Domini &
Co., Inc.; Private Trustee, Loring, Wolcott &
Coolidge; Trustee, Episcopal Church Pension Fund;
Member, Governing Board, Interfaith Center on
Corporate Responsibility. Ms. Domini is married to
Peter D. Kinder.
ALLEN M. MAYES (76).................................. 777 (4)
P.O. Box 21222, Beaumont, Texas 77720; Trustee of
the Portfolio since 1990; Trustee of the
Institutional Trust since 1996; Retired Senior
Associate General Secretary of the General Board of
Pensions of the United Methodist Church; Director of
Ministerial Services, Texas Annual Conference, The
United Methodist Church; Former Member of the Board
of Directors of Investor Responsibility Research
Center; Member of Board of Trustees of Wiley
College.
WILLIAM C. OSBORN (52)............................... 2,176 (4)
115 Buckminster Road, Brookline, Massachusetts
02146; Trustee of the Fund since 1990; Trustee of
the Portfolio and the Institutional Trust since
1997; Manager, Venture Investment Management Company
LLC (since 1996); Vice President and General
Manager, TravElectric Services Corp. (from 1993 to
1995); President, Environmental Technologies, Inc.
(from 1990 to 1993); Director, Evergreen Solar, Inc.
(since 1996); Director, Conservation Services Group
(since 1992).
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
SHARES OF THE FUND
OWNED BENEFICIALLY AS
NAME, AGE, POSITION WITH FUND OR PORTFOLIO, OF PERCENT OF
PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1) SEPTEMBER 1, 1997(2) CLASS(3)
- ----------------------------------------------------- --------------------- -------------
<S> <C> <C>
KAREN PAUL (52)...................................... 812 (4)
4050 Park Avenue, Miami, Florida 33133; Trustee of
the Fund since 1990; Trustee of the Institutional
Trust since 1997; Associate Dean, Florida
International University since April 1996; Professor
of Business Environment, Florida International
University.
TIMOTHY SMITH (53)................................... 1,178 (4)
475 Riverside Drive, New York, New York 10115;
Trustee of the Portfolio since 1990; Trustee of the
Fund since 1997; Trustee of the Institutional Trust
since 1996; Executive Director of the Interfaith
Center on Corporate Responsibility; Trustee of the
Calvert New Africa Fund (since 1994).
FREDERICK C. WILLIAMSON, SR. (81).................... 1,118 (4)
Five Roger Williams Green, Providence, Rhode Island
02904; Trustee of the Portfolio since 1990; Trustee
of the Fund since 1997; Treasurer and Trustee of
RIGHA (Charitable foundation supporting health care
needs) since 1990; Trustee, National Parks Trust;
Chairman, Rhode Island Historical Preservation and
Heritage Commission (since 1995); Trustee of
National Parks and Conservation Association.
</TABLE>
OFFICERS OF THE TRUST AND THE PORTFOLIO
<TABLE>
<CAPTION>
SHARES OF THE FUND
OWNED BENEFICIALLY
AS OF
NAME, AGE, POSITION WITH FUND OR PORTFOLIO, SEPTEMBER 1, PERCENT OF
PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1) 1997(2) CLASS(3)
- ----------------------------------------------------- ------------------- -------------
<S> <C> <C>
LINDA T. GIBSON* (31)................................ -- --
Secretary of the Fund and the Portfolio; Vice
President and Assistant Secretary, Signature
Financial Group, Inc.; Assistant Secretary,
Signature Broker-Dealer Services, Inc. (since
October, 1992).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
SHARES OF THE FUND
OWNED BENEFICIALLY
AS OF
NAME, AGE, POSITION WITH FUND OR PORTFOLIO, SEPTEMBER 1, PERCENT OF
PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1) 1997(2) CLASS(3)
- ----------------------------------------------------- ------------------- -------------
<S> <C> <C>
PETER D. KINDER* (50)................................ 663 (4)
129 Mt. Auburn Street, Cambridge, MA 02138, Vice
President of the Fund and the Portfolio; President,
Kinder, Lydenberg, Domini & Co., Inc. Mr. Kinder is
married to Amy Lee Domini.
STEVEN D. LYDENBERG* (51)............................ 1,412 (4)
129 Mt. Auburn Street, Cambridge, MA 02138, Vice
President of the Fund and the Portfolio; Director of
Research, Kinder, Lydenberg, Domini & Co., Inc.
MOLLY S. MUGLER* (45)................................ -- --
Assistant Secretary of the Fund and the Portfolio;
Vice President and Assistant Secretary, Signature
Financial Group, Inc. and Assistant Secretary,
Signature Broker-Dealer Services, Inc. and its
affiliates.
