<PAGE>
Annual Report 2000
July 31, 2000
[GRAPHIC]
Domini Social Equity FundSM
Domini Social Bond FundSM
[LOGO OF DOMINI SOCIAL INVESTMENTS]
The Way You Invest MattersSM
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter from the President..................................... 2
Domini Social Equity Fund
Performance Commentary........................................ 5
Social Profiles............................................... 7
Portfolio of Investments...................................... 18
Domini Social Bond Fund
Performance Commentary and Social Impact...................... 26
Portfolio of Investments...................................... 29
Domini Social Index Portfolio
Statement of Assets and Liabilities........................... 32
Statement of Operations....................................... 33
Statement of Changes in Net Assets............................ 34
Financial Highlights.......................................... 34
Notes to Financial Statements................................. 35
Independent Auditors' Report.................................. 37
Domini Social Equity Fund
Statement of Assets and Liabilities........................... 38
Statement of Operations....................................... 39
Statement of Changes in Net Assets............................ 40
Financial Highlights.......................................... 41
Notes to Financial Statements................................. 42
Independent Auditors' Report.................................. 45
Domini Social Bond Fund
Statement of Assets and Liabilities........................... 46
Statement of Operations....................................... 47
Statement of Changes in Net Assets............................ 48
Financial Highlights.......................................... 49
Notes to Financial Statements................................. 50
Independent Auditors' Report.................................. 53
For More Information.......................................... Inside back cover
</TABLE>
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<PAGE>
Letter from the President
Dear Fellow Shareholders:
The twelve months ending July 31, 2000 were truly remarkable ones at Domini
Social Investments. As we celebrated the tenth anniversary of the Domini 400
Social Index, our assets under management crossed the $2 billion mark. In ad-
dition, our shareholder activism returned high social dividends. We filed
eleven shareholder resolutions addressing sweatshop issues, environmental is-
sues and diversity. But the highlight of the past twelve months was the intro-
duction of the Domini Social Bond Fund, submanaged by South Shore Bank, the
nation's oldest and largest community development bank.
Socially responsible investing uses three basic tools to build a more just and
environmentally sustainable future. We screen our portfolios, we enter into
shareholder dialogue with companies in which we invest and we lend support
to communities through innovative lending institutions that serve at-risk
populations.
We screen our portfolios in part because we learned from the debate in South
Africa that data must be gathered systematically to have value. It took re-
cordkeeping, through the Sullivan Principles, to convince the world's popula-
tion that simply by their presence, American corporations were not alleviating
the suffering caused by Apartheid. By screening, we create new ways of track-
ing and evaluating corporate behavior. We create the basic framework within
which positive social change can occur. Screening is also a way of bearing
witness. By emphasizing the positive and avoiding the negative, we investors
involve ourselves personally in the discussion over what it takes to preserve
human dignity and create a more livable planet.
We file shareholder resolutions in order to engage corporate management in
conversations over new issues, to address particularly troublesome aspects of
otherwise good corporate citizens, and to speak out for those who have no
voice in corporate boardrooms, whose lives are critically affected by corpo-
rate policies, everyday. The Domini Social Equity Fund has taken the lead
among mutual funds by filing more resolutions than any other fund and by con-
tinuously distributing, via our web site at www.domini.com, and in hard copy,
updates on the initiatives we have undertaken. In addition, we are deliberate
and rigorous in voting on issues other shareholders raise and publishing our
votes, thereby supporting and expanding the impact we have.
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<PAGE>
Letter from the President
However successful our efforts are at screening and shareholder dialogue, we
are mindful that even here in the United States whole populations live outside
of the economic mainstream, under conditions we, as a civilized society, should
not tolerate. There are two Americas--one enjoying unprecedented growth in
wealth and security over the past ten years, while the other lives in ever
deepening despair and poverty. Yet lending a helping hand to those in need can
be as simple as being deliberate about where you do your banking.
Six years ago we strengthened our commitment to communities by entering into a
unique partnership with Shorebank, the nation's oldest and largest community
development bank. Thanks to investments in the Domini Money Market Account, we
have been able to provide the South Shore Bank of Chicago with more than $40
million and have become the bank's single largest source of deposits. With
these funds the bank has made loans to small businesses, almost all minority or
women/owned, to rehabbers who use credit and their energy and resources to re-
vitalize apartment buildings in Chicago and single-family homes in Cleveland
and Detroit and to hundreds of individuals who have bought their first home,
repaired existing homes or borrowed to put their kids through college. The loan
repayment history is excellent, above national averages. This year, we have ex-
panded the number of banks in the Domini Money Market Account to include
Shorebank, Cleveland and Shorebank, Detroit. We will soon expand our relation-
ship to include Shorebank, Pacific, a bank that makes loans to small businesses
working toward environmental sustainability.
The movie classic, It's a Wonderful Life, starring Jimmy Stewart, is shown ev-
ery holiday season. In it, our hero is desperate over losses at the bank he
runs and resolves to take his own life. An angel appears and reveals what the
future of his town will be if no local lender exists. The streets have become
mean, downtown is boarded up and people who were once cheerful and generous
have become nasty and selfish. The well-being of the entire community hangs on
the frail thread of this man and his willingness to hold together the community
lending institution. Our hero chooses life and returns home to find that the
entire town has contributed small amounts of cash to bridge the deficit. No
single one of them could have saved the bank, but together, the town saves it-
self.
Although we know in our hearts that a vibrant society needs to be vibrant at
every level, most of us do not know how to help. Community development
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<PAGE>
Letter from the President
lending institutions, by contrast, have developed innovative techniques for
dealing with these complex problems. This annual report gives me an opportunity
to introduce the Domini Social Bond Fund, our new fund. Launched on June 1,
2000, this is the first mutual fund to be managed by a community development
financial institution and expands our partnership with Shorebank. We anticipate
that as the fund's assets grow, innovative new ways of supporting community
economic development will become possible, but even today we have purchased
bonds and time deposits from a number of important lending agencies. More about
our exciting new initiative to support communities is in the pages that follow.
These past twelve months ushered in a new millennium and a new century for
those of us who use the western calendar. Millions upon millions of us paused
to consider what sort of a world the next century would bring and resolved to
find ways to do what we could to stand up for human decency, for a cleaner en-
vironment, and for justice. At Domini Social Investments we believe that in-
vesting with these goals in mind is possible, profitable and makes a difference
to tomorrow. Thank you for your ongoing interest in and support of socially re-
sponsible investing.
Very truly yours,
/s/ Amy Domini
Amy Domini
[email protected]
The Domini Social Equity Fund and Domini Social Bond Fund are not insured and
are subject to market risks. Economic and market conditions change, and both
will cause investment return, principal value, and yield to fluctuate. Thus if
you decide to sell your shares, you may receive more or less than your original
investment. The Domini Social Bond Fund's community development investments may
be unrated and carry greater credit risks than the Fund's other holdings. This
material must be preceded or accompanied by the Fund's current prospectus. DSIL
Investment Services LLC, Distributor (DSILD) DSILD and South Shore Bank are not
affiliated. 09/00
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<PAGE>
Domini Social Equity Fund --
Performance Commentary
For the 12 months ended July 31, 2000, the Domini Social Equity Fund rose
8.16%, while the Standard & Poor's 500 Index rose 8.97%.
For the past year, extreme levels of volatility have characterized the market
with technology stocks driving the returns of the large capitalization domestic
market. The technology-rich NASDAQ composite rose by 75% in the first eight
months of the year and then proceeded to decline by 18% over the next four
months.
The best performing industries in the market during the first eight months of
the fiscal year were semiconductor and wireless telecommunications companies as
investors sought out the fastest growing companies. Investors viewed the group
as a beneficiary of developing technologies. However, the next four months were
marked by strong performance in the electric and gas utility industries as well
as health care, and insurance companies.
The Domini Social Equity Fund benefited through this period from a large
representation in the technology sector, specifically, semiconductor companies.
Unfortunately, a portion of those gains were offset by a decline in computer
software stocks as Microsoft faced a setback in its recent antitrust
litigation.
The following is a list of the ten largest holdings of the Domini Social Index
Portfolio as of July 31, 2000:
-----------------------------------------
% of
Company Portfolio
Cisco Systems Inc. 6.75%
Intel Corp. 6.63%
Microsoft Corp. 5.45%
Wal-Mart Stores Inc. 3.66%
American Intl Group Inc. 3.01%
EMC Corp Mass. 2.75%
Sun Microsystems Inc. 2.48%
Merck & Co Inc. 2.44%
The Coca-Cola Co. 2.25%
SBC Communications Inc. 2.15%
-----------------------------------------
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<PAGE>
Domini Social Equity Fund -- Performance Commentary
Average Annual Total Return/1/
As of 6-30-00 As of 7-31-00
Since Since
1 Year 5 Year Inception 1 Year 5 Year Inception
(6/3/91) (6/3/91)
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Domini Social
Equity Fund 7.02% 24.31% 18.25% 8.16% 23.09% 17.82%
S&P 500 7.24% 23.80% 18.21% 8.97% 22.61% 17.83%
Comparison of $10,000 Investment in the
Domini Social Equity Fund and S&P 500/1/
[GRAPH]
Domini Social
Equity Fund S&P 500
(Dollars in thousands)
6/30/91 10 10
10/30/91 10.59134 10.67656
1/31/92 11.26964 11.20443
4/30/92 11.26964 11.45136
7/31/92 11.80416 11.8094
10/31/92 12.2204 11.74513
1/31/93 12.89376 12.39685
4/30/93 12.62491 12.52083
7/31/93 12.96598 12.8416
10/31/93 13.6461 13.50023
1/31/94 13.94968 13.99337
4/30/94 13.2057 13.18614
7/31/94 13.36719 13.50288
10/31/94 13.85207 14.02062
1/31/95 13.97643 14.05953
4/30/95 15.20832 15.47674
7/31/95 16.72338 17.01578
10/31/95 17.41034 17.7157
1/31/96 18.85141 19.49132
4/30/96 19.48813 20.1598
7/31/96 19.08306 19.83869
10/31/96 21.20848 21.98457
1/31/97 23.9672 24.63018
4/30/97 24.76304 25.21475
7/31/97 29.38935 30.15839
10/31/97 28.15276 29.05176
1/31/98 30.95879 31.24764
2/28/98 33.252 33.493
3/31/98 34.63 35.212
4/30/98 34.815 35.579
5/31/98 34.167 34.959
6/30/98 35.927 36.379
7/31/98 35.73 35.992
8/31/98 30.451 30.781
9/30/98 32.396 32.753
10/31/98 35.221 35.417
11/30/98 37.525 37.564
12/31/98 40.372 39.728
1/31/99 42.871 41.389
2/28/99 40.947 40.103
3/31/99 42.273 41.708
4/30/99 43.294 43.323
5/31/99 42.320 42.300
6/30/99 45.009 44.648
7/31/99 43.683 43.254
8/31/99 43.554 43.038
9/30/99 42.145 41.858
10/31/99 44.975 44.507
11/30/99 46.653 45.411
12/31/99 45.506 48.086
1/31/2000 46.799 45.67
2/29/2000 46.161 44.806
3/31/2000 50.853 49.189
4/30/2000 48.548 47.709
5/31/2000 45.516 46.73
6/30/2000 48.17 47.882
7/31/2000 47.248 47.134
Past performance is not predictive of future results.
1 Past performance is no guarantee of future results. Total Return for the
Domini Social Equity Fund is based on the Fund's net asset values and assumes
all dividends and capital gains were reinvested. Economic and market
conditions change, and both will cause investment return, principal value,
and yield to fluctuate. Thus if you decide to sell your shares, you may
receive more or less than your original investment. The Standard & Poor's
(S&P) 500 Index is an unmanaged index of common stocks. Investors cannot
invest directly in the S&P 500 Index. This chart comprises actual mutual fund
performance after all expenses. The Fund waived certain fees during the
period and the Fund's average annual total returns would have been lower had
these not been waived. This material must be preceded or accompanied by the
Fund's current prospectus. DSIL Investment Services LLC, Distributor. 09/00
2 The Fund began investing in the stocks comprising the Domini 400 Social Index
on June 3, 1991. The above chart begins on June 30, 1991.
