<PAGE>
DEVCAP SHARED RETURN FUND
ANNUAL REPORT
- -------------------------------------------------------------------------------
FOR THE YEAR ENDED JULY 31, 1998
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DEVCAP Shared Return Fund ("DEVCAP" or the "Fund") commenced operation in
October 1995. DEVCAP is constructed to be a Socially Responsible Mutual Fund
that invests in a Portfolio that is consistent with the Domini Social Index.
The results of this construction over our brief history are shown in the
Fund's performance that was consistent with our goals. DEVCAP has tracked the
S&P 500 through investments in 400 large cap-stocks, which were screened to
reflect a positive social agenda.
DEVCAP investment results are only part of our story. Perhaps an even
greater part of our history is portrayed in the charitable support provided by
our investors in fostering small enterprise development to less fortunate peo-
ple who are striving to improve their lives and the lives of those around
them.
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PRESIDENT'S LETTER TO INVESTORS
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September 8, 1998
Dear Shareholder,
Your investment in the DEVCAP Shared Return Fund for the fiscal year ended
July 31, 1998, produced results that mirrored the strong performance rendered
by the Standard & Poor's 500 Index (the S&P 500). In fact, DEVCAP's total re-
turn for its fiscal year was 20.84%*, exceeding the return of the S&P 500 by a
full percentage point. It was also considerably above the average total return
for the same period of 13.15% for growth funds as tracked by Lipper Analytical
Services.
In a further demonstration of its support of DEVCAP, Catholic Relief Serv-
ices made an additional $3 million investment in DEVCAP in May of this year.
This helped to bring total assets in the Fund as of July 31, 1998 to just un-
der $11 million. This expansion in DEVCAP's asset base helped to bring us
closer to our goal of reducing our expense ratio.
As an investor in the Fund, you have continued to benefit from the strong
performance of the US equity market.
Recently, there has been some concern that the weakness in the Asian markets
could eventually impact underlying US business operations and slow the pace of
advance of the bull market. In light of these concerns, the possibility of a
market correction gained ground, and the recent volatility in the US stock
market took center stage. This could mean lower returns for investors in the
Fund and for the contribution calculation at December 31, 1998.
Nevertheless, many of the positive fundamentals that underlie the gains in
the US market remain in force. We continue to see low inflation rates, low in-
terest rates, low unemployment and strong consumer spending. The Federal Re-
serve Board appears unlikely to raise rates as the stock market has taken a
set back and may consider lowering rates in the future.
In the event of a downturn in the market, our investors may also take com-
fort in knowing that index funds in the 1990's have faired better than managed
funds, even in down markets. (Wall Street Journal article of 8/6/98, "S&P
Funds Can Do Well In Slump, Too" by Robert McGough and Charles Gasparino.)
Some investors in our fund who liquidate during this reversal may lose mon-
ey; there are no guarantees in investing in the stock market. The DEVCAP fund
is an investment opportunity that best serves those who are investing with
long term goals in mind and are willing and able to ride out the more volatile
periods in the market.
<PAGE>
We know that our investors generally believe in sharing their returns with
the world's emerging entrepreneurs. For the calendar year ending December 31,
1998, we are modifying our procedures to give our investors additional options
in specifying a portion of the return as a contribution. We will add a 10% and
a 25% alternative to percentage contribution rates. We also will provide an
alternative to select a contribution of shares rather than continue to allow
only cash contribution following a liquidation of shares. We hope that these
adjustments will better serve those investors who continue to support the
charitable programs of our sponsors.
During the past year, we have taken a number of steps to improve our in-
vestor services and overcome some unexpected delays in processing investor
transactions. We have centralized our transfer agency and administrative serv-
ices with Sunstone Financial Services. We also moved our broker-dealer affili-
ation to CBIS Financial Services, Inc. to join with our efforts with a service
provider with common goals. We anticipate growing our relationships along a
path that continues to foster a strong social consciousness in the market-
place.
Finally, we are now examining the social screening process we use in our
portfolio selection and are soliciting your input in this regard. It is our
intent to ensure that our screening process conforms to principles espoused by
the majority of our investors.
Sincerely,
LOGO
Joseph N. St. Clair
President
* The performance information quoted represents past performance and is not a
guarantee of future results. Investment return and principal 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 /(1)/ AND S&P 500 /(2)/
----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------
1 Year Ended
7/31/98 20.84%
----------------------------------------------
5 Year Ended
7/31/98 21.11%
----------------------------------------------
Inception (6/3/91)/(3)/
to 7/31/98 17.38%
----------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------
DATE S&P DEVCAP
- ----------------------------------------------------
<S> <C> <C>
6/91 10000 10000
- ----------------------------------------------------
7/91 10465.7 10498.53
- ----------------------------------------------------
10/91 10674.88 10556.57
- ----------------------------------------------------
1/92 11203.28 11205.11
- ----------------------------------------------------
4/92 11454.23 11177.12
- ----------------------------------------------------
7/92 11801.92 11678.43
- ----------------------------------------------------
10/92 11736.87 11912.8
- ----------------------------------------------------
1/93 12386.89 12693.7
- ----------------------------------------------------
4/93 12510.53 12397.75
- ----------------------------------------------------
7/93 12829.98 12720.76
- ----------------------------------------------------
10/93 13486.75 13334.55
- ----------------------------------------------------
1/94 13978.9 13597.4
- ----------------------------------------------------
4/94 13174.7 12839.45
- ----------------------------------------------------
7/94 13491.02 12964.12
- ----------------------------------------------------
10/94 14007.09 13401.2
- ----------------------------------------------------
1/95 14052.53 13487.83
- ----------------------------------------------------
4/95 15472 14646.36
- ----------------------------------------------------
7/95 17008.21 16072.3
- ----------------------------------------------------
10/95 17706.34 16697.44
- ----------------------------------------------------
1/96 19479.2 17998.76
- ----------------------------------------------------
4/96 20142.09 18556.47
- ----------------------------------------------------
7/96 19823.67 18100.17
- ----------------------------------------------------
10/96 21970.19 20043.69
- ----------------------------------------------------
1/97 24607.55 22562.85
- ----------------------------------------------------
4/97 25202.21 23239.2
- ----------------------------------------------------
7/97 30153.87 27433.99
- ----------------------------------------------------
10/97 29055.93 26317.69
- ----------------------------------------------------
1/98 31267.38 28850.25
- ----------------------------------------------------
4/98 35593.97 32354.95
- ----------------------------------------------------
7/98 36012.51 33150.70
- ----------------------------------------------------
</TABLE>
(1) The DEVCAP Shared Return Fund performance prior to October 19, 1995 (com-
mencement of investment operations) is the investment return of the Domini
Social Index Portfolio adjusted for the expenses of the Fund.
(2) The S&P 500 is an unmanaged index used to portray the pattern of common
stock movement based on the average performance of 500 widely held common
stocks and does not pay expenses.
(3) The Portfolio began investing in the stocks comprising the Domini 400 So-
cial Index on June 3, 1991. The above chart begins on June 30, 1991.
The performance information in this chart represents past performance. The in-
vestment 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 origi-
nal cost.
3
<PAGE>
COMPANY HIGHLIGHTS
All the companies whose stock is held in the Domini Social Index Portfolio
("DSIP") portfolio meet multiple standards for corporate accountability. We
avoid companies in the business of manufacturing alcohol and tobacco products
as well as those that provide gambling services or equipment. We seek to avoid
companies that sell weapons or are in the nuclear power industry. In addition,
we evaluate a company's social profile by weighing both strengths and weakness
in the areas of community impact, employee relations, the environment, product
safety and usefulness, non-U.S. operations and diversity.
The following sampling of some of the smaller companies in our portfolio
highlights some impressive achievements in the areas of community impact, em-
ployee relations, the environment, diversity and product safety and useful-
ness.
COMMUNITY
We seek companies with innovative and generous charitable giving programs
with a particular emphasis on programs promoting economic and social justice.
In evaluating the level of a firm's generosity, we look for companies that
have consistently given over 1.5% of trailing three-year net earnings before
taxes to charity, or have otherwise been notably generous in their giving.
GRACO, INC. manufactures and markets a wide range of fluid handling products
for the industrial and commercial markets, including specialized pumps, regu-
lators, valves, atomizing devices, and painting and cleaning equipment. In
fiscal year ("FY") 1997, the company donated 2.44% ($1,300,000) of trailing
three-year net earnings before taxes (NEBT) to charity. Graco has a stated
goal of contributing 5% of U.S. pretax profits in cash and in-kind giving to
charity each year, focusing on human services in communities where the company
has facilities. In the mid-1970s, David Koch, Graco's former CEO, and a cur-
rent member of Graco's Board, was instrumental in creating the Minnesota 5%
Club. Corporations that join the club pledge to contribute 5% of pretax prof-
its to charity each year. The 5% club was one of the first of its kind in the
U.S. and has served as a model for similar organizations in other cities and
states. As of July 31, 1998, Graco, Inc. represented .014% of the DSIP.
OSHKOSH B'GOSH manufactures and markets children's clothing and work apparel
for adults. In FY 1996, the company donated 2.4% ($340,000) of average trail-
ing three-year net earnings before taxes (NEBT) to charity. In FY 1997, the
company made $350,000 in cash gifts to charity. Oshkosh B'Gosh's charitable
giving program focuses on children. In February 1998, the company told KLD
that in FY 1997 it supported the Boys and Girls Club, the Child Welfare League
of America, and Kids in Distressed Situations (KIDS). The company's CEO Doug
Hyde is a past president of KIDS. The company also told KLD that it donated
approximately 25,000 garments to charitable organizations, including KIDS. As
of July 31, 1998, Oshkosh B'Gosh represented .008% of the DSIP.
UNITED AMERICAN HEALTHCARE CORPORATION provides management and consulting
services, primarily to health maintenance organizations (HMOs) owned by the
company in Michigan, Tennessee, and Florida. In Michigan and Tennessee its op-
erations are known primarily as Omnicare Health Care. In Florida the firm op-
erates Ultramedix Healthcare Systems and United American of Florida. The com-
pany primarily serves Medicaid recipients and was among the companies that
pioneered the development of cost control and management for Medicaid servic-
es. One of the firm's fundamental business strategies is to reduce health care
costs by providing preventative and home health care services to the economi-
cally disadvantaged. As of November 1997, four of the company's five senior
line executives were African Americans, including the CEO.
