<PAGE>
As filed with the Securities and Exchange Commission on November 25, 1998.
Registration Nos. 33-29180, 811-5823
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 12
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14
DOMINI SOCIAL EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
11 West 25th Street, New York, NY 10010
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 212-352-9200
Amy L. Domini
Domini Social Investments LLC
11 West 25th Street
New York, NY 10010
(Name and Address of Agent for Service)
Copy To
Roger P. Joseph, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 27, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number of its shares of beneficial
interest (without par value) pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed the Notice required by Rule 24f-2 on
or about September 30, 1998 for Registrant's fiscal year ended July 31, 1998.
Domini Social Index Portfolio has also executed this registration statement.
<PAGE>
DOMINI SOCIAL EQUITY FUND
CROSS REFERENCE SHEET
(As required by Rule 495)
<TABLE>
<CAPTION>
Item Number Statement of Additional
Form N-1A, Part A Prospectus Caption Information Caption
<S> <C> <C>
1 Front Cover Page *
2 Expense Summary *
3 Financial Highlights; Performance Information
Performance Information
4 Front Cover Page; Investment *
Objective and Policies
5 The Fund; Management; Manager, *
Submanager, Sponsor; Service
Organizations, Transfer Agent
and Custodian; Back Cover Page;
Other Information Concerning
Shares of the Fund-Expenses
5A Not Applicable *
6 Other Information Concerning Voting Rights and Liabilities
Shares of the Fund-Description
of Shares, Voting Rights and
Liabilities; Service
Organizations, Transfer Agent
and Custodian; Other
Information Concerning Shares
of the Fund-Dividends and
Capital Gains Distributions;
Tax Matters
7 Purchases and Redemptions of *
Shares-Purchases, Automatic
Investment Plan, Individual
Retirement Accounts; Other
Information Concerning Shares
of the Fund-Net Asset Value,
Distribution Plan and
Agreement; Service
Organizations, Transfer Agent
and Custodian
8 Purchases and Redemptions of *
Shares-Redemptions, Systematic
Withdrawal Plan
9 Not Applicable *
Item Number Statement of Additional
Form N-1A, Part B Prospectus Caption Information Caption
10 * Front Cover Page
11 * Front Cover Page
<PAGE>
12 * The Fund
13 Investment Objective and Investment Objective,
Policies Policies and
Restrictions
14 * Management of the Fund
and the Portfolio-
Trustees of the Fund and
the Portfolio, Officers
15 * Management of the Fund
and the Portfolio-
Trustees of the Fund and
the Portfolio, Officers
16 Other Information Concerning *
Shares of the Fund-Expenses
Management of the Fund- Management of the Fund
Administrator, Sponsor and the Portfolio-
Manager and Submanager,
Sponsor
Purchases and Redemptions of Management of the Fund
Shares-Distribution Plan and and the Portfolio-
Agreement Distributor
Service Organizations, Transfer Management of the Fund
Agent and Custodian-Transfer and Portfolio; Transfer
Agent and Custodian; Back Cover Agent, Custodian and
Page Service Organizations;
Independent Auditors;
Back Cover Page
* Management of the Fund
and the Portfolio-
Distributor
17 * Portfolio Transactions
and Brokerage
Commissions
18 Other Information Concerning Description of Shares,
Shares of the Fund-Description Voting Rights and
of Shares, Voting Rights and Liabilities
Liabilities
19 Purchases and Redemptions of Management of the Fund
Shares; Other Information and the Portfolio-
Concerning Shares of the Fund- Transfer Agent,
Net Asset Value Custodian and Service
Organizations
20 Tax Matters Taxation
21 * Management of the Fund
and the Portfolio-
Distributor
22 Performance Information Performance Information
23 * Financial Statements
</TABLE>
Form N-1A, Part C
Information required to be included in Part C is set forth under the
appropriately numbered item in Part C of this registration statement.
<PAGE>
PROSPECTUS
November 27, 1998
DOMINI SOCIAL EQUITY FUND
The investment objective of the Domini Social Equity Fund (the "Fund") is to
provide its shareholders with long-term total return which corresponds to the
total return performance of the Domini 400 Social IndexSM (the "Domini Social
Index"), an index comprised of stocks selected according to social criteria. The
Fund seeks to achieve its investment objective by investing all of its
investable assets in the Domini Social Index Portfolio (the "Portfolio"), a
diversified open-end management investment company having the same investment
objective as the Fund. The Portfolio invests in the common stocks included in
the Domini 400 Social IndexSM. There can, of course, be no assurance that the
Fund will achieve its investment objective.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
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<S> <C>
Investment in the Fund................................................................... 2
The Fund................................................................................. 2
Expense Summary.......................................................................... 3
Financial Highlights..................................................................... 5
Performance Information.................................................................. 6
Investment Objective and Policies........................................................ 7
Management............................................................................... 12
Purchases and Redemptions of Shares...................................................... 14
Tax Matters.............................................................................. 17
Other Information Concerning Shares of the Fund.......................................... 18
Service Organizations, Transfer Agent and Custodian...................................... 21
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The manager of the Portfolio is Domini Social Investments LLC . The
investment submanager of the Portfolio is Mellon Equity Associates. The sponsor
of the Fund is Domini Social Investments LLC and the distributor of the Fund is
Signature Broker-Dealer Services, Inc. ("Distributor"). INVESTMENTS IN THE FUND
ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. SHARES OF THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK, AND THE SHARES
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
FEDERAL, STATE OR OTHER GOVERNMENTAL AGENCY.
"Domini" and "Domini 400 Social Index" are service marks of Kinder,
Lydenberg, Domini & Co., Inc.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor ought to know before investing. The Fund has filed
with the Securities and Exchange Commission ("SEC") a Statement of Additional
Information, dated November 27, 1998, as amended from time to time, which
contains more detailed information about the Fund and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the Statement of
Additional Information ("SAI") without charge by contacting the distributor (see
back cover for address and phone number).
THE SEC MAINTAINS A WEBSITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE SAI,
MATERIAL INCORPORATED BY REFERENCE, AND OTHER INFORMATION REGARDING THE FUND AND
THE PORTFOLIO.
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PORTFOLIO. THE FUND INVESTS IN THE
PORTFOLIO THROUGH A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE
"SPECIAL INFORMATION CONCERNING THE MASTER-FEEDER INVESTMENT FUND STRUCTURE"
HEREIN.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
INVESTMENT IN THE FUND
The Fund seeks to provide its shareholders with long-term total return which
corresponds to the total return performance of the Domini 400 Social IndexSM, an
index comprised of stocks selected according to social criteria. The Fund may be
appropriate, therefore, for investors who are willing to ride out stock market
fluctuations in pursuit of long-term returns. Because the Fund seeks to track,
rather than exceed, the performance of a particular index, the Fund is not
managed in the same way as other mutual funds. In particular, the manager
generally does not judge the merits of any particular stock as an investment.
Therefore, investors should not expect to achieve the potentially greater
results that could be obtained by a fund that aggressively seeks growth.
The value of an investment in the Fund varies from day to day, generally
reflecting changes in the financial condition of the companies in which the
Portfolio invests, general market conditions and political and economic factors.
Stock prices can fluctuate dramatically in response to these and other factors
or speculation about these factors. Over the long term, stocks have generally
shown greater growth potential than other types of securities. However, when you
sell your Fund shares, they may be worth more or less than what you paid for
them. Like any mutual fund, you may lose money if you invest in the Fund.
Potential investors should note that because the Portfolio seeks to be fully
invested in the stocks comprising the Domini 400 Social IndexSM, the Fund is not
a balanced investment plan. You should carefully consider your investment
objectives and risk tolerance before making a decision to invest in the Fund.
THE FUND
Domini Social Equity Fund is a no-load, diversified, open-end management
investment company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on June 7, 1989. Although shares of the Fund are
sold without a sales load, Signature Broker-Dealer Services, Inc. ("Signature"
or the "Distributor") receives a distribution fee from the Fund pursuant to a
Distribution Plan adopted in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund offers to buy back
(redeem) its shares from its shareholders at any time at net asset value.
Shares of the Fund are sold continuously by the Distributor. The minimum
initial investment is $1,000, except that the minimum initial investment for an
investor investing through an automatic investment plan is $500 and the minimum
initial investment for an Individual Retirement Account ("IRA") is $250. See
"Purchases and Redemptions of Shares" herein.
Proceeds from the sale of shares of the Fund are invested in the Portfolio
which then purchases securities in accordance with its investment objective and
policies. Domini Social Investments LLC ("DSIL" or the "Manager") is the
Portfolio's manager and provides investment supervisory and administrative
services to the Portfolio. Mellon Equity Associates ("Mellon Equity" or the
"Submanager") is the Portfolio's investment submanager. DSIL is also the sponsor
("Sponsor") of the Fund and provides administrative services to the Fund. The
Boards of Trustees of the Fund and of the Portfolio provide broad supervision
over the affairs of the Fund and of the Portfolio, respectively. The Trustees
who are not "interested persons" as defined in the 1940 Act (the "Independent
Trustees") of the Fund, are the same
2
<PAGE>
as the Independent Trustees of the Portfolio. A majority of the Fund's Trustees
are not affiliated with the Manager or the Submanager. For further information
about the Trustees of the Fund and the Portfolio, see "Management of the Fund
and the Portfolio" in the Statement of Additional Information.
Kinder, Lydenberg, Domini & Co., Inc. ("KLD"), the former investment adviser
of the Portfolio and an affiliate of DSIL, determines the composition of the
Domini 400 Social Index (which determines the composition of the Portfolio's
securities). The following persons are primarily responsible for the development
and maintenance of the Domini 400 Social IndexSM: Amy L. Domini, Founder of KLD,
since 1988, Steven D. Lydenberg, Director of Research, KLD, since 1990; and
Peter D. Kinder, President, KLD, since 1988. The Submanager manages the
investments of the Portfolio from day to day in accordance with the Portfolio's
investment objective and policies.
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 (including the Fund's share of Portfolio expenses), 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.
The purpose of the expense table is to help investors understand the various
costs and expenses that a shareholder will bear directly or indirectly.. See
"Management" and "Other Information Concerning Shares of the Fund -- Expenses"
for more information with respect to the expenses of the Fund and the Portfolio.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES............................. None
ANNUAL OPERATING EXPENSES:
Advisory and Management Fees............................. 0.19%(1)
12b-1 Fees............................................... 0.18%(2)
Other Expenses
-- Administrative Services and Sponsorship Fees........ 0.46%(3)
-- Other Expenses...................................... 0.15%(4)
-----
Total Operating Expenses................................. 0.98%(3)(4)(5)
-----
-----
</TABLE>
- ------------------------
(1) Under the Management Agreement between the Portfolio and DSIL, DSIL's fee
for advisory and administrative services to the Portfolio is 0.20% of the
average daily net assets of the Portfolio. Currently, DSIL is waiving its
fee 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 0.20% of the average
daily net assets of the Portfolio. This fee waiver is voluntary and may be
reduced or terminated at any time.
(2) The percentage represents actual expenditures, expressed as a percentage of
average daily net assets, under the Fund's Distribution Plan during the
fiscal year ended July 31, 1998. The Distribution Plan permits reimbursement
for expenses incurred by the Distributor of up to 0.25% of the Fund's
average daily net assets. See "Other Information Concerning Shares of the
Fund -- Distribution Plan and Agreement".
(3) Under the Sponsorship Agreement between DSIL and the Fund, DSIL's fee for
administrative and sponsorship services is 0.50% of the average daily net
assets of the Fund. Currently, DSIL is reducing its fee to the extent
necessary to keep the aggregate annual operating expenses of the
3
<PAGE>
Fund (including the Fund's share of the Portfolio's expenses but excluding
brokerage fees and commissions, interest, taxes and other extraordinary
expenses) at no greater than 0.98% of the average daily net assets of the
Fund. This fee waiver is voluntary and may be reduced or terminated at any
time. For the fiscal year ended July 31, 1998, it was not necessary for DSIL
to waive its sponsor fee.
(4) Other Expenses and Total Operating Expenses do not reflect the payment by
the Fund of $650,000 in connection with termination of the expense payment
arrangements with Signature, including a payment to Signature of $550,000
and other expenses incurred by the Fund in connection with the termination
of such arrangements. Had such nonrecurring expenses been included, Other
Expenses and Total Operating Expenses would be 0.34% and 1.17%,
respectively.
(5) Without the fee waivers described in footnotes (1) and (3) above, it is
estimated that the aggregate annual operating expenses of the Fund
(including the Fund's share of the Portfolio's expenses) would be 0.99% of
the average daily net assets of the Fund assuming the same level of assets
and ordinary expenses of the Fund as existed during the fiscal year ended
July 31, 1998.
The purpose of the expense table is to help investors understand the various
costs and expenses that a shareholder will bear directly or indirectly. See
"Management" and "Other Information Concerning Shares of the Fund -- Expenses"
for more information with respect to the expenses of the Fund and the Portfolio.
<TABLE>
<S> <C> <C>
EXAMPLE:
A shareholder of the Fund would pay the following expenses on a
$1,000 investment in the Fund, assuming (1) 5% annual return and (2)
redemption at the end of:
1 year.......................................................... $ 10
3 years......................................................... $ 31
5 years......................................................... $ 54
10 years......................................................... $ 120
</TABLE>
The Fund pays a distribution fee at an annual rate of up to 0.25% of the
Fund's average daily net assets in reimbursement of, or in anticipation of,
expenses incurred by the Distributor in connection with the sale of shares of
the Fund. LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF
THE MAXIMUM DISTRIBUTION CHARGES PERMITTED BY THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. The Fund may pay fees to Service Organizations (as
defined below) in amounts up to an annual rate of 0.25% of the daily net asset
value of shares of the Fund owned by shareholders with whom the Service
Organization has a servicing relationship. See "Other Information Concerning
Shares of the Fund -- Distribution Plan and Agreement" and "Service
Organizations, Transfer Agent and Custodian".
THE "EXAMPLE" SET FORTH ABOVE IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES AND
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund's Trustees believe that the aggregate per share expenses of the
Fund and the Portfolio will be less than or approximately equal to the expenses
which the Fund would incur if it retained the services of an investment manager
and an investment submanager and invested directly in the types of securities
being held by the Portfolio.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated
periods has been audited by KPMG Peat Marwick LLP, independent auditors, whose
report thereon is included in the Fund's annual report which is incorporated by
reference in the Statement of Additional Information. This information should be
read in conjunction with the financial statements incorporated by reference in
the Statement of Additional Information.
