As filed with the Securities and Exchange Commission on November 27, 1996
Registration Nos. 33-94668 and 811-9070
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 2
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 4
DEVCAP TRUST
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
Molly S. Mugler
6 St. James Avenue
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
Keith A. Palzer
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
It is proposed that this filing will become effective (check appropriate box)
[x] immediately upon filing pursuant to paragraph (b)
[ ] on [DATE] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on [DATE] pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on [DATE] pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has previously registered an indefinite number of its shares
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant filed a Rule 24f-2
notice with respect to DEVCAP Shared Return Fund for its fiscal year ending July
31, 1996 on or after September 30, 1996.
Domini Social Index Portfolio has also executed this registration statement.
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DEVCAP SHARED RETURN FUND
CROSS REFERENCE SHEET
(As Required by Rule 495)
PART A ITEM NO.: Prospectus Headings.
1. COVER PAGE: Front Cover Page.
2. SYNOPSIS: The Fund; Expense Summary.
3. CONDENSED FINANCIAL INFORMATION: Financial Highlights.
4. GENERAL DESCRIPTION OF REGISTRANT: Front Cover Page; The Fund;
Charitable Contribution Program; Investment Objective, Policies and
Risks.
5. MANAGEMENT OF THE FUND: The Fund; Management; Service Organizations,
Transfer Agent and Custodian; Back Cover Page; Other Information
Concerning Shares of the Fund.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not Applicable.
6. CAPITAL STOCK AND OTHER SECURITIES: Other Information Concerning
Shares of the Fund; Service Organizations, Transfer Agent and
Custodian; Tax Matters.
7. PURCHASE OF SECURITIES BEING OFFERED: Purchases and Redemptions of
Shares; Other Information Concerning Shares of the Fund; Service
Organizations, Transfer Agent and Custodian.
8. REDEMPTION OR REPURCHASE: Purchases and Redemption of Shares.
9. PENDING LEGAL PROCEEDINGS: Not Applicable.
PART B ITEM NO.: Statement of Additional Information Headings.
10. COVER PAGE: Front Cover Page.
11. TABLE OF CONTENTS: Front Cover Page.
12. GENERAL INFORMATION AND HISTORY: The Trust.
13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objective, Policies and
Restrictions.
14. MANAGEMENT OF THE FUND: Management of the Trust and the Portfolio.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Management of the
Trust and Portfolio.
16. INVESTMENT ADVISORY AND OTHER SERVICES: Management of the Trust and
the Portfolio; Independent Auditors.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions and
Brokerage Commissions.
18. CAPITAL STOCK AND OTHER SECURITIES: Description of Shares, Voting
Rights and Liabilities.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED:
Determination of Net Asset Value; Valuation of Portfolio Securities.
20. TAX STATUS: Taxation.
21. UNDERWRITERS: Management of the Fund and the Portfolio -- Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Information.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C
Information required to be included in Part C is set forth under the
appropriately numbered item in Part C of this registration statement.
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PROSPECTUS
November 27, 1996
DEVCAP SHARED RETURN FUND
The DEVCAP Shared Return Fund (the "Fund") has two primary objectives: (I)
an investment objective, to provide its shareholders with long-term total return
which corresponds to the total return performance of the Domini 400 Social
Index-SM-, an index comprised of stocks selected based upon social criteria and;
(ii) a charitable objective, to enable each shareholder of the Fund to make a
donation of a portion of that shareholder's annual contribution basis to finance
the economic development of underprivileged people in developing countries. The
Fund is a separate series of shares of DEVCAP Trust, which is organized as a
business trust under the laws of the Commonwealth of Massachusetts. The Fund
seeks to achieve its investment objective by investing all of its investable
assets in the Domini Social Index Portfolio (the "Portfolio"), a diversified
open-end management investment company having the same investment objective as
the Fund. The Portfolio invests in the common stocks included in the Domini 400
Social Index-SM-.
The Fund seeks to achieve its charitable objective by providing for the
tax-deductible donation of a portion of each shareholder's annual contribution
basis in the Fund to further the charitable purposes of the Development Capital
Fund ("DEVCAP"). DEVCAP is a non-profit charitable corporation that functions as
a consortium of non-profit organizations and is independent of the Fund. DEVCAP
is dedicated to supporting micro-enterprise and other economic development
programs in developing countries, in an effort to improve the welfare of
underprivileged persons in those countries. See "Charitable Contribution
Program" herein for more detailed information. In general, investors will not
incur net tax liability as a result of providing for donations of a portion of
their annual contribution basis in the Fund. See "Tax Matters--Tax Deductibility
of Charitable Contributions" herein for more detailed information.
TABLE OF CONTENTS PAGE
- ---------------------------------------------------------------------- ----
The Fund.............................................................. 3
Expense Summary....................................................... 4
Financial Highlights.................................................. 5
Charitable Contribution Program....................................... 5
DEVCAP................................................................ 7
Performance Information............................................... 8
Investment Objective, Policies and Risk Factors....................... 9
Management............................................................ 14
Purchases and Redemptions of Shares................................... 16
Tax Matters........................................................... 20
Other Information Concerning Shares of the Fund....................... 21
Service Organizations, Transfer Agent and Custodian................... 25
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The investment adviser and sponsor of the Portfolio is Kinder, Lydenberg,
Domini & Co., Inc. The investment manager of the Portfolio is Mellon Equity
Associates. The administrator and distributor of the Fund, and the administrator
of the Portfolio, is Signature Broker-Dealer Services, Inc. INVESTMENTS IN THE
FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION, AND THE SHARES ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL, STATE OR OTHER
GOVERNMENTAL AGENCY.
"Domini-SM-" and "Domini 400 Social Index-SM-" are service marks of Kinder,
Lydenberg, Domini & Co., Inc.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor ought to know before investing. The Fund has filed
with the Securities and Exchange Commission a Statement of Additional
Information, dated November 27, 1996, as amended from time to time, which
contains more detailed information about the Fund and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the Statement of
Additional Information without charge by contacting the Distributor (see back
cover for address and phone number).
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PORTFOLIO. THE FUND INVESTS IN THE
PORTFOLIO THROUGH THE HUB AND SPOKE-REGISTERED TRADEMARK- MASTER-FEEDER
INVESTMENT FUND STRUCTURE. "HUB AND SPOKE-REGISTERED TRADEMARK-" IS A REGISTERED
SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE "SPECIAL INFORMATION
CONCERNING THE HUB AND SPOKE-REGISTERED TRADEMARK- MASTER-FEEDER INVESTMENT FUND
STRUCTURE" ON PAGE 12.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
2
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THE FUND
DEVCAP Trust (the "Trust") was organized as a business trust under the laws
of the Commonwealth of Massachusetts, with the Fund established as a separate
series of the Trust, on June 29, 1995. The Fund is a no-load diversified
open-end management investment company. Although shares of the Fund are sold
without a sales load, Signature Broker-Dealer Services, Inc. ("Signature") may
receive a distribution fee from the Fund pursuant to a Distribution Plan adopted
in accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust offers to buy back (redeem) shares of the
Fund from its shareholders at any time at net asset value.
Shares of the Fund are sold continuously by Signature, the Fund's
distributor (the "Distributor"). The minimum initial investment is $1,000,
except that the minimum initial investment when selecting the Automatic
Investment Plan is $500 and the minimum initial investment when selecting the
Individual Retirement Account is $250. An investor should obtain from the
Distributor, and should read in conjunction with this Prospectus, the materials
describing the procedures under which Fund shares may be purchased and redeemed.
See "Purchases and Redemptions" herein.
The Fund seeks to achieve its investment objective by investing the proceeds
from the sales of its shares in the Portfolio, which has the same investment
objective as the Fund and which invests all of its assets in stocks included in
the Domini 400 Social Index (the "Domini Social Index" or "DSI"). There can be
no assurance that the Fund or the Portfolio will be able to achieve their
investment objective. It should be noted that the limitation of the Portfolio's
investments to stocks included in the Domini Social Index will tend to limit the
availability of investment opportunities to the Fund compared to other
investment companies that have a comparable investment objective to that of the
Fund. See "Investment Objective, Policies and Risk Factors" herein.
Kinder, Lydenberg, Domini & Co., Inc. ("KLD") is the Portfolio's investment
adviser (the "Adviser") and sponsor (the "Sponsor"). Mellon Equity Associates
("Mellon Equity") is the Portfolio's investment manager (the "Manager").
Signature, the administrator of the Fund (the "Administrator") and of the
Portfolio (the "Portfolio Administrator"), supervises the overall administration
of the Fund and of the Portfolio. The Boards of Trustees of the Trust and the
Portfolio provide broad supervision over the affairs of the Fund and the
Portfolio, respectively. The Trustees who are not "interested persons" of the
Trust as defined in the 1940 Act (the "Independent Trustees") are separate and
independent from the Independent Trustees of the Portfolio. For further
information about the Trustees of the Trust and the Portfolio, see "Management
of the Fund and the Portfolio" in the Statement of Additional Information. A
majority of the Fund's Trustees are not affiliated with the Adviser.
The Adviser determines the composition of the Domini Social Index. The
following persons are primarily responsible for the development and maintenance
of the Domini Social Index (which determines the composition of the Portfolio's
securities): Steven D. Lydenberg, Director of Research, KLD, since 1990; Peter
D. Kinder, President, KLD, since 1988. The Manager manages the investments of
the Portfolio from day to day in accordance with the Portfolio's investment
objective and policies.
DEVCAP provides no investment advisory, management, administrative or other
investment support services to the Fund or the Portfolio.
3
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EXPENSE SUMMARY
The following table provides (I) a summary of estimated expenses relating to
purchases and sales of shares of the Fund, and the aggregate annual operating
expenses for the Fund and the Portfolio, as a percentage of average net assets
of the Fund, and (ii) an example illustrating the dollar cost of such estimated
expenses on a $1,000 investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES..................................... 0%
ANNUAL OPERATING EXPENSES*
Advisory and Management Fees..................................... 0.125%
12b-1 Fee........................................................ 0.25%
Other Expenses................................................... 1.375%
------
--Sponsorship and Administrative Services Fees.......... 0.20%
--Other Operating Expenses (after expense
reimbursement)........................................ 1.175%
Total Operating Expenses (after expense reimbursement)........... 1.75%
------
* These expenses are shown after any applicable expense reimbursement by DEVCAP.
Without such expected reimbursement, the estimated Total Operating Expenses
would equal, on an annual basis, 2.50% of the estimated average daily net
assets of the Fund. See "Other Information Concerning Shares of The Fund"
herein.
EXAMPLE:
A shareholder of the Fund would pay the following expenses on a
$1,000 investment in the Fund, assuming (1) 5% annual return and
(2) redemption at the end of:
1 year....................................................... $ 18
3 years...................................................... $ 55
5 years...................................................... $ 95
10 years..................................................... $206
THE "EXAMPLE" SET FORTH ABOVE IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES AND
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. The purpose of the expense table
provided above is to assist investors in understanding the various costs and
expenses that a shareholder will bear directly or indirectly. The expense
information in the Expense Table provided above has been restated to reflect
fees currently in effect. For more information with respect to the expenses of
the Fund and the Portfolio, see "Management" herein.
The Trust pays a distribution fee at an annual rate of up to 0.25% of the
Fund's average daily net assets in reimbursement of, or in anticipation of,
expenses incurred by the Distributor in connection with the sale of shares of
the Fund. Long-term shareholders may pay more than the economic equivalent of
the maximum distribution charges permitted by the National Association of
Securities Dealers, Inc. The Trust may pay fees to Service Organizations at an
annual rate in amounts up to 0.25% of the daily net asset value of shares of the
Fund owned by shareholders with whom the Service Organization has a servicing
relationship. The Trust does not currently intend to enter into agreements with
and pay fees to Service Organizations with respect to the Fund, but it may do so
in the future. See "Distribution Plan and Agreement" and "Service Organizations,
Transfer Agent and Custodian" herein.
Pursuant to the Sponsorship Agreement between the Portfolio and KLD, KLD
pays the ordinary operating expense of the Portfolio, except the sponsorship
fee, and excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses. KLD has entered into an expense payment arrangement with
Signature pursuant to which Signature provides these expense payment services to
the Portfolio. All of the advisory and
4
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management fees shown above and 0.025% of the administrative services fees shown
above are paid through the expense payment arrangement. See "Other Information
Concerning Shares of the Fund--Expenses" herein.
The Trust's Trustees believe that the aggregate per share expenses of the
Fund and the Portfolio will be less than or approximately equal to the expenses
which the Fund would incur if it retained the services of an investment adviser
and an investment manager and invested directly in the types of securities being
held by the Portfolio. See "Other Information Concerning Shares of the
Fund--Expenses" herein for further discussion of Fund and Portfolio expenses.
FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding for the
indicated period for the Fund which has been audited by KPMG Peat Marwick LLP,
the Fund's independent certified public accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.
FOR THE PERIOD
OCTOBER 19, 1995
(COMMENCEMENT OF
INVESTMENT
OPERATIONS)
FOR A SHARE OUTSTANDING FOR THE PERIOD: TO JULY 31, 1996
- ------------------------------------------------------------ -----------------
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.............................................. 7.10%
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)
- ------------------------------
(1) Includes the Fund's share of Domini Social Index Portfolio expenses and net
of fee waivers and expense reimbursements. Had the fee waiver, expense
reimbursements and expense offset arrangement not been in effect, the
annualized ratios of expenses and of net investment income to average net
assets would have been 26.4% and (24.4%), respectively.
(2) Annualized.
CHARITABLE CONTRIBUTION PROGRAM
The Fund is designed to enable an investor to share with charity,
specifically with DEVCAP, on an annual basis the return on his or her investment
in the Fund. When a shareholder makes an initial purchase of shares of the Fund,
the shareholder must also declare an intention to make an annual donation to
DEVCAP of fifty percent, seventy-five percent or all of the annual contribution
basis (calculated as indicated below) derived from the shareholder's investment
in the Fund. DEVCAP will direct the shareholder's donation to non-profit
organizations working to improve the welfare of underprivileged persons in
developing countries through grants or loans for micro-enterprises and other
economic development programs.
5
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After the initial purchase of shares and contribution election, a
shareholder may elect to contribute to DEVCAP a different portion of the
shareholder's annual contribution basis, so long as the shareholder elects to
contribute fifty percent, seventy-five percent or all of the shareholder's
annual contribution basis. Alternatively, a shareholder may elect at year's end
not to contribute any portion of the shareholder's annual contribution basis. On
or about December 1 of each year, the Fund will mail a notice to each
shareholder of record indicating the dollar amount of the shareholder's
estimated contribution for that year, based on the shareholder's then current
contribution election and the shareholder's estimated annual contribution basis
on that date. To change a shareholder's contribution election, the shareholder
must notify the Fund in writing on or before the fifth business day prior to the
last business day of that December, at the Fund's address: DEVCAP Shared Return
Fund, P.O. Box 107, New York, NY 10274-0107. By the end of the following
January, the Fund will mail a notice to each shareholder of record indicating
the dollar amount of the shareholder's actual contribution for the previous
year. This contribution will be tax deductible, as explained in more detail
under "Tax Matters" herein.
A shareholder's contribution (if any) will consist of a percentage (which
must be fifty percent, seventy-five percent or all) of the shareholder's annual
contribution basis derived from the shareholder's investment in the Fund. A
shareholder's annual contribution basis is the change in value of that
particular shareholder's account between (a) January 1 or the date of the
shareholder's initial investment and (b) the fifth business day prior to the end
of the calendar year, adjusted for redemptions, distributions and purchases. The
shareholder's annual contribution will be calculated by the Fund's transfer
agent on or about five business days before the end of each calendar year in
accordance with the following formula:
[Account value at year-end calculation date (including reinvested distributions,
if any)]
PLUS
[Shareholder redemptions during the year, if any]
PLUS
[Cash distributions from the Fund during the year, if any]
MINUS
[Shareholder purchases during the year, if any]
MINUS
[Account value at (a) beginning of year or (b) date of initial investment]
EQUALS SHAREHOLDER'S ANNUAL CONTRIBUTION BASIS
The shareholder's annual contribution is calculated by multiplying the
shareholder's annual contribution basis by the shareholder's specified
percentage of contribution.
