<PAGE>
April 8, 1997
Dear Shareholder:
We are pleased to present to you the DEVCAP Shared Return Fund's Semi-Annual
Report for the period ending January 31, 1997. These past months have been
remarkable ones for the Fund. Fueled by a robust stock market, the Fund was able
to provide its shareholders with robust returns. Total return for the six months
ending January 31, 1997, was 25.4%.* The number of shareholders in the Fund has
more than doubled, and today we have shareholders from all over the world who
have joined in support of the microenterprise development movement. Thanks to
these accomplishments, in the past year the DEVCAP Shared Return Fund collected
over $74,000 in donations to support the businesses of microentrepreneurs in
developing regions in 54 countries.
Your contributions have become increasingly important in this time of
diminishing government support for international development projects. The
Financial Times recently reported that the world's richest countries have cut
their aid to developing nations as a percentage of GNP to the lowest level in 45
years. Government aid fell sharply in 1995 and 1996 due to mounting pressure on
governments to reduce budget deficits and growing public cynicism over
government-sponsored development programs. International aid now accounts for
only 0.27 percent of the GNP of the OECD group of industrialized nations.
Private foundations and businesses have emerged as the most important sources of
funds to give the poor countries of the world the push they need to transform
their own economies.
Your contributions will allow DEVCAP's microenterprise programs to provide
participants from every continent the opportunity to earn the additional income
they need to improve the quality of life for their family and their community.
The services offered by DEVCAP members have often enabled microentrepreneurs to
achieve a 70-100% increase in their earnings. This reduction in poverty leads to
better nutrition and improved health and education for children and thus
improves the prospects for the next generation.
Please help us to continue to grow and serve the poor. If you can think of
any friends or family members who may have an interest in the Fund, please take
a minute to provide us with their names and addresses on the enclosed business
reply cards.
If you have any questions or comments about your investment in the DEVCAP
Shared Return Fund, please do not hesitate to call us at (800) 371-2655. We are
pleased to have you as a shareholder and value your opinions. Thank you once
again for your investment and your continued support of the DEVCAP Shared Return
Fund.
Sincerely,
Gil Crawford
Chairman of the Board of Trustees
*The performance information quoted represents past performance and is not a
guarantee of future results. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
<PAGE>
COMPARISON OF $10,000 INVESTMENT IN THE
DEVCAP SHARED RETURN FUND AND THE
STANDARD & POOR'S 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS (THOUSANDS)
<S> <C> <C> <C> <C>
DEVCAP Shared Return Fund S&P 500
6/30/1991 9.383114465 10
7/31/1991 9.85089129 10.4657
10/31/1991 9.905351939 10.67488
1/31/1992 10.51388422 11.20328
4/30/1992 10.48761541 11.45423
7/31/1992 10.95800741 11.80192
10/31/1992 11.17791507 11.73687
1/31/1993 11.91064321 12.38689
4/30/1993 11.63295003 12.51053
7/31/1993 11.93603352 12.82998
10/31/1993 12.51195935 13.48675
1/31/1994 12.7585938 13.9789
4/30/1994 12.04740153 13.1747
7/31/1994 12.16438018 13.49102
10/31/1994 12.57449899 14.00709
1/31/1995 12.65578427 14.05253
4/30/1995 13.74284542 15.472
7/31/1995 15.08082232 17.00821
10/31/1995 15.66740367 17.70634
1/31/1996 16.88844627 19.4792
4/30/1996 17.41175023 20.14209
7/31/1996 16.98359244 19.82367
10/31/1996 18.80722748 21.97019
1/31/1997 22.563 24.60756
Average Annual
Total Return
1 Year ended 1/31/97 25.4%
5 Years ended 1/31/97 15.0%
Inception (6/3/91) to
1/31/97 14.4%
</TABLE>
The performance information in this chart represents past performance. The
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Performance prior to October 19, 1995 (commencement of investment
operations of the Fund) represents the investment performance of the Domini
Social Index Portfolio adjusted for expenses.
2
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1)............. $ 1,419,241
Deferred organization expenses............................................. 42,823
Prepaid expenses........................................................... 10,482
------------
Total assets........................................................... 1,472,546
------------
LIABILITIES:
Transfer agent............................................................. 5,885
Fund accounting............................................................ 1,500
Administration fees........................................................ 771
Miscellaneous.............................................................. 1,034
------------
Total Liabilities...................................................... 9,190
------------
NET ASSETS..................................................................... $ 1,463,356
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital............................................................ $ 1,226,695
Undistributed net investment income........................................ (2,847)
Accumulated net realized gain on investment................................ 3,242
Net unrealized appreciation of investment.................................. 236,267
------------
NET ASSETS..................................................................... $ 1,463,357
------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($1,463,357
DIVIDED BY 109,723 SHARES).................................................. $ 13.34
------------
------------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO (NOTE 1):
Dividend income............................................................... $ 9,141
Expenses from Portfolio....................................................... (1,767)
---------
Net Income from Portfolio................................................. 7,374
EXPENSES (NOTES 1 AND 2):
Transfer agent fee................................................. 11,772
Professional fees.................................................. 7,500
Registration fees.................................................. 7,254
Servicing and fund accounting agent fee (Note 2)................... 4,500
Amortization of organization expenses (Note 1)..................... 3,296
Administration fees (Note 2)....................................... 1,900
Trustee fees and expenses (Note 2)................................. 496
---------
Total Expenses................................................. 36,718
Less: Reimbursement of expenses (Note 2)....................... (27,851)
---------
Net Expenses.............................................................. 8,867
---------
NET INVESTMENT INCOME............................................................. (1,493)
---------
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO
Net realized gain from Portfolio.............................................. 2,251
Net change in unrealized appreciation from Portfolio.......................... 233,899
---------
Net realized and unrealized gain from Portfolio............................... 236,150
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................ $ 234,657
---------