The Fund's Annual Report includes a discussion of those factors, strategies
and techniques that materially affected the Fund's performance during the fiscal
year ended July 31, 1998, as well as certain related information. A copy of the
Annual Report will be made available without charge upon request.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JULY 31
-----------------------------------------------------------------
1998 1997 1996 1995
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 25.43 $ 16.70 $ 14.85 $ 12.13
------------- -------------- ------------- -------------
Income from investment operations:
Net investment income........................... 0.01 0.11 0.16 0.17
Net realized and unrealized gain (loss) on
investments.................................... 5.48 8.85 1.93 2.83
------------- -------------- ------------- -------------
Total from investment operations.................. 5.49 8.96 2.09 3.00
------------- -------------- ------------- -------------
Less distributions and dividends:
Dividends to shareholders from net investment
income......................................... (0.01) (0.11) (0.16) (0.20)
Distributions to shareholders from net realized
gain........................................... (0.05) (0.12) (0.08) (0.08)
------------- -------------- ------------- -------------
Total distributions............................... (0.06) (0.23) (0.24) (0.28)
------------- -------------- ------------- -------------
Net asset value, end of period.................... $ 30.86 $ 25.43 $ 16.70 $ 14.85
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Ratios/supplemental data:
Total return.................................... 21.58% 54.01% 14.11% 25.10%
Net assets, end of period (in 000's)............ $501,894 $212,310 $80,915 $54,638
Ratio of expenses to average net assets......... 1.17%(1) 0.98%(2) 0.98%(2) 0.90%(3)
Ratio of net investment income to average net
assets......................................... 0.07%(1) 0.62%(2) 1.01%(2) 1.38%(3)
<CAPTION>
FOR THE PERIOD
AUGUST 10, 1990
TO JULY 31,
1994 1993 1992 1991
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 12.00 $ 11.06 $ 9.95 $ 10.00
------------- ------------- ------------- -------
Income from investment operations:
Net investment income........................... 0.17 0.14 0.12 0.02
Net realized and unrealized gain (loss) on
investments.................................... 0.18 0.97 1.10 (0.07)
------------- ------------- ------------- -------
Total from investment operations.................. 0.35 1.11 1.22 (0.05)
------------- ------------- ------------- -------
Less distributions and dividends:
Dividends to shareholders from net investment
income......................................... (0.15) (0.15) (0.11) --
Distributions to shareholders from net realized
gain........................................... (0.07) (0.02) -- --
------------- ------------- ------------- -------
Total distributions............................... (0.22) (0.17) (0.11) --
------------- ------------- ------------- -------
Net asset value, end of period.................... $ 12.13 $ 12.00 $ 11.06 $ 9.95
------------- ------------- ------------- -------
------------- ------------- ------------- -------
Ratios/supplemental data:
Total return.................................... 2.90% 10.00% 12.30% (0.50)%
Net assets, end of period (in 000's)............ $31,369 $17,229 $ 7,174 $1,740
Ratio of expenses to average net assets......... 0.75%(3) 0.75%(3) 0.75%(3) 0.75%(4)
Ratio of net investment income to average net
assets......................................... 1.67%(3) 1.41%(3) 1.53%(3) 1.49%(4)
</TABLE>
- ------------------------------
(1) Reflects a non-recurring payment by the Fund of $650,000 in connection with
the termination of the expense payment arrangements with the Fund's former
administrator and other such expenses incurred by the Fund in connection
with the termination of such arrangements. Had such non-recurring expenses
not been included, expenses and net investment income to average net assets
would have been 0.98% and 0.27%, respectively.
(2) Had the expense payment agreement not been in place the ratio of expenses
and net investment income to average daily net assets would have been 0.84%
and 0.76%, respectively, for the year ended July 31, 1997; and 1.07% and
0.92%, respectively for the year ended July 31, 1996.
(3) Reflects a voluntary waiver of fees by Signature and KLD due to limitations
set forth in an expense payment agreement. Had Signature and KLD not waived
their fees, the ratios of net investment income and expenses to average net
assets for the years ended July 31, 1995, 1994 and 1993 would have been
1.13% and 1.15%, 1.39% and 1.03% and 1.26% and 0.90%, respectively.
(4) Annualized.
5
<PAGE>
PERFORMANCE INFORMATION
Performance information concerning the Fund may from time to time be used in
advertisements, shareholder reports or other communications to shareholders. The
Fund may provide period and average annualized "total rates of return" with
respect to the Fund. The "total rate of return" refers to the change in the
value of an investment over a stated period based on any change in net asset
value per share and includes the value of any shares purchasable with any
dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An average annualized total rate of
return is a compounded total rate of return which assumes that the period total
rate of return is generated over a 52-week period, and that all dividends and
capital gains distributions are reinvested. An annualized total rate of return
will be slightly higher than a period total rate of return if the period is
shorter than one year, because of the effect of compounding.
The table that follows sets forth average annual total return information
for the periods indicated
<TABLE>
<CAPTION>
7/31/98 9/30/98
----------- -----------
<S> <C> <C>
1 Year:.................................................................... 21.58% 11.32%
5 Years:................................................................... 22.44% 19.33%
Commencement of Investment in the Portfolio* to date....................... 18.63% 16.60%
</TABLE>
* The Fund commenced investment in the Portfolio on June 3, 1991.
The Fund may provide "yield" quotations with respect to the Fund. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day or one-month period (which period shall be stated in any
advertisement or communications with a shareholder). This income is then
"annualized", that is, the amount of income generated by the investment over the
period is assumed to be generated over a 52-week period and is shown as a
percentage of investment. A "yield" quotation, unlike a total rate of return
quotation, does not reflect changes in net asset value.
From time to time the Fund may also quote fund rankings from various
sources, such as Lipper Analytical Services, Inc. and Morningstar, Inc. and may
compare its performance to that of the Domini 400 Social IndexSM and various
other unmanaged securities indices, such as the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") and the Dow Jones Industrial Average.
"Standard & Poor-Registered Trademark-", "S&P-Registered Trademark-" and
"Standard & Poor's 500-Registered Trademark-" are trademarks of McGraw Hill
Companies.
See the Statement of Additional Information for further information
concerning the calculation of yield and any total rate of return quotations.
SINCE THE FUND'S YIELD AND TOTAL RATE OF RETURN QUOTATIONS ARE BASED ON
HISTORICAL EARNINGS AND SINCE SUCH YIELD AND RATES OF RETURN FLUCTUATE OVER
TIME, SUCH QUOTATIONS SHOULD NOT BE CONSIDERED AS AN INDICATION OR
REPRESENTATION OF THE FUTURE PERFORMANCE OF THE FUND.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with long-term total return (reflecting both dividend and price
performance of the Fund) which corresponds to the total return performance of
the Domini 400 Social IndexSM (referred to herein as the "Index" or the "Domini
Social Index"). There can, of course, be no assurance that the Fund will achieve
its investment objective. The investment objective of the Fund may be changed
without approval by the Fund's shareholders.
6
<PAGE>
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has the same
investment objective as the Fund. The Portfolio seeks to achieve its investment
objective by investing substantially all of its assets in the common stocks
comprising the Domini Social Index. The Portfolio will approximate the
weightings of securities held by the Portfolio to the weightings of the stocks
in the Domini Social Index, except as described below, and will seek a
correlation between the weightings of securities held by the Portfolio and the
weightings of the stocks in the Domini Social Index of 0.95 or better. A figure
of 1.0 would indicate a perfect correlation. As of September 30, 1998, the
correlation between the weightings of securities held by the Portfolio and the
weightings of the stocks in the Domini Social Index was 0.99. To the extent
practicable, the Portfolio will attempt to be fully invested. The ability of the
Fund to duplicate the performance of the Domini Social Index by investing in the
Portfolio will depend to some extent on the size and timing of cash flows into
and out of the Fund and the Portfolio as well as the Fund's and the Portfolio's
expenses. Adjustments in the securities holdings of the Portfolio to accommodate
cash flows will track the Domini Social Index to the extent practicable, but
this will result in brokerage expenses.
SOCIAL CRITERIA -- The Domini Social Index was developed and is currently
maintained by KLD. It is a common stock index comprised of the stocks of
approximately 400 companies which meet certain social criteria. The weightings
of the stocks comprising the Domini Social Index are based upon market
capitalization. The criteria, and the application thereof, used in developing
and maintaining the Domini Social Index involve the subjective judgment of KLD.
KLD, based on available data, seeks to exclude the following types of companies:
firms that derive more than 2% of their gross revenues from the sale of military
weapons; firms that derive any revenues from the manufacture of tobacco products
or alcoholic beverages; firms that derive any revenues from gambling
enterprises; and firms that have an ownership share in, or operate, nuclear
power plants. KLD also considers criteria such as corporate citizenship,
employee relations, environmental performance, and product-related issues when
evaluating stocks for inclusion in the Domini Social Index. The corporate
citizenship criteria include a company's record with regard to its philanthropic
activities and its community relations in general. The employee relations
criteria include a company's record with regard to labor matters, workplace
safety, equal employment opportunity, employee benefit programs, and meaningful
participation in company profits either through stock purchase or profit sharing
plans. The environmental performance criteria include a company's record with
regard to fines or penalties, waste disposal, toxic emissions, efforts in waste
reduction and emissions reduction, recycling, and environmentally beneficial
fuels, products and services. The product-related criteria include a company's
record with regard to product safety, marketing practices, and commitment to
quality.
The Manager intends to vote proxies of companies included in the Portfolio
consistent with the social criteria used in developing and maintaining the
Domini Social Index.
INDEX MANAGEMENT -- The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities included
in the Domini Social Index. Moreover, inclusion of a stock in the Domini Social
Index does not imply an opinion by KLD or the Manager as to the merits of that
specific stock as an investment. However, KLD and the Manager believe that
enterprises which exhibit a social awareness, based on the criteria described
above, should be better prepared to meet future societal
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needs for goods and services and may also be less likely to incur certain legal
liabilities that may be incurred when a product or service is determined to be
harmful, and that such enterprises should over the longer term be able to
provide a positive return to investors.
In selecting stocks for inclusion in the Domini Social Index:
1. KLD evaluated, in accordance with the social criteria described
above, each of the companies the stocks of which comprise the S&P 500. If a
company whose stock was included in the S&P 500 met KLD's social criteria
and met KLD's further criteria for industry diversification, financial
solvency, market capitalization, and minimal portfolio turnover, it was
included in the Domini Social Index. As of July 31, 1998, of the 500
companies whose stocks comprised the S&P 500, approximately 48% were
included in the Domini Social Index.
2. The remaining stocks comprising the Domini Social Index (I.E., those
which are not included in the S&P 500) were selected based upon KLD's
evaluation of the social criteria described above, as well as upon KLD's
criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover. Because of the social
criteria applied in the selection of stocks comprising the Domini Social
Index, industry sector weighting in the Domini Social Index may vary
materially from the industry weightings in other stock indices, including
the S&P 500, and certain industry sectors will be excluded altogether.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole. Since some industries are characterized by
companies of relatively small stock capitalization, the S&P 500 does not
comprise the 500 largest companies listed on the New York Stock Exchange. Not
all stocks included in the S&P 500 are listed on the New York Stock Exchange.
However, the total market value of the S&P 500 as of July 31, 1998 represented
approximately 83% of the aggregate market value of common stocks traded on the
New York Stock Exchange.
Inclusion of a stock in the S&P 500 in no way implies an opinion by S&P as
to its attractiveness as an investment, nor is S&P a sponsor of or otherwise
affiliated with the Fund or the Portfolio.
Some of the stocks included in the Domini Social Index may be stocks of
foreign issuers (provided that the stocks are traded in the United States in the
form of American Depositary Receipts or similar instruments the market for which
is denominated in United States dollars). Securities of foreign issuers may
represent a greater degree of risk (I.E., as a result of exchange rate
fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (I.E., market price per share times
the number of shares outstanding). Because of this weighting, as of July 31,
1998 approximately 45% of the Domini Social Index was comprised of the 20
largest companies in the Domini Social Index.
KLD may exclude from the Domini Social Index stocks issued by companies
which are in bankruptcy or whose bankruptcy KLD believes may be imminent. KLD
may also remove from the Domini Social Index stocks issued by companies which no
longer meet its investment criteria.
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The Portfolio intends to readjust its securities holdings periodically such
that those holdings will correspond, to the extent reasonably practicable, to
the Domini Social Index both in terms of composition and weighting. The timing
and extent of adjustments in the holdings of the Portfolio, and the extent of
the correlation of the holdings of the Portfolio with the Domini Social Index,
will reflect the Submanager's judgment as to the appropriate balance between the
goal of correlating the holdings of the Portfolio with the composition of the
Domini Social Index, and the goals of minimizing transaction costs and keeping
sufficient reserves available for anticipated redemptions of Fund shares. To the
extent practicable, the Portfolio will seek a correlation between the weightings
of securities held by the Portfolio to the weightings of the securities in the
Domini Social Index and will seek to match, before expenses, a correlation
between the performance of the Fund and the performance of the Domini Social
Index of 0.95 or better. The Board of Trustees of the Portfolio will receive and
review, at least quarterly, a report prepared by the Submanager comparing the
performance of the Fund and the Portfolio with that of the Domini Social Index,
and comparing the composition and weighting of the Portfolio's holdings with
those of the Domini Social Index, and will consider what action, if any, should
be taken in the event of a significant variation between the performance of the
Fund or the Portfolio, as the case may be, and that of the Domini Social Index,
or between the composition and weighting of the Portfolio's securities holdings
with those of the stocks comprising the Domini Social Index. If the correlation
between the weightings of securities held by the Portfolio and the weightings of
the stocks in the Domini Social Index or the correlation between the performance
of the Fund, before expenses, and the performance of the Domini Social Index
falls below 0.95, the Board of Trustees will review with the Submanager methods
for increasing such correlation, such as through adjustments in securities
holdings of the Portfolio.
The Portfolio may invest cash reserves in short-term debt securities (I.E.,
securities having a remaining maturity of one year or less) issued by agencies
or instrumentalities of the United States Government, bankers' acceptances,
commercial paper or certificates of deposit, provided that the issuer satisfies
certain social criteria. The Portfolio does not currently intend to invest in
direct obligations of the United States Government. Short-term debt securities
purchased by the Portfolio will be rated at least Prime-1 by Moody's Investors
Service, Inc. or A-1+ or A-1 by S&P or, if not rated, determined to be of
comparable quality by the Portfolio's Board of Trustees. The Portfolio's policy
is to hold its assets in such securities pending readjustment of its portfolio
holdings of stocks comprising the Domini Social Index and in order to meet
anticipated redemption requests. Such investments are not intended to be used
for defensive purposes in periods of anticipated market decline.
The annual portfolio turnover rates of the Portfolio for the fiscal years
ended July 31, 1997 and July 31, 1998 were 1% and 5%, respectively. The
Portfolio's average brokerage commission rates paid per share for the fiscal
years ended July 31, 1997 and July 31, 1998 were $0.05 and $0.04, respectively.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers is to seek the best price and execution. The Portfolio may
pay higher commission rates than the lowest available when the Manager or
Submanager believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. Neither the Portfolio nor the Fund will engage in brokerage
transactions with the Manager, the Submanager or the Sponsor or any of their
respective affiliates or any affiliate of the Fund or the Portfolio. For further
discussion regarding securities trading by the Portfolio, see the Statement of
Additional Information.
Consistent with applicable regulatory policies, including those of the Board
of Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Portfolio may make loans of
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<PAGE>
its securities to member banks of the Federal Reserve System and to
broker-dealers. Such loans would be required to be secured continuously by
collateral consisting of securities, cash or cash equivalents maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on three days' notice.
