As filed with the Securities and Exchange Commission on January 13, 2000.
Registration Nos. 33-29180
811-5823
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 16
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18
DOMINI SOCIAL EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
11 West 25th Street, New York, NY 10010
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 212-352-9200
Amy L. Domini
Domini Social Investments LLC
11 West 25th Street
New York, NY 10010
(Name and Address of Agent for Service)
Copy To:
Roger P. Joseph, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
It is proposed that this filing will become effective March 31, 2000 pursuant
to paragraph (a) of Rule 485.
Domini Social Index Portfolio has also executed this registration statement.
<PAGE>
PROSPECTUS
__________ __, 2000
[PICTURE]
DOMINI SOCIAL EQUITY FUNDSM
THE RESPONSIBLE INDEX FUND
DOMINI SOCIAL BOND FUNDSM
DOMINI
SOCIAL INVESTMENTS
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT JUDGED
WHETHER THESE FUNDS ARE GOOD INVESTMENTS OR WHETHER THE INFORMATION IN THIS
PROSPECTUS IS TRUTHFUL AND COMPLETE. ANYONE WHO INDICATES OTHERWISE IS
COMMITTING A FEDERAL CRIME.
<PAGE>
TABLE OF CONTENTS
OVERVIEW......................................................... [XX]
THE FUNDS AT A GLANCE
DOMINI SOCIAL EQUITY FUND
Investment Objective..................................... [XX]
Primary Investment Strategy.............................. [XX]
Risks.................................................... [XX]
Past Performance......................................... [XX]
Fund Fees and Expenses................................... [XX]
DOMINI SOCIAL BOND FUND
Investment Objective..................................... [XX]
Primary Investment Strategy.............................. [XX]
Risks.................................................... [XX]
Past Performance......................................... [XX]
Fund Fees and Expenses................................... [XX]
PRIMARY RISKS................................................ [XX]
SOCIALLY RESPONSIBLE INVESTING............................... [XX]
DOMINI SOCIAL EQUITY FUND
ABOUT INDEX INVESTING........................................ [XX]
Answers to basic questions about how index funds work,
how index funds differ from actively managed funds,
and an overview of the advantages they offer.
WHAT IS THE DOMINI 400 SOCIAL INDEXSM?....................... [XX]
Information about the nation's first socially screened index
and how it was created and is maintained.
DOMINI SOCIAL BOND FUND
ABOUT BOND FUND INVESTING.................................... [XX]
More information on the Domini Social Bond Fund's investments
and investment techniques.
THE SOCIAL IMPACT OF THE DOMINI SOCIAL BOND FUND............. [XX]
Information about how the Domini Social Bond Fund invests to
promote community development.
ADDITIONAL INVESTMENT STRATEGIES & RiSK INFORMATION.............. [XX]
WHO MANAGES THE FUNDS?........................................... [XX]
THE FUNDS' DISTRIBUTION PLAN..................................... [XX]
SHAREHOLDER MANUAL............................................... A-1
Information about buying and selling shares, distributions,
and the tax consequences of an investment in a Fund.
FINANCIAL HIGHLIGHTS............................................. B-1
<PAGE>
OVERVIEW
The Funds offered in this prospectus provide ways to pursue your investment
goals without compromising your social conscience. Each Fund's investments pass
multiple, broad-based social screens designed to meet the needs of most
socially responsible investors.
THE DOMINI FUNDS
The DOMINI SOCIAL EQUITY FUND seeks long-term total return by investing in the
stocks of companies that are included in the Domini 400 Social Index. You may
want to invest in the Domini Social Equity Fund if you are seeking long-term
growth and an efficient way to invest in a broad cross-section of the U.S.
stock market, and you can accept the risks of investing in the stock market.
The DOMINI SOCIAL BOND FUND seeks a high level of current income and total
return by investing in bonds and other debt securities. You may want to invest
in the Domini Social Bond Fund if you are seeking current income and long-term
appreciation from a diversified portfolio of bonds and other debt securities
and can accept the risks that are associated with investments in the bond
market.
Each Fund should be considered a long-term investment and is not appropriate
for short-term trading purposes. Each Fund can be used in both regular and
tax-deferred accounts, such as IRAs.
SOCIALLY RESPONSIBLE INVESTING
The DOMINI SOCIAL EQUITY FUND and the DOMINI SOCIAL BOND FUND are both
"socially and environmentally screened", meaning that they seek to invest in
companies and other issuers that are socially and environmentally responsible.
o The Funds avoid securities and obligations of issuers that manufacture
tobacco products or alcoholic beverages, derive any revenues from
gambling enterprises or have an ownership share in, or operate, nuclear
power plants. The Funds also avoid investment in major military
contractors.
o The Funds seek to hold the securities and obligations of good corporate
citizens, demonstrated by positive relations with their communities and
their employees, by their environmental record, and by the quality and
safety of their products.
Please see pages [xx-xx] for more information regarding the Funds' social and
environmental policies.
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WHY READING THIS PROSPECTUS IS IMPORTANT
This prospectus explains the objective, risks, and strategies of the Domini
Social Equity Fund and the Domini Social Bond Fund. Reading the prospectus will
help you to decide whether a Fund is the right investment for you. Mutual
funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
Because you could lose money by investing in these Funds, we suggest that you
read this prospectus carefully, and keep it for future reference.
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<PAGE>
THE FUNDS AT A GLANCE
DOMINI SOCIAL EQUITY FUND
INVESTMENT OBJECTIVE
The Domini Social Equity Fund seeks to provide its shareholders with long-term
total return that matches the performance of the Domini 400 Social Index, an
index made up of the stocks of 400 companies selected using social and
environmental criteria. The Index is composed primarily of large-capitalization
U.S. companies.
PRIMARY INVESTMENT STRATEGY
The Domini Social Equity Fund seeks to match the composition of the Index as
closely as possible. The Fund typically invests in all 400 stocks included in
the Domini 400 Social Index, in approximately the same proportion as they are
found in the Index. This is known as a full replication strategy.
Although you cannot invest directly in an index, an index mutual fund provides
you the opportunity to invest in a portfolio that tracks an index.
For information about the Domini 400 Social Index's social screens, please
refer to page [XX].
RISKS
The Domini Social Equity Fund is subject to the following primary risks, any of
which could cause an investor to lose money (see pages [xx - xx] for more
details):
o MARKET RISK o STYLE RISK
o INDEX RISK o LARGE CAPITALIZATION COMPANIES
PAST PERFORMANCE
The bar chart and table below provide an indication of the risk of investing in
the Domini Social Equity Fund by illustrating how returns have varied from one
year to the next and by showing how the Fund's average annual total returns
compare with those of the Standard & Poor's 500 Index (S&P 500), a broad-based
index. PLEASE NOTE THAT THIS INFORMATION REPRESENTS PAST PERFORMANCE, AND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
TOTAL RETURN FOR YEARS ENDED DECEMBER 31
This bar chart shows how the Domini Social Equity Fund's performance has varied
over the last eight calendar years.
<TABLE>
<CAPTION>
[BAR CHART]
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
12.10% 6.54% -0.36% 35.17% 21.84% 36.02% 32.99% _____%
- ------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Best quarter covered by the bar chart above: _____%
(quarter ended __/__/__)
Worst quarter covered by the bar chart above: _____%
(quarter ended __/__/__)
Year-to-date performance as of 12/31/99: ______%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
The table below shows the Domini Social Equity Fund's average annual total
returns in comparison to the S&P 500.
Since
1 Year 5 Years Inception
(6/3/91)
Domini Social Equity Fund _____% _____% _____%
S&P 500 _____% _____% _____%
FUND FEES AND EXPENSES
The table below describes the fees and expenses that you would pay if you buy
and hold shares of the Domini Social Equity Fund*.
Shareholder Fees (fees paid directly by you)
Sales Charge (Load) Imposed on Purchases: None
Deferred Sales Charge (Load): None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees**: None
Exchange Fees: None
Annual Fund Operating Expenses
(expenses deducted from the Fund's assets)
Management Fees: 0.20%
Distribution (12b-1) Fees: 0.25%
Other Expenses
Administrative Services and Sponsorship Fee: 0.50%
Other Expenses: 0.12%
Total Annual Fund Operating Expenses: 1.07%
Fee Waiver***: 0.12%
NET EXPENSES: 0.95%
* The table reflects the expenses of the Domini Social Equity Fund and the
Domini Social Index Portfolio, the underlying portfolio in which that Fund
invests.
** You may redeem by writing or calling the Fund. If you wish to
receive your redemption proceeds by wire, there is a $10 wire service fee. For
additional information, please refer to the Shareholder Manual, page A-1.
<PAGE>
*** For the period from November 30, 1999 to November 30, 2000, Domini Social
Investments LLC has contractually agreed to waive certain fees and/or reimburse
certain expenses, including management fees, so that the Fund's expenses will
not exceed, on a per annum basis, 0.95% of its average daily net assets.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Domini Social Equity Fund with the cost of investing in other mutual funds.
It illustrates the hypothetical expenses that you would incur if you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
shares at the end of each period. This example assumes that the Fund provides a
return of 5% a year, all dividends and distributions are reinvested, that
operating expenses remain constant for the time period indicated and that the
fee waiver reflected in the fee table above is in effect for the one year time
period.
1 Year 3 Years 5 Years 10 Years
$97 $328 $578 $1295
This example should not be considered to represent actual expenses or
performance from the past or the future. Actual future expenses may be higher
or lower than those shown.
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QUICK GUIDE TO IMPORTANT INFORMATION REGARDING THE DOMINI SOCIAL EQUITY FUND
MINIMUM INITIAL INVESTMENT: $1,000 ($250 for IRAs) ($500 with Automatic
Investment Plan)
INVESTMENT ADVISER: Domini Social Investments LLC
INCEPTION DATE: June 3, 1991
NET ASSETS AS OF ________ __, ____: $________
AVAILABLE FOR IRAS
DIVIDENDS: Distributed Semi-annually, in June and December
CAPITAL GAINS: Distributed Annually, in December
NEWSPAPER LISTING: Domini Social Invmts (Soc Eq) or Dom Social
TICKER SYMBOL: DSEFX
CUSIP NUMBER: 257132100
WEBSITE: www.domini.com
SHAREHOLDER SERVICES: 1-800-762-6814
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<PAGE>
DOMINI SOCIAL BOND FUND
INVESTMENT OBJECTIVE
The Domini Social Bond Fund seeks to provide its shareholders with a high level
of current income and total return by investing in bonds and other debt
securities that meet the Fund's social and environmental criteria.
PRIMARY INVESTMENT STRATEGY
The Domini Social Bond Fund invests primarily in investment grade fixed income
securities issued by domestic entities, including government and corporate
bonds, mortgage-backed and asset-backed securities and U.S. dollar-denominated
bonds issued by non-U.S. entities. The Fund normally maintains a
dollar-weighted average maturity of between 2 and 10 years. All securities meet
the Fund's environmental and social criteria.
The Fund also invests a portion of its assets (up to [___%] percent) in debt
securities that directly support community development by promoting business
creation, housing development and the economic and social development of urban
and rural communities. Some of these investments are in unrated or lower rated
securities that carry a higher degree of risk than the Fund's investment grade
securities.
The Fund may temporarily use a different investment strategy for defensive
purposes in response to market conditions, economic factors, or other
occurrences. This may affect the Fund's performance.
For information about the Domini Social Bond Fund's social screens, please
refer to page [XX].
RISKS
The Domini Social Bond Fund is subject to the following primary risks, any of
which could cause an investor to lose money (see pages [xx - xx] for more
details):
o MARKET RISK o PREPAYMENT AND EXTENSION RISK
o INTEREST RATE RISK o STYLE RISK
o CREDIT RISK
PAST PERFORMANCE
The Domini Social Bond Fund is newly-created and does not have annual returns
for a full calendar year. Therefore, a bar chart and table that illustrate how
the returns of the Fund have varied from one year to the next and showing how
the Fund's average annual total returns compare with those of a broad-based
index are not provided.
<PAGE>
FUND FEES AND EXPENSES
The table below describes the fees and expenses that you would pay if you buy
and hold shares of the Domini Social Bond Fund*.
Shareholder Fees (fees paid directly by you)
Sales Charge (Load) Imposed on Purchases: None
Deferred Sales Charge (Load): None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees**: None
Exchange Fees: None
Annual Fund Operating Expenses
(expenses deducted from the Fund's assets)
Management Fees: 0.40%
Distribution (12b-1) Fees: 0.25%
Other Expenses
Administrative Services and Sponsorship Fee: 0.25%
Other Expenses: ___%
Total Annual Fund Operating Expenses: ___%
Fee Waiver***: ___%
NET EXPENSES: ___%
- -----------------------------------
* Because the Domini Social Bond Fund is newly-created, expenses are estimated
for the fiscal year ending July 31, 2000.
** You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds by wire, there is a $10 wire service fee. For additional
information, please refer to the Shareholder Manual, page A-1.
*** For the period from inception of the Domini Social Bond Fund to November
30, 2000, Domini Social Investments LLC has contractually agreed to waive
certain fees and/or reimburse certain expenses, including management fees, so
that the Fund's expenses will not exceed, on a per annum basis, [___%] of its
average daily net assets.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Domini Social Bond Fund with the cost of investing in other mutual funds.
It illustrates the hypothetical expenses that you would incur if you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
shares at the end of each period. This example assumes that the Fund provides a
return of 5% a year, all dividends and distributions are reinvested, that
operating expenses remain constant for the time period indicated and that the
fee waiver reflected in the fee table above is in effect for the one year time
period.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------
$---- $---- $---- $----
<PAGE>
This example should not be considered to represent actual expenses or
performance from the past or the future. Actual future expenses may be higher
or lower than those shown.
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QUICK GUIDE TO IMPORTANT INFORMATION REGARDING THE DOMINI SOCIAL BOND FUND
MINIMUM INITIAL INVESTMENT: $1,000 ($250 for IRAs) ($500 with Automatic
Investment Plan)
INVESTMENT ADVISER: Domini Social Investments LLC
INCEPTION DATE: _______ __, 2000
NET ASSETS AS OF ____ __, ____: newly-created and had no assets as of that date
AVAILABLE FOR IRAS
DIVIDENDS: Distributed Monthly
CAPITAL GAINS: Distributed Annually, in December
NEWSPAPER LISTING: __________
TICKER SYMBOL: __________
CUSIP NUMBER: __________
WEBSITE: www.domini.com
SHAREHOLDER SERVICeS: 1-800-762-6814
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PRIMARY RISKS
There can be no guarantee that either Fund will be able to achieve its
investment objective. The investment objectives of the Funds may be changed
without the approval of the Funds' shareholders, although management currently
has no intention to do so. Both the DOMINI SOCIAL EQUITY FUND and the DOMINI
SOCIAL BOND FUND are subject to the risks described below.
o MARKET RISK. The market prices of the securities owned by either of the
Funds may go up and down. Therefore, the value of your investment will vary
from day to day and may fluctuate widely. This is particularly true for the
Domini Social Equity Fund because it seeks to remain fully invested in the
market during all market conditions and equity securities generally have
greater price volatility than debt securities. You could lose money.
o STYLE RISK. Both Funds apply strict social and environmental screens to
their portfolios. Because of these screens, each Fund's portfolio managers may
pass up opportunities to buy certain securities when it is otherwise
advantageous to do so, or may sell certain securities for social or
environmental reasons when it is otherwise disadvantageous to do so.
An investment in either Fund is not a bank deposit and is not insured or
guaranteed. In addition, each Fund is subject to additional specific risks,
described below.
<PAGE>
The primary risks of investing in the DOMINI SOCIAL EQUITY FUND include:
o LARGE-CAPITALIZATION COMPANIES. The Fund primarily invests in the stocks of
large-capitalization companies. Large-capitalization stocks tend to go through
cycles where they do better, or worse, than the stock market in general. The
performance of your investment will generally follow these broad market trends.
Because the Domini 400 Social Index is weighted by market capitalization, a few
large companies represent a relatively large percentage of the Index. Should
the value of one or more of these stocks decline significantly, it could
negatively affect the Fund's performance.
o INDEXING. The Fund will continue to invest in the Domini 400 Social Index,
regardless of how the Index is performing. It will not shift its concentration
from one industry to another, or from stocks to bonds or cash, in order to
defend against a falling or stagnant stock market. If the Index is heavily
weighted in a single industry or sector, the Fund will be heavily invested in
that industry or sector, and as a result can be affected more positively or
negatively by developments in those industries than would be another investment
company whose investments are not restricted to the securities in the Index.
Also, the Fund's ability to match the performance of the Index may be affected
by a number of factors, including Fund operating expenses and transaction
costs, inflows and outflows of cash from the Fund and imperfect correlation
between the Fund's holdings and those in the Index.
The primary risks of investing in the DOMINI SOCIAL BOND FUND include:
o INTEREST RATE RISK. In general, the value of bonds go down when interest
rates go up, and rise when interest rates fall. The value of bond funds tend to
follow the same pattern. Falling interest rates could also cause the Fund's
income to decline. Securities with longer maturities tend to be more sensitive
to changes in interest rates, usually making them more volatile than securities
with shorter maturities. Under normal market conditions, the Domini Social Bond
Fund's dollar-weighted average portfolio maturity is from 2 to 10 years.
Prepayments of the debt securities held by the Domini Social Bond Fund may
cause its average maturity to differ from its normal range. This deviation is
not a violation of investment policy.
<PAGE>
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[PLACE IN MARGIN]
UNDERSTANDING BOND FUND RISK: AVERAGE MATURITY
Unlike an individual bond, which reaches maturity and is repaid, a bond fund
has no fixed maturity date. Instead, it maintains an average "rolling" maturity
by selling aging bonds and buying newer ones.
The "average maturity" of a bond fund is the average length of time until each
bond held by a fund reaches maturity and is repaid. The average maturity of
mortgage-backed and asset-backed securities is based on expectations of
prepayments of these securities.
In general, a bond fund with a longer average maturity will usually experience
greater volatility than a fund with a shorter average maturity.
- -------------------------------------------------------------------------------
o CREDIT RISK. One factor affecting the price of debt securities is how
creditworthy the issuers of these securities are perceived to be. This
perception is often reflected in the credit ratings. The Fund could lose money
if the issuer or a guarantor of a bond or other debt security does not make
timely principal and/or interest payments, or otherwise does not honor its
obligations. In addition, the performance of the Fund may be negatively
affected for a number of reasons that directly relate to the issuer, such as
management performance, financial leverage and reduced demand for the issuer's
goods or services. Debt securities with lower ratings tend to be more volatile
than those with higher ratings. Lower rated securities may also be hard to
value accurately or sell at a fair price. At least 80% of the Domini Social
Bond Fund's portfolio will be investment grade securities.
The Fund will devote a portion of its assets to community development
investments. A portion of these investments will be unrated and illiquid. These
investments are riskier than investment grade securities.
- -------------------------------------------------------------------------------
[PLACE IN MARGIN]
UNDERSTANDING BOND FUND RISK: CREDIT RATINGS
Investment grade debt securities are those rated "Aaa", "Aa", "A" or "Baa" by
Moody's Investors Service, Inc. or "AAA", "AA", "A" or "BBB" by Standard &
Poor's and those that the Fund's portfolio managers believe to be of comparable
quality. If the credit quality of a security declines after the Domini Social
Bond Fund buys it, the Fund's portfolio managers will decide whether to the
Fund should continue to hold or should sell the security.
- -------------------------------------------------------------------------------
o PREPAYMENT AND EXTENSION RISK. When interest rates go down, the issuers of
debt securities may prepay the principal due on the securities. This can reduce
the returns of the Fund because it may have to reinvest that money at the lower
prevailing interest rates. On the other hand, rising interest rates may cause
debt securities to be repaid later than expected, forcing the Fund to endure
<PAGE>
the relatively low interest rates on these securities. This also extends the
average maturity of certain debt securities, making them more sensitive to
changes in interest rates and the Fund's net asset value more volatile.
SOCIALLY RESPONSIBLE INVESTING
Socially responsible investors factor social and environmental criteria into
their investment decisions. They believe that this helps to encourage greater
corporate responsibility, and may also help to identify companies that are good
long-term investments because enlightened management may be better able to meet
the future needs of society and the environment. In addition, in the course of
seeking financial gain for themselves, they look for opportunities to use their
investments to improve the lives of others.
Typically, social investors avoid companies that manufacture products, or
employ practices, that they believe have harmful effects on society. They seek
to invest in issuers with positive qualities, such as a proactive environmental
record, or positive employee relations. This process is called "social
screening."
Each of the Domini Social Equity Fund and the Domini Social Bond Fund, in
addition to screening it investments, works with issuers to improve their
social and environmental performance. The Domini Social Equity Fund votes
company proxies in a manner that is consistent with its social screening
criteria, publicly discloses how it votes its proxies and, when necessary,
files shareholder resolutions on important social and environmental issues. The
Domini Social Bond Fund invests in debt securities and other instruments that
promote community development.
DOMINI SOCIAL EQUITY FUND
ABOUT INDEX INVESTING
WHAT IS AN INDEX?
An index is an unmanaged group of stocks selected to measure the behavior of
the market, or some portion of it. The S&P 500, for example, is an index of 500
companies selected to track the performance of the broad market of large-cap
U.S. companies. Investors use indexes as benchmarks to measure how their
investments are performing in comparison to the market as a whole.
The Domini 400 Social Index attempts to track the performance of primarily
large-cap U.S. companies that the typical socially responsible investor would
consider appropriate to invest in. The Domini 400 Social Index was created to
serve as a benchmark for socially and environmentally conscious investors.
<PAGE>
WHAT IS THE DIFFERENCE BETWEEN AN INDEX FUND AND AN ACTIVELY MANAGED FUND?
The Domini Social Equity Fund uses a passive investment strategy. This means
that the Fund purchases, holds and sells stocks based on the composition of the
Domini 400 Social Index, rather than on a manager's judgment as to the
direction of the market or the merits of any particular stock.
Unlike index funds, actively managed funds are generally managed to achieve the
highest possible return within certain parameters. These funds are managed by
stock-pickers who buy and sell stocks based on their opinion of the financial
outlook of the stock. Because index funds use a passive strategy, changes in
management generally have less impact on fund performance.
Index funds provide investors with an opportunity to invest in a portfolio that
is specially designed to match the performance of a particular index. Rather
than relying on the skills of a particular mutual fund manager, index fund
investors purchase, in a sense, a cross-section of the market. Their
performance should therefore reflect the segment of the market that their fund
is designed to track.
WHAT ARE SOME OF THE ADVANTAGES OF INDEX INVESTING?
Index investing has become quite popular because it offers investors a
convenient, relatively low-cost and tax-efficient way to obtain exposure to a
broad spectrum of the stock market. Here are some other advantages:
o DIVERSIFICATION. Because indexes such as the Domini 400 Social Index seek
to measure the performance of the broad market, they invest in a large number
of companies representing a diverse mix of industries. This structure can help
reduce volatility as compared to funds that may invest in a smaller number of
companies, or focus on a particular industry.
o BENCHMARK COMPARABILITY. All stock mutual funds measure their performance
in relation to a particular market benchmark. Index funds typically match the
performance of their particular benchmarks more closely than comparable
actively managed funds.
o TAX EFFICIENCY. Turnover rate refers to the volume of buying and selling of
stocks by a fund. The turnover rate of index funds tends to be much lower than
the average actively managed mutual fund. Depending on your particular tax
situation, a low turnover rate may produce fewer taxable capital gains.
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COMPARE TURNOVER RATES
The average annual turnover rate for all domestic stock funds is _____%.*
The annual turnover rate for the Domini Social Equity Fund is _____%.** (There
is no guarantee that this turnover will not be higher in the future.)
A 100% turnover rate would occur if a fund sold and replaced securities valued
at 100% of its net assets within a one-year period.
* As of __/__/__; taken from Morningstar PrincipiaPro.
** For the period from __/__/__ to __/__/__.
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<PAGE>
WHAT IS THE DOMINI 400 SOCIAL INDEX?
The Domini 400 Social Index (DSI 400) is the nation's first socially screened
index. It was created and launched in May 1990 by the social research firm of
Kinder, Lydenberg, Domini & Co., Inc. ("KLD") in order to serve as a benchmark
for social investors, and to determine how social screens affect financial
performance. KLD is an affiliate of Domini Social Investments. The Domini
Social Equity Fund was launched in 1991 to give investors an opportunity to
invest based on the Index. The Index is maintained by KLD. It is composed of
the common stocks of 400 companies that meet the social criteria described
above.
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[PLACE IN THE MARGIN]
WHAT ARE SOCIAL SCREENS?
All investment decisions use some type of "screen." Screens are guidelines that
define which securities will be included in a portfolio, and which will be
excluded. In addition to basic financial screens relating to financial
solvency, industry and sector diversification, and market capitalization, the
stocks in the DSI 400 are selected using two basic types of social screens:
exclusionary and qualitative.
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HOW WAS THE DOMINI 400 SOCIAL INDEX CONSTRUCTED?
To construct the Index, KLD first applied to the S&P 500 a number of
traditional social screens. Roughly half of the S&P 500 companies qualified for
the Index in this initial screening process. Approximately 150 non-S&P 500
companies were then added with two goals in mind. One goal was to obtain a
broad representation of industries, so that the Index would more accurately
reflect the composition of the broad market. Another goal was to identify
companies that are particularly strong models of corporate behavior.
KLD maintains an extensive database of corporate accountability information on
more than 1,000 publicly traded companies and bases its decisions on research
into the factors described below.
EXCLUSIONARY SCREENS
KLD seeks to exclude the following types of companies from the Index:
o TOBACCO AND ALCOHOL - companies that manufacture tobacco products or
alcoholic beverages;
o GAMBLING - companies that receive identifiable revenues from gambling
enterprises;
o NUCLEAR POWER - companies that have an ownership share in, or operate
nuclear power plants; and
<PAGE>
o WEAPONS - companies that receive more than 2% of their gross revenues from
the sale of military weapons.
QUALITATIVE SCREENS
KLD considers the following criteria when evaluating companies for possible
inclusion in the Index:
o ENVIRONMENTAL PERFORMANCE - the company's record with regard to fines or
penalties, waste disposal, toxic emissions, efforts in waste reduction and
emissions reduction, recycling, and environmentally beneficial fuels, products
and services;
o EMPLOYEE RELATIONS - the company's record with regard to labor matters,
workplace safety, employee benefit programs, and meaningful participation in
profits either through stock purchase or profit sharing plans;
o DIVERSITY - the company's record with regard to the hiring and promotion
of women and minorities, particularly to management positions and the board of
directors, including the company's record with respect to the availability of
benefit programs that address work/family concerns, innovative hiring programs
for the disabled and progressive policies toward gays and lesbians;
o CITIZENSHIP - the company's record with regard to its charitable
activities and its community relations in general; and
o PRODUCT-RELATED ISSUES - the company's record with regard to product
safety, marketing practices, and commitment to quality.
From time to time, KLD may, at its discretion, choose to apply additional
criteria, or to modify the application of the criteria listed above, to the
Index. As a result, companies may be dropped from or added to the Index. This
will impact the types of investments held by the Domini Social Equity Fund
because it seeks to invest in the securities of the companies that are included
in the Index. The social criteria listed in this prospectus may be modified and
additional social criteria may be imposed at any time without approval of
shareholders.
HOW ARE THE DOMINI SOCIAL EQUITY FUND'S LARGEST HOLDINGS SELECTED?
Like the S&P 500, the DSI 400 is "market capitalization-weighted." Market
capitalization is a measure of the value of a publicly traded company. It is
calculated by multiplying the total number of outstanding shares of company
stock by the price per share.
The Domini Social Equity Fund's portfolio is also market
capitalization-weighted. For example, assume that the total market value of
Company A's shares is twice the total market value of Company B's shares. The
Fund's portfolio is structured so that its holdings of Company A's shares will
<PAGE>
be about twice the value of its holding of Company B's shares. The Fund's top
ten holdings therefore are simply the ten companies with the highest market
value in the Index.
Because it seeks to duplicate the Index as closely as possible, the Fund will
attempt to have a correlation between the weightings of the stocks it holds in
its portfolio and the weightings of the stocks in the Index of 0.95 or better.
A figure of 1.0 would indicate a perfect correlation.
HOW IS THE DOMINI 400 SOCIAL INDEX MAINTAINED?
To keep turnover low and to more accurately reflect the performance of the
market, the Index is maintained using a "buy and hold" strategy. Generally
speaking, this means that companies that are in the Index stay in the Index for
a long time. A company will not be removed because its stock has not been
performing well, unless in KLD's opinion the company is no longer financially
viable. Sometimes a company is removed from the Index because it has been
acquired by another company. Sometimes a company may split into two companies,
and only one of the surviving companies is selected to stay in the Index
(because the Index is maintained to consist of exactly 400 companies at all
times).
A company may also be removed from the Index because its social profile has
deteriorated, or due to its inadequate response to a significant controversy.
When a company is removed from the Index, it is replaced with another company.
In the selection process, among other factors, KLD considers the size of the
company, the industry it is in, and its social profile.
ARE THERE COMPANIES I WON'T LIKE IN THE DOMINI 400 SOCIAL INDEX?
The screens for the Index are designed to reflect those most widely used by
social investors. Therefore, you may find that some companies in the Index do
not reflect your social or environmental standards. You may wish to review a
list of the companies in the Domini Social Equity Fund's portfolio to decide if
they meet your personal standards. The complete list is available in the Domini
Social Equity Fund's annual and semi-annual reports. To obtain copies of these
reports, free of charge, call 1-800-762-6814.
No company is a perfect model of corporate or social responsibility. Each year,
the Domini Social Equity Fund uses its voice as a shareholder to encourage
companies to improve their social and environmental records by voting proxies,
writing letters, engaging management in dialogue and filing shareholder
resolutions.
DOMINI SOCIAL BOND FUND
ABOUT BOND FUND INVESTING
WHAT IS A BOND?
Essentially, a bond is an IOU issued by a corporation or a government entity.
When you purchase a bond, you are lending the issuer a specified amount of
money (the principal) for a specified period of time (the term). In exchange,
<PAGE>
the issuer usually pays regular interest and, when the term is up and the bond
matures, the issuer repays the principal amount.
Many investors purchase bonds because the interest income paid tends to be
higher than money market funds, certificates of deposit or bank accounts.
Investors also use bonds to help diversify their portfolio because, although
bonds and bond funds are subject to market fluctuations, they don't always move
in the same direction or to the same degree as stocks.
WHAT ADVANTAGES DO BOND FUNDS OFFER?
Bond funds are a convenient way to invest in bonds because they allow you to
invest in a professionally managed pool of bonds and other debt securities.
Bond funds offer all of the familiar conveniences of stock mutual funds, such
as:
o LIQUIDITY. See page xx for information how to buy and sell shares.
o REINVEST YOUR DIVIDENDS. If you do not depend upon your investment for
regular income, you may choose to reinvest your dividends.
o LOW MINIMUM INVESTMENT. Purchasing an individual bond can be expensive
because of the brokerage commissions you may be required to pay and the size of
the bond you may be required to purchase. You can invest in the Domini Social
Bond Fund for $1,000. If you open your account as an IRA, the minimum is $250,
and if you choose to use our automatic investment plan, the minimum is $500.
o DIVERSIFICATION. A bond fund invests in a large number of bonds. Although
bond funds do not provide any guarantees, investing in a large number of bonds
allows you to spread certain risks (such as credit risk) among more than one
issuer.
WHAT TYPES OF BONDS WILL THE FUND TYPICALLY HOLD?
The Domini Social Bond Fund typically invests at least 80% of its assets in
investment grade debt securities. The Fund can buy many types of debt
securities including, without limitation, corporate bonds, bonds issued by U.S.
government agencies or instrumentalities, and mortgage- and asset-backed
securities. The Fund may also invest in the debt securities of, and deposit
cash with, community development banks. All of the Fund's holdings must pass
the Fund's social and environmental screens.
The following describes the most common types of bonds and other debt
securities the Fund will hold (for a discussion of the risks associated with
these types of securities, refer to page xx):
o U.S. GOVERNMENT SECURITIES include U.S. Government agency bonds, which
represent loans by investors to a wide variety of governmental agencies and
instrumentalities. The Domini Social Bond Fund will generally hold bonds issued
by those agencies involved in housing, farming and education. For example, the
Fund will hold bonds issued by "Sallie Mae", the agency responsible for
<PAGE>
financing student loans, and the Federal Farm Credit Board, the agency
responsible for making loans to farmers and ranchers. For information on the
Fund's mortgage-related holdings, see below.
Please keep in mind that some securities issued by U.S. government agencies and
instrumentalities may not be backed by the full faith and credit of the U.S.
government. The Fund does not currently intend to invest in direct obligations
of the U.S. government such as U.S. Treasury bills, notes and bonds.
o STATE AND MUNICIPAL BONDS represent loans to a state or municipal
government, or one of their agencies or instrumentalities.
o CORPORATE BONDS are IOUs issued by businesses that want to borrow money
for some business purpose. As with other types of bonds, the issuer promises to
repay the principal on a specific date and to make interest payments in the
meantime. The amount of interest offered depends on market conditions and also
on the financial health of the corporation issuing the bonds. For example, a
company whose credit rating is weak will have to offer a higher interest rate
to obtain buyers for its bonds. The Fund expects to invest primarily in
investment grade corporate bonds, which are corporate bonds rated in one of the
four highest rating categories by independent bond rating agencies and those
that the Fund's portfolio managers believe to be of comparable quality.
