As filed with the Securities and Exchange Commission on November 30, 1999.
Registration 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. 10
DOMINI SOCIAL INDEX PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
11 West 25th Street, New York, NY 10010
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 212-352-9200
Amy L. Domini
Domini Social Investments LLC
11 West 25th Street
New York, NY 10010
(Name and Address of Agent for Service)
Copy To:
Roger P. Joseph, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
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EXPLANATORY NOTE
Domini Social Index Portfolio has filed this Registration Statement
pursuant to Section 8(b) of the Investment Company Act of 1940. However,
beneficial interests in the Portfolio are not being registered under the
Securities Act of 1933, since such interests will be issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Only investment companies, insurance
company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act may make investments in the Portfolio. This
Registration Statement is not an offer to sell, or the solicitation of an offer
to buy, any beneficial interests in the Portfolio.
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PART A
Responses to Items 1, 2, 3, 5 and 9 have been omitted pursuant to General
Instruction B.2(b) of Form N-1A.
Item 4. Investment Objective, Principal Investment Strategies, and Related
Risks.
INVESTMENT OBJECTIVE
The Portfolio seeks to provide its investors with long-term total return
which matches the performance of the Domini 400 Social Index, an index made up
of the stocks of 400 companies selected using social and environmental
criteria. The Index is composed primarily of large-capitalization U.S.
companies.
There can be no guarantee that the Portfolio will be able to achieve its
investment objective. The investment objective of the Portfolio may be changed
without the approval of the Portfolio's investors.
INVESTMENT STRATEGIES
PRIMARY INVESTMENT STRATEGY
The Portfolio seeks to match the composition of the Index as closely as
possible. The Portfolio typically invests in all 400 stocks included in the
Domini 400 Social Index, in approximately the same proportion as they are found
in the Index. This is known as a full replication strategy.
Although an investor cannot invest directly in an index, an index mutual
fund provides an investor the opportunity to invest in a portfolio that tracks
an index.
OVERVIEW OF THE SOCIAL SCREENS USED BY THE INDEX:
o The Index avoids companies that manufacture tobacco products or
alcoholic beverages, companies that derive any revenues from gambling
enterprises, major military contractors and companies that have an
ownership share in, or operate, nuclear power plants.
o The Index seeks to hold the stocks of good corporate citizens,
demonstrated by positive relations with their communities and their
employees, by their environmental record, and by the quality and safety
of their products.
ABOUT INDEX INVESTING
DESCRIPTION OF AN INDEX:
An index is an unmanaged group of stocks selected to measure the behavior
of the market, or some portion of it. The Standard & Poor's 500 Index, for
example, is an index of 500 companies selected to track the performance of the
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broad market of large-cap U.S. companies. Investors use indexes as benchmarks
to measure how their investments are performing in comparison to the market as
a whole.
The Domini 400 Social Index attempts to track the performance of the broad
market of primarily large-cap U.S. companies that the typical socially
responsible investor would consider appropriate to invest in. The Domini 400
Social Index was created to serve as a benchmark for socially and
environmentally conscious investors.
THE DIFFERENCE BETWEEN THE PORTFOLIO AND AN ACTIVELY MANAGED FUND:
The Portfolio uses a passive investment strategy. This means that the
Portfolio purchases, holds and sells stocks based on the composition of the
Domini 400 Social Index, rather than on a manager's judgment as to the
direction of the market or the merits of any particular stock.
Unlike index funds, actively managed funds are generally managed to
achieve the highest possible return within certain parameters. These funds are
managed by stock-pickers who buy and sell stocks based on their opinion of the
financial outlook of the stock. Because index funds use a passive strategy,
changes in management generally have less impact on fund performance.
Index funds provide investors with an opportunity to invest in a portfolio
that is specially designed to match the performance of a particular index.
Rather than relying on the skills of a particular mutual fund manager, index
fund investors purchase, in a sense, a cross-section of the market. Their
performance should therefore reflect the segment of the market that their fund
is designed to track.
ADVANTAGES OF INDEX INVESTING:
Index investing has become quite popular because it offers investors a
convenient, relatively low-cost and tax-efficient way to obtain exposure to a
broad spectrum of the stock market. Here are some other advantages:
o Diversification. Because indexes such as the Domini 400 Social Index seek
to measure the performance of the broad market, they invest in a large
number of companies representing a diverse mix of industries. This
structure can help reduce volatility as compared to funds that may invest
in a smaller number of companies, or focus on a particular industry.
o Benchmark Comparability. All stock mutual funds measure their performance
in relation to a particular market benchmark. Index funds typically match
the performance of their particular benchmarks more closely than
comparable actively managed funds.
o Tax Efficiency. Turnover rate refers to the volume of buying and selling
of stocks by a fund. The turnover rate of index funds tends to be much
lower than the average actively managed mutual fund. Depending on an
investor's particular tax situation, a low turnover rate may produce fewer
taxable capital gains.
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SOCIALLY RESPONSIBLE INVESTING:
Corporations have both positive and negative effects on society and the
natural environment. Socially responsible investing is an investment strategy
designed to take these effects into account.
Social investors use social and environmental factors to make their
investment decisions. They believe that this helps to encourage greater
corporate responsibility, and may also help to identify companies that are good
long-term investments because enlightened management may be better able to meet
the future needs of society and the environment.
Typically, social investors avoid companies that manufacture products, or
employ practices, that they believe have harmful effects on society. They seek
to invest in companies with positive qualities, such as a proactive
environmental record, or positive employee relations. This process is called
"social screening."
At Domini Social Investments we work with companies to improve their
social and environmental performance. We vote company proxies in a manner that
is consistent with our social screening criteria, and file shareholder
resolutions on important social and environmental issues.
THE DOMINI 400 SOCIAL INDEX
The Domini 400 Social Index (DSI 400) is the nation's first socially
screened index. It was created and launched in May 1990 by the social research
firm of Kinder, Lydenberg, Domini & Co., Inc. (KLD) in order to serve as a
benchmark for social investors, and to determine how social screens affect
financial performance. KLD is an affiliate of Domini Social Investments. The
Domini Social Equity Portfolio was launched in 1991 to give investors an
opportunity to invest in the Index.
The Index is maintained by KLD. It is composed of the common stocks of 400
companies that meet the social criteria described below.
SOCIAL SCREENS:
All investment decisions use some type of "screen." Screens are guidelines
that define which securities will be included in a portfolio, and which will be
excluded. In addition to basic financial screens relating to financial
solvency, industry and sector diversification, and market capitalization, the
stocks in the Domini 400 Social Index are selected using two basic types of
social screens: exclusionary and qualitative.
KLD uses exclusionary social screens to avoid certain industries such as
tobacco and alcohol, and qualitative social screens to select companies based
on their performance in a number of areas, such as diversity and the
environment.
CONSTRUCTION OF THE DOMINI 400 SOCIAL INDEX:
To construct the Domini 400 Social Index, KLD first applied to the S&P 500
a number of traditional social screens. Roughly half of the S&P 500 companies
qualified for the Index in this initial screening process. Approximately 150
non-S&P 500 companies were then added with two goals in mind. One goal was to
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obtain a broad representation of industries, so that the Index would more
accurately reflect the composition of the broad market. Another goal was to
identify companies that are particularly strong models of corporate behavior.
KLD maintains an extensive database of corporate accountability
information on more than 1,000 publicly traded companies and bases its
decisions on research into the factors described below.
EXCLUSIONARY SCREENS
KLD seeks to exclude the following types of companies from the Index:
o TOBACCO AND ALCOHOL - firms that manufacture tobacco products or
alcoholic beverages;
o GAMBLING - firms that receive identifiable revenues from gambling
enterprises;
o NUCLEAR POWER - firms that have an ownership share in, or operate
nuclear power plants; and
o WEAPONS - firms that receive more than 2% of their gross revenues
from the sale of military weapons.
QUALITATIVE SCREENS
KLD considers the following criteria when evaluating companies for
possible inclusion in the Index:
o ENVIRONMENTAL PERFORMANCE - a company's record with regard to fines
or penalties, waste disposal, toxic emissions, efforts in waste
reduction and emissions reduction, recycling, and environmentally
beneficial fuels, products and services;
o EMPLOYEE RELATIONS - a company's record with regard to labor matters,
workplace safety, employee benefit programs, and meaningful
participation in company profits either through stock purchase or
profit sharing plans;
o DIVERSITY - a company's record with regard to the hiring and
promotion of women and minorities, particularly to management
positions and the board of directors, including a company's record
with respect to the availability of benefit programs that address
work/family concerns, innovative hiring programs for the disabled and
progressive policies toward gays and lesbians;
o CORPORATE CITIZENSHIP - a company's record with regard to its
charitable activities and its community relations in general; and
o PRODUCT-RELATED ISSUES - a company's record with regard to product
safety, marketing practices, and commitment to quality.
From time to time, KLD may, at its discretion, choose to apply additional
criteria, or to modify the application of the criteria listed above,
without consulting shareholders.
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SELECTION OF THE PORTFOlIO'S LARGEST HOLDINGS:
Like the S&P 500, the DSI 400 is "market capitalization-weighted." Market
capitalization is a measure of the value of a publicly traded company. It is
calculated by multiplying the total number of outstanding shares of company
stock by the price per share.
The Domini Social Equity Portfolio's investment portfolio is also market
capitalization-weighted. For example, assume that the total market value of
Company A's shares is twice the total market value of Company B's shares. The
Portfolio's investment portfolio is structured so that its holdings of Company
A's shares will be twice the value of its holding of Company B shares. The
Portfolio's top ten holdings therefore are simply the ten companies with the
highest market value in the Index.
Because it seeks to duplicate the Index as closely as possible, the
Portfolio will attempt to have a correlation between the weightings of the
stocks it holds in its portfolio and the weightings of the stocks in the Index
of 0.95 or better. A figure of 1.0 would indicate a perfect correlation.
MAINTENANCE OF THE DOMINI 400 SOCIAL INDEX:
To keep turnover low and to more accurately reflect the performance of the
market, the Index is maintained using a "buy and hold" strategy. Generally
speaking, this means that companies that are in the Index stay in the Index for
a long time. A company will not be removed because its stock has not been
performing well, unless in KLD's opinion the company is no longer financially
viable. Sometimes a company is removed from the Index because it has been
acquired by another company. Sometimes a company may split into two companies,
and only one of the surviving companies is selected to stay in the Index
(because the Index is maintained to consist of exactly 400 companies at all
times).