The firm has endowed the United American Healthcare Foundation, established
to encourage minorities to enter the medical profession. In FY 1995, 1996, and
1997 the company contributed $150,000 to the foundation. At several universi-
ties around the
4
<PAGE>
country, including Wayne State and Morehouse, the Foundation has funded five
full four-year scholarships for minority students hoping to become doctors or
registered nurses. United American is also a strong supporter of African Amer-
ican art. For its corporate headquarters, through 1996, it had purchased ap-
proximately $250,000 in art by contemporary African American artists. In the
past, the firm has sponsored numerous volunteer programs in inner city Detroit
and donates to other charities including the March of Dimes, the American Red
Cross, and the Detroit Institute of Art. As of July 31, 1998, United American
Healthcare Corporation represented .001% of the DSIP.
WHOLE FOODS MARKET, INC. owns and operates natural foods supermarkets in 17
states, operating under the names Whole Foods Market, Fresh Fields, Bread and
Circus, and Wellspring Grocery. In FY 1995, the company donated approximately
8.11% ($790,000) of trailing three-year net earnings before taxes (NEBT) to
charity. This figure is up from $500,000 the previous year, due largely to the
company's increase in net income since 1993. In 1997, the company reported
that it donated approximately $1 million in combined cash and in-kind dona-
tions. The company has a policy to contribute a minimum of 5% of after-tax
earnings in cash and goods to charity each year. Charitable contributions are
made primarily at the store level so that they can directly benefit local com-
munity groups that make up the store's customer base. The company offers 20
hours of paid time-off per year for community service. Whole Foods has a "five
percent day" program whereby its stores designate a nonprofit organization to
receive 5% of the net sales of that day. Organizations supported include the
AIDS Action Committee, American Indian Family, Foundation for Children with
AIDS, Habitat for Humanity, National Museum of Women in Arts, New England Ani-
mal Action, Rainforest Action Network, and the Boston Coalition for Gay, Les-
bian, Bisexual & Transgendered Youth. Whole Foods is part of Chefs Collabora-
tive 2000, a national network of well-know chefs working to promote
sustainable food choices. As part of the network, the company hosted a tasting
and demonstration series, proceeds of which will help make a video to educate
children regarding food, culture, and sustainable food choices. The company's
payroll deduction plan includes Environmental Fund of Texas, Another Way, In-
ternational Services Agencies, Black United Fund of Texas, United Way, and
others. As of July 31, 1998, Whole Foods Market, Inc. represented .029% of the
DSIP.
EMPLOYEE RELATIONS
We seek companies with a commitment to worker involvement/ownership through
employee stock ownership, cash profit sharing and employee participation in
management decision-making. We also look for companies with histories of fair
labor negotiations and strong retirement benefits.
BALDOR ELECTRIC COMPANY manufactures and markets electric motors and indus-
trial control systems, including electronic servo drives which can be pro-
grammed to control robotics and machine tools, and other products such as in-
dustrial grinders, buffers, and dental polishing lathes. In 1996 the board of
directors voted to expand the company's employee stock option grant program to
include all employees, not just salaried employees. Options were distributed
under the plan in 1997. The number of options granted each employee was based
on years of service. A March 1995 Forbes article commented that "Baldor is one
of those companies that do several things very well." In the article, chairman
Roland Boreham attributes Baldor's success to its employee training and qual-
ity programs. At the company's 1994 annual meeting, CEO R. L. Qualls stated
the company's goal is to provide one hour of training per week per employee.
Since 1992 the firm has spent an average of $677 per employee ($2 million) an-
nually for employee education and training. For employees lacking basic liter-
acy and math skills, Baldor provides education opportunities. Its goal is to
achieve 8th-grade-level skills for all its employees. In January
5
<PAGE>
1998, Baldor was included on Fortune magazine's list of "The 100 Best Compa-
nies to Work for in America." A 1992 Fortune magazine article reported that in
1991, rather than lay off workers in a difficult period of recession, the com-
pany went to four-day workweeks for seven weeks. One of Baldor's plants was
among those profiled in 1995 by the Department of Labor's Best Practices
Clearinghouse. The company's retirement program is funded through a profit
sharing plan that contributes 12% of Baldor's pretax earnings to all partici-
pants based on compensation. In addition, the employees may contribute to a
401(k) savings plan through which the firm matches 25% up to 4% of compensa-
tion. As of March 1998, employees owned 10% of the company's stock through the
profit sharing and savings plans. As of July 31, 1998, Baldor Electric Co.
represented .016% of the DSIP.
HANNAFORD BROS. CO. owns and operates supermarkets in New England under the
names Shop 'n Save and Hannaford Food and Drug Superstores. It also operates
the Wilson's Supermarkets chain of stores in Virginia, North Carolina, and
South Carolina, and a trucking and food distribution subsidiary. As of 1996,
the company distributed profits annually to executives and a substantial num-
ber of full time employees. This program pays out regularly and approximately
1,000 of its employees are eligible for the plan. At its retail stores, the
company has also instituted gainsharing programs, where a portion of costs
saved due to employee suggestions are passed on to employees. In 1990 the com-
pany pioneered a new team management philosophy whereby 120 employees work in
five teams virtually without management supervision. The firm has begun simi-
lar experiments at several of its retail supermarkets. Its new store in Con-
cord, New Hampshire, is run entirely by self-directed teams. The company of-
fers a variety of employee-involvement programs, as well as a "Customer
Counts" program that aims at promoting better customer service. Hannaford re-
cently began offering certain items in bulk quantities at its retail stores,
items priced at club store levels. Hannaford has an associate referral program
called "BreadWinner," which rewards employees for referring qualified candi-
dates who are eventually hired. In August 1996, the company stopped selling
eggs from a large egg producer in Maine, when it learned that the producer was
facing a $3.6 million OSHA fine for worker safety violations. As of July 31,
1998, Hannaford Bros. Co. represented .037% of the DSIP.
LUBY'S CAFETERIAS, INC. owns and operates 232 cafeterias in the southern
United States. Luby's has a cash profit sharing program available to all em-
ployees over the age of 21 and with at least one year of service. The firm's
contributions to this program are contingent on whether the company meets cer-
tain minimum net income standards. In FY 1997 and 1996, the company distrib-
uted $1.5 million and $5.1 million, respectively, under this plan. All compen-
sation for managers is based on profit. Although the company does not pay its
store managers a salary, it does guarantee a minimum salary. This program ena-
bles Luby's managers to earn far more than the industry's average wage: on av-
erage, in excess of $100,000 per year. The company reports that at some stores
bonuses tied to store performance extend down to hourly employees. The
company's notably autonomous restaurant managers set their own menus and are
responsible for hiring and training of employees. The company has a reputation
for promoting from within. Most of the company's senior management team was
drawn from its restaurant managers. In 1995 the company reported that it hired
169 employees from its management training program. The program is approxi-
mately three months long. One week is spent in class-room training at corpo-
rate headquarters and the remainder of the time in cafeterias. In 1995 the
firm created a series of "satellite" training schools at several cafeterias.
In 1996 it launched a program called Career 2000 to improve its management
training and human resources initiatives. The average Luby's manager has
worked for the company for 15 years. Of its 190 cafeteria managers in 1995,
156 had been with the company for at least ten years. As of July 31, 1998,
Luby's Cafeterias, Inc. represented .006% of the DSIP.
6
<PAGE>
NORTHWEST NATURAL GAS CO. (NNG) is principally engaged in the distribution
of natural gas (90% of FY 1996 revenues), a fuel with significant environmen-
tal advantages over oil and coal, to western Oregon, including the metropoli-
tan Portland area. The company also has investments in alternative energy pro-
jects, including wind, solar and hydroelectric power. NNG and the union
representing its employees enjoy a uniquely stable and innovative relation-
ship. In March 1997, the union and the company agreed to a new collective bar-
gaining agreement, to last for seven years. Under the agreement, no regular
employee who was employed prior to April 1997 will be laid off, and benefits
will be maintained at the April 1997 level. The agreement continues a "joint
accord" partnership that began in 1989 and was renewed in 1992, which obli-
gates labor and management to create more flexible work rules, a more effi-
cient workplace, and to improve customer service. The company's last major
strike was in 1977. In 1989, the union negotiated Key Goals, a gainsharing
plan for all bargaining and nonbargaining employees (the firm now has a sepa-
rate plan for nonbargaining employees, based solely on profitability). Since
1995, the plan has had five goal areas: profitability-utility earnings per
share; customer satisfaction based on survey results; return on new residen-
tial customers; productivity in serving customers; and market share. Each year
the company reviews its performance against set benchmarks within each of the
goal areas and determines the award to be given to all employees. In 1996, all
employees received the maximum award of 5.5% of their base compensation. In
1997, all employees received an award equal to almost 3% of their base compen-
sation, representing a total award of $2.76 million. In February 1998, the
company told KLD that the lower award was due to decreased profitability,
which it attributed to warmer weather.
The company was profiled in 1995 by the Department of Labor's Best Practices
Clearinghouse. The company has union representation at the monthly executive
staff meeting, and union members consti-tute two thirds of the company's labor
relations team (LRT), which monitors employee issues on a daily basis. The
LRT, executives, and middle management representatives meet once a month to
discussemployee issues and share information on company activities. The min-
utes from these meetings are distributed to all employees within two days.
Data on company finances, customers, and general operations are shared with
employees. Information on the company's key goals, which measure customer sat-
isfaction, increased productivity, cost control, capital construction, and the
amount of earnings per share is shared with all employee work groups once a
month. NNG's CEO and president visits each of the company worksites once a
year to answer employee questions. The company also has a bimonthly newsletter
in which management answers anonymous questions submitted by employees. Em-
ployee teams from the LRT were involved in establishing the performance ap-
praisal system. In some of the company's departments all levels of employees
are allowed to participate in the interviewing of potential employees. For
substantially all of its employees, the company has a defined benefit pension
plan. In addition, its retirement options include a 401(k) savings plan
through which the firm matches in cash 50% of employee contributions up to 4%
of base compensation. As of July 31, 1998, Northwest Natural Gas Co. repre-
sented .013% of the DSIP.