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<PAGE>
Domini Social Equity Fund --
Social Profiles
There were 34 additions and deletions to the Domini 400 Social Index (DSI 400)
over the past 12 months. The Domini Social Equity Fund seeks to replicate the
Domini 400 Social Index. Companies are generally removed from the Index due to
mergers and acquisitions. Less frequently, companies may be removed for social
or environmental reasons. The Index is maintained at 400 companies at all
times. For more information on the maintenance of the DSI 400, visit our
website at www.domini.com. The following are brief social profiles of some of
the Fund's new additions.
Yahoo! is an Internet media company that provides Internet directory,
electronic mail, Website hosting, and shopping services to users through the
World Wide Web.
Yahoo! Inc.
Ticker: YH00
Industry/Sector: Computers, Software & Services/Technology
Market Capitalization; $69.9 Billion
Website: www.yahoo.com
Percentage of Domini Social Index Portfolio (DSIP): 1.04
There are two minorities (Gary Valenzuela and Jerry Yang) among Yahoo!'s four
senior line executives. Mr. Yang, who is Asian-American, is co-founder of the
company. Mr. Yang also holds the position of chief Yahoo! and exercises
considerable influence on the strategic direction of the firm. Mr. Valenzuela,
who is Hispanic-American, is chief financial officer and senior vice president
for finance and administration.
Yahoo! offers stock options to its full-time employees, both upon date of hire
and annually based on performance and position. Yahoo!'s family benefits
include flexible spending accounts, including a dependent care option,
counseling for work/life issues, and research and search services for finding
child and elder care. Yahoo! offers domestic partner benefits to all its
employees.
An August 1999 New York Times article noted that salaries at Yahoo! are
generally lower than those at most Silicon Valley companies, but that the use
of stock options as compensation makes up the difference. Yahoo! reputedly has
a relaxed, fun atmosphere that includes frequent parties to celebrate
achievements and foosball
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<PAGE>
Domini Social Equity Fund -- Social Profiles
tournaments. Jeff Mallett, the company's president, was quoted in an October
1999 Financial Times article as saying "People do not come here for the best
salary. They come here for no bureaucracy, to get their ideas heard by good
people and to actually create something." The article also reported that Mr.
Mallett said that no Yahoo! employee had ever voluntarily left the company. As
of December 1999, the company had approximately 1,800 employees.
Qualcomm provides digital wireless communications products, technologies and
services. The company's code division multiple access (CDMA) technology is the
industry standard for mobile communications, used in cellular, personal
communications services, and wireless local loop systems. Qualcomm's OmniTRACS
system is used by the trucking industry for two-way satellite-messaging and
position-tracking. In a joint venture with Loral Space, the firm is developing
a global system of low-orbit satellites to provide telecommunications around
the world. The company also publishes the e-mail software, Eudora.
Qualcomm
Ticker: QCOM
Industry/Sector: Communications, Equipment/Technology
Market Capitalization: $48.1 Billion
Website: www.qualcomm.com
Percentage of DSIP: 0.71
Adelia Coffman is one of the three founders of the company, along with
Irwin Mark Jacobs and Andrew Viterbi.
Most of Qualcomm's community involvement revolves around education. For
example, every quarter the company holds High School Days. Students spend a day
at the company participating in various activities, including presentations,
hands-on demonstrations, and real work experience. Qualcomm also holds an
annual Job Shadow Day, where students spend the day shadowing a Qualcomm
employee, and an annual Teacher Shadow Day, where teachers have the opportunity
to spend a day in a high-tech corporate environment, so that they can then
share that experience with their students. On Teacher Tech Day, teachers and
school administrators spend a full day at the Qualcomm campus learning about
new technology and ways to apply it in the classroom, local educational
resources, and ideas about best educational practices.
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<PAGE>
Domini Social Equity Fund -- Social Profiles
According to a January 1999 Fortune magazine article, Qualcomm awards stock
options to more than 80% of its 9,700 employees.
In January 2000, Qualcomm was included on Fortune magazine's list "The 100 Best
Companies to Work for in America." The company has appeared on the list
previously. The list was compiled by Robert Levering and Milton Moskowitz,
authors of the 1984 and 1993 books of the same title. In August 1998, Qualcomm
was included on the 100 Best Managed Companies' list, published annually by
Industry Week magazine.
In April 1999, Qualcomm told our social researchers at Kinder, Lydenberg,
Domini & Co. (KLD) that all of its facilities are ISO 9001 certified. ISO is an
international standards organization. The 9000 certification series addresses
quality management issues.
PNC Financial Services Group provides regional community banking, private
banking, corporate banking, secured finance, mortgage banking, asset
management, mutual fund servicing, and other services.
PNC Financial Services Group
Ticker: PNC
Industry/Sector: Banks, Major Regional/Financials
Market Capitalization: $14.8 Billion
Website: www.pncbank.com
Percentage of DSIP: 0.22
According to an analysis provided to KLD by CANICCOR, a church-supported
nonprofit organization specializing in the analysis of federal data on bank
mortgages, as of 1998 PNC's record on purchase and home improvement loans to
African-Americans and to low- and moderate-income families within its core
service territory exceeded that of its peers. Its peers include other large-
sized mortgage lenders that KLD follows.
In addition, PNC's record on multi-family lending to low- and moderate-income
families exceeded that of other large-sized mortgage lenders. Multifamily
lending can create much-needed affordable rental units in economically
disadvantaged neighborhoods.
In 1999 PNC invested $1.4 million in low income housing tax credits to help
construct lease-to-own homes in Erie, Pennsylvania. That year it also made an
investment of $1 million in the Local Initiatives Support Corporation.
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<PAGE>
Domini Social Equity Fund -- Social Profiles
As of 1997, PNC Bank was operating a pilot program through which it placed
specialized community development loan officers within the community
development departments in an effort to expand the scope and nature of its
community development financial assistance. The company was monitoring the
results of the program relative to new community loans and the performance of
that portfolio.
PNC was one of the original investors in United Bank of Philadelphia, the only
minority-owned bank in that city. In 1994 PNC helped United acquire two
additional branches from the Resolution Trust Corporation (RTC) and temporarily
assumed $35 million in deposit liabilities from United. By 1996 PNC had made
$225,000 low-interest deposits with four community development credit unions in
Philadelphia and had invested $750,000 with the Delaware Valley Community
Reinvestment Fund. PNC also made commitments of $7.8 million in low-income
housing tax credit investments. Through October 1997, PNC reported it made
available approximately $1 billion in new credit to small businesses and small
municipalities and townships. The company also works with community-based
organizations to provide financial and credit counseling and seminars for low-
and moderate-income families. In 1997, the bank originated over $500 million in
residential mortgages to low and moderate income borrowers. During 1999, PNC
invested $500,000 in the Community Loan Fund of Southwestern Pennsylvania's
Manufacturing Jobs Initiative for loans to small manufacturers in the region.
In 1995 and 1996, PNC invested a total of $1 million in the Keystone Minority
Capital Fund, a venture capital fund designed to promote entrepreneurship among
African-Americans in the local community. PNC Financial also works with the New
Jersey Department of Human Services to help people make the transition from
welfare to work.
In Fiscal Year ("FY") 1998, PNC Bank placed approximately 7.7% of its
subcontracting for goods and services with women-owned or minority-owned firms.
Of total subcontracts, approximately $12.1 million went to women-owned firms
and $3.6 million went to minority-owned firms.
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<PAGE>
Domini Social Equity Fund -- Social Profiles
Tribune Company is a media company whose primary businesses are newspaper
publishing, broadcasting and entertainment, and educational publishing. In
addition, the company owns the Chicago Cubs baseball team. In June 2000, the
company acquired Times Mirror Company.
Tribune Company
Ticker: TRB
Industry/Sector: Publishing, Newspaper/Consumer Cyclicals
Market Capitalization: $10 Billion
Website: www.tribune.com
Percentage of DSIP: 0.19
The Chicago Tribune Foundation's education program centers on improving the
quality of early childhood education in the Chicago area, with a focus on
children from low-income families. In 1993 the company established the goal of
accrediting 150 preschools, accrediting 125 family care homes, and training 133
preschool directors by 1998. As of 1997, the company had donated approximately
$14.39 million to meet those goals. Grants included $500,000 to National-Louis
University for accreditation of 40 inner-city preschools, $50,000 to Early
Childhood Funders Collaborative for the creation of a national preschool
directors credential, and $1.03 million for the training of 105 preschool
directors. Funding also went to childhood education system advocacy groups and
to public awareness campaigns heightening the importance of early childhood
education.
The company is an investor in the Chicago Equity Fund, a Chicago area low-
income housing fund. Tribune is also a partner in Education Connect, an
initiative designed to link school education to workplace requirements.
In February 1998, the National Committee for Responsive Philanthropy reported
that the company was one of the top ten U.S corporations in grantmaking to
women and girls of color. In FY 1997, the company donated $193,000 to such
programs.
The Chicago Tribune Foundation matches employee charitable contributions on a
two-for-one basis. In FY 1997, the company match to employee contributions
totaled approximately $107,000.
In 1999 the Chicago Tribune won the Pulitzer Prize for criticism. The
publication also won a Pulitzer Prize in 1998 for explanatory journalism.
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<PAGE>
Domini Social Equity Fund -- Social Profiles
As of December 1999, the company had approximately 13,400 employees (up from
12,700 employees the previous year). In 1999 the company reported that recycled
fiber content for its total newsprint consumption was approximately 37%.
The company recycles press plates, film, and newsprint waste at its operations.
In 1995 the Chicago Tribune significantly reduced postpress waste of
supplements (comics, TV Week, Sunday Magazine) with a new system for tracking
ordering controls.
Univision Communications broadcasts Spanish-language television in the
United States. Henry Cisneros, an Hispanic-American, is president and chief
operating officer. He was appointed to the position in 1997.
Univision Communications
Ticker: UVN
Industry/Sector: Broadcast Media/Consumer Staples
Market Capitalization: $12.8 Billion
Website: www.univision.com
Percentage of DSIP: 0.15
In June 1998, the Radio-Television News Directors Association gave Univision an
Edward R. Murrow award for overall excellence in electronic reporting for an
investigative series that appeared on Primer Impacto, Univision's daily
afternoon newsmagazine. The award winning series focused on conditions inside
Latin American prisons. A Univision news program had also received a Murrow
award in 1997.
Through its disability benefits program, Univision exceeds federal requirements
by granting 6 to 8 weeks of paid maternity and an additional 4 to 6 weeks of
unpaid maternity leave. The government mandates 12 weeks of unpaid leave. In
February 2000, the company told KLD that it planned to offer dependent care
accounts in April 2000. The company offers domestic partner benefits to all its
employees.
In partnership with Communities in Schools, the largest dropout-prevention
network in the U.S., Univision created a mentoring program that encourages
Hispanic high school students to explore careers in television. As of December
1998, 86 employees at six stations participated in the program. In August 1999,
two subsidiaries of Univision, The Network and Galavision, along with a number
of other Hispanic media businesses, allied with the Associations of Hispanic
Advertising Agencies to launch a free, nationwide advertising campaign designed
to encourage Hispanics to register to vote in this year's presidential
elections.
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<PAGE>
Domini Social Equity Fund -- Social Profiles
Lexmark International Group develops, manufactures, and supplies laser, inkjet,
and dot matrix printers and associated supplies for home and office markets.
The company was spun-off from International Business Machines Corporation (IBM)
in 1991.
Lexmark International Group
Ticker: LXK
Industry/Sector: Computers, Peripheral/Technology
Market Capitalization: $5.8 Billion
Website: www.lexmark.com
Percentage of DSIP: 0.09
The company offers several programs to help employees balance work and family
demands, including six-to-eight weeks paid maternity leave, adoption assistance
($2,500 per adoption per family), flexible working hours, pre-tax set-asides
for child and elder care, child and elder care referral services, and an
employee assistance program to help employees and their families with other
personal issues.
