<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1998
File No. 811-5824
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9
DOMINI SOCIAL INDEX PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
11 West 25th Street, 7th Floor, New York, New York 10010
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 352-9200
Amy L. Domini, c/o Loring, Wolcott & Coolidge,
250 Congress Street, 12th Floor, Boston, Massachusetts 02110
(Name and Address of Agent for Service)
=============================================================================
<PAGE>
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 other 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.
<PAGE>
PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
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 other 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.
Part B contains more detailed information about the Portfolio, including
information related to (i) investment policies and restrictions of the
Portfolio, (ii) the Trustees, officers and other management of the Portfolio,
(iii) portfolio transactions, (iv) the Portfolio's beneficial interests,
including rights and liabilities of investors, (v) determination of the net
asset value of the Portfolio, and (vi) the audited financial statements of the
Portfolio at July 31, 1998.
INVESTMENT IN THE PORTFOLIO. The Portfolio seeks to provide investors with
long-term total return which corresponds to the total return performance of the
Domini 400 Social Index-SM- (the "Domini Social Index"), an index comprised of
stocks selected according to social criteria. The Portfolio may be appropriate,
therefore, for investors who are willing to ride out stock market fluctuations
in pursuit of long-term returns. Because the Portfolio seeks to track, rather
than exceed, the performance of a particular index, the Portfolio is not managed
in the same way as other mutual funds. In particular, the manager (the
"Manager") of the Portfolio generally does not judge the merits of any
particular stock as an investment. Therefore, investors should not expect to
achieve the potentially greater results that could be obtained by a fund that
aggressively seeks growth. There can, of course, be no assurance that the
Portfolio will achieve its investment objective.
The Portfolio's net asset value varies from day to day, generally
reflecting changes in the financial condition of the companies in which the
Portfolio invests, general market conditions and political and economic
factors. Stock prices can fluctuate dramatically in response to these and
other factors or speculation about these factors. Over the long term, stocks
have generally shown greater growth potential than other types of securities.
However, when an investor withdraws its interest, proceeds may be more or less
than the amount initially invested. Like any mutual fund, you may lose money
if you invest in the Portfolio.
A-1
<PAGE>
Potential investors should note that because the Portfolio seeks to be
fully invested in the stocks comprising the Domini 400 Social Index-SM-, the
Portfolio is not a balanced investment plan. Potential investors should
carefully consider their respective investment objectives and risk tolerance
before making a decision to invest in the Portfolio.
INVESTMENT OBJECTIVE. 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-SM- (referred to herein as the
"Index" or the "Domini Social Index), an index comprised of stocks selected
based upon the Portfolio's social criteria. There can, of course, be no
assurance that the Portfolio will achieve its investment objective. The
investment objective of the Portfolio may be changed without approval by the
Portfolio's investors.
INVESTMENT POLICIES. 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 September 30, 1998, 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 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 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 Kinder, Lydenberg, Domini & Co., Inc. ("KLD"), an
affiliate of the Manager, Domini Social Investments LLC ("DSIL" or the
"Manager"). The Index is a common stock index comprised of the stocks of
approximately 400 companies which meet certain social criteria. The
weightings of the stocks comprising the Index are based upon market
capitalization. The criteria used in developing and maintaining the Index
involve the subjective judgment of KLD. KLD, based on available data, seeks
to exclude the following types of companies: firms that derive more than 2%
of their gross revenues from the sale of military weapons; firms that derive
any revenues from the manufacture of tobacco products or alcoholic beverages;
firms that derive any revenues from gambling enterprises; and firms that have
an ownership share in, or operate, nuclear power plants. KLD also considers
criteria such as corporate citizenship, employee relations, environmental
performance, and product-related issues when evaluating stocks for inclusion
in the Index. The corporate citizenship criteria include a company's record
with regard to its philanthropic activities and its community relations in
general. The employee relations criteria include a company's record with
regard to labor matters, workplace safety, equal employment opportunity,
employee benefit programs, and meaningful participation in company profits
either through stock purchase or profit sharing plans. The environmental
performance criteria include a company's record with regard to fines or
penalties, waste disposal, toxic emissions, efforts in waste reduction and
emissions reduction, recycling, and
A-2
<PAGE>
environmentally beneficial fuels, products and services. The product-related
criteria include a company's record with regard to product safety, marketing
practices, and commitment to quality.
The Manager intends to vote proxies of companies included in the Portfolio
consistent with the social criteria used in developing and maintaining the
Domini Social Index.
INDEX MANAGEMENT. The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities
included in the Domini Social Index. Moreover, inclusion of a stock in the
Index does not imply an opinion by KLD or the Manager as to the merits of
that specific stock as an investment. However, KLD and the Manager believe
that enterprises which exhibit a social awareness, based on the criteria
described above, should be better prepared to meet future societal needs for
goods and services and may also be less likely to incur certain legal
liabilities that may be incurred when a product or service is determined to
be harmful, and that such enterprises should over the longer term be able to
provide a positive return to investors.
In selecting stocks for inclusion in the Domini Social Index:
1. KLD evaluated, in accordance with the social criteria described above,
each of the companies the stocks of which comprise the S&P 500. If a company
whose stock was included in the S&P 500 met KLD's social criteria and met KLD's
further criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover, it was included in the Domini
Social Index. As of July 31, 1998, of the 500 companies whose stocks comprised
the S&P 500, approximately 48% were included in the Index.
2. The remaining stocks comprising the Domini Social Index (i.e., those
which are not included in the S&P 500) were selected based upon KLD's evaluation
of the social criteria described above, as well as upon KLD's criteria for
industry diversification, financial solvency, market capitalization, and minimal
portfolio turnover. Because of the social criteria applied in the selection of
stocks comprising the Index, industry sector weighting in the Index may vary
materially from the industry weightings in other stock indices, including the
S&P 500, and certain industry sectors will be excluded altogether.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P
proceeds from industry groups to the whole. Since some industries are
characterized by companies of relatively small stock capitalization, the S&P 500
does not comprise the 500 largest companies listed on the New York Stock
Exchange. Not all stocks included in the S&P 500 are listed on the New York
Stock Exchange. However, the total market value of the S&P 500 as of July 31,
1998 represented approximately 83% of the aggregate market value of common
stocks traded on the New York Stock Exchange.
