<PAGE>
GREEN [GRAPHIC ANNUAL REPORT
CENTURY APPEARS
FUNDS HERE] Green Century Balanced Fund
June 30, 1998
July 31, 1998
Green Century Equity Fund
July 31, 1998
An Investment For Your Future. 29 Temple Place, Boston, Massachusetts 02111
For information on the Green Century Funds (R), call 1-800-93-GREEN.
For information on opening an account, details on account services and
information about existing accounts, call 1-800-221-5519. For share price
information, call 1-800-882-8316 24 hours a day.
- --------------------------------------------------------------------------------
Dear Green Century Funds Shareholder:
The Green Century Funds were founded in 1991 by a partnership of non-
profit environmental advocacy organizations. Since that time, our mission has
been to seek solid financial returns for environmentally conscious investors
while promoting greater corporate environmental accountability. We are pleased
to report to our shareholders our progress toward these goals.
The Green Century Equity Fund's performance was competitive during
its fiscal year ended July 31, 1998, outdistancing the one-, three- and five-
year Lipper averages for growth funds for the periods ended July 31, 1998. The
Green Century Balanced Fund underperformed in its last quarter, leading to
disappointing year-end returns.*
Assets under management nearly doubled in the last year and the
number of shareholder accounts grew by 116%. We welcome our many new investors
and thank our long-term shareholders for your continued commitment to
environmentally responsible investing.
THE GREEN CENTURY EQUITY FUND'S total return for its fiscal year
ended July 31, 1998 was 21.32%, exceeding the return for the Standard & Poor's
500 Index (the "S&P 500")/1/ of 19.28% and well above the 13.15% average total
return of growth funds tracked by Lipper Analytical Services ("Lipper") for the
same time period./2/ In comparison to the S&P 500, the Equity Fund benefited
from its underexposure to the producer goods, international oil and chemical
industries and from its overexposure to telecommunications and retail
industries. Conversely, the Fund suffered from its underexposure to
pharmaceutical and domestic petroleum reserve industries. It was also hurt by
its overexposure to companies with greater variability in markets, greater
trading activity and greater labor intensity.
For the three-year period ended July 31, 1998, the average annual
total return for the Green Century Equity Fund was 28.48%, just slightly above
the 28.37% for the S&P 500 and surpassing the 20.97% average annual total
return of growth funds tracked by Lipper for the same time period. The five-
year average annual total return of the Equity Fund as of July 31, 1998 was
21.90%, behind the S&P 500's 22.91% but beating the Lipper average annual total
return of growth funds of 18.42% for the same period. Since inception on June
3, 1991, the average annual total return for the Green Century Equity Fund was
18.01%./3/
The Green Century Equity Fund invests primarily in a portfolio of the
400 companies that comprise the Domini Social Index, a broadly diversified
portfolio which excludes companies with the worst
*The performance data quoted represents past performance and is not a guarantee
of future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
<PAGE>
environmental and social records. As of July 31, 1998, 99.09% of the net assets
of the Fund were invested in the stocks of the 400 companies.
THE GREEN CENTURY BALANCED FUND'S total return for the year ended
July 31, 1998 was 2.07%; the average total return of balanced fund's tracked by
Lipper was 9.75% for the same period./4/ As of July 31, 1998, the three- and
five-year average annual total returns of the Balanced Fund were 12.55% and
10.37%, respectively, as compared to the three- and five-year Lipper balanced
fund average annual total returns of 16.27% and 13.54% for the same time
periods. Since inception on March 18, 1992, the Green Century Balanced Fund's
average total return was 8.20%.
On the heels of a very strong first quarter in calendar year 1998,
the Green Century Balanced Fund's performance lagged in the last four months of
the year ended July 31, 1998. The Balanced Fund's portfolio manager, Jack
Robinson provides this analysis: "One reason the Balanced Fund underperformed
is that it is currently primarily invested in small- to mid-sized companies
whose stocks peaked in mid-April and have declined significantly from that
high. Growing concerns about Asian markets have lead many investors to redirect
their capital to companies with large market capitalizations. While we cannot
make guarantees about the Balanced Fund's future performance, I believe the
Green Century Balanced Fund holds excellent high-growth companies which offer
the potential for significant earnings growth at reasonable value. Over the
long-term, I believe these environmentally responsible companies may enjoy
advantages from cost reductions, quality improvements and access to expanding
and new growth markets."
The Green Century Balanced Fund invests primarily in the stocks and
bonds of select companies that have clean environmental records, many of which
also make positive environmental contributions. The Balanced Fund also invests
in those companies that have minimized their adverse impact on the environment
and those companies Green Century believes are "best in their class" companies
that are setting standards for environmental protection in their industries.
For instance, Hi-Rise Recycling, a recent addition to the Balanced Fund's
portfolio, develops recycling systems that meet the challenges of urban
recycling. The company's flagship system allows residents of multi-story
buildings to press a button at a disposal chute to automatically sort and
deliver recyclables./5/
As of this writing in mid-August, the market, as represented by the
S&P 500, is off nearly 10% from its July 17, 1998 peak, with the stocks of
small companies, as represented by the Russell 2000 Index,/6/ off over 18% from
their high on April 22, 1998. These recent declines serve as a reminder that
investing in stocks, as do both Green Century Funds, entails significant
volatility and risk, particularly in the short term.
SHAREHOLDER ADVOCACY is critical to Green Century's mission of
promoting corporate environmental responsibility. In May of 1998, the Green
Century Equity Fund, on behalf of the Domini Social Index Portfolio, joined
other shareholders of Procter & Gamble to file a resolution with the
company./7/ It is Green Century's belief that Procter & Gamble's use of
chlorinated bleached paper perpetuates the release of unnecessary toxins that
are harmful to human and environmental health. The resolution presses the
company to report on its plans for a long-term phase out of chlorinated
compounds in all of its products. The proposal will be included in the
company's proxy materials and voted on at the annual meeting of shareholders on
October 13, 1998.
THE GREEN CENTURY FUNDS BOARD OF TRUSTEES voted in June to change the
fiscal year end of the Balanced Fund from June 30 to July 31 in order to bring
the fiscal year end of the Balanced Fund in line with that of the Equity Fund.
Thus, the accompanying financial statements for the Balanced Fund report on two
periods, the Fund's previous fiscal year ended June 30, 1998 and the one month
fiscal period ended
2
<PAGE>
July 31, 1998. In the future, our Annual Report will include financial
statements and data on both Funds for their fiscal years ending July 31.
Thank you for your continuing confidence and investment in the Green
Century Funds.
Respectfully,
The Green Century Funds
/1/ The S&P 500 is an unmanaged index of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The S&P 500 is heavily
weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic stocks.
/2/ Lipper Analytical Services, Inc. is a respected mutual fund ranking
service. The Lipper growth fund category of mutual funds includes funds that
normally invest in companies whose long-term earnings are expected to grow
significantly faster than the earnings of the stocks represented in the major
unmanaged indices.
/3/ The Green Century Equity Fund, which commenced investment operations in
September, 1995, invests all of its assets in an existing separate registered
investment company which has the same investment objective as the Fund (the
"Index Portfolio"). Consistent with regulatory guidance, the performance for
the period prior to the Fund's inception reflects the performance of the Index
Portfolio adjusted to reflect the deduction of the charges and expenses of the
Fund.
/4/ The Lipper balanced fund category of mutual funds includes funds whose
primary objective is to conserve principal by maintaining at all times a
balanced portfolio of stocks and bonds.
/5/ As of July 31, 1998, Hi-Rise Recycling, Inc. composed 2.36% of the
portfolio of the Green Century Balanced Fund. The holdings of the Balanced
Fund may change due to ongoing management of the Fund. References to specific
investments should not be construed as a recommendation of the security by the
Funds, the advisor or their distributor.
/6/ The Russell 2000 is an index of the smallest 2000 companies in the Russell
3000 Index, as ranked by total market capitalizations. The Russell 2000 Index
is widely regarded in the industry to accurately capture the universe of
small-cap stocks.
/7/ As of July 31, 1998 Procter & Gamble comprised 2.24% of the portfolio in
which the Green Century Equity Fund invests. Holdings may change due to
ongoing management. References to specific investments should not be construed
as a recommendation of the security by the Funds or their distributor.
This material must be preceded or accompanied by a current prospectus.
Distributor: Sunstone Distribution Services, LLC. 8/98
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GREEN CENTURY BALANCED FUND
INVESTMENT OBJECTIVE--The Green Century Balanced Fund seeks capital growth
and income from a diversified portfolio of equity and fixed-income securities.
The Fund invests in the securities of environmentally responsible and
environmentally proactive companies.
PORTFOLIO ORIENTATION--The Fund is invested in equity and fixed income
securities of performance driven, environmentally responsible companies. Equity
holdings focus on growth companies that have earnings growth greater than that
of the overall market, a rate of growth that the Fund's portfolio manager
believes will ultimately generate superior stock performance. The fixed-income
portion of the portfolio is comprised of debt of investment and non-investment
grade environmentally responsible companies.
ECONOMIC ENVIRONMENT--In the United States, inflation and interest rates
remain low while corporate earnings generally are rising, albeit at a modest
single digit pace and significantly below the rate of increase in 1997. The
global economic environment however is mixed: while Western Europe is strong,
most other economies, including Japan, Southeast Asia and many emerging
countries, are experiencing difficulties. As global markets have become
increasingly interconnected, a rise in global economic uncertainties negatively
impacts all economies and markets.
INVESTMENT STRATEGY AND PERFORMANCE--The Balanced Fund's investment advisers
believe that environmental responsibility and economic gain go hand in hand.
The premise of the Fund is that environmental responsibility enhances corporate
profitability, which in turn can produce competitive shareholder returns.
The performance objective of the Fund is to be in the top quartile of all
balanced funds. In order to reach this goal, the Fund is positioned in
financially driven companies that are selling ecologically sustainable
solutions and other companies with clean environmental records. Environmentally
sound companies frequently enjoy higher profitability through lower costs and
participation in growth markets. In addition, this investment strategy helps to
avoid companies at risk due to exposure to environmental liability.
The Fund's total return for the year ended July 31, 1998 was 2.07%, compared
to 9.75% for the average balanced fund tracked by Lipper Analytical Services,
Inc. during the same period. For the five years ended July 31, 1998, the
Balanced Fund's average annual total return was 10.37%, compared to 13.54% for
the average balanced fund tracked by Lipper. The Fund's average annual total
return since inception on March 18, 1992 was 8.20%.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Micropal Micropal
Green Century Balanced Environmental
Date Balanced Fund S&P 500 Index Fund Index Sector Index
- ---- ------------- ------------- -------- -------------
3/31/92 $10,000 $10,000 $10,000 $10,000
6/30/92 $10,015 $10,190 $10,120 $9,083
6/30/93 $10,385 $11,580 $11,526 $9,298
6/30/94 $9,987 $11,742 $11,651 $8,843
6/30/95 $11,486 $14,804 $13,463 $10,483
6/30/96 $14,010 $18,653 $15,544 $12,732
6/30/97 $16,142 $25,125 $18,508 $14,368
6/30/98 $18,262 $32,703 $21,751 $15,473
7/31/98 $16,792 $32,355 $18,362 $7,503
Past performance is not predictive of future performance
The S&P 500 Index is an unmanaged index of 500 stocks.
The Micropal Balanced Fund Index is a time weighted index of the returns of
mutual funds that seek to achieve current income, growth of income and
principal, and principal preservation through investment in a portfolio
composed of bonds, stocks, and money market securities.