Although the Fund may invest in corporate bonds issued by corporations that are
not included in the Domini 400 Social Index, all of the Fund's corporate bond
holdings must pass the same social and environmental screens used in connection
with the Index (see pages xx-xx for more information).
o MORTGAGE-BACKED AND ASSET-BACKED SECURITIES represent interests in
underlying pools of mortgages or consumer or commercial loans - most often home
loans or credit card, automobile or trade receivables. Unlike ordinary bonds,
which generally pay a fixed rate of interest at regular intervals and then pay
principal upon maturity, mortgage-backed securities pay both interest and
principal as part of their regular payments. Because the mortgages and loans
underlying the securities can be prepaid at any time by homeowners or consumer
or corporate borrowers, mortgage-backed securities and asset-backed securities
are particularly sensitive to prepayment risk, discussed earlier (page xx) in
this prospectus.
Mortgage-backed securities are issued by a number of governmental and
quasi-governmental agencies, including the Government National Mortgage
Association (GNMA or "Ginnie Mae"), Freddie Mac (formerly the Federal Home Loan
Mortgage Corporation) and Fannie Mae (formerly the Federal National Mortgage
Association). GNMAs are guaranteed by the full faith and credit of the U.S.
government as to the timely payment of principal and interest. Mortgage
securities issued by other government agencies or private corporations are not,
and, of course, your investment in the Domini Social Bond Fund is not insured.
The Fund may also invest to a lesser extent in conventional mortgage
securities, which are packaged by private entities and are not guaranteed by
the U.S. government.
<PAGE>
- -------------------------------------------------------------------------------
[PLACE IN MARGIN]
Because the Domini Social Bond Fund may invest extensively in mortgage-backed
and asset-backed securities, the prepayment risk for the Fund may be higher
than that for a bond fund that does not invest in these types of securities.
See page xx for more information.
- -------------------------------------------------------------------------------
o COMMUNITY DEVELOPMENT. The Fund will invest in mortgages, loans and pools
of loans issued by community development banks and financial institutions and
community loan funds. These investments are targeted to underinvested areas,
low to moderate income individuals, and small businesses. These investments may
be lower rated or unrated and may subject the Fund to more credit risk than
other types of debt securities. Some of these investments may also be illiquid
and the Fund may not be able to sell them at an advantageous time or price.
The Fund may also make deposits in community development banks and financial
institutions. These deposits may not be insured by the FDIC.
o INTERNATIONAL DOLLAR-DENOMINATED BONDS (or Yankee bonds) are bonds
denominated in U.S. dollars issued by foreign governments and companies.
Because the bond's value is designated in dollars rather than the currency of
the issuer's country, the investor is not exposed to currency risk. To the
extent that the Fund owns bonds issued by foreign governments and companies,
the Fund is subject to risks relating to political, social and economic
developments abroad.
Please refer to page xx for additional information about the types of bonds the
Domini Social Bond Fund may hold.
THE SOCIAL IMPACT OF THE DOMINI SOCIAL BOND FUND
Although an equity fund such as the Domini Social Equity Fund can have an
impact on corporate behavior through its screening policies and its proxy
voting, a socially responsible bond fund provides a special opportunity to make
a significant and immediate difference to people and their communities.
The Domini Social Bond Fund seeks to play a positive role in the economic and
social development of communities by investing a portion (up to [___%]), of its
assets in debt instruments and other investments that support and promote
community development. The Fund's submanager will draw upon its experience in
making productive community development investments to carefully select those
financial institutions, funds and organizations that are making the greatest
impact in the areas of affordable housing, job creation, and economic
development in underserved communities.
The purchase of investments originated by such institutions, funds and
organizations are not hand-outs or charitable contributions. These are
investments in hard-working people who have been denied access to traditional
<PAGE>
markets because investors are not willing to take a chance on them.
Consequently, some of these investments carry greater credit risks than the
Fund's other holdings.
The Fund's community investments are focused in two critical areas: affordable
housing and economic empowerment for low to medium income entrepreneurs through
the financing of small business loans. Examples of these types of investments
include loans and deposits purchased from Community Development Financial
Institutions and Community Loan Funds, and small business association (SBA)
guaranteed portions of small business loans. The Fund may invest a portion of
its assets in below market-rate community development investments.
- -------------------------------------------------------------------------------
[PLACE IN MARGIN]
South Shore Bank, the Domini Social Bond Fund's submanager, is the nation's
largest and oldest community development bank, founded with the purpose of
serving the financial needs of residents and businesses in traditionally
underserved urban areas. Between 1974 and November 1999, the Bank loaned $600
million for local rehabilitation and commercial development to approximately
12,500 borrowers. South Shore Bank currently has more than $830 million in
assets and $57 million in capital. The Bank's parent company, Shorebank
Corporation, has founded a variety of other for-profit and not-for-profit
development enterprises in the U.S. and abroad. Shorebank's investments--which
include loans to minority-owned businesses, housing loans in urban
neighborhoods, and real estate development-exceeded [$100 million in 1999] and
are on track to at least equal that amount in 2000. Shorebank is responsible
for more than 900 jobs created, placed or retained, and for the rehabilitation
of over 2,300 units of multi-family housing.
- -------------------------------------------------------------------------------
ADDITIONAL INVESTMENT STRATEGIES & RISK INFORMATION
INVESTMENT STRUCTURE
The DOMINI SOCIAL EQUITY FUND invests its assets in the Domini Social Index
Portfolio. The Portfolio has the same investment objective as the Domini Social
Equity Fund and invests in securities using the strategies described in this
prospectus. The Domini Social Equity Fund may withdraw its investment from the
Portfolio at any time if the Board of Trustees of the Domini Social Equity Fund
determines that it is in the best interests of the Domini Social Equity Fund to
do so. The Board of Trustees would then consider what action might be taken,
including investing all of the Domini Social Equity Fund's assets in another
similarly structured portfolio having the same investment objective as the
Domini Social Equity Fund, or hiring an investment adviser to manage the Domini
Social Equity Fund's assets. There is currently no intention to change the
Domini Social Equity Fund's investment structure. References to the Domini
Social Equity Fund in this prospectus include the Portfolio, unless the context
requires otherwise.
<PAGE>
The DOMINI SOCIAL BOND FUND invests directly in securities and does not invest
through an underlying Portfolio.
ADDITIONAL INVESTMENT STRATEGIES
Additional permissible DOMINI SOCIAL BOND FUND investments include, but are not
limited to:
o CONVERTIBLE BONDS. The Fund may invest in convertible bonds, which are
bonds that may be converted into stock. Convertible bonds are subject to the
market risk of stocks, and, like other bonds, are also subject to interest rate
risk and the credit risk of their issuers. Convertible bonds tend to offer
lower rates of interest than non-convertible bonds because the stock conversion
feature represents increased potential for capital gains. Call provisions may
allow the issuer to repay the debt before it matures. This may hurt the Fund's
performance because it may have to reinvest the money repaid at a lower rate.
o ZERO COUPON OBLIGATIONS. The Fund may invest in obligations that do not
pay current interest, known as "zero coupon" obligations. The prices of zero
coupon obligations tend to be more volatile than those of securities that offer
regular payments of interest. This makes the Fund's net asset value more
volatile. In order to pay cash distributions representing income on zero coupon
obligations, the Fund may have to sell other securities on unfavorable terms.
These sales may generate taxable gains for shareholders.
o DERIVATIVES. The Fund may use derivatives (including futures and options),
which are financial contracts whose value depends on, or is derived from, the
value of an underlying asset, reference rate or index. The various derivatives
that the Fund may use are described in more detail in the Statement of
Additional Information. The Fund may use derivatives to reduce exposure to
certain risks, such as interest rate risk. The Fund will not use derivatives
for leverage. Suitable derivative transactions may not be available in all
circumstances, and there can be no assurance that the Fund will use
derivatives, even when they may benefit the Fund.
Derivatives are subject to a number of risks described on pages [xx-xx] of this
prospectus, such as market risk, interest rate risk and credit risk. They also
may be mispriced or improperly valued, and changes in the value of derivatives
may not correlate perfectly with the underlying asset, rate or index.
<PAGE>
TRADING
The DOMINI SOCIAL BOND FUND is actively managed. Although the Fund's portfolio
managers attempt to minimize portfolio turnover, from time to time the Fund's
annual portfolio turnover rate may exceed [**100**]%. The sale of securities
may produce capital gains, which, when distributed, are taxable to investors.
Active trading may also increase the amount of commissions or mark-ups the Fund
pays to brokers or dealers when it buys and sells securities. The turnover rate
for the Fund is not expected to exceed _____% for its fiscal year ending July
31, 2000.
CASH RESERVES
Although the DOMINI SOCIAL EQUITY FUND seeks to be fully invested at all times,
it keeps a small percentage of its assets in cash or cash equivalents. These
reserves provide the Fund with flexibility to meet redemptions and expenses,
and to readjust its portfolio holdings. The Fund may hold these cash reserves
uninvested or may invest them in high quality, short-term debt securities
issued by agencies or instrumentalities of the U.S. government, bankers'
acceptances, commercial paper, certificates of deposit, bank deposits or
repurchase agreements. The issuers of these securities must satisfy certain
social criteria.
The DOMINI SOCIAL BOND FUND will also invest a portion of its assets in
quality, short-term debt securities issued by agencies or instrumentalities of
the U.S. government, bankers' acceptances, commercial paper, certificates of
deposit, bank deposits and repurchase agreements. Some of the investments will
be with community development banks and financial institutions and may not be
insured by the FDIC. The issuers of these securities must satisfy certain
social criteria.
SECURITIES LENDING
Consistent with applicable regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the Securities and Exchange
Commission, each of the DOMINI SOCIAL EQUITY FUND and the DOMINI SOCIAL BOND
FUND may make loans of its securities to member banks of the Federal Reserve
System and to broker-dealers. These loans would be required to be secured
continuously by collateral consisting of securities, cash or cash equivalents
maintained on a current basis at an amount at least equal to the market value
of the securities loaned. A Fund would have the right to terminate a loan and
obtain the securities loaned at any time on three days notice. During the
existence of a loan, a Fund would continue to collect the equivalent of the
dividends paid by the issuer on the securities loaned and would also receive
interest on investment of cash collateral. A Fund may pay finder's and other
fees in connection with securities loans. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
The Funds are not required to use every investment technique or strategy listed
in this prospectus or in the Statement of Additional Information.
<PAGE>
FOR ADDITIONAL INFORMATION about the Funds' investment strategies and risks,
the Funds' Statement of Additional Information is available, free of charge,
from Domini Social Investments.
WHO MANAGES THE FUNDS?
INVESTMENT MANAGER
Domini Social Investments LLC (DSIL), 536 Broadway, 7th floor, New York, NY
10012, has been managing money since November of 1997 and currently manages
more than $1.5 billion dollars in assets for individual and institutional
investors who are working to create positive change in society by using social
and environmental criteria in their investment decisions. DSIL is the manager
of the Domini Social Equity Fund and the Domini Social Bond Fund and provides
the Funds with investment supervisory services, overall operational support and
administrative services.
SOCIAL RESEARCH & INDEX MAINTENANCE
Kinder, Lydenberg, Domini & Co., Inc. (KLD), an affiliate of DSIL, determines
the composition of the Domini 400 Social Index. The following persons are
primarily responsible for the development and maintenance of the Domini 400
Social Index: Amy L. Domini, CFA, a Managing Principal of DSIL and Founder of
KLD (since 1988), Steven D. Lydenberg, CFA, Director of Research, KLD (since
1990), and Peter D. Kinder, JD, President, KLD (since 1988).
PORTFOLIO INVESTMENT SUBMANAGERS
Mellon Equity Associates, LLP, with its main offices at 500 Grant Street,
Pittsburgh, PA 15258, provides investment submanagement services to the Domini
Social Equity Fund pursuant to a Submanagement Agreement with DSIL. A team of
portfolio managers at Mellon Equity implements the daily transactions necessary
to maintain the proper correlation between the Domini Social Equity Fund's
portfolio and the Domini 400 Social Index. They do not determine the
composition of the Index.
South Shore Bank, with its offices at [**____________________**], provides
investment submanagement services to the Domini Social Bond Fund pursuant to a
Submanagement Agreement with DSIL. South Shore Bank is the nation's largest and
oldest community development bank, 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) is
primarily responsible for the management of the Domini Social Bond Fund. Mr.
Oser has been with South Shore Bank since 1976, where he currently manages $450
million in assets for affiliates and institutional clients of the Bank. He also
serves as Retirement Plan Trustee and Corporate Secretary for the Bank. Mr.
Oser holds a master's degree from the University of Chicago and a bachelor's
degree from Carleton College, Northfield, Minnesota.
<PAGE>
For the services DSIL and Mellon Equity provided to the Domini Social Equity
Fund and the Portfolio during the fiscal year ended July 31, 1999, they
received a total of 0.69% of the average daily net assets of the Domini Social
Equity Fund, after waivers.
The Domini Social Bond Fund is newly-created and has not paid management fees.
DSIL and South Shore Bank expect to receive total investment advisory fees of
[____%] of the average daily net assets of the Domini Social Bond Fund, after
waivers, during the fiscal year ended July 31, 2000.
THE FUNDS' DISTRIBUTION PLAN
DSIL Investment Services LLC, a wholly owned subsidiary of DSIL, is the
distributor of each Fund's shares. Each Fund has adopted a Rule 12b-1 plan that
allows the Fund to pay its distributor up to 0.25% of the Fund's average daily
net assets, on an annual basis, for the sale and distribution of the Fund's
shares and for services provided to shareholders. Because this fee is paid out
of each Fund's assets on an ongoing basis, over time the fee will increase the
cost of your investment and may cost you more than paying other types of sales
charges. For more information about the Funds' distribution plan, see the
expense table, on page [XX] of this prospectus, and the Statement of Additional
Information.
<PAGE>
SHAREHOLDER MANUAL
This section provides you with information on how to buy and sell shares of the
Funds, how Fund shares are valued, and the tax consequences of an investment in
a Fund.
TABLE OF CONTENTS
How to Open an Account.............................................. A-__
Types of Accounts............................................... A-__
How to Buy Shares................................................... A-__
How to Exchange Shares.............................................. A-__
How to Sell Shares.................................................. A-__
How the Price of Your Shares is Determined.......................... A-__
How can I find out a Fund's NAV?................................ A-__
How do you determine what price I will get when I buy shares?... A-__
How do you determine what price I will get when I sell shares?.. A-__
How is the value of securities held by the Funds determined?.... A-__
Fund Statements and Reports......................................... A-__
Dividends and Capital Gains......................................... A-__
Taxes............................................................... A-__
Rights Reserved by the Funds........................................ A-__
FOR MORE INFORMATION ON:
o investing in the Funds,
o your account,
o each Fund's daily share price, and
o socially responsible investing,
Call our Shareholder Information Line toll-free at 1-800-762-6814. Shareholder
representatives are available to take your call weekdays, from 9-5PM, Eastern
Time. You may obtain the share price of a Fund 24 hours a day, 7 days a week by
using our automated system. Visit our web site at WWW.DOMINI.COM.
QUICK REFERENCE
NASDAQ SYMBOLS:
DOMINI SOCIAL EQUITY FUND - DSEFX
DOMINI SOCIAL BOND FUND - ______
NEWSPAPER LISTING:
DOMINI SOCIAL EQUITY FUND - Domini Social Invmts (Soc Eq) or Dom Social
DOMINI SOCIAL BOND FUND - __________
ACCOUNT STATEMENTS are mailed quarterly.
TRADE CONFIRMATIONS are sent after purchases and redemptions.
ANNUAL AND SEMI-ANNUAL REPORTS will be mailed in late September and March,
respectively, and are available online at WWW.DOMINI.COM.
<PAGE>
HOW TO OPEN AN ACCOUNT
1. Read this prospectus (and please keep it for future reference).
2. Review the available accounts listed below under "Types of Accounts"
and decide which account-type is appropriate for you.
3. Decide how much you want to invest.
The minimum initial investments in each Fund are:
o $1,000 for regular accounts ($500 if using our Automatic
Investment Plan)
o $250 for Retirement Accounts (Automatic Investment Plan also
available)
The minimums to buy additional shares of each Fund are:
o $50 for regular and Retirement Accounts
o $25 for Automatic Investment Plan Accounts
4. You can choose one of several different payment methods to make your initial
investment. Please review the options listed under "How to Buy Shares", and
follow the simple instructions we've provided. Be sure to completely fill
out and sign the Account Application.
If at any time you need assistance, please call us at 1-800-762-6814, weekdays
from 9-5PM, Eastern Time.
TYPES OF ACCOUNTS
You may invest in the Funds through the following types of accounts:
INDIVIDUAL AND JOINT ACCOUNTS (NON-RETIREMENT):
Invest as an individual or with one or more people. If you are opening a joint
account, joint tenancy with rights of survivorship will be assumed unless other
ownership is noted on your account application. You may also open an account to
invest assets held in an existing personal trust.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS):
You may open an account to fund a traditional IRA, Roth IRA or Education IRA.
o $10 Annual IRA account maintenance fee
o $10 IRA account termination fee
Call 1-800-762-6814 for more information and an IRA account application.
UNIFORM GIFTS/TRANSFERS TO MINORS ACT (UGMA/UTMA) ACCOUNTS:
You may open a UGMA/UTMA account for any child.
EMPLOYER-SPONSORED RETIREMENT PLANS:
If offered by your employer, you may be able to open an account as part of an
employer-sponsored retirement plan, such as a 401(k) plan, 403(b) plan, SEP-IRA
or SIMPLE IRA. You may obtain 403(b) forms and information by calling
1-800-762-6814. You may also contact your employer's plan administrator for
further information.
<PAGE>
AUTOMATIC INVESTMENT PLAN ACCOUNTS:
Automatically invest specified amounts in a Fund at monthly, quarterly,
semi-annual or annual intervals. Automatic investments will continue to be made
until you notify the Fund and your bank to discontinue further investments.
This service may be established for your account at any time. See below for
more details, or call 1-800-762-6814.
FOR AN ORGANIZATION:
You may open an account for a trust, corporation, partnership, endowment,
foundation or other entity.
HOW TO BUY SHARES
BY CHECK
Mail the completed Account Application and your check to:
Domini Funds
P.O. Box 60494
King of Prussia, PA 19406-0494
For subsequent investments, fill out the investment form that came with your
trade confirmation or account statement or send a note with your account number
and Fund name. Always be sure to include your account number on your check. If
you need additional forms, please call 1-800-762-6814.
YOUR CHECKS MUST BE IN U.S. DOLLARS DRAWN ON A U.S. BANK AND BE MADE PAYABLE TO
"DOMINI FUNDS."
IMPORTANT: For our mutual protection, Domini cannot accept checks made payable
to third parties.
BY BANK WIRE
To establish wire privileges on an existing account, or for additional
information about the service, please call the Funds' transfer agent at
1-800-762-6814.
Wire your investment to:
Bank: Boston Safe Deposit Bank
ABA: 011001234
Acct Name: Domini Funds
Acct #: 043370
FBO: Fund Name, and Your Account Name and Number
at Domini Funds
For new accounts, please call 1-800-762-6814 to obtain an account number before
wiring funds.
AUTOMATIC INVESTMENT PLAN
Our Automatic Investment Plan allows you to have specified amounts
automatically deducted from your bank account or Domini Money Market Account
<PAGE>
and invested in a Fund in monthly, quarterly, semi-annual or annual intervals.
Please follow the instructions in the Account Application to establish this
service when you open your account. This service can be established for your
account at any time. Call the Funds' transfer agent at 1-800-762-6814 for more
information.
This service may take up to 4 weeks to begin. Also, due to the varying
procedures to prepare, process and forward the bank withdrawal information to
the Funds, there may be periodic delays between the time of the bank withdrawal
and the time your money reaches the appropriate Fund.
HOW TO EXCHANGE SHARES
You may exchange all or a portion of your shares into any other available
Domini Funds or the Domini Money Market AccountSM. You may request an exchange
by calling 1-800-762-6814, or in writing. All written requests must be signed
by all owners. For information on transferring assets from another mutual fund
family, please call 1-800-762-6814 or visit www.domini.com to obtain the
necessary forms.
THE DOMINI MONEY MARKET ACCOUNT
The Domini Money Market Account (DMMA) offered through South Shore Bank is an
FDIC-insured (up to $300,000) interest-bearing account with direct community
development benefits. You may open and maintain a DMMA at no charge, and take
advantage of free check-writing (with a $500 minimum per check), and easy
transfers by telephone to and from your Domini Social Equity Fund or Domini
Social Bond Fund account. A DMMA investment is subject to certain terms and
conditions. Please call 1-800-762-6814 for more information. The rate of return
for the Domini Money Market Account will vary. The Domini Social Equity Fund
and Domini Social Bond Fund are not insured by the FDIC.
<PAGE>
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THE ADVANTAGE OF DOLLAR-COST AVERAGING
One thing is certain: markets fluctuate. Even
experienced investors often find it impossible to
accurately time a market, and to "sell high and
buy low."
Dollar-cost averaging is an investment strategy
designed to avoid the pitfalls of market timing
by investing equal amounts of money at regular
intervals (monthly, quarterly, and so on) over a
long period of time.
The advantage of dollar cost averaging is that an
investor buys more shares at lower prices, and
fewer shares at higher prices. As a result, an
investor ends up paying an average price per
share over a period of time.
The key to dollar-cost averaging is to stick with
it for the long term. Of course, no strategy can
guarantee a profit, or protect your investment
from losses. Strictly adhering to a long-term
dollar-cost averaging strategy, however, is a
good way to ensure that you don't make the
mistake of investing all of your money when the
market is high.
To facilitate dollar-cost-averaging you may
purchase Fund shares at regular intervals through
the Funds' Automatic Investment Plan.
- --------------------------------------------------
HOW TO SELL SHARES
You are free to sell all or part of your Fund shares at any time during New
York Stock Exchange trading hours (generally weekdays from 9AM - 4PM Eastern
Time). The appropriate Fund will send the proceeds from the sale to you or a
third party that you have designated (this may require a Signature Guarantee --
see below).
Transactions are processed at the next determined share price after Domini
receives your sale request in good order.
<PAGE>
You may sell (redeem) your shares in the Funds in the following ways:
IN WRITING
Mail written redemption requests to:
Domini Funds
P.O. Box 60494
King of Prussia, PA 19406-0494
For overnight deliveries, please use the following address:
Domini Funds
c/o First Data Investor Services Group
211 South Gulph Road
King of Prussia, PA 19406
WHAT IS "GOOD ORDER"?
Purchase and sale requests must be in "good order" to be accepted by a Fund. To
be in "good order" a request must include:
o The Fund name and your account number.
o The amount of the transaction (in dollars or shares).
o Signatures of all owners exactly as registered on the account (for
requests by mail).
o Signature guarantees, if required (see page [XX]).
o Any supporting legal documentation that may be required.
Letters requesting redemptions must:
o specify the dollar amount or number of shares to be sold, the fund name
and the account number; and
o be signed in exactly the same way the account is registered by all
registered owners or authorized signers.
Your redemption request may require a signature guarantee. Please refer to page
[XX] for details.
BY TELEPHONE
To sell shares by telephone, call the Funds' transfer agent at 1-800-762-6814.
If you wish to receive your redemption by wire and have not already established
wire privileges on your account, you must submit wire redemption requests in
writing along with a Signature Guarantee (see page [XX]).
<PAGE>
Please consider sending a written request to sell shares if you cannot reach
the Funds' transfer agent by telephone.
Neither the Funds, nor their transfer agent or their distributor will be liable
for any loss, liability, cost or expense for acting on telephone instructions
believed to be genuine. The Funds will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. Please contact the
Funds' transfer agent if you wish to suspend telephone redemption privileges.
BY WIRE
To establish wire redemption privileges on a new account, fill out the
appropriate area on the application, and attach a voided check.
If you have not already established wire redemption privileges on your account
you must submit wire redemption requests in writing along with a Signature
Guarantee (see page [XX]).
o $10 wire transfer fee (deducted directly from sale proceeds)
o $1,000 minimum wire amount
The wire transfer fee and minimum wire amount may be waived for certain
institutions at the manager's discretion.
SYSTEMATIC WITHDRAWAL PLAN
Call our Shareholder Information Line at 1-800-762-6814 for information.
If you own shares of a Fund with an aggregate value of $10,000 or more you may
establish a Systematic Withdrawal Plan under which shares will be sold, at net
asset value, in the amount and for the periods specified (minimum $100.00 per
payment). There is no additional charge to participate in the Systematic
Withdrawal Plan.
ADDITIONAL INFORMATION ON SELLING SHARES
SIGNATURE GUARANTEES
You are required to obtain a Signature Guarantee from an Eligible Guarantor for
any:
o Sales (redemptions) exceeding $50,000;
o Written sales requests, regardless of amount, made within 30 days
following any changes in account registration; and
o Redemptions made to a third party or to an address other than the
address for which the account is registered (unless already established
on your account).
Eligible Guarantors may include:
o banks;
o savings institutions;
o credit unions;
o broker-dealers; and
o other guarantors acceptable to the Funds and their transfer agent.
<PAGE>
The Funds and their transfer agent cannot accept guarantees from notaries
public or organizations that do not provide reimbursement in the case of fraud.
The Funds or their transfer agent may, at their option, request further
documentation prior to accepting requests for redemptions.
UNUSUAL CIRCUMSTANCES
Each Fund reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In the event that a Fund suspends
telephone redemption privileges, or if you have difficulty getting through on
the phone, you will still be able to redeem your shares through the other
methods listed above.
Each Fund may stop selling its shares or postpone payment:
o during any period in which the New York Stock Exchange is closed or in
which trading is restricted; or
o if the Securities and Exchange Commission determines
that an emergency exists.
LARGE REDEMPTIONS
It is important that you call the Funds' transfer agent before you redeem a
large dollar amount. We must consider the interests of all fund shareholders
and so reserve the right to delay delivery of your redemption proceeds -- up to
seven days -- if the amount will disrupt a Fund's operation or performance.
Each Fund reserves the right to pay part or all of the redemption proceeds in
kind, i.e., in securities, rather than cash. If payment is made in kind, you
may incur brokerage commissions if you elect to sell the securities for cash.
In an effort to protect the Funds from the possible adverse effects of a
substantial redemption in a large account, as a matter of general policy, no
shareholder or group of shareholders controlled by the same person or group of
persons will knowingly be permitted to purchase in excess of 5% of the
outstanding shares of a Fund, except upon approval of that Fund's management.
HOW THE PRICE OF YOUR SHARES IS DETERMINED
Each Fund determines its share price (or "NAV", net asset value per share) at
the close of regular trading on the New York Stock Exchange, normally 4PM
Eastern Time, on each day the Exchange is open for trading. This calculation is
made by deducting the amount of the Fund's liabilities (debts) from the value
of its assets, and dividing the difference by the number of outstanding shares
of that Fund.
Total Assets - Total Liabilities
--------------------------------
Net Asset Value (NAV) = Number of Shares Outstanding
To calculate the value of your investment, simply multiply the NAV by the
number of shares of the Fund you own.
<PAGE>
HOW CAN I FIND OUT A FUND'S NAV?
BY PHONE: You may obtain a Fund's NAV 24 hours a day, by calling 1-800-762-6814
from a touch-tone phone and accessing our automated system. You may speak with
a shareholder representative weekdays from 9-5PM, Eastern Time.
NEWSPAPER LISTINGS: This information is also listed in the mutual fund listings
of most major newspapers. The Domini Social Equity Fund is most commonly listed
as: Domini Social Invmts (Soc Eq) or Dom Social. The Domini Social Bond Fund is
most commonly listed as: [**________**].
QUARTERLY STATEMENTS: You will also receive this information quarterly, in your
account statement.
HOW DO YOU DETERMINE WHAT PRICE I WILL GET WHEN I BUY SHARES?
If your order is received by the Funds' transfer agent by 4:00 PM Eastern Time
in good order, you will receive the NAV determined at the end of that day. See
"What is "Good Order"?" on page [XX] of this prospectus.
Each Fund may stop offering its shares for sale at any time and may reject any
order for the purchase of its shares.
HOW DO YOU DETERMINE WHAT PRICE I WILL GET WHEN I SELL SHARES?
When you sell shares you will receive the next share price that is calculated
after your sale request is received by the Funds' transfer agent in good order.
See "What is `Good Order'?" on page [XX] of this prospectus. Please note that
the Funds will not accept redemption requests after 4PM, and will not hold
trades for the following day. The appropriate Fund will normally pay for the
shares on the next day the New York Stock Exchange is open for trading, but in
any event within seven days. A Fund will delay payment for at least seven
business days if your checks in payment for the purchase of the shares you wish
to sell have not yet cleared (this may take up to 15 days). Each Fund may pay
by check or, if you have completed the appropriate box on the Account
Application, by wire transfer.
HOW IS THE VALUE OF SECURITIES HELD BY THE FUNDS DETERMINED?
Each Fund typically uses market prices to value securities. However, when a
market price is not available, or when a Fund has reason to believe that the
price does not represent market realities, the Fund may value securities
instead by using methods approved by the Fund's Board of Trustees. In such a
case, the Fund's value for a security may be different from quoted market
values. To the extent that a Fund invests in securities that are traded
primarily in foreign markets, the value of those securities may change at a
time when you are not able to buy or sell Fund shares. This will happen when
foreign markets are open on days when the Fund does not price its shares. Each
short-term obligation (with a remaining maturity of less than sixty days) is
valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees.
<PAGE>
FUND STATEMENTS AND REPORTS
HOUSEHOLDING:
To keep the Funds' costs as low as possible, and to conserve paper usage, where
practical, we attempt to eliminate duplicate mailings to the same address. When
we find that two or more Fund shareholders have the same last name and address,
rather than send a separate report to each shareholder, we will send just one
report to that address. If your household is receiving separate mailings that
you feel are unnecessary, or if you want us to send separate statements, notify
our Shareholder Services department at 1-800-762-6814.
CONFIRMATION STATEMENTS:
Statements confirming the trade date and the amount of your transaction are
sent each time you buy, sell, or exchange shares. Confirmation statements are
not sent for reinvested distributions or for purchases made through automatic
investment plans. Always verify your transactions by reviewing your
confirmation statement carefully for accuracy. Please report any discrepancies
to our Shareholder Services department at 1-800-762-6814 promptly.
FUND FINANCIAL REPORTS:
Each Fund's annual report is mailed in September, and each Fund's semi-annual
report is mailed in March. These reports include information about a Fund's
performance, as well as a complete listing of that Fund's holdings. You may
also view the Funds' most recent reports online at www.domini.com.
TAX STATEMENTS:
Each year we will send you a statement reporting the previous year's dividend
and capital gains distributions, proceeds from the sale of shares, and
distributions from IRAs or other retirement accounts as required by the
Internal Revenue Service. These are generally mailed in January.
DIVIDENDS AND CAPITAL GAINS
Each Fund pays to its shareholders substantially all of its net income in the
form of dividends. Dividends from net income are typically paid by the DOMINI
SOCIAL EQUITY FUND semi-annually (usually in June and December) and by the
DOMINI SOCIAL BOND FUND monthly. Any capital gains are distributed annually in
December.
You may elect to receive dividends and capital gains either by check or in
additional shares. Unless you choose to receive your dividends by check, all
dividends will be reinvested in additional shares. In either case, these
distributions are taxable to you.
<PAGE>
TAXES
This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation and the status of your
account under state and local laws.
TAXABILITY OF DIVIDENDS:
Each year the Funds will mail you a report of your dividends for the prior year
and how they are treated for federal tax purposes. You will normally have to
pay federal income taxes on the dividends you receive from the Funds, whether
you take the dividends in cash or reinvest them in additional shares. Dividends
designated by the Fund as capital gain dividends are taxable as long-term
capital gains. Other dividends are generally taxable as ordinary income. Some
dividends paid in January may be taxable to you as if they had been paid the
previous December.
BUYING A DIVIDEND:
Dividends paid by a Fund will reduce that Fund's net asset value per share. As
a result, if you buy shares just before a Fund pays a dividend, you may pay the
full price for the shares and then effectively receive a portion of the
purchase price back as a dividend on which you may need to pay tax.
TAXABILITY OF TRANSACTIONS:
Anytime you redeem, sell or exchange shares in a non-retirement account, it is
considered a taxable event for you. Depending on the purchase price and the
sale price of the shares you sell or exchange, you may have a gain or a loss on
the transaction. You are responsible for any tax liabilities generated by your
transactions.
IMPORTANT: By law, you must certify that the Social Security or taxpayer
identification number you provide the Fund is correct and that you are not
otherwise subject to 31% backup withholding for failing to report income to the
IRS. The Fund may be required to withhold (and pay over to the IRS for your
credit) 31% of certain distributions and proceeds it pays you if you fail to
provide this information or otherwise violate IRS regulations.