A company may also be removed from the Index because its social profile
has deteriorated, or due to its inadequate response to a significant
controversy. When a company is removed from the Index, it is replaced with
another company. In the selection process, among other factors, KLD considers
the size of the company, the industry it is in, and its social profile.
CERTAIN COMPANIES IN THE DOMINI 400 SOCIAL INDEX:
The screens for the Index are designed to reflect those most widely used
by social investors. Therefore, an investor may find that some companies in the
Index do not reflect its social or environmental standards. An investor may
wish to review a list of companies in the Portfolio's investment portfolio to
decide if they meet its standards. The complete list is available in the
Portfolio's annual and semi-annual reports. To obtain copies of these reports,
free of charge, call 1-800-762-6814.
No company is a perfect model of corporate responsibility. Each year, the
Portfolio uses its voice as a shareholder to encourage companies to improve
their social and environmental records by voting proxies, writing letters,
engaging management in dialogue and filing shareholder resolutions.
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SUITABILITY:
The Portfolio may be appropriate for an investor that is seeking long-term
growth, and is looking for an efficient way to invest in the broad U.S. stock
market.
Please note that although the Portfolio's investment portfolio holds a
broad cross-section of the U.S. stock market, it should not be considered a
balanced investment program because it only holds stocks. In addition, the
Portfolio should be considered a long-term investment and is not appropriate
for short-term trading purposes.
If an investor depends on its investments for current income, or would
find it a financial hardship to wait out periods of stock market volatility,
the Portfolio may not be appropriate for that investor.
PRIMARY RISKS
o MARKET RISK. The Portfolio seeks to remain fully invested in the stock
market during all market conditions. Therefore, the value of an investor's
investment, like stock prices generally, may fluctuate widely. An investor
could lose money. Stock markets tend to move in unpredictable cycles, with
periods of rising prices and periods of falling prices. The value of its
investment will vary from day to day due to changing market conditions, or
conditions relating to specific companies.
o STYLE RISK. The Portfolio primarily invests in the stocks of
large-capitalization companies. Large-capitalization stocks tend to go
through cycles where they do better, or worse, than the stock market in
general. The performance of the Portfolio's investments will generally
follow these broad market trends. Because the Domini 400 Social Index is
weighted by market capitalization, a few large companies represent a
relatively large percentage of the Index. Should the value of one or more
of these stocks decline significantly, it could negatively affect the
Portfolio's performance.
The Portfolio only invests in companies that meet its criteria for
socially responsible investing. Because of this restriction, the
investments that the Portfolio's portfolio managers may choose from may be
more limited than those of a fund that is not restricted to investing in
companies meeting the Fund's social criteria.
o INDEXING. The Portfolio will continue to invest in the Domini 400 Social
Index, regardless of how the Index is performing. It will not shift its
concentration from one industry to another, or from stocks to bonds or
cash, in order to defend against a falling or stagnant stock market. If
the Index is heavily weighted in a single industry or sector, the
Portfolio will be heavily invested in that industry or sector, and as a
result can be affected more positively or negatively by developments in
those industries than would be another investment company whose
investments are not restricted to the securities in the Index. Also, the
Portfolio's ability to match the performance of the Index may be affected
by a number of factors, including Portfolio operating expenses and
transaction costs, inflows and outflows of cash from the Portfolio and
imperfect correlation between the Portfolio's holdings and those in the
Index.
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ADDITIONAL INVESTMENT STRATEGIES AND RISK INFORMATION
CASH RESERVES:
Although the Portfolio seeks to be fully invested in the stock market at
all times, it keeps a small percentage of its assets in cash, or cash
equivalents. These reserves provide the Portfolio with flexibility to meet
redemptions and expenses, and to readjust its portfolio holdings. The Portfolio
may hold these cash reserves uninvested or may invest them in high quality,
short-term debt securities issued by agencies or instrumentalities of the
United States Government, bankers' acceptances, commercial paper, certificates
of deposit, bank deposits or repurchase agreements. The issuers of these
securities must satisfy certain social criteria.
SECURITIES LENDING:
Consistent with applicable regulatory policies, including those of the
Board of Governors of the Federal Reserve System and the Securities and
Exchange Commission, the Portfolio may make loans of its securities to member
banks of the Federal Reserve System and to broker-dealers. These loans would be
required to be secured continuously by collateral consisting of securities,
cash or cash equivalents maintained on a current basis at an amount at least
equal to the market value of the securities loaned. The Portfolio would have
the right to terminate a loan and obtain the securities loaned at any time on
three days' notice.
During the existence of a loan, the 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.
YEAR 2000:
Some software programs and computer systems are not able to recognize the
Year 2000. The Portfolio could be harmed if the computer systems used by the
Portfolio or its service providers are not programmed to accurately process
information on or after January 1, 2000. The Portfolio and its service
providers have been diligently working to resolve any potential Year 2000
problems. While these efforts are likely to be successful, the failure to
implement any necessary changes could harm the Portfolio. The Portfolio also
could be harmed if companies in the Portfolio's investment portfolio do not
solve their Year 2000 problems, if it costs those companies large amounts of
money to do so, or if the general market is affected by the Year 2000
transition.
TURNOVER:
The annual portfolio turnover rates of the Portfolio for the fiscal years
ended July 31, 1997, 1998 and 1999 were 1%, 5% and 8%, respectively.
The Portfolio is not required to use every investment technique or
strategy listed in this Part A or in Part B to this Registration Statement.
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FOR ADDITIONAL INFORMATION about the Portfolio's investment strategies and
risks, see Part B to this Registration Statement.
Item 6. Management, Organization and Capital Structure.
INVESTMENT MANAGERS
PORTFOLIO ADVISER:
Domini Social Investments LLC (DSIL), 11 West 25th Street, 7th Floor, New
York, NY 10010, has been managing money since November of 1997 and currently
manages more than $1.5 billion dollars in assets for individual and
institutional investors who are working to create positive change in society by
using social and environmental criteria in their investment decisions. DSIL is
the Portfolio's manager and provides the Portfolio with investment supervisory
services, overall operational support and administrative services.
SOCIAL RESEARCH & INDEX MAINTENANCE:
Kinder, Lydenberg, Domini & Co., Inc. (KLD), an affiliate of DSIL,
determines the composition of the Domini 400 Social Index. The following
persons are primarily responsible for the development and maintenance of the
Domini 400 Social Index: Amy L. Domini, CFA, a Managing Principal of DSIL and
Founder of KLD (since 1988), Steven D. Lydenberg, CFA, Director of Research,
KLD (since 1990), and Peter D. Kinder, JD, President, KLD (since 1988).
PORTFOLIO INVESTMENT SUBMANAGER:
Mellon Equity Associates, LLP with its main offices at 500 Grant Street,
Pittsburgh, PA 15258, provides investment submanagement services to the
Portfolio pursuant to a Submanagement Agreement with DSIL. A team of portfolio
managers at Mellon Equity implements the daily transactions necessary to
maintain the proper correlation between the Portfolio's investment portfolio
and the Domini 400 Social Index. They do not determine the composition of the
Index.
MANAGEMENT FEES
For the services DSIL and Mellon Equity provided to the Portfolio during
the fiscal year ended July 31, 1999, they received a total of 0.19% of the
average daily net assets of the Portfolio, after waivers.
CAPITAL STOCK
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
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requesting a meeting of investors for the purpose of removing one or more
Trustees. Investors also have the right to remove one or more Trustees without
a meeting by a declaration in writing by a specified number of investors. Upon
liquidation of the Portfolio, investors would be entitled to share pro rata in
the net assets of the Portfolio available for distribution to investors.
The Portfolio 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.
Item 7. Investor Information.
HOW NET INCOME IS CALCULATED
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 the close
of regular trading of the New York Stock Exchange, normally 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.
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 PURCHASE AND REDEMPTION OF BENEFICIAL INTERESTS IN THE PORTFOLIOS
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
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meaning of Section 4(2) of the Securities Act of 1933. Only investment
companies, insurance company separate accounts, common or commingled trust
funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act may invest in the
Portfolio. This Registration Statement is not an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Portfolio. The net asset value of the Portfolio is determined
on each 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
Investors Bank & Trust Company 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
Portfolio's manager and submanager. Securities offered in exchange for
purchases will be valued in accordance with the usual valuation procedure for
the Portfolio.
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.
TAX MATTERS
Under the anticipated method of operation of the Portfolio, the Portfolio
will not be subject to any federal income tax and withdrawals from the
Portfolio should not generate any taxable gain to an investor. However, each
investor in the Portfolio will have to take into account is shares (as
determined in accordance with the governing instruments of the Portfolio) of
the Portfolio's taxable income, gain, loss, deductions, credits and tax
preference items in determining its income tax liability without regard to
whether it has received any cash distributions from the Portfolio.
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.
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Item 8. Distribution Arrangements.
The exclusive placement agent for the Portfolio is DSIL Investment
Services LLC, 11 West 25th Street, 7th Floor, New York, New York 10010. DSIL
Investment Services LLC receives no compensation for serving as the exclusive
placement agent for the Portfolio.
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PART B
Item 10. Cover Page and Table of Contents.
This Part B sets forth information with respect to Domini Social Index
Portfolio, an investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The date of this Part B and Part A to the
Registration Statement for the Portfolio is December 1, 1999.
TABLE OF CONTENTS Page
Portfolio History.......................................................B-2
Description of the Portfolio and Its Investments and Risks..............B-2
Management of the Portfolio.............................................B-7
Control Persons and Principal Holders
of Securities.........................................................B-10
Investment Advisory and Other Services..................................B-11
Brokerage Allocation and Other Practices................................B-14
Capital Stock and Other Securities......................................B-16
Purchase, Redemption and Pricing of
Securities............................................................B-16
Taxation of the Portfolio...............................................B-18
Underwriters............................................................B-18
Calculations of Performance Data........................................B-18
Financial Statements....................................................B-18
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Item 11. Portfolio History.
Domini Social Index Portfolio (the "Portfolio") was organized as a trust
under the laws of the State of New York on June 7, 1989.
Item 12. Description of the Portfolio and Its Investments and Risks.
The investment objective of the Portfolio is to provide its investors with
long-term total return which matches the performance of the Domini Social
Index.