During the existence of a loan, the Portfolio would continue to collect the
equivalent of the dividends paid by the issuer on the securities loaned and
would also receive interest on investment of cash collateral. The Portfolio may
pay finder's and other fees in connection with securities loans. Loans of
securities involve a risk that the borrower may fail to return the securities or
may fail to provide additional collateral.
Although it has no current intention to do so, the Portfolio may make short
sales of securities or maintain a short position, if at all times when a short
position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.
SPECIAL INFORMATION CONCERNING THE MASTER FEEDER INVESTMENT FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objective as the Fund. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions as the Fund and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Manager at 212-352-9200.
The investment objective of the Fund may be changed without the approval of
the Fund's shareholders, but not without written notice thereof to shareholders
thirty days prior to implementing the change. If there were a change in the
Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then-current financial
positions and needs. The investment objective of the Portfolio may also be
changed without the approval of the investors in the Portfolio, but not without
written notice thereof to the investors in the Portfolio (and notice by the Fund
to its shareholders) 30 days prior to implementing the change. There can, of
course, be no assurance that the investment objective of either the Fund or the
Portfolio will be achieved. See "Investment Restrictions" in the Statement of
Additional Information for a description of the fundamental policies of the Fund
and of the Portfolio that cannot be changed without approval by the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund or the Portfolio, respectively. Except as stated otherwise, all
investment guidelines, policies and restrictions described herein and in the
Statement of Additional Information are non-fundamental.
The Portfolio, in which all of the investable assets of the Fund are
invested, is organized as a trust under the laws of the State of New York. The
Portfolio's Declaration of Trust provides that the Fund and
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<PAGE>
other entities investing in the Portfolio (I.E., other investment companies,
insurance company separate accounts and common and commingled trust funds) will
each be liable for all obligations of the Portfolio. However, the risk of the
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Fund's Trustees
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund's investing in the Portfolio.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. (However, this
possibility exists as well for traditionally structured funds which have large
or institutional investors.) Also, funds with a greater pro rata ownership in
the Portfolio could have effective voting control of the operations of the
Portfolio. Subject to exceptions that are not inconsistent with applicable rules
or policies of the Securities and Exchange Commission, whenever the Fund is
requested to vote on matters pertaining to the Portfolio, the Fund will hold a
meeting of shareholders of the Fund and will cast all of its votes in the same
proportion as the votes of the Fund's shareholders. Fund shareholders who do not
vote will not affect the Fund's votes at the Portfolio meeting. The percentage
of the Fund's votes representing Fund shareholders not voting will be voted by
the Trustees of the Fund in the same proportion as the Fund shareholders who do,
in fact, vote. Certain changes in the Portfolio's investment objective, policies
or restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If securities
are distributed, the Fund could incur brokerage, tax or other charges in
converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Fund determines that it is in the best interests of the
Fund to do so. Upon any such withdrawal, the Board of Trustees would consider
what action might be taken, including the investment of all the assets of the
Fund in another pooled investment entity having the same investment objective as
the Fund or the retention of an investment adviser to manage the Fund's assets
in accordance with the investment policies described above with respect to the
Portfolio. In the event the Trustees of the Fund were unable to find a
substitute investment company in which to invest the Fund's assets and were
unable to secure directly the services of an investment manager and investment
submanager, the Trustees will seek to determine the best course of action.
For more information about the Portfolio's policies, management and expenses
see "Investment Objective and Policies", "Management" and "Other Information
Concerning Shares of the Fund -- Expenses". For information about the
Portfolio's investment restrictions see the Statement of Additional Information.
------------------------
As a matter of fundamental policy, the Fund will invest all of its
investable assets (either directly or through the Portfolio) in one or more of:
(i) stocks comprising an index of securities selected applying social criteria,
which initially will be the Domini Social Index, (ii) short-term debt securities
of issuers
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<PAGE>
which meet social criteria, (iii) cash, and (iv) options on equity securities.
This fundamental policy cannot be changed without the approval of the holders of
a majority of the Fund's shares (which, as used in this Prospectus, means the
lesser of (a) more than 50% of the outstanding shares of the Fund, or (b) 67% or
more of the outstanding shares of the Fund present at a meeting at which holders
of more than 50% of the Fund's outstanding shares are represented in person or
by proxy). Except for this fundamental policy, investor approval is not required
to change the Fund's or the Portfolio's investment objective or any of the
investment policies described above.
The Statement of Additional Information includes a discussion of other
investment policies and a listing of specific investment restrictions which
govern the Portfolio's and the Fund's investment policies. Certain of the
investment restrictions listed in the Statement of Additional Information may
not be changed by the Portfolio without the approval of the Fund and the other
investors in the Portfolio or by the Fund without the approval of the
shareholders of the Fund. If a percentage or rating restriction on investment or
utilization of assets is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
Portfolio's total assets or the value of the Portfolio's securities or a later
change in the rating of a security held by the Portfolio will not be considered
a violation of policy.
Expenses of the Portfolio with respect to investment management and
administrative services, investment submanagement services and sponsorship
services are described herein under "Management -- Manager, -- Submanager, and
- -- Sponsor", respectively.
MANAGEMENT
The Boards of Trustees of the Fund and the Portfolio provide broad
supervision over the affairs of the Fund and the Portfolio, respectively. The
Fund has retained the services of DSIL as Sponsor, but has not retained the
services of an investment manager or investment submanager since the Fund seeks
to achieve its investment objective by investing all of its investable assets in
the Portfolio. The Portfolio has retained the services of DSIL as investment
manager and Mellon Equity as investment submanager.
MANAGER
DSIL, a Massachusetts limited liability company, provides investment
management and administrative services to the Portfolio pursuant to a Management
Agreement. DSIL has been registered as an investment adviser under the
Investment Advisers Act of 1940 since 1997. The services provided by the Manager
consist of investment supervisory services, overall operational support and
administrative services. The administrative services include the provision of
general office facilities and supervising the overall administration of the
Portfolio. For its services under the Management Agreement, the Manager receives
from the Portfolio a fee accrued daily and paid monthly at an annual rate equal
to 0.20% of the Portfolio's average daily net assets, on an annualized basis for
the Portfolio's then-current fiscal year. Currently, DSIL is waiving its fee 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 0.20% of the average daily net assets
of the Portfolio. This fee waiver is voluntary and may be reduced or terminated
at any time.
Prior to October 22, 1997, KLD, as the Portfolio's former investment
adviser, received from the Portfolio a fee accrued daily and paid monthly at an
annual rate equal to 0.025% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then-current fiscal year. Additionally,
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<PAGE>
prior to October 22, 1997, KLD received from the Portfolio a fee accrued daily
and paid monthly at an annual rate equal to 0.025% of the average daily net
assets of the Portfolio for its then current fiscal year for administrative
services.
"DominiSM" and "Domini 400 Social IndexSM" are service marks of KLD which
are licensed to DSIL with the consent of Amy L. Domini. Pursuant to agreements
among DSIL, Amy L. Domini, and each of the Fund and the Portfolio, the Portfolio
may be required to discontinue use of these service marks if DSIL ceases to be
the Manager of the Portfolio or Ms. Domini withdraws her consent, and the Fund
may be required to discontinue the use of these service marks if either DSIL
ceases to be the Sponsor of the Fund or Ms. Domini withdraws her consent or if
either DSIL ceases to be the Manager of the Portfolio or the Fund ceases to
invest all of its assets in the Portfolio.
SUBMANAGER
Mellon Equity provides investment submanagement services to the Portfolio on
a day-to-day basis pursuant to a Submanagement Agreement with DSIL. Mellon
Equity does not determine the composition of the Domini Social Index.
Under the Submanagement Agreement, DSIL pays Mellon Equity an investment
submanagement fee equal on an annual basis to 0.10% of the average daily net
assets of the Portfolio. Prior to October 22, 1997, the Portfolio paid Mellon
Equity an investment management fee equal on an annual basis to 0.10% of the
average daily net assets of the Portfolio.
Mellon Equity is a Pennsylvania business trust founded in 1987 whose
beneficial owners are Mellon Bank N.A. and MMIP, Inc (a wholly owned subsidiary
of Mellon Bank Corporation ("Mellon Bank")), and with its principal offices at
500 Grant Street, Pittsburgh, PA 15258-0001. Mellon Equity has been registered
as an investment adviser under the Investment Advisers Act of 1940 since 1986.
Prior to 1987, the Submanager was part of the Equity Management Group of Mellon
Bank's Trust and Investment Department, which managed domestic equity,
tax-exempt and institutional pension assets since 1947. As of September 30,
1998, the Submanager had approximately $21.8 billion in assets under management.
The Portfolio is team managed and John R. O'Toole (a senior vice president
of Mellon Equity, and a CFA), is the team leader. He has been actively involved
in the portfolio management of the Portfolio since November 1994. He has been
employed by Mellon Equity and/or Mellon Bank as a portfolio manager for over
five years. Ms. Jocelin Reed (a vice president of Mellon Equity, and a CFA) is
responsible for the day to day management of the Portfolio since November 1996.
SPONSOR
Pursuant to a Sponsorship Agreement, DSIL provides the Fund with the
administrative personnel and services necessary to operate the Fund. In addition
to general administrative services and facilities for the Fund similar to those
provided by DSIL to the Portfolio under the Management Agreement, DSIL answers
questions from the general public and the media regarding the composition of the
Domini Social Index and the securities holdings of the Portfolio. For these
services and facilities, DSIL receives fees computed and paid monthly from the
Fund at an annual rate equal to 0.50% of the average daily net assets of the
Fund for the Fund's then-current fiscal year. Currently, DSIL is reducing its
fee to the extent necessary to keep the aggregate annual operating expenses of
the Fund (including the Fund's share of
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<PAGE>
the Portfolio's expenses but excluding brokerage fees and commissions, interest,
taxes and other extraordinary expenses) at no greater than 0.98% of the average
daily net assets of the Fund. For the fiscal year ended July 31, 1998, it was
not necessary for DSIL to waive its sponsor fee.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased without a sales load at the net asset
value next determined after an order for shares is received in good order by the
Fund's transfer agent provided such order is received prior to the close of
regular trading (normally 4:00 p.m. Eastern Time) on any day the New York Stock
Exchange is open for trading (a "Fund Business Day"). The minimum initial
investment in the Fund is $1,000, except that the minimum initial investment for
an investor who invests through an automatic investment plan is $500 and the
minimum initial investment for an IRA is $250. Except as noted below, there is a
$50 minimum on additional investments.
The Fund reserves the right to cease offering its shares for sale at any
time or to reject any order for the purchase of its shares.
For each shareholder of record, the Fund establishes an open account to
which all shares purchased are credited together with any dividends and capital
gains distributions which are paid in additional shares. See "Other Information
Concerning Shares of the Fund -- Dividends and Capital Gains Distributions".
Although most shareholders elect not to receive share certificates, certificates
for full shares can be obtained on specific written request to the Fund. No
certificates are issued for fractional shares.
Shares may be purchased directly from the Distributor or through Service
Organizations (see "Service Organizations" below) by clients of those Service
Organizations. If an investor purchases shares through a Service Organization,
the Service Organization must promptly transmit such order to the Fund so that
the order receives the net asset value next determined following receipt of the
order. Service Organizations may impose additional fees, account minimums, and
other requirements in addition to those imposed by the Fund. Investors wishing
to purchase shares through a Service Organization should contact that
organization directly for appropriate instructions. Other investors may purchase
Fund shares in the manner described below.
Payment by Check: Investors desiring to purchase shares of the Fund by mail
should complete an Account Application and mail the Application and a check (in
U.S. dollars), payable to "Domini Social Equity Fund", to the Fund at the
following address
Domini Social Equity Fund
P.O. Box 959
New York, New York 10159-0959
Payment by Wire: An investor desiring to purchase shares by a wire transfer
of funds should request its bank to transmit immediately available funds. The
information transmitted with the funds must include the investor's name and
address and a statement indicating whether a new account is being established by
such wire transfer or whether such wire transfer is being made by a shareholder
with an account with the Fund. If the initial purchase by an investor is by a
wire transfer of funds, an account
14
<PAGE>
number will be assigned to such investor and an Account Application must
subsequently be completed and mailed to the Fund. For purchases by wire
transfer, please call FSSI, the Fund's transfer agent (the "Transfer Agent"), at
1-800-582-6757 to obtain wire transfer instructions.
At the discretion of the Manager, and upon pre-approval shares of the Fund
may be purchased by exchanging securities acceptable to the Fund for shares of
the Fund. The Fund will not accept a security in exchange for Fund shares unless
(a) the security is consistent with the investment objective and policies of the
Fund and the Portfolio, and (b) the security is deemed acceptable by the Manager
and the Submanager. Securities offered in exchange for shares of the Fund will
be valued in accordance with the usual valuation procedure for the Fund. See
"Net Asset Value."
Investors making purchases through a Service Organization should be aware
that it is the responsibility of the Service Organization to transmit orders for
purchases of shares by its customers to the Transfer Agent and to deliver
required funds on a timely basis, in accordance with the procedures stated
above.
For further information on how to purchase shares of the Fund, an investor
should call 1-800-582-6757.
AUTOMATIC INVESTMENT PLAN
The Fund offers a plan for regularly investing specified dollar amounts
($25.00 minimum in monthly, quarterly, semi-annual or annual intervals) in the
Fund. The minimum initial investment for an investor investing through an
automatic investment plan is $500. If the Automatic Investment Plan is selected,
subsequent investments will be automatic and will continue until such time as
the Fund and the investor's bank are notified to discontinue further
investments. Due to the varying procedures to prepare, process and to forward
the bank withdrawal information to the Fund, there may be a delay between the
time of the bank withdrawal and the time the money reaches the Fund. The
investment in the Fund will be made at the net asset value per share determined
on the day that both the funds and bank withdrawal data are received in the form
required by the Fund. Further information about the plan and form may be
obtained from the Transfer Agent at 1-800-582-6757.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund may be used as a funding medium for an Individual
Retirement Account ("IRA"). The minimum initial investment for an IRA is $250;
the minimum subsequent investment is $50. IRAs are available to individuals who
receive compensation or earned income and their spouses whether or not they are
active participants in a tax-qualified or Government-approved retirement plan.
An IRA contribution by an individual who participates, or whose spouse
participates, in a tax-qualified or Government-approved retirement plan may not
be deductible depending upon various factors, including the individual's income.
Individuals also may establish an IRA to receive a "rollover" contribution of
distributions from another IRA or a qualified plan. Tax advice should be
obtained before planning a rollover. The fee for annual account maintenance and
full distribution for IRAs is $10 each.
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in its account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to the Fund. Redemptions will
therefore be effected on the same day the redemption order is received in good
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<PAGE>
order by the Fund provided such order is received on a Fund Business Day prior
to the time at which the net asset value of the Fund is determined. The proceeds
of a redemption will be paid by the Fund normally on the next Fund Business Day,
but in any event within seven days if all checks in payment for the purchase of
shares to be redeemed have been cleared by the Fund (which may take up to 15
days). Redemptions may be paid by the Fund by check or by wire transfer if the
appropriate box on the Account Application has been completed. Instructions for
wire redemptions are set forth in the Account Application. Shareholders who sell
shares by wire are charged a $10 wire transfer fee that will be deducted
directly from their proceeds. The minimum wire amount is $1,000. The minimum
wire amount and fee may be waived for certain institutions and at the Manager's
discretion. If shares to be redeemed are held in certificate form, the
certificates must be mailed to the Fund at the address noted below. Do not sign
the certificates and, for protection, use registered mail.