RIGHTS RESERVEd BY THE FUNDS
EachFund and its agents reserve the following rights:
o To waive or lower investment minimums;
o To accept initial purchases by telephone or mailgram;
o To refuse any purchase or exchange order;
o To cancel any purchase or exchange order (including, but not limited to,
orders deemed to result in excessive trading, market timing, fraud, or
5% ownership) upon notice to the shareholder within five business days
of the transaction or prior to the time the shareholder receives
confirmation of the transaction, whichever is sooner;
o To implement policies designed to prevent excessive trading;
<PAGE>
o To freeze any account and suspend account services when notice has been
received of a dispute between the registered or beneficial account
owners or there is reason to believe a fraudulent transaction may
occur;
o To otherwise modify the conditions of purchase and any services at any
time;
o To act on instructions believed to be genuine; and
o To notify shareholders and redeem accounts (other than retirement and
Automatic Investment Plan Accounts) with a value of less than $500.
These actions will be taken when, in the sole discretion of management, they
are deemed to be in the best interests of a Fund.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Domini
Social Equity Fund's financial performance for the past 5 years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, whose report,
along with the Social Equity Fund's financial statements, is included in the
annual report, which is available upon request. The Domini Social Bond Fund is
newly-created and has not yet issued financial statements.
<TABLE>
<CAPTION>
Year Ended July 31,
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Net Asset Value, beginning of
period ....................... $ 30.86 $ 25.43 $ 16.70 $ 14.85 $ 12.13
-------------------------------------------------
Income from investment
operations:
Net investment income......... 0.02 0.01 0.11 0.16 0.17
Net realized and
unrealized gain on
investments............... 6.81 5.48 8.85 1.93 2.83
---------------------------------------------
Total income from investment
operations ....................... 6.83 5.49 8.96 2.09 3.00
---------------------------------------------
Less distributions and
dividends:
Dividends to
shareholders from net
investment income......... (0.03) (0.01) (0.11) (0.16) (0.20)
Dividends to
shareholders from net
realized gain............. (0.45) (0.05) (0.12) (0.08) (0.08)
-----------------------------------------------
Total distributions............... (0.48) (0.06) (0.23) (0.24) (0.28)
-----------------------------------------------
Net asset value, end of
period ....................... $ 37.21 $ 30.86 $ 25.43 $ 16.70 $ 14.85
=================================================
Ratios/supplemental data
Total return .................... 22.26% 21.58% 54.01% 14.11% 25.10%
Portfolio turnover*............... 8% 5% 1% 5% 6%
Net assets, end of year
(in 000's).................... $1,082,978 $501,894 $212,310 $80,915 $54,638
Ratio of expenses to
average net assets............ 0.98%(1) 1.17%(2) 0.98%(3) 0.98%(3) 0.90%(4)
Ratio of net investment
income to average net
assets ....................... 0.06%(1) 0.07%(2) 0.62%(3) 1.01%(3) 1.38%(4)
</TABLE>
*The Portfolio turnover rates represent the rate of portfolio activity of the
Domini Social Index Portfolio, the underlying portfolio through which the
Domini Social Equity Fund invests.
(1) Reflects a voluntary waiver of expenses by Domini Social Investments LLC,
the Manager of the Domini Social Index Portfolio. Had the Manager not waived
its fees, the ratios of expenses and net investment income to average net
assets for the year ended July 31, 1999, would have been 0.99% and 0.05%,
respectively.
(2) Reflects a non-recurring payment to the Domini Social Equity Fund's former
administrator by the Fund of $650,000 in connection with the termination of the
expense payment arrangements with the Fund's former administrator and other
such expenses incurred by the Fund in connection with the termination of such
arrangements. Had such non-recurring expenses not been included, expenses and
net investment income to average net assets would have been 0.98% and 0.27%,
respectively.
(3) Had the expense payment agreement not been in place the ratio of expenses
to average net assets for the years ended July 31, 1997 and 1996 would have
been [0.84% and 0.76%], respectively. Had the expense payment agreement not
been in place the ratio of net investment income to average net assets for the
years ended July 31, 997 and 1996 would have been [1.07% and 0.92%],
respectively.
<PAGE>
(4) Reflects the voluntary waiver of fees by certain service providers for the
Fund. Had these fees not been waived, the ratios of expenses and net investment
income to average net assets for the year ended July 31, 1995 would have been
1.15% and 1.13%, respectively.
<PAGE>
FOR ADDITIONAL INFORMATION
ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Domini Social Equity Fund's investments is
available in that Fund's annual and semi-annual reports to shareholders. These
reports include a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year,
as well as a complete listing of the Fund's holdings. They are available by
mail from Domini Social Investments, or on our website, www.domini.com. The
Domini Social Bond Fund is newly-created and has not issued annual or
semi-annual reports as of the date of this prospectus.
STATEMENT OF ADDITIONAL INFORMATION
The Funds' Statement of Additional Information contains more detailed
information about each Fund and its management and operations. The Statement of
Additional Information is incorporated by reference into this prospectus and is
legally part of it. Available by mail from Domini Social Investments.
PROXY VOTING GUIDELINES & SOCIAL SCREENING CRITERIA
Published annually, describing how we will vote our proxies and containing
information about the social screens used to maintain the Domini 400 Social
Index. Also contains a description of our shareholder activism program.
Available by mail from Domini Social Investments, or on our website,
www.domini.com.
CONTACT DOMINI
To make inquiries about the Funds or obtain copies of any of the above, free of
charge, call 1-800-762-6814.
Domini Social Investments
P.O. Box 60494
King of Prussia, PA 19406-0494
WEB SITE: To learn more about the Funds or about socially responsible
investing, visit us online at www.domini.com.
SECURITIES AND EXCHANGE COMMISSION
Information about the Funds (including the Statement of Additional Information)
is available at the Commission's website, www.sec.gov. Copies may be obtained
upon payment of a duplicating fee by electronic request at the following e-mail
address: [email protected], or by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. You may also visit the Commission's
Public Reference Room in Washington, D.C. For more information about the Public
Reference Room you may call the Commission at 1-202-942-8090.
File No. 811-5823
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
__________ __, 2000
DOMINI SOCIAL EQUITY FUND
DOMINI SOCIAL BOND FUND
TABLE OF CONTENTS PAGE
1. The Funds........................................................... __
2. Investment Objectives; Information Concerning Investment
Structure; Investment Policies and Restrictions..................... __
3. Performance Information............................................. __
4. Determination of Net Asset Value; Valuation of Portfolio Securities;
Additional Purchase Information..................................... __
5. Management of the Funds and the Portfolio........................... __
6. Independent Auditors................................................ __
7. Taxation............................................................ __
8. Portfolio Transactions and Brokerage Commissions.................... __
9. Description of Shares, Voting Rights and Liabilities................ __
10. Financial Statements................................................ __
11. Appendix - Rating Information....................................... A-1
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Funds'
Prospectus dated ________ __, 2000, as amended from time to time. This
Statement of Additional Information should be read in conjunction with the
Prospectus. This Statement of Additional Information incorporates by reference
the financial statements described on page __ hereof. These financial
statements can be found in the Domini Social Equity Fund's Annual Report to
Shareholders. An investor may obtain copies of the Funds' Prospectus and the
Domini Social Equity Fund's Annual Report without charge by contacting DSIL
Investment Services LLC, the Funds' distributor, at (800) 762-6814.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.
<PAGE>
1. THE FUNDS
The Domini Social Equity Fund and the Domini Social Bond Fund
(collectively with the Domini Social Equity Fund, the "Funds") are each
no-load, diversified open-end management investment companies. Each Fund is a
series of shares of beneficial interest of Domini Social Investment Trust (the
"Trust"), which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on June 7, 1989 and commenced operations on June
3, 1991. Prior to __________ __, _____ the name of the Trust was "Domini Social
Equity Fund."
Each Fund offers to buy back (redeem) its shares from its shareholders at
any time at net asset value. References in this Statement of Additional
Information to the "Prospectus" are to the current Prospectus of the Funds, as
amended or supplemented from time to time.
Domini Social Investments LLC ("DSIL"), the Domini Social Bond Fund's
investment manager (the "Bond Fund Manager") and the Domini Social Equity
Fund's and Domini Social Bond Fund's sponsor (the "Sponsor"), supervises the
overall administration of the Domini Social Equity Fund and provides investment
advisory and administrative services to the Domini Social Bond Fund. South
Shore Bank ("South Shore") is the Domini Social Bond Fund's investment
submanager (the "Bond Fund Submanager"). South Shore manages the investments of
the Domini Social Bond Fund from day to day in accordance with that Fund's
investment objective and policies. The Board of Trustees provides broad
supervision over the affairs of each Fund. Shares of each Fund are continuously
sold by DSIL Investment Services LLC, the Funds' distributor (the
"Distributor"). An investor should obtain from the Distributor, and should read
in conjunction with the Prospectus, the materials describing the procedures
under which Fund shares may be purchased and redeemed.
The Domini Social Equity Fund seeks to achieve its investment objective by
investing all its assets in the Domini Social Index Portfolio (the
"Portfolio"), a diversified open-end management investment company having the
same investment objective as the Domini Social Equity Fund. DSIL is the
Portfolio's investment manager (the "Portfolio Manager"). Mellon Equity
Associates, LLP ("Mellon Equity") is the Portfolio's investment submanager (the
"Portfolio Submanager"). Mellon Equity manages the investments of the Portfolio
from day to day in accordance with the Portfolio's investment objective and
policies. Kinder, Lydenberg, Domini & Co., Inc. ("KLD") determines the
composition of the Domini 400 Social Index SM (the "Domini Social Index").
"Domini 400," "Domini Social Index," "Domini 400 Social Index" and "investing
for good" are service marks of KLD which are licensed to DSIL with the consent
of Amy L. Domini (with regard to the word "Domini"). Pursuant to agreements
among KLD, DSIL, Amy L. Domini, and each of the Domini Social Equity Fund and
the Portfolio, the Domini Social Equity Fund and the Portfolio may be required
to discontinue use of one or more of these service marks if (i) DSIL ceases to
be the Portfolio Manager, (ii) Ms. Domini or DSIL withdraws her or its consent
to the use of the word "Domini," or (iii) the license agreement between KLD and
DSIL is terminated.
2. INVESTMENT OBJECTIVES;
INFORMATION CONCERNING INVESTMENT STRUCTURE;
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objective of the DOMINI SOCIAL EQUITY FUND is to provide
its shareholders with long-term total return which matches the performance of
the Domini Social Index.
<PAGE>
The investment objective of the DOMINI SOCIAL BOND FUND is to provide its
shareholders with a high level of current income and total return by investing
in bonds and other debt securities that meet the Fund's social and
environmental criteria.
The investment objective of either Fund may be changed without the
approval of that Fund's shareholders, but not without written notice thereof to
shareholders thirty days prior to implementing the change. If there is a change
in a Fund's investment objective, shareholders of that Fund should consider
whether the Fund remains an appropriate investment in light of their financial
positions and needs. The investment objective of the Portfolio may also be
changed without the approval of the investors in the Portfolio, but not without
written notice thereof to the investors in the Portfolio (and notice by the
Domini Social Equity Fund to its shareholders) 30 days prior to implementing
the change. There can, of course, be no assurance that the investment objective
of either the Funds or the Portfolio will be achieved.
INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the DOMINI SOCIAL EQUITY FUND seeks to achieve its
investment objective by investing all of its investable assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Domini Social Equity Fund. In addition to selling a beneficial
interest to the Domini Social Equity Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions as the Domini Social
Equity Fund and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to
sell their shares at the same public offering price as the Domini Social Equity
Fund due to variations in sales commissions and other operating expenses.
Investors in the Domini Social Equity Fund should be aware that differences in
sales commissions and operating expenses may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Portfolio Manager at 212-352-9200.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk. This
possibility also exists for traditionally structured funds which have large or
institutional investors. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Subject to exceptions that are not inconsistent with applicable
rules or policies of the Securities and Exchange Commission (the "SEC"),
whenever the Domini Social Equity Fund is requested to vote on matters
pertaining to the Portfolio, the Domini Social Equity Fund will hold a meeting
of shareholders of the Domini Social Equity Fund and will cast all of its votes
in the same proportion as the votes of the Domini Social Equity Fund's
shareholders. Fund shareholders who do not vote will not affect the Domini
Social Equity Fund's votes at the Portfolio meeting. The percentage of the
Domini Social Equity Fund's votes representing Fund shareholders not voting
will be voted by the Trustees of the Domini Social Equity Fund in the same
proportion as the Domini Social Equity Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objective, policies or
restrictions may require the Domini Social Equity Fund to withdraw its interest
in the Portfolio. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution) from the Portfolio.
If securities are distributed, the Domini Social Equity Fund could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio
of investments or adversely affect the liquidity of the Domini Social Equity
Fund.
<PAGE>
The Domini Social Equity Fund's Trustees believe that the aggregate per
share expenses of the Domini Social Equity Fund and the Portfolio will be less
than or approximately equal to the expenses which the Domini Social Equity Fund
would incur if it retained the services of an investment manager and an
investment submanager and invested directly in the types of securities being
held by the Portfolio.
The Domini Social Equity Fund may withdraw its investment from the
Portfolio at any time if the Board of Trustees of the Domini Social Equity Fund
determines that it is in the best interests of the Domini Social Equity Fund to
do so. Upon any such withdrawal, the Board of Trustees of the Domini Social
Equity Fund would consider what action might be taken, including the investment
of all the assets of the Domini Social Equity Fund in another pooled investment
entity having the same investment objective as the Domini Social Equity Fund or
the retention of an investment adviser to manage the Domini Social Equity
Fund's assets in accordance with the investment policies described above with
respect to the Portfolio. In the event the Trustees of the Domini Social Equity
Fund were unable to find a substitute investment company in which to invest the
Domini Social Equity Fund's assets and were unable to secure directly the
services of an investment manager and investment submanager, the Trustees would
seek to determine the best course of action.
The DOMINI SOCIAL BOND FUND invests directly in securities and does not
invest through a Portfolio.
INVESTMENT POLICIES
The following supplements the information concerning the Funds' and the
Portfolio's investment policies contained in the Prospectus and should only be
read in conjunction therewith. References to the Domini Social Equity Fund
include the Portfolio, unless the context otherwise requires.
DOMINI SOCIAL EQUITY FUND
INDEX INVESTING: The Domini Social Equity Fund is not managed in the
traditional investment sense, since changes in the composition of its
securities holdings are made in order to track the changes in the composition
of securities included in the Domini Social Index. Moreover, inclusion of a
stock in the Domini Social Index does not imply an opinion by KLD, the
Portfolio Manager or the Portfolio Submanager as to the merits of that specific
stock as an investment. Because the Domini Social Equity Fund seeks to track,
rather than exceed the performance of a particular index, investors should not
expect to achieve the potentially greater results that could be obtained by a
fund that aggressively seeks growth. However, KLD and the Portfolio Manager
believe that enterprises which exhibit a social awareness, based on the
criteria described in the Prospectus, should be better prepared to meet future
societal needs for goods and services and may also be less likely to incur
certain legal liabilities that may be incurred when a product or service is
determined to be harmful, and that such enterprises should over the longer term
be able to provide a positive return to investors.
The Domini Social Equity Fund intends to readjust its securities holdings
periodically such that those holdings will correspond, to the extent reasonably
practicable, to the Domini Social Index both in terms of composition and
weighting. The timing and extent of adjustments in the holdings of the Domini
Social Equity Fund, and the extent of the correlation of the holdings of the
Domini Social Equity Fund with the Domini Social Index, will reflect the
Portfolio Submanager's judgment as to the appropriate balance between the goal
of correlating the holdings of the Portfolio with the composition of the Domini
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Social Index, and the goals of minimizing transaction costs and keeping
sufficient reserves available for anticipated redemptions of Domini Social
Equity Fund shares. To the extent practicable, the Portfolio will seek a
correlation between the weightings of securities held by the Portfolio and the
weightings of the securities in the Domini Social Index of 0.95 or better. A
figure of 1.0 would indicate a perfect correlation. To the extent practicable,
the Domini Social Equity Fund will attempt to be fully invested. The ability of
the Domini Social Equity Fund to duplicate the performance of the Domini Social
Index by investing in the Portfolio will depend to some extent on the size and
timing of cash flows into and out of the Domini Social Equity Fund and the
Portfolio as well as the Domini Social Equity Fund's and the Portfolio's
expenses.
The Board of Trustees will receive and review, at least quarterly, a
report prepared by the Portfolio Submanager comparing the performance of the
Domini Social Equity Fund and the Portfolio with that of the Domini Social
Index, and comparing the composition and weighting of the Portfolio's holdings
with those of the Domini Social Index, and will consider what action, if any,
should be taken in the event of a significant variation between the performance
of the Domini Social Equity Fund or the Portfolio, as the case may be, and that
of the Domini Social Index, or between the composition and weighting of the
Portfolio's securities holdings with those of the stocks comprising the Domini
Social Index. If the correlation between the weightings of securities held by
the Portfolio and the weightings of the stocks in the Domini Social Index or
the correlation between the performance of the Domini Social Equity Fund,
before expenses, and the performance of the Domini Social Index falls below
0.95, the Board of Trustees will review with the Portfolio Submanager methods
for increasing such correlation, such as through adjustments in securities
holdings of the Portfolio.
In selecting stocks for inclusion in the Domini Social Index, KLD
evaluated, in accordance with the social criteria described in the Prospectus,
each of the companies the stocks of which comprise the Standard and Poor's 500
Composite Stock Price Index (the "S&P 500"). If a company whose stock was
included in the S&P 500 met KLD's social criteria and met KLD's further
criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover, it was included in the Domini
Social Index. As of July 31, 1999, of the 500 companies whose stocks comprised
the S&P 500, approximately 58% were included in the Domini Social Index. The
remaining stocks comprising the Domini Social Index (i.e., those which are not
included in the S&P 500) were selected based upon KLD's evaluation of the
social criteria described in the Prospectus, as well as upon KLD's criteria for
industry diversification, financial solvency, market capitalization, and
minimal portfolio turnover. A company which is not included in the S&P 500 may
be included in the Domini Social Index primarily in order to afford
representation to an industry sector which would otherwise be under-represented
in the Domini Social Index. Because of the social criteria applied in the
selection of stocks comprising the Domini Social Index, industry sector
weighting in the Domini Social Index may vary materially from the industry
weightings in other stock indices, including the S&P 500, and certain industry
sectors will be excluded altogether. KLD may exclude from the Domini Social
Index stocks issued by companies which are in bankruptcy or whose bankruptcy
KLD believes may be imminent. KLD may also remove from the Domini Social Index
stocks issued by companies which no longer meet its investment criteria.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (i.e., market price per share
times the number of shares outstanding). Because of this weighting, as of
August 31, 1999 approximately 34% and 51% of the Domini Social Index was
comprised of the 10 largest and 20 largest companies, respectively, in the
Domini Social Index.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Ratings Group ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange ("NYSE") common stock population, taken as the assumed
model for the composition of the total market. Construction of the S&P 500 by
S&P proceeds from industry groups to the whole. Since some industries are
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characterized by companies of relatively small stock capitalization, the S&P
500 does not comprise the 500 largest companies listed on the NYSE. Not all
stocks included in the S&P 500 are listed on the NYSE. However, the total
market value of the S&P 500 as of October 28, 1999 represented approximately
72.32% of the aggregate market value of common stocks traded on the NYSE.
Inclusion of a stock in the S&P 500 in no way implies an opinion by S&P as to
its attractiveness as an investment, nor is S&P a sponsor of or otherwise
affiliated with the Domini Social Equity Fund or the Portfolio.
CONCENTRATION: It is a fundamental policy of the Portfolio and the Domini
Social Equity Fund that neither the Portfolio nor the Domini Social Equity Fund
may invest more than 25% of the total assets of the Portfolio or the Domini
Social Equity Fund, respectively, in any one industry, although the Domini
Social Equity Fund will invest all of its assets in the Portfolio, and the
Portfolio may and would invest more than 25% of its assets in an industry if
stocks in that industry were to comprise more than 25% of the Domini Social
Index. Based on the current composition of the Domini Social Index, this is
considered highly unlikely. If the Portfolio were to concentrate its
investments in a single industry, the Portfolio and the Domini Social Equity
Fund would be more susceptible to any single economic, political or regulatory
occurrence than would be another investment company which was not so
concentrated.
DOMINI SOCIAL BOND FUND
REPURCHASE AGREEMENTS: The Domini Social Bond Fund may invest in
repurchase agreements that are fully collateralized by securities in which the
Domini Social Bond Fund may otherwise invest. A repurchase agreement involves
the purchase of a security that must later be sold back to the seller (which is
usually a member bank of the U.S. Federal Reserve System or a member firm of
the New York Stock Exchange (or a subsidiary thereof)) at an agreed time
(usually not more than seven days from the date of purchase) and price. The
resale price reflects the purchase price plus an agreed-upon market rate of
interest. Under the Investment Company Act of 1940, as amended (the "1940
Act"), repurchase agreements may be considered to be loans by the buyer. If the
seller defaults, the underlying security constitutes collateral for the
seller's obligation to pay although the Domini Social Bond Fund may incur
certain costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. In the event of the bankruptcy of the
other party to a repurchase agreement, the Domini Social Bond Fund could
experience delays in recovering either the securities or cash. To the extent
that, in the meantime, the value of the securities purchased has decreased, the
Domini Social Bond Fund could experience a loss.
REVERSE REPURCHASE AGREEMENTS: The Domini Social Bond Fund may enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Domini
Social Bond Fund sells its securities to banks, brokers or dealers, who agree
to sell the securities back to the Domini Social Bond Fund at an agreed time
and price. The Domini Social Bond Fund will segregate securities of a dollar
amount equal in value to the securities subject to the repurchase agreement.
The Domini Social Bond Fund cannot use these segregated assets to meet its
current obligations. Reverse repurchase agreements are considered to be a form
of borrowing. In the event of the bankruptcy of the other party to a reverse
repurchase agreement, the Domini Social Bond Fund could experience delays in
recovering the securities sold. To the extent that, in the meantime, the value
of the securities sold has changed, the Domini Social Bond Fund could
experience a loss.
FORWARD COMMITMENTS OR PURCHASES ON A WHEN-ISSUED BASIS: The Domini Social
Bond Fund may invest its assets in forward commitments or commitments to
purchase securities on a when-issued basis. Forward commitments or purchases of
securities on a when-issued basis are transactions where the price of the
securities is fixed at the time of the commitment and delivery and payment
normally take place beyond conventional settlement time after the date of
commitment to purchase. The Domini Social Bond Fund will make commitments to
<PAGE>
purchase obligations on a when-issued basis only with the intention of actually
acquiring the securities, but may sell them before the settlement date. The
when-issued securities are subject to market fluctuation, and no interest
accrues on the security to the purchaser during this period. The payment
obligation and the interest rate that will be received on the securities are
each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case,
there could be an unrealized loss at the time of delivery.
While awaiting delivery of securities purchased on a when-issued basis,
the Domini Social Bond Fund will establish a segregated account consisting of
cash and liquid securities equal to the amount of the commitments to purchase
securities on such basis. If the value of these assets declines, the Domini
Social Bond Fund will place additional assets of the type described in the
preceding sentence in the account on a daily basis so that the value of the
assets in the account is equal to the amount of such commitments.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS: The Domini Social Bond Fund
may invest up to 15% of its net assets in illiquid securities, or securities
for which there is no readily available market, including privately placed
restricted securities. The absence of a trading market can make it difficult to
establish a market value for illiquid investments. It may be difficult or
impossible for the Domini Social Bond Fund to sell illiquid securities at the
desired time and at an acceptable price.
BANK OBLIGATIONS: The Domini Social Bond Fund may invest in bank
obligations, including:
o certificates of deposit, which are negotiable interest-bearing
instruments with a specific maturity; certificates of deposit are
issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market
prior to maturity;
o time deposits (including Eurodollar time deposits), which are
non-negotiable receipts issued by a bank in exchange for the deposit of
funds; time deposits earn a specified rate of interest over a definite
period of time, but cannot be traded in the secondary market; time
deposits with a withdrawal penalty are considered to be illiquid
securities;
o bankers' acceptances, which are bills of exchange or time drafts drawn
on and accepted by a commercial bank; they are used by corporations to
finance the shipment and storage of goods and to furnish dollar
exchange; maturities are generally six months or less; and
o other short-term debt obligations.
The Domini Social Bond Fund's investments in bank obligations are
particularly susceptible to adverse events in the banking industry. Banks are
highly regulated. Decisions by regulators may limit the loans banks make and
interest rates and fees they charge, and may reduce bank profitability. Banks
also depend on being able to obtain funds at reasonable costs to finance their
lending operations. This makes them sensitive to changes in money market and
general economic conditions. When a bank's borrowers get in financial trouble,
their failure to repay the bank will also negatively affect the bank's
financial situation.
Bank obligations may be issued by domestic banks, foreign subsidiaries or
foreign branches of domestic banks, domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking institutions.
COMMERCIAL PAPER: The Domini Social Bond Fund may invest in commercial
paper, which is unsecured debt of corporations usually maturing in 270 days or
less from its date of issuance.
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VARIABLE RATE OBLIGATIONS: Unlike most bonds, which pay a fixed rate of
interest, variable rate debt obligations pay interest at rates that change
based on market interest rates. Interest rates on variable rate obligations may
move in the same or in the opposite direction as market interest rates and may
increase or decrease based on a multiple of the change in a market interest
rate. These obligations tend to be highly sensitive to interest rate movements.
MORTGAGE-BACKED SECURITIES: The Domini Social Bond Fund may invest in
mortgage-backed securities, which are securities representing interests in
pools of mortgage loans. Interests in pools of mortgage-related securities
differ from other forms of debt securities which normally provide for periodic
payment of interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a monthly payment which
consists of both interest and principal payments. In effect, these payments are
a "pass-through" of the monthly payments made by the individual borrowers on
their mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by prepayments of principal
resulting from the sale, refinancing or foreclosure of the underlying property,
net of fees or costs which may be incurred. The market value and interest yield
of these instruments can vary due to market interest rate fluctuations and
early prepayments of underlying mortgages.
The principal governmental issuers or guarantors of mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), and Federal Home Loan Mortgage
Corporation ("FHLMC"). Obligations of GNMA are backed by the full faith and
credit of the U.S. government while obligations of FNMA and FHLMC are supported
by the respective agency only.
A portion of the Domini Social Bond Fund's assets may be invested in
collateralized mortgage obligations ("CMOs"), which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by certificates issued by the GNMA, the FNMA
or the FHLMC but also may be collateralized by whole loans or private mortgage
pass-through securities (such collateral collectively hereinafter referred to
as "Mortgage Assets"). The Domini Social Bond Fund may also invest a portion of
its assets in multi-class pass-through securities which are interests in a
trust composed of Mortgage Assets. CMOs (which include multi-class pass-through
securities) may be issued by agencies, authorities or instrumentalities of the
U.S. government or by private originators of or investors in mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Payments of
principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multi-class pass-through securities. In a CMO, a series of
bonds or certificates is usually issued in multiple classes with different
maturities. The class of CMO, often referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any
has been paid. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semiannual basis. The principal of and interest on the
Mortgage Assets may be allocated among the several classes of a series of a CMO
in various ways. In a common structure, payments of principal, including any
principal prepayments, on the Mortgage Assets are applied to the classes of the
series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class
of CMOs until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
The Domini Social Bond Fund also may invest in real estate mortgage
investment conduits ("REMICs"). REMICs, which were authorized under the Tax
<PAGE>
Reform Act of 1986, are private entities formed for the purpose of holding a
fixed pool of mortgages secured by an interest in real property. REMICs are
similar to CMOs in that they issue multiple classes of securities.
Even if the U.S. government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market
volatility. When interest rates decline, mortgage-backed securities experience
higher rates of prepayment because the underlying mortgages are refinanced to
take advantage of the lower rates. The prices of mortgage-backed securities may
not increase as much as prices of other debt obligations when interest rates
decline, and mortgage-backed securities may not be an effective means of
locking in a particular interest rate. In addition, any premium paid for a
mortgage-backed security may be lost when it is prepaid. When interest rates go
up, mortgage-backed securities experience lower rates of prepayment. This has
the effect of lengthening the expected maturity of a mortgage-backed security.
This particular risk, referred to as "maturity extension risk," may effectively
convert a security that was considered short or intermediate-term at the time
of purchase into a long-term security. Long-term securities generally fluctuate
more widely in response to changes in interest rates than short or
intermediate-term securities. Thus, rising interest rates would not only likely
decrease the value of the Domini Social Bond Fund's fixed income securities,
but would also increase the inherent volatility of the Fund by effectively
converting short-term debt instruments into long-term debt instruments. As a
result, prices of mortgage-backed securities may decrease more than prices of
other debt obligations when interest rates go up.
CORPORATE ASSET-BACKED SECURITIES: The Domini Social Bond Fund may
invest in corporate asset-backed securities. These securities, issued by trusts
and special purpose corporations, are backed by a pool of assets, such as
credit card and automobile loan receivables, representing the obligations of a
number of different parties.
Corporate asset-backed securities present certain risks. For instance,
in the case of credit card receivables, these securities may not have the
benefit of any security interest in the related collateral. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
The underlying assets (e.g., loans) are also subject to prepayments which
shorten the securities' weighted average life and may lower their return.
Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. The
degree of credit support provided for each issue is generally based on
historical information regarding the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in
such a security.
<PAGE>
MORTGAGE "DOLLAR ROLLS": The Domini Social Bond Fund may enter into
mortgage dollar roll transactions. In these transactions, the Domini Social
Bond Fund sells mortgage-backed securities for delivery in the future and at
the same time contracts to repurchase substantially similar securities on a
specified future date. During the roll period, the Domini Social Bond Fund does
not receive principal and interest paid on the mortgage-backed securities. The
Domini Social Bond Fund is compensated for the lost principal and interest by
the difference between the current sales price and the lower price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. The Domini Social Bond Fund
may also be compensated by receipt of a commitment fee. However, the Domini
Social Bond Fund takes the risk that the market price of the mortgage-backed
security may drop below the future purchase price. When the Domini Social Bond
Fund uses a mortgage dollar roll, it is also subject to the risk that the other
party to the agreement will not be able to perform. The Domini Social Bond Fund
will invest only in covered rolls, which are specific types of dollar rolls for
which the Domini Social Bond Fund establishes a segregated account with liquid
high grade debt securities equal in value to the securities subject to
repurchase by the Fund.
SECURITIES RATED Baa or BBB: The Domini Social Bond Fund may purchase
securities rated Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Rating Service ("S&P") and securities of comparable quality,
which may have poor protection of payment of principal and interest. These
securities are often considered to be speculative and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness than
securities assigned a higher quality rating. The market prices of these
securities may go up and down more than higher-rated securities and may go down
significantly in periods of general economic difficulty which may follow
periods of rising interest rates.
CALL FEATURES: Certain securities held by the Domini Social Bond Fund may
permit the issuer at its option to "call," or redeem, its securities. If an
issuer were to redeem securities held by the Domini Social Bond Fund during a
time of declining interest rates, the Domini Social Bond Fund may have to
reinvest that money at the lower prevailing interest rates.
ZERO-COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: The Domini
Social Bond Fund may invest in debt obligations called zero coupon bonds,
deferred interest bonds and payment-in-kind (PIK) bonds. Zero coupon bonds do
not pay any interest. Instead, zero coupon bonds are issued at a significant
discount from the value the Domini Social Bond Fund expects to receive upon
maturity. Deferred interest bonds are similar to zero coupon bonds except that
they begin to pay interest after some delay. Although PIK bonds may pay
interest in cash, they also are similar to zero coupon bonds or deferred
interest bonds because the issuer has the option to make interest payments in
additional debt obligations rather than cash. Because these bonds may not pay
interest at regular intervals, changes in interest rates affect the value of
zero coupon, deferred interest and PIK bonds more than debt obligations that
pay regular interest, and the credit risk of these bonds tends to be greater
than the credit risk of debt obligations which pay regular interest. Even
though zero coupon, deferred interest and PIK bonds may not make payments of
interest until maturity or until after a delay, the Domini Social Bond Fund is
required to accrue interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, it may be necessary at times
for the Domini Social Bond Fund to sell investments in order to make these
distribution payments.
STRIPPED SECURITIES: The Domini Social Bond Fund may invest in stripped
securities, such as interest-only strips (called IOs), which may receive only
interest payments and other types of stripped securities, such as
principal-only strips (called POs), that may receive only principal payments.
Stripped securities are more sensitive to changes in interest rates than are
<PAGE>
certain other debt securities. The value of IOs generally will decrease as
interest rates increase. As interest rates decrease, the Domini Social Bond
Fund's investments in IOs may be adversely affected by a rapid rate of
principal payments (including prepayments) on the underlying securities. A
rapid rate of principal payments (including prepayments) may cause an IO to
mature before the Domini Social Bond Fund recovers its initial investment in
the security. Conversely, if interest rates increase, the Domini Social Bond
Fund's investments in POs may be adversely affected by a lower than expected
rate of principal payments (including prepayments) on the underlying
securities. A lower rate of principal payments (including prepayments)
effectively extends the maturity of a PO.
