AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 27, 1996
File No. 811-5824
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 7
DOMINI SOCIAL INDEX PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 617-423-0800
Philip W. Coolidge, 6 St. James Avenue, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
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DSI73E
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DSI73E
EXPLANATORY NOTE
This Registration Statement is being filed by the Registrant pursuant
to Section 8(b) of the Investment Company Act of 1940. However, beneficial
interests in the Registrant are not being registered under the Securities Act of
1933 (the "1933 Act") since such interests will be issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interests in the Registrant.
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DSI73E
PART A
Responses to Items 1 through 3 and 5-A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
The Domini Social Index Portfolio (the "Portfolio") is a no-load,
diversified, open-end investment company which was organized as a trust under
the laws of the State of New York on June 7, 1989. Beneficial interests in the
Portfolio will be issued solely in private placement transactions which do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
which are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any security within the meaning of the 1933
Act.
The investment objective of the Portfolio is to provide its investors
with long-term total return which corresponds to the total return performance of
the Domini 400 Social IndexSM (sometimes referred to herein as the "Domini
Social Index" or "DSI" or the "Index"), an index comprised of stocks selected
based upon the Portfolio's social criteria. There can be no assurance that the
Portfolio will achieve its investment objective.
The Portfolio seeks to achieve its investment objective by investing
its assets in the common stocks comprising the Domini Social Index. The
Portfolio will approximate the weightings of securities held by the Portfolio to
the weightings of the stocks in the Index, except as described below, and will
seek a correlation between the weightings of securities held by the Portfolio
and the weightings of the stocks in the Index of 0.95 or better. A figure of 1.0
would indicate a perfect correlation. As of July 31, 1996, the correlation
between the weightings of securities held by the Portfolio and the weightings of
the stocks in the Index was 0.99. To the extent practicable, the Portfolio will
attempt to be fully invested. The Portfolio's ability to duplicate the
performance of the Domini Social Index will depend to some extent on the size
and timing of cash flows into and out of the Portfolio as well as the
Portfolio's expenses. Adjustments in the securities holdings of the Portfolio to
accommodate cash flows will track the Domini Social Index to the extent
practicable, but this will result in brokerage expenses.
Social Criteria -- The Domini Social Index is a common stock index
developed and maintained by the Kinder, Lydenberg, Domini & Co., Inc., the
Portfolio's investment adviser ("KLD" or the "Adviser"), comprised of the common
stocks of approximately 400 companies which meet certain social criteria. The
weightings of the stocks comprising the DSI are based upon market
capitalization. The criteria used in developing and maintaining the DSI involve
subjective judgment by the Adviser. The Adviser, based on available data, seeks
to exclude the following types of companies: firms that derive more than 2% of
their gross revenues from the sale of military weapons; firms that derive any
revenues from the manufacture of tobacco products or alcoholic beverages; firms
that derive any revenues from gambling enterprises; and firms that have an
ownership share in, or operate nuclear power
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plants, or participate in businesses related to the nuclear fuel cycle. The
Adviser also considers criteria such as environmental performance, particularly
in taking positive initiatives in environmental matters; its employee relations;
its corporate citizenship; and the quality of a company's products and its
attitudes with regard to consumer issues. Environmental performance includes a
company's record on waste disposal, toxic emissions, fines or penalties, and
efforts in waste and emissions reductions, recycling, and the use of
environmentally beneficial fuels, products and services. Corporate citizenship
includes a company's record on philanthropic activities and its interaction with
the communities it affects. Employee relations includes a company's record with
regard to labor matters, its commitment to work place safety and to equal
employment opportunity (reflected, for example, in the number of women and
minorities in executive positions), the breadth, quality and innovation of its
employee benefit programs, and its commitment to provide employees with a
meaningful participation in company profits either through stock purchase or
profit sharing plans. The product-related criteria include a company's record
with regard to product safety, marketing practices and commitment to quality.
The Adviser intends to vote proxies of companies included in the
Portfolio consistent with the social criteria used in developing and maintaining
the Index.
Index Management -- The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities included
in the Index. Moreover, inclusion of a stock in the Domini Social Index does not
imply an opinion by the Adviser as to the merits of that specific stock as an
investment. However, the Adviser believes that enterprises which exhibit a
social awareness, based on the criteria described above, 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.
In selecting stocks for inclusion in the Index:
1. The Adviser evaluated, in accordance with the social criteria
described above, each of the companies the stocks of which comprise the S&P 500.
If a company whose stock was included in the S&P 500 met the Adviser's social
criteria and met the Adviser'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, 1996, of the 500
companies whose stocks comprised the S&P 500, approximately 50% were included
in the Index.
2. The remaining stocks comprising the Domini Social Index (i.e., those
which are not included in the S&P 500) were selected based upon the Adviser's
evaluation of the social criteria described above, as well as upon the Adviser's
criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover. Because of the social criteria
applied in the selection of stocks comprising the Domini Social Index, industry
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500, and certain
industry sectors will be excluded altogether.
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The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole. Since some industries are characterized by
companies of relatively small stock capitalization, the S&P 500 does not
comprise the 500 largest companies listed on the New York Stock Exchange. Not
all stocks included in the S&P 500 are listed on the New York Stock Exchange.
However, the total market value of the S&P 500 as of July 31, 1996 represented
76.3% of the aggregate market value of common stocks traded on the New York
Stock Exchange.
Inclusion of a stock in the S&P 500 Index 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 Portfolio.
Some of the stocks included in the Domini Social IndexSM may be stocks
of foreign issuers (provided that the stocks are traded in the United States in
the form of American Depositary Receipts or similar instruments the market for
which is denominated in United States dollars). Securities of foreign issuers
may represent a greater degree of risk (i.e., as a result of exchange rate
fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (i.e., market price per share times
the number of shares outstanding). Because of this weighting, as of July 31,
1996 approximately 40% of the Domini Social Index was comprised of the 20
largest companies in that Index.
The Adviser may exclude from the Domini Social Index stocks issued by
companies which are in bankruptcy or whose bankruptcy the Adviser believes may
be imminent.
The Portfolio intends to readjust its securities holdings periodically
such that those holdings will correspond, to the extent reasonably practicable,
to the Domini Social Index both in terms of composition and weighting. The
timing and extent of adjustments in the holdings of the Portfolio, and the
extent of the correlation of the holdings of the Portfolio with the Domini
Social Index, will reflect the judgment of Mellon Equity Associates ("Mellon
Equity" or the "Manager") as to the appropriate balance between the goal of
correlating the holdings of the Portfolio with the composition of the Index, and
the goals of minimizing transaction costs and keeping sufficient reserves
available for anticipated redemptions of shares. To the extent practicable, the
Portfolio will seek a correlation between the weightings of securities held by
the Portfolio to the weightings of the securities in the Index of 0.95 or
better.
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The Board of Trustees of the Portfolio will receive and review, at least
quarterly, a report prepared by the Manager comparing the performance of the
Portfolio with that of the Index, and comparing the composition and weighting of
the Portfolio's holdings with those of the Index, and will consider what action,
if any, should be taken in the event of a significant variation between the
performance of the Portfolio and that of the Index, or between the composition
and weighting of the Portfolio's securities holdings with those of the stocks
comprising the Index. If the correlation between the weightings of securities
held by the Portfolio and the weightings of the stocks in the Index falls below
0.95, the Board of Trustees will review with the Manager methods for increasing
such correlation, such as through adjustments in securities holdings of the
Portfolio.
The Portfolio may invest cash reserves in short-term debt securities
(i.e., securities having a remaining maturity of one year or less) issued by
agencies or instrumentalities of the United States Government, bankers'
acceptances, commercial paper or certificates of deposit, provided that the
issuer satisfies the Adviser's social criteria. The Portfolio does not currently
intend to invest in direct obligations of the United States Government.
Short-term debt securities purchased by the Portfolio will be rated at least
Prime-1 by Moody's Investors Service, Inc. or A-1 + or A-1 by S&P or, if not
rated, determined to be of comparable quality by the Portfolio's Board of
Trustees. The Portfolio's policy is to hold its assets in such securities
pending readjustment of its 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.
Frequent changes in the Portfolio's holdings may result from the policy
of attempting to correlate the Portfolio's securities holdings with the
composition of the Index, and the frequency of such changes will increase as the
rate and volume of purchases and redemptions of shares of the Portfolio
increases. The annual portfolio turnover rates of the Portfolio for the fiscal
years ended July 31, 1995 and 1996 were 6% and 5%, respectively.
The Portfolio's primary consideration in placing securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. The Portfolio will not engage in brokerage
transactions with the Adviser, the Manager or the Administrator or any of their
respective affiliates or any affiliate of the Portfolio. For further discussion
regarding securities trading by the Portfolio, see Part B of this Registration
Statement.
Consistent with applicable regulatory policies, including those of the
Board of Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Portfolio may make loans of its securities to member banks of
the Federal Reserve System and to broker-dealers. Such loans would be required
to be secured continuously by collateral and cash or cash equivalents maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. The Portfolio would have the right to call a loan and obtain
the
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securities loaned at any time on five days' notice. During the existence of a
loan, the Portfolio would continue to collect the equivalent of the dividends
paid by the issuer on the securities loaned and would also receive interest on
investment of cash collateral. The Portfolio may pay finder's and other fees in
connection with securities loans. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.
Although it has no current intention to do so, the Portfolio may make
short sales of securities or maintain a short position, if at all times when a
short position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.
The approval of the investors in the Portfolio is not required to
change the investment objective or any of the investment policies discussed
above.
Part B of this Registration Statement includes a discussion of other
investment policies and a listing of specific investment restrictions which
govern the investment policies of the Portfolio. Certain of the investment
restrictions listed in Part B of this Registration Statement may not be changed
without the approval of the investors in the Portfolio.
Item 5. Management of the Portfolio.
The Portfolio's Board of Trustees provides broad supervision over the
affairs of the Portfolio. KLD is the investment adviser and sponsor of the
Portfolio. The address of KLD is 129 Mt. Auburn Street, Cambridge, Massachusetts
02138. A majority of the Portfolio's Trustees are not affiliated with KLD.
Signature Broker-Dealer Services, Inc. ("Signature") is the Portfolio's
administrator (the "Administrator"). The Portfolio's transfer agent and dividend
paying agent is Investors Bank & Trust Company ("IBT"). The address of IBT is 89
South Street, Boston, Massachusetts 02111.
KLD provides advice to the Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The services provided by the Adviser
consist of determining the stocks to be included in the Index and evaluating, in
accordance with the Adviser's social criteria, debt securities which may be
purchased by the Portfolio. For its services under the Advisory Agreement, the
Adviser receives from the Portfolio a fee accrued daily and paid monthly at an
annual rate equal to 0.05% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then current fiscal year.
"DominiSM" and "Domini 400 Social IndexSM" are service marks of KLD.
Pursuant to an agreement with the Portfolio, the Portfolio will be required to
discontinue use of such service marks if KLD ceases to be the investment adviser
of the Portfolio.
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Mellon Equity manages the Portfolio on a day-to-day basis pursuant to
an Investment Management Agreement (the "Management Agreement"). Mellon Equity
does not determine the composition of the Domini Social Index.
Under the Management Agreement, the Portfolio pays 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 4, 1996, the Portfolio paid Mellon
Equity an investment management fee equal on an annual basis to the following
percentages of the Portfolio's average daily net assets for its then-current
fiscal year: 0.10% of assets up to $50 million; 0.30% of assets between $50
million and $100 million; 0.20% of assets between $100 million and $500 million;
and 0.15% of assets over $500 million.
Mellon Equity is a Pennsylvania business trust whose beneficial owners
are Mellon Bank N.A. and MMIP, Inc. Mellon Equity has been registered as an
investment adviser under the Investment Advisers Act of 1940 since 1986. Prior
to 1987, the Manager was part of the Equity Management Group of Mellon Bank
Corporation's Trust and Investment Department, which has managed pension assets
since 1947.
As of June 30, 1996, the Manager had approximately $9.8 billion in
assets under management.
Mellon Equity believes that the performance of investment management
services for the Portfolio will not violate the Glass-Steagall Act or other
applicable banking laws or regulations. However, future statutory or regulatory
changes, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could prevent
Mellon Equity from continuing to perform such services for the Portfolio. If
Mellon Equity were prohibited from acting as investment manager to the
Portfolio, it is expected that the Trustees would recommend to shareholders
approval of a new investment management agreement with another qualified
investment manager selected by the Trustees, or that the Trustees would
recommend other appropriate action.
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Pursuant to a Sponsorship Agreement, dated November 6, 1996, KLD pays
the ordinary operating expenses of the Portfolio (other than brokerage fees and
commissions, interest, taxes and extraordinary expenses) and provides the
Portfolio with adminstrative personnel and services necessary to operate the
Portfolio. In addition to general administrative services, such services include
answering quesoins from the general public and the media regarding the
securities holdings of the Portfolio. For these services and facilities, KLD
receives fees computed and paid monthly from the Portfolio at an annual rate of
0.20% of the average daily net assets of the Portfolio, for the Portfolio's then
current fiscal year.