Redemptions may be made by letter to the Fund specifying the dollar amount
or number of shares to be redeemed and the account number. The letter must be
signed in exactly the same way the account is registered. To protect you and the
Fund against fraud, redemptions exceeding $50,000 (and for all written
redemptions, regardless of amount, made within 30 days following any changes in
account registration), must be signature guaranteed. You can obtain a signature
guarantee from most banks, savings institutions, credit unions, broker-dealers,
and other guarantors acceptable to the Fund and its transfer agent. The Fund and
its transfer agent cannot accept guarantors from notaries public or
organizations that do not provide reimbursement in the case of fraud. The Fund
and its transfer agent may, at its option, request further documentation from
corporations, executors, administrators, trustees, or guardians. In some cases
the Fund may require the furnishing of additional documents.
Written requests should be mailed to the Fund at the following address:
Domini Social Equity Fund
P.O. Box 959
New York, New York 10159-0959
For overnight deliveries, please use the following address:
Domini Social Equity Fund
11 W. 25th Street, 7th Floor
New York, New York 10010-2001
212-352-9200
An investor may also redeem shares by telephone by calling the Transfer
Agent, at 1-800-582-6757, if the appropriate box on the Account Application has
been completed. The Fund, Transfer Agent and Distributor will not be liable for
any loss, liability, cost or expense for acting upon telephone instructions
believed to be genuine. Accordingly, shareholders will bear the risk of loss.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including, without limitation, recording
telephone instructions and/or requiring the caller to provide some form of
personal identification. Failure to employ reasonable procedures may make the
Fund liable for any losses due to unauthorized or fraudulent telephone
instructions. The following information must be supplied by the shareholder or
broker at the time a request for a telephone redemption is made: (1) the
shareholder's account number; (2) the shareholder's social security number; and
(3) the name and account number of the shareholder's designated securities
dealer or bank.
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<PAGE>
The Fund, Transfer Agent and Distributor reserve the right to refuse wire or
telephone redemptions. Procedures for redeeming shares by wire or telephone may
be modified or terminated at any time by the Fund or the Distributor. A Service
Organization may request a wire redemption provided a Wire Authorization Form is
on file with the Fund. The proceeds of a wire redemption will be sent to an
account with a Service Organization designated on the appropriate form. The Fund
reserves the right to restrict or terminate wire redemption privileges. Proceeds
of wire redemptions will be transferred within seven days after receipt of the
request.
The value of shares redeemed may be more or less than the shareholder's
cost, depending on the Fund's performance during the period the shareholder
owned its shares. Redemptions of shares are taxable events on which the
shareholder may recognize a gain or a loss.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns shares of the Fund with an aggregate value of
$10,000 or more may establish a Systematic Withdrawal Plan under which he or she
redeems at net asset value the number of full and fractional shares which will
produce the monthly, quarterly, semi-annual or annual payments specified
(minimum $50.00 per payment). Depending on the amounts withdrawn, systematic
withdrawals may deplete the investor's principal. Investors contemplating
participation in this Plan should consult their tax advisers. No additional
charge to the shareholder is made for this service.
TAX MATTERS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Provided the Fund qualifies as a "regulated
investment company" under the Code, and distributes all of its net investment
income and realized capital gains to shareholders in accordance with the timing
requirements imposed by the Code, the Fund will not be required to pay any
federal income or excise taxes. The Portfolio also does not expect to be
required to pay any federal income or excise taxes.
Shareholders of the Fund normally will have to pay federal income taxes, and
any state or local taxes, on dividends and other distributions they received
from the Fund. Generally, distributions from the Fund's net investment income
and short-term capital gains will be taxed as ordinary income. Distributions
from long-term net capital gains will be taxed as such regardless of how long
the shares of the Fund have been held. Dividends and distributions to
shareholders will be treated in the same manner for federal income tax purposes
whether received in cash or reinvested in additional shares of the Fund.
Distributions of net capital gains (I.E., the excess of net long-term capital
gains over net short-term capital losses) will cause any short-term capital loss
realized on the disposition by a Fund's shareholder of Fund shares held for six
or fewer months to be recharacterized, to the extent of those distributions, as
long-term capital loss.
After the end of each calendar year, each shareholder receives information,
as required by the Internal Revenue Service, for tax purposes on the
distributions received in respect of that calendar year
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<PAGE>
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains, the portion, if any, representing a return of capital
(which is generally treated as a reduction in basis rather than taxable income)
and the amount of dividends eligible for the corporate dividends received
deduction.
Under the back-up withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and payments
made by the Fund. Generally, shareholders are subject to back-up withholding if
they have not provided the Fund with a correct taxpayer identification number
and certain other certifications.
The Fund is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as it qualifies as a regulated investment company under
the Code.
The foregoing discussion is intended for general information only. A
prospective shareholder should consult with its own tax advisor as to the tax
consequences of an investment in the Fund including the status of distributions
from the Fund under applicable state or local law.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The Fund determines the net asset value of each of its shares on each Fund
Business Day. This determination is made once during each such day as of the
close of regular trading on the New York Stock Exchange by deducting the amount
of the Fund's liabilities from the value of its assets and dividing the
difference by the number of shares of the Fund outstanding.
Since the Fund will invest all of its investable assets in the Portfolio,
the value of the Fund's assets will be equal to the value of its beneficial
interest in the Portfolio. The net asset value of the Portfolio is determined as
of the close of regular trading on the New York Stock Exchange on each Fund
Business Day, by deducting the amount of the Portfolio's liabilities from the
value of its assets. The value of the Fund's beneficial interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, effective for that day, which represents the Fund's share of
the aggregate beneficial interests in the Portfolio. (See "Description of
Shares, Voting Rights and Liabilities" below.)
Equity securities held by the Portfolio are valued at the last sale price on
the exchange on which they are primarily traded or on the NASDAQ system for
unlisted national market issues, or at the last quoted bid price for securities
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. If the Portfolio purchases option contracts, such
option contracts which are traded on commodities or securities exchanges are
normally valued at the settlement price on the exchange on which they are
traded. Short-term obligations with remaining maturities of less than sixty days
are valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees of the Portfolio. Portfolio securities (other than short-term
obligations with remaining maturities of less than sixty days) for which there
are no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Portfolio's Board of Trustees.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Substantially all of the Fund's net income from dividends and interest is
paid to the Fund's shareholders semi-annually (usually in the months of June and
December) as a dividend. For this purpose, the
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Fund's "net income from dividends and interest" consists of all income from
dividends and interest accrued on the assets of the Fund (I.E., the Fund's share
of the Portfolio's net income from dividends and interest), less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
The Fund usually declares and distributes a capital gains distribution to
its shareholders on an annual basis, in December, if the Fund's share of the
Portfolio's profits during the year from the sale of securities held for longer
than the applicable long-term capital gains holding period exceeds the Fund's
share of the Portfolio's losses during such year from the sale of securities
together with the Fund's share of the Portfolio's net capital losses carried
forward from prior years (to the extent not used to offset short-term capital
gains). The Fund's share of the Portfolio's net short-term capital gains
realized during each fiscal year will also be distributed at that time.
The Fund will also make additional distributions to its shareholders to the
extent necessary to avoid application of the 4% nondeductible excise tax created
by the Tax Reform Act of 1986 on certain undistributed income and net capital
gains of mutual funds.
A shareholder of the Fund may elect to receive dividends and capital gains
distributions in either cash or additional shares. Unless otherwise specified in
writing by a shareholder, all dividends and capital gains distributions will be
reinvested in additional shares.
EXPENSES
The Fund and the Portfolio each are responsible for all of their respective
expenses, including the compensation of their respective Trustees who are not
interested persons of the Fund or the Portfolio; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund or the Portfolio; fees and expenses of independent auditors, of legal
counsel and of any transfer agent, custodian, registrar or dividend disbursing
agent of the Fund or the Portfolio; insurance premiums; and expenses of
calculating the net asset value of the Portfolio and of shares of the Fund.
The Fund will also pay sponsorship fees payable to the Sponsor; all expenses
of distributing and redeeming shares and servicing shareholder accounts;
expenses of preparing, printing and mailing prospectuses, reports, notices,
proxy statements and reports to shareholders and to governmental offices and
commissions; expenses of shareholder meetings; and expenses relating to the
issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes.
Under the Sponsorship Agreement, DSIL agreed to reduce its fee to the extent
necessary to keep the aggregate annual operating expenses of the Fund (including
the Fund's share of the Portfolio's expenses but excluding brokerage fees and
commissions, interest, taxes and other extraordinary expenses) at no greater
than 0.98% of the average daily net assets of the Fund through October 22, 1998.
Currently, DSIL is continuing with this expense reduction on a voluntary basis.
However, this reduction may be reduced or terminated at any time.
The Portfolio will also pay the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio,
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<PAGE>
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
governmental offices and commissions; expenses of meetings of investors; and the
investment management fees payable to the Manager.
Under the Management Agreement, DSIL's fee was 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 0.20% of the average daily net assets
of the Portfolio through October 22, 1998. Currently, DSIL is continuing with
the fee reduction as stated in the Management Agreement. However, this reduction
is voluntary and may be reduced or terminated at any time.
DISTRIBUTION PLAN AND AGREEMENT
The Trustees of the Fund have adopted a Distribution Plan in accordance with
Rule 12b-1 under the 1940 Act after having concluded that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. As contemplated by the Distribution Plan, the Distributor acts as
agent of the Fund in connection with the offering of shares of the Fund pursuant
to a Distribution Agreement. The Distributor acts as the principal underwriter
of shares of the Fund and bears the compensation of personnel necessary to
provide such services and all costs of travel, office expenses (including rent
and overhead) and equipment.
Under the Distribution Plan, the Distributor may receive a fee from the Fund
at an annual rate not to exceed 0.25% of the Fund's average daily net assets in
anticipation of, or as reimbursement for, costs and expenses incurred in
connection with the sale of shares of the Fund, such as payments to broker-
dealers who advise shareholders regarding the purchase, sale or retention of
shares of the Fund, payments to employees of the Distributor, advertising
expenses and the expenses of printing and distributing prospectuses and reports
used for sales purposes, expenses of preparing and printing sales literature and
other distribution-related expenses. The Distributor will provide to the
Trustees of the Fund a quarterly written report of amounts expended by it under
the Distribution Plan and the purposes for which such expenditures were made.
Signature Broker Dealer Services, Inc. is currently acting as distributor.
However, the Fund's Board has approved the appointment of DSIL Investment
Services LLC, a wholly owned subsidiary of DSIL to act as distributor effective
upon completion of certain regulatory requirements anticipated to occur in the
first quarter of 1999.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial Interest (without par value)
and to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in the Fund.
Each share represents an equal proportionate interest in the Fund with each
other share. Shares have no pre-emptive or conversion rights. Shares when issued
are fully paid and non-assessable, except as set forth below. Shareholders are
entitled to one vote for each share held. The Fund is not required to hold
annual meetings of shareholders but the Fund will hold special meetings of
shareholders when in the judgment of the Trustees it is necessary or desirable
to submit matters for a shareholder vote. Upon liquidation of the Fund,
shareholders would be entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders. Shareholders have under certain
circumstances the right to
20
<PAGE>
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have under certain circumstances the right to remove one or more Trustees
without a meeting.
The Fund reserves the right to create and issue any number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series). Currently, the Fund has only one
series of shares, all of which are of the same class. The Fund may establish
additional classes of any series of shares. For example, the Fund may offer
another class of shares that has lower annual distribution fees or shareholder
servicing fees. Prior to offering another class of shares, the Fund would either
issue a new prospectus and statement of additional information or amend this
Prospectus and the Statement of Additional Information to reflect such issuance.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each Fund Business Day. At the close of each such
Fund Business Day, the value of each investor's beneficial interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, effective for that day, which represents that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
withdrawals, which are to be effected as of the close of business on that day,
will then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be re-computed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of any additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of business on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business on the
following Fund Business Day.
SERVICE ORGANIZATIONS, TRANSFER AGENT AND CUSTODIAN
SERVICE ORGANIZATIONS
The Fund may also contract with various banks, trust companies (other than
Mellon Equity), broker-dealers (other than the Distributor) or other financial
organizations (collectively, "Service Organizations") to provide services for
the Fund, such as maintaining shareholder accounts and records. The Fund may pay
fees to Service Organizations (which may vary depending upon the services
provided) in amounts up to an annual rate of 0.25% of the daily net asset value
of the shares of the Fund owned by shareholders with whom the Service
Organization has a servicing relationship. In addition the fund may reimburse
Service Organizations for their costs related to servicing shareholder accounts.
Some Service Organizations may impose additional or different conditions on
their clients such as requiring their clients to invest more than the minimum
initial investment specified by the Fund or charging a direct fee for servicing.
If imposed, these fees would be in addition to any amounts which might be paid
to the Service Organization by the Fund. Each Service Organization has agreed to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations are urged to consult them regarding any such fees or conditions.
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<PAGE>
YEAR 2000
Many software programs were written to use two digits to represent the year
(e.g. 98) rather than four digits (e.g. 1998). Systems that rely on these
programs assume that the first two digits of the year are "1" and "9".
Significant problems could occur if after December 31, 1999, these systems
misinterpret the date as 19xx rather than 20xx; hence, the Year 2000 ("Y2K")
challenge. The Fund could be adversely affected if the computer systems used by
the Fund or its service providers are not programmed to accurately process
information on or after January 1, 2000. DSIL, the Fund and its service
providers are diligently working to resolve any potential Year 2000 problems.
While it is likely these efforts will be successful, the failure to implement
any necessary modifications could have an adverse impact on the Fund. The Fund
also could be adversely affected if the issuers of securities held by the Fund
do not solve their Year 2000 problems, or if it costs them large amounts of
money to solve these problems.
TRANSFER AGENT AND CUSTODIAN
The Fund has entered into a Transfer Agency Agreement with FSSI, 11 West
25th Street, 7th Floor, New York, NY 10010, pursuant to which FSSI acts as
Transfer Agent for the Fund. The Transfer Agent maintains an account for each
shareholder of the Fund, performs other transfer agency functions and acts as
dividend disbursing agent for the Fund. Pursuant to Custodian Agreements,
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116,
acts as the custodian of the Fund's assets (I.E., cash and the Fund's interest
in the Portfolio) and as the custodian of the Portfolio's assets (the
"Custodian"). The Custodian's responsibilities include safeguarding and
controlling the Portfolio's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on the
Portfolio's investments, maintaining books of original entry for portfolio and
fund accounting and other required books and accounts, and calculating the daily
net asset value of the Portfolio and the daily net asset value of shares of the
Fund. Securities held by the Portfolio may be deposited into certain securities
depositaries. The Custodian does not determine the investment policies of the
Portfolio or decide which securities the Portfolio will buy or sell. The
Portfolio may, however, invest in securities of the Custodian and may deal with
the Custodian as principal in securities transactions. IBT also serves as
transfer agent for the Portfolio. For their services, FSSI and IBT will receive
such compensation as may from time to time be agreed upon by each of them and
the Fund or the Portfolio.
