September 25, 1996
Dear Shareholder:
This October the DEVCAP Shared Return Fund will celebrate its one year
anniversary. Thanks to globally responsible investors like you, the Fund has
enjoyed great success in its first year. We have accumulated over $1 Million in
assets (as of the time of this writing) and have greatly increased the public's
awareness of the need for microenterprise lending. Most importantly, our success
will allow us to channel much needed funds to struggling enterpreneurs
throughout the world to start and operate their own businesses.
As you enjoy a competitive financial return on your investment in the DEVCAP
Shared Return Fund, you also have the peace of mind of knowing that your
investment will make a difference in the world. Your return is not only
financial, it is also the satisfaction of knowing that your dollars are bringing
hope to people that are working hard to improve their lives. DEVCAP's member
organizations work in a total of 54 countries in developing regions, and serve
over 173,000 microenterprise clients. Your contributions will allow DEVCAP's
microenterprise programs to provide participants from every continent the
opportunity to earn the additional income they need to improve the quality of
life for their family and their community. The profits the microentrepreneurs
make through their businesses do more than help individual families; they
contribute to the improvement of the entire community by producing higher levels
of health and nutrition, bettering education, and helping to heal the wounds of
years of war and internal strife.
Given the grassroots nature of DEVCAP's work, we rely heavily on current
DEVCAP supporters to help us to spread the word about the Shared Return Fund and
microenterprise development. Some of you have already asked us to speak to your
faith-based and community groups. Others have sent us names of people who wanted
to learn more about DEVCAP. Please help us to continue to grow and serve the
poor. If you can think of any friends or family members who may have an interest
in the fund, please take a minute to provide us with their names and addresses
on the enclosed business reply cards.
If you have any questions or comments about your investment in the DEVCAP
Shared Return Fund, please do not hesitate to call us at (800) 371-2655. We are
pleased to have you as a shareholder and value your opinions. Thank you once
again for your investment in the DEVCAP Shared Return Fund.
Sincerely yours,
Gil Crawford
Chairman of the Board of Trustees
This material must be accompanied or preceded by the Fund's prospectus. Shares
of the fund are distributed by Signature Broker- Dealer Services, Inc.
<PAGE>
COMPARISON OF $10,000 INVESTMENT IN THE
DEVCAP SHARED RETURN FUND(1) AND S&P 500(2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DEVCAP S&P
<S> <C> <C>
Jun-91 10000 10000
Jul-91 9983.318 9986.594
Oct-91 10038.51 10186.2
Jan-92 10655.22 10690.4
Apr-92 10628.6 10929.87
Jul-92 11105.32 11261.64
Oct-92 11328.18 11199.57
Jan-93 12070.76 11819.83
Apr-93 11789.33 11937.81
Jul-93 12096.49 12242.64
Oct-93 12680.16 12869.34
Jan-94 12930.11 13338.96
Apr-94 12209.36 12571.58
Jul-94 12327.91 12873.42
Oct-94 12743.54 13365.86
Jan-95 12825.92 13409.22
Apr-95 13927.59 14763.71
Jul-95 15283.56 16229.59
Oct-95 15878.02 16895.76
Jan-96 17115.48 18587.47
Apr-96 17645.82 19220
Jul-96 17211.9 18916.16
Average Annual
Total Return
1 Year ended
7/31/96 12.6%
5 Years ended
7/31/96 11.6%
Inception (6/3/91)
to 7/31/96 11.5%
Past performance is not predictive of future
performance.
</TABLE>
(1) The DEVCAP Shared Return Fund performance prior to October 19, 1995
(commencement of investment operations) is the investment return of the
Domini Social Index Portfolio adjusted for the expenses of the Fund.
(2) The performance information in this chart represents past performance. The
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.
The Fund began investing in the stocks comprising the Domini Social Index on
June 3, 1991.
2
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio................... $ 642,641
Deferred organization expenses................................ 46,892
Receivable from affiliate..................................... 8,727
----------
Total assets.............................................. 698,260
LIABILITIES:
Accrued organization expense.................................. 55,643
----------
NET ASSETS........................................................ $ 642,617
----------
----------
NET ASSETS CONSIST OF:
Paid-in capital............................................... 639,552
Undistributed net investment income........................... (1,353)
Accumulated net realized gain on investment................... 2,050
Net unrealized appreciation on investment..................... 2,368
----------
NET ASSETS........................................................ $ 642,617
----------
----------
SHARES OUTSTANDING................................................ 60,002
----------
----------
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE
($642,617 DIVIDED BY 60,002 shares)............................ $ 10.71
----------
----------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 19, 1995 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO JULY
31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM DOMINI SOCIAL INDEX PORTFOLIO:
Investment income from Portfolio................................. $4,936
Expenses from Portfolio.......................................... 1,263
------
Net income from Portfolio.................................... 3,673
EXPENSES:
Transfer agent fee................................. $ 18,589
Professional fees.................................. 15,418
Insurance.......................................... 8,000
Servicing and fund accounting agent fee............ 7,500
Registration fees.................................. 4,782
Trustee fees and expenses.......................... 1,614
Administration fees................................ 375
Amortization of organization expenses.............. 8,750
--------
Total expenses................................. 65,028
Less reimbursement and waiver of expenses...... (60,002)
--------
Net expenses............................................. 5,026
------
NET INVESTMENT LOSS.............................................. (1,353)
------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT:
Net realized gain from Portfolio................................. 2,050
Net change in unrealized appreciation from Portfolio............. 2,368
------
NET REALIZED AND UNREALIZED GAIN FROM DOMINI SOCIAL INDEX
PORTFOLIO...................................................... 4,418
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $3,065
------