FUTURES CONTRACTS: Subject to applicable laws, the Domini Social Bond Fund
may enter into bond and interest rate futures contracts. The Domini Social Bond
Fund intends to use futures contracts only for bona fide hedging purposes.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specified security at a specified
future time and at a specified price. A "sale" of a futures contract entails a
contractual obligation to deliver the underlying securities called for by the
contract, and a "purchase" of a futures contract entails a contractual
obligation to acquire such securities, in each case in accordance with the
terms of the contract. Futures contracts must be executed through a futures
commission merchant, or brokerage firm, which is a member of an appropriate
exchange designated as a "contract market" by the Commodity Futures Trading
Commission ("CFTC").
When the Domini Social Bond Fund purchases or sells a futures contract,
the Fund must allocate certain of its assets as an initial deposit on the
contract. The initial deposit may be as low as approximately five percent or
less of the value of the contract. The futures contract is marked to market
daily thereafter and the Domini Social Bond Fund may be required to pay or
entitled to receive additional "variation margin", based on decrease or
increase in the value of the futures contract.
Futures contracts call for the actual delivery or acquisition of
securities, or in the case of futures contracts based on indices, the making or
acceptance of a cash settlement at a specified future time; however, the
contractual obligation is usually fulfilled before the date specified in the
contract by closing out the futures contract position through the purchase or
sale, on a commodities exchange, of an identical futures contract. Positions in
futures contracts may be closed out only if a liquid secondary market for such
contract is available, and there can be no assurance that such a liquid
secondary market will exist for any particular futures contract.
The Domini Social Bond Fund's ability to hedge effectively through
transactions in futures contracts depends on, among other factors, the Bond
Fund Manager's or Submanager's judgment as to the expected price movements in
the securities underlying the futures contracts. In addition, it is possible in
some circumstances that the Domini Social Bond Fund would have to sell
securities from its portfolio to meet "variation margin" requirements at a time
when it may be disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS: The Domini Social Bond Fund may purchase and
write options to buy or sell futures contracts in which the Fund may invest.
These investment strategies may be used for hedging purposes.
An option on a futures contract provides the holder with the right to
enter into a "long" position in the underlying futures contract, in the case of
a call option, or a "short" position in the underlying futures contract, in the
case of a put option, at a fixed exercise price up to a stated expiration date
or, in the case of certain options, on such date. Upon exercise of the option
by the holder, the contract market clearinghouse establishes a corresponding
short position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
<PAGE>
option is exercised, the parties will be subject to all the risks associated
with the trading of futures contracts, such as payment of initial and variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's
profits or loss on the transaction.
Options on futures contracts that are written or purchased by the Domini
Social Bond Fund on U.S. exchanges are traded on the same contract market as
the underlying futures contract, and, like futures contracts, are subject to
regulation by the CFTC and the performance guarantee of the exchange
clearinghouse. In addition, options on futures contracts may be traded on
foreign exchanges.
The Domini Social Bond Fund may cover the writing of call options on
futures contracts (a) through purchases of the underlying futures contract, or
(b) through the holding of a call on the same futures contract and in the same
principal amount as the call written where the exercise price of the call held
(i) is equal to or less than the exercise price of the call written or (ii) is
greater than the exercise price of the call written if the difference is
maintained by the Domini Social Bond Fund in cash or liquid securities in a
segregated account. The Domini Social Bond Fund may cover the writing of put
options on futures contracts (a) through sales of the underlying futures
contract, (b) through segregation of cash or liquid securities in an amount
equal to the value of the security underlying the futures contract, (c) through
the holding of a put on the same futures contract and in the same principal
amount as the put written where the exercise price of the put held is equal to
or greater than the exercise price of the put written or where the exercise
price of the put held is less than the exercise price of the put written if the
difference is maintained by the Domini Social Bond Fund in cash or liquid
securities in a segregated account. Put and call options on futures contracts
may also be covered in such other manner as may be in accordance with the rules
of the exchange on which the option is traded and applicable laws and
regulations. Upon the exercise of a call option on a futures contract written
by the Domini Social Bond Fund, the Fund will be required to sell the
underlying futures contract which, if the Domini Social Bond Fund has covered
its obligation through the purchase of such contract, will serve to liquidate
its futures position. Similarly, where a put option on a futures contract
written by the Domini Social Bond Fund is exercised, the Fund will be required
to purchase the underlying futures contract which, if the Fund has covered its
obligation through the sale of such contract, will close out its futures
position.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities deliverable on exercise of the
futures contract. The Domini Social Bond Fund will receive an option premium
when it writes the call, and, if the price of the futures contract at
expiration of the option is below the option exercise price, the Domini Social
Bond Fund will retain the full amount of this option premium, which provides a
partial hedge against any decline that may have occurred in the Domini Social
Bond Fund's security holdings. Similarly, the writing of a put option on a
futures contract constitutes a partial hedge against increasing prices of the
securities deliverable upon exercise of the futures contract. If the Domini
Social Bond Fund writes an option on a futures contract and that option is
exercised, the Domini Social Bond Fund may incur a loss, which loss will be
reduced by the amount of the option premium received, less related transaction
costs. The Domini Social Bond Fund's ability to hedge effectively through
transactions in options on futures contracts depends on, among other factors,
<PAGE>
the degree of correlation between changes in the value of securities held by
the Domini Social Bond Fund and changes in the value of its futures positions.
This correlation cannot be expected to be exact, and the Domini Social Bond
Fund bears a risk that the value of the futures contract being hedged will not
move in the same amount, or even in the same direction, as the hedging
instrument. Thus it may be possible for the Domini Social Bond Fund to incur a
loss on both the hedging instrument and the futures contract being hedged.
The Domini Social Bond Fund may purchase options on futures contracts for
hedging purposes instead of purchasing or selling the underlying futures
contracts. For example, where a decrease in the value of portfolio securities
is anticipated as a result of a projected market-wide decline or changes in
interest or exchange rates, the Domini Social Bond Fund could, in lieu of
selling futures contracts, purchase put options thereon. In the event that such
decrease occurs, it may be offset, in whole or part, by a profit on the option.
Conversely, where it is projected that the value of securities to be acquired
by the Domini Social Bond Fund will increase prior to acquisition, due to a
market advance or changes in interest or exchange rates, the Domini Social Bond
Fund could purchase call options on futures contracts, rather than purchasing
the underlying futures contracts.
Futures contracts and options on futures contracts may be entered into on
U.S. exchanges regulated by the CFTC and on foreign exchanges. The securities
underlying options and futures contracts traded by the Domini Social Bond Fund
may include domestic as well as foreign securities. Investors should recognize
that transactions involving foreign securities or foreign currencies, and
transactions entered into in foreign countries, may involve considerations and
risks not typically associated with investing in U.S. markets.
SWAPS AND RELATED INVESTMENTS: The Domini Social Bond Fund may use swaps,
caps, collars and floors to hedge against a change in interest rates or other
rates which could affect the value of securities in its portfolio. Interest
rate swaps involve the exchange by the Domini Social Bond Fund with another
party of their respective commitments to pay or receive interest. An equity
swap is an agreement to exchange cash flows on a principal amount based on
changes in the values of the reference index. In a typical cap or floor
agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. For
example, the purchase of an interest rate cap entitles the buyer, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the
counterparty selling such interest rate cap. The sale of an interest rate floor
obligates the seller to make payments to the extent that a specified interest
rate falls below an agreed-upon level. A collar arrangement combines elements
of buying a cap and selling a floor.
The Domini Social Bond Fund will maintain liquid assets with its custodian
or otherwise cover its current obligations under swap transactions in
accordance with current regulations and policies applicable to the Fund.
The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, equity or other factor
that determines the amount of payments to be made under the arrangement. If the
Bond Fund Manager or Submanager is incorrect in its forecasts of such factors,
the investment performance of the Fund would be less than what it would have
been if these investment techniques had not been used. If a swap agreement
calls for payments by the Domini Social Bond Fund, the Fund must be prepared to
make such payments when due. The Domini Social Bond Fund will not enter into
any swap unless the Bond Fund Manager or Submanager deems the counterparty to
be creditworthy. If the counterparty's creditworthiness declined, the value of
the swap agreement would be likely to decline, potentially resulting in losses.
If the counterparty defaults, the Domini Social Bond Fund's risk of loss
consists of the net amount of payments that the Fund is contractually entitled
to receive. The Domini Social Bond Fund anticipates that it will be able to
eliminate or reduce its exposure under these arrangements by assignment or
other disposition or by entering into an offsetting agreement with the same or
another counterparty.
<PAGE>
Swap agreements are subject to the Domini Social Bond Fund's overall limit
that not more than 15% of its net assets may be invested in illiquid
securities.
STRUCTURED NOTES AND INDEXED SECURITIES: The Domini Social Bond Fund may
invest in structured notes and indexed securities. A structured note is a debt
security with its interest rate or principal determined by reference to changes
in the value of specific currencies, interest rates, commodities, indices or
other financial indicators or the relative change in two or more financial
indicators. Indexed securities include structured notes as well as securities
other than debt securities, with their interest rates or principal determined
by one or more financial indicators.
Structured notes and indexed securities may be more volatile, less liquid
and more difficult to accurately price than less complex fixed income
investments. These securities generally expose the Domini Social Bond Fund to
credit risks equal to that of the underlying financial indicators. The interest
rate or the principal amount payable upon maturity of a structured note or
indexed security may go up or down depending on changes in the underlying
indicators. Structured notes and indexed securities often are less liquid than
other debt securities because they are typically sold in private placement
transactions with no active trading market.
DOMINI SOCIAL EQUITY FUND AND DOMINI SOCIAL BOND FUND
FOREIGN ISSUERS: Some of the stocks included in the Domini Social Index
may be stocks of foreign issuers (provided that the stocks are traded in the
United States in the form of American Depositary Receipts or similar
instruments the market for which is denominated in United States dollars). The
Domini Social Bond Fund also may invest in obligations of foreign issuers.
Investments in foreign securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject. With respect to securities and obligations of foreign
issuers, the Domini Social Equity Fund and the Domini Social Bond Fund do not
purchase securities which the Domini Social Equity Fund or the Domini Social
Bond Fund, as the case may be, believes, at the time of purchase, will be
subject to exchange controls or foreign withholding taxes; however, there can
be no assurance that such laws may not become applicable to certain of the
Domini Social Equity Fund's or the Domini Social Bond Fund's investments. In
the event unforeseen exchange controls or foreign withholding taxes are imposed
with respect to any of the Domini Social Equity Fund's or the Domini Social
Bond Fund's investments, the effect may be to reduce the income received by the
Domini Social Equity Fund or the Domini Social Bond Fund on such investments.
RULE 144A SECURITIES: The Domini Social Equity Fund and the Domini Social
Bond Fund each may invest in securities which may be resold pursuant to Rule
144A under the Securities Act of 1933, as amended (the "1933 Act"). The Domini
Social Equity Fund has no current intention to invest in these securities.
LOANS OF SECURITIES: Consistent with applicable regulatory policies,
including those of the Board of Governors of the Federal Reserve System and the
SEC, the Domini Social Equity Fund and the Domini Social Bond Fund each may
make loans of its securities to member banks of the Federal Reserve System and
to broker-dealers. The Domini Social Equity Fund and the Domini Social Bond
Fund may lend their respective securities to the broker-dealers and financial
institutions, provided that (1) the loan is secured continuously by collateral,
consisting of securities, cash or cash equivalents, which is marked to the
market daily to ensure that each loan is fully collateralized at all times; (2)
the Domini Social Equity Fund or the Domini Social Bond Fund, as the case may
be, may at any time call the loan and obtain the return of the securities
<PAGE>
loaned within three business days; (3) the Domini Social Equity Fund or the
Domini Social Bond Fund, as the case may be, will receive any interest or
dividends paid on the securities loaned; and (4) the aggregate market value of
securities loaned will not at any time exceed 30% of the total assets of the
Domini Social Equity Fund or the Domini Social Bond Fund, as applicable.
The Domini Social Equity Fund and the Domini Social Bond Fund each will
earn income for lending its securities either in the form of fees received from
the borrower of the securities or in connection with the investment of cash
collateral in short-term money market instruments. Loans of securities involve
a risk that the borrower may fail to return the securities or may fail to
provide additional collateral.
In connection with lending securities, the Domini Social Equity Fund and
the Domini Social Bond Fund may pay reasonable finders, administrative and
custodial fees. No such fees will be paid to any person if it or any of its
affiliates is affiliated with the Domini Social Equity Fund, the Domini Social
Bond Fund, the Portfolio or Bond Fund Manager or the Portfolio or Bond Fund
Submanager.
OPTION CONTRACTS: Although it has no current intention to do so, the
Domini Social Equity Fund may in the future enter into certain transactions in
stock options. The Domini Social Bond Fund may enter into certain transactions
in options involving securities in which that Fund may otherwise invest. Each
Fund may enter into such options transactions for the purpose of hedging
against possible increases in the value of securities which are expected to be
purchased by the respective Fund or possible declines in the value of
securities which are expected to be sold by that Fund. Generally, the Domini
Social Equity Fund would only enter into such transactions on a short-term
basis pending readjustment of its holdings of underlying stocks.
The purchase of an option on a security provides the holder with the
right, but not the obligation, to purchase the underlying security, in the case
of a call option, or to sell the underlying security, in the case of a put
option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire
amount of the premium, plus related transaction costs, but not more. Upon
exercise of the option, the holder is required to pay the purchase price of the
underlying security in the case of a call option, or deliver the security in
return for the purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While a Fund would establish an option position only if there
appears to be a liquid secondary market therefor, there can be no assurance
that such a market will exist for any particular option contract at any
specific time. In that event, it may not be possible to close out a position
held by a Fund, and that Fund could be required to purchase or sell the
instrument underlying an option, make or receive a cash settlement or meet
ongoing variation margin requirements. The inability to close out option
positions also could have an adverse impact on a Fund's ability effectively to
hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Portfolio
Manager and the Bond Fund Manager do not believe that these trading and
position limits would have an adverse impact on the possible use of hedging
strategies by the Domini Social Equity Fund or the Domini Social Bond Fund, as
applicable.
SHORT SALES: Although they have no current intention to do so, the Domini
Social Equity Fund and the Domini Social Bond Fund may make short sales of
securities or maintain a short position, if at all times when a short position
is open the Domini Social Equity Fund or the Domini Social Bond Fund, as
applicable, owns an equal amount of such securities, or securities convertible
into such securities.
<PAGE>
CASH RESERVES: The Domini Social Equity Fund and the Domini Social Bond
Fund each may invest cash reserves in short-term debt securities (i.e.,
securities having a remaining maturity of one year or less) issued by agencies
or instrumentalities of the United States Government, bankers' acceptances,
commercial paper, certificates of deposit, bank deposits or repurchase
agreements, provided that the issuer satisfies certain social criteria. The
Domini Social Equity Fund and the Domini Social Bond Fund do not currently
intend to invest in direct obligations of the United States Government.
Short-term debt securities purchased by the Domini Social Equity Fund and the
Domini Social Bond Fund will be rated at least Prime-1 by Moody's or A-1+ or
A-1 by S&P or, if not rated, determined to be of comparable quality by the
Portfolio's or Domini Social Bond Fund's, as applicable, Board of Trustees. The
Domini Social Equity Fund's policy is to hold its assets in such securities
pending readjustment of its portfolio holdings of stocks comprising the Domini
Social Index and in order to meet anticipated redemption requests. Such
investments are not intended to be used for defensive purposes in periods of
anticipated market decline.
-------------------------
The approval of the Domini Social Equity Fund and of the other investors
in the Portfolio and the approval of shareholders of the Domini Social Bond
Fund are not required to change the investment objective or any of the
investment policies discussed above (other than the policy regarding
concentration by the Domini Social Equity Fund and the Portfolio), including
those concerning security transactions.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS: Each of the Funds and the Portfolio have adopted
the following policies which may not be changed without approval by holders of
a "majority of the outstanding voting securities" of the applicable Fund or the
Portfolio, respectively, which as used in this Statement of Additional
Information means the vote of the lesser of (i) 67% or more of the outstanding
"voting securities" of a Fund or the Portfolio, respectively, present at a
meeting, if the holders of more than 50% of the outstanding "voting securities"
of that Fund or the Portfolio, respectively, are present or represented by
proxy, or (ii) more than 50% of the outstanding "voting securities" of a Fund
or the Portfolio, respectively. The term "voting securities" as used in this
paragraph has the same meaning as in the 1940 Act.
Except as described below, whenever the Domini Social Equity Fund is
requested to vote on a change in the investment restrictions of the Portfolio,
the Domini Social Equity Fund will hold a meeting of its shareholders and will
cast its vote proportionately as instructed by its shareholders. However,
subject to applicable statutory and regulatory requirements, the Domini Social
Equity Fund would not request a vote of its shareholders with respect to (a)
any proposal relating to the Portfolio, which proposal, if made with respect to
the Domini Social Equity Fund, would not require the vote of the shareholders
of the Domini Social Equity Fund, or (b) any proposal with respect to the
Portfolio that is identical in all material respects to a proposal that has
previously been approved by shareholders of the Domini Social Equity Fund. Any
proposal submitted to holders in the Portfolio, and that is not required to be
voted on by shareholders of the Domini Social Equity Fund, would nevertheless
be voted on by the Trustees of the Domini Social Equity Fund.
Neither the DOMINI SOCIAL EQUITY FUND nor the PORTFOLIO may:
(1) borrow money, except that as a temporary measure for extraordinary or
emergency purposes either the Domini Social Equity Fund or the Portfolio may
borrow an amount not to exceed 1/3 of the current value of the net assets of
the Domini Social Equity Fund or the Portfolio, respectively, including the
<PAGE>
amount borrowed (moreover, neither the Domini Social Equity Fund nor the
Portfolio may purchase any securities at any time at which borrowings exceed 5%
of the total assets of the Domini Social Equity Fund or the Portfolio,
respectively, taken in each case at market value) (it is intended that the
Portfolio would borrow money only from banks and only to accommodate requests
for the withdrawal of all or a portion of a beneficial interest in the
Portfolio while effecting an orderly liquidation of securities);
(2) purchase any security or evidence of interest therein on margin,
except that either the Domini Social Equity Fund or the Portfolio may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales of securities and except that either the Domini Social Equity Fund or the
Portfolio may make deposits of initial deposit and variation margin in
connection with the purchase, ownership, holding or sale of options;
(3) write any put or call option or any combination thereof, provided that
this shall not prevent (i) the purchase, ownership, holding or sale of warrants
where the grantor of the warrants is the issuer of the underlying securities,
or (ii) the purchase, ownership, holding or sale of options on securities;
(4) underwrite securities issued by other persons, except that the Domini
Social Equity Fund may invest all or any portion of its assets in the Portfolio
and except insofar as either the Domini Social Equity Fund or the Portfolio may
technically be deemed an underwriter under the 1933 Act in selling a security;
(5) make loans to other persons except (a) through the lending of
securities held by either the Domini Social Equity Fund or the Portfolio and
provided that any such loans not exceed 30% of its total assets (taken in each
case at market value), or (b) through the use of repurchase agreements or the
purchase of short-term obligations and provided that not more than 10% of its
net assets will be invested in repurchase agreements maturing in more than
seven days; for additional related restrictions, see paragraph (6) immediately
following;
(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to Rule
144A under the 1933 Act if the Board of Trustees determines that a liquid
market exists for such securities) if, as a result thereof, more than 10% of
its net assets (taken at market value) would be so invested (including
repurchase agreements maturing in more than seven days), except that the Domini
Social Equity Fund may invest all or any portion of its assets in the
Portfolio;
(7) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (the Domini Social Equity Fund and Portfolio
reserve the freedom of action to hold and to sell real estate acquired as a
result of the ownership of securities by the Domini Social Equity Fund or the
Portfolio);
(8) make short sales of securities or maintain a short position, unless at
all times when a short position is open the Domini Social Equity Fund or the
Portfolio, as applicable, owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 5% of the Domini Social Equity Fund's or
the Portfolio's, as applicable, net assets (taken in each case at market value)
is held as collateral for such sales at any one time;
<PAGE>
(9) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Portfolio's or the
Domini Social Equity Fund's, as applicable, assets (taken at market value) to
be invested in the securities of such issuer (other than securities or
obligations issued or guaranteed by the United States or any agency or
instrumentality of the United States), except that for purposes of this
restriction the issuer of an option shall not be deemed to be the issuer of the
security or securities underlying such contract and except that the Domini
Social Equity Fund may invest all or any portion of its assets in the
Portfolio; or
(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Domini Social
Index, in which case the Portfolio or the Domini Social Equity Fund, as
applicable, will invest more than 25% of its assets in that industry, and
except that the Domini Social Equity Fund may invest all of its assets in the
Portfolio.
In addition, as a matter of fundamental policy, the Domini Social Equity
Fund will invest all of its investable assets (either directly or through the
Portfolio) in one or more of: (i) stocks comprising an index of securities
selected applying social criteria, which initially will be the Domini Social
Index, (ii) short-term debt securities of issuers which meet social criteria,
(iii) cash, and (iv) options on equity securities. This fundamental policy
cannot be changed without the approval of the holders of a majority of the
outstanding voting securities of the Domini Social Equity Fund.
The DOMINI SOCIAL BOND FUND may not:
(1) borrow money if such borrowing is specifically prohibited by the 1940
Act or the rules and regulations promulgated thereunder;
(2) make loans to other persons if such loans are specifically prohibited
by the 1940 Act or the rules and regulations promulgated thereunder;
(3) purchase securities of any issuer if such purchase at the time thereof
would cause with respect to 75% of the total assets of the Domini Social Bond
Fund more than 10% of the voting securities of such issuer to be held by the
Domini Social Bond Fund; provided that, for purposes of this restriction, the
issuer of an option or futures contract shall not be deemed to be the issuer of
the security or securities underlying such contract; and provided further that
the Domini Social Bond Fund may invest all or any portion of its assets in one
or more investment companies, to the extent not prohibited by the 1940 Act, the
rules and regulations thereunder, and exemptive orders granted under such Act;
(4) purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Domini Social Bond Fund's total assets more than
5% of the Domini Social Bond Fund's assets (taken at market value) to be
invested in the securities of such issuer (other than securities or obligations
issued or guaranteed by the United States, any state or political subdivision
thereof, or any political subdivision of any such state, or any agency or
instrumentality of the United States or of any state or of any political
subdivision of any state); provided that, for purposes of this restriction, the
issuer of an option or futures contract shall not be deemed to be the issuer of
the security or securities underlying such contract; and provided further that
the Domini Social Bond Fund may invest all or any portion of its assets in one
or more investment companies, to the extent not prohibited by the 1940 Act, the
rules and regulations thereunder, and exemptive orders granted under such Act;
<PAGE>
(5) concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Domini Social Bond Fund's
investment objective, up to 25% of its assets, at market value at the time of
each investment, may be invested in any one industry, except that positions in
futures contracts shall not be subject to this restriction;
(6) underwrite securities issued by other persons, except that all or any
portion of the assets of the Domini Social Bond Fund may be invested in one or
more investment companies, to the extent not prohibited by the 1940 Act, the
rules and regulations thereunder, and exemptive orders granted under such Act,
and except in so far as the Domini Social Bond Fund may technically be deemed
an underwriter under the 1933 Act in selling a security;
(7) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein) or
interests in oil, gas or mineral leases in the ordinary course of business (the
foregoing shall not be deemed to preclude the Domini Social Bond Fund from
purchasing or selling futures contracts or options thereon, and the Domini
Social Bond Fund reserves the freedom of action to hold and to sell real estate
acquired as a result of the ownership of securities by that Fund);
(8) purchase or sell commodities or commodity contracts in the ordinary
course of business (the foregoing shall not be deemed to preclude the Domini
Social Bond Fund from purchasing or selling futures contracts or options
thereon); and
(9) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder.
For purposes of restriction (1) above, covered mortgage dollar rolls and
arrangements with respect to securities lending are not treated as borrowing.
NON-FUNDAMENTAL RESTRICTION: Neither the DOMINI SOCIAL EQUITY FUND nor the
PORTFOLIO will as a matter of operating policy:
purchase puts, calls, straddles, spreads and any combination thereof if the
value of its aggregate investment in such securities will exceed 5% of the
Domini Social Equity Fund's or Portfolio's, as applicable, total assets at the
time of such purchase.
This restriction is not fundamental and may be changed with respect to the
Domini Social Equity Fund by that Fund without approval by the Fund's
shareholders or with respect to the Portfolio by the Portfolio without the
approval of the Domini Social Equity Fund or its other investors. Each Fund
will comply with the state securities laws and regulations of all states in
which it is registered.
PERCENTAGE RESTRICTIONS: If a percentage restriction or rating restriction
on investment or utilization of assets set forth above or referred to in the
Prospectus is adhered to at the time an investment is made or assets are so
utilized, a later change in percentage resulting from changes in the value of
the securities held by a Fund or the Portfolio or a later change in the rating
of a security held by a Fund or the Portfolio will not be considered a
violation of policy; provided that if at any time the ratio of borrowings of a
Fund or the Portfolio to the net asset value of that Fund or the Portfolio,
respectively, exceeds the ratio permitted by Section 18(f) of the 1940 Act, the
applicable Fund or the Portfolio as the case may be, will take the corrective
action required by Section 18(f).
<PAGE>
3. PERFORMANCE INFORMATION
Performance information concerning each Fund may from time to time be used
in advertisements, shareholder reports or other communications to shareholders.
Each Fund may provide its period, annualized, and average annual "total rates
of return." The "total rate of return" refers to the change in the value of an
investment over a stated period based on any change in net asset value per
share and includes the value of any shares purchasable with any dividends or
capital gains declared during such period. Period total rates of return may be
"annualized." An average "annualized" total rate of return is a compounded
total rate of return which assumes that the period total rate of return is
generated over a 52-week period, and that all dividends and capital gains
distributions are reinvested. An annualized total rate of return will be
slightly higher than a period total rate of return if the period is shorter
than one year, because of the effect of compounding. Average annual total
return figures represent the average annual percentage change over the
specified period.
Each Fund will calculate its total rate of return for any period by (a)
dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains declared during such period
with respect to a share held at the beginning of such period and with respect
to shares purchased with such dividends and capital gains distributions, by
(ii) the public offering price per share (i.e., net asset value) on the first
day of such period, and (b) subtracting 1 from the result. Any annualized total
rate of return quotation will be calculated by (x) adding 1 to the period total
rate of return quotation calculated above, (y) raising such sum to a power
which is equal to 365 divided by the number of days in such period, and (z)
subtracting 1 from the result.
Average annual total return is a measure of a Fund's performance over
time. It is determined by taking a Fund's performance over a given period and
expressing it as an average annual rate. The average annual total return
quotation is computed in accordance with a standardized method prescribed by
SEC rules. The average annual total return for a specific period is found by
taking a hypothetical $1,000 initial investment in Fund shares on the first day
of the period and computing the redeemable value of the investment at the end
of the period. The redeemable value is then divided by the initial investment,
and its quotient is taken to the Nth root (N representing the number of years
in the period) and is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains
distributions have been reinvested in Fund shares at net asset value on the
reinvestment date during the period.
The Domini Social Bond Fund may provide "yield" quotations with respect to
that Fund. The "yield" of the Domini Social Bond Fund refers to the income
generated by an investment in that Fund over a 30-day or one-month period
(which period shall be stated in any advertisement or communications with a
shareholder). This income is then "annualized", that is, the amount of income
generated by the investment over the period is assumed to be generated over a
52-week period and is shown as a percentage of investment. A "yield" quotation,
unlike a total rate of return quotation, does not reflect changes in net asset
value.
Any current "yield" quotation of the Domini Social Bond Fund shall consist
of an annualized historical yield, carried at least to the nearest hundredth of
one percent, based on a thirty calendar day period and shall be calculated by
(a) raising to the sixth power the sum of 1 plus the quotient obtained by
dividing that Fund's net investment income earned during the period by the
product of the average daily number of shares outstanding during the period
that were entitled to receive dividends and the maximum offering price per
share on the last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.
<PAGE>
Set forth below is average annual total return information for shares of
the Domini Social Equity Fund for the periods indicated, assuming that capital
gains distributions, if any, were reinvested.
Period Average Annual Total Return
One year ended July 31, 1999 22.26%
Five years ended July 31, 1999 26.72%
June 3, 1991 (Commencement of
Investment in the Portfolio) to
July 31, 1999 19.07%
SINCE THE DOMINI SOCIAL EQUITY FUND'S AVERAGE ANNUAL TOTAL RETURN
QUOTATIONS ARE BASED ON HISTORICAL EARNINGS AND SINCE RATES OF RETURN FLUCTUATE
OVER TIME, THESE QUOTATIONS SHOULD NOT BE CONSIDERED AS AN INDICATION OR
REPRESENTATION OF THE FUTURE PERFORMANCE OF THAT FUND.
The Domini Social Bond Fund is newly-created and does not have performance
information as of the date of this Statement of Additional Information.
Total rate of return information with respect to the Domini Social Index
will be computed in the same fashion as set forth above with respect to the
Domini Social Equity Fund, except that for purposes of this computation an
investment will be assumed to have been made in a portfolio consisting of all
of the stocks comprising the Domini Social Index weighted in accordance with
the weightings of the stocks comprising the Domini Social Index. Performance
information with respect to the Domini Social Index will not take into account
brokerage commission and other transaction costs which will be incurred by the
Portfolio.
From time to time the Funds may also quote data and fund rankings from
various sources, such as Lipper Analytical Services, Inc., Morningstar, Inc.,
Wiesenberger, Money Magazine, The Wall Street Journal, Kiplinger's Personal
Finance Magazine, Smart Money Magazine, Business Week and The New York Times,
and may compare their respective performance to that of the Domini 400 Social
IndexSM and various other unmanaged securities indices, such as the S&P 500 and
the Dow Jones Industrial Average. "Standard & Poor(", "S&P(" and "Standard &
Poor's 500(" are trademarks of McGraw Hill Companies.
4. DETERMINATION OF NET ASSET VALUE;
VALUATION OF PORTFOLIO SECURITIES; ADDITIONAL PURCHASE INFORMATION
The net asset value of each share of the Funds is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
weekday except for the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day). This determination of net asset value
of shares of each Fund is made once during each such day as of the close of
regular trading of the NYSE by dividing the value of each Fund's net assets
(i.e., for the Domini Social Equity Fund the value of its investment in the
Portfolio and any other assets less its liabilities, including expenses payable
or accrued, for the Domini Social Bond Fund the value of its assets less its
liabilities, including expenses payable or accrued) by the number of shares of
that Fund outstanding at the time the determination is made. Purchases and
redemptions will be effected at the time of determination of net asset value
next following the receipt of any purchase or redemption order deemed to be in
good order. See "Shareholder Manual" in the Prospectus.
<PAGE>
The value of the Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued)
is determined at the same time and on the same day as the Domini Social Equity
Fund determines its net asset value per share. The net asset value of the
Domini Social Equity Fund's investment in the Portfolio is equal to the Domini
Social Equity Fund's pro rata share of the total investment of the Domini
Social Equity Fund and of other investors in the Portfolio less the Domini
Social Equity Fund's pro rata share of the Portfolio's liabilities.
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities in which there
were no sales during the day or for unlisted securities not reported on the
NASDAQ system. Options and futures contracts are normally valued at the
settlement price on the exchange on which they are traded.
Bonds and other fixed income securities (other than short-term
obligations) are valued on the basis of valuations furnished by a pricing
service, use of which has been approved by the Board of Trustees of the
Portfolio or 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 Portfolio's of the Funds', as applicable, Board of Trustees.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by
the Portfolio's or the Funds', as applicable, Board of Trustees. While no
single standard for determining fair value exists, as a general rule, the
current fair value of a security would appear to be the amount which the
Portfolio or a Fund, as applicable, could expect to receive upon its current
sale. Some, but not necessarily all, of the general factors which may be
considered in determining fair value include: (i) the fundamental analytical
data relating to the investment; (ii) the nature and duration of restrictions
on disposition of the securities; and (iii) an evaluation of the forces which
influence the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be considered in
determining fair value, some of the specific factors include: type of security,
financial statements of the issuer, cost at date of purchase, size of holding,
discount from market value, value of unrestricted securities of the same class
at the time of purchase, special reports prepared by analysts, information as
to any transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the security, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of "original issue discount" (generally, the
difference between issue price and stated redemption price at maturity) and
premiums (generally, the excess of purchase price over stated redemption price
at maturity). Interest income on short-term obligations is determined on the
basis of interest accrued less amortization of premium.
Shares may be purchased directly from the Distributor or through Service
<PAGE>
Organizations (see "Transfer Agent, Custodian, and Service Organizations"
below) by clients of those Service Organizations. If an investor purchases
shares through a Service Organization, the Service Organization must promptly
transmit such order to the appropriate Fund so that the order receives the net
asset value next determined following receipt of the order. Investors wishing
to purchase shares through a Service Organization should contact that
organization directly for appropriate instructions. Investors making purchases
through a Service Organization should be aware that it is the responsibility of
the Service Organization to transmit orders for purchases of shares by its
customers to the Transfer Agent and to deliver required funds on a timely
basis.