The investment objective of the Portfolio may be changed without the
approval of the investors in the Portfolio, but not without written notice
thereof to the investors in the Portfolio 30 days prior to implementing the
change. There can, of course, be no assurance that the investment objective of
Portfolio will be achieved.
The Portfolio may, but need not, invest in any or all of the investments
and utilize any or all of the investment techniques described below and in Part
A to this Registration Statement. The selection of investments and the
utilization of investment techniques depend on, among other things, the
investment strategies of Domini Social Investments LLC ("DSIL"), the investment
manager and administrative services provider (the "Manager") of the Portfolio
and Mellon Equity Associates, LLP ("Mellon Equity"), the Portfolio's investment
submanager (the "Submanager"), conditions and trends in the economy and
financial markets, and investments being available on terms that, in the
Manager's or Submanager's opinion, make economic sense. The Submanager manages
the investments of the Portfolio from day to day in accordance with the
Portfolio's investment objective and policies. Kinder, Lydenberg, Domini & Co.,
Inc. ("KLD") determines the composition of the Domini 400 Social Index SM (the
"Domini Social Index"). "Domini 400," "Domini Social Index," "Domini 400 Social
Index" and "investing for good" are service marks of KLD which are licensed to
DSIL with the consent of Amy L. Domini (with regard to the word "Domini").
Pursuant to agreements among KLD, DSIL, Amy L. Domini, and the Portfolio, the
Portfolio may be required to discontinue use of one or more of these service
marks if (i) DSIL ceases to be the Manager of the Portfolio, (ii) Ms. Domini or
DSIL withdraws her or its consent to the use of the word "Domini," or (iii) the
license agreement between KLD and DSIL is terminated.
The following supplements the information concerning the Portfolio's
investment policies contained in Part A to this Registration Statement and
should only be read in conjunction therewith.
INDEX INVESTING: The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities
included in the Domini Social Index. Moreover, inclusion of a stock in the
Domini Social Index does not imply an opinion by KLD, the Manager or the
Submanager as to the merits of that specific stock as an investment. Because
the Portfolio seeks to track, rather than exceed the performance of a
particular index, investors should not expect to achieve the potentially
greater results that could be obtained by a fund that aggressively seeks
growth. However, KLD and the Manager believe that enterprises which exhibit a
social awareness, based on the criteria described in Part A to this
Registration Statement, should be better prepared to meet future societal needs
for goods and services and may also be less likely to incur certain legal
liabilities that may be incurred when a product or service is determined to be
harmful, and that such enterprises should over the longer term be able to
provide a positive return to investors.
The Portfolio intends to readjust its securities holdings periodically
such that those holdings will correspond, to the extent reasonably practicable,
to the Domini Social Index both in terms of composition and weighting. The
<PAGE>
timing and extent of adjustments in the holdings of the Portfolio, and the
extent of the correlation of the holdings of the Portfolio with the Domini
Social Index, will reflect the Submanager's judgment as to the appropriate
balance between the goal of correlating the holdings of the Portfolio with the
composition of the Domini Social Index, and the goals of minimizing transaction
costs and keeping sufficient reserves available for anticipated redemptions. To
the extent practicable, the Portfolio will seek a correlation between the
weightings of securities held by the Portfolio and the weightings of the
securities in the Domini Social Index of 0.95 or better. A figure of 1.0 would
indicate a perfect correlation. To the extent practicable, the Portfolio will
attempt to be fully invested.
The Board of Trustees will receive and review, at least quarterly, a
report prepared by the Submanager comparing the performance of the Portfolio
with that of the Domini Social Index, and comparing the composition and
weighting of the Portfolio's holdings with those of the Domini Social Index,
and will consider what action, if any, should be taken in the event of a
significant variation between the performance of the Portfolio and that of the
Domini Social Index, or between the composition and weighting of the
Portfolio's securities holdings with those of the stocks comprising the Domini
Social Index. If the correlation between the weightings of securities held by
the Portfolio and the weightings of the stocks in the Domini Social Index falls
below 0.95, the Board of Trustees will review with the Submanager methods for
increasing such correlation, such as through adjustments in securities holdings
of the Portfolio.
In selecting stocks for inclusion in the Domini Social Index, KLD
evaluated, in accordance with the social criteria described in Part A to this
Registration Statement, each of the companies the stocks of which comprise the
Standard and Poor's 500 Composite Stock Price Index (the "S&P 500"). If a
company whose stock was included in the S&P 500 met KLD's social criteria and
met KLD's further criteria for industry diversification, financial solvency,
market capitalization, and minimal portfolio turnover, it was included in the
Domini Social Index. As of July 31, 1999, of the 500 companies whose stocks
comprised the S&P 500, approximately 58% were included in the Domini Social
Index. The remaining stocks comprising the Domini Social Index (i.e., those
which are not included in the S&P 500) were selected based upon KLD's
evaluation of the social criteria described in Part A to this Registration
Statement, as well as upon KLD's criteria for industry diversification,
financial solvency, market capitalization, and minimal portfolio turnover. A
company which is not included in the S&P 500 may be included in the Domini
Social Index primarily in order to afford representation to an industry sector
which would otherwise be under-represented in the Domini Social Index. Because
of the social criteria applied in the selection of stocks comprising the Domini
Social Index, industry sector weighting in the Domini Social Index may vary
materially from the industry weightings in other stock indices, including the
S&P 500, and certain industry sectors will be excluded altogether. KLD may
exclude from the Domini Social Index stocks issued by companies which are in
bankruptcy or whose bankruptcy KLD believes may be imminent. KLD may also
remove from the Domini Social Index stocks issued by companies which no longer
meet its investment criteria.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (i.e., market price per share
times the number of shares outstanding). Because of this weighting, as of
August 31, 1999 approximately 34% and 51% of the Domini Social Index was
comprised of the 10 largest and 20 largest companies, respectively, in the
Domini Social Index.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Ratings Group ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange ("NYSE") common stock population, taken as the assumed
model for the composition of the total market. Construction of the S&P 500 by
S&P proceeds from industry groups to the whole. Since some industries are
characterized by companies of relatively small stock capitalization, the S&P
<PAGE>
500 does not comprise the 500 largest companies listed on the NYSE. Not all
stocks included in the S&P 500 are listed on the NYSE. However, the total
market value of the S&P 500 as of October 28, 1999 represented approximately
72.32% of the aggregate market value of common stocks traded on the NYSE.
Inclusion of a stock in the S&P 500 in no way implies an opinion by S&P as to
its attractiveness as an investment, nor is S&P a sponsor of or otherwise
affiliated with the Portfolio.
CONCENTRATION: It is a fundamental policy of the Portfolio that it may not
invest more than 25% of its total assets in any one industry, although the
Portfolio may and would invest more than 25% of its assets in an industry if
stocks in that industry were to comprise more than 25% of the Domini Social
Index. Based on the current composition of the Domini Social Index, this is
considered highly unlikely. If the Portfolio were to concentrate its
investments in a single industry, the Portfolio would be more susceptible to
any single economic, political or regulatory occurrence than would be another
investment company which was not so concentrated.
FOREIGN ISSUERS: Some of the stocks included in the Domini Social Index
may be stocks of foreign issuers (provided that the stocks are traded in the
United States in the form of American Depositary Receipts or similar
instruments the market for which is denominated in United States dollars).
Securities of foreign issuers may represent a greater degree of risk (i.e., as
a result of exchange rate fluctuation, tax provisions, war or expropriation)
than do securities of domestic issuers. With respect to stocks of foreign
issuers, the Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
foreign withholding taxes; however, there can be no assurance that such laws
may not become applicable to certain of the Portfolio's investments. In the
event unforeseen exchange controls or foreign withholding taxes are imposed
with respect to any of the Portfolio's investments, the effect may be to reduce
the income received by the Portfolio on such investments.
RULE 144A SECURITIES: Although the Portfolio does not have any current
intention to do so, the Portfolio may invest in securities which may be resold
pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act").
LOANS OF SECURITIES: Consistent with applicable regulatory policies,
including those of the Board of Governors of the Federal Reserve System and the
Securities and Exchange Commission, the Portfolio may make loans of its
securities to member banks of the Federal Reserve System and to broker-dealers.
The Portfolio may lend its securities to the broker-dealers and financial
institutions, provided that (1) the loan is secured continuously by collateral,
consisting of securities, cash or cash equivalents, which is marked to the
market daily to ensure that each loan is fully collateralized at all times; (2)
the Portfolio may at any time call the loan and obtain the return of the
securities loaned within three business days; (3) the Portfolio will receive
any interest or dividends paid on the securities loaned; and (4) the aggregate
market value of securities loaned will not at any time exceed 30% of the total
assets of the Portfolio.
The Portfolio will earn income for lending its securities either in the
form of fees received from the borrower of the securities or in connection with
the investment of cash collateral in short-term money market instruments. Loans
of securities involve a risk that the borrower may fail to return the
securities or may fail to provide additional collateral.
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Manager or the Submanager.
OPTION CONTRACTS: Although it has no current intention to do so, the
Portfolio may in the future enter into certain transactions in stock options
<PAGE>
for the purpose of hedging against possible increases in the value of
securities which are expected to be purchased by the Portfolio or possible
declines in the value of securities which are expected to be sold by the
Portfolio. Generally, the Portfolio would only enter into such transactions on
a short-term basis pending readjustment of its holdings of underlying stocks.
The purchase of an option on an equity security provides the holder with
the right, but not the obligation, to purchase the underlying security, in the
case of a call option, or to sell the underlying security, in the case of a put
option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire
amount of the premium, plus related transaction costs, but not more. Upon
exercise of the option, the holder is required to pay the purchase price of the
underlying security in the case of a call option, or deliver the security in
return for the purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase
or sell the instrument underlying an option, make or receive a cash settlement
or meet ongoing variation margin requirements. The inability to close out
option positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Manager
does not believe that these trading and position limits would have an adverse
impact on the possible use of hedging strategies by the Portfolio.
SHORT SALES: Although it has no current intention to do so, the Portfolio
may make short sales of securities or maintain a short position, if at all
times when a short position is open the Portfolio owns an equal amount of such
securities, or securities convertible into such securities.