------------------------
The Fund's Statement of Additional Information contains more detailed
information about the Fund and the Portfolio, including information related to
(i) investment policies and restrictions of the Fund and the Portfolio, (ii) the
Trustees, officers, Manager of the Portfolio and Sponsor of the Fund, (iii)
portfolio transactions, (iv) the Fund's shares, including rights and liabilities
of shareholders, (v) additional performance information, including the method
used to calculate yield and total rate of return quotations of the Fund, (vi)
determination of the net asset value of shares of the Fund, and (vii) the
audited financial statements of the Fund and the Portfolio at July 31, 1998.
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[LOGO]
P.O. BOX 959
NEW YORK, NY 10159-0959
1-800-762-6814
HTTP://WWW.DOMINI.COM
<TABLE>
<S> <C> <C>
PORTFOLIO INVESTMENT MANAGER CUSTODIAN:
AND FUND SPONSOR: Investors Bank &
Domini Social Trust Company
Investments, LLC Boston, MA
11 West 25th Street, 7th INDEPENDENT AUDITORS:
Floor KPMG Peat Marwick LLP
New York, NY 10010 Boston, MA
PORTFOLIO INVESTMENT
SUBMANAGER: LEGAL COUNSEL:
Mellon Equity Associates Bingham Dana LLP
Pittsburgh, PA Boston, MA
DISTRIBUTOR: TRANSFER AGENT:
Signature Broker-Dealer FSSI
Services, Inc. New York, NY
21 Milk Street
Boston, MA 02109
1-800-762-6814
</TABLE>
- --------------------------------------------------------
DOMINI SOCIAL EQUITY FUND
PROSPECTUS
---------------------------------------
November 27, 1998
[LOGO]
INVESTING FOR GOOD SM
[LOGO]
M PRINTED ON RECYCLED PAPER WITH SOY INK
Cusip: 257132100
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 25, 1998
DOMINI SOCIAL EQUITY FUND
<TABLE>
<CAPTION>
<S><C>
TABLE OF CONTENTS PAGE
1. The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Investment Objective, Policies and Restrictions . . . . . . . . . . . . .
3. Performance Information . . . . . . . . . . . . . . . . . . . . . . . . .
4. Determination of Net Asset Value; Valuation of Portfolio Securities . . .
5. Management of the Fund and the Portfolio. . . . . . . . . . . . . . . . .
6. Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Portfolio Transactions and Brokerage Commissions. . . . . . . . . . . . .
9. Description of Shares, Voting Rights and Liabilities . . . . . . . . . .
10. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
DOMINI SOCIAL EQUITY FUND
11 West 25th Street, New York, New York 10010
(800) 762-6814
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Fund's
Prospectus dated November 25, 1998, as amended from time to time. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting Signature Broker-Dealer Services, Inc., the Fund's distributor, at
(800) 762-6814.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.
1. THE FUND
Domini Social Equity Fund (the "Fund") is a no-load diversified open-end
management investment company which was organized as a business trust under the
laws of the Commonwealth of Massachusetts on June 7, 1989. The Fund offers to
buy back (redeem) its shares from its shareholders at any time at net asset
value. References in this Statement of Additional Information to the
"Prospectus" are to the current Prospectus of the Fund, as amended or
supplemented from time to time.
Domini Social Investments LLC ("DSIL") the Fund's sponsor (the "Sponsor"),
supervises the overall administration of the Fund. The Board of
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<PAGE>
Trustees provides broad supervision over the affairs of the Fund. Shares of the
Fund are continuously sold by Signature Broker-Dealer Services, Inc.
("Signature"), the Fund's distributor (the "Distributor"). The minimum initial
investment is $1,000, except that the minimum initial investment for an
Individual Retirement Account is $250 and the minimum initial investment for
investors who invest through an automatic investment plan is $500. An investor
should obtain from the Distributor, and should read in conjunction with the
Prospectus, the materials describing the procedures under which Fund shares may
be purchased and redeemed.
The Fund seeks to achieve its investment objective by investing all its
assets in the Domini Social Index Portfolio (the "Portfolio"), a diversified
open-end management investment company having the same investment objective
as the Fund. DSIL is the Portfolio's investment manager (the "Manager").
Mellon Equity Associates ("Mellon Equity") is the Portfolio's investment
submanager (the "Submanager"). Kinder, Lydenberg, Domini & Co., Inc. ("KLD")
determines the composition of the Domini 400 Social Index -SM- (the "Domini
Social Index"). The Submanager manages the investments of the Portfolio from
day to day in accordance with the Portfolio's investment objective and
policies. "Domini " and "Domini 400 Social Index " are service marks of KLD.
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide its shareholders with
long-term total return (reflecting both dividend and price performance of the
Fund) which corresponds to the performance of the Domini Social Index. There
can, of course, be no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may be changed without approval
by the Fund's shareholders.
INVESTMENT POLICIES
The Fund seeks to achieve its investment objective by investing all its
assets in the Portfolio, which has the same investment objective as the Fund.
The Fund may withdraw its investment in the Portfolio at any time if the Board
of Trustees of the Fund determines that it is in the best interests of the Fund
to do so. Upon any such withdrawal, the Board of Trustees would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having the same investment
objective as the Fund, or the retaining of an investment adviser to manage the
Fund's assets in accordance with the investment policies described below with
respect to the Portfolio. The approval of the Fund's shareholders would not be
required to change any of the Fund's investment policies.
The following supplements the information concerning the Portfolio's
investment policies contained in the Prospectus and should only be read in
conjunction therewith. A company which is not included in the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500") may be included in the Domini
Social Index primarily in order to afford representation to an industry sector
which would otherwise be under-represented in the Domini Social Index. Because
of the social criteria applied in the selection of stocks comprising the Domini
Social Index, industry
2
<PAGE>
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500.
With respect to stocks of foreign issuers, the Portfolio does not purchase
securities which the Portfolio believes, at the time of purchase, will be
subject to exchange controls or foreign withholding taxes; however, there can be
no assurance that such laws may not become applicable to certain of the
Portfolio's investments. In the event unforeseen exchange controls or foreign
withholding taxes are imposed with respect to any of the Portfolio's
investments, the effect may be to reduce the income received by the Portfolio on
such investments.
Although neither the Fund nor the Portfolio has any current intention to do
so, the Fund and the Portfolio may invest in securities which may be resold
pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act").
It is a fundamental policy of the Portfolio and the Fund that neither the
Portfolio nor the Fund may invest more than 25% of the total assets of the
Portfolio or the Fund, respectively, in any one industry, although the Fund will
invest all of its assets in the Portfolio, and the Portfolio may and would
invest more than 25% of its assets in an industry if stocks in that industry
were to comprise more than 25% of the Domini Social Index. Based on the current
composition of the Domini Social Index, this is considered highly unlikely. If
the Portfolio were to concentrate its investments in a single industry, the
Portfolio and the Fund would be more susceptible to any single economic,
political or regulatory occurrence than would be another investment company
which was not so concentrated.
LOANS OF SECURITIES: The Portfolio may lend its securities to brokers,
dealers and financial institutions, provided that (1) the loan is secured
continuously by collateral, consisting of U.S. Government securities or cash or
letters of credit, which is marked to the market daily to ensure that each loan
is fully collateralized at all times; (2) the Portfolio may at any time call the
loan and obtain the return of the securities loaned within three business days;
(3) the Portfolio will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Portfolio.
The Portfolio will earn income for lending its securities either in the
form of fees received from the borrower of the securities or in connection with
the investment of cash collateral in short-term money market instruments. Loans
of securities involve a risk that the borrower may fail to return the securities
or may fail to provide additional collateral.
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Manager or the Submanager.
Although the Portfolio reserves the right to lend its securities, it has no
current intention of doing so in the foreseeable future.
RISK FACTORS INVOLVED IN OPTION CONTRACTS: Although it has no current
intention to do so, the Portfolio may in the future enter into certain
transactions in stock options for the purpose of hedging against possible
increases in the value of securities which are expected to be purchased by the
Portfolio or possible declines
3
<PAGE>
in the value of securities which are expected to be sold by the Portfolio.
Generally, the Portfolio would only enter into such transactions on a short-term
basis pending readjustment of its holdings of underlying stocks.
The purchase of an option on an equity security provides the holder with
the right, but not the obligation, to purchase the underlying security, in the
case of a call option, or to sell the underlying security, in the case of a put
option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire
amount of the premium, plus related transaction costs, but not more. Upon
exercise of the option, the holder is required to pay the purchase price of the
underlying security in the case of a call option, or deliver the security in
return for the purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase
or sell the instrument underlying an option, make or receive a cash settlement
or meet ongoing variation margin requirements. The inability to close out
option positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a number
of limitations governing the maximum number of positions which may be held by a
trader, whether acting alone or in concert with others. The Manager does not
believe that these trading and position limits would have an adverse impact on
the possible use of hedging strategies by the Portfolio.
------------
The approval of the Fund and of the other investors in the Portfolio is not
required to change the investment objective or any of the non-fundamental
investment policies discussed above, including those concerning security
transactions.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio have each adopted the following policies which
may not be changed without approval by holders of a "majority of the outstanding
voting securities" of the Fund or the Portfolio, respectively, which as used in
this Statement of Additional Information means the vote of the lesser of (i) 67%
or more of the outstanding "voting securities" of the Fund or the Portfolio,
respectively, present at a meeting, if the holders of more than 50% of the
outstanding "voting securities" of the Fund or the Portfolio, respectively, are
present or represented by proxy, or (ii) more than 50% of the outstanding
"voting securities" of the Fund or the Portfolio, respectively. The term
"voting securities" as used in this paragraph has the same meaning as in the
Investment Company Act of 1940, as amended (the "1940 Act").
Except as described below, whenever the Fund is requested to vote on a
change in the investment restrictions of the Portfolio, the Fund will hold a
4
<PAGE>
meeting of its shareholders and will cast its vote proportionately as instructed
by its shareholders. However, subject to applicable statutory and regulatory
requirements, the Fund would not request a vote of its shareholders with respect
to (a) any proposal relating to the Portfolio, which proposal, if made with
respect to the Fund, would not require the vote of the shareholders of the Fund,
or (b) any proposal with respect to the Portfolio that is identical in all
material respects to a proposal that has previously been approved by
shareholders of the Fund. Any proposal submitted to holders in the Portfolio,
and that is not required to be voted on by shareholders of the Fund, would
nevertheless be voted on by the Trustees of the Fund.
Neither the Fund nor the Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary or
emergency purposes either the Fund or the Portfolio may borrow an amount not to
exceed 1/3 of the current value of the net assets of the Fund or the Portfolio,
respectively, including the amount borrowed (moreover, neither the Fund nor the
Portfolio may purchase any securities at any time at which borrowings exceed 5%
of the total assets of the Fund or the Portfolio, respectively, taken in each
case at market value) (it is intended that the Portfolio would borrow money only
from banks and only to accommodate requests for the withdrawal of all or a
portion of a beneficial interest in the Portfolio while effecting an orderly
liquidation of securities);
(2) purchase any security or evidence of interest therein on margin, except
that either the Fund or the Portfolio may obtain such short-term credit as may
be necessary for the clearance of purchases and sales of securities and except
that either the Fund or the Portfolio may make deposits of initial deposit and
variation margin in connection with the purchase, ownership, holding or sale of
options;
(3) write any put or call option or any combination thereof, provided that
this shall not prevent (i) the purchase, ownership, holding or sale of warrants
where the grantor of the warrants is the issuer of the underlying securities, or
(ii) the purchase, ownership, holding or sale of options on securities;
(4) underwrite securities issued by other persons, except that the Fund may
invest all or any portion of its assets in the Portfolio and except insofar as
either the Fund or the Portfolio may technically be deemed an underwriter under
the 1933 Act in selling a security;
(5) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio and provided that any such
loans not exceed 30% of its total assets (taken in each case at market value),
or (b) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of its net assets will be
invested in repurchase agreements maturing in more than seven days; for
additional related restrictions, see paragraph (6) immediately following;
(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to Rule
144A under the 1933 Act if the Board of Trustees determines that a liquid market
exists for such securities) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that the Fund
5
<PAGE>
may invest all or any portion of its assets in the Portfolio;
(7) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein), interests
in oil, gas or mineral leases, commodities or commodity contracts in the
ordinary course of business (the Fund and Portfolio reserve the freedom of
action to hold and to sell real estate acquired as a result of the ownership of
securities by the Fund or the Portfolio);
(8) make short sales of securities or maintain a short position, unless at
all times when a short position is open the Fund or the Portfolio, as
applicable, owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and unless not more than 5% of the Fund's or the Portfolio's, as
applicable, net assets (taken in each case at market value) is held as
collateral for such sales at any one time;
(9) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Portfolio's or the
Fund's, as applicable, assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States), except that for purposes of this restriction the issuer of an option
shall not be deemed to be the issuer of the security or securities underlying
such contract and except that the Fund may invest all or any portion of its
assets in the Portfolio; or
(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Domini Social
Index, in which case the Portfolio or the Fund, as applicable, will invest more
than 25% of its assets in that industry, and except that the Fund may invest all
of its assets in the Portfolio.
NON-FUNDAMENTAL RESTRICTIONS: In order to comply with certain federal
statutes and regulatory policies, neither the Fund nor the Portfolio will as a
matter of operating policy:
purchase puts, calls, straddles, spreads and any combination thereof if
the value of its aggregate investment in such securities will exceed 5% of the
Fund's or the Portfolio's total assets at the time of such purchase.
This restriction is not fundamental and may be changed
6
<PAGE>
with respect to the Fund by the Fund without approval by the Fund's shareholders
or with respect to the Portfolio by the Portfolio without the approval of the
Fund or its other investors. The Fund will comply with the state securities
laws and regulations of all states in which it is registered.
PERCENTAGE RESTRICTIONS: If a percentage restriction or rating restriction
on investment or utilization of assets set forth above or referred to in the
Prospectus is adhered to at the time an investment is made or assets are so
utilized, a later change in percentage resulting from changes in the value of
the securities held by the Fund or the Portfolio or a later change in the rating
of a security held by the Fund or the Portfolio will not be considered a
violation of policy; provided that if at any time the ratio of borrowings of the
Fund or the Portfolio to the net asset value of the Fund or the Portfolio,
respectively, exceeds the ratio permitted by Section 18(f) of the 1940 Act, the
Fund or the Portfolio as the case may be, will take the corrective action
required by Section 18(f).
3. PERFORMANCE INFORMATION
The Fund will calculate its total rate of return for any period by (a)
dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share (i.e., net asset value) on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate
of return quotation will be calculated by (x) adding 1 to the period total rate
of return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.