ENVIRONMENT
We seek companies that show respect for the natural environment. This may be
demonstrated by the product or service the firm provides or exhibited through
in-house recycling or pollution-prevention programs, gifts to conservation
groups, or other ways of conducting day-to-day business.
W.H. BRADY CO. develops, manufactures and markets industrial identification
and safety products, and specialty coated materials. The company's industrial
and facility identification products include pipe
7
<PAGE>
and valve markers, wire markers, computer printable labels, informational
signs, and automatic identifica-tion and data collection systems. Safety and
regulatory products include safety signs, lockout/tagout products to meet OSHA
regulations, and traffic control products. The company also manufactures tapes
for the data storage, semiconductor, and audio/video industries. Katherine M.
Hudson serves as the company's president and chief executive officer.
The company has taken steps to reduce emissions of volatile organic com-
pounds (VOCs) from its adhesive operations. It has reformulated some adhesives
to a water base and installed incineration equipment to burn other emissions,
destroying 96% to 99% of VOCs. In 1997 the company reported that it had re-
duced air emissions by 50% since 1990, and that 90% of its U.S. facilities use
the more environmentally friendly ultra-violet ink technologies rather than
solvent-based systems. Brady's generation of hazardous wastes was down by 30%
and of water-borne wastes by 80% from 1990 to 1993, while during the same pe-
riod its sales increased by 30%. As of July 31, 1998, W.H. Brady Co. repre-
sented .007% of the DSIP.
CARAUSTAR INDUSTRIES, INC. is a manufacturer of paperboard products such as
tubes, cores, and composite containers, folding cartons, gypsum wallboard fac-
ing paper, specialty and paperboard products, injection-molded and extruded
plastics, and paperstock. The company's paper products are made from fiber re-
covered from recycled paper. The company has been recovering fiber from waste
paper since the 1930s. Recycled paper is its sole source of fiber. Caraustar
uses approximately 600,000 tons of waste paper per year. The company operates
a program through which it sells, leases, or furnishes baling machines to
small companies to bale their own paperstock for collection by the company. In
1997 Caraustar reported that it had not been named as a potentially responsi-
ble party for any hazardous waste sites or any Superfund sites. In 1997 the
company told KLD that it had no accrued liabilities for envi-ronmental
remediation. As of July 31, 1998, Caraustar Industries, Inc. represented .013%
of the DSIP.
ENERGEN CORPORATION distributes natural gas in central and northern Alabama
through its Alagasco subsidiary. The company is also involved in natural gas
and oil exploration and production, primarily in Alabama, Louisiana, Texas,
and the Gulf of Mexico through its Taurus Exploration subsidiary. Taurus also
produces natural gas from coal-bed methane. Energen reports that since 1985,
it has acquired 22 municipal natural gas systems. The company derived 94% of
its FY 1997 revenues from natural gas, a fuel with significant environmental
advantages over oil and coal. The company has a fleet of compressed natural
gas (CNG) fueled vehicles. Through a joint venture with Sonat Ventures, Inc.,
the company will supply CNG to refueling stations and finance vehicle conver-
sion. The first station opened in Birmingham, Alabama, in December 1993. As of
July 31, 1998, Energen Corporation represented .010% of the DSIP.
MODINE MANUFACTURING COMPANY manufactures heat transfer equipment, primarily
radiators for cars, trucks, and other vehicles, vehicular condensors and evap-
orators, oil coolers, charge air coolers, heating and cooling equipment for
buildings, and miscellaneous related products. The company's charge-air cool-
ers for large trucks cool air as it enters an engine's cylinders, helping fuel
to burn more efficiently and reducing emissions. The design of Modine's con-
denser in its automobile air conditioners reduces the amount of refrigerant
chlorofluorocarbons (CFCs) needed by 40%. It can also be used with new gases
that contain no CFCs. In 1996 the company began producing latent-heat batter-
ies which quickly warm engine fluids, reducing vehicle emissions produced
while running an engine to warm the motor. Between 1988 and 1994, the company
achieved an 83% reduction in emissions of toxic chemicals covered by the EPA's
voluntary "33/50" toxics reduction program, exceeding the EPA's 50% goal. As
of April 1996, the company had eliminated the use of 1,1,1,
8
<PAGE>
trichlorethane at all its plants. As of January 1994, several plants had also
eliminated the use of naphtha, xylene, and toluene. The company has also re-
duced its emissions of volatile organic compounds (VOCs) by using powder
paints that are applied electrostatically. In its aluminum manufacturing, the
firm uses the Nocolok technology licensed from Alcoa, which reduces hazardous
emissions to virtually zero. In 1991 Modine established a waste minimization
program, setting a company-wide goal of a 65% reduction by 1995. In March
1996, the company reported reductions of over 65% through calendar year 1995.
It also reported plans to improve its tracking of wastes based on degree of
toxicity. The company established similar programs at its facilities in Canada
and Mexico in 1996. In 1997 the company reported that it regularly monitors
and audits its facilities for environmental performance. In addition, all its
facilities have their own unique environmental programs with commitments to
one-and five-year goals. As of July 31, 1998, Modine Manufacturing Company
represented .020% of the DSIP.
THOMAS INDUSTRIES, INC. manufactures and markets lighting products, and com-
pressors and vacuum pumps. The company developed and manufactures a special-
ized pump used in vapor-recovery systems for gasoline fumes at pumping sta-
tions. The firm's compressors are used in vehicle emissions testing equipment
and other air quality measurement devices, as well as in freon recovery. The
company also makes leak detectors for monitoring underground fuel storage
tanks. Thomas participates in the EPA's Green Lights program to develop and
promote energy efficient lighting. The company is a manufacturer of energy ef-
ficient fixtures and controls, including a lighting system with sensors that
reduce light levels when an area is not in use. In cooperation with the U.S.
Department of Energy, Thomas publishes efficacy ratings and comparative yearly
lighting energy costs in its catalogue. Thomas has initiated reduction of its
use of toxic chemicals, including the elimination of ozone-depleting sub-
stances, from all its manufacturing facilities. The company publishes luminare
rat-ings regarding the energy efficiency of its lighting products. As of July
31, 1998, Thomas Industries, Inc. represented .005% of the DSIP.
DIVERSITY
We seek companies with women and minorities in management positions and on
the board of directors as well as those that have a record of purchasing from
or investing in women- and minority-owned businesses. We look for companies
with strong employee benefit programs that address work/family concerns such
as childcare, elder care, and flextime. We also recognize innovative hiring
programs for the disabled as well as progressive policies toward gays and les-
bians.
AULT INCORPORATED manufactures and markets external power conversion prod-
ucts, including switch power supplies, linear power supplies, transformers,
and battery chargers. The company's chief executive officer, Frederick M.
Green, is African American. Of the four senior line executives at the firm,
three are African American, including the firm's chief financial officer and
vice president for sales and marketing. Mr. Hokung Choi, who is Asian Ameri-
can, is vice president for Far Eastern Operations and among these four senior
executives. Of the company's six regionally focused business teams, one is
headed by Linda Denson, who is African American. In addition, Ruth Abbott
serves as co-head of the Asian team. Three of the seven members of the
company's board of directors are African American, including Delbert W. John-
son, chief executive officer of Pioneer Metal Finishing and Eric G. Mitchell,
Jr., president of the business consulting firm, The Pricing Advisor. As of
July 31, 1998, Ault Inc. represented .001% of the Domini Social Index Portfo-
lio (DSIP).
LILLIAN VERNON CORPORATION is a specialty catalog company that markets prod-
ucts including gift, household, gardening, kitchen, Christmas, and children's
products. The company's founder, Ms. Lillian Vernon, is the chief executive
officer of the company. There are two women among the company's
9
<PAGE>
five senior line executives. In 1997 the company reported that 11 of its 25
highest-paid employees were women, a notably high percentage. Women serve as
the firm's executive vice president of merchandising, and as vice presidents
for merchandising, the creative department, finance, specialty catalogs, prod-
uct development, and for the wholesale division. Karen Bhola, who is an Indian
national, is director of MIS. Two women (Ms. Vernon and Betty Eveillard) serve
on the company's nine-member board of directors. Ms. Eveillard is managing di-
rector of the retail industry group of PaineWebber, Inc. She was appointed to
the board in September 1997. The company extends health benefits to the domes-
tic partners of its gay and lesbian employees. The 1994 book "Cracking the
Corporate Closet" reported that the company includes sexual orientation in its
antidiscrimination policy and conducts AIDS education through its employee
health office. Family benefits include family leave one month longer than the
federally mandated three months. The firm arranges for employee discounts at
day care firms and has flexible spending accounts for dependent care. Work ar-
rangements include phaseback for new mothers, flextime, and part time work.
The company offers work/family seminars for employees. Wellness programs in-
clude health fairs with breast and skin cancer screening, exercise programs,
and first aid training. In 1996, Ms. Vernon headed the White House National
Women's Business Council formed in 1995 to help women fund and expand their
own businesses. As of July 31, 1998, Lillian Vernon Corporation represented
.003% of the DSIP.
MERIX CORPORATION manufactures custom-engineered electronic interconnect
products including rigid printed circuits, high performance printed circuit
boards, and flexible circuits. The company recently added a new product line
of laminate-based chip carriers. In 1996 the company completed the acquisition
of Hewlett-Packard Company's circuit fabrication operation and of Roger Corpo-
ration's printed circuit fabrication operations. Deborah Coleman has served as
the company's CEO since it spun off from Tektronix as an independent company
in June 1994. Ms. Coleman has a history of success in the computer business.
In 1987 Apple Computer appointed her the youngest chief financial officer in
the Fortune 500. In 1992, after eleven years at Apple, Ms. Coleman left to be-
come vice president of materials operations at Tektronix where she served for
two years before becoming CEO of Merix. Two women serve among the company's
four senior line executives. In addition to Ms. Coleman, Terri Timberland is
vice president for human resources and one of the five highest-paid officers
at the company. Women in senior staff positions include Valerie Rosenfeld,
vice president and treasurer, and Janie Brown, vice president and corporate
controller. Two women (CEO Coleman and Carlene M. Ellis) and one minority (Dr.