Pursuant to an Administrative Services Agreement between Signature and
KLD, KLD has engaged Signature to provide certain administrative services to the
Portfolio. In such capacity, Signature performs certain administrative services
requested by the Sponsor. For these services, since November 6, 1996, the
Sponsor pays to Signature a fee computed daily and paid monthly at an annual
rate equal to 0.020% of the average daily net assets of the Portfolio, for the
Portfolio's then-current fiscal year. From October 4, 1996 to November 6, 1996
Signature received fees computed daily and paid monthly at an annual rate equal
to 0.25% of the average daily net assets of the Portfolio, for the Portfolio's
then-current fiscal year. Prior to October 4, 1996, Signature waived its
administrative fees from the Portfolio.
The Portfolio pays all of its expenses, including the compensation of
its Trustees who are not affiliated with Signature; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Portfolio; fees and expenses of independent auditors, of legal counsel and
of any transfer agent, custodian, registrar or dividend disbursing agent of the
Portfolio; insurance premiums; expenses of calculating the net asset value of
and the net income on the Portfolio; expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to governmental offices and commissions;
and the advisory fees and the sponsorship fees.
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Pursuant to an expense payment arrangement between Signature and the
Portfolio effective January 1, 1995, Signature has agreed to pay all of the
operating expenses of the Portfolio. The arrangement will terminate on December
31, 1999 unless sooner terminated by mutual agreement of the parties. Under the
arrangement, Signature receives expense payment fees computed and paid monthly
from the Portfolio, at an annual rate equal to 0.175% of the Portfolio's average
daily net assets for its then-current fiscal year.
Item 6. Capital Stock and Other Securities.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and nonassessable, except as set forth below. The Portfolio
is not required and has no current intention to hold annual meetings of
investors, but the Portfolio will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote. Investors have under certain circumstances (e.g., upon
application and submission of certain specified documents to the Trustees by a
specified number of shareholders) the right to communicate with other investors
in connection with requesting a meeting of investors for the purpose of removing
one or more Trustees. Investors also have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified number of
investors. Upon liquidation of the Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
The Portfolio reserves the right to create and issue any number of
series, in which case investments in each series would participate equally in
the earnings, dividends and assets of the particular series. Currently, the
Portfolio has only one series.
The Portfolio is organized as a trust under the laws of the State of
New York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of his investment at any time at net asset value. Investors in the
Portfolio (e.g., 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 an investor in the Portfolio 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.
The net income of the Portfolio is determined each day on which the New
York Stock Exchange is open for trading ("Fund Business Day") (and on such other
days as are deemed necessary in order to comply with Rule 22c-1 under the
Investment Company Act of 1940 (the "1940 Act")). This determination is made
once during each such day as of 4:00 p.m., Eastern time. All the net income of
the Portfolio, as defined below, so determined is allocated pro rata among the
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investors in the Portfolio at the time of such determination. For this purpose,
the net income of the Portfolio (from the time of the immediately preceding
determination thereof) shall consist of (i) all income accrued, less the
amortization of any premium, on the assets of the Portfolio, less (ii) all
actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio.
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Fund Business Day. At 4:00 p.m., Eastern time, on each
Fund Business day, the value of each investor's beneficial interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, effective for that day, that represents that investor's share
of the aggregate beneficial interests in the Portfolio. Any additions or
withdrawals, which are to be effected 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 4:00 p.m., Eastern time, 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 on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 p.m., Eastern time, 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 4:00 p.m., Eastern
time, on the following Fund Business Day.
The end of the Portfolio's fiscal year is July 31.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's ordinary income and
capital gains in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended, assuming that the investor invested all of its assets in the
Portfolio.
Investor inquiries may be directed to Signature at 6 St. James Avenue,
Boston, Massachusetts 02116, (617) 423-0800.
Item 7. Purchase of Securities.
Beneficial interests in the Portfolio will be issued solely in private
placement transactions which do not involve any "public offering" within the
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meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any security within the meaning of the 1933
Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Portfolio. The net asset value of the Portfolio is determined on
each Fund Business Day.
Since the Portfolio intends to be as fully invested at all times as is
reasonably practicable in order to enhance the yield on its assets, investments
must be made in federal funds (i.e., monies credited to the account of the
Portfolio's custodian bank by a Federal Reserve Bank).
The Portfolio reserves the right to cease accepting investments at any
time or to reject any investment order.
The exclusive placement agent for the Portfolio is Signature. The
principal business address of Signature is 6 St. James Avenue, Boston,
Massachusetts 02116. Signature receives no additional compensation for serving
as the exclusive placement agent for the Portfolio.
Item 8. Redemption or Repurchase.
An investor in the Portfolio may withdraw all or any portion of its
investment at any time at the net asset value next determined after a withdrawal
request in proper form is furnished by the investor to the Portfolio. The
proceeds of a withdrawal will be paid by the Portfolio in federal funds normally
on the Fund Business Day the withdrawal is effected, but in any event within
seven days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
Item 9. Pending Legal Proceedings.
Not applicable
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DSI73C
PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History.................. B-1
Investment Objectives and Policies............... B-1
Management of the Portfolio...................... B-7
Control Persons and Principal Holders
of Securities.................................. B-9
Investment Advisory, Management and Other
Services....................................... B-9
Portfolio Transactions and Brokerage Commissions. B-12
Capital Stock and Other Securities............... B-14
Purchase, Redemption and Pricing of Securities... B-15
Tax Status....................................... B-17
Underwriters..................................... B-18
Calculations of Performance Data................. B-18
Financial Statements............................. B-18
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
The investment objective of the Portfolio is to provide its investors
with long-term total return which corresponds to the total return performance of
the Domini 400 Social Index (sometimes referred to herein as the "Domini Social
Index" or the"Index"), an index comprised of stocks selected based upon the
Portfolio's social criteria. There can be no assurance that the Portfolio will
achieve its investment objective.
The following supplements the information concerning the investment
policies of the Portfolio contained in Part A and should read only in
conjunction therewith.
A company which is not included in the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") may be included in the Index primarily in
order to afford representation to an industrial sector which would otherwise be
under- represented in the Index. Because of the social criteria applied in the
selection of stocks comprising the Index, industry sector weighting in the Index
may vary materially from the industry weightings in other stock indices,
including the S&P 500.
The Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
foreign withholding taxes; however, there can be no assurance that such laws may
not become applicable to certain of the Portfolio's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
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respect to any of the Portfolio's investments, the effect may be to reduce the
income received by the Portfolio on such investments.
Although the Portfolio has no current intention to do so, the Portfolio
may invest in securities which may be resold pursuant to Rule 144A under the
1933 Act.
It is a fundamental policy of the Portfolio that Portfolio may not
invest more than 25% of the total assets of the Portfolio in any one industry,
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 Index, this is considered
highly unlikely. If the Portfolio were to concentrate its investments in a
single industry, the Portfolio would be more susceptible to any single economic,
political or regulatory occurrence than would be another investment company
which was not so concentrated.
LOANS OF SECURITIES: The Portfolio may lend its securities to brokers,
dealers and financial institutions, provided that (1) the loan is secured
continuously by collateral consisting of U.S. Government securities or cash or
letters of credit which is marked to the market daily to ensure that each loan
is fully collateralized at all times; (2) the Portfolio may at any time call the
loan and obtain the return of the securities loaned within five business days;
(3) the Portfolio will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Portfolio.
The Portfolio will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Adviser or the Manager.
Although the Portfolio reserves the right to lend its securities, it
has no current intention of doing so in the foreseeable future.
RISK FACTORS INVOLVED IN OPTION CONTRACTS: Although it has no current
intention to do so, the Portfolio may in the future enter into certain
transactions in stock options for the purpose of hedging against possible
increases in the value of securities which are expected to be purchased by the
Portfolio or possible declines in the value of securities which are expected to
be sold by the Portfolio. Generally, the Portfolio would only enter into such
transactions on a short-term basis pending readjustment of its holdings of
underlying stocks.
The purchase of an option on an equity security provides the holder
with the right, but not the obligation, to purchase the underlying security, in
the case of a call option, or to sell the underlying security, in the case of a
put
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option, for a fixed price at any time up to a stated expiration date. The holder
is required to pay a non-refundable premium, which represents the purchase price
of the option. The holder of an option can lose the entire amount of the
premium, plus related transaction costs, but not more. Upon exercise of the
option, the holder is required to pay the purchase price of the underlying
security in the case of a call option, or deliver the security in return for the
purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated
only by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a position
held by the Portfolio, and the Portfolio could be required to purchase or sell
the instrument underlying an option, make or receive a cash settlement or meet
ongoing variation margin requirements. The inability to close out option
positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on the possible use of hedging strategies by the Portfolio.
The approval of the investors in the Portfolio is not required to
change the investment objective or any of the non-fundamental investment
policies discussed above, including those concerning security transactions.
INVESTMENT RESTRICTIONS: The Portfolio has adopted the following
policies which may not be changed without approval by holders of a "majority of
the outstanding voting securities" of the Portfolio, which as used in this
Registration Statement means the vote of the lesser of (i) 67% or more of the
beneficial interest in the Portfolio present at a meeting, if the holders or
more than 50% of the beneficial interest in the Portfolio are present or
represented by proxy, or (ii) more than 50% of the beneficial interest in the
Portfolio.
The Portfolio may not:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes it may borrow an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed (moreover the Portfolio
may not purchase any securities at any time at which borrowings exceed 5% of the
total assets of the Portfolio, taken 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); for additional related
restrictions, see clause (i) under the caption "Non-Fundamental State and
Federal Restrictions" below;
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(2) purchase any security or evidence of interest therein on margin,
except that the Portfolio may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of securities and except that 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 insofar as
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 its
securities and provided that any such loans not exceed 30% of the Portfolio's
total assets (taken 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 the Portfolio's total 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);
(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 Portfolio reserves the freedom of action to
hold and to sell real estate acquired as a result of the ownership of securities
by the Portfolio);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open it 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
Portfolio's net assets (taken at market value) is held as collateral for such
sales at any one time (it is the present intention of the Portfolio to make such
sales only for the purpose of deferring realization of gain or loss for federal
income tax purposes);
(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;
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(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 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; 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 will invest more than 25% of its assets in
that industry.
NON-FUNDAMENTAL STATE AND FEDERAL RESTRICTIONS: In order to comply with
certain state and federal statutes and policies, the Portfolio will not as a
matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the total assets of the
Portfolio (taken in each case at cost) (moreover, the Portfolio will not
purchase any securities at any time at which borrowings exceed 5% of its total
assets (taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of the net
assets of the Portfolio (taken in each case at market value), provided that
collateral arrangements with respect to options, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction,
(iii) sell any security which it does not own unless by virtue of its ownership
of other securities it has at the time of sale a right to obtain securities,
without payment of further consideration, equivalent in kind and amount to the
securities sold, and provided that if such right is conditional the sale is made
upon the same conditions,
(iv) invest for the purpose of exercising control or management,
(v) purchase securities issued by any registered investment company except by
purchase in the open market where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission, or
except when such purchase, though not made in the open market, is part of a plan
of merger or consolidation; provided, however, that the Portfolio will not
purchase the securities of any registered investment company if such purchase at
the time thereof would cause more than 10% of the total assets of the Portfolio
(taken at the greater of cost or market value) to be invested in the securities
of such issuers or would cause more than 3% of the outstanding voting securities
of any such issuer to be held by the Portfolio; and provided, further, that the
Portfolio shall not purchase securities issued by any open-end investment
company,
(vi) invest more than 10% of the net assets of the Portfolio (taken at the
greater of cost or market value), in securities (excluding Rule 144A securities)
that are restricted as to resale under the 1933 Act,
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(vii) invest more than 15% of the net assets of the Portfolio (taken at the
greater of cost or market value), (a) in securities that are restricted as to
resale by the 1933 Act (including Rule 144A securities), and (b) in securities
that are issued by issuers which (including the period of operation of any
predecessor company or unconditional guarantor of such issuer) have been in
operation less than three years, provided, however, that no more than 5% of the
net assets of the Fund or the Portfolio, respectively, are invested in
securities issued by issuers which (including predecessors) have been in
operation less than three years,
(viii) purchase puts, calls, straddles, spreads and any combination thereof if
the value of its aggregate investment in such securities will exceed 5% of the
Portfolio's total assets at the time of such purchase,
(ix) purchase securities of any issuer if such purchase at the time thereof
would cause it to hold more than 10% of any class of securities of such issuer,
for which purposes all indebtedness of an issuer shall be deemed a single class
and all preferred stock of an issuer shall be deemed a single class, except that
option contracts shall not be subject to this restriction,
(x) purchase or retain any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Portfolio or is an officer or director of the Adviser or the Manager, if after
the purchase of the securities of such issuer by the Portfolio one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or securities,
or both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market value,
(xi) invest more than 5% of the Portfolio's net assets in warrants (valued at
the lower of cost or market), but not more than 2% of the Portfolio's net assets
may be invested in warrants not listed on the New York Stock Exchange Inc. or
the American Stock Exchange, or
(xii) make short sales of securities or maintain a short position, unless at all
times when a short position is open, the Portfolio 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 and equal in amount
to the securities sold short, and unless not more than 10% of the Portfolio's
net assets (taken at market value) is represented by such securities, or
securities convertible into or exchangeable for such securities, at any one time
(the Portfolio has no current intention to engage in short selling).