Inclusion of a stock in the S&P 500 Index in no way implies an opinion by
S&P as to its attractiveness
A-3
<PAGE>
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 Index may be stocks of
foreign issuers (provided that the stocks are traded in the United States in
the form of American Depositary Receipts or similar instruments the market
for which is denominated in United States dollars). Securities of foreign
issuers may represent a greater degree of risk (i.e., as a result of exchange
rate fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (i.e., market price per share times
the number of shares outstanding). Because of this weighting, as of July 31,
1998 approximately 45% of the Index was comprised of the 20 largest companies in
the Index.
KLD may exclude from the Domini Social Index stocks issued by companies
which are in bankruptcy or whose bankruptcy KLD believes may be imminent. KLD
may also remove from the Domini Social Index stocks issued by companies which no
longer meet their investment criteria.
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 Index, will reflect
the judgment of Mellon Equity Associates ("Mellon Equity" or the "Submanager")
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
withdrawals. 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. The Board of Trustees of the
Portfolio will receive and review, at least quarterly, a report prepared by the
Submanager comparing the performance of the 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 and/or the Submanager methods for
increasing such correlation, such as through adjustments in securities holdings
of the Portfolio.
The Portfolio may invest cash reserves in short-term debt securities (i.e.,
securities having a remaining maturity of one year or less) issued by agencies
or instrumentalities of the United States Government, bankers' acceptances,
commercial paper or certificates of deposit, provided that the issuer satisfies
KLD'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
A-4
<PAGE>
meet anticipated requests for withdrawals. Such investments are not intended
to be used for defensive purposes in periods of anticipated market decline.
The annual portfolio turnover rates of the Portfolio for the fiscal
years ended July 31, 1996, 1997 and 1998 were 5%, 1% and 5%, respectively.
The Portfolio's average brokerage commission rates paid per share for the
fiscal years ended July 31, 1996, 1997 and 1998 were $0.04, $0.05 and
$0.04, respectively.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers is to seek best price and execution. The Portfolio may
pay higher commission rates than the lowest available when the Manager or
Submanager believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. The Portfolio will not engage in brokerage transactions with the
Manager or the Submanager or any of their respective affiliates or any other
affiliate of the Portfolio. For further discussion regarding securities
trading by the Portfolio, see Part B.
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 consisting of securities, cash or cash
equivalents maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Portfolio would have the right to
call a loan and obtain the securities loaned at any time on three days' notice.
During the existence of a loan, the Portfolio would continue to collect the
equivalent of the dividends paid by the issuer on the securities loaned and
would also receive interest on investment of cash collateral. The Portfolio may
pay finder's and other fees in connection with securities loans. Loans of
securities involve a risk that the borrower may fail to return the securities or
may fail to provide additional collateral.
Although it has no current intention to do so, the Portfolio may make short
sales of securities or maintain a short position, if at all times when a short
position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.
The approval of the investors in the Portfolio is not required to change
any of the investment policies discussed above.
As a matter of fundamental policy, the Portfolio will invest all of its
assets in one or more of: (i) stocks comprising an index of securities selected
applying social criteria, which initially will be the Domini Social Index,
(ii) short-term debt securities of issuers which meet social criteria,
(iii) cash, and (iv) options on equity securities. This fundamental policy
cannot be changed without the approval of the holders of a majority of the
Portfolio's outstanding voting securities (which, as used herein, means the
lesser of (a) more than 50% of the outstanding securities of the Portfolio, or
(b) 67% or more of the outstanding voting securities of the Portfolio present at
a meeting at which holders of more than 50% of the Portfolio's outstanding
voting securities are represented in person or by proxy).
A-5
<PAGE>
Part B includes a discussion of other investment policies and a listing of
other investment restrictions which govern the Portfolio's investment policies.
Certain of the investment restrictions listed in Part B may not be changed by
the Portfolio without the approval of investors.
If a percentage or rating restriction on investment or utilization of
assets is adhered to at the time an investment is made or assets are so
utilized, a later change in percentage resulting from changes in the Portfolio's
total assets or the value of the Portfolio's securities or a later change in the
rating of a security held by the Portfolio will not be considered a violation of
policy.
Expenses of the Portfolio with respect to investment management or
administrative services and investment submanagement services are described in
Item 5.
Part B 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 may not be
changed without the approval of the investors in the Portfolio.
ITEM 5. MANAGEMENT OF THE FUND.
The Portfolio's Board of Trustees provides broad supervision over the
affairs of the Portfolio. DSIL, a Massachusetts limited liability company,
provides investment management and administrative services to the Portfolio
pursuant to a Management Agreement. The address of DSIL is 11 West 25th Street,
7th Floor, New York, New York 10010. A majority of the Portfolio's Trustees are
not affiliated with the Manager or the Submanager. The Portfolio's custodian
and transfer agent is Investors Bank & Trust Company ("IBT"). The address of
IBT is 200 Clarendon Street, Boston, Massachusetts 02116.
MANAGER. DSIL has been registered as an investment adviser under the
Investment Advisers Act of 1940 since 1997. The services provided by the
Manager consist of investment supervisory services, overall operational support
and administrative services. The administrative services include the provision
of general office facilities and supervising the overall administration of the
Portfolio. For its services under the Management Agreement, the Manager
receives from the Portfolio a fee accrued daily and paid monthly at an annual
rate equal to 0.20% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then-current fiscal year, subject to
reduction. Currently, DSIL is waiving its fee to the extent necessary to keep
the aggregate annual operating expenses of the Portfolio (excluding brokerage
fees and commissions, interest, taxes and other extraordinary expenses) at no
greater than 0.20% of the average daily net assets of the Portfolio. This fee
waiver is voluntary and may be reduced or terminated at any time.