Koichi Nishimura) serve on the six-member board of directors. Ms. Ellis is
vice president and director of the information technology group of Intel. Dr.
Nishimura, an Asian American, is CEO of Solectron Corporation. While none of
its training programs are specifically targeted for women or minorities, the
company does have a diversity council. The council incorporates diversity pro-
grams into Merix's business goals, assists in recruiting, and monitors pro-
gress of Merix's diversity education programs. In FY 1996, 25% of the
company's officials and managers were women, and 8% were minorities. These
percentages are high for the engineering industry. As of July 31, 1998, Merix
Corporation represented .001% of the DSIP.
TENNANT COMPANY manufactures and markets industrial floor maintenance equip-
ment, commercial floor maintenance equipment, and industrial floor coatings.
In April 1998, Janet M. Dolan was promoted to president and chief operating
officer of the company. She is among the four highest line executives at the
firm. Prior to her promotion she was executive vice president of Tennant's
North American operations. The 1993 book "The 100 Best Companies to Work For
in America" reported that 14% of Tennant's employees are disabled. One woman
(Pamela Knous) and one minority (Delbert Johnson)
10
<PAGE>
serve on the company's eight-member board of directors. Ms. Knous, who is ex-
ecutive vice president and chief financial officer for SUPERVALU Inc., was
elected to the board of directors in 1998. Mr. Johnson, who is African Ameri-
can, is chairman and CEO of Pioneer Metal Finishing. The company's family ben-
efits include parental leave for either parent, including for adoption. As of
July 31, 1998, Tennant Company represented .007% of the DSIP.
PRODUCT
We seek companies that provide high quality products and are industry lead-
ers in research and development.
DIONEX CORPORATION manufactures and markets analytical instruments includ-
ing: chromatography systems used to identify the components of chemical mix-
tures; bioseparation products; and supercritical fluid separations systems.
The company also makes automation systems for chemical analysis. Ion chroma-
tography (IC) accounts for the majority of the company's revenues. IC has a
wide range of environmental applications, including analysis of water quality,
acid rain, pollution in manufacturing wastewaters, and ozone-layer depletion.
Another technology developed by Dionex, called accelerated solvent technology,
is used by governmental regulators to monitor the level of pesticides and her-
bicides on fruits and vegetables and in soil. As of July 31, 1998, Dionex Cor-
poration represented .008% of the DSIP.
SCHOLASTIC CORPORATION publishes and distributes children's books, classroom
and professional magazines, and other educational materials including video
and software in the United States. It also markets similar products abroad. It
sells its products in elementary and secondary schools primarily through book
clubs, book fairs, and library sales. In the mid-1990's Scholastic introduced
several core-curriculum products, including reading, science, mathematics, and
preschool programs. Scholastic widely distributes its Credo and Editorial
Platform, which guides much of its editorial policy. This policy stresses the
values of citizenship, democracy, and freedom from prejudice. Many of the
company's publications are explicitly multicultural. Its CD/ROM literacy pro-
gram WiggleWorks and its preschool and kindergarten instructional program
Scholastic Early Childhood Workshop are offered in bilingual English/Spanish
versions. Its Action classroom magazine is targeted to at-risk students. In
1995 the company introduced Literacy Place, a core-curriculum reading program
to help children develop their reading and learning skills. Literacy Place
also has a Spanish program, called Scholastic Solares for bilingual students.
As of July 31, 1998, Scholastic Corporation represented .014% of the DSIP.
SPARTAN MOTORS, INC. designs, manufactures, and markets custom heavy-duty
chassis used for motor homes, fire trucks, school buses, transit buses, and
specialty vehicles. Spartan is aggressively innovative in its product design.
In recent years it has brought to market a motor home chassis with a rear-
mounted diesel engine which offered substantial cost savings over previous
models. In 1997 the company introduced an independent front suspension system
for its motor home chassis which allows better wheel control and handling.
Spartan has also made several notable innovations in fire engine design, in-
cluding an enclosed cab with safety advantages and a cab that, because it
lacks the traditional partition between the front and back seats, facilitates
communications among the firemen. In 1994 the firm initiated research and de-
velopment of a low-floor bus chassis that would meet the standards of the
American with Disabilities Act and eliminate the need for mechanically powered
wheelchair lifts. In 1996 Spartan introduced the first rear exit door school
bus chassis. In 1995 the company introduced a school bus with a rear-engine
design that improves the sight line of the driver and features a quieter motor
that facilitates communication with the passengers. All these features address
safety issues for school bus drivers. In 1994 the company introduced a 24-hour
emergency road service program for its recreational vehicle customers. In 1995
the company increased its quality control staff and introduced new work rules
that allow quality
11
<PAGE>
control personnel to halt production if a quality issue arises. As of July 31,
1998, Spartan Motors, Inc. represented .001% of the DSIP.
HUFFY CORPORATION manufactures and markets leisure products, including bi-
cycles, garden tools, basketball equipment, and juvenile products. It also
provides inventory, assembly, repair, and merchandising services for retail
stores. Huffy conducts its business through six companies: Huffy Sports, Huffy
Service First, Washington Inventory Service, Gerry Baby Products, Huffy Bicyc-
les, and True Temper Hardware. The company markets primarily in the U.S. Since
the mid-1980s, the company has instituted a variety of Deming-style quality-
control initiatives. Quality control has become the responsibility of teams of
employees. To assure that quality standards are met, employees have the right
to shut down the manufacturing line at the company's Celina, Ohio, plant. In
1995 the company introduced the country's first 100% postconsumer recycled
aluminum bicycle. Three Huffy Metaloid bicycle models were introduced for the
juvenile market. Huffy Sports Company also introduced a basketball backboard
made out of 100% postconsumer materials. As of July 31, 1998, Huffy Corpora-
tion represented .003% of the DSIP.
LAWSON PRODUCTS, INC. distributes maintenance, repair, and replacement parts
and products, including fasteners and fitting parts such as screws, nuts, and
rivets; industrial supplies, such as hoses, lubricants, cleansers, files, and
drills; and automotive and equipment maintenance parts, such as wiring, con-
nectors, exhaust, and other automotive parts. The firm has implemented a for-
mal "quality of service" program throughout its organization. It trains agents
to provide customer education on the proper use and maintenance of its prod-
ucts. It does not manufacture the products it distributes, but maintains
strict quality control standards for its suppliers. The company's commitment
to quality control leads it to purchase primarily from domestic suppliers.
This practice allowed it to avoid an influx of counterfeit fasteners from the
Far East in the late 1980s. The company competes primarily on service, rather
than on price. The company reports that it ships virtually all products within
24-hours of receiving the orders. In January 1996, the company was awarded the
ISO 9002 certification for its Des Plaines facility in Illinois. The ISO is an
international standards organization. The 9000 certification series addresses
quality management issues. As of July 31, 1998, Lawson Products, Inc. repre-
sented .004% of the DSIP.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees DEVCAP Shared Return Fund:
We have audited the accompanying statements of assets and liabilities of
DEVCAP Shared Return Fund (the "Fund") as of July 31, 1998, and the related
statement of operations for the year then ended, and the statements of changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period then ended
and the period from October 19, 1995 (commencement of operations) to July 31,
1996. These financial statements and financial highlights are the responsibil-
ity of the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
DEVCAP Shared Return Fund as of July 31, 1998, the results of its operations
for the year then ended, changes in its net assets for each of the years in
the two-year period then ended, and financial highlights for each of the years
in the two-year period then ended and the period from October 19, 1995 to July
31, 1996, in conformity with generally accepted accounting principles.
LOGO
Boston, Massachusetts
September 15, 1998
13
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1) $10,602,004
Receivable for Fund shares sold 11,659
Receivable from affiliate (Note 2) 57,955
Deferred organization expenses (Note 1) 24,635
Prepaid expenses 12,337
-----------
Total Assets 10,708,590
-----------
LIABILITIES:
Accrued expenses 11,733
-----------
NET ASSETS $10,696,857
===========
NET ASSETS CONSIST OF:
Paid-in capital $ 8,758,535
Accumulated net realized gain from Portfolio 62,990
Net unrealized appreciation from Portfolio 1,875,332
-----------
NET ASSETS $10,696,857
===========
SHARES OUTSTANDING 546,424
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE ($10,696,857 / 546,424 SHARES) $ 19.58
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO:
Investment income from Portfolio $ 86,547
Expenses from Portfolio (13,820)
----------
Net investment income from Portfolio 72,727
EXPENSES (NOTES 1 AND 2):
Professional fees 40,255
Printing 39,839
Transfer agent fee 32,456
Administration fees (Note 2) 17,192
Registration fees 16,327
Amortization of organization expenses (Note 1) 11,129
Servicing and fund accounting agent fee (Note 2) 10,669
Insurance 9,391
Other 1,660
-------
Total Expenses 178,918
Less: Reimbursement of expenses (Note 2) (70,684)
-------
Net Expenses 108,234
----------
NET INVESTMENT LOSS (35,507)
----------
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO
Net realized gain from Portfolio 71,154
Net change in unrealized appreciation from Portfolio 1,244,866
----------
Net realized and unrealized gain from Portfolio 1,316,020
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,280,513
==========
</TABLE>
See Notes to Financial Statements
15
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------
JULY 31, 1998 JULY 31, 1997
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss $ (35,507) $ (3,122)
Net realized gain from Portfolio 71,154 3,813
Net change in unrealized appreciation from
Portfolio 1,244,866 628,098
----------- ----------
Net increase in net assets resulting from
operations 1,280,513 628,789
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED
GAIN (5,944) (1,059)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares 4,505,896 4,167,358
Payments for shares redeemed (414,873) (113,074)
Net asset value of shares issued in reinvestment
of distributions 5,700 934
----------- ----------
Net increase in net assets from capital share
transactions 4,096,723 4,055,218
----------- ----------
Total increase in net assets 5,371,292 4,682,948
NET ASSETS:
Beginning of period 5,325,565 642,617
----------- ----------
End of period (including accumulated net
investment loss of $0 and $4,475, respectively) $10,696,857 $5,325,565
=========== ==========
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold 242,295 277,132
Redeemed (24,537) (8,894)
Reinvested 352 74
----------- ----------
Net increase 218,110 268,312
=========== ==========
</TABLE>
See Notes to Financial Statements
16
<PAGE>
DEVCAP SHARED RETURN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 19, 1995
FOR THE YEAR ENDED (COMMENCEMENT OF
--------------------------- OF OPERATIONS) TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996
------------- ------------- -----------------
<S> <C> <C> <C>
Net Asset Value, beginning of
period $ 16.22 $10.71 $10.00
------- ------ ------
Income from investment operations:
Net investment loss (0.06) (0.03) (0.02)
Net realized and unrealized gain
on investments 3.44 5.55 0.73
------- ------ ------
Total income from investment
operations 3.38 5.52 0.71
------- ------ ------
Less distributions from net
realized gain (0.02) (0.01) --
------- ------ ------
Net Asset Value, end of period $ 19.58 $16.22 $10.71
======= ====== ======
Ratios/supplemental data
Total return 20.84 % 51.57 % 7.10 %/1/
Net Assets, end of period (in
000's) $10,697 $5,326 $ 643
Ratio of expenses to average net
assets/2/ 1.75 % 1.75 % 2.50 %/3/
Ratio of net investment loss to
average net assets/2/ (0.51)% (0.21)% (0.54)%/3/
- --------
/1/Not annualized
/2/Reflects the Fund's proportionate share of the Portfolio's expenses as well
as reimbursements by agents of the Fund. If the reimbursements had not been
in place, the ratios of expenses and net investment income to average net
assets would have been as follows:
Ratio of expenses to average net
assets 2.76 % 5.93 % 26.30 %/3/
Ratio of net investment loss to
average net assets (1.52)% (4.39)% (24.34)%/3/
</TABLE>
/3/Annualized.