CASH RESERVES: The Portfolio may invest cash reserves in short-term debt
securities (i.e., securities having a remaining maturity of one year or less)
issued by agencies or instrumentalities of the United States Government,
bankers' acceptances, commercial paper, certificates of deposit, bank deposits
or repurchase agreements, provided that the issuer satisfies certain social
criteria. The Portfolio does not currently intend to invest in direct
obligations of the United States Government. Short-term debt securities
purchased by the Portfolio will be rated at least Prime-1 by Moody's Investors
Service, Inc. or A-1+ or A-1 by S&P or, if not rated, determined to be of
comparable quality by the Portfolio's Board of Trustees. The Portfolio's policy
is to hold its assets in such securities pending readjustment of its portfolio
holdings of stocks comprising the Domini Social Index and in order to meet
anticipated requests for withdrawals. Such investments are not intended to be
used for defensive purposes in periods of anticipated market decline.
-------------------------
The approval of the investors in the Portfolio is not required to change
the investment objective or any of the non-fundamental investment policies
discussed above, including those concerning security transactions.
<PAGE>
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following policies which may not be changed
without approval by holders of a "majority of the outstanding voting
securities" of the Portfolio, which as used in this Part B means the vote of
the lesser of (i) 67% or more of the outstanding "voting securities" of the
Portfolio present at a meeting, if the holders of more than 50% of the
outstanding "voting securities" of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the outstanding "voting securities" of the
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act.
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, without payment of
<PAGE>
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 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.
In addition, as a matter of fundamental policy, the Portfolio will invest
all of its investable 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 outstanding voting securities of the Portfolio.
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 13. Management of the Portfolio.
The management and affairs of the Portfolio are supervised by its Trustees
under the laws of the State of New York.
The Trustees and officers of the Portfolio and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate that those Trustees and officers are
"interested persons" (as defined in the 1940 Act) of the Portfolio. Unless
otherwise indicated below, the address of each officer is 11 West 25th Street,
New York, New York 10010.
<PAGE>
TRUSTEES OF THE PORTFOLIO
AMY L. DOMINI* -- 230 Congress Street, Boston, Massachusetts 02110; Chair,
President and Trustee of the Portfolio, Domini Social Equity Fund and Domini
Institutional Trust; Managing Principal of DSIL; Officer of Kinder, Lydenberg,
Domini & Co., Inc.; Private Trustee, Loring, Wolcott & Coolidge; Trustee, New
England Quarterly (since 1998); Board Member, Social Investment Forum (since
1994); Trustee, Episcopal Church Pension Fund; Former Member, Governing Board,
Interfaith Center on Corporate Responsibility; Former Trustee, National
Association Community Loan Funds; Former Board Member of National Community
Capital Association (1987-1990). Her date of birth is January 15, 1950.
JULIA ELIZABETH HARRIS -- 54 Burroughs Street, Jamaica Plain, Massachusetts
02130; Vice President, UNC Partners, Inc. (since April 1990); Director and
Treasurer, Boom Times, Inc. (since May 1997); Director and Chair of Board of
Directors, The Green Book, Inc. (October 1991 - June 1996); Trustee, Domini
Social Equity Fund and Domini Institutional Trust. Her date of birth is July
11, 1948.
KIRSTEN S. MOY -- 151 North Michigan Avenue, Suite 1209, Chicago, Illinois
60601; Consultant, Project Director and Principal Researcher, Community
Development Innovation and Infrastructure Initiative (since December 1998);
CDFI Rating System Advisory Board Member, National Community Capital
Association (since 1999); Member, Community Economic Development Board of
Overseers, New Hampshire College (since November 1998); Advisory Group Member,
Shorebank Liquidity Project (since 1999); Consultant, Equitable Life Assurance
Society (since December 1998); Board Member, Free Associates Theatre Company
(since August 1999); Consultant, Social Investment Forum, Community Development
Project (June 1998-December 1998); Director, Community Development Financial
Institutions Fund, U.S. Department of the Treasury (October 1995 - October
1997); Senior Vice President and Portfolio Manager, Equitable Real Estate
Investment Management (prior to October 1995); Trustee, Domini Social Equity
Fund and Domini Institutional Trust. Her date of birth is June 30, 1947.
WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02445;
Consultant, Arete Corporation; Manager, Venture Investment Management Company
LLC (prior to 1999); Trustee, Domini Social Equity Fund and Domini
Institutional Trust; Vice President and General Manager, TravElectric Services
Corp (prior to 1995); President, Environmental Technologies (prior to 1993);
Director, Evergreen Solar, Inc; Director, Conservation Services Group;
Director, Fingerlakes Aquaculture LLC; Director, Surgical Sealants, Inc;
Director, World Power Technologies, Inc. His date of birth is July 7, 1944.
KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Associate Dean and
Professor of Business Environment, Florida International University (since
1991); Trustee, Domini Social Equity Fund and Domini Institutional Trust;
Partner, Trinity Industrial Technology (since 1997); Executive Director, Center
for Management in the Americas (since 1997). Her date of birth is September 23,
1944.
GREGORY A. RATLIFF -- 1712 Carmen Avenue, Chicago, Illinois 60640; Director,
Access to Economic Opportunity, John D. and Catherine T. MacArthur Foundation
(since 1997); Associate Director, Program-Related Investments, John D. and
Catherine T. MacArthur Foundation (1993-1997); Trustee, Domini Social Equity
Fund and Domini Institutional Trust. His date of birth is June 12, 1960.
TIMOTHY SMITH -- 475 Riverside Drive, Room 550, New York, New York 10115;
Executive Director, Interfaith Center on Corporate Responsibility (since 1971);
Trustee, Calvert New Africa Fund; Chair, Calvert Social Investment Fund
Advisory Council; Trustee, Domini Social Equity Fund and Domini Institutional
Trust. His date of birth is September 15, 1943.
<PAGE>
FREDERICK C. WILLIAMSON, SR. -- Five Roger Williams Green, Providence, Rhode
Island 02904; Treasurer and Trustee, RIGHA (charitable foundation supporting
health care needs) since 1990; Chairman, Rhode Island Historical Preservation
and Heritage Commission (since 1995); Trustee, National Parks and Conservation
Association (1986-1997); Advisor, National Parks and Conservation Association
(since 1997); Trustee of the National Park Trust (since 1991); Trustee, Domini
Social Equity Fund and Domini Institutional Trust. His date of birth is
September 20, 1915.
Each of the Trustees who are not interested persons receives an annual
retainer for serving as a Trustee of the Portfolio, the Domini Social Equity
Fund and the Domini Institutional Trust of $6,000, and in addition, receives
$1,000 for attendance at each joint meeting of the Boards of the Portfolio, the
Domini Social Equity Fund and the Domini Institutional Trust (reduced to $500
in the event that a Trustee participates at an in-person meeting by telephone).
In addition, each Trustee receives reimbursement for reasonable expenses
incurred in attending meetings. The compensation paid to the Trustees for the
fiscal year ended July 31, 1999 is set forth below. The Trustees may hold
various other directorships unrelated to the Portfolio.
<TABLE>
<CAPTION>
Total
Compensation
Pension or From The
Retirement Portfolio, The
Benefits Domini Social
Aggregate Accrued as Estimated Equity Fund and
Compensation Part of Annual Benefits The Domini
From The Fund Upon Institutional
Portfolio Expenses Retirement Trust
<S> <C> <C> <C> <C>
Amy L. Domini, None None None None
Chair, President
and Trustee
Julia Elizabeth $0 None None $1160
Harris,
Trustee
Kirsten S. Moy, $0 None None $1160
Trustee
William C. Osborn, $1000 None None $6000
Trustee
Karen Paul, $1000 None None $6000
Trustee
Gregory A. Ratliff, $0 None None $1160
Trustee
Timothy Smith, $1000 None None $6000
Trustee
<PAGE>
Frederick C. $1000 None None $6000
Williamson, Sr.,
Trustee
</TABLE>
OFFICERS
PETER D. KINDER* -- Vice President of the Portfolio, Domini Social Equity Fund
and Domini Institutional Trust; President of Kinder, Lydenberg, Domini & Co.,
Inc.; Member, Domini Social Investments LLC (since 1997). His date of birth is
September 28, 1946.
STEVEN D. LYDENBERG* -- Vice President of the Portfolio, Domini Social Equity
Fund and Domini Institutional Trust; Director of Research of Kinder, Lydenberg,
Domini & Co., Inc.; Member, Domini Social Investments LLC (since 1997). His
date of birth is October 21, 1945.
DAVID P. WIEDER* -- Vice President of the Portfolio, Domini Social Equity Fund
and Domini Institutional Trust (since 1997); Chief Executive Officer and
Managing Principal, Domini Social Investments LLC (since 1997); President of
FSSI (since 1989); Vice-President of investment companies within Fundamental
Family of Funds (1989-1997); Vice-President of Fundamental Portfolio Advisors
(1991-1997). His date of birth is January 8, 1966.
SIGWARD M. MOSER* -- Vice President of the Portfolio, Domini Social Equity Fund
and Domini Institutional Trust (since 1997); President and Managing Principal,
Domini Social Investments LLC (since 1997); President of Communications House
International, Inc.; Director of Financial Communications Society. His date of
birth is June 12, 1962.
CAROLE M. LAIBLE* -- Secretary and Treasurer of the Portfolio, Domini Social
Equity Fund and Domini Institutional Trust (since 1997); Financial Compliance
Officer of Domini Social Investments LLC (since 1997); Board of Governors,
Daytop - NJ (since 1998); Financial Compliance Officer, FSSI (1994-1997);
Financial Compliance Officer and Secretary of investment companies within
Fundamental Family of Funds (1994-1997); General Service Manager, McGladrey &
Pullen LLP (certified public accountants) (prior to 1994). Her date of birth is
October 31, 1963.
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 with litigation in which they may be involved
because of their offices with the Portfolio, unless, as to liability to the
Portfolio or its shareholders, it is finally adjudicated that the Indemnified
Parties engaged in wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to
any other matter it is finally adjudicated that the Indemnified Parties did not
act in good faith in the reasonable belief that their actions were in the best
interests of the Portfolio. In case of settlement, such indemnification will
not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such Indemnified Parties have not engaged in wilful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
Item 14. Control Persons and Principal Holders of Securities.
As of November 22, 1999, all Trustees and officers of the Portfolio as a
group owned less than 1% of the Portfolio's outstanding shares. As of the same
date, the following shareholders of record owned 5% or more of the outstanding
<PAGE>
shares of the Portfolio: Domini Social Equity Fund 80.4% and Domini
Institutional Social Equity Fund 16.7%. The Portfolio has no knowledge of any
other owners of record or beneficial owners of 5% or more of the outstanding
shares of the Portfolio. Shareholders owning 25% or more of the outstanding
shares of the Portfolio may take actions without the approval of any other
investor in the Portfolio.