Any current "yield" quotation of the Fund shall consist of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a thirty calendar day period and shall be calculated by (a) raising to
the sixth power the sum of 1 plus the quotient obtained by dividing the Fund's
net investment income earned during the period by the product of the average
daily number of shares outstanding during the period that were entitled to
receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.
Total rate of return and yield information with respect to the Domini
Social Index will be computed in the same fashion as set forth above with
respect to the Fund, except that for purposes of this computation an investment
will be assumed to have been made in a portfolio consisting of all of the stocks
comprising the Domini Social Index weighted in accordance with the weightings of
the stocks comprising the Domini Social Index. Performance information with
respect to the Domini Social Index will not take into account brokerage
commission and other transaction costs which will be incurred by the Portfolio.
4. DETERMINATION OF NET ASSET VALUE;
VALUATION OF PORTFOLIO SECURITIES
The net asset value of each share of the Fund is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
7
<PAGE>
weekday except for the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day). This determination of net asset value
of shares of the Fund is made once during each such day as of the close of the
NYSE by dividing the value of the Fund's net assets (i.e., the value of its
investment in the Portfolio and any other assets less its liabilities, including
expenses payable or accrued) by the number of shares outstanding at the time the
determination is made. Purchases and redemptions will be effected at the time
of determination of net asset value next following the receipt of any purchase
or redemption order deemed to be in good order. See "Purchases and Redemptions
of Shares" in the Prospectus.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable
or accrued) is determined at the same time and on the same day as the Fund
determines its net asset value per share. The net asset value of the Fund's
investment in the Portfolio is equal to the Fund's pro rata share of the
total investment of the Fund and of other investors in the Portfolio less the
Fund's pro rata share of the Portfolio's liabilities. Equity securities held
by the Portfolio are valued at the last sale price on the exchange on which
they are primarily traded or on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities in which there
were no sales during the day or for unlisted securities not reported on the
NASDAQ system. If the Portfolio purchases option contracts, such option
contracts which are traded on commodities or securities exchanges are
normally valued at the settlement price on the exchange on which they are
traded. Short-term obligations with remaining maturities of less than sixty
days are valued at amortized cost, which constitutes fair value as determined
by the Board of Trustees of the Portfolio. Portfolio securities (other than
short-term obligations with remaining maturities of less than sixty days) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Portfolio's Board of
Trustees.
A determination of value used in calculating net asset value must be a fair
value determination made in good faith utilizing procedures approved by the
Portfolio's Board of Trustees. While no single standard for determining fair
value exists, as a general rule, the current fair value of a security would
appear to be the amount which the Portfolio could expect to receive upon its
current sale. Some, but not necessarily all, of the general factors which may
be considered in determining fair value include: (i) the fundamental analytical
data relating to the investment; (ii) the nature and duration of restrictions on
disposition of the securities; and (iii) an evaluation of the forces which
influence the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be considered in
determining fair value, some of the specific factors include: type of security,
financial statements of the issuer, cost at date of purchase, size of holding,
discount from market value, value of unrestricted securities of the same class
at the time of purchase, special reports prepared by analysts, information as to
any transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the security, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
Interest income on short-term obligations held by the Portfolio is
determined on the basis of interest accrued less amortization of premium.
8
<PAGE>
5. MANAGEMENT OF THE FUND AND THE PORTFOLIO
The Trustees and officers of the Fund and the Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Fund. Unless otherwise indicated below, the address of each officer is 11
West 25th Street, New York, New York 10010.
TRUSTEES OF THE FUND AND THE PORTFOLIO
EMILY W. CARD -- 1158 26th Street, #450, Santa Monica, California 90403;
Attorney; President, The Card Group, Inc; Trustee, Domini Institutional Trust.
Her date of birth is May 8, 1942.
AMY L. DOMINI* -- 230 Congress Street, Boston, Massachusetts 02110; Chair,
President and Trustee of the Fund, Portfolio and Domini Institutional Trust;
Managing Principal of DSIL; Officer of Kinder, Lydenberg, Domini & Co., Inc.;
Private Trustee, Loring, Wolcott & Coolidge; Trustee, New England Quarterly
(since 1998); Board Member, Social Investment Forum (since 1994); Trustee,
Episcopal Church Pension Fund; Former Member, Governing Board, Interfaith Center
on Corporate Responsibility, Former Trustee, National Association Community Loan
Funds. Former Board Member of National Community Capital Association (1987-
1990). Her date of birth is January 15, 1950.
ALLEN M. MAYES -- P.O. Box 21222, Beaumont, Texas 77720; Trustee, Domini
Institutional Trust; 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. His date of birth is September 20, 1920.
WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02146;
Manager, Venture Investment Management Company LLC; Trustee, Domini
Institutional Trust; Vice President and General Manager, TravElectric Services
Corp (prior to 1995); President, Environmental Technologies [Packaging] (prior
to 1993); Director, Evergreen Solar, Inc; Director, Conservation Services Group.
His date of birth is July 7, 1944.
KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Associate Dean and
Professor of Business Environment, Florida International University (since
1991); Trustee, Domini Institutional Trust. Partner, Trinity Industrial
Technology (since 1995); Director, Center for Management in the Americas (since
1997); and Co-director, Center for Global Business (since 1998). Her date of
birth is September 23, 1944.
TIMOTHY SMITH -- 475 Riverside Drive, Room 550, New York, New York 10115;
Executive Director, Interfaith Center on Corporate Responsibility; Trustee,
Calvert New Africa Fund; Trustee, Domini Institutional Trust. His date of birth
is September 15, 1943.
FREDERICK C. WILLIAMSON -- Five Roger Williams Green, Providence, Rhode Island
02904; Treasurer and Trustee, RIGHA (charitable foundation supporting health
care needs)since 1990; Chairman, Rhode Island Historical Preservation and
Heritage Commission since 1995; Trustee, National Parks and Conservation
Association (1986-1997); Advisor, National Parks and Conservation Association
(since 1997); Trustee of the National Park Trust (since 1991); Trustee, Domini
Institutional Trust. His date of birth is September 20, 1914.
9
<PAGE>
Each of the Trustees who are not interested persons receives an annual
retainer for serving as a Trustee of the Fund, the Portfolio and the Domini
Institutional Trust of $4,000, and in addition, receives $500 for attendance
at each joint meeting of the Boards of the Fund, the Portfolio and the Domini
Institutional Trust (reduced to $250 in the event that a Trustee participates
at an in-person meeting by telephone), such retainer and fees in no event to
exceed in the aggregate $6,000 per year. In addition, each Trustee receives
reimbursement for reasonable expenses incurred in attending meetings. The
compensation paid to the Trustees for the fiscal year ended July 31, 1998 is
set forth below. The Trustees may hold various other directorships unrelated
to the Fund or Portfolio.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED AS COMPENSATION
COMPENSATION PART OF FROM THE
FROM THE FUND ANNUAL BENEFITS FUND, PORTFOLIO AND
FUND EXPENSES UPON RETIREMENT DOMINI INSTITUTIONAL TRUST
<S> <C> <C> <C> <C>
Amy L. Domini*, None None None None
Chair, President
and Trustee
Emily W. Card, $4,000 None None $6,000
Trustee
Karen Paul, $4,000 None None $6,000
Trustee
William C. Osborn, $4,000 None None $6,000
Trustee
Allen M. Mayes, $4,000 None None $6,000
Trustee
Timothy Smith, $4,000 None None $6,000
Trustee
Frederick C. Williamson, Sr., $4,000 None None $6,000
Trustee
</TABLE>
OFFICERS
PETER D. KINDER* -- Vice President of the Fund and the Portfolio; President of
Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social Investments LLC
(since 1997). His date of birth is September 28, 1946.
STEVEN D. LYDENBERG* -- Vice President of the Fund and the Portfolio; Director
of Research of Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social
Investments LLC (since 1997). His date of birth is October 21, 1945.
DAVID P. WIEDER* -- Vice President of the Fund and the Portfolio (since
1997); Chief Executive Officer and Managing Principal, Domini Social
Investments LLC (since 1997); President of FSSI (since 1989),
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<PAGE>
Vice-President of investment companies within Fundamental Family of Funds
(1989-1997); Vice-President of Fundamental Portfolio Advisors (1991-1997). His
date of birth is January 8, 1966.
SIGWARD M. MOSER* -- Vice President of the Fund and the Portfolio (since
1997); President of Communications House International, Inc.; Director of
Financial Communications Society; President and Managing Principal, Domini
Social Investments LLC (since 1997). His date of birth is June 12, 1962.
CAROLE M. LAIBLE* -- Secretary and Treasurer of the Fund and the Portfolio
(since 1997); Financial Compliance Officer of Domini Social Investments LLC
(since 1997); Board of Governors, Daytop -NJ (since 1998); Financial Compliance
Officer, FSSI (1994-1997); Financial Compliance Officer and Secretary of
investment companies within Fundamental Family of Funds (1994-1997); General
Service Manager, McGladrey & Pullen LLP (certified public accountants) prior to
1994. Her date of birth is October 31, 1963.
As of November 11, 1998, all Trustees and officers of the Fund and the
Portfolio as a group owned less than 1% of the Fund's outstanding shares. As of
the same date, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: Charles Schwab & Co., Inc. 101 Montgomery
Street, San Francisco, CA 94104 (as a nominee on behalf of its customers),
4,014,703.012 shares (21.1%); WEA Tax Sheltered Annuity Trust, 45 Nob Hill Road,
Madison, WI 1,147,560.834 shares (6.03%); Manulife Financial, 250 Bloor Street,
East 7E, Toronto, Ontario, CA MAW 1E5, 1,238,997.406 shares (6.51%); National
Financial Services Corporation, PO Box 3908, Church Street Station, New York, NY
10008-3908 (as a nominee on behalf of its customers), 958,151.599 shares (5.04%)
(the Fund has no knowledge as to the beneficial ownership of these shares). The
Fund has no knowledge of any other owners of record or beneficial owners of 5%
or more of the outstanding shares of the Fund. Shareholders owning 25% or more
of the outstanding shares of the Fund may take actions without the approval of
any other investor in the Fund.
The Trustees who are not "interested persons" (the "Disinterested
Trustees") of the Fund as defined by the 1940 Act are the same as the
Disinterested Trustees of the Portfolio. The Disinterested Trustees have
adopted written procedures reasonably appropriate to deal with potential
conflicts of interest arising from the fact that the same individuals are
Trustees of the Fund and the Portfolio, up to and including creating a
separate board of Trustees. Any conflict of interest between the Fund and
the Portfolio will be resolved by the Trustees in accordance with their
fiduciary obligations and in accordance with the 1940 Act. The Fund's
Declaration of Trust provides that it will indemnify its Trustees and
officers (the "Indemnified Parties") against liabilities and expenses
incurred in connection with litigation in which they may be involved because
of their offices with the Fund, unless, as to liability to the Fund or its
shareholders, it is finally adjudicated that the Indemnified Parties engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in their offices, or unless with respect to any other
matter it is finally adjudicated that the Indemnified Parties did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Fund. In case of settlement, such indemnification will not
be provided unless it has been determined by a court or other body approving
the settlement or other disposition, or by a reasonable determination, based
upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that
such Indemnified Parties have not engaged in wilful misfeasance, bad faith,
gross negligence or reckless disregard of their duties.
MANAGER AND SUBMANAGER
DSIL provides advice to the Portfolio pursuant to a Management Agreement
11
<PAGE>
(the "Management Agreement"). The services provided by the Manager consist of
furnishing continuously an investment program for the Portfolio. DSIL will have
authority to determine from time to time what securities are purchased, sold or
exchanged, and what portion of assets of the Portfolio is held uninvested. DSIL
will also perform such administrative and management tasks 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 monitoring of performance and billings of the
Portfolio's transfer agent, shareholder servicing agents, custodian and other
independent contractors or agents; (iii) overseeing (with the advice of
Portfolio's counsel) 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. The
Manager furnishes at its own expense all facilities and personnel necessary in
connection with providing these services. The Management Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Portfolio's Board of Trustees or by a majority of the
outstanding voting securities of the Portfolio at a meeting called for the
purpose of voting on the Management Agreement (with the vote of each investor in
the Portfolio being in proportion to the amount of its investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Management Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Management Agreement.
The Management Agreement provides that the Manager may render services to
others. DSIL 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
submanagers, subject to DSIL's supervision. The Management Agreement is
terminable without penalty on not more than 60 days' nor less than 30 days'
written notice by the Portfolio when authorized either by majority vote of the
outstanding voting securities in the Portfolio (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment) or by a
vote of a majority of its Board of Trustees, or by the Manager, and will
automatically terminate in the event of its assignment. The Management
Agreement provides that neither the Manager nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for wilful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Management Agreement.
The Fund's Prospectus contains a description of fees payable to the Manager
for services under the Management Agreement.
DSIL is a 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 (the "Advisers
Act"). The names of the principal owners of DSIL, their relationship to the
Fund and their percentage ownership of DSIL follows: Amy L. Domini, Chair of the
Board and President of the Fund, is the Manager and principal
12
<PAGE>
executive officer of DSIL and a 21.55% owner of DSIL. Ms. Domini is also Chief
Executive Officer, Secretary, Treasurer and 51% owner of KLD which licenses the
Domini Social Index to DSIL. Peter D. Kinder, Vice President of the Fund, is a
21.25% owner of DSIL. Mr. Kinder is also President and 19% owner of KLD.
Sigward M. Moser, Vice President of the Fund, is a 21.25% owner of DSIL. David
P. Wieder, Vice President of the Fund is a 21.25% owner of DSIL. Mr. Wieder is
also President and an owner of FSSI, a registered transfer agent which has
served as the Fund's transfer agent since 1995.
Mellon Equity manages the assets of the Portfolio pursuant to an Investment
Submanagement Agreement (the "Submanagement Agreement"). 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 the
Portfolio's Board of Trustees or by a majority vote of the outstanding voting
securities in the Portfolio at a meeting called for the purpose of voting on the
Submanagement Agreement (with the vote of each being in proportion to the amount
of its investment), and, in either case, by a majority of the Portfolio's
Trustees who are not parties to the Submanagement Agreement or interested
persons of any such party 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
upon not more than 60 days' nor less than 30 days' written notice by the
Portfolio when authorized either by majority vote of the outstanding voting
securities in the Portfolio (with the vote of each being in proportion to the
amount of their investment) or by a vote of the majority of its Board of
Trustees, or by the Manager 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 mistake of law or for any loss arising
out of any investment or for any act or omission in its services to the
Portfolio, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard for its or their obligations and duties under the
Submanagement Agreement.
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 pension,
public fund, and profit-sharing investment management markets, and is a
registered investment adviser under the Advisers Act. Mellon Bank'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.