See Notes to Financial Statements
17
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JULY 31, 1998
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 man-
agement investment company under the Investment Company Act of 1940 (the
"Act").
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 (approximately 1.65% at July 31, 1998). The financial statements of
the Portfolio are included elsewhere in this report and should be read in con-
junction with the Fund's financial statements. The Fund became effective on
September 13, 1995, and commenced investment operations on October 19, 1995.
The presentation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sures of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Ac-
tual 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. Divi-
dends to shareholders are declared and paid annually from net investment in-
come. Distributions to shareholders of net realized capital gains, if any, are
made annually. The amount and character of income and net realized gains to be
distributed are determined in accordance with Federal income tax rules and
regulations, which may differ from generally accepted accounting principles.
These differences are attributable to permanent book and tax accounting dif-
ferences. According, at July 31, 1998 for the Fund, a reclassification was re-
corded to decrease paid-in capital, accumulated net investment loss and accu-
mulated net realized gain from Fund by $32,958, $39,982 and $7,024,
respectively.
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 dis-
tribute substantially all of its taxable income, including net realized gains,
if any, within the prescribed time periods. Accordingly, no provision for fed-
eral income or excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES. Organization 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 ini-
tial 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 organiza-
tion expenses, Development Capital Fund ("DEVCAP -- Non-Profit"), the Fund's
sponsor, has agreed to reimburse the Fund for such difference.
E. OTHER. All net investment income and realized and unrealized gains and
losses of the Portfolio are allocated pro rata among the Fund and other in-
vestors in the Portfolio.
18
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
YEAR ENDED JULY 31, 1998
2. TRANSACTIONS WITH AFFILIATES.
A. DISTRIBUTION. The Fund has adopted a Distribution Plan (the "Plan") in
accordance with Rule 12b-1 under the Act. Effective November 25, 1997, CBIS
Financial Services, Inc. ("CBIS") acts as agent of the Fund and principal un-
derwriter of shares of the Fund ("Distributor") pursuant to the Plan. Prior to
November 25, 1997, Signature Broker-Dealer Services, Inc. served as Distribu-
tor. Under the Plan, the Fund 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
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 re-
garding the purchase, sale or retention of shares of the Fund, payments to em-
ployees of the Distributor, advertising used for sales purposes, expenses of
preparing and printing sales literature and other distribution-related ex-
penses. No expenses were incurred by the Fund in connection with the Plan for
the year ended July 31, 1998.
B. REIMBURSEMENT OF EXPENSES. DEVCAP Non-Profit has agreed that it will re-
imburse the Fund to the extent necessary to maintain the Fund's total operat-
ing expenses (which include expenses of the Fund and Portfolio) at an annual
rate of 1.75% of the Fund's average daily net assets.
3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio aggregated $7,513,248 and $415,535, respectively, for the
year ended July 31, 1998.
Approximately $210,000 of the reductions in the Fund's assets this period
characterized as redemptions in the statement of changes in net assets were
withdrawals made to effect the charitable contribution to DEVCAP Non-Profit in
December 1997 as described in the Fund prospectus. Upon a shareholder's ini-
tial investment in the Fund, the shareholder declares an intention to make an
annual donation to DEVCAP Non-Profit of fifty percent, seventy-five percent,
or all of the Annual Contribution Basis, as defined in the Fund's registration
statement, derived from the shareholder's investment in the Fund. DEVCAP Non-
Profit will direct these shareholder donations to non-profit organizations
(primarily Catholic Relief Services) working to improve the welfare of under-
privileged persons in developing countries. In January 1999 shareholders will
receive notification as to the character and amounts of income and deductions
from their investment in the Fund. Shareholders should consult their tax advi-
sors as to the treatment of such items.
TAX INFORMATION--UNAUDITED
The federal tax status of distributions made to shareholders on December 29,
1997 was as follows:
<TABLE>
<CAPTION>
28%
SHORT- LONG- 20%
NET TERM TERM LONG-TERM
INVESTMENT CAPITAL CAPITAL CAPITAL
INCOME GAINS GAINS GAINS
---------- ------- ------- ---------
<S> <C> <C> <C> <C>
Shared Return Fund......................... $0 $0 $477 $5,467
</TABLE>
For the year ended July 31, 1998, the Shared Return Fund did not pay any
dividends from net investment income or short-term capital gains that would
qualify for the 70% dividends received deduction available to corporate share-
holders.
19
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
APPAREL--0.3%
Brown Group, Inc. ...................................... 1,700 $ 27,413
Hartmarx Corporation (b)................................ 4,400 29,700
Liz Claiborne, Inc. .................................... 8,600 332,175
Oshkosh B'Gosh.......................................... 1,300 53,300
Phillips-Van Heusen Corporation......................... 3,000 41,250
Reebok International Ltd. (b)........................... 7,200 154,350
Russell Corporation..................................... 4,800 156,900
Springs Industries, Inc................................. 2,500 95,781
Stride Rite Corporation................................. 5,100 61,838
Timberland Company (The) (b)............................ 1,500 96,750
V. F. Corporation....................................... 16,200 762,413
------------
1,811,870
------------
BANKING--6.9%
Banc One Corporation.................................... 94,794 4,899,665
BankAmerica Corporation................................. 92,500 8,301,875
BankBoston Corporation.................................. 39,700 1,920,488
Bankers Trust New York Corporation...................... 13,000 1,456,813
Fifth Third Bancorp..................................... 35,425 2,205,206
First Chicago NBD Corp.................................. 38,606 3,235,665
Mellon Bank Corporation................................. 35,100 2,364,863
Morgan (J.P.) & Co. Incorporated........................ 23,900 3,011,400
Norwest Corporation..................................... 102,300 3,676,406
PNC Bank Corp. ......................................... 40,200 2,168,287
SunTrust Banks, Inc. ................................... 28,300 2,065,900
Synovus Financial Corp. ................................ 34,950 773,269
Vermont Financial Services Corp. ....................... 1,300 34,125
Wachovia Corporation.................................... 27,800 2,380,375
Washington Mutual Inc. ................................. 51,970 2,075,552
Wells Fargo & Company................................... 11,500 4,092,562
------------
44,662,451
------------
COMMERCIAL PRODUCTS & SERVICES--1.9%
Angelica Corporation.................................... 800 17,850
Avery Dennison Corporation.............................. 15,300 880,706
Bemis Company, Inc. .................................... 6,800 262,650
Cintas Corporation...................................... 13,000 660,563
Deluxe Corporation...................................... 10,300 350,844
DeVry Inc. (b).......................................... 8,800 179,300
Donnelley (R.R.) & Sons Company......................... 18,500 786,250
Harland (John H.) Company............................... 3,300 51,975
Herman Miller, Inc...................................... 11,700 324,675
HON Industries, Inc. ................................... 7,900 226,631
Ikon Office Solutions................................... 17,200 184,900
Interface Inc. ......................................... 6,900 112,988
Kelly Services, Inc. ................................... 4,975 170,083
Moore Corporation....................................... 11,300 121,475
National Service Industries, Inc. ...................... 5,500 285,656
New England Business Service, Inc....................... 1,300 39,325
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMERCIAL PRODUCTS & SERVICES--CONTINUED
Pitney Bowes Inc.......................................... 38,300 $ 1,934,150
Sealed Air Corporation (b)................................ 11,100 444,000
Sonoco Products Company................................... 14,045 410,816
Standard Register Company................................. 3,700 133,663
Tennant Company........................................... 1,000 43,875
Xerox Corporation......................................... 44,300 4,676,419
------------
12,298,794
------------
CONSTRUCTION--0.3%
Apogee Enterprises, Inc. ................................. 3,000 38,906
Centex Corporation........................................ 7,600 311,600
Champion Enterprises Inc. (b)............................. 6,100 161,650
Fleetwood Enterprises, Inc................................ 4,700 167,731
Granite Construction Incorporated......................... 2,100 74,550
Kaufman & Broad Home Corporation.......................... 5,100 142,481
Rouse Company............................................. 8,700 253,931
Sherwin-Williams Company.................................. 22,600 720,375
Skyline Corporation....................................... 900 28,969
TJ International, Inc..................................... 1,700 39,525
------------
1,939,718
------------
ENERGY--2.6%
Amoco Corporation......................................... 129,900 5,423,325
Anadarko Petroleum Corporation............................ 16,000 549,000
Apache Corporation........................................ 12,800 339,200
Atlantic Richfield Company................................ 43,300 2,933,575
Consolidated Natural Gas Company.......................... 12,500 646,094
Enron Corp................................................ 44,500 2,355,719
Helmerich & Payne, Inc.................................... 6,400 131,200
Oryx Energy Company (b)................................... 13,500 248,906
Pennzoil Company.......................................... 6,000 270,000
Rowan Companies, Inc. (b)................................. 11,100 156,788
Santa Fe Energy Resources, Inc. (b)....................... 13,100 115,444
Sun Company, Inc.......................................... 12,500 467,969
Union Pacific Resources Group, Inc........................ 33,400 467,600
Western Atlas Inc. (b).................................... 6,900 451,519
Williams Companies........................................ 57,300 1,837,181
------------
16,393,520
------------
FINANCIAL SERVICES--5.8%
Ahmanson (H.F.) & Company................................. 14,300 944,694
American Express Company.................................. 62,200 6,865,325
Block (H & R), Inc........................................ 13,900 590,750
Dime Bancorp.............................................. 14,900 443,275
Edwards (A.G.), Inc....................................... 12,187 476,055
Fannie Mae................................................ 141,300 8,760,600
Federal Home Loan Mortgage Corporation.................... 92,600 4,375,350
</TABLE>
20
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
FINANCIAL SERVICES--CONTINUED
FirstFed Financial Corp. (b).............................. 2,200 $ 47,850
Golden West Financial..................................... 7,500 692,813
Household International, Inc.............................. 66,246 3,295,739
MBIA Inc.................................................. 12,700 855,663
MBNA Corporation.......................................... 67,700 2,267,950
Merrill Lynch & Co., Inc.................................. 46,800 4,563,000
Schwab (Charles) Corporation.............................. 35,800 1,342,500
Student Loan Marketing Association........................ 22,600 1,045,250
