<PAGE>
As filed with the Securities and Exchange Commission on November 30, 1999.
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. 15
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 17
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 on December 1, 1999
pursuant to paragraph (b) of Rule 485.
Domini Social Index Portfolio has also executed this registration statement.
<PAGE>
Prospectus
December 1, 1999
[PICTURE]
Domini Social Equity Fund/(SM)/
Domini [LOGO]
------------------
SOCIAL INVESTMENTS
The Responsible Index Fund/(SM)/
As with all mutual funds, the Securities and Exchange Commission has not judged
whether this fund is a good investment or whether the information in this
prospectus is truthful and complete. Anyone who indicates otherwise is
committing a federal crime.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
The Fund at a Glance
Investment Objective................................................................ 3
Primary Investment Strategy and
Overview of the Social Screens Used by the Index.............................. 3
Primary Risks....................................................................... 4
Past Performance of the Fund........................................................ 5
Fund Fees and Expenses.............................................................. 7
Structure........................................................................... 8
More About the Fund
About Index Investing............................................................... 9
Answers to basic questions about how index funds work,
how index funds differ from actively managed funds,
and an overview of the advantages they offer.
What is the Domini 400 Social Index/(sm)/?.......................................... 11
Information about the nation's first socially screened
index, how it was created and is maintained, and further
details about the Fund's socially responsible investment
criteria.
Is the Fund an Appropriate Investment for Me?....................................... 15
Additional Investment Strategies & Risk Information................................. 15
Who Manages the Fund?............................................................... 17
The Fund's Distribution Plan........................................................ 18
Shareholder Manual..................................................................... A-1
Information about buying and selling shares, distributions,
and the tax consequences of an investment in the Fund.
Financial Highlights................................................................... B-1
</TABLE>
Why Reading this Prospectus is Important
This prospectus explains the objective, risks, and strategies of the Domini
Social Equity Fund. Reading the prospectus will help you to decide whether the
Fund is the right investment for you.
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
Because you could lose money by investing in this Fund, we suggest that you read
this prospectus carefully, and keep it for future reference.
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<PAGE>
The Fund at a Glance
Investment Objective
The Fund seeks to provide its shareholders with long-term total return that
matches the performance of the Domini 400 Social Index, an index made up of the
stocks of 400 companies selected using social and environmental criteria. The
Index is composed primarily of large-capitalization U.S. companies.
Primary Investment Strategy
The Fund seeks to match the composition of the Index as closely as possible. The
Fund typically invests in all 400 stocks included in the Domini 400 Social
Index, in approximately the same proportion as they are found in the Index. This
is known as a full replication strategy.
Although you cannot invest directly in an index, an index mutual fund provides
you the opportunity to invest in a portfolio that tracks an index.
Overview of the Social Screens Used by the Index:
o The Index avoids companies that manufacture tobacco products or alcoholic
beverages, companies that derive any revenues from gambling enterprises, major
military contractors and companies that have an ownership share in, or
operate, nuclear power plants.
o The Index seeks to hold the stocks of good corporate citizens, demonstrated by
positive relations with their communities and their employees, by their
environmental record, and by the quality and safety of their products.
For more information about the Domini 400 Social Index and its social screens,
please refer to page 11.
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<PAGE>
The Fund at a Glance
Primary Risks
o Market Risk. The Fund seeks to remain fully invested in the stock market
during all market conditions. Therefore, the value of your investment, like
stock prices generally, may fluctuate widely. You could lose money. Stock
markets tend to move in unpredictable cycles, with periods of rising prices and
periods of falling prices. The value of your investment will vary from day to
day due to changing market conditions, or conditions relating to specific
companies.
o Style Risk. The Fund primarily invests in the stocks of large-capitalization
companies. Large-capitalization stocks tend to go through cycles where they do
better, or worse, than the stock market in general. The performance of your
investment will generally follow these broad market trends. Because the Domini
400 Social Index is weighted by market capitalization, a few large companies
represent a relatively large percentage of the Index. Should the value of one or
more of these stocks decline significantly, it could negatively affect the
Fund's performance.
The Fund only invests in companies that meet its criteria for socially
responsible investing. Because of this restriction, the investments that the
Fund's portfolio managers may choose from may be more limited than those of a
fund that is not restricted to investing in companies that meet social criteria.
o Indexing. The Fund will continue to invest in the Domini 400 Social
Index, regardless of how the Index is performing. It will not shift its
concentration from one industry to another, or from stocks to bonds or cash, in
order to defend against a falling or stagnant stock market. If the Index is
heavily weighted in a single industry or sector, the Fund will be heavily
invested in that industry or sector, and as a result can be affected more
positively or negatively by developments in those industries than would be
another investment company whose investments are not restricted to the
securities in the Index. Also, the Fund's ability to match the performance of
the Index may be affected by a number of factors, including Fund operating
expenses and transaction costs, inflows and outflows of cash from the Fund and
imperfect correlation between the Fund's holdings and those in the Index.
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<PAGE>
The Fund at a Glance
There can be no guarantee that the Fund will be able to achieve its investment
objective. The investment objective of the Fund may be changed without the
approval of the Fund's shareholders, although management currently has no
intention to do so.
Additional risk information is provided in the More About the Fund section at
page 9, and is available in the Statement of Additional Information.
Past Performance of the Fund
The bar chart and table below provide an indication of the risk of investing in
the Fund by illustrating how returns have varied from one year to the next and
by showing how the Fund's average annual total returns compare with those of the
Standard & Poor's 500 Index, a broad-based index. Please note that this
information represents past performance, and is not necessarily an indication of
how the Fund will perform in the future.
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<PAGE>
The Fund at a Glance
Total Return for Years Ended December 31
This bar chart shows how the Fund's performance has varied over the last seven
calendar years.
[BAR CHART]
12.10% 6.54% -0.36% 35.17% 21.84% 36.02% 32.99%
- -----------------------------------------------------
1992 1993 1994 1995 1996 1997 1998
Best quarter covered by the bar chart above: 24.62%
(quarter ended 12/31/98)
Worst quarter covered by the bar chart above: -9.83%
(quarter ended 9/30/98)
Year-to-date performance as of 9/30/99: 4.39%
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<PAGE>
The Fund at a Glance
Average Annual Total Return as of 12/31/98
The table below shows the Fund's average annual total returns in comparison to
the S&P 500.
Since
1 Year 5 Years Inception
(6/3/91)
- --------------------------------------------------------------------
Domini Social 32.99% 24.31% 19.42%
Equity Fund
S&P 500 28.58% 24.04% 19.21%
Fund Fees and Expenses
The table below describes the fees and expenses that you would pay if you buy
and hold shares of the Fund.(*)
Shareholder Fees (fees paid directly by you)
Sales Charge (Load) Imposed on Purchases: None
Deferred Sales Charge (Load): None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees(++): None
Exchange Fees: None
Annual Fund Operating Expenses
(expenses deducted from the Fund's assets)
Management Fees: 0.20%
Distribution (12b-1) Fees: 0.25%
Other Expenses
Administrative Services and Sponsorship Fee: 0.50%
Other Expenses: 0.12%
Total Annual Fund Operating Expenses: 1.07%
Fee Waiver(**): 0.12%
Net Expenses: 0.95%
- --------------------------------------------------------------------------------
(++) You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds by wire, there is a $10 wire service fee. For additional
information, please refer to the Shareholder Manual, page A-1.
(*) The table reflects the expenses of the Fund and the Domini Social Index
Portfolio, the underlying portfolio in which the Fund invests.
(**) For the period from November 30, 1999 to November 30, 2000, Domini Social
Investments LLC has contractually agreed to waive certain fees and/or reimburse
certain expenses, including management fees, so that the Fund's expenses will
not exceed, on a per annum basis, 0.95% of its average daily net assets.
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<PAGE>
The Fund at a Glance
Example
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur if you invest $10,000 in the Fund for
the time periods indicated and then sell all of your shares at the end of each
period. This example assumes that the Fund provides a return of 5% a year, all
dividends and distributions are reinvested and that operating expenses remain
constant for the time period indicated.
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------
$97 $328 $578 $1295
This example should not be considered to represent actual expenses or
performance from the past or the future. Actual future expenses may be higher or
lower than those shown.
Structure
The Fund invests its assets in the Domini Social Index Portfolio. The Portfolio
has the same investment objective as the Fund and invests in securities using
the strategies described in this prospectus.
Quick Guide to Important Information
Minimum Initial Investment: $1,000 ($250 for IRAs)
($500 with Automatic Investment Plan)
Investment Adviser: Domini Social Investments LLC
Inception Date: June 3, 1991
Net Assets as of September 30, 1999: $1,092,686,549
Available for IRAs
Dividends: Distributed Semi-annually, in June and December
Capital Gains: Distributed Annually, in December
Newspaper Listing: Domini Social Invmts (Soc Eq) or
Dom Social
Ticker Symbol: DSEFX
Cusip Number: 257132100
Website: www.domini.com
Shareholder Services: 1-800-762-6814
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<PAGE>
More About the Fund
About Index Investing
What is an index?
An index is an unmanaged group of stocks selected to measure the behavior of the
market, or some portion of it. The Standard & Poor's 500 Index, for example, is
an index of 500 companies selected to track the performance of the broad market
of large-cap U.S. companies. Investors use indexes as benchmarks to measure how
their investments are performing in comparison to the market as a whole.
The Domini 400 Social Index attempts to track the performance of the broad
market of primarily large-cap U.S. companies that the typical socially
responsible investor would consider appropriate to invest in. The Domini 400
Social Index was created to serve as a benchmark for socially and
environmentally conscious investors.
What is the difference between an index fund and an actively managed fund?
The Fund uses a passive investment strategy. This means that the Fund
purchases, holds and sells stocks based on the composition of the Domini 400
Social Index, rather than on a manager's judgment as to the direction of the
market or the merits of any particular stock.
Unlike index funds, actively managed funds are generally managed to achieve the
highest possible return within certain parameters. These funds are managed by
stock-pickers who buy and sell stocks based on their opinion of the financial
outlook of the stock. Because index funds use a passive strategy, changes in
management generally have less impact on fund performance.
Index funds provide investors with an opportunity to invest in a portfolio that
is specially designed to match the performance of a particular index. Rather
than relying on the skills of a particular mutual fund manager, index fund
investors purchase, in a sense, a cross-section of the market. Their performance
should therefore reflect the segment of the market that their fund is designed
to track.
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<PAGE>
More About the Fund
What are some of the advantages of index investing?
Index investing has become quite popular because it offers investors a
convenient, relatively low-cost and tax-efficient way to obtain exposure to a
broad spectrum of the stock market. Here are some other advantages:
o Diversification. Because indexes such as the Domini 400 Social Index seek to
measure the performance of the broad market, they invest in a large number of
companies representing a diverse mix of industries. This structure can help
reduce volatility as compared to funds that may invest in a smaller number of
companies, or focus on a particular industry.
o Benchmark Comparability. All stock mutual funds measure their performance in
relation to a particular market benchmark. Index funds typically match the
performance of their particular benchmarks more closely than comparable actively
managed funds.
o Tax Efficiency. Turnover rate refers to the volume of buying and selling of
stocks by a fund. The turnover rate of index funds tends to be much lower than
the average actively managed mutual fund. Depending on your particular tax
situation, a low turnover rate may produce fewer taxable capital gains.
Compare Turnover Rates
The average annual turnover rate for all domestic stock funds is 111%.(*)
The annual turnover rate for the Domini Social Equity Fund is 8%.(**) (There is
no guarantee that this turnover will not be higher in the future.)
A 100% turnover rate would occur if a fund sold and replaced securities valued
at 100% of its net assets within a one-year period.
(*) As of 9/30/99; taken from Morningstar PrincipiaPro.
(**)For the period from 8/1/98 to 7/31/99.
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<PAGE>
More About the Fund
Socially Responsible Investing
Corporations have both positive and negative effects on society and the natural
environment. Socially responsible investing is an investment strategy designed
to take these effects into account.
Social investors use social and environmental factors to make their investment
decisions. They believe that this helps to encourage greater corporate
responsibility, and may also help to identify companies that are good long-term
investments because enlightened management may be better able to meet the future
needs of society and the environment.
Typically, social investors avoid companies that manufacture products, or employ
practices, that they believe have harmful effects on society. They seek to
invest in companies with positive qualities, such as a proactive environmental
record, or positive employee relations. This process is called "social
screening."