------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 19, 1995 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO JULY
31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment loss.............................. $ (1,353)
Net realized gain from Portfolio................. 2,050
Net change in unrealized appreciation from
Portfolio....................................... 2,368
--------
Net increase in net assets from operations... 3,065
--------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares..................... 641,519
Payments for shares redeemed..................... (1,967)
--------
Net increase in net assets from capital share
transactions................................ 639,552
--------
NET INCREASE IN NET ASSETS........................... 642,617
NET ASSETS:
Beginning of period.............................. --
--------
End of period.................................... $642,617
--------
--------
</TABLE>
<TABLE>
<S> <C>
---------------------------------------------------
FINANCIAL HIGHLIGHTS:
FOR THE PERIOD OCTOBER 19, 1995 (COMMENCEMENT OF
INVESTMENT OPERATIONS) TO JULY 31, 1996
For a share outstanding for the period:
Net asset value, beginning of period.... $10.00
Income from investment operations:
Net investment loss................. (0.02)
Net realized and unrealized gain on
investments........................ 0.73
---------
Total income from investment
operations......................... 0.71
---------
Net asset value, end of period.......... $10.71
---------
---------
Total return............................ (7.1%)
Ratios/Supplemental data:
Net assets, end of period (000's
omitted)........................... $ 643
Ratio of expenses to average net
assets(1).......................... 2.50%(2)
Ratio of net investment income to
average net assets(1).............. (0.54%)(2)
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes the Fund's share of Domini Social Index Portfolio expenses and net
of fee waivers and expense reimbursements. Had the fee waiver and expense
reimbursements not been in effect the annualized ratios of expenses and of
net investment income to average net assets would have been 26.3% and
(24.4%), respectively.
(2) Annualized.
See Notes to Financial Statements
5
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD OCTOBER 19, 1995 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO JULY
31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. DEVCAP Shared Return Fund
(the "Fund") is a series of DEVCAP Trust and is registered as an open-end
management investment company under the Investment Company Act of 1940.
The Fund invests substantially all of its assets in the Domini Social Index
Portfolio ( the "Portfolio"), an open-end, diversified management investment
company having the same investment objective as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of the
Portfolio (0.635% at July 31, 1996). The financial statements of the Portfolio
are included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The Fund commenced operations upon effectiveness on
Septrember 13, 1995, and commenced investment operations on October 19, 1995.
The presentation 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
disclosures of contingent 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 Fund's significant accounting policies.
(A) VALUATION OF INVESTMENTS. Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
(B) INVESTMENT INCOME AND DIVIDENDS TO SHAREHOLDERS. The Fund earns income
daily, net of Portfolio expenses, on its investment in the Portfolio. Dividends
to shareholders are declared and paid semiannually from net investment income.
Distributions to shareholders of realized capital gains, if any, are made
annually.
(C) FEDERAL TAXES. The Fund's policy is to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income, including net realized
gains, if any, within the prescribed time periods. Accordingly, no provision for
federal income or excise tax is necessary.
(D) DEFERRED ORGANIZATION EXPENSES. Organizational costs are being
amortized on a straight-line basis over a five-year period. The amount paid by
the Fund on any redemption of the Fund's initial shares will be reduced by the
pro rata portion of any unamortized organization expenses which the number of
the initial shares redeemed bears to the total number of initial shares
outstanding immediately prior to such redemption. To the extent that the
proceeds of the redemptions are less than such pro rata portion of any
unamortized organization expenses, DEVCAP has agreed to reimburse the Fund for
such difference.
(E) OTHER. All net investment income of the Portfolio is allocated pro
rata among the Fund and the other investors in the Portfolio.
<PAGE>
2. TRANSACTIONS WITH AFFILIATES.
(A) ADMINISTRATION. The Fund has retained Signature Broker-Dealer
Services, Inc. ("Signature") to serve as Administrator and Distributor.
Signature provides administrative services necessary for the operations of the
Fund, furnishes office space and facilities required for conducting the business
of the Fund and pays the compensation of the Fund's officers. For its services
under the Administrative Services Agreement, Signature receives from the Fund a
fee accrued daily at an annual rate equal to 0.15% of the Fund's average daily
net assets. The Portfolio has a similar agreement with Signature at a rate equal
to 0.05% of the Portfolio's average daily net assets. For the period October 19,
1995 (commencement of investment operations) through July 31, 1996, Signature
waived Fund expenses aggregating $375.
(B) DISTRIBUTION. The Fund has adopted a Distribution Plan in accordance
with Rule 12b-1 under the Act. Signature acts as agent of the Fund and principal
underwriter of shares of the Fund pursuant to the Plan. Under the Plan, the Fund
may pay Signature a fee not to exceed 0.25% per annum of the Fund's average
daily net assets in anticipation of, or in reimbursement for, expenses incurred
in connection with the sale of shares of the Fund. Such expenses include
payments to broker-dealers who advise shareholders regarding the purchase, sale
or retention of shares of the Fund, payments to employees of the Distributor,
advertising used for sales purposes, expenses of preparing and printing sales
literature and other distribution-related expenses.
(C) REIMBURSEMENT OF EXPENSES. DEVCAP has agreed that it will reimburse
the Fund through at least November 30, 1996 to the extent necessary to maintain
the Fund's total operating expenses (which includes expenses of the Fund
6
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE PERIOD OCTOBER 19, 1995 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO JULY
31, 1996
- --------------------------------------------------------------------------------
and Portfolio) at an annual rate of 2.5% of the Fund's average daily net assets.