On or about the fifth business day prior to the last business day of
December, a shareholder's annual contribution basis will be finalized using the
above formula. Shares in the Fund, equal to the value of the contribution amount
derived by applying the specified percentage to the shareholder's annual
contribution basis, will be redeemed for the shareholder and the funds generated
from that redemption will be contributed to DEVCAP. If a shareholder's annual
contribution basis has been zero, or if a shareholder's account has been closed
before the end of the year, or if the specified percentage has been
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reduced to zero after proper notice to the Fund, no contribution will result. A
shareholder may still make a contribution by using the convenient donation form
provided by DEVCAP for that purpose.
Note that, notwithstanding the above formula, if a shareholder liquidates
his or her total investment in the Fund before the year-end calculation date,
the shareholder's annual contribution will be deemed to be zero. The method of
calculation of the shareholder's annual contribution combined with the
shareholder's contribution election could result in a complete redemption of the
shareholder's end of year account.
In general, shareholders participating in the Charitable Contribution
Program will not incur a tax liability from their charitable contribution to
DEVCAP. The Board of Trustees believes that generally any tax liability that
might arise due to liquidation of shares in the Fund to make the charitable
deduction will normally be offset by a corresponding itemized tax deduction for
the contribution for taxpayers that itemize deductions. However, certain
taxpayers may be subject to limits on itemized deductions or charitable
deductions on their U.S. or state tax returns. Shareholders are advised to
consult with their tax advisers with respect to the particular tax consequences
to them of an investment in the Fund and participation in the Charitable
Contribution Program.
Shareholders desiring to make a contribution to DEVCAP outside the
Charitable Contribution Program, either in cash or in kind (I.E., by donating
shares of the Fund or other non-cash assets), should contact DEVCAP directly at
800-371-2655.
DEVCAP
DEVCAP is a non-profit, tax-exempt 501(c)(3) corporation that functions as a
consortium of non-profit organizations. DEVCAP was created to support a class of
existing charities, each of which is dedicated to improving the welfare of
underprivileged people in developing countries by supporting micro-enterprise
and other economic development programs. Micro-enterprise development programs
assist underprivileged people by providing direct financing and technical
support for their business enterprises, which support would be unavailable
through normal business channels. Contributions made pursuant to the Charitable
Contribution Program are allocated equally among the member organizations of
DEVCAP listed below.
The member organizations of DEVCAP pursue their shared development
objectives in different ways:
(i) APPROPRIATE TECHNOLOGY INTERNATIONAL provides technical and financial
assistance to organizations of small producers throughout Africa, Asia and
Latin America in agricultural and other strategic sectors.
(ii) CATHOLIC RELIEF SERVICES, founded by the Catholic Bishops of the United
States, funds a "village banking" program which provides financial services
to over 10,000 underprivileged people in nine countries throughout the
world;
(iii) SAVE THE CHILDREN funds credit and savings programs for women in
numerous developing regions of the world in order to generate income
necessary to improve the lives of their children.
(iv) SEED CAPITAL DEVELOPMENT FUND invests in and lends funds to a network
of finance companies located in developing countries that specialize in
micro-enterprise lending programs.
7
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DEVCAP was formed in 1992 in order to provide fund-raising and other support
to member organizations and other non-profits engaged in international economic
development for the world's poor. The money generated by the Fund will be used
as direct grants or loans to DEVCAP member organizations in support of their
programs. The money may also be used to support the programs of non-member
organizations.
In addition to its primary fund-raising activities, DEVCAP also plans to
promote cooperation among micro-enterprise development agencies and
organizations, and to provide information and support for micro-enterprise
development around the world. These activities could include educational
campaigns, research programs, and implementation of other financial programs to
aid in the development of micro-enterprises.
DEVCAP is independent of the Adviser, Manager, Distributor, Administrator
and all other service providers of the Fund. While DEVCAP personnel will
encourage donations through the Fund and DEVCAP itself incurs costs in these
efforts, DEVCAP and DEVCAP personnel receive no compensation from the Fund or
the Portfolio other than through charitable donations from individual
shareholders, as described above. Neither DEVCAP nor DEVCAP member organizations
provide any investment advisory, broker-dealer, management, administrative or
other investment support services to the Fund or the Portfolio.
For more information regarding DEVCAP or its member organizations, please
contact DEVCAP directly at 800-371-2655.
PERFORMANCE INFORMATION
Performance information concerning the Fund may from time to time be used in
advertisements, shareholder reports or other communications to shareholders. The
Trust may provide period and average annualized "total rates of return" with
respect to the Fund. The "total rate of return" of the Fund refers to the change
in the value of an investment in a Fund over a stated period based on any change
in net asset value per share and includes the value of any shares purchasable
with any dividends or capital gain distributions declared during such period.
Period total rates of return may be annualized. An annualized total rate of
return is a compounded total rate of return which assumes that the period total
rate of return is generated over a 52-week period, and that all dividends and
capital gain distributions are reinvested. An annualized total rate of return
will be slightly higher than a period total rate of return if the period is
shorter than one year, because of the effect of compounding.
Historical total return information for any period or portion thereof prior
to the establishment of the Fund will be that of the Portfolio, adjusted to
assume that all charges, expenses and fees of the Fund and the Portfolio which
are presently in effect were deducted during such periods.
The table that follows sets forth average annual total return information
for the periods indicated:
7/31/96 9/30/96
------ ------
1 Year ..................................................... 12.62% 17.60%
5 Years..................................................... 11.51% 13.34%
Commencement of Investment Operations of Portfolio* to
date....................................................... 11.09% 12.43%
- ------------------------
*Domini Social Index Portfolio commenced investing in the DSI on June 3, 1991.
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The Trust may provide "yield" quotations with respect to the Fund. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day or one-month period (which period shall be stated in any
advertisement or communications with a shareholder). This income is then
"annualized", that is, the amount of income generated by the investment over the
period is assumed to be generated over a 52-week period and is shown as a
percentage of investment. A "yield" quotation, unlike a total rate of return
quotation, does not reflect changes in net asset value.
From time to time the Trust may also quote fund rankings from various
sources, such as Lipper Analytical Services, Inc., and may compare its
performance to that of the Domini Social Index and various other unmanaged
securities indices, such as the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500") and the Dow Jones Industrial Average. "Standard &
Poor-Registered Trademark-", "S&P-Registered Trademark-" and "Standard & Poor's
500-Registered Trademark-" are trademarks of Standard & Poor's Corporation.
See the Statement of Additional Information for further information
concerning the calculation of yield and any total rate of return quotations.
Since the Fund's yield and total rate of return quotations are based on
historical earnings and since such yield and rates of return fluctuate over
time, such quotations should not be considered as an indication or
representation of the future performance of the Fund.
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
INVESTMENT OBJECTIVE--The investment objective of the Fund is to provide its
shareholders with long-term total return (reflecting both dividend and price
performance of the Fund) which corresponds to the total return performance of
the Domini Social Index (sometimes referred to herein as the "Index"). There
can, of course, be no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may be changed without approval
by the Fund's shareholders.
INVESTMENT POLICIES--The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has the same
investment objective as the Fund. The Portfolio seeks to achieve its investment
objective by investing in the common stocks comprising the Domini Social Index.
The Portfolio will approximate the weightings of securities held by the
Portfolio to the weightings of the stocks in the Index, except as described
below, and will seek a correlation between the weightings of securities held by
the Portfolio and the weightings of the stocks in the Index of 0.95 or better. A
figure of 1.0 would indicate a perfect correlation. As of July 31, 1996 , the
correlation between the weightings of securities held by the Portfolio and the
weightings of the stocks in the Index was 0.99. To the extent practicable, the
Portfolio will attempt to be fully invested. The ability of the Fund to
duplicate the performance of the Domini Social Index by investing in the
Portfolio will depend to some extent on the size and timing of cash flows into
and out of the Fund and the Portfolio as well as the Fund's and the Portfolio's
expenses. Adjustments in the securities holdings of the Portfolio to accommodate
cash flows will track the Domini Social Index to the extent practicable, but
this will result in brokerage expenses.
SOCIAL CRITERIA--The Domini Social Index was developed and is currently
maintained by the Adviser. The DSI is a common stock index comprised of the
stocks of approximately 400 companies which meet certain social criteria. The
weightings of the stocks comprising the DSI are based upon market
capitalization. The criteria used in developing and maintaining the DSI involve
the subjective judgment of the Adviser. The Adviser, based on available data,
seeks to exclude the following types of companies: firms that derive more than
2% of their gross revenues from the sale of military weapons; firms
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that derive any revenues from the manufacture of tobacco products or alcoholic
beverages; firms that derive any revenues from gambling enterprises; and firms
that have an ownership share in, or operate, nuclear power plants, or
participate in businesses related to the nuclear fuel cycle. The Adviser also
considers criteria such as corporate citizenship, employee relations,
environmental performance, and product-related issues when evaluating stocks for
inclusion in the DSI. The corporate citizenship criteria include a company's
record with regard to its philanthropic activities and its community relations
in general. The employee relations criteria include a company's record with
regard to labor matters, workplace safety, equal employment opportunity,
employee benefit programs, and meaningful participation in company profits
either through stock purchase or profit sharing plans. The environmental
performance criteria include a company's record with regard to fines or
penalties, waste disposal, toxic emissions efforts in waste reduction and
emissions reduction , recycling, and environmentally beneficial fuels, products
and services. The product-related criteria include a company's record with
regard to product safety, marketing practices and commitment to quality.
The Adviser intends to vote proxies of companies included in the Portfolio
consistent with the social criteria used in developing and maintaining the
Index.
INDEX MANAGEMENT--The Portfolio is not managed in the traditional investment
sense, since changes in the composition of its securities holdings are made in
order to track the changes in the composition of securities included in the
Index. Moreover, inclusion of a stock in the Domini Social Index does not imply
an opinion by the Adviser as to the merits of that specific stock as an
investment. However, the Adviser believes that enterprises which exhibit a
social awareness, based on the criteria described above, should be better
prepared to meet future societal needs for goods and services and may also be
less likely to incur certain legal liabilities that may be incurred when a
product or service is determined to be harmful, and that such enterprises should
over the longer term be able to provide a positive return to investors.
In selecting stocks for inclusion in the Index:
1. The Adviser evaluated, in accordance with the social criteria described
above, each of the companies the stocks of which comprise the S&P 500. If a
company whose stock was included in the S&P 500 met the Adviser's social
criteria and met the Adviser's further criteria for industry diversification,
financial solvency, market capitalization, and minimal portfolio turnover, it
was included in the Domini Social Index. As of July 31, 1996, of the 500
companies whose stocks comprised the S&P 500, approximately 50% were included in
the Index.
2. The remaining stocks comprising the Domini Social Index (I.E., those
which are not included in the S&P 500) were selected based upon the Adviser's
evaluation of the social criteria described above, as well as upon the Adviser's
criteria for industry diversification, financial solvency, market
capitalization, and minimal portfolio turnover. Because of the social criteria
applied in the selection of stocks comprising the Domini Social Index, industry
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500, and certain
industry sectors will be excluded altogether.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole.
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Since some industries are characterized by companies of relatively small stock
capitalization, the S&P 500 does not comprise the 500 largest companies listed
on the New York Stock Exchange. Not all stocks included in the S&P 500 are
listed on the New York Stock Exchange. However, the total market value of the
S&P 500 as of July 31, 1996 represented 76.3% of the aggregate market value of
common stocks traded on the New York Stock Exchange.
Inclusion of a stock in the S&P 500 Index in no way implies an opinion by
S&P as to its attractiveness as an investment, nor is S&P a sponsor of or
otherwise affiliated with the Fund or the Portfolio.
Some of the stocks included in the Domini Social Index may be stocks of
foreign issuers (provided that the stocks are traded in the United States in the
form of American Depositary Receipts or similar instruments the market for which
is denominated in United States dollars). Securities of foreign issuers may
represent a greater degree of risk (i.e., as a result of exchange rate
fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (i.e., market price per share times
the number of shares outstanding). Because of this weighting, as of July 31,
1996 approximately 40% of the Domini Social Index was comprised of the 20
largest companies in that Index.
The Adviser may exclude from the Domini Social Index stocks issued by
companies which are in bankruptcy or whose bankruptcy the Adviser believes may
be imminent.
The Portfolio intends to readjust its securities holdings periodically such
that those holdings will correspond, to the extent reasonably practicable, to
the Domini Social Index both in terms of composition and weighting. The timing
and extent of adjustments in the holdings of the Portfolio, and the extent of
the correlation of the holdings of the Portfolio with the Domini Social Index,
will reflect the Manager's judgment as to the appropriate balance between the
goal of correlating the holdings of the Portfolio with the composition of the
Index, and the goals of minimizing transaction costs and keeping sufficient
reserves available for anticipated redemptions of shares. To the extent
practicable, the Portfolio will seek a correlation between the weightings of
securities held by the Portfolio to the weightings of the securities in the
Index of 0.95 or better. The Board of Trustees of the Portfolio will receive and
review, at least quarterly, a report prepared by the Manager comparing the
performance of the Fund and the Portfolio with that of the Index, and comparing
the composition and weighting of the Portfolio's holdings with those of the
Index, and will consider what action, if any, should be taken in the event of a
significant variation between the performance of the Fund or the Portfolio, as
the Index, or between the composition and weighting of the Portfolio's
securities holdings with those of the stocks comprising the Index. If the
correlation between the weightings of securities held by the Portfolio and the
weightings of the stocks in the Index falls below 0.95, the Board of Trustees
will review with the Manager methods for increasing such correlation, such as
through adjustments in securities holdings of the Portfolio.
The Portfolio may invest cash reserves in short-term debt securities (i.e.,
securities having a remaining maturity of one year or less) issued by agencies
or instrumentalities of the United States Government, bankers' acceptances,
commercial paper or certificates of deposit, provided that the issuer satisfies
the Adviser's social criteria. The Portfolio does not currently intend to invest
in direct obligations of the United States Government. Short-term debt
securities purchased by the Portfolio will be rated at least Prime-1 by Moody's
Investors Service, Inc. or A-1+ or A-1 by S&P or, if not rated, determined to be
of comparable quality by the Portfolio's Board of Trustees. The Portfolio's
policy is to hold its
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assets in such securities pending readjustment of its portfolio holdings of
stocks comprising the Domini Social Index and in order to meet anticipated
redemption requests. Such investments are not intended to be used for defensive
purposes in periods of anticipated market decline.
The annual portfolio turnover rates of the Portfolio for the fiscal years
ended July 31, 1995 and 1996 were 6% and 5%, respectively.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers for execution is to obtain, and maintain the availability
of, execution at the most favorable prices and in the most effective manner
possible. Neither the Portfolio nor the Fund will engage in brokerage
transactions with the Adviser, the Manager, the Sponsor or the Administrator or
any of their respective affiliates or any affiliate of the Fund or the
Portfolio. For further discussion regarding securities trading by the Portfolio,
see the Statement of Additional Information.
Consistent with applicable regulatory policies, including those of the Board
of Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Portfolio may make loans of its securities to member banks of
the Federal Reserve System and to broker-dealers. Such loans would be required
to be secured continuously by collateral and cash or cash equivalents maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. The Portfolio would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During the existence of
a loan, the Portfolio would continue to collect the equivalent of the dividends
paid by the issuer on the securities loaned and would also receive interest on
investment of cash collateral. The Portfolio may pay finder's and other fees in
connection with securities loans. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.
Although it has no current intention to do so, the Portfolio may make short
sales of securities or maintain a short position, if at all times when a short
position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.
SPECIAL INFORMATION CONCERNING THE HUB AND SPOKE-REGISTERED TRADEMARK-
MASTER-FEEDER INVESTMENT FUND STRUCTURE
The Fund and the Portfolio are utilizing certain Hub and Spoke proprietary
rights, know-how and financial services from Signature Financial Group, Inc.
("Signature Financial"), of which the Administrator is a wholly owned
subsidiary. Hub and Spoke-Registered Trademark- is a registered service mark of
Signature Financial.