At Domini Social Investments we work with companies to improve their social and
environmental performance. We vote company proxies in a manner that is
consistent with our social screening criteria, and file shareholder resolutions
on important social and environmental issues.
What is the Domini 400 Social Index?
The Domini 400 Social Index (DSI 400) is the nation's first socially screened
index. It was created and launched in May 1990 by the social research firm of
Kinder, Lydenberg, Domini & Co., Inc.(KLD) in order to serve as a benchmark for
social investors, and to determine how social screens affect financial
performance. KLD is an affiliate of Domini Social Investments. The Domini Social
Equity Fund was launched in 1991 to give investors an opportunity to invest in
the Index.
The Index is maintained by KLD. It is composed of the common stocks of 400
companies that meet the social criteria described below.
What are Social Screens?
All investment decisions use some type of "screen." Screens are guidelines that
define which securities will be included in a portfolio, and which will be
excluded. In addition to basic financial screens relating to financial
solvency, industry and sector diversification, and market capitalization, the
stocks in the Domini 400 Social Index are selected using two basic types of
social screens: exclusionary and qualitative.
KLD uses exclusionary social screens to avoid certain industries such as tobacco
and alcohol, and qualitative social screens to select companies based on their
performance in a number of areas, such as diversity and the environment.
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<PAGE>
More About the Fund
How was the Domini 400 Social Index constructed?
To construct the Domini 400 Social Index, KLD first applied to the S&P 500 a
number of traditional social screens. Roughly half of the S&P 500 companies
qualified for the Index in this initial screening process. Approximately 150
non-S&P 500 companies were then added with two goals in mind. One goal was to
obtain a broad representation of industries, so that the Index would more
accurately reflect the composition of the broad market. Another goal was to
identify companies that are particularly strong models of corporate behavior.
KLD maintains an extensive database of corporate accountability information on
more than 1,000 publicly traded companies and bases its decisions on research
into the factors described below.
Exclusionary Screens
KLD seeks to exclude the following types of companies from the Index:
o Tobacco and Alcohol - firms that manufacture tobacco products or alcoholic
beverages;
o Gambling - firms that receive identifiable revenues from gambling enterprises;
o Nuclear Power - firms that have an ownership share in, or operate nuclear
power plants; and
o Weapons - firms that receive more than 2% of their gross revenues from the
sale of military weapons.
Qualitative Screens
KLD considers the following criteria when evaluating companies for possible
inclusion in the Index:
o Environmental Performance - 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;
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<PAGE>
More About the Fund
o Employee Relations - a company's record with regard to labor matters,
workplace safety, employee benefit programs, and meaningful participation in
company profits either through stock purchase or profit sharing plans;
o Diversity - a company's record with regard to the hiring and promotion of
women and minorities, particularly to management positions and the board of
directors, including a company's record with respect to the availability of
benefit programs that address work/family concerns, innovative hiring programs
for the disabled and progressive policies toward gays and lesbians;
o Corporate Citizenship - a company's record with regard to its charitable
activities and its community relations in general; and
o Product-Related Issues - a company's record with regard to product
safety, marketing practices, and commitment to quality.
From time to time, KLD may, at its discretion, choose to apply additional
criteria, or to modify the application of the criteria listed above, without
consulting shareholders.
How are the Fund's largest holdings selected?
Like the S&P 500, the DSI 400 is "market capitalization-weighted." Market
capitalization is a measure of the value of a publicly traded company. It is
calculated by multiplying the total number of outstanding shares of company
stock by the price per share.
The Domini Social Equity Fund's portfolio is also market
capitalization-weighted. For example, assume that the total market value of
Company A's shares is twice the total market value of Company B's shares. The
Fund's portfolio is structured so that its holdings of Company A's shares will
be twice the value of its holding of Company B's shares. The Fund's top ten
holdings therefore are simply the ten companies with the highest market value in
the Index.
Because it seeks to duplicate the Index as closely as possible, the Fund will
attempt to have a correlation between the weightings of the stocks it holds in
its portfolio and the weightings of the stocks in the Index of 0.95 or better. A
figure of 1.0 would indicate a perfect correlation.
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<PAGE>
More About the Fund
How is the Domini 400 Social Index maintained?
To keep turnover low and to more accurately reflect the performance of the
market, the Index is maintained using a "buy and hold" strategy. Generally
speaking, this means that companies that are in the Index stay in the Index for
a long time. A company will not be removed because its stock has not been
performing well, unless in KLD's opinion the company is no longer financially
viable. Sometimes a company is removed from the Index because it has been
acquired by another company. Sometimes a company may split into two companies,
and only one of the surviving companies is selected to stay in the Index
(because the Index is maintained to consist of exactly 400 companies at all
times).
A company may also be removed from the Index because its social profile has
deteriorated, or due to its inadequate response to a significant controversy.
When a company is removed from the Index, it is replaced with another company.
In the selection process, among other factors, KLD considers the size of the
company, the industry it is in, and its social profile.
Are there companies I won't like in the Domini 400 Social Index?
The screens for the Index are designed to reflect those most widely used by
social investors. Therefore, you may find that some companies in the Index do
not reflect your social or environmental standards. You may wish to review a
list of companies in the Fund's portfolio to decide if they meet your personal
standards. The complete list is available in the Fund's annual and semi-annual
reports. To obtain copies of these reports, free of charge, call 1-800-762-6814.
No company is a perfect model of corporate responsibility. Each year, the Fund
uses its voice as a shareholder to encourage companies to improve their social
and environmental records by voting proxies, writing letters, engaging
management in dialogue and filing shareholder resolutions.
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<PAGE>
More About the Fund
Is the Fund an Appropriate Investment for Me?
If you are seeking long-term growth, and are looking for an efficient way to
invest in the broad U.S. stock market, the Fund may be appropriate for you.
Please note that although the Fund's portfolio holds a broad cross-section of
the U.S. stock market, it should not be considered a balanced investment program
because it only holds stocks. In addition, the Fund should be considered a
long-term investment and is not appropriate for short-term trading purposes.
If you depend on your investments for current income, or would find it a
financial hardship to wait out periods of stock market volatility, the Fund may
not be appropriate for you.
The Fund can be used in both regular and tax-deferred accounts, such as IRAs.
Additional Investment Strategies & Risk Information
Investment Structure:
The Fund invests its assets in the Domini Social Index Portfolio. The Portfolio
has the same investment objective as the Fund and invests in securities using
the strategies described in this prospectus. 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. The Board of
Trustees would then consider what action might be taken, including investing all
of the Fund's assets in another similarly structured portfolio having the same
investment objective as the Fund, or hiring an investment adviser to manage the
Fund's assets. There is currently no intention to change the Fund's investment
structure. References to the Fund in this prospectus include the Portfolio,
unless the context requires otherwise.
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<PAGE>
More About the Fund
Cash Reserves:
Although the Fund seeks to be fully invested in the stock market at all times,
it keeps a small percentage of its assets in cash, or cash equivalents. These
reserves provide the Fund with flexibility to meet redemptions and expenses, and
to readjust its portfolio holdings. The Fund may hold these cash reserves
uninvested or may invest them in high quality, short-term debt securities issued
by agencies or instrumentalities of the United States Government, bankers'
acceptances, commercial paper, certificates of deposit, bank deposits or
repurchase agreements. The issuers of these securities must satisfy certain
social criteria.
Securities Lending:
Consistent with applicable regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Fund may make loans of its securities to member banks of the
Federal Reserve System and to broker-dealers. These 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 Fund would have the right to
terminate a loan and obtain the securities loaned at any time on three days
notice.
During the existence of a loan, the Fund 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 Fund 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.
Year 2000:
Some software programs and computer systems are not able to recognize the Year
2000. The Fund could be harmed 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. The Fund and its service providers have been diligently
working to resolve any potential Year 2000 problems. While these efforts are
likely to be successful, the failure to implement any necessary changes could
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<PAGE>
More About the Fund
harm the Fund. The Fund also could be harmed if companies in the Fund's
portfolio do not solve their Year 2000 problems, if it costs those companies
large amounts of money to do so, or if the general market is affected by the
Year 2000 transition.
The Fund is not required to use every investment technique or strategy listed in
this prospectus or in the Statement of Additional Information.
For Additional Information about the Fund's investment strategies and risks, the
Fund's Statement of Additional Information is available, free of charge, from
Domini Social Investments.
Who Manages the Fund?
Portfolio Adviser:
Domini Social Investments LLC (DSIL), 11 West 25th Street, 7th Floor, New York,
NY 10010, has been managing money since November of 1997 and currently manages
more than $1.5 billion dollars in assets for individual and institutional
investors who are working to create positive change in society by using social
and environmental criteria in their investment decisions. DSIL is the
Portfolio's manager and provides the Portfolio with investment supervisory
services, overall operational support and administrative services. In addition,
DSIL is the sponsor of the Fund and provides the Fund with the administrative
personnel and services necessary to operate the Fund. After March 1,2000 DSIL's
new address will be 536 Broadway, 7th floor, New York, NY 10012.
Social Research & Index Maintenance:
Kinder, Lydenberg, Domini & Co., Inc.(KLD), an affiliate of DSIL, determines the
composition of the Domini 400 Social Index. The following persons are primarily
responsible for the development and maintenance of the Domini 400 Social Index:
Amy L. Domini, CFA, a Managing Principal of DSIL and Founder of KLD (since
1988), Steven D. Lydenberg, CFA, Director of Research, KLD (since 1990), and
Peter D. Kinder, JD, President, KLD (since 1988).
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<PAGE>
More About the Fund
Portfolio Investment Submanager:
Mellon Equity Associates, LLP with its main offices at 500 Grant Street,
Pittsburgh, PA 15258, provides investment submanagement services to the
Portfolio pursuant to a Submanagement Agreement with DSIL. A team of portfolio
managers at Mellon Equity implements the daily transactions necessary to
maintain the proper correlation between the Fund's portfolio and the Domini 400
Social Index. They do not determine the composition of the Index.
For the services DSIL and Mellon Equity provided to the Fund and the Portfolio
during the fiscal year ended July 31, 1999, they received a total of 0.69% of
the average daily net assets of the Fund, after waivers.
The Fund's Distribution Plan
DSIL Investment Services LLC, a wholly owned subsidiary of DSIL, is the
distributor of the Fund's shares. The Fund has adopted a Rule 12b-1 plan that
allows the Fund to pay its distributor up to 0.25% of the Fund's average daily
net assets, on an annual basis, for the sale and distribution of the Fund's
shares and for services provided to shareholders. Because this fee is paid out
of the Fund's assets on an ongoing basis, over time the fee will increase the
cost of your investment and may cost you more than paying other types of sales
charges. For more information about the Fund's distribution plan, see the
expense table, on page 7 of this prospectus, and the Statement of Additional
Information.
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<PAGE>
Shareholder Manual
This section provides you with information on how to buy and sell shares of the
Fund, how Fund shares are valued, and the tax consequences of an investment in
the Fund.
Table of Contents
How to Open an Account................................................. A-2
Types of Accounts.................................................. A-2
How to Buy Shares...................................................... A-4
How to Exchange Shares................................................. A-5
How to Sell Shares..................................................... A-6
How the Price of Your Shares is Determined............................. A-10
How can I find out the Fund's NAV?................................. A-10
How do you determine what price I will get when I buy shares?...... A-10
How do you determine what price I will get when I sell shares?..... A-11
How is the value of securities held by the Fund determined?........ A-11
Fund Statements and Reports............................................ A-12
Dividends and Capital Gains............................................ A-13
Taxes.................................................................. A-13
Rights Reserved by the Fund............................................ A-15
For more information on:
o investing in the Fund,
o your account,
o the Fund's daily share price, and
o socially responsible investing,
Call our Shareholder Information Line toll-free at 1-800-762-6814. Shareholder
representatives are available to take your call weekdays, from 9-5PM, Eastern
Time. You may obtain the share price of the Fund 24 hours a day, 7 days a week
by using our automated system.
Visit our web site at www.domini.com.
Quick Reference
Nasdaq Symbol: DSEFX
Newspaper Listing: Domini Social Invmts (Soc Eq) or Dom Social
Account Statements are mailed quarterly.
Trade Confirmations are sent after purchases and redemptions.
Annual and Semi-Annual Reports will be mailed in late September and March,
respectively, and are available online at www.domini.com.