This limit does not cover extraordinary increases in these expenses during the
period and no longer applies in the event of a precipitous decline in assets due
to unforseen circumstances.
3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio aggregated $641,519 and $6,969 respectively.
7
<PAGE>
[LOGO]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
DEVCAP Shared Return Fund:
We have audited the accompanying statement of assets and liabilities of the
DEVCAP Shared Return Fund as of July 31, 1996, and the related statements of
operations, changes in net assets and financial highlights for period from
October 19, 1995 (commencement of investment 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 audit.
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. 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 audit provides 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
DEVCAP Shared Return Fund at July 31, 1996, the results of its operations,
changes in its net assets and financial highlights for the period from October
19, 1995 to July 31, 1996 in conformity with generally accepted accounting
principles.
[LOGO]
Boston, Massachusetts
September 20, 1996
8
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
COMMON STOCKS -- 99.2%
APPAREL -- 1.1%
Brown Group Inc.......... 400 $ 5,450
Hartmarx Corp. (b)....... 600 2,925
Lands' End Inc........... 1,700 34,425
Liz Claiborne, Inc....... 3,200 104,400
Nike Inc. (Class B)...... 6,000 617,250
Oshkosh B'Gosh, Inc.
(Class A)............... 300 4,725
Phillips-Van Heusen
Corp.................... 600 6,450
Reebok International
Ltd..................... 3,200 112,000
Russell Corp............. 1,600 53,600
Stride Rite Corp......... 1,900 13,775
Timberland Co. (b)....... 550 9,900
VF Corp.................. 2,700 150,862
------------
1,115,762
------------
COMMERCIAL PRODUCTS & SERVICES -- 1.8%
Autodesk Inc............. 2,100 48,431
Banta Corp............... 1,250 27,188
Cintas Corp.............. 1,900 96,900
Deluxe Corp.............. 3,500 129,063
Donnelley, (R.R.) &
Sons.................... 6,200 199,950
Harland (J.H.) Co........ 1,300 31,525
HON Industries Inc....... 1,300 39,000
Kelly Services (Class
A)...................... 1,775 49,700
Miller, (Herman) Inc..... 800 25,650
Moore Corp., Ltd......... 4,300 74,712
National Education Corp.
(b)..................... 1,300 19,662
National Service
Industries, Inc......... 1,900 72,437
New England Business
Services Inc............ 300 5,137
Pitney Bowes Inc......... 6,400 310,400
Standard Register Co..... 1,200 32,400
Xerox Corp............... 13,400 675,025
------------
1,837,180
------------
CONSTRUCTION -- 0.3%
Centex Corp.............. 1,500 43,500
Fleetwood Enterprises,
Inc..................... 1,500 45,563
Graco Inc................ 950 17,931
Kaufman & Broad Home
Corp.................... 1,700 20,188
Rouse Co................. 1,900 47,500
Sherwin-Williams Co...... 3,600 162,900
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
CONSTRUCTION -- CONTINUED
TJ International Inc..... 400 $ 6,400
------------
343,982
------------
CONSUMER PRODUCTS & SERVICES -- 0.1%
Avery Dennison Corp...... 2,200 113,850
ISCO Inc................. 200 1,875
Tennant Co............... 200 5,200
------------
120,925
------------
ENERGY -- 3.7%
Amoco Corp............... 20,800 1,391,000
Anadarko Petroleum
Corp.................... 2,600 132,925
Apache Corp.............. 3,800 107,825
Atlantic Richfield Co.... 6,700 777,200
Consolidated Natural Gas
Co...................... 3,900 196,463
ENERGEN Corp............. 300 6,788
Enron Corp............... 10,800 425,250
Helmerich & Payne Inc.... 900 31,500
Louisiana Land &
Exploration Co.......... 1,300 70,200
Oryx Energy Co. (b)...... 4,400 69,300
Pennzoil Co.............. 2,200 108,075
Rowan Companies Inc.
(b)..................... 4,000 57,500
Santa Fe Energy Resources
Inc. (b)................ 3,700 42,087
Sun Co................... 3,400 87,975
Williams Companies
Inc..................... 4,500 206,437
------------
3,710,525
------------
FINANCIAL -- 12.8%
Ahmanson (H.F.) & Co..... 4,600 116,150
American Express Co...... 19,900 870,625
Banc One Corp............ 18,595 643,852
Bank of Boston........... 6,400 339,200
BankAmerica Corp......... 15,300 1,220,175
Bankers Trust (N.Y.)
Corp.................... 3,300 237,188
Barnett Banks Inc........ 4,100 251,638
Beneficial Corp.......... 2,100 113,400
Block (H. & R.), Inc..... 4,600 120,175
Cincinnati Financial
Corp.................... 2,195 122,371
CoreStates Financial
Corp.................... 9,200 361,100
Dime Bancorp Inc. (b).... 4,500 55,688
Edwards (A.G.), Inc...... 2,525 69,122
Federal Home Loan
Mortgage Corp........... 7,300 615,025
</TABLE>
9
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
FINANCIAL -- CONTINUED
<S> <C> <C>
Federal National Mortgage
Association............. 45,900 $ 1,457,325
Fifth Third Bancorp...... 4,300 222,525
First Chicago Corp....... 13,506 519,981
First Fed Financial Corp.