---------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 19, 1995
SIX MONTHS ENDED (COMMENCEMENT
JANUARY 31, 1997 OF OPERATIONS) TO
(UNAUDITED) JULY 31, 1996
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss................................................. $ (1,493) $ (1,353)
Net realized gain from Portfolio.................................... 2,251 2,050
Change in net unrealized gain from Portfolio........................ 233,899 2,368
----------------- ----------
Net increase in net assets resulting from operations................ 234,657 3,065
----------------- ----------
Dividends to shareholders from net realized gain........................ (1,059) --
----------------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares........................................ 675,665 641,519
Payments for shares redeemed........................................ (89,457) (1,967)
Reinvestment of dividends........................................... 934 --
----------------- ----------
Net Increase in Net Assets from Capital Share Transactions...... 587,142 639,552
----------------- ----------
Total Increase in Net Assets................................ 820,740 642,617
NET ASSETS:
Beginning of period................................................. 642,617 --
----------------- ----------
End of period (including undistributed net investment loss of $2,847
and $314, respectively)........................................... $ 1,463,357 $ 642,617
----------------- ----------
----------------- ----------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold................................................................ 56,859 60,188
Redeemed............................................................ (7,212) (186)
Reinvested.......................................................... 74 --
----------------- ----------
Net increase........................................................ 64,145 60,002
----------------- ----------
----------------- ----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
DEVCAP SHARED RETURN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 19, 1995
SIX MONTHS ENDED (COMMENCEMENT
JANUARY 31, 1997 OF OPERATIONS) TO
(UNAUDITED) JULY 31, 1996
----------------- -------------------
<S> <C> <C>
Net Asset Value, beginning of period.................................... $ 10.71 $ 10.00
------- -------
Income from investment operations:
Net investment income............................................... 0.00 (0.02)
Net realized and unrealized gain on investments..................... 2.64 0.73
------- -------
Total income from investment operations................................. 2.64 0.71
------- -------
Less distributions from net realized gain............................... (0.01)
------- -------
Net asset value, end of period.......................................... $ 13.34 $ 10.71
------- -------
------- -------
Ratios/supplemental data
Total return........................................................ 24.7% 7.10%
Net Assets, end of period (in 000's)................................ $ 1,463 $ 643
Ratio of net investment income to average net assets................ (0.65)%1 (0.54)%1
Expenses expressed as a percentage of net assets:
Total expenses.................................................. 10.35%1,2 47.75%1,2
Expenses paid by fund........................................... 2.50%1 2.50%1
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
(2) Total expenses include portfolio custody fees which were reduced by an
expense offset arrangement. These offsets reduced expenses by the Fund by
0.05% in the six months ended January 31, 1997 and 0.09% for the period
ended July 31, 1996. Total expenses also include expenses which have been
reimbursed or waived by DEVCAP.
See Notes to Financial Statements
6
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. DEVCAP Shared Return Fund
(the "Fund") is a series of DEVCAP Trust and is registered as an open-end
management investment company under the Investment Company Act of 1940.
The Fund invests substantially all of its assets in the Domini Social Index
Portfolio (the "Portfolio"), an open-end, diversified management investment
company having the same investment objective as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of the
Portfolio (0.8% at January 31, 1997). The financial statements of the Portfolio
are included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The Fund commenced operations upon effectiveness on
September 13, 1995, and commenced investment operations on October 19, 1995.
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
the Fund's significant accounting policies.
A. VALUATION OF INVESTMENTS. Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INVESTMENT INCOME AND DIVIDENDS TO SHAREHOLDERS. The Fund earns income
daily, net of Portfolio expenses, on its investment in the Portfolio. Dividends
to shareholders are declared and paid semiannually from net investment income.
Distributions to shareholders of realized capital gains, if any, are made
annually.
C. FEDERAL TAXES. The Fund's policy is to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income, including net realized
gains, if any, within the prescribed time periods. Accordingly, no provision for
federal income or excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES. Organizational costs are being
amortized on a straight-line basis over a five-year period. The amount paid by
the Fund on any redemption of the Fund's initial shares will be reduced by the
pro rata portion of any unamortized organization expenses which the number of
the initial shares redeemed bears to the total number of initial shares
outstanding immediately prior to such redemption. To the extent that the
proceeds of the redemptions are less than such pro rata portion of any
unamortized organization expenses, DEVCAP has agreed to reimburse the Fund for
such difference.
E. OTHER. All net investment income of the Portfolio is allocated pro rata
among the Fund and other investors in the Portfolio.
7
<PAGE>
2. TRANSACTIONS WITH AFFILIATES.
A. ADMINISTRATION. The Fund has retained Signature Broker-Dealer Services,
Inc. ("Signature") to serve as Administrator and Distributor. Signature provides
administrative services necessary for the operations of the Fund, furnishes
office space and facilities required for conducting the business of the Fund and
pays the compensation of the Fund's officers. For its services under the
Administrative Services Agreement, Signature receives from the Fund a fee
accrued daily at an annual rate equal to 0.15% of the Fund's average daily net
assets. The Portfolio has a similar agreement with Signature at a rate equal to
0.05% of the Portfolio's average daily net assets.
B. DISTRIBUTION. The Fund has adopted a Distribution Plan in accordance
with Rule 12b-1 under the Act. Signature acts as agent of the Fund and principal
underwriter of shares of the Fund pursuant to the Plan. Under the Plan, the Fund
may pay Signature a fee not to exceed 0.25% per annum of the Fund's average
daily net assets in anticipation of, or in reimbursement for, expenses incurred
in connection with the sale of shares of the Fund. Such expenses include
payments to broker-dealers who advise shareholders regarding the purchase, sale
or retention of shares of the Fund, payments to employees of the Distributor,
advertising used for sales purposes, expenses of preparing and printing sales
literature and other distribution-related expenses.