The company accomodates employees with disabilities by providing sign language
interpreters, captioned videotapes and telecommunications devices for the
hearing impaired, architectural modifications and computer adaptations for
employees with ambulatory impairments and screen readers with audio output for
computer users with visual impairments. In 1999, the National Business and
Disability Council gave Lexmark an employer of the year award.
Substantially all of Lexmark's regular employees are eligible to receive
payments under its cash profit sharing plan. In FY 1999, employees received a
payout under this plan equal to approximately 7% of their base compensation. In
FY 1998 and FY 1997, employees received payouts equal to approximately 10% and
6%, respectively, of their base compensation. In September 1999, the company
told KLD that substantially all of its regular employees receive stock options
within one year of their date of hire.
In 1999, Industry Week magazine included Lexmark on its list of the world's 100
best-managed companies. The company was selected for increased sales and
profits and its ability to invest in employees, new technologies, the
environment, and local communities. As of December 1999, Lexmark had
approximately 10,900 employees worldwide.
- 13 -
<PAGE>
Domini Social Equity Fund -- Social Profiles
In September 1998, The Rocky Mountain Water Environment Association (RMWEA)
honored Lexmark for eliminating nickel acetate from its production of laser
printer photoconductor cores. The company replaced nickel acetate with a
solution that does not require special disposal. The RMWEA is a non-profit
organization of water quality professionals whose goal is the protection and
enhancement of the water environment in Colorado, Wyoming and New Mexico.
In 1997, the U.S. Environmental Protection Agency recognized Lexmark as the
"Energy Star Office Equipment Printer Partner of the Year." All of the
company's printers comply with the EPA's energy efficiency requirements. The
company reported that the amount of waste it was able to recycle increased from
10% in 1991 to 80% in 1999. In May 2000, the company told KLD that it had no
accruals for environmental remediation liabilities.
The company's printers have won numerous industry awards. In June 1999, the
company's Lexmark 3200 Color Jetprinter won a Bronze Industrial Design
Excellence Award (IDEA). The IDEA award, co-sponsored by the Industrial
Designers Society of America and Business Week magazine, included such criteria
as design innovation and ecological responsibility.
Stillwater Mining Company mines, processes, and refines palladium, platinum,
and associated metals from a geological formation in southern Montana known as
the J-M Reef, the only significant source of platinum group metals (PGMs)
outside of South Africa and Russia.
Stillwater Mining Company
Ticker: SWC
Industry/Sector: Mining, Gold & Precious Metals/Basic Materials
Market Capitalization: $1 Billion
Website: www.stillwatermining.com
Percentage of DSIP: 0.01
Stillwater grants stock options to all newly hired employees on a graded scale.
As of March 1999, the company had approximately 916 employees, 73% of whom were
represented by labor unions.
In January 1999, Stillwater's Columbus metallurgical complex in Montana, which
consists of a smelter and a base metals refinery, became the first complex ever
to
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<PAGE>
Domini Social Equity Fund -- Social Profiles
be twice awarded the Montana Governor's Safety and Health Achievement Award. In
FY 1998, the complex had no lost time accidents. In addition, in FY 1998, the
smelter (for the sixth consecutive year) and the base metals refinery (for the
second consecutive year) were granted the Sharp's Award, which exempts these
facilities from routine Occupational Safety and Health Administration
inspections.
In October 1999, Stillwater told KLD that approximately 90% of its palladium
and platinum production is sold to the automobile industry for use in catalytic
converters. Catalytic converters reduce harmful automobile emissions. In March
1999, Stillwater reported that it had not received an environmental citation
since it began operations in 1986.
PGM mining operations, if implemented responsibly, have four intrinsic
environmental advantages over mining processes used to obtain a number of other
metals. First, PGM mining uses underground--not open pit--mines, thereby
causing substantially less surface pollution. Second, PGM extraction does not
entail cyanide or other highly toxic chemicals. Third, PGM mines are not
subject to acid drainage. Fourth, the technology exists to enable PGM
operations to effectively treat, or even entirely eliminate, wastewater
discharge.
Stillwater does not discharge any of its nitrate-contaminated mine water into
the Stillwater River, but instead recycles the water for use in the mine. The
company utilizes foxtail (a perennial plant) and operates a treatment plant
that uses bacteria to reclaim nitrates created by explosives used in its mining
processes. Using slope stabilization and revegetation, the company has
reclaimed old chrome tailings from former U.S. government contracted mining,
which had ended in 1962.
In September 1999, Stillwater reached a tentative agreement with Northern
Plains Resource Council (NPRC) and two of NPRC's affiliates (Cottonwood
Resource Council (CRC) and Stillwater Protective Association (SPA)) to resolve
disagreements surrounding the expansion of the company's mine near Nye,
Montana. NRPC is a grassroots Montana citizens group dedicated to land
stewardship and social justice. The "good neighbor agreement," which also
includes the company's new East Boulder Mine near Big Timber, Montana, covers a
number of environmental issues, including water quality monitoring, tailings
and waste rock disposal, and review of reclamation and bond coverage. In
addition, the four parties will agree on protective covenants and easements on
Stillwater Mining properties in order to
- 15 -
<PAGE>
Domini Social Equity Fund -- Social Profiles
preserve open space and agricultural land. Further, Stillwater Mining agreed to
continue providing bus transportation for its employees to help relieve traffic
problems. Finally, the parties agreed to establish a Technology and Responsible
Mining Practices Committee, which will explore the research, development, and
implementation of new technologies and practices related to environmental
procedures and performance.
-----------
The Domini Social Equity Fund is subject to market risks and is not insured.
You may lose money.
Unlike other mutual funds, the Domini Social Equity Fund seeks to achieve its
investment objective by investing all of its investable assets in a separate
portfolio with an identical investment objective called the Domini Social Index
Portfolio ("DSIP"). All data is current as of July 31, 2000. The composition of
the DSIP is subject to change. The preceding profiles should not be deemed an
offer to sell or a solicitation of an offer to buy the stock of any of the com-
panies noted, or a recommendation concerning the merits of any of these compa-
nies as an investment. This material must be accompanied or preceded by the
Fund's current prospectus. DSIL Investment Services LLC, Distributor. 9/00
- 16 -
<PAGE>
[This page intentionally left blank]
- 17 -
<PAGE>
Domini Social Index Portfolio
Portfolio of Investments
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Basic Materials -- 0.6%
Air Products & Chemicals, Inc. .......................... 66,700 $ 2,226,113
Bemis Company, Inc. ..................................... 15,400 529,375
Cabot Corporation........................................ 19,400 620,800
Calgon Carbon Corporation................................ 11,200 85,400
Caraustar Industries, Inc. .............................. 7,500 101,250
Catalytica, Incorporated (b)............................. 9,500 108,656
Consolidated Papers, Inc. ............................... 26,400 1,032,900
Echo Bay Mines Ltd (b)................................... 40,700 38,156
Ecolab Inc. ............................................. 37,500 1,342,969
Fuller (H.B.) Company.................................... 4,100 158,363
IMCO Recycling Inc. ..................................... 4,500 21,938
Mead Corporation......................................... 29,700 753,638
Minerals Technologies Inc. .............................. 6,000 287,625
Nucor Corporation........................................ 24,550 926,763
Praxair, Inc. ........................................... 45,800 1,811,963
Ryerson Tull, Inc. ...................................... 7,200 63,450
Sigma-Aldrich Corporation................................ 24,600 670,350
Sonoco Products Company.................................. 28,745 540,765
Stillwater Mining Company (b)............................ 11,100 291,375
Westvaco Corporation..................................... 29,100 798,431
Worthington Industries, Inc. ............................ 24,900 263,006
--------------
12,673,286
--------------
Capital Goods -- 2.1%
American Power Conversion (b)............................ 56,400 1,434,675
Ault Incorporated (b).................................... 1,300 7,313
Avery Dennison Corporation............................... 32,600 1,768,550
Baldor Electric Company.................................. 9,800 180,075
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Capital Goods -- Continued
Brady Corporation....................................... 6,600 $ 200,888
CLARCOR Inc. ........................................... 7,050 147,609
Cooper Industries, Inc. ................................ 26,900 862,481
Cross (A.T.) Company (b)................................ 4,900 25,113
Crown Cork & Seal Company, Inc. ........................ 37,000 515,688
Cummins Engine Company, Inc. ........................... 12,000 384,000
Deere & Company......................................... 68,000 2,622,250
Dionex Corporation (b).................................. 6,400 166,400
Donaldson Co., Inc. (b)................................. 13,300 255,194
Emerson Electric Co. ................................... 124,100 7,577,856
Fastenal Company........................................ 11,000 679,250
Graco Inc. ............................................. 5,875 199,750
Granite Construction Incorporated....................... 7,850 189,381
Herman Miller, Inc. .................................... 22,800 715,350
HON Industries, Inc. ................................... 17,400 464,363
Hubbell Incorporated.................................... 18,060 435,698
Hunt Corporation........................................ 2,900 29,363
Hutchinson Technology Incorporated (b).................. 7,200 107,100
Illinois Tool Works Inc. ............................... 87,700 5,020,825
Ionics, Inc. (b)........................................ 4,700 143,938
Isco, Inc. (b).......................................... 1,600 6,800
Lawson Products, Inc.................................... 2,900 74,675
Leggett & Platt, Inc.................................... 56,800 994,000
Merix Corporation (b)................................... 1,900 95,000
Milacron Inc............................................ 10,300 148,063
Millipore Corporation................................... 13,300 836,238
Molex Incorporated...................................... 57,046 2,683,838
Moore Corporation....................................... 25,600 73,600
National Service Industries, Inc. ...................... 11,800 241,163
New England Business Service, Inc....................... 3,900 80,925
Nordson Corporation..................................... 4,700 265,550
</TABLE>
- 18 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Capital Goods -- Continued
Osmonics, Inc. (b).................................... 4,100 $ 36,388
Pitney Bowes Inc. .................................... 74,900 2,593,413
Sealed Air Corporation (b)............................ 24,200 1,219,075
Smith (A.O.) Corporation.............................. 6,800 109,650
Solectron Corporation (b)............................. 173,300 6,986,156
Spartan Motors, Inc. ................................. 3,400 12,538
Standard Register Company............................. 7,900 101,219
Steelcase Inc. ....................................... 8,800 149,600
Thomas & Betts Corporation............................ 16,800 327,600
Thomas Industries Inc. ............................... 4,500 93,938
Toro Company.......................................... 3,700 111,463
Watts Industries, Inc. ............................... 7,600 90,250
Wellman, Inc. ........................................ 9,100 133,088
--------------
41,597,340
--------------
Communication Services -- 7.4%
AT&T Corp. ........................................... 1,086,980 33,628,444
BellSouth Corporation................................. 547,100 21,781,419
Citizens Communications Company (b)................... 76,267 1,277,472
SBC Communications Inc. .............................. 989,028 42,095,505
Sprint Corporation.................................... 254,900 9,080,813
Telephone and Data Systems, Inc. ..................... 17,600 1,960,200
Verizon Communications................................ 790,922 37,173,334
--------------
146,997,187
--------------
Consumer Cyclicals -- 7.1%
American Greetings Corporation........................ 18,700 317,900
Angelica Corporation.................................. 2,500 20,625
Apogee Enterprises, Inc. ............................. 8,000 34,000
AutoZone, Inc. (b).................................... 38,700 885,263
Bandag, Incorporated.................................. 6,000 155,250
Banta Corporation..................................... 7,250 140,016
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Consumer Cyclicals -- Continued
Bassett Furniture Industries............................ 3,400 $ 45,900
Black & Decker Corporation.............................. 24,800 922,250
Block (H&R), Inc. ...................................... 28,400 908,800
Brown Shoe Company, Inc. ............................... 5,300 75,194
Centex Corporation...................................... 17,200 411,725
Champion Enterprises, Inc. (b).......................... 13,700 74,494
Charming Shoppes, Inc. (b).............................. 29,200 164,250