-A-1-
<PAGE>
Shareholder Manual
How to Open an Account
1. Read this prospectus (and please keep it for future reference).
2. Review the available accounts listed below under "Types of Accounts" and
decide which account-type is appropriate for you.
3. Decide how much you want to invest.
The minimum initial investments are:
o $1,000 for regular accounts ($500 if using our Automatic
Investment Plan)
o $250 for Retirement Accounts (Automatic Investment Plan
also available)
The minimums to buy additional shares are:
o $50 for regular and Retirement Accounts
o $25 for Automatic Investment Plan Accounts
4. You can choose one of several different payment methods to make your initial
investment. Please review the options listed under "How to Buy Shares", and
follow the simple instructions we've provided. Be sure to completely fill out
and sign the Account Application.
If at any time you need assistance, please call us at 1-800-762-6814, weekdays
from 9-5PM, Eastern Time.
Types of Accounts
You may invest in the Fund through the following types of accounts:
Individual and Joint Accounts (Non-Retirement):
Invest as an individual or with one or more people. If you are opening a joint
account, joint tenancy with rights of survivorship will be assumed unless other
ownership is noted on your account application. You may also open an account to
invest assets held in an existing personal trust.
-A-2-
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Shareholder Manual
Individual Retirement Accounts (IRAs):
You may open an account to fund a traditional IRA, Roth IRA or Education
IRA.
o $10 Annual IRA account maintenance fee
o $10 IRA account termination fee
Call 1-800-762-6814 for more information and an IRA account application.
Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) Accounts:
You may open a UGMA/UTMA account for any child.
Employer-Sponsored Retirement Plans:
If offered by your employer, you may be able to open an account as part of an
employer-sponsored retirement plan, such as a 401(k) plan, 403(b) plan, SEP-IRA
or SIMPLE IRA. You may obtain 403(b) forms and information by calling 1-800-762-
6814. You may also contact your employer's plan administrator for further
information.
Automatic Investment Plan Accounts:
Automatically invest specified amounts in the Fund at monthly,
quarterly, semi-annual or annual intervals. Automatic investments will continue
to be made until you notify the Fund and your bank to discontinue further
investments. This service may be established for your account at any time. See
below for more details, or call 1-800-762-6814.
For an Organization:
You may open an account for a trust, corporation, partnership,
endowment, foundation or other entity.
-A-3-
<PAGE>
Shareholder Manual
How to Buy Shares
By Check
Mail the completed Account Application and your check to:
Domini Funds
P.O. Box 60494
King of Prussia, PA 19406-0494
For subsequent investments, fill out the investment form that came with your
trade confirmation or account statement or send a note with your account number
and Fund name. Always be sure to include your account number on your check. If
you need additional forms, please call 1-800-762-6814.
Your checks must be in U.S. dollars drawn on a U.S. bank and be made payable to
"Domini Funds."
IMPORTANT: For our mutual protection, Domini
cannot accept checks made payable to third parties.
By Bank Wire
To establish wire privileges on an existing account, or for additional
information about the service, please call the Fund's transfer agent at
1-800-762-6814.
Wire your investment to:
Bank: Boston Safe Deposit Bank
ABA: 011001234
Acct Name: Domini Funds
Acct #: 043370
FBO: Fund Name, and Your Account Name and Number
at Domini Funds
For new accounts, please call 1-800-762-6814 to obtain an account number before
wiring funds.
-A-4-
<PAGE>
Shareholder Manual
The Advantage of Dollar-Cost Averaging
One thing is certain: the stock market will fluctuate. Even experienced
investors often find it impossible to accurately time the market, and to "sell
high and buy low."
Dollar-cost averaging is an investment strategy designed to avoid the pitfalls
of market timing by investing equal amounts of money at regular intervals
(monthly, quarterly, and so on) over a long period of time.
The advantage of dollar cost averaging is that an investor buys more shares at
lower prices, and fewer shares at higher prices. As a result, an investor ends
up paying an average price per share over a period of time.
The key to dollar-cost averaging is to stick with it for the long term. Of
course, no strategy can guarantee a profit, or protect your investment from
losses. Strictly adhering to a long-term dollar-cost averaging strategy,
however, is a good way to ensure that you don't make the mistake of investing
all of your money when the market is high.
To facilitate dollar-cost-averaging you may purchase Fund shares at regular
intervals through the Fund's Automatic Investment Plan.
Automatic Investment Plan
Our Automatic Investment Plan allows you to have specified amounts automatically
deducted from your bank account or Domini Money Market Account and invested in
the Fund in monthly, quarterly, semi-annual or annual intervals.
This service may take up to 4 weeks to begin. Also, due to the varying
procedures to prepare, process and forward the bank withdrawal information to
the Fund, there may be periodic delays between the time of the bank withdrawal
and the time your money reaches the Fund.
Please follow the instructions in the Account Application to establish this
service when you open your account. This service can be established for your
account at any time. Call the Fund's transfer agent at 1-800-762-6814 for more
information.
How to Exchange Shares
You may exchange all or a portion of your shares into any other available Domini
Fund 5 or the Domini Money Market Account(sm). You may request an exchange by
calling 1-800-762-6814, or in writing. All written requests must be signed by
all owners.
For information on transferring assets from another mutual fund family, please
call 1-800-762-6814 or visit www.domini.com to obtain the necessary forms.
The Domini Money Market Account
The Domini Money Market Account (DMMA) offered through South Shore Bank is an
FDIC-insured (up to $300,000) interest-bearing account with direct community
development benefits. You may open and maintain a DMMA at no charge, and take
advantage of free check-writing (with a $500 minimum per check), and easy
transfers by telephone to and from your Domini Social Equity Fund account. A
DMMA investment is subject to certain terms and conditions. Please call
1-800-762-6814 for more information.
The rate of return for the Domini Money Market Account will vary. The Domini
Social Equity Fund is not affiliated with any bank and is not insured by the
FDIC.
-A-5-
<PAGE>
Shareholder Manual
How to Sell Shares
You are free to sell all or part of your Fund shares at any time during New York
Stock Exchange trading hours (generally weekdays from 9AM - 4PM Eastern
Time). The Fund will send the proceeds from the sale to you or a third party
that you have designated (this may require a Signature Guarantee -- see below).
Transactions are processed at the next determined share price after Domini
receives your sale request in good order.
IMPORTANT: Once a redemption order is placed,
the transaction cannot be canceled.
You may sell (redeem) your shares in the Fund in the following ways:
In Writing
Mail written redemption requests to:
Domini Funds
P.O. Box 60494
King of Prussia, PA 19406-0494
For overnight deliveries, please use the following address:
Domini Funds
c/o First Data Investor Services Group
211 South Gulph Road
King of Prussia, PA 19406
What is "Good Order"?
Purchase and sale requests must be in "good order" to be accepted by the Fund.
To be in "good order" a request must include:
o The Fund name and your account number.
o The amount of the transaction (in dollars or shares).
o Signatures of all owners exactly as registered on the account (for requests by
mail).
o Signature guarantees, if required (see page A-8).
o Any supporting legal documentation that may be required.
-A-6-
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Shareholder Manual
Letters requesting redemptions must:
o specify the dollar amount or number of shares to be sold, the
fund name and the account number; and
o be signed in exactly the same way the account is registered
by all registered owners or authorized signers.
Your redemption request may require a signature guarantee. Please refer to page
A-8 for details.
By Telephone
To sell shares by telephone, call the Fund's transfer agent at
1-800-762-6814.
If you wish to receive your redemption by wire and have not already established
wire privileges on your account, you must submit wire redemption requests in
writing along with a Signature Guarantee (see page A-8).
Please consider sending a written request to sell shares if you cannot reach the
Fund's transfer agent by telephone.
Neither the Fund, nor its transfer agent or its distributor will be liable for
any loss, liability, cost or expense for acting on telephone instructions
believed to be genuine. The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. Please contact the
Fund's transfer agent if you wish to suspend telephone redemption privileges.
By Wire
To establish wire redemption privileges on a new account, fill out the
appropriate area on the application, and attach a voided check.
If you have not already established wire redemption privileges on your account
you must submit wire redemption requests in writing along with a Signature
Guarantee (see page A-8).
o $10 wire transfer fee (deducted directly from sale proceeds)
o $1,000 minimum wire amount
The wire transfer fee and minimum wire amount may be waived for certain
institutions at the manager's discretion.
-A-7-
<PAGE>
Shareholder Manual
Systematic Withdrawal Plan
Call our Shareholder Information Line at 1-800-762-6814 for information.
If you own shares of the Fund with an aggregate value of $10,000 or more you may
establish a Systematic Withdrawal Plan under which shares will be sold, at net
asset value, in the amount and for the periods specified (minimum $100.00 per
payment).
There is no additional charge to participate in the Systematic Withdrawal Plan.
Additional Information on Selling Shares
Signature Guarantees
You are required to obtain a Signature Guarantee from an Eligible Guarantor for
any:
o Sales (redemptions) exceeding $50,000;
o Written sales requests, regardless of amount, made within
30 days following any changes in account registration; and
o Redemptions made to a third party or to an address other
than the address for which the account is registered (unless already
established on your account).
Eligible Guarantors may include:
o banks;
o savings institutions;
o credit unions;
o broker-dealers; and
o other guarantors acceptable to the Fund and
its transfer agent.
The Fund and its transfer agent cannot accept guarantees from notaries public or
organizations that do not provide reimbursement in the case of fraud. The Fund
or its transfer agent may, at its option, request further documentation prior to
accepting requests for redemptions.
-A-8-
<PAGE>
Shareholder Manual
Unusual Circumstances
The Fund reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In the event that the Fund suspends
telephone redemption privileges, or if you have difficulty getting through on
the phone, you will still be able to redeem your shares through the other
methods listed above.
The Fund may stop selling its shares or postpone payment:
o during any period in which the New York Stock Exchange is closed or in
which trading is restricted; or
o if the Securities and Exchange Commission determines that an emergency
exists.
Large Redemptions
It is important that you call the Fund's transfer agent before you redeem a
large dollar amount. We must consider the interests of all fund shareholders and
so reserve the right to delay delivery of your redemption proceeds -- up to
seven days -- if the amount will disrupt the Fund's operation or performance.
The Fund reserves the right to pay part or all of the redemption proceeds in
kind, i.e., in securities, rather than cash. If payment is made in kind, you may
incur brokerage commissions if you elect to sell the securities for cash.
In an effort to protect the Fund from the possible adverse effects of a
substantial redemption in a large account, as a matter of general policy, no
shareholder or group of shareholders controlled by the same person or group of
persons will knowingly be permitted to purchase in excess of 5% of the
outstanding shares of the Fund, except upon approval of the Fund's management.
-A-9-
<PAGE>
Shareholder Manual
How the Price of Your Shares is Determined
The Fund determines its share price (or "NAV", net asset value per share) at the
close of the New York Stock Exchange, normally 4PM Eastern Time, on each day the
Exchange is open for trading. This calculation is made by deducting the amount
of the Fund's liabilities (debts) from the value of its assets, and dividing the
difference by the number of outstanding shares of the Fund.
Total Assets - Total Liabilities
Net Asset Value (NAV) = -------------------------------------------
Number of Shares Outstanding
To calculate the value of your investment, simply multiply the NAV by the number
of shares of the Fund you own.
How can I find out the Fund's NAV?
By Phone: You may obtain the Fund's NAV 24 hours a day, by calling
1-800-762-6814 from a touch-tone phone and accessing our automated system. You
may speak with a shareholder representative weekdays from 9-5PM, Eastern Time.
Newspaper Listings: This information is also listed in the mutual fund listings
of most major newspapers. The Fund is most commonly listed as: Domini Social
Invmts (Soc Eq) or Dom Social.
Quarterly Statements: You will also receive this information quarterly, in your
account statement.
How do you determine what price I will get when I buy shares?
If your order is received by the Fund's transfer agent by 4:00 PM Eastern Time
in good order, you will receive the NAV determined at the end of that day. See
"What is "Good Order"?" on page A-6 of this prospectus.
The Fund may stop offering its shares for sale at any time and may reject any
order for the purchase of its shares.
-A-10-
<PAGE>
Shareholder Manual
How do you determine what price I will get when I sell shares?
When you sell shares you will receive the next share price that is calculated
after your sale request is received by the Fund's transfer agent in good
order. See "What is `Good Order'?"on page A-6 of this prospectus. Please note
that the Fund will not accept redemption requests after 4PM, and will not hold
trades for the following day.