The Micropal Environmental Sector Index is a time weighted index of the returns
of mutual funds that seek investments primarily in the environmental services
sector of the economy.
-----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------------------
<TABLE>
<S> <C>
One year ended July 31, 1998.............................. 2.07%
-----------------------------------------------------------------
Five years ended July 31, 1998............................ 10.37%
-----------------------------------------------------------------
Inception (March 18, 1992) to July 31, 1998............... 8.20%
-----------------------------------------------------------------
</TABLE>
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GREEN CENTURY EQUITY FUND
INVESTMENT OBJECTIVE--The Green Century Equity Fund seeks long-term total
return from a diversified portfolio of stocks which corresponds to the
performance of an index consisting of approximately 400 companies which conform
to basic standards for environmental and social corporate responsibility.
PORTFOLIO ORIENTATION--The Fund seeks to achieve its investment objective by
investing all its investable assets in the Domini Social Index Portfolio (the
"Index Portfolio") which has the same investment objective as the Fund. Like
other index funds, the Equity Fund is not actively managed in the traditional
investment sense, but rather seeks to track the performance of a broad based
index. The Equity Fund thus provides an investor with the opportunity to be
nearly fully invested at all times in a broad and diverse portfolio of stocks
which meet certain environmental and social criteria.
In evaluating stocks for inclusion in the index, a company's environmental
performance, employee relations, corporate citizenship, and the quality of the
company's products and its attitudes with regard to consumer issues are
considered. Companies are excluded which, based on data available, derive more
than 2% of their gross revenues from the sale of military weapons; derive any
revenues from the manufacture of tobacco products or alcoholic beverages;
derive any revenues from gambling enterprises; own directly or operate nuclear
power plants or participate in businesses related to the nuclear fuel cycle.
INVESTMENT STRATEGY AND PERFORMANCE--The Equity Fund's managers believe that
enterprises which exhibit a social awareness should be better prepared to meet
future societal needs for goods and services and may be less likely to incur
certain legal liabilities that may be charged when a product or service is
determined to be harmful. The Fund's managers also believe that such
enterprises should over the long term be able to provide investors with a
return that is competitive with enterprises that do not exhibit such social
awareness.
The Fund's total return for its fiscal year was 21.32%, compared to 19.28%
for the Standard & Poor's 500 Index (the "S&P 500"). For the five years ended
July 31, 1998, the Equity Fund's average annual total return was 21.90%,
compared to 22.91% for the S&P 500. The Fund's average annual total return
since inception on June 3, 1991 was 18.01%.*
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Green Century
Date Equity Fund S&P 500 Index
- ---- ----------- -------------
6/3/91 $10,000 $10,000
7/31/91 $9,987 $9,987
7/31/92 $11,137 $11,264
7/31/93 $12,162 $12,249
7/31/94 $12,425 $12,880
7/31/95 $15,442 $16,243
7/31/96 $17,628 $18,934
7/31/97 $26,996 $28,807
7/31/98 $32,752 $34,362
Past performance is not predictive of future performance
Yearly periods ending July 31
The S&P 500 Index is an unmanaged index of 500 stocks. Its performance reflects
reinvestment of dividends and distributions but not management and other
operating expenses, as does the Fund's performance. Performance on the
accompanying graph for the S&P 500 commences on May 31, 1991.
-----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------------------
<TABLE>
<S> <C>
One year ended July 31, 1998.............................. 21.32%
-----------------------------------------------------------------
Five years ended July 31, 1998*........................... 21.90%
-----------------------------------------------------------------
Inception (June 3, 1991) to July 31, 1998*................ 18.01%
-----------------------------------------------------------------
</TABLE>
* The Green Century Equity Fund, which commenced investment operations in
September, 1995, invests all of its investable assets in an existing separate
registered investment company which has the same investment objective as the
Fund (the "Index Portfolio"). Consistent with regulatory guidance, performance
for the period prior to the Fund's inception reflects the performance of the
Index Portfolio adjusted to reflect the deduction of the charges and expenses
of the Fund.
5
<PAGE>
GREEN CENTURY BALANCED FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
COMMON STOCKS--70.2%
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
ENVIRONMENTAL PRODUCTS & SERVICES--20.6%
CUNO Inc. (b)............................................. 12,500 $ 270,312
Galileo Corp. (b)......................................... 110,000 1,306,250
Hi-Rise Recycling Systems, Inc. (b)....................... 122,000 320,250
IMCO Recycling, Inc....................................... 10,000 185,000
Ionics, Inc. (b).......................................... 9,000 331,875
KTI, Inc. (b)............................................. 24,000 519,000
Thermo Electron Corp. (b)................................. 100 3,419
Thermo Trilogy Corp. (b)(f)............................... 12,000 99,000
U.S. Filter Corp. (b)..................................... 11,180 313,739
-----------
3,348,845
-----------
TECHNOLOGY--15.5%
C2i Solutions, Inc. (b)................................... 10,000 80,000
Checkpoint Systems, Inc. (b).............................. 25,000 353,125
Data Dimensions, Inc. (b)................................. 25,000 426,562
Intel Corp................................................ 200 14,825
Metrika Systems Corp. (b)................................. 20,000 335,000
Natural Microsystems Corp. (b)............................ 15,000 240,000
Orbital Sciences Corp. (b)................................ 18,000 672,750
Project Software & Development, Inc. (b).................. 20,000 401,250
-----------
2,523,512
-----------
NATURAL FOODS & NUTRACEUTICALS--7.0%
Nutraceutical International Corp. (b)..................... 15,000 157,500
Rexall Sundown, Inc. (b).................................. 15,000 528,750
Whole Foods Market, Inc. (b).............................. 7,500 453,750
-----------
1,140,000
-----------
COMMUNICATIONS--6.8%
NTN Communications, Inc. (b).............................. 250,000 250,000
Powerwave Technologies, Inc. (b).......................... 25,000 418,750
SmarTalk TeleServices, Inc. (b)........................... 30,000 436,875
Time Warner, Inc.......................................... 100 8,544
-----------
1,114,169
-----------
PHARMACEUTICALS--6.2%
Elan Corp. PLC ADR (b)(c)................................. 6,000 385,875
Sepracor, Inc. (b)........................................ 15,000 622,500
-----------
1,008,375
-----------
HEALTH SERVICES & HOSPITAL SUPPLIES--5.2%
Hologic, Inc. (b)......................................... 10,000 181,875
PSS World Medical, Inc. (b)............................... 36,000 526,500
Thermo Bioanalysis Corp. (b).............................. 7,500 135,938
-----------
844,313
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
RETAIL--2.9%
CVS Corp................................................ 10,000 $ 389,375
Garden Fresh Restaurant Corp. (b)....................... 5,000 90,000
-----------
479,375
-----------
AGRICULTURE--2.1%
Potash Corp. of Saskatchewan (e)........................ 4,500 340,031
-----------
FINANCIAL SERVICES--1.9%
American International Group, Inc....................... 100 14,600
Conning Corp............................................ 15,000 292,500
-----------
307,100
-----------
CONSUMER PRODUCTS & SERVICES--1.0%
Advanced Lighting Technologies, Inc. (b)................ 1,000 23,250
Bright Horizons, Inc. (b)............................... 5,000 140,000
-----------
163,250
-----------
ENERGY--1.0%
Vestas Wind Systems A/S (b)(c).......................... 4,000 157,917
-----------
PAPER & FOREST PRODUCTS--0.0%
Champion International Corp............................. 100 4,919
-----------
Total Common Stocks
(Cost $10,610,146)..................................... 11,431,806
-----------
CORPORATE BONDS & NOTES--23.5%
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
COMMUNICATIONS--8.1%
GST USA, Inc.
0%, due 12/15/05 (g)................................... $ 300,000 $ 244,500
Globalstar LP
11.25%, due 06/15/04................................... 200,000 195,000
Ionica PLC
0%, due 05/01/07....................................... 400,000 82,000
Level 3 Communications, Inc.
9.125%, due 5/01/08 (d)................................ 300,000 293,625
Nextel Communications
0%, due 08/15/04 (g)................................... 300,000 294,000
Winstar Communications, Inc.
0%, due 10/15/05 (g)................................... 250,000 209,375
-----------
1,318,500
-----------
</TABLE>
6
<PAGE>
GREEN CENTURY BALANCED FUND
PORTFOLIO OF INVESTMENTS--(CONCLUDED)
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
FOOD & BEVERAGE--5.9%
Curtice-Burns Foods
12.25%, due 2/01/05.................................... $ 200,000 $ 222,000
Homeland Stores, Inc.
10.00%, due 8/01/03.................................... 250,000 237,500
Sparkling Spring Water
11.50%, due 11/15/07 (d)............................... 250,000 262,500
Specialty Foods Corp.
10.25%, due 8/15/01.................................... 250,000 243,750
-----------
965,750
-----------
CONSUMER GOODS--5.1%
Brazos Sportswear, Inc.
10.50%, due 7/01/07.................................... 300,000 208,500
Collins & Aikman Floorcovering Corp.
10.00%, due 1/15/07 (d)................................ 250,000 252,500
NBC Acquisition Corp.
0%, due 2/15/09 (d)(g)................................. 300,000 174,000
Nebraska Book Co.
8.75%, due 2/15/08 (d)................................. 200,000 192,000
-----------
827,000
-----------
ENERGY--1.6%
Calpine Corp.
8.75%, due 07/15/07 (d)................................ 250,000 258,125
-----------
EQUIPMENT--1.5%
Willcox & Gibbs, Inc.
12.25%, due 12/15/03................................... 250,000 246,250
-----------
ENVIRONMENTAL SERVICES--1.3%
ICF Kaiser International
13.00%, due 12/31/03................................... 200,000 219,000
-----------
Total Corporate Bonds and Notes (Cost $3,924,002)....... 3,834,625
-----------
<CAPTION>
SHARES
<S> <C> <C>
WARRANTS--0.5%
C2i Solutions, Inc., Exp. 2/24/03
(Cost $2,000).......................................... 20,000 75,624
-----------
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
VALUE
<S> <C> <C>
SHORT-TERM
OBLIGATIONS--4.6%
REPURCHASE AGREE-
MENTS
Salomon Brothers,
5.25%, dated
6/30/98, due
7/01/98, pro-
ceeds $745,552
(collateralized
by U.S. Treasury
securities with
maturities from
5/15/99 through
8/15/19, value
$762,314)
(Cost $745,443). $ 745,443
-----------
TOTAL INVESTMENTS (A)--98.8%
(Cost
$15,281,591)... 16,087,498
-----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
WRITTEN OPTIONS--(0.0)%
<CAPTION>
NUMBER OF STRIKE
CONTRACTS PRICE
<S> <C> <C> <C>
Potash Corp. of Saskatchewan Call option,
1/16/99........................................ 45 $100.00 (4,219)
-----------
Other Assets Less Other Liabilities--1.2%....... 202,487
-----------
NET ASSETS--100%.................................................. $16,285,766
===========
</TABLE>
- -------
(a) The cost of investments for federal income tax purposes is $15,281,591,
resulting in gross unrealized appreciation and depreciation of $1,882,196
and $1,076,289, respectively, and net unrealized appreciation of $805,907.
(b) Non-income producing security.
(c) Securities whose values are determined or significantly influenced by
trading on exchanges not in the United States or Canada. ADR after the name
of a foreign holding stands for American Depository Receipt representing
foreign securities on deposit with a domestic custodian bank.
(d) Securities that may be resold to "qualified institutional buyers" under
Rule 144a or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(e) Securities pledged as collateral to cover outstanding call options written
at June 30, 1998.