Cintas Corporation...................................... 48,700 2,054,531
Circuit City Stores, Inc. .............................. 59,100 1,355,606
Claire's Stores, Inc. .................................. 14,800 249,750
Cooper Tire and Rubber Company.......................... 21,300 238,294
Costco Wholesale Corporation (b)........................ 129,930 4,230,846
Dana Corporation........................................ 44,000 1,009,250
Delphi Automotive Systems Corp ......................... 163,700 2,424,806
DeVry Inc. (b).......................................... 20,100 680,888
Dillard's, Inc. ........................................ 27,100 370,931
Dollar General Corporation.............................. 95,651 1,757,587
Donnelly Corporation.................................... 1,700 22,313
Dow Jones & Company..................................... 25,800 1,701,188
Enesco Group, Inc. ..................................... 3,900 24,863
Fedders Corporation..................................... 10,300 53,431
Federal-Mogul Corporation............................... 20,400 186,150
Fleetwood Enterprises, Inc. ............................ 9,500 122,906
Gap, Inc. (The)......................................... 247,387 8,859,547
Genuine Parts Company................................... 51,100 1,025,194
Handleman Company (b)................................... 8,200 107,113
Harcourt General........................................ 20,900 1,153,419
Harland (John H.) Company............................... 8,200 109,675
Harman International Industries, Inc. .................. 4,930 311,823
</TABLE>
- 19 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Consumer Cyclicals -- Continued
Hartmarx Corporation (b)................................ 8,500 $ 19,656
Hillenbrand Industries, Inc. ........................... 18,100 579,200
Home Depot, Inc. ....................................... 672,697 34,812,070
Huffy Corporation....................................... 2,900 20,481
IMS Health Incorporated................................. 86,400 1,560,600
Interface, Inc. ........................................ 15,000 76,875
Kaufman & Broad Home Corporation........................ 13,900 271,919
Kelly Services, Inc. ................................... 10,375 240,570
Kmart Corporation (b)................................... 139,100 973,700
Lands' End, Inc. (b).................................... 8,700 325,706
Lee Enterprises, Inc. .................................. 12,800 339,200
Lillian Vernon Corporation.............................. 2,600 28,600
Limited, Inc. (The)..................................... 124,900 2,552,644
Liz Claiborne, Inc. .................................... 15,800 616,200
Lowe's Companies, Inc. ................................. 111,200 4,691,250
Mattel, Inc. ........................................... 123,785 1,369,372
May Department Stores Company........................... 96,700 2,296,625
Maytag Corporation...................................... 22,700 768,963
McGraw-Hill Companies, Inc. ............................ 56,600 3,364,163
Media General, Inc. .................................... 7,100 355,000
Men's Wearhouse, Inc. (b)............................... 12,100 313,844
Meredith Corporation.................................... 14,600 464,463
Modine Manufacturing Company............................ 8,500 229,500
New York Times Company.................................. 49,400 2,034,663
Nordstrom, Inc. ........................................ 38,900 680,750
Omnicom Group Inc. ..................................... 51,700 4,394,500
Oshkosh B'Gosh, Inc. ................................... 3,800 60,325
Penney (J.C.) Company, Inc. ............................ 75,500 1,217,438
Pep Boys -- Manny, Moe & Jack........................... 15,400 89,513
Phillips-Van Heusen Corporation......................... 7,900 71,100
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Consumer Cyclicals -- Continued
Pulte Corporation (b)................................... 11,900 $ 272,956
Radio Shack Corporation................................. 54,300 3,061,163
Reebok International Ltd. (b)........................... 16,400 276,750
Rouse Company (The)..................................... 20,300 529,069
Russell Corporation..................................... 9,400 185,063
Scholastic Corporation (b).............................. 4,900 312,988
Sears, Roebuck and Co. ................................. 102,500 3,062,188
Service Corporation International....................... 78,700 201,669
Shaw Industries, Inc. .................................. 37,200 476,625
Sherwin-Williams Company (The).......................... 47,300 984,431
Skyline Corporation..................................... 2,500 50,469
Snap-On Incorporated.................................... 16,950 511,678
Springs Industries, Inc. ............................... 5,200 167,700
SPX Corporation (b)..................................... 9,115 1,305,154
Stanley Works (The)..................................... 25,300 662,544
Staples, Inc. (b)....................................... 140,800 1,944,800
Stride Rite Corporation................................. 12,500 74,219
Target Corporation...................................... 265,200 7,690,800
Tennant Company......................................... 2,600 106,113
Timberland Company (The) (b)............................ 11,600 380,625
TJX Companies, Inc. .................................... 87,200 1,460,600
Toys 'R' Us, Inc. (b)................................... 62,520 1,031,580
Tribune Company (b)..................................... 89,650 2,913,625
Univision Communications Inc. (b)....................... 29,900 3,715,075
Venator Group, Inc. (b)................................. 39,800 562,175
VF Corporation.......................................... 33,000 726,000
Walgreen Company........................................ 293,000 9,137,938
Washington Post Company................................. 2,700 1,296,000
Whirlpool Corporation................................... 21,100 911,256
--------------
141,035,921
--------------
Consumer Staples -- 14.9%
Alberto-Culver Company.................................. 16,100 489,038
Albertson's, Inc. ...................................... 123,200 3,719,100
Avon Products, Inc. .................................... 69,000 2,738,438
</TABLE>
- 20 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Consumer Staples -- Continued
Bergen Brunswig Corporation............................. 38,936 $ 340,690
Bestfoods............................................... 79,800 5,556,075
Bob Evans Farms, Inc. .................................. 10,700 171,200
Campbell Soup Company................................... 122,800 3,254,200
Church & Dwight Co., Inc. .............................. 11,000 193,875
Clorox Company.......................................... 68,200 2,817,513
Coca-Cola Company....................................... 719,600 44,120,475
Colgate-Palmolive Company............................... 167,700 9,338,794
Comcast Corporation (b)................................. 261,000 8,878,072
CVS Corporation......................................... 113,400 4,472,213
Darden Restaurants, Inc. ............................... 35,800 583,988
Deluxe Corporation...................................... 20,900 449,350
Disney, Walt Company (The).............................. 604,100 23,371,119
Donnelley (R.R.) & Sons Company......................... 35,200 783,200
Fleming Companies, Inc. ................................ 11,400 178,838
Fort James Corporation.................................. 59,800 1,827,638
General Mills Incorporated.............................. 84,700 2,911,563
Gillette Company........................................ 303,500 8,858,406
Great Atlantic & Pacific Tea Company, Inc............... 11,100 159,563
Heinz (H.J.) Company.................................... 102,400 4,089,600
Hershey Foods Corporation............................... 39,900 1,845,375
Horizon Organic Holding Corporation (b)................. 2,800 32,725
Kellogg Company......................................... 117,900 3,058,031
Kimberly-Clark Corporation.............................. 161,564 9,279,832
Kroger Co. (b).......................................... 242,800 5,022,925
Longs Drug Stores Corporation........................... 11,400 230,850
Luby's, Inc. ........................................... 6,500 52,813
McDonald's Corporation.................................. 388,500 12,237,750
Nature's Sunshine Products, Inc. ....................... 4,900 39,200
Newell Rubbermaid, Inc. ................................ 77,478 2,087,064
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Consumer Staples -- Continued
Odwalla, Inc. (b)..................................... 1,500 $ 10,688
Oneida Ltd. .......................................... 4,700 85,188
PepsiCo, Inc. ........................................ 419,000 19,195,438
Procter & Gamble Company.............................. 380,300 21,629,563
Quaker Oats Company................................... 38,100 2,562,225
Ralston Purina Company................................ 89,200 1,800,725
Ruby Tuesday, Inc. ................................... 17,800 219,163
Ryan's Family Steakhouse, Inc. (b).................... 9,400 85,775
Smucker (J.M.) Company................................ 8,200 147,600
Starbucks Corporation (b)............................. 53,400 2,002,500
SUPERVALU Inc. ....................................... 38,000 672,125
SYSCO Corporation..................................... 96,900 3,815,438
Tootsie Roll Industries, Inc.......................... 9,669 365,609
Tupperware Corporation................................ 16,700 324,606
Viacom, Inc. (b)...................................... 40,000 2,667,500
Wal-Mart Stores, Inc. ................................ 1,295,900 71,193,506
Wendy's International, Inc. .......................... 32,900 557,244
Whitman Corporation................................... 39,400 588,538
Whole Foods Market, Inc. (b).......................... 7,500 335,156
Wild Oats Markets, Inc. (b)........................... 6,650 67,331
Wrigley (Wm.) Jr. Company............................. 33,200 2,523,200
--------------
294,038,631
--------------
Energy -- 0.4%
Anadarko Petroleum Corporation........................ 100,685 4,814,002
Apache Corporation.................................... 33,100 1,646,725
Helmerich & Payne, Inc. .............................. 14,400 460,800
Rowan Companies, Inc. (b)............................. 27,100 684,275
</TABLE>
- 21 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Energy -- Continued
Santa Fe Snyder Corporation (b)......................... 52,700 $ 527,000
Sunoco, Inc. ........................................... 25,600 624,000
--------------
8,756,802
--------------
Financials -- 15.3%
Aetna, Inc. ............................................ 40,970 2,273,835
AFLAC Inc. ............................................. 77,200 4,009,575
American Express Company................................ 388,400 22,017,425
American General Corporation............................ 72,262 4,818,972
American International Group, Inc. ..................... 672,206 58,944,021
AmSouth Bancorporation (b).............................. 114,200 1,919,988
Bank One Corporation.................................... 333,485 10,608,992
Capital One Financial Corporation....................... 56,900 3,335,763
Chittenden Corporation.................................. 8,261 214,270
Chubb Corporation....................................... 50,900 3,766,600
CIGNA Corporation....................................... 47,300 4,724,088
Cincinnati Financial Corporation........................ 46,785 1,766,134
Comerica Incorporated (b)............................... 45,500 2,320,500
Dime Bancorp, Inc. ..................................... 32,300 520,838
Edwards (A.G.), Inc. ................................... 25,787 1,363,488
Fannie Mae.............................................. 292,900 14,608,388
Fifth Third Bancorp..................................... 135,138 5,582,868
First Tennessee National Corporation.................... 37,600 686,200
Firstar Corporation..................................... 282,000 5,569,500
FirstFed Financial
Corp. (b).............................................. 5,000 80,000
Freddie Mac............................................. 202,100 7,970,319
Golden West Financial................................... 46,000 2,116,000
Household International, Inc. .......................... 137,546 6,129,394
HSB Group, Inc. ........................................ 8,350 296,425
Jefferson-Pilot Corporation............................. 29,850 1,820,850
KeyCorp................................................. 126,400 2,219,900
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Financials -- Continued
Lincoln National Corporation............................ 55,700 $ 2,429,913
Marsh & McLennan Companies, Inc. ....................... 78,350 9,558,700
MBIA Inc. .............................................. 28,600 1,592,663
MBNA Corporation........................................ 233,150 7,781,381
Mellon Financial Corp. ................................. 142,800 5,381,775
Merrill Lynch & Co., Inc. ............................. 112,800 14,579,400
MGIC Investment Corporation............................. 30,800 1,749,825
Morgan (J.P.) & Co. Incorporated........................ 47,200 6,301,200
National City Corporation............................... 176,300 3,129,325
Northern Trust Corporation.............................. 64,600 4,836,925
PNC Financial Services Group............................ 84,400 4,293,850
Progressive Corporation (The)........................... 21,200 1,425,700
Providian Financial Corporation......................... 41,400 4,220,213
ReliaStar Financial Corp. .............................. 25,900 1,377,556
SAFECO Corporation...................................... 36,900 851,006
Schwab (Charles) Corporation............................ 395,900 14,301,888
SLM Holding Corporation................................. 45,500 1,959,344
St. Paul Companies, Inc. (The).......................... 61,664 2,740,194
Stilwell Financial, Inc. (b)............................ 64,800 2,855,250