Restrictions (i) through (xii) are not fundamental and may be changed
by the Portfolio without the approval of its investors in response to changes in
the various state and federal requirements.
PERCENTAGE AND RATING RESTRICTIONS: If a percentage restriction or
rating restriction on investment or utilization of assets set forth above or
referred to in Part A is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the securities held by the Portfolio or a later change in the rating of
a security
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held by the Portfolio will not be considered a violation of policy; provided
that if at any time the ratio of borrowings of the Portfolio to the net asset
value of the Portfolio exceeds the ratio permitted by Section 18(f) of the 1940
Act, the Portfolio will take the corrective action required by Section 18(f).
Item 14. Management of the Portfolio.
The Trustees and officers of 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 Portfolio.
Unless otherwise indicated below, the address of each Trustee and officer is 6
St. James Avenue, Boston, Massachusetts 02116.
Trustees
AMY L. DOMINI* -- Chair, President and Trustee of the Portfolio; Officer of
Kinder, Lydenberg, Domini & Co., Inc.; Trustee, Loring, Wolcott & Coolidge.
PHILIP W. COOLIDGE* -- Trustee of the Portfolio; Chief Executive Officer,
Signature Financial Group, Inc. ("SFG").
ALLEN M. MAYES -- 7985 Willow Creek Drive, Beaumont, Texas 77707; Trustee of the
Portfolio; Senior Associate General Secretary of the General Board of Pensions
of the United Methodist Church; Member of the Board of Directors of Investor
Responsibility Research Center; Member of Board of Trustees of Wiley College.
TIMOTHY SMITH -- 475 Riverside Drive, New York, New York 10115; Trustee of the
Portfolio; Executive Director of the Interfaith Center on Corporate
Responsibility.
FREDERICK C. WILLIAMSON -- Five Roger Williams Green, Providence, Rhode Island
02904; Trustee of the Portfolio; Treasurer of Rhode Island Group Health
Association (HMO); Trustee of National Trust for Historic Preservation; Chairman
of Rhode Island Localities Cash Trust; Trustee of National Parks and
Conservation Association.
Each Trustee is paid an annual fee as follows for serving as Trustee of
the Portfolio and is reimbursed for expenses incurred in connection with service
as a Trustee. The compensation paid to the Trustees for the fiscal year ended
July 31, 1996 is set forth below. The Trustees may hold various other
directorships unrelated to the Portfolio.
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Pension or
Retirement
Benefits Total
Aggregate Accrued as Annual Compensation
Compensation Part of Benefits from
from the Portfolio upon the
Portfolio Expenses Retirement Portfolio
Amy L. Domini*, None None None None
Chair, President
and Trustee
Philip W. Coolidge*, None None None None
Trustee
Allen M. Mayes, $1,200 None None $1,200
Trustee
Timothy Smith, $1,200 None None $1,200
Trustee
Frederick C. Williams, $1,200 None None $1,200
Trustee
Officers
PETER D. KINDER -- Vice President of the Portfolio; President of Kinder,
Lydenberg, Domini & Co., Inc.
STEVEN D. LYDENBERG -- Vice President of the Portfolio; Director of Research of
Kinder, Lydenberg, Domini & Co., Inc.
JOHN R. ELDER -- Treasurer; Vice President, SFG (since April, 1995); Treasurer,
Phoenix Family of Mutual Funds (prior to April, 1995).
LINDA T. GIBSON -- Assistant Secretary; Legal Counsel and Assistant Secretary,
SFG; Assistant Secretary, Signature (since November, 1992); law student, Boston
University School of Law (prior to May, 1992).
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant Secretary,
SFG; Assistant Secretary, Signature.
Messrs. Coolidge and Elder and Mss. Gibson and Mugler also hold similar
positions for other investment companies for which Signature or an affiliate
serves as the principal underwriter.
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The Portfolio's Declaration of Trust provides that it will indemnify
its Trustees and officers (the "Indemnified Parties") against liabilities and
expenses incurred in connection will litigation in which they may be involved
because of their offices with the Portfolio, unless, as to liability to the
Portfolio or its investors, 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 Portfolio. 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 Indemnified
Parties have not engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
Item 15. Control Persons and Principal Holders of Securities.
As of October 31, 1996 the following shareholders of record owned 5% or
more of the outstanding shares of the Portfolio: Domini Social Equity Fund
(owner of 82.9% of the Portfolio) and Domini Institutional Social Equity Fund
(owner of 15.2% of the Portfolio).
Item 16. Investment Advisory, Management and Other Services.
KLD provides advice to the Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The services provided by the Adviser
consist of determination of the stocks to be included in the Index and
evaluating, in accordance with the Adviser's social criteria, debt securities
which may be purchased by the Portfolio. The Adviser 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 Advisory Agreement will continue in effect indefinitely if
such continuance is specifically approved at least annually by the Portfolio's
Board of Trustees or by a majority vote of the investors of the Portfolio at a
meeting called for the purpose of voting on the Advisory 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 Advisory Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Advisory Agreement.
For the fiscal years ended July 31, 1994 and 1995, the Adviser
voluntarily waived all of its advisory fees. For the fiscal year ended July 31,
1996, the Portfolio incurred $38,150 in advisory fees.
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The Advisory Agreement provides that the Adviser may render services to
others. The Advisory Agreement is terminable without penalty on not more than 60
days' nor less than 30 days' written notice by the Portfolio when authorized
either by majority vote of the investors in the Portfolio (with the vote of each
being in proportion to the amount of their investment) or by a vote of a
majority of its Board of Trustees, or by the Adviser, and will automatically
terminate in the event of its assignment. The Advisory Agreement provides that
neither the Adviser not 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 the execution of security transactions for the Portfolio, except
for wilful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Advisory Agreement.
Mellon Equity manages the assets of the Portfolio pursuant to an
Investment Management Agreement (the "Management Agreement"). The Manager
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 Management Agreement will continue in effect
if such continuance is specifically approved at least annually by the
Portfolio's Board of Trustees or by a majority vote of the investors in the
Portfolio at a meeting called for the purpose of voting on the Management
Agreement (with the vote of each being in proportion to the amount of their
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.
Prior to November 21, 1994, State Street Bank and Trust Company (the
"Former Manager") served as investment manager to the Portfolio. For the fiscal
years ended July 31, 1994, the Portfolio incurred $16,986 in management fees to
the Former Manager. For the period August 1, 1994 through November 20, 1994, the
Portfolio incurred $10,180 in management fees to the Former Manager. For the
period November 21, 1994 through July 31, 1995 and the fiscal year ended July
31, 1996, the Portfolio incurred $29,409 and $128,901 in management fees,
respectively.
The Management Agreement provides that the Manager may render services
to others. The Management Agreement is terminable without penalty upon not more
than 60 days' nor less than 30 days' written notice by the Portfolio when
authorized either by majority vote of the investors in the Portfolio (with the
vote of each being in proportion to the amount of their investment) or by a vote
of the majority of its Board of Trustees, or by the Manager, and will
automatically terminate in the event of its assignment. The Management Agreement
provides that neither the Manager nor its personnel shall be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for wilful misfeasance, bad faith or gross negligence or reckless disregard for
its or their obligations and duties under the Management Agreement.
The Sponsorship Agreement, dated November 6, 1996, provides that
Kinder, Lydenberg, Domini & Co., Inc. ("KLD" or the "Sponsor") pays the ordinary
operating expenses of the Portfolio (other than brokerage fees and commissions,
interest, taxes and extraordinary expenses) and provides the Portfolio with
general office facilities and supervises the overall administration of the
Portfolio, including, among other responsibilities, answering questions from the
general public and the media regarding the securities holdings of the Portfolio,
negotiating contracts and fees with and monitoring performance and billings of,
the independent contractors and agents of the Portfolio; preparing and filing of
all documents required for compliance by the Portfolio with applicable laws and
regulations; and arranging for the maintenance of books and records of the
Portfolio. The Sponsor provides persons satisfactory to the Board of Trustees of
the Portfolio to serve as officers of the Portfolio. Such officers, as well as
certain other employees and Trustees of the Portfolio, may be directors,
officers or employees of the Sponsor or its affiliates.
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The Sponsorship Agreement with the Portfolio provides that KLD 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 the Portfolio, except for wilful 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.
The Sponsorship Agreement may be terminated without penalty by either
party on not more than 60 days' written notice, except with respect to the
expense payment obligations which terminate on December 31, 1999, unless sooner
terminated by the mutual agreement of KLD and Signature.
Pursuant to an Administrative Services Agreement between Signature and
KLD, Signature serves as Administrator of the Portfolio. In such capacity,
Signature performs certain administrative services requested by the Sponsor.
For the fiscal years ended July 1994 and 1995, Signature voluntarily
waived all of its administrative servces fees from the Portfolio. For the fiscal
year ended July 31, 1996, the Portfolio incurred $38,150 in administrative fees.
The Portfolio has entered into a Transfer Agency Agreement and a
Custodian Agreement with Investors Bank & Trust Company ("IBT") pursuant to
which IBT acts as transfer agent and custodian for the Portfolio. The principal
business address of IBT is 89 South Street, Boston, Massachusetts 02111.
Pursuant to an expense payment arrangement between Signature and the
Portfolio, Signature has agreed to pay all of the operating expenses of the
Portfolio. The arrangement will terminate on December 31, 1999 unless sooner
terminated by mutual agreement of the parties. Under the arrangement, Signature
receives expense payment fees computed and paid monthly from the Portfolio, at
an annual rate equal to 0.175% of the Portfolio's average daily net assets for
its then-current fiscal year.
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KPMG Peat Marwick LLP are the independent auditors for the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Securities and
Exchange Commission. The principal business address of KPMG Peat Marwick LLP is
99 High Street, Boston, Massachusetts 02110.
Item 17. Portfolio Transactions and Brokerage Commissions.
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Manager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Manager in a similar capacity.
The Portfolio's primary consideration in placing securities
transactions with broker-dealers for execution is to obtain and maintain the
availability of execution at the most favorable prices and in the most effective
manner possible. The Manager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Manager on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Manager normally seeks to deal directly with the primary
market makers, unless in its option, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Manager on the tender of the
Portfolio's securities in so-called tender or exchange offers. Such soliciting
dealer fees are in effect recaptured for the Portfolio by the Manager. At
present no other recapture arrangements are in effect. Consistent with the
foregoing primary consideration, the Conduct Rules of the National Association
of Securities Dealers, Inc. and such other policies as the Trustees of the
Portfolio may determine, the Manager may consider sales of shares of securities
of investors in the Portfolio as a factor in the selection of broker-dealers to
execute the Portfolio's securities transactions.
Under the Management Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Manager may cause the Portfolio to pay a
broker-dealer which provides brokerage and research services to the Manager an
amount of commission for effecting a securities transaction for the Portfolio in
excess of the amount other broker-dealers would have charged for the transaction
if the Manager 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 Manager's overall responsibilities to the Portfolio or to its
other clients. Not all of such services are useful or of value in advising the
Portfolio.
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The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Manager and Adviser currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will in the judgment of
the Manager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Manager's and Adviser's other clients in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Manager or the Adviser for no
consideration other than brokerage or underwriting commissions.
The Manager and the Adviser attempt to evaluate the quality of research
provided by brokers. The Manager and the Adviser sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the Manager nor the Adviser is
able to quantify the amount of commissions which are paid as a result of such
research because a substantial number of transactions are effected through
brokers which provide research but which are selected principally because of
their execution capabilities.
The fees that the Portfolio pays to the Adviser and the Manager will
not be reduced as a consequence of the Portfolio's receipt of brokerage and
research services. To the extent the Portfolio's securities transactions are
used to obtain brokerage and research services, the brokerage commissions paid
by the Portfolio will exceed those that might otherwise be paid for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services may be useful and of value to the Manager or the
Adviser in serving both the Portfolio and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients may be
useful to the Manager or the Adviser in carrying out its obligations to the
Portfolio. While such services are not expected to reduce the expenses of the
Manager or the Adviser, the Manager and the Adviser 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, 1994, 1995 and 1996, the Portfolio paid brokerage
commissions of $13,000, $15,222 and $45,017, respectively.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Adviser's or the Manager's other
clients. Investment decisions for the Portfolio and for the Adviser's or the
Manager's other clients are made with a view to achieving their respective
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investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by or bought or sold for
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.