The Fund will normally pay for the shares on the next day the New York Stock
Exchange is open for trading, but in any event within seven days. The Fund will
delay payment for at least seven business days if your checks in payment for the
purchase of the shares you wish to sell have not yet cleared (this may take up
to 15 days). The Fund may pay by check or, if you have completed the appropriate
box on the Account Application, by wire transfer.
How is the value of securities held by the Fund determined?
Securities held by the Fund are normally valued as follows:
Equity securities: Each security that is primarily traded on an exchange or on
the Nasdaq Stock Market is valued at the last sale price on such exchange or on
the Nasdaq.
Each security for which there were no sales during the day and each unlisted
security not reported on the Nasdaq system is valued at the last quoted bid
price, or at fair value as determined in good faith by or at the direction of
the Board of Trustees.
Short-term obligations (remaining maturities of less than sixty days): Each
short-term obligation is valued at amortized cost, which constitutes fair value
as determined by the Board of Trustees.
Portfolio securities for which there are no such quotations or valuations: Each
other portfolio security is valued at fair value as determined in good faith by
or at the direction of the Board of Trustees.
-A-11-
<PAGE>
Shareholder Manual
Fund Statements and Reports
Householding:
To keep the Fund's costs as low as possible, and to conserve paper usage, where
practical, we attempt to eliminate duplicate mailings to the same address. When
we find that two or more Fund shareholders have the same last name and address,
rather than send a separate report to each shareholder, we will send just one
report to that address. If your household is receiving separate mailings that
you feel are unnecessary, or if you want us to send separate statements, notify
our Shareholder Services department at 1-800-762-6814.
Confirmation Statements:
Statements confirming the trade date and the amount of your transaction are sent
each time you buy, sell, or exchange shares. Confirmation statements are not
sent for purchases made through automatic investment plans. Always verify your
transactions by reviewing your confirmation statement carefully for accuracy.
Please report any discrepancies to our Shareholder Services department at 1-800-
762-6814 promptly.
Fund Financial Reports:
The Fund's annual report is mailed in September, and the Fund's semi-annual
report is mailed in March. These reports include information about the Fund's
performance, as well as a complete listing of the Fund's holdings. You may also
view the Fund's most recent reports online at www.domini.com.
Tax Statements:
Each year we will send you a statement reporting the previous year's dividend
and capital gains distributions, proceeds from the sale of shares, and
distributions from IRAs or other retirement accounts as required by the Internal
Revenue Service. These are generally mailed in January.
-A-12-
<PAGE>
Shareholder Manual
Dividends
Paid Semi-annually
Capital Gains
Paid Annually
Dividends and Capital Gains
The Fund pays to its shareholders substantially all of its net income in the
form of dividends. Dividends from net income are typically paid semi-annually
(usually in June and December). Any capital gains are distributed annually in
December.
You may elect to receive dividends and capital gains either by check or in
additional shares. Unless you choose to receive your dividends by check, all
dividends will be reinvested in additional shares. In either case, these
distributions are taxable to you.
Taxes
This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation and the status of your
account under state and local laws.
Taxability of Dividends:
Each year the Fund will mail you a report of your dividends for the prior year
and how they are treated for federal tax purposes. You will normally have to pay
federal income taxes on the dividends you receive from the Fund, whether you
take the dividends in cash or reinvest them in additional shares.
Dividends from the Fund's short-term capital gains are taxable as ordinary
income. Distributions from the Fund's long-term capital gains are taxable at a
lower capital gains rate. Other dividends are generally taxable as ordinary
income. Some dividends paid in January may be taxable to you as if they had been
paid the previous December.
Buying a Dividend:
Dividends paid by the Fund will reduce the Fund's net asset value per share. As
a result, if you buy
-A-13-
<PAGE>
Shareholder Manual
shares just before the Fund pays a dividend, you may pay the full price for the
shares and then effectively receive a portion of the purchase price back as a
dividend for which you may need to pay tax.
Taxability of Transactions:
Anytime you sell or exchange shares in a non-retirement account, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
IMPORTANT: By law, the Fund must withhold 31% of your taxable distributions and
any redemption proceeds if you do not provide your correct Social Security or
taxpayer identification number, or certify that it is correct, or if the IRS
instructs the Fund to do so. The Fund may also be required to withhold if you
fail to certify that you are not otherwise subject to 31% backup withholding for
failing to report income to the IRS, or otherwise violate IRS requirements.
-A-14-
<PAGE>
Shareholder Manual
Rights Reserved by the Fund
The Fund and its agents reserve the following rights:
o To waive or lower investment minimums;
o To accept initial purchases by telephone or mailgram;
o To refuse any purchase or exchange order;
o To cancel any purchase or exchange order (including, but not limited
to, orders deemed to result in excessive trading, market
timing, fraud, or 5% ownership) upon notice to the shareholder within
five business days of the transaction or prior to the time the
shareholder receives confirmation of the transaction, whichever is
sooner;
o To implement policies designed to prevent excessive trading;
o To freeze any account and suspend account services when notice has
been received of a dispute between the registered or beneficial
account owners or there is reason to believe a fraudulent transaction
may occur;
o To otherwise modify the conditions of purchase and any services at any
time;
o To act on instructions believed to be genuine; and
o To notify shareholders and redeem accounts (other than retirement and
Automatic Investment Plan Accounts) with a value of less than $500.
These actions will be taken when, in the sole discretion of management, they are
deemed to be in the best interests of the Fund.
-A-15-
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $ 30.86 $ 25.43 $ 16.70 $ 14.85 $ 12.13
---------- -------- -------- ------- -------
Income from investment operations:
Net investment income 0.02 0.01 0.11 0.16 0.17
Net realized and
unrealized gain on
investments 6.81 5.48 8.85 1.93 2.83
---------- -------- -------- ------- -------
Total income from investment
operations 6.83 5.49 8.96 2.09 3.00
---------- -------- -------- ------- -------
Less distributions and
dividends:
Dividends to
shareholders from net
investment income (0.03) (0.01) (0.11) (0.16) (0.20)
Dividends to
shareholders from net
realized gain (0.45) (0.05) (0.12) (0.08) (0.08)
---------- -------- -------- ------- -------
Total distributions (0.48) (0.06) (0.23) (0.24) (0.28)
---------- -------- -------- ------- -------
Net asset value, end of
period $ 37.21 $ 30.86 $ 25.43 $ 16.70 $ 14.85
========== ======== ======== ======= =======
Ratios/supplemental data
Total return 22.26% 21.58% 54.01% 14.11% 25.10%
Portfolio turnover(*) 8% 5% 1% 5% 6%
Net assets, end of year
(in 000's) $1,082,978 $501,894 $212,310 $80,915 $54,638
Ratio of expenses to
average net assets 0.98%(1) 1.17%(2) 0.98%(3) 0.98%(3) 0.90%(4)
Ratio of net investment
income to average net
assets 0.06%(1) 0.07%(2) 0.62%(3) 1.01%(3) 1.38%(4)
</TABLE>
- --------------------------------------------------------------------------------
(*)The Portfolio turnover rates represent the rate of portfolio activity of the
Domini Social Index Portfolio, the underlying portfolio through which the Fund
invests.
(1) Reflects a voluntary waiver of expenses by Domini Social Investments LLC,
the Manager of the Domini Social Index Portfolio. Had the Manager not waived
their fees, the ratios of expenses and net investment income to average net
assets for the year ended July 31, 1999, would have been 0.99% and 0.05%,
respectively.
(2) Reflects a non-recurring payment to the Fund's former administrator 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.
(3) Had the expense payment agreement not been in place the ratio of expenses
and net investment income to average net assets for the years ended July 31,
1997 and 1996, would have been 0.84% and 0.76%, and 1.07% and 0.92%,
respectively.
(4) Reflects a voluntary waiver of fees by Signature Financial Group, the Fund's
former Administrator, and Kinder, Lydenberg, Domini Co., the Fund's former
Adviser, due to the limitations set forth in the expense payment agreement. Had
Signature Financial Group and Kinder, Lydenberg, Domini Co. not waived their
fees, the ratios of expenses and net investment income to average net assets for
the year ended July 31, 1995 would have been 1.15% and 1.13%, respectively.
-B-1-
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For Additional Information
Annual and Semi-Annual Reports
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. These reports include a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year, as well as a
complete listing of the Fund's holdings. They are available by mail from Domini
Social Investments, or on our website, www.domini.com.
Statement of Additional Information
The Fund's Statement of Additional Information contains more detailed
information about the Fund and its management and operations. The Statement of
Additional Information is incorporated by reference into this prospectus and is
legally part of it. Available by mail from Domini Social Investments.
Proxy Voting Guidelines & Social Screening Criteria
Published annually, describing how we will vote our proxies and containing
information about the social screens used to maintain the Domini 400 Social
Index. Also contains a description of our shareholder activism program.
Available by mail from Domini Social Investments, or on our website,
www.domini.com.
Contact Domini
To make inquiries about the Fund or obtain copies of any of the above, free of
charge, call 1-800-762-6814.
Social Investments
P.O. Box 60494
King of Prussia, PA 19406-0494
Web Site: To learn more about the Fund or about socially responsible
investing, visit us online at www.domini.com.
Securities and Exchange Commission
Information about the Fund (including the Statement of Additional Information)
is available at the Commission's website, www.sec.gov. Copies may be obtained
upon payment of a duplicating fee by electronic request at the following e-mail
address: [email protected], or by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. You may also visit the Commission's
Public Reference Room in Washington, D.C. For more information about the Public
Reference Room you may call the Commission at 1-202-942-8090.
File No. 811-5823
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1999
DOMINI SOCIAL EQUITY FUND
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
1. The Fund.............................................................. 2
2. Investment Objective; Information Concerning Investment
Structure; Investment Policies and Restrictions....................... 2
3. Performance Information............................................... 9
4. Determination of Net Asset Value; Valuation of Portfolio Securities;
Additional Purchase Information....................................... 11
5. Management of the Fund and the Portfolio.............................. 12
6. Independent Auditors.................................................. 20
7. Taxation.............................................................. 20
8. Portfolio Transactions and Brokerage Commissions...................... 22
9. Description of Shares, Voting Rights and Liabilities.................. 24
10. Financial Statements.................................................. 25
</TABLE>
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 December 1, 1999, as amended from time to time. This Statement
of Additional Information should be read in conjunction with the Prospectus.
This Statement of Additional Information incorporates by reference the financial
statements described on page 25 hereof. These financial statements can be found
in the Fund's Annual Report to Shareholders. An investor may obtain copies of
the Fund's Prospectus and Annual Report without charge by contacting DSIL
Investment Services LLC, the Fund's distributor, at (800) 762-6814.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.
<PAGE>
-2-
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 and commenced
operations on June 3, 1991. 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 Trustees
provides broad supervision over the affairs of the Fund. Shares of the Fund are
continuously sold by DSIL Investment Services LLC, the Fund's distributor (the
"Distributor"). 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, LLP ("Mellon Equity") is the Portfolio's investment
submanager (the "Submanager"). The Submanager manages the investments of the
Portfolio from day to day in accordance with the Portfolio's investment
objective and policies. Kinder, Lydenberg, Domini & Co., Inc. ("KLD")
determines the composition of the Domini 400 Social Index /SM/ (the "Domini
Social Index"). "Domini 400," "Domini Social Index," "Domini 400 Social Index"
and "investing for good" are service marks of KLD which are licensed to DSIL
with the consent of Amy L. Domini (with regard to the word "Domini"). Pursuant
to agreements among KLD, DSIL, Amy L. Domini, and each of the Fund and the
Portfolio, the Fund and the Portfolio may be required to discontinue use of one
or more of these service marks if (i) DSIL ceases to be the Manager of the
Portfolio, (ii) Ms. Domini or DSIL withdraws her or its consent to the use of
the word "Domini," or (iii) the license agreement between KLD and DSIL is
terminated.
2. INVESTMENT OBJECTIVE;
INFORMATION CONCERNING INVESTMENT STRUCTURE;
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide its shareholders with
long-term total return which matches the performance of the Domini Social Index.
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 is a change in the
Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their 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.
INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities,
<PAGE>
-3-
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. Investors in the Fund should be aware that differences
in sales commissions and operating expenses 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.
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. This
possibility also exists 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 potential means for meeting shareholder redemption
requests, such as borrowing.
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.
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 of the Fund
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 would seek to determine the best course
of action.