SunTrust Banks, Inc. ................................... 87,900 4,208,213
Synovus Financial Corp. ................................ 82,150 1,478,700
Torchmark Corporation................................... 37,100 922,863
U.S. Bancorp............................................ 218,600 4,194,388
UnumProvident Corp. .................................... 69,900 1,607,700
Value Line, Inc. ....................................... 2,900 113,100
Wachovia Corporation.................................... 58,900 3,239,500
Washington Mutual, Inc. ................................ 159,302 5,117,577
</TABLE>
- 22 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Financials -- Continued
Wells Fargo & Company................................... 468,500 $ 19,354,906
Wesco Financial Corporation............................. 2,100 474,600
--------------
301,761,988
--------------
Healthcare -- 7.7%
Acuson Corporation (b).................................. 8,000 98,500
ADAC Laboratories (b)................................... 6,000 118,875
Allergan, Inc. ......................................... 37,700 2,523,544
ALZA Corporation (b).................................... 29,700 1,923,075
Becton Dickinson and Company............................ 73,400 1,853,350
Biomet, Inc. ........................................... 34,400 1,539,400
Boston Scientific Corporation (b)....................... 118,500 1,962,656
Forest Laboratories, Inc. (b)........................... 24,600 2,632,200
Guidant Corporation (b)................................. 89,100 5,023,013
Humana Inc. (b)......................................... 48,500 354,656
Johnson & Johnson....................................... 404,400 37,634,475
Mallinckrodt Inc. ...................................... 19,400 887,550
Manor Care, Inc. (b).................................... 29,600 292,300
McKesson HBOC, Inc. .................................... 81,920 1,991,680
Medtronic, Inc. ........................................ 348,000 17,769,750
Merck & Co., Inc. ...................................... 668,600 47,930,263
Mylan Laboratories, Inc. ............................... 37,400 794,750
Oxford Health Plans, Inc. (b)........................... 23,800 569,713
PE Corp-Celera Gen (b).................................. 16,600 1,442,125
Quintiles Transnational Corp. (b)....................... 33,300 522,394
Schering-Plough Corporation............................. 425,700 18,384,919
St. Jude Medical, Inc. (b).............................. 24,400 1,006,500
Stryker Corporation..................................... 56,700 2,434,556
Sunrise Medical Inc. (b)................................ 6,400 30,000
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Healthcare -- Continued
United American Healthcare Corporation (b)............ 2,000 $ 1,125
Watson Pharmaceuticals, Inc. (b)...................... 28,100 1,552,525
--------------
151,273,894
--------------
Technology -- 41.2%
3Com Corporation (b).................................. 102,000 1,383,375
Adaptec, Inc. (b)..................................... 30,100 744,975
ADC Telecommunications, Inc. (b)...................... 196,200 8,228,138
Advanced Micro Devices, Inc. (b)...................... 44,500 3,201,219
America Online........................................ 668,000 35,612,750
Analog Devices, Inc. (b).............................. 102,900 6,881,438
Apple Computer, Inc. (b).............................. 94,600 4,806,863
Applied Materials, Inc. (b)........................... 234,800 17,815,450
Arrow Electronics, Inc. (b)........................... 27,900 922,444
AstroPower, Inc. (b).................................. 3,300 69,919
Autodesk, Inc. ....................................... 16,900 365,463
Automatic Data Processing, Inc. ...................... 182,374 9,038,911
Avnet, Inc. .......................................... 12,800 728,800
BMC Software, Inc. (b)................................ 71,000 1,340,125
Ceridian Corporation (b).............................. 41,900 953,225
Cisco Systems, Inc. (b)............................... 2,022,500 132,347,344
Compaq Computer Corporation........................... 493,688 13,854,120
Computer Associates International, Inc................ 171,100 4,245,419
Compuware Corporation (b)............................. 104,200 833,600
CPI Corp. ............................................ 2,500 62,031
</TABLE>
- 23 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Technology -- Continued
Dell Computer Corporation (b)......................... 748,700 $ 32,896,006
EMC Corporation (b)................................... 630,900 53,705,363
Gerber Scientific Inc. ............................... 6,400 64,000
Grainger (W.W.), Inc. ................................ 27,200 863,600
Hewlett-Packard Company............................... 290,800 31,751,725
Ikon Office Solutions, Inc. .......................... 43,200 175,500
Inprise Corporation (b)............................... 17,800 97,900
Intel Corporation..................................... 1,947,400 129,988,950
Lexmark International Group, Inc. (b)................. 37,600 1,694,350
LSI Logic Corporation (b)............................. 89,300 3,025,038
Lucent Technologies, Inc. ............................ 946,800 41,422,500
Micron Technology, Inc. (b)........................... 161,300 13,145,950
Microsoft Corporation (b)............................. 1,530,000 106,813,125
National Semiconductor Corporation (b)................ 51,300 1,856,419
Novell, Inc. (b)...................................... 95,200 916,300
Palm, Inc. (b)........................................ 151,287 5,900,204
Paychex, Inc. ........................................ 108,000 4,941,000
PeopleSoft, Inc. (b).................................. 80,200 1,749,363
Polaroid Corporation.................................. 13,000 235,625
QRS Corporation (b)................................... 4,400 80,850
Qualcomm, Inc. (b).................................... 215,500 13,994,031
Sanmina Corporation (b)............................... 43,100 4,002,913
Scientific-Atlanta, Inc. ............................. 46,300 3,565,100
Sun Microsystems, Inc. (b)............................ 461,200 48,627,775
Symantec Corporation (b).............................. 17,200 881,500
Tektronix, Inc. ...................................... 13,900 854,850
Tellabs, Inc. (b)..................................... 119,100 7,741,500
Texas Instruments Incorporated........................ 475,800 27,923,513
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Technology -- Continued
Xerox Corporation....................................... 193,700 $ 2,881,288
Xilinx, Inc. (b)........................................ 93,400 7,010,838
Yahoo! Inc. (b)......................................... 158,000 20,332,625
--------------
812,575,310
--------------
Transportation -- 0.7%
Airborne Freight Corporation............................ 14,200 219,213
Alaska Air Group, Inc. (b).............................. 7,600 208,525
AMR Corporation (b)..................................... 43,300 1,431,606
Consolidated Freightways Corporation (b)................ 6,200 27,319
Delta Air Lines, Inc. .................................. 35,600 1,911,275
Fed Ex Holding Corporation (b).......................... 84,300 3,340,388
GATX Corporation........................................ 13,800 551,137
Kansas City Southern Industries, Inc. (b)............... 32,200 223,388
Norfolk Southern Corporation............................ 111,400 2,074,825
Roadway Express, Inc. .................................. 5,600 133,000
Ryder System, Inc. ..................................... 17,200 359,050
Southwest Airlines Co. ................................. 144,275 3,408,497
UAL Corporation......................................... 14,400 779,400
Yellow Corporation (b).................................. 7,300 117,256
--------------
14,784,879
--------------
Utilities -- 1.7%
AGL Resources Inc. ..................................... 15,700 283,581
American Water Works, Inc. ............................. 28,300 686,275
Cascade Natural Gas Corporation......................... 3,200 52,800
Cleco Corporation....................................... 6,500 239,687
Eastern Enterprises..................................... 7,800 488,475
El Paso Energy Corporation.............................. 67,200 3,250,800
Energen Corporation..................................... 8,700 195,750
Enron Corp. ............................................ 212,800 15,667,400
Equitable Resources, Inc. .............................. 9,500 494,594
IDACORP Inc. ........................................... 10,900 403,300
</TABLE>
- 24 -
<PAGE>
Domini Social Index Portfolio / Portfolio of Investments--(Continued)
July 31, 2000
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Utilities -- Continued
KeySpan Corporation...................................... 38,700 $ 1,228,725
LG&E Energy Corp. ....................................... 37,500 909,375
MCN Energy Group, Inc. .................................. 24,800 536,300
National Fuel Gas Company................................ 11,300 557,231
NICOR Inc. .............................................. 13,400 464,813
Northwest Natural Gas Company............................ 7,300 168,813
Northwestern Corporation................................. 6,700 154,100
OGE Energy Corp. ........................................ 22,500 427,500
Peoples Energy Corporation............................... 10,200 323,213
Potomac Electric Power Company........................... 34,300 846,781
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
------ ------ -----
<S> <C> <C>
Utilities -- Continued
Questar Corporation..................................... 23,100 $ 450,450
Southern Union
Company (b)............................................ 14,300 246,674
Washington Gas Light Company............................ 13,400 329,931
Williams Companies, Inc. ............................... 128,400 5,360,705
--------------
33,767,274
--------------
Total Investments (a) 99.3%............................. 1,959,262,503
Other Assets, less liabilities -- 0.7%.................. 14,359,213
--------------
Net Assets -- 100.0%.................................... $1,973,621,716
==============
</TABLE>
-----------
(a) The aggregate cost for book and federal income tax purposes is
$1,567,545,271, the aggregate gross unrealized appreciation is $512,603,748
and the aggregate gross unrealized depreciation is $120,886,541, resulting
in net unrealized appreciation of $391,717,237.
(b) Non-income producing security.
- 25 -
<PAGE>
Domini Social Bond Fund
Performance Commentary and Social Impact
Performance Commentary
The Domini Social Bond Fund ("DSBF") was launched on June 1, 2000. The DSBF
invests in an intermediate-term portfolio of investment-grade fixed-income
securities. Its investment objective is to provide a high level of current
income and total return. We are pleased to report that in its first two months
of operations, our fund has provided a total return of 1.59%.
In June and July fixed-income markets began to show signs of recovering from a
year-and-a-half long slide, during which interest rates steadily increased.
Bond yields therefore increased as well, resulting in price declines (Bond
yields always move in the opposite direction from prices). At the height of
the Asian Crisis in October 1998, the yield on the five-year U.S. Treasury
Note, a proxy for the intermediate sector of the market, fell to 3.95%. On May
8, 2000, it rose to 6.83%. Meanwhile, at the short end of the maturity
spectrum, the Federal Open Market Committee, under Chairman Alan Greenspan,
was raising overnight interest rates 1.75 percentage points between June 1999
and May 2000. By early June, the cumulative effect of the Fed's moves appeared
to have dampened consumer demand sufficiently to relieve the pressures that
were threatening to overheat the economy. As inflation fears receded, yields
fell, and bond prices increased.
Our fund entered the market near the beginning of this process. Prices had
just begun to rise, while yields were still quite high by the standards of the
last decade. As a result, shareholders of the Domini Social Bond Fund have
enjoyed a high rate of current income as well as appreciation in share value,
without any sacrifice in credit quality. All of the bonds in the portfolio
have credit ratings of either AAA or AA.
Social Impact
All bond funds seek to provide shareholder value in two ways: price
appreciation and interest income. Our fund is no exception, but it adds a
third dimension, a social return. In building the fund's portfolio, we have
been emphasizing securities whose proceeds are used to finance housing, to
fund community revitalization projects, to provide capital to rural electric
cooperatives, and more. These investments are, first and foremost, worthy
financial investments, but they also serve worthy goals.
- 26 -
<PAGE>
Domini Social Bond Fund
The direct and mortgage-related obligations of the three major housing
agencies, Fannie Mae, Freddie Mac and the Federal Home Loan Banks form the
centerpiece of the fund's portfolio. These Agencies deserve considerable credit
for the fact that almost two-thirds of American families own their own homes.
All three focus on middle- and lower-income families, and have major
initiatives for increasing home ownership among minorities and new immigrants.
Other holdings include a bond issued by the Urban Redevelopment Authority of
Pittsburgh for the construction of the Mellon Bank Client Service Center
Project in downtown Pittsburgh. According to Tom Cox, Chairman of the Authority
and Deputy Mayor of Pittsburgh, the development will retain "thousands" of jobs
in the core city. It will utilize a partially vacant piece of land that was
tied up for years in bankruptcy, and will stabilize the central business
district. Improvements include a new transit station and a public plaza.
While these publicly traded, high-quality investments comprise the bulk of the
portfolio, up to 10% of the fund's portfolio can be put into targeted community
development investments. So far, we have made two such investments -- insured
certificates of deposits with the Self-Help Credit Union of Durham, North
Carolina ("Self Help"), and the Vermont Development Credit Union of Burlington,
Vermont ("VDCU").