(b)..................... 200 3,500
Golden West Financial
Corp.................... 2,400 133,200
Great Western Financial
Corp.................... 5,400 128,250
Household International
Inc..................... 4,000 298,000
MBNA Corp................ 9,300 259,238
Mellon Bank Corp......... 5,800 305,950
Merrill Lynch & Co.,
Inc..................... 7,200 434,700
Morgan (J.P.) & Co.,
Inc..................... 7,900 679,400
Norwest Corp............. 15,500 550,250
Piper Jaffray Inc........ 600 7,125
PNC Bank Corp............ 14,400 419,400
ReliaStar Financial
Corp.................... 1,500 62,812
Schwab (Charles) Corp.... 7,200 173,700
Student Loan Marketing
Association............. 2,500 182,500
SunTrust Banks Inc....... 9,700 356,475
Transamerica Corp........ 2,800 193,550
Value Line Inc........... 300 9,975
Vermont Financial
Services Corp........... 100 3,150
Wachovia Corp............ 6,900 305,325
Wells Fargo & Co......... 3,950 919,856
Wesco Financial Corp..... 300 49,350
------------
12,811,246
------------
FOODS & BEVERAGES -- 10.9%
Ben & Jerry's (Class A)
(b)..................... 100 1,600
CPC International Inc.... 6,000 401,250
Campbell Soup Co......... 10,400 705,900
Coca-Cola Co............. 104,600 4,903,125
Fleming Cos. Inc......... 1,300 19,663
General Mills, Inc....... 6,700 363,475
Heinz (H.J.) Co.......... 15,300 506,813
Hershey Foods Corp....... 3,300 270,600
Kellogg Co............... 8,800 657,800
Odwalla Inc. (b)......... 300 5,175
PepsiCo, Inc............. 65,600 2,074,600
Quaker Oats Co........... 5,500 176,000
Ralston Purina Group..... 4,600 288,650
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
FOODS & BEVERAGES -- CONTINUED
Smucker (J.M.) Co. (Class
A)...................... 1,100 $ 19,525
Super Valu Inc........... 3,100 86,412
Sysco Corp............... 7,400 214,600
TCBY Enterprises, Inc.... 500 2,062
Tootsie Roll Industries,
Inc..................... 1,145 40,361
Wrigley, (Wm.) Jr. Co.... 4,900 252,962
------------
10,990,573
------------
HEALTH CARE -- 8.5%
Acuson Corp. (b)......... 1,100 14,575
Allergan Inc............. 2,600 105,950
Alza Corp. (b)........... 3,800 94,050
Angelica Corp............ 300 6,563
Apogee Enterprises,
Inc..................... 700 22,750
Becton Dickinson & Co.... 2,700 201,488
Bergen Brunswig Corp.
(Class A)............... 1,895 49,270
Biomet Inc. (b).......... 5,300 81,488
Community Psychiatric
Centers (b)............. 2,000 16,000
Forest Laboratories, Inc.
(b)..................... 1,700 58,013
Humana Inc. (b).......... 6,800 113,900
Johnson & Johnson........ 55,600 2,654,900
Manor Care Inc........... 2,800 92,400
Medtronic Inc............ 9,700 459,537
Merck & Co., Inc......... 51,000 3,276,750
Mylan Laboratories
Inc..................... 4,700 70,500
Oxford Health Plans
(b)..................... 3,300 113,850
Schering-Plough Corp..... 15,400 848,925
St. Jude Medical Inc.
(b)..................... 3,300 110,962
Stryker Corp............. 4,300 105,686
Sunrise Medical Inc.
(b)..................... 600 9,225
United American
Healthcare (b).......... 200 2,050
------------
8,508,832
------------
HOUSEHOLD GOODS -- 6.0%
Alberto Culver Co. (Class
B)...................... 1,200 51,750
Avon Products, Inc....... 5,600 246,400
Bassett Furniture
Industries, Inc......... 300 6,600
Church & Dwight Co.,
Inc..................... 900 18,675
Clorox Co................ 2,100 190,838
Colgate-Palmolive Co..... 6,200 486,700
</TABLE>
10
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
HOUSEHOLD GOODS -- CONTINUED
<S> <C> <C>
Handleman Co. (b)........ 700 $ 3,238
Harman International
Industries, Inc......... 830 37,246
Hasbro Inc............... 3,500 125,563
Huffy Corp............... 300 3,525
Kimberly-Clark Corp...... 11,832 899,232
Leggett & Platt Inc...... 3,600 93,600
Mattel, Inc.............. 11,585 286,729
Maytag Co................ 4,500 90,000
Newell Co................ 6,700 215,237
Oneida, Ltd.............. 200 3,100
Procter & Gamble Co...... 28,600 2,556,125
Rubbermaid Inc........... 6,400 184,000
Shaw Industries.......... 5,300 72,875
Snap-On Tools Corp....... 1,900 84,312
Springs Industries Inc.
(Class A)............... 800 36,500
Stanhome, Inc............ 600 15,750
Stanley Works............ 3,900 111,150
Thomas Industries........ 200 3,475
Whirlpool Corp........... 3,200 157,600
------------
5,980,220
------------
INSURANCE -- 6.1%
Aetna Inc................ 6,570 381,885
Alexander & Alexander
Services Inc............ 1,600 26,400
American General Corp.... 8,900 309,275
American International
Group, Inc.............. 19,800 1,863,675
Chubb Corp............... 7,100 296,425
CIGNA Corp............... 3,200 340,800
General Re Corp.......... 3,300 484,275
Hartford Steam Boiler.... 800 34,900
Jefferson-Pilot Corp..... 3,100 162,750
Lincoln National Corp.... 4,200 179,025
Marsh & McLennan
Companies, Inc.......... 3,100 280,937
Providian Corp........... 3,800 150,575
SAFECO Corp.............. 5,300 182,519
St. Paul Companies....... 3,400 175,950
Torchmark Corp........... 3,300 140,662
Travelers Corp........... 19,764 835,008
UNUM Corp................ 3,000 183,000
USF&G Corp............... 5,400 85,725
USLIFE Corp.............. 1,425 42,394
------------
6,156,180
------------
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
MANUFACTURING -- 2.1%
Applied Materials, Inc.