Item 18. Capital Stock and Other Securities.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interests in the Portfolio may elect all of the Trustees of the Portfolio if
they choose to do so and in such event the other investors in the Portfolio
would not be able to elect any Trustee. The Portfolio is not required to hold
annual meetings of investors but the Portfolio will hold special meetings of
investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
their investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment), except that if the Trustees of the Portfolio recommend such sale of
assets, the approval by vote of a majority of the investors (with the vote of
each being in proportion to the amount of their investment) will be sufficient.
The Portfolio may also be terminated (i) upon liquidation and distribution of
its assets, if approved by the vote of two-thirds of its investors (with the
vote of each being in proportion to the amount of their investment), or (ii) by
the Trustees of the Portfolio by written notice to its investors.
B-14
<PAGE>
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he or she would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his or her office.
The Portfolio reserves the right to create and issue a number of
series, in which case investments in each series would participate equally in
the earnings and assets of the particular series. Investors in each series would
be entitled to vote separately to approve advisory agreements or changes in
investment policy, but investors of all series would vote together in the
election or selection of Trustees, principal underwriters and accountants for
the Portfolio. Upon liquidation or dissolution of the Portfolio, the investors
in each series would be entitled to share pro rata in the net assets of their
respective series available for distribution to investors.
Item 19. Purchase, Redemption and Pricing of Securities.
Beneficial interests in the Portfolio will be issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities which are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any security within
the meaning of the 1933 Act.
The net asset value of the Portfolio is determined each day on which
the New York Stock Exchange is open for trading ("Portfolio Business Day"). (As
of the date of this Registration Statement, the New York Stock Exchange is open
for trading every weekday except for the following holidays: New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) This determination of net asset value is made
once during each such day as of the close of regular trading of such Exchange by
deducting the amount of the Portfolio's liabilities, including expenses payable
or accrued, from the value of its assets. Purchases and redemptions will be
B-15
<PAGE>
effected at the time of determination of net asset value next following the
receipt of any purchase or redemption order.
Equity securities held by the Portfolio are valued at the last sale
price on the exchange on which they are primarily traded or on the NASDAQ system
for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. If the Portfolio purchases option
contracts, such option contracts which are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Short-term obligations with remaining maturities of less than
sixty days are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of the Portfolio. Other securities held by
the Portfolio 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 Board of
Trustees.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by the
Portfolio's Board of Trustees. While no single standard for determining fair
value exists, as a general rule, the current fair value of a security would
appear to be the amount which the Portfolio could expect to receive upon its
current sale. Some, but not necessarily all, of the general factors which may be
considered in determining fair value include: (i) the fundamental analytical
data relating to the investment; (ii) the nature and duration of restrictions on
disposition of the securities; and (iii) an evaluation of the forces which
influence the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be considered in
determining fair value, some of the specific factors include: type of security,
financial statements of the issuer, cost at date of purchase, size of holding,
discount from market value, value of unrestricted securities of the same class
at the time of purchase, special reports prepared by analysts, information as to
any transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the security, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
Interest income on short-term obligations held by the Portfolio is
determined on the basis of interest accrued less amortization of premium.
At the close of each Portfolio Business Day, the value of each
investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals, which are to be
effected as of the close of business on that day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be re-computed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from
B-16
<PAGE>
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 Portfolio Business Day.
Item 20. Tax Status.
The Portfolio is organized as a trust under New York law. As such, the
Portfolio will not be subject to any income tax and, under the anticipated
method of operation of the Portfolio, withdrawals from the Portfolio should not
generate any taxable gain to an investor. However, each investor in the
Portfolio must take into account its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's taxable income, gain,
loss, deductions and credits in determining its income tax liability. The
determination of such share will be made in accordance with regulations
promulgated by the Internal Revenue Service and should therefore be respected by
the Internal Revenue Service.
The Portfolio's taxable year-end is currently July 31. Although the
Portfolio will not be subject to federal income tax, it will file a federal
information income tax return upon which it will report its income, gain, loss,
deductions and credits for its taxable year.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended, assuming that the investor invested all of its assets in the
Portfolio.
There are certain tax issues which will be relevant to only certain of
the investors, specifically, investors which are segregated asset accounts and
investors who contribute assets rather than cash to the Portfolio. It is
intended that such segregated asset accounts will be able to satisfy
diversification requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met. Such investors
are advised to consult their own tax advisors as to the tax consequences.
It is assumed that, (1) the Portfolio will be treated for federal
income tax purposes as a partnership and (2) for purposes of determining whether
the Fund satisfies the income and diversification requirements to maintain its
status as a regulated investment company, the Fund, as an investor in the
Portfolio, will be deemed to own a proportionate share of the Portfolio's assets
and will be deemed to be entitled to the Portfolio's income or loss attributable
to that share. The Portfolio has advised the Fund that it intends to conduct its
operations so as to enable its investors, including the Fund, to satisfy those
requirements.
The Fund anticipates that the Portfolio will be treated as a
partnership for federal income tax purposes. As such, the Portfolio is not
subject to federal income taxation. Instead, the Fund must take into account, in
computing its federal income tax liability, its share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether it has
B-17
<PAGE>
received any cash distributions from the Portfolio. Withdrawals by the Fund from
the Portfolio generally will not result in the Fund recognizing any gain or loss
for federal income tax purposes, except that (1) gain will be recognized to the
extent that any cash distributed exceeds the basis of the Fund's interest in the
Portfolio prior to the distribution, (2) income or gain will be realized if the
withdrawal is in liquidation of the Fund's entire interest in the Portfolio and
includes a disproportionate share of any unrealized receivables held by the
Portfolio, and (3) loss will be recognized if the distribution is in liquidation
of that entire interest and consists solely of cash and/or unrealized
receivables. The basis of the Fund's interest in the Portfolio generally equals
the amount of cash and the basis of any property that the Fund invests in the
Portfolio, increased by the Fund's share of income from the Portfolio and
decreased by the Fund's share of losses from the Portfolio and the amount of any
cash distributions and the basis of any property distributed from the Portfolio.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. The investment by the Fund in the Portfolio does
not cause the Fund to be liable for any income or franchise tax in the State of
New York.
Item 21. Underwriters.
The exclusive placement agent for the Portfolio is Signature, which
receives no additional compensation for serving in this capacity. Investment
companies, insurance company separate accounts, common and commingled trust
funds and similar organizations and entities may continuously invest in the
Portfolio.
Item 22. Calculations of Performance Data.
Not applicable.
Item 23. Financial Statements.
Financial statements of the Portfolio as of July 31, 1996 included
herein have been so included in reliance upon the report of KPMG Peat Marwick
LLP, independent auditors, as experts in accounting and auditing.
B-18
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
COMMON STOCKS -- 99.2%
APPAREL -- 1.1%
Brown Group Inc.......... 400 $ 5,450
Hartmarx Corp. (b)....... 600 2,925
Lands' End Inc........... 1,700 34,425
Liz Claiborne, Inc....... 3,200 104,400
Nike Inc. (Class B)...... 6,000 617,250
Oshkosh B'Gosh, Inc.
(Class A)............... 300 4,725
Phillips-Van Heusen
Corp.................... 600 6,450
Reebok International
Ltd..................... 3,200 112,000
Russell Corp............. 1,600 53,600
Stride Rite Corp......... 1,900 13,775
Timberland Co. (b)....... 550 9,900
VF Corp.................. 2,700 150,862
------------
1,115,762
------------
COMMERCIAL PRODUCTS & SERVICES -- 1.8%
Autodesk Inc............. 2,100 48,431
Banta Corp............... 1,250 27,188
Cintas Corp.............. 1,900 96,900
Deluxe Corp.............. 3,500 129,063
Donnelley, (R.R.) &
Sons.................... 6,200 199,950
Harland (J.H.) Co........ 1,300 31,525
HON Industries Inc....... 1,300 39,000
Kelly Services (Class
A)...................... 1,775 49,700
Miller, (Herman) Inc..... 800 25,650
Moore Corp., Ltd......... 4,300 74,712
National Education Corp.
(b)..................... 1,300 19,662
National Service
Industries, Inc......... 1,900 72,437
New England Business
Services Inc............ 300 5,137
Pitney Bowes Inc......... 6,400 310,400
Standard Register Co..... 1,200 32,400
Xerox Corp............... 13,400 675,025
------------
1,837,180
------------
CONSTRUCTION -- 0.3%
Centex Corp.............. 1,500 43,500
Fleetwood Enterprises,
Inc..................... 1,500 45,563
Graco Inc................ 950 17,931
Kaufman & Broad Home
Corp.................... 1,700 20,188
Rouse Co................. 1,900 47,500
Sherwin-Williams Co...... 3,600 162,900
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
CONSTRUCTION -- CONTINUED
TJ International Inc..... 400 $ 6,400
------------
343,982
------------
CONSUMER PRODUCTS & SERVICES -- 0.1%
Avery Dennison Corp...... 2,200 113,850
ISCO Inc................. 200 1,875
Tennant Co............... 200 5,200
------------
120,925
------------
ENERGY -- 3.7%
Amoco Corp............... 20,800 1,391,000
Anadarko Petroleum
Corp.................... 2,600 132,925
Apache Corp.............. 3,800 107,825
Atlantic Richfield Co.... 6,700 777,200
Consolidated Natural Gas
Co...................... 3,900 196,463
ENERGEN Corp............. 300 6,788
Enron Corp............... 10,800 425,250
Helmerich & Payne Inc.... 900 31,500
Louisiana Land &
Exploration Co.......... 1,300 70,200
Oryx Energy Co. (b)...... 4,400 69,300
Pennzoil Co.............. 2,200 108,075
Rowan Companies Inc.
(b)..................... 4,000 57,500
Santa Fe Energy Resources
Inc. (b)................ 3,700 42,087
Sun Co................... 3,400 87,975
Williams Companies
Inc..................... 4,500 206,437
------------
3,710,525
------------
FINANCIAL -- 12.8%
Ahmanson (H.F.) & Co..... 4,600 116,150
American Express Co...... 19,900 870,625
Banc One Corp............ 18,595 643,852
Bank of Boston........... 6,400 339,200
BankAmerica Corp......... 15,300 1,220,175
Bankers Trust (N.Y.)
Corp.................... 3,300 237,188
Barnett Banks Inc........ 4,100 251,638
Beneficial Corp.......... 2,100 113,400
Block (H. & R.), Inc..... 4,600 120,175
Cincinnati Financial
Corp.................... 2,195 122,371
CoreStates Financial
Corp.................... 9,200 361,100
Dime Bancorp Inc. (b).... 4,500 55,688
Edwards (A.G.), Inc...... 2,525 69,122
Federal Home Loan
Mortgage Corp........... 7,300 615,025
</TABLE>
9
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
FINANCIAL -- CONTINUED
<S> <C> <C>
Federal National Mortgage
Association............. 45,900 $ 1,457,325
Fifth Third Bancorp...... 4,300 222,525
First Chicago Corp....... 13,506 519,981
First Fed Financial Corp.
(b)..................... 200 3,500
Golden West Financial
Corp.................... 2,400 133,200
Great Western Financial
Corp.................... 5,400 128,250
Household International
Inc..................... 4,000 298,000
MBNA Corp................ 9,300 259,238
Mellon Bank Corp......... 5,800 305,950
Merrill Lynch & Co.,
Inc..................... 7,200 434,700
Morgan (J.P.) & Co.,
Inc..................... 7,900 679,400
Norwest Corp............. 15,500 550,250
Piper Jaffray Inc........ 600 7,125
PNC Bank Corp............ 14,400 419,400
ReliaStar Financial
Corp.................... 1,500 62,812
Schwab (Charles) Corp.... 7,200 173,700
Student Loan Marketing
Association............. 2,500 182,500
SunTrust Banks Inc....... 9,700 356,475
Transamerica Corp........ 2,800 193,550
Value Line Inc........... 300 9,975
Vermont Financial
Services Corp........... 100 3,150
Wachovia Corp............ 6,900 305,325
Wells Fargo & Co......... 3,950 919,856
Wesco Financial Corp..... 300 49,350
------------
12,811,246
------------
FOODS & BEVERAGES -- 10.9%
Ben & Jerry's (Class A)
(b)..................... 100 1,600
CPC International Inc.... 6,000 401,250
Campbell Soup Co......... 10,400 705,900
Coca-Cola Co............. 104,600 4,903,125
Fleming Cos. Inc......... 1,300 19,663
General Mills, Inc....... 6,700 363,475
Heinz (H.J.) Co.......... 15,300 506,813
Hershey Foods Corp....... 3,300 270,600
Kellogg Co............... 8,800 657,800
Odwalla Inc. (b)......... 300 5,175
PepsiCo, Inc............. 65,600 2,074,600
Quaker Oats Co........... 5,500 176,000
Ralston Purina Group..... 4,600 288,650
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
FOODS & BEVERAGES -- CONTINUED
Smucker (J.M.) Co. (Class
A)...................... 1,100 $ 19,525
Super Valu Inc........... 3,100 86,412
Sysco Corp............... 7,400 214,600
TCBY Enterprises, Inc.... 500 2,062
Tootsie Roll Industries,
Inc..................... 1,145 40,361
Wrigley, (Wm.) Jr. Co.... 4,900 252,962
------------
10,990,573
------------
HEALTH CARE -- 8.5%
Acuson Corp. (b)......... 1,100 14,575
Allergan Inc............. 2,600 105,950
Alza Corp. (b)........... 3,800 94,050
Angelica Corp............ 300 6,563
Apogee Enterprises,
Inc..................... 700 22,750
Becton Dickinson & Co.... 2,700 201,488
Bergen Brunswig Corp.