<PAGE>
-4-
INVESTMENT POLICIES
The following supplements the information concerning the Fund's and the
Portfolio's investment policies contained in the Prospectus and should only be
read in conjunction therewith. References to the Portfolio include the Fund,
unless the context otherwise requires.
INDEX INVESTING: 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, the Manager or the Submanager as to the
merits of that specific stock as an investment. Because the Portfolio seeks to
track, rather than exceed the performance of a particular index, investors
should not expect to achieve the potentially greater results that could be
obtained by a fund that aggressively seeks growth. However, KLD and the Manager
believe that enterprises which exhibit a social awareness, based on the criteria
described in the Prospectus, should be better prepared to meet future societal
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.
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 and the weightings of the
securities in the Domini Social Index of 0.95 or better. A figure of 1.0 would
indicate a perfect correlation. 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.
The Board of Trustees 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.
In selecting stocks for inclusion in the Domini Social Index, KLD
evaluated, in accordance with the social criteria described in the Prospectus,
each of the companies the stocks of which comprise the Standard and Poor's 500
Composite Stock Price Index (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 I ndex. As of
July 31, 1999, of the 500
<PAGE>
-5-
companies whose stocks comprised the S&P 500, approximately 58% were included in
the Domini Social Index. 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 in the Prospectus, as well as
upon KLD's criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover. A company which is not included
in 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 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. 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.
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 August 31,
1999 approximately 34% and 51% of the Domini Social Index was comprised of the
10 largest and 20 largest companies, respectively, in the Domini Social Index.
The component stocks of the S&P 500 are chosen by Standard & Poor's Ratings
Group ("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 ("NYSE") 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 NYSE. Not all stocks
included in the S&P 500 are listed on the NYSE. However, the total market value
of the S&P 500 as of October 28, 1999 represented approximately 72.32% of the
aggregate market value of common stocks traded on the NYSE. 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.
CONCENTRATION: 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.
FOREIGN ISSUERS: 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. 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
<PAGE>
-6-
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.
RULE 144A SECURITIES: Although the Portfolio does not have any current
intention to do so, the Portfolio may invest in securities which may be resold
pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act").
LOANS OF SECURITIES: Consistent with applicable regulatory policies,
including those of the Board of Governors of the Federal Reserve System and the
Securities and Exchange Commission, the Portfolio may make loans of its
securities to member banks of the Federal Reserve System and to broker-dealers.
The Portfolio may lend its securities to the broker-dealers and financial
institutions, provided that (1) the loan is secured continuously by collateral,
consisting of securities, cash or cash equivalents, 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.
OPTION CONTRACTS: Although it has no current intention to do so, the
Portfolio may in the future enter into certain transactions in stock options for
the purpose of hedging against possible increases in the value of securities
which are expected to be purchased by the Portfolio or possible declines in the
value of securities which are expected to be sold by the Portfolio. Generally,
the Portfolio would only enter into such transactions on a short-term basis
pending readjustment of its holdings of underlying stocks.
The purchase of an option on an equity security provides the holder with
the right, but not the obligation, to purchase the underlying security, in the
case of a call option, or to sell the underlying security, in the case of a put
option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire
amount of the premium, plus related transaction costs, but not more. Upon
exercise of the option, the holder is required to pay the purchase price of the
underlying security in the case of a call option, or deliver the security in
return for the purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase
or sell the instrument underlying an option, make or receive a cash settlement
or meet ongoing variation margin requirements. The inability to close out
option positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
<PAGE>
-7-
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.
SHORT SALES: 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.
CASH RESERVES: 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, certificates of deposit, bank deposits
or repurchase agreements, 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 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
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.
<PAGE>
-8-
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 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;
<PAGE>
-9-
(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.
In addition, as a matter of fundamental policy, the Fund will invest all of
its investable assets (either directly or through the Portfolio) in one or more
of: (i) stocks comprising an index of securities selected applying social
criteria, which initially will be the Domini Social Index, (ii) short-term debt
securities of issuers which meet social criteria, (iii) cash, and (iv) options
on equity securities. This fundamental policy cannot be changed without the
approval of the holders of a majority of the outstanding voting securities of
the Fund.
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 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
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 its period, annualized, and average annual "total rates of
return". 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 declared during such period. Period total rates of return may be
"annualized". An average
<PAGE>
-10-
"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 or 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. Average annual total return figures represent the average annual
percentage change over the specified period.
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.
Average annual total return is a measure of the Fund's performance over
time. It is determined by taking the Fund's performance over a given period and
expressing it as an average annual rate. The average annual total return
quotation is computed in accordance with a standardized method prescribed by SEC
rules. The average annual total return for a specific period is found by taking
a hypothetical $1,000 initial investment in Fund shares on the first day of the
period and computing the redeemable value of the investment at the end of the
period. The redeemable value is then divided by the initial investment, and its
quotient is taken to the Nth root (N representing the number of years in the
period) and is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains
distributions have been reinvested in Fund shares at net asset value on the
reinvestment date during the period.
Set forth below is average annual total return information for shares of
the Fund for the periods indicated, assuming that capital gains distributions,
if any, were reinvested.
<TABLE>
<CAPTION>
Period Average Annual Total Return
- ------ ---------------------------
<S> <C>
One year ended July 31, 1999 22.26%
Five years ended July 31, 1999 26.72%
June 3, 1991 (Commencement of Investment in the
Portfolio) to July 31, 1999 19.07%
</TABLE>
<PAGE>
-11-
Since the Fund's average annual total return quotations are based on
historical earnings and since rates of return fluctuate over time, these
quotations should not be considered as an indication or representation of the
future performance of the Fund.
Total rate of return 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.
From time to time the Fund may also quote data and fund rankings from
various sources, such as Lipper Analytical Services, Inc., Morningstar, Inc.,
Wiesenberger, Money Magazine, The Wall Street Journal, Kiplinger's Personal
Finance Magazine, Smart Money Magazine, Business Week and The New York Times,
and may compare its performance to that of the Domini 400 Social Index/SM/ and
various other unmanaged securities indices, such as the S&P 500 and the Dow
Jones Industrial Average. "Standard & Poor/TM/", "S&P/TM/" and "Standard &
Poor's 500" are trademarks of McGraw Hill Companies.
4. DETERMINATION OF NET ASSET VALUE;
VALUATION OF PORTFOLIO SECURITIES; ADDITIONAL PURCHASE INFORMATION
The net asset value of each share of the Fund is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
weekday except for the following holidays: New Year's Day, 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 "Shareholder Manual" 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.
<PAGE>
-12-
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.
Shares may be purchased directly from the Distributor or through Service
Organizations (see "Transfer Agent, Custodian, and 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. Investors wishing to purchase shares
through a Service Organization should contact that organization directly for
appropriate instructions. 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.
The Fund has authorized certain brokers to accept on its behalf purchase
and redemption orders and has authorized these brokers to designate
intermediates to accept such orders. The Fund will be deemed to have received
such an order when an authorized broker or its designee accepts the order.
Orders will be priced at the Fund's net asset value next computed after they are
accepted by an authorized broker or designee.
5. MANAGEMENT OF THE FUND AND THE PORTFOLIO
The management and affairs of the Fund are supervised by its Trustees under
the laws of the Commonwealth of Massachusetts. The management and affairs of
the Portfolio are supervised by its Trustees under the laws of the State of New
York.
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
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
<PAGE>
-13-
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.
JULIA ELIZABETH HARRIS -- 54 Burroughs Street, Jamaica Plain, Massachusetts
02130; Vice President, UNC Partners, Inc. (since April 1990); Director and
Treasurer, Boom Times, Inc. (since May 1997); Director and Chair of Board of
Directors, The Green Book, Inc. (October 1991 - June 1996); Trustee, Domini
Institutional Trust. Her date of birth is July 11, 1948.
KIRSTEN S. MOY -- 151 North Michigan Avenue, Suite 1209, Chicago, Illinois
60601; Consultant, Project Director and Principal Researcher, Community
Development Innovation and Infrastructure Initiative (since December 1998);
CDFI Rating System Advisory Board Member, National Community Capital
Association (since 1999); Member, Community Economic Development Board of
Overseers, New Hampshire College (since November 1998); Advisory Group Member,
Shorebank Liquidity Project (since 1999); Consultant, Equitable Life Assurance
Society (since December 1998); Board Member, Free Associates Theatre Company
(since August 1999); Consultant, Social Investment Forum, Community Development
Project (June 1998-December 1998); Director, Community Development Financial
Institutions Fund, U.S. Department of the Treasury (October 1995 - October
1997); Senior Vice President and Portfolio Manager, Equitable Real Estate
Investment Management (prior to October 1995); Trustee, Domini Institutional
Trust. Her date of birth is June 30, 1947.
WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02445;
Consultant, Arete Corporation; Manager, Venture Investment Management Company
LLC (prior to 1999); Trustee, Domini Institutional Trust; Vice President and
General Manager, TravElectric Services Corp (prior to 1995); President,
Environmental Technologies (prior to 1993); Director, Evergreen Solar, Inc;
Director, Conservation Services Group; Director, Fingerlakes Aquaculture LLC;
Director, Surgical Sealants, Inc; Director, World Power Technologies, Inc. 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 1997); Executive Director, Center for Management in the
Americas (since 1997). Her date of birth is September 23, 1944.
GREGORY A. RATLIFF -- 1712 Carmen Avenue, Chicago, Illinois 60640; Director,
Access to Economic Opportunity, John D. and Catherine T. MacArthur Foundation
(since 1997); Associate Director, Program-Related Investments, John D. and
Catherine T. MacArthur Foundation (1993-1997); Trustee, Domini Institutional
Trust. His date of birth is June 12, 1960.
TIMOTHY SMITH -- 475 Riverside Drive, Room 550, New York, New York 10115;
Executive Director, Interfaith Center on Corporate Responsibility (since 1971);
Trustee, Calvert New Africa Fund; Chair, Calvert Social Investment Fund Advisory
Council; Trustee, Domini Institutional Trust. His date of birth is September
15, 1943.
FREDERICK C. WILLIAMSON, SR. -- 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, 1915.
<PAGE>
-14-
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 $6,000, and in addition, receives $1,000 for attendance
at each joint meeting of the Boards of the Fund, the Portfolio and the Domini
Institutional Trust (reduced to $500 in the event that a Trustee participates at
an in-person meeting by telephone). 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, 1999 is set
forth below. The Trustees may hold various other directorships unrelated to the
Fund or Portfolio.
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits From The Fund,
Aggregate Accrued as Estimated Portfolio and
Compensation Part of Annual Benefits Domini
From The Fund Upon Institutional
Fund Expenses Retirement Trust
Amy L. Domini, None None None None
Chair, President
and Trustee
<S> <C> <C> <C> <C>
Julia Elizabeth $ 928 None None $1,160
Harris,
Trustee
Kirsten S. Moy, $ 928 None None $1,160
Trustee
William C. Osborn, $4,000 None None $6,000
Trustee
Karen Paul, $4,000 None None $6,000
Trustee
Gregory A. Ratliff, $ 928 None None $1,160
Trustee
Timothy Smith, $4,000 None None $6,000
Trustee
Frederick C. $4,000 None None $6,000
Williamson, Sr.,
Trustee
</TABLE>
<PAGE>
-15-
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); 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 and Managing Principal, Domini Social Investments LLC (since 1997);
President of Communications House International, Inc.; Director of Financial
Communications Society. 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 22, 1999, 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 (5,584,488.629 shares; 17.85%), Manulife Financial, 250
Bloor Street East, Toronto, Ontario, CA M4W 1E5 (3,651,342.466 shares; 11.67%),
Fidelity Investments, 100 Magellan Way, Covington, KY 41015 (1,810,949.949
shares; 5.79%). 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. 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
<PAGE>
-16-
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
(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.
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.
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 and their relationship to the
Fund follows: Amy L. Domini, Chair of the Board and President of the Fund, is
the Manager and principal executive officer and a co-owner of DSIL. Ms. Domini
is also Chief Executive Officer, Secretary, Treasurer and co-owner of KLD which
licenses the Domini Social Index
<PAGE>
-17-
to DSIL. Peter D. Kinder, Vice President of the Fund, is a co-owner of DSIL. Mr.
Kinder is also President and a co-owner of KLD. Sigward M. Moser, Vice President
of the Fund, is a co-owner of DSIL. David P. Wieder, Vice President of the Fund
is a co-owner of DSIL. Mr. Wieder is also President and an owner of FSSI, a
registered transfer agent which served as the Fund's transfer agent until
September 24, 1999.