Prior to October 22, 1997, KLD, as the Portfolio's former investment
adviser, received from the Portfolio a fee accrued daily and paid monthly at an
annual rate equal to 0.025% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then-current fiscal year. Additionally,
prior to October 22, 1997, KLD received from the Portfolio a fee accrued daily
and paid monthly at an annual rate equal to 0.025% of the average daily net
assets of the Portfolio for its then current fiscal year for administrative
services.
A-6
<PAGE>
"Domini," "Domini 400 Social Index" and "Investing for Good" are service
marks of KLD which are licensed to DSIL, and the Portfolio and its investors may
be required to discontinue use of these service marks if DSIL ceases to be the
Manager of the Portfolio.
SUBMANAGER. Mellon Equity provides investment submanagement services to
the Portfolio on a day-to-day basis pursuant to a Submanagement Agreement with
DSIL. Mellon Equity does not determine the composition of the Domini Social
Index.
Under the Submanagement Agreement, DSIL pays Mellon Equity an investment
submanagement fee equal on an annual basis to 0.10% of the average daily net
assets of the Portfolio. Prior to October 22, 1997, the Portfolio paid Mellon
Equity an investment management fee equal on an annual basis to 0.10% of the
average daily net assets of the Portfolio.
Mellon Equity is a Pennsylvania business trust founded in 1987 whose
beneficial owners are Mellon Bank N.A. and MMIP, Inc (a wholly owned subsidiary
of Mellon Bank Corporation ("Mellon Bank")). Mellon Equity has been registered
as an investment adviser under the Investment Advisers Act of 1940 since 1986.
Prior to 1987, the Submanager was part of the Equity Management Group of Mellon
Bank's Trust and Investment Department, which managed domestic equity,
tax-exempt and institutional pension assets since 1947. As of September 30,
1998, the Submanager had approximately $21.8 billion in assets under management.
The Portfolio is team managed and John R. O'Toole (a senior vice president
of Mellon Equity, and CFA) is the team leader. He has been actively involved
in the portfolio management of the Portfolio since November 1994. He has been
employed by Mellon Equity and/or Mellon Bank as a portfolio manager for over
five years. Ms. Jocelin Reed (a vice president of Mellon Equity and a CFA)
has been responsible for the day to day management of the Portfolio since
November, 1994.
EXPENSES. The Portfolio is responsible for all of its expenses, including
the compensation of the Portfolio's Trustees who are not interested persons of
the Portfolio; 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 disbursing agent of the Portfolio; insurance premiums; and expenses
of calculating the net asset value of the Portfolio.
The Portfolio will also pay the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to governmental offices and
commissions; expenses of meetings of investors; and the investment management
fees payable to the Manager.
A-7
<PAGE>
Currently, DSIL is waiving its fee to the extent necessary to keep the
aggregate annual operating expenses of the Portfolio (excluding brokerage fees
and commissions, interest, taxes and other extraordinary expenses) at no greater
than 0.20% of the average daily net assets of the Portfolio. This fee waiver is
voluntary and may be reduced or terminated at any time.
CUSTODIAN AND TRANSFER AGENT. The Portfolio's custodian and transfer agent
is Investors Bank & Trust Company ("IBT"). The address of IBT is 200 Clarendon
Street, Boston, Massachusetts 02116. As the Portfolio's transfer agent, IBT
maintains an account for each investor and acts as disbursing agent for the
Portfolio. Pursuant to a Custodian Agreement, IBT acts as the custodian (the
"Custodian") of the Portfolio's assets. The Custodian's responsibilities
include safeguarding and controlling the Portfolio's cash and securities,
handling the receipt and delivery of securities, determining income and
collecting interest on the Portfolio's investments, maintaining books of
original entry for portfolio and fund accounting and other required books and
accounts, and calculating the daily net asset value of the Portfolio.
Securities held by the Portfolio may be deposited into certain securities
depositaries. The Custodian does not determine the investment policies of the
Portfolio or decide which securities the Portfolio will buy or sell. The
Portfolio may, however, invest in securities of the Custodian and may deal with
the Custodian as principal in securities transactions. For its services, IBT
will receive such compensation as may from time to time be agreed upon by IBT
and the Portfolio.
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 investors) 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.
Although it does not currently create and issue any number of series, the
Portfolio reserves the right to do so, in which case investments in each series
would participate equally in the earnings, losses and assets of the particular
series.
A-8
<PAGE>
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., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of 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 ("Portfolio 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, as amended (the "1940 Act")). This
determination is made once during each Portfolio Business Day as of 4:00 p.m.,
Eastern time. All the net income of the Portfolio, as described below, is
allocated pro rata among the 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 Portfolio Business Day. At 4:00 p.m., Eastern time, on 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, 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 recomputed 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 Portfolio 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
(the "Code"), and regulations promulgated thereunder.
A-9
<PAGE>
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 Code, assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed the Manager and/or KLD ([212]352-9200
and/or [617]547-7479).
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolio will be issued solely in private
placement transactions described in Item 4.
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 Portfolio 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 at IBT by a
Federal Reserve Bank).
The Portfolio reserves the right to cease accepting investments at any time
or to reject any investment order.
Subject to limitations of the 1940 Act, the Portfolio may accept securities
in exchange for a beneficial interest or an increase in a beneficial interest,
as the case may be. The Portfolio will not accept such a security unless
(a) the security is consistent with the investment objective and policies of the
Portfolio, and (b) the security is deemed acceptable by the Manager and the
Submanager. Securities offered in exchange for purchases will be valued in
accordance with the usual valuation procedure for the Portfolio. See "Net Asset
Value" below and Item 19 in Part B.
NET ASSET VALUE. Equity securities held by the Portfolio are valued at the
last sale price on the exchange on which they are primarily traded or on the
NASDAQ system for unlisted national market issues, or at the last quoted bid
price for securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. If the Portfolio purchases option
contracts, such option contracts which are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Short-term obligations with remaining maturities of less than
sixty days are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of the Portfolio. Portfolio securities
(other than short-term obligations with remaining maturities of less than
60 days) for which there are no such quotations or valuations are valued at fair
value as determined in good faith by or at the direction of the Portfolio's
Board of Trustees.
The exclusive placement agent for the Portfolio is Signature Broker-Dealer
Services, Inc.