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Trust seeks to achieve the investment objective of the
Fund by investing all of the investable assets of the Fund in the Portfolio, a
separate registered investment company. The Portfolio has the same investment
objective and policies as the Fund. In addition to selling a beneficial interest
to the Fund, the Portfolio may sell beneficial interests to other mutual funds
or institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions as the Fund and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Furthermore, the other investors may not participate in the charitable
contribution program of the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in returns
are
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also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available from the Administrator at
(617) 423-0800. The Hub and Spoke-Registered Trademark- investment fund
structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
The investment objective of the Fund may be changed without the approval of
the Fund's shareholders, but not without written notice thereof to shareholders
thirty days prior to implementing the change. If there were a change in the
Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then- current financial
positions and needs. The investment objective of the Portfolio may also be
changed without the approval of the investors in the Portfolio, but not without
written notice thereof to the investors in the Portfolio (and notice by the Fund
to its shareholders) 30 days prior to implementing the change. There can, of
course, be no assurance that the investment objective of either the Fund or the
Portfolio will be achieved. See "Investment Restrictions" in the Statement of
Additional Information for a description of the fundamental policies of the Fund
and the Portfolio that cannot be changed without approval by the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund and the Portfolio, respectively. Except as stated otherwise, all
investment objectives, policies, strategies and restrictions described herein
and in the Statement of Additional Information are non-fundamental.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. (However, this
possibility exists as well for traditionally structured funds which have large
or institutional investors.) Also, funds with a greater pro rata ownership in
the Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio (other than a vote by the Fund to continue the operation of the
Portfolio upon the withdrawal of another investor in the Portfolio), the Trust
will hold a meeting of shareholders of the Fund and will cast all of its votes
in the same proportion as the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the Fund's votes at the Portfolio
meeting. The percentage of the Trust's votes representing Fund shareholders not
voting will be voted by the Trustees of the Trust in the same proportion as the
Fund shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objective, policies or restrictions may require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in a
distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund. Notwithstanding the
above, there are other means for meeting shareholder redemption requests, such
as borrowing.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time, if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective as the Fund or the retention of an investment adviser to
manage the Fund's assets in accordance with the investment policies described
above with respect to the Portfolio.
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For descriptions of the investment objective, policies and restrictions of
the Portfolio, see "Investment Objective, Policies and Risk Factors" herein and
"Investment Objective, Policies and Restrictions" in the Statement of Additional
Information. For descriptions of the management of the Portfolio, see
"Management" herein and "Management of the Trust and the Portfolio" in the
Statement of Additional Information. For descriptions of the expenses of the
Portfolio, see "Management" and "Other Information Concerning Shares of the Fund
Expenses" below.
-------------------
As a matter of fundamental policy, the Fund will invest all of its
investable assets (either directly or through the Portfolio) in one or more of:
(I) stocks comprising an index of securities selected applying social criteria,
which initially will be the Domini Social Index, (ii) short-term debt securities
of issuers which meet social criteria, (iii) cash, and (iv) options on equity
securities. This fundamental policy cannot be changed without the approval of
the holders of a majority of the Fund's shares (which, as used in this
Prospectus, means the lesser of (a) more than 50% of the outstanding shares of
the Fund, or (b) 67% or more of the outstanding shares of the Fund present at a
meeting at which holders of more than 50% of the Fund's outstanding shares are
represented in person or by proxy). Except for this fundamental policy, investor
approval is not required to change the Fund's or the Portfolio's investment
objective or any of the non-fundamental investment policies described above.
The Statement of Additional Information includes a discussion of other
investment policies and a listing of specific investment restrictions which
govern the Portfolio's and the Fund's investment policies. Certain of the
investment restrictions listed in the Statement of Additional Information may
not be changed by the Portfolio without the approval of the Fund and the other
investors in the Portfolio or by the Fund without the approval of the
shareholders of the Fund. If a percentage or rating restriction on investment or
utilization of assets is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
Portfolio's total assets or the value of the Portfolio's securities or a later
change in the rating of a security held by the Portfolio will not be considered
a violation of policy.
MANAGEMENT
The Boards of Trustees of the Trust and the Portfolio provide broad
supervision over the affairs of the Fund and the Portfolio, respectively. The
Trust has retained the services of Signature as administrator of the Fund, but
has not retained the services of an investment adviser or investment manager
since the Fund seeks to achieve its investment objective by investing all its
investable assets in the Portfolio. The Portfolio has retained the services of
Signature as administrator, KLD as investment adviser and sponsor, and Mellon
Equity as investment manager.
ADVISER
KLD provides advice to the Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The services provided by the Adviser
consist of determining the stocks to be included in the Index and evaluating, in
accordance with the Adviser's social criteria, debt securities which may be
purchased by the Portfolio.
For its services under the Advisory Agreement, the Adviser receives from the
Portfolio a fee accrued daily and paid monthly at an annual rate equal to 0.025%
of the Portfolio's average daily net assets, on an annualized basis for the
Portfolio's then-current fiscal year.
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Prior to October 4, 1996, the Adviser received a fee accrued daily, and paid
monthly, at an annual rate equal to 0.05% of the Portfolio's average daily net
assets, on an annualized basis for the Portfolio's then-current fiscal year.
"Domini-SM-" and "Domini 400 Social Index-SM-" are service marks of KLD.
Pursuant to agreements with the Fund and the Portfolio, the Portfolio will be
required to discontinue use of such service marks if KLD ceases to be the
investment adviser of the Portfolio, and the Fund will be required to
discontinue the use of such service marks if either KLD ceases to be the
investment adviser of the Portfolio or the Fund ceases to invest all of its
assets in the Portfolio.
MANAGER
Mellon Equity manages the Portfolio on a day-to-day basis pursuant to an
Investment Management Agreement (the "Management Agreement"). Mellon Equity does
not determine the composition of the Domini Social Index.
Under the Management Agreement, the Portfolio pays Mellon Equity an
investment management fee at an annual rate equal to 0.10% of the Portfolio's
average daily net assets. Prior to October 4, 1996, Mellon Equity received an
investment management fee equal on an annual basis to the following percentages
of the Portfolio's average daily net assets for its then-current fiscal year:
0.10% of assets up to $50 million; 0.30% of assets between $50 million and $100
million; 0.20% of assets between $100 million and $500 million; and 0.15% of
assets over $500 million.
Mellon Equity is a Pennsylvania business trust whose beneficial owners are
Mellon Bank N.A. and MMIP, Inc. Mellon Equity has been registered as an
investment adviser under the 1940 Act since 1986. Prior to 1987, the Manager was
part of the Equity Management Group of Mellon Bank Corporation's Trust and
Investment Department, which has managed pension assets since 1947.
As of June 30, 1996 , the Manager had approximately $9.8 billion of assets
under management.
Mellon Equity believes that performance of investment management services
for the Portfolio will not violate the Glass-Steagall Act or other applicable
banking laws or regulations. However, future statutory or regulatory changes, as
well as future judicial or administrative decisions and interpretations of
present and future statutes and regulations, could prevent Mellon Equity from
continuing to perform such services for the Portfolio. If Mellon Equity were
prohibited from acting as investment manager to the Portfolio, it is expected
that the Trustees would recommend to shareholders approval of a new investment
management agreement with another qualified investment manager selected by the
Trustees, or that the Trustees would recommend other appropriate action.
ADMINISTRATOR
Pursuant to an Administrative Services Agreements, Signature provides the
Trust with general office facilities and supervises the overall administration
of the Trust, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of, the
independent contractors and agents of the Trust; the preparation and filing of
all documents required for compliance by the Trust with applicable laws and
regulations; and arranging for the maintenance of books and records of the
Trust. Signature provides persons satisfactory to the Board of Trustees of the
Trust to serve as officers of the Trust. Such officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
Signature or its affiliates. For these
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services and facilities, Signature receives fees computed and paid monthly from
the Trust at an annual rate equal to 0.175% of the first $100 million of average
daily net assets of the Fund and 0.125% of the average daily net assets of the
Fund in excess of $100 million. Prior to October 4, 1996, Signature received
administrative fees computed and paid monthly from the Trust at an annual rate
equal to 0.15% of the $100 million on average daily net assets of the Fund and
0.10% of the average daily net assets of the Fund in excess of $100 million.
Signature is a wholly-owned subsidiary of Signature Financial Group, Inc.
SPONSOR
Pursuant to a Sponsorship Agreement, dated November 6, 1996, KLD pays the
ordinary operating expenses of the Portfolio (other than brokerage fees and
commissions, interest, taxes and extraordinary expenses) and provides the
Portfolio with administrative personnel and services necessary to operate the
Portfolio. In addition to general administrative services, such services include
answering questions from the general public and the media regarding the
securities holdings of the Portfolio. For these services and facilities, KLD
receives fees computed and paid monthly from the Portfolio at an annual rate of
0.20% of the average daily net assets of the Portfolio, for the Portfolio's
then-current fiscal year.
Pursuant to an Administrative Services Agreement between Signature and KLD,
KLD has engaged Signature to provide certain administrative services to the
Portfolio. In such capacity, Signature performs certain administrative services
requested by the Sponsor. For these services, since November 6, 1996, the
Sponsor pays to Signature a fee computed daily and paid monthly at an annual
rate equal to 0.025% of the average daily net assets of the Portfolio, for the
Portfolio's then-current fiscal year. For its services, for the period from
October 4,1996 until November 6, 1996, Signature received fees computed daily
and paid monthly from the Portfolio at an annual rate equal to 0.025% of the
average daily net assets of the Portfolio for the Portfolio's then-current
fiscal year. Prior to October 4, 1996 Signature received administrative fees
computed daily and paid monthly from the Portfolio at annual rate equal to 0.05%
of the average daily net assets of the Portfolio for its then-current fiscal
year.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased without a sales load at the net asset
value next determined after an order for shares is received and accepted by the
Fund provided such order is received and accepted on any day the New York Stock
Exchange is open for trading (a "Fund Business Day"). The minimum initial
investment in the Fund is $1,000, except that the minimum initial investment
when selecting the Automatic Investment Plan is $500. There is no minimum on
additional investments.
The Fund reserves the right to cease offering its shares for sale at any
time or to reject any order for the purchase of its shares.
For each shareholder of record, the Fund establishes an open account to
which all shares purchased are credited together with any dividends and capital
gain distributions which are paid in additional shares. See "Dividends and
Capital Gain Distributions" herein. The Trust has a policy of not issuing share
certificates.
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Shares may be purchased directly from the Distributor or through Service
Organizations (see "Service Organizations" below) by clients of those Service
Organizations. If an investor purchases shares through a Service Organization,
the Service Organization must promptly transmit such order to the Fund so that
the order receives the net asset value next determined following receipt of the
order. Service Organizations may impose minimum customer account and other
requirements in addition to those imposed by the Fund. Investors wishing to
purchase shares through a Service Organization should contact that organization
directly for appropriate instructions. Other investors may purchase Fund shares
in the manner described below.
Investors desiring to purchase shares of the Fund by mail should complete an
Account Application and mail the Application and a check (in U.S. dollars),
payable to "DEVCAP Shared Return Fund," to the Fund at the following address:
DEVCAP Shared Return Fund
P.O. Box 107
New York, NY 10274-0107
An investor desiring to purchase shares by a wire transfer of funds should
request its bank to transmit immediately available funds. The information
transmitted with the funds must include the investor's name and address and a
statement indicating whether a new account is being established by such wire
transfer or whether such wire transfer is being made by a shareholder with an
account with the Fund. If the initial purchase by an investor is by a wire
transfer of funds, an account number will be assigned to such investor and an
Account Application must subsequently be completed and mailed to the Fund. Bank
wires for the purchase of shares should be sent to:
The Chase Manhattan Bank
ABA# 021000021
BBK = United States Trust Company of New York
A/C# 920-1-073195
For Credit to: DEVCAP Shared Return Fund
A/C# 10-12-592
FBO: "Include Shareholder Name, Address, and Social Security
Number (if purchase is for a New Account) or Account
Number (if shareholder account is existing.)"
Shares of the Fund may be purchased by exchanging securities acceptable to
the Trust for shares of the Fund. The Trust will not accept a security in
exchange for Fund shares unless (a) the security is consistent with the
investment objectives and policies of the Fund and the Portfolio, and (b) the
security is deemed acceptable by the Manager. Securities offered in exchange for
shares of the Fund will be valued in accordance with the usual valuation
procedure for the Fund. See "Net Asset Value".
Investors making purchases through a Service Organization should be aware
that it is the responsibility of the Service Organization to transmit orders for
purchases of shares by its customers to the Transfer Agent and to deliver
required funds on a timely basis, in accordance with the procedures stated
above.
For further information on how to purchase shares of the Fund, an investor
should contact the Distributor (see back cover for address and phone number).
AUTOMATIC INVESTMENT PLAN
The Trust offers a plan for regularly investing specified dollar amounts
($25.00 minimum in monthly, quarterly, semi-annual or annual intervals) in the
Fund. The minimum
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investment for an investor investing through an automatic investment plan is
$500. If the Automatic Investment Plan is selected, subsequent investments will
be automatic and will continue until such time as the Fund and the investor's
bank are notified to discontinue further investments. Due to the varying
procedures to prepare, process and to forward the bank withdrawal information to
the Fund, there may be a delay between the time of the bank withdrawal and the
time the money reaches the Fund. The investment in the Fund will be made at the
public offering price per share determined on the day that both the check and
bank withdrawal data are received in the form required by the Fund. Further
information about the plan and form may be obtained from the Distributor at the
telephone number listed on the back cover of the Prospectus.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund may be used as a funding medium for an Individual
Retirement Account ("IRA"). An IRA plan approved by the Internal Revenue Service
is available from the Distributor naming Investors Bank & Trust Company as
custodian. The minimum initial investment for an IRA is $250; there is no
minimum for subsequent investments. IRAs are available to individuals under age
70 1/2 who receive compensation or earned income during the year. An IRA
contribution by an individual who participates, or whose spouse participates, in
a tax-qualified or Government-approved retirement plan may not be deductible
depending upon various factors, including the individual's income. Individuals
may also establish an IRA to receive a "rollover" distribution from another IRA
or a qualified plan. Tax advice should be obtained before planning a rollover.
IRA ACCOUNTS AND THE FUND'S CHARITABLE CONTRIBUTION PROGRAM. As described
above under the section header "Charitable Contribution Program," while shares
equal to the value of a shareholder's charitable contribution amount are usually
redeemed automatically pursuant to the shareholder's charitable contribution
instructions, shares may not be redeemed in this way from an IRA account without
incurring certain tax liabilities associated with early withdrawals from IRA
accounts. Therefore, for IRA accounts only, shareholders will be requested to
remit their charitable contribution from a source other than their IRA account.
By January 31 of each year, the Fund will mail a notice to each IRA shareholder
indicating the shareholder's charitable contribution amount for the previous
year. Each shareholder will then be requested to make a contribution to DEVCAP
equal in value to his or her charitable contribution amount payable by check or
credit card. For more information regarding how the Fund calculates a
shareholder's annual charitable contribution amount, see "Charitable
Contribution Program" above.
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in its account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to the Fund. Redemptions will
therefore be effected on the same day the redemption order is received by the
Fund provided such order is received and accepted prior to the close of the Fund
Business Day. In addition to the procedures discussed in this section,
redemption of shares of an investor may also occur as described under
"Charitable Contribution Program" herein. The proceeds of a redemption will be
paid by the Fund in federal funds normally on the next Fund Business Day, but in
any event within seven days if all checks in payment for the purchase of shares
to be redeemed have been cleared by the Fund (which may take up to 15 days).
Redemptions may be paid by the Fund by check or by wire transfer if the
appropriate box on the Account Application has been completed. Instructions for
wire redemptions are set forth in the Account Application.
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Redemptions may be made by letter to the DEVCAP Shared Return Fund
specifying the dollar amount or number of shares to be redeemed and the account
number. The letter must be signed in exactly the same way the account is
registered and, with respect to redemptions in excess of $5,000, the signatures
must be guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange or by a commercial bank (not a savings
bank) which is a member of the Federal Deposit Insurance Corporation. In some
cases the Fund may require the furnishing of additional documents.
Written redemption requests should be mailed to the Fund at the following
address:
DEVCAP Shared Return Fund
P.O. Box 107
New York, NY 10274-0107
For overnight deliveries, please use the following address:
DEVCAP Shared Return Fund
c/o Fundamental Shareholder Services, Inc.
90 Washington Street
New York, NY 10006
(212) 635-5000
An investor may also redeem shares by telephone by calling the Transfer
Agent, at 1-800-371-2655, if the appropriate box on the Account Application has
been completed. The Fund, Transfer Agent and Distributor will not be liable for
any loss, liability, cost or expense for acting upon telephone instructions
believed to be genuine. Accordingly, shareholders will bear the risk of loss.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including, without limitation, recording
telephone instructions and/or requiring the caller to provide some form of
personal identification. Failure to employ reasonable procedures may make the
Fund liable for any losses due to unauthorized or fraudulent telephone
instructions. The following information must be supplied by the shareholder or
broker at the time a request for a telephone redemption is made: (1) the
shareholder's account number; (2) the shareholder's social security number; and
(3) the name and account number of the shareholder's designated securities
dealer or bank.