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.
Under the Submanagement Agreement, DSIL pays Mellon Equity an investment
submanagement fee equal on an annual basis to 0.07% of the average daily net
assets of the Portfolio.
Effective January 1, 1998, Mellon Equity Associates was reorganized as a
Pennsylvania limited liability partnership. Pursuant to an Agreement and Plan of
Merger dated December 29, 1997, (the "Merger Agreement"), Mellon Equity
Associates was merged into Mellon Equity Associates, LLP. a newly formed
Pennsylvania limited liability partnership, with Mellon Equity Associates, LLP
being the surviving entity. Mellon Bank, N.A. ("Mellon Bank") is the 99% limited
partner and MMIP, Inc. is the 1% general partner of Mellon Equity Associates,
LLP. In accordance with the provisions of the Merger Agreement, all property,
rights, privileges, franchises, patents, trademarks, licenses, registrations,
and other assets and interests of Mellon Equity Associates vested in Mellon
Equity Associates, LLP. By operation of law, the obligations and liabilities of
Mellon Equity Associates were assumed by Mellon Equity Associates, LLP. 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 4200, Pittsburgh, Pennsylvania
15258.
Prior to October 22, 1997, pursuant to an investment advisory agreement
(the "KLD Advisory 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 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. 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"),
<PAGE>
-18-
Signature Broker-Dealer Services, Inc. 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 end July 31, 1999, the Portfolio incurred approximately
$1,791,617 in management fees pursuant to the Management Agreement. For the
fiscal year end 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.
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
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.
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 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 0.95% of
the average daily net assets of the Fund. For the fiscal years ended July 31,
1999 and July 31, 1998, the Fund incurred $3,820,667 and $1,419,618 in
sponsorship fees, respectively.
Prior to October 22, 1997, Signature Broker-Dealer Services, Inc. served as
administrator. For the fiscal year ended July 31, 1997, the Fund incurred
$156,868 in administrative fees.
The Sponsorship Agreement with the Fund provides that DSIL 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.
<PAGE>
-19-
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, 1997,
1998, and 1999 the Fund accrued $153,295, $580,272, and $1,327,042 respectively,
in distribution fees. For the fiscal year ended July 31, 1999, payments pursuant
to the Distribution Plan were used for advertising ($310,408) printing and
mailing of prospectuses to other than current shareholders ($34,943)
compensation to dealers ($563,574) and communications and servicing ($418,117).
The Distribution Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Fund's Trustees and a majority of the Fund's Trustees who are
not "interested persons of the Fund" and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any agreement
related to such Plan ("Qualified Trustees"). The Distributor will provide to
the Trustees of the Fund a quarterly written report of amounts expended by it
under the Distribution Plan and the purposes for which such expenditures were
made. The Distribution Plan further provides that the selection and nomination
of the Fund's Qualified Trustees shall be committed to the discretion of the
disinterested Trustees of the Fund. The Distribution Plan may be terminated at
any time by a vote of a majority of the Fund's Qualified Trustees or by a vote
of the shareholders of the Fund. The Distribution Plan may not be 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 and is obligated to use
its best efforts to find purchasers for shares of the Fund. 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. Prior to
August 15, 1999, Signature Broker-Dealer Services, Inc. served as the
distributor of the Fund.
TRANSFER AGENT, CUSTODIAN AND SERVICE ORGANIZATIONS
The Fund has entered into a Transfer Agency Agreement with First Data
Investor Services Group, Inc. ("First Data"), 4400 Computer Drive, Westborough,
MA 01581, pursuant to which First Data acts as the 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.
The Fund has entered into a Custodian Agreement with Investors Bank & Trust
Company ("IBT"), 200 Clarendon Street, Boston, MA 02116, 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 also has entered into a Custodian Agreement with IBT
pursuant to which IBT acts as custodian for the Portfolio. The Custodian's
responsibilities
<PAGE>
-20-
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.
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 (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 r elated
to servicing shareholder accounts. For the fiscal years ended July 31, 1997,
1998, and 1999 the Fund accrued $3,711, $0, and $940 respectively, in service
organization fees.
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.
The Portfolio will also pay the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to governmental offices and
commissions; expenses of meetings of investors; and the investment management
fees payable to the Manager.
6. INDEPENDENT AUDITORS
KPMG 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.
<PAGE>
-21-
7. TAXATION
TAXATION OF THE FUND AND THE PORTFOLIO
Federal Taxes: 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"). As a regulated investment
company, the Fund will not be subject to any federal income or excise taxes on
its net investment income and net realized capital gains that it distributes to
shareholders in accordance with the timing requirements imposed by the Code. If
the Fund should fail to qualify as a "regulated investment company" in any year,
the Fund would incur a regular corporate federal income tax upon its taxable
income and Fund distributions would generally be taxable as ordinary dividend
income to shareholders.
We anticipate 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.
FOREIGN TAXES: Although we do not expect the Fund will pay any federal
income or excise taxes, investment income received by the Fund from foreign
securities may be subject to foreign income taxes withheld at the source; we do
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.
STATE TAXES: The Fund is organized as a Massachusetts business trust. As
long as it qualifies as a "regulated investment company" under the Code, the
Fund will not have to pay Massachusetts income or excise taxes. 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.
TAXATION OF SHAREHOLDERS
Taxation of Distributions: 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.
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.
DIVIDENDS-RECEIVED DEDUCTION: 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
<PAGE>
-22-
limitations, and deducted amounts may be subject to the alternative minimum tax
and result in certain basis adjustments.
"BUYING A DIVIDEND": 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.
DISPOSITION OF SHARES: 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.
EFFECTS OF CERTAIN INVESTMENTS AND TRANSACTIONS
Foreign Securities: Special tax considerations apply with respect to
foreign investments of the Fund. Foreign exchange gains and losses realized by
the Fund will generally be treated as ordinary income and losses.
The foregoing should not be viewed as a comprehensive discussion of the
items referred to or as covering all provisions relevant to investors.
Dividends and distributions may also be subject to state or local taxes.
Shareholders should consult their own tax advisers for additional details on
their particular tax status. 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 portfolio managers who are employees of the Submanager and who are
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio managers of
the Portfolio may serve other clients of the Submanager in a similar capacity.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The 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
<PAGE>
-23-
Portfolio's securities transactions. 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.
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.
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, 1997, 1998 and 1999, the Portfolio paid brokerage
commissions of $101,639, $175,344, and $327,338 respectively.
<PAGE>
-24-
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
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. 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
the current Prospectus and the Statement of Additional Information to reflect
such issuance.
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. Shareholders have under
certain circumstances the right to communicate with other shareholders in
connection with requesting a meeting of shareholders for the purpose of removing
one or more Trustees. Shareholders also have under certain circumstances the
right to remove one or more Trustees without a meeting. 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
<PAGE>
-25-
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.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that the Fund shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Fund, its shareholders, Trustees, officers,
employees and agents covering possible tort and other liabilities. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate insurance existed
and the Fund itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the Fund are
not binding upon the Trustees individually but only upon the property of the
Fund and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust 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.
The Portfolio, in which all of the investable assets of the Fund are
invested, is organized as a trust under the laws of the State of New York. The
Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (i.e., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Fund's Trustees believe that neither the Fund
nor its shareholders will be adversely affected by reason of the Fund's
investing in the Portfolio.
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.
<PAGE>
-26-
10. FINANCIAL STATEMENTS
The audited financial statements of the Fund and the Portfolio (Statement
of Assets and Liabilities at July 31, 1999, Statement of Operations for the year
ended July 31, 1999, Statement of Changes in Net Assets for each of the years in
the two-year period ended July 31, 1999, Financial Highlights for each of the
years in the five-year period ended July 31, 1999, 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 LLP, independent auditors, on behalf of the Fund and the
Portfolio.
Domini Social InvestmentsSM, Domini Social Equity FundSM, Domini Money Market
AccountSM, The Responsible Index FundSM and domini.comSM are service marks of
Domini Social Investments LLC.
<PAGE>
PART C
<TABLE>
<CAPTION>
Item 23. Exhibits
<S> <C> <C>
* a(1) Amended and Restated Declaration of Trust of the Registrant.
** a(2) Certificate and Amendment No. 2 to Declaration of Trust of the Registrant.
** b By-Laws of the Registrant, as amended October 6, 1997.
*** e Distribution Agreement between the Registrant and DSIL Investment Services
LLC, as distributor.
**** g Custodian Agreement between the Registrant and Investors Bank & Trust
Company, as custodian.
h(1) Transfer Agency Agreement between the Registrant and First Data Investor
Services Group, Inc. ("First Data").
** h(2) Sponsorship Agreement between the Registrant and DSIL, as sponsor.
h(3) Form of Expense Limitation Agreement.
*** i Opinion and consent of counsel.
j Consent of independent accountants.
*** m Distribution Plan of the Registrant.
*** q Powers of Attorney.
and ****
</TABLE>
________________________
* Incorporated by reference from Post-Effective Amendment No. 7 to the
Registrant's Registration Statement as filed with the SEC on November 22,
1995.
** Incorporated by reference from Post-Effective Amendment No. 11 to the
Registrant's Registration Statement as filed with the SEC on November 25,
1997.
*** Incorporated by reference from Post-Effective Amendment No. 13 to the
Registrant's Registration Statement as filed with the SEC on September 29,
1999.
*** Incorporated by reference from Post-Effective Amendment No. 14 to the
Registrant's Registration Statement as filed with the SEC on November 23,
1999.
Item 24. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 25. Indemnification
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an exhibit to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement; and (b) Section 4 of the Distribution
Agreement by and between the Registrant and DSIL Investment Services LLC, filed
as an exhibit to Post-Effective Amendment No. 13 to the Registrant's
Registration Statement.
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 26. Business and Other Connections of Investment Adviser
Domini Social Investments LLC ("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
<PAGE>
owners of DSIL are James Earl Brooks, Amy Lee Domini,
Peter D. Kinder, Steven D. Lydenberg, Sigward Moser and David P. Wieder.
<TABLE>
<CAPTION>
Principal Employment during the
Name Business Address Past Two Fiscal Years
<S> <C> <C>
James E. Brooks Four Arlington Street President, Equity Resources Group, Inc. (real estate
Cambridge, MA 02140 investment)
Amy L. Domini 230 Congress Street CEO, Secretary and Treasurer, Kinder, Lydenberg, Domini &
Cambridge, MA 02110 Co., Inc. ("KLD") (investment adviser); Trustee, Loring,
Wolcott & Coolidge (fiduciary)
Peter D. Kinder 11 West 25th Street President, KLD
New York, NY 10010
Steven D. Lydenberg 11 West 25th Street Director of Research, KLD
New York, NY 10010
Sigward Moser 11 West 25th Street President and Director, Communication House International,
New York, NY 10010 Inc. (advertising agency)
David P. Wieder 11 West 25th Street President, Director, Equity Owner and Chairman, Fundamental
New York, NY 10010 Shareholder Services, Inc.; Secretary, Fundamental Portfolio
Advisors (investment adviser); Registered Representative,
Fundamental Service Corp. (broker-dealer)
</TABLE>
Item 27. Principal Underwriters
(a) DSIL Investment Services LLC is the distributor for the Registrant.
DSIL Investment Services LLC serves as the distributor or placement
agent for the following other registered investment companies:
Domini Institutional Social Equity Fund and Domini Social Index
Portfolio.
(b) The information required by this Item 27 with respect to each
director or officer of DSIL Investment Services LLC is incorporated
herein by reference from Schedule A of Form BD (File No. 008-44763)
as filed by DSIL Investment Services LLC pursuant to the Securities
Exchange Act of 1934.
(c) Not applicable.
Item 28. 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
DSIL Investment Services LLC 11 W. 25th Street (distributor)
-2
<PAGE>
New York, NY 10010
Investors Bank & Trust Company 200 Clarendon Street (custodian)
Boston, MA 02116
First Data 4400 Computer Drive (transfer agent)
Westborough, MA 01581
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and 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 29th day of November,
1999.