ALL TRUSTEES AND OFFICERS OF THE TRUST AS A GROUP.... 12,331 (4)
</TABLE>
- ------------------------
(1) Directorships or Trusteeships of companies required to report to the
Securities and Exchange Commission (the "SEC") (i.e., "public companies") or
registered investment companies other than those administered or advised by
the Portfolio's investment adviser or the administrator of the Fund and the
Portfolio.
(2) Numbers are approximate and include, where applicable, shares which are
owned by a nominee's spouse or minor children, or which were otherwise
considered by the nominee as being "beneficially owned" in light of
pertinent SEC rules.
(3) Percentage of shares outstanding on September 1, 1997. All shares are held
with sole voting and investment power.
(4) Under 1.00%.
During the fiscal year ended July 31, 1997 the Board of Trustees of the Fund
met eight times and the Board of Trustees of the Portfolio met nine times. Each
incumbent Trustee of the Fund and the Portfolio attended at least
33
<PAGE>
75% of the meetings of the Board of Trustees of the Fund and the Portfolio,
respectively, during his or her term.
The Board of Trustees of the Fund has created a standing Audit Committee
comprised of Mr. Osborn and Ms. Paul, and the Board of Trustees of the Portfolio
has created a standing Audit Committee comprised of Messrs. Mayes, Smith and
Williamson, none of whom is an "interested person" of the Fund or its
administrator or distributor or of the Portfolio or its investment adviser,
investment manager or placement agent. The Audit Committees of the Fund and the
Portfolio (i) review the internal and external accounting procedures of the Fund
and the Portfolio, as the case may be, and, among other things, consider the
selection of independent certified public accountants of the Fund or the
Portfolio, as the case may be, (ii) approve all significant services proposed to
be performed by the independent certified public accountants, and (iii) consider
the possibility and effect of such services on their independence. The Audit
Committee met once during the fiscal year ended July 31, 1997. In addition, the
Fund has a standing Nominating Committee comprised of all the Independent
Trustees of the Fund. The Nominating Committee did not meet as a separate
committee during the fiscal year ended July 31, 1997. No policy or procedure has
been established by the Fund or the Portfolio as to the nomination of Trustees.
The Fund's Declaration of Trust provides that it will indemnify its Trustees
and officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the Fund,
unless, with respect to liability to the Fund's shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Fund. In the case of settlement, such indemnification will
not be provided unless it has been determined by a court or other body approving
the settlement or other disposition, or by a reasonable determination, based
upon a review of readily available facts, by vote of a majority of the
Independent Trustees, or in a written opinion of independent counsel, that such
Trustees or officers have not engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. The Portfolio's Declaration of
Trust provides that it will indemnify its Trustees and officers in the same
manner as described above for the Fund against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Portfolio.
Election of the nominees as Trustees of the Portfolio will require the vote
of a plurality of the investors in the Portfolio, including the Fund, holding a
34
<PAGE>
plurality of outstanding interests in the Portfolio and election of the nominees
as Trustees of the Fund will require the vote of a plurality of the outstanding
voting securities of the Fund present in person or represented by proxy at the
Meeting.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR ELECTION OF THE
NOMINEES AS TRUSTEES OF THE FUND AND THE PORTFOLIO.
ITEM 5: OTHER BUSINESS
Neither the Trustees of the Fund nor the persons appointed as proxies are
aware of any matters other than those set forth in the accompanying Notice of
Special Meeting which may be presented by others, nor do they have any intention
of bringing before the Meeting for action any matters other than those specified
in such Notice. If any other business shall properly come before the Meeting,
the persons appointed as proxies shall vote thereon in accordance with their
best judgment.
MANNER OF VOTING PROXIES AND VOTE REQUIRED
If the accompanying form of proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the proxy. Shareholders of the Fund will vote separately with
respect to each Item. If no instructions are specified, all shares of the Fund
will be voted FOR proposed Items 1a, 1b, 2, 3 and 4. If the enclosed form of
proxy is executed and returned, it may nevertheless be revoked prior to its
exercise by a signed writing delivered at the Meeting or filed with the
Secretary of the Fund.
In the event that a quorum is not present at the Meeting, or if sufficient
votes to approve any of the proposals are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares voted at the Meeting. When voting on a proposed
adjournment with respect to any of the proposals, the persons named as proxies
will vote all shares that they are entitled to vote FOR the proposed
adjournment, unless directed to disapprove the proposal, in which case such
shares will be voted against the proposed adjournment.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund entitled to vote is required to constitute a
quorum at the Meeting for the purposes of voting on each item. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the
35
<PAGE>
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are present but which have not been voted. For
this reason, abstentions and broker "non-votes" will have the effect of a "no"
vote for purposes of obtaining the requisite number of votes for approval of
items at the Meeting.