(Class A)............... 1,895 49,270
Biomet Inc. (b).......... 5,300 81,488
Community Psychiatric
Centers (b)............. 2,000 16,000
Forest Laboratories, Inc.
(b)..................... 1,700 58,013
Humana Inc. (b).......... 6,800 113,900
Johnson & Johnson........ 55,600 2,654,900
Manor Care Inc........... 2,800 92,400
Medtronic Inc............ 9,700 459,537
Merck & Co., Inc......... 51,000 3,276,750
Mylan Laboratories
Inc..................... 4,700 70,500
Oxford Health Plans
(b)..................... 3,300 113,850
Schering-Plough Corp..... 15,400 848,925
St. Jude Medical Inc.
(b)..................... 3,300 110,962
Stryker Corp............. 4,300 105,686
Sunrise Medical Inc.
(b)..................... 600 9,225
United American
Healthcare (b).......... 200 2,050
------------
8,508,832
------------
HOUSEHOLD GOODS -- 6.0%
Alberto Culver Co. (Class
B)...................... 1,200 51,750
Avon Products, Inc....... 5,600 246,400
Bassett Furniture
Industries, Inc......... 300 6,600
Church & Dwight Co.,
Inc..................... 900 18,675
Clorox Co................ 2,100 190,838
Colgate-Palmolive Co..... 6,200 486,700
</TABLE>
10
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
HOUSEHOLD GOODS -- CONTINUED
<S> <C> <C>
Handleman Co. (b)........ 700 $ 3,238
Harman International
Industries, Inc......... 830 37,246
Hasbro Inc............... 3,500 125,563
Huffy Corp............... 300 3,525
Kimberly-Clark Corp...... 11,832 899,232
Leggett & Platt Inc...... 3,600 93,600
Mattel, Inc.............. 11,585 286,729
Maytag Co................ 4,500 90,000
Newell Co................ 6,700 215,237
Oneida, Ltd.............. 200 3,100
Procter & Gamble Co...... 28,600 2,556,125
Rubbermaid Inc........... 6,400 184,000
Shaw Industries.......... 5,300 72,875
Snap-On Tools Corp....... 1,900 84,312
Springs Industries Inc.
(Class A)............... 800 36,500
Stanhome, Inc............ 600 15,750
Stanley Works............ 3,900 111,150
Thomas Industries........ 200 3,475
Whirlpool Corp........... 3,200 157,600
------------
5,980,220
------------
INSURANCE -- 6.1%
Aetna Inc................ 6,570 381,885
Alexander & Alexander
Services Inc............ 1,600 26,400
American General Corp.... 8,900 309,275
American International
Group, Inc.............. 19,800 1,863,675
Chubb Corp............... 7,100 296,425
CIGNA Corp............... 3,200 340,800
General Re Corp.......... 3,300 484,275
Hartford Steam Boiler.... 800 34,900
Jefferson-Pilot Corp..... 3,100 162,750
Lincoln National Corp.... 4,200 179,025
Marsh & McLennan
Companies, Inc.......... 3,100 280,937
Providian Corp........... 3,800 150,575
SAFECO Corp.............. 5,300 182,519
St. Paul Companies....... 3,400 175,950
Torchmark Corp........... 3,300 140,662
Travelers Corp........... 19,764 835,008
UNUM Corp................ 3,000 183,000
USF&G Corp............... 5,400 85,725
USLIFE Corp.............. 1,425 42,394
------------
6,156,180
------------
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
MANUFACTURING -- 2.1%
Applied Materials, Inc.
(b)..................... 7,700 $ 183,838
Boston Scientific Corp.
(b)..................... 7,400 353,350
Brady (W.H.) (Class A)... 700 15,225
Briggs & Stratton
Corp.................... 1,200 45,150
Case Corp................ 3,000 132,750
Cincinnati Milacron...... 1,400 27,650
Clarcor, Inc............. 300 5,888
Deere & Co............... 11,100 396,825
Dionex Corp. (b)......... 400 13,900
Fastenal Co.............. 1,700 73,100
Gerber Scientific........ 800 11,800
Goulds Pumps, Inc........ 1,200 26,700
Hunt Manufacturing Co.... 400 5,250
Illinois Tool Works
Inc..................... 5,000 321,875
James River Corp. of
Virginia................ 3,600 90,900
Lawson Products, Inc..... 300 6,675
Marquette Electronics
(Class A) (b)........... 1,500 27,750
Millipore Corp........... 1,700 58,012
Nordson Corp............. 800 40,400
Thermo Electron Corp.
(b)..................... 6,000 224,250
Watts Industries Inc.
(Class A)............... 1,100 17,737
Wellman Inc.............. 1,600 31,200
Zurn Industries Inc...... 400 8,150
------------
2,118,375
------------
MEDIA -- 3.9%
BET Holdings Inc. (Class
A) (b).................. 800 19,600
Comcast Corp. (Class
A)...................... 9,600 135,600
Disney (Walt) Co......... 28,400 1,579,750
Dow Jones & Co. Inc...... 4,100 160,413
Edmark Corp. (b)......... 500 8,125
Frontier Corp............ 6,700 188,438
King World Productions
Inc. (b)................ 1,600 57,400
Lee Enterprises, Inc..... 1,600 31,800
McGraw-Hill Inc.......... 4,100 159,900
Media General Inc. (Class
A)...................... 1,300 37,212
Meredith Corp............ 1,200 48,750
New York Times Co. (Class
A)...................... 4,300 125,237
</TABLE>
11
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
MEDIA -- CONTINUED
<S> <C> <C>
Scholastic Corp. (b)..... 700 $ 45,675
Tele-Communications, Inc.
(Class A) (b)........... 26,90 383,325
Times Mirror Co. (Class
A)...................... 4,300 177,912
Turner Broadcasting
System Inc. (Class A)... 5,700 146,775
US West Media Group (b).. 19,000 327,750
Viacom Inc. (Class A)
(b)..................... 3,300 113,025
Washington Post Co.
(Class B)............... 450 140,175
------------
3,886,862
------------
MISCELLANEOUS -- 2.0%
Alco Standard Corp....... 5,700 249,375
Allwaste, Inc. (b)....... 1,300 5,688
American Greetings Corp.
(Class A)............... 3,500 84,875
Avnet, Inc............... 1,800 78,525
Bemis Co., Inc........... 2,000 65,250
CPI Corp................. 400 5,750
Cross, (A.T.) Co. (Class
A)...................... 500 6,688
DeVRY Inc. (b)........... 1,100 47,988
Fedders Corp............. 1,300 7,475
Fuller (H.B.) Co......... 500 17,375
General Signal Corp...... 2,200 86,075
Harcourt General Inc..... 3,000 143,625
Hillenbrand Industries
Inc..................... 3,200 107,200
Ionics Inc. (b).......... 800 33,400
Jostens Inc.............. 1,600 30,600
KENETECH Corp. (b)....... 900 253
Marriott International
Corp.................... 5,300 272,287
Omnicom Group, Inc....... 3,000 121,500
Polaroid Corp............ 1,800 76,050
Sealed Air Corp. (b)..... 1,600 55,600
Service Corp.
International........... 5,000 275,625
Sonoco Products Co....... 4,005 118,147
Toro Co.................. 800 24,300
Whitman Corp............. 4,600 102,925
------------
2,016,576
------------
RESOURCE DEVELOPMENT -- 2.5%
Air Products & Chemicals,
Inc..................... 4,800 256,200
Aluminum Co. of America.. 7,200 417,600
ARCO Chemical Co......... 4,000 199,000
Battle Mountain Gold
Co...................... 10,700 97,638
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
RESOURCE DEVELOPMENT -- CONTINUED
Betz Laboratories,
Inc..................... 1,100 $ 49,913
Cabot Corp............... 3,300 82,913
Calgon Carbon Corp....... 1,300 15,275
Consolidated Papers
Inc..................... 1,800 90,450
Cyprus Amax Minerals
Co...................... 4,000 86,000
Echo Bay Mines Ltd....... 5,400 55,350
Inland Steel Industries
Inc..................... 2,300 39,963
Mead Corp................ 2,100 114,975
Morton International
Inc..................... 6,100 219,600
Nalco Chemical Co........ 3,200 96,000
Nucor Corp............... 3,600 168,750
Praxair Inc.............. 6,500 249,437
Sigma-Aldrich Corp....... 2,000 105,000
Westvaco Corp............ 4,500 127,687
Worthington Industries,
Inc..................... 3,800 72,200
------------
2,543,951
------------
RETAIL -- 10.9%
Albertson's, Inc......... 10,700 438,700
American Stores Co....... 6,400 238,400
Bob Evans Farms, Inc..... 1,900 26,600
Charming Shoppes Inc.
(b)..................... 3,700 23,819
Circuit City Stores
Inc..................... 3,900 122,850
Claire's Stores Inc...... 1,600 45,800
Dayton-Hudson Corp....... 9,300 281,325
Dillard Department
Stores.................. 4,800 150,600
Dollar General Corp...... 3,308 85,582
Egghead Inc. (b)......... 300 2,775
Gap, Inc................. 12,000 357,000
Giant Food Inc. (Class
A)...................... 2,300 77,338
Gibson Greetings Inc.
(b)..................... 500 6,000
Great Atlantic & Pacific
Tea Co., Inc............ 1,700 46,963
Hannaford Brothers Co.... 2,000 63,000
Hechinger Co. (Class
A)...................... 800 2,800
Home Depot, Inc.......... 20,033 1,011,667
International Dairy
Queen, Inc. (Class A)
(b)..................... 1,300 26,000
K-Mart Corp. (b)......... 20,600 206,000
Kroger Co. (b)........... 5,400 203,850
Lillian Vernon Corp...... 200 2,450
Limited, Inc............. 13,000 250,250
Longs Drug Stores,
Inc..................... 700 27,125
Lowe's Companies, Inc.... 7,200 234,900
Luby's Cafeterias,
Inc..................... 1,100 26,675
May Department Stores
Co...................... 10,500 471,187
</TABLE>
12
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
RETAIL -- CONTINUED
<S> <C> <C>
McDonald's Corp.......... 29,200 $ 1,354,150
Melville Corp............ 4,500 176,062
Mercantile Stores Co.,
Inc..................... 1,600 78,400
Morrison Restaurants
Inc..................... 0 4
Nordstrom Inc............ 3,400 141,100
Penney, (J.C.) Co.,
Inc..................... 9,300 462,675
Pep Boys................. 2,400 72,600
Price/Costco Inc. (b).... 8,315 170,457
Ruby Tuesday............. 500 9,875
Ryan's Family Steakhouse,
Inc. (b)................ 2,400 18,300
Sears Roebuck & Co....... 16,200 664,200
Skyline Corp............. 400 9,700
Specs Music Inc. (b)..... 200 300
Starbucks Corp. (b)...... 3,400 88,400
Tandy Corp............... 2,600 109,850
TJX Companies Inc........ 2,900 87,362
Toys 'R' Us, Inc. (b).... 11,620 306,477
Wal-Mart Stores, Inc..... 96,400 2,313,600
Walgreen Co.............. 10,000 317,500
Whole Foods Market (b)... 800 25,100
Woolworth (F.W.) Co.
(b)..................... 5,500 105,875
------------
10,941,643
------------
TECHNOLOGIES -- 14.8%
Advanced Micro Devices,
Inc. (b)................ 5,300 64,263
Amdahl Corp. (b)......... 5,300 52,338
American Power Conversion
Corp. (b)............... 4,200 49,350
Analog Devices, Inc.
(b)..................... 4,600 96,025
Apple Computer, Inc.
(b)..................... 5,600 123,200
Automatic Data
Processing, Inc......... 12,100 479,463
Baldor Electric Co....... 1,200 23,850
Borland International,
Inc. (b)................ 1,300 9,750
Cisco Systems, Inc.
(b)..................... 26,700 1,381,725
Compaq Computer Corp.
(b)..................... 11,300 618,675
Computer Assoc.
International Inc....... 15,300 778,388
Cooper Industries Inc.... 4,400 173,250
Digital Equipment Corp.