The address of each of Domini Social Equity Fund and Domini Institutional
Social Equity Fund is 11 West 25th Street, 7th Floor, New York, NY 10010.
Item 15. Investment Advisory and Other Services.
MANAGER AND SUBMANAGER
DSIL provides advice to the Portfolio pursuant to a Management Agreement
(the "Management Agreement"). The services provided by the Manager consist of
furnishing continuously an investment program for the Portfolio. DSIL will have
authority to determine from time to time what securities are purchased, sold or
exchanged, and what portion of assets of the Portfolio is held uninvested. DSIL
will also perform such administrative and management tasks as may from time to
time be reasonably requested, including: (i) maintaining office facilities and
furnishing clerical services necessary for maintaining the organization of the
Portfolio and for performing administrative and management functions; (ii)
supervising the overall administration of the Portfolio, including negotiation
of contracts and fees with and monitoring of performance and billings of the
Portfolio's transfer agent, shareholder servicing agents, custodian and other
independent contractors or agents; (iii) overseeing (with the advice of
Portfolio's counsel) the preparation of and, if applicable, filing all
documents required for compliance by the Portfolio with applicable laws and
regulations, including registration statements, prospectuses and statements of
additional information, semi-annual and annual reports to shareholders, proxy
statements and tax returns; (iv) preparing agendas and supporting documents for
and minutes of meetings of Trustees, committees of Trustees and shareholders;
and (v) arranging for maintenance of the books and records of the Portfolio.
The Manager furnishes at its own expense all facilities and personnel necessary
in connection with providing these services. The Management Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Portfolio's Board of Trustees or by a majority of the
outstanding voting securities of the Portfolio at a meeting called for the
purpose of voting on the Management Agreement (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Management Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Management Agreement.
The Management Agreement provides that the Manager may render services to
others. DSIL may employ, at its own expense, or may request that the Portfolio
employ (subject to the requirements of the 1940 Act) one or more subadvisers or
submanagers, subject to DSIL's supervision. The Management Agreement is
terminable without penalty on not more than 60 days' nor less than 30 days'
written notice by the Portfolio when authorized either by majority vote of the
outstanding voting securities in the Portfolio (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment) or by a
vote of a majority of its Board of Trustees, or by the Manager, and will
automatically terminate in the event of its assignment. The Management
Agreement provides that neither the Manager nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for wilful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Management Agreement.
Under the Management Agreement between the Portfolio and DSIL, DSIL's fee
for advisory and administrative services to the Portfolio is 0.20% of the
average daily net assets of the Portfolio.
<PAGE>
DSIL is a Massachusetts limited liability company with offices at 11 West
25th Street, 7th Floor, New York, New York 10010, and is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act"). The names of the principal owners of DSIL and their relationship to the
Portfolio follows: Amy L. Domini, Chair of the Board and President of the
Portfolio, is the Manager and principal executive officer and a co-owner of
DSIL. Ms. Domini is also Chief Executive Officer, Secretary, Treasurer and
co-owner of KLD which licenses the Domini Social Index to DSIL. Peter D.
Kinder, Vice President of the Portfolio, is a co-owner of DSIL. Mr. Kinder is
also President and a co-owner of KLD. Sigward M. Moser, Vice President of the
Portfolio, is a co-owner of DSIL. David P. Wieder, Vice President of the
Portfolio is a co-owner of DSIL.
Mellon Equity manages the assets of the Portfolio pursuant to an
Investment Submanagement Agreement (the "Submanagement Agreement"). The
Submanager furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio. The Submanagement Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Portfolio's Board of Trustees or by a majority vote of the
outstanding voting securities in the Portfolio at a meeting called for the
purpose of voting on the Submanagement Agreement (with the vote of each being
in proportion to the amount of its investment), and, in either case, by a
majority of the Portfolio's Trustees who are not parties to the Submanagement
Agreement or interested persons of any such party at a meeting called for the
purpose of voting on the Submanagement Agreement.
The Submanagement Agreement provides that the Submanager may render
services to others. The Submanagement Agreement is terminable without penalty
upon not more than 60 days' nor less than 30 days' written notice by the
Portfolio when authorized either by majority vote of the outstanding voting
securities in the Portfolio (with the vote of each being in proportion to the
amount of their investment) or by a vote of the majority of its Board of
Trustees, or by the Manager with the consent of the Trustees and may be
terminated by the Submanager on not less than 90 days' written notice to the
Manager and the Trustees, and will automatically terminate in the event of its
assignment. The Submanagement Agreement provides that the Submanager shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in its services to the
Portfolio, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard for its or their obligations and duties under the
Submanagement Agreement.
Under the Submanagement Agreement, DSIL pays Mellon Equity an investment
submanagement fee equal on an annual basis to 0.07% of the average daily net
assets of the Portfolio.
Effective January 1, 1998, Mellon Equity Associates was reorganized as a
Pennsylvania limited liability partnership. Pursuant to an Agreement and Plan
of Merger dated December 29, 1997, (the "Merger Agreement"), Mellon Equity
Associates was merged into Mellon Equity Associates, LLP, a newly-formed
Pennsylvania limited liability partnership, with Mellon Equity Associates, LLP
being the surviving entity. Mellon Bank, N.A. ("Mellon Bank") is the 99%
limited partner and MMIP, Inc. is the 1% general partner of Mellon Equity
Associates, LLP. In accordance with the provisions of the Merger Agreement, all
property, rights, privileges, franchises, patents, trademarks, licenses,
registrations, and other assets and interests of Mellon Equity Associates
vested in Mellon Equity Associates, LLP. By operation of law, the obligations
and liabilities of Mellon Equity Associates were assumed by Mellon Equity
Associates, LLP. Mellon Equity is a professional investment counseling firm
<PAGE>
that provides investment management services to the equity and balanced
pension, public fund, and profit-sharing investment management markets, and is
a registered investment adviser under the Advisers Act. Mellon Bank's
predecessor organization managed domestic equity, tax-exempt and institutional
pension accounts since 1947. The address of Mellon Equity and each of the
principal executive officers and directors of Mellon Equity is 500 Grant
Street, Suite 4200, Pittsburgh, Pennsylvania 15258.
Prior to October 22, 1997, pursuant to an investment advisory agreement
(the "KLD Advisory Agreement"), KLD served as investment adviser to the
Portfolio and furnished continuously an investment program by determining the
stocks to be included in the Domini Social Index. Additionally, prior to
October 22, 1997, pursuant to a management agreement (the "Mellon Equity
Management Agreement"), Mellon Equity served as investment manager and managed
the assets of the Portfolio on a daily basis. Prior to October 22, 1997, the
Portfolio paid Mellon Equity an investment management fee equal on an annual
basis to 0.10% of the average daily net assets of the Portfolio. Prior to
October 22, 1997, pursuant to a sponsorship agreement (the "KLD Sponsorship
Agreement"), KLD furnished administrative services for the Portfolio. Prior to
October 22, 1997, pursuant to an administrative services agreement (the
"Signature Administration Agreement"), Signature Broker-Dealer Services, Inc.
served as the administrator of the Portfolio. Prior to October 22, 1997, the
aggregate investment management and administration fees under the prior
agreements with respect to the Portfolio were equal to 0.15% of the Portfolio's
average daily net assets for its then current fiscal year.
For the fiscal year end July 31, 1999, the Portfolio incurred
approximately $1,791,617 in management fees pursuant to the Management
Agreement. For the fiscal year end July 31, 1998, the Portfolio incurred
approximately $701,774 in management fees pursuant to the Management Agreement,
$17,385 in advisory fees pursuant to the KLD Advisory Agreement, $17,385 in
aggregate administration fees pursuant to the Signature Administration
Agreement and $86,354 in management fees pursuant to the Mellon Equity
Management Agreement. For the fiscal year ended July 31, 1997, the Portfolio
incurred $46,528 in advisory fees pursuant to the KLD Advisory Agreement,
$46,528 in administration fees pursuant to the KLD Sponsorship Agreement,
$156,868 in aggregate administration fees pursuant to the Signature
Administration Agreement, and $182,885 in management fees pursuant to the
Mellon Equity Management Agreement.
TRANSFER AGENT AND CUSTODIAN
The Portfolio has entered into a Transfer Agency Agreement with Investors
Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116, pursuant
to which IBT acts as transfer agent for the Portfolio. The Portfolio also has
entered into a Custodian Agreement with IBT pursuant to which IBT acts as
custodian for the Portfolio. The Custodian's responsibilities include
safeguarding and controlling the Portfolio's 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.
INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, MA 02110, 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.
EXPENSES
The Portfolio is responsible for all of its expenses, including the
compensation of its Trustees who are not interested persons of the Portfolio;
<PAGE>
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Portfolio; fees and expenses of independent
auditors, of legal counsel and of any transfer agent, custodian, registrar or
dividend disbursing agent of the Portfolio; insurance premiums; 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.
Item 16. Brokerage Allocation and Other Practices.
Specific decisions to purchase or sell securities for the Portfolio are
made by portfolio managers who are employees of the Submanager and who are
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio managers of
the Portfolio may serve other clients of the Submanager in a similar capacity.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Submanager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Submanager on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Submanager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Submanager on the tender of
the Portfolio's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Portfolio by the
Submanager. At present no other recapture arrangements are in effect.
Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. and such other policies as the
Trustees of the Portfolio may determine, the Submanager may consider sales of
securities of investors in the Portfolio as a factor in the selection of
broker-dealers to execute the Portfolio's securities transactions. The
Portfolio will not engage in brokerage transactions with the Manager or the
Submanager or any of their respective affiliates or any affiliate of the
Portfolio.
Under the Submanagement Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Submanager may cause the Portfolio to pay
a broker-dealer acting on an agency basis which provides brokerage and research
services to the Submanager or the Manager an amount of commission for effecting
a securities transaction for the Portfolio in excess of the amount other
broker-dealers would have charged for the transaction if the Submanager
determines in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or the
Submanager's or the Manager's overall responsibilities to the Portfolio or to
its other clients. Not all of such services are useful or of value in advising
the Portfolio.