(b)..................... 7,700 $ 183,838
Boston Scientific Corp.
(b)..................... 7,400 353,350
Brady (W.H.) (Class A)... 700 15,225
Briggs & Stratton
Corp.................... 1,200 45,150
Case Corp................ 3,000 132,750
Cincinnati Milacron...... 1,400 27,650
Clarcor, Inc............. 300 5,888
Deere & Co............... 11,100 396,825
Dionex Corp. (b)......... 400 13,900
Fastenal Co.............. 1,700 73,100
Gerber Scientific........ 800 11,800
Goulds Pumps, Inc........ 1,200 26,700
Hunt Manufacturing Co.... 400 5,250
Illinois Tool Works
Inc..................... 5,000 321,875
James River Corp. of
Virginia................ 3,600 90,900
Lawson Products, Inc..... 300 6,675
Marquette Electronics
(Class A) (b)........... 1,500 27,750
Millipore Corp........... 1,700 58,012
Nordson Corp............. 800 40,400
Thermo Electron Corp.
(b)..................... 6,000 224,250
Watts Industries Inc.
(Class A)............... 1,100 17,737
Wellman Inc.............. 1,600 31,200
Zurn Industries Inc...... 400 8,150
------------
2,118,375
------------
MEDIA -- 3.9%
BET Holdings Inc. (Class
A) (b).................. 800 19,600
Comcast Corp. (Class
A)...................... 9,600 135,600
Disney (Walt) Co......... 28,400 1,579,750
Dow Jones & Co. Inc...... 4,100 160,413
Edmark Corp. (b)......... 500 8,125
Frontier Corp............ 6,700 188,438
King World Productions
Inc. (b)................ 1,600 57,400
Lee Enterprises, Inc..... 1,600 31,800
McGraw-Hill Inc.......... 4,100 159,900
Media General Inc. (Class
A)...................... 1,300 37,212
Meredith Corp............ 1,200 48,750
New York Times Co. (Class
A)...................... 4,300 125,237
</TABLE>
11
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
MEDIA -- CONTINUED
<S> <C> <C>
Scholastic Corp. (b)..... 700 $ 45,675
Tele-Communications, Inc.
(Class A) (b)........... 26,90 383,325
Times Mirror Co. (Class
A)...................... 4,300 177,912
Turner Broadcasting
System Inc. (Class A)... 5,700 146,775
US West Media Group (b).. 19,000 327,750
Viacom Inc. (Class A)
(b)..................... 3,300 113,025
Washington Post Co.
(Class B)............... 450 140,175
------------
3,886,862
------------
MISCELLANEOUS -- 2.0%
Alco Standard Corp....... 5,700 249,375
Allwaste, Inc. (b)....... 1,300 5,688
American Greetings Corp.
(Class A)............... 3,500 84,875
Avnet, Inc............... 1,800 78,525
Bemis Co., Inc........... 2,000 65,250
CPI Corp................. 400 5,750
Cross, (A.T.) Co. (Class
A)...................... 500 6,688
DeVRY Inc. (b)........... 1,100 47,988
Fedders Corp............. 1,300 7,475
Fuller (H.B.) Co......... 500 17,375
General Signal Corp...... 2,200 86,075
Harcourt General Inc..... 3,000 143,625
Hillenbrand Industries
Inc..................... 3,200 107,200
Ionics Inc. (b).......... 800 33,400
Jostens Inc.............. 1,600 30,600
KENETECH Corp. (b)....... 900 253
Marriott International
Corp.................... 5,300 272,287
Omnicom Group, Inc....... 3,000 121,500
Polaroid Corp............ 1,800 76,050
Sealed Air Corp. (b)..... 1,600 55,600
Service Corp.
International........... 5,000 275,625
Sonoco Products Co....... 4,005 118,147
Toro Co.................. 800 24,300
Whitman Corp............. 4,600 102,925
------------
2,016,576
------------
RESOURCE DEVELOPMENT -- 2.5%
Air Products & Chemicals,
Inc..................... 4,800 256,200
Aluminum Co. of America.. 7,200 417,600
ARCO Chemical Co......... 4,000 199,000
Battle Mountain Gold
Co...................... 10,700 97,638
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
RESOURCE DEVELOPMENT -- CONTINUED
Betz Laboratories,
Inc..................... 1,100 $ 49,913
Cabot Corp............... 3,300 82,913
Calgon Carbon Corp....... 1,300 15,275
Consolidated Papers
Inc..................... 1,800 90,450
Cyprus Amax Minerals
Co...................... 4,000 86,000
Echo Bay Mines Ltd....... 5,400 55,350
Inland Steel Industries
Inc..................... 2,300 39,963
Mead Corp................ 2,100 114,975
Morton International
Inc..................... 6,100 219,600
Nalco Chemical Co........ 3,200 96,000
Nucor Corp............... 3,600 168,750
Praxair Inc.............. 6,500 249,437
Sigma-Aldrich Corp....... 2,000 105,000
Westvaco Corp............ 4,500 127,687
Worthington Industries,
Inc..................... 3,800 72,200
------------
2,543,951
------------
RETAIL -- 10.9%
Albertson's, Inc......... 10,700 438,700
American Stores Co....... 6,400 238,400
Bob Evans Farms, Inc..... 1,900 26,600
Charming Shoppes Inc.