A-10
<PAGE>
("Signature"). The principal business address of Signature is 21 Milk
Street, Boston, MA 02109. Signature receives no 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 Portfolio 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 the New York Stock Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
A-11
<PAGE>
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
Page
Item 10. Cover Page....................................... B-1
Item 11. Table of Contents................................ B-1
Item 12. General Information and History.................. B-1
Item 13. Investment Objectives and Policies............... B-1
Item 14. Management of the Fund........................... B-5
Item 15. Control Persons and Principal Holders
of Securities.................................. B-9
Item 16. Investment Advisory and Other Services........... B-9
Item 17. Brokerage Allocation and Other Practices......... B-12
Item 18. Capital Stock and Other Securities............... B-14
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered....................... B-15
Item 20. Tax Status....................................... B-16
Item 21. Underwriters..................................... B-17
Item 22. Calculation of Performance Data.................. B-18
Item 23. Financial Statements............................. B-18
ITEM 12. GENERAL INFORMATION AND HISTORY.
Domini Social Investments LLC ("DSIL") is the investment manager and
administrative services provider (the "Manager") of Domini Social Index
Portfolio (the "Portfolio"). Mellon Equity Associates ("Mellon Equity") is the
Portfolio's investment submanager (the "Submanager"). Kinder, Lydenberg,
Domini & Co., Inc. ("KLD") determines the composition of the Domini 400 Social
Index-SM- (referred to herein as the "Index" or the "Domini Social Index"). The
Portfolio's Board of Trustees provides broad supervision over the affairs of the
Portfolio, including those with respect to the Manager and the Submanager.
"Domini" and "Domini 400 Social Index" are service marks of KLD.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
The investment objective of the Portfolio is to provide its investors with
long-term total return which
B-1
<PAGE>
corresponds to the total return performance of the Domini 400 Social
Index-SM- (referred to herein as the "Domini Social Index" or the "Index").
The Index is 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 investment objective of the Portfolio may be
changed without approval by the Portfolio's investors.
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 Domini Social 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.
With respect to stocks of foreign issuers, the Portfolio does not purchase
securities which the Portfolio believes, at the time of purchase, will be
subject to exchange controls or foreign withholding taxes; however, there can be
no assurance that such laws may not become applicable to certain of the
Portfolio's investments. In the event unforeseen exchange controls or foreign
withholding taxes are imposed with respect to any of the Portfolio's
investments, the effect may be to reduce the income received by the Portfolio on
such investments.
Although 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
Securities Act of 1933, as amended (the "1933 Act").
It is a fundamental policy of the Portfolio that Portfolio may not invest
more than 25% of its total assets in any one industry, unless the 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 three business days;
(3) the Portfolio will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Portfolio.
The Portfolio will earn income for lending its securities either in the
form of fees received from the borrower of the securities or in connection with
the investment of cash collateral in short-term money market instruments. Loans
of securities involve a risk that the borrower may fail to return the securities
or may fail to provide additional collateral.
B-2
<PAGE>
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Manager or the Submanager.
Although the Portfolio reserves the right to lend its securities, it has
no current intention of doing so in the foreseeable future.
RISK FACTORS INVOLVED IN OPTION CONTRACTS: Although it has no current
intention to do so, the Portfolio may in the future enter into certain
transactions in stock options for the purpose of hedging against possible
increases in the value of securities which are expected to be purchased by the
Portfolio or possible declines in the value of securities which are expected to
be sold by the Portfolio. Generally, the Portfolio would only enter into such
transactions on a short-term basis pending readjustment of its holdings of
underlying stocks.
The purchase of an option on an equity security provides the holder with
the right, but not the obligation, to purchase the underlying security, in the
case of a call option, or to sell the underlying security, in the case of a put
option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a nonrefundable premium, which represents the purchase
price of the option. The holder of an option can lose the entire amount of the
premium, plus related transaction costs, but not more. Upon exercise of the
option, the holder is required to pay the purchase price of the underlying
security in the case of a call option, or deliver the security in return for the
purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase
or sell the instrument underlying an option, make or receive a cash settlement
or meet ongoing variation margin requirements. The inability to close out
option positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a number
of limitations governing the maximum number of positions which may be held by a
trader, whether acting alone or in concert with others. The Manager does not
believe that these trading and position limits would have an adverse impact on
the possible use of hedging strategies by the Portfolio.
The approval of the Portfolio's investors 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 herein means
the vote of the lesser of (i) 67% or more of the beneficial interests in the
Portfolio
B-3
<PAGE>
present at a meeting, if the holders or more than 50% of the beneficial
interests in the Portfolio are present or represented by proxy, or (ii) more
than 50% of the beneficial interests 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);
(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,
B-4
<PAGE>
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;
(9) issue any senior security (as that term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) if such issuance is
specifically prohibited by the 1940 Act or the rules and regulations promulgated
thereunder, except as appropriate to evidence a debt incurred without violating
paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Portfolio's 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 federal statutes and policies, the Portfolio will not, as a matter of
operating policy, purchase puts, calls, straddles, spreads and any combination
thereof if the value of its aggregate investment in such securities will exceed
5% of the Portfolio's total assets at the time of such purchase.
This restriction is not fundamental and may be changed by the Portfolio
without the approval of its investors in response to changes in 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 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 FUND.
The Trustees and officers of the Portfolio, their principal occupations
during the past five years and dates of birth 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 11 West 25th Street, 7th Floor, New York, New York 10010.
B-5
<PAGE>
TRUSTEES
EMILY W. CARD -- 1158 26th Street, #450, Santa Monica, California 90403;
Attorney; President, The Card Group, Inc. Her date of birth is May 8, 1942.
AMY L. DOMINI* -- c/o Loring, Wolcott & Coolidge, 230 Congress Street, Boston,
Massachusetts 02110; Chair, President and Trustee of the Portfolio; Managing
Principal of DSIL; Officer of KLD; Private Trustee, Loring, Wolcott & Coolidge;
Trustee, New England Quarterly (since 1998); Board Member, Social Investment
Forum (since 1994); Trustee, Episcopal Church Pension Fund; Former Member,
Governing Board, Interfaith Center on Corporate Responsibility; Former Trustee,
National Association Community Loan Funds; Former Board Member of National
Community Capital Association (1987-1990). Her date of birth is January 15,
1950.