C. REIMBURSEMENT OF EXPENSES. DEVCAP has agreed that it will reimburse the
Fund to the extent necessary to maintain the Fund's total operating expenses
(which includes expenses of the Fund and Portfolio) at an annual rate of 2.5% of
the Fund's average daily net assets. This limit does not cover extraordinary
increases in these expenses during the period and no longer applies in the event
of a precipitous decline in assets due to unforseen circumstances.
3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio aggregated $675,664 and $142,588 respectively.
8
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
COMMON STOCKS -- 98.5%
APPAREL -- 1.1%
Brown Group Inc...................................... 900 $ 14,850
Hartmarx Corp.(b).................................... 1,800 10,575
Lands' End Inc....................................... 1,700 48,237
Liz Claiborne, Inc................................... 3,900 164,288
Nike Inc. (Class B).................................. 15,300 1,038,488
Oshkosh B'Gosh, Inc. (Class A)....................... 800 11,000
Phillips-Van Heusen Corp............................. 1,400 18,900
Reebok International Ltd............................. 3,200 152,000
Russell Corp......................................... 2,200 70,950
Stride Rite Corp..................................... 2,700 32,400
Timberland Co.(b).................................... 600 26,625
VF Corp.............................................. 3,400 226,100
------------
1,814,413
------------
COMMERCIAL PRODUCTS & SERVICES -- 2.5%
Autodesk Inc......................................... 2,400 75,900
Banta Corp........................................... 1,850 43,475
Centex Corp.......................................... 1,600 62,400
Cintas Corp.......................................... 2,600 148,200
Crown Cork & Seal Inc................................ 6,800 391,000
Deluxe Corp.......................................... 4,700 144,525
DeVRY Inc.(b)........................................ 2,200 57,750
Donnelley, (R.R.) & Sons............................. 8,100 253,125
Fleetwood Enterprises, Inc........................... 1,900 50,825
Fuller (H.B.) Co..................................... 800 39,900
Graco Inc............................................ 950 30,519
Harland (J.H.) Co.................................... 1,600 46,600
HON Industries Inc................................... 1,600 57,200
Ikon Office Solutions Inc............................ 7,100 313,288
Kaufman & Broad Home Corp............................ 2,100 29,663
Kelly Services (Class A)............................. 1,775 49,700
Miller, (Herman) Inc................................. 1,300 75,238
Moore Corp., Ltd..................................... 5,300 109,975
National Education Corp.(b).......................... 2,100 31,763
National Service Industries, Inc..................... 2,400 92,100
New England Business Services Inc.................... 800 16,600
Pitney Bowes Inc..................................... 8,000 461,000
Rouse Co............................................. 3,000 93,000
Sherwin-Williams Co.................................. 4,600 255,300
Sonoco Products Co................................... 4,805 128,534
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
COMMERCIAL PRODUCTS & SERVICES -- CONTINUED
Standard Register Co................................. 1,500 $ 51,750
TJ International Inc................................. 3,500 64,750
Xerox Corp........................................... 18,100 1,061,113
------------
4,235,193
------------
CONSUMER PRODUCTS & SERVICES -- 0.2%
American Greetings Corp. (Class A)................... 4,000 113,250
Avery Dennison Corp.................................. 5,700 208,762
ISCO Inc............................................. 300 2,550
Tennant Co........................................... 500 13,438
------------
338,000
------------
ENERGY -- 3.7%
Amoco Corp........................................... 26,800 2,331,600
Anadarko Petroleum Corp.............................. 3,200 207,200
Apache Corp.......................................... 4,800 184,200
Atlantic Richfield Co................................ 9,000 1,190,250
Consolidated Natural Gas Co.......................... 5,100 283,687
ENERGEN Corp......................................... 600 18,450
Enron Corp........................................... 13,100 540,375
Helmerich & Payne Inc................................ 1,300 62,888
Louisiana Land & Exploration Co...................... 2,000 112,500
OGE Energy Corp...................................... 2,100 89,513
Oryx Energy Co.(b)................................... 5,600 135,800
Pennzoil Co.......................................... 2,500 155,938
Rowan Companies Inc.(b).............................. 4,700 118,675
Santa Fe Energy Resources Inc.(b).................... 4,800 71,400
Sonat Inc............................................ 4,700 250,275
Sun Co............................................... 3,900 102,862
Williams Companies Inc............................... 9,000 361,125
------------
6,216,7389
------------
FINANCIAL -- 13.2%
Ahmanson (H.F.) & Co................................. 5,700 213,750
American Express Co.................................. 26,200 1,634,225
Banc One Corp........................................ 23,095 1,047,935
Bank of Boston....................................... 8,100 577,125
BankAmerica Corp..................................... 19,700 2,199,012
Bankers Trust (N.Y.) Corp............................ 4,500 382,500
Barnett Banks Inc.................................... 10,400 457,600
Beneficial Corp...................................... 2,800 188,300
</TABLE>
9
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
FINANCIAL -- CONTINUED
<S> <C> <C>
Block (H. & R.), Inc................................. 5,500 $ 162,937
Cincinnati Financial Corp............................ 2,995 187,188
CoreStates Financial Corp............................ 11,700 582,075
Dime Bancorp Inc.(b)................................. 5,800 90,625
Edwards (A.G.), Inc.................................. 3,525 119,409
Federal Home Loan Mortgage Corp...................... 38,000 1,149,500
Federal National Mortgage Association................ 58,000 2,291,000
Fifth Third Bancorp.................................. 5,600 433,300
First Chicago Corp................................... 17,206 982,893
First Fed Financial Corp.(b)......................... 600 13,200
Golden West Financial Corp........................... 3,100 208,088
Great Western Financial Corp......................... 7,100 224,538
Household International Inc.......................... 5,200 515,450
MBNA Corp............................................ 17,700 610,650
Mellon Bank Corp..................................... 6,900 514,913
Merrill Lynch & Co., Inc............................. 10,400 876,200
Morgan (J.P.) & Co., Inc............................. 10,700 1,102,100
Norwest Corp......................................... 20,500 976,312