Each Fund has authorized certain brokers to accept on its behalf purchase
and redemption orders and has authorized these brokers to designate
intermediates to accept such orders. Each Fund will be deemed to have received
such an order when an authorized broker or its designee accepts the order.
Orders will be priced at the appropriate Fund's net asset value next computed
after they are accepted by an authorized broker or designee. Investors may be
charged a fee if they effect transactions in Fund shares through a broker or
agent.
5. MANAGEMENT OF THE FUNDS AND THE PORTFOLIO
The management and affairs of the Funds are supervised by the Trustees of
the Trust under the laws of the Commonwealth of Massachusetts. The management
and affairs of the Portfolio are supervised by its Trustees under the laws of
the State of New York.
The Trustees and officers of the Trust and the Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Funds. Unless otherwise indicated below, the address of each officer is 536
Broadway, 7th floor, New York, NY 10012.
TRUSTEES OF THE TRUST AND THE PORTFOLIO
AMY L. DOMINI* -- 230 Congress Street, Boston, Massachusetts 02110; Chair,
President and Trustee of the Trust, Portfolio and Domini Institutional Trust;
Managing Principal of DSIL; Officer of Kinder, Lydenberg, Domini & Co., Inc.;
Private Trustee, Loring, Wolcott & Coolidge; Trustee, New England Quarterly
(since 1998); Board Member, Social Investment Forum (since 1994); Trustee,
Episcopal Church Pension Fund; Former Member, Governing Board, Interfaith
Center on Corporate Responsibility; Former Trustee, National Association
Community Loan Funds; Former Board Member of National Community Capital
Association (1987-1990). Her date of birth is January 15, 1950.
JULIA ELIZABETH HARRIS -- 54 Burroughs Street, Jamaica Plain, Massachusetts
02130; Vice President, UNC Partners, Inc. (since April 1990); Director and
Treasurer, Boom Times, Inc. (since May 1997); Director and Chair of Board of
Directors, The Green Book, Inc. (October 1991 - June 1996); Trustee, Domini
Institutional Trust. Her date of birth is July 11, 1948.
KIRSTEN S. MOY -- 151 North Michigan Avenue, Suite 1209, Chicago, Illinois
60601; Consultant, Project Director and Principal Researcher, Community
Development Innovation and Infrastructure Initiative (since December 1998);
CDFI Rating System Advisory Board Member, National Community Capital
Association (since 1999); Member, Community Economic Development Board of
Overseers, New Hampshire College (since November 1998); Advisory Group Member,
Shorebank Liquidity Project (since 1999); Consultant, Equitable Life Assurance
Society (since December 1998); Board Member, Free Associates Theatre Company
(since August 1999); Consultant, Social Investment Forum, Community Development
<PAGE>
Project (June 1998-December 1998); Director, Community Development Financial
Institutions Fund, U.S. Department of the Treasury (October 1995 - October
1997); Senior Vice President and Portfolio Manager, Equitable Real Estate
Investment Management (prior to October 1995); Trustee, Domini Institutional
Trust. Her date of birth is June 30, 1947.
WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02445;
Consultant, Arete Corporation; Manager, Venture Investment Management Company
LLC (prior to 1999); Trustee, Domini Institutional Trust; Vice President and
General Manager, TravElectric Services Corp (prior to 1995); President,
Environmental Technologies (prior to 1993); Director, Evergreen Solar, Inc;
Director, Conservation Services Group; Director, Fingerlakes Aquaculture LLC;
Director, Surgical Sealants, Inc; Director, World Power Technologies, Inc. His
date of birth is July 7, 1944.
KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Associate Dean and
Professor of Business Environment, Florida International University (since
1991); Trustee, Domini Institutional Trust; Partner, Trinity Industrial
Technology (since 1997); Executive Director, Center for Management in the
Americas (since 1997). Her date of birth is September 23, 1944.
GREGORY A. RATLIFF -- 1712 Carmen Avenue, Chicago, Illinois 60640; Director,
Access to Economic Opportunity, John D. and Catherine T. MacArthur Foundation
(since 1997); Associate Director, Program-Related Investments, John D. and
Catherine T. MacArthur Foundation (1993-1997); Trustee, Domini Institutional
Trust. His date of birth is June 12, 1960.
TIMOTHY SMITH -- 475 Riverside Drive, Room 550, New York, New York 10115;
Executive Director, Interfaith Center on Corporate Responsibility (since 1971);
Trustee, Calvert New Africa Fund; Chair, Calvert Social Investment Fund
Advisory Council; Trustee, Domini Institutional Trust. His date of birth is
September 15, 1943.
FREDERICK C. WILLIAMSON, SR. -- Five Roger Williams Green, Providence, Rhode
Island 02904; Treasurer and Trustee, RIGHA (charitable foundation supporting
health care needs) since 1990; Chairman, Rhode Island Historical Preservation
and Heritage Commission (since 1995); Trustee, National Parks and Conservation
Association (1986-1997); Advisor, National Parks and Conservation Association
(since 1997); Trustee of the National Park Trust (since 1991); Trustee, Domini
Institutional Trust. His date of birth is September 20, 1915.
Each of the Trustees who are not interested persons receives an annual
retainer for serving as a Trustee of the Trust, the Portfolio and the Domini
Institutional Trust of $6,000, and in addition, receives $1,000 for attendance
at each joint meeting of the Boards of the Trust, the Portfolio and the Domini
Institutional Trust (reduced to $500 in the event that a Trustee participates
at an in-person meeting by telephone). In addition, each Trustee receives
reimbursement for reasonable expenses incurred in attending meetings. The
compensation paid to the Trustees for the fiscal year ended July 31, 1999 is
set forth below. The Trustees may hold various other directorships unrelated to
the Trust or Portfolio.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Benefits from the Trust,
Accrued as Estimated Portfolio and
Aggregate Part of Annual Benefits Domini
Compensation Fund Upon Institutional
from the Trust Expenses Retirement Trust
Amy L. Domini, None None None None
Chair,
President
and Trustee
Julia Elizabeth $928* None None $1,160*
Harris,
Trustee
Kirsten S. Moy, $928* None None $1,160*
Trustee
William C.
Osborn, $4,000 None None $6,000
Trustee
Karen Paul, $4,000 None None $6,000
Trustee
Gregory A. $928* None None $1,160*
Ratliff,
Trustee
Timothy Smith, $4,000 None None $6,000
Trustee
Frederick C. $4,000 None None $6,000
Williamson, Sr.,
Trustee
</TABLE>
- ------------------------
* Ms. Harris, Ms. Moy and Mr. Rattliff became trustees on June 1, 1999.
OFFICERS
PETER D. KINDER* -- Vice President of the Trust and the Portfolio; President of
Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social Investments LLC
(since 1997). His date of birth is September 28, 1946.
STEVEN D. LYDENBERG* -- Vice President of the Trust and the Portfolio; Director
of Research of Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social
Investments LLC (since 1997). His date of birth is October 21, 1945.
DAVID P. WIEDER* -- Vice President of the Trust and the Portfolio (since 1997);
Chief Executive Officer and Managing Principal, Domini Social Investments LLC
<PAGE>
(since 1997); President of FSSI (since 1989); Vice-President of investment
companies within Fundamental Family of Funds (1989-1997); Vice-President of
Fundamental Portfolio Advisors (1991-1997). His date of birth is January 8,
1966.
SIGWARD M. MOSER* -- Vice President of the Trust and the Portfolio (since
1997); President and Managing Principal, Domini Social Investments LLC (since
1997); President of Communications House International, Inc.; Director of
Financial Communications Society. His date of birth is June 12, 1962.
CAROLE M. LAIBLE* -- Secretary and Treasurer of the Trust and the Portfolio
(since 1997); Financial Compliance Officer of Domini Social Investments LLC
(since 1997); Board of Governors, Daytop - NJ (since 1998); Financial
Compliance Officer, FSSI (1994-1997); Financial Compliance Officer and
Secretary of investment companies within Fundamental Family of Funds
(1994-1997); General Service Manager, McGladrey & Pullen LLP (certified public
accountants) (prior to 1994). Her date of birth is October 31, 1963.
As of __________ __, 2000, all Trustees and officers of the Trust and the
Portfolio as a group owned less than 1% of any Fund's outstanding shares. As of
the same date, the following shareholders of record owned 5% or more of the
outstanding shares of the Domini Social Equity Fund: __________. The Domini
Social Equity Fund has no knowledge of any other owners of record or beneficial
owners of 5% or more of the outstanding shares of that Fund. Shareholders
owning 25% or more of the outstanding shares of the Domini Social Equity Fund
may take actions without the approval of any other investor in that Fund. The
Domini Social Bond Fund is newly-created and has no shareholders as of the date
of this Statement of Additional Information.
The Trustees who are not "interested persons" (the "Disinterested
Trustees") of the Trust as defined by the 1940 Act are the same as the
Disinterested Trustees of the Portfolio. Any conflict of interest between the
Domini Social Equity Fund and the Portfolio will be resolved by the Trustees in
accordance with their fiduciary obligations and in accordance with the 1940
Act. The Trust's Declaration of Trust provides that it will indemnify its
Trustees and officers (the "Indemnified Parties") against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Trust, unless, as to liability to the Trust
or its shareholders, it is finally adjudicated that the Indemnified Parties
engaged in wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to
any other matter it is finally adjudicated that the Indemnified Parties did not
act in good faith in the reasonable belief that their actions were in the best
interests of the Trust. In case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such Indemnified
Parties have not engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
MANAGER AND SUBMANAGERS
DSIL provides advice to the Portfolio and the Domini Social Bond Fund
pursuant to separate Management Agreements (the "Management Agreements"). The
services provided by DSIL consist of furnishing continuously an investment
program for the Portfolio and the Domini Social Bond Fund. DSIL will have
authority to determine from time to time what securities are purchased, sold or
exchanged, and what portion of assets of the Portfolio and the Domini Social
Bond Fund is held uninvested. With respect to the Portfolio, DSIL will also
perform such administrative and management tasks as may from time to time be
reasonably requested, including: (i) maintaining office facilities and
<PAGE>
furnishing clerical services necessary for maintaining the organization of the
Portfolio and for performing administrative and management functions; (ii)
supervising the overall administration of the Portfolio, including negotiation
of contracts and fees with and monitoring of performance and billings of the
Portfolio's transfer agent, shareholder servicing agents, custodian and other
independent contractors or agents; (iii) overseeing (with the advice of
Portfolio's counsel) the preparation of and, if applicable, filing all
documents required for compliance by the Portfolio with applicable laws and
regulations, including registration statements, prospectuses and statements of
additional information, semi-annual and annual reports to shareholders, proxy
statements and tax returns; (iv) preparing agendas and supporting documents for
and minutes of meetings of Trustees, committees of Trustees and shareholders;
and (v) arranging for maintenance of the books and records of the Portfolio.
DSIL furnishes at its own expense all facilities and personnel necessary in
connection with providing these services. The Management Agreement for the
Portfolio will continue in effect if such continuance is specifically approved
at least annually by the Portfolio's Board of Trustees or by a majority of the
outstanding voting securities of the Portfolio at a meeting called for the
purpose of voting on the Management Agreement (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Management Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Management Agreement. The Management
Agreement for the Domini Social Bond Fund will continue in effect for an
initial two-year period and thereafter if such continuance is specifically
approved at least annually by the Domini Social Bond Fund's Board of Trustees
or by a majority of the outstanding voting securities of the Domini Social Bond
Fund at a meeting called for the purpose of voting on the Management Agreement,
and, in either case, by a majority of the Domini Social Bond Fund's Trustees
who are not parties to the Management Agreement or interested persons of any
such party at a meeting called for the purpose of voting on the Management
Agreement.
Each Management Agreement provides that DSIL may render services to
others. DSIL may employ, at its own expense, or may request that the Portfolio
or the Domini Social Bond Fund employ (subject to the requirements of the 1940
Act) one or more subadvisers or submanagers, subject to DSIL's supervision.
Each Management Agreement is terminable without penalty on not more than 60
days' nor less than 30 days' written notice by the Portfolio or the Domini
Social Bond Fund, as the case may be, when authorized either by majority vote
of the outstanding voting securities in the Portfolio (with the vote of each
investor in the Portfolio being in proportion to the amount of its investment)
or the Domini Social Bond Fund, as applicable, or by a vote of a majority of
the appropriate Board of Trustees, or by DSIL, and will automatically terminate
in the event of its assignment. Each Management Agreement provides that neither
DSIL nor its personnel shall be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
its services to the Portfolio or the Domini Social Bond Fund, as the case may
be, except for wilful misfeasance, bad faith or gross negligence or reckless
disregard of its or their obligations and duties under the Management
Agreement.
Under the Management Agreement between the Portfolio and DSIL, DSIL's fee
for advisory and administrative services to the Portfolio is 0.20% of the
average daily net assets of the Portfolio.
Under the Management Agreement between the Trust, with respect to the
Domini Social Bond Fund, and DSIL, DSIL's fee for advisory services to the
Domini Social Bond Fund is 0.40% of the average daily net assets of that Fund.
DSIL is a Massachusetts limited liability company with offices at 536
Broadway, 7th floor, New York, NY 10012, and is registered as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act"). The
names of the principal owners of DSIL and their relationship to the Trust
follows: Amy L. Domini, Chair of the Board and President of the Trust, is the
Manager and principal executive officer and a co-owner of DSIL. Ms. Domini is
also Chief Executive Officer, Secretary, Treasurer and co-owner of KLD which
<PAGE>
licenses the Domini Social Index to DSIL. Peter D. Kinder, Vice President of
the Trust, is a co-owner of DSIL. Mr. Kinder is also President and a co-owner
of KLD. Sigward M. Moser, Vice President of the Trust, is a co-owner of DSIL.
David P. Wieder, Vice President of the Trust is a co-owner of DSIL. Mr. Wieder
is also President and an owner of FSSI, a registered transfer agent which
served as the Domini Social Equity Fund's transfer agent until September 24,
1999.
Mellon Equity manages the assets of the Portfolio pursuant to an
Investment Submanagement Agreement (the "Portfolio Submanagement Agreement").
The Portfolio Submanager furnishes at its own expense all services, facilities
and personnel necessary in connection with managing the Portfolio's investments
and effecting securities transactions for the Portfolio. The Portfolio
Submanagement Agreement will continue in effect if such continuance is
specifically approved at least annually by the Portfolio's Board of Trustees or
by a majority vote of the outstanding voting securities in the Portfolio at a
meeting called for the purpose of voting on the Portfolio Submanagement
Agreement (with the vote of each being in proportion to the amount of its
investment), and, in either case, by a majority of the Portfolio's Trustees who
are not parties to the Portfolio Submanagement Agreement or interested persons
of any such party at a meeting called for the purpose of voting on the
Portfolio Submanagement Agreement.
Effective January 1, 1998, Mellon Equity Associates was reorganized as a
Pennsylvania limited liability partnership. Pursuant to an Agreement and Plan
of Merger dated December 29, 1997, (the "Merger Agreement"), Mellon Equity
Associates was merged into Mellon Equity Associates, LLP, a newly-formed
Pennsylvania limited liability partnership, with Mellon Equity Associates, LLP
being the surviving entity. Mellon Bank, N.A. ("Mellon Bank") is the 99%
limited partner and MMIP, Inc. is the 1% general partner of Mellon Equity
Associates, LLP. In accordance with the provisions of the Merger Agreement, all
property, rights, privileges, franchises, patents, trademarks, licenses,
registrations, and other assets and interests of Mellon Equity Associates
vested in Mellon Equity Associates, LLP. By operation of law, the obligations
and liabilities of Mellon Equity Associates were assumed by Mellon Equity
Associates, LLP. Mellon Equity is a professional investment counseling firm
that provides investment management services to the equity and balanced
pension, public fund, and profit-sharing investment management markets, and is
a registered investment adviser under the Advisers Act. Mellon Bank's
predecessor organization managed domestic equity, tax-exempt and institutional
pension accounts since 1947. The address of Mellon Equity and each of the
principal executive officers and directors of Mellon Equity is 500 Grant
Street, Suite 4200, Pittsburgh, Pennsylvania 15258.
South Shore manages the assets of the Domini Social Bond Fund pursuant to
an Investment Submanagement Agreement (the "Bond Fund Submanagement
Agreement"). The Bond Fund Submanager furnishes at its own expense all
services, facilities and personnel necessary in connection with managing the
Domini Social Bond Fund's investments and effecting securities transactions for
the Domini Social Bond Fund. The Bond Fund Submanagement Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Domini Social Bond Fund's Board of Trustees or by a majority
vote of the outstanding voting securities of that Fund at a meeting called for
the purpose of voting on the Bond Fund Submanagement Agreement, and, in either
case, by a majority of the Domini Social Bond Fund's Trustees who are not
parties to the Bond Fund Submanagement Agreement or interested persons of any
such party at a meeting called for the purpose of voting on the Bond Fund
Submanagement Agreement.
Shorebank Corporation is the parent company of South Shore, which is
located at [**----------**].
Each Submanagement Agreement provides that the applicable submanager may
render services to others. Each Submanagement Agreement is terminable without
penalty upon not more than 60 days' nor less than 30 days' written notice by
the Portfolio or Domini Social Bond Fund, as the case may be, when authorized
<PAGE>
either by majority vote of the outstanding voting securities in the Portfolio
(with the vote of each being in proportion to the amount of their investment)
or of the Domini Social Bond Fund, as applicable, or by a vote of the majority
of the appropriate Board of Trustees, or by DSIL with the consent of the
Trustees and may be terminated by the applicable submanager on not less than 90
days' written notice to DSIL and the Trustees, and will automatically terminate
in the event of its assignment. Each Submanagement Agreement provides that the
applicable submanager shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in its services to the Portfolio or the Domini Social Bond Fund, as the case
may be, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard for its or their obligations and duties under the
Submanagement Agreement.
Under the Portfolio Submanagement Agreement, DSIL pays Mellon Equity an
investment submanagement fee equal on an annual basis to 0.07% of the average
daily net assets of the Portfolio.
Under the Bond Fund Submanagement Agreement, DSIL pays South Shore an
investment submanagement fee equal on an annual basis to 0.20% of the average
daily net assets of the Domini Social Bond Fund.
Prior to October 22, 1997, pursuant to an investment advisory agreement
(the "KLD Advisory Agreement"), KLD served as investment adviser to the
Portfolio and furnished continuously an investment program by determining the
stocks to be included in the Domini Social Index. Additionally, prior to
October 22, 1997, pursuant to a management agreement (the "Mellon Equity
Management Agreement"), Mellon Equity served as investment manager and managed
the assets of the Portfolio on a daily basis. Prior to October 22, 1997, the
Portfolio paid Mellon Equity an investment management fee equal on an annual
basis to 0.10% of the average daily net assets of the Portfolio. Prior to
October 22, 1997, pursuant to a sponsorship agreement (the "KLD Sponsorship
Agreement"), KLD furnished administrative services for the Portfolio. Prior to
October 22, 1997, pursuant to an administrative services agreement (the
"Signature Administration Agreement"), Signature Broker-Dealer Services, Inc.
served as the administrator of the Portfolio. Prior to October 22, 1997, the
aggregate investment management and administration fees under the prior
agreements with respect to the Portfolio were equal to 0.15% of the Portfolio's
average daily net assets for its then current fiscal year.
For the fiscal year ended July 31, 1999, the Portfolio incurred
approximately $1,791,617 in management fees pursuant to its Management
Agreement. For the fiscal year ended July 31, 1998, the Portfolio incurred
approximately $701,774 in management fees pursuant to its Management Agreement,
$17,385 in advisory fees pursuant to the KLD Advisory Agreement, $17,385 in
aggregate administration fees pursuant to the Signature Administration
Agreement and $86,354 in management fees pursuant to the Mellon Equity
Management Agreement. For the fiscal year ended July 31, 1997, the Portfolio
incurred $46,528 in advisory fees pursuant to the KLD Advisory Agreement,
$46,528 in administration fees pursuant to the KLD Sponsorship Agreement,
$156,868 in aggregate administration fees pursuant to the Signature
Administration Agreement, and $182,885 in management fees pursuant to the
Mellon Equity Management Agreement.
Because the Domini Social Bond Fund is newly-created, it has not paid
management fees as of the date of this Statement of Additional Information.
SPONSOR
Pursuant to a Sponsorship Agreement with respect to the Domini Social
Equity Fund and Administration Agreement with respect to the Domini Social Bond
Fund, DSIL provides the Domini Social Equity Fund and the Domini Social Bond
<PAGE>
Fund with oversight, administrative and management services. DSIL provides each
Fund with general office facilities and supervises the overall administration
of each Fund, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of, the
independent contractors and agents of each Fund; the preparation and filing of
all documents required for compliance by each 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 each Fund
regarding the securities holdings of the Portfolio and the Domini Social Bond
Fund, as applicable, limits on investment and the Funds' proxy voting
philosophy and shareholder activism philosophy; and arranging for the
maintenance of books and records of each Fund. The Sponsor provides persons
satisfactory to the Board of Trustees of the Funds to serve as officers of the
Funds. Such officers, as well as certain other employees and Trustees of the
Funds, may be directors, officers or employees of the Sponsor or its
affiliates.
Under the Sponsorship Agreement between DSIL and the Trust on behalf of
the Domini Social Equity Fund, DSIL's fee for administrative and sponsorship
services with respect to the Domini Social Equity Fund 0.50% of the average
daily net assets of that Fund. Under the Administration Agreement between DSIL
and the Trust on behalf of the Domini Social Bond Fund, DSIL's fee for
administrative services with respect to the Domini Social Bond Fund is 0.25% of
the average daily net assets of that Fund. Currently, DSIL is reducing its fee
to the extent necessary to keep the aggregate annual operating expenses of the
Domini Social Equity Fund (including the Domini Social Equity 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 Domini Social Equity Fund. For the fiscal
years ended July 31, 1999 and July 31, 1998, the Domini Social Equity Fund
incurred $3,820,667 and $1,419,618 in sponsorship fees, respectively. [**INSERT
FEE WAIVER FOR THE BOND FUND**] Because the Domini Social Bond Fund is
newly-created, as of the date of this Statement of Additional Information, it
has not paid sponsorship fees.
Prior to October 22, 1997, Signature Broker-Dealer Services, Inc. served
as administrator of the Domini Social Equity Fund. For the fiscal year ended
July 31, 1997, the Domini Social Equity Fund incurred $156,868 in
administrative fees.
The Sponsorship Agreement with respect to the Funds provides that DSIL may
render administrative services to others. The Sponsorship Agreement also
provides that neither the Sponsor nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of either Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Sponsorship Agreement.
DISTRIBUTOR
Each Fund has adopted a Distribution Plan which provides that each Fund
may pay the Distributor a fee not to exceed 0.25% per annum of that Fund's
average daily net assets in anticipation of, or as reimbursement or
compensation for, expenses incurred in connection with the sale of shares of
the Fund, such as payments to broker-dealers who advise shareholders regarding
the purchase, sale or retention of shares of the Fund, payments to employees of
the Distributor, advertising expenses and the expenses of printing and
distributing prospectuses and reports used for sales purposes, expenses of
preparing and printing sales literature and other distribution-related
<PAGE>
expenses. For the fiscal years ended July 31, 1997, 1998, and 1999 the Domini
Social Equity Fund accrued $153,295, $580,272, and $1,327,042 respectively, in
distribution fees. For the fiscal year ended July 31, 1999, payments made by
the Domini Social Equity Fund pursuant to the Distribution Plan were used for
advertising ($310,408), printing and mailing of prospectuses to other than
current shareholders ($34,943), compensation to dealers ($563,574) and
communications and servicing ($418,117). Because the Domini Social Bond Fund is
newly-created, as of the date of this Statement of Additional Information, it
has not paid distribution fees.
The Distribution Plan will continue in effect indefinitely as to a Fund if
such continuance is specifically approved at least annually by a vote of both a
majority of that Fund's Trustees and a majority of that Fund's Trustees who are
not "interested persons of the Fund" and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any
agreement related to such Plan ("Qualified Trustees"). The Distributor will
provide to the Trustees of each Fund a quarterly written report of amounts
expended by that Fund under the Distribution Plan and the purposes for which
such expenditures were made. The Distribution Plan further provides that the
selection and nomination of each Fund's Qualified Trustees shall be committed
to the discretion of the disinterested Trustees of that Fund. The Distribution
Plan may be terminated as to a Fund at any time by a vote of a majority of that
Fund's Qualified Trustees or by a vote of the shareholders of that Fund. The
Distribution Plan may not be materially amended with respect to a Fund without
a vote of the majority of both that Fund's Trustees and Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to the Distribution Plan for a period of not less than six (6) years from the
date of the Distribution Plan, and for the first two (2) years the Distributor
will preserve such copies in an easily accessible place.
Each Fund has entered into a Distribution Agreement with the Distributor.
Under the Distribution Agreement, the Distributor acts as the agent of each
Fund in connection with the offering of shares of that Fund and is obligated to
use its best efforts to find purchasers for shares of the Fund. The Distributor
acts as the principal underwriter of shares of each Fund and bears the
compensation of personnel necessary to provide such services and all costs of
travel, office expenses (including rent and overhead) and equipment. Prior to
August 15, 1999, Signature Broker-Dealer Services, Inc. served as the
distributor of the Domini Social Equity Fund.
TRANSFER AGENT, CUSTODIAN AND SERVICE ORGANIZATIONS
Each Fund has entered into a Transfer Agency Agreement with First Data
Investor Services Group, Inc. ("First Data"), 4400 Computer Drive, Westborough,
MA 01581, pursuant to which First Data acts as the transfer agent for each
Fund. The Transfer Agent maintains an account for each shareholder of the
Funds, performs other transfer agency functions, and acts as dividend
disbursing agent for the Funds.
Each Fund has entered into a Custodian Agreement with Investors Bank &
Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116, pursuant to
which IBT acts as custodian for each Fund. The Portfolio has entered into a
Transfer Agency Agreement with IBT pursuant to which IBT acts as transfer agent
for the Portfolio. The Portfolio also has entered into a Custodian Agreement
with IBT pursuant to which IBT acts as custodian for the Portfolio. The
Custodian's responsibilities include safeguarding and controlling the
Portfolio's and the Domini Social Bond Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Portfolio's and Domini Social Bond Fund's investments, maintaining books
of original entry for portfolio and fund accounting and other required books
and accounts, and calculating the daily net asset value of the Portfolio and
the daily net asset value of shares of each Fund. Securities held by the
Portfolio and the Domini Social Bond Fund may be deposited into certain
securities depositaries. The Custodian does not determine the investment
policies of the Portfolio or the Domini Social Bond Fund or decide which
securities the Portfolio or the Domini Social Bond Fund will buy or sell. The
Portfolio and the Domini Social Bond Fund may, however, invest in securities of
the Custodian and may deal with the Custodian as principal in securities
transactions.
<PAGE>
Each Fund may from time to time enter into agreements with various banks,
trust companies (other than Mellon Equity), broker-dealers (other than the
Distributor) or other financial organizations (collectively, "Service
Organizations") to provide services for that Fund, such as maintaining
shareholder accounts and records. Each Fund may pay fees to Service
Organizations (which may vary depending upon the services provided) in amounts
up to an annual rate of 0.25% of the daily net asset value of the shares of
that Fund owned by shareholders with whom the Service Organization has a
servicing relationship. In addition each Fund may reimburse Service
Organizations for their costs related to servicing shareholder accounts. For
the fiscal years ended July 31, 1997, 1998, and 1999 the Domini Social Equity
Fund accrued $3,711, $0, and $940 respectively, in service organization fees.
The Domini Social Bond Fund is newly-created and has not accrued service
organization fees as of the date of this Statement of Additional Information.
EXPENSES
The Funds and the Portfolio each are responsible for all of their
respective expenses, including the compensation of their respective Trustees
who are not interested persons of a Fund or the Portfolio; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to a Fund or the Portfolio; fees and expenses of independent
auditors, of legal counsel and of any transfer agent, custodian, registrar or
dividend disbursing agent of a Fund or the Portfolio; insurance premiums; and
expenses of calculating the net asset value of the Portfolio and of shares of
the Funds.
The Domini Social Equity Fund and the Domini Social Bond Fund each will
also pay sponsorship fees payable to the Sponsor, and all expenses of
distributing and redeeming shares and servicing shareholder accounts; expenses
of preparing, printing and mailing prospectuses, reports, notices, proxy
statements and reports to shareholders and to governmental offices and
commissions; expenses of shareholder meetings; and expenses relating to the
issuance, registration and qualification of shares of the Funds and the
preparation, printing and mailing of prospectuses for such purposes.
The Portfolio and the Domini Social Bond Fund each will pay the expenses
connected with the execution, recording and settlement of security transactions
and the investment management fees payable to DSIL. The Portfolio and the
Domini Social Bond Fund each also will pay the fees and expenses of its
custodian for all services to the Portfolio and the Domini Social Bond Fund, as
applicable, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of preparing and mailing reports to
investors and to governmental offices and commissions; and expenses of meetings
of investors.
CODES OF ETHICS
The Portfolio, the Funds, and DSIL have each adopted a Code of Ethics
(collectively, the "Codes of Ethics") under Rule 17j-1 of the 1940 Act. The
Codes of Ethics permit personnel subject to the Codes to invest in securities,
including securities that may be purchased or held by the Portfolio or the
Funds. The Codes of Ethics can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-202-942-8090. The Codes
of Ethics are available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of the Codes of Ethics may be obtained, after
<PAGE>
paying a duplicating fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
6. INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, MA 02110, are the independent auditors
for the Funds and for the Portfolio, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the SEC.
7. TAXATION
Taxation of the FundS and the Portfolio
FEDERAL TAXES: Each of our Funds is treated as a separate entity for
federal tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code"). Further, each Fund has elected to be treated and intends to qualify as
a "regulated investment company" under Subchapter M of the Code. We plan to
continue this election in the future for all of the Funds. As a regulated
investment company, a Fund will not be subject to any federal income or excise
taxes on its net investment income and net realized capital gains that it
distributes to shareholders in accordance with the timing requirements imposed
by the Code. If a Fund should fail to qualify as a "regulated investment
company" in any year, that Fund would incur a regular corporate federal income
tax upon its taxable income and Fund distributions would generally be taxable
as ordinary dividend income to shareholders.
We anticipate that the Portfolio will be treated as a partnership for
federal income tax purposes. As such, the Portfolio is not subject to federal
income taxation. Instead, the Domini Social Equity Fund must take into account,
in computing its federal income tax liability, its share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether it has received any cash distributions from the Portfolio.
FOREIGN TAXES: Although neither Fund expects to pay any federal income or
excise taxes, investment income received by a Fund from foreign securities may
be subject to foreign income taxes withheld at the source; we do not expect to
be able to pass through to shareholders foreign tax credits with respect to
such foreign taxes. The United States has entered into tax treaties with many
foreign countries that may entitle the Funds to a reduced rate of tax or an
exemption from tax on such income; each Fund intends to qualify for treaty
reduced rates where available. It is not possible, however, to determine a
Fund's effective rate of foreign tax in advance since the amount of a Fund's
assets to be invested within various countries is not known.
STATE TAXES: Each Fund is organized as a series of the Trust, a
Massachusetts business trust. As long as it qualifies as a "regulated
investment company" under the Code, a Fund will not have to pay Massachusetts
income or excise taxes. The Portfolio is organized as a New York trust. The
Portfolio is not subject to any income or franchise tax in the State of New
York.
Taxation of Shareholders
TAXATION OF DISTRIBUTIONS: Shareholders of each Fund normally will have to
pay federal income taxes, and any state or local taxes, on the dividends and
other distributions they receive from a Fund. Dividends from ordinary income
and any distributions from net short-term capital gains are taxable to
shareholders as ordinary income for federal income tax purposes, whether the
distributions are paid in cash or reinvested in additional shares.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), whether paid in cash or reinvested
in additional shares, are taxable to shareholders as long-term capital gains
for federal income tax purposes without regard to the length of time the
<PAGE>
shareholders have held their shares. Any Fund dividend that is declared in
October, November, or December of any calendar year, that is payable to
shareholders of record in such a month, and that is paid the following January
will be treated as if received by the shareholders on December 31 of the year
in which the divided is declared.
DIVIDENDS-RECEIVED DEDUCTION: A portion of Domini Social Equity Fund's
ordinary income dividends (but none of that Fund's capital gains) is normally
eligible for the dividends received deduction for corporations if the recipient
otherwise qualifies for that deduction with respect to its holding of Fund
shares. Availability of the deduction for a particular corporate shareholder is
subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Since the
investment income of the Domini Social Bond Fund is derived from interest
rather than dividends, no portion of the dividends received from this Fund will
be eligible for the dividends received deduction. Moreover, the portion of any
Fund's dividends that is derived from investments in foreign corporations will
not qualify for such deduction.
"BUYING A DIVIDEND": Any Fund distribution will have the effect of
reducing the per share net asset value of shares in that Fund by the amount of
the distribution. Shareholders purchasing shares shortly before the record date
of any distribution may thus pay the full price for the shares and then
effectively receive a portion of the purchase price back as a taxable
distribution.