SUBMISSION OF CERTAIN PROPOSALS
Proposals of shareholders which are intended to be presented at a future
shareholder meeting must be received by the Fund a reasonable time prior to the
Fund's solicitation of proxies relating to such future meeting. The Fund is an
entity of the type commonly referred to as a "Massachusetts business trust". As
such, it is not required to hold, and has no intention of holding, annual
meetings, although the Fund may hold special shareholder meetings.
ADDITIONAL INFORMATION
INTERESTS OF CERTAIN PERSONS
As of September 8, 1997 the following shareholders of record owned 5% or
more of the outstanding shares of the Fund:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF SHAREHOLDER SHARES OWNED SHARES
- --------------------------------------------------------- ------------- -------------
<S> <C> <C>
Charles Schwab & Co., Inc. (Schwab) (1).................. 2,612,979.548 29.6%
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
- ------------------------
(1) Such shares are held by Schwab as nominee on behalf of its customers and
the Fund has no knowledge as to the beneficial ownership of these shares.
As of September 1, 1997, all Trustees and officers of the Fund as a group
owned less than 1% of the outstanding shares of the Fund. To the knowledge of
the Fund, no other shareholder beneficially owned 5% or more of the outstanding
shares of the Fund as of the same date.
SERVICE PROVIDERS
Signature Broker-Dealer Services, Inc. ("SBDS") is the distributor of shares
of the Fund and placement agent for interests in the Portfolio. SBDS also serves
as administrator of the Fund and the Portfolio, and currently is a party to
expense payment arrangements with respect to the Fund and the Portfolio. SBDS is
a wholly-owned subsidiary of Signature Financial Group, Inc., which directly and
indirectly through its subsidiaries acts as principal underwriter and serves as
administrator to other mutual funds unrelated to the
36
<PAGE>
Fund and Portfolio. The address of Signature Financial Group, Inc. is 6 St.
James Avenue, Boston, Massachusetts 02116.
The Fund is the sole series of Domini Social Equity Fund, a business trust
organized under the laws of the Commonwealth of Massachusetts on June 7, 1989.
The mailing address of the Fund is 6 St. James Avenue, Boston, Massachusetts
02116.
BY ORDER OF THE BOARD OF TRUSTEES.
LINDA T. GIBSON, SECRETARY
37
<PAGE>
APPENDIX A
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of ______ _ 1997, by and between Domini
Social Index Portfolio, a New York trust (the "Portfolio") and Domini Social
Investments LLC ("DSI" or the "Adviser").
WITNESSETH:
WHEREAS, the Portfolio engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act"), and
WHEREAS, the Portfolio wishes to engage DSI to provide certain investment
advisory and administrative services for the Portfolio, and DSI is willing to
provide such investment advisory and administrative services for the Portfolio
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF DSI. (A) DSI shall act as the Adviser for the Portfolio and
as such shall furnish continuously an investment program and shall determine
from time to time what securities shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held uninvested, subject always
to the restrictions of the Portfolio's Declaration of Trust, dated June 7, 1989,
and By-laws, as each may be amended from time to time (respectively, the
"Declaration" and the "By-Laws"), the provisions of the 1940 Act, and the
then-current Registration Statement of the Portfolio. The Adviser shall also
make recommendations as to the manner in which voting rights, rights to consent
to corporate action and any other rights pertaining to the Portfolio's portfolio
securities shall be exercised. Should the Board of Trustees of the Portfolio at
any time, however, make any definite determination as to investment policy
applicable to the Portfolio and notify the Adviser thereof in writing, the
Adviser shall be bound by such determination for the period, if any, specified
in such notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end the Adviser is authorized as the agent of the Portfolio to
give instructions to the custodian or any subcustodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
In connection with the selection of such brokers or dealers and the placing of
such orders, brokers or dealers may be selected who also provide brokerage
<PAGE>
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other accounts over
which the Adviser, any subadviser, submanager or their respective affiliates
exercise investment discretion. The Adviser is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. In making purchases or sales of securities
or other property for the account of the Portfolio, the Adviser may deal with
itself or with the Trustees of the Portfolio or the Portfolio's underwriter or
distributor, to the extent such actions are permitted by the 1940 Act. In
providing the services and assuming the obligations set forth herein, the
Adviser may subject to the requirements of the 1940 Act or any exemptive order
granted thereunder employ at its own expense, or may request that the Portfolio
employ at the Portfolio's expense, one or more subadvisers or submanagers;
provided that in each case the Adviser shall supervise the activities of each
subadviser. Any agreement between the Adviser and a subadviser shall be subject
to the renewal, termination and amendment provisions applicable to this
Agreement. Any agreement by the Portfolio and a subadviser may be terminated by
the Adviser at any time on not more than 60 days' nor less than 30 days' written
notice to the Portfolio and the subadviser.