Piper Jaffray Inc.................................... 1,000 17,625
PNC Bank Corp........................................ 18,300 727,425
ReliaStar Financial Corp............................. 2,000 111,000
Schwab (Charles) Corp................................ 9,300 347,588
Student Loan Marketing Association................... 2,900 315,738
SunTrust Banks Inc................................... 11,800 590,000
Transamerica Corp.................................... 3,600 296,100
Value Line Inc....................................... 500 15,125
Vermont Financial Services Corp...................... 200 7,925
Wachovia Corp........................................ 8,900 512,863
Wells Fargo & Co..................................... 4,900 1,493,275
Wesco Financial Corp................................. 400 78,000
------------
22,253,489
------------
FOODS & BEVERAGES -- 9.8%
Ben & Jerry's (Class A)(b)........................... 700 8,225
Campbell Soup Co..................................... 12,800 1,062,400
Coca-Cola Co......................................... 134,700 7,795,762
CPC International Inc................................ 7,700 591,937
Fleming Cos. Inc..................................... 2,000 32,250
General Mills, Inc................................... 8,400 569,100
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
FOODS & BEVERAGES -- CONTINUED
Heinz (H.J.) Co...................................... 19,900 $ 800,975
Hershey Foods Corp................................... 8,200 346,450
Kellogg Co........................................... 11,700 814,612
Odwalla Inc.(b)...................................... 1,300 16,250
PepsiCo, Inc......................................... 86,300 3,009,713
Quaker Oats Co....................................... 7,200 276,300
Ralston Purina Group................................. 5,600 440,300
Smucker (J.M.) Co. (Class A)......................... 1,500 26,250
Super Valu Inc....................................... 3,600 111,150
Sysco Corp........................................... 9,500 312,313
TCBY Enterprises, Inc................................ 1,300 5,525
Tootsie Roll Industries, Inc......................... 1,145 43,939
Wrigley, (Wm.) Jr. Co................................ 6,200 360,375
------------
16,623,826
------------
HOUSEHOLD GOODS -- 5.7%
Alberto Culver Co. (Class B)......................... 1,500 78,187
Avon Products, Inc................................... 7,100 445,525
Bassett Furniture Industries, Inc.................... 900 20,362
Church & Dwight Co., Inc............................. 4,400 112,200
Clorox Co............................................ 2,700 320,287
Colgate-Palmolive Co................................. 7,800 754,650
Fedders Corp......................................... 2,200 13,750
Handleman Co.(b)..................................... 1,900 15,200
Harman International Industries, Inc................. 930 43,129
Hasbro Inc........................................... 4,600 181,700
Huffy Corp........................................... 700 9,975
Kimberly-Clark Corp.................................. 15,232 1,485,120
Leggett & Platt Inc.................................. 4,900 157,413
Mattel, Inc.......................................... 14,685 413,016
Maytag Co............................................ 5,400 110,700
Newell Co............................................ 8,400 277,200
Oneida, Ltd.......................................... 800 13,900
Procter & Gamble Co.................................. 36,900 4,261,950
Rubbermaid Inc....................................... 8,000 185,000
Shaw Industries...................................... 7,300 101,288
Snap-On Tools Corp................................... 3,550 132,238
Springs Industries Inc. (Class A).................... 1,100 46,475
Stanhome, Inc........................................ 1,100 28,463
Stanley Works........................................ 4,700 178,600
Thomas Industries.................................... 800 17,500
</TABLE>
10
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
HOUSEHOLD GOODS -- CONTINUED
<S> <C> <C>
Whirlpool Corp....................................... 4,100 $ 208,588
------------
9,612,416
------------
INSURANCE -- 6.1%
Aetna Inc............................................ 7,970 629,630
American General Corp................................ 11,300 450,587
American International Group, Inc.................... 25,400 3,076,575
Chubb Corp........................................... 9,300 506,850
CIGNA Corp........................................... 4,200 636,825
General Re Corp...................................... 4,400 710,600
Hartford Steam Boiler................................ 1,100 50,875
Jefferson-Pilot Corp................................. 3,800 224,200
Lincoln National Corp................................ 5,600 300,300
Marsh & McLennan Companies, Inc...................... 3,800 409,450
Providian Corp....................................... 5,000 269,375
SAFECO Corp.......................................... 6,700 254,600
St. Paul Companies................................... 4,500 281,250
Torchmark Corp....................................... 3,800 196,650
Travelers Corp....................................... 34,600 1,812,206
UNUM Corp............................................ 3,900 294,938
USF&G Corp........................................... 6,200 130,975
USLIFE Corp.......................................... 1,925 78,925
------------
10,314,811
------------
MANUFACTURING -- 2.0%
Applied Materials, Inc.(b)........................... 9,500 469,062
Boston Scientific Corp.(b)........................... 9,700 662,025
Brady (W.H.) (Class A)............................... 1,400 32,200
Case Corp............................................ 4,000 212,000
Cincinnati Milacron.................................. 2,300 52,900
Clarcor, Inc......................................... 900 22,387
Deere & Co........................................... 4,300 611,325
Dionex Corp.(b)...................................... 800 32,400
Fastenal Co.......................................... 2,000 75,500
Gerber Scientific.................................... 1,200 17,100
Goulds Pumps, Inc.................................... 1,200 28,050
Hunt Manufacturing Co................................ 600 10,350
Illinois Tool Works Inc.............................. 6,600 538,725
James River Corp. of Virginia........................ 4,500 144,563
Lawson Products, Inc................................. 800 17,700
Millipore Corp....................................... 2,300 98,325
Nordson Corp......................................... 1,000 60,750
Thermo Electron Corp.(b)............................. 7,930 270,611
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
MANUFACTURING -- CONTINUED
Watts Industries Inc. (Class A)...................... 1,400 $ 34,125
Wellman Inc.......................................... 1,700 29,963
Zurn Industries Inc.................................. 700 16,888