(b)..................... 6,200 219,325
DSC Communications Corp.
(b)..................... 5,000 150,000
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
TECHNOLOGIES -- CONTINUED
Grainger, (W.W.) Inc..... 2,100 $ 147,525
Hewlett-Packard Co....... 42,900 1,887,600
Hubbell Inc. (Class B)... 1,430 98,134
Intel Corp............... 34,500 2,591,813
International Business
Machines Inc............ 22,500 2,427,188
MCI Communications
Corp.................... 28,700 706,737
Micron Technology,
Inc..................... 8,300 155,625
Molex, Inc............... 4,500 132,750
National Semiconductor
Corp. (b)............... 5,700 80,512
Novell Inc. (b).......... 14,300 152,831
Perkin-Elmer Corp........ 2,000 104,500
Quarterdeck Corp. (b).... 1,100 7,150
Raychem Corp............. 1,800 119,025
Shared Medical Systems
Corp.................... 1,000 55,000
Solectron Corp. (b)...... 2,100 66,150
Sprint Corp.............. 18,400 673,900
Stratus Computer Inc.
(b)..................... 1,100 20,212
Sun Microsystems Inc.
(b)..................... 7,900 431,537
Tandem Computers Inc.
(b)..................... 4,600 48,300
Tektronix, Inc........... 1,400 53,550
Tellabs, Inc. (b)........ 3,800 227,050
Thomas & Betts Corp...... 1,700 62,050
3Com Corp. (b)........... 6,900 271,688
360 (Degrees)
Communications (b)...... 1 23
Xilinx Inc. (b).......... 3,300 106,837
------------
14,847,289
------------
TRANSPORTATION -- 2.3%
AMR Corp. (b)............ 3,800 299,725
Airborne Freight Corp.... 1,200 25,650
Alaska Air Group, Inc.
(b)..................... 600 14,400
CSX Corp................. 8,900 429,425
Conrail Inc.............. 3,400 222,700
Consolidated Freightways,
Inc..................... 1,700 33,363
Delta Air Lines, Inc..... 3,200 223,600
Federal Express Corp.
(b)..................... 2,300 178,825
GATX Corp................ 900 40,500
Norfolk Southern Corp.... 5,300 428,637
Roadway Services......... 750 10,969
Ryder System, Inc........ 3,700 98,512
Southwest Airlines
Inc..................... 6,000 148,500
</TABLE>
13
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
TRANSPORTATION -- CONTINUED
<S> <C> <C>
UAL Corp. (b)............ 2,400 $ 122,400
Yellow Corp. (b)......... 1,300 16,575
------------
2,293,781
------------
UTILITIES -- 8.8%
AGL Resources Inc........ 2,200 40,150
American Water Works Co.,
Inc..................... 3,600 71,550
Ameritech Corp........... 23,100 1,282,050
Bell Atlantic Corp....... 18,400 1,087,900
BellSouth Corp........... 42,000 1,722,000
Brooklyn Union Gas
Company................. 2,300 57,500
California Energy Co.,
Inc. (b)................ 2,500 65,625
Citizens Utilities Co.
(Class A)(b)............ 8,431 92,745
Connecticut Energy
Corp.................... 200 3,900
Eastern Enterprises...... 900 28,913
El Paso Natural Gas
Co...................... 1,500 58,500
Equitable Resources
Inc..................... 1,300 32,988
Idaho Power Co........... 1,600 47,800
LG & E Energy Corp....... 3,000 67,125
MCN Corp................. 3,200 75,200
NICOR Inc................ 2,100 59,587
Noram Energy Corp........ 5,800 63,075
Northwestern Public
Service Co.............. 200 5,475
NYNEX.................... 18,100 812,237
Oklahoma Gas & Electric
Co...................... 1,700 66,725
ONEOK Inc................ 1,200 31,650
Pacific Enterprises...... 3,400 99,875
Pacific Telesis Group.... 17,600 591,800
Peoples Energy Corp...... 1,300 40,462
Potomac Electric Power
Co...................... 5,000 120,625
Public Service Co. of
Colorado................ 2,900 102,587
SBC Telecommunications... 25,500 1,246,312
Southern New England
Telecom................. 3,200 122,800
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
UTILITIES -- CONTINUED
Telephone & Data
Systems................. 2,700 $ 104,287
US West Communications
Group................... 19,700 598,387
Washington Gas Light
Co...................... 2,000 41,750
------------
8,841,580
------------
VEHICLE COMPONENTS -- 0.6%
Cooper Tire & Rubber
Co...................... 3,600 67,950
Cummins Engine Inc....... 1,600 59,800
Dana Corp................ 4,400 122,650
Federal-Mogul Corp....... 1,200 20,250
Genuine Parts............ 5,000 211,875
Modine Manufacturing
Co...................... 1,600 42,000
SPX Corp................. 400 9,950
Smith, (A.O.)............ 1,200 26,700
Spartan Motors Inc.
(b)..................... 300 1,987
------------
563,162
------------
Total Common Stocks (Cost,
$83,008,100).................. 99,628,644
------------
PREFERRED STOCK -- 0.0%
Aetna Inc. 6.25%
convertible............. 1 56
------------
Total Preferred Stock (Cost,
$65).......................... 56
------------
TOTAL INVESTMENTS -- 99.2%
(COST, $83,008,165) (A)........... 99,628,700
OTHER ASSETS, LESS LIABILITIES --
0.8%.............................. 771,858
------------
NET ASSETS -- 100.0%............... $100,400,558
------------
------------
</TABLE>
- ------------
(a)The aggregate cost for federal income tax purposes is $83,008,165, the
aggregate gross unrealized appreciation is $18,466,003, and the aggregate
gross unrealized depreciation is $1,845,468, resulting in net unrealized
appreciation of $16,620,535.
(b)Non-income producing security.
See Notes to Financial Statements
14
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $83,008,165)....................... $ 99,628,700
Cash.......................................................... 1,313,323
Dividends receivable.......................................... 175,702
------------
Total assets.............................................. 101,117,725
------------
LIABILITIES:
Payable for securities purchased.............................. 675,937
Expense payment fee payable................................... 41,230
------------
Total liabilities......................................... 717,167
------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.......... $100,400,558
------------
------------
NET ASSETS CONSIST OF:
Paid in capital............................................... $100,400,558
------------
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $268).............. $1,514,033
EXPENSES:
Expense payment fee................................ $ 372,596
Amortization of organization expenses.............. 8,657
-----------
Total expenses................................. 381,253
----------
NET INVESTMENT INCOME............................................... 1,132,780
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales................................ 3,459,916
Cost of securities sold............................ 2,762,579
-----------
Net realized gain on investments............................ 697,337
NET UNREALIZED APPRECIATION OF INVESTMENTS
Beginning of year.................................. 9,759,028
End of year........................................ 16,620,535
-----------
Net change in unrealized appreciation of investments........ 6,861,507
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $8,691,624
----------
----------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1996 1995
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income............................ $ 1,132,780 $ 734,456
Net realized gain on investments................. 697,337 405,427
Net change in unrealized appreciation of
investments..................................... 6,861,507 8,729,434
------------ -----------
Net Increase in Net Assets Resulting from
Operations.................................. 8,691,624 9,869,317
------------ -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Additions........................................ 52,533,365 14,888,452
Reductions....................................... (14,827,219) (2,076,641)
------------ -----------
Net Increase in Net Assets from Transactions
in Investors' Beneficial Interests.......... 37,706,146 12,811,811
------------ -----------
Total Increase in Net Assets............. 46,397,770 22,681,128
NET ASSETS:
Beginning of year................................ 54,002,788 31,321,660
------------ -----------
End of year...................................... $100,400,558 $54,002,788
------------ -----------
------------ -----------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
YEAR ENDED
------------------------------------------------------------------------------
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994 JULY 31, 1993 JULY 31, 1992
-------------- ------------- ------------- ------------- -------------
FINANCIAL HIGHLIGHTS:
<S> <C> <C> <C> <C> <C>
Net investment income to average net
assets............................. 1.48%(1) 1.85%(2) 2.13%(2) 1.88% 1.99%
Expenses to average net assets...... 0.50%(1) 0.43%(2) 0.29%(2) 0.29% 0.29%
Portfolio turnover rate............. 5% 6% 8% 4% 3%
Average commission rate paid per
share.............................. $0.0496 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
(1) Had the Expense Payment Agreement not been in place, the ratios of net
investment income and expenses for the year ended July 31,1996 would have
been 1.14% and 0.85% respectively.
(2) Reflects a voluntary waiver of fees by the Administrator and Adviser due to
the limitations set forth in the Expense Reimbursement Agreement. Had the
Administrator and Adviser not waived their fees, for the years ended July
31, 1995 and 1994, the ratios of net investment income and expenses to
average net assets would have been 1.75% and 0.53% and 2.00% and 0.42%
respectively.
See Notes to Financial Statements
17
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. Domini Social Index
Portfolio (the "Index Portfolio") is registered under the Investment Company Act
of 1940 (the "Act") as a no-load, diversified, open-end management investment
company which was organized as a trust under the laws of the State of New York
on June 7, 1989. The Index Portfolio intends to correlate its investment
portfolio as closely as is practicable with the Domini Social Index (the
"Index"), which is a common stock index developed and maintained by Kinder,
Lydenberg, Domini & Co., Inc. ("KLD"), the Index Portfolio's Adviser. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Index Portfolio. The Index Portfolio commenced
operations upon effectiveness on August 10, 1990 and began investment operations
on June 3, 1991.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of the Index Portfolio's significant accounting policies.
(A) VALUATION OF INVESTMENTS: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales are
reported.
(B) DIVIDEND INCOME: Dividend income is recorded on the ex-dividend date.
(C) FEDERAL TAXES: The Index Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for Federal taxes is deemed necessary.
(D) DEFERRED ORGANIZATION EXPENSE: Expenses incurred by the Index
Portfolio in connection with its organization are being amortized by the Index
Portfolio on a straight-line basis over a five-year period.
(E) OTHER: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
2. TRANSACTIONS WITH AFFILIATES.
(A) INVESTMENT ADVISORY FEES: The Index Portfolio has retained KLD as the
Investment Adviser of the Index Portfolio. The services provided by KLD consist
of the determination of the stocks to be included in the Index and evaluating,
in accordance with KLD's criteria, debt securities which may be purchased by the
Index Portfolio. For its services under the Investment Advisory Agreement, KLD
receives from the Index Portfolio a fee accrued daily at an annual rate equal to
0.05% of the Index Portfolio's average daily net assets.
(B) INVESTMENT MANAGEMENT FEES: The Index Portfolio has retained Mellon
Equity Associates ("MEA") as the Investment Manager of the Index Portfolio. MEA
does not determine the composition of the Index. Under the Management Agreement,
the Index Portfolio pays MEA an investment management fee equal on an annual
basis to the following percentages of the Index Portfolio's average daily net
assets for its then-current fiscal year: 0.10% of assets up to $50 million;
0.30% of assets between $50 million and $100 million; 0.20% of assets between
$100 million and $500 million; and 0.15% of assets over $500 million.
(C) ADMINISTRATION FEES: The Index Portfolio has retained Signature
Broker-Dealer Services, Inc. ("Signature") to serve as Administrator of the
Index Portfolio. Certain officers of Signature serve as officers and trustee to
the Index Portfolio. Under the Administrative Services Agreement, Signature
provides management and administrative services necessary for the operations of
the Index Portfolio, furnishes office space and facilities required for
conducting the business of the Index Portfolio and pays the compensation of the
Index Portfolio's officers and Trustee affiliated with Signature. For these
services, Signature receives from the Index Portfolio a fee accrued daily at an
annual rate equal to 0.05% of the Index Portfolio's average daily net assets.
(D) EXPENSE PAYMENT FEES: The Administrator has agreed to pay all of the
operating expenses of the Index Portfolio, including advisory, management and
administration fees, subject to an Expense Payment Arrangement. Under this
arrangement, the Administrator receives expense payment fees from the Index
Portfolio at an annual rate equal to 0.50% of the average daily net assets of
the Index Portfolio. The Expense Payment Arrangement will terminate on December
31, 1999. For the year ended July 31, 1996, the Administrator incurred
approximately $264,025 in expenses on behalf of the Index Portfolio.
3. INVESTMENT TRANSACTIONS. Purchase and sales of investments, other than U.S.
Government securities and short-term obligations, aggregated $41,791,647 and
$3,387,873, respectively.
18
<PAGE>
[LOGO]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Domini Social Index Portfolio as of July
31, 1996, and the related statement of operations for the year then ended,
statement of changes in net assets for each of the years in the two-year period
then ended and financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned by the
Portfolio as of July 31, 1996 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Domini Social Index Portfolio at July 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended and financial highlights for each of the years in
the five-year period then ended in conformity with generally accepted accounting
principles.
Boston, Massachusetts
August 23, 1996
ANNUAL REPORT
JULY 31, 1996
<PAGE>
DSI73E
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
Not applicable.