ALLEN M. MAYES -- P.O. Box 21222, Beaumont, Texas 77720; Retired Senior
Associate General Secretary of the General Board of Pensions of the United
Methodist Church, Director of Ministerial Services, Texas Annual Conference, The
United Methodist Church; Former Member of the Board of Directors of Investor
Responsibility Research Center; Member of Board of Trustees of Wiley College.
His date of birth is September 20, 1920.
WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02146;
Manager, Venture Investment Management Company LLC; Vice President and General
Manager, TravElectric Services Corp (prior to 1995); President, Environmental
Technologies (prior to 1993; Director, Evergreen Solar, Inc; Director,
Conservation Services Group. His date of birth is July 7, 1944.
KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Associate Dean and
Professor of Business Environment, Florida International University (since
1991); Partner, Trinity Industrial Technology (since 1995); Director, Center
for Management in the Americas (since 1997); and Co-director, Center for
Global Business (since 1998). Her date of birth is September 23, 1944.
TIMOTHY SMITH -- 475 Riverside Drive, Room 550, New York, New York 10115;
Executive Director, Interfaith Center on Corporate Responsibility; Trustee,
Calvert New Africa Fund. His date of birth is September 15, 1943.
FREDERICK C. WILLIAMSON -- Five Roger Williams Green, Providence, Rhode Island
02904; Treasurer and Trustee, RIGHA (charitable foundation supporting health
care needs) since 1990; Chairman, Rhode Island Historical Preservation and
Heritage Commission since 1995; Trustee, National Parks and Conservation
Association (1986-1997); Advisor, National Parks and Conservation Association
(since 1997); Trustee of the National Park Trust (since 1991). His date of
birth is September 20, 1914.
Each of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Portfolio is paid an annual retainer of $4,000 for serving as
a Trustee of the Portfolio, Domini Social Equity Fund and Domini Institutional
Trust and in addition, receives $500 for
B-6
<PAGE>
attendance at each joint meeting of the Boards of the Portfolio, the Domini
Social Equity Fund, and the Domini Institutional Trust) (reduced to $250 in
the event that a Trustee participates at an in-person meeting by telephone),
such retainer and fees in no event to exceedin the aggregate $6,000 per
year. In addition, each Trustee receives reimbursement for reasonable
expenses incurred in attending meetings. The compensation paid to the
Trustees for the fiscal year ended July 31, 1998 is set forth below. The
Trustees may hold various other directorships unrelated to the Portfolio or
the other investment companies in the fund complex.
Pension or Total Compensa-
Retirement tion from the
Benefits Portfolio,
Aggregate Accrued as Annual Domini Social
Compensation Part of Benefits Equity Fund and
from the Portfolio upon Domini Institu-
Portfolio Expenses Retirement tional Trust
Emily W. Card,
Trustee $1,000 None None $6,000
Amy L. Domini*, None None None None
Chair, President
and Trustee
Allen M. Mayes, $1,000 None None $6,000
Trustee
William C. Osborn, $1,000 None None $6,000
Trustee
Karen Paul, Trustee $1,000 None None $6,000
Timothy Smith, $1,000 None None $6,000
Trustee
Frederick C. $1,000 None None $6,000
Williamson, Trustee
OFFICERS
B-7
<PAGE>
PETER D. KINDER* -- Vice President of the Portfolio; President of KLD; Member
of Domini Social Investments LLC (since 1997). His date of birth is
September 28, 1946. Mr. Kinder is married to Ms. Domini.
CAROLE M. LAIBLE* -- Secretary and Treasurer of the Portfolio (since 1997);
Financial/Compliance Officer of Domini Social Investments LLC (since 1997);
Member of Governing Board of Daytop-NJ (since 1998); Financial/Compliance
Officer of FSSI (1994-1997); Financial Compliance Officer and Secretary of
investment companies within Fundamental Family of Funds (1994 -1997); General
Service Manager, McGladrey & Pullen, LLP (certified public accountants) prior to
1994. Her date of birth is October 31, 1963.
STEVEN D. LYDENBERG* -- Vice President of the Portfolio; Director of Research of
KLD; Member of Domini Social Investments LLC (since 1997). His date of birth is
October 21, 1945.
SIGWARD M. MOSER* -- Vice President of the Portfolio (since 1997); President of
Communications House International, Inc.; Director of Financial Communications
Society; Managing principal of Domini Social Investments LLC (since 1997). His
date of birth is June 12, 1962.
DAVID P. WIEDER* -- Vice President of the Portfolio (since 1997); Managing
principal of Domini Social Investments LLC (since 1997); President of FSSI since
1989. His date of birth is January 8, 1966.
Each of the officers also holds a similar officership with Domini Social
Equity Fund and Domini Institutional Trust.
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.
B-8
<PAGE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of September 30, 1998 the following holders of record owned 5% or more
of the outstanding beneficial interests of the Portfolio: Domini Social Equity
Fund (owner of [72.64]% of the Portfolio) and Domini Institutional Social Equity
Fund (owner of [23.71]% of the Portfolio).
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
MANAGER. DSIL provides advice to the Portfolio pursuant to a Management
Agreement (the "Management Agreement"). The services provided by the Manager
consist of furnishing continuously an investment program for the Portfolio.
