Rule 497(e)
File Nos. 33-29180
and 811-5823
Supplement dated August 22, 1997
to Prospectus dated November 29, 1996
DOMINI SOCIAL EQUITY FUND
At a meeting held on June 30, 1997, the Board of Trustees of Domini Social
Equity Fund (the "Fund") voted to approve certain changes in the management of
the Fund in order to provide for a more centralized management structure. On
that same date, the Board of Trustees of Domini Social Index (SM) Portfolio
(the "Portfolio") also approved a restructuring of the management of the
Portfolio. Because substantially all of the Fund's investable assets are
invested in the Portfolio, the proposed new management structure affects both
the Fund and the underlying Portfolio. The restructuring includes the following
changes.
The Portfolio will enter into a new management agreement (the "Proposed
Management Agreement") with Domini Social Investments LLC ("DSI"), subject to
shareholder approval, pursuant to which DSI will provide investment supervisory
and administrative services, and a new submanagement agreement (the "Proposed
Mellon Agreement") with Mellon Equity Associates ("Mellon Equity"), subject to
shareholder approval, pursuant to which Mellon Equity will manage the
investments of the Portfolio on a day to day basis. For its services under the
Proposed Management Agreement, DSI will receive a fee equal on an annual basis
to 0.20% of the Portfolio'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 Portfolio exceed, on
an annual basis, 0.20% of the average daily net assets of the Portfolio for its
current fiscal year. The Trustees of the Fund have authorized the calling of a
Special Meeting of Shareholders of the Fund to vote on these agreements as well
as other matters, and the solicitation of proxies in connection therewith.
The Portfolio currently employs, as investment adviser, Kinder, Lydenberg,
Domini & Co., Inc. ("KLD"), which developed and maintains the Domini 400 Social
Index(SM), and as investment manager, Mellon Equity, to manage the investments
of the Portfolio on a day to day basis. See "MANAGEMENT--Adviser" and
"MANAGEMENT--Manager" in the Prospectus and "MANAGEMENT OF THE FUND AND THE
PORTFOLIO--Adviser and Manager" in the Statement of Additional Information for
a description of the current agreements with KLD and Mellon Equity. DSI is a
newly created management company formed by the principals of KLD and other
investment company and marketing professionals.
As part of the management restructuring, the Board of Trustees of the Fund
has approved a Sponsorship Agreement with DSI pursuant to which DSI will
provide the Fund with centralized administration and management functions
(other than the provision of investment advice). For its services under the
Sponsorship Agreement, DSI will receive a fee equal on an annual basis to 0.50%
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,
0.98% of the average daily net assets of the Fund for its current fiscal year.
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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 Broker-Dealer Services, Inc. ("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 (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 (including the Fund's share of
the Portfolio's expenses, but 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 consent 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. The table in the Expense Summary showing the aggregate annual
operating expenses of the Fund and the Portfolio does not reflect this one time
payment to Signature by the Fund of $550,000, nor the expenses incurred by the
Fund in connection with the termination of such agreements with Signature,
which are considered to be extraordinary expenses.
Signature currently serves as distributor and administrator of the Fund,
and serves as Placement Agent and provides administrative services to the
Portfolio, and intends to assist in the transition to the new management
structure.
"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 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.