(B) Subject to the direction and control of the Board of Trustees of the
Portfolio, DSI shall perform such administrative and management services as may
from time to time be reasonably requested by the Portfolio, which shall include
without limitation: (1) maintaining office facilities (which may be in the
office of DSI, or an affiliate) and furnishing clerical services necessary for
maintaining the organization of the Portfolio and for performing the
administrative and management functions herein set forth; (2) arranging, if
desired by the Portfolio, for Directors, officers or employees of the Adviser to
serve as Trustees, officers or agents of the Portfolio if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by the law; (3) supervising the overall administration of
the Portfolio, including negotiation of contracts and fees with and the
monitoring of performance and billings of the Portfolio's transfer agent,
custodian and other independent contractors or agents; (4) overseeing (with
advice of the Portfolio's counsel), the preparation of and, if applicable,
filing all documents
2
<PAGE>
required for compliance by the Trust with applicable laws and regulations,
including registration statements, semi-annual and annual reports to investors,
proxy statements and tax returns; (5) preparation of agendas and supporting
documents for and minutes of meetings of Trustees, committees of Trustees and
investors (6) arranging for maintenance of books and records of the Trust; (7)
maintaining telephone coverage to respond to investor inquiries regarding
matters to which this Agreement pertains to which the transfer agent is unable
to respond; (8) providing reports and assistance regarding the Portfolio's
compliance with securities and tax laws and investment objectives and
restrictions; (9) arranging for dissemination of yield and other performance
information to newspapers and tracking services; (10) arranging for and
preparing annual renewals for fidelity bond and errors and omissions insurance
coverage; (11) developing a budget for the Portfolio, establishing the rate of
expense accruals and arranging for the payment of all fixed and management
expenses; and (12) answering questions from the general public, the media and
investors in the Portfolio regarding (a) the securities holdings of the
Portfolio; (b) any limits in which the Portfolio invests; (c) the social
investment philosophy of the Portfolio; and (d) the proxy voting philosophy and
shareholder activism philosophy of the Portfolio. Notwithstanding the foregoing,
DSI shall not be deemed to have assumed any duties with respect to, and shall
not be responsible for, the distribution of beneficial interests in the
Portfolio, nor shall DSI be deemed to have assumed or have any responsibility
with respect to functions specifically assumed by any transfer agent, fund
accounting agent or custodian of the Portfolio. In providing administrative and
management services as set forth herein, DSI may, at its own expense, employ one
or more subadministrators; provided that DSI shall remain fully responsible for
the performance of all administrative and management duties set forth herein and
shall supervise the activities of each subadministrator.
2. ALLOCATION OF CHARGES AND EXPENSES. DSI shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section I above. Except as provided in the foregoing
sentence it is understood that the Portfolio will pay all of its own expenses
including, without limitation, organization costs of the Portfolio; compensation
of Trustees who are not "interested persons" of the Portfolio; governmental
fees, including but not limited to SEC fees and state "blue sky" fees; interest;
loan commitment fees; taxes; brokerage fees and commissions; membership dues in
industry and professional associations; fees and expenses of auditors and
accountants, legal counsel and any transfer agent, distributor, shareholder,
servicing agent, recordkeeper, registrar or dividend disbursing agent of the
Portfolio; expenses of issuing and redeeming beneficial interests and servicing
investor accounts; expenses of preparing, typesetting, printing and mailing:
3
<PAGE>
prospectus for regulatory purposes and for distribution to current shareholders,
investor reports, notices, proxy statements and reports to governmental officers
and commissions and to investors in the Portfolio; expenses connected with the
execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the Portfolio,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of the Portfolio
(including but not limited to the fees of independent pricing services);
expenses connected with maintaining the Portfolio's existence as a New York
Trust, expenses of meetings of the Portfolio's investors; expenses relating to
the issuance of beneficial interests in the Portfolio; and such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Portfolio may be party and the legal obligation
which the Portfolio may have to indemnity its Trustees and officers with respect
thereto.
3. COMPENSATION OF DSI. For the services to be rendered and facilities
provided by DSI hereunder, the Portfolio will pay DSI a management fee accrued
daily and payable monthly at an annual rate equal to 0.20% of the Portfolio's
average daily net assets for the Portfolio's then current fiscal year, provided,
however, for a period of one year from the date of this Agreement, the fee
payable to the Adviser shall be the lesser of (i) 0.20% of the Portfolio's
average daily net assets for the Portfolio's then-current fiscal year and (ii)
the percentage obtained by deducting from 0.20%, the Portfolio's annual
operating expenses (excluding amounts payable under this Agreement, and
brokerage fees and commissions, interest, taxes, and any other extraordinary
expenses) expressed as a percentage of the Portfolio's average daily net assets.