DSIL will have authority to determine from time to time what securities are
purchased, sold or exchanged, and what portion of assets of the Portfolio is
held uninvested. DSIL will also perform such administrative and management
tasks as may from time to time be reasonably requested, including: (i)
maintaining office facilities and furnishing clerical services necessary for
maintaining the organization of the Portfolio and for performing administrative
and management functions; (ii) supervising the overall administration of the
Portfolio, including negotiation of contracts and fees with and monitoring of
performance and billings of the Portfolio's transfer agent, shareholder
servicing agents, custodian and other independent contractors or agents; (iii)
overseeing (with the advice of the Portfolio's counsel) the preparation of and,
if applicable, filing all documents required for compliance by the Portfolio
with applicable laws and regulations, including registration statements,
semi-annual and annual reports to investors, proxy statements and tax returns;
(iv) preparing agendas and supporting documents for and minutes of meetings of
Trustees, committees of Trustees and investors; and (v) arranging for
maintenance of the books and records of the Portfolio. The Manager furnishes at
its own expense all facilities and personnel necessary in connection with
providing these services. The Management Agreement will continue in effect if
such continuance is specifically approved at least annually by the Portfolio's
Board of Trustees or by a majority of the outstanding voting securities of the
Portfolio at a meeting called for the purpose of voting on the Management
Agreement (with the vote of each investor in the Portfolio being in proportion
to the amount of its investment), and, in either case, by a majority of the
Portfolio's Trustees who are not parties to the Management Agreement or
interested persons of any such party at a meeting called for the purpose of
voting on the Management Agreement.
The Management Agreement provides that the Manager may render services to
others. DSIL may employ, at its own expense, or may request that the Portfolio
employ (subject to the requirements of the 1940 Act) one or more subadvisers or
submanagers, subject to DSIL's supervision. The Management Agreement is
terminable without penalty on not more than 60 days' nor less than 30 days'
written notice by the Portfolio when authorized either by majority vote of the
outstanding voting securities in the Portfolio (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment) or by a
vote of a majority of its Board of Trustees, or by the Manager, and will
automatically terminate in the event of its assignment. The Management
Agreement provides that neither the Manager nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for wilful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Management Agreement.
Part A contains a description of fees payable to the Manager for services
under the Management Agreement. See "Expenses" under Item 5 for a description
B-9
<PAGE>
of the voluntary fee waiver currently in effect. This waiver may be reduced or
terminated at any time.
DSIL is a Massachusetts limited liability company with offices at 11 West
25th Street, 7th Floor, New York, New York 10010, and is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act"). The names of the principal owners of DSIL, their relationship to the
Portfolio and their ownership percentage of DSIL follows: Amy L. Domini, Chair
of the Board and President of the Portfolio, is the Manager and principal
executive officer of DSIL and a 21.25% owner of DSIL. Ms. Domini is also Chief
Executive Officer, Secretary, Treasurer and 51% owner of KLD which licenses the
Domini Social Index to DSIL. Peter D. Kinder, Vice President of the Portfolio,
is a 21.25% owner of DSIL. Mr. Kinder is also President and 19% owner of KLD.
Sigward M. Moser, Vice President of the Portfolio, is a 21.25% owner of DSIL.
David P. Wieder, Vice President of the Portfolio, is a 21.25% owner of DSIL.
SUBMANAGER. Mellon Equity manages the assets of the Portfolio pursuant to
an Investment Submanagement Agreement (the "Submanagement Agreement"). The
Submanager furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio. The Submanagement Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Portfolio's Board of Trustees or by a majority vote of the
outstanding voting securities in the Portfolio at a meeting called for the
purpose of voting on the Submanagement Agreement (with the vote of each being in
proportion to the amount of its investment), and, in either case, by a majority
of the Portfolio's Trustees who are not parties to the Submanagement Agreement
or interested persons of any such party at a meeting called for the purpose of
voting on the Submanagement Agreement.
The Submanagement Agreement provides that the Submanager may render
services to others. The Submanagement Agreement is terminable without penalty
upon not more than 60 days' nor less than 30 days' written notice by the
Portfolio when authorized either by majority vote of the outstanding voting
securities in the Portfolio (with the vote of each being in proportion to the
amount of its investment) or by a vote of the majority of its Board of Trustees,
or by the Manager with the consent of the Trustees and may be terminated by the
Submanager on not less than 90 days' written notice to the Manager and the
Trustees, and will automatically terminate in the event of its assignment. The
Submanagement Agreement provides that the Submanager shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for wilful misfeasance, bad faith or gross negligence or reckless disregard for
its or their obligations and duties under the Submanagement Agreement.
Mellon Equity is a Pennsylvania business trust founded in 1987, which is
beneficially owned by Mellon Bank, N.A. (99% beneficial interest) and MMIP (1%
beneficial interest), a wholly owned subsidiary of Mellon Bank Corporation
("Mellon Bank"). Mellon Equity is a professional investment counseling firm
that provides investment management services to the equity and balanced pension,
public fund, and profit-sharing investment management markets, and is a
registered investment adviser under the Advisers Act. Mellon
B-10
<PAGE>
Bank's predecessor organization managed domestic equity, tax-exempt and
institutional pension accounts since 1947. The address of Mellon Equity and
each of the principal executive officers and directors of Mellon Equity is
500 Grant Street, Suite 3700, Pittsburgh, Pennsylvania 15258.
Part A contains a description of fees payable to the Submanager for
services under the Submanagement Agreement.
PRIOR ADVISORY, MANAGEMENT, SPONSORSHIP AND ADMINISTRATION AGREEMENTS.
Prior to October 22, 1997, pursuant to an investment advisory agreement (the
"KLD Advisory Agreement"), KLD served as investment adviser to the Portfolio and
furnished continuously an investment program by determining the stocks to be
included in the Domini Social Index. Additionally, prior to October 22, 1997,
pursuant to a management agreement (the "Mellon Equity Management Agreement"),
Mellon Equity served as investment manager and managed the assets of the
Portfolio on a daily basis. Prior to November 21, 1994, pursuant to an
investment management agreement (the "State Street Management Agreement"), State
Street Bank and Trust Company served as investment manager to the Portfolio.
Prior to October 22, 1997, pursuant to a sponsorship agreement (the "KLD
Sponsorship Agreement"), KLD furnished administrative services for the
Portfolio. Prior to November 6, 1996, pursuant to an administrative services
agreement (the "Signature Administration Agreement"), Signature Broker-Dealer
Services, Inc. ("Signature") served as the administrator of the Portfolio.
Prior to October 22, 1997, the aggregate investment management and
administration fees under the prior agreements with respect to the Portfolio
were equal to 0.15% of the Portfolio's average daily net assets for its then
current fiscal year.