Transamerica Corporation.................................. 8,400 992,250
Value Line, Inc........................................... 1,000 36,875
------------
37,595,939
------------
FOODS & BEVERAGES--8.2%
Ben & Jerry's Homemade, Inc. (b).......................... 600 11,850
Bestfoods................................................. 39,000 2,169,375
Campbell Soup Company..................................... 61,500 3,321,000
Coca-Cola Company......................................... 333,800 26,933,488
Fleming Companies, Inc.................................... 4,900 75,031
General Mills Incorporated................................ 20,800 1,288,300
Heinz (H.J.) Company...................................... 49,600 2,734,200
Hershey Foods Corporation................................. 18,800 1,186,750
Kellogg Company........................................... 55,600 1,841,750
Nature's Sunshine Products, Inc........................... 2,100 43,575
Odwalla, Incorporated (b)................................. 500 6,000
PepsiCo, Inc.............................................. 202,100 7,844,006
Quaker Oats Company....................................... 18,200 962,325
Ralston Purina Company.................................... 42,600 1,371,188
Smucker (J.M.) Company.................................... 3,100 73,625
SUPERVALU Inc............................................. 7,700 381,631
Sysco Corporation......................................... 45,800 1,087,750
Tootsie Roll Industries, Inc.............................. 4,254 178,136
Wrigley (Wm.) Jr. Company................................. 15,500 1,390,156
------------
52,900,136
------------
HEALTH CARE--8.9%
Acuson Corporation (b).................................... 2,800 46,200
Allergan, Inc............................................. 8,400 438,900
ALZA Corporation (b)...................................... 11,500 447,062
Becton Dickinson and Company.............................. 16,400 1,355,050
Bergen Brunswig Corporation............................... 6,418 340,154
Biomet, Inc............................................... 14,300 446,875
Boston Scientific Corporation (b)......................... 25,600 1,961,600
Forest Laboratories, Inc. (b)............................. 10,200 382,500
Guidant Corp.............................................. 20,300 1,508,544
Humana Health Plans, Inc. (b)............................. 21,700 589,969
Johnson & Johnson......................................... 181,800 14,044,050
Mallinckrodt, Inc. ....................................... 9,300 257,494
Manor Care, Inc........................................... 8,100 302,231
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
HEALTH CARE--CONTINUED
Marquette Medical Systems, Inc. (b)....................... 2,000 $ 48,250
Medtronic, Inc............................................ 63,100 3,908,256
Merck & Co., Inc.......................................... 161,500 19,914,969
Mylan Laboratories, Inc................................... 16,200 440,438
Oxford Health Plans, Inc. (b)............................. 10,200 82,237
Schering-Plough Corporation............................... 99,300 9,607,275
St. Jude Medical Inc. (b)................................. 11,600 353,800
Stryker Corporation....................................... 12,800 556,000
Sunrise Medical Inc. (b).................................. 1,900 22,800
United American Healthcare
Corporation (b).......................................... 800 1,550
------------
57,056,204
------------
HOUSEHOLD GOODS--5.2%
Alberto-Culver Company.................................... 7,400 188,238
Avon Products, Inc. ...................................... 17,700 1,531,050
Bassett Furniture Industries.............................. 1,300 36,075
Black & Decker Corp. ..................................... 12,400 705,250
Church & Dwight Co., Inc.................................. 2,600 80,275
Clorox Company............................................ 13,800 1,414,500
Colgate-Palmolive Company................................. 39,700 3,669,769
Enesco Group, Inc......................................... 1,600 46,400
Fedders Corporation....................................... 5,400 35,775
Fort James Corp........................................... 29,600 999,000
Handleman Company (b)..................................... 4,200 37,538
Harman International Industries, Inc. .................... 2,430 95,833
Hasbro, Inc............................................... 17,350 627,853
Huffy Corporation......................................... 1,100 19,181
Kimberly-Clark Corporation................................ 75,264 3,382,176
Leggett & Platt........................................... 25,600 686,400
Mattel, Inc............................................... 39,285 1,510,017
Maytag Corporation........................................ 12,500 550,000
Newell Co................................................. 21,000 1,081,500
Oneida Ltd. .............................................. 1,600 41,800
Procter & Gamble Company.................................. 181,300 14,390,688
Rubbermaid Incorporated................................... 19,900 662,919
Shaw Industries, Inc. .................................... 16,100 297,850
Snap-On Incorporated...................................... 7,750 275,125
Stanley Works............................................. 11,300 493,669
Thomas Industries Inc..................................... 1,500 33,469
Whirlpool Corporation..................................... 10,000 605,000
------------
33,497,350
------------
INSURANCE--7.2%
Aetna, Inc................................................ 19,570 1,356,446
American General Corporation.............................. 34,262 2,340,523
American International Group, Inc. ....................... 94,500 14,251,781
Chubb Corporation......................................... 22,500 1,650,938
</TABLE>
21
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
INSURANCE--CONTINUED
CIGNA Corporation......................................... 28,400 $ 1,876,175
Cincinnati Financial Corporation.......................... 21,685 775,239
General Re Corporation.................................... 10,300 2,441,100
Hartford Steam Boiler Inspection and Insurance............ 3,750 194,766
Jefferson-Pilot Corporation............................... 13,850 780,794
Lincoln National Corp..................................... 13,400 1,283,050
MGIC Investment Corp...................................... 15,000 804,375
Marsh & McLennan Companies, Inc. ......................... 34,550 2,109,709
Providian Corporation..................................... 12,400 974,175
ReliaStar Financial Corporation........................... 12,100 600,463
SAFECO Corporation........................................ 18,400 829,150
St. Paul Companies, Inc................................... 31,464 1,138,603
Torchmark Corporation..................................... 18,300 801,769
Travelers Group Inc....................................... 155,400 10,411,800
UNUM Corporation.......................................... 18,600 979,988
Wesco Financial Corporation............................... 900 329,456
------------
45,930,300
------------
MEDIA--3.8%
Banta Corporation......................................... 3,350 101,756
Comcast Corporation....................................... 49,500 2,247,607
Disney (Walt) Company..................................... 276,400 9,518,525
Dow Jones & Company....................................... 12,200 662,613
Harcourt General.......................................... 9,000 507,937
King World Productions, Inc. (b).......................... 9,300 260,400
Lee Enterprises, Inc. .................................... 5,800 165,662
McGraw-Hill Companies..................................... 12,900 1,056,994
Media General, Inc. ...................................... 3,500 162,969
Media One Group........................................... 82,300 3,976,119
Meredith Corporation...................................... 6,700 280,144
New York Times Company.................................... 25,000 768,750
Scholastic Corporation (b)................................ 2,200 92,194
Tele-Communications, Inc. (b)............................. 68,500 2,859,875
Times Mirror Company...................................... 11,600 696,725
Viacom, Inc. (b).......................................... 9,300 631,237
Washington Post Company................................... 1,300 707,850
------------
24,697,357
------------
MISCELLANEOUS--1.1%
American Greetings Corporation............................ 9,300 429,544
Caraustar Industries, Inc. ............................... 3,000 81,937
Case Corporation.......................................... 9,500 322,406
CPI Corp. ................................................ 1,000 25,000
Cross (A.T.) Company...................................... 1,400 14,525
Deere & Company........................................... 33,300 1,338,244
Gibson Greetings, Inc. ................................... 1,900 43,225
Hillenbrand Industries, Inc. ............................. 8,700 486,656
Hunt Manufacturing Co. ................................... 1,100 19,250
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
MISCELLANEOUS--CONTINUED
Ionics, Inc. .............................................. 1,900 $ 60,325
Jostens, Inc. ............................................. 4,300 97,019
Marriott International, Inc. .............................. 34,000 1,105,000
Omnicom Group Inc. ........................................ 22,400 1,176,000
Polaroid Corporation....................................... 5,800 191,400
Service Corporation International.......................... 34,300 1,299,112
Toro Company............................................... 1,200 32,550
Whitman Corporation........................................ 12,900 273,319
------------
6,995,512
------------
MISCELLANEOUS MANUFACTURING--0.8%
Applied Materials, Inc. (b)................................ 49,100 1,644,850
Brady (W.H.) Co. .......................................... 2,200 45,100
Cincinnati Milacron Inc. .................................. 4,400 96,250
CLARCOR Inc. .............................................. 2,850 51,122
Crown Cork & Seal Company, Inc. ........................... 16,300 670,338
Dionex Corporation (b)..................................... 2,400 53,250
Fastenal Company........................................... 4,900 213,915
General Signal Corporation................................. 5,300 211,337
Gerber Scientific Inc. .................................... 3,000 83,625
Graco Inc. ................................................ 3,375 94,922
Illinois Tool Works Inc. .................................. 33,700 1,889,306
Isco, Inc. ................................................ 300 1,950
Lawson Products, Inc. ..................................... 1,100 25,094
Millipore Corporation...................................... 5,600 135,800
Nordson Corporation........................................ 2,000 94,125
Watts Industries........................................... 2,900 58,362
Wellman, Inc. ............................................. 3,500 69,344
------------
5,438,690
------------
RESOURCE DEVELOPMENT--1.2%
Air Products & Chemicals, Inc. ............................ 31,400 1,099,000
Aluminum Company of America................................ 22,600 1,566,463
Battle Mountain Gold Company............................... 29,300 137,344
Betz Laboratories.......................................... 3,400 227,800
Cabot Corporation.......................................... 8,600 233,813
Calgon Carbon Corporation.................................. 4,300 43,538
Consolidated Papers, Inc. ................................. 11,400 328,463
Cyprus Amax Minerals Company............................... 11,900 148,750
Echo Bay Mines Ltd (b)..................................... 17,800 36,713
Fuller (H.B.) Company...................................... 1,800 101,250
IMCO Recycling Inc. ....................................... 1,600 25,700
Inland Steel Industries, Inc. ............................. 6,200 174,763
Mead Corporation........................................... 13,300 399,831
Morton International, Inc. ................................ 16,600 401,513
Nalco Chemical Company..................................... 8,600 295,088