The Adviser shall pay any applicable fees to the subadviser(s) on the
Portfolio's behalf if DSI provides services hereunder for less than the whole of
any period specified in this Section 3, the compensation to DSI shall be
accordingly adjusted and prorated.
4. COVENANTS OF DSI. DSI agrees that it will not deal with itself, or with
the Trustees of the Portfolio or the Portfolio's principal underwriter or
distributor, if any, as principals in making purchases or sales of securities or
other property, except as permitted by the 1940 Act, will not take a long or
short position in beneficial interests of the Portfolio except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current Registration Statement of the Portfolio
relative to DSI and its directors and officers.
5. LIMITATION OF LIABILITY OF DSI. DSI shall not be liable for any error
of judgment or mistake of law or for any loss arising out of any investment or
for any act or omission in the execution of securities transactions for the
Portfolio,
4
<PAGE>
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Section 5, the term "DSI" shall include directors,
officers and employees of DSI as well as DSI itself.
6. ACTIVITIES OF DSI. The services of DSI to the Portfolio are not to be
deemed to be exclusive, DSI being free to render investment advisory,
administrative and/or other services to others. It is understood that Trustees,
officers, and investors of the Portfolio are or may be or may become interested
in DSI, as directors, officers, employees, or otherwise and that directors,
officers and employees of DSI are or may become similarly interested in the
Portfolio and that DSI may be or may become interested in the Portfolio as an
investor or otherwise.
7. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This Agreement
shall become effective as of the day and year first above written, shall govern
the relations between the parties hereto thereafter and shall remain in force
until ______ _, 1999, on which date it will terminate unless its continuance
after ______ _, 1999 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Portfolio who are not "interested
persons" of the Portfolio or of DSI at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Portfolio or by "vote of a majority of the outstanding voting securities" of the
Portfolio.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by the "vote of a majority of the outstanding voting
securities" of the Portfolio, or by DSI, in each case on not more than 60 days'
nor less than 30 days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Portfolio
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority of
the outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
Each party acknowledges and agrees that all obligations of the Portfolio
under this Agreement are binding only with respect to the Portfolio; that any
liability of the Portfolio under this Agreement, or in connection with the
5
<PAGE>
transactions contemplated herein, shall be discharged only out of the assets of
the Portfolio.
The undersigned officer of the Portfolio has executed this Agreement not
individually, but as an officer under the Declaration and the obligations of
this Agreement are not binding upon any of the Trustees, officers or holders of
beneficial interests in the Portfolio individually.
8. GOVERNING LAW. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
<TABLE>
<S> <C>
DOMINI SOCIAL
DOMINI SOCIAL INDEX PORTFOLIO INVESTMENTS LLC
By: ----------------------------- By: -----------------------------
Title: Title:
- --------------------------- ---------------------------
</TABLE>
6
<PAGE>
APPENDIX B
SUBMANAGEMENT AGREEMENT
SUBMANAGEMENT AGREEMENT, dated as of _____ __, 1997, by and between Domini
Social Investments LLC, a Massachusetts limited liability company ("DSI" or the
"Manager"), and Mellon Equity Associates, a Pennsylvania business trust
("Mellon" or the "Submanager").
WITNESSETH:
WHEREAS, the Domini Social Index Portfolio (the "Portfolio") engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (collectively with the
rules and regulations promulgated thereunder, the "1940 Act"); and
WHEREAS, DSI has entered into a Management Agreement (the "Management
Agreement") with the Portfolio wherein DSI has agreed to serve as Manager to the
Portfolio; and
WHEREAS, as permitted by Section 1.A. of the Management Agreement, DSI
wishes to subcontract some of the performance of its obligations thereunder to
Mellon and Mellon desires to accept such obligations on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. APPOINTMENT OF MELLON. In accordance with and subject to the Management
Agreement between the Portfolio and the Manager, the Manager hereby retains
Mellon to act as the Submanager for the Portfolio for the period and on the
terms set forth in this Agreement. The Submanager accepts such appointment and
agrees to provide an investment program for the Portfolio for the compensation
provided by this Agreement.