DISPOSITION OF SHARES: In general, any gain or loss realized upon a
taxable disposition of shares of a Fund by a shareholder that holds such shares
as a capital asset will be treated as long-term capital gain or loss if the
shares have been held for more than twelve months and otherwise as a short-term
capital gain or loss. However, any loss realized upon a disposition of shares
in a Fund held for six months or less will be treated as a long-term capital
loss to the extent of any distributions of net capital gain made with respect
to those shares. Any loss realized upon a disposition of shares may also be
disallowed under rules relating to wash sales.
Effects of Certain Investments and Transactions
CERTAIN DEBT INSTRUMENTS. A investment by Domini Social Bond Fund in zero
coupon bonds, deferred interest bonds, payment-in-kind bonds, certain stripped
securities and certain securities purchased at a market discount will cause the
Fund to recognize income prior to the receipt of cash payments with respect to
those securities. In order to distribute this income and avoid a tax on the
Fund, the Fund may be required to liquidate portfolio securities that it might
otherwise have continued to hold, potentially resulting in additional taxable
gain or loss to the Fund.
OPTIONS, ETC. A Fund's transactions in options, futures and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund income and distributions to shareholders. For
example, certain positions held by a Fund on the last business day of each
taxable year will be marked to market (e.g., treated as if closed out) on that
day, and any gain or loss associated with the positions will be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held by a
Fund that substantially diminish its risk of loss with respect to other
positions in its portfolio may constitute "straddles", and may be subject to
special tax rules that would cause deferral of fund losses, adjustments in the
holding periods of fund securities, and conversion of short-term into long-term
capital losses. Certain tax elections exist for straddles that may alter the
effects of these rules. Each Fund intends to limit its activities in options,
futures and forward contracts to the extent necessary to meet the requirements
of the Code.
FOREIGN SECURITIES: Special tax considerations apply with respect to
foreign investments of each Fund. Foreign exchange gains and losses realized by
a Fund will generally be treated as ordinary income and losses. Use of non-U.S.
currencies for non-hedging purposes may have to be limited in order to avoid a
tax on a Fund.
<PAGE>
The foregoing is limited to a discussion of federal taxation. It should
not be viewed as a comprehensive discussion of the items referred to nor as
covering all provisions relevant to investors. Dividends and distributions may
also be subject to state or local taxes. Shareholders should consult their own
tax advisers for additional details on their particular tax status.
8. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Portfolio and
the Domini Social Bond Fund are made by portfolio managers who are employees of
the applicable submanager and who are appointed and supervised by its senior
officers. Changes in the Portfolio's or the Domini Social Bond Fund's
investments are reviewed by the appropriate Board of Trustees. The portfolio
managers of the Portfolio and the Domini Social Bond Fund may serve other
clients of a submanager in a similar capacity.
The Portfolio's and Domini Social Bond Fund's primary consideration in
placing securities transactions with broker-dealers for execution is to obtain
and maintain the availability of execution at the most favorable prices and in
the most effective manner possible. The applicable submanager attempts to
achieve this result by selecting broker-dealers to execute transactions on
behalf of the Portfolio or the Domini Social Bond Fund and other clients of
that submanager on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), a submanager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. Consistent
with the foregoing primary consideration, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Trustees
of the Portfolio or the Domini Social Bond Fund may determine, the applicable
submanager may consider sales of shares of the Domini Social Equity Fund and of
securities of other investors in the Portfolio or shares of the Domini Social
Bond Fund as a factor in the selection of broker-dealers to execute the
Portfolio's or the Domini Social Bond Fund's securities transactions. None of
the Portfolio, Domini Social Bond Fund or Domini Social Equity Fund will engage
in brokerage transactions with DSIL, Mellon Equity, or South Shore or any of
their respective affiliates or any affiliate of a Fund or the Portfolio. Most
of the Domini Social Bond Fund's transactions will be on a principal basis.
Under the Portfolio and Bond Fund Submanagement Agreements and as
permitted by Section 28(e) of the Securities Exchange Act of 1934, a submanager
may cause the Portfolio or the Domini Social Bond Fund, as applicable, to pay a
broker-dealer acting on an agency basis which provides brokerage and research
services to the submanager or DSIL an amount of commission for effecting a
securities transaction for the Portfolio or the Domini Social Bond Fund in
excess of the amount other broker-dealers would have charged for the
transaction if the submanager determines in good faith that the greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of either a
particular transaction or the submanager's or DSIL's overall responsibilities
to the Portfolio or the Domini Social Bond Fund, as the case may be, or to its
other clients. Not all of such services are useful or of value in advising the
Portfolio or the Domini Social Bond Fund.
The term "brokerage and research services" includes advice as to the value
of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
<PAGE>
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index,
Mellon Equity and DSIL currently intend to make only a limited use of such
brokerage and research services with respect to the Portfolio.
Although commissions paid on every transaction will, in the judgment of
the submanagers, be reasonable in relation to the value of the brokerage
services provided, commissions exceeding those which another broker might
charge may be paid to broker-dealers who were selected to execute transactions
on behalf of the Portfolio or the Domini Social Bond Fund and a submanager's or
DSIL's other clients, in part for providing advice as to the availability of
securities or of purchasers or sellers of securities and services in effecting
securities transactions and performing functions incidental thereto such as
clearance and settlement. Certain broker-dealers may be willing to furnish
statistical, research and other factual information or services to a submanager
or DSIL for no consideration other than brokerage or underwriting commissions.
The submanagers and DSIL attempt to evaluate the quality of research
provided by brokers. The submanagers and DSIL sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the submanagers nor DSIL are
able to quantify the amount of commissions which are paid as a result of such
research because a substantial number of transactions are effected through
brokers which provide research but which are selected principally because of
their execution capabilities.
The fees that the Portfolio and the Domini Social Bond Fund pay to their
respective submanager and DSIL will not be reduced as a consequence of the
Portfolio's or the Domini Social Bond Fund's receipt of brokerage and research
services. To the extent the Portfolio's or the Domini Social Bond Fund's
securities transactions are used to obtain brokerage and research services, the
brokerage commissions paid by the Portfolio or the Domini Social Bond Fund will
exceed those that might otherwise be paid for such portfolio transactions and
research, by an amount which cannot be presently determined. Such services may
be useful and of value to a submanager or DSIL in serving the Portfolio or the
Domini Social Bond Fund, as the case may be, and other clients and, conversely,
such services obtained by the placement of brokerage business of other clients
may be useful to a submanager or DSIL in carrying out its obligations to the
Portfolio or the Domini Social Bond Fund. While such services are not expected
to reduce the expenses of the submanagers or DSIL, a submanager or DSIL would,
through use of the services, avoid the additional expenses which would be
incurred if it should attempt to develop comparable information through its own
staff. For the fiscal years ended July 31, 1997, 1998 and 1999, the Portfolio
paid brokerage commissions of $101,639, $175,344, and $327,338 respectively.
The Domini Social Bond Fund is newly-created and did not pay brokerage
commissions during those periods.
In certain instances there may be securities which are suitable for the
Portfolio or the Domini Social Bond Fund as well as for one or more of a
submanager's or DSIL's other clients. Investment decisions for the Portfolio
and the Domini Social Bond Fund and for a submanager's or DSIL's other clients
are made with a view to achieving their respective investment objectives. It
may develop that a particular security is bought or sold for only one client
even though it might be held by, or bought or sold for, other clients.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling that same security. Some simultaneous transactions
are inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Portfolio and the
Domini Social Bond Fund are concerned. However, it is believed that the ability
of the Portfolio and the Domini Social Bond Fund to participate in volume
transactions will produce better executions for the Portfolio and the Domini
Social Bond Fund.
<PAGE>
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust is a Massachusetts business trust established under a
Declaration of Trust dated as of March 1, 1990. Its authorized capital consists
of an unlimited number of shares of beneficial interest of $0.01 par value,
issued in separate series. Each share of each series represents an equal
proportionate interest in that series with each other share of that series.
The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the
liabilities in respect to such series and with such a share of the general
liabilities of the Trust. If a series were unable to meet its obligations, the
assets of all other series might be available to creditors for that purpose, in
which case the assets of such other series could be used to meet liabilities
which are not otherwise properly chargeable to them. Expenses with respect to
any two or more series are to be allocated in proportion to the asset value of
the respective series except where allocations of direct expenses can otherwise
be fairly made. The officers of the Trust, subject to the general supervision
of the Trustees, have the power to determine which liabilities are allocable to
a given series, or which are general or allocable to two or more series. In the
event of the dissolution or liquidation of the Trust or any series, the holders
of the shares of any series are entitled to receive as a class the value of the
underlying assets of such shares available for distribution to shareholders.
Shares of the Trust entitle their holder to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series, a Shareholder Servicing Agent may vote any shares as to which such
Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares otherwise represented at the
meeting in person or by proxy as to which such Shareholder Servicing Agent is
the agent of record. Any shares so voted by a Shareholder Servicing Agent will
be deemed represented at the meeting for purposes of quorum requirements.
The Trustees of the Trust have the authority to designate additional
series and to designate the relative rights and preferences as between the
different series. There is presently one series so designated. All shares
issued and outstanding will be fully paid and nonassessable by the Trust, and
redeemable as described in this Statement of Additional Information and in the
Prospectus.
The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Trust unless, as to liability to Trust or Fund shareholders, it is finally
adjudicated that they engaged in wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Trust. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in wilful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
<PAGE>
Under Massachusetts law, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Funds and provides for indemnification and reimbursement of expenses out of
Fund property for any shareholder held personally liable for the obligations of
a Fund. The Declaration of Trust also provides for the maintenance, by or on
behalf of the Trust and the Funds, of appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Funds and their shareholders and the Trust's Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and a Fund
itself was unable to meet its obligations.
The Portfolio, in which all of the investable assets of the Domini Social
Equity Fund are invested, is organized as a trust under the laws of the State
of New York. The Portfolio's Declaration of Trust provides that the Domini
Social Equity Fund and other entities investing in the Portfolio (i.e., other
investment companies, insurance company separate accounts and common and
commingled trust funds) will each be liable for all obligations of the
Portfolio. However, the risk of the Domini Social Equity Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trust's Trustees believe that neither
the Domini Social Equity Fund nor its shareholders will be adversely affected
by reason of the Domini Social Equity Fund's investing in the Portfolio.
Each investor in the Portfolio, including the Domini Social Equity Fund,
may add to or reduce its investment in the Portfolio on each Fund Business Day.
At the close of each such business day, the value of each investor's interest
in the Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage representing that investor's share of the aggregate
beneficial interests in the Portfolio effective for that day. Any additions or
withdrawals, which are to be effected as of the close of business on that day,
will then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be re-computed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of any additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of business on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business on the
following Fund Business Day.
10. FINANCIAL STATEMENTS
The audited financial statements of the Domini Social Equity Fund and the
Portfolio (Statement of Assets and Liabilities at July 31, 1999, Statement of
Operations for the year ended July 31, 1999, Statement of Changes in Net Assets
for each of the years in the two-year period ended July 31, 1999, Financial
Highlights for each of the years in the five-year period ended July 31, 1999,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the Annual Report to Shareholders of the Domini Social Equity
Fund which has been filed with the SEC pursuant to Section 30(b) of the 1940
Act and Rule 30b2-1 thereunder, are hereby incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
upon the reports of KPMG LLP, independent auditors, on behalf of the Domini
Social Equity Fund and the Portfolio.
The Domini Social Bond Fund is newly-created and has not issued financial
<PAGE>
statements as of the date of this Statement of Additional Information.
Domini Social InvestmentsSM, Domini Social Equity FundSM, Domini Social Bond
FundSM, Domini Money Market AccountSM, The Responsible Index FundSM and
domini.comSM are service marks of Domini Social Investments LLC.
<PAGE>
APPENDIX
RATING INFORMATION
The following ratings are opinions of Standard & Poor's Rating Service
("Standard & Poor's") or Moody's Investors Service, Inc. ("Moody's"), not
recommendations to buy, sell or hold an obligation. The ratings below are as
described by the rating agencies. While the rating agencies may from time to
time revise such ratings, they are under no obligation to do so.
STANDARD & POOR'S
STANDARD & POOR'S FOUR HIGHEST LONG-TERM ISSUE CREDIT RATINGS
AAA An obligation rated AAA has the HIGHEST RATING ASSIGNED by
Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to
meet its financial commitment on the obligation is very
strong.
A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.
PLUS The ratings from AA to CCC may be modified by the addition of
(+) a plus or minus sign to show relative standing within the
OR MINUS(-) major rating categories.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse financial and economic changes
over the term of the notes.
SP-3 Speculative capacity to pay principal and interest.
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A-1 This designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics are
denoted with a plus sign (+) designation.
<PAGE>
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is
not as high as for issues designated A-1.
A-3 Issues carrying this designation have an adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
B Issues rated B are regarded as having only speculative
capacity for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not
made on the due date, even if the applicable grace period has
not expired, unless Standard & Poor's believes such payments
will be made during such grace period.
MOODY'S
MOODY'S FOUR HIGHEST DEBT RATINGS - TAXABLE DEBT & DEPOSITS GLOBALLY
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear
somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
Baa Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
<PAGE>
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM - TAXABLE DEBT & DEPOSITS GLOBALLY
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be
evidenced by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets
and assured sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and
market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level
of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is
maintained.
NOT PRIME Issuers rated Not Prime do not fall within any of the
Prime rating categories.
<PAGE>
PART C
Item 23. Exhibits
<TABLE>
<CAPTION>
<S> <C>
* a(1) Amended and Restated Declaration of Trust of the Registrant.
** a(2) Certificate and Amendment No. 2 to Declaration of Trust of the Registrant.
a(3) Forms of Amendments to Declaration of Trust of the Registrant.
** b(1) By-Laws of the Registrant, as amended October 6, 1997.
b(2) Form of Amended and Restated By-Laws of the Registrant.
d(1) Form of Management Agreement between the Registrant and Domini
Social Investments LLC ("DSIL") with respect to Domini Social Bond Fund.
d(2) Form of Submanagement Agreement between DSIL and South Shore Bank
with respect to Domini Social Bond Fund.
e Form of Amended and Restated Distribution Agreement between the
Registrant and DSIL Investment Services LLC, as distributor.
**** g(1) Custodian Agreement between the Registrant and Investors Bank &
Trust Company, as custodian.
g(2) Form of Letter Agreement adding Domini Social Bond Fund to the Custodian
Agreement between the Registrant and Investors Bank & Trust
Company, as custodian.
***** h(1) Transfer Agency Agreement between the Registrant and First Data Investor
Services Group, Inc. ("First Data").
h(2) Form of Letter Agreement adding Domini Social Bond Fund to the Transfer Agency
Agreement between the Registrant and First Data.
h(3) Expense Limitation Agreement with respect to Domini Social Equity Fund.
h(4) Form of Expense Limitation Agreement with respect to Domini Social Bond Fund.
h(5) Form of Administration Agreement.
*** i Opinion and consent of counsel.
and
filed
herewith
m Form of Amended and Restated Distribution Plan of the Registrant.
*** q Powers of Attorney.
</TABLE>
and ****
- ------------------------
<TABLE>
<CAPTION>
<S> <C>
* Incorporated by reference from Post-Effective Amendment No. 7 to the Registrant's
Registration Statement as filed with the SEC on November 22, 1995.
** Incorporated by reference from Post-Effective Amendment No. 11 to the Registrant's
Registration Statement as filed with the SEC on November 25, 1997.
*** Incorporated by reference from Post-Effective Amendment No. 13 to the Registrant's
Registration Statement as filed with the SEC on September 29, 1999.
**** Incorporated by reference from Post-Effective Amendment No. 14 to the Registrant's
Registration Statement as filed with the SEC on November 23, 1999.
***** Incorporated by reference from Post-Effective Amendment No. 15 to the Registrant's
Registration Statement as filed with the SEC on November 30, 1999.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 25. Indemnification
<PAGE>
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an exhibit to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement; and (b) Section 4 of the Amended and
Restated Distribution Agreement by and between the Registrant and DSIL
Investment Services LLC, filed as an exhibit hereto.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator and distributor are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
Item 26. Business and Other Connections of Investment Adviser
Domini Social Investments LLC ("DSIL") is a Massachusetts limited
liability company with offices at 11 West 25th Street, 7th Floor, New York, New
York 10010, and is registered as an investment adviser under the Investment
Advisers Act of 1940. The owners of DSIL are James Earl Brooks, Amy Lee Domini,
Peter D. Kinder, Steven D. Lydenberg, Sigward Moser and David P. Wieder.
Principal Employment during the
Name Business Address Past Two Fiscal Years
<TABLE>
<CAPTION>
<S> <C> <C>
James E. Brooks Four Arlington Street President, Equity Resources Group, Inc. (real estate
Cambridge, MA 02140 investment)
Amy L. Domini 230 Congress Street CEO, Secretary and Treasurer, Kinder, Lydenberg,
Cambridge, MA 02110 Domini & Co., Inc. ("KLD")(investment adviser);
Trustee, Loring, Wolcott & Coolidge (fiduciary)
Peter D. Kinder 11 West 25th Street President, KLD
New York, NY 10010
Steven D. Lydenberg 11 West 25th Street Director of Research, KLD
New York, NY 10010
Sigward Moser 11 West 25th Street President and Director, Communication House
New York, NY 10010 International, Inc. (advertising agency)
David P. Wieder 11 West 25th Street President, Director, Equity Owner and
New York, NY 10010 Chairman, Fundamental Shareholder Services, Inc.; Secretary,
Fundamental Portfolio Advisors (investment
adviser); Registered Representative, Fundamental
Service Corp. (broker-dealer)
</TABLE>
Item 27. Principal Underwriters
<TABLE>
<CAPTION>
<S> <C>
(a) DSIL Investment Services LLC is the distributor for the Registrant.
DSIL Investment Services LLC serves as the distributor or placement agent
for the following other registered investment companies:
Domini Social Equity Fund, Domini Institutional Social Equity Fund and
<PAGE>
Domini Social Index Portfolio.
(b) The information required by this Item 27 with respect to each director or
officer of DSIL Investment Services LLC is incorporated herein by reference
from Schedule A of Form BD (File No. 008-44763) as filed by DSIL
Investment Services LLC pursuant to the Securities Exchange Act of 1934.
(c) Not applicable.
</TABLE>
Item 28. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the offices of the Registrant and at the following locations:
Name: Address:
Domini Social Investments LLC 11 W. 25th Street (manager)
New York, NY 10010
DSIL Investment Services LLC 11 W. 25th Street (distributor)
New York, NY 10010
Investors Bank & Trust Company 200 Clarendon Street (custodian)
Boston, MA 02116
First Data 4400 Computer Drive (transfer agent)
Westborough, MA 01581
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 12th day of January, 2000.
DOMINI SOCIAL EQUITY FUND
By:
Amy L. Domini
-------------------------------------
Amy L. Domini
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on January 12, 2000.
Signature Title
Amy L. Domini President (Principal Executive Officer)
- ----------------------------- and Trustee of Domini Social Equity Fund
Amy L. Domini
Carole M. Laible Treasurer (Principal Accounting and
- ----------------------------- Financial Officer) of Domini Social Equity
Carole M. Laible Fund
Julia Elizabeth Harris* Trustee of Domini Social Equity Fund
- -----------------------------
Julia Elizabeth Harris
Kirsten S. Moy* Trustee of Domini Social Equity Fund
- -----------------------------
Kirsten S. Moy
William C. Osborn* Trustee of Domini Social Equity Fund
- -----------------------------
William C. Osborn
Karen Paul* Trustee of Domini Social Equity Fund
- -----------------------------
Karen Paul
Gregory A. Ratliff* Trustee of Domini Social Equity Fund
- -----------------------------
Gregory A. Ratliff
<PAGE>
Timothy H. Smith* Trustee of Domini Social Equity Fund
- -----------------------------
Timothy H. Smith
Frederick C. Williamson, Sr.* Trustee of Domini Social Equity Fund
- -----------------------------
Frederick C. Williamson, Sr.
*By:
Amy L. Domini
- -----------------------------
Amy L. Domini
Executed by Amy L. Domini on
behalf of those indicated
pursuant to Powers of Attorney.
<PAGE>
SIGNATURES
Domini Social Index Portfolio has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A (File No. 33-29180) of
Domini Social Equity Fund to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth of
Massachusetts on the 12th day of January, 2000.
DOMINI SOCIAL INDEX PORTFOLIO
By:
Amy L. Domini
-------------------------------------
Amy L. Domini
President of Domini Social Index Portfolio
This Post-Effective Amendment to the Registration Statement on Form N-1A
of Domini Social Equity Fund has been signed below by the following persons in
the capacities indicated below on January 12, 2000.
Signature Title
Amy L. Domini President (Principal Executive Officer)and
- ----------------------------- Trustee of Domini Social Index Portfolio
Amy L. Domini
Carole M. Laible Treasurer (Principal Accounting and
- ----------------------------- Financial Officer) of Domini Social Index
Carole M. Laible Portfolio
Julia Elizabeth Harris* Trustee of Domini Social Index Portfolio
- -----------------------------
Julia Elizabeth Harris
Kirsten S. Moy* Trustee of Domini Social Index Portfolio
- -----------------------------
Kirsten S. Moy
William C. Osborn* Trustee of Domini Social Index Portfolio
- -----------------------------
William C. Osborn
Karen Paul* Trustee of Domini Social Index Portfolio
- -----------------------------
Karen Paul
Gregory A. Ratliff* Trustee of Domini Social Index Portfolio
- -----------------------------
Gregory A. Ratliff
Timothy H. Smith* Trustee of Domini Social Index Portfolio
- -----------------------------
Timothy H. Smith
<PAGE>
Frederick C. Williamson, Sr.* Trustee of Domini Social Index Portfolio
- -----------------------------
Frederick C. Williamson, Sr.
*By:
Amy L. Domini
- -----------------------------
Amy L. Domini
Executed by Amy L. Domini on behalf of
those indicated pursuant to Powers of
Attorney.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<TABLE>
<CAPTION>
<S> <C>
a(3) Forms of Amendments to Declaration of Trust of the Registrant.
b(2) Form of Amended and Restated By-Laws of the Registrant.
d(1) Form of Management Agreement between the Registrant and Domini
Social Investments LLC ("DSIL") with respect to Domini Social Bond
Fund.
d(2) Form of Submanagement Agreement between DSIL and South Shore
Bank with respect to Domini Social Bond Fund.
e Form of Amended and Restated Distribution Agreement between the
Registrant and DSIL Investment Services LLC, as distributor.
g(2) Form of Letter Agreement adding Domini Social Bond Fund to the
Custodian Agreement between the Registrant and Investors Bank &
Trust Company, as custodian.
h(2) Form of Letter Agreement adding Domini Social Bond Fund to the
Transfer Agency Agreement between the Registrant and First Data.
h(3) Expense Limitation Agreement with respect to Domini Social
Equity Fund.
h(4) Form of Expense Limitation Agreement with respect to Domini Bond
Fund.
h(5) Form of Administration Agreement.
i Opinion and consent of counsel.
m Form of Amended and Restated Distribution Plan of the Registrant.
</TABLE>
Exhibit a(3)
DOMINI SOCIAL EQUITY FUND
FORM OF
AMENDMENT NO. 3 TO
AMENDED AND RESTATED
DECLARATION OF TRUST OF
DOMINI SOCIAL EQUITY FUND
The undersigned, being at least a majority of the Trustees of Domini
Social Equity Fund (the "Trust"), a business trust organized under the laws of
the Commonwealth of Massachusetts, pursuant to a Declaration of Trust dated
June 7, 1989, as amended and restated on March 1, 1990, and as further amended
(the "Declaration of Trust"), do hereby amend Section 1.1 of the Declaration of
Trust by deleting Section 1.1 in its entirety and replacing it with the
following, effective as of January __, 2000:
SECTION 1.1. NAME. The name of the trust is hereby amended to be "Domini
Social Investment Trust".
IN WITNESS WHEREOF, the undersigned have executed this Amendment on
separate counterparts this 14th day of January, 2000.
- ------------------------------- -------------------------------
AMY L. DOMINI JULIA ELIZABETH HARRIS
As trustee and not individually As trustee and not individually
- ------------------------------- -------------------------------
KIRSTEN S. MOY WILLIAM C. OSBORN
As trustee and not individually As trustee and not individually
- ------------------------------- -------------------------------
KAREN PAUL GREGORY A. RATLIFF
As trustee and not individually As trustee and not individually
- ------------------------------- -------------------------------
TIMOTHY SMITH FREDERICK C. WILLIAMSON, SR.
As trustee and not individually As trustee and not individually
<PAGE>
Exhibit a(3)
DOMINI SOCIAL INVESTMENT TRUST
FORM OF
AMENDMENT NO. 4 TO AMENDED AND RESTATED
DECLARATION OF TRUST AND AMENDED AND RESTATED
ESTABLISHMENT AND DESIGNATION OF SERIES OF SHARES OF
BENEFICIAL INTEREST (WITHOUT PAR VALUE)
Pursuant to Sections 6.9 and 9.3 of the Declaration of Trust, dated June
7, 1989, as amended and restated on March 1, 1990, and as further amended (the
"Declaration of Trust"), of Domini Social Investment Trust (formerly, Domini
Social Equity Fund) (the "Trust"), the undersigned, being at least a majority
of the Trustees of the Trust, do hereby amend and restate the Trust's existing
Establishment and Designation of Series of Shares of Beneficial Interest
(without par value) in order to establish a new series of Shares (as defined in
the Declaration of Trust). No other changes to the special and relative rights
of the existing series are intended by this amendment and restatement. This
amendment and restatement shall become effective as of January 17, 2000.
1. The series shall be as follows:
The new series shall be designated as "Domini Social Bond Fund."
The other existing series of the Trust is Domini Social Equity Fund.
2. Each series shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of each series. Each Share of a series shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters on which Shares of that series shall be entitled to vote, shall
represent a pro rata beneficial interest in the assets allocated or belonging
to that series, and shall be entitled to receive its pro rata share of the net
assets of that series upon liquidation of that series, all as provided in
Section 6.9 of the Declaration of Trust. The proceeds of sales of Shares of a
series, together with any income and gain thereon, less any diminution or
expenses thereof, shall irrevocably belong to that series, unless otherwise
required by law.
3. Shareholders of each series shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
<PAGE>
effectively acted upon with respect to each series as provided in, Rule 18f-2,
as from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated to each
series as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to create additional series,
to reallocate assets and expenses, to change the designation of each series or
any other series created hereafter, or otherwise to change the special and
relative rights of each series or any such other series.
IN WITNESS WHEREOF, the undersigned have executed this Establishment and
Designation of Series on separate counterparts this 14th day of January, 2000.
- ------------------------------- -------------------------------
AMY L. DOMINI JULIA ELIZABETH HARRIS
As trustee and not individually As trustee and not individually
- ------------------------------- -------------------------------
KIRSTEN S. MOY WILLIAM C. OSBORN
As trustee and not individually As trustee and not individually
- ------------------------------- -------------------------------
KAREN PAUL GREGORY A. RATLIFF
As trustee and not individually As trustee and not individually
- ------------------------------- -------------------------------
TIMOTHY SMITH FREDERICK C. WILLIAMSON, SR.
As trustee and not individually As trustee and not individually
Exhibit b(2)
AMENDED AND RESTATED BY-LAWS
OF
Domini Social Investment Trust
(formerly, DOMINI SOCIAL EQUITY FUND)
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY" and "TRUSTEES" have the respective
meanings given them in the Declaration of Trust of Domini Social Investment
Trust (formerly, Domini Social Equity Fund) dated June 7, 1989, as amended and
restated as of March 1, 1990, and as further amended and restated from time to
time.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be in the City
of Boston, County of Suffolk.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other places
without as well as within the Commonwealth as the Trustees may from time to
time determine.
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. A meeting of Shareholders may be called at any time
by a majority of the Trustees and shall be called by any Trustee upon written
request, which shall specify the purpose or purposes for which such meeting is
to be called, of Shareholders holding in the aggregate not less than 10% of the
outstanding Shares entitled to vote on the matters specified in such written
request. Any such meeting shall be held within or without the Commonwealth of
Massachusetts on such day and at such time as the Trustees shall designate. The
holders of a majority of outstanding Shares entitled to vote present in person
or by proxy shall constitute a quorum at any meeting of the Shareholders. In
<PAGE>
the absence of a quorum, a majority of outstanding Shares entitled to vote
present in person or by proxy may adjourn the meeting from time to time until a
quorum shall be present.
SECTION 2. NOTICE OF MEETINGS Notice of all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
address as recorded on the register of the Trust, mailed at least 10 days and
not more than 60 days before the meeting. Only the business stated in the
notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice. No notice need be
given to any Shareholder who shall have failed to inform the Trust of his
current address or if a written waiver of notice, executed before or after the
meeting by the Shareholder or his attorney thereunto authorized, is filed with
the records of the meeting.
SECTION 3. RECORD DATE. For the purpose of determining the Shareholders
who are entitled to notice of and to vote at any meeting, or to participate in
any distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding 30 days,
as the Trustees may determine; or without closing the transfer books the
Trustees may fix a date not more than 60 days prior to the date of any meeting
of Shareholders or distribution or other action as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.
SECTION 4. ACTION. The Shareholders shall take action by the affirmative
vote of the holders of a majority, except in the case of the election of
Trustees which shall only require a plurality, of the Shares present and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by the 1940 Act, or the Declaration of
Trust.
SECTION 5. PROXY REPRESENTATION AND VOTING. At any meeting of
Shareholders, any holder of Shares entitled to vote thereat may vote by proxy,
provided that no proxy shall be voted at any meeting unless it shall have been
placed on file with the Secretary, or with such other officer or agent of the
Trust as the Secretary may direct, for verification prior to the time at which
such vote shall be taken. The placing of a Shareholder's name on a proxy
pursuant to telephonic or electronically transmitted instructions obtained
pursuant to procedures which are reasonably designed to verify that such
instructions have been authorized by such Shareholder, shall constitute
execution of such proxy by or on behalf of such Shareholder. Pursuant to a vote
of a majority of the Trustees, proxies may be solicited in the name of one or
<PAGE>
more Trustees or one or more officers of the Trust or such others persons as
the Trustees shall designate. Only Shareholders of record shall be entitled to
vote.
Each full Share shall be entitled to one vote and fractional Shares shall
be entitled to a vote of such fractions. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such votes shall not be received in
respect of such Share. Any copy, facsimile telecommunication or other reliable
reproduction of a proxy may be substituted for or used in lieu of the original
proxy for any and all purposes for which the original proxy could be used,
provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original proxy. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
such Share may be voted by such guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting.
SECTION 6. INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted shareholders
of a Massachusetts business corporation.
SECTION 7. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
<PAGE>
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the Chairman or by any
Trustee. Notice of the time and place of each meeting other than regular or
stated meetings shall be given by the Secretary or an Assistant Secretary or by
the officer or Trustee calling the meeting and shall be mailed to each Trustee
at least two days before the meeting, or shall be telegraphed, cabled, or
wirelessed to each Trustee at his business address, or personally delivered to
him at least one day before the meeting. Notice of a meeting need not be given
to any Trustee if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. A notice or waiver of notice need not specify the
purpose of any meeting. The Trustees may meet by means of a telephone
conference circuit or similar communications equipment by means of which all
persons participating in the meeting can hear each other, which telephone
conference meeting shall be deemed to have been held at a place designated by
the Trustees at the meeting. Participation in a telephone conference meeting
shall constitute presence in person at such meeting. Any action required or
permitted to be taken at any meeting of the Trustees may be taken by the
Trustees without a meeting if all the Trustees consent to the action in writing
and the written consents are filed with the records of the Trustees' meetings.
Such consents shall be treated as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees present
in person at any regular or special meeting of the Trustees shall constitute a
quorum for the transaction of business at such meeting and (except as otherwise
required by law, the Declaration or these By-Laws) the act of a majority of the
Trustees present at any such meeting, at which a quorum is present, shall be
the act of the Trustees. In the absence of a quorum, a majority of the Trustees
present may adjourn the meeting from time to time until a quorum shall be
present. Notice of an adjourned meeting need not be given.
SECTION 3. ATTENDANCE BY TRUSTEES. A Trustee who fails, during any fiscal
year of the Trust, to attend at least 75% of the meetings of the Board, or who
fails to attend at least 75% of the meetings of each Committee of the Board of
which such Trustee is a member, unless such failure was the result of an
illness or incapacity which, as determined by the Board, is not likely to
materially interfere with the future performance of the duties of such Trustee,
shall be subject to removal for cause by vote of two-thirds of the remaining
Trustees. The foregoing shall not be construed to limit in any way the
authority of the Board with respect to removal of Trustees.