The Fund's Prospectus contains a description of fees payable to the
Submanager for services under the Submanagement Agreement. Prior to
October 22, 1997, pursuant to an investment advisory agreement (the "KLD
Advisory
13
<PAGE>
Agreement"), KLD served as investment adviser to the Portfolio and furnished
continuously an investment program by determining the stocks to be included in
the Domini Social Index. Additionally, prior to October 22, 1997, pursuant to a
management agreement (the "Mellon Equity Management Agreement"), Mellon Equity
served as investment manager and managed the assets of the Portfolio on a daily
basis. Prior to November 21, 1994, pursuant to an investment management
agreement (the "State Street Management Agreement"), State Street Bank and Trust
Company served as investment manager to the Portfolio. Prior to October 22,
1997, pursuant to a sponsorship agreement (the "KLD Sponsorship Agreement"), KLD
furnished administrative services for the Portfolio. Prior to October 22, 1997,
pursuant to an administrative services agreement (the "Signature Administration
Agreement"), Signature served as the administrator of the Portfolio. Prior to
October 22, 1997, the aggregate investment management and administration fees
under the prior agreements with respect to the Portfolio were equal to 0.15% of
the Portfolio's average daily net assets for its then current fiscal year.
For the fiscal year ended July 31, 1998, the Portfolio incurred
approximately $701,774 in Management fees pursuant to the Management Agreement,
$17,385 in advisory fees pursuant to the KLD Advisory Agreement, $17,385 in
aggregate administration fees pursuant to the Signature Administration
Agreement and $86,354 in management fees pursuant to the Mellon Equity
Management Agreement. For the fiscal year ended July 31, 1997, the Portfolio
incurred $46,528 in advisory fees pursuant to the KLD Advisory Agreement,
$46,528 in administration fees pursuant to the KLD Sponsorship Agreement,
$156,868 in aggregate administration fees pursuant to the Signature
Administration Agreement, and $182,885 in management fees pursuant to the Mellon
Equity Management Agreement. For the fiscal year ended July 31, 1996, the
Portfolio incurred $38,150 in advisory fees pursuant to the KLD Advisory
Agreement, $38,150 in aggregate administration fees pursuant to the Signature
Administration Agreement and the KLD Sponsorship Agreement, and $128,901 in
management fees pursuant to the Mellon Equity Management Agreement.
SPONSOR
Pursuant to a Sponsorship Agreement, DSIL provides the Fund with oversight,
administrative and management services. DSIL provides the Fund with general
office facilities and supervises the overall administration of the Fund,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, the independent
contractors and agents of the Fund; the preparation and filing of 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; preparing agendas and supporting documents for and minutes of
meetings of Trustees, committees of Trustees and shareholders; maintaining
telephone coverage to respond to shareholder inquiries; answering questions from
the general public, the media and investors in the Fund regarding the securities
holdings of the Portfolio, limits on investment and the Fund's proxy voting
philosophy and shareholder activism philosophy; and arranging for the
maintenance of books and records of the Fund. The Sponsor provides persons
14
<PAGE>
satisfactory to the Board of Trustees of the Fund to serve as officers of the
Fund. Such officers, as well as certain other employees and Trustees of the
Fund, may be directors, officers or employees of the Sponsor or its affiliates.
The Fund's Prospectus contains a description of the fees payable to DSIL
by the Fund, as Sponsor of the Fund under the Sponsorship Agreement. For the
fiscal year ended July 31, 1998, the Fund incurred $1,419,618 in sponsorship
fees.
Prior to October 22, 1997, Signature served as administrator. For the fiscal
years ended July 31, 1996 and 1997, the Fund incurred $73,423 and $156,868,
respectively, in administrative fees.
The Sponsorship Agreement with the Fund provides that DSI may render
administrative services to others. The Sponsorship Agreement with the Fund also
provides that neither the Sponsor nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under the Fund's
Sponsorship Agreement.
DISTRIBUTOR
The Fund has adopted a Distribution Plan which provides that the Fund may
pay the Distributor a fee not to exceed 0.25% per annum of the Fund's average
daily net assets in anticipation of, or as reimbursement for, expenses incurred
in connection with the sale of shares of the Fund, such as payments to
broker-dealers who advise shareholders regarding the purchase, sale or retention
of shares of the Fund, payments to employees of the Distributor, advertising
expenses and the expenses of printing and distributing prospectuses and reports
used for sales purposes, expenses of preparing and printing sales literature and
other distribution-related expenses. For the fiscal years ended July 31, 1996,
1997 and 1998, the Fund accrued $183,558, $153,295, and $580,272 respectively,
in distribution fees. For the fiscal year ended July 31, 1998, payments
pursuant to the Distribution Plan were used for advertising ($29,912), printing
and mailing of prospectuses to other than current shareholders ($5,968),
compensation to dealers ($45,746), compensation to sales personnel; i.e.
payments to brokers ($51,782), and communications and servicing ($183,706).
The Distribution Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Fund's Trustees and a majority of the Fund's Trustees who are
not "interested persons of the Fund" and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any agreement
related to such Plan ("Qualified Trustees"). The Distributor will provide to
the Trustees of the Fund a quarterly written report of amounts expended by it
under the Distribution Plan and the purposes for which such expenditures were
made. The Distribution Plan further provides that the selection and nomination
of the Fund's Qualified Trustees shall be committed to the discretion of the
15
<PAGE>
disinterested Trustees of the Fund. The Distribution Plan may be terminated at
any time by a vote of a majority of the Fund's Qualified Trustees or by a vote
of the shareholders of the Fund. The Distribution Plan may not be materially
amended without a vote of the majority of both the Fund's Trustees and the
Fund's Qualified Trustees. The Distributor will preserve copies of any plan,
agreement or report made pursuant to the Distribution Plan for a period of not
less than six (6) years from the date of the Distribution Plan, and for the
first two (2) years the Distributor will preserve such copies in an easily
accessible place.
The Fund has entered into a Distribution Agreement with the Distributor.
Under the Distribution Agreement, the Distributor acts as the agent of the Fund
in connection with the offering of shares of the Fund.
TRANSFER AGENT, CUSTODIAN AND SERVICE ORGANIZATIONS
The Fund has entered into a Transfer Agency Agreement with FSSI pursuant to
which FSSI acts as the transfer agent for the Fund. Mr. David P. Wieder, Vice
President of the Fund and a principal of DSIL, the Manager of the Portfolio and
Sponsor of the Fund, is a 60% owner of, and President of FSSI. For its services
to the Fund as transfer agent, FSSI receives compensation on a per account basis
plus out-of-pocket expenses. The Fund has entered into a Custodian Agreement
with Investors Bank & Trust Company ("IBT") pursuant to which IBT acts as
custodian for the Fund. The Portfolio has entered into a Transfer Agency
Agreement with IBT pursuant to which IBT acts as transfer agent for the
Portfolio. The Portfolio has entered into a Custodian Agreement with IBT
pursuant to which IBT acts as custodian for the Portfolio. For additional
information, see "Transfer Agent and Custodian" in the Prospectus.
The Fund may from time to time enter into agreements with various banks,
trust companies (other than Mellon Equity), broker-dealers (other than the
Distributor) or other financial organizations to provide services for the Fund,
such as maintaining shareholder accounts and records. For the fiscal year ended
July 31, 1995, the Fund did not accrue any service organization fees. For the
fiscal years ended July 31, 1996 and 1997, the Fund accrued $12,526 and $3,711,
respectively, in service organization fees. For additional information, see
"Service Organizations, Transfer Agent and Custodian--Service Organizations" in
the Prospectus.
6. INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110, are the
independent auditors for the Fund and for the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission.
7. TAXATION
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), by meeting all applicable requirements
of Subchapter M, including requirements (applied through the Fund's
proportionate interest in the Portfolio) as to the nature of the Fund's gross
income, the amount of Fund distributions and the composition of the Fund's
portfolio assets. Because the Fund intends to distribute all of its net
investment income and net realized capital gains to shareholders in
accordance with the timing requirements imposed by the Code, it is not
expected that the Fund will be required to pay any federal income or excise
taxes although the Fund's foreign-source income may be subject to foreign
withholding taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund would incur a
16
<PAGE>
regular corporate federal income tax upon its taxable income and Fund
distributions would generally be taxable as ordinary dividend income to the
shareholders. As long as it qualifies as a "regulated investment company"
under the Code, the Fund will not be required to pay New York income or
excise taxes.
It is assumed that (1) the Portfolio will be treated for federal income
tax purposes as a partnership and (2) for purposes of determining whether the
Fund satisfies the income and diversification requirements to maintain its
status as a regulated investment company, the Fund, as an investor in the
Portfolio, will be deemed to own a proportionate share of the Portfolio's
assets and will be deemed to be entitled to the Portfolio's income or loss
attributable to that share. The Portfolio has advised the Fund that it intends
to conduct its operations so as to enable its investors, including the Fund,
to satisfy those requirements.
Shareholders of the Fund normally will have to pay federal income taxes,
and any state or local taxes, on the dividends and other distributions they
receive from the Fund. Dividends from ordinary income and any distributions
from net short-term capital gains are taxable to shareholders as ordinary
income for federal income tax purposes, whether the distributions are paid in
cash or reinvested in additional shares. A portion of the Fund's ordinary
income dividends (but none of the Fund's capital gains) is normally eligible
for the dividends received deduction for corporations if the recipient
otherwise qualifies for that deduction with respect to its holding of Fund
shares. Availability of the deduction for a particular corporate shareholder
is subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), whether paid in cash or reinvested
in additional shares, are taxable to shareholders as long-term capital gains
for federal income tax purposes without regard to the length of time the
shareholders have held their shares. Any Fund dividend that is declared in
October, November, or December of any calendar year, that is payable to
shareholders of record in such a month, and that is paid the following
January will be treated as if received by the shareholders on December 31 of
the year in which the divided is declared. The Fund will notify shareholders
regarding the federal tax status of its distributions after the end of each
calendar year.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares
of the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than twelve months and otherwise as a short-term capital gain or loss. However,
any loss realized upon a disposition of shares in the Fund held for six months
or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales.
Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will
17
<PAGE>
generally be treated as ordinary income and losses.
Investment income received by the Fund from foreign securities may be
subject to foreign income taxes withheld at the source; the Fund does not expect
to be able to pass through to shareholders foreign tax credits with respect to
such foreign taxes. The United States has entered into tax treaties with many
foreign countries that may entitle the Fund to a reduced rate of tax or an
exemption from tax on such income; the Fund intends to qualify for treaty
reduced rates where available. It is not possible, however, to determine the
Fund's effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known.
The Fund anticipates that the Portfolio will be treated as a partnership
for federal income tax purposes. As such, the Portfolio is not subject to
federal income taxation. Instead, the Fund must take into account, in computing
its federal income tax liability, its share of the Portfolio's income, gains,
losses, deductions, credits and tax preference items, without regard to whether
it has received any cash distributions from the Portfolio. Withdrawals by the
Fund from the Portfolio generally will not result in the Fund recognizing any
gain or loss for federal income tax purposes, except that (1) gain will be
recognized to the extent that any cash distributed exceeds the basis of the
Fund's interest in the Portfolio prior to the distribution, (2) income or gain
will be realized if the withdrawal is in liquidation of the Fund's entire
interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, and (3) loss will be recognized if
the distribution is in liquidation of that entire interest and consists solely
of cash and/or unrealized receivables. The basis of the Fund's interest in the
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in the Portfolio, increased by the Fund's share of income from
the Portfolio and decreased by the Fund's share of losses from the Portfolio and
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York. The
investment by the Fund in the Portfolio does not cause the Fund to be liable
for any income or franchise tax in the State of New York.
Fund shareholders may be subject to state and local taxes on Fund
distributions to them. Shareholders are advised to consult with their tax
advisers with respect to the particular tax consequences of an investment in the
Fund.
8. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Submanager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Submanager in a similar capacity.
The Portfolio's primary consideration in placing securities transactions
18
<PAGE>
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Submanager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Submanager on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Submanager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Submanager on the tender of
the Portfolio's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Portfolio by the
Submanager. At present no other recapture arrangements are in effect.
Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. and such other policies as the
Trustees of the Portfolio may determine, the Submanager may consider sales of
shares of the Fund and of securities of other investors in the Portfolio as a
factor in the selection of broker-dealers to execute the Portfolio's securities
transactions.
Under the Submanagement Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Submanager may cause the Portfolio to pay a
broker-dealer acting on an agency basis which provides brokerage and research
services to the Submanager or the Manager an amount of commission for effecting
a securities transaction for the Portfolio in excess of the amount other broker-
dealers would have charged for the transaction if the Submanager determines in
good faith that the greater commission is reasonable in relation to the value of
the brokerage and research services provided by the executing broker-dealer
viewed in terms of either a particular transaction or the Submanager's or the
Manager's overall responsibilities to the Portfolio or to its other clients. Not
all of such services are useful or of value in advising the Portfolio.
The term "brokerage and research services" includes advice as to the value
of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Submanager and the Manager currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will, in the judgment of the
Submanager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Submanager's or the Manager's other clients, in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
19
<PAGE>
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Submanager or the Manager for no
consideration other than brokerage or underwriting commissions.
The Submanager and the Manager attempt to evaluate the quality of research
provided by brokers. The Submanager and the Manager sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the Submanager nor the Manager
is able to quantify the amount of commissions which are paid as a result of such
research because a substantial number of transactions are effected through
brokers which provide research but which are selected principally because of
their execution capabilities.
The fees that the Portfolio pays to the Submanager and the Manager will
not be reduced as a consequence of the Portfolio's receipt of brokerage and
research services. To the extent the Portfolio's securities transactions are
used to obtain brokerage and research services, the brokerage commissions
paid by the Portfolio will exceed those that might otherwise be paid for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services may be useful and of value to the Submanager or the
Manager in serving both the Portfolio and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients may
be useful to the Submanager or the Manager in carrying out its obligations to
the Portfolio. While such services are not expected to reduce the expenses
of the Submanager or the Manager, the Submanager or the Manager would,
through use of the services, avoid the additional expenses which would be
incurred if it should attempt to develop comparable information through its
own staff. For the fiscal years ended July 31, 199, 1996, 1997, and 1998,
respectively, the Portfolio paid brokerage commissions of $45,017, $101,639,
and $175,344 respectively.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Submanager's or the Manager's other
clients. Investment decisions for the Portfolio and for the Submanager's or the
Manager's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to be
equitable to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Fund's Board of Trustees to
20
<PAGE>
issue an unlimited number of full and fractional shares of beneficial interest
(without par value) and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the Fund. Each share represents an equal proportionate interest in the Fund
with each other share. Upon liquidation or dissolution of the Fund, the Fund's
shareholders are entitled to share pro rata in the Fund's net assets available
for distribution to its shareholders. The Fund reserves the right to create and
issue a number of series of shares, in which case the shares of each series
would participate equally in the earnings, dividends and assets of the
particular series (except for any differences among classes of shares of a
series). Shares of each series would be entitled to vote separately to approve
advisory agreements or changes in investment policy, but shares of all series
may vote together in the election or selection of Trustees, principal
underwriters and accountants for the Fund. Upon liquidation or dissolution of
the Fund, the shareholders of each series would be entitled to share pro rata in
the net assets of their respective series available for distribution to
shareholders.