2. DUTIES OF THE SUBMANAGER. The Submanager shall provide the Portfolio
and the Manager with such investment advice and supervision as the Manager may
from time to time consider necessary for the proper supervision of such portion
of the Portfolio's investment assets as the Manager may designate from time to
time. Notwithstanding any provision of this Agreement, the Manager shall retain
all rights and ultimate responsibilities to supervise and, in its discretion,
conduct investment activities relating to the Portfolio. The Submanager shall
furnish continuously an investment program and shall determine from time to time
what securities shall be purchased, sold or exchanged and what portion of the
assets of the Portfolio allocated by the Manager to the Submanager shall be held
uninvested, subject always to the restrictions of the Portfolio's Declaration of
Trust, dated June 7, 1989, and By-
<PAGE>
laws, as each may be amended from time to time (respectively, the "Declaration"
and the "By-Laws"), the provisions of the 1940 Act, and the then-current
Registration Statement of the Portfolio, and, subject further, to the Submanager
notifying the Manager in advance of the Submanager's intention to purchase any
securities except insofar as the requirement for such notification may be waived
or limited by the Manager, it being understood that the Submanager shall be
responsible for compliance with any restrictions imposed in writing by the
Manager from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Manager may
determine. Further, the Manager or the Trustees of the Portfolio may at any
time, upon written notice to the Submanager, suspend or restrict the right of
the Submanager to determine what securities shall be purchased or sold on behalf
of the Portfolio and what portion if any, of the assets of the Portfolio
allocated by the manager to the Submanager shall be held uninvested. The
Submanager shall also, as requested, make recommendations to the Manager as to
the manner in which proxies, voting rights, rights to consent to corporate
action and any other rights pertaining to the Portfolio's portfolio securities
shall be exercised. Should the Board of Trustees of the Portfolio or the Manager
at any time, however, make any definite determination as to investment policy
applicable to the Portfolio and notify the Submanager thereof in writing, the
Submanager shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked.
The Submanager shall take, on behalf of the Portfolio, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end the Submanager is authorized as the agent of the Portfolio
to give instructions to the custodian or any subcustodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
The Submanager will advise the manager on the same day it gives any such
instructions. In connection with the selection of such brokers or dealers and
the placing of such orders, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Portfolio and/or the other accounts
over which the Submanager, the Manager or their respective affiliates exercise
investment discretion. The Submanager is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Submanager determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage
2
<PAGE>
and research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Submanager, the Manager and their respective
affiliates have with respect to accounts over which they exercise investment
discretion. In making purchases or sales of securities or other property for the
account of the Portfolio, the Submanager may deal with itself or with the
Trustees of the Portfolio or the Portfolio's underwriter or distributor, to the
extent such actions are permitted by the 1940 Act. The Board of Trustees of the
Portfolio, in its discretion, may instruct the Submanager to effect all or a
portion of its securities transactions with one or more brokers and/or dealers
selected by the Board of Trustees, if it determines that the use of such brokers
and/or dealers is in the best interest of the Portfolio.
3. ALLOCATION OF CHARGES AND EXPENSES. The Submanager shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 2 above. Except as provided in the foregoing
sentence it is understood that the Portfolio will pay all of its own expenses
including, without limitation, organization costs of the Portfolio; compensation
of Trustees who are not "interested persons" of the Portfolio; governmental
fees; interest charges; loan commitment fees; taxes; membership dues in industry
associations allocable to the Portfolio; fees and expenses of independent
auditors, legal counsel and any transfer agent, distributor, registrar or
dividend disbursing agent of the Portfolio; expenses of issuing and redeeming
beneficial interests and servicing investor accounts; expenses of preparing,
typesetting, printing and mailing investor reports, notices, proxy statements
and reports to governmental officers and commissions and to investors in the
Portfolio; expenses connected with the execution, recording and settlement of
security transactions; insurance premiums; fees and expenses of the custodian
for all services to the Portfolio, including safekeeping of funds and securities
and maintaining required books and accounts; expenses of calculating the net
asset value of the Portfolio (including but not limited to the fees of
independent pricing services); expenses of meetings of the Portfolio's
investors; expenses relating to the issuance of beneficial interests in the
Portfolio; and such non-recurring or extraordinary expenses as may arise,
including those relating to actions, suits or proceedings to which the Portfolio
may be a party and the legal obligation which the Portfolio may have to
indemnity its Trustees and officers with respect thereto.
4. COMPENSATION OF THE SUBMANAGER. For the services to be rendered by the
Submanager hereunder, the Manager shall pay to the Submanager a fee computed and
paid monthly at an annual rate equal to 0.10% of the Portfolio's average daily
net assets for its then-current fiscal year. If Mellon serves as Submanager for
less than the whole of any period specified in this Section 3, the compensation
to Mellon, as Submanager, shall be prorated.