(f) Restricted Security. Purchased in a private placement transaction on
December 19, 1997; resale to the public may require registration or sale
only to qualified institutional buyers. This security is valued at fair
value, which at June 30, 1998, is equal to cost.
(g) Step bond. Rate shown is currently in effect at June 30, 1998.
7
<PAGE>
GREEN CENTURY BALANCED FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
COMMON STOCKS--66.4%
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
ENVIRONMENTAL PRODUCTS & SERVICES--16.4%
CUNO Inc. (b)............................................ 12,500 $ 239,844
Galileo Corp. (b)........................................ 110,000 440,000
Hi-Rise Recycling Systems, Inc. (b)...................... 122,000 358,375
IMCO Recycling, Inc...................................... 10,000 160,625
Ionics, Inc. (b)......................................... 9,000 285,750
KTI, Inc. (b)............................................ 25,000 600,000
Thermo Electron Corp. (b)................................ 100 2,300
Thermo Trilogy Corp. (b)(f).............................. 12,000 99,000
U.S. Filter Corp. (b).................................... 11,180 301,860
-----------
2,487,754
-----------
TECHNOLOGY--13.4%
C2i Solutions, Inc. (b).................................. 10,000 67,500
Data Dimensions, Inc. (b)................................ 30,000 436,875
Intel Corp. ............................................. 200 16,888
Metrika Systems Corp. (b)................................ 20,000 285,000
Natural Microsystems Corp. (b)........................... 30,000 378,750
Orbital Sciences Corp. (b)............................... 18,000 490,500
Project Software & Development, Inc. (b)................. 20,000 365,000
-----------
2,040,513
-----------
NATURAL FOODS & NUTRACEUTICALS--8.3%
Natrol, Inc. (b)......................................... 5,000 82,500
NBTY, Inc. (b)........................................... 13,400 221,937
Nutraceutical International Corp. (b).................... 10,000 100,000
Rexall Sundown, Inc. (b)................................. 15,000 452,813
Whole Foods Market, Inc. (b)............................. 7,500 406,875
-----------
1,264,125
-----------
PHARMACEUTICALS--8.2%
Elan Corp. PLC ADR (b)(c)(e)............................. 6,000 432,000
Sepracor, Inc. (b)....................................... 15,000 810,000
-----------
1,242,000
-----------
COMMUNICATIONS--7.1%
NTN Communications, Inc. (b)............................. 250,000 250,000
Powerwave Technologies, Inc. (b)......................... 25,000 328,125
SmarTalk TeleServices, Inc. (b).......................... 30,000 496,875
Time Warner, Inc. ....................................... 100 9,006
-----------
1,084,006
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
HEALTH SERVICES & HOSPITAL SUPPLIES--5.7%
Hologic, Inc. (b).................................... 10,000 $ 165,625
PSS World Medical, Inc. (b).......................... 36,000 559,123
Thermo Bioanalysis Corp. (b)......................... 7,500 142,031
-----------
866,779
-----------
RETAIL--3.2%
CVS Corp............................................. 10,000 410,000
Garden Fresh Restaurant Corp. (b).................... 5,000 85,000
-----------
495,000
-----------
FINANCIAL SERVICES--1.9%
American International Group, Inc.................... 100 15,081
Conning Corp. ....................................... 15,000 277,500
-----------
292,581
-----------
ENERGY--1.1%
Vestas Wind Systems A/S (b)(c)....................... 4,000 163,482
-----------
CONSUMER PRODUCTS & SERVICES--1.1%
Advanced Lighting Technologies, Inc. (b)............. 1,000 24,125
Bright Horizons, Inc. (b)............................ 5,751 138,745
-----------
162,870
-----------
PAPER & FOREST PRODUCTS--0.0%
Champion International Corp.......................... 100 4,244
-----------
Total Common Stocks
(Cost $10,481,137).................................. 10,103,354
-----------
CORPORATE BONDS & NOTES--24.8%
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
COMMUNICATIONS--8.6%
GST USA, Inc.
0%, due 12/15/05 (g)................................ $ 300,000 $ 248,250
Globalstar LP
11.25%, due 06/15/04................................ 200,000 186,000
Ionica PLC
0%, due 05/01/07.................................... 400,000 70,000
Level 3 Communications, Inc.
9.125%, due 05/01/08 (d)............................ 300,000 298,125
Nextel Communications
0%, due 08/15/04 (g)................................ 300,000 302,625
</TABLE>
8
<PAGE>
GREEN CENTURY BALANCED FUND
PORTFOLIO OF INVESTMENTS--(CONCLUDED)
JULY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
Winstar Communications, Inc.
0%, due 10/15/05 (g)................................... $ 250,000 $ 206,250
-----------
1,311,250
-----------
FOOD & BEVERAGE--6.3%
Curtice-Burns Foods
12.25%, due 02/01/05................................... 200,000 222,000
Homeland Stores, Inc.
10.00%, due 08/01/03................................... 250,000 237,500
Sparkling Spring Water
11.50%, due 11/15/07 (d)............................... 250,000 262,187
Specialty Foods Corp.
10.25%, due 08/15/01................................... 250,000 243,438
-----------
965,125
-----------
CONSUMER GOODS--5.5%
Brazos Sportswear, Inc.
10.50%, due 07/01/07................................... 300,000 208,500
Collins & Aikman Floorcovering Corp.
10.00%, due 01/15/07 (d)............................... 250,000 252,500
NBC Acquisition Corp.
0%, due 02/15/09 (d)(g)................................ 300,000 175,500
Nebraska Book Co.
8.75%, due 02/15/08 (d)................................ 200,000 192,500
-----------
829,000
-----------
ENERGY--1.7%
Calpine Corp.
8.75%, due 07/15/07 (d)................................ 250,000 260,000
-----------
EQUIPMENT--1.6%
Willcox & Gibbs, Inc.
12.25%, due 12/15/03................................... 250,000 248,750
-----------
ENVIRONMENTAL SERVICES--1.1%
ICF Kaiser International
13.00%, due 12/31/03................................... 200,000 159,000
-----------
Total Corporate Bonds and Notes
(Cost $3,930,622)...................................... 3,773,125
-----------
<CAPTION>
SHARES
<S> <C> <C>
WARRANTS--0.3%
C2i Solutions, Inc., Exp. 02/24/03
(Cost $2,000).......................................... 20,000 52,500
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
<S> <C>
SHORT-TERM OBLIGATIONS--6.0%
REPURCHASE AGREEMENTS
Salomon Brothers, 5.02%, dated 07/31/98, due
08/03/98, proceeds $912,535 (collateralized
by U.S. Treasury Bonds with maturities from
02/15/15 through 02/15/85, value $930,396)
(Cost $912,153)................................................... $ 912,153
-----------
TOTAL INVESTMENTS (A)--97.5%
(Cost $15,325,912)................................................ 14,841,132
-----------
</TABLE>
<TABLE>
<CAPTION>
WRITTEN OPTIONS--(0.0)%
NUMBER OF STRIKE
CONTRACTS PRICE
<S> <C> <C> <C>
Elan Corp. PLC ADR
Call option, 08/22/98 (c)........................ 34 $75.00 (4,463)
-----------
Other Assets Less Other Liabilities--2.5%......... 375,130
-----------
NET ASSETS--100%................................................... $15,211,799
===========
</TABLE>
- -------
(a) The cost of investments for federal income tax purposes is $15,325,912,
resulting in gross unrealized appreciation and depreciation of $1,429,720
and $1,914,500, respectively, and net unrealized depreciation of $484,780.
(b) Non-income producing security.
(c) Securities whose values are determined or significantly influenced by
trading on exchanges not in the United States or Canada. ADR after the name
of a foreign holding stands for American Depository Receipt representing
foreign securities on deposit with a domestic custodian bank.
(d) Securities that may be resold to "qualified institutional buyers" under
Rule 144a or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(e) Securities pledged as collateral to cover outstanding call options written
at July 31, 1998.
(f) Restricted Security. Purchased in a private placement transaction on
December 19, 1997; resale to the public may require registration or sale
only to qualified institutional buyers. This security is valued at fair
value, which at July 31, 1998, is equal to cost.
(g) Step bond. Rate shown is currently in effect at July 31, 1998.