------------
3,436,949
------------
MEDIA -- 3.7%
BET Holdings Inc. (Class A)(b)....................... 900 23,625
Comcast Corp. (Class A).............................. 17,300 317,888
Disney (Walt) Co..................................... 37,100 2,717,575
Dow Jones & Co. Inc.................................. 5,300 210,012
Frontier Corp........................................ 8,700 190,313
Harcourt General Inc................................. 3,900 176,475
King World Productions Inc.(b)....................... 2,000 78,250
Lee Enterprises, Inc................................. 2,500 57,500
McGraw-Hill Inc...................................... 5,300 263,675
Media General Inc. (Class A)......................... 1,400 44,100
Meredith Corp........................................ 1,700 87,338
New York Times Co. (Class A)......................... 5,200 199,550
Scholastic Corp.(b).................................. 2,200 129,800
Tele-Communications, Inc. (Class A)(b)............... 35,300 469,931
Times Mirror Co. (Class A)........................... 5,600 264,600
US West Media Group(b)............................... 33,200 618,350
Viacom Inc. (Class A)(b)............................. 4,000 136,000
Washington Post Co. (Class B)........................ 600 200,400
------------
6,185,382
------------
MISCELLANEOUS -- 1.2%
Allwaste, Inc.(b).................................... 2,000 10,750
Avnet, Inc........................................... 2,300 142,312
Bemis Co., Inc....................................... 2,800 114,450
CPI Corp............................................. 600 11,100
Cross (A.T.) Co. (Class A)........................... 900 10,800
General Signal Corp.................................. 2,600 117,650
Hillenbrand Industries Inc........................... 3,800 147,250
Ionics Inc.(b)....................................... 900 45,113
Jostens Inc.......................................... 2,100 43,312
Marriott International Corp.......................... 7,400 393,125
Omnicom Group, Inc................................... 4,300 209,088
Polaroid Corp........................................ 2,500 110,000
</TABLE>
11
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
MISCELLANEOUS -- CONTINUED
<S> <C> <C>
Sealed Air Corp.(b).................................. 2,300 $ 98,325
Service Corp. International.......................... 12,500 362,500
Toro Co.............................................. 800 28,100
Whitman Corp......................................... 5,600 128,800
------------
1,972,675
------------
PHARMACEUTICALS AND HEALTH CARE -- 8.5%
Acuson Corp. (b)..................................... 1,500 38,063
Allergan Inc......................................... 3,500 123,812
Alza Corp.(b)........................................ 4,500 129,937
Angelica Corp........................................ 800 15,300
Apogee Enterprises, Inc.............................. 700 26,425
Becton Dickinson & Co................................ 6,900 339,825
Bergen Brunswig Corp. (Class A)...................... 1,895 56,376
Biomet Inc.(b)....................................... 6,200 96,100
Forest Laboratories, Inc.(b)......................... 2,400 90,600
Humana Inc.(b)....................................... 8,600 163,400
Johnson & Johnson.................................... 72,000 4,149,000
Manor Care Inc....................................... 3,700 94,350
Medtronic Inc........................................ 12,700 869,950
Merck & Co., Inc..................................... 65,800 5,971,350
Mylan Laboratories Inc............................... 9,600 157,200
Natures Sunshine Products Inc........................ 600 10,650
Oxford Health Plans(b)............................... 4,000 217,500
Schering-Plough Corp................................. 20,000 1,512,500
St. Jude Medical Inc.(b)............................. 4,500 170,438
Stryker Corp......................................... 5,100 147,900
Sunrise Medical Inc.(b).............................. 1,000 15,500
Transitional Hospitals............................... 2,384 21,754
United American Healthcare(b)........................ 300 1,425
------------
14,419,355
------------
RESOURCE DEVELOPMENT -- 2.2%
Air Products & Chemicals, Inc........................ 5,900 421,112
Aluminum Co. of America.............................. 9,600 662,400
ARCO Chemical Co..................................... 5,100 242,887
Battle Mountain Gold Co.............................. 11,900 77,350
Betz Laboratories, Inc............................... 1,500 87,750
Cabot Corp........................................... 4,200 100,275
Calgon Carbon Corp................................... 2,200 25,025
Consolidated Papers Inc.............................. 2,400 114,300
Cyprus Amax Minerals Co.............................. 4,900 109,638
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
RESOURCE DEVELOPMENT -- CONTINUED
Echo Bay Mines Ltd................................... 7,400 $ 47,638
Inland Steel Industries Inc.......................... 2,600 49,725
Marquette Medical Sys................................ 1,500 30,938
Mead Corp............................................ 2,800 157,500
Morton International Inc............................. 7,700 312,813
Nalco Chemical Co.................................... 3,600 127,800
Nucor Corp........................................... 4,750 247,000
Praxair Inc.......................................... 8,900 412,738
Sigma-Aldrich Corp................................... 5,300 168,275
Westvaco Corp........................................ 5,400 157,950
Worthington Industries, Inc.......................... 4,800 93,000
------------
3,646,114
------------
RETAIL -- 8.6%
Albertson's, Inc..................................... 13,400 469,000
American Stores Co................................... 7,700 323,400
Bob Evans Farms, Inc................................. 2,300 32,200
Charming Shoppes Inc.(b)............................. 5,600 26,600
Circuit City Stores Inc.............................. 5,300 186,163
Claire's Stores Inc.................................. 2,500 35,625
CVS Corp............................................. 6,200 268,150
Dayton-Hudson Corp................................... 11,600 436,450
Dillard Department Stores............................ 6,300 188,213
Dollar General Corp.................................. 4,207 130,433
Egghead Inc.(b)...................................... 900 4,838
Gap, Inc............................................. 15,000 431,250
Giant Food Inc. (Class A)............................ 3,200 105,600
Gibson Greetings Inc.(b)............................. 900 16,650
Great Atlantic & Pacific Tea Co., Inc................ 2,000 62,500
Hannaford Brothers Co................................ 2,200 76,175
Hechinger Co. (Class A).............................. 800 1,625
Home Depot, Inc...................................... 25,933 1,283,684
International Dairy Queen, Inc. (Class A)(b)......... 1,300 25,675