DOMINI SOCIAL EQUITY FUND
By:
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 29, 1999.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
Amy L. Domini President (Principal Executive Officer) and
- -------------------------- Trustee of Domini Social Equity Fund
Amy L. Domini
Carole M. Laible Treasurer (Principal Accounting and
- -------------------------- Financial Officer) of Domini Social Equity Fund
Carole M. Laible
Julia Elizabeth Harris* Trustee of Domini Social Equity Fund
- --------------------------
Julia Elizabeth Harris
Kirsten S. Moy* Trustee of Domini Social Equity Fund
- --------------------------
Kirsten S. Moy
William C. Osborn* Trustee of Domini Social Equity Fund
- --------------------------
William C. Osborn
Karen Paul* Trustee of Domini Social Equity Fund
- --------------------------
Karen Paul
Gregory A. Ratliff* Trustee of Domini Social Equity Fund
- --------------------------
Gregory A. Ratliff
</TABLE>
<PAGE>
Timothy H. Smith* Trustee of Domini Social Equity Fund
- ----------------------------
Timothy H. Smith
Frederick C. Williamson, Sr.* Trustee of Domini Social Equity Fund
- ----------------------------
Frederick C. Williamson, Sr.
*By:
Amy L. Domini
- -------------------------------
Amy L. Domini
Executed by Amy L. Domini on
behalf of those indicated
pursuant to Powers of Attorney.
<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 29th day of November, 1999.
DOMINI SOCIAL INDEX PORTFOLIO
By:
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 29, 1999.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
Amy L. Domini President (Principal Executive Officer) and Trustee
- --------------------------------- of Domini Social Index Portfolio
Amy L. Domini
Carole M. Laible Treasurer (Principal Accounting and Financial
- --------------------------------- Officer) of Domini Social Index Portfolio
Carole M. Laible
Julia Elizabeth Harris* Trustee of Domini Social Index Portfolio
- ---------------------------------
Julia Elizabeth Harris
Kirsten S. Moy* Trustee of Domini Social Index Portfolio
- ---------------------------------
Kirsten S. Moy
William C. Osborn* Trustee of Domini Social Index Portfolio
- ---------------------------------
William C. Osborn
Karen Paul* Trustee of Domini Social Index Portfolio
- ---------------------------------
Karen Paul
Gregory A. Ratliff* Trustee of Domini Social Index Portfolio
- ---------------------------------
Gregory A. Ratliff
Timothy H. Smith* Trustee of Domini Social Index Portfolio
- ---------------------------------
Timothy H. Smith
</TABLE>
<PAGE>
Frederick C. Williamson, Sr.* Trustee of Domini Social Index Portfolio
- ---------------------------------
Frederick C. Williamson, Sr.
*By:
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
h(1) Transfer Agency Agreement between the Registrant and First Data
Investor Services Group, Inc.
h(3) Form of Expense Limitation Agreement.
j Consent of independent accountants.
<PAGE>
Exhibit 99.H(1)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 24th day of September, 1999 between
Domini Social Equity Fund (the "Fund"), a Massachusetts business trust having
its principal place of business at 11 West 25th Street, New York, New York
10010-2001 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor Services
Group"), a Massachusetts corporation with principal offices at 4400 Computer
Drive, Westboro, Massachusetts 01581.
WITNESSETH
----------
WHEREAS, the Fund is authorized to issue Shares in separate series, with
each such series representing interests in a separate portfolio of securities or
other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Exhibit 1, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 18;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint Investor
Services Group as its transfer agent, dividend disbursing agent and agent in
connection with certain other activities and Investor Services Group desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions
-----------
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any officer of
the Fund; or (ii) any person, whether or not such person is an officer or
employee of the Fund, in each case, only if such officer or person has been
duly authorized to give Oral Instructions or Written Instructions on behalf
of the Fund as indicated in writing to Investor Services Group from time to
time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
<PAGE>
(d) "Board of Directors" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
(e) "Commission" shall mean the Securities and Exchange Commission.
(f) "Custodian" refers to any custodian or subcustodian of securities
and other property which the Fund may from time to time deposit, or cause
to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(g) "1934 Act" shall mean the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, all as amended from time to
time.
(h) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(i) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by Investor Services Group from an
Authorized Person;
(j) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements thereto
if any, which has become effective under the Securities Act of 1933 and the
1940 Act.
(k) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of the Fund as
may be issued from time to time.
(l) "Shareholder" shall mean a record owner of Shares of the Fund.
(m) "Written Instructions" shall mean a written communication signed
by an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a manually
executed original or other process.
Article 2 Appointment of Investor Services Group
--------------------------------------
2.1 Subject to the terms of this Agreement, the Fund hereby appoints and
constitutes Investor Services Group as its sole and exclusive transfer agent and
dividend disbursing agent for Shares of the Fund and as shareholder servicing
agent for the Fund and Investor Services Group hereby accepts such appointments
and agrees to perform the duties hereinafter set forth.
Article 3 Duties of Investor Services Group
---------------------------------
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and
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<PAGE>
for performing shareholder account and administrative agent functions in
connection with the issuance, transfer and redemption or repurchase
(including coordination with the Custodian) of Shares of the Fund, as more
fully described in the written schedule of Duties of Investor Services
Group annexed hereto as Schedule A and incorporated herein, and in
accordance with the terms of the Prospectus of the Fund, applicable law and
the procedures established from time to time between Investor Services
Group and the Fund. Notwithstanding the foregoing or anything in this
Agreement to the contrary, in no event shall the Fund make any
modifications to the prospectus of the Fund or adopt any policies which in
either case affect materially the obligations or responsibilities of
Investor Services Group hereunder without the prior written approval of
Investor Services Group, which approval shall not be unreasonably withheld
or delayed.
(b) Recording the issuance of Shares and maintaining pursuant to Rule
17Ad-10(e) of the 1934 Act a record of the total number of Shares of the
Fund which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. Investor Services Group shall provide the Fund on
a regular basis with the total number of Shares which are authorized and
issued and outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(c) In addition to performing the foregoing services, the Fund hereby
engages Investor Services Group as a service provider with respect to the
Print/Mail Services set forth in Schedule B for the fees also identified in
Schedule B. Investor Services Group agrees to perform the services and its
obligations subject to the terms and conditions of this Agreement.
(d) Notwithstanding any of the foregoing provisions of this Agreement,
Investor Services Group shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or
sale of any Shares or the sufficiency of the amount to be received
therefor; (ii) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor; (iii) the legality of the
declaration of any dividend by the Board of Directors, or the legality of
the issuance of any Shares in payment of any dividend; or (iv) the legality
of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Investor Services Group for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund and its agents as provided above.
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<PAGE>
3.3 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
3.4 Investor Services Group agrees to provide the services described
herein in accordance with the Performance Standards annexed hereto as Exhibit 1
of Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement by
the parties.
Article 4 Recordkeeping and Other Information
-----------------------------------
4.1 Investor Services Group shall create and maintain all records required
of it pursuant to its duties hereunder and as set forth in Schedule A in
accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records
shall be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will, at the expense of
the Fund, be surrendered promptly to the Fund on and in accordance with the
Fund's request.
4.3 In case of any requests or demands for the inspection of Shareholder
records of the Fund, Investor Services Group will endeavor to notify the Fund of
such request and secure Written Instructions as to the handling of such request.
Investor Services Group reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to comply with such request.
Article 5 Fund Instructions
-----------------
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which bear the proper signature of Investor
Services Group and which it reasonably believes to bear the proper manual or
facsimile signatures of the officers of the Fund.
5.2 At any time, Investor Services Group may request Written Instructions
from the Fund and may seek advice from legal counsel for the Fund with respect
to any matter arising in connection with this Agreement, and it shall not be
liable for any action taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or in accordance with the opinion of
counsel for the Fund. Written Instructions requested by Investor Services Group
will be provided by the Fund within a reasonable period of time.
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<PAGE>
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation
------------
6.1 The Fund will compensate Investor Services Group for the performance
of its obligations hereunder in accordance with the fees and charges set forth
in the written Fee Schedule annexed hereto as Schedule B and incorporated
herein.
6.2 In addition to those fees and charges referenced in Section 6.1 above,
the Fund agrees to pay for such out-of-pocket expenses incurred by Investor
Services Group in the performance of its duties hereunder. Out-of-pocket
expenses shall include, but shall not be limited to, the items specified in the
written schedule of out-of-pocket expenses annexed hereto as Schedule D and
incorporated herein. Unspecified out-of-pocket expenses shall be limited to
those out-of-pocket expenses reasonably incurred by Investor Services Group at
the request, or with the consent, of the Fund in the performance of its
obligations hereunder.
6.3 The Fund agrees to pay all fees, charges and out-of-pocket expenses
within fifteen (15) business days following the receipt of the respective
invoice for services rendered prior to or on the date of such invoice. In
addition, with respect to all invoices issued pursuant to this Agreement,
Investor Services Group may charge a service fee equal to the lesser of (i) one
and one half percent (1 1/2%) per month or (ii) the highest interest rate
legally permitted on any past due invoiced amounts, provided however, the
foregoing service fee shall not apply if the Fund in good faith legitimately
disputes any invoice amount in which case the Fund shall do the following within
thirty (30) days of the postmark date: (a) pay Investor Services Group the
undisputed amount of the invoice; and (b) provide Investor Services Group a
detailed written description of the disputed amount and the basis for the Fund's
dispute with such amount. In addition, the Fund shall cooperate with Investor
Services Group in resolving disputed invoice amounts and then promptly paying
such amounts determined to be due.
6.4 The Fund acknowledges that the fees that Investor Services Group
charges the Fund under this Agreement reflect the allocation of risk between the
parties, including the disclaimer of warranties in Section 9.3 and the
limitations on liability and exclusion of remedies in Section 11.2 and Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that Investor Services Group charges, and in consideration of those fees,
the Fund agrees to the stated allocation of risk.
Article 7 Documents
---------
7.1 In connection with the appointment of Investor Services Group, the
Fund shall, on or before the date this Agreement goes into effect, but in any
case within a reasonable period of
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<PAGE>
time for Investor Services Group to prepare to perform its duties hereunder,
deliver or cause to be delivered to Investor Services Group the documents set
forth in the written schedule of Fund Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System
---------------------
8.1 Investor Services Group shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report formats, interactive
design techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by Investor Services Group in connection
with the services provided by Investor Services Group to the Fund herein (the
"Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license to
the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of on-
line mainframe terminal entry or PC emulation of such mainframe terminal entry
and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations, Warranties and Covenants
-----------------------------------------
9.1 Investor Services Group represents and warrants to the Fund and
covenants and agrees that:
(a) it is a corporation duly organized, existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to authorize
it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as a
transfer agent and such registration will remain in effect for the duration
of this Agreement;
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<PAGE>
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement;
(f) its systems and facilities, and those of its material vendors,
will be able to properly recognize and perform date-sensitive functions
involving any date after December 31, 1999;
(g) it shall maintain insurance which covers such risks and is in such
amounts, with such deductibles and exclusions, sufficient for compliance by
Investor Services Group with all requirements of law and sufficient for
Investor Services Group to perform its obligations under this Agreement;
and all such policies are in full force and effect; and are with
financially sound and reputable insurance companies, funds or underwriters;
(h) all shareholder accounts shall be maintained on the Surpas system
until converted to the FSR system (which shall not occur until the Fund is
satisfied that the FSR system can support the shareholders records and
data) and shall not be converted to any other system without the prior
written consent of the Fund, which consent shall not be unreasonably
withheld or delayed; and
(i) in the event of the termination of this Agreement, Investor
Services Group shall provide reasonable cooperation to the Fund in the
movement of all records (in all media) and materials of the Fund and the
conversion of the shareholder accounts to a successor transfer agent.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under the laws
of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Article of
Incorporation and By-Laws to enter into this Agreement;
(c) all proceedings required by said Articles of Incorporation, By-
Laws and applicable laws have been taken to authorize it to enter into this
Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of the Fund is currently effective and
will remain effective, and all appropriate state securities law filings
have been made and will continue to be made, with respect to all Shares of
the Fund being offered for sale; and
(e) all outstanding Shares are validly issued, fully paid and non-
assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus, such
Shares shall be validly issued, fully paid and non-assessable.