(b)..................... 3,700 23,819
Circuit City Stores
Inc..................... 3,900 122,850
Claire's Stores Inc...... 1,600 45,800
Dayton-Hudson Corp....... 9,300 281,325
Dillard Department
Stores.................. 4,800 150,600
Dollar General Corp...... 3,308 85,582
Egghead Inc. (b)......... 300 2,775
Gap, Inc................. 12,000 357,000
Giant Food Inc. (Class
A)...................... 2,300 77,338
Gibson Greetings Inc.
(b)..................... 500 6,000
Great Atlantic & Pacific
Tea Co., Inc............ 1,700 46,963
Hannaford Brothers Co.... 2,000 63,000
Hechinger Co. (Class
A)...................... 800 2,800
Home Depot, Inc.......... 20,033 1,011,667
International Dairy
Queen, Inc. (Class A)
(b)..................... 1,300 26,000
K-Mart Corp. (b)......... 20,600 206,000
Kroger Co. (b)........... 5,400 203,850
Lillian Vernon Corp...... 200 2,450
Limited, Inc............. 13,000 250,250
Longs Drug Stores,
Inc..................... 700 27,125
Lowe's Companies, Inc.... 7,200 234,900
Luby's Cafeterias,
Inc..................... 1,100 26,675
May Department Stores
Co...................... 10,500 471,187
</TABLE>
12
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
RETAIL -- CONTINUED
<S> <C> <C>
McDonald's Corp.......... 29,200 $ 1,354,150
Melville Corp............ 4,500 176,062
Mercantile Stores Co.,
Inc..................... 1,600 78,400
Morrison Restaurants
Inc..................... 0 4
Nordstrom Inc............ 3,400 141,100
Penney, (J.C.) Co.,
Inc..................... 9,300 462,675
Pep Boys................. 2,400 72,600
Price/Costco Inc. (b).... 8,315 170,457
Ruby Tuesday............. 500 9,875
Ryan's Family Steakhouse,
Inc. (b)................ 2,400 18,300
Sears Roebuck & Co....... 16,200 664,200
Skyline Corp............. 400 9,700
Specs Music Inc. (b)..... 200 300
Starbucks Corp. (b)...... 3,400 88,400
Tandy Corp............... 2,600 109,850
TJX Companies Inc........ 2,900 87,362
Toys 'R' Us, Inc. (b).... 11,620 306,477
Wal-Mart Stores, Inc..... 96,400 2,313,600
Walgreen Co.............. 10,000 317,500
Whole Foods Market (b)... 800 25,100
Woolworth (F.W.) Co.
(b)..................... 5,500 105,875
------------
10,941,643
------------
TECHNOLOGIES -- 14.8%
Advanced Micro Devices,
Inc. (b)................ 5,300 64,263
Amdahl Corp. (b)......... 5,300 52,338
American Power Conversion
Corp. (b)............... 4,200 49,350
Analog Devices, Inc.
(b)..................... 4,600 96,025
Apple Computer, Inc.
(b)..................... 5,600 123,200
Automatic Data
Processing, Inc......... 12,100 479,463
Baldor Electric Co....... 1,200 23,850
Borland International,
Inc. (b)................ 1,300 9,750
Cisco Systems, Inc.
(b)..................... 26,700 1,381,725
Compaq Computer Corp.
(b)..................... 11,300 618,675
Computer Assoc.
International Inc....... 15,300 778,388
Cooper Industries Inc.... 4,400 173,250
Digital Equipment Corp.
(b)..................... 6,200 219,325
DSC Communications Corp.
(b)..................... 5,000 150,000
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
TECHNOLOGIES -- CONTINUED
Grainger, (W.W.) Inc..... 2,100 $ 147,525
Hewlett-Packard Co....... 42,900 1,887,600
Hubbell Inc. (Class B)... 1,430 98,134
Intel Corp............... 34,500 2,591,813
International Business
Machines Inc............ 22,500 2,427,188
MCI Communications
Corp.................... 28,700 706,737
Micron Technology,
Inc..................... 8,300 155,625
Molex, Inc............... 4,500 132,750
National Semiconductor
Corp. (b)............... 5,700 80,512
Novell Inc. (b).......... 14,300 152,831
Perkin-Elmer Corp........ 2,000 104,500
Quarterdeck Corp. (b).... 1,100 7,150
Raychem Corp............. 1,800 119,025
Shared Medical Systems
Corp.................... 1,000 55,000
Solectron Corp. (b)...... 2,100 66,150
Sprint Corp.............. 18,400 673,900
Stratus Computer Inc.
(b)..................... 1,100 20,212
Sun Microsystems Inc.
(b)..................... 7,900 431,537
Tandem Computers Inc.
(b)..................... 4,600 48,300
Tektronix, Inc........... 1,400 53,550
Tellabs, Inc. (b)........ 3,800 227,050
Thomas & Betts Corp...... 1,700 62,050
3Com Corp. (b)........... 6,900 271,688
360 (Degrees)
Communications (b)...... 1 23
Xilinx Inc. (b).......... 3,300 106,837
------------
14,847,289
------------
TRANSPORTATION -- 2.3%
AMR Corp. (b)............ 3,800 299,725
Airborne Freight Corp.... 1,200 25,650
Alaska Air Group, Inc.