K-Mart Corp.(b)...................................... 25,900 288,138
Kroger Co.(b)........................................ 7,000 334,250
Lillian Vernon Corp.................................. 500 6,500
Limited, Inc......................................... 14,400 246,600
Longs Drug Stores, Inc............................... 2,400 58,200
Lowe's Companies, Inc................................ 9,100 301,438
Luby's Cafeterias, Inc............................... 1,300 26,487
May Department Stores Co............................. 13,400 596,300
McDonald's Corp...................................... 37,700 1,715,350
Mercantile Stores Co., Inc........................... 2,000 98,000
Nordstrom Inc........................................ 4,300 159,637
</TABLE>
12
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
RETAIL -- CONTINUED
<S> <C> <C>
Penney, J.C. Co., Inc................................ 12,200 $ 577,975
Pep Boys............................................. 3,300 104,775
Price/Costco Inc.(b)................................. 11,015 293,274
Ruby Tuesday......................................... 900 16,088
Ryan's Family Steakhouse, Inc.(b).................... 2,700 20,925
Sears Roebuck & Co................................... 21,200 1,017,600
Skyline Corp......................................... 500 11,688
Specs Music Inc.(b).................................. 200 125
Starbucks Corp.(b)................................... 4,100 140,425
Tandy Corp........................................... 3,200 144,800
TJX Companies Inc.................................... 4,000 159,000
Toys 'R' Us, Inc. (b)................................ 14,720 368,000
Wal-Mart Stores, Inc................................. 123,600 2,935,500
Walgreen Co.......................................... 13,200 542,850
Whole Foods Market(b)................................ 3,300 59,813
Woolworth (F.W.) Co.(b).............................. 7,200 146,700
------------
14,474,669
------------
TECHNOLOGIES -- 20.6%
3Com Corp.(b)........................................ 9,000 604,125
Advanced Micro Devices, Inc.(b)...................... 7,300 255,500
Airborne Freight Corp................................ 1,200 32,100
Alaska Air Group, Inc.(b)............................ 800 17,300
Amdahl Corp.(b)...................................... 6,400 73,600
American Power Conversion Corp.(b)................... 5,100 137,381
Analog Devices, Inc.(b).............................. 11,999 346,499
Apple Computer, Inc.................................. 6,600 109,725
Automatic Data Processing, Inc....................... 15,400 637,175
Baldor Electric Co................................... 1,400 35,875
Borland International, Inc.(b)....................... 1,900 12,112
Cisco Systems, Inc.(b)............................... 35,300 2,462,175
Compaq Computer Corp.(b)............................. 15,200 1,320,500
Computer Assoc. International Inc.................... 19,400 880,275
Cooper Industries Inc................................ 5,700 245,812
Digital Equipment Corp.(b)........................... 8,300 311,250
DSC Communications Corp.(b).......................... 6,200 139,500
Grainger, (W.W.) Inc................................. 2,700 208,575
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
TECHNOLOGIES -- CONTINUED
Hewlett-Packard Co................................... 55,300 $ 2,910,162
Hubbell Inc. (Class B)............................... 3,560 157,530
Intel Corp........................................... 44,600 7,236,350
International Business Machines Inc.................. 28,700 4,513,075
MCI Communications Corp.............................. 37,200 1,306,650
Merix Corp........................................... 300 5,662
Micron Technology, Inc............................... 11,400 396,150
Microsoft Corp....................................... 64,500 6,579,000
Molex, Inc........................................... 5,400 206,550
National Semiconductor Corp.(b)...................... 7,500 208,125
Novell Inc.(b)....................................... 18,700 236,087
Perkin-Elmer Corp.................................... 2,400 167,700
Quarterdeck Corp.(b)................................. 1,900 9,738
Raychem Corp......................................... 2,500 216,563
Shared Medical Systems Corp.......................... 1,400 66,063
Solectron Corp.(b)................................... 2,900 174,725
Sprint Corp.......................................... 23,100 941,325
Stratus Computer Inc.(b)............................. 1,400 44,450
Sun Microsystems Inc.(b)............................. 20,000 635,000
Tandem Computers Inc.(b)............................. 6,400 88,800
Tektronix, Inc....................................... 2,000 99,250
Tellabs, Inc.(b)..................................... 10,000 411,875
Thomas & Betts Corp.................................. 2,800 131,250
Xilinx Inc.(b)....................................... 4,400 200,200
------------
34,771,759
------------
TRANSPORTATION -- 1.6%
AMR Corp.(b)......................................... 4,700 378,350
Consolidated Freightways, Inc........................ 1,200 10,500
CSX Corp............................................. 11,400 552,900
Delta Air Lines, Inc................................. 4,000 316,000
Federal Express Corp.(b)............................. 6,100 312,625
GATX Corp............................................ 1,100 53,763
Norfolk Southern Corp................................ 6,800 602,650
Roadway Services..................................... 1,100 22,550
Ryder System, Inc.................................... 4,600 131,100
Southwest Airlines Inc............................... 8,000 176,000
UAL Corp.(b)......................................... 3,100 175,150
Yellow Corp.(b)...................................... 1,500 25,688
------------
2,757,276
------------
</TABLE>
13
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS -- CONTINUED
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
UTILITIES -- 7.5%
<S> <C> <C>
AGL Resources Inc.................................... 3,100 $ 64,713
American Water Works Co., Inc........................ 4,100 95,325
Ameritech Corp....................................... 29,700 1,774,575
Bell Atlantic Corp................................... 23,600 1,587,100
BellSouth Corp....................................... 54,200 2,405,125
Brooklyn Union Gas Company........................... 2,600 77,025
California Energy Co., Inc.(b)....................... 3,500 134,312
Citizens Utilities Co. (Class A)(b).................. 12,535 142,589
Connecticut Energy Corp.............................. 700 16,013
Eastern Enterprises.................................. 1,100 36,162
El Paso Natural Gas Co............................... 3,000 161,625
Equitable Resources Inc.............................. 1,900 61,750
Idaho Power Co....................................... 2,200 68,475
LG & E Energy Corp................................... 3,500 84,875