For the fiscal year ended July 31, 1998, the Portfolio incurred
approximately $701,774 in Management fees pursuant to the Management Agreement,
$17,385 in advisory fees pursuant to the KLD Advisory Agreement, $17,365 in
aggregate administrative fees purusant to the Signature Administtration
Agreement and $86,354 in management fees pursuant to the Mellon Equity
Management Agreement. For the fiscal year ended July 31, 1997, the Portfolio
incurred $46,528 in advisory fees pursuant to the KLD Advisory Agreement,
$46,528 in administration fees pursuant to the KLD Sponsorship Agreement and
$182,885 in management fees pursuant to the Mellon Equity Management Agreement.
For the fiscal year ended July 31, 1996, the Portfolio incurred $38,150 in
advisory fees pursuant to the KLD Advisory Agreement, $38,150 in aggregate
administration fees pursuant to the Signature Administration Agreement and the
KLD Sponsorship Agreement, and $128,901 in management fees pursuant to the
Mellon Equity Management Agreement.
TRANSFER AGENT AND CUSTODIAN. 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 200 Clarendon Street,
Boston, Massachusetts 02116.
B-11
<PAGE>
INDEPENDENT AUDITORS. 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. BROKERAGE ALLOCATION AND OTHER PRACTICES.
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Submanager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Submanager in a similar capacity.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Submanager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Submanager on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Submanager normally seeks to deal directly with the primary
market makers, unless in its 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 Submanager on the tender of
the Portfolio's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Portfolio by the
Submanager. At present no other recapture arrangements are in effect.
Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. and such other policies as the
Trustees of the Portfolio may determine, the Submanager may consider sales of
shares of securities of investors in the Portfolio as a factor in the selection
of broker-dealers to execute the Portfolio's securities transactions.
Under the Submanagement Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Submanager may cause the Portfolio to pay a
broker-dealer acting on an agency basis which provides brokerage and research
services to the Submanager or the Manager an amount of commission for effecting
a securities transaction for the Portfolio in excess of the amount other
broker-dealers would have charged for the transaction if the Submanager
determines in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or the
Submanager's or the Manager's overall responsibilities to the Portfolio or to
its other clients. Not all of such services are useful or of value in advising
the Portfolio.
The term "brokerage and research services" includes advice as to the value
of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions
B-12
<PAGE>
and performing functions incidental thereto such as clearance and settlement.
However, because of the Portfolio's policy of investing in accordance with
the Domini Social Index, the Submanager and the Manager currently intend to
make only a limited use of such brokerage and research services.
Although commissions paid on every transaction will in the judgment of the
Submanager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Submanager's and Manager's other clients in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Submanager or the Manager for no
consideration other than brokerage or underwriting commissions.
The Submanager and the Manager attempt to evaluate the quality of
research provided by brokers. The Submanager and the Manager sometimes use
evaluations resulting from this effort as a consideration in the selection of
brokers to execute portfolio transactions. However, neither the Submanager nor
the Manager is able to quantify the amount of commissions which are paid as a
result of such research because a substantial number of transactions are
effected through brokers which provide research but which are selected
principally because of their execution capabilities.
The fees that the Portfolio pays to the Manager, or the fees that the
Manager pays the Submanager, will not be reduced as a consequence of the
Portfolio's receipt of brokerage and research services. To the extent the
Portfolio's securities transactions are used to obtain brokerage and research
services, the brokerage commissions paid by the Portfolio will exceed those that
might otherwise be paid for such portfolio transactions and research, by an
amount which cannot be presently determined. Such services may be useful and of
value to the Submanager or the Manager in serving both the Portfolio and other
clients and, conversely, such services obtained by the placement of brokerage
business of other clients may be useful to the Submanager or the Manager in
carrying out its obligations to the Portfolio. While such services are not
expected to reduce the expenses of the Submanager or the Manager, the Submanager
and the Manager would, through use of the services, avoid the additional
expenses which would be incurred if it should attempt to develop comparable
information through their respective staffs.
For the fiscal years ended July 31, 1996, 1997, and 1998 the Portfolio paid
brokerage commissions of $45,017, $101,639, and $175,344 respectively. The
increases in brokerage commissions reflected above were due to increased
portfolio activity and increases in net investments in the Portfolio throughout
the respective periods.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Submanager's or the Manager's other
clients. Investment decisions for the Portfolio and for the Submanager's or the
Manager's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by or bought or sold for
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are
B-13
<PAGE>
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
its 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 its
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 its 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 its investment), or (ii) by
the Trustees of the Portfolio by written notice to investors.
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
B-14
<PAGE>
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 BEING OFFERED.
Beneficial interests in the Portfolio will be issued solely in private
placement transactions described in Item 4.
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, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas.) This determination of net
asset value is made once during each Portfolio Business Day as of the close of
regular trading of the New York Stock Exchange by deducting the amount of the
Portfolio's liabilities, including expenses payable or accrued, from the value
of its assets. Purchases and withdrawals will be effected at the time of
determination of net asset value next following the receipt of any purchase
order or request for withdrawal.
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 60 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
B-15
<PAGE>
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 recomputed
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
that Portfolio Business day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the Portfolio
effected as of the close of business on such day, and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the close of
business on such day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio as of
the close of business on the following 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 federal 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.
B-16
<PAGE>
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 (as such, the Portfolio is not subject to federal
income taxation) (2) for purposes of determining whether an investor in the
Portfolio satisfies the income and diversification requirements to maintain its
status as a regulated investment company, such investor 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 investors that it intends to conduct its operations so as to enable the
Portfolio's investors to satisfy those requirements.