See Notes to Financial Statements
9
<PAGE>
GREEN CENTURY BALANCED FUND
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JULY 31, 1998 JUNE 30, 1998
<S> <C> <C>
ASSETS:
Investments, at value (cost of $15,325,912 and
$15,281,591 at July 31, 1998 and June 30, 1998,
respectively).................................... $14,841,132 $16,087,498
Receivables for:
Securities sold.................................. 329,697 187,806
Interest and dividends........................... 73,352 99,994
Capital stock sold............................... 7,269 6,915
----------- -----------
Total assets..................................... 15,251,450 16,382,213
----------- -----------
LIABILITIES:
Payable for securities purchased.................. -- 48,375
Accrued expenses.................................. 34,358 33,436
Payable for capital stock redeemed................ 830 10,417
Written options (premiums received $6,664 and
$16,445 at July 31, 1998 and June 30, 1998,
respectively).................................... 4,463 4,219
----------- -----------
Total liabilities................................ 39,651 96,447
----------- -----------
NET ASSETS........................................ $15,211,799 $16,285,766
=========== ===========
NET ASSETS CONSIST OF:
Paid-in capital................................... $14,677,421 $14,420,784
Accumulated net realized gain on investments and
options written.................................. 1,013,880 1,046,849
Net unrealized appreciation (depreciation) on
investments and options written.................. (482,579) 818,133
Accumulated undistributed net investment income... 3,077 --
----------- -----------
NET ASSETS........................................ $15,211,799 $16,285,766
=========== ===========
SHARES OUTSTANDING................................ 1,199,430 1,180,620
=========== ===========
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING
PRICE PER SHARE.................................. $ 12.68 $ 13.79
=========== ===========
GREEN CENTURY BALANCED FUND
STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE FOR THE
ONE MONTH ENDED YEAR ENDED
JULY 31, 1998 JUNE 30, 1998
<S> <C> <C>
INVESTMENT INCOME:
Interest income................................... $ 35,892 $ 332,764
Dividend income (net of foreign withholding tax of
$180 and $704 for the one month ended July 31,
1998 and the year ended June 30, 1998, respec-
tively).......................................... 1,520 34,050
----------- -----------
Total investment income.......................... 37,412 366,814
----------- -----------
EXPENSES (NOTE 2):
Administrative services fee....................... 20,597 209,666
Investment advisory fee........................... 10,301 104,833
Distribution fee.................................. 3,437 34,944
----------- -----------
Total expenses................................... 34,335 349,443
----------- -----------
NET INVESTMENT INCOME............................. 3,077 17,371
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVEST-
MENTS (NOTE 1):
Net realized gain (loss) on:
Investments...................................... (45,246) 1,615,375
Options written.................................. 12,277 86,343
----------- -----------
(32,969) 1,701,718
----------- -----------
Net increase (decrease) in unrealized net
appreciation/depreciation of:
Investments...................................... (1,290,688) (492,411)
Options written.................................. (10,024) 34,910
----------- -----------
(1,300,712) (457,501)
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVEST-
MENTS............................................ (1,333,681) 1,244,217
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $(1,330,604) $ 1,261,588
=========== ===========
</TABLE>
See Notes to Financial Statements
10
<PAGE>
GREEN CENTURY BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
ONE MONTH ENDED YEAR ENDED YEAR ENDED
JULY 31, 1998 JUNE 30, 1998 JUNE 30, 1997
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income............. $ 3,077 $ 17,371 $ 84,186
Net realized gain (loss) on in-
vestments and options written.... (32,969) 1,701,718 701,949
Net increase (decrease) in
unrealized net
appreciation/depreciation of in-
vestments and options written.... (1,300,712) (457,501) 653,503
----------- ----------- -----------
Net increase (decrease) in net as-
sets resulting from operations... (1,330,604) 1,261,588 1,439,638
----------- ----------- -----------
Dividends and distributions to
shareholders (Note 1):
From net investment income........ -- (78,490) (67,661)
From net realized gains........... -- (1,204,821) (1,042,169)
----------- ----------- -----------
Total dividends and distributions.. -- (1,283,311) (1,109,830)
----------- ----------- -----------
Capital share transactions (Note
4):
Proceeds from sales of shares..... 567,446 5,329,586 2,238,592
Reinvestment of dividends and dis-
tributions....................... -- 1,022,174 626,390
Payments for shares redeemed...... (310,809) (1,066,413) (387,839)
----------- ----------- -----------
Net increase in net assets result-
ing from capital stock transac-
tions............................ 256,637 5,285,347 2,477,143
----------- ----------- -----------
Total Increase (Decrease) in Net
Assets............................ (1,073,967) 5,263,624 2,806,951
NET ASSETS:
Beginning of Period............... 16,285,766 11,022,142 8,215,191
----------- ----------- -----------
End of Period (including undis-
tributed net investment income of
$3,077 and $0 for the one month
ended July 31, 1998 and the year
ended June 30, 1998, respective-
ly, and undistributed net invest-
ment income of $53,427 for the
year ended June 30, 1997)........ $15,211,799 $16,285,766 $11,022,142
=========== =========== ===========
</TABLE>
GREEN CENTURY BALANCED FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
ONE MONTH FOR THE YEARS ENDED JUNE 30,
ENDED -----------------------------------------
JULY 31, 1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, begin-
ning of period......... $ 13.79 $ 13.53 $ 13.34 $11.03 $ 9.68 $10.14
------- ------- ------- ------ ------ ------
Income from investment
operations:
Net investment income.. -- 0.02 0.12 0.10 0.10 0.07
Net realized and
unrealized gain (loss)
on investments........ (1.11) 1.68 1.77 2.31 1.35 (0.46)
------- ------- ------- ------ ------ ------
Total increase (de-
crease) from investment
operations............. (1.11) 1.70 1.89 2.41 1.45 (0.39)
------- ------- ------- ------ ------ ------
Less dividends and dis-
tributions (Note 1):
Dividends from net in-
vestment income....... -- (0.09) (0.10) (0.10) (0.10) (0.07)
Distributions from net
realized gains........ -- (1.35) (1.60) -- -- --
------- ------- ------- ------ ------ ------
Total decrease from div-
idends and distribu-
tions.................. -- (1.44) (1.70) (0.10) (0.10) (0.07)
------- ------- ------- ------ ------ ------
Net Asset Value, end of
period................. $ 12.68 $ 13.79 $ 13.53 $13.34 $11.03 $ 9.68
======= ======= ======= ====== ====== ======
Total return............ (8.05)%(a) 13.13% 15.22% 21.98% 15.00% (3.83)%
Ratios\Supplemental da-
ta:
Net assets, end of pe-
riod (in 000's)....... $15,212 $16,286 $11,022 $8,215 $3,291 $3,151
Ratio of expenses to
average net assets.... 2.50%(b) 2.50% 2.50% 2.50% 2.50% 2.50%
Ratio of net investment
income to average net
assets................ 0.22%(b) 0.12% 0.94% 0.85% 0.97% 0.74%
Portfolio turnover..... 4%(a) 96% 109% 136% 16% 14%
</TABLE>
(a) Not annualized
(b) Annualized
See Notes to Financial Statements
11
<PAGE>
GREEN CENTURY EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31,1998
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1)...... $15,426,641
Receivable for capital stock sold................................... 89,742
-----------
Total assets..................................................... 15,516,383
-----------
LIABILITIES:
Accrued expenses (Note 2)........................................... 16,254
Payable for capital stock redeemed.................................. 24,552
-----------
Total liabilities................................................ 40,806
-----------
NET ASSETS.......................................................... $15,475,577
===========
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $12,577,082
Accumulated net realized gain on investment......................... 77,828
Net unrealized appreciation on investment........................... 2,820,667
-----------
NET ASSETS.......................................................... $15,475,577
===========
SHARES OUTSTANDING.................................................. 756,959
===========
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE...... $ 20.44
===========
</TABLE>
GREEN CENTURY EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME FROM INDEX PORTFOLIO:
Investment income from Index Portfolio............................. $ 116,592
Expenses from Index Portfolio...................................... (18,799)
----------
Net income from Index Portfolio................................. 97,793
----------
EXPENSES:
Administrative services fee (Note 2)............................... 122,190
----------
NET INVESTMENT LOSS................................................ (24,397)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT:
Net realized gain on investment allocated from Index Portfolio..... 101,835
Net increase in net unrealized appreciation of investment allocated
from Index Portfolio.............................................. 1,755,126
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT..................... 1,856,961
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $1,832,564
==========
</TABLE>
See Notes to Financial Statements
12
<PAGE>
GREEN CENTURY EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997
<S> <C> <C>
INCREASE IN NET ASSETS:
From Operations:
Net investment income (loss)...................... $ (24,397) $ 1,603
Net realized gain on investment allocated from In-
dex Portfolio.................................... 101,835 6,238
Net increase in net unrealized appreciation of in-
vestment allocated from Index Portfolio.......... 1,755,126 1,064,623
----------- ----------
Net increase in net assets resulting from opera-
tions............................................ 1,832,564 1,072,464
----------- ----------
Dividends and distributions to shareholders:
From net investment income........................ -- (4,238)
From net realized gains........................... (5,456) (824)
----------- ----------
Total dividends and distributions................. (5,456) (5,062)
----------- ----------
Capital Share Transactions (Note 4):
Proceeds from sales of shares..................... 10,106,426 3,530,696
Reinvestment of dividends and distributions....... 5,171 4,505
Payments for shares redeemed...................... (1,738,306) (207,152)
----------- ----------
Net increase in net assets resulting from capital
share transactions............................... 8,373,291 3,328,049
----------- ----------
Total Increase in Net Assets....................... 10,200,399 4,395,451
NET ASSETS:
Beginning of period............................... 5,275,178 879,727
----------- ----------
End of period (including distributions in excess
of net investment income of $0 and $2,240 for the
years ended July 31, 1998, and July 31, 1997,
respectively).................................... $15,475,577 $5,275,178
=========== ==========
</TABLE>
GREEN CENTURY EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 13, 1995
FOR THE YEARS (COMMENCEMENT OF
ENDED JULY 31, OPERATIONS) TO
--------------- JULY 31, 1996
1998 1997
<S> <C> <C> <C>
Net Asset Value, beginning of period...... $ 16.86 $11.04 $10.00
------- ------ ------
Income from investment operations:
Net investment income (loss)............. (0.03) 0.02 0.02
Net realized and unrealized gain on in-
vestments............................... 3.62 5.84 1.04
------- ------ ------
Total increase from investment opera-
tions................................... 3.59 5.86 1.06
------- ------ ------
Less dividends and distributions:
Dividends from net investment income..... -- (0.03) (0.02)
Distributions from net realized gains.... (0.01) (0.01) --
------- ------ ------
Total decrease from dividends and distri-
butions.................................. (0.01) (0.04) (0.02)
------- ------ ------
Net Asset Value, end of period............ $ 20.44 $16.86 $11.04
======= ====== ======
Total return.............................. 21.32% 53.14% 10.64%(a)
Ratios/supplemental data
Net Assets, end of period (in 000's)..... $15,476 $5,275 $ 880
Ratio of expenses to average net assets.. 1.50% 1.50% 1.50%(b)
Ratio of net investment income to average
net assets.............................. (0.26)% 0.07% 0.49%(b)
</TABLE>
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements
13
<PAGE>
GREEN CENTURY BALANCED FUND/JUNE 30, 1998 AND JULY 31, 1998
GREEN CENTURY EQUITY FUND/JULY 31, 1998
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Green Century Funds (the "Trust") is a Massachusetts business trust which
offers two separate series, the Green Century Balanced Fund (the "Balanced
Fund") and the Green Century Equity Fund (the "Equity Fund"). The Trust is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. The Trust accounts separately for
the assets, liabilities and operations of each series. The Balanced Fund
commenced operations on March 18, 1992 and the Equity Fund commenced operations
on September 13, 1995.
The Equity Fund invests substantially all of its assets in the Domini Social
Index Portfolio (the "Index Portfolio"), an open-end, diversified management
investment company having the same investment objective as the Fund. The Equity
Fund accounts for its investment in the Index Portfolio as a partnership
investment and records its share of the Index Portfolio's income, expenses and
realized and unrealized gains and losses daily. The value of such investment
reflects the Fund's proportionate interest in the net assets of the Index
Portfolio (2.40% at July 31, 1998). The financial statements of the Index
Portfolio are included elsewhere in this report and should be read in
conjunction with the Equity Fund's financial statements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
the Trust's significant accounting policies:
(A) BALANCED FUND INVESTMENT VALUATION: Equity securities listed on
national securities exchanges or reported through the NASDAQ system are
valued at last sale price. Unlisted securities or listed securities for
which last sale prices are not available are valued at the mean between
the closing bid and asked prices if such securities are listed on a
national exchange, and at the last quoted bid price in the case of
securities not listed on a national exchange. Debt securities (other
than short-term obligations maturing in sixty days or less) are valued
on the basis of valuation furnished by a pricing service which takes
into account appropriate factors such as institution-size trading in
similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, and other market data, without exclusive reliance on
quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of the
securities. Securities, if any, for which there are no such valuations
or quotations available are valued at fair value as determined in good
faith under guidelines established by the Trustees. Short-term
obligations maturing in sixty days or less are valued at amortized cost,
which approximates market value. EQUITY FUND INVESTMENT VALUATION:
Valuation of securities by the Index Portfolio is discussed in Note 1 of
the Index Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
(B) BALANCED FUND SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gains and
losses from securities transactions are determined using the identified
cost basis. Interest income is recognized on the accrual basis and
dividend income is recorded on ex-dividend date.
EQUITY FUND SECURITIES TRANSACTIONS AND INVESTMENT INCOME: The Fund earns
income, net of Index Portfolio expenses, daily based on its investment in
the Index Portfolio.
14
<PAGE>
GREEN CENTURY BALANCED FUND
GREEN CENTURY EQUITY FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(C) DISTRIBUTIONS: Distributions to shareholders are recorded on the ex-
dividend date. The Funds declare and pay dividends of net investment
income, if any, semi-annually and distribute net realized capital gains,
if any, annually. The amount and character of income and net realized
gains to be distributed are determined in accordance with Federal income
tax rules and regulations, which may differ from generally accepted
accounting principles. These differences are attributable to permanent
book and tax accounting differences. Accordingly, at June 30, 1998 for
the Balanced Fund, a reclassification was recorded to increase
undistributed net investment income and reduce undistributed net
realized gain by $7,692. No additional reclassification was required for
the Balanced Fund for the period ended July 31, 1998. At July 31, 1998
for the Equity Fund, a reclassification was recorded to increase
undistributed net investment income and reduce accumulated net realized
gain on investment by $26,637.