The Fund, Transfer Agent and Distributor reserve the right to refuse wire or
telephone redemptions. Procedures for redeeming shares by wire or telephone may
be modified or terminated at any time by the Fund or the Distributor. A Service
Organization may request a wire redemption provided a Wire Authorization Form is
on file with the Fund. The proceeds of a wire redemption will be sent to an
account with a Service Organization designated on the appropriate form. Proceeds
of wire redemptions will be transferred within seven days after receipt of the
request.
The Fund reserves the right to redeem involuntarily on at least 30 days'
notice the balance in a shareholder's account having a current value of less
than $500, but not if an account falls below $500 due to a change in the market
value of the Fund's shares.
The value of shares redeemed may be more or less than the shareholder's
cost, depending on the Fund's performance during the period the shareholder
owned its shares. Redemptions of shares are taxable events on which the
shareholder may recognize a gain or a loss.
The right of any shareholder or DEVCAP to receive payment with respect to
any redemption may be suspended or the payment of the redemption proceeds
postponed
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during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
TAX MATTERS
FUND TAXATION
Each year the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). Provided the Fund qualifies as a "regulated investment company"
under the Code, and distributes all of its net investment income and realized
capital gains to shareholders in accordance with the timing requirements imposed
by the Code, the Fund will not be required to pay any federal income or excise
taxes. The Portfolio will also not be required to pay any federal income or
excise taxes. However, shareholders of the Fund normally will have to pay
federal income taxes, and any state or local taxes, on distributions of net
investment income and net realized capital gains from the Fund. At the end of
each calendar year, each shareholder receives information for tax purposes on
distributions received during that calendar year including the portion taxable
as ordinary income, the portion taxable as capital gains, the portion, if any,
representing a return of capital (which generally is free of current taxes but
results in a basis reduction) and the amount of dividends eligible for the
dividends-received deduction for corporations.
Distributions of net long-term capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) will cause any
short- term capital loss realized on the disposition by a Fund's shareholder of
Fund shares held for six or fewer months to be recharacterized, to the extent of
those distributions, as long-term capital loss. Under the back-up withholding
rules of the Code, certain shareholders may be subject to 31% withholding of
federal income tax on distributions and payments made by the Fund. Generally,
shareholders are subject to back-up withholding if they have not provided the
Fund with a correct taxpayer identification number and certain other
certifications.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund qualifies as a regulated investment company
under the Code.
The foregoing discussion is intended for general information only. A
prospective shareholder should consult with its own tax advisor as to the tax
consequences of an investment in the Fund including the status of distributions
from the Fund under applicable state or local law.
TAX DEDUCTIBILITY OF CHARITABLE CONTRIBUTIONS
The Charitable Contribution Program of the Fund (the "Program") has been
designed so that individual investors utilizing the cash method of accounting
who donate to DEVCAP through the Program will be entitled to a tax deduction for
the value of the donation in the taxable year in which the donation is made.
Under the Program, the charitable donation will be made within the last five
business days of any calendar year of the Fund, thus tracking the taxable year
for most individual investors in the Fund. See "Charitable Contribution Program"
herein.
The tax effect of the donation for a particular investor of the Fund may
vary according to the individual circumstances of that investor. For example,
the Code sets an upper limit on the dollar amount of tax deductions that can be
taken by individual taxpayers for
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<PAGE>
charitable donations in a given year. In addition, the redemption of shares in
the Fund under the Program for the value of the charitable contribution to
DEVCAP may be subject to capital gains tax. In view of the foregoing, as well as
the possibility of other tax consequences of the donation to particular
investors, potential purchasers of the Fund should consult their own tax
advisors in determining the federal, state, local and other tax consequences of
purchasing shares of the Fund and participating in the Program.
Each of DEVCAP's member organizations is recognized by the United States
Internal Revenue Service (the "IRS") as a tax-exempt, section 501(c)(3)
organization under the Code. In addition, on October 18, 1995, DEVCAP received
from the IRS recognition as a tax-exempt "supporting organization," a category
of exemption available under sections 501(c)(3) and 509(a)(3) of the Code for
organizations, like DEVCAP, that are engaged solely in activities designed to
support other tax-exempt charitable organizations. In the case of DEVCAP, these
supported organizations are the DEVCAP member organizations and other charities
that are engaged in micro-enterprise and other economic development programs for
underprivileged people in developing countries.
The Program (as described above) has been structured so that investors are
provided an opportunity to donate to DEVCAP each year. The Fund has been
structured this way in order to allow the contributions made through the Program
to be tax deductible donations made to non-profit organizations under existing
interpretations of section 170(c) of the Code. Investors should recognize,
however, that neither the Fund nor DEVCAP are tax advisers, that existing law
and interpretations thereof may be modified, and that no ruling has been sought
from the IRS confirming the tax deductible nature of Program contributions.
Nevertheless, the IRS has been informed of the details of the Program in
DEVCAP's filing for recognition as a section 501(c)(3) organization, and the
Fund believes that the granting of tax-exempt status to DEVCAP represents
approval of DEVCAP's activities, including the Program, and confirmation that
the donations are tax deductible.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The Trust determines the net asset value of the shares of the Fund on each
Fund Business Day. This determination is made once during each such day as of
the close of regular trading of the New York Stock Exchange by deducting the
amount of the Fund's liabilities from the value of its assets and dividing the
difference by the number of shares of the Fund outstanding.
Since the Fund will invest all of its assets in the Portfolio, the value of
the Fund's assets will be equal to the value of its beneficial interest in the
Portfolio. The net asset value of the Portfolio is determined as of the close of
regular business on the New York Stock Exchange on each day on which such
Exchange is open for trading, by deducting the amount of the Portfolio's
liabilities from the value of its assets. At the close of each such business
day, the value of the Fund's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents the Fund's share of the
aggregate beneficial interests in the Portfolio. See "Description of Shares,
Voting Rights and Liabilities" below.
Equity securities held by the Portfolio are valued at the last sale price on
the exchange on which they are primarily traded or on the NASDAQ system for
unlisted national market issues, or at the last quoted bid price for securities
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. If the Portfolio purchases option contracts, such
option contracts which are traded on commodities or
21
<PAGE>
securities exchanges are normally valued at the settlement price on the exchange
on which they are traded. Short-term obligations with remaining maturities of
less than sixty days are valued at amortized cost, which constitutes fair value
as determined by the Board of Trustees of the Portfolio. Portfolio securities
(other than short-term obligations with remaining maturities of less than sixty
days) for which there are no such quotations or valuations are valued at fair
value as determined in good faith by or at the direction of the Portfolio's
Board of Trustees.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the Fund's net income from dividends and interest is
paid to the Fund's shareholders annually as a dividend, usually in December. For
this purpose, the Fund's "net income from dividends and interest" consists of
all income from dividends and interest accrued on the assets of the Fund (i.e.,
the Fund's share of the Portfolio's net income from dividends and interest),
less all actual and accrued expenses of the Fund determined in accordance with
generally accepted accounting principles.
The Fund also declares a long-term capital gain distribution to its
shareholders on an annual basis, usually in December, if the Fund's share of the
Portfolio's profits during the year from the sale of securities held for longer
than the applicable long-term capital gains holding period exceeds the Fund's
share of the Portfolio's losses during such year from the sale of securities
together with the Fund's share of the Portfolio's net capital losses carried
forward from prior years (to the extent not used to offset short-term capital
gains). The Fund's share of the Portfolio's net short-term capital gains
realized during each fiscal year will also be distributed at that time.
The Fund will also make additional distributions to its shareholders to the
extent necessary to avoid application of the 4% non-deductible excise tax
created by the Tax Reform Act of 1986 on certain undistributed income and net
capital gains of mutual funds.
A shareholder of the Fund may receive dividends and capital gain
distributions in cash or additional shares of the Fund.
After the Fund has paid to its shareholders (I) substantially all of its net
income from dividends and interests and (ii) any long-term capital gain
distributions, a portion of the shareholder's total return will be donated to
DEVCAP to support charitable organizations. See "Charitable Contribution
Program" herein for more detailed information.
EXPENSES
Expenses of the Fund and the Portfolio include the compensation of their
respective Trustees who are not interested persons of the Fund or the Portfolio;
governmental fees, interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Fund or the Portfolio; fees and expenses of
independent auditors, of legal counsel and of any transfer agent, custodian,
registrar or dividend disbursing agent of the Fund or the Portfolio; insurance
premiums; and expenses of calculating the net asset value of the Portfolio and
of shares of the Fund.
Expenses of the Fund also include expenses of distributing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, reports, notices, proxy statements and reports to
shareholders and to governmental offices and commissions; expenses of
shareholder meetings; and expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes.
22
<PAGE>
Expenses of the Portfolio also include the expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Portfolio's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
offices and commissions; expenses of meetings of investors; and the advisory
fees payable to the Adviser, the management fees payable to the Manager, the
sponsorship fees payable to the Sponsor and the administrative fees payable to
the Portfolio Administrator.
Pursuant to the Sponsorship Agreement between the Portfolio and KLD, KLD
pays the ordinary operating expenses of the Portfolio, except the sponsorship
fee, and excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses. KLD has entered into an expense payment agreement with
Signature pursuant to which Signature provides this expense payment service to
the Portfolio and pursuant to which Signature has agreed to pay all of the
operating expenses of the Portfolio until December 31, 1999. Under this
arrangement, Signature receives an expense payment fee from KLD, computed and
paid monthly at an annual rate equal to 0.175% of the Portfolio's average daily
net assets for its then-current fiscal year.
DEVCAP has agreed that it will reimburse the Fund through at least November
30, 1997 to the extent necessary to maintain the Fund's total operating expenses
(which includes expenses of the Fund and the Portfolio) at the annual rate of
1.75% 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 unforeseen
circumstances. DEVCAP will review its undertaking annually, however, there is no
assurance that DEVCAP will continue this reimbursement beyond the specified
period, except as required by the following sentence. DEVCAP has agreed to
reimburse the Fund as necessary if in any fiscal year the sum of the Fund's
expenses exceeds the limits set by applicable regulations of state securities
commissions. Such annual limits are currently 2.50% of the first $30 million of
average net assets, 2% of the next $70 million of such net assets, and 1.50% of
such net assets in excess of $100 million for any fiscal year.
DISTRIBUTION PLAN AND AGREEMENT
The Trustees of the Trust have adopted a Distribution Plan (the
"Distribution Plan") with respect to the Fund in accordance with Rule 12b-1
under the 1940 Act after having concluded that there is a reasonable likelihood
that the Distribution Plan will benefit the Fund and its shareholders. As
contemplated by the Distribution Plan, Signature acts as agent of the Fund in
connection with the offering of shares of the Fund pursuant to a Distribution
Agreement. Signature acts as the principal underwriter of shares of the Fund and
bears the compensation of personnel necessary to provide such services and all
costs of travel, office expenses (including rent and overhead) and equipment.
Under the Distribution Plan, Signature may receive a fee from the Trust at
an annual rate not to exceed 0.25% of the Fund's average daily net assets in
anticipation of, or as reimbursement for, costs and expenses incurred in
connection with the sale of shares of the Fund, such as payments to
broker-dealers who advise shareholders regarding the purchase, sale or retention
of shares of the Fund, payments to employees of Signature, advertising expenses
and the expenses of printing and distributing prospectuses and reports used for
sales purposes, expenses of preparing and printing sales literature and other
distribution-related expenses. Signature will provide to the Trustees of the
Trust a quarterly written report of amounts expended by it under the
Distribution Plan and the purposes for which such expenditures were made.
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<PAGE>
No payments under the Distribution Plan are made to the Service
Organizations, although Service Organizations may receive fees from the Trust
for their services. See "Service Organizations" below.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (par value $0.01 per
share) and to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in the
Trust. The Fund is presently the only series of the Trust. However, the Trust
reserves the right to create and issue additional series of shares, in which
case the shares of each series would participate equally in the dividends and
assets of the particular series. The Trust may establish additional classes of
any series of shares. For example, the Fund may offer another class of shares
that has lower annual distribution fees or shareholder servicing fees. Prior to
offering another class of shares, the Fund would either issue a new Prospectus
and Statement of Additional Information or amend this Prospectus and the
Statement of Additional Information to reflect such issuance.
Each share of the Fund represents an equal proportionate interest in the
Fund with each other share. Shares have no preference, preemptive, conversion or
similar rights. Shares when issued are fully paid and nonassessable, except as
set forth below. Shareholders are entitled to one vote for each share held on
matters on which they are entitled to vote. The Trust is not required to and has
no current intention of holding annual meetings of shareholders, although the
Trust will hold special meetings of Fund shareholders when, in the judgment of
the Trustees of the Trust, it is necessary or desirable to submit matters for a
shareholder vote. Shares of each series are entitled to vote separately to
approve amendments to the Distribution Plan or changes in fundamental investment
policies or restrictions, but shares of all series will vote together in the
election or selection of Trustees and accountants for the Trust. If holders of
10% or more of the Trust's outstanding shares so request, a meeting of the Trust
shareholders will be called for the purpose of voting on the removal of a
Trustee or Trustees. The Trust will assist in shareholder communications as
required by Section 16(c) of the 1940 Act.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (i.e., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trust's Trustees
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund's investing in the Portfolio. Whenever the Fund is requested
to vote on a fundamental policy of the Portfolio, the Fund will hold a meeting
of its shareholders and will cast its vote as instructed by its shareholders.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each Fund Business Day. At the close of each such
business day, the
24
<PAGE>
value of each investor's beneficial interest in the Portfolio will be determined
by multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals, which are to be
effected as of the close of business on that day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be re-computed as the percentage equal to the fraction (I) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the close of business on the following Fund Business Day.
SERVICE ORGANIZATIONS, TRANSFER AGENT AND CUSTODIAN
SERVICE ORGANIZATIONS
The Trust may also contract with various banks, trust companies (other than
Mellon Equity), broker-dealers (other than Signature) or other financial
organizations (collectively, "Service Organizations") to provide administrative
services for the Fund, such as maintaining shareholder accounts and records. The
Fund may pay fees to Service Organizations (which may vary depending upon the
services provided) in amounts up to an annual rate of 0.25% of the daily net
asset value of shares of the Fund owned by shareholders with whom the Service
Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients such as requiring their clients to invest more than the minimum
initial investment specified by the Fund or charging a direct fee for servicing.
If imposed, these fees would be in addition to any amounts which might be paid
to the Service Organization by the Fund. Each Service Organization has agreed to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations are urged to consult them regarding any such fees or conditions.
The Trust does not currently intend to enter into agreements with and pay
fees to Service Organizations with respect to the Fund, but it may do so in the
future.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Fund and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
25
<PAGE>
TRANSFER AGENT AND CUSTODIAN
The Trust has entered into a Transfer Agency and Service Agreement with
Fundamental Shareholder Services, Inc. ("FSSI") and the Portfolio has entered
into a Transfer Agency Agreement with Investors Bank & Trust Company ("IBT"),
pursuant to which FSSI and IBT act as Transfer Agent for the Fund and the
Portfolio, respectively. Each Transfer Agent maintains an account for each
shareholder of the Fund or the Portfolio, respectively, performs other transfer
agency functions and acts as dividend disbursing agent for the Fund and the
Portfolio, respectively. Pursuant to Custodian Agreements, IBT acts as the
custodian of the Fund's assets, (i.e., cash and the Fund's interest in the
Portfolio) and as the custodian of the Portfolio's assets (the "Custodian"). The
Custodian's responsibilities include safeguarding and controlling the
Portfolio's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest on the Portfolio's
investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of shares of the Portfolio. Securities held by the Portfolio may be
deposited into certain securities depositaries. The Custodian does not determine
the investment policies of the Portfolio or decide which securities the
Portfolio will buy or sell. The Portfolio may, however, invest in securities of
the Custodian and may deal with the Custodian as principal in securities
transactions. For their services, FSSI and IBT will receive such compensation as
may from time to time be agreed upon by each of them and the Fund or the
Portfolio.
-------------------
The Fund's Statement of Additional Information contains more detailed
information about the Fund and the Portfolio, including information related to
(I) investment policies and restrictions of the Fund and the Portfolio, (ii) the
Trustees, officers, investment adviser, investment manager, sponsor and
administrator of the Fund and the Portfolio, (iii) portfolio transactions, (iv)
the Fund's shares, including rights and liabilities of shareholders, (v)
additional performance information, including the method used to calculate yield
and total rate of return quotations of the Fund, (vi) determination of the net
asset value of shares of the Fund, and (vii) the audited financial statements of
the Fund and the Portfolio at July 31, 1996.