Nucor Corporation.......................................... 11,750 511,125
Praxair, Inc. ............................................. 20,800 1,024,400
Sigma-Aldrich Corporation.................................. 13,400 386,925
</TABLE>
22
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
RESOURCE DEVELOPMENT--CONTINUED
Westvaco Corporation...................................... 12,900 $ 323,306
Worthington Industries, Inc. ............................. 12,300 177,581
------------
7,643,366
------------
RETAIL--10.7%
Albertson's, Inc. ........................................ 33,300 1,600,481
American Stores Companies................................. 35,500 823,156
Bob Evans Farms, Inc. .................................... 4,600 85,819
Charming Shoppes, Inc. (b)................................ 12,800 59,200
Circuit City Stores, Inc. ................................ 13,100 677,925
Claire's Stores, Inc. .................................... 6,200 129,425
Costco Companies Inc. (b)................................. 28,915 1,640,926
CVS Corporation........................................... 51,600 2,115,600
Dayton Hudson Corporation................................. 59,100 2,825,719
Dillard Department Stores, Inc. .......................... 14,100 484,688
Dollar General Corporation................................ 18,785 770,185
Egghead, Inc. (b)......................................... 3,100 44,950
Gap, Inc. (The)........................................... 54,850 3,270,431
Great Atlantic & Pacific Tea Company, Inc. ............... 5,000 150,313
Hannaford Bros. Co. ...................................... 5,400 234,563
Home Depot, Inc. ......................................... 198,598 8,316,291
Kmart Corporation (b)..................................... 66,000 1,076,625
Kroger Co. (b)............................................ 34,600 1,637,013
Lands' End, Inc. (b)...................................... 3,600 94,725
Lillian Vernon Corporation................................ 1,000 16,375
Limited, Inc. (The)....................................... 34,300 919,669
Longs Drug Stores Corporation............................. 5,100 140,888
Lowe's Companies, Inc. ................................... 47,100 1,813,350
Luby's Cafeterias, Inc. .................................. 2,300 37,519
May Department Stores Company............................. 31,000 1,989,813
McDonald's Corporation.................................... 92,900 6,206,881
Nordstrom, Inc. .......................................... 20,300 633,740
Penney (J.C.) Company, Inc. .............................. 33,900 1,989,506
Pep Boys--Manny, Moe & Jack............................... 8,100 139,725
Ruby Tuesday, Inc. ....................................... 3,400 52,488
Ryan's Family Steakhouse, Inc. (b)........................ 5,300 57,638
Sears, Roebuck and Co. ................................... 52,600 2,669,450
Spec's Music, Inc. (b).................................... 200 660
Starbucks Corporation (b)................................. 11,400 477,375
Tandy Corporation......................................... 13,100 744,244
TCBY Enterprises, Inc. ................................... 2,300 18,831
TJX Companies, Inc. ...................................... 43,000 1,010,500
Toys "R' Us, Inc. (b)..................................... 37,120 844,480
Venator Group, Inc. ...................................... 17,200 247,250
Walgreen Company.......................................... 67,100 2,897,881
Wal-Mart Stores, Inc. .................................... 303,500 19,158,438
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
RETAIL--CONTINUED
Wendys International Inc. ................................ 16,700 $ 372,619
Whole Foods Market, Inc. (b).............................. 3,400 184,450
------------
68,661,805
------------
TECHNOLOGY--25.4%
3Com Corporation (b)...................................... 47,500 1,175,625
Adaptec Inc (b)........................................... 14,900 173,212
Advanced Micro Devices, Inc. (b).......................... 18,300 315,675
American Power Conversion (b)............................. 12,100 390,225
Analog Devices, Inc. (b).................................. 21,600 464,400
Apple Computer, Inc. (b).................................. 17,700 612,863
AT&T Corporation.......................................... 219,600 13,313,250
Ault Inc. (b)............................................. 500 1,969
Autodesk, Inc............................................. 6,000 196,500
Automatic Data Processing, Inc............................ 40,500 2,741,344
Avnet, Inc. .............................................. 5,000 274,375
Baldor Electric Company................................... 4,900 101,675
Broderbund Software Inc. (b).............................. 2,800 58,800
Ceridian Corp. (b)........................................ 9,700 554,719
Cisco Systems, Inc. (b)................................... 138,300 13,242,225
Citizens Utilities Company (b)............................ 32,467 284,086
Compaq Computer Corporation............................... 223,389 7,343,897
Computer Associates International, Inc.................... 73,800 2,449,238
Cooper Industries, Inc.................................... 15,700 823,269
Dell Computer Corp. (b)................................... 87,000 9,447,652
DSC Communications Corporation (b)........................ 15,800 479,430
EMC Corp. Mass (b)........................................ 67,300 3,297,700
Grainger (W.W.), Inc. .................................... 12,600 555,975
Hewlett-Packard Company................................... 140,000 7,770,000
Hubbell Incorporated...................................... 8,560 359,520
Hutchinson Technology (b)................................. 2,200 47,575
Inprise Corp. (b)......................................... 6,500 40,625
Intel Corporation......................................... 229,300 19,361,519
International Business Machines Corporation............... 129,800 17,198,500
LSI Logic (b)............................................. 17,900 370,306
MCI Communications Corporation............................ 97,900 6,339,025
Merix Corporation (b)..................................... 600 3,600
Micron Technology, Inc. (b)............................... 28,300 944,513
Microsoft Corporation (b)................................. 333,100 36,682,638
Molex Incorporated........................................ 20,837 591,250
National Semiconductor
Corporation (b).......................................... 20,900 257,331
Novell Inc. (b)........................................... 47,700 542,588
Perkin-Elmer Corporation.................................. 6,100 357,612
QRS Corporation (b)....................................... 700 22,050
Quarterdeck Corporation (b)............................... 7,300 4,562
</TABLE>
23
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
TECHNOLOGY--CONTINUED
Raychem Corporation....................................... 10,700 $ 333,037
Scientific Atlanta Inc. .................................. 10,300 247,844
Shared Medical Systems Corporation........................ 3,400 230,775
Solectron Corporation (b)................................. 15,100 724,800
Sprint Corporation........................................ 57,800 4,046,000
Stratus Computer, Inc. (b)................................ 3,200 92,000
Sun Microsystems, Inc. (b)................................ 51,300 2,423,925
Tektronix, Inc............................................ 6,400 175,200
Tellabs, Inc. (b)......................................... 24,600 1,851,917
Texas Instruments, Inc.................................... 52,400 3,107,974
Thomas & Betts Corporation................................ 7,000 287,000
Xilinx, Inc. (b).......................................... 9,500 356,250
------------
163,068,041
------------
TRANSPORTATION--1.3%
Airborne Freight Corporation.............................. 6,400 152,800
Alaska Air Group, Inc. (b)................................ 3,200 134,000
AMR Corporation (b)....................................... 24,400 1,743,075
Consolidated Freightways Corporation (b).................. 2,100 24,413
Delta Air Lines, Inc. .................................... 10,000 1,225,000
FDX Holding Corporation (b)............................... 19,800 1,201,613
GATX Corporation.......................................... 6,200 237,925
Norfolk Southern Corporation.............................. 50,700 1,514,662
Roadway Express, Inc. .................................... 2,000 27,250
Ryder System, Inc......................................... 9,500 275,500
Southwest Airlines Co. ................................... 29,700 978,244
UAL Corporation (b)....................................... 7,700 599,637
Yellow Corporation (b).................................... 2,800 44,800
------------
8,158,919
------------
UTILITIES--7.3%
AGL Resources Inc......................................... 7,300 137,331
American Water Works, Inc. ............................... 10,200 305,363
Ameritech................................................. 148,700 7,314,181
Bell Atlantic Corporation................................. 209,822 9,520,673
BellSouth Corporation..................................... 133,700 9,133,381
CalEnergy Company, Inc. (b)............................... 9,000 244,688
Cleco Corporation......................................... 3,000 89,063
Connecticut Energy Corporation............................ 1,000 25,625
Eastern Enterprises....................................... 2,700 107,831
El Paso Energy Corporation................................ 15,700 533,800
Energen Corporation....................................... 3,900 67,031
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
UTILITIES--CONTINUED
Equitable Resources, Inc. .............................. 4,800 $ 118,200
Frontier Corporation.................................... 22,800 765,225
Idaho Power Company..................................... 4,900 147,919
LG&E Energy Corp........................................ 17,200 419,250
Marketspan Corp......................................... 20,600 567,788
MCN Corporation......................................... 10,000 248,125
New Century Energies, Inc. ............................. 14,500 603,563
NICOR Inc. ............................................. 6,100 234,850
Northwest Natural Gas Co................................ 3,100 81,375
Northwestern Corp....................................... 2,000 49,750
Oklahoma Gas and Electric Company....................... 10,300 268,444
Peoples Energy Corporation.............................. 4,600 161,000
Potomac Electric Power Company.......................... 15,100 364,287
SBC Communications Inc.................................. 248,518 10,158,173
Sonat Inc............................................... 14,600 427,050
Southern New England Telecommunications Corporation..... 8,900 612,987
Telephone and Data Systems, Inc. ....................... 7,800 312,000
U S West Communications Group........................... 67,841 3,621,013
Washington Gas Light Company............................ 5,600 133,000
------------
46,772,966
------------
VEHICLE COMPONENTS--0.5%
Cooper Tire and Rubber Company.......................... 10,000 188,750
Cummins Engine Company, Inc. ........................... 5,000 278,438
Dana Corporation........................................ 22,100 1,099,475
Federal-Mogul Corporation............................... 6,500 390,812
Genuine Parts Company................................... 23,300 808,219
Modine Manufacturing Company............................ 3,800 126,825
Smith (A.O.) Corporation................................ 2,000 82,625
Spartan Motors, Inc. ................................... 1,200 6,450
SPX Corporation (b)..................................... 1,600 90,890
------------
3,072,484
------------
TOTAL INVESTMENTS (A)--99.4%.................................... $638,595,422
Other Assets, less liabilities--0.6%............................ 3,640,213
------------
NET ASSETS--100.0%.............................................. $642,235,635
============
</TABLE>
- -------
(a) The aggregate cost for book and federal income tax purposes is
$462,874,654, the aggregate gross unrealized appreciation is $182,864,578,
and the aggregate gross unrealized depreciation is $7,143,810, resulting
in net unrealized appreciation of $175,720,768.