MCN Corp............................................. 3,600 116,550
NICOR Inc............................................ 2,700 97,538
Noram Energy Corp.................................... 7,300 114,063
Northwestern Public Service Co....................... 500 18,937
NYNEX................................................ 24,000 1,215,000
ONEOK Inc............................................ 1,500 44,438
Pacific Enterprises.................................. 4,400 132,550
Pacific Telesis Group................................ 23,400 918,450
Peoples Energy Corp.................................. 1,900 63,175
Potomac Electric
Power Co............................................ 6,300 155,925
Public Service Co. of Colorado....................... 3,600 140,400
SBC Telecommunications............................... 32,500 1,783,423
Southern New England Telecom......................... 3,500 130,375
<CAPTION>
ISSUER SHARES VALUE
---------------------------------------------------------- ------- ------------
<S> <C> <C>
UTILITIES -- CONTINUED
Telephone & Data Systems............................. 3,300 $ 125,813
US West Communications Group......................... 25,300 831,738
Washington Gas Light Co.............................. 2,300 50,888
------------
12,648,927
------------
VEHICLE COMPONENTS -- 0.5%
Cooper Tire & Rubber Co.............................. 4,500 91,125
Cummins Engine Inc................................... 2,100 110,513
Dana Corp............................................ 5,400 176,175
Federal-Mogul Corp................................... 1,900 44,650
Genuine Parts........................................ 6,400 282,400
Modine Manufacturing Co.............................. 1,600 45,600
Smith (A.O.)......................................... 1,200 40,050
Spartan Motors Inc.(b)............................... 700 5,338
SPX Corp............................................. 800 32,500
------------
828,352
------------
Total Common Stocks (cost $121,975,433)....................
166,550,344
------------
OTHER ASSETS, LESS LIABILITIES --
1.5%.......................................................... 2,553,600
------------
NET ASSETS --100.0%............................................ $169,103,944
------------
------------
</TABLE>
- ------------
(a)The aggregate cost for federal income tax purposes is $121,975,432, the
aggregate gross unrealized appreciation is $46,017,567, and the aggregate
gross unrealized depreciation is $1,442,656, resulting in net unrealized
appreciation of $44,574,911.
(b)Non-income producing security.
See Notes to Financial Statements
14
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $121,975,433) (Note 1)........................ $166,550,344
Cash..................................................................... 2,224,657
Receivable for securities sold........................................... 483,050
Dividends receivable..................................................... 218,065
------------
Total assets......................................................... 169,476,116
------------
LIABILITIES:
Payable for securities purchased......................................... 325,563
Sponsorship fee payable (Note 2)......................................... 46,609
------------
Total liabilities.................................................... 372,172
------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS..................... $169,103,944
------------
------------
NET ASSETS CONSIST OF:
Paid in capital.......................................................... $169,103,944
------------
------------
</TABLE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $339)........................ $ 1,066,890
EXPENSES (NOTE 2):
Expense payment and sponsorship fees...................................... 211,362
Custody fees offset by compensating balances.............................. 30,572
-----------
Total expenses............................................................ 241,934
Fees paid indirectly.................................................... (30,572)
-----------
Net expenses............................................................ 211,362
-----------
NET INVESTMENT INCOME......................................................... 855,528
NET REALIZED GAIN ON INVESTMENTS (NOTE 3):
Proceeds from sales........................................... 1,054,315
Cost of securities sold....................................... 795,862
----------
Net realized gain on investments...................................... 258,453
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period........................................... 16,620,535
End of period................................................. 44,574,911
----------
Net change in unrealized appreciation................................. 27,954,376
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $29,068,357
-----------
-----------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE
JANUARY 31, 1997 YEAR ENDED
(UNAUDITED) JULY 31, 1996
----------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income..................................................... $ 855,528 $ 1,132,780
Net realized gain on investments.......................................... 258,453 697,337
Net change in unrealized appreciation of investments...................... 27,954,376 6,861,507
----------------- -------------
Net Increase in Net Assets Resulting from Operations.................. 29,068,357 8,691,624
----------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Additions................................................................. 49,705,015 52,533,365
Reductions................................................................ (10,069,986) (14,827,219)
----------------- -------------
Net Increase from Transactions in Investors' Beneficial Interests..... 39,635,029 37,706,146
----------------- -------------
Total increase in net assets...................................... 68,703,386 46,397,770
NET ASSETS:
Beginning of year......................................................... 100,400,558 54,002,788
----------------- -------------
End of year............................................................... $ 169,103,944 $100,400,558
----------------- -------------
----------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
JANUARY 31, FOR THE YEAR ENDED JULY 31,
1997 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- ----------
FINANCIAL HIGHLIGHTS:
<S> <C> <C> <C> <C> <C> <C>
Ratio of net investment income to average
net assets............................... 1.35%1 1.48% 1.85% 2.13% 1.88% 1.99%
Expenses as a percentage of average net
assets:
Total expenses............................. 0.39%1,2,3 0.94%2,3 0.53%3 0.42%3 0.29%3 0.29%3
Expenses paid by Portfolio................. 0.33% 0.50% 0.43% 0.29% 0.29% 0.29%
Portfolio turnover rate.................... 5% 5% 6% 8% 4% 3%
Average commission rate paid per share..... $0.05 $0.05 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
(1) Annualized.