Shareholders are entitled to one vote for each share held. Shareholders in
the Fund do not have cumulative voting rights, and shareholders owning more than
50% of the outstanding shares of the Fund may elect all of the Trustees of the
Fund if they choose to do so and in such event the other shareholders in the
Fund would not be able to elect any Trustee. The Fund is not required to hold
annual meetings of shareholders but the Fund will hold special meetings of
shareholders when in the judgment of the Fund's Trustees it is necessary or
desirable to submit matters for a shareholder vote. No material amendment may
be made to the Fund's Declaration of Trust without the affirmative vote of the
holders of a majority of its outstanding shares. Shares have no preference,
preemptive, conversion or similar rights. Shares, when issued, are fully paid
and non-assessable, except as set forth below. The Fund may enter into a merger
or consolidation, or sell all or substantially all of its assets, if approved by
the vote of the holders of two-thirds of its outstanding shares, except that if
the Trustees of the Fund recommend such sale of assets, the approval by vote of
the holders of a majority of the Fund's outstanding shares will be sufficient.
The Fund may also be terminated upon liquidation and distribution of its assets,
if approved by the vote of the holders of two-thirds of its outstanding shares.
If not so terminated, the Fund will continue indefinitely. Stock certificates
are issued only upon the written request of a shareholder.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that the Fund shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Fund, its shareholders, Trustees, officers,
employees and agents covering possible tort and other liabilities. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate insurance existed
and the Fund itself was unable to meet its obligations.
21
<PAGE>
The Declaration of Trust further provides that obligations of the Fund are
not binding upon the Trustees individually but only upon the property of the
Fund and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Fund protects a Trustee against any liability
to which he or she would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each Fund Business Day. At the close of each
such business day, the value of each investor's interest in the Portfolio will
be determined by multiplying the net asset value of the Portfolio by the
percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio effective for that day. Any additions or
withdrawals, which are to be effected as of the close of business on that day,
will then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be re-computed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of any additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of business on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business on the
following Fund Business Day.
10. FINANCIAL STATEMENTS
The audited financial statements of the Fund and the Portfolio (Statement
of Assets and Liabilities at July 31, 1998, Statement of Operations for the year
ended July 31, 1998, Statement of Changes in Net Assets for each of the years in
the two-year period ended July 31, 1998, Financial Highlights for each of the
years in the five-year period ended July 31, 1998, Notes to Financial Statements
and Independent Auditors' Report), each of which is included in the Annual
Report to Shareholders of the Fund which has been filed with the Securities and
Exchange Commission pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder, are hereby incorporated by reference into this Statement of
Additional Information and have been so incorporated in reliance upon the
reports of KPMG Peat Marwick LLP, independent auditors, on behalf of the Fund
and the Portfolio. A copy of such report will be provided, without charge, to
each person receiving this Statement of Additional Information upon request by
calling (800) 762-6814.
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PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Financial Statements Included In Part A:
Financial Highlights for the period from August 10, 1990 (commencement of
operations) to July 31, 1991 and for the years ended July 31, 1992,
1993, 1994, 1995, 1996, 1997 and 1998.
Financial Statements Incorporated by Reference In Part B:
For the Registrant:
Statement of Assets and Liabilities at July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statements of Changes in Net Assets for the years ended July 31, 1998
and 1997
Financial Highlights for the years ended July 31, 1993, 1994, 1995,
1996, 1997 and 1998
Notes to Financial Statements at July 31, 1998
For Domini Social Index Portfolio:
Portfolio of Investments at July 31, 1998
Statement of Assets and Liabilities at July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statement of Changes in Net Assets for the years ended July 31, 1998
and 1997
Financial Highlights for the years ended July 31, 1993, 1994, 1995,
1996, 1997 and 1998
Notes to Financial Statements at July 31, 1998
(b) Exhibits
1(a). Amended and Restated Declaration of Trust of the Registrant.5
1(b). Cerfiticate and Amendment No. 2 to Declaration of Trust of the
Registrant.8
2. By-Laws of the Registrant, as amended October 6, 1997.8
4. Specimen of certificate representing ownership of the Registrant's
Shares of Beneficial Interest.3
6. Distribution Agreement between the Registrant and Signature
Broker-Dealer Services, Inc. ("SBDS"), as distributor.1
8. Custodian Agreement between the Registrant and Investors Bank & Trust
Company, as custodian.1
9(a). Form of Transfer Agency Agreement between the Registrant and
Fundamental Shareholder Services, Inc.5
9(b). Sponsorship Agreement between the Registrant and DSIL,
as sponsor.8
11. Consents of KPMG Peat Marwick LLP, independent auditors for the
Registrant and Domini Social Index Portfolio.9
13. Copies of investment representation letters from initial
shareholders.1
15. Distribution Plan of the Registrant.1
16. Schedule for Calculation of Performance Quotations.2
18. Powers of Attorney.9
27. Financial Data Schedule.9
C-1
<PAGE>
1 Incorporated by reference from Pre-Effective Amendment No. 2 to
Registrant's Registration Statement (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "SEC") on June 7, 1989.
2 Incorporated by reference from Post-Effective Amendment ("PEA") No. 1 to
the Registration Statement as filed with the SEC on December 2, 1991.
3 Incorporated by reference from PEA No. 2 to the Registration Statement as
filed with the SEC on November 16, 1992.
4 Incorporated by reference from PEA No. 4 to the Registration Statement as
filed with the SEC on September 16, 1993.
5 Incorporated by reference from PEA No. 7 to the Registration Statement as
filed with the SEC on November 22, 1995.
6 Incorporated by reference from PEA No. 9 to the Registration Statement as
filed with the SEC on November 27, 1996.
7 Incorporated by reference from PEA No. 10 to the Registration Statement
as filed with the SEC on September 26, 1997.
8 Incorporated by reference from PEA No. 11 to the Registration Statement
as filed with the SEC on November 25, 1997.
9 Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Title of Class: Shares of Beneficial Interest (without par value).
Number of Record Holders as of October 31, 1998: 14,479
Item 27. Indemnification
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an exhibit hereto; (b) Section 4 of the Distribution
Agreement by and between the Registrant and SBDS, filed as an exhibit hereto;
and (c) the undertaking of the Registrant regarding indemnification set forth in
Item 32 below.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator and distributor are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
Item 28. Business and Other Connections of Investment Adviser
Not applicable.
Item 29. Principal Underwriters
(a) SBDS is the distributor for the Registrant. SBDS and its affiliates
serve as the distributor for other registered investment companies.
(b) The information required by this Item 29 with respect to each director
or officer of SBDS is incorporated herein by reference from Schedule A
of Form BD (File No. 8-41134) as filed
C-2
<PAGE>
by SBDS pursuant to the Securities Exchange Act of 1934.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the offices of the Registrant and at the following locations:
Name: Address:
Domini Social Investments LLC 11 W. 25th Street
(administrator) New York, NY 10010
Signature Broker-Dealer Services, Inc. 21 Milk St.
(distributor) Boston, MA 02109
Investors Bank & Trust Company 200 Clarendon Street
(custodian) Boston, MA 02116
FSSI 11 W. 25th Street
(transfer agent) New York, NY 10010
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant's Declaration of Trust mandates indemnification by the
Registrant of its Trustees, officers and certain others under certain
conditions. Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended (the "1933 Act"), may be
permitted to Trustees, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee of officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person of the Registrant in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether or not
such indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of such
issue.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940 Act
as though such provisions of the 1940 Act were applicable to the
Registrant, except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of
C-3
<PAGE>
the net asset value or value of shares held by such requesting
shareholders.
(c) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the registrant shall furnish
each person to whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders upon request and
without charge.
<PAGE>
SIGNATURES
Domini Social Index Portfolio has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A (File No. 33-29180) of Domini Social
Equity Fund to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and Commonwealth of Massachusetts on the 24th
day of November, 1998.
DOMINI SOCIAL INDEX PORTFOLIO
By: /s/ Amy L. Domini
------------------------------------
Amy L. Domini
President of Domini Social Index
Portfolio
This Post-Effective Amendment to the Registration Statement on Form N-1A of
Domini Social Equity Fund has been signed below by the following persons in the
capacities indicated below on November 24, 1998.
Signature Title
--------- -----
/s/ Amy L. Domini
- -----------------------------------
Amy L. Domini President (Principal Executive Officer)
and Trustee of Domini Social Index
Portfolio
Carole M. Laible
- -----------------------------------
Carole M. Laible Treasurer (Principal Accounting and
Financial Officer) of Domini Social
Index Portfolio
Allen M. Mayes*
- -----------------------------------
Allen M. Mayes Trustee of Domini Social Index Portfolio
William C. Osborn*
- -----------------------------------
William C. Osborn Trustee of Domini Social Index Portfolio
Karen Paul*
- -----------------------------------
Karen Paul Trustee of Domini Social Index Portfolio
Timothy H. Smith*
- -----------------------------------
Timothy H. Smith Trustee of Domini Social Index Portfolio
Frederick C. Williamson, Sr.*
- -----------------------------------
Frederick C. Williamson, Sr. Trustee of Domini Social Index Portfolio
*By: /s/ Amy L. Domini
-------------------------------
Amy L. Domini
Executed by Amy L. Domini on
behalf of those indicated
pursuant to Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement on Form N-1A meets all of
the requirements for effectiveness pursuant to Rule 485(b) under the Securities
Act of 1933 and that the Registrant has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 24th day of November, 1998.
DOMINI SOCIAL EQUITY FUND
By: /s/ Amy L. Domini
-------------------------------------
Amy L. Domini
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on November 24, 1998.
Signature Title
--------- -----
/s/ Amy L. Domini
- -----------------------------------
Amy L. Domini President (Principal Executive Officer)
and Trustee of Domini Social Equity
Fund
/s/ Carole M. Laible
- -----------------------------------
Carole M. Laible Treasurer (Principal Accounting and
Financial Officer) of Domini Social
Equity Fund
Allen M. Mayes*
- -----------------------------------
Allen M. Mayes Trustee of Domini Social Equity
Fund
William C. Osborn*
- -----------------------------------
William C. Osborn Trustee of Domini Social Equity
Fund
Karen Paul*
- -----------------------------------
Karen Paul Trustee of Domini Social Equity
Fund
Timothy H. Smith*
- -----------------------------------
Timothy H. Smith Trustee of Domini Social Equity
Fund
Frederick C. Williamson, Sr.*
- -----------------------------------
Frederick C. Williamson, Sr. Trustee of Domini Social Equity
Fund
*By: /s/ Amy L. Domini
-------------------------------
Amy L. Domini
Executed by Amy L. Domini on
behalf of those indicated
pursuant to Powers of Attorney.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
EX-27 Financial Data Schedule
EX-99.B11 Consent of KPMG Peat Marwick LLP, independent auditors
for the Registrant.
EX-99.B18 Powers of Attorney.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 499,840,842
<RECEIVABLES> 2,966,583
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 502,807,425
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 913,239
<TOTAL-LIABILITIES> 913,239
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 358,615,414
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 247,716
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,544,386
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 139,486,670
<NET-ASSETS> 501,894,186
<DIVIDEND-INCOME> 3,502,827
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,252,202
<NET-INVESTMENT-INCOME> 250,625
<REALIZED-GAINS-CURRENT> 3,680,164
<APPREC-INCREASE-CURRENT> 64,706,869
<NET-CHANGE-FROM-OPS> 68,637,658
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 136,383
<DISTRIBUTIONS-OF-GAINS> 361,622
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,417,927
<NUMBER-OF-SHARES-REDEEMED> (1,522,572)
<SHARES-REINVESTED> 16,973
<NET-CHANGE-IN-ASSETS> 289,584,594
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,419,628
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,252,202
<AVERAGE-NET-ASSETS> 334,398,570
<PER-SHARE-NAV-BEGIN> 25.43
<PER-SHARE-NII> 0.010
<PER-SHARE-GAIN-APPREC> 5.480
<PER-SHARE-DIVIDEND> (0.010)
<PER-SHARE-DISTRIBUTIONS> (0.050)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.86
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<PAGE>
Consent of Independent Auditors
The Board of Trustees
Domini Social Equity Fund
Domini Social Index Portfolio:
We consent to the use of our reports for the Domini Social Equity Fund, dated
September 15, 1998, and the Domini Social Index Portfolio, dated August 24,
1998, incorporated herein by reference, and to the references to our Firm under
the headings "Financial Highlights" in the Prospectus and "Independent Auditors"
and "Financial Statements" in the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
November 25, 1998
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Carole M. Laible,
Sigward M. Moser, and David P. Wieder, and each of them, with full powers of
substitution as her true and lawful attorneys and agents to execute in her
name and on her behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by Domini Social
Equity Fund, and Domini Institutional Trust, (each, a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor (collectively with each Trust, the "Investors") in Domini
Social Index Portfolio (the "Portfolio") (insofar as each of the Investors
invests all its assets in the Portfolio), with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and/or the
Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable
any of the Investors or the Portfolio, as applicable, to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as her own act
and deed any and all acts that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 16th day of October, 1998.
/s/ Amy L. Domini
------------------------------------
Amy L. Domini
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
5th day of November, 1998.
/s/ Allen M. Mayes
------------------------------------
Allen M. Mayes
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder and each of them, with full powers
of substitution as his true and lawful attorneys and agents to execute in his
name and on his behalf in any and all capacities the Registration Statements on
Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.
/s/ William C. Osborn
------------------------------------
William C. Osborn
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder and each of them, with full powers
of substitution as her true and lawful attorneys and agents to execute in her
name and on her behalf in any and all capacities the Registration Statements on
Form N-1A, and any and all amendments thereto, filed by Domini Social Equity
Fund, and Domini Institutional Trust, (each, a "Trust"), or the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
(collectively with each Trust, the "Investors") in Domini Social Index Portfolio
(the "Portfolio") (insofar as each of the Investors invests all its assets in
the Portfolio), with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended,
and any and all instruments which such attorneys and agents, or any of them,
deem necessary or advisable to enable any of the Investors or the Portfolio, as
applicable, to comply with such Acts, the rules, regulations and requirements of
the Securities and Exchange Commission, and the securities or Blue Sky laws of
any state or other jurisdiction, and the undersigned hereby ratifies and
confirms as her own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
24th day of November, 1998.
/s/ Karen Paul
----------------------------
Karen Paul
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute
in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Domini
Social Equity Fund, and Domini Institutional Trust, (each, a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor (collectively with each Trust, the "Investors") in Domini
Social Index Portfolio (the "Portfolio") (insofar as each of the Investors
invests all its assets in the Portfolio), with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and/or the
Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable
any of the Investors or the Portfolio, as applicable, to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.
/s/ Timothy Smith
------------------------------------
Timothy Smith
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Amy L. Domini, Carole M.
Laible, Sigward M. Moser, and David P. Wieder, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute
in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Domini
Social Equity Fund, and Domini Institutional Trust, (each, a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor (collectively with each Trust, the "Investors") in Domini
Social Index Portfolio (the "Portfolio") (insofar as each of the Investors
invests all its assets in the Portfolio), with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and/or the
Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable
any of the Investors or the Portfolio, as applicable, to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
16th day of October, 1998.
/s/ Frederick C. Williamson, Sr.
------------------------------------
Frederick C. Williamson, Sr.