<PAGE>
ARTICLE V
COMMITTEES AND ADVISORY BOARD
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three Trustees to hold office at the
pleasure of the Trustees. While the Trustees are not in session, the Executive
Committee shall have the power to conduct the current and ordinary business of
the Trust, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate
to the Executive Committee except those powers which by law, the Declaration or
these By-Laws the Trustees are prohibited from so delegating. The Trustees may
also elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees
may designate a chairman of any such Committee. In the absence of such
designation a Committee may elect its own chairman.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may (i)
provide for stated meetings of any Committee, (ii) specify the manner of
calling and notice required for special meetings of any Committee, (iii)
specify the number of members of a Committee required to constitute a quorum
and the number of members of a Committee required to exercise specified powers
delegated to such Committee, (iv) authorize the making of decisions to exercise
specified powers by written assent of the requisite number of members of a
Committee without a meeting, and (v) authorize the members of a Committee to
meet by means of a telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records of
decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
SECTION 3. ADVISORY BOARD. The Trustees may appoint an Advisory Board to
consist in the first instance of not less than three members. Members of such
Advisory Board shall not be Trustees or officers and need not be Shareholders.
A member of such Advisory Board shall hold office for such period as the
Trustees may by vote provide and may resign therefrom by a written instrument
signed by him which shall take effect upon its delivery to the Trustees. The
<PAGE>
Advisory Board shall have no legal powers and shall not perform the functions
of Trustees in any manner, such Advisory Board being intended merely to act in
an advisory capacity. Such Advisory Board shall meet at such times and upon
such notice as the Trustees may by vote provide.
SECTION 4. CHAIRMAN. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to hold office until his
successor shall have been duly elected and qualified. The Chairman shall not
hold any other office. The Chairman may be, but need not be, a Shareholder. The
Chairman shall preside at all meetings of the Trustees and shall have such
other duties as from time to time may be assigned to him by the Trustees.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
President, a Treasurer and a Secretary, each of whom shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or more Vice Presidents,
one or more Assistant Treasurers, and one or more Assistant Secretaries. The
Trustees may delegate to any officer or committee the power to appoint any
subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise provided
by law, the Declaration or these By-Laws, the President, the Treasurer and the
Secretary shall hold office until his respective successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. The Secretary and Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall not hold any other office.
Except as above provided, any two offices may be held by the same person. Any
officer may be, but does not need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause by a vote of a majority
of the Trustees. Any officer or agent appointed by any officer or committee may
be removed with or without cause by such appointing officer or committee.
<PAGE>
SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President, unless a
Chairman is so elected by the Trustees, shall be the principal executive
officer of the Trust. Subject to the control of the Trustees and any committee
of the Trustees, the President shall at all times exercise a general
supervision and direction over the affairs of the Trust. The President shall
have the power to employ attorneys and counsel for the Trust and to employ such
subordinate officers, agents, clerks and employees as he may find necessary to
transact the business of the Trust. The President shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust. The President shall have such other powers and duties
as, from time to time, may be conferred upon or assigned to him by the
Trustees.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, the Vice President or, if there are more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to such custodian
as the Trustees may employ pursuant to Article X hereof. The Treasurer shall
render a statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and shall in general perform all the
duties incident to the office of Treasurer and such other duties as from time
to time may be assigned to him by the Trustees. The Treasurer shall give a bond
for the faithful discharge of his duties, if required to do so by the Trustees,
in such sum and with such surety or sureties as the Trustees shall require.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep
the minutes of all meetings of the Shareholders in proper books provided for
that purpose; shall keep the minutes of all meetings of the Trustees; shall
have custody of the seal of the Trust; and shall have charge of the Share
transfer books, lists and records unless the same are in the charge of the
Transfer Agent. The Secretary shall attend to the giving and serving of all
notices by the Trust in accordance with the provisions of these By-Laws and as
required by law; and subject to these By-Laws, shall in general perform all the
duties incident to the office of Secretary and such other duties as from time
<PAGE>
to time may be assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from
time to time may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if required to do
so by the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all of the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE
ADVISORY BOARD. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers,
by any committee of officers upon whom such power may be conferred by the
Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall be that annual period as designated by
the Trustees of the Trust.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
<PAGE>
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been
telegraphed, cabled or wirelessed for the purposes of these By-Laws when it has
been delivered to a representative of any telegraph, cable or wireless company
with instruction that it be telegraphed, cabled or wirelessed. Any notice shall
be deemed to be given at the time when the same shall be mailed, telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times employ
a bank or trust company having a capital, surplus and undivided profits of at
least $5,000,000 as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained
in the Declaration, these By-Laws and the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same
upon written order;
(ii) to receive and receipt for any monies due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and accounts of
the Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of the
Trust and the net asset value of Shares;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
<PAGE>
the custodian and upon such terms and conditions as may be agreed upon between
the custodian and such sub-custodian and approved by the Trustees, provided
that in every case such sub-custodian shall be a bank or trust company
organized under the laws of the United States or one of the states thereof and
having capital, surplus and undivided profits of at least $5,000,000.
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian
to deposit all or any part of the securities owned by the Trust in a system for
the central handling of securities established by a national securities
exchange or a national securities association registered with the Commission
under the Securities Exchange Act of 1934, or with such other person as may be
permitted by the Commission, or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodian.
SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled, and
shall order the same to be delivered by the custodian only upon
completion of a sale, exchange, transfer, pledge, or other
disposition thereof, and upon receipt by the custodian of the
consideration therefor or a certificate of deposit or a receipt of an
issuer or of its Transfer Agent, all as the Trustees may generally or
from time to time require or approve, or to a successor custodian;
and the Trustees shall cause all funds owned by the Trust or to which
<PAGE>
it may become entitled to be paid to the custodian, and shall order
the same disbursed only for investment against delivery of the
securities acquired, or in payment of expenses, including management
compensation, and liabilities of the Trust, including distributions
to Shareholders, or to a successor custodian; provided, however, that
nothing herein shall prevent delivery of securities for examination
to the broker purchasing the same in accord with the "street
delivery" custom whereby such securities are delivered to such broker
in exchange for a delivery receipt exchanged on the same day for an
uncertified check of such broker to be presented on the same day for
certification.
(b) In case of the resignation, removal or inability to serve of any such
custodian, the Trust shall promptly appoint another bank or trust
company meeting the requirements of this Article X as successor
custodian. The agreement with the custodian shall provide that the
retiring custodian shall, upon receipt of notice of such appointment,
deliver all Trust Property in its possession to and only to such
successor, and that pending appointment of a successor custodian, or
a vote of the Shareholders to function without a custodian, the
custodian shall not deliver any Trust Property to the Trust, but may
deliver all or any part of the Trust Property to a bank or trust
company doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus and undivided profits
(as shown in its last published report) of at least $5,000,000;
provided that arrangements are made for the Trust Property to be held
under terms similar to those on which they were held by the retiring
custodian.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted (a) by the Shareholders by a Majority Shareholder Vote,
or (b) by the Trustees, provided, however, that no By-Law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration or these By-Laws, a vote of the
Shareholders.
Exhibit d(1)
FORM OF MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of ________ __, 2000, by and between Domini
Social Investment Trust, a Massachusetts business trust (the "Trust"), and
Domini Social Investments LLC, a Massachusetts limited liability company ("DSI"
or the "Manager").
W I T N E S S E T H:
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, in each case as amended and in effect from time to time, the "1940
Act"); and
WHEREAS, the Trust wishes to engage DSI to provide certain investment
advisory services for the series of the Trust designated as Domini Social Bond
Fund (the "Fund"), and DSI is willing to provide such investment advisory
services for the Fund on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF DSI.
DSI shall act as the Manager for the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Trust's Declaration of Trust, dated June 7, 1989, and By-laws, as each may be
amended and restated from time to time (respectively, the "Declaration" and the
"By-Laws"), the provisions of the 1940 Act, and the then-current registration
statement of the Trust with respect to the Fund. The Manager shall also make
recommendations as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Trust's portfolio
securities shall be exercised. Should the Board of Trustees of the Trust at any
time, however, make any definite determination as to investment policy
applicable to the Fund and notify the Manager thereof in writing, the Manager
shall be bound by such determination for the period, if any, specified in such
notice or until similarly notified that such determination has been revoked.
The Manager shall take, on behalf of the Fund, all actions which it deems
<PAGE>
necessary to implement the investment policies determined as provided above
and, in particular, to place all orders for the purchase or sale of securities
for the Fund's account with the brokers or dealers selected by it, and to that
end the Manager is authorized as the agent of the Trust to give instructions to
the custodian or any subcustodian of the Fund as to deliveries of securities
and payments of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such orders, brokers or
dealers may be selected who also provide brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Fund and/or the other accounts over which the Manager, any
subadviser, submanager or respective "affiliated person" thereof exercises
investment discretion. The Manager is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Manager determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Manager and any "affiliated person" of the Manager have with respect
to accounts over which they exercise investment discretion. The Trustees of the
Trust shall periodically review the commissions paid by the Fund to determine
if the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Fund. In making purchases or sales of
securities or other property for the account of the Fund, the Manager may deal
with itself or with the Trustees of the Trust or the Trust's underwriter or
distributor to the extent such actions are permitted by the 1940 Act. In
providing the services and assuming the obligations set forth herein, the
Manager may, subject to the requirements of the 1940 Act or any exemptive order
granted thereunder, employ at its own expense, or may request that the Trust
employ at the Fund's expense, one or more subadvisers or submanagers; provided
that in each case the Manager shall supervise the activities of each subadviser
or submanager. Any agreement between the Manager and a subadviser or submanager
shall be subject to the renewal, termination and amendment provisions
applicable to this Agreement. Any agreement by the Trust on behalf of the Fund
and a subadviser or submanager may be terminated by the Manager at any time on
not more than 60 days' nor less than 30 days' written notice to the Trust and
the subadviser or submanager, as applicable.
2. ALLOCATION OF CHARGES AND EXPENSES.
DSI shall furnish at its own expense all necessary services, facilities
<PAGE>
and personnel in connection with its responsibilities under Section 1 above.
Except as provided in the foregoing sentence, it is understood that the Trust
will pay all of its own expenses including, without limitation, organization
costs of the Trust; compensation of Trustees who are not "interested persons"
of the Trust; governmental fees, including but not limited to Securities and
Exchange Commission fees and state "blue sky" fees, if any; interest expense;
loan commitment fees; taxes; brokerage fees and commissions; membership dues in
industry and professional associations; fees and expenses of auditors and
accountants, legal counsel and any transfer agent, distributor, shareholder
servicing agent, recordkeeper, registrar or dividend disbursing agent of the
Trust; expenses relating to the issuance and redemption of shares of beneficial
interest of the Fund and servicing shareholder accounts; expenses of preparing,
typesetting, printing and mailing prospectuses, statements of additional
information, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders of the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses connected with maintaining the Trust's existence as a
Massachusetts business trust; expenses of meetings of the Fund's shareholders;
and such non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Trust on behalf of the
Fund may be party and the legal obligation which the Trust may have to
indemnify its Trustees and officers with respect thereto.
3. COMPENSATION OF DSI.
For the services to be rendered and facilities provided by DSI hereunder
for the benefit of the Fund, the Trust will pay DSI from the assets of the Fund
an advisory fee accrued daily and payable monthly at an annual rate equal to
0.40% of the Fund's average daily net assets for the Fund's then current fiscal
year. The Manager shall pay any applicable fees to any subadviser(s) or
submanager(s) on the Fund's behalf. If DSI provides services hereunder for less
than the whole of any period specified in this Section 3, the compensation to
DSI shall be accordingly adjusted and prorated.
4. COVENANTS OF DSI.
DSI agrees that it will not deal with itself, or with the Trustees of the
Trust or the Trust's principal underwriter or distributor, if any, as
<PAGE>
principals in making purchases or sales of securities or other property, except
as permitted by the 1940 Act, will not take a long or short position in shares
of beneficial interest of the Fund, except as permitted by the Declaration, and
will comply with all other provisions of the Declaration and By-Laws and the
then-current registration statement of the Trust applicable to the Fund
relative to DSI and its directors and officers.
5. LIMITATION OF LIABILITY OF DSI.
DSI shall not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
execution of securities transactions for the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As
used in this Section 5, the term "DSI" shall include directors, officers and
employees of DSI as well as DSI itself.
6. ACTIVITIES OF DSI.
The services of DSI to the Fund are not to be deemed to be exclusive, DSI
being free to render investment advisory and/or other services to others. It is
understood that Trustees and officers of the Trust and shareholders of the Fund
are or may be or may become interested in DSI as directors, officers, employees
or otherwise and that directors, officers and employees of DSI are or may
become similarly interested in the Trust or the Fund and that DSI may be or may
become interested in the Trust or the Fund as a shareholder or otherwise.
7. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT.
This Agreement shall become effective as of the day and year first above
written, shall govern the relations between the parties hereto thereafter and
shall remain in force until January 14, 2002, on which date it will terminate
unless its continuance after January 14, 2002 is "specifically approved at
least annually" (a) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" of the Trust or of DSI at a meeting specifically
called for the purpose of voting on such approval and (b) by the Board of
Trustees of the Trust or by "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by the "vote of a majority of the outstanding voting
securities" of the Fund, or by DSI, in each case on not more than 60 days' nor
<PAGE>
less than 30 days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment."
This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Fund (except
for any such amendment as may be effected in the absence of such approval
without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person" and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under the Act.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Fund; that any liability of
the Trust under this Agreement, or in connection with the transactions
contemplated herein, shall be discharged only out of the assets of the Fund;
and that no other series of the Trust shall be liable with respect to this
Agreement or in connection with the transactions contemplated herein.
The undersigned officer of the Trust has executed this Agreement not
individually, but as an officer under the Declaration and the obligations of
this Agreement are not binding upon any of the Trustees or officers of the
Trust or holders of shares of beneficial interest of the Fund individually.
8. GOVERNING LAW.
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
DOMINI SOCIAL INVESTMENT TRUST DOMINI SOCIAL
On behalf of Domini Social Bond Fund INVESTMENTS LLC
By: By:
Title: Title:
Exhibit d(2)
FORM OF SUBMANAGEMENT AGREEMENT
SUBMANAGEMENT AGREEMENT, dated as of ________ __, 2000, by and between
Domini Social Investments LLC, a Massachusetts limited liability company ("DSI"
or the "Manager"), and South Shore Bank a [**__________**] ("SSB" or the
"Submanager").
W I T N E S S E T H:
WHEREAS, Domini Social Investment Trust (the "Trust") engages in business
as an open-end management investment company and is registered as such under
the Investment Company Act of 1940, as amended (collectively with the rules and
regulations promulgated thereunder, in each case as in effect from time to
time, the "1940 Act");
WHEREAS, DSI has entered into a Management Agreement (the "Management
Agreement") with the Trust wherein DSI has agreed to provide certain investment
advisory services for the series of the Trust designated as Domini Social Bond
Fund (the "Fund"); and
WHEREAS, as permitted by Section 1 of the Management Agreement, DSI wishes
to subcontract some of the performance of its obligations thereunder to SSB,
and SSB desires to accept such obligations on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. APPOINTMENT OF SSB.
In accordance with and subject to the Management Agreement between the
Trust and the Manager with respect to the Fund, the Manager hereby retains SSB
to act as the Submanager for the Fund for the period and on the terms set forth
in this Agreement. The Submanager accepts such appointment and agrees to
provide an investment program for the Fund for the compensation provided by
this Agreement.
2. DUTIES OF THE SUBMANAGER.
The Submanager shall provide the Fund and the Manager with such investment
advice and supervision as the Manager may from time to time consider necessary
<PAGE>
for the proper supervision of such portion of the Fund's investment assets as
the Manager may designate from time to time. Notwithstanding any provision of
this Agreement, the Manager shall retain all rights and ultimate
responsibilities to supervise and, in its discretion, conduct investment
activities relating to the Fund.
The Submanager shall furnish continuously an investment program and shall
determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund allocated by the Manager
to the Submanager shall be held uninvested, subject always to the restrictions
of the Trust's Declaration of Trust, dated June 7, 1989, and By-laws, as each
may be amended and restated from time to time (respectively, the "Declaration"
and the "By-Laws"), the provisions of the 1940 Act, and the then-current
registration statement of the Trust with respect to the Fund and, subject
further, to the Submanager notifying the Manager in advance of the Submanager's
intention to purchase any securities except insofar as the requirement for such
notification may be waived or limited by the Manager, it being understood that
the Submanager shall be responsible for compliance with any restrictions
imposed in writing by the Manager from time to time in order to facilitate
compliance with the above-mentioned restrictions and such other restrictions as
the Manager may determine. Further, the Manager or the Trustees of the Trust
may at any time, upon written notice to the Submanager, suspend or restrict the
right of the Submanager to determine what securities shall be purchased or sold
on behalf of the Fund and what portion, if any, of the assets of the Fund
allocated by the Manager to the Submanager shall be held uninvested. The
Submanager shall also, as requested, make recommendations to the Manager as to
the manner in which proxies, voting rights, rights to consent to corporate
action and any other rights pertaining to the Fund's portfolio securities shall
be exercised. Should the Board of Trustees of the Trust or the Manager at any
time, however, make any definite determination as to an investment policy
applicable to the Fund and notify the Submanager thereof in writing, the
Submanager shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination
has been revoked.
The Submanager shall take, on behalf of the Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above and, in particular, to place all orders for the purchase or sale of
securities for the Fund's account with the brokers or dealers selected by it,
and to that end the Submanager is authorized as the agent of the Fund to give
instructions to the custodian or any subcustodian of the Fund as to deliveries
of securities and payments of cash for the account of the Fund. The Submanager
will advise the Manager on the same day it gives any such instructions. In
connection with the selection of such brokers or dealers and the placing of
<PAGE>
such orders, brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which the Submanager, the Manager or a respective "affiliated person" thereof
exercises investment discretion. The Submanager is authorized to pay a broker
or dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if the Submanager determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Submanager, the Manager and any "affiliated person" thereof have with
respect to accounts over which they exercise investment discretion. The
Trustees of the Trust shall periodically review the commissions paid by the
Fund to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Fund. In making purchases or
sales of securities or other property for the account of the Fund, the
Submanager may deal with itself or with the Trustees of the Trust or the Fund's
underwriter or distributor to the extent such actions are permitted by the 1940
Act. The Board of Trustees of the Trust, in its discretion, may instruct the
Submanager to effect all or a portion of its securities transactions with one
or more brokers and/or dealers selected by the Board of Trustees if it
determines that the use of such brokers and/or dealers is in the best interest
of the Fund.
3. ALLOCATION OF CHARGES AND EXPENSES.
The Submanager shall furnish at its own expense all necessary services,
facilities and personnel in connection with its responsibilities under Section
2 above. Except as provided in the foregoing sentence, it is understood that
the Trust will pay all of its own expenses including, without limitation,
organization costs of the Trust; compensation of Trustees who are not
"interested persons" of the Trust; governmental fees; interest charges; loan
commitment fees; taxes; membership dues in industry associations allocable to
the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, registrar or dividend disbursing agent of the
Trust; expenses relating to the issuance and redemption of shares of beneficial
interest of the Fund and servicing shareholder accounts; expenses of preparing,
typesetting, printing and mailing prospectuses, statements of additional
information, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders of the Fund; expenses
connected with the execution, recording and settlement of security
<PAGE>
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.
4. COMPENSATION OF THE SUBMANAGER.
For the services to be rendered by the Submanager hereunder, the Manager
shall pay to the Submanager out of the management fee it receives from the
Trust out of the assets of the Fund, and only to the extent thereof, a
subadvisory fee, accrued daily and paid monthly, at an annual rate equal to
0.20% of the average daily net assets of the Fund allocated to the Submanager.
If SSB serves as Submanager for less than the whole of any period specified in
this Section 4, the compensation to SSB, as Submanager, shall be accordingly
adjusted and prorated.
5. COVENANTS OF THE SUBMANAGER.
The Submanager agrees that it will not deal with itself, or with the
Trustees of the Trust or the Trust's principal underwriter or distributor, if
any, as principals in making purchases or sales of securities or other
property, except as permitted by the 1940 Act, will not take a long or short
position in shares of beneficial interest of the Fund, except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current registration statement of the Trust applicable
to the Fund relative to the Submanager and its directors and officers.
6. LIMITATION OF LIABILITY OF THE SUBMANAGER.
The Submanager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution of securities transactions for the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As
used in this Section 6, the term "Submanager" shall include directors, officers
and employees of the Submanager as well as the Submanager itself. The Trust is
expressly made a third party beneficiary of this Agreement and may enforce any
<PAGE>
obligations of the Submanager under this Agreement and recover directly from
the Submanager for any liability the Submanager may have hereunder.
7. ACTIVITIES OF THE SUBMANAGER.
The services of the Submanager to the Fund are not to be deemed to be
exclusive, the Submanager being free to render investment advisory and/or other
services to others. It is understood that Trustees and officers of the Trust
and shareholders of the Fund or the Manager are or may be or may become
interested in the Submanager as directors, officers, employees or otherwise and
that directors, officers and employees of the Submanager are or may become
similarly interested in the Trust or the Fund or the Manager and that the
Submanager may be or may become interested in the Trust or the Fund as a
shareholder or otherwise.
8. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT.
This Agreement shall become effective as of the day and year first above
written, shall govern the relations between the parties hereto thereafter and
shall remain in force until January 14, 2002, on which date it will terminate
unless its continuance after January 14, 2002 is "specifically approved at
least annually" (a) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" of the Trust or of DSI or the Submanager at a
meeting specifically called for the purpose of voting on such approval and (b)
by the Board of Trustees of the Trust or by "vote of a majority of the
outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees of the Trust, (ii) the "vote of a majority of the
outstanding voting securities" of the Fund or (iii) DSI with the prior consent
of the Trustees of the Trust, in each case on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement may be
terminated at any time without the payment of any penalty by the Submanager on
not less than 90 days' written notice to the Manager and the Trustees of the
Trust. This Agreement shall automatically terminate in the event of its
"assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the parties hereto, the
Trustees of the Trust and the "vote of a majority of the outstanding voting
securities" of the Fund (except for any such amendment as may be effected in
<PAGE>
the absence of such vote without violating the 1940 Act or any exemptive order
granted thereunder).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person" and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under the Act.
9. GOVERNING LAW.
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts;
provided, however, that nothing herein will be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or any
rules or regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
SOUTH SHORE BANK
By: ___________________________
Title:
DOMINI SOCIAL INVESTMENTS LLC
By: ___________________________
Title:
<PAGE>
Acknowledged:
DOMINI SOCIAL INVESTMENT TRUST
On behalf of Domini Social Bond Fund
By: ___________________________
Title:
Exhibit e
FORM OF AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
AMENDED AND RESTATED DISTRIBUTION AGREEMENT, dated as of August 15, 1999
and amended and restated as of [**__________ __**], 2000 by and between Domini
Social Investment Trust (formerly, "Domini Social Equity Fund"), a
Massachusetts business trust (the "Trust"), and DSIL INVESTMENT SERVICES LLC, a
New York limited liability company and a subsidiary of Domini Social
Investments LLC (the "Distributor").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Trust's shares of beneficial interests ("Shares") have been
divided into one or more series ("Series");
WHEREAS, the Board of Trustees of the Trust has adopted an Amended and
Restated Distribution Plan, dated as of May 1, 1990 and amended and restated as
of January 14, 2000 (as amended and restated and in effect from time to time,
the "Distribution Plan"), which is incorporated herein by reference and
pursuant to which the Trust desires to enter into this Amended and Restated
Distribution Agreement with respect to its current and future Series;
WHEREAS, the Trust wishes to engage the Distributor to provide certain
services with respect to the distribution of the Shares of each of its Series,
and the Distributor is willing to provide such services to each Series of the
Trust on the terms and conditions hereinafter set forth; and
WHEREAS, the Trust has entered into a distribution agreement, dated as of
August 15, 1999, with respect to its Series designated Domini Social Equity
Fund (the "Original Agreement") and desires to amend and restate the Original
Agreement in its entirety in order to provide that its provisions apply to each
of the Series of the Trust.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows, and the Original Agreement is hereby amended and restated as follows:
<PAGE>
1. The Trust grants to the Distributor the right, as agent of the Trust,
to sell Shares of each Series of the Trust upon the terms hereinbelow set forth
during the term of this Agreement. While this Agreement is in force, the
Distributor agrees to use its best efforts to find purchasers for Shares of
each Series of the Trust.
The Distributor shall have the right, as agent of the Trust, to order from
the Trust the Shares needed, but not more than the Shares needed (except for
clerical errors and errors of transmission), to fill unconditional orders for
Shares placed with the Distributor, all such orders to be made in the manner
set forth in the Trust's then-current prospectus (the "Prospectus") and
then-current statement of additional information (the "Statement of Additional
Information"). The price which shall be paid to the Trust for the Shares so
purchased shall be the net asset value per Share as determined in accordance
with the provisions of the Declaration of Trust and By-Laws, as each may from
time to time be amended (collectively, the "Governing Instruments"). The
Distributor shall notify the Custodian of the Trust (currently Investors Bank &
Trust Company), at the end of each business day, or as soon thereafter as the
orders placed with the Distributor have been compiled, of the number of Shares
and the prices thereof which have been ordered through the Distributor since
the end of the previous business day.
The right granted to the Distributor to place orders for Shares with the
Trust shall be exclusive, except that this exclusive right shall not apply to
Shares issued in the event that an investment company (whether a regulated or
private investment company or a personal holding company) is merged with and
into or consolidated with the Trust or in the event that the Trust acquires, by
purchase or otherwise, all (or substantially all) the assets or the outstanding
shares of any such company; nor shall it apply to Shares issued by the Trust as
a dividend or stock split. The exclusive right to place orders for Shares
granted to the Distributor may be waived by the Distributor by notice to the
Trust in writing, either unconditionally or subject to such conditions and
limitations as may be set forth in such notice to the Trust. The Trust hereby
acknowledges that the Distributor may render distribution and other services to
other parties, including other investment companies. In connection with its
duties hereunder, the Distributor shall also arrange for computation of
performance statistics with respect to the Trust and arrange for publication of
current price information in newspapers and other publications.
<PAGE>
2. The Shares may be sold by the Distributor on behalf of the Trust, to
any investor or to or through any dealer having a sales agreement with the
Distributor, upon the following terms and conditions:
The public offering price of Shares of the Trust, i.e., the price per
Share at which the Distributor or any dealer purchasing Shares through the
Distributor may sell shares to the public, shall be the net asset value of such
Shares.
The net asset value of Shares of the Trust shall be determined by the
Trust, or by an agent of the Trust, as of the close of the New York Stock
Exchange on each day on which the New York Stock Exchange is open for trading
(and on such other days as the Trustees deem necessary in order to comply with
Rule 22c-1 under the 1940 Act), in accordance with the method established
pursuant to the Governing Instruments. The Trust shall have the right to
suspend the sale of Shares if, because of some extraordinary condition, the New
York Stock Exchange shall be closed, or if conditions existing during the hours
when the Exchange is open render such action advisable or for any other reason
deemed adequate by the Trust.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval, if any, of its shareholders, take all necessary action to
register such number of Shares under the Securities Act of 1933, as amended
(the "1933 Act"), as the Distributor may reasonably be expected to sell.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or
shall be an employee of the Trust. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in the Distributor, as
directors, officers, employees, or otherwise and that directors, officers and
employees of the Distributor are or may become similarly interested in the
Trust and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct
and the employment, control and conduct (but only with respect to the duties
and obligations of the Distributor hereunder) of its agents and employees and
for any injury to any person through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it will
use its best efforts in all respects duly to conform with the requirements of
all state and federal laws and the Conduct Rules of the National Association of
Securities Dealers, Inc. relating to the sale of Shares, and will indemnify and
<PAGE>
hold harmless the Trust and each of its Trustees and officers and each person,
if any, who controls the Trust within the meaning of Section 15 of the Act (the
"Indemnified Parties") against all losses, liabilities, damages, claims or
expenses (including the reasonable cost of investigating or defending any
alleged loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising from any claim, demand, action or
suit (collectively, "Claims"), arising by reason of any person's acquiring any
of the Shares through the Distributor, which may be based upon the 1933 Act or
any other statute or common law, on account of any wrongful act of the
Distributor or any of its employees (including any failure to conform with any
requirement of any state or federal law or the Conduct Rules of the National
Association of Securities Dealers, Inc. relating to the sale of Shares) or on
the ground that the registration statement under the 1933 Act, including all
amendments thereto (the "Registration Statement"), or Prospectus or previous
prospectus or Statement of Additional Information or previous statement of
additional information, with respect to such Shares, includes or included an
untrue statement of a material fact or omits or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, if and only if any such act, statement or omission was
made in reliance upon information furnished by the Distributor to the Trust;
provided, however, that in no case (i) is the indemnity of the Distributor in
favor of any Indemnified Party to be deemed to protect any such Indemnified
Party against liability to which such Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its or his duties or by reason of its or his reckless disregard
of its or his obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
Section 4 with respect to any Claim made against any Indemnified Party unless
such Indemnified Party shall have notified the Distributor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the Claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Distributor
of any such Claim shall not relieve it from any liability which it may have to
any Indemnified Party otherwise than on account of its indemnity agreement
contained in this Section 4. The Distributor shall be entitled to participate,
at its own expense, in the defense, or, if it so elects, to assume the defense,
of any suit brought to enforce any such Claim, and, if the Distributor elects
to assume the defense, such defense shall be conducted by counsel chosen by it
and satisfactory to each Indemnified Party. In the event that the Distributor
elects to assume the defense of any such suit and retain such counsel, each
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it but, in case the Distributor does not elect to assume the
<PAGE>
defense of any such suit, it shall reimburse the Indemnified Parties for the
reasonable fees and expenses of any counsel retained by them. Except with the
prior written consent of the Distributor, no Indemnified Party shall confess
any Claim or make any compromise in any case in which the Distributor will be
asked to indemnify such Indemnified Party. The Distributor agrees promptly to
notify the Trust of the commencement of any litigation or proceeding against it
in connection with the issuance and sale of any of the Shares.
Neither the Distributor nor any dealer nor any other person is authorized
to give any information or to make any representation on behalf of the Trust in
connection with the sale of Shares, other than those contained in the
Registration Statement or Prospectus or Statement of Additional Information.
The Trust covenants and agrees that it will indemnify and hold harmless
the Distributor, its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the Act against
all losses, liabilities, damages, claims or expenses (including the reasonable
cost of investigating or defending any alleged loss, liabilities, damages,
claims or expenses and reasonable counsel fees incurred in connection
therewith) arising from any Claims, arising by reason of any person's acquiring
any of the Shares through the Distributor, which may be based upon the 1933 Act
or any other statute or common law, on account that the Registration Statement
or Prospectus or previous prospectus or Statement of Additional Information or
previous statement of additional information, with respect to such Shares,
includes or included an untrue statement of a material fact or omits or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, except insofar as such act,
statement or omission was made in reliance upon information furnished by the
Distributor to the Trust for use in the Registration Statement or Prospectus;
provided, however, that in no case (i) is the indemnity of the Trust in favor
of the Distributor deemed to protect any person who is also an officer or
Trustee of the Trust or who controls the Trust within the meaning of Section 15
of the 1933 Act unless a court of competent jurisdiction shall determine, or it
shall have been determined by controlling precedent, that such result would not
be against public policy as expressed in the 1933 Act; and further provided,
that in no event shall anything contained herein be so construed as to protect
the Distributor against any liability to the Trust or to its shareholders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations under this Agreement, or
(ii) is the Trust to be liable under its indemnity agreement contained in this
Section 4 with respect to any Claim made against the Distributor unless it
<PAGE>
shall have notified the Trust in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
Claim shall have been served upon it (or after the Distributor shall have
received notice of such service on any designated agent), but failure to notify
the Trust of any such Claim shall not relieve it from any liability which it
may have to the Distributor otherwise than on account of its indemnity
agreement contained in this Section 4. The Trust shall be entitled to
participate, at its own expense, in the defense, or, if it so elects, to assume
the defense, of any suit brought to enforce any such Claim, and, if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor. In the event that the Trust elects
to assume the defense of any such suit and retain such counsel, the Distributor
shall bear the fees and expenses of any additional counsel retained by it but,
in case the Trust does not elect to assume the defense of any such suit, it
shall reimburse the Distributor for the reasonable fees and expenses of any
counsel retained by them. Except with the prior written consent of the Trust,
the Distributor shall not confess any Claim or make any compromise in any case
in which the Trust will be asked to indemnify it. The Trust agrees promptly to
notify the Distributor of the commencement of any litigation in connection with
the issuance and sale of any of the Shares.