The term "brokerage and research services" includes advice as to the value
of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
<PAGE>
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Submanager and the Manager currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will, in the judgment of
the Submanager, be reasonable in relation to the value of the brokerage
services provided, commissions exceeding those which another broker might
charge may be paid to broker-dealers who were selected to execute transactions
on behalf of the Portfolio and the Submanager's or the Manager's other clients,
in part for providing advice as to the availability of securities or of
purchasers or sellers of securities and services in effecting securities
transactions and performing functions incidental thereto such as clearance and
settlement. Certain broker-dealers may be willing to furnish statistical,
research and other factual information or services to the Submanager or the
Manager for no consideration other than brokerage or underwriting commissions.
The Submanager and the Manager attempt to evaluate the quality of research
provided by brokers. The Submanager and the Manager sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the Submanager nor the Manager
is able to quantify the amount of commissions which are paid as a result of
such research because a substantial number of transactions are effected through
brokers which provide research but which are selected principally because of
their execution capabilities.
The fees that the Portfolio pays to the Submanager and the Manager will
not be reduced as a consequence of the Portfolio's receipt of brokerage and
research services. To the extent the Portfolio's securities transactions are
used to obtain brokerage and research services, the brokerage commissions paid
by the Portfolio will exceed those that might otherwise be paid for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services may be useful and of value to the Submanager or the
Manager in serving both the Portfolio and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients may
be useful to the Submanager or the Manager in carrying out its obligations to
the Portfolio. While such services are not expected to reduce the expenses of
the Submanager or the Manager, the Submanager or the Manager would, through use
of the services, avoid the additional expenses which would be incurred if it
should attempt to develop comparable information through its own staff. For the
fiscal years ended July 31, 1997, 1998 and 1999, the Portfolio paid brokerage
commissions of $101,639, $175,344, and $327,338, respectively.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Submanager's or the Manager's other
clients. Investment decisions for the Portfolio and for the Submanager's or the
Manager's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold
for, other clients. Likewise, a particular security may be bought for one or
more clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed to be equitable to each. It is recognized that in some cases this
system could have a detrimental effect on the price or volume of the security
as far as the Portfolio is concerned. However, it is believed that the ability
of the Portfolio to participate in volume transactions will produce better
executions for the Portfolio.
<PAGE>
Item 17. 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.
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 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.
Item 18. Purchase, Redemption and Pricing of Securities.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act. Investments in the Portfolio may
only be made by investment companies, common or commingled trust funds or
similar organizations or entities which are "accredited investors" within the
meaning of Regulation D under the Securities 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 Securities Act.
<PAGE>
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 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.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Portfolio Business Day. 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
<PAGE>
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 19. Taxation of the Portfolio.
The Portfolio is organized as a trust under New York law. As such, the
Portfolio expects it will be eligible to elect to be treated as a partnership
for federal income tax purposes with the result that it 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, credits
and tax preference items in determining its income tax liability without regard
to whether it has received any cash distributions from the Portfolio.
The Portfolio's taxable year-end is currently July 31. Although the
Portfolio will not be subject to federal income tax, it will file a federal
information income tax return upon which it will report its income, gain, loss,
deductions and credits for its taxable year.
It is intended that the Portfolio's assets, income and distributions will
be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended, assuming that the investor invested all of its assets in the
Portfolio. Generally, the Portfolio believes that for purposes of determining
whether such 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.
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.
The Portfolio is not subject to any income or franchise tax in the State
of New York or the Commonwealth of Massachusetts.
Item 20. Underwriters.
The exclusive placement agent for the Portfolio is DSIL Investment
Services LLC. Other investment companies, insurance company separate accounts,
common and commingled trust funds and similar organizations and entities may
continuously invest in the Portfolio.
Item 21. Calculation of Performance Data.
Not applicable.
Item 22. Financial Statements.
The audited financial statements of the Portfolio (Portfolio of
Investments, Statement of Assets and Liabilities at July 31, 1999, Statement of
Operations for the year ended July 31, 1999, Statement of Changes in Net Assets
<PAGE>
for each of the years in the two-year period ended July 31, 1999, Financial
Highlights for each of the years in the five-year period ended July 31, 1999,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the Portfolio's Annual Report which has been filed with the
Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act
and Rule 30b2-1 thereunder, are hereby incorporated by reference into Part B of
this Registration Statement and have been so incorporated in reliance upon the
reports of KPMG LLP, independent auditors, on behalf of the Portfolio.
<PAGE>
PART C
Item 23. Exhibits
* a(1)Amended and Restated Declaration of Trust of the Registrant.
** a(2)Certificate and Amendment to Declaration of Trust of the Registrant.
** b By-Laws of the Registrant, as amended.
** d(1)Management Agreement between the Registrant and Domini Social
Investments LLC ("DSIL").
d(2)Form of Amended and Restated Submanagement Agreement between DSIL and
Mellon Equity Associates, LLP.
e Placement Agency Agreement with DSIL Investment Services LLC, as
placement agent.
** g Custodian Agreement between the Registrant and Investors Bank &
Trust Company, as custodian and transfer agent.
- -----------------------
* Incorporated by reference from Amendment No. 6 to the Registrant's
Registration Statement as filed with the SEC on November 28, 1995.
** Incorporated by reference from Amendment No. 8 to the Registrant's
Registration Statement as filed with the SEC on October 22, 1997.
Item 24. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 25. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as an exhibit to Amendment No. 6 to the Registrant's Registration
Statement.
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,
as amended (the "1940 Act").
Item 26. Business and Other Connections of Investment Adviser
Domini Social Investments LLC ("DSIL") is a Massachusetts limited
liability company with offices at 11 West 25th Street, 7th Floor, New York, New
York 10010, and is registered as an investment adviser under the Investment
Advisers Act of 1940. The owners of DSIL are James Earl Brooks, Amy Lee Domini,
Peter D. Kinder, Steven D. Lydenberg, Sigward Moser and David P. Wieder.
<TABLE>
<CAPTION>
Principal Employment during the
Name Business Address Past Two Fiscal Years
<S> <C> <C>
James E. Brooks Four Arlington Street President, Equity Resources Group, Inc. (real
Cambridge, MA estate investment)
02140
<PAGE>
Amy L. Domini 230 Congress Street CEO, Secretary and Treasurer, Kinder,
Cambridge, MA Lydenberg, Domini & Co., Inc. ("KLD")
02110 (investment adviser); Trustee, Loring, Wolcott &
Coolidge (fiduciary)
Peter D. Kinder 11 West 25th Street President, KLD
New York, NY 10010
Steven D. Lydenberg 11 West 25th Street Director of Research, KLD
New York, NY 10010
Sigward Moser 11 West 25th Street President and Director, Communication House
New York, NY 10010 International, Inc. (advertising agency)
David P. Wieder 11 West 25th Street President, Director, Equity Owner and Chairman,
New York, NY 10010 Fundamental Shareholder Services, Inc.;
Secretary, Fundamental Portfolio Advisors
(investment adviser); Registered Representative,
Fundamental Service Corp. (broker-dealer)
</TABLE>
Item 27. Principal Underwriters
(a) DSIL Investment Services LLC is the placement agent for the
Registrant. DSIL Investment Services LLC serves as the
distributor or placement agent for the following other
registered investment companies: Domini Social Equity Fund and
Domini Institutional Social Equity Fund.
(b) The information required by this Item 27 with respect to each
director or officer of DSIL Investment Services LLC is
incorporated herein by reference from Schedule A of Form BD
(File No. 008-44763) as filed by DSIL Investment Services LLC
pursuant to the Securities Exchange Act of 1934.
(c) Not applicable.
Item 28. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the offices of the Registrant and at the following locations:
Name: Address:
Domini Social Investments LLC 11 W. 25th Street (manager)
New York, NY 10010
Mellon Equity Associates, LLP 500 Grant St., Suite 4200 (submanager)
Pittsburgh, PA 15258-0001
DSIL Investment Services LLC 11 W. 25th Street (placement agent)
New York, NY 10010
Investors Bank & Trust Company 200 Clarendon Street (custodian and
transfer agent)
Boston, MA 02116
<PAGE>
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<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 29th day of
November, 1999.
DOMINI SOCIAL INDEX PORTFOLIO
By: Amy L. Domini
---------------------------------
Amy L. Domini, President
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
d(2) Form of Amended and Restated Submanagement Agreement between
DSIL and Mellon Equity Associates, LLP.
e Placement Agency Agreement with DSIL Investment Services
LLC, as placement agent.
Exhibit d(2)
FORM OF AMENDED AND RESTATED
SUBMANAGEMENT AGREEMENT
AMENDED AND RESTATED SUBMANAGEMENT AGREEMENT, dated as of October 22, 1997
and amended and restated as of November 15, 1999, by and between Domini Social
Investments LLC, a Massachusetts limited liability company ("DSI" or the
"Manager"), and Mellon Equity Associates, LLP, a Pennsylvania limited liability
partnership ("Mellon" or the "Submanager").
WITNESSETH:
WHEREAS, the Domini Social Index Portfolio (the "Portfolio") engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (collectively with the
rules and regulations promulgated thereunder, the "1940 Act"); and
WHEREAS, DSI has entered into a Management Agreement (the "Management
Agreement") with the Portfolio wherein DSI has agreed to serve as Manager to
the Portfolio;
WHEREAS, as permitted by Section 1(A) of the Management Agreement, DSI has
subcontracted some of the performance of its obligations thereunder to Mellon,
and Mellon accepted such obligations, on the terms and conditions hereinafter
set forth in that certain Submanagement Agreement dated as of October 22, 1997
(the "Original Submanagement Agreement"); and
WHEREAS, DSI and Mellon wish to amend and restate the Original
Submanagement Agreement in its entirety in order to reduce the amount of
compensation payable by DSI to Mellon thereunder from and after the effective
date hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the Original Submanagement Agreement is
hereby amended and restated in its entirety as follows:
1. APPOINTMENT OF MELLON.
In accordance with and subject to the Management Agreement between the
Portfolio and the Manager, the Manager hereby retains Mellon to act as the
Submanager for the Portfolio for the period and on the terms set forth in this
Agreement. The Submanager accepts such appointment and agrees to provide an
investment program for the Portfolio for the compensation provided by this
Agreement.
2. DUTIES OF THE SUBMANAGER.
The Submanager shall provide the Portfolio and the Manager with such
investment advice and supervision as the Manager may from time to time consider
necessary for the proper supervision of such portion of the Portfolio's
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investment assets as the Manager may designate from time to time.