Self-Help is a leader in community development lending to homebuyers, small
businesses and non-profits throughout North Carolina. Its mission is to create
ownership and economic opportunities for minorities, women, rural residents,
and low-wealth families. In its 20-year existence, Self-Help has extended
credit totaling $325 million. Visit www.self-help.org for more information.
VDCU's mission is to provide affordable credit and banking services to people
not readily served by banks, including low-income people, women, immigrants,
people of color, micro-entrepreneurs, and those receiving federal assistance.
The credit union promotes grass-roots community development in Vermont through
home ownership, small business development, financial stability, and economic
literacy. Burlington has a large population of Vietnamese immigrants whom VDCU
actively serves. The credit union never turns down a member applying for a loan
without providing an individualized plan, which, if followed, will make the
member creditworthy. Visit www.vdcu.org for more information.
- 27 -
<PAGE>
Domini Social Bond Fund
We are currently considering additional community development investments and
will continue to look for investment-grade Agency and Corporate bonds that
provide our twin objectives of current income and total return.
---------------------------------------------------------------------
The Domini Social Bond Fund is managed by Domini Social Investments,
and sub-managed by South Shore Bank, the nation's oldest and largest
community development bank. South Shore Bank was founded with the
purpose of serving the financial needs of residents and businesses in
traditionally underserved urban areas. David J. Oser, Senior Vice
President, Investments (since 1994), leads the team at South Shore
Bank responsible for the management of the Fund.
---------------------------------------------------------------------
Past performance is no guarantee of future results. An investment in the Fund
is not a bank deposit and is not insured or guaranteed. The Fund is subject to
market risks that will cause principal value and yield to fluctuate. You may
lose money. As of July 31, 2000, the holdings mentioned above represented the
following percentages of the Fund's portfolio: Urban Redevelopment Authority of
Pittsburgh, PA: 7.3%, Self-Help Credit Union: 2.5%, Vermont Development Credit
Union: 2.5%. The Fund's community development investments may be unrated and
carry greater credit risks than the Fund's other holdings. This material must
be preceded or accompanied by the Fund's current prospectus. Please read it
carefully before investing or sending money. DSIL Investment Services LLC,
Distributor. 09/00
- 28 -
<PAGE>
Domini Social Bond Fund
Portfolio of Investments
July 31, 2000
<TABLE>
<CAPTION>
Principal Value
Amount (Note 1)
--------- -----------
<S> <C> <C> <C>
U.S. Government Agency Obligations--54.3%
Fannie Mae:
6.610% 04/23/08.................................... 100,000 $ 95,148
7.125% 02/15/05.................................... 350,000 352,068
7.125% 06/15/10.................................... 500,000 500,633
Federal Home Loan Bank:
6.000% 10/19/04.................................... 250,000 239,609
6.480% 12/03/13.................................... 365,000 328,956
Freddie Mac:
6.150% 11/19/13.................................... 190,000 167,876
6.250% 05/18/04.................................... 60,000 58,208
6.430% 05/12/06.................................... 100,000 95,885
6.500% 07/22/13.................................... 100,000 90,648
6.900% 09/10/07.................................... 315,000 304,846
-----------
Total U.S. Government Agency Obligations
(Cost $2,212,209).................................. 2,233,877
-----------
U.S. Government Agency--Mortgage Securities--16.2%
FNR 1992-145 K 7.15% 07/25/02....................... 538,005 537,223
FHR 1634 PW 4% 11/15/22............................. 150,000 130,468
-----------
Total U.S. Government Agency--Mortgage Securities
(Cost $667,015).................................... 667,691
-----------
State and Municipal Obligations--7.2%
Pittsburgh, PA Urban Redevelopment Authority, 7.46%,
05/01/06
(Cost $292,788).................................... 295,000 296,038
-----------
Corporate Obligations--10.5%
African Development Bank, 6.75%, 10/01/04........... 200,000 196,780
National Rural Utility, 5.5%, 01/15/05.............. 250,000 234,750
-----------
Total Corporate Obligations (Cost $430,454) ........ 431,530
-----------
Community Development Certificates of Deposit--4.9%
Self-Help Credit Union, 6.2%, 12/13/00.............. 100,000 100,000
Vermont Development Credit Union, 5.65%, 07/20/01... 100,000 100,000
-----------
Total Community Development Certificates of Deposit
(Cost $200,000).................................... 200,000
-----------
</TABLE>
- 29 -
<PAGE>
Domini Social Bond Fund
Portfolio of Investments
July 31, 2000
<TABLE>
<S> <C> <C>
Cash Equivalents--5.2% Maturity Amount
Investment in repurchase agreements--Investors Bank
and Trust, dated 7-31-00, due 8-1-00, 5.70%
(collateralized by U.S. Government Agency
Obligations, 8.625%, maturing 08-25-15, market
value $225,128)
(Cost $214,408).................................... 214,442 214,408
----------
Total Investment in Securities (a)--98.4%........... 4,043,544
Other Assets, less liabilities--1.6%................ 67,187
----------
Net Assets--100.0%.................................. $4,110,731
==========
</TABLE>
-----------
(a) The aggregate cost for book and federal income tax purposes is $4,016,874.
The aggregate gross unrealized appreciation is $28,390 and the aggregate
gross unrealized depreciation is $1,720 resulting in net unrealized appre-
ciation of $26,670.
- 30 -
<PAGE>
--------------------------------------------------------------------------------
Financial Statements
--------------------------------------------------------------------------------
- 31 -
<PAGE>
Domini Social Index Portfolio
Statement of Assets and Liabilities
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $1,567,009,801).................... $1,959,262,503
Cash.......................................................... 12,185,653
Receivable for securities sold................................ 5,365,340
Dividends receivable.......................................... 1,357,917
--------------
Total assets................................................. 1,978,171,413
--------------
LIABILITIES:
Accrued expenses (Note 2)..................................... 348,400
Payable for securities purchased.............................. 4,201,297
--------------
Total liabilities............................................ 4,549,697
--------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS........ $1,973,621,716
==============
</TABLE>
See Notes to Financial Statements
- 32 -
<PAGE>
Domini Social Index Portfolio
Statement of Operations
Year Ended July 31, 2000
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of
$617).......................................... $ 14,883,532
EXPENSES
Management fee (Note 2).......................... $ 3,282,473
Custody fees (Note 3)............................ 485,655
Professional fees................................ 55,654
Miscellaneous.................................... 45,148
Trustee fees..................................... 17,600
------------
Total expenses................................... 3,886,530
Fees paid indirectly (Note 3)................... (462,942)
Expenses paid and fee waived by manager
(Note 2)...................................... (24,857)
------------
Net expenses..................................... 3,398,731
------------
NET INVESTMENT INCOME.............................. 11,484,801
Net realized gain on investments
Proceeds from sales.............................. $142,028,419
Cost of securities sold.......................... 89,680,985
------------
Net realized gain on investments................ 52,347,434
Net changes in unrealized appreciation
of investments
Beginning of period.............................. $338,923,398
End of period.................................... 392,252,702
------------
Net change in unrealized appreciation........... 53,329,304
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $117,161,539
============
</TABLE>
See Notes to Financial Statements
- 33 -
<PAGE>
Domini Social Index Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 2000 July 31, 1999
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income....................... $ 11,484,801 $ 7,958,967
Net realized gain on investments............ 52,347,434 15,875,272
Net change in unrealized appreciation of
investments............................... 53,329,304 163,202,630
-------------- --------------
Net Increase in Net Assets Resulting from
Operations............................... 117,161,539 187,036,869
-------------- --------------
Transactions in Investors' Beneficial
Interest:
Additions................................... 774,293,376 531,746,685
Reductions.................................. (265,237,980) (13,614,408)
-------------- --------------
Net Increase in Net Assets from
Transactions in Investors' Beneficial
Interests................................ 509,055,396 518,132,277
-------------- --------------
Total Increase in Net Assets............. 626,216,935 705,169,146
NET ASSETS:
Beginning of period......................... 1,347,404,781 642,235,635
-------------- --------------
End of period............................... $1,973,621,716 $1,347,404,781
============== ==============
-------------------------------------------------------------------------------
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Assets (000's)...... $1,973,622 $1,347,405 $642,236 $292,359 $100,401
Ratio of net investment
income to average net
assets................ 0.70%(/1/) 0.84%(/1/) 1.05%(/2/) 1.34% 1.48%(/4/)
Ratio of expenses to
average net assets.... 0.24%(/1/)(/3/) 0.24%(/1/)(/3/) 0.24%(/2/)(/3/) 0.29%(/3/) 0.59%(/3/)(/4/)
Portfolio turnover
rate.................. 9% 8% 5% 1% 5%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(/1/) Reflects a voluntary expense reimbursement and fee waiver of 0.002% by the
Manager. Had the manager not waived their fee and reimbursed expenses,the
annualized ratios of net investment income and expense to average net as-
sets would have been 0.70% and 0.24%, for the year ended July 31, 2000 re-
spectively, and would have been 0.83% and 0.25%, for the year ended July
31, 1999 respectively.
(/2/) Reflects a waiver of 0.01% of fees by the Manager due to limitations set
forth in the Management Agreement. Had the Manager not waived their fees,
the ratios of net investment income and expenses to average net assets for
the year ended July 31, 1998 would have been 1.04% and 0.25%,
respectively.
(/3/) Ratio of expenses to average net assets for the years ended July 31, 2000,
1999, 1998, 1997 and 1996 include indirectly paid expenses. Excluding
indirectly paid expenses, the expense ratios would have been 0.21%, 0.20%,
0.20%, 0.25% and 0.50% for the years ended July 31, 2000, 1999, 1998, 1997
and 1996, respectively.
(/4/) Had the Expense Payment Agreement and Sponsor Arrangement not been in
place, the ratios of net investment income and expense for the year ended
July 31,1996 would have been 1.14% and 0.85% respectively.
See Notes to Financial Statements
- 34 -
<PAGE>
Domini Social Index Portfolio
Notes to Financial Statements
July 31, 2000
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES.
Domini Social Index Portfolio (the "Index Portfolio") is registered under the
Investment Company Act of 1940 (the "Act") as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on June 7, 1989. The Index Portfolio intends to correlate
its investment portfolio as closely as is practicable with the Domini 400
Social Index (the "Index"), which is a common stock index developed and
maintained by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"). The Declaration of
Trust permits the Trustees to issue an unlimited number of beneficial interests
in the Index Portfolio. The Index Portfolio commenced operations effective on
August 10, 1990 and began investment operations on June 3, 1991.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates. The following is a summary of the Index Portfolio's
significant accounting policies.
(A) Valuation of Investments: The Index Portfolio values securities at
the last reported sale price provided by independent pricing services, or at
the last reported bid price if no sales are reported. In the absence of readily
available market quotations, securities are valued at fair value determined in
accordance with procedures adopted by the Board of Trustees.
(B) Dividend Income: Dividend income is recorded on the ex-dividend
date.
(C) Federal Taxes: The Index Portfolio will be treated as a partnership
for U.S. federal income tax purposes and is therefore not subject to U.S.
federal income tax. As such, each investor in the Index Portfolio will be taxed
on its share of the Index Portfolio's ordinary income and capital gains. It is
intended that the Portfolio will be managed in such a way that an investor will
be able to satisfy the requirements of the Internal Revenue Code applicable to
regulated investment companies.
- 35 -
<PAGE>
Domini Social Index Portfolio / Notes to Financial Statements--(Continued)
July 31, 2000
(D) Other: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
2. TRANSACTIONS WITH AFFILIATES.
(A) Manager. Domini Social Investments LLC ("DSIL"or the "Manager") is
registered as an investment adviser under the Investment Advisers Act of 1940.
The services provided by the Manager consist of investment supervisory
services, overall operational support and administrative services. The
administrative services include the provision of general office facilities and
supervising the overall administration of the Index Portfolio. For its services
under the Management Agreement, the Manager receives from the Index Portfolio a
fee accrued daily and paid monthly at an annual rate equal to 0.20%. Until
December, 1999 DSIL was waiving its fee to the extent necessary to keep the
aggregate annual operating expenses of the Index Portfolio (excluding brokerage
fees and commissions, interest, taxes, and other extraordinary expenses) at no
greater than 0.20% of the average daily net assets of the Index Portfolio. For
the year ended July 31, 2000, DSIL waived fees totalling $24,857.