26
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(THIS PAGE INTENTIONALLY LEFT BLANK)
27
<PAGE>
DEVCAP SHARED RETURN FUND
6 St. James Avenue
Boston, MA 02116
(800) 371-2655
PORTFOLIO INVESTMENT ADVISER AND SPONSOR:
Kinder, Lydenberg,
Domini & Co., Inc.
129 Mt. Auburn Street
Cambridge, MA 02138
(617) 547-7479
PORTFOLIO INVESTMENT MANAGER:
Mellon Equity Associates
500 Grant Street
Suite 3700
Pittsburgh, PA 15258-0001
ADMINISTRATOR AND DISTRIBUTOR:
Signature Broker-Dealer
Services, Inc.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
CUSTODIAN:
Investors Bank &
Trust Company
89 South Street
Boston, MA 02111
AUDITORS:
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110
LEGAL COUNSEL:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
TRANSFER AGENT:
Fundamental Shareholder Services, Inc.
90 Washington Street
New York, NY 10006
(800) 371-2655
M Printed on recycled paper
with soy inks
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 27, 1996
DEVCAP SHARED RETURN FUND
TABLE OF CONTENTS PAGE
The Trust................................................................ 2
Investment Objective, Policies and Restrictions.......................... 2
Performance Information................................................ 10
Determination of Net Asset Value; Valuation of Portfolio
Securities............................................................ 11
Management of the Trust and the Portfolio............................. 12
Independent Auditors..................................................... 19
Taxation.................................................................. 19
Portfolio Transactions and Brokerage Commissions......................... 21
Description of Shares, Voting Rights and Liabilities..................... 23
Financial Statements.................................................. 26
DEVCAP TRUST
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(800) 371-2655
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Prospectus dated November 27, 1996, as amended from time to time, for DEVCAP
Shared Return Fund. This Statement of Additional Information should be read in
conjunction with the Prospectus, a copy of which may be obtained by an investor
without charge by contacting Signature Broker-Dealer Services, Inc., the Fund's
distributor, at (617) 423-0800.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.
DSI163H
<PAGE>
THE TRUST
DEVCAP Trust (the "Trust") was organized as a business trust under the
laws of the Commonwealth of Massachusetts, with DEVCAP Shared Return Fund (the
"Fund") established as a separate series of the Trust, on June 29, 1995. The
Fund is a no-load diversified open-end management investment company. The Trust
offers to buy back (redeem) shares of the Fund from its shareholders at any time
at net asset value. References in this Statement of Additional Information to
the "Prospectus" are to the current Prospectus of the Fund, as amended or
supplemented from time to time.
Signature Broker-Dealer Services, Inc. ( "Signature"), the Fund's
administrator (the "Administrator"), supervises the overall administration of
the Fund. The Board of Trustees provides broad supervision over the affairs of
the Fund.
Shares of the Fund are continuously sold by Signature, the Fund's distributor
(the "Distributor"). The minimum initial investment is $1,000, except that the
minimum initial investment when selecting the Automatic Investment Plan is $500.
An investor should obtain from the Distributor, and should read in conjunction
with the Prospectus, the materials describing the procedures under which Fund
shares may be purchased and redeemed.
The Trust seeks to achieve the investment objective of the Fund by
investing all of the Fund's investable assets in the Domini Social Index
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. Kinder, Lydenberg,
Domini & Co., Inc. ("KLD") is the Portfolio's investment adviser (the "Adviser")
and sponsor (the "Sponsor"). Mellon Equity Associates ("Mellon Equity") is the
Portfolio's investment manager (the "Manager"). The Adviser determines the
composition of the Domini 400 Social IndexSM ("Domini Social Index" or "DSI") .
The Manager manages the investments of the Portfolio from day to day in
accordance with the Portfolio's investment objective and policies. "DominiSM"
and "Domini 400 Social IndexSM" are service marks of KLD.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide its shareholders
with long-term total return (reflecting both dividend and price performance of
the Fund) which corresponds to the performance of the Domini Social Index
(sometimes referred to herein as the "Index"). There can, of course, be no
assurance that the Fund will achieve its investment objective. The investment
objective of the Fund may be changed without approval by the Fund's
shareholders.
DSI163H
-2-
<PAGE>
INVESTMENT POLICIES
The Trust seeks to achieve the investment objective of the Fund by
investing all of the Fund's investable assets in the Portfolio, which has the
same investment objective as the Fund. The Trust may withdraw the Fund's
investment in the Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interests of the Fund to do so. Upon any such
withdrawal, the Board of Trustees would consider what action might be taken,
including the investment of all the investable assets of the Fund in another
pooled investment entity having the same investment objective as the Fund, or
the retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Portfolio. The
approval of the Fund's shareholders would not be required to change any of the
Fund's investment policies.
The following supplements the information concerning the Portfolio's
investment policies contained in the Prospectus and should only be read in
conjunction therewith.
A company which is not included in the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") may be included in the Domini Social Index
primarily in order to afford representation to an industrial sector which would
otherwise be under-represented in the Index. Because of the social criteria
applied in the selection of stocks comprising the Domini Social Index, industry
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500.
The Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
foreign withholding taxes; however, there can be no assurance that such laws may
not become applicable to certain of the Portfolio's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
respect to any of the Portfolio's investments, the effect may be to reduce the
income received by the Portfolio on such investments.
Although neither the Fund nor the Portfolio has any current intention
to do so, the Fund and the Portfolio may invest in securities which may be
resold pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act").
It is a fundamental policy of the Portfolio and the Fund that neither
the Portfolio nor the Fund may invest more than 25% of the total assets of the
Portfolio or the Fund, respectively, in any one industry, although the Fund will
invest all of its assets in the Portfolio, and the Portfolio may and would
invest more than 25% of its assets in an industry if stocks in that industry
were to comprise more than 25% of the Domini Social Index. Based on the current
composition of the Index, this is
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considered highly unlikely. If the Portfolio were to concentrate its investments
in a single industry, the Portfolio and the Fund would be more susceptible to
any single economic, political or regulatory occurrence than would be another
investment company which was not so concentrated.
LOANS OF SECURITIES: The Portfolio may lend its securities to brokers,
dealers and financial institutions, provided that (1) the loan is secured
continuously by collateral, consisting of U.S. Government securities or cash or
letters of credit, which is marked to the market daily to ensure that each loan
is fully collateralized at all times; (2) the Portfolio may at any time call the
loan and obtain the return of the securities loaned within three business days;
(3) the Portfolio will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Portfolio.
The Portfolio will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Adviser or the Manager.
Although the Portfolio reserves the right to lend its securities, it
has no current intention of doing so in the foreseeable future.
RISK FACTORS INVOLVED IN OPTION CONTRACTS: Although it has no current
intention to do so, the Portfolio may in the future enter into certain
transactions in stock options for the purpose of hedging against possible
increases in the value of securities which are expected to be purchased by the
Portfolio or possible declines in the value of securities which are expected to
be sold by the Portfolio. Generally, the Portfolio would only enter into such
transactions on a short-term basis pending readjustment of its holdings of
underlying stocks.
The purchase of an option on an equity security provides the holder
with the right, but not the obligation, to purchase the underlying security, in
the case of a call option, or to sell the underlying security, in the case of a
put option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire amount
of the premium, plus related transaction costs, but not more. Upon exercise of
the option, the holder is required to pay the purchase price of the underlying
security in the case of a call option, or deliver the security in return for
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the purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated
only by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a position
held by the Portfolio, and the Portfolio could be required to purchase or sell
the instrument underlying an option, make or receive a cash settlement or meet
ongoing variation margin requirements. The inability to close out option
positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on the possible use of hedging strategies by the Portfolio.
The approval of the Fund and of the other investors in the Portfolio is
not required to change the investment objective or any of the non-fundamental
investment policies discussed above, including those concerning security
transactions.
INVESTMENT RESTRICTIONS
The Trust (on behalf of the Fund) and the Portfolio have each adopted
the following policies which may not be changed without approval by holders of a
"majority of the outstanding shares" of the Fund or the Portfolio, respectively,
which as used in this Statement of Additional Information means the vote of the
lesser of (I) 67% or more of the outstanding "voting securities" of the Fund or
the Portfolio, respectively, present at a meeting, if the holders of more than
50% of the outstanding "voting securities" of the Fund or the Portfolio,
respectively, are present or represented by proxy, or (ii) more than 50% of the
outstanding "voting securities" of the Fund or the Portfolio, respectively. The
term "voting securities" as used in this paragraph has the same meaning as in
the Investment Company Act of 1940, as amended (the "1940 Act").
Except as described below, whenever the Trust is requested to vote on a
change in the investment restrictions of the Portfolio, the Trust will hold a
meeting of the shareholders of the Fund and will cast its vote proportionately
as instructed by the Fund's shareholders. However, subject to applicable
statutory and regulatory requirements, the Trust would not request a vote of
shareholders of the Fund with respect to (a)
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any proposal relating to the Portfolio, which proposal, if made with respect to
the Fund, would not require the vote of the shareholders of the Fund, or (b) any
proposal with respect to the Portfolio that is identical in all material
respects to a proposal that has previously been approved by shareholders of the
Fund. Any proposal submitted to holders in the Portfolio, and that is not
required to be voted on by shareholders of the Fund, would, nevertheless, be
voted on by the Trustees of the Trust.
Neither the Fund nor the Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes either the Fund or the Portfolio may borrow an amount not
to exceed 1/3 of the current value of the net assets of the Fund or the
Portfolio, respectively, including the amount borrowed (moreover, neither the
Fund nor the Portfolio may purchase any securities at any time at which
borrowings exceed 5% of the total assets of the Fund or the Portfolio,
respectively, taken in each case at market value) (it is intended that the
Portfolio would borrow money only from banks and only to accommodate requests
for the withdrawal of all or a portion of a beneficial interest in the Portfolio
while effecting an orderly liquidation of securities); for additional related
restrictions, see clause (I) under the caption "Non-Fundamental State and
Federal Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that either the Fund or the Portfolio may obtain such short-term credit
as may be necessary for the clearance of purchases and sales of securities and
except that either the Fund or the Portfolio may make deposits of initial
deposit and variation margin in connection with the purchase, ownership, holding
or sale of options;
(3) write any put or call option or any combination thereof, provided
that this shall not prevent (I) the purchase, ownership, holding or sale of
warrants where the grantor of the warrants is the issuer of the underlying
securities, or (ii) the purchase, ownership, holding or sale of options on
securities;
(4) underwrite securities issued by other persons, except that the Fund
may invest all or any portion of its assets in the Portfolio and except insofar
as either the Fund or the Portfolio may technically be deemed an underwriter
under the 1933 Act in selling a security;
(5) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio and provided that any such
loans not exceed 30% of its total assets (taken in each case at market value),
or (b) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of its net assets will be
invested in repurchase agreements maturing in more than seven days; for
additional related restrictions, see paragraph (6) immediately following;
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(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to Rule
144A under the 1933 Act if the Board of Trustees determines that a liquid market
exists for such securities) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that the Fund may invest
all or any portion of its assets in the Portfolio;
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (the Fund and Portfolio reserve the freedom of
action to hold and to sell real estate acquired as a result of the ownership of
securities by the Fund or the Portfolio);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open the Fund or the Portfolio, as
applicable, owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and unless not more than 5% of the Fund's or the Portfolio's, as
applicable, net assets (taken in each case at market value) is held as
collateral for such sales at any one time (it is the present intention of the
Portfolio and the Fund to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes);
(9) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Portfolio's or the
Fund's, as applicable, assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States), except that for purposes of this restriction the issuer of an option
shall not be deemed to be the issuer of the security or securities underlying
such contract and except that the Fund may invest all or any portion of its
assets in the Portfolio; or
(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Domini Social
Index, in which case the Portfolio or
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the Fund, as applicable, will invest more than 25% of its assets in that
industry, and except that the Fund may invest all of its assets in the
Portfolio.
NON-FUNDAMENTAL STATE AND FEDERAL RESTRICTIONS: In order to comply with
certain state and federal statutes and regulatory policies, neither the Fund nor
the Portfolio will as a matter of operating policy:
(I) borrow money for any purpose in excess of 10% of the total assets
of the Fund or the Portfolio, respectively (taken in each case at
cost) (moreover, neither the Fund nor the Portfolio will purchase
any securities at any time at which borrowings exceed 5% of its
total assets (taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the net assets of the Fund or the Portfolio, respectively
(taken in each case at market value), provided that collateral
arrangements with respect to options, including deposits of
initial deposit and variation margin, are not considered a pledge
of assets for purposes of this restriction,
(iii) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right
to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold, and provided
that if such right is conditional the sale is made upon the same
conditions,
(iv) invest for the purpose of exercising control or management, except
that all of the assets of the Fund may be invested in the
Portfolio,
(v) purchase securities issued by any registered investment company,
except that the Fund may invest all its assets in the Portfolio
and except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that (except for the
Fund's investment in the Portfolio) the Fund and the Portfolio
will not purchase the securities of any registered investment
company if such purchase at the time thereof would cause more than
10% of the total assets of the Fund or the Portfolio, respectively
(taken at the greater of cost or market value) to be invested in
the securities of such issuers or would cause more than 3% of the
outstanding voting securities of any such issuer to be held by the
Fund or the Portfolio, respectively; and provided, further, that
(except for the Fund's investment in the Portfolio) the Fund and
the Portfolio shall not purchase securities issued by any open-end
investment company,
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<PAGE>
(vi) invest more than 15% of the net assets of the Fund or the
Portfolio, respectively (taken at the greater of cost or market
value), (a) in securities that are restricted as to resale by the
1933 Act (including Rule 144A securities), and (b) in securities
that are issued by issuers which (including the period of
operation of any predecessor company or unconditional guarantor of
such issuer) have been in operation less than three years,
provided, however, that no more than 5% of the net assets of the
Fund or the Portfolio, respectively, are invested in securities
issued by issuers which (including predecessors) have been in
operation less than three years,
(vii) invest more than 10% of the net assets of the Fund or the
Portfolio, respectively (taken at the greater of cost or market
value) in securities (excluding Rule 144A securities) that are
restricted as to resale by the 1933 Act,
(viii) invest more than 5% of the net assets of the Fund or the
Portfolio respectively (taken at the greater of cost or market
value) in securities that are issued by issuers which (including
the period of operation of any predecessor company or
unconditional guarantor of such issuer) have been in operation
less than three years (including predecessors),
(ix) purchase securities of any issuer if such purchase at the time
thereof would cause it to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness of
an issuer shall be deemed a single class and all preferred stock
of an issuer shall be deemed a single class, except that option
contracts shall not be subject to this restriction, and except
that the Fund may invest all or any portion of its assets in the
Portfolio,
(x)purchase or retain any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or
Trustee of the Fund or the Portfolio, as the case may be, or is an
officer or director of the Adviser or the Manager, if after the
purchase of the securities of such issuer by the Fund or the
Portfolio, as the case may be, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or
both, all taken at market value, of such issuer, and such persons
owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities, or
both, all taken at market value, except that the Fund may invest
all or any portion of its assets in the Portfolio,
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<PAGE>
(xi) invest more than 5% of the Fund's or the Portfolio's net assets in
warrants (valued at the lower of cost or market), but not more
than 2% of the Fund's or the Portfolio's net assets may be
invested in warrants not listed on the New York Stock Exchange
Inc. ("NYSE") or the American Stock Exchange, or
(xii) make short sales of securities or maintain a short position,
unless at all times when a short position is open, the Fund or the
Portfolio owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue and equal in
amount to the securities sold short, and unless not more than 10%
of the Fund's or the Portfolio's, respectively, net assets (taken
at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one
time (neither the Fund nor the Portfolio has any current intention
to engage in short selling).
Restrictions (i) through (xii) are not fundamental and may be changed
with respect to the Fund by the Trust without approval by the Fund's
shareholders or with respect to the Portfolio by the Portfolio without the
approval of the Fund or its other investors. The Fund will comply with the state
securities laws and regulations of all states in which it is registered. The
Portfolio will comply with the applicable investment limitations found in the
state securities laws and regulations of all states in which the Fund is
registered.