Notwithstanding any provision of this Agreement, the Manager shall retain all
rights and ultimate responsibilities to supervise and, in its discretion,
conduct investment activities relating to the Portfolio.
The Submanager shall furnish continuously an investment program and shall
determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Portfolio allocated by the
Manager to the Submanager shall be held uninvested, subject always to the
restrictions of the Portfolio's Declaration of Trust, dated June 7, 1989, and
By-laws, as each may be amended from time to time (respectively, the
"Declaration" and the "By-Laws"), the provisions of the 1940 Act, and the
then-current registration statement of the Portfolio and, subject further, to
the Submanager notifying the Manager in advance of the Submanager's intention
to purchase any securities except insofar as the requirement for such
notification may be waived or limited by the Manager, it being understood that
the Submanager shall be responsible for compliance with any restrictions
imposed in writing by the Manager from time to time in order to facilitate
compliance with the above-mentioned restrictions and such other restrictions as
the Manager may determine. Further, the Manager or the Trustees of the
Portfolio may at any time, upon written notice to the Submanager, suspend or
restrict the right of the Submanager to determine what securities shall be
purchased or sold on behalf of the Portfolio and what portion, if any, of the
assets of the Portfolio allocated by the Manager to the Submanager shall be
held uninvested. The Submanager shall also, as requested, make recommendations
to the Manager as to the manner in which proxies, voting rights, rights to
consent to corporate action and any other rights pertaining to the Portfolio's
portfolio securities shall be exercised. Should the Board of Trustees of the
Portfolio or the Manager at any time, however, make any definite determination
as to an investment policy applicable to the Portfolio and notify the
Submanager thereof in writing, the Submanager shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked.
The Submanager shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above and, in particular, to place all orders for the purchase or sale of
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end the Submanager is authorized as the agent of the Portfolio
to give instructions to the custodian or any subcustodian of the Portfolio as
to deliveries of securities and payments of cash for the account of the
Portfolio. The Submanager will advise the Manager on the same day it gives any
such instructions. In connection with the selection of such brokers or dealers
and the placing of such orders, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Submanager, the Manager or a respective "affiliated
person" thereof exercises investment discretion. The Submanager is authorized
to pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if the Submanager determines in good faith that
such amount of commission is reasonable in relation to the value of the
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brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which the Submanager, the Manager and any
"affiliated person" thereof have with respect to accounts over which they
exercise investment discretion. In making purchases or sales of securities or
other property for the account of the Portfolio, the Submanager may deal with
itself or with the Trustees of the Portfolio or the Portfolio's underwriter or
distributor to the extent such actions are permitted by the 1940 Act. The Board
of Trustees of the Portfolio, in its discretion, may instruct the Submanager to
effect all or a portion of its securities transactions with one or more brokers
and/or dealers selected by the Board of Trustees if it determines that the use
of such brokers and/or dealers is in the best interest of the Portfolio.
3. ALLOCATION OF CHARGES AND EXPENSES.
The Submanager shall furnish at its own expense all necessary services,
facilities and personnel in connection with its responsibilities under Section
2 above. Except as provided in the foregoing sentence, it is understood that
the Portfolio will pay all of its own expenses including, without limitation,
organization costs of the Portfolio; compensation of Trustees who are not
"interested persons" of the Portfolio; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Portfolio; fees and expenses of independent auditors, legal counsel and
any transfer agent, distributor, registrar or dividend disbursing agent of the
Portfolio; expenses relating to the issuance and redemption of beneficial
interests in the Portfolio and servicing investor accounts; expenses of
preparing, typesetting, printing and mailing investor reports, notices, proxy
statements and reports to governmental officers and commissions and to
investors in the Portfolio; expenses connected with the execution, recording
and settlement of security transactions; insurance premiums; fees and expenses
of the custodian for all services to the Portfolio, including safekeeping of
funds and securities and maintaining required books and accounts; expenses of
calculating the net asset value of the Portfolio (including but not limited to
the fees of independent pricing services); expenses of meetings of the
Portfolio's investors; and such non-recurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings to which the
Portfolio may be a party and the legal obligation which the Portfolio may have
to indemnify its Trustees and officers with respect thereto.
4. COMPENSATION OF THE SUBMANAGER.
For the services to be rendered by the Submanager hereunder, the Manager
shall pay to the Submanager a fee computed and paid monthly at an annual rate
equal to 0.07% of the Portfolio's average daily net assets for its then-current
fiscal year. (For the period from October 22, 1997 to October 22, 1999, the fee
was computed and paid monthly at an annual rate equal to 0.10% of the
Portfolio's average daily net assets for its then-current fiscal year.) If
Mellon serves as Submanager for less than the whole of any period specified in
this Section 4, the compensation to Mellon, as Submanager, shall be prorated.
5. COVENANTS OF THE SUBMANAGER.
The Submanager agrees that it will not deal with itself, or with the
Trustees of the Portfolio or the Portfolio's principal underwriter or
distributor, if any, as principals in making purchases or sales of securities
or other property, except as permitted by the 1940 Act, will not take a long or
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short position in beneficial interests of the Portfolio, except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current registration statement of the Portfolio
relative to the Submanager and its directors and officers.
6. LIMITATION OF LIABILITY OF THE SUBMANAGER.
The Submanager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution of securities transactions for the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As
used in this Section 6, the term "Submanager" shall include directors, officers
and employees of the Submanager as well as the Submanager itself. The Portfolio
is expressly made a third party beneficiary of this Agreement and may enforce
any obligations of the Submanager under this Agreement and recover directly
from the Submanager for any liability the Submanager may have hereunder.
7. ACTIVITIES OF THE SUBMANAGER.
The services of the Submanager to the Portfolio are not to be deemed to be
exclusive, the Submanager being free to render investment advisory,
administrative and/or other services to others. It is understood that Trustees,
officers and investors of the Portfolio or the Manager are or may be or may
become interested in the Submanager as directors, officers, employees or
otherwise and that directors, officers and employees of the Submanager are or
may become similarly interested in the Portfolio or the Manager and that the
Submanager may be or may become interested in the Portfolio as an investor or
otherwise.
8. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT.
This Agreement shall become effective as of October 22, 1997, shall govern
the relations between the parties hereto thereafter and shall remain in force
until October 22, 1999, on which date it will terminate unless its continuance
after October 22, 1999 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Portfolio who are not "interested
persons" of the Portfolio or of DSI or the Submanager at a meeting specifically
called for the purpose of voting on such approval and (b) by the Board of
Trustees of the Portfolio or by "vote of a majority of the outstanding voting
securities" of the Portfolio. The parties acknowledge that the continuance of
this Agreement through and including April 30, 2000 was approved by the vote of
a majority of the Trustees of the Portfolio who are not "interested persons" of
the Portfolio or of DSI or the Submanager at a meeting specifically called for
the purpose of voting on such approval.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees of the Portfolio, (ii) the "vote of a majority of
the outstanding voting securities" of the Portfolio or (iii) DSI with the prior
consent of the Trustees of the Portfolio, in each case on not more than 60
days' nor less than 30 days' written notice to the other party. This Agreement
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may be terminated at any time without the payment of any penalty by the
Submanager on not less than 90 days' written notice to the Manager and the
Trustees of the Portfolio.
This Agreement shall automatically terminate in the event of its
"assignment." This Agreement constitutes the entire agreement between the
parties and may be amended only if such amendment is approved by the parties
hereto, the Trustees of the Portfolio and the "vote of a majority of the
outstanding voting securities" of the Portfolio (except for any such amendment
as may be effected in the absence of such vote without violating the 1940 Act
or any exemptive order granted thereunder).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person" and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under the Act.
So long as the Submanager is organized as a limited liability partnership,
the Submanager agrees it will notify the Manager of any change in its ownership
within a reasonable period after such change.
9. GOVERNING LAW.
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts;
provided, however, that nothing herein will be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or any
rules or regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
MELLON EQUITY ASSOCIATES, LLP
By: ___________________________
Title:
DOMINI SOCIAL INVESTMENTS LLC
By: ___________________________
Title:
Exhibit e
PLACEMENT AGENT AGREEMENT
August 15, 1999
DSIL Investment Services LLC
11 West 25th Street, 7th Floor
New York, New York 10010-2001
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Domini Social Index Portfolio (the "Portfolio"), an
open-end diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), organized as a New
York trust, has agreed that DSIL Investment Services LLC, a subsidiary of
Domini Social Investments LLC, shall be the placement agent of beneficial
interests of the Portfolio ("Portfolio Interests").
1. Services as Placement Agent.
1.1 The Placement Agent will act as placement agent of the Portfolio
Interests. In acting as placement agent under this Placement Agent Agreement,
neither the Placement Agent nor its employees or any agents thereof shall make
any offer or sale of Portfolio Interests in a manner which would require the
Interests to be registered under the Securities Act of 1933, as amended (the
"1933 Act").
1.2 All activities by the Placement Agent and its agents and employees as
placement agent of Portfolio Interests shall comply with all applicable laws,
rules and regulations, including, without limitation, all rules and regulations
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission").
1.3 Nothing herein shall be construed to require the Portfolio to accept
any offer to purchase any Portfolio Interests, all of which shall be subject to
approval by the Portfolio's Board of Trustees.
1.4 The Portfolio shall furnish from time to time for use in connection
with the sale of Portfolio Interests such information with respect to the
Portfolio and Portfolio Interests as the Placement Agent may reasonably
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request. The Portfolio shall also furnish the Placement Agent upon request
with: (a) unaudited semiannual statements of the Portfolio's books and accounts
prepared by the Portfolio, and (b) from time to time such additional
information regarding the Portfolio's financial or regulatory condition as the
Placement Agent may reasonably request.