(D) BALANCED FUND OPTIONS WRITTEN: When the Balanced Fund writes a call
option or a put option, an amount equal to the premium received by the
Fund is recorded as a liability, the value of which is marked-to-market
daily. When a written option expires, the Balanced Fund realizes a gain
equal to the amount of the premium originally received. When the
Balanced Fund enters into a closing purchase transaction, the Fund
realizes a gain (or loss if the cost of the closing purchase transaction
exceeds the premium originally received when the option was written)
without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is eliminated. When a
call option is exercised, the Fund realizes a gain or loss from the sale
of the underlying security and the proceeds from such sale are increased
by the premium originally received. When a put option is exercised, the
amount of the premium originally received will reduce the cost of the
security which the Fund purchased upon exercise.
The risk in writing a call option is that the Balanced Fund may forego
the opportunity for profit if the market price of the underlying security
increases and the option is exercised. The risk in writing a put option
is that the Fund may incur a loss if the market price of the underlying
security decreases and the option is exercised. There is also the risk
the Fund may not be able to enter into a closing transaction because of
an illiquid secondary market. In addition, the Fund could be exposed to
risks if the counterparties to the transaction are unable to meet the
terms of the contracts.
(E) FEDERAL TAXES: Each series of the Trust is treated as a separate entity
for Federal income tax purposes. Each Fund's policy is to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provisions for Federal income or
excise tax are necessary. The Balanced Fund's accumulated net realized
loss on sales of investments for federal income tax purposes at July 31,
1998 is $32,969. This loss carryover is available to offset future
taxable gains in the Balanced Fund and, if not applied, will expire in
2006.
NOTE 2--TRANSACTIONS WITH AFFILIATES
(A) INVESTMENT ADVISER: Green Century Capital Management, Inc. ("Green
Century") is the adviser ("the Adviser") for the Balanced Fund and
oversees the portfolio management of the Balanced Fund on a day-to-day
basis. For these services, Green Century receives a fee, accrued daily
and paid monthly, at an annual rate equal to 0.75% of the Balanced
Fund's average daily net assets.
(B) SUBADVISER: Winslow Management Company ("Winslow"), a division of Eaton
Vance Management, is the subadviser for the Balanced Fund. For its
services, Winslow is paid a fee by the Adviser at an annual rate equal
to 0.40% of the average daily net assets of the Balanced Fund, subject
to an adjustment up or down of 0.20% annually. For the year ended June
30, 1998, and the
15
<PAGE>
GREEN CENTURY BALANCED FUND
GREEN CENTURY EQUITY FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
one month ended July 31, 1998, Green Century accrued fees of $60,011 and
$5,491 respectively to Winslow.
(C) ADMINISTRATOR: Green Century is the administrator ("the Administrator")
of the Green Century Funds. Pursuant to the Administrative Services
Agreement, Green Century pays all the expenses of each Fund other than
the investment advisory fees, fees under the Distribution Plan,
interest, taxes, brokerage costs and other capital expenses, expenses of
non-interested trustees (including counsel fees) and any extraordinary
expenses. For these services, Green Century receives a fee from the
Balanced Fund at an annual rate equal to 1.50% of the Fund's average
daily net assets, and receives a fee from the Equity Fund at a rate such
that immediately following any payment to the Administrator, the
combined total operating expenses of the Fund and the Index Portfolio
(including investment advisory and distribution fees and any
amortization of organization expenses), on an annual basis, do not
exceed 1.50% of the Fund's average daily net assets.
(D) SUBADMINISTRATOR: Pursuant to a Subadministrative Services Agreement
with the Administrator, Sunstone Financial Group, Inc. ("Sunstone"), as
Subadministrator, is responsible for conducting certain day-to-day
administration of the Trust subject to the supervision and direction of
the Administrator. For the year ended June 30, 1998 and the one month
ended July 31, 1998, Green Century accrued fees of $34,436 and $3,304
respectively to Sunstone relating to services performed on behalf of the
Balanced Fund, and for the year ended July 31, 1998, Green Century
accrued fees of $35,388 to Sunstone relating to services performed on
behalf of the Equity Fund. Prior to July 7, 1997, Signature Broker-
Dealer Services, Inc. ("Signature") served as Subadministrator of the
Funds. For the year ended June 30, 1998, Green Century accrued fees of
$273 to Signature relating to services performed on behalf of the
Balanced Fund.
(E) DISTRIBUTION PLAN: The Trust has adopted a Distribution Plan (the
"Plan") with respect to the Balanced Fund in accordance with Rule 12b-1
under the Act. The Plan provides that the Balanced Fund pay a fee to
Sunstone Distribution Services, LLC, as distributor of shares of the
Balanced Fund, at an annual rate not to exceed 0.25% of the Balanced
Fund's average daily net assets. The fee is reimbursement for, or in
anticipation of, expenses incurred for distribution-related activities.
For the year ended June 30, 1998 and the one month ended July 31, 1998,
the Balanced Fund accrued and paid $34,488 and $3,437 respectively to
Sunstone Distribution Services, LLC for services provided pursuant to
the plan. Prior to July 7, 1997, Signature served as the Distributor of
the Balanced Fund. For the year ended June 30, 1998, the Balanced Fund
accrued and paid $456 to Signature for services provided pursuant to the
Plan.
16
<PAGE>
GREEN CENTURY BALANCED FUND
GREEN CENTURY EQUITY FUND
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 3--INVESTMENT TRANSACTIONS
The Balanced Fund's purchases and sales of securities, other than short-term
securities, aggregated $16,363,926 and $13,008,657, respectively for the year
ended June 30, 1998, and $600,031 and $683,794 respectively for the one month
ended July 31, 1998.
The Balanced Fund's activity in written options was as follows:
<TABLE>
<CAPTION>
PREMIUM CONTRACTS
<S> <C> <C>
For the Year Ended June 30, 1998:
Options outstanding at June 30, 1997........................ $ 27,847 155
Options written............................................. 106,142 686
Options exercised........................................... (24,223) (210)
Options expired............................................. (86,752) (541)
Options closed.............................................. (6,569) (45)
-------- ----
Options outstanding at June 30, 1998........................ $ 16,445 45
======== ====
For the One Month Ended July 31, 1998:
Options outstanding at June 30, 1998........................ $ 16,445 45
Options written............................................. 6,664 34
Options closed.............................................. (16,445) (45)
-------- ----
Options outstanding at July 31, 1998........................ $ 6,664 34
======== ====
</TABLE>
Additions and reductions in the Equity Fund's investment in the Index
Portfolio aggregated $10,111,597 and $1,738,306 for the year ended July 31,
1998.
NOTE 4--CAPITAL SHARE TRANSACTIONS
Capital share transactions for the Balanced Fund and the Equity Fund were as
follows:
<TABLE>
<CAPTION>
BALANCED FUND EQUITY FUND
----------------------------------------- ------------------------
FOR THE
FOR THE ONE FOR THE FOR THE YEAR ENDED FOR THE
MONTH ENDED YEAR ENDED YEAR ENDED JULY YEAR ENDED
JULY 31, 1998 JUNE 30, 1998 JUNE 30, 1997 31, 1998 JULY 31, 1997
<S> <C> <C> <C> <C> <C>
Shares sold............. 41,766 360,830 178,968 535,842 248,224
Reinvestment of divi-
dends.................. 0 78,147 50,015 307 329
Shares redeemed......... (22,956) (72,916) (30,384) (92,049) (15,392)
------- ------- ------- ------- -------
18,810 366,061 198,599 444,100 233,161
======= ======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
TAX INFORMATION--UNAUDITED
The federal tax status of distributions per share made to shareholders on
December 29, 1997 was as follows:
<TABLE>
<CAPTION>
NET 28% 20%
INVESTMENT SHORT-TERM LONG-TERM LONG-TERM
INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL GAINS
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balanced Fund.............. $0.0880 $0.4044 $0.4976 $0.4488
Equity Fund................ NONE $0.0004 NONE $0.0123
</TABLE>
For the Balanced Fund for the year ended June 30, 1998, 3.2% of dividends
paid from net investment income and short-term capital gains qualified for the
70% dividends received deduction available to corporate shareholders. For the
one-month period ended July 31, 1998, the Balanced Fund did not pay any
dividends from net investment income or short-term capital gains that would
qualify for the 70% dividends received deduction available to corporate
shareholders.
For the year ended July 31, 1998, the Equity Fund did not pay any dividends
from net investment income or short-term capital gains that would qualify for
the 70% dividends received deduction available to corporate shareholders.