PERCENTAGE RESTRICTIONS: If a percentage restriction or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the securities held by the Fund or the Portfolio or a later change in
the rating of a security held by the Fund or the Portfolio will not be
considered a violation of policy; provided that if at any time the ratio of
borrowings of the Fund to the net asset value of the Fund exceeds the ratio
permitted by Section 18(f) of the 1940 Act, the Fund will take the corrective
action required by Section 18(f).
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PERFORMANCE INFORMATION
The Trust will calculate the Fund's total rate of return for any period
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains declared during such period
with respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share (i.e., net asset value) on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate of
return quotation will be calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.
Any current "yield" quotation of the Fund shall consist of an
annualized historical yield, carried at least to the nearest hundredth of one
percent, based on a thirty calendar day period and shall be calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.
Total rate of return and yield information with respect to the Domini
Social Index will be computed in the same fashion as set forth above with
respect to the Fund, except that for purposes of this computation an investment
will be assumed to have been made in a portfolio consisting of all of the stocks
comprising the Domini Social Index weighted in accordance with the weightings of
the stocks comprising the Index. Performance information with respect to the
Domini Social Index will not take into account brokerage commission and other
transaction costs which will be incurred by the Portfolio.
Historical performance information for any period or portion thereof
prior to the establishment of the Fund will be that of the Portfolio, adjusted
to assume that all charges, expenses and fees of the Fund and the Portfolio
which are presently in effect were deducted during such periods, as permitted by
applicable SEC staff interpretations. The table that follows sets forth
historical return information for the periods indicated:
7/31/96 9/30/96
1 Year 12.62% 17.60%
5 Years 11.51% 13.34%
Commencement of
Investment operations
of Portfolio* to date 11.09% 12.43%
* Domini Social Index Portfolio commenced investing in the DSI on June 3, 1991.
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DETERMINATION OF NET ASSET VALUE;
VALUATION OF PORTFOLIO SECURITIES
The net asset value of each share of the Fund is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
weekday except for the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). This determination of net asset value of shares of the Fund is
made once during each such day as of the close of the NYSE by dividing the value
of the Fund's net assets (i.e., the value of its investment in the Portfolio and
any other assets less its liabilities, including expenses payable or accrued) by
the number of shares outstanding at the time the determination is made.
Purchases and redemptions will be effected at the time of determination of net
asset value next following the receipt of any purchase or redemption order
deemed to be in good order. See "Purchases and Redemptions of Shares" in the
Prospectus.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same day as the Fund
determines its net asset value per share. The net asset value of the Fund's
investment in the Portfolio is equal to the Fund's pro rata share of the total
investment of the Fund and of other investors in the Portfolio less the Fund's
pro rata share of the Portfolio's liabilities. Equity securities held by the
Portfolio are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last quoted bid price for securities in which there were no sales during
the day or for unlisted securities not reported on the NASDAQ system. If the
Portfolio purchases option contracts, such option contracts which are traded on
commodities or securities exchanges are normally valued at the settlement price
on the exchange on which they are traded. Short-term obligations with remaining
maturities of less than sixty days are valued at amortized cost, which
constitutes fair value as determined by the Board of Trustees of the Portfolio.
Portfolio securities (other than short-term obligations with remaining
maturities of less than sixty days) for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Portfolio's Board of Trustees.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by the
Portfolio's Board of Trustees. While no single standard for determining fair
value exists, as a general rule, the current fair value of a security would
appear to be the amount which the Portfolio could expect to receive upon its
current sale. Some, but not necessarily all, of the general factors which may be
considered in determining fair value include: (i) the fundamental analytical
data relating to the investment; (ii) the nature and duration of restrictions on
disposition of the securities; and (iii) an evaluation of the forces which
influence the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be considered in
determining fair value, some of the specific factors include: type of security,
financial statements of the issuer, cost at date of purchase, size of holding,
discount from market value, value of unrestricted securities of the same class
at the time of purchase, special reports prepared by analysts, information as to
any transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the security, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
Interest income on short-term obligations held by the Portfolio is
determined on the basis of interest accrued less amortization of premium.
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<PAGE>
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
The Trustees and officers of the Trust and the Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees and
officers who are "interested persons" (as defined in the 1940 Act) of the Trust
or the Portfolio, as applicable. Unless otherwise indicated below, the address
of each Trustee and officer is 6 St. James Avenue, Boston, Massachusetts 02116.
TRUSTEES OF THE TRUST
STEPHEN D. CASHIN -- Trustee of the Trust; Vice President (Corporate Finance),
Equator Bank (since 1993); Vice President (East Africa Representative), Equator
Bank (prior to 1993).
GILBERT H. CRAWFORD* -- Trustee of the Trust; Alternate Director, PROFUND (since
September, 1995); President, Development Capital Fund (since November, 1992);
Executive Director, Seed Capital Development Fund, Ltd. (since September, 1991);
Assistant Project Director, Africa Venture Capital Project-Harvey & Company.
ALICE TEPPER MARLIN -- Trustee of the Trust; Executive Director, Council on
Economic Priorities; Trustee, Winston Foundation for World Peace; Trustee, Green
Seal; Trustee; Save the Earth Trust (prior to 1994).
CAROLINE L. WILLIAMS -- Trustee of the Trust; Director, Argyle Television, Inc.
(since 1995); Director, Briar Funds Trust, The Stalwart Funds (since 1995);
Member of Advisory Board, Burton Design Consultants, Inc. (since 1995); Member
of Advisory Board, New School for Social Research (since 1995); Director, The
Franklin Group, Inc. (since 1994); Founding Director and Chairman, E&Co. (since
1994); Director and Treasurer, Fund for Private Assistance in International
Development (since 1994); Director, TechnoServe, Inc. (1991 to 1992, since
1994); Director, HealthInfusion, Inc. (1992 to 1994); Member of Advisory Board,
Glencoe Growth Closely-Held Business Fund, L.P. (since 1994); Member of Advisory
Board, Experiment in International Living (1992 to 1994); Director, Morse Shoe,
Inc. (1992 to 1993); Managing Director, Donaldson, Lufkin & Jenrette Securities
Corporation (prior to 1992); Deputy Administrator, Donaldson, Lufkin & Jenrette
Foundation (1991).
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TRUSTEES OF THE PORTFOLIO
AMY L. DOMINI* -- Chair , President and Trustee of the Portfolio; Officer of
Kinder, Lydenberg, Domini & Co., Inc.; Trustee, Loring, Wolcott & Coolidge.
PHILIP W. COOLIDGE* -- Trustee of the Portfolio and President of the Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group, Inc.
and Signature Broker-Dealer Services, Inc.
ALLEN M. MAYES -- 7985 Willow Creek Drive, Beaumont, Texas 77707; Trustee of the
Portfolio; Senior Associate General Secretary of the General Board of Pensions
of the United Methodist Church; Member of the Board of Directors of Investor
Responsibility Research Center; Member of Board of Trustees of Wiley College .
TIMOTHY SMITH -- Interfaith Center for Corporate Responsibility, 475 Riverside
Drive, New York, New York 10115; Trustee of the Portfolio; Executive Director of
the Interfaith Center on Corporate Responsibility .
FREDERICK C. WILLIAMSON -- 5 Roger Williams Green, Providence, Rhode Island
02904; Trustee of the Portfolio; Chairman, Rhode Island Historical Preservation
and Heritage Commission (since 1995); Rhode Island State Historic Preservation
Officer; Trustee, National Park Trust ; Trustee, National Parks and Conservation
Association ; President Emeritus, National Conference of State Historic
Preservation Officers; Trustee Emeritus, National Trust for Historic
Preservation; Treasurer and Past Chairman, R.I. Black Heritage Society.
OFFICERS
JOHN R. ELDER -- Treasurer of the Trust and the Portfolio; Vice President,
Signature Financial Group, Inc. (since April, 1995); Treasurer, Phoenix Family
of Mutual Funds(prior to April, 1995).
LINDA T. GIBSON -- Assistant Secretary of the Trust and the Portfolio; Legal
Counsel and Assistant Secretary, Signature Financial Group, Inc. (since June,
1991); Assistant Secretary, Signature (since November, 1992); law student,
Boston University School of Law (prior to May, 1992).
MOLLY S. MUGLER -- Assistant Secretary of the Trust and the Portfolio; Legal
Counsel and Assistant Secretary, Signature Financial Group, Inc.; Assistant
Secretary, Signature.
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<PAGE>
Messrs. Coolidge and Elder and Mss. Gibson and Mugler also hold similar
positions for other investment companies for which Signature or an affiliate
serves as the principal underwriter. Each officer of the Trust holds the same
position with the Portfolio. In addition, the following persons serve as
officers of the Portfolio:
Peter D. Kinder -- Vice President of the Portfolio; President of
Kinder, Lydenberg, Domini & Co., Inc.
Steven D. Lydenberg -- Vice President of the Portfolio; Director of
Research of Kinder, Lydenberg, Domini & Co., Inc.
The Trustees who are not "interested persons" (the "Disinterested
Trustees") of the Trust as defined by the 1940 Act are separate from the
Disinterested Trustees of the Portfolio. Any conflict of interest between the
Trust and the Portfolio will be resolved by the Trustees of the Trust and the
Portfolio in accordance with their fiduciary obligations and in accordance with
the 1940 Act.
As of November 13, 1996, the following persons owned of record and
beneficially the percentage of outstanding shares of beneficial interest of the
Fund indicated next to their names: Development Capital Fund - 5.36% , Sisters
of Mercy of the Americas - 7.49%. As of the same date, the officers and Trustees
of the Trust and the Portfolio as a group owned less than 1% of the Fund's
outstanding shares.
The Trustees of the Trust receive no compensation for serving as
trustees of the Trust. The Trustees of the Portfolio are paid annual fees as
follows for serving as trustees of the Portfolio. The Trustees of the Trust and
the Portfolio are reimbursed for expenses incurred in connection with service as
a trustee. For the fiscal years ended July 31, 1994, 1995 and 1996, the Trustees
of the Portfolio received fees equal to $6,023, $6,847 and $5,379, respectively.
The Trustees may hold various other directorships unrelated to these funds.
-15-
<PAGE>
TRUST TRUSTEES
<TABLE>
<CAPTION>
ESTIMATED AGGREGATE ESTIMATED TOTAL
COMPENSATION COMPENSATION FROM THE
FROM THE TRUST PENSION OR RETIREMENT ESTIMATED TRUST AND THE PORTFOLIO
FOR THE FISCAL YEAR BENEFITS ACCRUED AS ANNUAL BENEFITS FOR THE FISCAL YEAR
ENDED JULY 31, 1996 PART OF FUND EXPENSES UPON RETIREMENT ENDED JULY 31, 1996
<S> <C> <C> <C> <C>
Stephen D. Cashin, Trustee None None None None
Gilbert H. Crawford, Trustee None None None None
Alice Tepper Marlin, Trustee None None None None
Caroline L. Williams, Trustee None None None None
</TABLE>
Portfolio Trustees
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION PENSION OR RETIREMENT TOTAL COMPENSATION FROM
FROM THE PORTFOLIO BENEFITS ESTIMATED ANNUAL THE TRUST AND THE PORTFOLIO
FOR THE FISCAL YEAR ACCRUED AS PART BENEFITS PAID TO TRUSTEES FOR THE
ENDED JULY 31, 1996 OF FUND EXPENSES UPON RETIREMENT FISCAL YEAR ENDED
JULY 31,1996
<S> <C> <C> <C> <C>
Amy L. Domini, Chair and Trustee None None None None
Philip W. Coolidge, President None None None None
and Trustee
Allen M. Mayes, Trustee $1,200 None None $1,200
Timothy Smith, Trustee $1,200 None None $1,200
Frederick C. Williamson, Trustee $1,200 None None $1,200
</TABLE>
-16-
<PAGE>
ADVISER AND MANAGER
KLD provides advice to the Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The services provided by the Adviser
consist of determination of the stocks to be included in the Index and
evaluating, in accordance with the Adviser's social criteria, debt securities
which may be purchased by the Portfolio. The Adviser furnishes at its own
expense all facilities and personnel necessary in connection with providing
these services. The Advisory Agreement will continue in effect if such
continuance is specifically approved at least annually by the Portfolio's Board
of Trustees or by a majority vote of the outstanding voting securities of the
Portfolio at a meeting called for the purpose of voting on the Advisory
Agreement (with the vote of each investor in the Portfolio being in proportion
to the amount of their investment), and, in either case, by a majority of the
Portfolio's Trustees who are not parties to the Advisory Agreement or interested
persons of any such party at a meeting called for the purpose of voting on the
Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to
others and may permit other investment companies in addition to the Portfolio to
use the name "DominiSM" or "Domini 400 Social IndexSM" in their names. Pursuant
to an agreement with the Portfolio, if KLD ceases to be the investment adviser
of the Portfolio, the Portfolio will be required to discontinue the use of such
service marks. The Advisory Agreement is terminable without penalty on not more
than 60 days' nor less than 30 days' written notice by the Portfolio when
authorized either by majority vote of the Fund and of the other investors in the
Portfolio (with the vote of each being in proportion to the amount of its
investment) or by a vote of a majority of its Board of Trustees, or by the
Adviser, and will automatically terminate in the event of its assignment. The
Advisory Agreement provides that neither the Adviser nor its personnel shall be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in its services to the Portfolio,
except for wilful misfeasance, bad faith or gross negligence or reckless
disregard of its or their obligations and duties under the Advisory Agreement.
The Fund's Prospectus contains a description of fees payable
to the Adviser for services under the Advisory Agreement. For
the fiscal years ended July 31, 1994 and 1995, the Adviser voluntarily waived
all of its advisory fees. For the fiscal year ended July 31, 1996, the Adviser
received Advisory fees of $38,150.
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<PAGE>
Mellon Equity manages the assets of the Portfolio pursuant to an
Investment Management Agreement (the "Management Agreement"). The Manager
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio. The Management Agreement will continue in effect
if such continuance is specifically approved at least annually by the
Portfolio's Board of Trustees or by a majority of the outstanding voting
securities in the Portfolio at a meeting called for the purpose of voting on the
Management Agreement (with the vote of each investor in the Portfolio being in
proportion to the amount of its investment), and, in either case, by a majority
of the Portfolio's Trustees who are not parties to the Management Agreement or
interested persons of any such party at a meeting called for the purpose of
voting on the Management Agreement.
The Management Agreement provides that the Manager may render services
to others. The Management Agreement is terminable without penalty upon not more
than 60 days' nor less than 30 days' written notice by the Portfolio when
authorized either by majority of the outstanding voting securities in the
Portfolio (with the vote of each investor in the Portfolio being in proportion
to the amount of its investment) or by a vote of the majority of its Board of
Trustees, or by the Manager, and will automatically terminate in the event of
its assignment. The Management Agreement provides that neither the Manager nor
its personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in its
services to the Portfolio, except for wilful misfeasance, bad faith or gross
negligence or reckless disregard for its or their obligations and duties under
the Management Agreement.
The Fund's Prospectus contains a description of fees payable to the
Manager for services under the Management Agreement. Prior to November 21, 1994,
State Street Bank and Trust Company served as investment manager to the
Portfolio. For the fiscal years ended July 31, 1994, 1995 and 1996, the
Portfolio incurred $16,986, $39,589 and $128,901, respectively in management
fees.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, Signature provides
the Trust with general office facilities and supervises the overall
administration of the Trust , including, among other responsibilities, the
negotiation of contracts and fees with, and the monitoring of performance and
billings of, the independent contractors and agents of the Trust ; the
preparation and filing of all documents required for compliance by the Trust
with applicable laws and regulations; and arranging for the maintenance of books
and records of the Trust . The Administrator provides persons satisfactory to
the Board of Trustees of the Trust to serve as officers of the Trust . Such
officers, as well as certain other employees and Trustees of the Trust , may be
directors, officers or employees of the Administrator or its affiliates.
The Administrative Services Agreement with the Trust provides that
Signature may render administrative services to others. The Administrative
Services Agreement with the Trust also provides that neither the Administrator
nor its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Trust, except
for wilful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their obligations
and duties under the Trust's Administrative Services Agreement. For the period
October 19, 1995 (commencement of operations) to July 31, 1996, Signature waived
Fund expenses aggregating $375.
The Administrative Services Agreement with respect to the Portfolio
provides that Federated may render administrative services to others. The
Administrative Services Agreement with respect to the Portfolio may be
terminated without penalty by either Signature or KLD on not less than 60 days'
written notice. The Administrative Services Agreement with KLD also provides
that neither Federated, as the Portfolio's Administrator, nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Portfolio, except for wilful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Administrative Services Agreement.