Financial Statements Included in Part B:
Portfolio of Investments at July 31, 1996
Statement of Assets and Liabilities at July 31, 1996
Statement of Operations at Year Ended July 31, 1996
Statements of Changes in Net Assets for the fiscal years ended
July 31, 1996 and 1995
Financial Highlights for the fiscal years ended July 31, 1996, 1995,
1994, 1993 and 1992
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits
1.Declaration of Trust of the Registrant.2
2.By-Laws of the Registrant.2
5.(a) Investment Advisory Agreement between the Registrant and Kinder,
Lydenberg, Domini & Co., Inc. ("KLD").3
5.(b) Investment Management Agreement between the Registrant and Mellon Equity
Associates.3
8. Custodian Agreement between the Registrant and Investors Bank & Trust
Company, as custodian (including transfer agency services).1
9.(a) Administrative Services Agreement between KLD and Signature Broker-Dealer
Services, Inc. ("Signature"), as administrator.3
9.(c) Sponsorship Agreement between Registrant and KLD, as Sponsor.3
13. Investment representation letters from initial shareholders.1
17. Financial Data Schedule.3
- --------------
1 Previously filed and incorporated herein by reference.
2 Previously filed and incorporated herein by reference from the Registrant's
Registration Statement filed with the SEC on November 28, 1995.
3 Filed herewith.
C-1
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class as of November 15, 1996
-------------- -----------------------
Beneficial Interests 5
Item 27. Indemnification.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator 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.
Item 28. Business and Other Connections of Investment Adviser.
The Directors of KLD are Peter D. Kinder, Amy L. Domini and Steven D.
Lydenberg. The stockholders of KLD are Peter D. Kinder, Amy L. Domini, Steven
D. Lydenberg and James Earl Brooks.
Item 29. Principal Underwriters.
(a) Signature is the exclusive placement agent for the Registrant.
Signature or an affiliate acts as the placement agent or distributor for other
registered investment companies.
(b) The information required by this Item 29 with respect to each
director or officer of Signature is incorporated by reference herein from
Schedule A of Form BD (File No. 8-41134) filed by Signature pursuant to the
Securities Exchange Act of 1934.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
Kinder, Lydenberg, Domini & Co., Inc. 129 Mt. Auburn Street
(investment adviser and sponsor) Cambridge, MA 02138
Mellon Equity Associates 500 Grant St., Suite 3700
(investment manager) Pittsburgh, PA 15258-0001
Signature Broker-Dealer 6 St. James Avenue
Services, Inc. Boston, MA 02116
(administrator and exclusive
placement agent)
Investors Bank & Trust Company 89 South Street
(custodian) Boston, MA 02111
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Not applicable.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to the Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereto duly authorized in
the City of Boston, and Commonwealth of Massachusetts on the 27th day of
November, 1996.
DOMINI SOCIAL INDEX PORTFOLIO
By /S/ AMY L. DOMINI
Amy L. Domini
President
DSI73E
<PAGE>
DSI73E
EXHIBITS
Exhibit
No. Description of Exhibit
5(a) Investment Advisory Agreement
5(b) Investment Management Agreement
9(a) Administrative Services Agreement
9(c) Sponsorship Agreement
17 Financial Data Schedule
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of May 1, 1990, as amended and
restated as of October 4, 1996, by and between the DOMINI SOCIAL INDEX
PORTFOLIO, a New York trust (the "Portfolio"), and Kinder, Lydenberg, Domini &
Co., Inc., a Massachusetts corporation ("KLD" or the "Adviser").
WITNESSETH:
WHEREAS, the Portfolio 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"); and
WHEREAS, the Portfolio wishes to engage the Adviser to provide certain
investment advisory services, and the Adviser is willing to provide such
investment advisory services to the Portfolio 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 THE ADVISER. KLD shall act as the Adviser to the Portfolio and
as such shall furnish continuously an investment program by determining the
stocks to be included in the Domini Social Index (the "Index") and evaluating,
in accordance with the Adviser's social criteria, debt securities which may be
purchased by the Portfolio, subject always to the restrictions of the
Portfolio's Declaration of Trust, dated June 7, 1989, and By-laws, as each may
be amended from time to time (respectively, the "Declaration" and the
"By-Laws"), to the provisions of the 1940 Act and to the Portfolio's
then-current Registration Statement under the 1940 Act. The Adviser 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 securities held by
the Portfolio shall be exercised. Should the Board of Trustees of the Portfolio
at any time, however, make any definite determination as to policy concerning
the exercise of voting rights, rights to consent to corporate action or other
rights pertaining to the securities held by the Portfolio, and notify the
Adviser thereof in writing, the Adviser 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 Adviser shall not be required not to do
any act or thing on behalf of the Portfolio not specifically described above,
including without limitation those actions to be taken by the Portfolio's
investment manager pursuant to the Investment Management Agreement as may be
amended from time to time without limiting the foregoing, it is understood that
the Adviser shall not be required to provide advice as to the investment merits
of particular securities or as to the purchase or sale of securities.
1
<PAGE>
2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section 1 above. It is understood that the Portfolio will
pay all of its own expenses including, without limitation, compensation of
Trustees not "affiliated" with the Adviser; governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the
Portfolio; fees and expenses of independent auditors, of legal counsel and of
any transfer agent, administrator, registrar or dividend disbursing agent of the
Portfolio; fees of the Manager; expenses of preparing, printing and mailing
reports, notices, proxy statements and reports to governmental officers and
commissions and to investors in the Portfolio; expenses connected with the
execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the Portfolio,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of the Portfolio; and
expenses of meetings of the Portfolio's investors.
3. COMPENSATION OF THE ADVISER. For the services to be rendered, the
Portfolio shall pay to the Adviser an investment advisory fee computed and paid
monthly at an annual rate equal to 0.025% of the Portfolio's average daily net
assets for its then-current fiscal year. If KLD serves as Adviser for less than
the whole of any period specified in this Section 3, the compensation to KLD, as
Adviser, shall be prorated.
4. COVENANTS OF THE ADVISER. The Adviser agrees that it will comply with
all applicable provisions of the Portfolio's Declaration and By-Laws and the
then-current Registration Statement of the Portfolio under the 1940 Act relative
to the Adviser and its Directors and officers.
5. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss arising out of any
act or omission in the performance of its duties hereunder, except for wilful
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 "Adviser" shall include Directors, officers and
employees of the Adviser as well as the corporation itself.
6. ACTIVITIES OF THE ADVISER. The services of the Adviser to the Portfolio
are not to be deemed to be exclusive, KLD being free to render investment
advisory and/or other services to others. It is understood that Trustees and
officers of, and investors in the Portfolio are or may be or may become
interested in the Adviser, as Directors, officers, employees, or otherwise and
that Directors, officers and employees of the Adviser are or may become
similarly interested in the Portfolio and that the Adviser may be or may become
interested in the Portfolio as an investor or otherwise.
7. 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, and shall
remain in force until September 30,1991 on
2
<PAGE>
which date it will terminate unless its continuance after September 30, 1991 is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Portfolio who are not "interested persons" of the Portfolio or
of the Adviser at a meeting specifically called for the purpose of voting on
such approval, and (b) by the Board of Trustees of the Portfolio or by "vote of
a majority of the outstanding voting securities" of the Portfolio.
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 Portfolio, or by the Adviser, in each case 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".
This Agreement may be amended only it such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Portfolio.
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 said Act.
IN WITNESS WHEREOF, the parties thereto 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 INDEX PORTFOLIO
Amy L. Domini
President
KINDER, LYDENBERG, DOMINI & CO., INC.
By:
Title:
3
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT, dated as of October 5, 1994, as amended
and restated as of October 4, 1996, by and between the DOMINI SOCIAL INDEX
PORTFOLIO, a New York trust (the "Portfolio"), and Mellon Equity Associates, a
Pennsylvania business trust whose sole beneficiary is MBC Investments, a wholly
owned subsidiary of Mellon Bank Corporation ("Mellon" or the "Manager").
WITNESSETH:
WHEREAS, the Portfolio 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"), and
WHEREAS, the Portfolio wishes to engage the Manager to provide certain
investment advisory services, and the Manager is willing to provide such
investment advisory services to the Portfolio 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 THE MANAGER. The Manager shall act as investment manager to
the Portfolio and as such shall manage the assets of the Portfolio on a daily
basis, subject always to the restrictions of the Portfolio's Declaration of
Trust, dated June 7, 1989, and By-laws, as each may be amended from time to time
(respectively, the "Declaration" and the "By-Laws"), to the provisions of the
1940 Act and to the Portfolio's then-current Registration Statement under the
1940 Act. Should the Board of Trustees of the Portfolio at any time, however,
make any definite determination as to investment policy 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
Portfolio, all actions which it deems necessary to implement the investment
policies determined as provided above, except those actions to be taken by the
Portfolio's investment adviser pursuant to the Investment Advisory Agreement
dated May 1, 1990 by and between the Portfolio and Kinder, Lydenberg, Domini &
Co., Inc, (the "Adviser"), and in particular to place all orders for the
purchase or sale of securities for the Portfolio's account with brokers or
dealers selected by it, and to that end the Manager is authorized as the agent
of the Portfolio to give instructions to the custodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Manager is directed to seek for the Portfolio in its best
judgment, prompt execution in an effective manner at the most favorable price.
Subject to this requirement of seeking the most favorable price, securities may
be bought from or sold to broker-dealers who have furnished statistical,
research and other information or services to the Manager or the
<PAGE>
Portfolio, subject to any applicable laws, rules and regulations. In making
purchases or sales of securities or other property for the account of the
Portfolio the Manager may deal with itself or with the Trustees of the Portfolio
or the Fund's exclusive placement agent, to the extent such actions are
permitted by the 1940 Act.
2. ALLOCATION OF CHARGES AND EXPENSES. The Manager shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 1 above. It is understood that the Portfolio
will pay all of its own expenses including, without limitation, compensation of
Trustees not "affiliated" with the Manager, governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the
Portfolio; fees and expenses of independent auditors, of legal counsel and of
any transfer agent, administrator, registrar or disbursing agent of the
Portfolio; fees of the Adviser, expenses of preparing, printing and mailing
reports, notices, proxy statements and reports to governmental officers and
commissions and to investors in the Portfolio; expenses connected with the
execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the Portfolio,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of the Portfolio; and
expenses of meetings of the Portfolio's investors.
3. COMPENSATION OF THE MANAGER. For the services to be rendered, the
Portfolio shall pay to the Manager an investment advisory fee computed and paid
monthly at an annual rate equal to 0.10% of the Portfolio's average daily net
assets for its then-current fiscal year. If Mellon serves as Manager for less
than the whole of any period specified in this Section 3, the compensation to
Mellon, as Manager, shall be prorated.
4. COVENANTS OF THE MANAGER. The Manager agrees that it will not deal
with itself, or with the Trustees of the Portfolio or the Portfolio's exclusive
placement agent or the investment adviser as principals in making purchases or
sales of securities or other property for the account of the Portfolio, except
as permitted by the 1940 Act, and will comply with all other provisions of the
Portfolio's Declaration and By-Laws and the then-current Registration Statement
of the Portfolio under the 1940 Act relative to the Manager and its Directors
and officers.
5. LIMITATION OF LIABILITY OF THE MANAGER. The Manager 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 security
transactions for the Portfolio, except for wilful 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 "Manager" shall include Directors, officers and employees of the
Manager as well as the company itself.
Federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith, and therefore nothing herein
shall in any why constitute a waiver or limitation of any rights which the
undersigned may have under any applicable laws.
2
<PAGE>
6. ACTIVITIES OF THE MANAGER. The services of the Manager to the
Portfolio are not to be deemed to be exclusive, Mellon being free to render
investment advisory and/or other services to others. It is understood that
Trustees and officers of, and investors in the Portfolio are or may be or may
become interested in the Manager, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Manager are or may
become similarly interested in the Portfolio and that the Manager may be or may
become interested in the Portfolio as an investor or otherwise.
7. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective as of November 21, 1994 and shall remain in
effect for a period of not more than 120 days unless approved by the investors
in the Portfolio, as provided pursuant to Rule 15a- 4 under the 1940 Act.
Thereafter, and unless sooner terminated as provided herein, this Agreement
shall govern the relations between the parties hereto, and shall remain in force
until October 5, 1996, on which date it will terminate unless its continuance
after October 5, 1996 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Portfolio who are not "interested
persons" of the Portfolio or of the Manager at a meeting specifically called for
the purpose of voting on such approval, and (b) by the Board of Trustees of the
Portfolio or by "vote of a majority of the outstanding voting securities" of the
Portfolio.
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 Portfolio, or by the Manager, in each case 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".
This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Portfolio.
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 said Act.