17
<PAGE>
[LOGO OF KPMG PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Green Century Funds
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Green Century Balanced Fund
(the "Fund") as of July 31, 1998 and June 30, 1998, and the related statements
of operations for the one-month period ended July 31, 1998 and the year ended
June 30, 1998, and statements of changes in net assets for the one-month period
ended July 31, 1998 and each of the years in the two-year period ended June 30,
1998 and financial highlights for the one month period ended July 31, 1998 and
each of the years in the three-year period ended June 30, 1998. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the years in the two-year period ended June 30, 1995
were audited by other auditors whose report thereon, dual-dated July 14, 1995
and August 3, 1995, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1998 and June 30, 1998 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Green Century Balanced Fund as of July 31, 1998 and June 30, 1998, the results
of its operations, changes in its net assets and financial highlights for the
years or periods described in the first paragraph above, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
August 24, 1998
18
<PAGE>
[LOGO OF KPMG PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Green Century Funds
We have audited the accompanying statement of assets and liabilities of the
Green Century Equity Fund (the "Fund") as of July 31, 1998, and the related
statement of operations for the year then ended, and statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period then ended,
and for the period from September 13, 1995 (commencement of operations) to July
31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Green Century Equity Fund as of July 31, 1998, the results of its operations,
changes in its net assets and financial highlights for the years or periods
described in the first paragraph above, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
August 24, 1998
19
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
APPAREL--0.3%
Brown Group, Inc. ...................................... 1,700 $ 27,413
Hartmarx Corporation (b)................................ 4,400 29,700
Liz Claiborne, Inc. .................................... 8,600 332,175
Oshkosh B'Gosh.......................................... 1,300 53,300
Phillips-Van Heusen Corporation......................... 3,000 41,250
Reebok International Ltd. (b)........................... 7,200 154,350
Russell Corporation..................................... 4,800 156,900
Springs Industries, Inc................................. 2,500 95,781
Stride Rite Corporation................................. 5,100 61,838
Timberland Company (The) (b)............................ 1,500 96,750
V. F. Corporation....................................... 16,200 762,413
------------
1,811,870
------------
BANKING--6.9%
Banc One Corporation.................................... 94,794 4,899,665
BankAmerica Corporation................................. 92,500 8,301,875
BankBoston Corporation.................................. 39,700 1,920,488
Bankers Trust New York Corporation...................... 13,000 1,456,813
Fifth Third Bancorp..................................... 35,425 2,205,206
First Chicago NBD Corp.................................. 38,606 3,235,665
Mellon Bank Corporation................................. 35,100 2,364,863
Morgan (J.P.) & Co. Incorporated........................ 23,900 3,011,400
Norwest Corporation..................................... 102,300 3,676,406
PNC Bank Corp. ......................................... 40,200 2,168,287
SunTrust Banks, Inc. ................................... 28,300 2,065,900
Synovus Financial Corp. ................................ 34,950 773,269
Vermont Financial Services Corp. ....................... 1,300 34,125
Wachovia Corporation.................................... 27,800 2,380,375
Washington Mutual Inc. ................................. 51,970 2,075,552
Wells Fargo & Company................................... 11,500 4,092,562
------------
44,662,451
------------
COMMERCIAL PRODUCTS & SERVICES--1.9%
Angelica Corporation.................................... 800 17,850
Avery Dennison Corporation.............................. 15,300 880,706
Bemis Company, Inc. .................................... 6,800 262,650
Cintas Corporation...................................... 13,000 660,563
Deluxe Corporation...................................... 10,300 350,844
DeVry Inc. (b).......................................... 8,800 179,300
Donnelley (R.R.) & Sons Company......................... 18,500 786,250
Harland (John H.) Company............................... 3,300 51,975
Herman Miller, Inc...................................... 11,700 324,675
HON Industries, Inc. ................................... 7,900 226,631
Ikon Office Solutions................................... 17,200 184,900
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMERCIAL PRODUCTS & SERVICES--(CONTINUED)
Interface Inc. ......................................... 6,900 $ 112,988
Kelly Services, Inc. ................................... 4,975 170,083
Moore Corporation....................................... 11,300 121,475
National Service Industries, Inc. ...................... 5,500 285,656
New England Business Service, Inc....................... 1,300 39,325
Pitney Bowes Inc........................................ 38,300 1,934,150
Sealed Air Corporation (b).............................. 11,100 444,000
Sonoco Products Company................................. 14,045 410,816
Standard Register Company............................... 3,700 133,663
Tennant Company......................................... 1,000 43,875
Xerox Corporation....................................... 44,300 4,676,419
------------
12,298,794
------------
CONSTRUCTION--0.3%
Apogee Enterprises, Inc. ............................... 3,000 38,906
Centex Corporation...................................... 7,600 311,600
Champion Enterprises Inc. (b)........................... 6,100 161,650
Fleetwood Enterprises, Inc.............................. 4,700 167,731
Granite Construction Incorporated....................... 2,100 74,550
Kaufman & Broad Home Corporation........................ 5,100 142,481
Rouse Company........................................... 8,700 253,931
Sherwin-Williams Company................................ 22,600 720,375
Skyline Corporation..................................... 900 28,969
TJ International, Inc................................... 1,700 39,525
------------
1,939,718
------------
ENERGY--2.6%
Amoco Corporation....................................... 129,900 5,423,325
Anadarko Petroleum Corporation.......................... 16,000 549,000
Apache Corporation...................................... 12,800 339,200
Atlantic Richfield Company.............................. 43,300 2,933,575
Consolidated Natural Gas Company........................ 12,500 646,094
Enron Corp.............................................. 44,500 2,355,719
Helmerich & Payne, Inc.................................. 6,400 131,200
Oryx Energy Company (b)................................. 13,500 248,906
Pennzoil Company........................................ 6,000 270,000
Rowan Companies, Inc. (b)............................... 11,100 156,788
Santa Fe Energy Resources, Inc. (b)..................... 13,100 115,444
Sun Company, Inc........................................ 12,500 467,969
Union Pacific Resources Group, Inc...................... 33,400 467,600
</TABLE>
20
<PAGE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
ENERGY--(CONTINUED)
Western Atlas Inc. (b).................................... 6,900 $ 451,519
Williams Companies........................................ 57,300 1,837,181
------------
16,393,520
------------
FINANCIAL SERVICES--5.8%
Ahmanson (H.F.) & Company................................. 14,300 944,694
American Express Company.................................. 62,200 6,865,325
Block (H & R), Inc........................................ 13,900 590,750
Dime Bancorp.............................................. 14,900 443,275
Edwards (A.G.), Inc....................................... 12,187 476,055
Fannie Mae................................................ 141,300 8,760,600
Federal Home Loan Mortgage Corporation.................... 92,600 4,375,350
FirstFed Financial Corp. (b).............................. 2,200 47,850
Golden West Financial..................................... 7,500 692,813
Household International, Inc.............................. 66,246 3,295,739
MBIA Inc.................................................. 12,700 855,663
MBNA Corporation.......................................... 67,700 2,267,950
Merrill Lynch & Co., Inc.................................. 46,800 4,563,000
Schwab (Charles) Corporation.............................. 35,800 1,342,500
Student Loan Marketing Association........................ 22,600 1,045,250
Transamerica Corporation.................................. 8,400 992,250
Value Line, Inc........................................... 1,000 36,875
------------
37,595,939
------------
FOODS & BEVERAGES--8.2%
Ben & Jerry's Homemade, Inc. (b).......................... 600 11,850
Bestfoods................................................. 39,000 2,169,375
Campbell Soup Company..................................... 61,500 3,321,000
Coca-Cola Company......................................... 333,800 26,933,488
Fleming Companies, Inc.................................... 4,900 75,031
General Mills Incorporated................................ 20,800 1,288,300
Heinz (H.J.) Company...................................... 49,600 2,734,200
Hershey Foods Corporation................................. 18,800 1,186,750
Kellogg Company........................................... 55,600 1,841,750
Nature's Sunshine Products, Inc........................... 2,100 43,575
Odwalla, Incorporated (b)................................. 500 6,000
PepsiCo, Inc.............................................. 202,100 7,844,006
Quaker Oats Company....................................... 18,200 962,325
Ralston Purina Company.................................... 42,600 1,371,188
Smucker (J.M.) Company.................................... 3,100 73,625
SUPERVALU Inc............................................. 7,700 381,631
Sysco Corporation......................................... 45,800 1,087,750
Tootsie Roll Industries, Inc.............................. 4,254 178,136
Wrigley (Wm.) Jr. Company................................. 15,500 1,390,156
------------
52,900,136
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
HEALTH CARE--8.9%
Acuson Corporation (b).................................... 2,800 $ 46,200
Allergan, Inc............................................. 8,400 438,900
ALZA Corporation (b)...................................... 11,500 447,062
Becton Dickinson and Company.............................. 16,400 1,355,050
Bergen Brunswig Corporation............................... 6,418 340,154
Biomet, Inc............................................... 14,300 446,875
Boston Scientific Corporation (b)......................... 25,600 1,961,600
Forest Laboratories, Inc. (b)............................. 10,200 382,500
Guidant Corp.............................................. 20,300 1,508,544
Humana Health Plans, Inc. (b)............................. 21,700 589,969
Johnson & Johnson......................................... 181,800 14,044,050
Mallinckrodt, Inc. ....................................... 9,300 257,494
Manor Care, Inc........................................... 8,100 302,231
Marquette Medical Systems, Inc. (b)....................... 2,000 48,250
Medtronic, Inc............................................ 63,100 3,908,256
Merck & Co., Inc.......................................... 161,500 19,914,969
Mylan Laboratories, Inc................................... 16,200 440,438
Oxford Health Plans, Inc. (b)............................. 10,200 82,237
Schering-Plough Corporation............................... 99,300 9,607,275
St. Jude Medical Inc. (b)................................. 11,600 353,800
Stryker Corporation....................................... 12,800 556,000
Sunrise Medical Inc. (b).................................. 1,900 22,800
United American Healthcare Corporation (b)................ 800 1,550
------------
57,056,204
------------
HOUSEHOLD GOODS--5.2%
Alberto-Culver Company.................................... 7,400 188,238
Avon Products, Inc. ...................................... 17,700 1,531,050
Bassett Furniture Industries.............................. 1,300 36,075
Black & Decker Corp. ..................................... 12,400 705,250
Church & Dwight Co., Inc.................................. 2,600 80,275
Clorox Company............................................ 13,800 1,414,500
Colgate-Palmolive Company................................. 39,700 3,669,769
Enesco Group, Inc......................................... 1,600 46,400
Fedders Corporation....................................... 5,400 35,775
Fort James Corp........................................... 29,600 999,000
Handleman Company (b)..................................... 4,200 37,538
Harman International Industries, Inc. .................... 2,430 95,833
Hasbro, Inc............................................... 17,350 627,853
Huffy Corporation......................................... 1,100 19,181
Kimberly-Clark Corporation................................ 75,264 3,382,176
Leggett & Platt........................................... 25,600 686,400
Mattel, Inc............................................... 39,285 1,510,017
Maytag Corporation........................................ 12,500 550,000
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
HOUSEHOLD GOODS--(CONTINUED)
Newell Co................................................. 21,000 $ 1,081,500
Oneida Ltd. .............................................. 1,600 41,800
Procter & Gamble Company.................................. 181,300 14,390,688
Rubbermaid Incorporated................................... 19,900 662,919
Shaw Industries, Inc. .................................... 16,100 297,850
Snap-On Incorporated...................................... 7,750 275,125
Stanley Works............................................. 11,300 493,669
Thomas Industries Inc..................................... 1,500 33,469
Whirlpool Corporation..................................... 10,000 605,000
------------
33,497,350
------------
INSURANCE--7.2%
Aetna, Inc................................................ 19,570 1,356,446
American General Corporation.............................. 34,262 2,340,523
American International Group, Inc......................... 94,500 14,251,781
Chubb Corporation......................................... 22,500 1,650,938
CIGNA Corporation......................................... 28,400 1,876,175
Cincinnati Financial Corporation.......................... 21,685 775,239
General Re Corporation.................................... 10,300 2,441,100
Hartford Steam Boiler Inspection and Insurance............ 3,750 194,766
Jefferson-Pilot Corporation............................... 13,850 780,794
Lincoln National Corp..................................... 13,400 1,283,050
MGIC Investment Corp...................................... 15,000 804,375
Marsh & McLennan Companies, Inc........................... 34,550 2,109,709
Providian Corporation..................................... 12,400 974,175
ReliaStar Financial Corporation........................... 12,100 600,463
SAFECO Corporation........................................ 18,400 829,150
St. Paul Companies, Inc................................... 31,464 1,138,603
Torchmark Corporation..................................... 18,300 801,769
Travelers Group Inc....................................... 155,400 10,411,800
UNUM Corporation.......................................... 18,600 979,988
Wesco Financial Corporation............................... 900 329,456
------------
45,930,300
------------
MEDIA--3.8%
Banta Corporation......................................... 3,350 101,756
Comcast Corporation....................................... 49,500 2,247,607
Disney (Walt) Company..................................... 276,400 9,518,525
Dow Jones & Company....................................... 12,200 662,613
Harcourt General.......................................... 9,000 507,937
King World Productions, Inc. (b).......................... 9,300 260,400
Lee Enterprises, Inc. .................................... 5,800 165,662
McGraw-Hill Companies..................................... 12,900 1,056,994
Media General, Inc. ...................................... 3,500 162,969
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
MEDIA--(CONTINUED)
Media One Group............................................ 82,300 $ 3,976,119