(b) Non-income producing security.
24
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $462,874,654) $638,595,422
Cash 7,419,976
Receivable for securities sold 706,600
Dividends receivable 698,498
------------
Total assets 647,420,496
------------
LIABILITIES:
Payable for securities purchased 4,868,668
Accrued expenses (Note 2) 316,193
------------
Total liabilities 5,184,861
------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $642,235,635
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT IN-
COME:
Dividends (net
of foreign
withholding
tax of $930) $ 5,509,338
-----------
EXPENSES:
Management fee
(Note 2) 753,366
Sub management
fee (Note 2) 86,354
Professional
fees 70,185
Custody fees
(Note 3) 166,325
Trustee fees 5,226
Administrative
fee (Note 2) 6,149
Miscellaneous 2,178
-----------
Total expenses 1,089,783
Fees paid
indirectly (157,745)
Management
fee waived (51,019)
-----------
Net expenses 881,019
-----------
NET INVESTMENT
INCOME 4,628,319
NET REALIZED
GAIN ON IN-
VESTMENTS
Proceeds from
sales $ 19,964,446
Cost of
securities
sold 15,128,020
------------
Net realized
gain on
investments 4,836,426
NET CHANGES IN
UNREALIZED AP-
PRECIATION OF
INVESTMENTS
Beginning of
year 91,161,408
End of year 175,720,768
------------
Net change
in
unrealized
appreciation 84,559,360
-----------
NET INCREASE IN
NET ASSETS RE-
SULTING FROM
OPERATIONS $94,024,105
===========
</TABLE>
See Notes to Financial Statements
25
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 4,628,319 $ 2,240,276
Net realized gain on investments 4,836,426 433,417
Net change in unrealized appreciation of
investments 84,559,360 74,540,873
------------ ------------
Net Increase in Net Assets Resulting from
Operations 94,024,105 77,214,566
------------ ------------
Transactions in Investors' Beneficial Interest:
Additions 267,044,708 137,135,556
Reductions (11,192,148) (22,391,710)
------------ ------------
Net Increase in Net Assets from Transactions in
Investors' Beneficial Interests 255,852,560 114,743,846
------------ ------------
Total Increase in Net Assets 349,876,665 191,958,412
NET ASSETS:
Beginning of year 292,358,970 100,400,558
------------ ------------
End of year $642,235,635 $292,358,970
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Assets (000's) $642,236 $292,359 $100,401 $54,003 $31,322
Ratio of net investment
income to average net
assets 1.05%(/1/) 1.34% 1.48%(/3/) 1.85%(/4/) 2.13%(/4/)
Ratio of expenses to
average net assets 0.25%(/1/)(/2/) 0.29%(/2/) 0.59%(/2/((/3/) 0.43%(/4/) 0.29%(/4/)
Portfolio turnover rate 5% 1% 5% 6% 8%
Average commission rate
paid per share $ 0.0402 $ 0.0512 $ 0.0496 -- --
</TABLE>
- --------
(/1/Reflects)a waiver of 0.01% of fees by the Manager due to limitations set
forth in the Management Agreement. Had the Manager not waived their fees,
the ratios of net investment income and expenses to average net assets for
the year ended July 31, 1998 would have been 1.04% and 0.25%, respective-
ly.
(/2/Ratio)of expenses to average net assets for the years ended July 31, 1998,
1997 and 1996 include indirectly paid expenses. Excluding indirectly paid
expenses, the expense ratios would have been 0.20%, 0.25% and 0.50% for
the years ended July 31, 1998, 1997 and 1996, respectively.
(/3/Had)the Expense Payment Agreement and Sponsor Arrangement not been in
place, the ratios of net investment income and expense for the years ended
July 31, 1996 would have been 1.14% and 0.85% respectively.
(/4/Reflects)a voluntary waiver of fees by the Administrator and Adviser due
to the limitations set forth in the Expense Reimbursement Agreement. Had
the Administrator and Adviser not waived their fees, the ratios of net in-
vestment income and expenses to average net assets for the years ended
July 31, 1995 and 1994 would have been 1.75% and 0.53% and 2.00% and 0.42%
respectively.
See Notes to Financial Statements
26
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DOMINI SOCIAL INDEX PORTFOLIO/JULY 31, 1998
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Domini Social Index Portfolio (the "Index Portfolio") is registered under
the Investment Company Act of 1940 (the "Act") as a no-load, diversified,
open-end management investment company which was organized as a trust under
the laws of the State of New York on June 7, 1989. The Index Portfolio intends
to correlate its investment portfolio as closely as is practicable with the
Domini 400 Social Index (the "Index"), which is a common stock index developed
and maintained by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"). The Declara-
tion 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 ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the re-
porting period. Actual results could differ from those estimates. The follow-
ing is a summary of the Index Portfolio's significant accounting policies.
(A) VALUATION OF INVESTMENTS: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales are
reported.
(B) DIVIDEND INCOME: Dividend income is reported on the ex-dividend date.
(C) FEDERAL TAXES: The Index Portfolio will be treated as a partnership for
U.S. federal income tax purposes and is therefore not subject to U.S. federal
income tax. As such, each investor in the Index Portfolio will be taxed on its
share of the Index Portfolio's ordinary income and capital gains. It is in-
tended that the Portfolio will be managed in such a way that an investor will
be able to satisfy the requirements of the Internal Revenue Code applicable to
regulated investment companies.
(D) OTHER: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
NOTE 2--TRANSACTIONS WITH AFFILIATES
(A) MANAGER. Domini Social Investments LLC ("DSIL" or the "Manager") is reg-
istered as an investment adviser under the Investment Advisers Act of 1940.
The services provided by the Manager consist of investment supervisory servic-
es, overall operational support and administrative services. The administra-
tive services include the provision of general office facilities and supervis-
ing the overall administration of the Index Portfolio. For its services under
the Management Agreement, the Manager receives from the Index Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.20% of the Index
Portfolio's average daily net assets, subject to reduction to the extent nec-
essary to keep the aggregate annual operating expenses of the Index Portfolio
(excluding brokerage fees and commissions, interest, taxes and other extraor-
dinary expenses) at no greater than 0.20% of the average daily net assets of
the Index Portfolio through October 22, 1998 (the contract anniversary date).
(B) SUBMANAGER. Mellon Equity provides investment submanagement services to
the Index Portfolio on a day-to-day basis pursuant to a Submanagement Agree-
ment with DSIL. Mellon Equity does not determine the composition of the Domini
Social Index. Under the Submanagement Agreement, DSIL pays Mellon Equity an
investment submanagement fee equal, on an annual basis, to 0.10% of the aver-
age daily net assets of the Portfolio.
27
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DOMINI SOCIAL INDEX PORTFOLIO/JULY 31, 1998
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(C) PRIOR ADVISORY, MANAGEMENT, SPONSORSHIP AND ADMINISTRATIVE
AGREEMENTS. Prior to October 22, 1997, pursuant to an investment advisory
agreement, KLD served as investment adviser to the Index Portfolio and fur-
nished continuously an investment program by determining the stocks to be in-
cluded in the Index. KLD received from the Index Portfolio a fee accrued daily
and paid monthly at an annual rate equal to 0.025% of the Index Portfolio's av-
erage daily net assets. Additionally, prior to October 22, 1997, pursuant to a
management agreement, Mellon Equity served as investment manager and managed
the assets of the Index Portfolio on a daily basis. Prior to October 22, 1997,
pursuant to a sponsorship agreement, KLD furnished administrative services for
the Index Portfolio. KLD received from the Portfolio a fee accrued daily and
paid monthly at an annual rate equal to 0.025% of the average daily net assets
of the Portfolio for administrative services. Prior to November 6, 1996, pursu-
ant to an administrative services agreement, Signature Broker-Dealer Services,
Inc. served as the administrator of the Portfolio. Prior to October 22, 1997,
the management and administration fees with respect to the Portfolio were equal
to 0.15% of the Index Portfolio's average daily net assets for its then current
fiscal year.
NOTE 3--INVESTMENT TRANSACTIONS
Purchase and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $277,785,785 and $19,964,446, respectively.
Custody fees of the Portfolio were reduced by $157,745 which was compensation
for uninvested cash left on deposit with the custodian. Cash balances could
have been employed to earn additional income for the Portfolio.
28
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LOGO
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Domini Social Index Portfolio (the
"Portfolio") as of July 31, 1998, and the related statement of operations for
the year then ended, and the related statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1998 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Domini Social Index Portfolio as of July 31, 1998, the results of its
operations for the year then ended, changes in its net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
LOGO
Boston, Massachusetts
August 24, 1998
29
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DEVCAP
SHARED RETURN FUND
LOGO
CHANGING THE WAY THE WORLD WORKS
ANNUAL REPORT
JULY 31, 1998
LOGO