Each investor should take into account, in computing its federal income tax
liability, its share of the Portfolio's income, gains, losses, deductions,
credits and tax preference items, without regard to whether it has received any
cash distributions from the Portfolio. Withdrawals by an investor from the
Portfolio generally will not result in the investor 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 investor's interest in
the Portfolio prior to the distribution, (2) income or gain will be realized if
the withdrawal is in liquidation of the investor'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 each investor's interest in the Portfolio
generally equals the amount of cash and the basis of any property that the
investor invests in the Portfolio, increased by the investor's share of income
from the Portfolio and decreased by the investor'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 not subject to any income or franchise tax in the State of
New York or the Commonwealth of Massachusetts.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Portfolio is Signature, which
receives no compensation for serving in this capacity. Other investment
companies, insurance company separate accounts, common and commingled trust
funds and similar organizations and entities may continuously invest in the
Portfolio.
B-17
<PAGE>
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The audited financial statements of the Portfolio dated July 31, 1998 are
incorporated herein by reference from the Portfolio's Form N-30D filed with the
Securities and Exchange Commission on October 8, 1998, accession number
0000950130-98-004920.
B-18
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements Included in Part A:
Not applicable.
Financial Statements (incorporated by reference to Form N-30D filed
with the Securities and Exchange Commission on October 8, 1998,
accession number 0000950130-98-004920) in Part B:
Portfolio of Investments at July 31, 1998
Statement of Assets and Liabilities at July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statements of Changes in Net Assets for the fiscal years ended July 31,
1997 and 1998
Financial Highlights for the fiscal years ended July 31, 1998, 1997, 1996,
1995, and 1994
Notes to Financial Statements at July 31, 1998
Independent Auditors' Report
(b) Exhibits
1. Amended and Restated Declaration of Trust of the Registrant.1
1(a). Certificate and Amendment to Amended and Restated Declaration of
Trust.2
2. By-Laws of the Registrant as amended.2
5(a). Management Agreement between the Registrant and Domini Social
Investments LLC ("DSIL").2
5(b). Submanagement Agreement between the DSIL and Mellon Equity
Associates.2
8. Custodian Agreement between the Registrant and Investors Bank &
Trust Company as custodian (including transfer agency services).2
13. Investment representation letters from initial investors.2
C-1
<PAGE>
17. Financial data schedule.3
--------------
1 Previously filed and incorporated herein by reference from
Amendment No. 6 to the Registrant's Registration Statement filed
with the Securities and Exchange Commission on November 28, 1995.
2 Previously filed and incorporated herein by reference from
Amendment No. 8 to the Registrant's Registration Statement filed
with the Securities and Exchange Commission on October 22, 1997.
3 Filed herewith.
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 11, 1998
-------------- -----------------------
Beneficial Interests 5
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Amended and
Restated Declaration of Trust filed as an Exhibit hereto.
The Trustees and officers of the Registrant and the personnel of the
Registrant's manager 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.
DSIL is a Massachusetts limited liability company with offices at 11 West
25th Street, 7th Floor, New York, New York 10010, and is registered as an
investment adviser under the Investment Advisers Act of 1940. The owners of
DSIL are James Earl Brooks, Amy Lee Domini, Peter D. Kinder, Steven D.
Lydenberg, Sigward Moser and David P. Wieder.
C-2
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS EMPLOYMENT DURING THE PAST TWO FISCAL YEARS
<S> <C> <C>
James E. Brooks Four Arlington Street President, Equity Resources Group, Inc. (real estate investment)
Cambridge, MA 02140
Amy L. Domini 230 Congress Street CEO, Secretary and Treasurer, Kinder, Lydenberg, Domini & Co.,
Cambridge, MA 02110 Inc. ("KLD") (investment adviser); Trustee, Loring, Wolcott &
Coolidge (fiduciary)
Peter D. Kinder 11 West 25th Street President, KLD
New York, NY 10010
Steven D. Lydenberg 11 West 25th Street Director of Research, KLD
New York, NY 10010
Sigward Moser 11 West 25th Street President and Director, Communication House International, Inc.
New York, NY 10010 (advertising agency)
David P. Wieder 11 West 25th Street President, Director, Equity Owner and Chairman, FSSI
New York, NY 10010 (transfer agent); Secretary, Fundamental Portfolio
Advisors (investment adviser); Registered Representative,
Fundamental Service Corp. (broker-dealer)
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Signature Broker-Dealer Services, Inc. ("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.
C-3
<PAGE>
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:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Domini Social Investments LLC 11 West 25th Street, 7th Floor,
(manager) New York, NY 10010
Mellon Equity Associates 500 Grant St., Suite 3700
(investment submanager) Pittsburgh, PA 15258-0001
Signature Broker-Dealer 21 Milk Street
Services, Inc. Boston, MA 02109
(exclusive placement agent)
Investors Bank & Trust Company 200 Clarendon Street
(custodian and transfer agent) Boston, MA 02116
</TABLE>
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-4
<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 21st day of
October, 1997.
DOMINI SOCIAL INDEX PORTFOLIO
By /s/ Amy L. Domini
Amy L. Domini
President
DSI73G
C-5
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
<S> <C>
27 Financial data schedule
99.B11 Consent of KPMG Peat Marwick LLP, independent
auditors for the registrant
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 462,874,654
<INVESTMENTS-AT-VALUE> 638,595,422
<RECEIVABLES> 1,405,098
<ASSETS-OTHER> 7,419,976
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 647,420,496
<PAYABLE-FOR-SECURITIES> 4,868,668
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 316,193
<TOTAL-LIABILITIES> 5,184,861
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 642,235,635
<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> 642,235,635
<DIVIDEND-INCOME> 5,509,338
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 881,019
<NET-INVESTMENT-INCOME> 4,628,319
<REALIZED-GAINS-CURRENT> 4,836,426
<APPREC-INCREASE-CURRENT> 84,559,360
<NET-CHANGE-FROM-OPS> 94,024,105
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 267,044,708
<NUMBER-OF-SHARES-REDEEMED> (11,192,148)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 255,852,560
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 753,366
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,089,783
<AVERAGE-NET-ASSETS> 441,468,227
<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> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Consent of Independent Auditors
The Board of Trustees
Domini Social Index Portfolio:
We consent to the use of our report on Domini Social Index Portfolio, dated
August 24, 1998, incorporated by reference herein on registration statement
filed on Form N-1A (File No. 811-5824), and to the reference to our Firm
under the heading "Independent Auditors" in Part B.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 25, 1998