(B) Submanager. Mellon Equity provides investment submanagement
services to the Index Portfolio on a day-to-day basis pursuant to a
Submanagement Agreement with DSIL. Mellon Equity does not determine the
composition of the Domini Social Index.
3. INVESTMENT TRANSACTIONS.
Cost of purchases and proceeds from sales of investments, other than U.S.
Government securities and short-term obligations, for the year ended July 31,
2000 aggregated $634,201,236 and $142,028,419, respectively. Custody fees of
the Portfolio were reduced by $462,942 which was compensation for uninvested
cash left on deposit with the custodian.
- 36 -
<PAGE>
[LOGO OF KPMG]
Independent Auditors' Report
The Board of Trustees and Investors
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities, includ-
ing the portfolio of investments, of the Domini Social Index Portfolio as of
July 31, 2000, and the related statement of operations for the year then end-
ed, the statements of changes in net assets for each of the years in the two-
year period then ended, and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our responsi-
bility is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of July 31, 2000 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the over-
all financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Domini Social Index Portfolio as of July 31, 2000, the results of its opera-
tions for the year then ended, the changes in its net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Boston, Massachusetts
September 15, 2000
/s/ KPMG LLP
KPMG LLP
- 37 -
<PAGE>
Domini Social Equity Fund
Statement of Assets and Liabilities
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1).. $1,469,707,268
Receivable for fund shares purchased............................ 3,590,816
--------------
Total assets................................................... 1,473,298,084
--------------
LIABILITIES:
Accrued expenses................................................ 1,020,588
Payable for fund shares redeemed................................ 1,351,288
--------------
Total liabilities.............................................. 2,371,876
--------------
NET ASSETS........................................................ $1,470,926,208
==============
NET ASSETS CONSIST OF:
Paid-in capital................................................. 1,106,224,246
Undistributed net investment income/(loss)...................... --
Accumulated net realized gain from Portfolio.................... 39,863,631
Net unrealized appreciation from Portfolio...................... 324,838,331
--------------
$1,470,926,208
==============
Shares outstanding................................................ 36,792,952
==============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
($1,470,926,208 / 36,792,952)................................... $39.98
======
</TABLE>
See Notes to Financial Statements
- 38 -
<PAGE>
Domini Social Equity Fund
Statement of Operations
Year Ended July 31, 2000
<TABLE>
<S> <C>
INCOME:
Investment income from Portfolio................................ $11,945,397
Expenses from Portfolio......................................... 2,724,698
-----------
Net investment income from Portfolio........................... 9,220,699
-----------
EXPENSES:
Sponsor fee (Note 2)............................................ 6,578,565
Distribution fees (Note 2)...................................... 2,874,845
Transfer agent fees (Note 2).................................... 439,801
Registration fees............................................... 287,012
Professional fees............................................... 172,373
Miscellaneous................................................... 77,329
Printing........................................................ 73,021
Trustees fees................................................... 53,265
Accounting fees................................................. 7,687
Shareholder communication....................................... 4,658
-----------
Total Expense.................................................. 10,568,556
Expense Paid and Fees Waived by Manager........................ (674,141)
-----------
Net Expenses................................................... 9,894,415
-----------
NET INVESTMENT INCOME/(LOSS)...................................... (673,716)
-----------
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain from Portfolio................................ 42,007,996
Net change in unrealized appreciation from Portfolio............ 50,495,687
-----------
Net realized and unrealized gain from Portfolio................. 92,503,683
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $91,829,967
===========
</TABLE>
See Notes to Financial Statements
- 39 -
<PAGE>
Domini Social Equity Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 2000 July 31, 1999
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income/(loss)................. $ (673,716) $ 488,051
Net realized gain from Portfolio............. 42,007,996 12,766,135
Net change in unrealized appreciation from
Portfolio.................................. 50,495,687 134,855,974
-------------- --------------
Net Increase in Net Assets Resulting from
Operations................................ 91,829,967 148,110,160
-------------- --------------
Distributions and Dividends:
Dividends to shareholders from net investment
income..................................... (116,389) (619,766)
Distributions to shareholders from net
realized gain.............................. (8,556,314) (9,243,472)
-------------- --------------
Net Decrease in Net Assets from
Distributions and Dividends............... (8,672,703) (9,863,238)
-------------- --------------
Capital Share Transactions:
Proceeds from sale of shares................. 504,865,029 515,274,055
Net asset value of shares issued in
reinvestment of distributions and
dividends.................................. 8,223,142 8,871,760
Payments for shares redeemed................. (208,296,976) (81,309,174)
-------------- --------------
Net Increase in Net Assets from Capital
Share Transactions........................ 304,791,195 442,836,641
-------------- --------------
Total Increase in Net Assets.............. 387,948,459 581,083,563
NET ASSETS:
Beginning of period.......................... 1,082,977,749 501,894,186
-------------- --------------
End of period (including undistributed/
(overdistributed) net investment income of
($673,266) and $116,839, respectively)..... $1,470,926,208 $1,082,977,749
============== ==============
OTHER INFORMATION
Share Transactions:
Sold......................................... 12,700,513 14,987,874
Issued in reinvestment of distributions
and dividends.............................. 200,781 257,946
Redeemed..................................... (5,215,463) (2,400,229)
-------------- --------------
Net increase................................. 7,685,831 12,845,591
============== ==============
</TABLE>
See Notes to Financial Statements
- 40 -
<PAGE>
Domini Social Equity Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period... $37.21 $30.86 $25.43 $16.70 $14.85
------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income.............. (0.02) 0.02 0.01 0.11 0.16
Net realized and
unrealized gain on
investments......... 3.06 6.81 5.48 8.85 1.93
------ ------ ------ ------ ------
Total income from
investment
operations............ 3.04 6.83 5.49 8.96 2.09
------ ------ ------ ------ ------
Less distributions and
dividends:
Dividends to
shareholders from
net investment
income.............. --* (0.03) (0.01) (0.11) (0.16)
Distributions to
shareholders from
net realized gain... (0.27) (0.45) (0.05) (0.12) (0.08)
------ ------ ------ ------ ------
Total distributions..... (0.27) (0.48) (0.06) (0.23) (0.24)
------ ------ ------ ------ ------
Net asset value, end of
period................ $39.98 $37.21 $30.86 $25.43 $16.70
====== ====== ====== ====== ======
Ratios/supplemental data
Total return.......... 8.16% 22.26% 21.58% 54.01% 14.11%
Net assets, end of
year (in 000,000s).. $1,471 $1,083 $ 502 $ 212 $ 81
Ratio of expenses to
average net assets.. 0.96%(/1/) 0.98%(/1/) 1.17%(/2/) 0.98%(/3/) 0.98%(/3/)
Ratio of net
investment income
(loss) to average
net assets.......... (0.05)%(/1/) 0.06%(/1/) 0.07%(/2/) 0.62%(/3/) 1.01%(/3/)
-------------------------------------------------------------------------------------------
</TABLE>
(/1/) Reflects a voluntary waiver of expenses by the Manager of the Portfolio
and the Sponsor of the Fund. Had the Manager and the Sponsor not waived
their fees, the ratios of expenses and net investment income (loss) to
average net assets would have been 1.01% and (0.10%), respectively, for
the year ended July 31, 2000 and 0.99% and 0.05%, respectively for the
year ended July 31, 1999.
(/2/) Reflects non-recurring payments by the Fund to the Fund's former
administrator for $650,000 in connection with the termination of the
expense payment arrangements with the Funds 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 arrangement 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.
* Amount represents less than $0.005 per share.
See Notes to Financial Statements
- 41 -
<PAGE>
Domini Social Equity Fund
Notes to Financial Statements
July 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES.
The Domini Social Equity Fund (the "Fund") is a series of the Domini Social
Investment Trust. The Fund is a Massachusetts business trust registered under
the Investment Company Act of 1940 (the "Act") as an open-end management
investment company. The Fund invests substantially all of its assets in the
Domini Social Index Portfolio (the "Portfolio"), an open-end, diversified
management investment company having the same investment objectives as the
Fund. The value of such investment reflects the Funds proportionate interest in
the net assets of the Portfolio (approximately 74.5% at July 31, 2000). The
financial statements of the Portfolio are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of the Fund's significant accounting policies.
(A) Valuation of Investments. Valuation of securities by the Portfolio
is discussed in Note 1 of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
(B) Investment Income and Dividends to Shareholders. The Fund earns
income daily, net of Portfolio expenses, on its investments in the Portfolio.
Dividends to shareholders are usually declared and paid semiannually from net
investment income. Distributions to shareholders of realized capital gains, if
any, are made annually.
(C) Federal Taxes. The Fund's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income, including net realized
gains, if any, within the prescribed time periods. Accordingly, no provision
for federal income or excise tax is deemed necessary.
- 42 -
<PAGE>
Domini Social Equity Fund / Notes to Financial Statements--(Continued)
July 31, 2000
(D) Other. All net investment income and unrealized gains and losses of
the Portfolio is allocated pro rata among the Fund and the other investors in
the Portfolio.
2. TRANSACTIONS WITH AFFILIATES.
(A) Manager. The Portfolio has retained Domini Social Investments LLC
("DSIL" or the Manager) to serve as investment manager and administrator. The
services provided by DSIL consist of investment supervisory services, overall
operational support and administrative services, including the provision of
general office facilities and supervising the overall administration of the
Portfolio. For its services under the Management Agreement, the Manager
receives from the Portfolio a fee accrued daily and paid monthly at an annual
rate equal to 0.20% of the Index Portfolio's average daily net assets. Until
December, 1999 DSIL was waiving its fee to the extent necessary to keep the
aggregate annual operating expenses of the Portfolio (excluding brokerage fees
and commissions, interest, taxes, and other extraordinary expenses) at no
greater than 0.20% of the average daily net assets of the Portfolio. For the
year ended July 31, 2000, DSIL waived fees totalling $24,857.
(B) Submanager. Mellon Equity provides investment submanagement
services to the Portfolio on a day-to-day basis pursuant to a Submanagement
Agreement with DSIL. Mellon Equity does not determine the composition of the
Domini Social Index.
(C) Sponsor. Pursuant to a Sponsorship Agreement, DSIL provides the
Fund with the administrative personnel and services necessary to operate the
Fund. In addition to general administrative services and facilities for the
Fund similar to those provided by DSIL to the Portfolio under the Management
Agreement, DSIL answers questions from the general public and the media
regarding the composition of the Domini Social Index and the securities
holdings of the Index Portfolio. For these services and facilities, DSIL
receives fees accrued daily and paid monthly from the Fund at an annual rate
equal to 0.50% of the average daily net assets of the Fund. DSIL has reduced
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 period December 1, 1999 through July 31, 2000 and at
0.98% of the average net assets of the Fund for the period August 1, 1999 to
November 30, 1999. The waiver currently in effect is contractual and expires on
November 30, 2000. For the year ended July 31, 2000, DSIL waived fees totalling
$674,141.
- 43 -
<PAGE>
Domini Social Equity Fund / Notes to Financial Statements--(Continued)
July 31, 2000
(D) Distribution. The Trustees of the Fund have adopted a Distribution
Plan in accordance with Rule 12b-1 under the Act. DSIL Investment Services,
LLC, (the Distributor) a wholly owned subsidiary of DSIL acts as agent of the
Fund in connection with the offering of shares of the Fund pursuant to a
Distribution Agreement. The Distributor acts as the principal underwriter of
shares of the Fund and bears the compensation of personnel necessary to provide
such services and all costs of travel, office expense (including rent and
overhead) and equipment. Under the Distribution Plan, the Distributor may
receive a fee from the Fund at an annual rate not to exceed 0.25% of the Fund's
average daily net assets in anticipation of, or reimbursement for, costs and
expenses incurred in connection with the sale of shares of the Fund.