(b)..................... 600 14,400
CSX Corp................. 8,900 429,425
Conrail Inc.............. 3,400 222,700
Consolidated Freightways,
Inc..................... 1,700 33,363
Delta Air Lines, Inc..... 3,200 223,600
Federal Express Corp.
(b)..................... 2,300 178,825
GATX Corp................ 900 40,500
Norfolk Southern Corp.... 5,300 428,637
Roadway Services......... 750 10,969
Ryder System, Inc........ 3,700 98,512
Southwest Airlines
Inc..................... 6,000 148,500
</TABLE>
13
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
TRANSPORTATION -- CONTINUED
<S> <C> <C>
UAL Corp. (b)............ 2,400 $ 122,400
Yellow Corp. (b)......... 1,300 16,575
------------
2,293,781
------------
UTILITIES -- 8.8%
AGL Resources Inc........ 2,200 40,150
American Water Works Co.,
Inc..................... 3,600 71,550
Ameritech Corp........... 23,100 1,282,050
Bell Atlantic Corp....... 18,400 1,087,900
BellSouth Corp........... 42,000 1,722,000
Brooklyn Union Gas
Company................. 2,300 57,500
California Energy Co.,
Inc. (b)................ 2,500 65,625
Citizens Utilities Co.
(Class A)(b)............ 8,431 92,745
Connecticut Energy
Corp.................... 200 3,900
Eastern Enterprises...... 900 28,913
El Paso Natural Gas
Co...................... 1,500 58,500
Equitable Resources
Inc..................... 1,300 32,988
Idaho Power Co........... 1,600 47,800
LG & E Energy Corp....... 3,000 67,125
MCN Corp................. 3,200 75,200
NICOR Inc................ 2,100 59,587
Noram Energy Corp........ 5,800 63,075
Northwestern Public
Service Co.............. 200 5,475
NYNEX.................... 18,100 812,237
Oklahoma Gas & Electric
Co...................... 1,700 66,725
ONEOK Inc................ 1,200 31,650
Pacific Enterprises...... 3,400 99,875
Pacific Telesis Group.... 17,600 591,800
Peoples Energy Corp...... 1,300 40,462
Potomac Electric Power
Co...................... 5,000 120,625
Public Service Co. of
Colorado................ 2,900 102,587
SBC Telecommunications... 25,500 1,246,312
Southern New England
Telecom................. 3,200 122,800
<CAPTION>
DESCRIPTION SHARES VALUE
------------------------------ ------- ------------
<S> <C> <C>
UTILITIES -- CONTINUED
Telephone & Data
Systems................. 2,700 $ 104,287
US West Communications
Group................... 19,700 598,387
Washington Gas Light
Co...................... 2,000 41,750
------------
8,841,580
------------
VEHICLE COMPONENTS -- 0.6%
Cooper Tire & Rubber
Co...................... 3,600 67,950
Cummins Engine Inc....... 1,600 59,800
Dana Corp................ 4,400 122,650
Federal-Mogul Corp....... 1,200 20,250
Genuine Parts............ 5,000 211,875
Modine Manufacturing
Co...................... 1,600 42,000
SPX Corp................. 400 9,950
Smith, (A.O.)............ 1,200 26,700
Spartan Motors Inc.
(b)..................... 300 1,987
------------
563,162
------------
Total Common Stocks (Cost,
$83,008,100).................. 99,628,644
------------
PREFERRED STOCK -- 0.0%
Aetna Inc. 6.25%
convertible............. 1 56
------------
Total Preferred Stock (Cost,
$65).......................... 56
------------
TOTAL INVESTMENTS -- 99.2%
(COST, $83,008,165) (A)........... 99,628,700
OTHER ASSETS, LESS LIABILITIES --
0.8%.............................. 771,858
------------
NET ASSETS -- 100.0%............... $100,400,558
------------
------------
</TABLE>
- ------------
(a)The aggregate cost for federal income tax purposes is $83,008,165, the
aggregate gross unrealized appreciation is $18,466,003, and the aggregate
gross unrealized depreciation is $1,845,468, resulting in net unrealized
appreciation of $16,620,535.
(b)Non-income producing security.
See Notes to Financial Statements
14
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $83,008,165)....................... $ 99,628,700
Cash.......................................................... 1,313,323
Dividends receivable.......................................... 175,702
------------
Total assets.............................................. 101,117,725
------------
LIABILITIES:
Payable for securities purchased.............................. 675,937
Expense payment fee payable................................... 41,230
------------
Total liabilities......................................... 717,167
------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.......... $100,400,558
------------
------------
NET ASSETS CONSIST OF:
Paid in capital............................................... $100,400,558
------------
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $268).............. $1,514,033
EXPENSES:
Expense payment fee................................ $ 372,596
Amortization of organization expenses.............. 8,657
-----------
Total expenses................................. 381,253
----------
NET INVESTMENT INCOME............................................... 1,132,780
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales................................ 3,459,916
Cost of securities sold............................ 2,762,579
-----------
Net realized gain on investments............................ 697,337
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS
Beginning of year.................................. 9,759,028
End of year........................................ 16,620,535
-----------
Net change in unrealized appreciation....................... 6,861,507
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $8,691,624
----------
----------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1996 1995
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income............................ $ 1,132,780 $ 734,456
Net realized gain on investments................. 697,337 405,427
Net change in unrealized appreciation of
investments..................................... 6,861,507 8,729,434
------------ -----------
Net Increase in Net Assets Resulting from
Operations.................................. 8,691,624 9,869,317
------------ -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Additions........................................ 52,533,365 14,888,452
Reductions....................................... (14,827,219) (2,076,641)
------------ -----------
Net Increase in Net Assets from Transactions
in Investors' Beneficial Interests.......... 37,706,146 12,811,811
------------ -----------
Total Increase in Net Assets............. 46,397,770 22,681,128
NET ASSETS:
Beginning of year................................ 54,002,788 31,321,660
------------ -----------
End of year...................................... $100,400,558 $54,002,788
------------ -----------
------------ -----------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
YEAR ENDED
------------------------------------------------------------------------------
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994 JULY 31, 1993 JULY 31, 1992
-------------- ------------- ------------- ------------- -------------
FINANCIAL HIGHLIGHTS:
<S> <C> <C> <C> <C> <C>
Net investment income to average net
assets............................. 1.48%(1) 1.85%(2) 2.13%(2) 1.88% 1.99%
Expenses to average net assets...... 0.50%(1) 0.43%(2) 0.29%(2) 0.29% 0.29%
Portfolio turnover rate............. 5% 6% 8% 4% 3%
Average commission rate paid per
share.............................. $0.0496 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
(1) Had the Expense Payment Agreement not been in place, the ratios of net
investment income and expenses for the year ended July 31,1996 would have
been 1.14% and 0.85% respectively.