Meredith Corporation....................................... 6,700 280,144
New York Times Company..................................... 25,000 768,750
Scholastic Corporation (b)................................. 2,200 92,194
Tele-Communications, Inc. (b).............................. 68,500 2,859,875
Times Mirror Company....................................... 11,600 696,725
Viacom, Inc. (b)........................................... 9,300 631,237
Washington Post Company.................................... 1,300 707,850
------------
24,697,357
------------
MISCELLANEOUS--1.1%
American Greetings Corporation............................. 9,300 429,544
Caraustar Industries, Inc. ................................ 3,000 81,937
Case Corporation........................................... 9,500 322,406
CPI Corp. ................................................. 1,000 25,000
Cross (A.T.) Company....................................... 1,400 14,525
Deere & Company............................................ 33,300 1,338,244
Gibson Greetings, Inc. .................................... 1,900 43,225
Hillenbrand Industries, Inc. .............................. 8,700 486,656
Hunt Manufacturing Co. .................................... 1,100 19,250
Ionics, Inc. .............................................. 1,900 60,325
Jostens, Inc. ............................................. 4,300 97,019
Marriott International, Inc. .............................. 34,000 1,105,000
Omnicom Group Inc. ........................................ 22,400 1,176,000
Polaroid Corporation....................................... 5,800 191,400
Service Corporation International.......................... 34,300 1,299,112
Toro Company............................................... 1,200 32,550
Whitman Corporation........................................ 12,900 273,319
------------
6,995,512
------------
MISCELLANEOUS MANUFACTURING--0.8%
Applied Materials, Inc. (b)................................ 49,100 1,644,850
Brady (W.H.) Co. .......................................... 2,200 45,100
Cincinnati Milacron Inc. .................................. 4,400 96,250
CLARCOR Inc. .............................................. 2,850 51,122
Crown Cork & Seal Company, Inc. ........................... 16,300 670,338
Dionex Corporation (b)..................................... 2,400 53,250
Fastenal Company........................................... 4,900 213,915
General Signal Corporation................................. 5,300 211,337
Gerber Scientific Inc. .................................... 3,000 83,625
Graco Inc. ................................................ 3,375 94,922
Illinois Tool Works Inc. .................................. 33,700 1,889,306
Isco, Inc. ................................................ 300 1,950
Lawson Products, Inc. ..................................... 1,100 25,094
</TABLE>
22
<PAGE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
MISCELLANEOUS MANUFACTURING--(CONTINUED)
Millipore Corporation..................................... 5,600 $ 135,800
Nordson Corporation....................................... 2,000 94,125
Watts Industries.......................................... 2,900 58,362
Wellman, Inc. ............................................ 3,500 69,344
------------
5,438,690
------------
RESOURCE DEVELOPMENT--1.2%
Air Products & Chemicals, Inc. ........................... 31,400 1,099,000
Aluminum Company of America............................... 22,600 1,566,463
Battle Mountain Gold Company.............................. 29,300 137,344
Betz Laboratories......................................... 3,400 227,800
Cabot Corporation......................................... 8,600 233,813
Calgon Carbon Corporation................................. 4,300 43,538
Consolidated Papers, Inc. ................................ 11,400 328,463
Cyprus Amax Minerals Company.............................. 11,900 148,750
Echo Bay Mines Ltd (b).................................... 17,800 36,713
Fuller (H.B.) Company..................................... 1,800 101,250
IMCO Recycling Inc. ...................................... 1,600 25,700
Inland Steel Industries, Inc. ............................ 6,200 174,763
Mead Corporation.......................................... 13,300 399,831
Morton International, Inc. ............................... 16,600 401,513
Nalco Chemical Company.................................... 8,600 295,088
Nucor Corporation......................................... 11,750 511,125
Praxair, Inc. ............................................ 20,800 1,024,400
Sigma-Aldrich Corporation................................. 13,400 386,925
Westvaco Corporation...................................... 12,900 323,306
Worthington Industries, Inc. ............................. 12,300 177,581
------------
7,643,366
------------
RETAIL--10.7%
Albertson's, Inc. ........................................ 33,300 1,600,481
American Stores Companies................................. 35,500 823,156
Bob Evans Farms, Inc. .................................... 4,600 85,819
Charming Shoppes, Inc. (b)................................ 12,800 59,200
Circuit City Stores, Inc. ................................ 13,100 677,925
Claire's Stores, Inc. .................................... 6,200 129,425
Costco Companies Inc. (b)................................. 28,915 1,640,926
CVS Corporation........................................... 51,600 2,115,600
Dayton Hudson Corporation................................. 59,100 2,825,719
Dillard Department Stores, Inc. .......................... 14,100 484,688
Dollar General Corporation................................ 18,785 770,185
Egghead, Inc. (b)......................................... 3,100 44,950
Gap, Inc. (The)........................................... 54,850 3,270,431
Great Atlantic & Pacific Tea Company, Inc. ............... 5,000 150,313
Hannaford Bros. Co. ...................................... 5,400 234,563
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
RETAIL--(CONTINUED)
Home Depot, Inc. ......................................... 198,598 $ 8,316,291
Kmart Corporation (b)..................................... 66,000 1,076,625
Kroger Co. (b)............................................ 34,600 1,637,013
Lands' End, Inc. (b)...................................... 3,600 94,725
Lillian Vernon Corporation................................ 1,000 16,375
Limited, Inc. (The)....................................... 34,300 919,669
Longs Drug Stores Corporation............................. 5,100 140,888
Lowe's Companies, Inc. ................................... 47,100 1,813,350
Luby's Cafeterias, Inc. .................................. 2,300 37,519
May Department Stores Company............................. 31,000 1,989,813
McDonald's Corporation.................................... 92,900 6,206,881
Nordstrom, Inc. .......................................... 20,300 633,740
Penney (J.C.) Company, Inc. .............................. 33,900 1,989,506
Pep Boys--Manny, Moe & Jack............................... 8,100 139,725
Ruby Tuesday, Inc. ....................................... 3,400 52,488
Ryan's Family Steakhouse, Inc. (b)........................ 5,300 57,638
Sears, Roebuck and Co. ................................... 52,600 2,669,450
Spec's Music, Inc. (b).................................... 200 660
Starbucks Corporation (b)................................. 11,400 477,375
Tandy Corporation......................................... 13,100 744,244
TCBY Enterprises, Inc. ................................... 2,300 18,831
TJX Companies, Inc. ...................................... 43,000 1,010,500
Toys "R' Us, Inc. (b)..................................... 37,120 844,480
Venator Group, Inc. ...................................... 17,200 247,250
Walgreen Company.......................................... 67,100 2,897,881
Wal-Mart Stores, Inc. .................................... 303,500 19,158,438
Wendys International Inc. ................................ 16,700 372,619
Whole Foods Market, Inc. (b).............................. 3,400 184,450
------------
68,661,805
------------
TECHNOLOGY--25.4%
3Com Corporation (b)...................................... 47,500 1,175,625
Adaptec Inc (b)........................................... 14,900 173,212
Advanced Micro Devices, Inc. (b).......................... 18,300 315,675
American Power Conversion (b)............................. 12,100 390,225
Analog Devices, Inc. (b).................................. 21,600 464,400
Apple Computer, Inc. (b).................................. 17,700 612,863
AT&T Corporation.......................................... 219,600 13,313,250
Ault Inc. (b)............................................. 500 1,969
Autodesk, Inc............................................. 6,000 196,500
Automatic Data Processing, Inc............................ 40,500 2,741,344
Avnet, Inc. .............................................. 5,000 274,375
Baldor Electric Company................................... 4,900 101,675
Broderbund Software Inc. (b).............................. 2,800 58,800
Ceridian Corp. (b)........................................ 9,700 554,719
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
TECHNOLOGY--(CONTINUED)
Cisco Systems, Inc. (b)................................... 138,300 $ 13,242,225
Citizens Utilities Company (b)............................ 32,467 284,086
Compaq Computer Corporation............................... 223,389 7,343,897
Computer Associates International, Inc.................... 73,800 2,449,238
Cooper Industries, Inc.................................... 15,700 823,269
Dell Computer Corp. (b)................................... 87,000 9,447,652
DSC Communications Corporation (b)........................ 15,800 479,430
EMC Corp. Mass (b)........................................ 67,300 3,297,700
Grainger (W.W.), Inc. .................................... 12,600 555,975
Hewlett-Packard Company................................... 140,000 7,770,000
Hubbell Incorporated...................................... 8,560 359,520
Hutchinson Technology (b)................................. 2,200 47,575
Inprise Corp. (b)......................................... 6,500 40,625
Intel Corporation......................................... 229,300 19,361,519
International Business Machines Corporation............... 129,800 17,198,500
LSI Logic (b)............................................. 17,900 370,306
MCI Communications Corporation............................ 97,900 6,339,025
Merix Corporation (b)..................................... 600 3,600
Micron Technology, Inc. (b)............................... 28,300 944,513
Microsoft Corporation (b)................................. 333,100 36,682,638
Molex Incorporated........................................ 20,837 591,250
National Semiconductor Corporation (b).................... 20,900 257,331
Novell Inc. (b)........................................... 47,700 542,588
Perkin-Elmer Corporation.................................. 6,100 357,612
QRS Corporation (b)....................................... 700 22,050
Quarterdeck Corporation (b)............................... 7,300 4,562
Raychem Corporation....................................... 10,700 333,037
Scientific Atlanta Inc. .................................. 10,300 247,844
Shared Medical Systems Corporation........................ 3,400 230,775
Solectron Corporation (b)................................. 15,100 724,800
Sprint Corporation........................................ 57,800 4,046,000
Stratus Computer, Inc. (b)................................ 3,200 92,000
Sun Microsystems, Inc. (b)................................ 51,300 2,423,925
Tektronix, Inc............................................ 6,400 175,200
Tellabs, Inc. (b)......................................... 24,600 1,851,917
Texas Instruments, Inc.................................... 52,400 3,107,974
Thomas & Betts Corporation................................ 7,000 287,000
Xilinx, Inc. (b).......................................... 9,500 356,250
------------
163,068,041
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
TRANSPORTATION--1.3%
Airborne Freight Corporation............................... 6,400 $ 152,800
Alaska Air Group, Inc. (b)................................. 3,200 134,000
AMR Corporation (b)........................................ 24,400 1,743,075
Consolidated Freightways Corporation (b)................... 2,100 24,413
Delta Air Lines, Inc. ..................................... 10,000 1,225,000
FDX Holding Corporation (b)................................ 19,800 1,201,613
GATX Corporation........................................... 6,200 237,925
Norfolk Southern Corporation............................... 50,700 1,514,662
Roadway Express, Inc. ..................................... 2,000 27,250
Ryder System, Inc.......................................... 9,500 275,500
Southwest Airlines Co. .................................... 29,700 978,244
UAL Corporation (b)........................................ 7,700 599,637
Yellow Corporation (b)..................................... 2,800 44,800
------------
8,158,919
------------
UTILITIES--7.3%
AGL Resources Inc.......................................... 7,300 137,331
American Water Works, Inc. ................................ 10,200 305,363
Ameritech.................................................. 148,700 7,314,181
Bell Atlantic Corporation.................................. 209,822 9,520,673
BellSouth Corporation...................................... 133,700 9,133,381
CalEnergy Company, Inc. (b)................................ 9,000 244,688
Cleco Corporation.......................................... 3,000 89,063
Connecticut Energy Corporation............................. 1,000 25,625
Eastern Enterprises........................................ 2,700 107,831
El Paso Energy Corporation................................. 15,700 533,800
Energen Corporation........................................ 3,900 67,031
Equitable Resources, Inc. ................................. 4,800 118,200
Frontier Corporation....................................... 22,800 765,225
Idaho Power Company........................................ 4,900 147,919
LG&E Energy Corp........................................... 17,200 419,250
Marketspan Corp............................................ 20,600 567,788
MCN Corporation............................................ 10,000 248,125
New Century Energies, Inc. ................................ 14,500 603,563
NICOR Inc. ................................................ 6,100 234,850
Northwest Natural Gas Co................................... 3,100 81,375
Northwestern Corp.......................................... 2,000 49,750
Oklahoma Gas and Electric Company.......................... 10,300 268,444
Peoples Energy Corporation................................. 4,600 161,000
Potomac Electric Power Company............................. 15,100 364,287
SBC Communications Inc..................................... 248,518 10,158,173
Sonat Inc.................................................. 14,600 427,050
Southern New England Telecommunications Corporation........ 8,900 612,987
</TABLE>
24
<PAGE>
PORTFOLIO OF INVESTMENTS--(CONCLUDED)
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
UTILITIES--(CONTINUED)
Telephone and Data Systems, Inc. .......................... 7,800 $ 312,000
U S West Communications Group.............................. 67,841 3,621,013
Washington Gas Light Company............................... 5,600 133,000
------------
46,772,966
------------
VEHICLE COMPONENTS--0.5%
Cooper Tire and Rubber Company............................. 10,000 188,750
Cummins Engine Company, Inc. .............................. 5,000 278,438
Dana Corporation........................................... 22,100 1,099,475
Federal-Mogul Corporation.................................. 6,500 390,812
Genuine Parts Company...................................... 23,300 808,219
Modine Manufacturing Company............................... 3,800 126,825
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
VEHICLE COMPONENTS--(CONTINUED)
Smith (A.O.) Corporation................................... 2,000 $ 82,625
Spartan Motors, Inc. ...................................... 1,200 6,450
SPX Corporation (b)........................................ 1,600 90,890
------------
3,072,484
------------
TOTAL INVESTMENTS (A)--99.4%...................................... $638,595,422
Other Assets, less liabilities--0.6%.............................. 3,640,213
------------
NET ASSETS--100.0%................................................ $642,235,635
============
</TABLE>
- -------
(a) The aggregate cost for book and federal income tax purposes is
$462,874,654, the aggregate gross unrealized appreciation is $182,864,578,
and the aggregate gross unrealized depreciation is $7,143,810, resulting in
net unrealized appreciation of $175,720,768.