5. The Trust will pay, or cause to be paid:
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
the Registration Statement, Prospectus and Statement of Additional Information,
and preparing and mailing to shareholders Prospectuses, Statements of
Additional Information, statements and confirmations and periodic reports
(including the expense of setting in type the Registration Statement,
Prospectus and Statement of Additional Information or any periodic report);
(ii) the cost of preparing temporary or permanent certificates for
Shares;
(iii) the cost and expenses of delivering to the Distributor all
Shares purchased through it as agent hereunder;
(iv) subject to the Distribution Plan, a distribution fee to the
Distributor at an annual rate not to exceed 0.25% of the average daily net
assets of each Series of the Trust for that Series' then-current fiscal year in
anticipation of, or as reimbursement for, expenses incurred by the Distributor
in connection with the sale of Shares of that Series or required to be borne by
the Distributor hereunder, including, without limitation, payments to
<PAGE>
broker-dealers, banks and investment advisers who advise shareholders regarding
the purchase or sale or retention of Shares of the Trust, compensation of
employees of the Distributor, advertising expenses and the expenses of printing
(excluding typesetting) and distributing prospectuses and reports used for
sales purposes, expenses of preparing and printing sales literature and other
distribution-related expenses whether or not specifically required to be made
by the Distributor pursuant to the terms of this Agreement;
(v) subject to the Distribution Plan, with respect to Series other
than Domini Social Equity Fund, a fee, in addition to the fee provided in
paragraph (iv) above, at an annual rate which, when added to the amount
received by the Distributor with respect to a Series under paragraph (vi)
above, will equal 0.25% of the average daily net assets of that Series for its
then-current fiscal year, as compensation for distribution services provided by
the Distributor in connection with the sale of Shares of that Series;
(vi) all fees and disbursements of the Transfer Agent and Custodian;
and
(vii) a fee to the Manager of the Trust (pursuant to the Management
Agreement).
The Distributor agrees that with respect to the sale of Shares of the
Trust, subject to the Trust's obligations under clause (iv) above, (a) after
the Prospectus and Statement of Additional Information and periodic reports
have been set in type, it will bear the expense (other than the cost of mailing
to shareholders of the Trust) of printing and distributing any copies thereof
ordered by it which are to be used in connection with the offering or sale of
Shares to any dealer or prospective investor, and (b) it will bear the expenses
of preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by any dealer in connection with the
offering of Shares for sale to the public and any expense of sending
confirmations and statements to any dealer having a sales agreement with the
Distributor.
6. If, at any time during the term of this Agreement, the Trust shall deem
it necessary or advisable in the best interests of the Trust that any amendment
of this Agreement be made in order to comply with any recommendation or
requirement of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts or federal tax laws,
it shall notify the Distributor of the form of amendment which it deems
necessary or advisable and the reasons therefor. If the Distributor declines to
assent to such amendment (after a reasonable time), the Trust may terminate
this Agreement forthwith by written notice to the Distributor without payment
<PAGE>
of any penalty. If, at any time during the term of this Agreement, the
Distributor requests the Trust to make any change in its Governing Instruments
or in its methods of doing business which are necessary in order to comply with
any requirement of federal law or regulations of the Securities and Exchange
Commission or of a national securities association of which the Distributor is
or may become a member, relating to the sale of Shares, and the Trust fails
(after a reasonable time) to make any such change as requested, the Distributor
may terminate this Agreement forthwith by written notice to the Trust without
payment of any penalty.
7. The Distributor agrees that it will not take any long or short position
in the Shares of the Trust and that, so far as it can control the situation, it
will prevent any of its Directors or officers from taking any long or short
position in the Shares of the Trust, except as permitted by the Governing
Instruments.
8. This Agreement shall become effective upon its execution and shall
continue in force indefinitely as to each Series, provided that such
continuance is "specifically approved at least annually" with respect to the
applicable Series by the vote of a majority of the Trustees of the Trust who
are not "interested persons" of the Trust or of the Distributor at a meeting
specifically called for the purpose of voting on such approval, and by the
Board of Trustees of the Trust. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act. If such annual approval is not
obtained, this Agreement shall terminate on the date which is 15 months after
the date of the last approval.
This Agreement may be terminated with respect to any Series of the Trust
at any time by (i) the Trust, (a) by the vote of a majority of the Trustees of
the Trust who are not "interested persons" of the Trust or the Distributor, (b)
by the vote of the Board of Trustees of the Trust, or (c) by the "vote of a
majority of the outstanding voting securities" of the applicable Series, or
(ii) by the Distributor, in any case without payment of any penalty on not more
than 60 days nor less than 30 days written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
9. The terms "vote of a majority of the outstanding voting securities",
"interested person", "assignment" and "specifically approved at least annually"
shall have the respective meanings specified in, and shall be construed in a
<PAGE>
manner consistent with, the 1940 Act, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first above written. The obligations of this Agreement
are not binding upon any of the Trustees or shareholders of the Trust
individually, but bind only the Trust estate. The obligations of a particular
Series shall be paid only from the assets of that Series and shall not be
enforceable against any other Series.
DOMINI SOCIAL INVESTMENT TRUST
By
Title:
DSIL INVESTMENT SERVICES LLC
By
Title:
Exhibit g(2)
Domini Social Investment Trust
11 West 25th Street
New York, NY 10010
________ __, 2000
Investors Bank & Trust Company
P.O. Box 1537
Boston, Massachusetts 02205-1537
Attention: Timothy O'Leary
Re: Domini Social Bond Fund - Custodian Contract
Ladies and Gentlemen:
Pursuant to Section 4 of the Custodian Contract dated June 3, 1993 (the
"Contract"), between Domini Social Investment Trust (formerly, "Domini Social
Index Trust") (the "Trust") and Investors Bank & Trust Company (the
"Custodian"), we hereby request that Domini Social Bond Fund (the "Fund") be
added to the list of series of the Trust to which the Custodian renders
services as custodian under the terms of the Contract.
Please sign below to evidence your agreement to render such services as
custodian on behalf of the Fund and to add the Fund as a beneficiary under the
Contract.
DOMINI SOCIAL INVESTMENT TRUST
By:
Title:
Agreed:
INVESTORS BANK & TRUST COMPANY
By:
Title:
Exhibit h(2)
Domini Social Investment Trust
11 West 25th Street
New York, NY 10010
________ __, 2000
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
Re: Domini Social Bond Fund - Transfer Agency and
Service Agreement
Ladies and Gentlemen:
This letter serves as notice that pursuant to Article 18 of the Transfer
Agency and Services Agreement dated as of September 24, 1999 (the "Agreement")
between Domini Social Investment Trust (formerly, "Domini Social Equity Fund")
(the "Trust") and First Data Investor Services Group, Inc. ("First Data"),
Domini Social Bond Fund (the "Fund") is added to the list of series of the
Trust to which First Data renders services as transfer agent pursuant to the
terms of the Agreement.
Please sign below to acknowledge your receipt of this notice adding the
Fund as a beneficiary under the Agreement.
DOMINI SOCIAL INVESTMENT TRUST
By:
Title:
Acknowledgment:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
Title:
Exhibit h(3)
Domini Social Investments LLC
11 West 25th Street
New York, New York 10010
November 30, 1999
Domini Social Equity Fund
11 West 25th Street
New York, New York 10010
Re: Expense Limitation Agreement
Ladies and Gentlemen:
Domini Social Investments LLC currently provides oversight and
administrative and management services to Domini Social Equity Fund (the
"Trust"), a Massachusetts business trust. We hereby agree with the Trust that
we will waive expenses payable to us by the Trust's series designated Domini
Social Equity Fund or will reimburse such series for all expenses payable by
that series to the extent necessary so that the series' aggregate expenses
(excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses), net of waivers and reimbursements, would not exceed on
a per annum basis 0.95% of that series' average daily net assets.
The agreement in this letter shall take effect on the date hereof, and
shall remain in effect until November 30, 2000.
Please sign below to confirm your agreement with the terms of this letter.
Sincerely,
Domini Social Investments LLC
By:____________________________
Title:
Agreed:
Domini Social Equity Fund
By:__________________________
Title:
Exhibit h(4)
Domini Social Investments LLC
11 West 25th Street
New York, New York 10010
________ __, 2000
Domini Social Investment Trust
11 West 25th Street
New York, New York 10010
Re: Expense Limitation Agreement
Ladies and Gentlemen:
Domini Social Investments LLC currently provides oversight and
administrative and management services to Domini Social Investment Trust (the
"Trust"), a Massachusetts business trust. We hereby agree with the Trust that
we will waive expenses payable to us by the Trust's series designated Domini
Social Bond Fund or will reimburse such series for all expenses payable by
that series to the extent necessary so that the series' aggregate expenses
(excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses), net of waivers and reimbursements, would not exceed on
a per annum basis ____% of that series' average daily net assets.
The agreement in this letter shall take effect on the date hereof, and
shall remain in effect until November 30, 2000.
Please sign below to confirm your agreement with the terms of this letter.
Sincerely,
Domini Social Investments LLC
By:_________________________
Title:
Agreed:
Domini Social Investment Trust
By:___________________________
Title:
Exhibit h(5)
FORM OF
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, dated as of January ___, 2000 by and between
Domini Social Investment Trust (formerly, "Domini Social Equity Fund"), a
Massachusetts business trust (the "Trust"), with respect to its series, the
Domini Social Bond Fund (the "Series'), and Domini Social Investments LLC, a
Massachusetts limited liability company ("DSI" or the "Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended, and
consists of one or more series;
WHEREAS, the Trust desires to enter into this Agreement with respect to
its Series;
WHEREAS, the Trust wishes to engage DSI to provide certain oversight,
administrative and management services with resepct to its Series, and DSI is
willing to provide such oversight, administrative and management services to
the Trust with respect to its Series on the terms and conditions hereinafter
set forth; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF THE ADMISTRATOR. Subject to the direction and control of the
Board of Trustees of the Trust, the Administrator shall perform such oversight,
administrative and management services as may from time to time be reasonably
requested by the Trust, which shall include without limitation: (a) maintaining
office facilities (which may be in the office of DSI or an affiliate) and
furnishing clerical services necessary for maintaining the organization of the
Trust and for performing the oversight, administrative and management functions
herein set forth; (b) arranging, if desired by the Trust, for directors,
officers or employees of the Administrator to serve as Trustees, officers or
agents of the Trust if duly elected or appointed to such positions and subject
to their individual consent and to any limitations imposed by law; (c)
supervising the overall administration of the Series, including the updating of
corporate organizational documents, and the negotiation of contracts and fees
with and the monitoring and coordinating of performance and billings of the
Series' transfer agent, shareholder servicing agents (if any), custodian,
administrator, subadministrator (if any) and other independent contractors or
agents; (d) overseeing (with advice of the Trust's counsel) the preparation of
<PAGE>
and, if applicable, filing all documents required for compliance by the Trust
with applicable laws and regulations (including state "blue sky" laws and
regulations) pertaining to the Series, including registration statements on
Form N-1A, prospectuses and statements of additional information, or similar
forms, as applicable, semi-annual and annual reports to shareholders and proxy
statements, and reviewing tax returns; (e) preparation of agendas and
supporting documents for and minutes of meetings of Trustees, committees of
Trustees and preparation of notices, proxy statements and minutes of meetings
of shareholders; (f) arranging for maintenance of books and records of the
Series; (g) maintaining telephone coverage to respond to shareholder inquiries
regarding matters to which this Agreement pertains to which the transfer agent
is unable to respond; (h) providing reports and assistance regarding the
Series' compliance with securities and tax laws and the Series' investment
objectives; (i) arranging for dissemination of yield and other performance
information to newspapers and tracking services; (j) arranging for and
preparing annual renewals for fidelity bond and errors and omissions insurance
coverage; (k) developing a budget for the Series, establishing the rate of
expense accruals and arranging for the payment of all fixed and management
expenses; and (l) answering questions from the general public, the media and
shareholders of the Series regarding (i) the securities holdings of the Series;
(ii) any limits in which the Series invests; (iii) the social investment
philosophy of the Series; and (iv) the proxy voting philosophy and shareholder
activism philosophy of the Series. Notwithstanding the foregoing, the
Administrator shall not be deemed to have assumed, pursuant to this Agreement,
any duties with respect to, and shall not be responsible for, the management of
the Series' assets or the rendering of investment advice and supervision with
respect thereto or the distribution of shares of the Series, nor shall the
Administrator be deemed to have assumed or have any responsibility with respect
to functions specifically assumed by any transfer agent, custodian, fund
accounting pricing agent or shareholder servicing agent of the Series.
2. ALLOCATION OF CHARGES AND EXPENSES. DSI shall pay the entire salaries
and wages of all of the Trust's Trustees, officers and agents who devote part
or all of their time to the affairs of DSI or its affiliates, and the wages and
salaries of such persons shall not be deemed to be expenses incurred by the
Trust for purposes of this Section 2. The Trust shall pay all of its operating
expenses, including but not limited to fees due the Administrator under this
Agreement, compensation of Trustees not affiliated with the Administrator,
governmental fees, including but not limited to Securities and Exchange
Commission fees and state "blue sky" fees; interest charges; taxes and related
charges; membership dues of the Trust in the Investment Company Institute and
other professional or industry associations; fees and expenses of the Trust's
independent auditors and accountants, of legal counsel and any transfer agent,
distributor, shareholder servicing agent, recordkeeper, registrar or dividend
<PAGE>
disbursing agent of the Trust; expenses of distributing, issuing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses and statements of additional information, reports,
notices, proxy statements and reports to shareholders and governmental officers
and commissions; expenses connected with the execution, recording and
settlement of portfolio security transactions; insurance premiums; fees and
expenses of the Trust's custodian for all services to the Series, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Series;
expenses of shareholder meetings; and expenses relating to the issuance,
registration and qualification of shares of the Series of the Trust.
3. COMPENSATION OF THE ADMISTRATOR. For the services to be rendered and
facilities to be provided by the Administrator hereunder with respect to the
Series, the Trust shall pay DSI from the assets of the Series a fee accrued
daily and payable monthly at an annual rate equal to 0.25% of the Series'
average daily net assets for the Series' then current fiscal year.
If DSI serves as the Administrator for less than the whole of any period
specified in this Section 3, the compensation to DSI, as Administrator, shall
be prorated. For purposes of computing the fees payable to the Administrator
hereunder, the value of the Series' net assets shall be computed in the manner
specified in the Trust's then-current prospectus and statement of additional
information applicable to the Series.
4. LIMITATION OF LIABILITY OF THE ADMISTRATOR. The Administrator shall not
be liable for any error of judgment or mistake of law or for any act or
omission in the oversight, administration or management of the Trust or the
performance of its duties hereunder, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder. As used in this
Section 4, the term "Administrator" shall include DSI and/or any of its
affiliates and the directors, officers and employees of DSI and/or any of its
affiliates.
5. ACTIVITIES OF THE ADMISTRATOR. The services of the Administrator to the
Trust are not to be deemed to be exclusive, DSI being free to render oversight,
administrative and/or other services to other parties. It is understood that
Trustees, officers and shareholders of the Trust are or may become interested
in the Administrator and/or any of its affiliates as directors, officers,
employees or otherwise and that directors, officers and employees of the
Administrator and/or any of its affiliates are or may become similarly
interested in the Trust and that the Administrator and/or any of its affiliates
may be or become interested in the Trust as a shareholder or otherwise.
<PAGE>
6. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, unless terminated
as set forth in this Section 6.
This Agreement may not be altered or amended, except by an instrument in
writing and executed by both parties. This Agreement may be terminated at any
time, without the payment of any penalty, by the Board of Trustees of the
Trust, or by the Administrator, in each case on not less than 60 days' written
notice to the other party.
7. SUBCONTRACTING BY DSI. DSI may subcontract for the performance of some
or all of DSI's obligations hereunder with any one or more persons; provided,
however, that DSI shall not enter into any such subcontract with any entity
other than a subsidiary or an affiliate of DSI unless the Trustees of the Trust
shall have found the subcontracting party to be qualified to perform the
obligations sought to be subcontracted; and provided, further, that, unless the
Trust otherwise expressly agrees in writing, DSI shall be as fully responsible
to the Trust for the acts and omissions of any subcontractor as it would be for
its own acts or omissions.
8. SEVERABILITY. If any provision of this Agreement shall become or shall
be found to be invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
9. NOTICE. Any notices under this Agreement shall be in writing addressed
and delivered personally, by telecopy or mailed postage-paid to the other party
at such address as such other party may designate in accordance with this
Section 9 for the receipt of such notice. Until further notice to the other
party, it is agreed that the address of the Trust shall be 11 West 25th Street,
7th Floor, New York, New York 10010, and the address of DSI shall be 11 West
25th Street, 7th Floor, New York, New York 10010.
10. MISCELLANEOUS. Each party agrees to perform such further actions and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced and interpreted in
accordance with and governed by the laws of the Commonwealth of Massachusetts
without reference to principles of conflicts of law. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned Trustee of the Trust has executed this Agreement not individually
but as a Trustee under the Trust's Declaration of Trust, dated June 7, 1989, as
amended, and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of the Trust individually but bind only the Trust
estate. The obligations of the Series shall be paid only from the assets of the
Series and shall not be enforceable against any other series of the Trust.
DOMINI SOCIAL INVESTMENT TRUST,
On Behalf of Domini Social Bond Fund
By
Name
Title
DOMINI SOCIAL INVESTMENTS LLC
By
Name
Title
Exhibit h(5)
FORM OF
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, dated as of January ___, 2000 by and between
Domini Social Investment Trust (formerly, "Domini Social Equity Fund"), a
Massachusetts business trust (the "Trust"), with respect to its series, the
Domini Social Bond Fund (the "Series'), and Domini Social Investments LLC, a
Massachusetts limited liability company ("DSI" or the "Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended, and
consists of one or more series;
WHEREAS, the Trust desires to enter into this Agreement with respect to
its Series;
WHEREAS, the Trust wishes to engage DSI to provide certain oversight,
administrative and management services with resepct to its Series, and DSI is
willing to provide such oversight, administrative and management services to
the Trust with respect to its Series on the terms and conditions hereinafter
set forth; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF THE ADMISTRATOR. Subject to the direction and control of the
Board of Trustees of the Trust, the Administrator shall perform such oversight,
administrative and management services as may from time to time be reasonably
requested by the Trust, which shall include without limitation: (a) maintaining
office facilities (which may be in the office of DSI or an affiliate) and
furnishing clerical services necessary for maintaining the organization of the
Trust and for performing the oversight, administrative and management functions
herein set forth; (b) arranging, if desired by the Trust, for directors,
officers or employees of the Administrator to serve as Trustees, officers or
agents of the Trust if duly elected or appointed to such positions and subject
to their individual consent and to any limitations imposed by law; (c)
supervising the overall administration of the Series, including the updating of
corporate organizational documents, and the negotiation of contracts and fees
with and the monitoring and coordinating of performance and billings of the
Series' transfer agent, shareholder servicing agents (if any), custodian,
administrator, subadministrator (if any) and other independent contractors or
agents; (d) overseeing (with advice of the Trust's counsel) the preparation of
<PAGE>
and, if applicable, filing all documents required for compliance by the Trust
with applicable laws and regulations (including state "blue sky" laws and
regulations) pertaining to the Series, including registration statements on
Form N-1A, prospectuses and statements of additional information, or similar
forms, as applicable, semi-annual and annual reports to shareholders and proxy
statements, and reviewing tax returns; (e) preparation of agendas and
supporting documents for and minutes of meetings of Trustees, committees of
Trustees and preparation of notices, proxy statements and minutes of meetings
of shareholders; (f) arranging for maintenance of books and records of the
Series; (g) maintaining telephone coverage to respond to shareholder inquiries
regarding matters to which this Agreement pertains to which the transfer agent
is unable to respond; (h) providing reports and assistance regarding the
Series' compliance with securities and tax laws and the Series' investment
objectives; (i) arranging for dissemination of yield and other performance
information to newspapers and tracking services; (j) arranging for and
preparing annual renewals for fidelity bond and errors and omissions insurance
coverage; (k) developing a budget for the Series, establishing the rate of
expense accruals and arranging for the payment of all fixed and management
expenses; and (l) answering questions from the general public, the media and
shareholders of the Series regarding (i) the securities holdings of the Series;
(ii) any limits in which the Series invests; (iii) the social investment
philosophy of the Series; and (iv) the proxy voting philosophy and shareholder
activism philosophy of the Series. Notwithstanding the foregoing, the
Administrator shall not be deemed to have assumed, pursuant to this Agreement,
any duties with respect to, and shall not be responsible for, the management of
the Series' assets or the rendering of investment advice and supervision with
respect thereto or the distribution of shares of the Series, nor shall the
Administrator be deemed to have assumed or have any responsibility with respect
to functions specifically assumed by any transfer agent, custodian, fund
accounting pricing agent or shareholder servicing agent of the Series.
2. ALLOCATION OF CHARGES AND EXPENSES. DSI shall pay the entire salaries
and wages of all of the Trust's Trustees, officers and agents who devote part
or all of their time to the affairs of DSI or its affiliates, and the wages and
salaries of such persons shall not be deemed to be expenses incurred by the
Trust for purposes of this Section 2. The Trust shall pay all of its operating
expenses, including but not limited to fees due the Administrator under this
Agreement, compensation of Trustees not affiliated with the Administrator,
governmental fees, including but not limited to Securities and Exchange
Commission fees and state "blue sky" fees; interest charges; taxes and related
charges; membership dues of the Trust in the Investment Company Institute and
other professional or industry associations; fees and expenses of the Trust's
independent auditors and accountants, of legal counsel and any transfer agent,
distributor, shareholder servicing agent, recordkeeper, registrar or dividend
<PAGE>
disbursing agent of the Trust; expenses of distributing, issuing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses and statements of additional information, reports,
notices, proxy statements and reports to shareholders and governmental officers
and commissions; expenses connected with the execution, recording and
settlement of portfolio security transactions; insurance premiums; fees and
expenses of the Trust's custodian for all services to the Series, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Series;
expenses of shareholder meetings; and expenses relating to the issuance,
registration and qualification of shares of the Series of the Trust.
3. COMPENSATION OF THE ADMISTRATOR. For the services to be rendered and
facilities to be provided by the Administrator hereunder with respect to the
Series, the Trust shall pay DSI from the assets of the Series a fee accrued
daily and payable monthly at an annual rate equal to 0.25% of the Series'
average daily net assets for the Series' then current fiscal year.
If DSI serves as the Administrator for less than the whole of any period
specified in this Section 3, the compensation to DSI, as Administrator, shall
be prorated. For purposes of computing the fees payable to the Administrator
hereunder, the value of the Series' net assets shall be computed in the manner
specified in the Trust's then-current prospectus and statement of additional
information applicable to the Series.
4. LIMITATION OF LIABILITY OF THE ADMISTRATOR. The Administrator shall not
be liable for any error of judgment or mistake of law or for any act or
omission in the oversight, administration or management of the Trust or the
performance of its duties hereunder, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder. As used in this
Section 4, the term "Administrator" shall include DSI and/or any of its
affiliates and the directors, officers and employees of DSI and/or any of its
affiliates.
5. ACTIVITIES OF THE ADMISTRATOR. The services of the Administrator to the
Trust are not to be deemed to be exclusive, DSI being free to render oversight,
administrative and/or other services to other parties. It is understood that
Trustees, officers and shareholders of the Trust are or may become interested
in the Administrator and/or any of its affiliates as directors, officers,
employees or otherwise and that directors, officers and employees of the
Administrator and/or any of its affiliates are or may become similarly
interested in the Trust and that the Administrator and/or any of its affiliates
may be or become interested in the Trust as a shareholder or otherwise.
<PAGE>
6. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, unless terminated
as set forth in this Section 6.
This Agreement may not be altered or amended, except by an instrument in
writing and executed by both parties. This Agreement may be terminated at any
time, without the payment of any penalty, by the Board of Trustees of the
Trust, or by the Administrator, in each case on not less than 60 days' written
notice to the other party.
7. SUBCONTRACTING BY DSI. DSI may subcontract for the performance of some
or all of DSI's obligations hereunder with any one or more persons; provided,
however, that DSI shall not enter into any such subcontract with any entity
other than a subsidiary or an affiliate of DSI unless the Trustees of the Trust
shall have found the subcontracting party to be qualified to perform the
obligations sought to be subcontracted; and provided, further, that, unless the
Trust otherwise expressly agrees in writing, DSI shall be as fully responsible
to the Trust for the acts and omissions of any subcontractor as it would be for
its own acts or omissions.
8. SEVERABILITY. If any provision of this Agreement shall become or shall
be found to be invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
9. NOTICE. Any notices under this Agreement shall be in writing addressed
and delivered personally, by telecopy or mailed postage-paid to the other party
at such address as such other party may designate in accordance with this
Section 9 for the receipt of such notice. Until further notice to the other
party, it is agreed that the address of the Trust shall be 11 West 25th Street,
7th Floor, New York, New York 10010, and the address of DSI shall be 11 West
25th Street, 7th Floor, New York, New York 10010.
10. MISCELLANEOUS. Each party agrees to perform such further actions and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced and interpreted in
accordance with and governed by the laws of the Commonwealth of Massachusetts
without reference to principles of conflicts of law. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned Trustee of the Trust has executed this Agreement not individually
but as a Trustee under the Trust's Declaration of Trust, dated June 7, 1989, as
amended, and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of the Trust individually but bind only the Trust
estate. The obligations of the Series shall be paid only from the assets of the
Series and shall not be enforceable against any other series of the Trust.
DOMINI SOCIAL INVESTMENT TRUST,
On Behalf of Domini Social Bond Fund
By
Name
Title
DOMINI SOCIAL INVESTMENTS LLC
By
Name
Title
Exhibit i
January 13, 2000
Domini Social Equity Fund
11 West 25th Street
New York, New York 10010
Ladies and Gentlemen:
We have acted as counsel to Domini Social Equity Fund, a Massachusetts
business trust (the "Trust"), in connection with Post-Effective Amendment
Number 16 to the Trust's Registration Statement filed with the Securities and
Exchange Commission on January 13, 2000 (the "Amendment"), with respect to the
Trust's series Domini Social Bond Fund (the "Fund").
In connection with this opinion, we have examined the following described
documents:
(a) the Amendment;
(b) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
(c) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Trust's Declaration of Trust and of all amendments
thereto on file in the office of the Secretary of State; and
(d) a certificate executed by the President of the Trust, certifying as
to, and attaching copies of, the Trust's By-Laws and certain votes of the
Trustees of the Trust authorizing the issuance of shares of the Fund.
In such examination, we have assumed the genuineness of all signatures,
the conformity to the originals of all of the documents reviewed by us as
copies, the authenticity and completeness of all documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document.
<PAGE>
This opinion is based entirely on our review of the documents listed
above. We have made no other review or investigation of any kind whatsoever,
and we have assumed, without independent inquiry, the accuracy of the
information set forth in such documents.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts (other than the Massachusetts Uniform Securities Act, as to which
we express no opinion) as applied by courts in such Commonwealth to the extent
such laws may apply to or govern the matters covered by this opinion.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that the shares of the Fund, when issued and sold in accordance with
the Amendment and the Trust's Declaration of Trust and By-laws, will be legally
issued, fully paid and non-assessable, except that, as set forth in the
Amendment, shareholders of the Fund may under certain circumstances be held
personally liable for the Trust's obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very truly yours,
/s/ Bingham Dana LLP
---------------------------
BINGHAM DANA LLP
Exhibit m
FORM OF AMENDED AND RESTATED
DISTRIBUTION PLAN
AMENDED AND RESTATED DISTRIBUTION PLAN, dated as of May 1, 1990, and
amended and restated as of January 14, 2000, of Domini Social Investment Trust
(formerly, "Domini Social Equity Fund"), a Massachusetts business trust (the
"Trust").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act");
WHEREAS, the Trust's shares of beneficial interests ("Shares") are divided
into separate series representing interests in separate securities and other
assets;
WHEREAS, the Trust has adopted a distribution plan in accordance with Rule
12b-1 under the 1940 Act ("Rule 12b-1") with respect to its series designated
Domini Social Equity Fund (the "Original Plan") and desires to adopt this
Amended and Restated Distribution Plan (the "Plan") to amend and restate the
Original Plan in its entirety in order to provide that its provisions apply to
the Domini Social Equity Fund, the Domini Social Bond Fund and each other
series of the Trust that adopts this Plan as provided herein (the "Series");
and
WHEREAS, the Trust desires to enter into an amended and restated
distribution agreement (in such form as may from time to time be approved by
the Board of Trustees of the Trust in the manner specified in Rule 12b-1) (the
"Distribution Agreement"), whereby the Distributor named in the Distribution
Agreement (the "Distributor") will provide facilities and personnel and render
services to the Trust in connection with the offering and distribution of the
Shares;
WHEREAS, the Board of Trustees, in considering whether the Trust should
adopt and implement this Plan, has evaluated such information as it deemed
necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors it deemed
necessary to form the basis for a decision to use assets of the Trust for such
purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Trust and its
shareholders.
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NOW, THEREFORE, the Board of Trustees hereby adopts this Plan for the
Trust as a plan for distribution in accordance with Rule 12b-1, on the
following terms and conditions, and hereby amends and restates the Original
Plan as follows:
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares.
2. The Distributor shall, subject to paragraph 3 below, bear all
distribution-related expenses in connection with the services described in
paragraph 1, including without limitation, the compensation of personnel
necessary to provide such services and all costs of travel, office expenses
(including rent and overhead) and equipment.
3. (a) As consideration for all services performed, the Trust may pay the
Distributor a fee at an annual rate not to exceed 0.25% of the average daily
net assets of each Series for its then-current fiscal year in anticipation of,
or as reimbursement for, expenses incurred by the Distributor in connection
with the sale of Shares of that Series such as payments to broker-dealers,
banks and investment advisers who advise shareholders regarding the purchase,
sale or retention of Shares of the Trust, compensation of employees of the
Distributor, advertising expenses and the expenses of printing (excluding
typesetting) and distributing prospectuses and reports used for sales purposes,
expenses of preparing and printing sales literature and other
distribution-related expenses.
(b) With respect to any Series other than Domini Social Equity Fund,
the Trust may pay the Distributor a fee, in addition to the fee provided in
paragraph (a) above, at an annual rate which, when added to the amount received
by the Distributor with respect to such Series under paragraph (a) above, will
not exceed 0.25% of the average daily net assets of that Series for its
then-current fiscal year, as compensation for distribution services provided by
the Distributor in connection with the sale of Shares of that Series.
4. The Trust shall pay all fees and expenses of any independent auditor,
legal counsel, administrator, transfer agent, custodian, shareholder servicing
agent, registrar or dividend disbursing agent of each Series, expenses of
distributing and redeeming Shares and servicing shareholder accounts; expenses
of preparing, printing and mailing prospectuses, shareholder reports, notices,
proxy statements reports to governmental officers and commissions and to
shareholders of each Series; expenses connected with the execution, recording
<PAGE>
and settlement of portfolio security transactions; insurance premiums; expenses
of calculating the net asset value of Shares; expenses of shareholder meetings;
and expenses relating to the issuance, registration and qualification of
Shares.
5. Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the responsibility for
and control of the conduct of the affairs of the Trust.
6. The Original Plan having been approved with respect to the Series of
the Trust designated Domini Social Equity Fund by a vote of at least a
"majority of the outstanding voting securities" of that Series and by a vote of
the Board of Trustees and vote a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
(the "Qualified Trustees"), this Plan shall become effective as to Domini
Social Equity Fund upon approval by a vote of the Board of Trustees and vote of
a majority of the Qualified Trustees, such votes to be cast in person at a
meeting called for the purpose of voting on this Plan.
7. This Plan shall become effective as to each Series of the Trust other
than Domini Social Equity Fund upon (a) approval by a vote of at least a
"majority of the outstanding voting securities" of that Series, and (b)
approval by a vote of the Board of Trustees and vote of a majority of the
Qualified Trustees, such votes to be cast in person at a meeting called for the
purpose of voting on this Plan.
8. This Plan shall continue in effect indefinitely; provided, however,
that such continuance is subject to annual approval by a vote of the Board of
Trustees and a majority of the Qualified Trustees, such votes to be cast in
person at a meeting called for the purpose of voting on continuance of this
Plan. If such annual approval is not obtained with respect to a Series, this
Plan shall expire as to that Series on the date which is 15 months after the
date of the last approval.
9. This Plan may be amended at any time by the Board of Trustees, provided
that (a) any amendment to increase materially the amount to be spent for the
services described herein shall be effective only upon approval by a vote of a
"majority of the outstanding voting securities" of each applicable Series, and
(b) any material amendment of this Plan shall be effective only upon approval
by a vote of the Board of Trustees and a majority of the Qualified Trustees,
<PAGE>
such votes to be cast in person at a meeting called for the purpose of voting
on such amendment. This Plan may be terminated at any time with respect to any
Series by vote of a majority of the Qualified Trustees or by a vote of a
"majority of the outstanding voting securities" of the applicable Series.
10. The Trust and the Distributor each shall provide the Board of
Trustees, and the Board of Trustees shall review, at least quarterly, a written
report of the amounts expended under the Plan and the purposes for which such
expenditures were made.
11. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Trust.
12. For the purposes of this Plan, the terms "interested persons" and
"majority of the outstanding voting securities" are used as defined in the 1940
Act. In addition, for purposes of determining the fees payable to the
Distributor, the value of a Series' net assets shall be computed in the manner
specified in the Trust's then-current prospectus with respect to that Series
for computation of the net asset value of the Shares of that Series.
13. The Trust shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 10 hereof
(collectively, the "Records") for a period of six years from end of the fiscal
year in which such Record was made and each such Record shall be kept in an
easily accessible place for the first two years of said record-keeping.
14. This Plan shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
15. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