(2) Reflects a voluntary waiver of fees by the Administrator and Adviser due to
the limitations set forth in the Expense Reimbursement Agreement. Had the
Administrator and Adviser not waived their fees, 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
17
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. Domini Social Index
Portfolio (the "Index Portfolio") is registered under the Investment Company Act
of 1940 (the "Act") as a no-load, diversified, open-end management investment
company which was organized as a trust under the laws of the State of New York
on June 7, 1989. The Index Portfolio intends to correlate its investment
portfolio as closely as is practicable with the Domini Social Index (the
"Index"), which is a common stock index developed and maintained by Kinder,
Lydenberg, Domini & Co., Inc. ("KLD"), the Index Portfolio's Adviser. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Index Portfolio. The Index Portfolio commenced
operations upon effectiveness on August 10, 1990 and began investment operations
on June 3, 1991.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of the Index Portfolio's significant accounting policies.
(A) VALUATION OF INVESTMENTS: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales are
reported.
(B) DIVIDEND INCOME: Dividend income is recorded on the ex-dividend date.
(C) FEDERAL TAXES: The Index Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for Federal taxes is deemed necessary.
(D) DEFERRED ORGANIZATION EXPENSE: Expenses incurred by the Index
Portfolio in connection with its organization are being amortized by the Index
Portfolio on a straight-line basis over a five-year period.
(E) OTHER: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
2. TRANSACTIONS WITH AFFILIATES.
(A) INVESTMENT ADVISORY FEES: The Index Portfolio has retained KLD as the
Investment Adviser of the Index Portfolio. The services provided by KLD consist
of the determination of the stocks to be included in the Index and evaluating,
in accordance with KLD's criteria, debt securities which may be purchased by the
Index Portfolio. For its services under the Investment Advisory Agreement, KLD
receives from the Index Portfolio a fee accrued daily at an annual rate equal to
0.05% of the Index Portfolio's average daily net assets.
(B) INVESTMENT MANAGEMENT FEES: The Index Portfolio has retained Mellon
Equity Associates ("MEA") as the Investment Manager of the Index Portfolio. MEA
does not determine the composition of the Index. Under the Management Agreement,
the Index Portfolio pays MEA an investment management fee equal on an annual
basis to the following percentages of the Index Portfolio's average daily net
assets for its then-current fiscal year: 0.10% of assets up to $50 million;
0.30% of assets between $50 million and $100 million; 0.20% of assets between
$100 million and $500 million; and 0.15% of assets over $500 million.
(C) ADMINISTRATION FEES: The Index Portfolio has retained Signature
Broker-Dealer Services, Inc. ("Signature") to serve as Administrator of the
Index Portfolio. Certain officers of Signature serve as officers and trustee to
the Index Portfolio. Under the Administrative Services Agreement, Signature
provides management and administrative services necessary for the operations of
the Index Portfolio, furnishes office space and facilities required for
conducting the business of the Index Portfolio and pays the compensation of the
Index Portfolio's officers and Trustee affiliated with Signature. For these
services, Signature receives from the Index Portfolio a fee accrued daily at an
annual rate equal to 0.05% of the Index Portfolio's average daily net assets.
(D) EXPENSE PAYMENT FEES: The Administrator has agreed to pay all of the
operating expenses of the Index Portfolio, including advisory, management and
administration fees, subject to an Expense Payment Arrangement. Under this
arrangement, the Administrator receives expense payment fees from the Index
Portfolio at an annual rate equal to 0.50% of the average daily net assets of
the Index Portfolio. The Expense Payment Arrangement will terminate on December
31, 1999. For the year ended July 31, 1996, the Administrator incurred
approximately $264,025 in expenses on behalf of the Index Portfolio.
3. INVESTMENT TRANSACTIONS. Purchase and sales of investments, other than U.S.
Government securities and short-term obligations, aggregated $41,791,647 and
$3,387,873, respectively.
18
<PAGE>
[LOGO]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Domini Social Index Portfolio as of July
31, 1996, and the related statement of operations for the year then ended,
statement of changes in net assets for each of the years in the two-year period
then ended and financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned by the
Portfolio as of July 31, 1996 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Domini Social Index Portfolio at July 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended and financial highlights for each of the years in
the five-year period then ended in conformity with generally accepted accounting
principles.
Boston, Massachusetts
August 23, 1996
19