1.5 The Portfolio represents to the Placement Agent that all registration
statements filed by the Portfolio with the Commission under the 1940 Act with
respect to Portfolio Interests have been prepared in conformity with the
requirements of such statute and the rules and regulations of the Commission
thereunder. As used in this Agreement the term "registration statement" shall
mean any registration statement filed with the Commission, as modified by any
amendments thereto that at any time shall have been filed with the Commission
by or on behalf of the Portfolio. The Portfolio represents and warrants to the
Placement Agent that any registration statement will contain all statements
required to be stated therein in conformity with both such statute and the
rules and regulations of the Commission; that all statements of fact contained
in any registration statement will be true and correct in all material respects
at the time of filing of such registration statement or amendment thereto; and
that no registration statement will include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of
Portfolio Interests. The Portfolio may but shall not be obligated to propose
from time to time such amendment to any registration statement as in the light
of future developments may, in the opinion of the Portfolio's counsel, be
necessary or advisable. If the Portfolio shall not propose such amendment
and/or supplement within fifteen days after receipt by the Portfolio of a
written request from the Placement Agent to do so, the Placement Agent may, at
its option, terminate this Agreement. The Portfolio shall not file any
amendment to any registration statement without giving the Placement Agent
reasonable notice thereof in advance; provided, however, that nothing contained
in this Agreement shall in any way limit the Portfolio's right to file at any
time such amendment to any registration statement as the Portfolio may deem
advisable, such right being in all respects absolute and unconditional.
1.6 The Portfolio agrees to indemnify, defend and hold the Placement
Agent, its several officers and directors, and any person who controls the
Placement Agent within the meaning of Section 15 of the 1933 Act or Section 20
of the Securities and Exchange Act of 1934 (the "1934 Act") (for purposes of
this paragraph 1.6, collectively, "Covered Persons") free and harmless from and
<PAGE>
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Covered Person may
incur under the 1933 Act, the 1934 Act, common law or otherwise, arising out of
or based on any untrue statement of a material fact contained in any
registration statement, private placement memorandum or other offering material
("Offering Material") relating to the Portfolio or the Portfolio Interests or
arising out of or based on any omission to state a material fact required to be
stated in any Offering Material or necessary to make the statements in any
Offering Material not misleading; provided, however, that the Portfolio's
agreement to indemnify Covered Persons shall not be deemed to cover any claims,
demands, liabilities or expenses arising out of any financial and other
statements as are furnished in writing to the Portfolio by the Placement Agent
in its capacity as Placement Agent for use in the answers to any items of any
registration statement or any statements made in any other Offering Material,
or arising out of or based on any omission or alleged omission to state a
material fact in connection with the giving of such information required to be
stated in such answers or necessary to make the answers not misleading; and
further provided that the Portfolio's agreement to indemnify the Placement
Agent and the Portfolio's representations and warranties hereinbefore set forth
in paragraph 1.5 shall not be deemed to cover any liability to the Portfolio or
its investors to which a Covered Person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of a Covered Person's reckless disregard of its
obligations and duties under this Agreement. The Portfolio shall be notified of
any action brought against a Covered Person, such notification to be given by
letter or by telegram addressed to the Portfolio, c/o Roger P. Joseph, Esq.,
Bingham Dana LLP, 150 Federal Street, 25th Floor, Boston, Massachusetts 02110,
promptly after the summons or other first legal process shall have been duly
and completely served upon such Covered Person. The failure to so notify the
Portfolio of any such action shall not relieve the Portfolio from any liability
except to the extent the Portfolio shall have been prejudiced by such failure,
or from any liability that the Portfolio may have to the Covered Person against
whom such action is brought by reason of any such untrue statement or omission,
otherwise than on account of the Portfolio's indemnity agreement contained in
this paragraph. The Portfolio will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but in such case
such defense shall be conducted by counsel of good standing chosen by the
Portfolio and approved by the Placement Agent, which approval shall not be
unreasonably withheld. In the event the Portfolio elects to assume the defense
<PAGE>
of any such suit and retain counsel of good standing approved by the Placement
Agent, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Portfolio does not elect to assume the defense of any such suit, or in case the
Placement Agent reasonably does not approve of counsel chosen by the Portfolio,
the Portfolio will reimburse the Covered Person named as defendant in such
suit, for the fees and expenses of any counsel retained by the Placement Agent
or the Covered Persons. The Portfolio's indemnification agreement contained in
this paragraph and the Portfolio's representations and warranties in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of Covered Persons, and shall survive the
delivery of any Portfolio Interests. This agreement of indemnity will inure
exclusively to Covered Persons and their successors. The Portfolio agrees to
notify the Placement Agent promptly of the commencement of any litigation or
proceedings against the Portfolio or any of its officers or Trustees in
connection with the issue and sale of any Portfolio Interests.
1.7 The Placement Agent agrees to indemnify, defend and hold the
Portfolio, its several officers and trustees, and any person who controls the
Portfolio within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act (for purposes of this paragraph 1.7, collectively, "Covered Persons")
free and harmless from and against any and all claims, demands, liabilities and
expenses (including the costs of investigating or defending such claims,
demands, liabilities and any counsel fees incurred in connection therewith)
that Covered Persons may incur under the 1933 Act, the 1934 Act, common law or
otherwise, but only to the extent that such liability or expense incurred by a
Covered Person resulting from such claims or demands shall arise out of or be
based on any untrue statement of a material fact contained in information
furnished in writing by the Placement Agent in its capacity as Placement Agent
to the Portfolio for use in the answers to any of the items of any registration
statement or in any statements in any other Offering Material relating to the
Portfolio or the Portfolio Interests or shall arise out of or be based on any
omission to state a material fact in connection with such information furnished
in writing by the Placement Agent to the Portfolio required to be stated in
such answers or necessary to make such information not misleading. The
Placement Agent shall be notified of any action brought against a Covered
Person, such notification to be given by letter or telegram addressed to the
Placement Agent at 11 West 25th Street, New York, New York 10010-2001,
Attention: David P. Wieder, promptly after the summons or other first legal
process shall have been duly and completely served upon such Covered Person.
The Placement Agent shall have the right of first control of the defense of the
action with counsel of its own choosing satisfactory to the Portfolio if such
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action is based solely on such alleged misstatement or omission on the
Placement Agent's part, and in any other event each Covered Person shall have
the right to participate in the defense or preparation of the defense of any
such action. The failure to so notify the Placement Agent of any such action
shall not relieve the Placement Agent from any liability except to the extent
the Placement Agent shall have been prejudiced by such failure, or from any
liability that the Placement Agent may have to Covered Persons by reason of any
such untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of the Placement Agent's indemnity agreement
contained in this paragraph.
1.8 No Portfolio Interests shall be offered by either the Placement Agent
or the Portfolio under any of the provisions of this Agreement and no orders
for the purchase or sale of Portfolio Interests hereunder shall be accepted by
the Portfolio if and so long as the effectiveness of the registration statement
or any necessary amendments thereto shall be suspended under any of the
provisions of the 1940 Act; provided, however, that nothing contained in this
paragraph shall in any way restrict or have an application to or bearing on the
Portfolio's obligation to redeem Portfolio Interests from any investor in
accordance with the provisions of the Portfolio's registration statement or
Declaration of Trust, as amended from time to time.
1.9 The Portfolio agrees to advise the Placement Agent as soon as
reasonably practical by a notice in writing delivered to the Placement Agent or
its counsel:
(a) of any request by the Commission for amendments to the registration
statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement then in effect or
the initiation by service of process on the Portfolio of any proceeding for
that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement then in effect or that
requires the making of a change in such registration statement in order to make
the statements therein not misleading; and
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(d) of all action of the Commission with respect to any amendment to any
registration statement that may from time to time be filed with the Commission.
For purposes of this paragraph 1.9, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.10 The Placement Agent agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Portfolio all
records and other information not otherwise publicly available relative to the
Portfolio and its prior, present or potential investors and not to use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Portfolio, which approval shall not be unreasonably
withheld and may not be withheld where the Placement Agent may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Portfolio.
1.11 In addition to the Placement Agent's duties as Placement Agent, the
Portfolio understands that the Placement Agent may, in its discretion, perform
additional functions in connection with transactions in Portfolio Interests.
The processing of Portfolio Interest transactions may include, but is not
limited to, compilation of all transactions from the Placement Agent's various
offices; creation of a transaction tape and timely delivery of it to the
Portfolio's transfer agent for processing; reconciliation of all transactions
delivered to the Portfolio's transfer agent; and the recording and reporting of
these transactions executed by the Portfolio's transfer agent in customer
statements; rendering of periodic customer statements; and the reporting of IRS
Form 1099 information at year end if required.
The Placement Agent may also provide other investor services, such as
communicating with Portfolio investors and other functions in administering
customer accounts for Portfolio investors.
The Placement Agent understands that these services may result in cost
savings to the Portfolio or to the Portfolio's investment manager and neither
the Portfolio nor the Portfolio's investment manager will compensate the
Placement Agent for all or a portion of the costs incurred in performing
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functions in connection with transactions in Portfolio Interests. Nothing
herein is intended, nor shall be construed, as requiring the Placement Agent to
perform any of the foregoing functions.
2. Term.
This Agreement shall become effective on the date first above written and,
unless sooner terminated as provided herein, shall continue until June 22, 2000
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Portfolio's Board of Trustees or (ii) by a vote of a majority (as defined in
the 1940 Act) of the Portfolio's outstanding voting securities, provided that
in either event the continuance is also approved by the majority of the
Portfolio's Trustees who are not interested persons (as defined in the 1940
Act) of the Portfolio and who have no direct or indirect financial interest in
this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable without penalty, on not
less than 60 days' notice, by the Board, by vote of a majority (as defined in
the 1940 Act) of the Portfolio's outstanding voting securities, or by the
Placement Agent. This Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the rules thereunder).
3. Representations and Warranties.
The Placement Agent and the Portfolio each hereby represents and warrants
to the other that it has all requisite authority to enter into, execute,
deliver and perform its obligations under this Agreement and that, with respect
to it, this Agreement is legal, valid and binding, and enforceable in
accordance with its terms.
4. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of law,
including the applicable provisions of the 1940 Act and to the extent that any
provisions herein contained conflict with any such applicable provisions of
law, the latter shall control.
This Agreement is executed and delivered in Boston, Massachusetts, and the
laws of the Commonwealth of Massachusetts shall, except to the extent that any
applicable provisions of Federal Law shall be controlling, govern the
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construction, validity and effect of this Agreement, without reference to
principles of conflicts of law.
If the contract set forth herein is acceptable to you, please so indicate
by executing the enclosed copy of this Agreement and returning the same to the
undersigned, whereupon this Agreement shall constitute a binding contract
between the parties hereto effective at the closing of business on the date
hereof.
Yours very truly,
DOMINI SOCIAL INDEX PORTFOLIO
By: David Wieder
--------------------------
Title: Vice President
Accepted:
DSIL INVESTMENT SERVICES LLC
By: Carole Laible
---------------------------
Title: Treasurer