(2) Total expenses include Portfolio custody fees which were reduced by expense
offset arrangements. These offsets reduced expenses paid by the Portfolio by
0.05% in the six months ended January 31, 1997 and 0.09% for the year ended
July 31, 1996.
(3) Total expenses include expenses waived by the advisor and administrator in
fiscal years ended through July 31, 1995 and expenses paid by the
administrator or sponsor in excess of expense payment fees in the year ended
July 31, 1996 and thereafter.
See Notes to Financial Statements
16
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. Domini Social Index
Portfolio (the "Index Portfolio") is registered under the Investment Company Act
of 1940 (the "Act") as a no-load, diversified, open-end management investment
company which was organized as a trust under the laws of the State of New York
on June 7, 1989. The Index Portfolio intends to correlate its investment
portfolio as closely as is practicable with the Domini Social Index (the
"Index"), which is a common stock index developed and maintained by Kinder,
Lydenberg, Domini & Co., Inc. ("KLD"), the Index Portfolio's Adviser. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Index Portfolio. The Index Portfolio commenced
operations upon effectiveness on August 10, 1990 and began investment operations
on June 3, 1991.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of the Index Portfolio's significant accounting policies.
A. VALUATION OF INVESTMENTS: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales are
reported.
B. DIVIDEND INCOME: Dividend income is recorded on the ex-dividend date.
C. FEDERAL TAXES: The Index Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for Federal taxes is deemed necessary.
D. OTHER: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
2. TRANSACTIONS WITH AFFILIATES.
A. INVESTMENT ADVISORY FEES: The Index Portfolio has retained KLD as the
Investment Adviser of the Index Portfolio. The services provided by KLD consist
of the determination of the stocks to be included in the Index and evaluating,
in accordance with KLD's criteria, debt securities which may be purchased by the
Index Portfolio. For its services under the Investment Advisory Agreement, KLD
receives from the Index Portfolio a fee accrued daily at an annual rate equal to
0.025% of the Index Portfolio's average daily net assets. Prior to October 4,
1996, KLD received an investment advisory fee accrued daily at an annual rate
equal to 0.050% of the Index Portfolio's average daily net assets.
B. INVESTMENT MANAGEMENT FEES: The Index Portfolio has retained Mellon
Equity Associates ("MEA") as the Investment Manager of the Index Portfolio. MEA
does not determine the composition of the Index. Under the Management Agreement,
the Index Portfolio pays MEA an investment management fee equal on an annual
basis to 0.10% of the Index Portfolio's average daily net assets. Prior to
October 4, 1996, MEA received a fee based on the following percentages of the
Index Portfolio's average daily net assets for its then-current fiscal year:
0.10% of assets up to $50 million; 0.30% of assets between $50 million and $100
million; 0.20% of assets between $100 million and $500 million; and 0.15% of
assets over $500 million.
C. SPONSOR FEES: Pursuant to a Sponsorship Agreement dated November 6,
1996, KLD agreed to pay all of the ordinary operating expenses of the Index
Portfolio except the sponsorship fee and excluding brokerage fees and
commissions, interest, taxes and extraordinary expenses. Under this arrangement,
KLD receives sponsorship fees from the Index Portfolio at an annual rate equal
to 0.20% of the average daily net assets of the Index Portfolio. From October 4,
1996 to November 5, 1996, the Administrator, Signature Broker-Dealer Services,
Inc. ("Signature"), received expense payment fees from the Index Portfolio at an
annual rate equal to 0.20% of the average daily net assets of the Index
Portfolio, and prior to October 4, 1996, at an annual rate equal to 0.50% of the
average daily net assets of the Index Portfolio. The Sponsorship Agreement will
terminate on December 31, 1999. For the six months ended July 31, 1997, the
Sponsor and Administrator incurred approximately $217,798 in expenses on behalf
of the Index Portfolio.
D. ADMINISTRATION FEES: Pursuant to an Administrative Services Agreement
between KLD and Signature, Signature serves as Administrator of the Index
Portfolio. Certain officers of Signature serve as officers and trustees to the
Index Portfolio. Under the Administrative Services Agreement, Signature provides
management and administrative services necessary for the operations of the Index
Portfolio, furnishes office space and facilities required for conducting the
business of the Index Portfolio and pays the compensation of the Index
Portfolio's officers and trustees affiliated with Signature. For these services
Signature receives from the KLD a fee accrued daily at an annual rate equal to
0.025% of the Index Portfolio's average daily net assets.
3. INVESTMENT TRANSACTIONS. Purchase and sales of investments, other than U.S.
Government securities and short-term obligations, aggregated $39,763,129 and
$1,054,315, respectively.
17
<PAGE>
DEVCAP SHARED RETURN FUND
6 St. James Avenue
Boston, MA 02116
(800) 371-2655
PORTFOLIO INVESTMENT ADVISER:
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
One Boston Place
Boston, MA 02108
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