(E) Other. Certain officers of the Fund are also officers of the former
transfer agent, Fundamental Shareholder Services, Inc. ("FSSI"). Total fees
paid to FSSI for the year ended July 31, 2000 were approximately $180,000.
3. INVESTMENT TRANSACTIONS.
Additions and reductions in the Fund's investment in the Portfolio aggregated
$502,875,354 and $216,859,622, respectively
4. FEDERAL TAX STATUS OF DIVIDENDS (UNAUDITED) For federal income tax purposes,
dividends paid during the year July 31, 2000 were characterized as follows:
<TABLE>
<S> <C>
Ordinary income..................................................... $ 116,389
Short-term capital gains............................................ $4,735,856
Long-term capital gains............................................. $3,820,458
</TABLE>
For corporate shareholders, 100% of dividends paid from net investment income
and short term capital gain were eligible for the corporate dividends received
deduction.
- 44 -
<PAGE>
[LOGO OF KPMG]
Independent Auditors' Report
The Board of Trustees and Shareholders
Domini Social Equity Fund:
We have audited the accompanying statement of assets and liabilities, of the
Domini Social Equity Fund as of July 31, 2000, and the related statement of op-
erations for the year then ended, and statements of changes in net assets for
each of the years in the two-year period then ended, and the financial high-
lights for each of the years in the five-year period then ended. These finan-
cial statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of July 31, 2000 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Domini Social Equity Fund as of July 31, 2000, the results of its operations
for the year then ended, changes in its net assets for each of the years in the
two-year period then ended, and financial highlights for each of the years in
the five-year period then ended, in conformity with accounting principles gen-
erally accepted in the United States of America.
/s/ KPMG LLP
KPMG LLP
Boston, Massachusetts
September 15, 2000
- 45 -
<PAGE>
Domini Social Bond Fund
Statement of Assets and Liabilities
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments at value (including repurchase agreements of
$214,408)
(cost $4,016,874).............................................. $4,043,544
Receivable for Shares Sold....................................... 19,770
Interest Receivable.............................................. 53,568
----------
Total assets.................................................... 4,116,882
----------
LIABILITIES
Dividend Payable................................................. 477
Payable for Shares Redeemed...................................... 460
Accrued Expenses................................................. 5,214
----------
Total liabilities............................................... 6,151
----------
NET ASSETS $4,110,731
==========
NET ASSETS CONSIST OF:
Paid-in capital.................................................. 4,088,554
Accumulated net realized loss from investments................... (4,494)
Net unrealized appreciation from investments..................... 26,670
----------
$4,110,730
==========
Shares outstanding............................................... 408,253
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE ($4,110,730 / 408,251)........................... $10.07
==========
</TABLE>
See Notes to Financial Statements
- 46 -
<PAGE>
Domini Social Bond Fund
Statement of Operations
Period from June 1, 2000 through July 31, 2000
<TABLE>
<S> <C>
INCOME:
Interest income...................................................... $36,973
EXPENSES:
Professional Fees.................................................... 20,500
Accounting and Custody............................................... 9,045
Transfer Agent Fees.................................................. 3,000
Printing............................................................. 2,500
Management Fee (Note 2).............................................. 2,240
Administrative Fee (Note 2).......................................... 1,400
Distribution Fees (Note 2)........................................... 1,400
Miscellaneous........................................................ 711
Trustee Fees......................................................... 200
-------
Total Expenses....................................................... 40,996
Fees Waived and Expenses Reimbursed.................................. 35,782
-------
Net Expenses......................................................... 5,214
-------
NET INVESTMENT INCOME.................................................. 31,759
-------
NET REALIZED AND UNREALIZED GAIN:
Net realized loss on investments..................................... (4,494)
Net change in unrealized appreciation on Investments................. 26,670
-------
Net realized and unrealized gain from Investments.................... 22,176
=======
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................................ $53,935
=======
</TABLE>
See Notes to Financial Statements
- 47-
<PAGE>
Domini Social Bond Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
June 1, 2000
(commencement of
operations) to
July 31, 2000
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income....................................... $ 31,759
Net realized loss on investments............................ (4,494)
Net unrealized gain on investments.......................... 26,670
----------
Net Increase in Net Assets Resulting from Operations....... 53,935
----------
Distributions and Dividends:
Dividends to shareholders from net investment income........ (31,759)
----------
Capital Share Transactions:
Proceeds from sale of shares................................ 4,068,198
Net asset value of shares issued in reinvestment of
dividends................................................. 31,263
Payment for shares redeemed................................. (10,907)
----------
Net increase in Net Assets from Capital Share Transactions.. 4,088,554
----------
Total Increase in Net Assets............................... 4,110,730
NET ASSETS:
Beginning of period......................................... --
----------
End of period (including ................................... $4,110,730
==========
OTHER INFORMATION
Share Transactions:
Sold........................................................ 408,067
Issued in reinvestments of dividends........................ 1,267
Redeemed.................................................... (1,083)
----------
Net increase................................................ 408,251
==========
</TABLE>
See Notes to Financial Statements
- 48 -
<PAGE>
Domini Social Bond Fund
Financial Highlights
<TABLE>
<CAPTION>
For the Period June 1,
2000* to July 31, 2000
----------------------
<S> <C>
For a share outstanding for the Period:
Net asset value, beginning of period................... $10.00
------
Income (loss) from investment operations:.............. 0.09
Net investment income................................
Net realized and unrealized gain (loss) on
investments........................................ 0.07
------
Total income (loss) from investment operations......... 0.16
------
Less dividends to shareholders from net investment
income............................................... (0.09)
------
Net asset value, end of period......................... $10.07
======
Total return........................................... 9.51%**
Ratios/supplemental data:
Net assets, end of year (000's)...................... $4,111
Ratios of net investment income to average net
assets............................................. 5.67%(1)**
Ratios of expenses to average net assets............. 0.93%(1)**
</TABLE>
-----------
*Commencement of operations
(1) Reflects a waiver of fees and expenses paid by the Manager due to contrac-
tual fee waiver in effect. Had the Manager not waived their fees and reim-
bursed expenses, the ratio of net investment income to average net assets
and expenses to average net assets would have been (0.18%) and 6.78%, re-
spectively.
** Annualized
See Notes to Financial Statements
- 49 -
<PAGE>
Domini Social Bond Fund
Notes to Financial Statements
July 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES.
Domini Social Bond Fund (the "Fund") is a series of the Domini Social
Investment Trust (the "Trust"). The Fund is a Massachusetts business trust
registered under the Investment Company Act of 1940 (the "Act") as an open-end
management investment company.
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of the Fund's significant accounting policies.
(A) Valuation of Investments. Bonds and other fixed income securities
(other than obligations with maturities of 60 days or less) are valued on the
basis of valuations furnished by an independent pricing service, use of which
has been approved by the Board of Trustees of the Funds, as applicable. In
making such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities. Short-
term obligations (maturing in 60 days or less) are valued at amortized cost,
which constitutes fair value as determined by the Board of Trustees of the
Portfolio or the Funds, as applicable.
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 Funds' Board of Trustees.
(B) Investment Income and Dividends to Shareholders. Dividends to
shareholders are usually declared daily and paid monthly from net investment
income. Distributions to shareholders of realized capital gains, if any, are
made annually.
- 50 -
<PAGE>
Domini Social Bond Fund / Notes to Financial Statements--(Continued)
July 31, 2000
(C) Federal Taxes. The Fund's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income, including net realized
gains, if any, within the prescribed time periods. Accordingly, no provision
for federal income or excise tax is deemed necessary
2. TRANSACTIONS WITH AFFILIATES.
(A) Manager. The Fund has retained Domini Social Investments LLC
("DSIL" or the Manager) to serve as investment manager and administrator. The
services provided by DSIL consist of investment supervisory services, overall
operational support and administrative services, including the provision of
general office facilities and supervising the overall administration of the
Fund. For its services under the Management Agreement, the Manager receives
from the Fund a fee accrued daily and paid monthly at an annual rate equal to
0.40% of the Fund's average daily net assets. For the period from inception
through November 30, 2000, DSIL is waiving its fee to the extent necessary to
keep the aggregate annual operating expenses of the Fund (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 year
ended July 31, 2000, DSIL waived fees and reimbursed expenses totalling
$31,201.
(B) Submanager. South Shore Bank ("South Shore") provides investment
submanagement services to the Fund on a day-to-day basis pursuant to a
Submanagement Agreement with DSIL.
(C) Administrator. Pursuant to an Administration Agreement, DSIL
provides oversight, administrative and management services. DSIL provides the
Fund with general office facilities and supervises the overall administration,
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 Fund, limits on investment and the Fund's proxy
voting philosophy and shareholder activism
- 51 -
<PAGE>
Domini Social Bond Fund / Notes to Financial Statements--(Continued)
July 31, 2000
philosophy; and arranging for the maintenance of books and records of the Fund.
For its services under the Administration Agreement, DSIL receives from the
Fund a fee accrued daily and paid monthly at an annual rate equal to 0.25% of
the Fund's average daily net assets. For the period from inception through
November 30, 2000, DSIL is waiving its fee to the extent necessary to keep the
aggregate annual operating expenses of the Fund (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 year ended July
31, 2000, DSIL waived fees totalling $1,400.
(D) Distribution. The Trustees of the Fund have adopted a Distribution
Plan in accordance with Rule 12b-1 under the Act. DSIL Investment Services,
LLC, (the Distributor) a wholly owned subsidiary of DSIL acts as agent of the
Fund in connection with the offering of shares of the Fund pursuant to a
Distribution Agreement. The Distributor acts as the principal underwriter of
shares of the Fund and bears the compensation of personnel necessary to provide
such services and all costs of travel, office expense (including rent and
overhead) and equipment. Under the Distribution Plan, the Distributor may
receive a fee from the Fund at an annual rate not to exceed 0.25% of the Fund's
average daily net assets in anticipation of, or reimbursement for, costs and
expenses incurred in connection with the sale of shares of the Fund.
3. INVESTMENT TRANSACTIONS.
Cost of purchases and proceeds from sales of investments, other than U.S.
Government securities and short-term obligations, for the year ended July 31,
2000 aggregated $4,218,477 and $592,398, respectively. Custody fees of the Fund
were reduced by $3,181 which was compensation for uninvested cash left on
deposit with the custodian.
4. FEDERAL TAX STATUS OF DIVIDENDS (UNAUDITED) For federal income tax purposes,
dividends paid during the year July 31, 2000 were characterized as follows:
<TABLE>
<S> <C>
Ordinary income........................................................ $31,759
Short-term capital gains............................................... $ 0
Long-term capital gains................................................ $ 0
</TABLE>
For corporate shareholders, 100% of dividends paid from net investment income
were eligible for the corporate dividends received deduction.
- 52 -
<PAGE>
[LOGO OF KPMG]
Independent Auditors' Report
The Board of Trustees and Shareholders
Domini Social Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Domini Social Bond Fund as of July 31,
2000, and the related statement of operations, statement of changes in net as-
sets and financial highlights for the period from June 1, 2000 (commencement of
operations) to July 31, 2000. These financial statements and financial high-
lights are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 2000 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Domini Social Bond Fund as of July 31, 2000, the results of its operations,
changes in its net assets and financial highlights for the period described
above in conformity with accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
KPMG LLP
Boston, Massachusetts
September 15, 2000
- 53 -
<PAGE>
[Notes]
<PAGE>
Domini Social Investments LLC
P.O. Box 60494
King of Prussia, PA 19406-0494
800-762-6814
www.domini.com
Portfolio Investment Manager Portfolio Investment Submanager:
and Fund Sponsor:
Mellon Equity Associates
Domini Social Investments LLC Pittsburgh, PA
536 Broadway, 7th Floor
New York, NY 10012
Legal Counsel:
Custodian:
Bingham Dana LLP
Investors Bank & Boston, MA
Trust Company
Boston, MA
Transfer Agent:
Distributor:
PFPC Global Fund Service
DSIL Investment Services LLC King of Prussia, PA
536 Broadway, 7th Floor
New York, NY 10012
800-762-6814