(b) Non-income producing security.
See Notes to Financial Statements
25
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $462,874,654).......................... $638,595,422
Cash.............................................................. 7,419,976
Receivable for securities sold.................................... 706,600
Dividends receivable.............................................. 698,498
------------
Total assets................................................... 647,420,496
------------
LIABILITIES:
Payable for securities purchased.................................. 4,868,668
Accrued expenses (Note 2)......................................... 316,193
------------
Total liabilities.............................................. 5,184,861
------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.......... $642,235,635
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $930)... $ 5,509,338
-----------
EXPENSES:
Management fee (Note 2).............................. 753,366
Sub management fee (Note 2).......................... 86,354
Professional fees.................................... 70,185
Custody fees (Note 3)................................ 166,325
Trustee fees......................................... 5,226
Administrative fee (Note 2).......................... 6,149
Miscellaneous........................................ 2,178
-----------
Total expenses....................................... 1,089,783
Fees paid indirectly................................ (157,745)
Management fee waived............................... (51,019)
-----------
Net expenses...................................... 881,019
-----------
NET INVESTMENT INCOME................................ 4,628,319
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales.................................. $ 19,964,446
Cost of securities sold.............................. 15,128,020
------------
Net realized gain on investments.................. 4,836,426
NET CHANGES IN UNREALIZED APPRECIATION OF INVESTMENTS
Beginning of year................................... 91,161,408
End of year......................................... 175,720,768
------------
Net change in unrealized appreciation............. 84,559,360
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS............................................... $94,024,105
===========
</TABLE>
See Notes to Financial Statements
26
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income............................. $ 4,628,319 $ 2,240,276
Net realized gain on investments.................. 4,836,426 433,417
Net change in unrealized appreciation of invest-
ments............................................ 84,559,360 74,540,873
------------ ------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 94,024,105 77,214,566
------------ ------------
Transactions in Investors' Beneficial Interest:
Additions......................................... 267,044,708 137,135,556
Reductions........................................ (11,192,148) (22,391,710)
------------ ------------
Net Increase in Net Assets from Transactions in
Investors' Beneficial Interests.................. 255,852,560 114,743,846
------------ ------------
Total Increase in Net Assets....................... 349,876,665 191,958,412
NET ASSETS:
Beginning of year................................. 292,358,970 100,400,558
------------ ------------
End of year....................................... $642,235,635 $292,358,970
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets (000's)...... $642,236 $292,359 $100,401 $54,003 $31,322
Ratio of net investment
income to average net
assets................. 1.05%(1) 1.34% 1.48%(3) 1.85%(4) 2.13%(4)
Ratio of expenses to av-
erage net assets....... 0.25%(1)(2) 0.29%(2) 0.59%(2)(3) 0.43%(4) 0.29%(4)
Portfolio turnover
rate................... 5% 1% 5% 6% 8%
Average commission rate
paid per share......... $ 0.0402 $ 0.0512 $ 0.0496 -- --
</TABLE>
(1) Reflects a waiver of 0.01% of fees by the Manager due to limitations set
forth in the Management Agreement. Had the Manager not waived their fees,
the ratios of net investment income and expenses to average net assets for
the year ended July 31, 1998 would have been 1.04% and 0.25%, respectively.
(2) Ratio of expenses to average net assets for the years ended July 31, 1998,
1997 and 1996 include indirectly paid expenses. Excluding indirectly paid
expenses, the expense ratios would have been 0.20%, 0.25% and 0.50% for the
years ended July 31, 1998, 1997 and 1996, respectively.
(3) Had the Expense Payment Agreement and Sponsor Arrangement not been in
place, the ratios of net investment income and expense for the years ended
July 31, 1996 would have been 1.14% and 0.85% respectively.
(4) Reflects a voluntary waiver of fees by the Administrator and Adviser due to
the limitations set forth in the Expense Reimbursement Agreement. Had the
Administrator and Adviser not waived their fees, the ratios of net
investment income and expenses to average net assets for the years ended
July 31, 1995 and 1994 would have been 1.75% and 0.53% and 2.00% and 0.42%
respectively.
See Notes to Financial Statements
27
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO/JULY 31, 1998
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Domini Social Index Portfolio (the "Index Portfolio") is registered under the
Investment Company Act of 1940 (the "Act") as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on June 7, 1989. The Index Portfolio intends to correlate
its investment portfolio as closely as is practicable with the Domini 400
Social Index (the "Index"), which is a common stock index developed and
maintained by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"). The Declaration of
Trust permits the Trustees to issue an unlimited number of beneficial interests
in the Index Portfolio. The Index Portfolio commenced operations upon
effectiveness on August 10, 1990 and began investment operations on June 3,
1991.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
the Index Portfolio's significant accounting policies.
(A) VALUATION OF INVESTMENTS: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales
are reported.
(B) DIVIDEND INCOME: Dividend income is reported on the ex-dividend date.
(C) FEDERAL TAXES: The Index Portfolio will be treated as a partnership for
U.S. federal income tax purposes and is therefore not subject to U.S.
federal income tax. As such, each investor in the Index Portfolio will
be taxed on its share of the Index Portfolio's ordinary income and
capital gains. It is intended that the Portfolio will be managed in such
a way that an investor will be able to satisfy the requirements of the
Internal Revenue Code applicable to regulated investment companies.
(D) OTHER: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
NOTE 2--TRANSACTIONS WITH AFFILIATES
(A) MANAGER. Domini Social Investments LLC ("DSIL" or the "Manager") is
registered as an investment adviser under the Investment Advisers Act of
1940. The services provided by the Manager consist of investment
supervisory services, overall operational support and administrative
services. The administrative services include the provision of general
office facilities and supervising the overall administration of the
Index Portfolio. For its services under the Management Agreement, the
Manager receives from the Index Portfolio a fee accrued daily and paid
monthly at an annual rate equal to 0.20% of the Index Portfolio's
average daily net assets, subject to reduction to the extent necessary
to keep the aggregate annual operating expenses of the Index Portfolio
(excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses) at no greater than 0.20% of the average daily
net assets of the Index Portfolio through October 22, 1998 (the contract
anniversary date).
(B) SUBMANAGER. Mellon Equity provides investment submanagement services to
the Index Portfolio on a day-to-day basis pursuant to a Submanagement
Agreement with DSIL. Mellon Equity does not determine the composition of
the Domini Social Index. Under the Submanagement Agreement, DSIL pays
Mellon Equity an investment submanagement fee equal, on an annual basis,
to 0.10% of the average daily net assets of the Portfolio.
(C) PRIOR ADVISORY, MANAGEMENT, SPONSORSHIP AND ADMINISTRATIVE
AGREEMENTS. Prior to October 22, 1997, pursuant to an investment
advisory agreement, KLD served as investment adviser to the
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
Index Portfolio and furnished continuously an investment program by
determining the stocks to be included in the Index. KLD received from the
Index Portfolio a fee accrued daily and paid monthly at an annual rate
equal to 0.025% of the Index Portfolio's average daily net assets.
Additionally, prior to October 22, 1997, pursuant to a management
agreement, Mellon Equity served as investment manager and managed the
assets of the Index Portfolio on a daily basis. Prior to October 22, 1997,
pursuant to a sponsorship agreement, KLD furnished administrative services
for the Index Portfolio. KLD received from the Portfolio a fee accrued
daily and paid monthly at an annual rate equal to 0.025% of the average
daily net assets of the Portfolio for administrative services. Prior to
November 6, 1996, pursuant to an administrative services agreement,
Signature Broker-Dealer Services, Inc. served as the administrator of the
Portfolio. Prior to October 22, 1997, the management and administration
fees with respect to the Portfolio were equal to 0.15% of the Index
Portfolio's average daily net assets for its then current fiscal year.
NOTE 3--INVESTMENT TRANSACTIONS
Purchase and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $277,785,785 and $19,964,446, respectively.
Custody fees of the Portfolio were reduced by $157,745 which was compensation
for uninvested cash left on deposit with the custodian. Cash balances could
have been employed to earn additional income for the Portfolio.
29
<PAGE>
[LOGO OF KPMG PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Domini Social Index Portfolio (the
"Portfolio") as of July 31, 1998, and the related statement of operations for
the year then ended, and the related statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1998 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Domini Social Index Portfolio as of July 31, 1998, the results of its
operations for the year then ended, changes in its net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
August 24, 1998
30
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
YOUR NOTES
31
<PAGE>
- --------------------------------------------------------------------------------
Annual Report
- --------------------------------------------------------------------------------
INVESTMENT ADVISER (BALANCED FUND) AND ADMINISTRATOR
Green Century Capital Management, Inc.
29 Temple Place GREEN
Boston, MA 02111 CENTURY
1-800-93-GREEN FUNDS
INVESTMENT SUBADVISER (BALANCED FUND) [GRAPHIC
Winslow Management Company APPEARS
24 Federal Street HERE]
Boston, MA 02110
INVESTMENT MANAGER (INDEX PORTFOLIO)
Domini Social Investments LLC
11 West 25th Street
New York, NY 10010
INVESTMENT SUBMANAGER (INDEX PORTFOLIO)
Mellon Equity Associates
500 Grant Street, Suite 3700
Pittsburgh, PA 15258-0001
COUNSEL TO INDEPENDENT TRUSTEES OF THE FUNDS
Debevoise & Plimpton
555 13th Street, N.W.
Washington, DC 20004
SUBADMINISTRATOR AND DISTRIBUTOR
Sunstone Financial Group, Inc.
(Subadministrator)
Sunstone Distribution Services,
LLC (Distributor)
207 East Buffalo Street, Suite 400
Milwaukee, WI 53202
TRANSFER AGENT AND CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
COUNSEL TO GREEN CENTURY CAPITAL MANAGEMENT, INC.
Goulston & Storrs
400 Atlantic Avenue
Boston, MA 02110
INDEPENDENT AUDITORS Balanced
KPMG Peat Marwick LLP Fund
99 High Street June 30, 1998
Boston, MA 02110 July 31, 1998
- --------------------------------------------------------------------------------
GREEN [GRAPHIC APPEARS Equity Fund
CENTURY HERE] July 31, 1998
FUNDS(R)
An investment for your future.
Printed on recycled paper with soy-based ink.