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<PAGE>
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR
SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification
---------------
10.1 Investor Services Group shall not be responsible for and the Fund
shall indemnify and hold Investor Services Group harmless from and against any
and all claims, costs, expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or kind (a "Claim") which
may be asserted against Investor Services Group or for which Investor Services
Group may be held to be liable arising out of or attributable to any of the
following:
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act
or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or reasonable
use of information, data, records and documents (including but not limited
to magnetic tapes, computer printouts, hard copies and microfilm copies)
received by Investor Services Group from the Fund, or any authorized third
party acting on behalf of the Fund, including but not limited to the prior
transfer agent for the Fund, in the performance of Investor Services
Group's duties and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund;
(d) the offer or sale of shares in violation of any requirement under
the securities laws or regulations of any state that such shares be
registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale of
such shares in such state; and
(e) The Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund made
herein.
10.2 The Fund shall not be responsible for and Investor Services Group
shall indemnify and hold the Fund harmless from and against any and all Claims
which may be asserted against the Fund or for which the Fund may be held to be
liable which result from the negligence, bad
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<PAGE>
faith or willful misconduct of Investor Services Group in the performance of its
duties hereunder.
10.3 In any case in which the either party (the "Indemnifying Party") may
be asked to indemnify or hold the other (the "Indemnified Party") harmless, the
Indemnified Party will notify the Indemnifying Party promptly after identifying
any situation which it believes presents or appears likely to present a claim
for indemnification against the Indemnifying Party although the failure to do so
shall not prevent recovery by the Indemnified Party and shall keep the
Indemnifying Party advised with respect to all developments concerning such
situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 10 shall survive the termination of this
Agreement.
10.4 Any claim for indemnification under this Agreement must be made prior
to the earlier of:
(a) one year after the Fund or Investor Services Group, as applicable,
becomes aware of the event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this Agreement or
the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care
----------------
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees, subcontractors or agents.
11.2 Notwithstanding any provision in this Agreement to the contrary and
except with respect to the gross negligence of Investor Services Group, or the
breach by Investor Services Group of section 14 of the Agreement, Investor
Services Group's cumulative liability (to the Fund) for all losses, claims,
suits, controversies, breaches, or damages for any cause whatsoever (including
but not limited to those arising out of or related to this Agreement) and
regardless of
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<PAGE>
the form of action or legal theory shall not exceed the lesser of (i) $1,500,000
or (ii) the fees received by Investor Services Group for services provided under
this Agreement during the twelve months immediately prior to the date of such
loss or damage. Fund understands the limitation on Investor Services Group's
damages to be a reasonable allocation of risk and Fund expressly consents with
respect to such allocation of risk. In allocating risk under the Agreement, the
parties agree that the damage limitation set forth above shall apply to any
alternative remedy ordered by a court in the event such court determines that
sole and exclusive remedy provided for in the Agreement fails of its essential
purpose.
11.3 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than two (2) years prior to the filing of
the suit (or commencement of arbitration proceedings) alleging such cause of
action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages
---------------------
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, THE FUND, THEIR AFFILIATES OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
PROVISION OF THIS AGREEMENT OR FOR ANY ACT OR FAILURE TO ACT HEREUNDER UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER
PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination
--------------------
13.1 This Agreement shall be effective on the date first written above and
shall continue for a period of four (4) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term and each Renewal Term, this
Agreement shall automatically renew for successive terms of one (1) year
("Renewal Terms") each, unless the Fund or Investor Services Group provides
written notice to the other of its intent not to renew. Such notice must be
received not less than ninety (90) days and not more than one-hundred eighty
(180) days prior to the expiration of the Initial Term or the then current
Renewal Term.
13.3 In the event of termination by the Fund under Section 13.2 or 13.6,
all reasonable expenses associated with movement of records and materials and
conversion thereof to a successor transfer agent will be borne by the Fund. In
the event of termination of this Agreement by the Fund under Section 13.4 (if
Investor Services Group is guilty of material breach) or 13.5,
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<PAGE>
all reasonable expenses associated with the movement of records and materials
and conversion thereof to a successor transfer agent will be borne by Investor
Services Group. In the event of termination of this Agreement by Investor
Services Group under Section 13.4 (if the Fund is guilty of material breach),
all reasonable expenses associated with the movement of records and materials
and conversion thereof to a successor transfer agent will be borne by the Fund.
In the event of termination of this Agreement by Investor Services Group under
Section 13.2, all reasonable expenses associated with the movement of records
and materials and conversion thereof to a successor transfer agent will be borne
by Investor Services Group.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Pursuant to Section 3.4 of this Agreement, Investor Services Group
has agreed to perform the services described in this Agreement in accordance
with the Performance Standards set forth in Exhibit 1 to Schedule A. The
parties agree that the measurement of the Performance Standards will not begin
until sixty (60) days after Investor Services Group has begun providing services
under this Agreement. The parties agree that each quarterly period, as
described below, will be measured on a rolling three calendar month period. The
parties agree that such Performance Standards, which are described below, may be
revised from time to time upon the mutual agreement of the parties.
(a) In the event that Investor Services Group fails to meet a
particular Performance Standard (except any failure due to circumstances
beyond its control) in any given quarter, the Fund will provide Investor
Services Group with written notice of such failure, and Investor Services
Group agrees to take appropriate corrective action as soon as reasonably
possible.
(b) In the event that Investor Services Group fails to meet a
particular Performance Standard (except for any failure due to
circumstances beyond its control) in two (2) consecutive quarters, the fee
payable to Investor Services Group hereunder for that particular service
shall be reduced by ten percent (10%) for the second of those two quarters.
(c) In the event that Investor Services Group fails to meet a
particular Performance Standard (except for any failure due to
circumstances beyond its control) for any three (3) consecutive quarters,
the Fund shall have the right to terminate this Agreement upon sixty (60)
days' written notice to Investor Services Group.
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<PAGE>
(d) Compliance with the Performance Standards shall be reported
monthly and measured quarterly based on the average performance during that
quarter and in the aggregate with respect to all Domini affiliated funds
serviced by Investor Services Group.
13.6 Notwithstanding anything contained in this Agreement to the contrary,
during the Initial Term and any subsequent Renewal Term, the Fund shall have the
right to terminate this Agreement without cause at any time on 90 days prior
written notice to Investor Services Group, provided that prior to the conversion
or termination of services pursuant to such notice, the Fund shall pay to
Investor Services Group the termination fee set forth in Schedule B. The
parties acknowledge that such fee shall not apply if the Fund terminates this
Agreement pursuant to Section 13.2, 13.4 or 13.5 above, but shall apply if the
Fund is liquidated or its assets merged or purchased or the like with another
entity which does not utilize the services of Investor Services Group.
Article 14 Confidentiality
---------------
14.1 The parties agree that the Proprietary Information (defined below)
and the contents of Schedule B of this Agreement (collectively "Confidential
Information") are confidential information of the parties, including Domini
Social Investments LLC, and their respective licensors. The Fund and Investor
Services Group shall exercise at least the same degree of care, but not less
than reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. The Fund and Investor Services Group shall not
duplicate, sell or disclose to others the Confidential Information of the other,
in whole or in part, without the prior written permission of the other party.
The Fund and Investor Services Group may, however, disclose Confidential
Information (i) to their respective parent corporation, their respective
affiliates, their subsidiaries and affiliated companies and employees, provided
that each shall use reasonable efforts to ensure that the Confidential
Information is not duplicated or disclosed in breach of this Agreement or (ii)
to any regulatory authority having jurisdiction over the disclosing party or
(iii) as required by law. The Fund and Investor Services Group may also
disclose the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 14.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent. Investor Services Group
hereby acknowledges that Domini Social Investments LLC is a third party
beneficiary of this Agreement solely for the purposes of this Section 14.
14.2 Proprietary Information means:
(a) any data or information that is competitively sensitive material,
and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, customer prospect lists, any
other information regarding customers, sales estimates, business plans, and
internal performance results relating to the past, present or future
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<PAGE>
business activities of the Fund, Domini Social Investments LLC or Investor
Services Group, their respective subsidiaries and affiliated companies and
the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and secret
in the sense that its confidentiality affords the Fund, Domini Social
Investments LLC or Investor Services Group a competitive advantage over its
competitors; and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
14.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and models,
and any other tangible manifestation of the foregoing of either party, Domini
Social Investments LLC which now exist or come into the control or possession of
the other.
14.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 15 Force Majeure
-------------
15.1 No party shall be liable for any default or delay in the performance
of its obligations under this Agreement if and to the extent such default or
delay is caused, directly or
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indirectly, by (i) fire, flood, elements of nature or other acts of God; (ii)
any outbreak or escalation of hostilities, war, riots or civil disorders in any
country, (iii) any act or omission of the other party or any governmental
authority; (iv) any labor disputes (whether or not the employees' demands are
reasonable or within the party's power to satisfy); or (v) nonperformance by a
third party or any similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in telecommunications or
other equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so affected only
for as long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or observance as soon
as practicable.
Article 16 Assignment and Subcontracting
-----------------------------
16.1 This Agreement, its benefits and obligations shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned or otherwise
transferred by either party hereto, without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that Investor Services Group may, in its sole discretion, assign all
its right, title and interest in this Agreement to an affiliate, parent or
subsidiary, provided that in the event of any such assignment, Investor Services
Group will remain liable for the acts and omissions of any assignee. Investor
Services Group may, in its sole discretion, engage subcontractors to perform any
of the obligations contained in this Agreement to be performed by Investor
Services Group provided that Investor Services Group shall remain liable for the
-------- ----
acts and omissions of any subcontractor as if performed by Investor Services
Group.
Article 17 Arbitration
-----------
17.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
17.2 The parties hereby agree that judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
17.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 17.
Article 18 Additional Portfolios.
---------------------
18.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have Investor Services Group
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<PAGE>
render services as transfer agent under the terms hereof, the Fund shall so
notify Investor Services Group in writing, and if Investor Services Group agrees
in writing to provide such services, Exhibit 1 shall be amended to include such
additional Portfolios.
Article 19 Notice
------
19.1 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or Investor Services Group, shall
be sufficiently given if addressed to that party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
Domini Social Equity Fund
c/o Domini Social Investments LLC
11 West 25th Street
New York, New York 10010-2001
Attention: David Wieder
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Roger P. Joseph, Esq.
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel at the same
address.
Article 20 Governing Law/Venue
-------------------
20.1 The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 Counterparts
------------
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<PAGE>
21.1 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions
--------
22.1 The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity
---------
23.1 Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation
----------------------------------------
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward, (a)
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees and (b) Investor Services Group shall not
recruit, solicit, employ or engage, for Investor Services Group or others,
employees of the Fund or Domini Social Investments LLC.
Article 25 Entire Agreement; Severability
------------------------------
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement. In such case, the parties
shall in good faith modify or substitute such provision consistent with the
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<PAGE>
original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
DOMINI SOCIAL EQUITY FUND
By: David P. Wieder
------------------
Title: Vice President
-----------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: J. Stratton
--------------
Title: SVP
------
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<PAGE>
EXHIBIT 1
List of Portfolios
Domini Social Equity Fund
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<PAGE>
Exhibit 99.H(3)
Domini Social Investments LLC
11 West 25th Street
New York, New York 10010
November 30, 1999
Domini Social Equity Fund
11 West 25th Street
New York, New York 10010
Re: Expense Limitation Agreement
Ladies and Gentlemen:
Domini Social Investments LLC currently provides oversight and
administrative and management services to Domini Social Equity Fund (the
"Trust"), a Massachusetts business trust. We hereby agree with the Trust that we
will waive expenses payable to us by the Trust's series designated Domini Social
Equity Fund or will reimburse such series for all expenses payable by that
series to the extent necessary so that the series' aggregate expenses (excluding
brokerage fees and commissions, interest, taxes and other extraordinary
expenses), net of waivers and reimbursements, would not exceed on a per annum
basis 0.95% of that series' average daily net assets.
The agreement in this letter shall take effect on the date hereof, and
shall remain in effect until November 30, 2000.
Please sign below to confirm your agreement with the terms of this letter.
Sincerely,
Domini Social Investments LLC
By:________________________
Title:
Agreed:
Domini Social Equity Fund
By:_______________________
Title:
<PAGE>
Exhibit 99.J
Independent Auditors' Consent
The Board of Trustees
Domini Social Equity Fund and
Domini Social Index Portfolio
We consent to the use of our reports for the Domini Social Equity Fund, dated
September 16, 1999, and the Domini Social Index Portfolio, dated August 25,
1999, both incorporated herein by reference, and to the reference to our firm
under the heading "Financial Highlights" in the prospectus and "Independent
Auditors" in the statement of additional information.
/s/ KPMG LLP
Boston, Massachusetts
November 29, 1999