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<PAGE>
The Fund's Prospectus contains a description of the fees payable to the
Administrator by the Trust (on behalf of the Fund), or payable to the Portfolio
Administrator by KLD, as the case may be, under the Administrative Services
Agreements. For the fiscal years ended July 31, 1994 and 1995, the Portfolio's
Administrator voluntarily waived all of its administrative services fees from
the Portfolio. For the fiscal year ended July 31, 1996, the Portfolio's
Administrator received $38,150 in administrative fees.
Signature is a wholly-owned subsidiary of Signature Financial Group,
Inc.
SPONSOR
Pursuant to a Sponsorship Agreement dated November 6, 1996, KLD pays the
ordinary operating expenses of the Portfolio (other than brokerage fees and
commissions, interest, taxes and extraordinary expenses) and provides the
Portfolio with general office facilities and supervises the overall
administration of the Portfolio, including, among other responsibilities,
answering questions from the general public, the media regarding the securities
holdings of the Portfolio, negotiating contracts and fees with, and monitoring
performance and billings of, the independent contractors and agents of the
Portfolio; preparing and filing of all documents required for compliance by the
Trust with applicable laws and regulations; and arranging for the maintenance of
books and records of the Portfolio. The Sponsor provides persons satisfactory to
the Board of Trustees of the Portfolio to serve as officers of the Portfolio.
Such officers, as well as certain other employees and Trustees of the Portfolio,
may be directors, officers or employees of the Sponsor or its affiliates.
The Sponsorship Agreement with the Portfolio may be terminated without
penalty by either party on not more than 60 days' written notice, except with
respect to the expense payment obligations which terminate on December 31, 1999,
unless sooner terminated by the mutual agreement of KLD and Signature. The
Sponsorship Agreement with the Portfolio also provides that neither the
Portfolio's Sponsor, nor its personnel shall be liable for any error of judgment
or mistake of law or for any act or omission in the administration or management
of the Portfolio, except for wilful misfeasance, bad faith or gross negligence
in the performance of its or their duties or by reason of reckless disregard of
its or their obligations and duties under the Portfolio's Sponsorship Agreement.
-19-
<PAGE>
DISTRIBUTOR
The Trust has adopted a Distribution Plan which provides that the Trust
may pay the Distributor a fee not to exceed 0.25% per annum of the Fund's
average daily net assets in anticipation of, or as reimbursement for, expenses
incurred in connection with the sale of shares of the Fund, such as 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
expenses and the expenses of printing and distributing prospectuses and reports
used for sales purposes, expenses of preparing and printing sales literature and
other distribution-related expenses. No payments under the Distribution Plan
will be made to Service Organizations, although Service Organizations may
receive payments under the Administrative Services Plan referred to below.
The Distribution Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Trust's Trustees and a majority of the Trust's Trustees who are
not "interested persons of the Trust" and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any agreement
related to such Plan ("Qualified Trustees"). The Distributor will provide to the
Trustees of the Trust a quarterly written report of amounts expended by it under
the Distribution Plan and the purposes for which such expenditures were made.
The Distribution Plan further provides that the selection and nomination of the
Trust's Qualified Trustees shall be committed to the discretion of the
disinterested Trustees of the Trust. The Distribution Plan may be terminated at
any time by a vote of a majority of the Trust's Qualified Trustees or by a vote
of the shareholders of the Fund. The Distribution Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders and may not be materially amended in any case without a
vote of the majority of both the Trust's Trustees and the Trust's Qualified
Trustees. The Distributor will preserve copies of any plan, agreement or report
made pursuant to the Distribution Plan for a period of not less than six (6)
years from the date of the Distribution Plan, and for the first two (2) years
the Distributor will preserve such copies in an easily accessible place.
The Trust has entered into a Distribution Agreement with Signature.
Under the Distribution Agreement, the Distributor acts as the agent of the Trust
in connection with the offering of shares of the Fund. For the period October
19, 1995 (commencement of operations) to July 31, 1996, the Fund did not accrue
any distribution fees.
TRANSFER AGENT, CUSTODIAN AND SERVICE ORGANIZATIONS
The Trust has entered into a Transfer Agency Agreement with Fundamental
Shareholder Services, Inc. ("FSSI") pursuant to which FSSI acts as transfer
agent for the Fund. The Trust has entered into a Custodian Agreement with
Investors Bank & Trust Company ("IBT") pursuant to which IBT acts as custodian
for the Fund. The Portfolio has also entered into a Transfer Agency Agreement
with FSSI pursuant to which FSSI acts as transfer agent for the Portfolio. The
Portfolio has entered into a Custodian Agreement with IBT pursuant to which IBT
acts as custodian for the Portfolio. For additional information, see "Transfer
Agent and Custodian" in the Prospectus.
The Fund may from time to time enter into agreements with various banks,
trust companies (other than Mellon Equity), broker-dealers (other than
Signature) or other financial organizations to provide administrative services
for the Fund, such as maintaining shareholder accounts and records. For the
period from October 19, 1995 (commencement of operations) to July 31, 1996, the
Fund did not accrue any service organization fees. For additional information,
see "Purchases and Redemptions of Shares -- Service Organizations" in the
Prospectus.
-20-
<PAGE>
EXPENSES
Pursuant to the Sponsorship Agreement between KLD and the Portfolio
(effective November 6, 1996), KLD has agreed to pay all of the ordinary
operating expenses of the Portfolio , except the sponsorship fees and excluding
brokerage fees and commissions, interest , taxes and extraordinary expenses. The
arrangement will terminate on December 31, 1999 unless sooner terminated by
mutual agreement of the parties. KLD has entered into expense payment
arrangements with Signature pursuant to which Signature provides these expense
payment services to the Portfolio . Under these arrangements, Signature receives
expense payment fees from KLD computed and paid monthly at an annual rate equal
to 0.175% of the Portfolio's average daily net assets for its then-current
fiscal year.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP are the independent auditors for the Trust and the
Portfolio, providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Securities and
Exchange Commission.
TAXATION
Each year the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code") . Provided the Fund qualifies as a "regulated investment company"
under the Code, and distributes all of its net investment income and net
realized capital gains to shareholders in accordance with the timing
requirements imposed by the Code, the Fund will not be required to pay any
federal income or excise taxes and will not be required to pay Massachusetts
income or excise taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and would be required to pay
Massachusetts income and excise taxes. Additionally, Fund distributions would
generally be taxable as ordinary dividend income to the shareholders.
It is assumed that, (1) the Portfolio will be treated for federal
income tax purposes as a partnership and (2) for purposes of determining whether
the Fund satisfies the income and diversification requirements to maintain its
status as a regulated investment company, the Fund, as an investor in the
Portfolio, will be deemed to own a proportionate share of the Portfolio's assets
and will be deemed to be entitled to the Portfolio's income or loss attributable
to that share. The Portfolio has advised the Fund that it intends to conduct its
operations so as to enable its investors, including the Fund, to satisfy those
requirements.
-21-
<PAGE>
Shareholders of the Fund normally will have to pay federal income taxes,
and any state or local taxes, on distributions of net investment income and net
realized capital gains from the Fund. Dividends from ordinary income and any
distributions from net short-term capital gains are taxable to shareholders as
ordinary income for federal income tax purposes, whether the distributions are
made in cash or in additional shares. A portion of the Fund's distributions from
net investment income is normally eligible for the corporate dividends received
deduction if the recipient otherwise qualifies for that deduction with respect
to its holding of Fund shares. Availability of the deduction for a particular
corporate shareholder is subject to certain limitations, and deducted amounts
may be subject to the alternative minimum tax and result in certain basis
adjustments. Distributions of net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses), whether made in
cash or in additional shares, are taxable to shareholders as long-term capital
gains for federal income tax purposes without regard to the length of time the
shareholders have held their shares.
Amounts not distributed on a timely basis in accordance with the
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of the excise tax, the Fund must, and intends to,
distribute during each calendar year substantially all of its ordinary income
for that year and substantially all of its capital gain in excess of its capital
losses for that year, plus any undistributed ordinary income and capital gains
from previous years. Any Fund dividend that is declared in October, November, or
December of any calendar year, that is payable to shareholders of record in such
a month, and that is paid the following January will be treated as if received
by the shareholders on December 31 of the year in which the divided is declared.
The Fund will notify shareholders regarding the federal tax status of its
distributions after the end of each calendar year.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of
shares of the Fund by a shareholder that holds such shares as a capital asset
will be treated as long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in the Fund held for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gain made with respect to those shares. Any
loss realized upon a disposition of shares may also be disallowed under rules
relating to wash sales.
The Trust anticipates that the Portfolio will be treated as a
partnership for federal income tax purposes. As such, the Portfolio is not
subject to federal income taxation. Instead, the Fund must take into account, in
computing its federal income tax liability, its share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether it has received any cash distributions from the Portfolio. Withdrawals
by the Fund from the Portfolio generally will not result in the Fund recognizing
any gain or loss for federal income tax purposes, except that (1) gain will be
recognized to the extent that any cash distributed exceeds the basis of the
Fund's interest in the Portfolio prior to the distribution, (2) income or gain
will be realized if the withdrawal is in liquidation of the Fund's entire
interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, and (3) loss will be recognized if
the distribution is in liquidation of that entire interest and consists solely
of cash and/or unrealized receivables. The basis of the Fund's interest in the
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in the Portfolio, increased by the Fund's share of income from
the Portfolio and decreased by the Fund's share of losses from the Portfolio and
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.
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<PAGE>
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. The investment by the Fund in the Portfolio does
not cause the Fund to be liable for any income or franchise tax in the State of
New York.
Fund shareholders may be subject to state and local taxes on Fund
distributions to them. Shareholders are advised to consult with their tax
advisers with respect to the particular tax consequences .
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Manager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Manager in a similar capacity.
The Portfolio's primary consideration in placing securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Manager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Manager on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Manager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Manager on the tender of the
Portfolio's securities in so-called tender or exchange offers. Such soliciting
dealer fees are in effect recaptured for the Portfolio by the Manager. At
present no other recapture arrangements are in effect. Consistent with the
foregoing primary consideration, the Conduct Rules of the National Association
of Securities Dealers, Inc. and such other policies as the Trustees of the
Portfolio may determine, the Manager may consider sales of shares of the Fund
and of securities of other investors in the Portfolio as a factor in the
selection of broker-dealers to execute the Portfolio's securities transactions.
Under the Management Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Manager may cause the Portfolio to pay a
broker-dealer acting on an agency basis which provides brokerage and research
services to the Manager or the Adviser an amount of commission for effecting a
securities transaction for the Portfolio in excess of the amount other broker-
dealers would have charged for the transaction if the Manager determines in good
faith that the
-23-
<PAGE>
greater commission is reasonable in relation to the value of the brokerage and
research services provided by the executing broker-dealer viewed in terms of
either a particular transaction or the Manager's or the Adviser's overall
responsibilities to the Portfolio or to its other clients. Not all of such
services are useful or of value in advising the Portfolio.
The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Manager and the Adviser currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will, in the judgment of
the Manager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Manager's or the Adviser's other clients, in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Manager or the Adviser for no
consideration other than brokerage or underwriting commissions.
The Manager and the Adviser attempt to evaluate the quality of research
provided by brokers. The Manager and the Adviser sometimes use evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, neither the Manager nor the Adviser is
able to quantify the amount of commissions which are paid as a result of such
research because a substantial number of transactions are effected through
brokers which provide research but which are selected principally because of
their execution capabilities.
The fees that the Portfolio pays to the Manager and the Adviser will not
be reduced as a consequence of the Portfolio's receipt of brokerage and research
services. To the extent the Portfolio's securities transactions are used to
obtain brokerage and research services, the brokerage commissions paid by the
Portfolio will exceed those that might otherwise be paid for such portfolio
transactions and research, by an amount which cannot be presently determined.
Such services may be useful and of value to the Manager or the Adviser in
serving both the Portfolio and other clients and, conversely, such services
obtained by the
-24-
<PAGE>
placement of brokerage business of other clients may be useful to the Manager or
the Adviser in carrying out its obligations to the Portfolio. While such
services are not expected to reduce the expenses of the Manager or the Adviser,
the Manager or the Adviser would, through use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff. For the fiscal years ended July
31, 1994, 1995 and 1996 the Portfolio paid brokerage commissions of $13,000,
$15,222 and $45,017, respectively.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Manager's or the Adviser's other
clients. Investment decisions for the Portfolio and for the Manager's or the
Adviser's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust is a Massachusetts business trust established under an Amended
and Restated Declaration of Trust dated as of September 15, 1995. Its authorized
capital consists of an unlimited number of shares of beneficial interest of
$0.01 par value, issued in separate series. Each share of each series represents
an equal proportionate interest in that series with each other share of that
series.
The assets of the Trust received for the issue or sale of the shares of
each fund and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the
liabilities in respect to such series and with such a share of the general
liabilities of the Trust. If a series were unable to meet its obligations, the
assets of all other series might be available to creditors for that purpose, in
which case the assets of such other series could be used to meet
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<PAGE>
liabilities which are not otherwise properly chargeable to them. Expenses with
respect to any two or more series are to be allocated in proportion to the asset
value of the respective series except where allocations of direct expenses can
otherwise be fairly made. The officers of the Trust, subject to the general
supervision of the Trustees, have the power to determine which liabilities are
allocable to a given series, or which are general or allocable to two or more
series. In the event of the dissolution or liquidation of the Trust or any
series, the holders of the shares of any series are entitled to receive as a
class the value of the underlying assets of such shares available for
distribution to shareholders.
Shares of the Trust entitle their holder to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series, a Shareholder Servicing Agent may vote any shares as to which such
Shareholder Servicing Agent is the agent of record and which are not represented
in person or by proxy at the meeting, proportionately in accordance with the
votes cast by holders of all shares otherwise represented at the meeting in
person or by proxy as to which such Shareholder Servicing Agent is the agent of
record. Any shares so voted by a Shareholder Servicing Agent will be deemed
represented at the meeting for purposes of quorum requirements.
The Trustees of the Trust have the authority to designate additional
series and to designate the relative rights and preferences as between the
different series. There is presently one series so designated. All shares issued
and outstanding will be fully paid and nonassessable by the Trust, and
redeemable as described in this Statement of Additional Information and in the
Prospectus.
The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust unless, as
to liability to Trust or Fund shareholders, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to any
other matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable
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<PAGE>
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
Under Massachusetts law, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides for the maintenance, by or on
behalf of the Trust and the Fund, of appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Fund and its shareholders and the Trust's Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the Fund
itself was unable to meet its obligations.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio as of July 31,
1996 have been filed as part of the Fund's annual report with the Securities and
Exchange Commission pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder, and are hereby incorporated herein by reference from such annual
report. A copy of such report will be provided, without charge, to each person
receiving this Statement of Additional Information.
DEVCAP Shared Return Fund
Statement of Assets and Liabilities, July 31, 1996
Statement of Operations for the Period from October 19, 1995
(commencement of operations) to July 31, 1996
Statements of Changes in Net Assets for the period indicated
Financial Highlights for the Period from October 19, 1995
(commencement of operations) to July 31, 1996
Notes to Financial Statements
Independent Auditors' Report
Domini Social Index Portfolio
Portfolio of Investments, July 31, 1996
Statement of Assets and Liabilities, July 31, 1996
Statement of Operations for the year July 31, 1996
Statements of Changes in Net Assets for the period indicated
Financial Highlights, July 31, 1996, 1995, 1994, 1993, 1992
Notes to Financial Statements
Independent Auditors' Report
-27-
<PAGE>
PART C
ITEM 24.FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements Included In Part A:
Financial Highlights
Financial Statements Included In Part B:
For the Registrant:
Statement of Assets and Liabilities, July 31, 1996
Statement of Operations For the Period October 19, 1995 (commencement of
operations) to July 31, 1996
Statements of Changes in Net Assets for the period indicated
Financial Highlights For the Period October 19, 1995 (commencement of
operations) to July 31, 1996
Notes to Financial Statements
For the Domini Social Index Portfolio:
Portfolio of Investments, July 31, 1996
Statement of Assets and Liabilities, July 31, 1996
Statement of Operations for the year ended July 31, 1996
Statements of Changes in Net Assets for the periods indicated
Financial Highlights, July 31, 1996, 1995, 1994, 1993, 1992
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits
1 Amended and Restated Declaration of Trust.3
2 By-Laws.3
4 Specimen of certificate representing ownership of Registrant's shares
of beneficial interest.1
6 Distribution Agreement between Registrant and Signature Broker-Dealer
Services, Inc. ("SBDS").1
8 Custodian Contract between Registrant and Investors Bank & Trust
Company.1
9(a) Administrative Services Agreement between Registrant and SBDS.4
9(b) Form of Transfer Agency and Services Agreement between Registrant and
Fundamental Shareholder Services, Inc.2
10 Opinion and consent of counsel.2
11 Consent of independent auditors.4
13 Investment representation letters of initial shareholders.2
15 Distribution and Services Plan of the Registrant.1
16 Schedule for computation of performance quotations.1
17 Financial Data Schedule.4
18 Powers of Attorney.2
- --------------------
1 Incorporated herein by reference from Pre-Effective Amendment No. 1 to
Registrant's registration statement on Form N-1A (File Nos. 33-94668 and
811-9070) (the "Registration Statement"), as filed with the Securities and
Exchange Commission (the "SEC") on September 8, 1995.