8. AGREEMENT. No assignment of this Agreement shall be made by the
Manager without the consent of the Portfolio
3
<PAGE>
IN WITNESS WHEREOF, the parties thereto 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 INDEX PORTFOLIO
By
Amy L. Domini
MELLON EQUITY ASSOCIATES
By
William P. Rydell
4
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of November 6, 1996, by and
between Kinder, Lydenberg, Domini & Co., Inc., a Massachusetts corporation
("KLD"), and Signature Broker-Dealer Services, Inc., a corporation ("SBDS" or
the "Administrator").
W I T N E S S E T H:
WHEREAS, KLD has entered into a Sponsorship Agreement (the "Sponsorship
Agreement") with Domini Social Index Portfolio (the "Trust"), an open-end
investment company registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act"); and
WHEREAS, as permitted by Section 7 of the Sponsorship Agreement, KLD
desires to subcontract some of the performance of its obligations thereunder to
SBDS, and SBDS desires to accept such obligations; and
WHEREAS, KLD wishes to engage SBDS to provide certain administrative
services on the terms and conditions hereinafter set forth, so long as the
Trustees of the Trust shall have found SBDS to be qualified to perform the
obligations sought to be subcontracted;
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 ADMINISTRATOR. Subject to the direction and control of
the Board of Trustees of the Trust, the Administrator shall perform such
administrative and management services as may from time to time be reasonably
requested by the Trust and agreed to between KLD and SBDS, which shall include
without limitation: (a) providing office space, equipment and clerical personnel
necessary for maintaining the organization of the Trust and for performing the
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
Trust, 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 Trust's transfer agent, custodian and other
independent contractors or agents; (d) preparing and, if applicable, filing all
documents required for compliance by the Trust with applicable laws and
regulations, including registration statements on Form N-1A or similar forms, as
applicable, and financial statements, semi-annual and annual reports to the
Trust's investors, proxy statements and reviewing (including coordinating the
preparing of, but not preparing) 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 meeting's
of investors; (f) arranging for maintenance of books and records of the Trust;
(g) providing reports and assistance regarding the Trust's compliance with
securities and tax laws and its investment objectives and restrictions; (h)
arranging for dissemination of yield and other performance information to
newspapers and tracking services; (i) arranging for and preparing annual
renewals for fidelity bond and errors and omissions insurance coverage; and (j)
developing a budget for the Trust, establishing the rate of expense accruals and
arranging for
<PAGE>
the payment of all fixed and management expenses. Notwithstanding the foregoing,
the Administrator shall not be deemed to have assumed any duties with respect
to, and shall not be responsible for, the management of the Trust's assets or
the rendering of investment advice and supervision with respect thereto or the
distribution of interests ("Shares") of the Trust, nor shall the Administrator
be deemed to have assumed or have any responsibility with respect to functions
specifically assumed by any transfer agent or custodian of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES. SBDS 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 SBDS or its affiliates, and
the wages and salaries of such persons shall not be deemed to be expenses
incurred by the Trust.
3. COMPENSATION OF THE ADMINISTRATOR. For the services to be rendered
and the facilities to be provided by the Administrator hereunder, KLD shall pay
to the Administrator an administrative fee computed and paid monthly at an
annual rate of 0.025% of the Trust's average daily net assets for its
then-current fiscal year. If SBDS serves as the Administrator for less than the
whole of any period specified in this Section 3, the compensation to SBDS, as
Administrator, shall be prorated. For purposes of computing the fees payable to
the Administrator hereunder, the value of the Trust's net assets shall be
computed in the manner specified in Part A or Part B of the Trust's then-current
Registration Statement on Form N-1A filed with the Securities and Exchange
Commission.
4. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The Administrator
shall not be liable for any error of judgment or mistake of law or for any act
or omission in the 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 SBDS and/or any of its affiliates and the
Directors, officers and employees of SBDS and/or any of its affiliates.
5. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator
on behalf of the Trust are not to be deemed to be exclusive, SBDS being free to
render administrative and/or other services to other parties. It is understood
that Trustees, officers, and investors 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 an investor or otherwise.
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,
with respect to any series or the Trust, by KLD or by the Administrator, in each
case on not more than 60 days written notice to the other party.
DOM07J
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<PAGE>
7. 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.
8. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the KLD shall be 129 Mt. Auburn
Street, Cambridge, MA 02138 and the address of SBDS shall be 6 St. James Avenue,
9th Floor, Boston, Massachusetts 02116.
9. 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.
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.
KINDER, LYDENBERG, DOMINI & CO., INC.
By
Name:
Title:
SIGNATURE BROKER-DEALER SERVICES, INC.
By
Philip W. Coolidge
President and Chief Executive Officer
DOM07J
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SPONSORSHIP AGREEMENT
SPONSORSHIP AGREEMENT (the "Agreement"), dated as of November 6, 1996,
by and between Domini Social Index Portfolio, a New York trust (the "Trust"),
and Kinder, Lydenberg, Domini & Co., Inc., a Massachusetts corporation ("KLD" or
the "Sponsor").
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"); and
WHEREAS, the Trust wishes to engage KLD to provide certain oversight,
administrative, expense payment and management services, and KLD is willing to
provide such oversight, administrative, expense payment and management services
to the Trust, 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 THE SPONSOR. Subject to the direction and control of the
Board of Trustees of the Trust, the Sponsor shall perform such oversight,
administrative, expense payment and management services as may from time to time
be reasonably requested by the Trust, which shall include without limitation:
(a) providing office space, equipment and clerical personnel necessary for
maintaining the organization of the Trust and for performing the oversight,
administrative, expense payment and management functions herein set forth; (b)
arranging, if desired by the Trust, for Directors, officers or employees of the
Sponsor 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
Trust, 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 Trust's transfer agent, custodian, administrator
and expense payment agent and other independent contractors or agents; (d)
preparing and, if applicable, filing all documents required for compliance by
the Trust with applicable laws and regulations, including registration
statements on Form N-1A or similar forms, as applicable, and semi-annual and
annual reports to the Trust's investors, proxy statements and reviewing
(including coordinating the preparing of, but not preparing) 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 meeting's of investors; (f) arranging for maintenance of books
and records of the Trust; (g) maintaining telephone coverage to respond to
investor inquiries regarding matters to which this Agreement pertains to which
the transfer agent is unable to respond; (h) providing reports and assistance
regarding the Trust's compliance with securities and tax laws and each series
investment objectives and restrictions; (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 Trust,
establishing the rate of expense accruals and arranging for the payment of all
fixed and management expenses; (l) paying all the expenses of the Trust
described in Part A or Part B of the Trust's then-current Registration
<PAGE>
Statement on Form N-1A file with the Securities and Exchange Commission (the
"Registration Statement") as further described in Section 2 below; and (m)
answering questions from the general public, the media and investors in the
Trust regarding (i) the securities holdings of the Trust; (ii) any limits in
which the Trust invests; (iii) the social investment philosophy of the Trust;
and (iv) the proxy voting philosophy and shareholder activism philosophy of the
Trust. Notwithstanding the foregoing, the Sponsor 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 Trust's assets or the rendering of
investment advice and supervision with respect thereto or the distribution of
interests ("Shares") of the Trust, nor shall the Sponsor be deemed to have
assumed or have any responsibility with respect to functions specifically
assumed by any transfer agent or custodian of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES. (a) KLD 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 KLD and Signature
Broker-Dealer Services, Inc. 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. (b) The Sponsor shall pay all of the Trust's
operating expenses including, without limitation, compensation of Trustees not
affiliated with the Sponsor; governmental fees; membership dues in the
Investment Company Institute allocable to the Trust; fees and expenses of the
Trust's independent auditors, of legal counsel and of any investment adviser or
manager, administrator, transfer agent, distributor, registrar or dividend
disbursing agent of the Trust; expenses of preparing, printing and mailing
reports, notices, proxy statements and reports to the Trust's investors 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 Trust,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Trust;
expenses of meetings of investors; and expenses relating to the issuance,
registration and qualification of Shares of the Trust but excluding (y) the fees
payable by the Trust to the Sponsor pursuant to Section 3 of this Agreement and
(z) brokerage fees and commissions, interest charges, taxes and extraordinary
expenses.
3. COMPENSATION OF THE SPONSOR. For the services to be rendered and the
facilities to be provided by the Sponsor hereunder, the Trust shall pay to the
Sponsor a fee computed and paid monthly at an annual rate of 0.20% of the
Trust's average daily net assets for its then-current fiscal year. If KLD serves
as the Sponsor for less than the whole of any period specified in this Section
3, the compensation to KLD, as Sponsor, shall be prorated. For purposes of
computing the fees payable to the Sponsor hereunder, the value of the Trust's
net assets shall be computed in the manner specified in the Trust's then-current
Registration Statement. Notwithstanding the foregoing, in the event of the
termination, pursuant to Section 6 hereof, of the rights and obligations of the
parties under the "expense payment provisions" (as defined in Section 6), the
amount payable to KLD by the Trust under this Section 3 shall thereafter be
reduced to an annual rate of 0.025% of the Trust's average daily net assets and
in the event of the termination, pursuant to Section 6 hereof, of the rights and
obligations of the parties under the "non-expense payment provisions" as defined
in Section 6), the amount payable to KLD by the Trust under this Section 3 shall
thereafter be reduced to an annual rate equal to 0.175% of the Trust's average
daily net assets plus any fee payable to the Trust's administrator, but not
exceeding, in the aggregate, an annual rate of 0.20% of the Trust's average
daily net assets.
DOM07H
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<PAGE>
4. LIMITATION OF LIABILITY OF THE SPONSOR. The Sponsor shall not be
liable for any error of judgment or mistake of law or for any act or omission in
the oversight, administration, expense payment 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 "Sponsor" shall include KLD and/or any of its affiliates and
the Directors, officers and employees of KLD and/or any of its affiliates.
5. ACTIVITIES OF THE SPONSOR. The services of the Sponsor to the Trust
are not to be deemed to be exclusive, KLD being free to render oversight,
administrative, expense payment and/or other services to other parties. It is
understood that Trustees, officers, and investors of the Trust are or may become
interested in the Sponsor and/or any of its affiliates, as Directors, officers,
employees, or otherwise, and that Directors, officers and employees of the
Sponsor and/or any of its affiliates are or may become similarly interested in
the Trust and that the Sponsor and/or any of its affiliates may be or become
interested in the Trust as an investor or otherwise.
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. The rights and obligations of the
parties hereto under subsection (l) of Section 1 and subsection (b) of Section 2
of this Agreement (the "expense payment provisions") will terminate on December
31, 1999 unless sooner terminated by the mutual agreement of the parties or
pursuant to the following sentence. In the event the Letter Agreement between
KLD and Signature Broker-Dealer Services, Inc. dated November 6, 1996, relating
to expense payment arrangements, shall cease to be in full force and effect, KLD
may, at its option, terminate such rights and obligations under those
subsections of this Agreement, without the consent of the Trust. The rights and
obligations of the parties under Sections 1 and 2 of this Agreement other than
the expense payment provisions (the "non-expense payment provisions"), may be
terminated at any time, without the payment of any penalty, with respect to the
Trust, by the Board of the Trust, or by the Sponsor, in each case on not less
than 60 days written notice to the other party, and upon the termination of all
of the rights and obligations of the parties under Sections 1 and 2 hereof in
accordance with this Section, this Agreement shall terminate.
7. SUBCONTRACTING BY KLD. KLD may subcontract for the performance of
some or all of KLD's obligations hereunder with any one or more persons;
PROVIDED, HOWEVER, that KLD shall not enter into any such subcontract 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, KLD 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.
DOM07H
-3-
<PAGE>
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 (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust shall be 6 St. James
Avenue, 9th Floor, Boston, Massachusetts 02116, and the address of KLD shall be
129 Mt Auburn Street, Cambridge, MA 02138.
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.
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 investors of the Trust individually, but bind only the Trust estate.
DOMINI SOCIAL INDEX PORTFOLIO
By
Amy L. Domini
President
KINDER, LYDENBERG, DOMINI & CO., INC.
By
Amy L. Domini
DOM07H
-4-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contain summary information extracted from the July 31, 1996
Domini Social Index Portfolio Annual Report and is qualified in its entirety by
reference to such report.
</LEGEND>
<CIK> 0000851681
<NAME> DOMINI SOCIAL INDEX PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 8,008,165
<INVESTMENTS-AT-VALUE> 99,628,700
<RECEIVABLES> 175,702
<ASSETS-OTHER> 1,313,323
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 101,117,725
<PAYABLE-FOR-SECURITIES> 675,937
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,230
<TOTAL-LIABILITIES> 717,167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,400,558
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,400,558
<DIVIDEND-INCOME> 1,514,033
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 381,253
<NET-INVESTMENT-INCOME> 1,132,780
<REALIZED-GAINS-CURRENT> 697,337
<APPREC-INCREASE-CURRENT> 6,861,507
<NET-CHANGE-FROM-OPS> 8,691,624
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,691,624
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38,150
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 76,300,494
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>