3
<PAGE>
5. COVENANTS OF THE SUBMANAGER. The Submanager agrees that it will not
deal with itself, or with the Trustees of the Portfolio or the Portfolio's
principal underwriter or distributor, if any, as principals in making purchases
or sales of securities or other property, except as permitted by the 1940 Act,
will not take a long or short position in beneficial interests of the Portfolio
except as permitted by the Declaration, and will comply with all other
provisions of the Declaration and By-Laws and the then-current Registration
Statement of the Portfolio relative to the Submanager and its directors and
officers.
6. LIMITATION OF LIABILITY OF THE SUBMANAGER. The Submanager shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution of securities
transactions for the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Section 6,
the term "Submanager" shall include directors, officers and employees of the
Submanager as well as the Submanager itself. The Portfolio is expressly made a
third party beneficiary of this Agreement, and may enforce any obligations of
the Submanager under this Agreement and recover directly from the Submanager for
any liability the Submanager may have hereunder.
7. ACTIVITIES OF THE SUBMANAGER. The services of the Submanager to the
Portfolio are not to be deemed to be exclusive, the Submanager being free to
render investment advisory, administrative and/or other services to others. It
is understood that Trustees, officers, and investors of the Portfolio or the
Manager are or may be or may become interested in the Submanager, as directors,
officers, employees, or otherwise and that directors, officers and employees of
the Submanager are or may become similarly interested in the Portfolio or the
Manager and that the Submanager may be or may become interested in the Portfolio
as an investor or otherwise.
8. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This Agreement
shall become effective as of the day and year first above written, shall govern
the relations between the parties hereto thereafter and shall remain in force
until _____ __, 1999, on which date it will terminate unless its continuance
after _____ __, 1999 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Portfolio who are not "interested
persons" of the Portfolio or of DSI or the Submanager at a meeting specifically
called for the purpose of voting on such approval, and (b) by the Board of
Trustees of the Portfolio or by "vote of a majority of the outstanding voting
securities" of the Portfolio.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees of the Portfolio, (ii) the "vote of a majority of
4
<PAGE>
the outstanding voting securities" of the Portfolio, or (iii) DSI with the prior
consent of the Trustees of the Portfolio, in each case on not more than 60 days'
nor less than 30 days' written notice to the other party. This Agreement may be
terminated at any time without the payment of any penalty by the Submanager on
not less than 90 days' written notice to the Manager and the Trustees of the
Portfolio. This Agreement shall automatically terminate in the event of its
"assignment."
This Agreement constitutes the entire agreement between the parties and may
be amended only if such amendment is approved by the Parties hereto, the
Trustees of the Portfolio and the "vote of a majority of the outstanding voting
securities" of the Portfolio (except for any such amendment as may be effected
in the absence of such vote without violating the 1940 Act or any exemptive
order granted thereunder).
The terms "specifically approved at least annually," "vote of a majority of
the outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
9. GOVERNING LAW. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that nothing herein will be construed in a
manner inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
<TABLE>
<S> <C>
MELLON EQUITY ASSOCIATES DOMINI SOCIAL
INVESTMENTS LLC
By: ----------------------------- By: -----------------------------
Title: Title:
- --------------------------- ---------------------------
</TABLE>
5
<PAGE>
APPENDIX C
OTHER INVESTMENT COMPANIES WITH SIMILAR INVESTMENT OBJECTIVES TO THE FUND FOR
WHICH MELLON EQUITY ASSOCIATES IS AN INVESTMENT ADVISER OR SUBADVISER
<TABLE>
<CAPTION>
ANNUAL FEE (AS A PERCENTAGE OF ASSETS AS OF
NAME OF FUND AVERAGE NET ASSETS) MAY 31, 1997
- -------------------- --------------------------------------- -------------------
<S> <C> <C>
MML Equity Index 0.09% of first $100,000,000 $ 21,219,732.67
Fund 0.07% of the next $150,000,000
0.05% of assets over $250,000,000
Dreyfus S&P 500 0.05% until assets exceed $1 billion $ 986,482,267.69
Stock Index Fund 0.075% thereafter
Dreyfus Stock Index 0.095% $ 1,277,929,336.37
Fund
Dreyfus MidCap Index 0.095% $ 200,804,249.15
Fund
</TABLE>
In each case Mellon Equity Associates also pays the fees for custody of the
investment company's assets with an affiliate of Mellon Equity Associates.