2 Incorporated herein by reference from Pre-Effective Amendment No. 2 to the
Registration Statement, as filed with the SEC on October 11, 1995.
3 Incorporated herein by reference from Post-Effective Amendment No. 1 to the
Registration Statement, as filed with the SEC on March 28, 1996.
4 Filed herewith.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of November 13, 1996:
TITLE OF CLASS: SHARES OF BENEFICIAL INTEREST
DEVCAP Shared Return Fund (par value $0.01): 281
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust
and Article 4 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain
expenses in connection with the defense of claims, demands, actions, suits, or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to directors,
trustees, officers and controlling persons of the Registrant and the principal
underwriter pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, trustee, officer, or controlling person of the
Registrant and the principal underwriter in connection with the successful
defense of any action, suite or proceeding) is asserted against the Registrant
by such director, trustee, officer or controlling person or principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) SBDS is the distributor (the "Distributor") for the shares of the
Registrant. SBDS also serves as the principal underwriter or placement agent for
numerous other registered investment companies.
(b) The following are the directors and officers of the Distributor. The
principal business address of these individuals is 6 St. James Avenue, Suite
900, Boston, Massachusetts 02116, unless otherwise noted.
PHILIP W. COOLIDGE: President, Chief Executive Officer and Director of SBDS.
President of Registrant.
JOHN R. ELDER: Treasurer of Registrant. Assistant Treasurer of SBDS.
LINWOOD C. DOWNS: Treasurer of SBDS.
MOLLY S. MUGLER: Assistant Secretary of SBDS. Assistant Secretary of Registrant.
LINDA T. GIBSON: Assistant Secretary of SBDS. Assistant Secretary of Registrant.
JOAN R. GULINELLO: Secretary of SBDS.
SUSAN JAKUBOSKI: Assistant Treasurer of SBDS.
JULIE J. WYETZNER: Product Management Officer of SBDS.
ROBERT G. DAVIDOFF: Director of SBDS; CMNY Capital, L.P., 135 East 57th Street,
New York, NY 10022.
LEEDS HACKETT: Director of SBDS; Hackett Associates Limited, 1260 Avenue of the
Americas, 12th Floor, New York, NY 10020
LAURENCE B. LEVINE: Director of SBDS; Blair Corporation, 250 Royal Palm Way,
Palm Beach, FL 33480
DONALD S. CHADWICK: Director of SBDS; 4609 Bayard Street, Apartment 411,
Pittsburgh, PA 15213.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), and the Rules thereunder will be maintained at the offices of:
Signature Broker-Dealer Services, Inc.: 6 St. James Avenue, Boston,
Massachusetts 02116 (records relating to its functions as distributor and
administrator).
Investors Bank and Trust Company: 89 South Street, Boston, Massachusetts 02111
(records relating to its functions as custodian).
Fundamental Shareholder Services, Inc.: 90 Washington Street, New York, New York
10006 (records relating to its functions as transfer agent).
<PAGE>
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained in the
latest annual report to shareholders, the Registrant shall furnish each person
to whom a prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders upon request and without charge.
(b) The Registrant undertakes to file a post-effective amendment, using
financials which need not be certified, within four to six months following the
effective date of this registration statement. The financial statements included
in such amendment will be as of and for the time period ended on a date
reasonably close or as soon as practicable to the date of the filing of the
amendment.
(c) The Registrant undertakes to comply with Section 16(c) of the 1940 Act as
though such provisions of the 1940 Act were applicable to the Registrant, except
that the request referred to in the third full paragraph thereof may only be
made by shareholders who hold in the aggregate at least 10% of the outstanding
shares of the Registrant, regardless of the net asset value of shares held by
such requesting shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Boston, and Commonwealth of Massachusetts on the
26th day of November, 1996.
DEVCAP TRUST
By /S/PHILIP W. COOLIDGE
PHILIP W. COOLIDGE
President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on November 26, 1996.
SIGNATURE TITLE
/S/PHILIP W. COOLIDGE President
PHILIP W. COOLIDGE
/S/JOHN R. ELDER Treasurer, principal financial
JOHN R. ELDER officer and principal accounting officer
GILBERT H. CRAWFORD* Trustee
GILBERT H. CRAWFORD
STEPHEN D. CASHIN* Trustee
STEPHEN D. CASHIN
ALICE TEPPER MARLIN* Trustee
ALICE TEPPER MARLIN
CAROLINE L. WILLIAMS* Trustee
CAROLINE L. WILLIAMS
*By /S/PHILIP W. COOLIDGE
Philip W. Coolidge
*As attorney-in-fact pursuant to a power of attorney previously filed.
<PAGE>
SIGNATURES
Domini Social Index Portfolio has duly caused the registration statement on
Form N-1A (File No. 33-94668) of DEVCAP Trust (the "Registration Statement") to
be signed on its behalf by the undersigned, thereto duly authorized in the
City of Boston, and Commonwealth of Massachusetts on the 26th day of November,
1996.
DOMINI SOCIAL INDEX PORTFOLIO
By /S/AMY L. DOMINI
AMY L. DOMINI
President
Pursuant to the requirements of the 1933 Act, the Registration Statement on
Form N-1A of DEVCAP Trust has been signed below by the following persons in the
capacities indicated on November 26, 1996.
SIGNATURE TITLE
/S/PHILIP W. COOLIDGE Trustee of Domini
PHILIP W. COOLIDGE Social Index Portfolio
/S/JOHN R. ELDER Treasurer, principal financial
JOHN R. ELDER officer and principal accounting officer of
Domini Social Index Portfolio
AMY L. DOMINI* President and Trustee of
AMY L. DOMINI Domini Social Index Portfolio
ALLEN M. MAYES* Trustee of
ALLEN M. MAYES Domini Social Index Portfolio
FREDERICK C. WILLIAMSON* Trustee of
FREDERICK C. WILLIAMSON Domini Social Index Portfolio
TIMOTHY SMITH* Trustee of
TIMOTHY SMITH Domini Social Index Portfolio
*By /S/PHILIP W. COOLIDGE
PHILIP W. COOLIDGE
*As attorney-in-fact pursuant to a power of attorney previously filed.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
9a Administrative Services Agreement.
11 Consent of independent auditors.
17 Financial Data Schedule.
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of October 5, 1995, as
amended and restated October 4, 1996, by and between DEVCAP Trust, a
Massachusetts business trust (the "Trust"), and Signature Broker-Dealer
Services, Inc., a Delaware corporation ("SBDS").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment
company;
WHEREAS, the Trust wishes to engage SBDS to provide certain
administrative and management services with respect to all currently existing or
future series (each a "Fund") of the Trust, and SBDS is willing to provide such
services to the Trust, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. ADMINISTRATIVE DUTIES. Subject to the direction and control of the
Board of Trustees of the Trust (the "Board"), SBDS shall perform such
administrative and management services as may from time to time be reasonably
requested by the Trust, which shall include without limitation: (a) providing
office space, equipment and clerical personnel necessary for performing the
administrative and management functions herein set forth; (b) arranging, if
desired by the Trust, for directors, officers or employees of SBDS to serve as
Trustees, officers or agents of the Trust if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law; (c) supervising the overall administration of the Trust, including the
updating of corporate organizational documents, and the negotiation of contracts
and fees with and the monitoring and coordinating of performance and billings of
the Trust's transfer agent, custodian, shareholder servicing agents and other
independent contractors or agents; (d) preparing and, if applicable, filing all
documents required for compliance by the Trust with applicable laws and
regulations (including state "blue sky" laws and regulations), including
registration statements on Form N-1A, prospectuses and statements of additional
information, or similar forms, and semi-annual and annual reports to the Trust's
shareholders and reviewing (including coordinating the preparing of, but not
preparing) tax returns; (e) preparation of agendas and supporting documents for
and minutes of meetings of Trustees, committees of Trustees and preparation of
notices, proxy statements and minutes of meetings of one or more Funds'
shareholders; (f) arranging for maintenance of books and records of the Trust;
(g) maintaining telephone coverage to respond to shareholder inquiries regarding
matters to which this Agreement pertains to which the transfer agent is unable
to respond; (h) providing monitoring reports and assistance regarding the Funds'
compliance with securities and tax laws; (i) arranging for dissemination of
yield and other performance information to newspapers and tracking services; (j)
arranging for and preparing annual renewals for fidelity bond and errors and
omissions insurance coverage; and (k) developing a budget for the Trust,
establishing the
<PAGE>
2
rate of expense accruals and arranging for the payment of all fixed and
management expenses. Notwithstanding the foregoing, SBDS shall not be deemed to
have assumed any duties with respect to, and shall not be responsible for, the
management of the Trust's assets or the rendering of investment advice and
supervision with respect thereto or the distribution of shares of beneficial
interest ("Shares") of the Funds, nor shall SBDS be deemed to have assumed or
have any responsibility with respect to functions specifically assumed by any
transfer agent or custodian of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES. SBDS shall pay the entire
salaries and wages of all of the Trust's Trustees, officers and agents who
devote part or all of their time to the affairs of SBDS or its affiliates, and
the wages and salaries of such persons shall not be deemed to be expenses
incurred by the Trust for purposes of this Section 2. Except as provided in the
foregoing sentence, the Trust shall pay all of its own expenses including,
without limitation, compensation of Trustees not affiliated with SBDS; all
out-of-pocket expenses and disbursements for the benefit of a Fund, including,
but not limited to, legal fees incurred by SBDS pursuant to Section 4 herein,
photocopying and courier (including express mail) charges, governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Trust; fees and expenses of the Trust's independent auditors,
of legal counsel and of any custodian, any transfer agent, distributor or
registrar or dividend disbursing agent of the Trust; expenses of distributing
and redeeming Shares and servicing shareholder accounts; expenses of preparing,
printing and mailing prospectuses and statements of additional information,
reports, notices, proxy statements to the Funds' shareholders and governmental
officers and commissions and the costs of producing and distributing copies of
such documents to others; expenses of reproducing and distributing materials for
the Board and other attendees of Board meetings; expenses connected with the
execution, recording and settlement of security transactions; insurance
premiums; expenses of meetings of shareholders of the Funds and expenses
relating to the registration of the Trust and the issuance of Shares of the
Funds.
3. COMPENSATION OF SBDS. For the services to be rendered and the
facilities to be provided by SBDS hereunder, the Trust shall pay to SBDS an
administrative services fee computed and paid monthly equal on an annual basis
as set forth in Schedule A hereto for each Fund's then-current fiscal year.
If SBDS serves under this Agreement for less than the whole of any
month, the compensation to SBDS hereunder shall be prorated. For purposes of
computing the fees payable to SBDS hereunder, the net asset value of each Fund
shall be computed in the manner specified in the Fund's then-current prospectus
and statement of additional information.
4. LIMITATION OF LIABILITY OF SBDS. SBDS shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust or the performance of its duties
hereunder, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the reckless disregard of its
obligations and duties hereunder. As used in this Section 4, the term "SBDS"
shall include SBDS and/or any of its affiliates and/or subcontractors as
provided for in Section 7 and the
<PAGE>
3
Directors, officers and employees of SBDS and/or any of its affiliates and/or
subcontractors as provided for in Section 7.
5. ACTIVITIES OF SBDS. The services of SBDS to the Trust are not to be
deemed to be exclusive, SBDS being free to render administrative and/or other
services to other parties. It is understood that Trustees, officers, and
shareholders of a Fund are or may become interested in SBDS and/or any of its
affiliates, as Directors, officers, employees, or otherwise, and that Directors,
officers and employees of SBDS and/or any of its affiliates are or may become
similarly interested in the Trust and that SBDS and/or any of its affiliates may
be or become interested in the Trust as a shareholder of a Fund or otherwise.
6. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective as of the day and year first above written and
shall govern the relations between the parties hereto thereafter, unless
terminated as set forth in this Section 6.
This Agreement may not be altered or amended, except by an instrument
in writing, and executed by both parties. This Agreement may be terminated at
any time without the payment of any penalty, with respect to any Fund or the
Trust, by the Board of the Trust, or by SBDS, in each case on not less than 60
days' written notice to the other party.
7. SUBCONTRACTING BY SBDS. SBDS may subcontract for the performance of
SBDS's obligations hereunder with any one or more persons; PROVIDED, HOWEVER,
that SBDS shall not enter into any such subcontract unless the Trustees of the
Trust shall have found the subcontracting party to be qualified to perform the
obligations sought to be subcontracted; and PROVIDED, FURTHER, that, unless the
Trust otherwise expressly agrees in writing, SBDS shall be as fully responsible
to the Trust for the acts and omissions of any subcontractor as it would be for
its own acts or omissions.
8. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
9. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of SBDS shall be 6 St. James Avenue,
9th Floor, Boston, Massachusetts 02116 and the address of the Trust shall be 6
St.
James Avenue, 9th Floor, Boston, Massachusetts 02116.
10. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced and interpreted in
accordance with and governed by the laws of the Commonwealth of Massachusetts
without reference to principles of conflicts of law. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement
<PAGE>
4
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned has executed this Agreement not individually, but as an officer
under the Trust's Declaration of Trust, and the obligations of this Agreement
are not binding upon the Trust's Trustees, its officers, or shareholders of the
Funds individually, but bind only the Trust estate.
DEVCAP TRUST
By
Name:
Title:
SIGNATURE BROKER-DEALER SERVICES, INC.
By
Name:
Title:
Hub and Spoke(R) is a registered service mark of Signature Financial Group, Inc.
("Signature"). HubSM and SpokeSM are each, individually, service marks of
Signature.
DSI175A
<PAGE>
5
ADMINISTRATIVE SERVICES AGREEMENT
Between DEVCAP Trust and
Signature Broker-Dealer Services, Inc.
dated as of October 5, 1995, as amended October 4, 1996
SCHEDULE A
FUND ANNUAL FEE RATE
DEVCAP Shared Return Fund
0.175% of average daily net
assets up to $100 million
0.125% of average daily net
assets greater than $100
million
DSI175A
CONSENT OF INDEPENDENT AUDITORS
The Trustees
DEVCAP Shared Return Fund and
Domini Social Index Portfolio:
We consent to the use of our reports incorporated herein by reference and to the
references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the
prospectus and "INDEPENDENT AUDITORS" in the statement of additional
information.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 25, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the January
31, 1996 DEVCAP Shared Return Fund Semi-Annual Report and is qualified in its
entirety to such Semi-Annual Report.
</LEGEND>
<CIK> 0000948119
<NAME> DEVCAP TRUST
<SERIES>
<NUMBER> 1
<NAME> DEVCAP SHARED RETURN FUND
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> OCT-19-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 232,791
<INVESTMENTS-AT-VALUE> 232,791
<RECEIVABLES> 21,735
<ASSETS-OTHER> 53,993
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 308,519
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 76,710
<TOTAL-LIABILITIES> 76,710
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,630
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> (314)
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 754
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,739
<NET-ASSETS> 231,809
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 909
<OTHER-INCOME> 0
<EXPENSES-NET> 1,223
<NET-INVESTMENT-INCOME> (314)
<REALIZED-GAINS-CURRENT> 754
<APPREC-INCREASE-CURRENT> 11,739
<NET-CHANGE-FROM-OPS> 12,179
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,845
<NUMBER-OF-SHARES-REDEEMED> 89
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 231,809
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,958
<AVERAGE-NET-ASSETS> 167,582
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.65
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