<PAGE>
APPENDIX D
Proposed Amendment to Section 2.2 of Article II of the Declaration of Trust
of Domini Social Index Portfolio (words deleted have been marked through and
words added are italicized)
SECTION 2.2. TERM AND ELECTION. A TRUSTEE MAY BE ELECTED EITHER BY THE
HOLDERS OR, AS PROVIDED IN THIS DECLARATION AND SUBJECT TO THE LIMITATIONS OF
THE 1940 ACT, BY THE TRUSTEES. EACH TRUSTEE SHALL HOLD OFFICE DURING THE
LIFETIME OF THIS TRUST, OR UNTIL THE ELECTION AND QUALIFICATION OF HIS OR HER
SUCCESSOR, OR UNTIL HE OR SHE SOONER DIES, Each Trustee named herein, or elected
or appointed prior to the first meeting of the Holders, shall (except in the
event of resignations or removals or vacancies pursuant to Section 2.3 or 2.4
hereof) hold office until his successor has been elected at such meeting and has
qualified to serve as Trustee, as required under the 1940 Act. Beginning with
the Trustees elected at the first meeting of Holders, each Trustee shall hold
office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below.
Proposed Amendment to Section 2.2 of Article II of the Declaration of Trust
of Domini Social Equity Fund (words deleted have been marked through and words
added are italicized)
SECTION 2.2. TERM OF OFFICE OF TRUSTEES. A TRUSTEE MAY BE ELECTED EITHER BY
THE SHAREHOLDERS OR, AS PROVIDED IN THIS DECLARATION AND SUBJECT TO THE
LIMITATIONS OF THE 1940 ACT, BY THE TRUSTEES. Subject to the provisions of
Section 16(a) of the 1940 Act, A TRUSTEE the Trustees shall hold office during
the lifetime of this Trust and until its termination as hereinafter provided OR
UNTIL THE ELECTION AND QUALIFICATION OF HIS OR HER SUCCESSOR; 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 from time to time by at least two thirds of the Trustees shall,
automatically and without action of such Trustees 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
<PAGE>
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 Trustees. 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.
Proposed Amendment to Section 6.8 of Article VII of the Declaration of Trust
of Domini Social Equity Fund (words deleted have been marked through and words
added are italicized)
SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote only
(i) for the ELECTION AND 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 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 Section 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Section 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 fraction 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.
2
<PAGE>
PROXY CARD PROXY CARD
DOMINI SOCIAL EQUITY FUND
A PROXY FOR A SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD OCTOBER 21, 1997
The undersigned, revoking all Proxies heretofore given, hereby appoints
each of Amy L. Domini, David P. Wieder, Roger P. Joseph, and Mari A. Wilson,
or any of them, as Proxies of the undersigned with full power of
substitution, to vote on behalf of all of the undersigned all shares in
Domini Social Equity Fund which the undersigned is entitled to vote at the
Special Meeting of Shareholders of the Fund to be held at the offices of
Bingham, Dana & Gould LLP at 150 Federal Street, 25th Floor, Boston,
Massachusetts 02110, on Tuesday, October 21, 1997, at 11:00 a.m., Eastern
Time, and at any adjournment thereof, as fully as the undersigned would be
entitled to vote if personally present, as follows:
Proxy solicited on behalf of the Funds' Board of Trustees.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
1a. To vote on a Management Agreement between Domini Social Investments LLC
("DSI") and Domini Social Index-SM- Portfolio (the "Portfolio").
Substantially all of the Fund's investable assets are invested in the
Portfolio.
______FOR ______AGAINST ______ABSTAIN
1b. To vote on a Submanagement Agreement between DSI and Mellon Equity
Associates.
______FOR ______AGAINST ______ABSTAIN
2. To vote on authorizing the Trustees of the Portfolio to select and
change the investment submanager and enter into submanagement agreements
without obtaining the approval of investors.
______FOR ______AGAINST ______ABSTAIN
3. To amend the Declaration of Trust of the Portfolio and the Declaration
of Trust of the Fund to clarify voting provisions with respect to the
election of Trustees by Shareholders.
______FOR ______AGAINST ______ABSTAIN
<PAGE>
4. To elect the following nominees to the Fund's and the Portfolio's Board
of Trustees: Emily W. Card, Amy Lee Domini, Allen M. Mayes, William C.
Osborn, Karen Paul, Timothy Smith, Frederick C. Williamson.
______For all for the Nominees
______For all of the Nominees (except those indicated below)
______Withhold authority to vote for all of the Nominees
- -----------------------------------------------------------------------------
To withhold authority for any nominee, please mark the box entitled "For
all Except" and write the nominee's number(s) on the line below.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR ANY PROPOSALS
FOR WHICH NO CHOICE IS INDICATED.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Date:_______________
___________________________________
Signature
___________________________________
Signature of joint owner, if any
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD
When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as
such. If signing on behalf of a corporation, please sign the full corporate
name and your name and indicate your title. If you are a partner signing for
a partnership, please sign the partnership name and your name. Joint owners
should each sign this proxy. Please sign, date and return in the enclosed
envelope.
